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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21097
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EINSTEIN/NOAH BAGEL CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1294908
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14123 DENVER WEST PARKWAY
GOLDEN, CO 80401-4086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 215-9300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
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COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days: Yes: X No:
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X].
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY
$341,072,810 AT MARCH 17, 1997 (BASED ON THE CLOSING SALE PRICE ON THE NASDAQ
NATIONAL MARKET ON MARCH 17, 1997, AS REPORTED BY THE WALL STREET JOURNAL
(WESTERN EDITION)). AT MARCH 17, 1997, THE REGISTRANT HAD ISSUED AND
OUTSTANDING AN AGGREGATE OF 32,689,678 SHARES OF COMMON STOCK.
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997 DESCRIBED IN PART III HEREOF
ARE INCORPORATED BY REFERENCE IN THIS REPORT.
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-K/A UNDER "ITEM 1. BUSINESS", "ITEM 3.
LEGAL PROCEEDINGS", "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS", AND ELSEWHERE IN THIS FORM 10-K/A,
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH FORWARD-
LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
EINSTEIN/NOAH BAGEL CORP. (THE "COMPANY"), ITS AREA DEVELOPERS, AND EINSTEIN
BROS.(TM) BAGELS STORES AND NOAH'S NEW YORK BAGELS(R) STORES TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS,
THE FOLLOWING: COMPETITION; SUCCESS OF OPERATING INITIATIVES; DEVELOPMENT AND
OPERATING COSTS; AREA DEVELOPERS' ADHERENCE TO DEVELOPMENT SCHEDULES;
ADVERTISING AND PROMOTIONAL EFFORTS; BRAND AWARENESS; THE COMPANY'S
RELATIONSHIPS WITH, AND THE CONTINUED SUCCESS OF, BOSTON CHICKEN, INC. ("BOSTON
CHICKEN"), THE COMPANY'S MAJORITY STOCKHOLDER; ADVERSE PUBLICITY; ACCEPTANCE OF
NEW PRODUCT OFFERINGS; AVAILABILITY, LOCATIONS, AND TERMS OF SITES FOR STORE
DEVELOPMENT; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT PLANS; AVAILABILITY AND
TERMS OF CAPITAL; FOOD, LABOR, AND EMPLOYEE BENEFITS COSTS; CHANGES IN
GOVERNMENT REGULATION; REGIONAL WEATHER CONDITIONS; AND OTHER FACTORS REFERENCED
IN THIS FORM 10-K/A. THE SUCCESS OF THE COMPANY IS DEPENDENT ON ITS AREA
DEVELOPERS AND THE MANNER IN WHICH THEY OPERATE AND DEVELOP EINSTEIN BROS.
BAGELS STORES AND NOAH'S NEW YORK BAGELS STORES.
ITEM 1. BUSINESS
GENERAL
The Company franchises specialty retail stores that feature fresh-baked
bagels, proprietary cream cheeses, specialty coffees and teas, and creative
soups, salads and sandwiches, primarily under the Einstein Bros. Bagels and
Noah's New York Bagels brand names. As of April 21, 1997, there were 420 stores
in operation systemwide, all of which 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 at a premium over the price per unit paid by the investors in the area
developer for their equity investments. As of April 21, 1997, the Company had
entered into area development agreements that provide for the development of
1,047 additional stores, the majority of which are scheduled to open over the
next three years. The Company estimates that there will be between 615 and 665
stores in operation systemwide by the end of 1997. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ABOVE.
The Company was incorporated in Delaware in February 1995 under the name
Progressive Bagel Concepts, Inc. The Company's name was subsequently changed to
Einstein/Noah Bagel Corp. in June 1996. The Company's principal executive
offices are located at 14123 Denver West Parkway, Golden, Colorado, 80401, and
its telephone number is (303) 215-9300.
THE COMPANY'S BRANDS
The Company has two principal brands. The Einstein Bros. Bagels brand was
developed by the Company after it was formed in March 1995. The Noah's New York
Bagels brand, which was acquired when the Company acquired Noah's New York
Bagels, Inc. ("Noah's") in February 1996, was originally introduced in 1989 in
Berkeley, California. As of April 21, 1997, there were 283 Einstein Bros.
Bagels stores in 28 states and the District of Columbia, and 102 Noah's New York
Bagels stores in California, Washington and Oregon.
The key component of the Company's product strategy is its offering of fresh-
baked bagels, produced utilizing proprietary processes that allow 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 and are baked fresh throughout the day in each Einstein Bros. Bagels and
Noah's New York Bagels store using steamed-baking processes.
Einstein Bros. Bagels and Noah's New York Bagels stores also offer consumers a
line of traditional and creative flavors of cream cheese and an extensive line
of beverages featuring branded coffees and teas, fruit teas, bottled sodas,
juices and waters, and a full line of fountain sodas. The stores also include a
menu of creative soups, salads and bagel sandwiches offering customers a variety
of lunch alternatives, as well as branded retail products that support the major
menu categories, including ground and whole bean coffee, teas, bagel chips,
coffee mugs and other items. Stores are typically in leased
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locations of approximately 2200 square feet with ample parking, substantial
indoor seating and when practical, additional outdoor seating.
AREA DEVELOPERS
General. The Company's strategy of concentrated development of 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 of
achieving market leadership than either Company ownership of all stores or more
traditional franchising approaches utilizing a larger number of franchisees.
The Company anticipates that domestic expansion of its brands will be undertaken
by its current area developers and is not seeking additional domestic area
developers or franchisees.
The Company believes that rapid penetration of selected designated market
areas ("DMAs") is superior to more limited penetration of many DMAs for several
reasons. Concentration of stores allows 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
concentration 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 assists the Company's area
developers in securing real estate for future sites on acceptable terms and
recruiting management and hourly employees.
The Company's success is dependent to a significant extent upon its area
developers and the manner in which they develop and operate their stores and
manage their organizational and financial resources. 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. The financial resources required
by the Company's area developers to comply with their area development
agreements are dependent upon, among other things, the number and cost of stores
developed and store operating results. The cost to develop a store typically
ranges from between $240,000 and $625,000. The area developers are expected to
finance their capital requirements through borrowings from the Company, equity,
debt and lease financing from third parties and internally generated funds.
There can be no assurance that area developers will have access to the financial
resources necessary to open the number of stores required by their development
schedules or will successfully develop or operate stores in their development
areas in a manner consistent with the Company's concepts and standards. Because
the amount of additional financing that the Company may provide to area
developers depends on the amount of funds internally generated by the area
developers, the amount of additional equity, debt and lease financing to be
obtained by the area developers from other parties and the cost of stores
developed, the Company has not determined, nor is it able at present to
reasonably estimate, any amount of additional financing that it may commit to
such area developers.
At times, the Company or its area developers may determine that a specific
store should be closed due to operating or site-related issues specific to that
store, changes in the market or trade area, changes in store development
strategy, or failure of the store to meet desired sales or profitability levels.
The cost to close a store varies depending upon the remaining lease renewal
terms and the ability of the site to be sublet, as well as the type, quantity
and condition of the equipment installed and the cost to remove such equipment
and improvements from the site. During fiscal 1996, the Company closed six
stores and its area developers closed five stores. The costs incurred to close
the Company-operated stores ranged from between $60,000 and $400,000 per store.
The Company has been informed by its area developers that the costs incurred by
them to close such stores ranged from between $260,000 and $520,000 per store.
A provision to close Company-operated stores was established in 1995. See Item
6. Selected Consolidated Financial Data and Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
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The following table sets forth information as of April 21, 1997 concerning the
Company's nine area developers. The operating principals of such area
developers listed below each have experience in the multi-unit retail industry
ranging from 10 to 30 years. A majority of the additional stores committed are
required to be opened over the next three years. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGE 2.
<TABLE>
<CAPTION>
CURRENT ADDITIONAL
OPERATING STORES STORES
AREA DEVELOPER PRIMARY MARKETS PRINCIPAL OPEN COMMITTED
- ------------------------- -------------------------------------------------------------- ---------------- ------- ----------
<S> <C> <C> <C> <C>
Einstein Bros. Bagels(1):
Colonial Bagels, L.P.(2) Boston, Cleveland, Pittsburgh, Columbus, New York City Robert Schlacter 45 217
metropolitan area
Finest Bagels, L.L.C.(2) Kansas City, St. Louis, Minneapolis, Dallas/Ft. Worth, Houston, Edwin Brownell 61 127
Austin
Great Lakes Bagels, L.L.C. Milwaukee, Chicago, Detroit, Madison, Indianapolis Joseph Hoog 53 144
Gulfstream Bagels, L.P.(2) Miami, Fort Lauderdale, West Palm Beach, Orlando, Tampa, Robert Hartnett 47 122
Atlanta(3), Charlotte, Norfolk
Mayfair Bagels, L.L.C.(2) Washington, D.C., Baltimore, Richmond Steve Quamme 17 58
Philly Rose, L.P.(2) Philadelphia Harry Rose 20 65
Sunbelt Bagels, L.L.C.(2) San Diego, Palm Springs, Orange County, San Bernardino County, Pearce Tucker 75 112
Denver, Salt Lake City, Phoenix, Tucson, Albuquerque, Las
Vegas, Colorado Springs
Noah's New York Bagels:
Noah's Bay Area Bagels, Sacramento, San Francisco/Oakland/San Jose, Fresno Jim Mizes 51 44
L.L.C.
Noah's Pacific, L.L.C. Portions of Los Angeles, Portland, Seattle/Tacoma Jim Mizes 51 158
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Total 420 1,047
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(1) Includes 11 stores operated under the Bagel & Bagel brand, one store
operated under the Offerdahl's Bagel Gourmet brand, seven stores operated
under the Baltimore Bagel brand, 15 stores operated under the Bagel
Boulevard brand and one store operated under the Bagel Street Cafe brand.
The Company's area developers intend to convert all such stores to Einstein
Bros. Bagels stores by early 1998.
(2) Effective April 21, 1997, Alamo Bagels, L.P. ("Alamo") merged into Finest
Bagels, L.L.C., BCE West Bagels, L.L.C. ("BCE West") merged into Sunbelt
Bagels, L.L.C., and Liberty Foods, L.L.C. ("Liberty") merged into Colonial
Bagels, L.P. Prior to such mergers, Alamo, BCE West and Liberty were area
developers of the Company. In addition, effective April 21, 1997, Gulfstream
Bagels, L.P. acquired certain development rights, stores and other assets of
Mayfair Bagels, L.L.C. ("Mayfair") in Atlanta, Charlotte and Norfolk. In
each of the merger transactions, owners of equity interests in the merging
area developer received equity interest in the surviving area developer.
Such transactions were the result of arms' length negotiations between the
relevant area developers and conditioned upon the consent of the Company in
its capacity as franchisor. The Company believes that any further
consolidation of area developers primarily will be the
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result of negotiations by and among such area developers, with input and
suggestions from the Company in its capacity as franchisor. On April 1,
1997, Mayfair and Philly Rose, L.P. ("Philly Rose") entered into a letter of
intent pursuant to which Philly Rose and Mayfair propose to combine their
operations in a statutory merger.
(3) Stores in the Atlanta metropolitan area will operate under the Melvyn &
Elmo's(TM) brand because the Company does not currently have the right to
use the Einstein Bros. Bagels brand for restaurant services in the Atlanta
metropolitan area.
Area Developer Ownership. No officer or director of the Company owns a
controlling equity interest in any area developer. Lawrence Beck, Scott Beck's
father, is a minority investor in Sunbelt Bagels, L.L.C. and Colonial Bagels,
L.P. The Company does not believe Lawrence Beck is an affiliate of the Company.
In addition, Messrs. Scott Beck, Jeffrey L. Butler, President of Einstein Bros.
Bagels Concept, W. Eric Carlborg, Chief Financial Officer, David G. Stanchak,
Chief Development Officer, and John H. Muhlstein, Jr. and Lloyd D. Ruth,
directors of the Company, each own a direct equity interest in Bagel Store
Development Funding, L.L.C. ("Bagel Funding"), which has invested approximately
$89.5 million in the Company's area developers. All of such individuals'
interests aggregate approximately 8.2% of the outstanding equity interests in
Bagel Funding.
DEVELOPMENT AGREEMENTS
The Company's form of area development agreement currently provides for the
development of a specified number of bagel stores of a specified brand within a
defined geographic territory in accordance with a schedule of store opening
dates. As of April 21, 1997, the Company had entered into area development
agreements that provide for the development of 1,047 additional stores. The
development schedule generally covers two to five years and contains 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 DMAs. Area
developers generally pay an initial 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 for which such fees have been paid is opened. The area
development agreements generally provide that the area 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 generally preclude the Company
from operating or franchising bagel stores of the brand for which rights have
been granted within such territory, except that, subject to certain area
developer rights of first refusal, the Company reserves the right to engage in
certain limited special distribution arrangements and 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.
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" (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 had previously 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 $40,000 per store. The
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Company currently specifies off-the-shelf computer hardware for use in stores
and charges fees aggregating $16,000 for licensed software for store systems,
$15,000 of which is paid to Boston Chicken and $1,000 of which is paid to a
third-party for certain proprietary software which the area developer is
required to use under an existing 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's area developers pay $323 to Boston Chicken and the Company's area
developers pay an additional $77 to the Company per four-week accounting period
per store for these services. The Company believes that the integrated hardware
and licensed software systems used by its area developers facilitate the
movement of knowledge, including financial, customer and employee performance
data, allowing the Company and its area developers to react 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 (generally
limited to bagel stores of the brand that has been licensed to the franchisee),
except that the Company reserves the right to engage in certain limited 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.
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. The Company is specifically authorized to take
accelerated action in the event that the operations of any franchise 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.
AREA DEVELOPER FINANCING
Secured Loan Agreements. Each of the Company's area developers is 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 Company's loan agreements with its area developers generally
require the area developer to expend at least 75% of its equity capital on
developing stores 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
contributed capital. The loans are convertible into a majority equity interest
in the area developer at a conversion price set forth in the loan agreement,
which is at a premium over the per unit price paid by investors in the area
developers for their equity investments, after the expiration of a moratorium
period, provided that the area developer has completed not less than 80% of its
store development commitment, or in the event of certain defaults. See Note 11
of Notes to Consolidated Financial Statements. Upon conversion, the Company
would typically become the majority equity owner of the area developer,
resulting in the Company consolidating the area developer's operations in its
financial statements. Consequently, the franchise and related fees earned by
the Company (including interest, royalties, real estate-related fees, software
fees, and other fees) from such area developer would be eliminated in
consolidation. The operating results of the area developer (primarily store
revenue, less expenses) would be included in the Company's financial results.
Such results would be adjusted for any remaining minority interest in the area
developer not acquired by the Company.
Each area developer loan agreement contains customary secured loan agreement
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 Consolidated Financial
Statements.
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As a result of executing the rapid expansion strategy required by the Company,
the Company's area developers have incurred aggregate net losses of $1.3 million
in 1995 (during which period most stores were operated by the Company) and $40.6
million in 1996, which amounts included (a) approximately $10.5 million of
depreciation and amortization charges, (b) approximately $26.0 million
attributable to investment overhead, scale inefficiencies in operating overhead,
and other start-up costs which the Company believes are necessary to establish
the Einstein Bros. Bagels and Noah's New York Bagels brands in new territories
and open stores at a rate sufficient to gain a competitive advantage over
similar concepts, and (c) royalties, interest, and other franchise-related fees
that would no longer be incurred in the event the Company acquired, or converted
its convertible secured loans to its area developers. As a result of the
foregoing factors, as well as ongoing improvements to store operating
performance and increases in scale efficiencies, the Company does not consider
these start-up losses to be a meaningful financial measure during this rapid
expansion phase (i.e., that period during which new stores constitute a
significant percentage of the store base). The Company believes the rapid
expansion phase for most of its area developers should last approximately three
to four years from the time significant development commences in an area
developer's DMA. As the rapid expansion phase ends, the size of an area
developer's store base should enable the area developer to gradually reduce and
eventually recover start-up losses. The reduction in and recovery of losses are
expected to be driven primarily by lower investment overhead, increased
operational and advertising efficiencies, greater economies of scale, and
increases in store revenue through continued product and service enhancements.
The point at which losses may be recovered will vary by area developer depending
primarily upon the size and timing of the area developer's store development
schedule, the achievement of advertising efficiency, the level of debt and
interest charges, the intensity of competition and the quality of management;
however, there can be no assurance that such losses will be recovered. Because
a majority of the Company's area developers are less than one year into
significant store development in their respective DMAs, the Company believes
they will remain in the rapid expansion phase during 1997. Subsequent to the
completion of the rapid expansion phase, the Company expects area developer
profitability to be a more meaningful factor in assessing loan recoverability
and any future loan commitments. Although the Company believes its current area
developers will achieve profitability, in the event the foregoing strategy does
not come to fruition or an area developer otherwise fails to achieve a
sufficient level of profitability subsequent to the completion of its rapid
expansion phase, such event could have a material adverse impact on the
Company's financial position and results of operations. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 2.
Conversion or Acquisition Criteria. As of April 21, 1997, the Company had not
converted (nor did it have the right to convert) any loan to any area developer
or otherwise acquired any equity interest in any area developer. Any
determination to convert any area developer loan or otherwise acquire an equity
interest in any developer would involve a variety of economic and operational
considerations, including the projected financial impact of converting the loan,
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 and the
willingness of the Company to incur the risk of owning such stores versus
receiving income as a franchisor, lender, and service provider, the Company's
ability to manage stores if necessary, the future capital requirements of the
area developer and its ability to raise a portion of such capital, and the
demand on Company resources. However, factors or circumstances unique to a
specific transaction may also impact the Company's decision. 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. There can be no assurance that the Company will exercise its future
rights to acquire an equity interest in any area developer to which it provides
financing or that such exercise will result in control of the area developer.
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 of such investments varies among area developers. Future investments
by management or others could include contributions of assets. In addition to
direct equity investments provided by area developer management, equity
investments in the Company's area developers are made by Bagel Funding, formed
in December 1995 to invest in area developers of the Company. Bagel Funding has
received total capital contributions from its members aggregating $89.5 million,
all of which has been invested by Bagel Funding in the Company's area
developers. The Company is currently the manager of Bagel Funding, but has no
equity interest in Bagel Funding. See Notes 10 and 13 of Notes to Consolidated
Financial Statements.
Bagel Funding has the right to require an area developer to redeem Bagel
Funding's equity interest in such area developer at a pre-determined formula
purchase price based on store level cash flow of the area developer in the event
(i) the Company acquires a majority equity 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 the area
developer's request to undertake a firm commitment underwritten public offering
of area developer's equity, or (iii) the Company does not acquire a majority
interest in the area developer pursuant to the exercise of the Company's
conversion or option rights, such rights have expired under the secured
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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.
MARKETING AND COMPETITION
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's area developers utilize community involvement as a
means of providing charitable service, as well as building brand awareness and
loyalty. The Company's area developers also utilize the traditional marketing
and advertising methods of 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. The
Company's area developers are currently testing a combination of multi-media and
consumer promotions designed to launch the Company's brands in local markets and
to build strong brand awareness in a short time. Area developer stores are
generally required to contribute to a national advertising fund and a local
advertising fund to pay for the development of advertising material and for
advertising in their respective DMAs. See "-- Franchise Agreements" and Note 9
of Notes to Consolidated Financial Statements.
The food service industry is intensely competitive with respect to food
quality, concept, location, service and price. 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 Bruegger's Bagel Bakery), specialty coffee
retailers, doughnut shops, fast-food restaurants, delicatessens, take-out food
service companies, supermarkets and convenience stores. 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 food quality, convenience, service and price.
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 (including food-borne illness claims) or operating issues
stemming from one store or a limited number of stores, whether or not the
Company is liable. Claims relating to foreign objects, food-borne illness or
operating issues are common in the food service industry and a number of such
claims may exist at any given time. In addition, factors such as increased cost
of goods, labor and employee benefits 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 adversely affect the Company and some or all of
its area developers.
VENDORS
In May 1996, the Company entered into a project and approved supplier
agreement (the "Harlan Supply Agreement") with Harlan Bagel Supply Company,
L.L.C. ("Harlan") and the equity owners of Harlan. Under the Harlan Supply
Agreement, Harlan has agreed to sell to the Company, its area developers and
their food service distributors frozen bagel dough, for which such purchasers
will be charged a price equal to the cost of ingredients and packaging, will
absorb an agreed upon allowance for product losses and will 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 their food service distributors to purchase certain
minimum numbers of bagels). Harlan has granted to 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 equal to a multiple of Harlan's
profits from sales of products under the Harlan Supply Agreement. The Company
owns certain equipment used in the Harlan Facility which is leased to Harlan
pursuant to an operating lease.
The Company also expects to enter into an approved supplier agreement with
Noah's Pacific, L.L.C. ("Noah's Pacific"), an area developer of the Company to
whom the Company currently subleases a dough production facility in Whittier,
California (the "Whittier Facility"), or with a third party bagel producer to
whom the Whittier Facility would be transferred (Noah's Pacific or such third
party producer being referred to herein as the "Whittier Supplier"). Under such
an agreement,
8
<PAGE>
the Whittier Supplier would agree to sell bagels to the Company, its area
developers and their food service distributors for sale in Einstein Bros. Bagels
stores. Noah's Pacific has recently completed the installation of a frozen bagel
dough production line in the Whittier Facility. The Company owns certain
equipment in the Whittier Facility which is leased to Noah's Pacific pursuant to
an operating lease.
The Company is a party to a cream cheese supply agreement and certain related
agreements (the "Doc's Agreements") with Doc's Cheese Company, L.L.C. ("Doc's").
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 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. 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 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 recently approved
another vendor for sale of cream cheese to its area developers but does not have
a long-term supply agreement with such new vendor.
The Company has a long-term distribution agreement with Marriott Distribution
Services, Inc. ("Marriott"), which provides for distribution of food, beverages
and supplies to stores operated by the Company and its area developers at a
negotiated fixed mark-up above cost. The Company and its area developers
currently purchase in excess of 10% of their products and supplies from
Marriott. Certain vendors have provided funds to the national advertising fund
to be used by such fund for advertising and promotions.
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.
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), Noah's
Shmears(R), Shmear 'Em(R), Protect Your Bagels, Put Lox on Them(R), The Veg
Out(R) and Veggie Confetti(R). In addition, the Company has federal trademark
applications pending for a number of trademarks and service marks, including
Just Say Noah's(TM), Einstein Bros.(TM), Melvyn & Elmo's(TM) and Man Cannot Live
on Great Bagels Alone(TM), as well as the Einstein Bros. logo and certain other
logos used by the Company. The Company has applied to register Noah's New York
Bagels(R) in more than 30 foreign countries and Einstein Bros. Bagels(TM) in
approximately 70 foreign countries. Most of such pending applications in the
United States and foreign countries were filed in 1995 and 1996. The Company has
not yet obtained federal registrations for the principal trademarks and service
marks used in connection with the Einstein Bros. Bagels stores and products and
there can be no assurance that such registrations will be obtained.
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 may have prior rights
to such marks in their respective localities. While the Company is not aware of
any prior uses that would prevent the use of any of the Company's marks in any
DMA for which it has granted development rights for such marks, 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 actively defends and enforces 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 benefits 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
9
<PAGE>
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.
RELATIONSHIP WITH BOSTON CHICKEN
The Company's rapid growth has been fostered in part by its relationship with
Boston Chicken. Boston Chicken has provided (i) significant capital financing,
(ii) multi-unit retail infrastructure and systems, including accounting,
administration, real estate, and computer and communications services and
systems, and (iii) assistance in recruiting experienced area developer
candidates. The Company believes that the multi-unit retail infrastructure and
services provided by Boston Chicken, pursuant to fee service agreements, allow
the Company to focus its energy and resources on brand and store development.
The Company has granted to Boston Chicken an option (the "BCI Option") to
maintain ownership of shares of common stock of the Company 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. The
BCI Option is exercisable at a per share exercise price equal to (i) the
weighted average price per share at which the Company's common stock is 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. The BCI
Option terminates if (i) Boston Chicken sells or transfers shares of the
Company's 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 the Company's 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. In
determining the percentage ownership of the voting stock of the Company owned by
Boston Chicken for purposes of the BCI Option, the following shares are
excluded: (i) 701,177 shares of the Company's common stock subject to options
granted by Boston Chicken, (ii) any shares of common stock held by officers,
directors or employees of Boston Chicken, and (iii) any shares of common stock
held by any person or entity that would not be counted under generally accepted
accounting principles in determining whether Boston Chicken owns a majority of
the voting stock for consolidated financial statement purposes. Pursuant to
such calculation, as of April 21, 1997, Boston Chicken owned approximately 50.4%
of the outstanding common stock of the Company and the right to purchase
1,109,368 shares of common stock of the Company at prices ranging from $23.28 to
$30.75 per share. The Company also granted Boston Chicken, pursuant to a
registration rights agreement, five demand and unlimited piggyback registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to shares of the Company's common stock owned by Boston Chicken. See
Note 12 of Notes to Consolidated Financial Statements.
Boston Chicken has also provided the Company with a $50.0 million unsecured,
subordinated, non-convertible loan facility. As of May 1, 1997, there was no
balance outstanding under the facility. Interest on the loan will be based on
the reference rate of the Bank of America Illinois plus 0.5%. Any borrowings
outstanding are payable on June 15, 2003. Boston Chicken may satisfy its
funding obligations under the loan facility in either cash or shares of Boston
Chicken common stock. Boston Chicken has agreed to guarantee the price of any
shares of common stock delivered to the Company in satisfaction of its
obligations under the loan facility and thereafter sold by the Company.
During fiscal 1996, the Company and Boston Chicken were parties to several fee
service agreements, pursuant to which Boston Chicken provided the Company with
infrastructure support services, including accounting and administration
services, financial services, real estate services and computer and
communications services. During fiscal 1996, the Company paid Boston Chicken an
aggregate of approximately $10.2 million pursuant to such agreements. Boston
Chicken continues to provide the Company with certain accounting and
administration and computer and communications services pursuant to such
agreements. The Company and Boston Chicken are also parties to two subleases,
pursuant to which the Company is entitled to the non-exclusive use of aircraft
leased by Boston Chicken from unaffiliated third party leasing companies.
During fiscal 1996, the Company paid Boston Chicken an aggregate of
approximately $.5 million under the
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two subleases. In addition, Boston Chicken subleases to the Company
approximately 38,000 square feet of office space (and certain common areas,
including parking areas) for the Company's support center located in Golden,
Colorado. The sublease currently provides for rental payments of $38,000 per
month and has an initial term of 15 years expiring in August 2011. The Company's
agreements with Boston Chicken were negotiated at arms' length and the Company
believes that terms of such agreements are as favorable to the Company as those
that it would have with an unaffiliated third party.
EMPLOYEES
At April 21, 1997, the Company had approximately 124 employees. None of the
Company's employees are represented by a labor union or covered by a collective
bargaining contract. The Company believes that its relationship with its
employees is good.
EXECUTIVE OFFICERS
Set forth below are the names and ages of the executive officers of the
Company, the positions they hold with the Company, and summaries of their
business experience. Executive officers are elected by, and serve at the
discretion of the Board of Directors. The executive officers of the Company are
as follows:
Scott A. Beck, age 38, became Chairman of the Board of the Company in July
1996. Mr. Beck has served as a director of the Company since March 1995. He
has been Chief Executive Officer and a director of Boston Chicken since June
1992 and has served as Chairman or Co-Chairman of the Board of Boston Chicken
since that date. In January 1997, he also assumed the responsibilities of
President of Boston Chicken. He was Vice Chairman of the Board of Blockbuster
Entertainment Corporation ("Blockbuster") in Fort Lauderdale, Florida from
September 1989 until his retirement in January 1992 and Chief Operating Officer
of Blockbuster from September 1989 to January 1991. From June 1987 to August
1989, Mr. Beck was Managing Partner of Blockbuster's first and largest
franchisee until its acquisition by Blockbuster in 1989. Since 1980, Mr. Beck
also has been President of Pace Affiliates, Inc., an investment banking firm he
founded.
Mark R. Goldston, age 42, 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 and
in August 1996, he became a Vice Chairman of the Board and a director of Boston
Chicken. From July 1994 to April 1996, Mr. Goldston was Chairman and Chief
Executive Officer of The Goldston Group, a strategic advisory firm. From
October 1991 to June 1994, Mr. Goldston served as President and Chief Operating
Officer of L.A. Gear, Inc.
W. Eric Carlborg, age 33, became Chief Financial Officer in April 1997. Prior
thereto he was Senior Vice President -- Finance of the Company since July 1996.
From October 1995 through June 1996, he was Vice President of Alignment and
Planning of Boston Chicken. Prior to that time, Mr. Carlborg served as Vice
President -- Corporate Finance of Merrill Lynch from January 1994 to October
1995 and served as an Associate of Merrill Lynch from August 1989 through
December 1993.
David G. Stanchak, age 38, became a director 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.
Jeffrey L. Butler, age 35, 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 to that time, he was employed by BC
Great Lakes, L.L.C., an area developer of Boston Chicken ("BC Great Lakes"),
since June 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 to that time, Mr. Butler
was an independent consultant from July 1991 until January 1992.
Joel M. Alam, age 39, became a Senior Vice President of the Company in
February 1997 and has been Secretary of the Company since April 1995. From
April 1995 to February 1997, he was a Vice President of the Company. 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 to that time, Mr. Alam was an associate at the
Chicago law firm of Bell, Boyd & Lloyd from 1986 to May 1993.
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<PAGE>
Paul A. Strasen, age 40, became a Senior Vice President of the Company in
February 1997 and has been General Counsel of the Company since April 1995.
From April 1995 to February 1997, he was a Vice President of the Company. Prior
to that time, he was a partner at the Chicago law firm of Bell, Boyd & Lloyd
from 1988 to April 1995.
Theodore P. Heininger, age 43, became Vice President-Controller of the Company
in March 1997. Prior to that time, he served as Vice President of Performance
Evaluation since January 1996 and was the Company's Controller from April 1995
until January 1996. From June 1993 to March 1995, Mr. Heininger was employed as
Vice President and Chief Financial Officer with Meyercord Co., a subsidiary of
the Berwind Group in Carol Stream, Illinois. He served as Vice President and
Chief Financial Officer of GPS Healthcare, also a subsidiary of the Berwind
Group, in Pottsville, Pennsylvania, from October 1990 to May 1993. Mr.
Heininger is a certified public accountant.
ITEM 2. PROPERTIES
The Company leases its support center facility in Golden, Colorado, which
consists of approximately 38,000 square feet of office space (and certain common
areas, including parking areas), from Boston Chicken. The Company also leases
office space in Los Angeles, California.
The Company and its subsidiaries also lease sites for stores and commissaries
that are subleased 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 and
commissaries to the extent acceptable terms are available.
Stores and commissaries leased by the Company are typically leased under
"triple net" leases that require the lessee to pay its proportionate share of
real estate taxes, maintenance costs and insurance premiums. In some cases,
store leases require not only base rent but also 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 two or three additional
five-year periods at market rates.
A subsidiary of the Company leases dough production facilities in San Leandro
and Whittier, California, which are subleased to one of the Company's area
developers.
ITEM 3. 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 (including food-borne illness
claims) or operational concerns. Claims relating to foreign objects, food-borne
illness or operating issues are common in the food service industry and a number
of such claims may exist at any given time. Adverse publicity resulting from
such allegations may materially adversely affect the Company and one or more 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.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of fiscal 1996.
12
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the high and low sales prices of the common
stock during each of the Company's fiscal quarters since its initial public
offering of common stock on August 1, 1996, as quoted on the Nasdaq National
Market as reported by The Wall Street Journal (Western Edition).
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1996:
Third Quarter (ended October 6, 1996) 36 1/2 19
Fourth Quarter (ended December 29, 1996) 36 1/8 29 1/4
</TABLE>
As of April 21, 1997, there were approximately 730 record holders of the
common stock.
The Company has never paid cash dividends on its common stock and the Board of
Directors intends to continue a policy of retaining any earnings for use in the
Company's operations. The Company does not anticipate paying any cash dividends
in the foreseeable future. In addition, the Company's current revolving credit
facilities contain prohibitions on the payment of any cash dividends.
During the fourth quarter of 1996, the Company issued an aggregate of 124,139
shares of common stock pursuant to the exercise of warrants for an aggregate
exercise price of $803,179.33. The shares of common stock issued upon exercise
of such warrants were sold without registration under the Securities Act of
1933, as amended (the "Securities Act"), in reliance on Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated under the Securities
Act.
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<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial and store data
for the Company. This data should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto included in Item 8
hereof and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in Item 7 hereof.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 24, 1995
(INCEPTION) FISCAL YEAR
THROUGH ENDED
DECEMBER 31, 1995 DECEMBER 29, 1996(1)
--------------------- ----------------------
(In thousands, except share data and number of stores)
<S> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue:
Company stores............ $ 25,685 $ 35,803
Royalties and franchise
related fees............. 671 19,918
Interest income........... 67 5,986
-------------- -------------
Total revenue........... 26,423 61,707
Cost and expenses:
Cost of products sold..... 8,239 11,546
Salaries and benefits..... 13,531 18,302
General and
administrative expenses.. 47,805(2) 21,820
-------------- -------------
69,575 51,668
-------------- -------------
Income (loss) from
operations................ (43,152) 10,039
Other expense, net......... (564) (4,332)
-------------- -------------
Net income (loss).......... $(43,716) $ 5,707
============== =============
Net income (loss) per
common and equivalent
share..................... $ (4.54) $0.25
============== =============
Weighted average number
of common and equivalent
shares outstanding during
the period............... 9,659 22,344
============== =============
STORE DATA (UNAUDITED):
Systemwide revenue (3)..... $ 26,986 $145,631
============== =============
Number of stores:
Beginning of period....... - 60
Opened or acquired........ 60 266
Closed (4)................ - (11)
-------------- -------------
End of year............... 60 315
============== =============
Company stores............ 47 14
Area developer stores..... 13 301
CONSOLIDATED BALANCE SHEET
DATA:
Working capital............ $ 41 $ 46,421
Notes receivable........... 7,267 146,087
Total assets............... 50,299 332,418
Long-term debt (5)......... 58,875 -
Stockholders' equity
(deficit)................. $(20,994) $315,517
</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.
(2) Includes a $25,575,000 write-off of intangible assets. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations".
(3) Includes gross revenue for all stores in the Einstein/Noah Bagel Corp.
system.
(4) Such stores were closed because the sites were determined to be unsuitable
for the Einstein Bros. Bagels brand and store. The Company closed five
stores in Colorado and one store in California and area developers closed
the remaining stores located in three states. Such stores were open for an
average of approximately 23 months prior to closing. Costs associated with
such closings were expensed by the owners of such stores.
(5) Includes at December 31, 1995, $11,062,000 attributable to repurchase common
stock shares and $7,813,000 attributable to Series A preferred stock. See
Note 12 of Notes to Consolidated Financial Statements.
14
<PAGE>
ITEM 7: 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 has sold all of the stores operated by it to area
developers financed in part by the Company. Because the Company has sold all of
its 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 derived principally from royalties, franchise-related
fees and interest income from its area developers as opposed to revenue from
Company stores. Consequently, comparisons of operating results to date may not
be meaningful.
The Company currently estimates that there will be between 615 and 665 stores
in operation systemwide by the end of 1997. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGE 2. This rapid expansion significantly
affects the comparability of results of operations from period to period in a
number of ways. store revenue is generally 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 franchise stores and those of
competitors, the size of the store and its visibility. Further, salaries,
benefits and the cost of products sold are 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.
As of April 21, 1997, Boston Chicken owned a majority of the voting stock of
the Company. In addition, Boston Chicken has an option that permits 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. See "Item 1.
Business--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 and computer and
communications services. Boston Chicken has also made available to the Company a
non-convertible loan facility of up to $50.0 million. See "-- Liquidity and
Capital Resources."
RESULTS OF OPERATIONS
Fiscal year ended December 29, 1996 compared to the period beginning March 24,
1995 (inception) and ended December 31, 1995
Revenue. Total revenue increased 134% for the year ended December 29, 1996
over the prior period. Royalties and franchise-related fees were $19.9 million
compared to $671,000 in the prior period, caused by an increase in stores opened
and operated by area developers, which totaled 301 as of December 29, 1996
compared to 13 as of December 31, 1995. Interest income was $6.0 million
compared to $67,000 in the prior period, due to higher interest income generated
on increased loans made to area developers. Revenue from Company stores
increased 39% for the year ended December 29, 1996 to $35.8 million from $25.7
million in the prior period. The increase was due to the revenue from acquired
stores and stores opened by the Company prior to being sold to area developers.
Cost of Products Sold. Cost of products sold increased 40% to $11.5 million
for the year ended December 29, 1996, compared to $8.2 million in the prior
period. The increase was primarily due to the increase in revenue from Company
stores. Cost of products sold, as a percentage of Company store revenue,
increased to 32.2% in 1996 from 32.1% in 1995.
Salaries and Benefits. Salaries and benefits increased 35% to $18.3 million
for the year ended December 29, 1996, compared to $13.5 million in the prior
period. The increase in salaries and benefits was due to a greater number of
Company stores in 1996 and an increase in the number of employees at the
Company's support center necessary to support systemwide expansion.
General and Administrative. General and administrative expenses decreased 54%
to $21.8 million for the year ended December 29, 1996 compared to $47.8 million
in the prior period. The decrease was due primarily to a $26.6 million write-
off of intangible assets in the prior period. After the acquisition of Brackman
Brothers, Inc., Bagel & Bagel, Inc.,
15
<PAGE>
Offerdahl's Bagel Gourmet, Inc. and Baltimore Bagel Co. (collectively the
"Founding Companies"), the Company launched a development project, pursuant to
which management analyzed (i) the Founding Companies' stores, including brand
positioning, 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 identifiable intangible assets acquired in the
acquisitions of the Founding Companies, including trademarks and recipes. This
change in business strategy resulted in an impairment of such intangible assets,
and accordingly, the assets were written down to their fair market values. In
addition, in 1995, certain acquired store locations were determined to be
unsuitable for the Einstein Bros. Bagels brand and store, resulting in a $2.4
million provision for anticipated costs required to close those locations.
Absent these write-downs, general and administrative expenses increased 16% for
the year ended December 29, 1996 compared to the prior period. This increase was
due to an increase in expenditures at the Company's support center necessary to
support systemwide expansion and a greater number of Company stores in 1996.
Included in general and administrative expenses are depreciation and
amortization charges of $5.4 million in fiscal year 1996 and $1.7 million in the
prior period. The increase in depreciation and amortization charges was
primarily attributable to the goodwill and intangible assets related to the
acquisition of Noah's in February 1996.
Other Income (Expense). The Company incurred other expense of $4.3 million
for the year ended December 29, 1996, compared to $564,000 in the prior period.
The increase reflects higher net interest expense attributable to borrowings
under the Company's loan agreements, offset by gains recognized on the sale of
marketable equity securities.
Income Taxes. No income tax expense has been recorded for the year ended
December 29, 1996 or the prior period. During 1996, the Company recognized a
portion of its deferred tax asset which resulted in no tax expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations in 1996 totaled $6.5 million, an increase of
$18.8 million from the cash used in operations in 1995 of $12.3 million. The
primary cause of the change resulted from the Company incurring a net loss of
$43.7 million in 1995 compared to net income of $5.7 million in 1996. Included
in the 1995 net loss was a non-cash charge of $26.6 million to write-off
intangible assets. See "-- Results of Operations -- General and
Administrative."
Cash provided from financing activities totaled $271.6 million in 1996. In
August 1996, the Company completed an underwritten initial public offering of
3,105,000 shares of its common stock, a concurrent non-underwritten public
offering of 425,000 shares of its common stock and a concurrent private
placement of 2,000,000 shares of its common stock to Boston Chicken. In
December 1996, the Company completed an underwritten offering of 2,640,000
shares of its common stock to the public and a concurrent non-underwritten
public offering of 500,000 shares of its common stock to Boston Chicken. The
aggregate net proceeds of all these offerings totaled approximately $174.6
million. In 1996, the Company borrowed $80.0 million from Boston Chicken under
its convertible secured loan agreement resulting in a $120.0 million outstanding
balance. In June 1996, Boston Chicken converted the entire $120.0 million
balance of convertible debt into 15,307,421 shares of common stock of the
Company. As of December 29, 1996, the Company had $50.7 million available in
cash and cash equivalents. In addition, the Company had a $50.0 million non-
convertible credit facility with Boston Chicken and a $45.0 million senior
secured credit facility with Bank of America Illinois and the lenders named
therein. No balance was outstanding under either facility at December 29, 1996.
During 1995, the Company borrowed $40.0 million from Boston Chicken under its
convertible secured loan agreement (which Boston Chicken converted to equity of
the Company in 1996) and raised $20.8 million from the sale of approximately
3,500,000 shares of its common stock.
The Company's primary use of capital reflects its goal of establishing brand
awareness and market leadership by providing partial financing to its area
developers for their use in rapid store development and to finance their working
capital needs. As of December 29, 1996, the Company had secured loan
commitments to its area developers aggregating $283.2 million, of which $140.8
million had been advanced. Net loan advances to area developers were $137.3
million in 1996 (consisting of $206.8 million of loan advances, net of $69.5
million of loan repayments) and $3.6 million in 1995 (consisting of $7.4 million
of loan advances net of $3.8 million of loan repayments). The majority of the
loan advance and repayment activity reflects the revolving nature of the loans;
that is, amounts are drawn and repaid on a regular basis to optimize cash
management. The increase in loan advances was attributable to the increase in
the number of area developer stores opened in 1996 compared to 1995.
16
<PAGE>
As a result of executing the rapid expansion strategy required by the Company,
the Company's area developers have incurred aggregate net losses of $1.3 million
in 1995 (during which period most stores were operated by the Company) and $40.6
million in 1996, which amounts included (a) approximately $10.5 million of
depreciation and amortization charges, (b) approximately $26.0 million
attributable to investment overhead, scale inefficiencies in operating overhead,
and other start-up costs which the Company believes are necessary to establish
the Einstein Bros. Bagels and Noah's New York Bagels brands in new territories
and open stores at a rate sufficient to gain a competitive advantage over
similar concepts, and (c) royalties, interest, and other franchise-related fees
that would no longer be incurred in the event the Company acquired, or converted
its convertible secured loans to its area developers. As a result of the
foregoing factors, as well as ongoing improvements to store operating
performance and increases in scale efficiencies, the Company does not consider
these start-up losses to be a meaningful financial measure during this rapid
expansion phase (i.e., that period during which new stores constitute a
significant percentage of the store base). The Company believes the rapid
expansion phase for most of its area developers should last approximately three
to four years from the time significant development commences in an area
developer's DMA. As the rapid expansion phase ends, the size of an area
developer's store base should enable the area developer to gradually reduce and
eventually recover start-up losses. The reduction in and recovery of losses are
expected to be driven primarily by lower investment overhead, increased
operational and advertising efficiencies, greater economies of scale, and
increases in store revenue through continued product and service enhancements.
The point at which losses may be recovered will vary by area developer depending
primarily upon the size and timing of the area developer's store development
schedule, the achievement of advertising efficiency, the level of debt and
interest charges, the intensity of competition and the quality of management;
however, there can be no assurance that such losses will be recovered. Because
a majority of the Company's area developers are less than one year into
significant store development in their respective DMAs, the Company believes
they will remain in the rapid expansion phase during 1997. Subsequent to the
completion of the rapid expansion phase, the Company expects area developer
profitability to be a more meaningful factor in assessing loan recoverability
and any future loan commitments. Although the Company believes its current area
developers will achieve profitability, in the event the foregoing strategy does
not come to fruition or an area developer otherwise fails to achieve a
sufficient level of profitability subsequent to the completion of its rapid
expansion phase, such event could have material adverse impact on the Company's
financial position and results of operations. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGE 2.
The allowance for area developers' loan 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 use of
loan proceeds, adherence to store development schedules, store performance
trends, type and amount of collateral securing the loan, prevailing economic
conditions, and other factors that management deems relevant at the time. Based
upon this review and analysis, no allowance for loan losses was required as of
December 31, 1995 and December 29, 1996.
Area developer loans are convertible into a majority equity interest in the
area developer at a conversion price set forth in the loan agreement, which is
at a premium over the per unit price paid by investors in the area developer for
their equity investments, after the expiration of a moratorium period, provided
that the area developer has completed not less than 80% of its area development
commitment, or in the event of certain defaults. Any determination to convert
any area developer loan or otherwise acquire an equity interest in any area
developer would involve a variety of economic and operational considerations,
including the projected financial impact of converting the loan, 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 and the willingness of the
Company to incur the risk of owning such stores versus receiving income as a
franchisor, lender, and service provider, the Company's ability to manage stores
if necessary, the future capital requirements of the area developer and its
ability to raise a portion of such capital, and the demand on Company resources.
However, factors and circumstances unique to a specific transaction may also
impact the Company's decision. 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. There can be no
assurance that the Company will exercise its future rights to acquire an equity
interest in any area developer to which it provides financing or that such
exercise will result in control of the area developer. At April 21, 1997, the
Company had not converted (nor did it have the right to convert) any loan to any
area developer or otherwise acquired any equity interest in any area developer.
In addition to providing funding to its area developers, the Company's capital
requirements have consisted of store acquisition and development, development of
its corporate infrastructure, which supports systemwide expansion, and
investments in food production facilities. In 1996, the Company expended $107.9
million on store acquisition and development, including the acquisition of all
the capital stock of Noah's for $100.9 million. In 1995, the Company expended
$16.9 million on store acquisition and development. In 1996, the Company
expended $10.1 million on its corporate infrastructure and investments in food
production facilities compared to $1.2 million in 1995. These capital
17
<PAGE>
expenditures have been offset with proceeds from selling Company stores. The
Company generated $49.9 million in 1996 and $5.5 million in 1995 from the sale
of stores to newly-formed area developers. There were no material gains or
losses recognized as a result of these sales. The Company completed its
practice of selling Company stores to newly-formed area developers during the
first quarter of 1997. Consequently, the Company does not anticipate it will
realize cash proceeds from the sale of stores in the future.
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 stores opened, operational
results of the stores, and the amount and timing of borrowings under the loan
agreements between the Company and its 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. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON
PAGE 2.
SEASONALITY
Historically, the Company has experienced lower average store revenue during
the November and December holiday periods.
IMPACT OF INFLATION
The Company believes that inflation has not had a material impact on its
operations to date. Substantial increases in the cost of labor, employee
benefits, food and other operating expenses could adversely affect store
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
The following table shows quarterly financial results for the period from
March 24, 1995 (inception) through December 31, 1995 and fiscal 1996. The first
quarter consists of four four-week periods (first quarter 1995 data is for the
period from March 24, 1995 (inception) through April 16, 1995) and the second,
third and fourth quarters consist of three four-week periods, except the fourth
quarter in 1995, which consists of two four-week periods and one five-week
period.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1995: QUARTER QUARTER QUARTER QUARTER
- ----- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue........................... $ 1,423 $ 6,292 $ 8,483 $ 10,225
Loss from Operations.............. (180) (1,784) (30,220) (10,968)
Net Loss.......................... (260) (1,924) (30,010) (11,522)
Net Loss per Common and
Equivalent Share................ $ (0.03) $ (0.20) $ (3.11) $ (1.20)
1996:
- -----
Revenue........................... $22,379 $18,206 $ 10,257 $ 10,865
Income (Loss) from Operations..... (1,270) 2,303 4,235 4,771
Net Income (Loss)................. (3,317) 295 3,953 4,776
Net Income (Loss) per Common and
Equivalent Share................ $ (0.35) $ 0.01 $ 0.13 $ 0.15
</TABLE>
18
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Public Accountants..................... 20
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1995 and
December 29, 1996........................................ 21
Consolidated Statements of Operations for the period
from March 24, 1995 (inception) through December 31,
1995 and the fiscal year ended December 29, 1996......... 22
Consolidated Statements of Stockholders' Equity (Deficit)
for the period from March 24, 1995 (inception) through
December 31, 1995, and the fiscal year ended December 29,
1996.................................................. 23
Consolidated Statements of Cash Flows for the period
from March 24, 1995 (inception) through December 31, 1995
and the fiscal year ended December 29, 1996.............. 24
Notes to Consolidated Financial Statements................ 25
Report of Independent Public
Accountants on Schedule II.................................. 39
Supplemental Schedule II..................................... 40
</TABLE>
19
<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 sheets of Einstein/Noah
Bagel Corp. (a Delaware corporation) and subsidiaries as of December 31, 1995
and December 29, 1996, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the period from March 24, 1995
(inception) through December 31, 1995, and for the fiscal year ended December
29, 1996. 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 financial position of Einstein/Noah Bagel Corp. and
subsidiaries as of December 31, 1995 and December 29, 1996, and the results of
their operations and their cash flows for the period from March 24, 1995
(inception) through December 31, 1995 and for the fiscal year ended December 29,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 24, 1997
20
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
-------------- -------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents.............. $ 5,368 $ 50,741
Accounts receivable, net............... 1,327 5,589
Prepaid expenses and other current
assets................................ 2,592 579
-------------- -------------
Total current assets.................. 9,287 56,909
Property and Equipment, net............. 19,410 28,213
Notes Receivable........................ 7,267 146,087
Goodwill, net........................... 13,715 68,921
Trademarks, net......................... - 22,239
Recipes, net............................ - 4,758
Other Assets, net....................... 620 5,291
-------------- -------------
Total assets.......................... $ 50,299 $332,418
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
- ----------------------------------------
Current Liabilities:
Accounts payable....................... $ 5,633 $ 3,873
Accrued expenses....................... 2,968 3,615
Deferred franchise revenue............. 645 3,000
-------------- -------------
Total current liabilities............. 9,246 10,488
Convertible Debt........................ 40,000 -
Deferred Franchise Revenue.............. 265 6,105
Other Noncurrent Liabilities............ 2,907 308
Repurchase Common Stock Shares -
1,721,250 issued and outstanding in
1995................................... 11,062 -
Series A Preferred Stock - 6,250 issued
and outstanding in 1995................ 7,813 -
Commitments and Contingencies
Stockholders' Equity (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 in 1995 and 32,299,756
issued and outstanding in 1996........ 38 323
Additional paid-in capital............. 22,684 353,203
Accumulated deficit.................... (43,716) (38,009)
Total stockholders' equity (deficit).. (20,994) 315,517
-------------- -------------
Total liabilities and stockholders'
equity (deficit).................... $ 50,299 $332,418
============== ===============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
21
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Period from
March 24, 1995 Fiscal
(inception) Year
through Ended
December 31, December 29,
1995 1996
---------------- -------------
<S> <C> <C>
Revenue:
Company stores........................ $ 25,685 $35,803
Royalties and franchise-related fees.. 671 19,918
Interest income....................... 67 5,986
---------------- -------------
Total revenue....................... 26,423 61,707
Costs and Expenses:
Cost of products sold................. 8,239 11,546
Salaries and benefits................. 13,531 18,302
General and administrative............ 47,805 21,820
---------------- -------------
Total costs and expenses............ 69,575 51,668
---------------- -------------
Income (Loss) from Operations.......... (43,152) 10,039
Other Income (Expense):
Interest expense, net................. (1,281) (6,261)
Other income, net..................... 717 1,929
Total other income (expense)........ (564) (4,332)
---------------- -------------
Income (Loss) Before Income Taxes...... (43,716) 5,707
Income Taxes........................... - -
---------------- -------------
Net Income (Loss)...................... $(43,716) $ 5,707
================ =============
Net Income (Loss) Per Common and
Equivalent Share...................... $(4.54) $0.25
================ =============
Weighted Average Number of Common
and Equivalent Shares Outstanding..... 9,659 22,344
================ =============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
22
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Period from
March 24,
1995 Fiscal
(inception) Year
through Ended
December 31, December 29,
1995 1996
------------- -------------
<S> <C> <C>
COMMON STOCK
Balance at beginning of period......... $ - $ 38
Conversion of preferred stock,
repurchase common stock,
and debt.............................. - 175
Issuance of common stock............... 38 96
Exercise of stock options and warrants. - 14
------------- -------------
Balance at end of year................. $ 38 $ 323
============= =============
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period......... $ - $ 22,684
Conversion of preferred stock,
repurchase common stock and
debt.................................. - 140,270
Issuance of common stock, net of
offering costs of $500 in 1995
and $10,343 in 1996................... 22,051 182,491
Exercise of stock options and warrants. - 9,227
Dividends on Series A preferred stock
and accretion of dividends
on repurchase common stock............ (1,077) (1,708)
Issuance of options and warrants....... 1,710 239
------------- -------------
Balance at end of year................. $ 22,684 $353,203
============= =============
ACCUMULATED DEFICIT
Balance at beginning of period......... $ - $(43,716)
Net income (loss)...................... (43,716) 5,707
------------- -------------
Balance at end of year................. $(43,716) $(38,009)
============= =============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
23
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Period from
March 24, 1995 Fiscal
(inception) Year
through Ended
December 31, December 29,
1995 1996
---------------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)...................... $(43,716) $ 5,707
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization........ 1,657 5,431
Warrant and option expense........... 1,710 239
Write-off of intangible assets....... 26,575 -
Gain on the sale of marketable (719) (1,824)
equity securities...................
Changes in assets and liabilities,
net of effect of acquisitions:
Accounts receivable................ (680) (3,966)
Accounts payable and accrued 1,778 (292)
expenses..........................
Deferred franchise revenue......... 910 8,180
Other assets and liabilities....... 173 (7,003)
Net cash provided by (used in)
operating activities............. (12,312) 6,472
---------------- ------------
Cash Flows from Investing Activities:
Purchase of property and equipment..... (18,109) (38,198)
Proceeds from sale of net assets....... 5,519 49,943
Acquisition of Noah's New York Bagels,
Inc., net of cash acquired............ - (100,902)
Purchase of marketable equity
securities, net of proceeds from sales (22,682) 1,824
Purchase of other assets............... (621) (6,552)
Issuance of notes receivable........... (10,569) (209,514)
Repayment of notes receivable.......... 3,831 70,694
---------------- ------------
Net cash used in investing activities (42,631) (232,705)
---------------- ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock. 20,311 191,606
Proceeds from convertible debt......... 91,060 352,272
Repayment of convertible debt.......... (51,060) (272,272)
---------------- ------------
Net cash provided by financing
activities.......................... 60,311 271,606
Net Increase in Cash and Cash
Equivalents............................ 5,368 45,373
Cash and Cash Equivalents, beginning of
period................................. - 5,368
---------------- ------------
Cash and Cash Equivalents, end of year.. $ 5,368 $ 50,741
================ ============
Supplemental Cash Flow Information:
Interest Paid.......................... $ 1,107 $ 7,232
================ ============
Supplemental Schedule of Non-Cash
Activities:
Conversion of debt to common stock..... $ - $ 120,000
================ ============
Conversion of preferred stock,
repurchase common stock
and accrued dividends on preferred
stock............................... $ - $ 20,445
================ ============
Exchange of 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 $ 1,486
============== ============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
24
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Einstein/Noah Bagel Corp. and its subsidiaries (the "Company") franchise and
operate specialty retail stores in the United States that feature fresh-baked
bagels, 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 stores and 13 franchise stores. In 1995,
the Company sold 13 Company stores to area developers of the Company. At
December 29, 1996, there were 315 stores in operation systemwide, consisting of
301 franchise stores and 14 Company stores. In 1996, the Company sold 105
Company stores to 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 franchise
stores.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of Einstein/Noah Bagel Corp. 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, and normally consist of 13 four-week periods. The
first quarter consists of four periods and each of the remaining three quarters
consist of three periods. Fiscal period 1995 was the period from March 24, 1995
(inception) through December 31, 1995. Fiscal year 1996 contained 13 four-week
periods.
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, which are classified in prepaid expenses and other
current assets, 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 with buildings
and improvements being depreciated over 15 to 30 years, leasehold improvements
being amortized over the lesser of their useful lives or their lease terms,
including option periods, furniture, fixtures and equipment being depreciated
over 5 to 8 years, and pre-opening costs being depreciated over one year.
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 store
management activities incurred prior to the opening of new stores.
Long-Lived Assets. The Company evaluates whether events and circumstances
have occurred that indicate revision to the remaining useful lives or the
remaining balances of long-lived assets may be appropriate. Such events and
circumstances include, but are not limited to, a change in business strategy or
a change in current and long-term projected operating performance. When factors
indicate that the carrying amount of an asset may not be recoverable, the
Company estimates the future cash flows expected to result from the use of such
asset and its eventual disposition. If the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the carrying
amount of the asset, the Company will recognize an impairment loss equal to the
excess of the carrying amount over the fair value of the asset.
25
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Revenue Recognition. Revenue from Company stores is recognized in the period
during which related food and beverage products are sold. Royalties are
recognized in the same period that related franchise store revenue is generated.
Revenue derived from initial franchise fees and area development fees is
recognized when the franchise store opens. Real estate fees are recognized as
earned, and lease income is recognized over the life of the lease on a straight-
line basis. Interest income is recognized as earned. The components of royalties
and franchise-related fees are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL PERIOD OR YEAR ENDED
----------------------------
DECEMBER 31, DECEMBER 29,
1995 1996
-------------- ------------
<S> <C> <C>
Initial franchise and area development $ 520 $12,140
fees...................................
Royalties............................... 35 6,086
Real estate fees and lease income....... - 1,564
Other................................... 116 128
-------------- ------------
Total royalties and franchise related $ 671 $19,918
fees...................................
============== ============
</TABLE>
Per Share Data. Net income (loss) per common share is computed by dividing
net income (loss), adjusted for dividends on Series A preferred stock, by the
weighted average number of common shares and dilutive common stock equivalents
outstanding during the period. Common and equivalent shares include any common
stock, options and warrants issued within one year prior to the effective date
of the Company's initial public offering, with a price below the initial public
offering price. These have been included as common stock equivalents
outstanding, 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.
Advertising Costs. Advertising costs are expensed in the period incurred.
Employee Stock Options. The Company accounts for its employee stock options
in accordance with the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25. Required pro forma disclosures of compensation
expense determined under the fair value method of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS
No. 123") are presented in Note 12.
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.
Reclassifications. Certain reclassifications have been made to the 1995
amounts to conform with the 1996 presentation.
26
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO 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. There was no allowance at December 29, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
-------------- ------------
<S> <C> <C>
Property and equipment consists of
(in thousands of dollars):
Land...................................... $ 123 $ 118
Buildings and improvements................ 366 384
Development in progress................... 1,212 1,449
Leasehold improvements.................... 10,505 9,763
Furniture, fixtures and equipment......... 7,544 17,962
Pre-opening expenses...................... 401 -
-------------- ------------
20,151 29,676
Less: Accumulated depreciation and
amortization............................. (741) (1,463)
-------------- ------------
Total property and equipment, net........ $ 19,410 $ 28,213
============== ============
</TABLE>
Included in furniture, fixtures and equipment are $14.9 million (net of
accumulated depreciation of approximately $860,000) of assets leased to
others at December 29, 1996.
Goodwill, trademarks, and recipes are reported net of accumulated amortization
of $2.2 million, $584,000, and $484,000, respectively, as of December 29, 1996.
Goodwill is net of accumulated amortization of $269,000 as of December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------- -----------
<S> <C> <C>
Accrued expenses consist of (in thousands
of dollars):
Accrued payroll and fringe benefits..... $ 876 $ 871
Accrued interest......................... 325 17
Accrued other............................ 1,767 2,727
------------- -----------
Total accrued expenses.................. $ 2,968 $ 3,615
============= ===========
</TABLE>
<TABLE>
<CAPTION>
FISCAL PERIOD OR YEAR ENDED
------------------------------------------------
DECEMBER 31, DECEMBER 29,
1995 1996
------------- -----------
<S> <C> <C>
Interest expense, net consists of (in
thousands of dollars):
Interest expense.......... $ (1,432) $ (6,950)
Interest income........... 151 689
------------- -----------
Total interest expense, net............ $ (1,281) $ (6,261)
============= ===========
</TABLE>
4. ACQUISITIONS
In 1995, the Company acquired four regional bagel companies. In March 1995,
the acquisitions included Brackman Brothers, Inc., for which the Company issued
573,750 shares of common stock valued at $5.88 per share and other marketable
equity securities with a value of $8.3 million, Bagel & Bagel, Inc., for which
the Company issued 573,750 shares of common stock valued at $5.88 per share and
other marketable equity securities with a value of $5.5 million, and Offerdahl's
Bagel Gourmet, Inc., for which the Company issued 811,625 shares of common stock
valued at $5.88 per share and other marketable equity securities with a value of
$5.6 million. In August 1995, the Company acquired Baltimore Bagel Co.
("Baltimore Bagel"), for which the Company issued 6,250 shares of Series A
preferred stock with a value of $7.8
27
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
million and other marketable equity securities with a value of $4.0 million.
Pursuant to the acquisitions, the Company agreed to repurchase up to 1,721,250
shares of the common stock under certain circumstances (see Note 12). The
acquisitions have been accounted for as purchases, and, accordingly, the
purchase prices were allocated to assets (both tangible and intangible) and
liabilities based upon their fair values at the dates of the acquisitions. The
total purchase price for these four companies, including assumption of
liabilities, was $51.1 million, of which $21.2 million was allocated to
trademarks (amortized over a 35-year life), $5.4 million was allocated to
recipes (amortized over a 10-year life) and $14.0 million was allocated to
goodwill (amortized over a 35-year life). Such assets were identified by
management based upon its evaluation of the businesses acquired. The allocation
of the purchase price to trademarks and recipes was based upon a royalty savings
methodology which determines the present value of the stream of royalties which
the Company believes an independent third party would be willing to pay to
obtain the use of such trademarks and recipes. The estimated useful life for
these assets was based upon various factors which existed at the time of the
acquisitions, including the anticipated periods of benefit to be derived from
the utilization of such assets in connection with executing a regional brand
business strategy, increasing consumer demand for bagel products, the lack of a
competitor with national brand awareness, the lack of regulatory limitations on
the potential useful lives of such assets, the absence of any inherent or
technological obsolescence for such assets, and in the case of trademarks, the
long-lived nature of a primary brand name in the consumer marketplace.
Subsequent to these acquisitions, management launched a project which resulted
in the development of the Einstein Bros. Bagels brand and store, at which time
management determined it would discontinue the use of the acquired trademarks
and recipes. Consequently, this change in business strategy resulted in an
impairment of these intangible assets, and, accordingly, the assets were written
down to their fair market values, resulting in a write-off of $26.6 million in
1995.
In February 1996, the Company acquired all of the outstanding capital stock of
Noah's New York Bagels, Inc. for approximately $100.9 million. The acquisition
has been accounted for as a purchase, and, accordingly, the purchase price was
allocated to assets (both tangible and intangible) and liabilities based upon an
evaluation of their fair values at the date of the acquisition. Of the total
purchase price, $22.1 million was allocated to trademarks (amortized over a 35-
year life), $5.2 million was allocated to recipes (amortized over a 10-year
life) and $56.3 million was allocated to goodwill (amortized over a 35-year
life). Such assets were identified by management based upon its evaluation of
the business acquired. The allocation of the purchase price to trademarks and
recipes was based upon the royalty savings methodology described in the
preceding paragraph.
The financial statements include the results of operations for the acquired
entities from their dates of acquisition. The following represents the
unaudited pro forma results of operations as if all of the purchase transactions
described above had occurred at the beginning of the periods presented (in
thousands of dollars, except per share data):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------- ------------
<S> <C> <C>
Revenue...................... $ 70,388 $65,011
Net income (loss)............ (56,236) 3,825
Net income (loss) per share.. (5.82) 0.16
</TABLE>
The pro forma information given above does not purport to be indicative of the
results that actually would have been reported if the transactions had occurred
at the beginning of the periods presented and is not intended to be a projection
of future results or trends.
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.
28
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Notes Receivable. The estimated fair value of notes receivable (Notes 6 and
11), including the conversion option, 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 convertible debt, including the
conversion option, is based on the discounted value of future payments using the
current rate at which similar loans would be made to companies with similar
credit ratings.
Repurchase Common Stock Shares. The estimated fair value of common stock
subject to repurchase by the Company is based on the price of other common stock
transactions near December 31, 1995.
Series A Preferred Stock. The estimated fair value of 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>
DECEMBER 31, 1995 DECEMBER 29, 1996
----------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------------ ----------------- --------------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents............... $ 5,368 $ 5,368 $ 50,741 $ 50,741
Notes receivable........................ 7,267 7,267 146,087 146,087
Convertible debt........................ 40,000 40,000 - -
Repurchase common stock shares.......... 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 (in
thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------------- ---------------
<S> <C> <C>
Due from area developers (Note 11)...... $ 3,538 $140,754
Notes receivable from stockholder....... 1,888 3,437
Term loans.............................. 1,108 1,496
Other................................... 733 400
------------------- ---------------
$ 7,267 $146,087
=================== ===============
</TABLE>
Notes receivable from stockholder bear interest at the applicable reference
rate of Bank of America Illinois ("Reference Rate") plus 1%. Principal and
interest are due April 2001. The notes are collateralized by various assets.
Term loans bear interest at the Reference Rate plus 1%. Principal is due in
annual installments with balloon payments required on various dates through
2001. The loans are collateralized by various assets.
7. DEBT
The Company has a secured revolving credit facility providing for borrowings
of up to $45.0 million through April 30, 1998. Borrowings under the facility
may be either floating rate loans with interest at the Reference Rate plus
applicable margin or, eurodollar rate loans with interest at the eurodollar rate
plus applicable margin. In addition, a commitment fee of .5% of the average
daily unused portion of the loan is required. The facility contains covenants
that, among other things, restrict other borrowings, prohibit cash dividends,
and require maintenance of specified cash flow ratios, store-level sales,
29
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and minimum capital levels. The facility is collateralized by substantially all
of the assets of the Company. As of December 29, 1996, no balance was
outstanding under the facility.
The Company also has an unsecured non-convertible revolving credit facility
from Boston Chicken, Inc. ("Boston Chicken") providing for borrowings of up to
$50.0 million through June 15, 2003. The facility bears interest at the
Reference Rate plus applicable margin. As of December 29, 1996, there was no
balance outstanding under the facility.
8. INCOME TAXES
As of December 29, 1996, the Company had cumulative federal and state tax
operating loss carryforwards available to reduce future taxable income of
approximately $17.0 million which begin to expire in 2010.
The primary components that comprise deferred tax assets and liabilities are
as follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 29, 1996
------------------- -----------------
<S> <C> <C>
Deferred tax assets:
Accounts payable and accrued expenses $ 218 $ 199
Deferred franchise revenue........... 355 3,551
Other noncurrent liabilities......... 220 226
Write-off of intangible assets that 2,017 1,582
are amortizable for tax.............
Net operating loss carryforwards..... 4,104 6,648
Other................................ 1,380 63
------------------- ------------------
Total deferred tax assets........ 8,294 12,269
Deferred tax liabilities:
Property and equipment............... (489) (1,335)
Other assets......................... (116) (652)
Total deferred tax liabilities... (605) (1,987)
------------------- ------------------
Net deferred tax assets.......... 7,689 10,282
Valuation allowance.................. (7,689) (10,282)
------------------- ------------------
Net deferred tax assets.............. $ - $ -
=================== ==================
</TABLE>
The increase in the valuation allowance of $2,593,000 from December 31, 1995
to December 29, 1996 is due to uncertainty regarding the realization of the
related tax benefits. The difference between the Company's actual tax provision
and the tax provision that would result from applying the statutory federal
income tax rate to income before income taxes is attributable to the following
(in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 29, 1996
-------------------
<S> <C>
Income tax expense at statutory rate.... $ 1,997
State taxes, net of federal benefit..... 228
Permanent difference related to
goodwill............................... 1,138
Change of valuation allowance........... (3,363)
-------------------
Provision for income taxes.............. $ -
===================
</TABLE>
9. NATIONAL AND LOCAL ADVERTISING FUNDS
The Company administers a National Advertising Fund (the "Fund") to which
stores make contributions based on individual franchise agreements (2% of base
revenue). Collected amounts are spent primarily on developing marketing and
advertising materials for use systemwide. In addition, the Company maintains
Local Advertising Funds ("LAFs") that
30
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
provide comprehensive advertising and sales promotion support for stores in
particular markets. Contributions are made by all stores (a minimum of 4% of net
revenue). The Company disburses funds and accounts for all transactions related
to the Fund and LAFs. Such amounts are not segregated from the cash resources of
the Company; however, consistent with Statement of Financial Accounting
Standards No. 45 "Accounting for Franchise Fee Revenue", such funds are
accounted for separately and are not included in the financial statements of the
Company because the Company acts only as an agent for its franchisees in placing
orders for advertising and paying related invoices out of such accounts.
10. COMMITMENTS AND CONTINGENCIES
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 arm's 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.
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, sublease proceeds, and rental receipts due
under leases on equipment owned by the Company as of December 29, 1996 (in
thousands of dollars):
<TABLE>
<CAPTION>
MINIMUM
RENTAL RECEIPTS
ON
MINIMUM SUBLEASE NET MINIMUM EQUIPMENT OWNED
RENTAL PAYMENTS PROCEEDS RENTAL PAYMENTS BY THE COMPANY
----------------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
1997........ $14,085 $13,139 $ 946 $1,279
1998........ 13,436 12,686 750 1,278
1999........ 12,892 12,232 660 1,276
2000........ 11,952 11,395 557 1,284
2001........ 9,130 8,627 503 1,273
Thereafter.. 36,573 30,704 5,869 2,076
----------------- -------- --------------- ---------------
$98,068 $88,783 $9,285 $8,466
================= ======== =============== ===============
</TABLE>
Rental expense, net of sublease income, under operating leases was
approximately $1,909,000 and $1,601,000 for the period from March 24, 1995
(inception) through December 31, 1995 and for the fiscal year ended December 29,
1996, respectively.
As of December 29, 1996, Bagel Store Development Funding, L.L.C. ("Bagel
Funding") had invested a total of $70.2 million in the common equity of the
Company's area developers. At December 29, 1996, the Company was the manager of
Bagel Funding. Bagel Funding has the right to require each area developer to
redeem Bagel Funding's equity interest in an area developer at a pre-determined
formula price based on the store level cash flow of the area developer in the
event that (i) the Company acquires a majority equity 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 does not consent to
the area developer's request to undertake a firm commitment underwritten public
offering after the Company's conversion and option rights under its loan
agreement with the area developer have expired unexercised; or (iii) the Company
does not consent to the area developer's request to terminate the area
developer's area development and franchise agreements with the Company after the
Company's conversion and option rights under its loan agreement with the area
developer have expired unexercised. 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.
31
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
The Company has become subject to various lawsuits, claims and other legal
matters in the course of conducting its business. The Company believes that the
outcome of such lawsuits, claims and other legal matters will not have a
material impact on the Company's financial position or results of operations.
11. AREA DEVELOPER FINANCING
The Company currently offers partial financing to its area developers for use
in expansion of their operations. 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 facility provided by the Company, with draws permitted during a three-year
draw period in a predetermined maximum amount generally 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. The Company may extend the
draw and repayment periods, subject to the area developer purchasing additional
development rights, contributing additional capital, or in connection with other
amendments to the loan agreement. Interest is set at the Reference Rate from
time to time (8.25% at December 29, 1996 and an average rate of 8.27% for 1996)
plus 1%, 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, which is at a 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. Default provisions contained in the area
developer loans typically include default in payment of principal and interest,
breach of a representation or warranty or of any covenant contained in the loan
agreement or security instruments, bankruptcy or bankruptcy-related act of the
borrower, resignation or termination of key management personnel, default under
the area development agreement, termination of three or more franchise
agreements, dissolution or liquidation, material adverse change in financial
condition, default of other indebtedness, sublease or any real estate lease, a
judgment in excess of $100,000 (not satisfied, vacated or covered by insurance)
and the invalidity or termination of any security instrument. The conversion
price is negotiated at arms' length with each area developer and, at December
29, 1996, the average conversion premium was 12% 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 or subsequent amendments
thereto. 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 convert any loan amount or exercise
its option at such time as it may be permitted to do so and, if it does convert
or exercise its option, that such conversion or option exercise will result in a
majority interest in such area developer.
32
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO 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, except number of area developers):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Number of area developers receiving
financing.............................. 2 11
Loan commitments........................ $ 16,000 $ 283,200
Unused loans............................ (12,462) (142,446)
-------- ---------
Loans outstanding (included in Notes
Receivable)............................ $ 3,538 $ 140,754
======== =========
Contributed capital..................... $ 4,000 $ 75,765
======== =========
</TABLE>
The following table summarizes area developer financing activity of the
Company during 1995 and 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Area developer loan balances,
beginning of period.................. $ - $ 3,538
Loan advances........................... 7,369 206,762
Loan repayments......................... (3,831) (69,546)
--------- ---------
Area developer loan balances,
end of year.......................... $ 3,538 $ 140,754
========= =========
</TABLE>
The majority of the loan advance and repayment activity reflects the revolving
nature of the loans, that is, amounts are drawn and repaid on a regular basis to
optimize cash management.
The principal maturities on the aforementioned notes receivable are as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
<S> <C>
1998....................................... $ 375
1999...................................... 9,582
2000...................................... 14,075
2001...................................... 14,075
Thereafter................................ 102,647
-----------
$140,754
===========
</TABLE>
(c) Credit Risk and Allowance for Loan Losses
Five of the Company's area developers accounted for 21%, 17%, 15%, 10% and 10%
of the area developers' notes receivable balance at December 29, 1996, and no
other area developer of the Company individually accounted for 10% or more of
such notes receivable balance as of such date.
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 or December 29, 1996.
The following table sets forth certain combined financial information, as of
the dates indicated, provided by all the Company's area developers. During
1995, two area developers were formed, and their data have been included in the
table
33
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
for 1995 from the dates of their respective formation. During 1996, ten
area developers were formed, and their data has been included in the table for
1996 from the dates of their respective formations. In addition, one area
developer combined with one other area developer with geographically contiguous
territory.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
-------------- ------------
(in thousands, except number of area
developers and store data)
<S> <C> <C>
Total number of area developers......... 2 11
Total number of area developer
stores open............................ 13 301
Balance sheet data:
Total gross assets..................... $ 9,262 $ 221,156
Total debt:
To the Company....................... 3,538 140,754
To third parties..................... - -
Total other liabilities (including
trade payables)....................... 3,011 37,033
Total partner/member equity............ 2,676 33,847
</TABLE>
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
(in thousands)
<S> <C> <C>
Statement of operations data:
Gross revenue.......................... $ 768 $ 109,940
Income (loss) from continuing
operations............................ (1,324) (40,592)
Statement of cash flows data:
Cash flows from (used in) operating
activities............................ $ 1,616 $ (16,382)
Cash flows from (used in) investing
activities............................ (8,064) (187,955)
Cash flows from (used in) financing
activities............................ 7,038 205,756
------------ -------------
Net change in cash................... $ 590 $ 1,419
============= ==============
</TABLE>
12. STOCKHOLDERS' EQUITY
Common Stock. On July 8, 1996, the Company effected a 225-for-one split of
the Company's common stock 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.
In June 1996, Boston Chicken converted its $120.0 million loan to the Company
into 15,307,421 shares of common stock.
In August 1996, the Company completed an underwritten initial offering of
3,105,000 shares of its common stock to the public, a concurrent non-
underwritten public offering of 425,000 shares of its common stock and a
concurrent private placement of 2,000,000 shares of its common stock to Boston
Chicken raising aggregate net proceeds of approximately $86.0 million.
34
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In December 1996, the Company completed an additional underwritten offering of
2,640,000 shares of its common stock to the public and a concurrent non-
underwritten public offering of 500,000 shares to Boston Chicken. The aggregate
net proceeds of these offerings were approximately $88.6 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 had a liquidation preference of $1,000 per share,
paid annual dividends of $60 per share, and was automatically convertible into
common stock of the Company upon closing of its 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 total number of shares of common stock issued on conversion was
465,829.
Repurchase Common Stock Shares. Pursuant to the purchase agreements (see Note
4), the Company had agreed that, in the event it had not completed an initial
public offering of its common stock resulting in gross proceeds of at least
$15.0 million by specified dates or if Boston Chicken's ownership of, or right
to acquire an ownership interest in, the Company's common stock fell below 25%,
the holders of common stock subject to repurchase by the Company could require
the Company to redeem such shares of common stock at their fair market value,
but not less than a specific floor price per share. In 1996, as a result of the
completion of an initial public offering of common stock, the repurchase
obligation was eliminated, resulting in such shares being reclassified to
stockholders' equity.
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 share and expire in 2000. In 1996, the Company also sold or issued
warrants to purchase an aggregate of 1,252,425 shares of common stock of the
Company to other third parties at exercise prices ranging from $6.47 to $11.58
per share. The warrants expire at various dates through 2001.
Stock Option Plans. The Company has a stock option plan (the "Plan") under
which options to purchase up 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,
and the balance vesting at the end of the fourth year from the date of the
grant.
The Company also has a non-employee directors stock option plan (the
"Directors Plan"), under which options to purchase up to 100,000 shares of the
common stock of the Company may be granted to directors of the Company who are
not officers or employees of the Company. Under the terms of the Directors
Plan, the Company automatically grants to each such director, upon election or
re-election as a director of the Company, options to purchase shares having a
fair market value of $50,000 at the date of the grant, except that initial
grants under the Directors Plan were made on the date the Directors Plan was
adopted by the Company's board of directors. Options are granted at a price
equal to the fair market value of the stock on the date of grant, become
exercisable after the end of one year from the date of grant and have a term of
ten years from the date of grant. The options are subject to termination should
the optionee's service as a director of the Company terminate. At December 29,
1996, 12,954 shares had been granted under the Directors Plan, at an exercise
price of $11.58 per share.
35
<PAGE>
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no employee compensation expense has been recognized for the
Company's stock option plans. Had employee compensation expense for the
Company's plans been determined based on the fair value at the grant date for
awards in 1995 and 1996 consistent with the provisions of SFAS No. 123, the
Company's net income and net income per common and equivalent share would have
been reduced to the pro forma amounts indicated below (in thousands, except per
share data):
<TABLE>
<CAPTION>
1995 1996
-------------------
<S> <C> <C>
Net income (loss) - as reported......... $(43,716) $5,707
Net income (loss) - pro forma........... (44,395) 3,188
Net income (loss) per common and
equivalent share - as reported......... (4.54) 0.25
Net income (loss) per common and
equivalent share - pro forma........... (4.97) 0.14
</TABLE>
The fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1995 1996
-----------------------
<S> <C> <C>
Expected volatility..................... 38.0% 37.1%
Risk-free interest rate................. 6.8% 6.3%
Expected lives.......................... 5 years 5 years
Dividend yield.......................... 0 0
</TABLE>
Activity under the option plans through December 29, 1996 was as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION
NUMBER OF PRICE
SHARES PER SHARE
----------- ------------
<S> <C> <C>
Granted................................. 2,090,248 $5.93
Canceled................................ (16,778) 5.88
----------- ------------
Outstanding as of December 31, 1995..... 2,073,470 5.93
Granted............................... 1,959,165 7.94
Exercised............................. (353,096) 6.03
Canceled.............................. (201,464) 7.27
----------- ------------
Outstanding as of December 29, 1996..... 3,478,075 $6.87
=========== ============
Exercisable as of December 29, 1996..... 275,824 $5.93
=========== ============
</TABLE>
36
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
Information on options outstanding at December 29, 1996 is as follows:
OPTIONS EXERCISABLE
WEIGHTED ---------------------------
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICE OF OPTIONS LIFE (YEARS) EXERCISE PRICE OF OPTIONS EXERCISE PRICE
- ----------------- ---------- ------------ -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
$5.88 1,616,739 8.46 $ 5.88 257,700 $5.88
6.01 - 9.00 1,433,755 9.04 6.58 18,124 6.54
9.01 - 12.00 417,411 9.41 11.36 - -
12.01 - 15.00 8,109 9.58 15.00 - -
27.01 - 30.00 685 9.70 29.13 - -
30.01 - 33.00 1,376 9.76 32.63 - -
---------- ------------ -------------- ---------- --------------
Total 3,478,075 8.81 $ 6.87 275,824 $5.93
========== ============ ============== ========== ==============
</TABLE>
Boston Chicken Option. The Company has granted to Boston Chicken an option
(the "BCI Option") to purchase such number of shares of the Company's common
stock as will 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
the capital stock of the Company having the power generally to vote in the
election of directors. The terms of the BCI Option provide that certain shares
of the Company's common stock owned by Boston Chicken are excluded in
determining the percentage ownership of the voting stock of the Company owned by
Boston Chicken for purposes of BCI Option. As of December 29, 1996, Boston
Chicken had the right under the BCI Option to purchase 416,407 shares of the
Company's common stock at a weighted average price of $28.61.
As of December 29, 1996, the Company had 6,878,449 shares of common stock
reserved for issuance upon exercise of options and warrants.
13. RELATED PARTY TRANSACTIONS
Boston Chicken is the majority shareholder of 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 the
Company paid to Boston Chicken amounts aggregating approximately $3.0 million
and $10.2 million in fiscal 1995 and 1996, respectively, for software license,
software maintenance, real estate, financial advisory and accounting fees, and
interest.
Pursuant to Statement of Financial Accounting Standards No. 57, all the
Company's area developers may be deemed to be related parties as a result of the
lending and franchise relationships with its area developers. Total royalties
and franchise-related fees earned from all area developers were $671,000 and
$19.9 million in 1995 and 1996, respectively. Total interest income earned from
all area developers was $67,000 and $6.0 million in 1995 and 1996, respectively.
Total notes receivable from all area developers were $3.5 million and $140.8
million at December 31, 1995 and December 29, 1996, respectively.
Certain officers and directors of the Company and Boston Chicken are investors
in Bagel Funding and had invested an aggregate of $15.2 million in Bagel Funding
at December 29, 1996. The Company is the manager of Bagel Funding but has no
equity interest in Bagel Funding. Bagel Funding paid $500,000 to the Company in
its capacity as manager during 1996.
Certain directors and officers and members of their families have a direct or
indirect equity interest in the Company's area developers. The Company received
fees and other payments from these entities aggregating approximately $2.3
million and $33.0 million in fiscal 1995 and 1996, respectively, for area
development, real estate, software maintenance,
37
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
franchise, royalty, miscellaneous fees, interest and deposits. The Company has
also sold to these entities, stores, inventory, equipment and other
miscellaneous net assets for which it received approximately $5.5 million and
$49.9 million in fiscal 1995 and 1996, respectively.
During fiscal 1995 and 1996, the Company paid approximately $86,000 and
$98,000, respectively, to Bowana Aviation, Inc. ("Bowana") for the Company's use
of 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 by Bowana are at rates at least comparable to those charged by
unaffiliated third parties.
14. SUBSEQUENT EVENT
On March 24, 1997, the Company sold the 16 remaining Company stores and
related assets to Sunbelt Bagels, L.L.C., a newly-formed area developer, for
approximately $3.3 million. No material gain or loss resulted from this sale.
38
<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 and December 29, 1996, and for the period from March 24,
1995 (inception) through December 31, 1995, and for the fiscal year ended
December 29, 1996 included in this Form 10-K, and have issued our report thereon
dated March 24, 1997. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The supplemental
schedule listed in Part IV, Item 14 of this Form 10-K 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. The schedule has been subjected to the auditing
procedures applied in the audits 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 24, 1997
39
<PAGE>
SCHEDULE II
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance Additions Deductions
at charged to for Balance
beginning costs and accounts at end of
Classifications of period expenses written-off period
- -------------------------------------- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Fiscal year ended December 29, 1996:
Allowance for Doubtful Accounts..... $81,000 $ - $(81,000) $ -
Period ended December 31, 1995:
Allowance for Doubtful Accounts..... - 81,000 - 81,000
</TABLE>
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors. The information appearing under the caption "Election of
Directors" in the Company's Proxy Statement dated April 1, 1997 (the "Proxy
Statement") is incorporated herein by reference.
Executive Officers. Information with respect to executive officers of the
Company is set forth under the caption "Executive Officers" in Item 1 of this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Executive Compensation" in the
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the caption "Principal Stockholders and
Securities Ownership of Management" in the Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the captions "Certain Transactions" and "
Relationships with Boston Chicken" in the Proxy Statement is incorporated herein
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
1. The Company's Consolidated Financial Statements are set forth in Part
II, Item 8.
A. Report of Independent Public Accountants (Arthur Andersen LLP);
B. Consolidated Balance Sheets at December 31, 1995 and December 29,
1996;
C. Consolidated Statements of Operations for the period from March 24,
1995 (inception) through December 31, 1995 and the fiscal year ended
December 29, 1996;
D. Consolidated Statements of Stockholders' Equity for the period from
March 24, 1995 (inception) through December 31, 1995 and the fiscal
year ended December 29, 1996;
E. Consolidated Statements of Cash Flows for the period from March 24,
1995 (inception) through December 31, 1995 and the fiscal year ended
December 29, 1996; and
F. Notes to Consolidated Financial Statements.
2. The following schedules are set forth in Part II, Item 8.
A. Report of Independent Public Accountants (Arthur Andersen LLP); and
B. Schedule II - Valuation and Qualifying Accounts.
41
<PAGE>
3. Exhibits
The exhibits to this report are listed in the Exhibit Index included
elsewhere herein. Included in the exhibits listed therein are the following
exhibits which constitute management contracts or compensatory plans or
arrangements:
(i) The Company's Amended and Restated 1995 Stock Option Plan.
(ii) The Company's 1996 Stock Option Plan for Non-Employee Directors.
(iii) Letter Agreement dated April 5, 1996 between Mark R. Goldston and the
Company.
(iv) Letter Agreement dated as of September 23, 1996 terminating the
Employment Agreement dated March 31, 1995 between the Company and
John A. Offerdahl.
(v) Consulting Agreement dated as of July 1, 1996 between Kyle T. Craig
and the Company.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of fiscal 1996.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: May 12, 1997
Einstein/Noah Bagel Corp.
By: /s/ MARK R. GOLDSTON
---------------------------------------
Name: Mark R. Goldston
Title: President and
Chief Executive Officer
43
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT+ PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
2 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") (incorporated by
reference to Exhibit 2.5 to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
3.1 Restated Certificate of Incorporation of the
Company ("Certificate of Incorporation")
(incorporated by reference to Exhibit 3 to
the Company's quarterly report for the
quarter ended October 6, 1996).
3.2 Amended and Restated Bylaws of the Company
("Bylaws") (incorporated by reference to
Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (Registration No.
333-04725)).
4.1 Certificate of Incorporation (included in
Exhibit 3.1).
4.2 Bylaws (included in Exhibit 3.2).
4.3 Certificate representing Common Stock
(incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form
S-1 (Registration No. 333-04725)).
4.4 Amended and Restated Registration Rights
Agreement dated February 1, 1996 by and
among the Company and certain stockholders
of the Company (incorporated by reference to
Exhibit 4.4 to the Company's Registration
Statement on Form S-1 (Registration No.
333-04725)).
4.5 Concurrent Private Placement Agreement dated
August 1, 1996 between Boston Chicken, Inc.
("Boston Chicken") and the Company
(incorporated by reference to Exhibit 10.3
to Boston Chicken's quarterly report on Form
10-Q for the quarter ended July 14, 1996).
4.6 Registration Agreement dated August 1, 1996
between Boston Chicken and the Company
(incorporated by reference to Exhibit 10.3
to Boston Chicken's quarterly report on Form
10-Q for the quarter ended July 14, 1996).
</TABLE>
__________
+ In case of incorporation by reference to documents filed by the Company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company's file number under that Act is 0-21097. In the case of incorporation by
reference to documents filed by Boston Chicken, Inc. ("Boston Chicken") under
the Exchange Act, Boston Chicken's file number under that Act is 0-22802.
Exhibit 1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT+ PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
4.7 Concurrent Offering Purchase Agreement dated
November 26, 1996 between Boston Chicken and
the Company ("Concurrent Offering Purchase
Agreement") (incorporated by reference to
Exhibit 10.41 to Boston Chicken's 1996 annual
report on Form 10-K).
4.8 Registration Rights Agreement dated February
24, 1997 by and between the Company and
Alamo Bagels, L.P. (incorporated by
reference to the Company's 1996 Annual
Report on Form 10-K).
10.1(a) Amended and Restated Loan Agreement dated
May 17, 1996 between Boston Chicken and the
Company (the "Loan Agreement") (incorporated
by reference to Exhibit 10.1(a) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.1(b) First Amendment to the Loan Agreement dated
July 19, 1996 (incorporated by reference to
Exhibit 10.1(b) to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
10.1(c) Second Amendment to the Loan Agreement dated
September 16, 1996 (incorporated by
reference to Exhibit 10.1(c) to the
Company's Registration Statement on Form S-1
(Registration No. 333-12395)).
10.2 Concurrent Private Placement Agreement dated
August 1, 1996 between Boston Chicken and
the Company (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) to 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 (incorporated by
reference to Exhibit 10.3(b) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.3(c) Second Amendment to Secured Demand Note
dated as of September 16, 1996 (included in
Exhibit 10.1(c)).
10.4 Noah's Agreement (included in Exhibit 2).
</TABLE>
__________
+ In case of incorporation by reference to documents filed by the Company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company's file number under that Act is 0-21097. In the case of incorporation by
reference to documents filed by Boston Chicken, Inc. ("Boston Chicken") under
the Exchange Act, Boston Chicken's file number under that Act is 0-22802.
Exhibit 2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT+ PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
10.5(a) Secured Credit Agreement dated as of May 17,
1996 among the Company, the Lenders named
therein, and Bank of America Illinois, as
Agent ("Secured Credit Agreement")
(incorporated by reference to Exhibit 10.9
to the Company's Registration Statement on
Form S-1 (Registration No. 333-04725)).
10.5(b) First Amendment and Waiver to Secured Credit
Agreement dated August 27, 1996
(incorporated by reference to Exhibit
10.9(b) to the Company's Registration
Statement on Form S-1 (Registration No.
333-12395)).
10.5(c) Second Amendment to Secured Credit Agreement
dated April 29, 1997.
10.6 The Company's Amended and Restated 1995
Stock Option Plan (incorporated by reference
to Exhibit 10.10 to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
10.7 The Company's 1996 Stock Option Plan for
Non-Employee Directors (incorporated by
reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
10.8(a) Amended and Restated Accounting and
Administration Services Agreement dated as
of May 28, 1996 between Boston Chicken and
the Company (incorporated by reference to
Exhibit 10.12(a) to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
10.8(b) First Amendment to Amended and Restated
Accounting and Administration Services
Agreement dated as of June 17, 1996 between
Boston Chicken and the Company (incorporated
by reference to Exhibit 10.12(b) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.9 Financial Services Agreement Termination
Agreement effective as of May 20, 1996
(incorporated by reference to Exhibit
10.13(c) to the Company's Registration
Statement on Form S-1 (Registration No.
333-04725)).
</TABLE>
__________
+ In case of incorporation by reference to documents filed by the Company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company's file number under that Act is 0-21097. In the case of incorporation by
reference to documents filed by Boston Chicken, Inc. ("Boston Chicken") under
the Exchange Act, Boston Chicken's file number under that Act is 0-22802.
Exhibit 3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT+ PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
10.10(a) Amended and Restated Real Estate Services
Agreement dated as of May 28, 1996 between
Boston Chicken and the Company (incorporated
by reference to Exhibit 10.14(a) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.10(b) Amended and Restated Real Estate Services
Agreement Termination Agreement dated as of
June 17, 1996 between the Company and Boston
Chicken (incorporated by reference to
Exhibit 10.14 (b) to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
10.11(a) Amended and Restated Computer and
Communications Systems Services Agreement
dated as of June 17, 1996 between Boston
Chicken and the Company (incorporated by
reference to Exhibit 10.15(a) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.11(b) First Amendment to the Amended and Restated
Computer and Communications Systems Services
Agreement dated as of June 17, 1996 between
Boston Chicken and the Company (incorporated
by reference to Exhibit 10.15(b) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.12 Letter Agreement dated April 5, 1996 between
Mark R. Goldston and the Company
(incorporated by reference to Exhibit 10.18
to the Company's Registration Statement on
Form S-1 (Registration No. 333-04725)).
10.13+++ Project and Approved Supplier Agreement
dated May 24, 1996 among the Company, Harlan
Bagel Supply Company, L.L.C. ("Harlan Bagel
Supply"), Harlan Bakeries, Inc. ("Harlan
Bakeries") and Hal P. Harlan, Hugh P. Harlan
and Doug H. Harlan (the "Harlans")
(incorporated by reference to Exhibit 10.24
to the Company's Registration Statement on
Form S-1 (Registration No. 333-04725)).
10.14 Option Agreement dated August 27, 1996 among
Harlan Bagel Supply, the Harlans and the
Company (incorporated by reference to
Exhibit 10.25 to the Company's Registration
Statement on Form S-1 (Registration No.
333-12395)).
</TABLE>
__________
+ In case of incorporation by reference to documents filed by the Company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company's file number under that Act is 0-21097. In the case of incorporation by
reference to documents filed by Boston Chicken, Inc. ("Boston Chicken") under
the Exchange Act, Boston Chicken's file number under that Act is 0-22802.
+++Confidential treatment requested.
Exhibit 4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT+ PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
10.15 Right of First Refusal Agreement dated
August 27, 1996 among Harlan Bakeries, the
Harlans and the Company (incorporated by
reference to Exhibit 10.26 to the Company's
Registration Statement on Form S-1
(Registration No. 333-12395)).
10.16 Aircraft Dry Leases dated January 16, 1996
between the Company and Bowana Aviation,
Inc. (incorporated by reference to Exhibit
10.27 to the Company's Registration
Statement on Form S-1 (Registration No.
333-04725)).
10.17 Fifth Amended and Restated Limited Liability
Company Agreement of Bagel Store Development
Funding, L.L.C. ("Bagel Funding") dated as
of April 14, 1997.
10.18 Form of agreement between the Company and
Bagel Funding relating to the Company's
purchase of Bagel Funding's interests in
area developers (incorporated by reference
to Exhibit 10.30 to the Company's
Registration Statement on Form S-1
(Registration No. 333-04725)).
10.19 Form of Area Development Agreement between
the Company and its Area Developers
(included in Exhibit 99).
10.20 Form of Franchise Agreement between the
Company and its Area Developers (included in
Exhibit 99).
10.21 Form of Secured Loan Agreement between the
Company and its Area Developers (included in
Exhibit 99).
10.22 Letter Agreement dated as of September 23,
1996 terminating the Employment Agreement
dated March 31, 1995 between the Company and
John A. Offerdahl (incorporated by reference
to Exhibit 10.3 to the Company's quarterly
report on Form 10-Q for the quarter ended
October 6, 1996).
10.23 Office Lease Agreement dated as of July 1,
1996 between the Company and Boston Chicken
(incorporated by reference to Exhibit 10.35
to the Company's Registration Statement on
Form S-1 (Registration No. 333-04725)).
10.24 Consulting Agreement dated as of July 1,
1996 between Kyle T. Craig and the Company
(incorporated by reference to Exhibit 10.36
to the Company's Registration Statement on
Form S-1 (Registration No. 333-04725)).
</TABLE>
__________
+ In case of incorporation by reference to documents filed by the Company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company's file number under that Act is 0-21097. In the case of incorporation by
reference to documents filed by Boston Chicken, Inc. ("Boston Chicken") under
the Exchange Act, Boston Chicken's file number under that Act is 0-22802.
Exhibit 5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT+ PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
10.25(a) Aircraft Dry Sublease and related Letter
Agreement dated as of July 9, 1996 between
the Company and Boston Chicken (incorporated
by reference to Exhibit 10.37(a) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.25(b) Aircraft Dry Sublease and related Letter
Agreement dated as of July 9, 1996 between
the Company and Boston Chicken (incorporated
by reference to Exhibit 10.37(b) to the
Company's Registration Statement on Form S-1
(Registration No. 333-04725)).
10.26 Concurrent Offering Purchase Agreement
(included in Exhibit 4.7).
11 Statement re: Computation of Earnings (Loss)
Per Share (incorporated by reference to the
Company's 1996 Annual Report on Form 10-K).
21 Subsidiaries of the Company (incorporated by
reference to the Company's 1996 Annual Report
on Form 10-K).
23.1 Consent of Arthur Andersen LLP with respect
to the Audited Consolidated Financial
Statements of the Company
27 Financial Data Schedule (incorporated by
reference to the Company's 1996 Annual
Report on Form 10-K).
99 Uniform Franchise Offering Circular dated
March 27, 1997.
</TABLE>
__________
+ In case of incorporation by reference to documents filed by the Company under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company's file number under that Act is 0-21097. In the case of incorporation by
reference to documents filed by Boston Chicken, Inc. ("Boston Chicken") under
the Exchange Act, Boston Chicken's file number under that Act is 0-22802.
Exhibit 6
<PAGE>
SECOND AMENDMENT
TO
SECURED CREDIT AGREEMENT
THIS SECOND AMENDMENT dated as of April 29, 1997 is entered into by
and among Einstein/Noah Bagel Corp. (f/k/a Einstein Bros. Bagels, Inc.), a
Delaware corporation (the "Borrower"), the lenders who are party to the Credit
Agreement referred to below (the "Lenders") and Bank of America Illinois, an
Illinois banking corporation, as Agent for the Lenders (herein, in such
capacity, the "Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Agent are parties to a
certain Secured Credit Agreement dated as of May 17, 1996 (as heretofore
amended, called the "Credit Agreement"; terms used but not otherwise defined
herein are used herein as defined in the Credit Agreement);
WHEREAS, the Borrower desires to amend the Credit Agreement to permit
the issuance, in certain circumstances, of Letters of Credit expiring after the
Termination Date without first pledging cash collateral;
WHEREAS, subject to the terms and conditions set forth herein the
Agent and the Lenders are willing to amend the Credit Agreement so as to, among
other things, permit the issuance of such Letters of Credit.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Borrower, the Agent and the Lenders hereby agree as
follows:
<PAGE>
SECTION 1. AMENDMENTS.
----------
In reliance on the Borrower's warranties set forth in Section 2 below,
as of the date hereof,
(a) Section 2.3A of the Credit Agreement is amended to read in its
entirety as follows:
" Section 2.3A Expiration. Each Letter of Credit may expire before,
on or after the Termination Date; provided, that with respect to each
Letter of Credit expiring after the Termination Date, the Borrower
hereby agrees to pledge cash collateral to the Agent, no later than
thirty (30) days prior to the Termination Date, in an amount, and
pursuant to documentation, reasonably satisfactory to the Issuing
Lender and the Agent."
(b) Section 8.1(3) of the Credit Agreement is amended to read in its
entirety as follows:
"The Borrower or any Subsidiary shall fail to perform or observe any
term, covenant or agreement contained in Sections 2.3A, 6.3, 6.6,
6.9, 6.10, 6.12, 6.13, and 6.14 of this Agreement applicable thereto;"
SECTION 2. WARRANTIES.
----------
To induce the Agent and the Lenders to enter into this Amendment, the
Borrower warrants to the Agent and the Lenders as of the date hereof that:
(a) The representations and warranties contained in Article IV of the
Credit Agreement are true and correct in all material respects on and as of
the date hereof (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.
<PAGE>
SECTION 3. GENERAL.
-------
(a) As hereby modified, the Credit Agreement shall remain in full
force and effect and is hereby ratified, approved and confirmed in all
respects.
(b) This Amendment shall be binding upon and shall inure to the
benefit of the Borrower, the Lenders and the Agent and respective
successors and assigns of the Lenders and the Agent.
(c) This Amendment may be executed in any number of counterparts and
by the different parties on separate counterparts, and each such
counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Amendment.
<PAGE>
Delivered at Chicago, Illinois, as of the date and year first above written.
EINSTEIN/NOAH BAGEL CORP.
By: /s/ Paul A. Strasen
-----------------------------
Title: Senior Vice President
----------------------
BANK OF AMERICA ILLINOIS, as Agent
By: /s/ David A. Johanson
-----------------------------
Title: Vice President
----------------------
BANK OF AMERICA ILLINOIS, as Lender
By: /s/ L. Richard DiDonato
-----------------------------
Title: Vice President
----------------------
LASALLE NATIONAL BANK
By: /s/ Meg Marion
-----------------------------
Title: Senior Vice President
----------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ Jan M. Dillon
-----------------------------
Title: Vice President
----------------------
The undersigned hereby acknowledge the foregoing amendments and reaffirm
their respective duties and obligations arising under the Loan Documents to
which each is a party.
BRACKMAN BROTHERS, INC.
By: /s/ Paul A. Strasen
-----------------------------
Its: President
-----------------------------
<PAGE>
BALTIMORE BAGEL CO.
By: /s/ Paul A. Strasen
-----------------------------
Its: President
-----------------------------
NOAH'S NEW YORK BAGELS, INC.
By: /s/ Paul A. Strasen
-----------------------------
Its: President
-----------------------------
BRACKMAN BROTHERS OF IDAHO, INC.
By: /s/ Paul A. Strasen
-----------------------------
Its: Vice President
-----------------------------
<PAGE>
FIFTH 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 Fifth 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 April 14, 1997, 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, a Fourth Amended and
Restated Limited Liability Company Agreement dated as of July 1, 1996 and an
Amendment (the "Amendment") dated as of April 1, 1997 to the Fourth Amended and
Restated Limited Liability Company Agreement. The Amendment, among other
things, authorized the Manager, without further consent of the Members, at any
time to prepare a restatement of the Company's Limited Liability Company
Agreement to reflect all prior amendments adopted by the Members. The Manager
has prepared this Fifth Restatement in order to reflect the changes to the
Limited Liability Company Agreement made by the Amendment.
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.
<PAGE>
"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 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.
"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 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.
2
<PAGE>
"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 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.
3
<PAGE>
"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.
"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).
4
<PAGE>
"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 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.
5
<PAGE>
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;
(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;
6
<PAGE>
(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
(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.
7
<PAGE>
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 such default, the defaulting Member shall cease to have any
rights as a Member except as described in the preceding sentence.
8
<PAGE>
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 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.
9
<PAGE>
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 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
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<PAGE>
(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) 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
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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.
Effective with fiscal year 1996, each member of the Advisory Committee
shall be paid an annual fee of $10,000, or such lesser amount for any
member of the Advisory Committee as the Advisory Committee may
determine, payable not later than the last day of the first fiscal
quarter of each year. In addition, members of the Advisory Committee
shall be entitled to reimbursement from the Company for reasonable
travel, lodging and similar expenses incurred in connection with the
business of the Company.
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.
Section 6.2 Designation of Successor Managers. The Members hereby
agree that at such time, if any, 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
the year following the year in which Bagel Corp. ceases to be the Manager, 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 relating to the Company's business,
including, without limitation, directing the investment of the
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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 $10,000 for 1997 and
each year thereafter during which Bagel Corp. serves as the Manager,
payable not later than the end of the first fiscal quarter of the
Manager.
6.6.2 Beginning at such time, if any, as the members of the
Advisory Committee become the successor Managers, each member of the
Board of Managers shall receive an annual management fee equal to
$10,000 or such lesser amount for any Manager as the Board of Managers
may determine, less any amount received by such member pursuant to
Section 5.4.2 hereof for such fiscal year, payable not later than the
last day of the first fiscal quarter of each year.
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
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the Company and shall not be deemed to constitute a distributive
share of Profits or a distribution to any Manager.
Section 6.7 Removal of Manager. Bagel Corp. may be removed as the
Manager with or without cause at any time by a Majority Vote of the Members. If
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 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.
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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. The Manager or Managers may at any time, without further consent of
the Members, prepare a restatement of this Agreement integrating into a single
instrument all of the provisions of this Agreement which are then in effect as
the result of prior amendments adopted as provided in this Section 7.2.
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.
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
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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 occuring 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. 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 operations of the Company
for such Fiscal Year;
(iii) a statement of such Member's Capital Account as
of the close of such Fiscal Year, and changes therein during
such Fiscal Year; and
(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 income, gain, loss, deduction or credit for such Fiscal
Year for income tax purposes.
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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 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.
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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
(including any tax advisor) 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 to the existence and
amount of assets from which distributions to Members might properly be
paid.
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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
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.
22
<PAGE>
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 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.
23
<PAGE>
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.
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;
24
<PAGE>
(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 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
25
<PAGE>
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.
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
26
<PAGE>
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.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MEMBERS:
/s/ Lawrence Beck
-----------------
Lawrence Beck
D&R, L.L.C.
By /s/ Dean L. Buntrock
--------------------
Dean L. Buntrock
DONALD F. FLYNN
1993 TRUST
By /s/ Donald F. Flynn
-------------------
Donald F. Flynn
/s/ Robert Flynn
----------------
Robert Flynn
BRIAN J. FLYNN
June, 1992 NONEXEMPT TRUST
By /s/ Brian J. Flynn
------------------
Brian J. Flynn
KEVIN F. FLYNN
June, 1992 NONEXEMPT TRUST
By /s/ Kevin F. Flynn
------------------
Kevin F. Flynn
/s/ John J. Melk
----------------
John J. Melk
/s/ Janet L. Melk
-----------------
Janet L. Melk
<PAGE>
/s/ Peer Pedersen
-----------------
Peer Pedersen
BELUSHI PARTNERS II
By /s/ James A. Belushi
--------------------
James A. Belushi
/s/ Vincent Buonnanno
---------------------
Vincent Buonnanno
JOSEPH A. CUSIMANO
IRA ROLLOVER
By /s/ Joseph A. Cusimano
----------------------
Joseph A. Cusimano
/s/ Peter B. Desnoes
--------------------
Peter B. Desnoes
RICHARD A. FORSYTHE
REVOCABLE TRUST DATED
1/22/85 AS RESTATED 10/11/94
By /s/ Richard A. Forsythe
------------------------
Richard A. Forsythe
/s/ J. Douglas Gray
-------------------
J. Douglas Gray
/s/ J. Michael Hester
---------------------
J. Michael Hester
<PAGE>
JMH ASSOCIATES, INC.
PROFIT SHARING FUND
By /s/ J. Michael Hester
---------------------
J. Michael Hester
/s/ William P. Hulligan
-----------------------
William P. Hulligan
/s/ David B. Meltzer
--------------------
David B. Meltzer
/s/ James Fox Miller
--------------------
James Fox Miller
/s/ John Muehlstein
-------------------
John Muehlstein
/s/ Charles Reeder
------------------
Charles Reeder
/s/ J. Christopher Reyes
------------------------
J. Christopher Reyes
/s/ M. Jude Reyes
-----------------
M. Jude Reyes
PSR INVESTMENTS, L.P.
By /s/ Philip Rooney
-----------------
Philip Rooney
FURST RUDMAN INVESTORS, L.P.
By /s/ Robert D. Furst, Jr.
-----------------------
Robert D. Furst, Jr.
<PAGE>
/s/ L.D. Ruth
-------------
L.D. Ruth
/s/ John A. Shields
-------------------
John A. Shields
/s/ H.C. Warren by Peer Pedersen
--------------------------------
H.C. Warren by Peer Pedersen
WIJLER GUERNSEY, LTD.
By /s/ Rene' Burgauer
---------------------
Rene' Burgauer
/s/ Penny Bender Sebring
------------------------
Penny Bender Sebring
/s/ Jeffrey C. Neal
-------------------
Jeffrey C. Neal
/s/ Martin Schwartz
-------------------
Martin Schwartz
YOUNGSTOWN PARTNERS
By /s/ Thomas H. Patrick
----------------------
Thomas H. Patrick
BALDWIN & LYONS, INC.
By /s/ G. Patrick Corydon
-----------------------
G. Patrick Corydon
N.S. ASSOCIATES, INC.
By /s/ Nathan Shapiro
-------------------
Nathan Shapiro
/s/ Scott A. Beck
-----------------
Scott A. Beck
<PAGE>
/s/ Jeff Butler
---------------
Jeff Butler
/s/ W. Eric Carlborg
--------------------
W. Eric Carlborg
/s/ Andrew J. Filipowski
------------------------
Andrew J. Filipowski
/s/ Mark X. Hayden
------------------
Mark X. Hayden
ALTGELD MANAGEMENT CORPORATION
By /s/ Hank Huth
----------------
Hank Huth
/s/ John Morlock
----------------
John Morlock
/s/ Joe Hoog
------------
Joe Hoog
/s/ Dennis B. Mullen
--------------------
Dennis B. Mullen
HAY PROPERTY COMPANY, LTD.
By /s/ Raymond A. Hay
-------------------
Raymond A. Hay
/s/ Andrew P. Murphy
--------------------
Andrew P. Murphy
<PAGE>
/s/ A.G. Rappaport
------------------
A.G. Rappaport
/s/ Harry T. Rose
-----------------
Harry T. Rose
/s/ Jeff Shearer
----------------
Jeff Shearer
/s/ David Stanchak
------------------
David Stanchak
/s/ Jeff Harpster
-----------------
Jeff Harpster
/s/ M. David White
------------------
M. David White
/s/ Larry Zwain
---------------
Larry Zwain
THEODORE A. BOSLER TRUST,
THEODORE A. BOSLER,
TRUSTEE, U/A 4/21/93
By /s/ Theodore A. Bosler
----------------------
Theodore A. Bosler
JWC TRUST DATED 12/28/82
By /s/ John W. Croghan
-------------------
John W. Croghan
EBB INVESTORS, INC.
By /s/ John Hume
--------------
John Hume
/s/ Alain O'Hayon
-----------------
Alain O'Hayon
BAGEL SOUTH, L.L.C.
By /s/ S. Kent Stewart
--------------------
S. Kent Stewart
<PAGE>
/s/ Jeffrey A. Klein
--------------------
Jeffrey A. Klein
MORGAN LEWIS GITHENS & AHN, L.P.
By /s/ Sangwoo Ahn
---------------
Sangwoo Ahn
TRIUNE VENTURE PARTNERS, II, L.P.
By TRIUNE VENTURE HOLDINGS, L.P.
--------------------------------
as general partner
By TRIUNE, INC.
as general partner
By /s/ Kevin Shepherd
------------------
Kevin Shepherd
EB&M HOLDINGS, LTD.
By /s/ Michelle Bencher
---------------------
Michelle Bencher
MAVERICK INCOME FUND USA, LTD.
By /s/ Evan Wyly
-------------
Evan Wyly
<PAGE>
MAVERICK FUND USA, LTD.
By /s/ Evan Wyly
-------------
Evan Wyly
BANKAMERICA INVESTMENT CORP.
By /s/ Edward J. McCaffrey
-----------------------
Edward J. McCaffrey
/s/ Richard T. Caleel
---------------------
Richard T. Caleel
KMK & ASSOCIATES
By /s/ Laura K. McGrath
---------------------
Laura K. McGrath
/s/ A. Barry Hirschfield
------------------------
A. Barry Hirschfield
/s/ Hal P. Harlan
-----------------
Hal P. Harlan
GROSVENOR FUND, L.P.
By /s/ Bruce B. Dunnan
-------------------
Bruce B. Dunnan
This Agreement is accepted and agreed to by:
MANAGER:
EINSTEIN/NOAH BAGEL CORP.
By /s/ Paul A. Strasen
-------------------
Paul A. Strasen
MEMBERS OF THE ADVISORY COMMITTEE
/s/ Perry J. Lewis
------------------
Perry J. Lewis
/s/ J. Christopher Reyes
------------------------
J. Christopher Reyes
/s/ Alberto Finol
-----------------
Alberto Finol
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K/A, into the Company's previously filed
Registration Statement File No. 333-11197.
Arthur Andersen LLP
Denver, Colorado
May 8, 1997
<PAGE>
BOSTON CHICKEN, INC.
EFFECTIVE DATE: MARCH 25, 1997
INFORMATION FOR PROSPECTIVE FRANCHISE OWNERS
REQUIRED BY FEDERAL TRADE COMMISSION
* * * * * *
TO PROTECT YOU, WE'VE REQUIRED YOUR FRANCHISOR TO GIVE YOU THIS
INFORMATION. WE HAVEN'T CHECKED IT, AND DON'T KNOW IF IT'S CORRECT. IT SHOULD
-----------------------------------------------------
HELP YOU MAKE UP YOUR MIND. STUDY IT CAREFULLY. WHILE IT INCLUDES SOME
INFORMATION ABOUT YOUR CONTRACT, DON'T RELY ON IT ALONE TO UNDERSTAND YOUR
CONTRACT. READ ALL OF YOUR CONTRACT CAREFULLY. BUYING A FRANCHISE IS A
COMPLICATED INVESTMENT. TAKE YOUR TIME TO DECIDE. IF POSSIBLE, SHOW YOUR
CONTRACT AND THIS INFORMATION TO AN ADVISOR, LIKE A LAWYER OR AN ACCOUNTANT. IF
YOU FIND ANYTHING YOU THINK MAY BE WRONG OR ANYTHING IMPORTANT THAT'S BEEN LEFT
OUT, YOU SHOULD LET US KNOW ABOUT IT. IT MAY BE AGAINST THE LAW.
THERE MAY ALSO BE LAWS ON FRANCHISING IN YOUR STATE. ASK YOUR STATE
AGENCIES ABOUT THEM.
FEDERAL TRADE COMMISSION
------------------------
WASHINGTON, D. C. 20580
-----------------
<PAGE>
FRANCHISE OFFERING CIRCULAR
[LOGO OF BOSTON CHICKEN INC.]
BOSTON CHICKEN, INC.,
A DELAWARE CORPORATION
14103 DENVER WEST PARKWAY
P.O. BOX 4086 GOLDEN, CO 80401
(303) 278-9500
Boston Chicken, Inc. ("BCI") offers and sells franchises for the operation of
food service businesses which sell, among other things, rotisserie roasted
chicken, roasted turkey, baked ham, meatloaf, potpies, vegetables, salads,
soups, desserts, beverages, and other food products approved or required by BCI
for sale ("Boston Market Units") and development rights to develop and operate a
specified number of Boston Market Units at approved location(s) within a defined
geographic area or area(s) in accordance with a specified development schedule.
The initial franchise fee is $35,000 under the Franchise Agreement for a Boston
Market Unit, and the development fee under the Development Agreement is $5,000
for each Boston Market Unit to be developed. BCI also requires a deposit of
$5,000 toward the $35,000 franchise fee for each Boston Market Unit to be
developed under the Development Agreement. That deposit is applied as a credit
toward the initial franchise fee due for each Unit. BCI also charges a software
license fee of $15,000 under the Computer and Communications Systems Agreement,
which is signed at the same time as the Franchise Agreement for each Boston
Market Unit. Other fees payable before the Boston Market Unit opens are a
Market Plan Fee of $75.00 per trade area within the geographic territory covered
by the plan (payable under the Development Agreement only), $1,500 per site to
reimburse us for fees that we pay to our software suppliers and $10,000 to be
spent on grand opening advertising and promotion for the Boston Market Unit.
The estimated initial investment for a Boston Market Unit ranges from $765,000
to $1,770,000 (including expenses for the first 3 months of operation of the
Unit).
Risk Factors:
1. THE FRANCHISE AGREEMENT AND DEVELOPMENT AGREEMENT PERMIT THE
FRANCHISEE AND DEVELOPER, RESPECTIVELY, TO SUE ONLY IN COLORADO. OUT
OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE
SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO SUE BCI IN COLORADO
THAN IN YOUR HOME STATE.
2. EACH OF THE FRANCHISE AGREEMENT AND DEVELOPMENT AGREEMENT STATE THAT
COLORADO LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE
SAME PROTECTIONS AND BENEFITS AS LOCAL LAWS. YOU MAY WANT TO COMPARE
THESE LAWS.
<PAGE>
3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
Information comparing franchisors is available. Call the state administrators
listed in Exhibit 1 or your public library for sources of information.
Registration of this franchise by a state does not mean that the state
recommends it or has verified the information in this offering circular. If you
learn that anything in the offering circular is untrue, contact the Federal
Trade Commission and the state authority listed in Exhibit 1.
Effective Date:
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C> <C>
1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.............. 1
2 BUSINESS EXPERIENCE.......................................... 8
3 LITIGATION................................................... 17
4 BANKRUPTCY................................................... 24
5 INITIAL FRANCHISE FEE........................................ 24
6 OTHER FEES................................................... 27
7 INITIAL INVESTMENT........................................... 33
8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES............. 39
9 FRANCHISEE'S OBLIGATIONS..................................... 52
10 FINANCING.................................................... 54
11 FRANCHISOR'S OBLIGATIONS..................................... 66
12 TERRITORY.................................................... 87
13 TRADEMARKS................................................... 97
14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION.............. 99
15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE
FRANCHISE BUSINESS...........................................102
16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL.................106
17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION........107
18 PUBLIC FIGURES...............................................111
19 EARNINGS CLAIMS..............................................112
20 LIST OF OUTLETS..............................................113
21 FINANCIAL STATEMENTS.........................................120
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C> <C>
22 CONTRACTS....................................................121
23 RECEIPT...........................................LAST TWO PAGES
</TABLE>
EXHIBITS
--------
EXHIBIT 1 STATE AGENCIES/AGENTS FOR SERVICE OF PROCESS/
EFFECTIVE DATES
EXHIBIT A BOSTON CHICKEN, INC. DEVELOPMENT AGREEMENT
EXHIBIT B BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
EXHIBIT C BOSTON CHICKEN, INC. DELIVERY RIDER
EXHIBIT D BOSTON CHICKEN, INC. CATERING RIDER
EXHIBIT E ADDENDUM TO LEASE
EXHIBIT F ADDENDUM TO IN-LINE SHOPPING CENTER LEASE
EXHIBIT G ADDENDUM TO PURCHASE AND SALE AGREEMENT
EXHIBIT H LIST OF FRANCHISES
EXHIBIT I LIST OF FORMER FRANCHISEES
EXHIBIT J BOSTON CHICKEN, INC. FINANCIAL STATEMENTS
EXHIBIT K SECURED LOAN AGREEMENT
EXHIBIT K-1 INDUCEMENT AGREEMENT
EXHIBIT K-2 FORM OF GECC SUBLEASE
EXHIBIT L FRANCHISE SUBLEASE
EXHIBIT M FRANCHISE LEASE
EXHIBIT M-1 SPECIAL PURPOSES ADDENDUM TO FRANCHISE LEASE
EXHIBIT M-2 THIRD PARTY LEASE
EXHIBIT N COMPUTER AND COMMUNICATIONS SYSTEMS AGREEMENT
EXHIBIT O OPERATIONS MANUAL TABLE OF CONTENTS
APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE
INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. THESE ADDITIONAL DISCLOSURES,
IF ANY, APPEAR IN AN ADDENDUM.
<PAGE>
ITEM 1
------
THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
BCI, PREDECESSORS, AFFILIATES, AND THE BOSTON MARKET SYSTEM.
- -----------------------------------------------------------
The franchisor is Boston Chicken, Inc. The franchisor will be referred to
in this offering circular as "BCI". A person who buys a franchise from BCI will
be referred to in this offering circular as "you". If you are a privately-held
corporation, partnership, limited liability company, or other entity, certain
provisions of BCI's franchise agreement, development agreement, and related
agreements also will apply to your owners.
BCI is a Delaware corporation, incorporated on August 26, 1993, and
currently maintains its principal office at 14103 Denver West Parkway, Golden,
Colorado 80401-4086. BCI's agents for service of process are disclosed in
Exhibit 1. BCI's predecessor, Boston Chicken, Inc. (the "Predecessor") was
incorporated in Massachusetts on March 9, 1988 under the corporate name "New
Boston Chicken, Inc." On December 9, 1991, the Predecessor changed its
corporate name to "Boston Chicken, Inc." On September 21, 1993, the Predecessor
was merged into BCI. BCI operates under its corporate name generally and under
the name "Boston Rotisserie Chicken, Inc." in Florida. It operates its food
service units under the name "Boston Market."
The Original Boston Chicken, Inc., a Massachusetts corporation ("OBC")
(formerly known as "The Boston Chicken, Inc."), incorporated in September 1985,
is also a predecessor of BCI. OBC operated the original Boston Chicken food
service facility in Newtonville, Massachusetts from December 1985 to August
1994. In March 1988, BCI acquired the Marks (defined below) and all ownership
rights to the System (defined below) and know-how for the operation of Boston
Market Units (defined below) from OBC, and granted OBC a perpetual, non-
exclusive, royalty-free license to use the System at the Newtonville site or an
alternate site within Newton, Massachusetts. In August 1994, BCI purchased the
Newtonville Boston Chicken facility from OBC. As a result of the transaction,
the license was terminated and OBC changed its name to Austin Street Liquidating
Corp. OBC's principal business address is 28 Barney Hill Road, Wayland,
Massachusetts 01778. OBC has neither offered nor sold any franchises in this or
any other line of business.
BC Real Estate Investments, Inc. ("BCREI") is a Delaware corporation,
incorporated on September 23, 1992 and a wholly-owned subsidiary of BCI. BCREI
currently maintains its principal office at 14103 Denver West Parkway, Golden,
Colorado 80401-4086. BCREI has not conducted a business of the type to be
operated by you and has neither offered nor sold any franchises in this or any
other line of business. As described in Items 8 and 10 below, BCREI may, under
certain circumstances, lease the real property, and under certain circumstances,
the buildings and improvements, of one or more Boston Market Units to you.
<PAGE>
BCI operates, and offers and sells development rights for multiple
franchises and, in some cases, single-unit franchises, for the operation of food
service businesses, referred to in this Offering Circular as "Boston Market
Units," which sell, among other things, rotisserie roasted chicken, other
chicken specialties, potpies, baked meatloaf, baked ham, roasted turkey, hearty
vegetables, salads, soups, desserts, baked goods, beverages and such other food
products approved or required by BCI for sale at Boston Market Units
("Products"). Boston Market Units operate at locations which feature a
distinctive food service format and trade dress and utilize BCI's trademarks,
service marks and associated logos, including "BOSTON MARKET" (collectively, the
"Marks"), which BCI may adopt. BCI Units use BCI's distinctive formats,
specifications, employee selection and training programs, signs, equipment,
layouts, systems, menu, recipes, methods, procedures, designs and marketing and
advertising standards and formats, all of which BCI may modify periodically in
its sole discretion (the "System"). Boston Market Units operate using the
System and the Marks and must meet BCI's standards and specifications. Boston
Market Units offer Products for on-premises and carry-out dining. BCI may, in
its sole discretion, offer Boston Market Units the opportunity to offer Delivery
Service (defined below), Catering Service (defined below) and/or operate Special
Distribution Arrangements (defined below), or require them to offer Delivery
Service.
Throughout the United States, the food service industry is highly
competitive, with constantly changing market conditions, and is characterized by
a profusion of operators, including well-financed and highly sophisticated
national and regional chains. Boston Market Units will compete with restaurants
and fast food outlets operated by national and regional chains and independent
operators and, to some extent, with grocery and convenience stores selling
various prepared food products. Boston Market Units will compete with such
competitors for market share, access to desirable locations, and recruitment of
food service personnel. Boston Market Units will offer Products primarily to
individual consumers for on-site or off-site consumption. The market for the
Products is developed in some areas and developing in other areas, depending on
the number of restaurants and stores operating in the particular area.
BCI has operated one or more Boston Market Units since June 1989. As of
December 31, 1996, BCI and its majority owned subsidiary, Mid-Atlantic
Restaurant Systems L.P., owned and/or operated 105 Boston Market Units of the
type offered in this offering circular. BCI intends to open and operate
additional Boston Market Units and to franchise others to establish and operate
additional Boston Market Units. BCI also may expand through acquisition of
existing businesses for conversion to Boston Market Units. Some of the persons
identified in Item 2 of this Offering Circular and/or members of their immediate
families have ownership interests in franchised Boston Market Units and may, in
the future, have additional ownership interests in franchised Boston Market
Units. BCI is not currently operating any other business, although BCI reserves
the right to research, develop and/or acquire other businesses, including other
food service businesses.
In November 1993, BCI made an initial offering of shares of its common
stock to the public and began trading via the NASDAQ National Market System.
2
<PAGE>
EINSTEIN/NOAH BAGEL CORP.
- -------------------------
As of December 31, 1996, BCI owned approximately 17.3 million shares
(representing approximately 53.5%) of the outstanding common stock of
Einstein/Noah Bagel Corp. ("ENBC"). ENBC franchises and operates specialty
retail stores that feature fresh-baked bagels, cream cheeses, coffee and other
related products, primarily under the Einstein Bros.[TM] Bagels and Noah's New
York Bagels(R) brand names. ENBC, formerly named Progressive Bagel Concepts,
Inc. and Einstein Bros. Bagels, Inc., was formed in 1995 through the combination
of a number of leading regional bagel retailers. ENBC has franchised bagel
stores and granted development rights to a number of entities, some of which
contractually share existing market development resources with certain Boston
Market Developers. BCI has entered into a loan agreement with ENBC pursuant to
which BCI has agreed to lend up to $50 million to ENBC. BCI has also entered
into agreements with ENBC under which BCI provides certain administrative,
accounting, real estate and systems support services to ENBC in order to
facilitate the rapid development of stores by ENBC. ENBC currently operates and
franchises bagel shops under several brand names in certain regions of the
United States. Those brands include Einstein Bros. Bagels (TM), Noah's New York
Bagels(R), Offerdahl's Bagel Gourmet(R), Bagel & Bagel(R), and Melvyn and
Elmo TM. ENBC may grant franchises for the operation of bagel shops under one
or more of those or additional brands.
PROGRESSIVE FOOD CONCEPTS, INC.
- -------------------------------
On January 31, 1997, Progressive Food Concepts, Inc. ("PFCI"), a new
company partially financed by BCI, entered into a series of agreements with
Harry's Farmers Market, Inc. ("Harry's"), an operator of retail food stores in
the Atlanta area, to capitalize on emerging trends in the food buying habits of
today's consumers. The transaction permits PFCI to develop a business model
based on Harry's existing businesses and acquire a substantial equity interest
in Harry's. BCI has provided PFCI with a $17.0 million secured loan that is
convertible, after a moratorium period and subject to PFCI meeting certain
financial performance criteria, into a majority equity interest in PFCI.
Harry's owns and operates five stores in the Atlanta area, including: three
Harry's Farmers Markets, mega-markets specializing in high quality fruits,
vegetables, meats and seafood, fresh bakery goods, fresh ready-to-heat/cook and
ready-to-eat prepared foods, and deli, cheese and dairy products; and two
smaller Harry's In A Hurry stores, which emphasize high quality, fresh ready-to-
heat/cook prepared foods and specialty perishables. Harry's line of over 300
prepared food products and meals are made in its 28,000 square foot USDA-
approved manufacturing facility, and over 200 proprietary bakery items are baked
fresh daily in its 55,000 square foot bakery.
Pursuant to the agreements with Harry's, PFCI has acquired beneficial
ownership of, and a royalty-free license to use, all of Harry's intellectual
property and trademark rights outside the states of Georgia and Alabama
(including all rights to the Harry's Farmers Market and Harry's
3
<PAGE>
In A Hurry retail concepts) and access to Harry's personnel, information, and
facilities for purposes of developing a business model based on Harry's
businesses. PFCI has also obtained the right to acquire, subject to certain
conditions, up to seven million shares of Harry's Class A common stock
(representing approximately 43% of Harry's currently outstanding common stock
and approximately 20% of the voting power of such outstanding common stock), and
a right of first refusal with respect to additional financings and business
combination transactions into which Harry's may propose to enter.
BOSTON MARKET INTERNATIONAL, INC.
- ---------------------------------
BCI is in the preliminary stage of taking the Boston Market brand into
foreign markets, which could occur through license, franchise, area development,
joint venture or other arrangements. In connection therewith, BCI intends to
license to a new company, Boston Market International, Inc. ("BMI"), the rights
to develop Boston Market stores in Taiwan and the People's Republic of China.
In January 1997, BMI entered into a letter of intent with a restaurant developer
in Southeast Asia that contemplates the formation of a new entity that would
sublicense such development rights and develop up to 600 Boston Market stores in
such countries over the next ten years. BMI is expected to be funded initially
with third party private equity capital and a loan from BCI which could be
convertible into a majority equity interest in BMI. To the extent practicable
in the jurisdictions in which it will operate, BMI expects to follow BCI's
business model of providing partial funding to its area developers, franchisees,
licensees, and/or joint venture partners with loans convertible into majority
equity interests in such entities.
DEVELOPMENT AND FRANCHISE RIGHTS OFFERED.
- ----------------------------------------
(a) DEVELOPMENT RIGHTS. BCI will offer and sell to certain qualified
------------------
persons ("Developers") the right to develop, own and operate a specified number
of Boston Market Units at approved location(s) within a defined geographic area
(the "Development Area") under the terms of the Boston Chicken, Inc. Development
Agreement (the "Development Agreement"), a copy of which is attached to this
offering circular as Exhibit A. The Development Area may be composed of a
number of smaller areas referred to as "Sub-Areas." Under the Development
Agreement, BCI will also grant franchises to Authorized Entities (defined below)
of the Developer. The total number of Boston Market Units which a Developer
will be obligated to develop under the Development Agreement (the "Development
Obligations") and the development schedule (the "Development Schedule")
specifying the number of Boston Market Units the Developer must have open and in
operation in each Sub-Area and the required opening dates for each of them will
be inserted in the Development Agreement before it is executed. The Development
Agreement provides that for each Boston Market Unit developed under the
Development Agreement, the Developer or an Authorized Entity must execute BCI's
standard franchise agreement in use at the time each such franchise agreement is
executed and any riders, exhibits, guarantees and other agreements used by BCI.
The material terms and conditions of
4
<PAGE>
the standard franchise agreement in use at the time the franchise agreement is
executed may vary substantially from the terms and conditions of the Franchise
Agreement (defined below) described in this offering circular. However, under
the Development Agreement, the initial franchise fee and royalty must remain the
same under all franchise agreements entered into under the Development
Agreement. Developers of Boston Market Units that previously entered into
development agreements with BCI may in some cases require, or be permitted by,
BCI to enter into the form of franchise agreement attached to their development
agreement rather than the Franchise Agreement described in this offering
circular.
The Development Agreement requires that the Principal Owners (defined
below) of the Developer and their spouses must sign the Guaranty and Assumption
of Developer's Obligations attached to the Development Agreement, although other
assurances of performance may be accepted by BCI in some cases, and that the
Developer and its Principal Owners must sign the Guaranty and Assumption of
Franchise Owner's Obligations attached to each Franchise Agreement (defined
below) executed by an Authorized Entity. For purposes of the Development
Agreement, a "Principal Owner" is an owner which: (1) is a general partner in
the Developer; or (2) has a direct or indirect equity interest: (a) in the
Developer of five percent or more (regardless of whether such owner is entitled
to vote that interest); or (b) in any Boston Market Unit other than the Boston
Market Units developed under the Development Agreement, or any developer or
franchise owner of Boston Market Units other than the Developer (or its
Authorized Entities); or (3) is otherwise designated as a Principal Owner in the
Development Agreement. However, a reduction in a Principal Owner's equity
interest in the Developer below 5% will not affect his/her/its status as a
Principal Owner unless such reduction is the result of the transfer of all
his/her/its interests in the Developer in compliance with the Development
Agreement.
(b) FRANCHISE RIGHTS. BCI will offer and sell to certain qualified persons
----------------
a franchise (the "Franchise") to establish and operate a Boston Market Unit
utilizing the System under the Marks and offering Products under the terms of
the Boston Chicken, Inc. Franchise Agreement (the "Franchise Agreement")
attached to this offering circular as Exhibit B. BCI anticipates that most
Boston Market Units will be developed by Developers acting under Development
Agreements. The Franchise Agreement requires that the Principal Owners of the
Franchise Owner and their spouses must sign the Guaranty and Assumption of
Franchise Owner's Obligations attached to the Franchise Agreement, although
other assurances of performance may be accepted by BCI in some cases. The
definition of a Principal Owner for purposes of the Franchise Agreement is
contained in Section 1.B. of the Franchise Agreement and is analogous to the
definition of a Principal Owner for purposes of the Development Agreement
(described above). Certain provisions of the Franchise Agreement and
Development Agreement and the guaranties restrict the Franchise Owner, Developer
and/or their Principal Owners from participating in a Competitive Business
(defined in Item 17 below).
BCI has begun a program whereby a flagship Boston Market Store (a "Flagship
Store"), utilizing a slightly larger kitchen facility and a core group of
trained, full-time food preparers,
5
<PAGE>
produces side dishes for satellite locations (each a "Satellite Store") owned by
the owner of the Flagship Store, allowing somewhat smaller kitchen facilities
and lower staffing levels for Satellite Store locations. This program is
designed to increase food quality and consistency, facilitate roll-out of new or
revised products, and decrease overall labor and food costs. If the Boston
Market Unit is to be operated as a Flagship Store or a Satellite Store, you will
be required to enter into the Flagship/Satellite Rider attached to the Franchise
Agreement. The initial investment for a Flagship Store and a Satellite Store
will vary from the initial investment for a traditional Boston Market Unit, as
described in the footnotes to the table contained in Item 7 below.
Certain of BCI's Developers who participate in BCI's "Financed Area
Developer Program" (described below in Item 10 of this offering circular) are
developing store operator incentive programs pursuant to which each store
operator would receive, in addition to fixed base compensation, periodic bonus
compensation based upon the Boston Market Unit's financial performance, as
defined for purposes of the programs.
GENERAL COMMENTS/DEFINITIONS.
- ----------------------------
This offering circular describes relevant information about (a) the
development rights offered for Boston Market Units, (b) the Franchise, (c)
Delivery Service, Catering Service and Special Distribution Arrangements (as BCI
may authorize and/or, in the case of Delivery Service, require periodically),
(d) the terms and conditions of the current Development Agreement, Franchise
Agreement, Delivery Rider and Catering Rider, and (e) certain financing
arrangements which may be available to you. "Delivery Service," Catering
Service" and "Special Distribution Arrangements" are defined and described in
Item 12 of the offering circular. There have been instances where BCI has
varied and there may be instances in the future where BCI will vary the terms
and conditions of such agreements and riders, depending upon the circumstances
involved in a particular transaction. It is BCI's intention only to enter into
multi-unit development transactions with sophisticated investors who are
experienced food service operators, or who employ management personnel having
food service expertise, and who have access to substantial capital necessary for
the financing of multi-unit development of Boston Market Units over development
terms of approximately two (2) to five (5) years, depending on the number of
Units to be developed.
In developing and operating Boston Market Units and, if applicable, in
offering Delivery Service or Catering Service or operating Special Distribution
Arrangements, you must comply with all local, state and federal laws and
regulations applicable to food service operations, including health and
sanitation laws and regulations.
As used in the Franchise Agreement, Development Agreement and this offering
circular, the term:
6
<PAGE>
(a) "Authorized Entity" means an entity, other than you, if you are a
Developer, which is permitted to sign a Franchise Agreement under the
Development Agreement. The entity must meet BCI's then applicable
standards and requirements for franchise owners, including financial
requirements, limits on total number of holders of equity interests and
requirements for owners of non-controlling Ownership Interests (defined
below). You will be considered to "control" an entity if and only during
such times as: (1) you own at least a majority of all the Ownership
Interests in such entity; (2) you have at least the percentage of voting
power required under applicable law to authorize a merger, liquidation or
transfer of substantially all of the assets of the entity and to control or
determine any other vote or decision of the entity without the vote or
approval of any other party; (3) if the entity is a partnership, you are
the sole general partner of a limited partnership or the managing partner
of a general partnership; (4) if the entity is a limited liability company,
you are the sole Manager, or you own at least a majority of all the
Ownership Interests in the Manager, of the limited liability company; and
(5) you establish to BCI's satisfaction that you have, and during the term
of the Franchise Agreement for the Boston Market Unit to be owned and
operated by such entity will have, the right and power to direct the
management policies and operation of such entity and the sale or other
disposition of such Boston Market Unit. BCI has the right to prohibit you
from using separate entities to sign Franchise Agreements under the
Development Agreement;
(b) "Owner" means all persons or entities holding direct or indirect,
legal or beneficial Ownership Interests (defined below) in you as specified
in the applicable agreement. The term Owner also refers to any person who
has any other direct or indirect property rights in you, the Franchise
Agreement, the Development Agreement, the Franchise or a Boston Market
Unit;
(c) "Ownership Interest" means in relationship to a: (i) corporation,
the legal or beneficial ownership of shares in the corporation; (ii)
partnership, the legal or beneficial ownership of a general or limited
partnership interest; (iii) limited liability company, the legal or
beneficial ownership of units of membership interest in the limited
liability company; or (iv) trust, the ownership of a beneficial interest of
such trust;
(d) "Principal Owner" means each Owner which (1) is a general partner
in the Developer; or (2) has a direct or indirect equity interest: (a) in
the Developer of 5% or more (regardless of whether such Owner is entitled
to vote thereon); or (b) in any Boston Market Units other than those
developed pursuant to the Development Agreement, or any developer and/or
franchise owner of Boston Market Units other than the Developer (or its
authorized Entities; or (3) is designated as a Principal owner in the
Development or the Franchise Agreement; provided, however, that a reduction
in a Principal Owner's equity interest in the Developer or the Franchise
Owner below 5% shall not affect his/her/its status as a Principal Owner
unless such reduction is the result of the transfer
7
<PAGE>
of all his/her/its equity interests in the Developer or the Franchise Owner
in compliance with the applicable Agreement; and
(e) "Immediate Family" means (1) the spouse of a person; and (2) the
natural and adoptive parents and natural and adopted children and siblings
of that person and their spouses; and (3) the natural and adoptive parents
and natural and adopted children and siblings of the spouse of that person;
and (4) any other member of the household of that person.
ITEM 2
------
BUSINESS EXPERIENCE
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER, AND DIRECTOR - SCOTT A. BECK
- -----------------------------------------------------
Scott A. Beck became Chairman of the Board, Chief Executive Officer and a
director of BCI in June 1992. He was Vice Chairman of the Board of Blockbuster
Entertainment Corporation ("Blockbuster") in Fort Lauderdale, Florida from
September 1989 until his retirement in January 1992, and Chief Operating Officer
from September 1989 to January 1991.
VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF FINANCIAL OFFICER - MARK
- --------------------------------------------------------------------------
STEPHENS
- --------
Mark Stephens became Chief Financial Officer of BCI in October 1993 and
Vice Chairman of the Board in January 1996. From November 1992 until October
1993, Mr. Stephens was the Managing Director of Haas Wheat & Partners in Dallas,
Texas and from April 1989 to November 1992 served as Senior Vice President of
Grauer & Wheat Investments, Inc. in Dallas, Texas and New York, New York.
VICE CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CEO-BOSTON MARKET - LAURENCE M. ZWAIN
- ---------------------------------------------------
Laurence M. Zwain became Vice Chairman of the Board of Directors in July
1996 and has been the President and Chief Executive Officer of the Boston Market
concept since January 1996. Mr. Zwain was previously with PepsiCo, Inc. serving
as President and Chief Operating Officer for PepsiCo Restaurants International
from September 1994 to January 1996 in Dallas, Texas, President and Chief
Executive Officer for KFC International from August 1993 to September 1994 in
Louisville, Kentucky, Senior Vice President - Operations of KFC International
from February 1993 to August 1993 in Louisville, Kentucky and Division Vice
President - West, Pizza Hut, Inc. from 1988 to 1993 in Irvine, California.
8
<PAGE>
VICE CHAIRMAN OF THE BOARD OF DIRECTORS - MARK R. GOLDSTON
- ----------------------------------------------------------
Mark R. Goldston became Vice Chairman of the Board of Directors of BCI in
August 1996. He became Chief Executive Officer and President of ENBC in April
1996. From July 1994 to April 1996, he was Chairman and CEO of The Goldston
Group, an advisory firm in Los Angeles, California. From October 1991 through
June 1994, Mr. Goldston was employed by L.A. Gear, Inc. in Santa Monica,
California, most recently as President and Chief Operating Officer. Since
December 1995, Mr. Goldston has been a director of Bohbot Entertainment and
Media, Inc. in New York, New York.
CHIEF OPERATING OFFICER - BUSINESS AND INFORMATION SERVICES - STUART N.
- -----------------------------------------------------------------------
FULLINWIDER
- -----------
Stuart N. Fullinwider became Chief Operating Officer - Business and
Information Services of BCI in June 1996. From June 1995 to June 1996, he was
Senior Vice President for BCI. He was Vice President - Accounting and
Administration from January 1995 until June 1995, after having served as Vice
President - Finance since February 1992. He served with Blockbuster in Fort
Lauderdale, Florida from April 1991 to February 1992 as Director, Strategic
Technologies, and from May 1989 to April 1991, as Director, Corporate Planning.
Mr. Fullinwider is a certified public accountant.
CHIEF PERSONNEL OFFICER - FREDRICK W. LEY
- -----------------------------------------
Fredrick W. Ley became Chief Personnel Officer of BCI in March 1996. From
January 1995 to March 1996, he was Vice President - Executive Development of
BCI. Mr. Ley was self-employed in Oregon from February 1994 to January 1995.
He was Corporate Vice President - Human Resources of Nike, Inc. in Beaverton,
Oregon from November 1991 to February 1994. From January 1991 to November 1991,
Mr. Ley was Vice President - Human Resources of Blockbuster in Fort Lauderdale,
Florida.
CHIEF MARKETING OFFICER - WILLIAM J. MCDONALD
- ---------------------------------------------
William J. McDonald became Chief Marketing Officer of BCI in January 1995
having previously served as a Market Partner in California from October 1993 to
January 1994, and as Executive Vice President from March 1993 to October 1993.
From October 1992 to February 1993, he was self-employed. From July 1989 to
September 1992, Mr. McDonald held the position of Senior Vice President, U.S.A.
Marketing with Kentucky Fried Chicken, Corp. ("KFC"), a subsidiary of PepsiCo,
Inc. located in Louisville, Kentucky. During 1992, he also served as KFC's
Senior Vice President, Worldwide New Concept Development.
CHIEF DEVELOPMENT OFFICER - JOREN PETERSON
- ------------------------------------------
Joren Peterson became Chief Development Officer of BCI in June 1995, having
previously served as Vice President of Real Estate since joining BCI in June
1992. From
9
<PAGE>
December 1989 until June 1992, he was a partner of Landmark Commercial Real
Estate Services, Inc., in Detroit, Michigan, specializing in real estate tenant
representation.
CHIEF FINANCIAL OFFICER - BOSTON MARKET - JOHN J. TODD
- ------------------------------------------------------
John T. Todd became Chief Financial Officer-Boston Market of BCI in April
1996. From February 1989 to April 1996, Mr. Todd was with PepsiCo, Inc. serving
as Vice President, Portfolio Planning from September 1995 to April 1996, Vice
President Strategic Planning from February 1994 to September 1995, Vice
President Acquisitions from December 1993 to February 1994, and Senior Director
Field Finance from February 1989 to December 1993.
CHIEF OPERATING OFFICER - BOSTON MARKET - JAY WILLOUGHBY
- --------------------------------------------------------
Jay Willoughby became Chief Operating Officer-Boston Market of BCI in April
1996. From July 1994 to April 1996, Mr. Willoughby was Chief Executive Officer
for Pizza Hut, UK, Ltd. From June 1992 through June 1994, he was Senior Vice
President and General Manager for Pizza Hut Southern Europe and Africa, in
Madrid, Spain, and from June 1989 to May 1992, Mr. Willoughby was Senior Vice
President for Pizza Hut Central Division in Chicago, IL.
EXECUTIVE VICE PRESIDENT - STEPHEN ELMONT
- -----------------------------------------
Stephen Elmont became Executive Vice President of BCI in March 1995. He
served as Chairman of the Food Group, Ltd. located in Boston, Massachusetts from
July 1992 to December 1995. Mr. Elmont also served as Chairman of the Board for
the National Restaurant Association from May 1993 to May 1994 in Washington,
D.C. From December 1975 to July 1992, Mr. Elmont was President of Creative
Gourmets, Ltd. located in Boston, Massachusetts.
SENIOR VICE PRESIDENT - MICHAEL J. BEAUDOIN
- -------------------------------------------
Michael J. Beaudoin became Senior Vice President of BCI in February 1997.
From June 1996 to February 1997, he was Senior Vice President for Einstein/Noah
Bagel Corp. and from July 1995 to June 1996, he served as Chief Financial
Officer for Einstein/Noah Bagel Corp. From February 1995 to July 1995, Mr.
Beaudoin served as Assistant to the Chairman of BCI. From July 1993 to February
1995, he served as Vice President for New Leaf Entertainment. From May 1993 to
July 1993, Mr. Beaudoin was Senior Director - Operations, for New Leaf
Entertainment. From December 1992 to May 1993, he served as Director of
Strategic Planning of Soundsational, Inc. From June 1990 to November 1992, he
was an Associate with Pfingsten Partners, L.P.
SENIOR VICE PRESIDENT - INTERNATIONAL - THOMAS J. BECK
- ------------------------------------------------------
Thomas J. Beck became Senior Vice President - International of BCI in
February 1997. From June 1993 to February 1997, he was Vice President -
Development for BCI. Mr. Beck
10
<PAGE>
was BCI's Director of Franchise Development from April 1992 to May 1993. From
August 1989 to March 1992, he was a director of and consultant to the KCEB
Foundation in Chicago, Illinois.
SENIOR VICE PRESIDENT - PLANNING AND ANALYSIS, TREASURER - ROBERT T. BIELINSKI
- ------------------------------------------------------------------------------
Robert T. Bielinski became Senior Vice President - Planning and Analysis of
BCI in September 1996. He has also held the position of Treasurer of BCI since
March 1995. From March 1994 to March, 1995, Mr. Bielinski was Director of
Financial Planning and Analysis of BCI. Prior to joining BCI, from August 1988
to March 1994, Mr. Bielinski was an investment banker with Lehman Bros.
SENIOR VICE PRESIDENT - SYSTEMS - STEPHEN A. ELOP
- -------------------------------------------------
Stephen A. Elop became Senior Vice President-Systems of BCI in March 1996.
He served as Vice President - Systems of BCI from February 1995 to March 1996,
having previously served as Director of Systems since joining BCI in May 1994.
From August 1992 to May 1994, he was Director of Consulting for Lotus
Development Corp. located in Cambridge, Massachusetts. From 1986 to August
1992, Mr. Elop was partner of Soma, Inc. located in Toronto, Ontario, Canada.
SENIOR VICE PRESIDENT - RESEARCH AND PRODUCT DEVELOPMENT - GERARD LEWIS
- -----------------------------------------------------------------------
Gerard Lewis became Senior Vice President - Research and Product
Development of BCI in July 1996. From May 1992 to July 1996, he was Vice
President - Research and Development of BCI. Mr. Lewis was Vice President of
Research and Development and Menu Planning for Vicorp Restaurants (Baker's
Square) in Denver, Colorado from April 1989 to May 1992.
VICE PRESIDENT - PROCUREMENT AND LOGISTICS - BRUCE O. BURNHAM
- -------------------------------------------------------------
Bruce O. Burnham became Vice President - Procurement and Logistics of BCI
in July 1994. Mr. Burnham is also President of Burnham & Tillinghast, LLC, in
Boulder, Colorado, a company that identifies and analyzes businesses to be
acquired for investment or operation, a position he has held since January 1994.
From June 1990 to February 1994, Mr. Burnham was Corporate Vice President,
Procurement for Service America Corp. in Stamford, Connecticut.
VICE PRESIDENT - BUSINESS DEVELOPMENT - MICHAEL R. DAIGLE
- ---------------------------------------------------------
Michael R. Daigle became Vice President - Business Development of BCI in
October 1995. From May 1995 to October 1995, he was Vice President of
Progressive Bagel Concepts, Inc. in Denver, Colorado. From September 1990 to
April 1995, Mr. Daigle was with Blockbuster Entertainment Corp./Viacom, Inc. in
Fort Lauderdale, Florida, serving as Senior
11
<PAGE>
Franchise Counsel from September 1990 to January 1992, Director - Franchise
Development from January 1992 to February 1994, Vice President - Franchise
Development from February 1994 to September 1994 and Vice President -Domestic
Franchising from September 1994 to April 1995.
VICE PRESIDENT - REAL ESTATE DEVELOPMENT - AL DAVIS
- ---------------------------------------------------
Al Davis became Vice President of Real Estate Development of BCI in June
1995. Mr. Davis served as Director of Development for BCI from October 1993 to
June 1995. From March 1990 to October 1993, he was Director of Development for
Kentucky Fried Chicken in Louisville, Kentucky.
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL - BERNADETTE DENNEHY
- -----------------------------------------------------------------
Bernadette Dennehy became Vice President and Associate General Counsel of
BCI in March 1996. From October 1994 to February 1996, she was Assistant
General Counsel-Finance of BCI. From January 1990 to August 1994, Ms. Dennehy
was a Partner in Dickinson, Wright, Moon, VanDusen & Freeman in Chicago,
Illinois.
VICE PRESIDENT - OPERATIONS SERVICES -- LARRY J. DEVRIES
- --------------------------------------------------------
Larry J. DeVries became Vice President - Operations Services of BCI in
September 1994. From March 1993 to September 1994, Mr. DeVries was a Market
Partner with BCI in Denver, Colorado. From December 1973 to March 1993, Mr.
DeVries held various positions with Pizza Hut, Inc. in Denver, Colorado,
including Region Manager from January 1989 to March 1991 and Market Manager of
the Colorado Market from March 1991 to March 1993.
VICE PRESIDENT - ADMINISTRATION - CHRIS B. DODGE
- ------------------------------------------------
Chris B. Dodge became Vice President - Administration of BCI in September
1994. Ms. Dodge was BCI's Director of Administration from June 1993 to
September 1994. From 1982 to June 1993, Ms. Dodge was Director of Human
Resources for Gabriel Ride Control Products and Maremont Corporation, each of
which is a subsidiary of Arvin Industries,Inc., in Carol Stream, Illinois.
VICE PRESIDENT - FLAGSHIP - GEORGE J. DRAGISITY
- -----------------------------------------------
George J. Dragisity became Vice President - Flagship of BCI in March 1996.
From September 1995 to February 1996, he was Director of Flagship of BCI. Mr.
Dragisity was employed as Sales Director (Michigan Division) of The Great
Atlantic & Pacific Tea Company from October 1987 to August 1995 in Detroit,
Michigan.
12
<PAGE>
VICE PRESIDENT - ACCOUNTING - SUSAN M. FINLEY
- ---------------------------------------------
Susan M. Finley became Vice President - Accounting of BCI in December 1996.
From August 1996 to December 1996, Ms. Finley was Vice President, Special
Projects of BCI. From July 1996 to August 1996, she was a Partner for KPMG Peat
Marwick, L.L.P. From August 1995 to June 1996, she was Senior Manager for KPMG
in Denver, Colorado, and from July 1990 to August 1995, she was Senior Manager
for KPMG in Dallas, Texas.
VICE PRESIDENT - HUMAN RESOURCES - JAMES R. FREDERICKS
- ------------------------------------------------------
James R. Fredericks became Vice President - Human Resources of BCI in
January 1996. From February 1994 to June 1996, he was Director of Global Human
Resources for Nike, Inc. He was also Director of Compensation and Benefits for
Nike, Inc. from January 1993 to February 1994. From July 1991 to January 1993,
he was Senior Consultant for the Wyatt Company.
VICE PRESIDENT - NATIONAL REAL ESTATE -- KEVIN GREVE
- ----------------------------------------------------
Kevin Greve became Vice President - National Real Estate of BCI in November
1995 having previously served as Vice President - Real Estate from April 1994 to
November 1995, and as Director of Real Estate since joining BCI in November
1993. From February 1990 to November 1993, Mr. Greve held the positions of
Director of Real Estate, Vice President of Real Estate and of Development of
Rally's Inc. in Louisville, Kentucky.
VICE PRESIDENT - ADVERTISING - JOSEPH W. HALL III (TREY)
- --------------------------------------------------------
Joseph W. Hall III became Vice President - Advertising of BCI in October
1995. From November 1994 to October 1995 he was Director - National Calendar
Marketing of BCI. Mr. Hall was employed by PepsiCo/Pizza Hut, Inc. From 1988 to
November 1994 serving in numerous positions including Marketing Supervisor of
the Western Division in Tustin, California, Manager of Sports Marketing, Manager
of National Advertising, Manager - National Delivery Marketing, Director -
National Calendar Marketing, Director - National Base Business Marketing and
Director - Base Business, Kids, Sports and Beverage Marketing in Wichita,
Kansas.
VICE PRESIDENT - FINANCE - MARK X. HAYDEN
- -----------------------------------------
Mark X. Hayden has been Vice President - Finance of BCI since October 1995.
He served as President of the Rocky Mountain Zone for Progressive Bagel
Concepts, Inc. from February 1995 to October 1995, in Denver, Colorado. He was
Vice President of Real Estate of BCI from June 1993 to February 1995 and Vice
President of Construction from January 1992 to June 1993. From November 1990 to
December 1991, he was Director of Special Programming for Blockbuster
Entertainment Corporation.
13
<PAGE>
VICE PRESIDENT - REAL ESTATE LEGAL SERVICES - JAMES C. HOAR
- -----------------------------------------------------------
James C. Hoar became Vice President - Real Estate Legal Services of BCI in
March 1996. From May 1994 to February 1996, he served as Director - Real Estate
Legal Services of BCI. From April 1989 to May 1994, he was Senior Attorney for
Burger King Corporation located in Miami, Florida.
VICE PRESIDENT - ACCOUNTING SERVICES - DAVID C. JONES
- -----------------------------------------------------
David C. Jones became Vice President - Accounting Services of BCI in
November 1995. Mr. Jones served as Director of Accounting for BCI from August
1994 to October 1995 and as Controller for BCI from November 1992 to August
1994. From March 1985 to November 1992, he was Controller for Summit Family
Restaurants, in Salt Lake City, Utah.
VICE PRESIDENT - PRODUCT DEVELOPMENT - ROBERT J. KARISNY
- --------------------------------------------------------
Robert J. Karisny became Vice President - Product Development of BCI in
August 1996. He served as Director of Product Development of BCI from October
1992 to August 1996. From October 1989 to October 1992, Mr. Karisny served as
Director of Research and Development for Vicorp Restaurants.
VICE PRESIDENT - TRAINING - DIANE KESSEL
- ----------------------------------------
Diane Kessel became Vice President - Training of BCI in February 1995
having previously served as Director of Training since joining BCI in September
1992. From September 1991 to September 1992, Ms. Kessel held the position of
Director of Human Resources with Young Presidents' Organization in Irving,
Texas. She was Director of Human Resources for Bay Street Restaurants, Inc.
("Bay Street") in Dallas, Texas from December 1988 to September 1991.
VICE PRESIDENT - SEC AND FINANCIAL REPORTING - MARK A. LINK
- -----------------------------------------------------------
Mark A. Link became Vice President - SEC and Financial Reporting of BCI in
March 1995 after having served as Director of SEC and Financial Reporting from
January 1994 to March 1995. From July 1988 to December 1993, Mr. Link was a
Senior Audit Manager for Deloitte & Touche in Boston, Massachusetts.
VICE PRESIDENT - INVESTOR RELATIONS - MELISSA A. MARSDEN
- --------------------------------------------------------
Melissa A. Marsden became Vice President - Investor Relations of BCI in
January 1996. Ms. Marsden served as Director of Investor Relations from April
1994 to January 1996. From December 1989 to April 1994 she was Senior Vice
President - Communications for OLC Corporation in Chicago, Illinois.
14
<PAGE>
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL - J. RANDAL MILLER
- ---------------------------------------------------------------
J. Randal Miller became Vice President and Associate General Counsel of BCI
in March 1996. From March 1994 to March 1996, he was Assistant General Counsel
- - Franchise of BCI. Mr. Miller was an Associate of Rudnick & Wolfe in Chicago,
Illinois from May 1987 to March 1994.
VICE PRESIDENT - STORE DESIGN - EDWARD PALMS
- --------------------------------------------
Edward Palms has been BCI's Vice President - Store Design since September,
1994 after having served as Vice President - Construction and Design since June
1993. From June 1992 to June 1993, he was employed by BCI as a full-time
consultant specializing in store design. From 1983 to 1992, he was Senior Vice
President, Design and Construction for Chili's Inc. (which changed its name to
Brinker International), in Dallas, Texas with responsibility for property
development, design, architecture, construction, and purchasing for all of its
restaurant concepts, including Chili's, Macaroni Grill, Regas, and Grady's
American Grill.
VICE PRESIDENT - CONSTRUCTION - JOHN R. PAULUS
- ----------------------------------------------
John R. Paulus became Vice President - Construction of BCI in June 1995.
From September 1994 to June 1995, Mr. Paulus acted as Director of Construction.
He was Senior Director of Facility Development for Pizza Hut, Inc., Wichita,
Kansas, from April 1994 to September 1994. Mr. Paulus was Director of Facility
Development for Pizza Hut, Inc. from February 1989 through April 1993 when he
became Director of Asset Management for Pizza Hut, Inc. where he served until
April 1994.
VICE PRESIDENT - NEW BUSINESS MARKETING - KEITH L. ROBINSON
- -----------------------------------------------------------
Keith L. Robinson became Vice President - New Business Marketing of BCI in
November 1996. From March 1988 through October 1996, Mr. Robinson was Vice
President, New Products, Redesign, and Hot Cereals for Quaker Oats Company, in
Chicago, Illinois.
VICE PRESIDENT - COMMUNICATIONS - KAREN RUGEN
- ---------------------------------------------
Karen Rugen became Vice President - Communications of BCI in October 1994.
Ms. Rugen headed the corporate communications department at Hyatt Hotels Corp.
in Chicago, Illinois from 1978 to 1994, serving as Vice President - Public
Affairs from June 1990 to September 1994.
15
<PAGE>
VICE PRESIDENT - CONCEPT - EDWARD M. RZASA
- ------------------------------------------
Edward M. Rzasa became Vice President - Concept of BCI in May 1994. From
November 1987 to May 1994, Mr. Rzasa was Vice President - Strategic Planning for
Bayer Bess Vanderwarker in Chicago, Illinois.
VICE PRESIDENT - REAL ESTATE FINANCE - FORREST W. TIPPEN, JR.
- -------------------------------------------------------------
Forrest W. Tippen became Vice President - Real Estate Finance of BCI in
October 1995. From January 1992 to October 1995 he was a Partner with TAG Realty
Partners in Dallas, Texas. From November 1982 to December 1991, Mr. Tippen was
Senior Vice President of The Swearingin Company in Dallas, Texas.
VICE PRESIDENT - REAL ESTATE - CHARLES E. WATSON
- ------------------------------------------------
Charles E. Watson became Vice President - Real Estate of BCI in March 1996.
Mr. Watson served as Director of Construction for BCI from June 1995 to March
1996. From 1984 to June 1995, he was Vice President of Real Estate &
Construction for Jack-In-The-Box Restaurants in San Diego, California.
VICE PRESIDENT - FINANCE -- M. DAVID WHITE
- ------------------------------------------
M. David White became Vice President - Finance of BCI in January 1995.
From November 1989 to November 1992, Mr. White served as Vice President of the
Investment Banking Division of Merrill Lynch Co. in Houston, Texas. From
November 1992 to January 1995 he served as Director of the Investment Banking
Division of Merrill Lynch Co. in Houston, Texas.
VICE PRESIDENT - SYSTEMS - ROY YOUNGMAN
- ---------------------------------------
Roy Youngman became Vice President - Systems of BCI in March 1996. Mr.
Youngman served as Director of Systems for BCI from February 1994 to March 1996.
From November 1987 to February 1994, he was Senior Manager for Ernst & Young in
Irving, Texas.
DIRECTOR - DEAN L. BUNTROCK
- ---------------------------
Dean L. Buntrock became a director of BCI in October 1993. Mr. Buntrock is
a director of WMX Technologies, Inc. ("WMX") in Oak Brook, Illinois and has
served from its founding in 1968 to the present as its Chairman of the Board.
From 1968 to June 1996, Mr. Buntrock served as WMX's Chief Executive Officer.
Mr. Buntrock is a director of Wheelabrator Technologies, Inc. and Waste
Management International plc which are also subsidiaries of WMX. He is also a
director of First Chicago/NBD.
16
<PAGE>
DIRECTOR - ARNOLD C. GREENBERG
- ------------------------------
Arnold C. Greenberg has been a director of BCI since February 1991. He
has been a self-employed private investor since May 1988.
DIRECTOR - J. BRUCE HARRELD
- ---------------------------
J. Bruce Harreld has been a Director of BCI since June 1993. He was
President of BCI from September 1993 to October 1995. Mr. Harreld has been
Senior Vice President-Strategy of IBM Corp. in New York, New York, since October
1995. Also during this period, Mr. Harreld was Chairman of JBH, Inc.,
management consultants, and Adjunct Professor of Management of the J.L. Kellogg
School of Management at Northwestern University. From June 1993 until September
1993, JBH, Inc. and Mr. Harreld provided services to BCI relating to systems and
process consulting, design, and implementation management under a consulting
agreement that was terminated in September 1993. Mr. Harreld was the Senior
Vice President, Marketing and Information Services from 1992 to 1993 and the
Senior Vice President/Chief Information Officer from 1989 to 1992 of Kraft
General Foods, Inc. in Glenview, Illinois.
DIRECTOR - M HOWARD JACOBSON
- ----------------------------
M Howard Jacobson has been a director of BCI since February 1991. Since
October 1991, he has been a Senior Advisor to Bankers Trust, Private Bank in
Greenwich, Connecticut. From August 1989 to August 1991, he was a Senior
Advisor to Prudential Bache Capital Funding in Boston, Massachusetts. Mr.
Jacobson also serves as a director of Allmerica Property and Casualty Companies,
Inc., Immulogic Pharmaceutical Corporation and Wyman-Gordon Company.
DIRECTOR - PEER PEDERSEN
- ------------------------
Peer Pedersen has been a director of BCI since January 1993. Mr. Pedersen
is Chairman of the Board of Pedersen & Houpt, a Chicago law firm, where he has
practiced law since 1957. Mr. Pedersen serves as a director of WMX, Chemical
Waste Management, Inc., Aon Corporation, Mallard Coach Company, and Discovery
Zone, Inc.
ITEM 3
------
LITIGATION
Dr. Frederick Sklar, Ray Schondak, Irving Smith, Ron Woodall, Atteberry
-----------------------------------------------------------------------
Children's Trust, Stan Fernald, Michael Boyd, and David Hickman v. Scott A.
- ---------------------------------------------------------------------------
Beck, Video Superstore Management, Inc., Pace Financial Management, Inc., Pace
- ------------------------------------------------------------------------------
Affiliated, Inc., Blockbuster Entertainment Corporation, Chuck Rice, Kevin
- --------------------------------------------------------------------------
Shepherd, and Jerry Reeves, (District Court, Dallas County, Texas, Cause No. 91-
- --------------------------
10192). On October 10, 1991, the plaintiffs (who are not
17
<PAGE>
related to BCI) began an action against the defendants by filing a Complaint in
the District Court for Dallas County, Texas. In the Complaint, plaintiffs
asserted various causes of action including breach of fiduciary duty, fraud,
civil conspiracy, violation of the Texas Securities Act, breach of contract and
negligence from Blockbuster's purchase of the general partnership interest of
Video Superstore Management, Inc. ("VSMI") in VSMI/Blockbuster Ltd. II. On
December 20, 1991, Blockbuster filed an Answer denying liability. On October
18, 1993, the plaintiffs agreed to drop all of their claims and settle this
lawsuit and the defendants agreed to pay to the plaintiffs the sum of
$50,000.00.
David Goldbaum v. Boston Chicken, Inc., f/k/a New Boston Chicken, Inc., Jan
---------------------------------------------------------------------------
Marshall, William Weiss, and George Nadaff, (Superior Court of the Commonwealth
- ------------------------------------------
of Massachusetts, Suffolk County, Civil Action No. 94-1502E). The plaintiff
(who is not related to BCI) filed a complaint on or about March 24, 1994. The
plaintiff alleged that, in February 1991, he obtained an option to purchase a
franchise from BCI and that BCI failed to allow exercise of such option either
by plaintiff alone or in combination or alleged partnership with others. The
plaintiff alleged that defendants Marshall and Weiss elected not to be his
partners in a purchase of the franchise with the plaintiff and that plaintiff's
continued attempts to purchase a franchise were refused by BCI. The plaintiff's
complaint asserted claims against each of the defendants for breach of contract,
interference with advantageous relations, breach of the implied covenant of good
faith and fair dealing, intentional and negligent misrepresentation, and unfair
or deceptive trade practices in violation of Massachusetts General Laws Chapter
93A. The plaintiff sought damages in an amount to be determined by the Court
with respect to each claim against each of the defendants, as well as double or
treble damages with respect to the plaintiff's claims of unfair or deceptive
trade practices, attorneys' fees, court costs and such other relief as the Court
deemed just. BCI denied the material allegations asserted in the complaint
against it. The parties entered into a Settlement Agreement on or about June 22,
1995 under which (a) all claims pending against BCI were dismissed with
prejudice, and (b) BCI agreed to pay the plaintiff $52,500.00.
Kathleen Pessin v. H. Wayne Huizenga, A. Clinton Allen, John J. Melk, Scott
---------------------------------------------------------------------------
A. Beck, Donald J. Flynn, Steven R. Berrard, John W. Croghan, Blockbuster
- -------------------------------------------------------------------------
Entertainment Corporation and Viacom Inc., (Court of Chancery, New Castle
- -----------------------------------------
County, Delaware (Civil Action No. 13456)). This suit, filed on April 8, 1994,
was brought by a shareholder of Blockbuster Entertainment Corporation
("Blockbuster") (who is not related to BCI), against, among others, certain
directors of Blockbuster, including Mr. Scott Beck. The first count, a
shareholder's derivative action, alleged a breach of fiduciary duty, waste of
corporate assets and usurpation of corporate opportunity on the part of the
directors. The plaintiff's claims arose out of various franchise transactions
with certain directors of Blockbuster or members of their immediate families or
entities controlled by them, including allegations that franchised stores owned
by these persons were sold to Blockbuster at inflated prices and also that the
grants of these franchises were made on favorable terms. None of the specific
transactions recited was with Mr. Beck or any member of his immediate family or
any entity controlled by him. The second count of the complaint was filed
individually and as a class action for all stockholders of Blockbuster against
Viacom, Inc.
18
<PAGE>
and the directors of Blockbuster and alleged that as a result of the alleged
self-dealing described above, the proposed merger of Blockbuster and Viacom Inc.
resulted in an artificially low purchase price and was unfair and a breach of
fiduciary duty. The plaintiff sought an order for an accounting with respect to
the transactions described in the first count and, with respect to the second
count, sought to be certified as a class, a declaration that the defendants
breached their fiduciary and other duties, an order enjoining them from
proceeding with the Blockbuster/Viacom merger or rescinding the merger if it was
completed and an unspecified amount of damages, costs and attorneys' and
accountants' fees. Mr. Beck is no longer on the Blockbuster Board of Directors
and was not on the Board at the time of the approval of the proposed merger. In
January 1995, the plaintiff and the defendants signed a settlement agreement
which provided that all claims would be dismissed with prejudice and that the
defendants would pay the plaintiff's attorneys' fees and costs. On April 5,
1995, the court determined that the proposed settlement was fair, reasonable,
adequate and in the best interest of the plaintiff and the lawsuit was
dismissed.
Michael Gehart v. New Boston Chicken, Inc., (United States District Court
------------------------------------------
for the Eastern District of Michigan, Case No. 91-CV-74505-DT). Plaintiff,
currently an investor in and employee of a BCI developer, filed suit against BCI
in the Macomb County Circuit Court, Mt. Clemens, Michigan on August 22, 1991,
Case No. 91-3815 CK. On September 5, 1991, the action was removed to the U.S.
District Court for the Eastern District of Michigan. This action raised a
number of claims, primarily arising out of BCI's alleged refusal to grant
plaintiff area franchise rights to develop and operate Boston Chicken Units.
The suit alleged breach of contract, misrepresentation and violations of the
Michigan Franchise Investment Law. The parties entered into a Settlement
Agreement dated September 3, 1992 under which (a) all claims pending against BCI
were dismissed with prejudice, (b) BCI agreed to reimburse plaintiff for certain
expenses, (c) the parties agreed to execute a Development Agreement
contemporaneously with a Secured Loan Agreement and plaintiff provided certain
personal guarantees and (d) plaintiff agreed that by September 3, 1994 plaintiff
would either (i) close a restaurant he controlled at the time of settlement,
(ii) execute a Franchise Agreement for the restaurant or (iii) sell the
restaurant to an unaffiliated third party.
Janet Rhoden and The Northern Trust Company, Co-Trustees of Clark S. Rhoden
---------------------------------------------------------------------------
Trusts A and B v. Leonard E. Greenberg, Arnold C. Greenberg, and Morton E.
- --------------------------------------------------------------------------
Handel, (United States District Court for the Southern District of New York,
- ------
Docket No. 89 Civ. 0483 (RPP)). In July 1988, plaintiffs brought suit in the
Circuit Court of Jackson County at Kansas City, Missouri, asserting that Coleco
and defendants made misrepresentations to Clark S. Rhoden concerning Coleco's
ability to produce and market a home computer system which induced Mr. Rhoden
(individually and for certain entities he controlled) to purchase and retain
Coleco stock. The complaint sought damages in excess of $2 million. The action
was removed to federal court and, by agreement of the parties, was dismissed in
October 1988 and refiled in the U.S. District Court for the Southern District of
New York. The action was settled in November 1990 with the plaintiffs receiving
$195,000.
19
<PAGE>
Charles D. Howell, in his Capacity as the Trustee of the Doug Howell Family
---------------------------------------------------------------------------
Trust, and Charles D. Howell, Individually, Plaintiffs, v. Blockbuster
- ----------------------------------------------------------------------
Entertainment Corporation, Scott A. Beck, Video Superstores Master Limited
- --------------------------------------------------------------------------
Partnership, Video Superstores Management, Inc., VSMI Limited Partnership,
- --------------------------------------------------------------------------
Blockbuster Midwest Limited Partnership, and SAB Acquisition Company, Inc.,
- ---------------------------------------------------------------------------
Defendants, (District Court, Dallas County, Texas, Cause No. 91-10193-M, removed
- ----------
to U.S. District Court, Northern District of Texas, Case No. 91 CV 1901-G and
then remanded to the Texas State District Court). Charles D. Howell
individually and in his capacity as trustee of the Doug Howell Family Trust (the
"Trust") began this action on August 23, 1991 by filing a Complaint in the
District Court for Dallas County, Texas against the defendants. Plaintiffs (who
are not related to BCI) asserted causes of action for breach of fiduciary duty,
fraud, conspiracy, breach of contract and intentional interference with contract
arising out of the acquisition by Blockbuster in August 1989 of the business
operations of Video Superstores Master Limited Partnership ("VSMLP") and VSMI
Limited Partnership ("VSMILP") and the failure at that time to have included in
that acquisition the limited partners' interest in VSMI/Blockbuster Ltd. I, in
which plaintiffs were an 18.75% limited partner. Plaintiffs sought actual
damages, exemplary damages, attorneys' fees and interest. The parties entered
into a settlement agreement in December 1995. Under the settlement agreement,
the parties exchanged mutual releases and Scott Beck and Viacom, Inc., as
successor to the other defendants, agreed to pay to the plaintiffs $30,750,000.
Karen Murphy, as Temporary Administrator of the Estate of Doris Berglund
------------------------------------------------------------------------
Brock, and B. Coleman Renick, Jr. v. Blockbuster Entertainment Corporation,
- ---------------------------------------------------------------------------
Scott A. Beck, Video Superstores Master Limited Partnership f/k/a Blockbuster
- -----------------------------------------------------------------------------
Midwest Limited Partnership, VSMI Limited Partnership, SAB Acquisition Company,
- -------------------------------------------------------------------------------
Inc. and Zenith Capital, Inc. f/k/a Pace Financial Management, Inc., (District
- -------------------------------------------------------------------
Court of Dallas County, Texas, Case No. 94-10051M). Karen Murphy, in her
capacity as trustee of the Estate of Doris Berglund Brock and B. Coleman Renick,
Jr. began this action on September 27, 1994 by filing a Complaint in the
District Court for Dallas County, Texas against the defendants. Plaintiffs (who
are not related to BCI) asserted causes of action identical to those asserted by
Plaintiff Howell in the case described above, which causes of action allegedly
arise out of the facts described above in the Howell case. Plaintiffs claim to
------
be similarly situated to Plaintiff Howell. Plaintiffs seek actual damages in
the amount of at least $6.0 million, all profits made by defendants Beck, Video
Superstores Master Limited Partnership, VSMI Limited Partnership and SAB
Acquisition Company, Inc. in the amount of at least $118 million and all profits
made by defendant Blockbuster in an additional amount of at least $117 million,
$350,000 in returned or forfeited compensation paid to one of the defendants,
exemplary damages in the amount of at least $1 billion, attorneys' fees, costs,
expenses, interest and such other and further relief as the court may determine.
In October 1996, the court dismissed with prejudice all of the plaintiffs'
claims except their claims for breach of fiduciary duty and conspiracy to commit
same. As of the date of this offering circular, discovery is in process and
trial has been scheduled for May 1997. The defendants deny the material
allegations asserted in the Complaint and intend to vigorously defend against
the Complaint.
20
<PAGE>
Andrew's Chicken Corp. and GCP Chicken, Inc. v. Boston Chicken, Inc.,
--------------------------------------------------------------------
(Superior Court of the Commonwealth of Massachusetts, Suffolk County, Civil
Action No. 93-5671E). The plaintiffs in this action filed a complaint on
October 1, 1993. Andrew's Chicken Corp. ("Andrew's") was an area developer
under an Area Development Agreement with BCI and was also a franchisee of BCI.
GCP Chicken, Inc. ("GCP") was a franchisee of BCI whose franchise agreement was
entered into under the Area Development Agreement with Andrew's. The plaintiffs
alleged that they had substantially complied with the Area Development Agreement
and their franchise agreements. The plaintiffs alleged that BCI used the
failure of Andrew's to meet its development schedule and quality deficiencies in
the operation of their franchised Boston Market Units as pretexts to terminate
the Area Development Agreement and to threaten termination of the franchise
agreements. As remedies, the plaintiffs sought an injunction for the alleged
wrongful termination of the Area Development Agreement; lost profits on the
Boston Chicken Units that would have been developed if the Area Development had
not been terminated; damages for breach of the implied covenant of good faith
and fair dealing and for alleged unfair and deceptive acts under Massachusetts
General Laws Chapter 93A; a temporary restraining order and preliminary
injunction prohibiting BCI from developing or operating Boston Chicken units in
Rhode Island; a temporary restraining order and preliminary injunction
prohibiting BCI from terminating the plaintiffs' franchise agreements and a
declaratory judgment that BCI had no basis on which to terminate the plaintiffs'
franchise agreements and that BCI's alleged attempts to terminate those
agreements constituted breaches of contract, a breach of the covenant of good
faith and fair dealing and a violation of Chapter 93A. On May 23, 1994, BCI
removed the case to federal court. In November 1994, BCI purchased the Boston
Chicken Units operated by the plaintiffs in Cranston and Newport, Rhode Island.
In accordance with this transaction, the plaintiffs and BCI dismissed this
proceeding with prejudice with each party to bear its own costs and fees. No
portion of the purchase price for the Units was allocated to settlement of this
litigation.
Boston Chicken, Inc. v. William L. Weiss, Gloria Weiss, Jan Marshall, and
-------------------------------------------------------------------------
Jill Marshall, (United States District Court, District of Massachusetts, Civil
- -------------
Action No. 94-12284-PBS). On or about November 16, 1994, BCI filed this action
against the above-named individuals, each of whom guaranteed certain of the
obligations of JM Boston Associates, Inc. ("JM Boston"), a former franchisee of
BCI, under two (2) franchise agreements between BCI and JM Boston. BCI filed
suit seeking to enforce the guaranty signed by each of the defendants and recoup
certain past due royalty fees and advertising contributions. In September 1994,
JM Boston began a proceeding under Chapter 11 of the United States Bankruptcy
Code. In re JM Boston Associates Inc. d/b/a Boston Chicken, United States
-------------------------------------------------------------------
Bankruptcy Court, United States Bankruptcy Court, District of Massachusetts,
- ----------------
Case No. 94-16192-CJK. Under a Stipulation dated November 17, 1994, BCI and JM
Boston stipulated that BCI had effectively terminated the franchise agreements
between the parties before JM Boston filed its petition with the bankruptcy
court. On December 8, 1994, BCI filed an adversarial proceeding against JM
Boston to enforce the post-termination provisions under the Franchise
Agreements, to transfer the telephone numbers of JM Boston's Chicken Units to
BCI and to obtain a temporary restraining order and injunctive relief. On
December 22, 1994, the bankruptcy court ordered
21
<PAGE>
JM Boston to complete full de-identification of the units. On January 5, 1995,
the bankruptcy court ordered JM Boston to transfer the telephone numbers to BCI
and scheduled a hearing for February 1995 regarding enforcement of the post-
termination covenant not to compete. On or about January 5, 1995, defendants
William Weiss and Gloria Weiss (the "Weisses") filed an answer, affirmative
defenses, and a counterclaim against BCI in their proceeding. The Weisses
claimed that BCI should not recover on its claim against them because BCI failed
to state a claim upon which relief could be granted and because BCI was barred
from recovering money damages by the doctrines of set-off, recoupment, estoppel,
unclean hands, breach of contract and waiver. The Weisses also alleged that BCI
violated the Massachusetts unfair and deceptive practices act, asserting that
BCI made oral and written representations (at the time JM Boston entered into
one of its franchise agreements) that it would assist JM Boston in acquiring
additional Boston Chicken Units which could be serviced by one of the Units
operated by JM Boston. The Weisses' claimed that BCI willfully and knowingly
took actions to prevent JM Boston from acquiring additional Units so that BC
Boston, L.P., a BCI area developer (which is beneficially owned, in part, by
Lawrence Beck, the father of Scott Beck and Tom Beck), could acquire all of the
Boston Chicken Units in the Boston, MA ADI. The Weisses sought unspecified
damages, treble damages, attorneys' fees, costs of suit, and such other relief
as the court deemed just and appropriate. On or about January 10, 1995, JM
Boston filed a counterclaim in its bankruptcy proceeding which was identical to
that filed by the Weisses in their action. In August, 1995, the parties entered
into a Stipulation of Settlement pursuant to which all claims were dismissed
with prejudice. None of the parties paid any money to any other party in
connection with the settlement of these cases.
Robert L. Lambert, Robert F. Lambert and American Maritime Officers, f/k/a
--------------------------------------------------------------------------
District 2 Marine Engineers Beneficial Association -- Associated Maritime
- -------------------------------------------------------------------------
Officers, AFL-CIO v. Viacom, Inc., H. Wayne Huizenga, Scott A. Beck, Steven R.
- ------------------------------------------------------------------------------
Berrard, Joseph J. Burke, B&L Holding Corp., Blockbuster Holding Corp., and FLC
- -------------------------------------------------------------------------------
Holding Corp., Inc., (Circuit Court, Broward County, Florida Case No. 95-08900).
- -------------------
On June 27, 1995, Robert F. and Robert L. Lambert (the "Lamberts"), founders of
Florida Princess Cruise Lines, Inc., Standard Cruise Lines, Inc. and Fort
Lauderdale Charter Corp. (the "Lambert Companies"), and the American Maritime
Officers, f/k/a District 2 Marine Engineers Beneficial Association -- Associated
Maritime Officers AFL-CIO (the "Union"), a New York corporation and an American
maritime union, brought this action against the defendants. Scott A. Beck is
included as a defendant, although the complaint in the lawsuit does not make any
specific allegations concerning Mr. Beck. The plaintiffs' claims arise from a
business enterprise in which Blockbuster Entertainment Corporation ("Blockbuster
Entertainment") (which was subsequently merged into Viacom, Inc.) and certain of
its affiliates entered into transactions with the Lamberts and companies
controlled by them to purchase 60% of the stock in B&L Holding Corp. ("B&L
Holding"), which controlled the Lamberts' luxury cruise line operations, and to
develop a cruise business. On July 16, 1990, Blockbuster Holding Corp.
("Blockbuster Holding"), a wholly-owned subsidiary of Blockbuster Entertainment,
paid the Lamberts $31,000 in cash and issued a promissory note for $569,000 (the
"Blockbuster Note") as consideration for the 60% interest in B&L Holding. The
Lamberts retained a 40% interest in B&L Holding. The Lamberts allege that,
through a
22
<PAGE>
stock redemption agreement dated December 14, 1990, Blockbuster Entertainment
caused B&L Holding to redeem the Blockbuster Note and coerced Florida Princess
Cruise Lines to issue a promissory note (the "Princess Note") to Blockbuster
Entertainment in the amount of $600,000. The Lamberts allege that the inability
of Florida Princess Cruise Lines to pay the Princess Note and the defendants'
failure to provide financing to B&L Holding caused the Lambert Companies to
fail. They further allege that this allowed defendant FLC Holding Corp. to
acquire a cruise ship from the Lambert Companies on favorable terms.
Specifically, the Lamberts allege that the defendants: (1) fraudulently
misrepresented that they would adequately promote the cruise line business of
B&L Holding and adequately finance B&L Holding so that it could pay the Princess
Note and its other debts; (2) interfered with the Lamberts' business
opportunities and relationships by causing the Lambert Companies to fail; (3)
individually and as directors and officers of Blockbuster Entertainment and
Blockbuster Holding breached their fiduciary duty to the Lamberts as minority
shareholders of B&L Holding by causing B&L Holding to incur debt which B&L
Holding could not repay; and (4) conspired to defraud the Lamberts out of their
businesses. The Lamberts claim compensatory damages of more than $25,000,000
and exemplary damages of more than $250,000,000 in each count of the complaint.
The American Maritime Officers union (the "Union") claims that the
defendants: (1) interfered with the Union's business relationships and
opportunity to generate union dues and economic benefits for its members who
would have served as crew members on the vessels operated by the cruise lines if
the cruise lines had not failed; and (2) caused Blockbuster Holding and B&L
Holding to breach the Memorandum of Understanding with the Union under which the
Union was to provide crew members for the cruise ships. The Union claims more
than $500,000 in compensatory damages and more than $250,000,000 in exemplary
damages.
The defendants have filed a motion for summary judgment and a motion to
dismiss this lawsuit stating that the claims made by the Lamberts were all
previously decided against the plaintiffs and in favor of the defendants in
earlier litigation among the parties which occurred in 1991. The court denied
the motion for summary judgment and granted the motion to dismiss the Union's
breach of contract claim. The case is currently in the discovery and court-
ordered mediation phase and is scheduled for trial in April 1997. The
defendants intend to vigorously defend against the plaintiffs' claims.
Other than these 10 actions, no litigation is required to be disclosed in
this offering circular.
23
<PAGE>
ITEM 4
------
BANKRUPTCY
Service America Corp. filed for reorganization under the U.S. Bankruptcy
Code (U.S. Bankruptcy Court, District of Connecticut, Bridgeport Division, Case
No. 92-53483) on October 20, 1992. Service America Corporation is not related
to BCI. Bruce Burnham was Vice President, Purchasing of Service America Corp.
from May, 1990 to February, 1994. A judgment order was issued on June 30, 1993
confirming the debtor's Fourth Amended Joint Plan of Reorganization and granting
relief. Service America Corp. is in the contract food service management and
vending business and is located at 100 First Stamford Place, Stamford,
Connecticut 06904.
Other than this action, no person previously identified in Items 1 or 2 of
this offering circular has been involved as a debtor in proceedings under the
U.S. Bankruptcy Code required to be disclosed in this Item.
ITEM 5
------
INITIAL FRANCHISE FEE
DEVELOPMENT AGREEMENT
- ---------------------
DEVELOPMENT FEE.
---------------
You must pay BCI a non-refundable development fee (the "Development Fee")
in a lump sum upon execution of the Development Agreement. The Development Fee
will be an amount equal to $5,000.00 multiplied by the number of Boston Market
Units to be developed under the Development Agreement. The Development Fee is
generally uniform for all Developers executing the Development Agreement and is
deemed fully earned upon payment, although BCI has negotiated the amount of the
Development Fee in certain cases in the past.
DEPOSIT.
-------
In addition to the Development Fee, you must pay BCI a non-refundable
deposit (the "Deposit") toward the Initial Franchise Fees (defined in Section
5.B.) due under Franchise Agreements which may be entered into under the
Development Agreement. The Deposit will be payable in a lump sum upon execution
of the Development Agreement and will be an amount equal to the product of
$5,000.00 multiplied by the aggregate number of Boston Market Units you must
develop under the Development Agreement. The Deposit will be applied in
$5,000.00 increments to reduce the amount of the Initial Franchise Fee payable
under each Franchise Agreement as it is executed under the Development
Agreement. The Deposit is generally
24
<PAGE>
uniform for all Developers executing Development Agreements with BCI and is
deemed fully earned upon payment, although in certain circumstances in the past
BCI has allowed Developers to pay a portion of the Deposit at a later date.
MARKET PLAN FEE.
---------------
Before the execution of the Development Agreement and during the
Development Term, you may purchase from BCI market plans on the demographics of
each Sub-Area ("Market Plans") in which you retain the right to develop Boston
Market Units. BCI's current charge for such Market Plans is $75.00 per trade
area within the geographic territory covered by the plan.
COMMUNICATION AND INFORMATION SYSTEMS.
-------------------------------------
You must enter into BCI's form of Computer and Communications Systems
Agreement (the "Systems Agreement"), as described in Item 8 below. A copy of
the current form of the Systems Agreement is attached to this offering circular
as Exhibit N. If you do not purchase the Computer System (defined in Item 8
below) from BCI, you must pay BCI a reasonable installation and testing fee to
BCI upon BCI's installation and testing of the operation of the Licensed Program
(defined in Item 8 below) with the Computer System. BCI's current fee for this
service is $3,500.00. The installation and testing fee is generally uniform for
all Developers who do not purchase the Computer System from BCI and it is not
refundable.
Upon installation of the Licensed Program on your Computer System, you must
pay to BCI a Software License Fee of Fifteen Thousand Dollars ($15,000.00). The
Software License Fee is generally uniform for all Developers and it is not
refundable. You must also pay to BCI a charge for the use of certain third
party computer software. The current charge is approximately $1,600.00. Of
this amount, BCI pays $1,000.00 to Compris Technologies, Inc. and the balance to
various other software suppliers.
TARGET SITE FEE.
---------------
As described in Item 12 of this offering circular, you must pay to BCI
either a "Site Location Fee" of $10,000.00 or a "Site Location and Negotiation
Fee" of $20,000.00 plus BCI's reasonable out-of-pocket expenses incurred in
locating a "Target Site" (as defined in Item 12) and negotiating the lease or
purchase agreement, if any, for it. The Target Site Fee will be payable within
ten (10) days after BCI delivers to you a lease or purchase agreement, if any,
and the Franchise Documents (defined in Item 12) for the Target Site.
CONVERSION SITES.
----------------
As described in Item 12 of this offering circular, if you purchase a
Conversion Site (defined in Item 12) from BCI, you must pay to BCI the price BCI
paid for it, in addition to
25
<PAGE>
signing a Franchise Agreement for the Conversion Site. That price will include
that portion of the direct and indirect costs and liabilities allocated to such
Conversion Site incurred or assumed by BCI in acquiring it, whether paid or owed
to the seller of the Conversion Site, BCI, its affiliates or third parties and
other expenses allocated to the Conversion Site (including losses, whether from
continuing operations or closing acquired units) plus interest at BCI's cost of
money on the balance of such amounts from time to time.
FRANCHISE AGREEMENT
- -------------------
INITIAL FRANCHISE FEE.
---------------------
You must pay BCI's current initial franchise fee (the "Initial Franchise
Fee") of $35,000.00 in a lump sum upon execution of the Franchise Agreement,
less any applicable Deposits. As described above, if the Franchise Agreement is
executed under a Development Agreement, $5,000.00 of the Deposit will be
credited toward the Initial Franchise Fee payable under the Franchise Agreement.
The Initial Franchise Fee is non-refundable and deemed earned upon payment. The
Initial Franchise Fee is generally uniform for all Franchise Owners executing a
Franchise Agreement with BCI.
COMMUNICATION AND INFORMATION SYSTEMS.
-------------------------------------
You are obliged to enter into the Systems Agreement for each Boston Market
Unit on terms analogous to those on which Developers must do so. The fees
payable by you under the Systems Agreement for each Unit are the same as those
described above, are generally uniform for all Franchise Owners, and are not
refundable.
CONSTRUCTION PLANS.
------------------
BCI will prepare, at your request, the preliminary layout for the Boston
Market Unit at BCI's then-current charge (which is currently $750.00). This
charge will be uniform for all Franchise Owners requesting BCI to prepare the
preliminary layout and is not refundable.
GRAND OPENING ADVERTISING.
-------------------------
You must pay to BCI $10,000.00 in a lump sum upon the execution of the
Franchise Agreement to be expended by BCI at your direction (or if you do not
give BCI timely direction, at BCI's direction) on grand opening advertising and
promotion during the period beginning 10 days before, and 90 days after, the
opening of the Boston Market Unit. This payment is uniform for all Franchise
Owners and is not refundable.
26
<PAGE>
MALL SITE FEE.
-------------
If you elect to develop and operate a Boston Market Unit at a Mall Site
(defined in Item 12) within the Territory, in addition to signing a lease for
the premises of the site and signing a Franchise Agreement, you must pay to BCI
a site location fee (the "Mall Site Fee") equal to $5,000 plus BCI's reasonable
out-of-pocket expenses incurred in locating the Mall Site and negotiating the
lease, if any. The Mall Site Fee will be payable within 10 days after BCI
delivers to you the Franchise Agreement and, if applicable, the lease, for the
Mall Site.
ITEM 6
------
OTHER FEES
<TABLE>
<CAPTION>
======================================================================================================================
DEVELOPMENT AGREEMENT/(1)/
- -----------------------------------------------------------------------------------------------------------------------
NAME OF FEE/(2)/ AMOUNT DUE DATE REMARKS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Software Support $323.00 per 8th day before BCI may increase fee
Fee Accounting each
Period/(3)/ Accounting Period
- -----------------------------------------------------------------------------------------------------------------------
Market Plan BCI's then current Upon your request
charge
Current charge --
$75.00 per trade
area within the
geographic territory
covered by the plan
- -----------------------------------------------------------------------------------------------------------------------
Additional Training Will vary under Upon your request See footnote (4) and Item 11
circumstances
- -----------------------------------------------------------------------------------------------------------------------
Training Materials Will vary under Upon your request See footnote (5) and Item 11
circumstances
- -----------------------------------------------------------------------------------------------------------------------
Indemnification Will vary under As incurred You must reimburse BCI for, and
circumstances defend BCI against, claims against
BCI and taxes imposed on BCI
arising out of your activities related
to the Development Agreement.
- -----------------------------------------------------------------------------------------------------------------------
Legal Fees & Will vary under As incurred Payable upon your failure to comply
Costs circumstances with Development Agreement
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
DEVELOPMENT AGREEMENT/(1)/
- -----------------------------------------------------------------------------------------------------------------------
NAME OF FEE/(2)/ AMOUNT DUE DATE REMARKS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transfer Fee $5,000.00 plus out- Before
of-pocket expenses consummation of
transfer
- -----------------------------------------------------------------------------------------------------------------------
Offering Expenses Will vary under As incurred You must reimburse BCI for its
circumstances reasonable expenses (including
attorneys' fees) with any offering of
securities by you, a Franchise
Owner, or an entity having an
interest in you, a Franchise Owner
or the Development Agreement
- -----------------------------------------------------------------------------------------------------------------------
Local Ad Fund Will vary under See footnote (6)
Contribution circumstances
- -----------------------------------------------------------------------------------------------------------------------
Sublease of Will vary under See Items 8 and 10 of this offering
Approved Sites circumstances circular
- -----------------------------------------------------------------------------------------------------------------------
Accounting See Footnote (7) By the 20th day If you participate in the Financed
Services Fees following each Area Developer Program, you must
Accounting Period use BCI's accounting services under
the Accounting and Administrative
Services Agreement attached to the
Secured Loan Agreement
======================================================================================================================
</TABLE>
- --------------------------------
(1) You will also be responsible for other fees and payments as required
under the Franchise Agreements entered under the Development
Agreement, which are described below.
(2) Except as noted, all fees are imposed by and payable to BCI. All fees
are non-refundable.
(3) An "Accounting Period" is each four week accounting period of BCI.
(4) BCI or a Boston Market Developer authorized to provide training trains
your initial Chief Operating Officer, Development Director, Training
Director and Marketing Director and the Unit Manager and the
Additional Manager for each of your first 3 Boston Market Units at no
charge (See Item 11). At your request, additional personnel and
replacement personnel will be trained at the then current charges
which will be payable to BCI or the Developer providing the training.
28
<PAGE>
(5) If you provide training to personnel of your Boston Market Units, as
we may require you to do, BCI or its designee will provide you with
appropriate training materials and refresher/updated materials at then
current standard charges.
(6) You must contribute to the Local Ad Fund the standard amount required
periodically under the Franchise Agreement or, if it is greater, an
amount which, when aggregated with the Local Ad Fund contributions of
your Boston Market Units, will be sufficient to enable you, through
the Local Ad Fund, to commence, within one year of opening your first
Boston Market Unit, television advertising in the Dominant Marketing
Area (or such other geographic market designation as BCI may use) in
which the applicable Sub-Areas or Development Area is located at a
minimum level of 150 gross ratings points for a minimum of 35 weeks
per calendar year, at least one-half of which gross ratings points
must be in prime time television viewing time.
(7) (a) During the time before the opening of the thirtieth Boston Market
Unit accounted for under the Accounting and Administrative
Services Agreement, the fee payable by you for each Accounting
Period will be $750 per Unit for all Units operated by you.
(b) Upon the opening of the thirtieth Boston Market Unit accounted
for under the Accounting and Administrative Services Agreement,
and before the opening of the fiftieth Boston Market Unit
accounted for under the Accounting and Administrative Services
Agreement, the fee payable by you for each Accounting Period is
$650 per Unit for all Units operated by you.
(c) Upon the opening of the fiftieth Boston Market Unit accounted for
under the Accounting and Administrative Services Agreement, and
before the opening of the one hundredth Boston Market Unit
accounted for under the Accounting and Administrative Services
Agreement, the fee payable by you for each Accounting Period is
$550 per Unit for all Units operated by you.
(d) Upon the opening of the one hundredth Boston Market Unit
accounted for under the Accounting and Administrative Services
Agreement, and before the opening of the two hundredth Boston
Market Unit accounted for under the Accounting and Administrative
Services Agreement, the fee payable by you for each Accounting
Period is $450 per Unit for all Units operated by you.
(e) Upon the opening of the two hundredth Boston Market Unit
accounted for under the Accounting and Administrative Services
Agreement, and for all additional Units opened, the fee payable
by you for each Accounting Period is $350 per Unit for all Units
operated by you.
If you and the Boston Chicken Units meet certain reporting
requirements, administrative procedure compliance requirements
and timeliness deadlines as BCI may establish and announce in its
sole discretion, the Unit fees in (a) through (e) above will be
reduced to $600, $500, $400, $300, and $250, respectively.
29
<PAGE>
You must also reimburse BCI for all non-ordinary, out-of-pocket
expenses incurred by BCI or its affiliates in providing the services
rendered by them under the Accounting and Administrative Services
Agreement including travel expenses, legal fees, fees of experts,
audit fees, tax fees, payroll service fees, etc. All non-ordinary,
out-of-pocket expenses, however, must be approved by you before
incurring such expenses.
<TABLE>
<CAPTION>
================================================================================================================
FRANCHISE AGREEMENT
- ----------------------------------------------------------------------------------------------------------------
NAME OF FEE/(1)/ AMOUNT DUE DATE REMARKS
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Royalty 5% of Royalty Base 20th day following See footnote (2)
Revenue each Accounting
Period
- ----------------------------------------------------------------------------------------------------------------
Marketing Fund 2% of Royalty Base 20th day following See Item 11
Contribution Revenue each Accounting
Period
- ----------------------------------------------------------------------------------------------------------------
Local Advertising 4% of Royalty Base 20th day following See footnote (3) and Item 11
Fund Contribution Revenue each Accounting
Period
- ----------------------------------------------------------------------------------------------------------------
Software Support $323 per 8th day before Subject to increase upon written
Fee Accounting period Accounting Period notice
- ----------------------------------------------------------------------------------------------------------------
Software $400 per year As billed by the See footnote (4)
Maintenance software supplier
Charges
- ----------------------------------------------------------------------------------------------------------------
Training and Will vary under As incurred See footnote (5) and Item 11
Special Assistance circumstances
- ----------------------------------------------------------------------------------------------------------------
Interest Lesser of 18% per Upon payment of
annum or highest past due amounts
legal rate owed
- ----------------------------------------------------------------------------------------------------------------
Cleaning, Repair, Will vary under 5th day after Payable if you do not maintain the
Remodeling, circumstances receipt of bill condition and appearance of the Unit
Upgrading and BCI arranges to do so
- ----------------------------------------------------------------------------------------------------------------
Product Evaluation Cost of evaluation, As incurred This covers BCI's cost of testing
Costs inspection, and new products, goods and supplies or
supervision of inspecting new suppliers you
distributor/supplier propose
- ----------------------------------------------------------------------------------------------------------------
Reimbursement of Will vary under As incurred Payable if you fail to obtain required
Insurance Costs circumstances insurance and BCI obtains on your
behalf
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
FRANCHISE AGREEMENT
- ----------------------------------------------------------------------------------------------------------------
NAME OF FEE/(1)/ AMOUNT DUE DATE REMARKS
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Reimbursement of Will vary under As incurred See footnote (6)
Inspection and circumstances
Audit Costs
- ----------------------------------------------------------------------------------------------------------------
Transfer Fee $5,000 plus out-of- Before
pocket expenses consummation of
transfer
- ----------------------------------------------------------------------------------------------------------------
Offering Expenses Will vary under As incurred You must reimburse BCI for
circumstances reasonable expenses (including
attorneys' fees) with any offering of
securities by you or an entity having
an interest in you or the Franchise
Agreement
- ----------------------------------------------------------------------------------------------------------------
Successor 33 1/3% of then- When you sign
Franchise Fee current Initial successor Franchise
Franchise Fee Agreement
- ----------------------------------------------------------------------------------------------------------------
Indemnification Will vary under As incurred You must reimburse BCI for, and
circumstances defend BCI against, claims against
BCI and taxes imposed on BCI
arising out of your activities related
to the Franchise Agreement
- ----------------------------------------------------------------------------------------------------------------
Legal Fees and Will vary under As incurred Payable upon your failure to comply
Costs circumstances with the Franchise Agreement
- ----------------------------------------------------------------------------------------------------------------
Demographic BCI's then current Upon your request See footnote (7)
Reports charge. Current
charge: $25.00-
$150.00
===============================================================================================================
</TABLE>
(1) All fees are non-refundable and are imposed by and payable to BCI.
(2) The term "Royalty Base Revenue" means and includes the gross revenue
from all sales of Products and all other products and services sold or
performed by or for you or the Boston Market Unit in, upon, from, or
away from the Boston Market Unit, or through or by means of the
business conducted under the Franchise Agreement, whether for cash or
credit, including any assumed gross revenue calculated for the purpose
of an insurance claim for lost profits to the extent such claim is
paid by the insurer, but excluding: (1) all sales or service taxes
collected from customers and paid or payable to the appropriate taxing
authority; (2) all customer refunds, valid discounts and coupons, and
31
<PAGE>
credits made by the Unit (such exclusions will not include any
reductions for credit card user fees, returned checks or reserves for
bad credit or doubtful accounts); and (3) any portion of employee
meals for which you do not charge the employee. Under the
Flagship/Satellite Rider, the parties acknowledge that Royalty Base
Revenue will not include revenue, if any, derived from your Satellite
Store, or your Flagship Stores's sale of products to a Satellite Store
owned and operated by you, provided such product are intended for
resale at the Satellite Store.
(3) BCI may periodically require you to increase your Local Ad Fund
contributions, although the Local Ad Fund contributions will not
exceed more than 4.25% before 1998, 4.5% before 1999, 4.75% before
2000, and 5% during any remaining term of the Franchise Agreement.
(Note that these amounts may be higher under certain circumstances.
See Note 6 to the preceding chart in Section 6 of this Offering
Circular). If you are not a member of a Local Advertising Fund, you
will be required to spend these amounts on local advertising on your
own, rather than contribute them to a Local Advertising Fund.
(4) These are the charges in effect as of the date of this offering
circular. These charges are set by BCI's software suppliers and are
collected by BCI and turned over to the suppliers, although BCI may
continue to collect these amounts even if they are no longer charged
to BCI by its suppliers.
(5) At your request, BCI or its designee will provide initial training to
additional or replacement personnel (and any manager who failed to
complete training to BCI's satisfaction) at BCI's then-current
standard charges, which may include travel and lodging expenses of
training personnel for training other than at the trainers' principal
office. The current charge is $3,500 per employee trained, plus travel
and lodging expenses, if applicable. BCI may offer, or require,
additional or refresher training programs and may offer or require
special assistance at BCI's per diem charges and may charge you, at
its then-current charges, for updated, additional or refresher
training materials provided to you or your personnel.
(6) If an inspection or audit is made necessary because of your failure to
submit reports, records or other information on a timely basis or if
an audit reveals that you have understated revenue by more than 2%,
you must reimburse BCI for the cost of the audit or inspection.
(7) The demographic reports currently available and the current charge for
each are as follows: (a) Trade Area Report - $50.00; (b) Grid Map -
$150.00; (c) Radius - Report -$25.00; and (d) Traffic Map - $25.00.
The charge will be determined by which and how many reports you
request.
32
<PAGE>
ITEM 7
------
INITIAL INVESTMENT
DEVELOPMENT AGREEMENT
- ---------------------
There is no initial investment required upon execution of the Development
Agreement except for: (1) the payment of the Development Fee and Deposit, (the
Deposit will be applied toward the Initial Franchise Fees due under the
Franchise Agreements entered into under the Development Agreement); (2) the
acquisition of the Computer System (including the Licensed Program and the
Specified Software (defined in Item 8 below)), which is described in Item 8 of
this offering circular; (3) the purchase of insurance; (4) the cost of the
Demographic Detail Report, and (5) certain working capital funds (which vary
greatly depending on the location of the Development Area and the number of
Boston Market Units to be developed in the Development Area). However, an
initial investment will be required for each Boston Market Unit developed.
BCI's estimate of this investment follows.
33
<PAGE>
YOUR ESTIMATED INITIAL INVESTMENT/(1)/
<TABLE>
<CAPTION>
====================================================================================================================================
ITEM ESTIMATED AMOUNT/ METHOD OF WHEN DUE WHETHER TO WHOM
LOW-HIGH RANGE PAYMENT REFUNDABLE PAID
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Initial Franchise Fee/(2)/ $35,000 Lump Sum Deposit upon execution No BCI
less any of Development
Deposit Agreement; remainder
upon execution of
Franchise Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Brokerage Fees/(3)/ $0-$30,000 As incurred Upon satisfaction of No Real Estate
lease/purchase Broker
contingencies
- ------------------------------------------------------------------------------------------------------------------------------------
Professional Fees and Due $5,000-$25,000 As incurred Before execution No Attorneys and
Diligence/(4)/ Consultants
- ------------------------------------------------------------------------------------------------------------------------------------
Lease Deposits/(5)/ $0-$30,000 Lump Sum Upon execution of lease Yes Lessor
- ------------------------------------------------------------------------------------------------------------------------------------
Leasehold Improvements/(6)/ $200,000-$500,000 As Incurred Before construction or No Architects,
renovation Engineers or
Contractors
- ------------------------------------------------------------------------------------------------------------------------------------
Furniture, Fixtures and Equipment $250,000-$340,000 Lump Sum Before opening No Suppliers
(including Signage)/(7)/
- ------------------------------------------------------------------------------------------------------------------------------------
Opening Inventory and Supplies/(8)/ $15,000-$19,000 Lump Sum Before opening No BCI and
Suppliers
- ------------------------------------------------------------------------------------------------------------------------------------
Architectural or Engineering Fees $7,000-$150,000 As Incurred Before construction or No Architects or
and Permit and Impact Fees/(9)/ renovation Engineers;
governmental
agencies
- ------------------------------------------------------------------------------------------------------------------------------------
Grand Opening Advertising and $10,000 Lump Sum Upon execution of No BCI/Suppliers
Promotion/(10)/ Franchise Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
ITEM ESTIMATED AMOUNT/ METHOD OF WHEN DUE WHETHER TO WHOM
LOW-HIGH RANGE PAYMENT REFUNDABLE PAID
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Miscellaneous Opening Costs $25,000-$90,000 As Incurred Before opening and No Suppliers,
thereafter Employees, and
other Creditors
- ------------------------------------------------------------------------------------------------------------------------------------
Computer System (including Licensed $38,000-$61,000 As Incurred Before opening No BCI and/or
Program and Specified Suppliers
Software)/(12)/
- ------------------------------------------------------------------------------------------------------------------------------------
Additional Funds -- 3 Months/(13)/ $180,000-$480,000 As Incurred As Incurred No BCI, Suppliers,
Employees and
other Creditors
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ESTIMATED INITIAL $765,000-$1,770,000
INVESTMENT/(14)/
(FOOTNOTES FOLLOW CHART)
====================================================================================================================================
</TABLE>
35
<PAGE>
FOOTNOTES TO THE ESTIMATED INITIAL INVESTMENT TABLE
- ---------------------------------------------------
(1) GENERAL COMMENTS. The amounts shown are BCI's reasonable estimates of
----------------
the amounts that you will typically spend for the purpose indicated. However,
the actual costs incurred may be higher or lower for any given Boston Market
Unit based upon the particular circumstances applicable to that Unit, including
such factors as its location, size, number and experience of personnel, and
whether the Boston Market Unit is a Flagship Store or a Satellite Store. BCI
relied on its 5 1/2 years of experience in the food service business, the actual
operating results of certain of its financed Developers, as well as the
experience of certain of its officers in compiling these estimates. You should
review these figures carefully with a business advisor before making any
decision to purchase the Franchise.
(2) INITIAL FRANCHISE FEE. The basic Initial Franchise Fee is $35,000.00.
---------------------
If the Franchise is granted under a Development Agreement, a Deposit of
$5,000.00 toward the Initial Franchise Fee of $35,000.00 will be payable upon
execution of the Development Agreement, in addition to the Development Fee
payable under the Development Agreement. The Deposit paid under the Development
Agreement will be credited toward the Initial Franchise Fee due for each
Franchise Agreement executed under the Development Agreement during the
applicable Sub-Area Term or Development Term. See Item 5 of this offering
circular. As described in Item 6 of this offering circular, if you elect to
accept BCI's offer to operate a Boston Market Unit at a Target Site or a Mall
Site, you will be required to pay a Site Location Fee, Site Location and
Negotiation Fee or a Mall Site Fee to BCI.
(3) REAL ESTATE BROKERAGE FEES. These fees represent commissions payable
--------------------------
to real estate brokers for securing possession of a site for the Boston Market
Unit, whether by lease or purchase.
(4) PROFESSIONAL FEES. This amount represents fees payable to professional
-----------------
advisors (attorneys and accountants) for the evaluation of the franchise and
real estate contracts, as well as any negotiations.
(5) LEASE DEPOSITS. This amount represents an estimate of up to six (6)
--------------
months' security deposit under the lease for the premises of a Boston Market
Unit where rent is $60,000.00 annually. Lease deposits vary widely from
location to location, and generally are refundable.
BCI estimates that the average location will have approximately 2,700 to
3,400 square feet with rentals that vary greatly depending on geographic
location, but broadly range from $10.00 to $40.00 per square foot or more per
annum. BCI estimates an average rental rate of $20.00 per square foot. As
described in Item 8 of this offering circular, if you own an Approved Site
(defined in Item 8 below), BCI may require that you lease the Approved Site to
BCI and BCI will sublease the Approved Site back to you.
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BCI estimates that the location for a Flagship Store will have
approximately 5,200-5,800 square feet. Therefore, lease deposits may range up
to $55,000.00 for a Flagship Store.
If you purchase the Site (defined in Item 8) for the Boston Market Unit,
the initial investment will be significantly higher, in the range of $200,000.00
to $750,000.00 or more in incremental cost, depending on the location and costs
of development of the Site and construction of improvements. Purchase contracts
generally require earnest money deposits of 5% to 25% or more of the purchase
price, which earnest money deposits may or may not be refundable.
(6) LEASEHOLD IMPROVEMENTS. BCI assumes a Boston Market Unit will require
----------------------
approximately 2,700 to 3,400 square feet with frontage of typically 40 feet.
Leasehold improvement costs are expected to range from $70 to $80 or more per
square foot. The costs of leasehold improvements may increase if a particular
site has unusual dimensions or seating requirements. Variations in leasehold
improvements also are attributable to size and condition of the premises,
construction, labor and installation costs, geographic location and compliance
with state and municipal building and zoning laws and regulations. The interior
and exterior of the Boston Market Unit must be renovated to conform to BCI's
unit design specifications. Factors such as the amount of heating, ventilation
and air conditioning, an adequate electrical system and adequate access to
water, among other items, can have a significant effect on the total cost of
leasehold improvements.
BCI estimates that a Flagship Store will require approximately 5,200 to
5,800 square feet. Therefore, leasehold improvements for a Flagship Store may
range up to $640,000.
(7) FURNITURE, FIXTURES AND EQUIPMENT. Furniture, fixtures and equipment
---------------------------------
includes interior and exterior signs, serving-line equipment, refrigeration,
cooking and heating equipment, cash registers (including capacity for
computerized financial information collection) decor, furniture, exhaust system,
and smallwares. BCI estimates that the cost of furniture, fixtures and
equipment: (a) for a Satellite Store will range from $250,000 to $340,000, and
(b) for a Flagship Store will range from $430,000 to $500,000.
(8) OPENING INVENTORY AND SUPPLIES. This item includes all initial food
------------------------------
products, inventory and paper supplies inventory and smallwares. BCI estimates
that the cost of opening inventory (a) for a Satellite Store will range from
$12,000 to $14,000; and (b) for a Flagship Store will range from $25,000 to
$30,000.
(9) ARCHITECTURAL OR ENGINEERING FEES AND PERMIT AND IMPACT FEES. Charges
------------------------------------------------------------
for architects or engineers vary widely depending on the quality, reputation and
experience of the professionals engaged, the geographic area and the nature and
extent of the work to be performed. At a minimum, you will have to incur such
costs in the preparation of initial schematic drawings (approximately $750.00)
as well as the final site construction plan (estimated
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to range from $7,000 to $25,000 or more). Permit and impact fees vary widely
depending on the geographic area but range from $1,000 to $150,000 or more.
(10) GRAND OPENING ADVERTISING. You must expend no less than $10,000.00
-------------------------
for the Boston Market Unit's grand opening advertising and promotion program
during the period 10 days before, and 90 days after, the opening of the Unit.
You can anticipate engaging in a variety of promotions including the use of
print media, direct mail, and/or radio or television. Such costs can vary
widely depending on the quality, reputation and experience of the advertising
agencies engaged, the geographic area and the nature and extent of advertising
and promotions which will take place. To ensure that such expenditures occur,
BCI collects the $10,000 minimum and reimburses you or expends such sums as
incurred when such costs are incurred and documented.
(11) MISCELLANEOUS OPENING COSTS. This is an estimate of the working
---------------------------
capital funds required to be available to cover pre-opening expenses including:
lodging, meals and travel expenses for at least two persons attending the
initial training program; initial employee wages; utility deposits; insurance
premiums; architectural fee for preparation of the Boston Market Unit's initial
schematic drawing; fee for BCI's Demographic Detail Report used for site
selection; license and permit costs; uniforms; recruitment and in-store training
expenses; various kitchen smallwares as well as additional operating capital for
other variable costs (e.g., electricity, telephone, heat, etc.).
(12) COMPUTER SYSTEM (INCLUDING LICENSED PROGRAM AND SPECIFIED SOFTWARE).
-------------------------------------------------------------------
As described in Item 8 of this offering circular, BCI may require you to
purchase, lease or obtain the Computer System (including the Licensed Program
and the Specified Software). The Estimated Initial Investment Table includes
the estimated cost of purchasing, leasing or obtaining all aspects of the
Computer System as currently configured, including the Software License Fee.
You will, however, be required to incur certain costs and expenses to purchase,
lease or obtain revised or upgraded components of the Computer System when
specified by BCI.
(13) ADDITIONAL FUNDS. This amount represents an estimate of all payments,
----------------
costs, and expenses necessary to operate the Boston Market Unit during the first
3 months of operation. It includes amounts required for inventory, employee
compensation and benefits, recruitment and training expenses, utilities,
supplies, telephone and mail charges, security system, music, repair and
maintenance, uniforms and laundry, bank charges, financing payments, royalties,
advertising contributions, and rental and all other related charges. The amount
will vary, in part, upon the Boston Market Unit's revenues during the first 3
months of operation. You should set aside an additional amount for living
expenses during the Boston Market Unit's start-up period as no such amount has
been included in these figures since they vary widely with each individual.
(14) FINANCING. BCI does not offer, either directly or indirectly,
---------
financing to you for any of the above items, other than under its Financed Area
Developer Program for certain
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Developers, its equipment lease financing, and its Sale/Leaseback Program for
certain Sites, as described in Item 10 below. The availability and terms of
financing from independent third parties will depend on factors such as the
availability of financing generally, your creditworthiness and the collateral
you make available to secure any such financing. Pledges of assets are subject
to the transfer provisions of the Development Agreement and Franchise Agreement.
ITEM 8
------
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
DEVELOPMENT AGREEMENT
- ---------------------
DEMOGRAPHIC REPORTS.
-------------------
At the beginning of the Development Term, and on an annual basis during the
Development Term, you may purchase Market Plans from BCI for those Sub-Areas
where you retain development rights, as noted in Items 5 and 6 of this offering
circular. BCI will derive revenue from providing Market Plans to you. BCI
cannot estimate what percentage the cost of Market Plans will represent of your
initial and ongoing purchases and leases of goods and services because the cost
will vary with the number of sites included in each report. BCI derived
$154,683 from the sale of Market Plans in 1996 and other demographic reports,
which represented less than one percent of BCI's total 1996 revenue (which was
$264,508,234).
COMMUNICATION AND INFORMATION SYSTEMS.
-------------------------------------
You must install, use and transmit information to, or allow the electronic
collection of information by BCI through the Computer System, the Specified
Software and Licensed Program (all as defined under "Franchise Agreement" below
in this Item 8), as it is comprised periodically and the components of the
Computer System are determined, as described below. If you participate in the
Financed Area Developer Program, you will be required to utilize BCI's
accounting services. See Items 6 and 10 of this offering circular. BCI billed
$4,802,000 for its provision of accounting services in 1996.
SITE REVIEW AND APPROVAL.
------------------------
You must comply with BCI's specifications and requirements regarding site
selection, development and construction, including those concerning relations
with and use of approved general contractors, subcontractors, real estate
developers and lessors and, if requested by BCI, real estate broker(s). BCI
will provide you with a complete site approval request package (the "Site
Package"), which includes, among other items, a location feasibility analysis
form. BCI will also furnish to you BCI's current standard form lease for Boston
Market Units (the "Form
39
<PAGE>
Unit Lease") and a standard form real estate purchase and sale agreement (the
"Form Purchase and Sale Agreement"). BCI may periodically modify those forms in
its sole discretion. You must submit to BCI on BCI's specified forms
(containing such demographic, commercial, and other information and photographs
as BCI may periodically require) a complete Site Package for each site at which
you propose and intend in good faith to establish and operate a Boston Market
Unit and which you reasonably believe to conform to certain minimum site
selection criteria periodically established by BCI in its sole discretion. In
approving or disapproving any proposed site, BCI may consider such matters as it
periodically deems material, which factors may (but are not required to) include
demographic characteristics, traffic patterns, parking, visibility, allowed
signage, the predominant character of the neighborhood, competition from other
businesses providing similar services within the area (including other Boston
Market Units), the proximity to other businesses, the exclusivity granted to
other franchise owners or developers of Boston Market Units, the nature of other
businesses in proximity to the site, and other commercial characteristics
(including the purchase price or rental obligations and other lease terms for
the proposed site) and the size, appearance, and other physical characteristics
of the proposed site. BCI may periodically alter the criteria or impose
additional criteria for acceptable sites for Boston Market Units at any time in
its sole discretion. You must abide by such site criteria as they periodically
exist and comply with your development obligations imposed under the Development
Agreement. No extension or alteration of the required opening date of any
Boston Market Unit will arise by reason of such altered or additional site
criteria.
BCI will approve or disapprove sites by delivery of written notice to you.
BCI will use its reasonable best efforts to deliver such notification to you
within 30 days after receipt by BCI of a complete Site Package and such other
materials periodically requested by BCI containing all information required by
BCI. BCI may approve or disapprove a site and will have no liability as a
result of such approval or disapproval. Regardless of any other provision of
the Development Agreement, BCI's failure to provide you with notice of its
approval or disapproval of one or more proposed sites will not constitute a
waiver of BCI's right to approve or disapprove such sites or alter the required
opening date of Boston Market Units scheduled for development under the
applicable Development Agreement. A proposed site which BCI approves as meeting
its minimum criteria for the development and operation of a Boston Market Unit
is referred to in the Development Agreement and this offering circular as an
"Approved Site."
BCI's approval of a site for a Boston Market Unit does not constitute BCI's
assurance, representation or warranty of any kind, express or implied, as to the
suitability of any site for a Boston Market Unit or the successful operation of
a Boston Market Unit at the site. BCI's approval of a site only indicates that
the site falls within acceptable minimum criteria established by BCI solely for
BCI's purposes at the time of the approval of a particular site. BCI will not
be responsible for the failure of any site approved by BCI to meet your
expectations as to revenue or operational criteria.
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LEASE AND PURCHASE OF APPROVED SITES.
------------------------------------
You must present the Form Unit Lease or Form Purchase and Sale Agreement to
the lessor or seller of an Approved Site, as applicable, and use your best
efforts to cause the lessor or seller of the Approved Site to sign the Form Unit
Lease or Form Purchase and Sale Agreement as the lease, sublease, assignment of
lease or purchase agreement (referred to in the Development Agreement as the
"Site Agreement"), as applicable, for the Approved Site. If you fail to obtain
the lessor's or seller's agreement to use the Form Unit Lease or Form Purchase
and Sale Agreement as the Site Agreement, you must cause the lessor or seller to
include in the Site Agreement the standard terms which BCI requires at that time
in its sole discretion, and any other terms as BCI may require or as it may
specifically approve in writing. Certain of BCI's current standard lease terms
are included in the form of Addendum to Lease and Addendum to In-Line Shopping
Center Lease attached to this offering circular as Exhibit E and Exhibit F,
respectively. Certain of BCI's current standard purchase and sale agreement
terms are included in the form of Addendum to Purchase and Sale Agreement
attached to the offering circular as Exhibit G. BCI may modify these addenda in
its sole discretion. BCI's terms for leases and for purchase and sale
agreements may differ if you participate in the Financed Area Developer Program.
After receiving a copy of a proposed Site Agreement in form for signature,
BCI may approve, approve with modification or disapprove the proposed Site
Agreement. BCI will use its best efforts to notify you of its response within
twenty (20) days after BCI's receipt of the proposed Site Agreement. You may
not sign a Site Agreement without BCI's prior written approval, and any Site
Agreement must contain the express requirement of BCI's prior written approval
of the Site Agreement. You must deliver to BCI a copy of the fully signed Site
Agreement as previously approved within 15 days after it has been signed by all
parties. You may not agree to any modification of the Site Agreement which
would affect BCI's rights without the prior written approval of BCI.
If you or an Authorized Entity fail to obtain lawful possession of an
Approved Site (through acquisition, lease, sublease or assignment) within 60
days after delivery of BCI's approval of the Approved Site, BCI may, in its sole
discretion, withdraw approval of such site. BCI may withdraw its offer to grant
a Franchise for a Boston Market Unit at an Approved Site and withdraw its
approval of a site at any time before BCI's receipt of all applicable payments
and BCI's execution of the Franchise Agreement for the Boston Market Unit.
At BCI's request, if you own an Approved Site, you must enter into a lease
with BCI or an affiliate of BCI under BCI's then-current form of lease for a
term equal to the term of the Franchise and for a rental equal to the Approved
Site's fair market rental value, and you must sublease the Approved Site from
BCI on the same terms as the prime lease. If you and BCI cannot agree on the
fair market rental value of such an Approved Site, then such rental value shall
be determined by an independent appraiser selected by BCI and you, and if they
are unable to agree on an independent appraiser, BCI and you will each select an
independent appraiser,
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who will select a third independent appraiser, and the fair market rental value
will be deemed to be the average of the three (3) independent appraisals made by
such appraisers. Except as described above and in Item 6 of this offering
circular, BCI will not derive revenue as a result of your lease of Sites in
accordance with BCI's standards and specifications.
As described in Item 10 below, under certain circumstances BCI or its
affiliate will purchase a Site which you propose to purchase and lease it, and
under certain circumstances, the building and improvements thereon, to you or
lease a Site at which BCI has been operating a Boston Market Unit, and under
certain circumstances, the building and improvements thereon, to you. BCI did
not derive revenue from any such lease in 1996. BCREI derived $14,984,228 from
its lease of Sites to Franchise Owners in 1996, which amount represented 99% of
BCREI's total revenues and approximately 5.67% of BCI's total revenues on a
consolidated basis.
INSURANCE.
---------
In addition to the insurance required for the development and operation of
a Boston Market Unit under a Franchise Agreement, during the Agreement Term you
must maintain under policies of insurance issued by insurers rated "A-" or
better by Alfred M. Best Company, Inc. and approved by BCI: (1) such insurance
as is necessary to comply with all legal requirements concerning insurance
coverage (including, without limitation, workers' compensation requirements) for
persons attending BCI training programs; and (2) general and motor vehicle
(whether or not such vehicles are owned by you or any Authorized Entity)
liability insurance against claims for bodily and personal injury, death and
property damage caused by or occurring in the conduct of your business under the
Development Agreement, under one or more policies of insurance containing
minimum liability coverage periodically required by BCI. Each insurance policy
must name BCI as an additional named insured, must contain a waiver of all
subrogation rights against BCI, its affiliates, and their successors and
assigns, and must provide for 30 days' prior written notice to BCI of any
material modification, cancellation, or expiration of such policy. Upon
execution of the Development Agreement, you must provide BCI with evidence of
such insurance and you must furnish to BCI annually and upon the replacement of
any policy providing coverage under the Development Agreement, a copy of the
certificate of insurance or other evidence requested by BCI that such insurance
coverage is in force. The maintenance of sufficient insurance coverage will be
your responsibility.
OTHER OBLIGATIONS.
-----------------
You must maintain the number and level of management personnel for adequate
management and supervision of all Boston Market Units developed under the
Development Agreement.
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<PAGE>
FRANCHISE AGREEMENT
- -------------------
COMMUNICATION AND INFORMATION SYSTEMS.
-------------------------------------
You must use in the development and operation of the Unit only the
Specified Software, Licensed Program and Computer System periodically specified
or required by BCI. The "Computer System" means those brands, types, makes,
and/or models of communications and computer systems and hardware specified or
required by BCI for use by, between, or among Boston Market Units and BCI,
including: (1) back office and point of sale systems, data, audio, video, and
voice storage, retrieval, and transmission systems for use at Boston Market
Units, between or among Boston Market Units, and between or among Boston Market
Units and BCI and/or you; (2) security systems; (3) printers; and (4) archival
and back-up systems. The "Specified Software" means such software, programming,
and services other than the Licensed Program, which BCI specifies or requires at
any time or times during the term of the Franchise Agreement for utilization of
the Computer System. The "Licensed Program" consists of the computer software
programs developed by or for BCI and designated by BCI at any time or times
during the term of the Franchise Agreement as specified or required with
utilization of the Computer System, which may include, BCI's required point-of-
sale, bookkeeping, inventory, training, marketing, employee selection,
operations and financial information, collection and retrieval systems
(including BCI's required general ledger system utilizing the standard chart of
accounts required by BCI) for use regarding the operation of Boston Market Units
or your business, including any updates, supplements, modifications or
enhancements we may make or prescribe, all related documentation, the tangible
media upon which the program is recorded, and the database file structure, 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.
Current specifications for the Computer System and Specified Software are
available from BCI on request. BCI may modify such specifications and the
components of the Computer System and Specified Software at any time or times
during the term of the Franchise Agreement. During the term of the Franchise
Agreement, BCI may require you to obtain specified computer hardware and/or
software, including, without limitation, a license to use the Licensed Program
from BCI, its designee or approved supplier under a separate agreement after BCI
notifies you to commence use. BCI's development and/or modification of
specifications for the components of the Computer System and Specified Software
may require you to incur costs to purchase, lease and/or license new or modified
computer and communications hardware and/or software and to obtain service and
support for the Computer System during the term of the Franchise Agreement. BCI
cannot estimate the costs of future additions, enhancements and modifications to
the Computer System and Specified Software beyond those estimated for its
current configuration and may add additional elements, components, and software
to the Licensed Program and the cost to you of obtaining the additions,
enhancements and modifications to the Computer System, Specified Software, and
Licensed Program may not be fully amortizable over the remaining term of the
Franchise Agreement. Nonetheless, you must incur those costs in
43
<PAGE>
obtaining the Computer System, Specified Software, and Licensed Program (or
additions or modifications), if the Computer System which BCI specifies for use
by you is the same Computer System which BCI is then currently specifying for
use in BCI-owned Boston Market Units. Within 120 days after you receive notice
from BCI, you must obtain the components of the Computer System, Specified
Software, and Licensed Program which BCI designates and requires. As described
in Item 6 above, BCI requires you to pay to BCI or its designee a reasonable
periodic systems fee for modifications and enhancements made to the Licensed
Program and other maintenance and support services related to operating the
Licensed Program and the Specified Software on the Computer System. If you are
a Developer, you must acquire and utilize at your principal office the Licensed
Program, Specified Software and the Computer System on terms analogous to those
in the Franchise Agreement. BCI attempts to negotiate its contracts with
computer hardware and software vendors to make discounted pricing available to
you. In some instances this may involve remarketing arrangements, in which
event BCI would derive revenue from sales to you. BCI estimates that the costs
of the Computer System and Specified Software will represent approximately 7% to
9% of the purchases and leases of goods and services you will make or enter into
in the establishment of the Boston Market Unit and will represent approximately
2% of the purchases and leases that you will make or enter into in the ongoing
operation of the Boston Market Unit. BCI derived $8,312,698 from the Computer
System, Specified Software, or Licensed Program in 1996, which amount
represented approximately 3.14% of BCI's total revenues.
PRODUCT PURCHASES.
-----------------
BCI has developed and will continue to develop certain proprietary food
products which will be prepared by or for BCI according to BCI's proprietary
recipes and formulae and certain private label food products, materials and
supplies ("Proprietary Items"). As of the date of this offering circular,
Proprietary Items include a specially formulated marinade for rotisserie chicken
and certain cornbread mixes, spice mixes, stuffing mixes, side dishes, sauces,
dressings, proteins, baked products, vegetable and dessert products, and cookie
doughs. You must purchase the Proprietary Items only from BCI or its designees
who are licensed by BCI to manufacture, prepare, distribute and/or sell such
products. BCI will designate in the Manuals (defined in Item 11 below) which
Products constitute Proprietary Items, and which of the Proprietary Items are
required to be purchased from BCI or its designated suppliers and/or which are
to be prepared at the Unit. BCI did not derive revenue from BCI's sales and
designated suppliers' sales of any products in 1996, although it may in the
future. BCI may derive revenue in the future from designated suppliers' sales
of other products or supplies to you. BCI estimates that the costs of the
Proprietary Items will represent less than 5% of the purchases or leases you
will make or enter into in the establishment of the Boston Market Unit and will
represent less than 50% of the required purchases and leases of goods and
services that you will make or enter into in the ongoing operation of the Boston
Market Unit. As described in more detail in Item 6 of this offering circular,
certain of BCI's approved suppliers may add a charge to their prices and pay
over that amount to an independent quality assurance service provider selected
by BCI to pay for quality assurance services.
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SITE SELECTION AND LEASE.
------------------------
Before signing the Franchise Agreement, you must have obtained BCI's
approval of, and the legal right of possession of, the Site in accordance with
the terms of a Development Agreement. If the Franchise Agreement is not signed
under a Development Agreement, then you will be required to comply with the site
and lease review and approval provisions specified in the form of Development
Agreement included in BCI's most recent offering circular delivered to you for
the state in which the site will be located. Other than as described in this
Item, BCI will not derive revenue as a result of your selection of the Site and
execution of a lease for the Site in accordance with BCI's standards and
specifications. (See heading "Lease and Purchase of Approved Sites" above for
additional information).
UNIT DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS.
-------------------------------------------------
BCI will furnish to you specifications of BCI's requirements for design,
decoration, layout, equipment, furnishings, seating for on-premises dining,
fixtures and signs for Boston Market Units (the "Design Specifications"). The
Design Specifications are an integral part of the System and include BCI's trade
dress and, therefore, the Unit must be designed and constructed in accordance
with the Design Specifications. You must cause to be prepared the preliminary
layout for the Boston Market Unit (if not already submitted to BCI) and detailed
construction plans and specifications and space plans for the Unit (the
"Construction Plans") that comply with the Design Specifications and all
applicable ordinances, building codes, permit requirements, and lease
requirements and restrictions. At your request, BCI will prepare the
preliminary layout for the Boston Market Unit at BCI's then current charge,
which is currently $750.00. BCI will not otherwise derive revenue as a result
of your development of the Boston Market Unit in accordance with BCI's standards
and specifications. BCI estimates that the preliminary layout charge will
represent less than 1% of the leases of goods and services you will make or
enter into in the establishment of the Boston Market Unit. BCI did not derive
any revenue from the preparation of preliminary layout plans in 1996.
DEVELOPMENT OF THE BOSTON MARKET UNIT.
-------------------------------------
Within 180 days after signing the Franchise Agreement, you must, at your
expense, do or cause to be done the following: (1) secure all financing
required to fully develop the Unit; (2) if you have not done so previously,
submit the Construction Plans to BCI for approval; (3) obtain all required
zoning changes, planning consents, building, utility, sign, health, sanitation
and business permits, licenses and approvals and any other required permits and
licenses; (4) construct all required improvements in compliance with
Construction Plans approved by BCI; (5) decorate and lay out the Unit in
compliance with Design Specifications and plans and specifications approved by
BCI; (6) purchase, lease or obtain the Computer System and the Licensed Program
(to the extent then available); (7) purchase or lease and install all required
equipment, vehicles, furnishings, fixtures and signs and the Computer System;
45
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(8) purchase an adequate opening inventory of Products, materials and supplies;
(9) obtain all customary contractors' sworn statements and partial and final
waivers of lien for construction, remodeling, decorating and installation
services and (10) open the Boston Market Unit for business and operate the
Boston Market Unit on a regular and continuing basis. If you are a Developer
and have already opened a Boston Market Unit under the Development Agreement,
you must comply with the above-mentioned within one hundred twenty (120) days
after the date of the Franchise Agreement.
UNIT MENU AND SERVICES.
----------------------
The Boston Market Unit will (1) offer for sale all Products (and no other
products) and (2) provide only the following services (and no other services):
(a) the carry-out service that BCI authorizes and requires, (b) the Delivery
Service that BCI, in its sole discretion, may authorize and/or periodically
require for the Boston Market Unit under a Delivery Rider and (c) the Catering
Service that BCI in its sole discretion may authorize you to provide from the
Boston Market Unit (or a Catering Facility) under a Catering Rider. The Boston
Market Unit may not offer for sale or sell any products or services at or from
the Boston Market Unit which have not been approved in writing by BCI. You may
not use the Site or Boston Market Unit for any purpose other than the operation
of a Boston Market Unit. You will be required to meet BCI's specifications,
standards and procedures for carry-out service, on-premises dining services and
Delivery Service, if applicable, which BCI periodically requires in the Manuals
or otherwise in writing. The Boston Market Unit may not provide any such
services at, from or away from the Site until BCI, in its sole discretion, has
approved the Boston Market Unit (or a Catering Facility) in writing for the
conduct of such services and BCI and you have executed the applicable Rider to
the Franchise Agreement. You may not sell any Products that have not been
packaged in accordance with BCI's specifications, standards and procedures
required in the Manuals or otherwise in writing. If BCI requires the Boston
Market Unit to offer Delivery Service, or requires the Boston Market Unit and
other Boston Market Units in the Market Area (defined below) (or, in BCI's sole
discretion, the trade area of the Boston Market Unit as determined by BCI in its
reasonable discretion) to offer new or substitute products not currently offered
at Boston Market Units in the Market Area (or such trade area), you must offer
such services and/or products in compliance with BCI's specifications, standards
and procedures required in the Manuals or otherwise in writing and diligently
pursue obtaining any permits and take such actions (including constructing
improvements and acquiring fixtures, furnishings, equipment, supplies and
materials) required to offer such products and/or services. Such modifications
to the services and/or products to be offered by the Boston Market Unit may
require you to incur additional costs and expenses to operate the Boston Market
Unit, including, without limitation, the purchase and/or lease of additional or
substitute furnishings, furniture, fixtures, vehicles or equipment for Catering
Service and/or Delivery Service. You must incur such costs and expenses. The
"Market Area" is defined in the Franchise Agreement as the geographic market in
which the Boston Market Unit is located, as determined by BCI periodically in
its sole discretion. In determining the Market Area, BCI may take into
consideration a number of factors, as described in the Franchise Agreement.
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QUALITY CONTROL PROGRAM.
-----------------------
BCI may conduct quality, service, cleanliness, and other inspections of
Boston Market Units periodically to determine compliance with applicable
contract provisions and the standards and specifications applied by BCI
periodically. Satisfactory performance in such inspections is required. BCI
may designate an independent evaluation service to conduct a "mystery shopper"
quality control and evaluation program, as may be more fully described in the
Manuals or in writing by BCI, with respect to BCI-owned and franchised Boston
Market Units. You must participate in such mystery shopper program. BCI-owned
and franchised Boston Market Units also will participate in such program to the
extent BCI has the right to require such participation as required by BCI.
APPROVED EQUIPMENT, FIXTURES, FURNISHINGS AND SIGNS.
---------------------------------------------------
You must use in the development and operation of the Boston Market Unit
only those brands, types and/or models of equipment, vehicles, signs displaying
the Marks, fixtures and furnishings which meet BCI's specifications. You may
purchase approved brands, types and/or models of equipment, fixtures and signs
which meet BCI's specifications only from suppliers designated or approved by
BCI, which may include BCI. BCI will periodically supply you with a list of
suppliers who sell items which meet BCI's specifications, at your request. BCI
will derive revenue as a result of your purchase of such items from BCI, but did
not derive revenue from these items in 1996.
ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.
--------------------------------------------
You must install and use at the Boston Market Unit the Computer System in
the form specified by BCI during the term of the Franchise Agreement, and
transmit to, or permit the electronic collection of information by, BCI through
use of the Computer System. You, at your own expense, must establish and
maintain at the Boston Market Unit, (i) a telephone modem and dedicated line
that BCI may use to access the Computer System, (ii) full, complete and accurate
records and reports and, (iii) if required by BCI, computer diskettes and
databases in the form specified by BCI pertaining to the operation of the Boston
Market Unit, including site reports on the Boston Market Unit prepared by you
and submitted to BCI, the Site Agreement (defined in the Development Agreement),
supervisory reports on operations, bookkeeping, accounting, recordkeeping and
records retention system conforming to the requirements required by BCI
periodically (including, without limitation, requirements for a general ledger
system which utilizes a standard chart of accounts required by BCI,
periodically, and for timely entry of information into data bases of the
Computer System and periodic printouts of reports generated from the Computer
System), information on employee turnover and such other records, reports and
information as BCI prescribes periodically.
47
<PAGE>
APPROVED PRODUCTS, DISTRIBUTORS AND SUPPLIERS.
---------------------------------------------
BCI has developed and will continue to develop standards and specifications
for chicken and other food products, ingredients, seasonings, spices, sauces,
mixes, marinades, beverages, materials and supplies (other than the Proprietary
Items) incorporated in or used in the preparation, cooking, serving, packaging,
catering and delivery of prepared food products authorized for sale at or from
Boston Market Units. BCI has approved and will review and continue to approve
suppliers and distributors of the foregoing products, supplies and materials
that meet its standards and requirements including, without limitation,
standards and requirements for quality, quantity and portions, prices, volume
capability, frequency of delivery, distribution methods and locations, standards
of service, including prompt attention to complaints, consistency, reliability,
financial capability, labor and customer relations and other criteria. The
Boston Market Unit must:
(1) purchase Proprietary Items only from BCI or designees which BCI
licenses to manufacture, prepare, distribute and/or sell such products;
(2) purchase only from distributors and suppliers approved or required
by BCI all other goods and items authorized to be sold in the Unit, and
other materials and supplies used in the preparation, baking, cooking,
serving, packaging, delivery and catering of Products and equipment, menus,
forms, paper and plastic products, packaging or other materials
(collectively "Supplies and Materials"); and
(3) purchase only from distributors and suppliers approved or required
by BCI all Products, materials, supplies and food products other than
Proprietary Items ("Non-Proprietary Items").
BCI may modify the list of approved or required suppliers and distributors
during the term of the Franchise Agreement, and may designate itself or an
affiliate as a required manufacturer, supplier and/or distributor of certain
equipment, products, materials, supplies or other items. You may not, after
receipt in writing of such modification, reorder any product from any supplier
or distributor that is no longer approved. BCI may approve or require a single
distributor or supplier for any products, materials or supplies and may approve
or require a distributor or supplier only as to certain products, materials and
supplies, and such approval may be temporary pending a more comprehensive
evaluation of such distributor or supplier by BCI. BCI may concentrate
purchases with one or more distributors or suppliers to obtain lower prices
and/or advertising support and/or services for the benefit of the System and/or
Boston Market Units. BCI may establish company or affiliate-owned and operated
food commissaries and distribution facilities which BCI may designate as an
approved or required distributor or supplier. You must at all times maintain an
adequate inventory of approved food and paper products, beverages, ingredients
and other products sufficient in quality and variety to realize the full
potential of the Unit.
48
<PAGE>
BCI will derive revenue as a result of your purchase of approved products
and supplies from BCI and may, in its sole discretion, collect and retain all
allowances, benefits, credits, monies, payments or rebates (collectively
"Promotional Allowances"), offered to you or BCI or its affiliates by
manufacturers, suppliers and distributors for promotional or advertising
purposes based upon your purchases of Proprietary Item, Supplies and Materials
and Non-Proprietary Items. You must assign to BCI or its designee all of your
right, title and interest in and to any and all such Promotional Allowances and
authorize BCI or its designee to collect any such Promotional Allowances for
remission to (a) the Marketing Fund to the extent based on your purchases of
Non-Proprietary items and Supplies and Materials, except as provided in the
following clause (b); and (b) the general operating funds of BCI to the extent
based on your purchases of Proprietary Items, regardless of where purchased, as
well as Non-Proprietary Items and Supplies and Materials purchased from BCI or
its affiliates. You must acknowledge and agree that under no circumstances will
BCI or its affiliates be required to contribute to the Marketing Fund any
revenue made or collected by BCI or its affiliates from sales to or purchases by
you of any goods or services. Other than as described above, BCI will not
derive revenue as a result of your purchases of such items in accordance with
BCI's standards and specifications from approved suppliers and did not derive
any such revenue in 1996. On occasion, BCI negotiates purchase arrangements
with various suppliers who operate on a large volume basis. As a result of
these negotiated purchase arrangements, you may be able to purchase some
products at reduced rates. During the fiscal year ending December 29, 1996, the
Boston Market Units earned various marketing allowances from some suppliers,
which amounts were paid to the Marketing Fund. The amounts earned from the
various suppliers ranged from 2% to 10% of the total purchase price paid for
applicable products by all Boston Market Units from those suppliers.
BCI is negotiating an amended agreement with one of its approved suppliers
relating to the production of two chicken processing facilities, as well as with
respect to certain procedures for turkey, ham and meatloaf supply bids. If this
agreement is signed, you may order covered products and supply shipping
instructions with regard to such products from time to time at agreed prices in
the same manner as if ordered directly by BCI, and such products are treated as
if sold directly to BCI and resold by it to you. Chicken purchases pursuant to
this arrangement will be credited against BCI's financial obligations under the
agreement and a portion of the invoice price of any turkey, ham or meatloaf so
purchased is also credited against BCI's financial obligations under the
agreement. As a result of this arrangement, BCI may receive from or pay to such
supplier monies pursuant to the profit and loss sharing provisions of the
agreement. BCI may, in its sole discretion, elect to contribute none, some, or
all of any gross or net amounts received by it to the Marketing Fund or may
elect to retain such funds for its own uses and purposes. BCI may, from time to
time, amend such provisions or enter into similar arrangements with this or
other suppliers.
You must notify BCI and submit to BCI such information, specifications and
samples as BCI requests if you propose to purchase any goods, food products,
ingredients, seasonings, spices, sauces, mixes, marinades, beverages, menus,
equipment, forms, paper or plastic
49
<PAGE>
products, packaging or other materials or utensils from a distributor or
supplier whom BCI has disapproved or not previously approved. BCI will use its
reasonable best efforts to notify you within 120 days after receipt of all
requested information and materials whether you are authorized to purchase such
products from such distributor or supplier. If you fail to receive a notice of
approval or disapproval within such one hundred twenty (120) day period, you may
purchase such products from such distributor or supplier. BCI's failure to give
its approval or disapproval will not be deemed to constitute BCI's approval
therefore. BCI may require you to reimburse BCI for its reasonable costs
incurred in evaluating, inspecting and supervising such distributor or supplier.
SPECIFICATIONS, STANDARDS AND PROCEDURES.
----------------------------------------
The operation of the Boston Market Unit in strict compliance with BCI's
high standards is important to BCI and other Boston Market Units and you must
maintain such high standards in the operation of the Boston Market Unit. You
must maintain the Boston Market Unit and all Products offered for sale at the
Boston Market Unit in a safe and sanitary condition at all times. You must
comply strictly with all of BCI's mandatory specifications, standards and
operating and inspection procedures on the appearance, function, cleanliness,
days and hours of operation (days and hours of operation may vary somewhat among
Boston Market Units based on BCI's reasonable judgment of the requirements of
the Boston Market Unit's trade area and whether BCI has approved any special
services to be offered at or from a Site), and operation of a Boston Market
Unit.
Mandatory specifications, standards and operating and inspection procedures
will be required periodically by BCI in the Manuals or otherwise communicated to
you in writing and will constitute binding obligations on your part as if fully
set forth in the Franchise Agreement and any failure by you to adhere to such
mandatory specifications, standards and operating and inspection procedures or
to pass BCI's periodic quality control inspections will constitute grounds for
termination of the Franchise Agreement by BCI, as provided for therein.
INSURANCE.
---------
During the term of the Franchise Agreement, you must maintain in force,
under policies of insurance issued by insurers rated "A-" or better by Alfred M.
Best & Company, Inc. and approved by BCI: (1) commercial general liability
insurance (including coverage for motor vehicles used in the operation of the
Unit, whether or not owned by you), against claims for bodily and personal
injury, death and property damage caused by or occurring in the operation of the
Boston Market Unit or otherwise in your conduct of business under the Franchise
Agreement, under one or more policies of insurance containing minimum liability
coverage required by BCI periodically; and (2) all risk property and casualty
insurance for the replacement value of the Unit and its contents (including
leasehold improvements, furnishings, fixtures, equipment, signs, inventory,
supplies, and materials). You must also maintain such insurance as is necessary
to comply with all legal requirements concerning insurance coverage (including
50
<PAGE>
worker's compensation requirements) including coverage for persons attending
BCI training programs on your behalf. BCI may periodically increase the amounts
of coverage required under such insurance policies and require different or
additional kinds of insurance at any time, including excess liability insurance,
to reflect inflation, identification of new risks, changes in law or standards
of liability, higher damage awards, or other relevant changes in circumstances.
The Franchise Agreement contains additional requirements, such as those
concerning waiver of subrogation and notice of modification, that are similar to
those in the Development Agreement described above in this Item 8. The
maintenance of sufficient insurance coverage will be your responsibility.
CREDIT CARDS AND OTHER METHODS OF PAYMENT.
-----------------------------------------
You must at all times have arrangements in existence with a full range of
credit and debit card issuers or sponsors, check verification services and
electronic fund transfer systems as BCI periodically designates in its sole
discretion during the term of the Franchise Agreement in order that the Boston
Market Unit may accept customers' credit and debit cards, checks and other
methods of payment. You may use only such methods of payment which BCI
authorizes or approves.
ADVERTISING.
-----------
See Item 11 of this Offering Circular.
DELIVERY SERVICE.
----------------
If you execute a Delivery Rider, you, at your sole expense, are required to
take such actions (including, without limitation, constructing such improvements
and acquiring fixtures, equipment, delivery vehicles, and other materials and
supplies) and obtain such permits as required to commence Delivery Service
within the time period specified in the Delivery Rider. You must maintain the
condition and appearance of, and perform maintenance with respect to, the
delivery vehicles, facilities, fixtures and equipment used in the provision of
Delivery Service in accordance with BCI's standards, specifications and
procedures, and consistent with the image of Boston Market Units as first class,
clean, sanitary, attractive and efficiently operated food service businesses.
CATERING SERVICE.
----------------
If you execute a Catering Rider, you, at your sole expense, are required to
take such actions (including, without limitation, constructing such improvements
and acquiring fixtures, equipment, vehicles, and other materials and supplies)
and obtain such permits as required to commence Catering Service from the
Catering Facility (defined below) within the time period specified in the
Catering Rider. You must maintain the condition and appearance of, and
51
<PAGE>
perform maintenance with respect to, the Catering Facility, catering vehicles,
furniture, fixtures and equipment used in the provision of Catering Service in
accordance with BCI's standards, specifications and procedures, and consistent
with the image of Boston Market Units and related facilities as first class,
clean, sanitary, attractive and efficiently operated food service businesses.
ITEM 9
------
FRANCHISEE'S OBLIGATIONS
THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER
AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR
OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ITEM IN
OFFERING
OBLIGATION SECTION IN AGREEMENT CIRCULAR
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) Site selection and Section 4.A of Franchise Agreement/ 6, 8, 10 and
acquisition/lease Sections 5.A and 5.B of 11
Development Agreement
- ----------------------------------------------------------------------------------------------------------------------------------
(b) Pre-opening purchases/leases Sections 4.B, 4.C, 4.D., 4.E and 8
4.G of Franchise Agreement/
Section 11.L of Development
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
(c) Site development and Sections 4.C, 4.G and 4.I of 5, 6, 7 and 11
other pre-opening Franchise Agreement/Sections 5.C
requirements and 5.D of Development Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
(d) Initial and ongoing Sections 5.A and 5.B of Franchise 6 and 11
training Agreement/Sections 11.D and 11.F
of Development Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
(e) Opening Section 4.F of Franchise Agreement 11
- -----------------------------------------------------------------------------------------------------------------------------------
(f) Fees Sections 4.E, 10.A-10.F, 12.A-12.C 5 and 6
of Franchise Agreement/
Sections 3.E, 5.D, 5.E, 6.A, 6.B
and 11.L of Development Agreement
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM IN
OFFERING
OBLIGATION SECTION IN AGREEMENT CIRCULAR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(g) Compliance with Sections 4.B, 4.C, 4.D, 5.B, 5.C, 11, 13 and 14
standards and policies/ 6.A, 6.B, 7.B, 11.A-11.H, 13 and
Operating Manual 14 of Franchise Agreement/
Sections 5.A, 5.B, 7, 9.A, 9.B,
10.B, 11.J, 11.L of Development
Agreement
- ------------------------------------------------------------------------------------------------------------------------
(h) Trademarks and Sections 4.E., 6.A-6.D, 7.A-7.D, 13 and 14
proprietary information 9.A, 9.B, 18.B, and 18.C of
Franchise Agreement/Sections 7,
9.A-9.E, 10.A-10.D and 11.L of
Development Agreement
- ------------------------------------------------------------------------------------------------------------------------
(i) Restrictions on products/ Section 11.B-11.D, 11.H of 16
services offered Franchise Agreement
- ------------------------------------------------------------------------------------------------------------------------
(j) Warranty and customer None
service requirements
- ------------------------------------------------------------------------------------------------------------------------
(k) Territorial development Sections 2.B-2.E and 3.A-3.C of 12
and sales quotas Franchise Agreement/Sections 3.B-
3.F and 4.A-4.C of Development
Agreement
- ------------------------------------------------------------------------------------------------------------------------
(l) Ongoing product/service Sections 11.B-11.D of Franchise 8
purchases Agreement
- ------------------------------------------------------------------------------------------------------------------------
(m) Maintenance, appearance Section 11.A of Franchise 9
and remodeling Agreement
requirements
- ------------------------------------------------------------------------------------------------------------------------
(n) Insurance Section 11.G of Franchise 6 and 8
Agreement/Section 11.H of
Development Agreement
- ------------------------------------------------------------------------------------------------------------------------
(o) Advertising Sections 12.A-12.C of Franchise 6 and 11
Agreement/Section 5.E of
Development Agreement
- ------------------------------------------------------------------------------------------------------------------------
(p) Indemnification Section 8.D of Franchise 6
Agreement/Section 15 of
Development Agreement
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ITEM IN
OFFERING
OBLIGATION SECTION IN AGREEMENT CIRCULAR
- -------------------------------------------------------------------------------------------
<S> <C> <C>
(q) Owner's participation/ Section 11.F of Franchise 11 and 15
management/staffing Agreement/Sections 11.A-11.F of
Development Agreement
- -------------------------------------------------------------------------------------------
(r)) Records/reports Section 13 of Franchise Agreement/
Section 11.I of Development
Agreement
- -------------------------------------------------------------------------------------------
(s) Inspections/audits Sections 14.A and 14.B of Franchise 6 and 11
Agreement
- -------------------------------------------------------------------------------------------
(t) Transfer Sections 15.A-15.J of Franchise 6 and 17
Agreement/Sections 12.A-12.I of
Development Agreement
- -------------------------------------------------------------------------------------------
(u) Renewal Sections 16.A-16.C of Franchise 6 and 17
Agreement
- -------------------------------------------------------------------------------------------
(v) Post-termination Sections 18.A-18.F of Franchise 17
obligations Agreement/Sections 14.A-14.E of
Development Agreement
- -------------------------------------------------------------------------------------------
(w) Non-competition Sections 9.B, 15.C (13) and 18.D of 17
covenants Franchise Agreement/Sections 8,
12.C (14) and 14.D of Development
Agreement
- -------------------------------------------------------------------------------------------
(x) Dispute resolution 19.C, 19.E, and 19.F-19.J of 17
Franchise Agreement and 16.C,
16.E-16.J. of Development
Agreement
- -------------------------------------------------------------------------------------------
</TABLE>
ITEM 10
-------
FINANCING
Neither BCI nor any agent or affiliate of BCI offers, directly or
indirectly, any financing arrangements to you, except as described below.
54
<PAGE>
FINANCED AREA DEVELOPER PROGRAM
BCI offers financing under its "Financed Area Developer Program" to certain
qualified Developer periodically for the design, construction, acquisition of
equipment, and reasonable initial working capital for, Boston Market United to
be developed by the Developer. Because of restrictions on when drawdowns of such
financing may occur, it is generally not available to be used for the payment of
the Development Fee or the Deposit on Initial Franchise Fees. BCI generally
considers as candidates for the Financed Area Developer Program only Developers
(1) to which BCI grants development rights for a significant portion of an ADI
or the greater metropolitan area of a major city involving the development of
more than 35 Units and (2) which meet all of BCI's other requirements,
including, without limitation, qualification of operators, minimum equity and
capitalization requirements, etc. The amount of financing available to you, if
you are a qualified Developer, will depend upon various factors such as the
location of your Development Area, the number of Boston Market Units you intend
to develop, and the amount of equity capital you raised for initial and ongoing
operations.
Under the secured loan agreement and the exhibits to it to be executed by
BCI and you under the Financed Area Developer Program (the "Loan Agreement"), a
copy of which is attached to this offering circular as Exhibit K and which
contains the terms of the Financed Area Developer Program, you must expend at
least 75% of your equity capital toward developing Boston Market Units before
drawing on the agreed loan amount. Draws will be permitted during a pre-
determined draw period, which will typically be approximately three years. Upon
expiration of the draw period, the loan converts to an amortizing term loan
payable in 65 substantially equal periodic installments of principal (the amount
of the periodic installments of principal is determined at the end of the draw
period based on a schedule amortizing such outstanding principal balance as of
such date in 130 substantially equal periodic installments of principal) plus
accrued but unpaid interest, with a final payment of the remaining principal
balance of the loan and all accrued but unpaid interest on the principal balance
due approximately five years after the expiration of the draw period. The
maximum loan amount available must be an amount at least equal to the amount
which, if converted into equity in you, would give BCI control of you under
applicable state law. Any amounts loaned to you will accrue interest daily on
the aggregate outstanding principal balance of the loan at a per annum rate
equal to the rate periodically designated and announced by Bank of America
Illinois (the "Bank") as its "reference rate" in effect at its principal office
in Chicago, Illinois, plus a premium specified by BCI, not to exceed 2%. The
interest rate will be adjusted, periodically, on the same day on which the Bank
adjusts its reference rate. The annual percentage rate charged by BCI as of
December 31, 1996 was 9.25%. Interest on the outstanding principal balance of
the loan will be payable in arrears on the first day of each of BCI's four-week
retail periods during the draw period. Upon expiration of the draw period and
conversion of the loan to a term loan, interest on the principal balance will be
payable to BCI together with the periodic installments of principal as described
above, and at maturity. (Sections 1.1-1.6 of Loan Agreement). At the time you
sign the Loan Agreement, you must also sign a promissory note (the "Note") for
the maximum loan amount.
55
<PAGE>
The Note may be prepaid in whole or in part at any time without penalty.
Demand, presentment, protest, diligence, notice of dishonor, and any other
formality are expressly waived by you under the Loan Agreement. (Page 2 of the
Note).
BCI may, at any time after the occurrence of both a specified date to be
negotiated by BCI and you and such time as you have completed 80% of your
development schedule, and up to the later of the date on which you have properly
repaid the outstanding principal balance of the loan in full or a specified date
to be negotiated by BCI and you, or at any time upon acceleration of the loan,
convert the outstanding principal balance of the Note or any portion of the
outstanding principal balance (but not interest) into shares of your common
stock (or corresponding equity interests if you are not a corporation) pursuant,
and subject to, the terms of the Loan Agreement at a premium to the original
issue price of the equity previously negotiated by BCI and you. Conversion of
any portion of the principal balance of the loan will not relieve you of your
obligation to pay any accrued but unpaid interest on the portion of the
principal balance of the loan so converted. (Section 1.7 of Loan Agreement,
Article 1 of the Note).
BCI also may, at any time after the occurrence of both a specified date to
be negotiated by BCI and you, and such time as you have completed 80% of your
development schedule, and up to the later of the date on which you have properly
repaid the outstanding principal balance of the loan and all accrued interest
thereon in full or a specified date to be negotiated by BCI and you, or at any
time upon acceleration of the loan, purchase at the price agreed upon for
conversion, up to that number of shares of common stock (or corresponding equity
interests if you are not a corporation) determined by application of the formula
set out in the Loan Agreement such that the shares obtained by option and by
conversion equal the maximum number of shares which could have been obtained by
conversion if the loan were fully drawn and no portion repaid. (Section 1.8 of
Loan Agreement).
To secure payment and performance of your obligations under the Loan
Agreement and all other of your obligations to BCI, including any obligations
under the Financing Sublease Program and Bridge Loan Program described below,
you must grant BCI a continuing security interest in and to substantially all of
your property and interest in property, whenever acquired by you and wherever
located, consisting of the following: (a) all of your real estate, accounts,
equipment (including 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, documents of title, letters of credit and capital stock or
other ownership interests in your subsidiaries; (b) all insurance proceeds of or
relating to any of the foregoing; (c) all of your 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 being referred to collectively as the
"Collateral"). (Section 2.1 of Loan Agreement).
56
<PAGE>
In addition to the security interest in the Collateral, your obligations
under the Loan Agreement and all other of your obligations to BCI must be
secured by a pledge of all of the outstanding shares or equity interests in your
company. Payment of the loan generally does not need to be personally
guaranteed by the stockholders. (Section 2.2 of Loan Agreement).
Under the Loan Agreement, with respect to any of your future financing, BCI
also has a right of first negotiation, a right of first refusal and preemptive
equity rights. As long as you do not have any amounts outstanding under the
Financing Sublease Program described below, BCI will subordinate its loan to
your other financing incurred later if certain conditions enumerated in the Loan
Agreement are met. In addition, the Loan Agreement provides that you may have
an employee stock option plan which provides for grants of options aggregating
up to an agreed upon portion of your fully-diluted equity, with a four-year
(10%, 20%, 30%, 40%) vesting schedule for option grants. (Sections 4.2, 5.9,
5.10 and 9.11 of Loan Agreement).
Upon a default under the Loan Agreement, BCI may: (1) terminate its
obligations under the Loan Agreement, cease to make advances and declare the
Note due and payable in full, without demand, presentment or notice of any kind;
(2) exercise its rights as a secured party under applicable law; (3) exercise
its rights under the various security documents; (4) convert any portion of the
outstanding principal balance of the loan into shares of your common stock; and
(5) exercise all or a portion of its option right (described above). Among
other things, (A) your default under the Development Agreement or termination of
the lesser of (1) 50% or (2) three of the Franchise Agreements to which you or
your affiliates and BCI are parties or (B) your default under the Equipment
Sublease Program (if you participate in the Equipment Sublease Program) or a
Bridge Loan, each of which is described below, constitute a default under the
Loan Agreement. (Sections 8.1 and 8.2 of Loan Agreement). You must also pay
all reasonable attorneys' fees and any costs and charges relating to or arising
out of the enforcement by BCI of its rights to collect any portion of the Loan
(Section 9.3 of the Loan Agreement).
The Loan Agreement requires you to acknowledge that BCI may not have cash,
cash equivalents and credit resources sufficient to permit BCI to necessarily
make all requested advances and to agree that if BCI fails to fund the loan as
and to the extent under the Loan Agreement solely as a result of the
unavailability to BCI of cash and/or credit resources to fund the loan and is
not the result of any failure of BCI to satisfy the conditions precedent to
advances or of a default, such failure will not (a) constitute fraud, and (b)
give rise to any liability of any person or entity (other than BCI, its
successors and assigns) in any other tort and, that you will be limited to your
remedies in contract and in tort, as described above, against BCI. This does
not affect the amount of damages for which BCI may be liable to you in contract
or non-fraud tort actions. (Section 1.10 of Loan Agreement).
Under the Loan Agreement, the parties agree that they will not be liable
for consequential, indirect, incidental, special, speculative or punitive
damages. The parties also agree to waive their right, if any, to a jury trial.
(Sections 9.15 and 9.15 of Loan Agreement).
57
<PAGE>
If you participate in the Financed Area Developer Program, you must utilize
BCI's accounting services under an Accounting and Administrative Services
Agreement, a copy of which is attached to this offering circular as Exhibit F to
the Loan Agreement. The fees payable to BCI under the Accounting and
Administrative Services Agreement are described in Item 6 of this offering
circular.
BRIDGE FINANCING.
----------------
In the past, BCI has offered to certain of its financed Developers short-
term financing to provide additional funds to such a Developer to meet its
short-term cash needs. The terms and conditions of, and the security for, this
financing are similar to the financing provided under the Financed Area
Developer Program, except that the principal amount of the Note executed with
such financing is payable upon demand or a date certain within one year, the
principal amount cannot be converted, and there is no option (as described
above).
SALE/LEASEBACK PROGRAM.
----------------------
BCI has developed a sale/leaseback program for Sites which it may, in it
its sole discretion, offer to you. In a typical sale/leaseback situation, you
will negotiate and sign a contract to purchase a Site (the "Purchase
Agreement"). If the Purchase Agreement is assignable to BCI and if the terms of
the Purchase Agreement are otherwise acceptable to BCI, you will assign and BCI
will assume the Purchaser's obligations under the Purchase Agreement. BCI will
then close the purchase and acquire the Site.
Upon the closing of the purchase of the Site, BCI will lease the Site to
you. BCI will typically lease the Site to you on the terms of BCI's standard
Franchise Lease, attached to this offering circular as Exhibit M. The monthly
rent under the Franchise Lease will be equal to the Percentage Factor (defined
below) multiplied by the Principal Amount (defined below) and divided by 12.
The Percentage Factor will vary periodically and is determined on a case-by-case
basis. BCI is currently employing a Percentage Factor of 11%. The Principal
Amount will also be determined on a case-by-case basis. In a typical case, BCI
will acquire the land and improvements, if any, located at a Site. In such a
case, the Principal Amount will be the purchase price for the land and
improvements, plus an amount which may vary periodically in BCI's sole
discretion (currently $25,000.00) and may include a "Landlord's Contribution"
toward the cost of constructing a Boston Market Unit at the Site. The
Landlord's Contribution, if any, will vary based on the circumstances, and may
be an amount which may vary periodically in BCI's sole discretion (currently
$250,000.00). BCI at its discretion may elect to fund the entire cost of
construction under the terms of the Special Purposes Addendum to the Franchise
Lease attached to this Offering Circular as Exhibit M-1. You must pay for
directly or reimburse BCI for all out-of-pocket expenses associated with the
transaction, e.g., survey, title insurance, soil tests, environmental
assessments, legal fees, closing costs. (Articles 1,2,4,6-8 of Franchise
Lease).
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If the building located at the Site can be remodeled to be converted into a
Boston Market Unit, BCI will normally not include a Landlord's Contribution in
the Principal Amount. If the Site consists only of raw land or if there is a
building located at the Site which must be torn down and replaced with a new
structure to house the Boston Market Unit, BCI will normally include a
Landlord's Contribution in the Principal Amount.
BCI may also offer the sale/leaseback program with respect to Sites already
owned by you. In those instances, BCI will purchase the Site from you and lease
it back to you in a manner similar to that described above.
The term of the Franchise Lease is typically 10 years with the possibility
of renewing for two periods of 5 additional years each. BCI may require
personal guarantees of the Franchise Lease from your Owners or other appropriate
parties. The Franchise Lease provides for a late charge of 5% of the amount of
any installment of rent that is delinquent by more than 15 days. It is a
"triple net" lease under which you are responsible for all costs associated with
the Site including, taxes, insurance, and repairs. If you default on your
obligation to pay rent, BCI may accelerate all or any part of rent due under the
Franchise Lease and/or terminate the Franchise Agreement. As security for your
performance under your Loan Agreement, you may be required to collaterally
assign the Franchise Lease to BCI. (Articles 1,2,4,6-8 of Franchise Lease).
The Franchise Lease provides that if BCI breaches the Franchise Lease, you
may look solely to the estate and property of BCI in the leased premises and no
other property or assets of BCI will be subject to levy, execution, or other
procedures for satisfaction of your remedies. It also provides that you waive
your right to trial by jury. (Sections 24.11 and 24.14 of Lease Agreement).
The foregoing is merely illustrative of typical sale/leaseback transactions
and BCI reserves the right to modify the terms for any particular situation.
All decisions whether to offer the sale/leaseback program to you will be made by
BCI in its sole and absolute discretion on a case-by-case basis. Whether BCI
determines to offer the program may vary from site to site and from Franchise
Owner to Franchise Owner. BCI may modify, suspend or terminate the
sale/leaseback program in its sole and absolute discretion at any time and
without prior notice. BCI may, in its sole and absolute discretion, cause a
sale/leaseback transaction to be effected by an affiliate of BCI, rather than by
BCI itself (e.g., BCREI may effect a sale/leaseback transaction with you).
LEASE AND SUBLEASE OF SITES CONTROLLED BY BCI
---------------------------------------------
In certain circumstances, BCI may sell existing Units it owns in a
particular market to a Developer when the Developer enters into a Development
Agreement for that market. In some of those cases, BCI may, in its sole
discretion, offer a real estate leasing and subleasing program for the Units
which BCI sells to the Developer. In the case of Units where BCI owns the land
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<PAGE>
and building, BCI would lease them to the Developer. In the case of Units for
which BCI has entered into a ground lease or a premises lease with the owner of
the Site, BCI would grant the Developer a sublease for those Units. In
appropriate circumstances, BCI may also sublease Units it owns to Developer, or
a Site to a Boston Market Developer who may sublease a portion of the site to an
Einstein/Noah Bagels Developer for a "dual use" operation as described below in
this Item 10 under "'Dual Use' Third Party Sale/Leaseback Program."
Like the sale/leaseback program described above, the monthly rent would be
equal to a Percentage Factor multiplied by a Principal Amount and divided by 12.
As is the case with the sale/leaseback program, under this program the
Percentage Factor will vary periodically and will be determined on a case-by-
case basis. BCI is currently employing a Percentage Factor of 11%. There will
be no Landlord's Contribution for Sites under this program.
In the case of a Site which BCI owns, the Franchise Owner would enter into
the Franchise Lease, attached to this offering circular as Exhibit M, and the
---------
Special Purposes Addendum, attached to this offering circular as Exhibit M-1,
------------
for the Site and the Principal Amount would be equal to BCI's cost of the land,
buildings and improvements at the Site plus an amount which may vary
periodically in BCI's sole discretion (currently $25,000.00). In the case of
Sites which BCI controls under a premises lease the Franchise Owner would enter
into the Franchise Sublease attached to this offering circular as Exhibit L and
---------
the Principal Amount would be equal to: (i) the monthly rent under the premises
lease, plus (ii) BCI's cost of the leasehold improvements at the Site, plus
(iii) an amount which may vary periodically in BCI's sole discretion (currently
$25,000.00). In the case of Sites which BCI controls under a ground lease, the
Franchise Owner will enter into the Franchise Lease and the Principal Amount
would be equal to: (i) the monthly rent under the ground lease, plus (ii) BCI's
cost of the buildings and improvements at the Site, plus (iii) an amount which
may vary periodically in BCI's sole discretion (currently $25,000.00).
In the event the buildings and improvements at a Site are not completed at
the time the Franchise Owner enters into the Franchise Lease or the Franchise
Sublease for that Site, the Principal Amount will not include the cost of the
buildings and improvements. Once the buildings and improvements are completed,
the Principal Amount will be adjusted to include the cost of those items.
THIRD PARTY SALE/LEASEBACK PROGRAM.
-----------------------------------
BCI has developed a third party sale/leaseback program for Sites which it
may, in its sole discretion, offer to you. As of the date of this offering
circular, such third party sale/leaseback financing is available from CNL
Institutional Advisors, Inc. and Captec Financial Group, Inc. (each of which is
referred to as a "third party"). In a typical situation you will negotiate and
sign a contract to purchase a Site (the "Purchase Agreement"). If the Purchase
Agreement is assignable to the third party and if the terms of the Purchase
Agreement are otherwise acceptable to BCI and the third party you will assign
the Purchase Agreement to the third party. The third
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party will then purchase the Site. In a limited number of cases, BCI may sell
Sites which it owns to the third party for lease back to you.
Upon the closing of the purchase of the Site, the third party will lease
the Site to you on the terms of the third party's then current standard form of
lease (the "Third Party Lease"). A copy of a typical Third Party Lease is
attached to this offering circular as Exhibit M-2. The monthly rental under the
-----------
third party lease will vary and will be determined on a case by case basis.
Currently the purchase price for the land and the reimbursement for the
construction of improvements is based on whether you are a Tier I, Tier II or
Tier III Developer (see the definitions of these terms below).
The monthly rent under the Third Party Lease will be equal to the
Percentage Factor (defined below) multiplied by the Rent Computation Base
(defined below) and divided by 12. The Percentage Factor will vary periodically
depending on when the Third Party Lease is entered into and, furthermore, the
Percentage Factor increases over time during the term of the Third Party Lease.
As of the date of this offering circular, the Percentage Factor was as follows:
<TABLE>
<CAPTION>
==============================================================================
YEARS 1 -5 YEARS 6-10 YEARS 11-15
- ------------------------------------------------------------------------------
<S> <C> <C>
10.5% 11.55% 12.71%
==============================================================================
</TABLE>
The Rent Computation Base will be calculated as follows:
Cost of Land + Overhead Reimbursement + Construction Cost =
Total Project Cost
[Total Project Cost x Applicable Sales Percentage] + Closing Costs =
Rent Computation Base
In the calculation above, the following terms have the following values:
OVERHEAD REIMBURSEMENT: Where the Third Party Lease is for a Site that
BCI owned and sells to a third party, this
charge will be $45,000 to reimburse BCI its
capitalized overhead costs related to the
Site. Where another party owns the land at a
Site and sells it to the third party for lease
to you, the reimbursement will be $25,000.
APPLICABLE SALES PERCENTAGE: 75% for Tier I and Tier II Developers and
100% for Tier III Developers (defined below)
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CLOSING COSTS: Actual closing costs (estimated to be $25,000)
TIER I DEVELOPERS: The most mature and most developed Developers
TIER II DEVELOPERS: The more mature and more developed Developers
TIER III DEVELOPERS: Newer, smaller and less developed Developers
BCI, the third party and the Developer will determine by agreement in which Tier
the Developer is placed.
Note that the Third Party Lease provides for percentage rent to commence in
the sixth year of its term. Thus, starting in the sixth year, rent will be the
greater of:
(a) the amount derived from the calculation set forth above; or
(b) a fixed percentage of the gross revenue of the Boston Market Unit
located at the Site.
For purposes of calculating percentage rent under the Third Party Lease, the
fixed percentage is 4% for Tier I and Tier II Developers and 5% for Tier III
Developers.
We will provide absolute and unconditional guarantees of only the rent and
real estate tax obligations of Tier III Developers under Third Party Leases. We
will also guarantee only the rent and real estate tax obligations of Tier II
Developers under Third Party Leases, which guarantees may be subordinated to
BCI's senior revolving credit agreement. We will not provide guarantees for
Tier I Developers.
The third party may also offer the sale/leaseback program to you for Sites
already owned by you. In those instances, the third party will purchase the
Site from you and lease it back to you in a manner similar to that described
above.
The term of the Third Party Lease is typically 15 years with the
possibility of renewing for 5 periods of 5 additional years each. It is a
"triple net" lease under which you are responsible for all costs associated with
the Site including taxes, insurance and repairs. In the event of the tenant's
default, the Third Party Lease provides for, among other remedies, damages
payable to the landlord equal to the present value of the amount by which the
unpaid rent for the balance of the term exceeds the amount of lost rent that the
tenant proves could be reasonably avoided. For purposes of determining the
present value of that amount, the Third Party Lease utilizes a discount rate of
10.5% per annum (Section 15.B.(ii) of the Third Party Lease). As security for
your performance under your secured Loan Agreement, you must collaterally assign
the Third Party Lease to BCI. (Article 12 of Third Party Lease.)
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The foregoing is merely illustrative of typical third party sale/leaseback
transactions and BCI reserves the right to modify the terms for any particular
situation. All decisions concerning whether to offer the sale/leaseback program
to you will be made by BCI in its sole and absolute discretion on a case-by-case
basis. Whether BCI determines to offer the program may vary from site to site
and from Franchise Owner to Franchise Owner. BCI may modify, suspend or
terminate the third party sale/leaseback program in its sole and absolute
discretion at any time and without prior notice.
"DUAL USE" THIRD PARTY SALE/LEASEBACK PROGRAM.
---------------------------------------------
BCI has developed a variation on the third party sales/leaseback program
for "dual use" Sites. This term refers to Sites which will be occupied by both
a Boston Market Unit and by an Einstein Bros. Bagels ("EBB") shop. In a typical
dual use sale/leaseback transaction, the owner of the Site will sell it to the
third party. The third party will then lease the Site to BCI who will either
(a) sublet the Site to a Boston Market Developer and an EBB Developer; or (b)
sublet the Site to the Boston Market Developer who, in turn, will sublet to an
EBB Developer. The Boston Market Developer will then construct a dual use
building at the Site using its own funds. Upon completion of construction, the
third party would provide additional funding to BCI in the form of a landlord
allowance the amount of which will vary, depending on whether the Boston Market
Developer is classified in Tier I, II or III. BCI would in turn pass that
allowance on to the Boston Market Developer as an allowance to defray the cost
of construction.
The rent under the subleases between BCI as sub-landlord and the Boston
Market Developer and EBB Developer as sub-tenants will be calculated in the same
manner as under the third party sale/leaseback program, including for percentage
rent. The rent to be paid by the Boston Market Developer and the EBB Developer
will, when added together, equal the total amount of rent payable under the
prime lease between the third party and BCI (the "Prime Lease"). That total
will be allocated between the Boston Market Developer and the EBB Developer,
depending on the amount of space at the Site each of them uses. It is expected
that a typical allocation will be that the Boston Market Developer will pay 57%
of the total rent and EBB Developer will pay 43%. However, this will vary
somewhat with the circumstances of particular Sites. The percentage rent
provided for in the Prime Lease will also be passed through to the Boston Market
Developer and the EBB Developer and allocated between them in a similar manner.
BCI may also enter into leases for dual use Sites with land owners in which case
BCI will sublet the Site to a Boston Chicken Developer and an EBB Developer in a
manner similar to the program described above. The form of lease used in this
program will be substantially similar to the Third Party Lease attached as
Exhibit M-2, with appropriate modifications to reflect the dual-use structure.
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<PAGE>
FINANCING SUBLEASE PROGRAMS.
----------------------------
BCI has developed sublease programs for Unit equipment, leasehold
improvements and fee real estate which it may, in its sole discretion,
periodically offer to you. Funding is available under the General Electric
Capital Corporation sublease program (the "GECC Program"), in BCI's sole
discretion.
BCI would enter into an inducement agreement with you (the "Inducement
Agreement"), a copy of which is attached to this offering circular as Exhibit K-
----------
1, which sets forth the conditions to be satisfied for participation, at BCI's
- -
sole discretion, in the GECC Program and any future financing sublease programs
developed by BCI. The Inducement Agreement requires you to acknowledge that BCI
may decline at any time to include any of your equipment in the equipment
sublease programs, and any such denial by BCI will not constitute a breach of
the Inducement Agreement or give rise to any claim or cause of action against,
or liability of, BCI, including any liability in fraud or any other tort. (See
Section 1.6 of the Inducement Agreement).
Under the GECC Program, on any specified funding date, you may submit to
BCI invoices for new Unit equipment, leasehold improvements and fee real estate
(the "Lease Assets"). If approved by BCI in its sole discretion, BCI will have
the Lease Assets purchased from you by General Electric Capital Corporation
(which is not related to BCI), for itself and as agent for certain participants
(the "Lessor"), who will then lease the equipment to BCI under a lease between
BCI and the Lessor (the "GECC Master Lease"). BCI, in turn, will sublease the
equipment to you under a sublease (the "GECC Sublease"), a copy of which is
attached to this offering circular as Exhibit K-2. The GECC Sublease will be a
-----------
net lease in which you will be responsible for the payment of all costs and
expenses applicable to the ownership and use of the Lease Assets, including
taxes, insurance and maintenance. Rent will be payable quarterly consisting of
two components; interest based upon the three-month LIBOR plus a spread, and
amortization of the purchase price of the equipment (which purchase price
includes transaction costs, including attorneys' fees), based upon a decline in
the fair market value of the equipment. As of February 25, 1997, the interest
rate was 9.3969%.
To secure your obligations under the GECC Sublease, you will grant to BCI a
security interest in the equipment. BCI, in turn, will assign both the security
interest and the GECC Sublease as collateral to the Lessor.
The base term of the GECC Sublease will commence on the date the Lease
Assets are acquired by the Lessor and end two years from such date.
At the end of the base term of the GECC Sublease or at the end of a renewal
term (as described below), you may exercise one of three options:
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(a) Renew the GECC Sublease as to all, but not less than all, of the
Lease Assets for an additional one year renewal term. The Sublease may
only be renewed for three one-year renewal terms.
(b) Purchase all, but not less than all, of the Lease Assets for the
outstanding balance due under the GECC Sublease.
(c) Return all, but not less than all, of the Lease Assets to BCI and
arrange for a sale, scrap or other disposition of the Lease Assets. You
will pay to BCI all scheduled rent due at the time you return the Lease
Assets, plus the product obtained by multiplying the GECC Sublease balance
by an applicable percentage specified in the GECC Sublease. Upon the sale,
scrap or other disposition of the Lease Assets, BCI will pay you the net
proceeds, if any, in excess of the residual risk amount of such Lease
Assets set forth in the GECC Sublease, and applicable taxes.
If no default or event of default exists, on any date rent is due, you may
purchase all, but not less than all, of the Lease Assets for the outstanding
balance due under the GECC Sublease.
Upon a default under the GECC Sublease, BCI may: (1) terminate the GECC
Sublease, (2) declare the GECC Sublease balance due and payable, (3) take
possession of the equipment or require you to return the equipment to BCI, or
(4) sell the equipment. If the GECC Sublease is terminated or the equipment is
sold to a third party, you will still be liable for any unpaid balances on the
GECC Sublease. You will be responsible to pay any costs, including attorneys'
fees and expenses, incurred by BCI in taking such actions. (Sections XI(b) and
(c) of the GECC Sublease) Among other things, nonpayment of rent, failure to
maintain insurance or perform other covenants in the GECC Sublease, or your
bankruptcy or insolvency constitute defaults under the GECC Sublease. (Section
XI(a) of the Sublease) A default under the Loan Agreement also constitutes a
default which allows BCI to exercise the remedies described above. (Section 8.1
of the Inducement Agreement)
The GECC Sublease is subject and subordinate to the GECC Master Lease.
Upon an event of default under the GECC Master Lease, the Lessor has the right
to terminate the GECC Master Lease and as a result may terminate your rights
under the GECC Sublease. After an event of default under the GECC Master Lease,
you will have the right, as long as your GECC Sublease is not in default, to
purchase the equipment, within 90 calendar days after notice of the event of
default, for a purchase price equal to the stipulated loss value of such
equipment plus all taxes and charges on such sale and all other reasonable and
documented expenses. (Section XVIII(f) of the GECC Sublease)
Demand and certain notices, including notice of sale, are expressly waived
by you under the GECC Sublease. (Section XI(d) of the Sublease) The parties to
the GECC Sublease and the Inducement Agreement agree to waive their right, if
any, to a jury trial. (Section XIX(a) of the
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Sublease, Section 10.10 of the Inducement Agreement) The non-prevailing party
in any action under the Inducement Agreement must pay to the prevailing party
the court costs and reasonable attorneys' fees and other expenses incurred,
directly or indirectly, by the prevailing party. (Section 10.11 of the
Inducement Agreement)
GENERAL.
-------
The terms of the financing described above in this Item 10 may vary
depending on the particular circumstances. BCI does not place financing with
anyone, and, therefore, it does not receive any payment for the placement of
financing.
Except for a qualified Developer's participation in the Financed Area
Developer Program, BCI is unable to estimate whether you will be able to obtain
financing for any part or all of your investment or the terms of any such
financing, which will depend on general credit conditions and your
creditworthiness. The terms on which financing is offered under the Financed
Area Developer Program are limited by BCI's credit arrangement with its lenders.
Under the terms of the Franchise Agreement, a pledge of the Franchise
Agreement or the lease in obtaining financing constitutes a transfer requiring
BCI's approval and BCI's policy is not to approve such pledges or leasehold
improvements or franchise rights or other liens, royalty deferrals or
subordination provisions sought by the SBA or bank lenders. Pledges of
equipment for equipment financing in the ordinary course of business are
generally outside the scope of this restriction.
BCI does not have any past or present practice or intention to sell, assign
or discount to any third party any note, contract or other instrument executed
by you, except that BCI's rights to security interests in you and your shares
may be pledged to any secured lender of BCI.
ITEM 11
-------
FRANCHISOR'S OBLIGATIONS
Except as listed below, BCI need not provide any assistance to you.
DEVELOPMENT AGREEMENT
- ---------------------
REVIEW OF DEVELOPMENT PLAN/GRANT OF FRANCHISES.
----------------------------------------------
BCI will review and may amend and approve a real estate development plan
for developing Boston Market Units in the Development Area that you prepare and
submit to BCI for consideration. In addition, if you are in full compliance
with all of the terms and conditions of the Development Agreement and you and
your Authorized Entities are in full compliance with
66
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all obligations under all Franchise Agreements executed under the Development
Agreement, BCI will grant to you (or your Authorized Entities) during the
Development Term and in accordance with the Development Agreement, the right to
develop and operate Boston Market Units in the Development Area. (Sections 3.A
and 5.A of Development Agreement).
TARGET SITES.
------------
If during the Sub-Area Term of a particular Sub-Area BCI locates a site
suitable for a Boston Market Unit within such Sub-Area (a "Target Site"), BCI
will notify you in writing of such Target Site if BCI intends that such Target
Site be developed and operated as a Boston Market Unit. If BCI has fully
negotiated a lease or purchase agreement for the Target Site, BCI will fully
cooperate with you in obtaining the landlord's consent to execute the lease or
the seller's consent to execute the purchase agreement or assignment of purchase
agreement. If BCI has not fully negotiated a lease or purchase agreement for
the Target Site, then you will have 30 days in which to negotiate and deliver to
BCI for review a lease or purchase agreement for the Target Site in form for
execution. Your right to develop a Boston Market Unit at the Target Site,
conditions to your exercise of the right and the consequences of not exercising
this right are further described in Item 12 of this offering circular and the
Development Agreement. (Section 3.E of Development Agreement).
CONVERSION SITES.
----------------
If, during the applicable Sub-Area Term for a particular Sub-Area, BCI
acquires the shares or assets (which may include, by way of illustration and not
by way of limitation, furniture, fixtures, equipment, leasehold improvements
and/or leasehold interests) of any business operating at one or more sites
located within such Sub-Area which meet BCI's specifications and standards as in
effect periodically for conversion to Boston Market Units (the "Conversion
Sites"), and BCI determines in its sole discretion to convert such Conversion
Sites to Boston Market Units, BCI agrees to offer to sell such Conversion Sites
to you or, at your option, to an Authorized Entity, for the price paid by BCI.
Additional information concerning your right to purchase Conversion Sites and
the consequences of not exercising this right are described elsewhere in this
offering circular and in the Development Agreement (Section 3.F of Development
Agreement).
SPECIAL DISTRIBUTION ARRANGEMENTS.
---------------------------------
BCI may, at any time and in its sole discretion, determine to offer you (or
an Authorized Entity that is a franchise owner of a Boston Market Unit) the
right to operate a Special Distribution Arrangement at a Special Distribution
Location designated by BCI. BCI will so notify you, or the Authorized Entity,
by delivery to you or the Authorized Entity a Special Distribution Agreement
authorizing you or the Authorized Entity to operate a Special
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Distribution Arrangement at the Special Distribution Location. (Section 4.A of
Development Agreement).
DELIVERY SERVICE.
----------------
If BCI, at any time and in its sole discretion, determines to offer
Delivery Service in a designated Delivery Area in which a Unit is located, BCI
will offer you (or an Authorized Entity that is the franchise owner of such
Unit) the right to offer Delivery Service by delivering to you or such
Authorized Entity a Delivery Rider to the applicable Franchise Agreement
authorizing the offer of Delivery Service within such designated Delivery Area.
Additional information concerning the consequences of not exercising this right
is contained in Item 12 of this Offering Circular. (Section 4.B of the
Development Agreement).
CATERING SERVICE.
----------------
If BCI, at any time and in its sole discretion, determines to offer
Catering Service in a designated Catering Area in which a Unit is located, BCI
will offer you (or an Authorized Entity that is the franchise owner of such
Unit) the right to offer Catering Service by delivering to you or such
Authorized Entity a Catering Rider to the applicable Franchise Agreement
authorizing the offer of Catering Service within such designated Catering Area.
Additional information concerning the consequences of not exercising this right
is contained in Item 12 of this Offering Circular. (Section 4.C of the
Development Agreement).
DEMOGRAPHIC SERVICES/SITE SELECTION.
-----------------------------------
Annually throughout the Development Term, BCI will sell to you demographic
detail reports on the demographics of each Sub-Area ("Demographic Detail
Report") in which you retain the right to develop Boston Market Units. At your
request, BCI may provide other demographic services at BCI's then-current
charges, which charges will vary with the type of service requested. At your
request, BCI will provide to you, at BCI's then-current charges, a report and
grid map containing certain demographic information concerning a proposed site
and surrounding area, which report and grid map may be prepared by BCI or by an
independent demographic statistics service at BCI's discretion. BCI will
provide you with its site selection criteria periodically established by BCI in
its sole discretion. BCI will approve or disapprove a site by delivery of
written notice to you. BCI will exert its reasonable best efforts to deliver
such notification to you within 30 days after receipt by BCI of a complete site
approval request package and location feasibility analysis on BCI's specified
forms (containing such demographic, commercial, and other information and
photographs as BCI may periodically require) for each site at which you propose
and intend in good faith to establish and operate a Boston Market Unit and which
you believe to conform to BCI's minimum site selection criteria. (Section 5.A
of the Development Agreement).
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FORM LEASE AND PURCHASE AND SALE AGREEMENTS.
-------------------------------------------
BCI will furnish you with a copy of its current standard forms of the Form
Unit Lease and Form Purchase and Sale Agreement and its standards, all of which
BCI may periodically modify in its sole discretion. After receiving a copy of a
proposed Site Agreement for an Approved Site, BCI will have the right, in its
sole discretion, to approve, approve with modification or disapprove the Site
Agreement. BCI will exert its best efforts to deliver notification to you
within 20 days after receipt by BCI of the proposed Site Agreement. (Section
5.B of Development Agreement).
OFFER OF FRANCHISES.
-------------------
If (1) you are in full compliance with all of the terms and conditions of
the Development Agreement, (2) you and your Authorized Entities are in full
compliance with all Franchise Agreements you and/or the Authorized Entities have
entered into, and (3) you (or an Authorized Entity) have obtained legal
possession of an Approved Site, BCI will offer to you or and Authorized Entity a
Franchise to operate a Boston Market Unit at such Approved Site by delivering to
you or your Authorized Entity a Franchise Agreement in form for execution by you
and your Principal Owners or your Authorized Entity and its Principal Owners.
(Section 5.C of Development Agreement).
CONFIDENTIAL INFORMATION.
------------------------
BCI will disclose such parts of the Confidential Information (defined in
Item 14 below) as BCI periodically deems necessary or advisable in its sole
discretion for the development of Boston Market Units to you in providing
training, and in guidance and assistance furnished to you under the Development
Agreement and you may learn or otherwise obtain from BCI additional Confidential
Information during the Agreement Term. (Section 7 of Development Agreement).
MARKS.
-----
BCI has sole discretion to take such action as it deems appropriate
regarding any apparent infringement of or challenge to your use of any Mark, or
claim by any person of any rights in any Mark, and the right to control
exclusively any settlement, litigation, arbitration or Patent and Trademark
Office or other proceeding arising out of any such alleged infringement,
challenge or claim or otherwise under any Mark. You must execute any and all
instruments and documents and 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 BCI's interest in any litigation or other proceeding or to
otherwise protect and maintain BCI's interests in the Marks. BCI will reimburse
you for your reasonable out-of-pocket expenses incurred and paid in complying
with these obligations. (Section 9.C of Development Agreement).
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BCI will indemnify you against, and reimburse you for, all damages for
which you are held liable in any proceeding arising out of your authorized use
of any Mark, under and in compliance with the Development Agreement, and for all
costs reasonably incurred by you in the defense of any such claim brought
against you or in any such proceeding in which you are named as a party, if you
have timely notified BCI of such claim or proceeding, have given BCI sole
control of the defense and settlement of any such claim, and have otherwise
complied with the Development Agreement. (Section 9.E of Development
Agreement).
COPYRIGHTED WORKS.
-----------------
BCI may authorize you to use certain copyrighted or copyrightable works
(the "Copyrighted Works") which are valuable property of BCI or its affiliates
provided you comply with the terms of the Development Agreement. BCI owns or is
the licensee of the owner of the Copyrighted Works and will continue to create,
acquire or obtain licenses for certain copyrights in various works of authorship
used in accordance with the operation of Boston Market Units, including all
categories of works eligible for protection under the United States copyright
laws, all of which will be deemed to be Copyrighted Works. (Section 10.A of
Development Agreement).
BCI will periodically prescribe standards, specifications and operating
procedures which relate to your right to use the Copyrighted Works, which right
is limited solely to uses directly connected with your development of Boston
Market Units during the Development Term under and in compliance with the
Development Agreement. (Section 10.B of Development Agreement).
BCI will have sole discretion to take such action as it deems appropriate
regarding 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, and the right to control exclusively any settlement, litigation,
arbitration or administration proceeding arising out of any such alleged
infringement, challenge, or claim or otherwise under the Copyrighted Works. You
must execute any and all instruments and documents and 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 BCI's interests in any litigation
or other proceeding or to otherwise protect and maintain BCI's interests in the
Copyrighted Works. BCI will reimburse you for your reasonable out-of-pocket
expenses incurred and paid in complying with the foregoing. (Section 10.C of
Development Agreement).
CONSIDERATION OF PERSONNEL.
--------------------------
BCI will review and determine whether your proposed Chief Operating
Officer, Development Director, Training Director and Marketing Director are
acceptable to BCI. See Item 15 below. (Sections 11.B-11.E of Development
Agreement).
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<PAGE>
FINANCIAL CAPACITY.
------------------
BCI will review the written plans for your financing which you must
periodically submit to BCI, which plans must be reasonably acceptable to BCI and
which must include details of the sources and terms of such financing and such
other information or documents required by BCI. (Section 11.G of Development
Agreement).
INSPECTIONS AND AUDITS.
----------------------
To determine whether you are complying with the Development Agreement, BCI
or its agents will have the right, at any reasonable time, to inspect, audit and
copy any books, records, reports, computer data bases and documents pertaining
to your obligations under the Development Agreement. (Section 11.I. of
Development Agreement)
DEVELOPMENT MANUAL.
------------------
BCI will loan to you for your sole use during the Agreement Term one (1)
copy of a confidential manual under the development and operation of Boston
Market Units, which are one or more volumes, handbooks, manuals, written
materials, video or audio cassette tapes, or computer diskettes, and other
materials and intangibles, as may be periodically modified, added, replaced or
supplemented by BCI in its sole discretion, whether by way of supplements,
replacement pages, Franchise Bulletin disclosure, or other official
pronouncements or means (collectively the "Development Manual"). BCI also will
loan to you for your, or an Authorized Entity's, use during the term of each
Franchise Agreement one (1) copy of the Manuals (defined below) for each Boston
Market Unit developed and opened by you under the Development Agreement (the
Manuals for the first Boston Market Unit to be developed under the Development
Agreement will be made available to you promptly after execution of the
Development Agreement). The Development Manual will contain specifications,
standards, policies and procedures periodically required by BCI for developers
of Boston Market Units and information relative to other of your obligations and
the operation of Boston Market Units. The Development Manual may be
periodically modified in BCI's sole discretion to reflect changes in the System
or specifications, standards, policies and procedures for Boston Market Units or
such other changes or additions as BCI deems necessary to advisable. You must
keep your copy of the Development Manual current by immediately inserting all
modified pages or materials furnished by BCI. If a dispute about the contents
of the Development Manual, the master copies maintained by BCI at its principal
office shall be controlling. The Development Manual is proprietary and
confidential. Accordingly, you may not, at any time, disclose, copy or
distribute any part of the Development Manual. (Section 11.J of Development
Agreement). A copy of the table of contents of BCI's Operations Manual as in
effect as of February 1, 1997, is attached to this offering circular as Exhibit
-------
O.
- -
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<PAGE>
COMPUTER SYSTEMS.
----------------
BCI will periodically identify those brands, types, makes, and/or models of
communications and computer systems or hardware which BCI specifies or requires
for the Computer System, Specified Software and the Licensed Program. (Section
11.L of Development Agreement).
TRANSFERS.
---------
BCI will review and consider for approval proposed transfers of: (i) the
Development Agreement; (ii) a Franchise Agreement executed under the Development
Agreement; (iii) a Franchise; (iv) a Boston Market Unit; (v) the lease for the
premises of a Boston Market Unit; (vi) some or all of the assets of a Boston
Market Unit (other than sales of inventory, equipment financing, or otherwise in
the ordinary course of business); or (vii) you or an Authorized Entity. Any
proposed transfer will be subject to the conditions for approval of transfer and
BCI's right of first refusal contained in the Development Agreement. (Sections
12.B-12.G of Development Agreement).
BCI has the right to periodically delegate the performance of any portion
or all of its obligations and duties under the Development Agreement to
designees, whether they are agents of BCI or independent contractors with which
BCI has contracted to provide such services. (Section 12.I of Development
Agreement).
FRANCHISE AGREEMENT
- -------------------
Before you open your Boston Market Unit, we will:
FINANCING PLAN. Before beginning development of the Boston Market Unit,
--------------
you must obtain BCI's consent to your financing plan for the Boston Market Unit.
You must submit a written plan for financing the Boston Market Unit's
development, which must include the sources and terms of such financing and
other information BCI may require. BCI will review such financing plan and may
approve or disapprove it in its sole discretion. (Section 4.I of the Franchise
Agreement)
SITE SELECTION AND LEASE APPROVAL. See Item 9 of this offering circular
---------------------------------
and Section 4.A of the Franchise Agreement.
UNIT SPECIFICATIONS. BCI will furnish you with mandatory and suggested
-------------------
plans and specifications for a Boston Market Unit as more fully described in
Item 9 of this offering circular (Section 4.B of the Franchise Agreement).
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<PAGE>
THE MANUALS. BCI will loan to you, for your sole use, one (1) copy of a
-----------
set of BCI's confidential manuals on the development and operation of Boston
Market Units, which are one or more volumes, handbooks, manuals, written
materials, video or audio cassette tapes, computer diskettes or any other
materials or intangibles, as may be periodically modified, added, replaced or
supplemented by BCI in its sole discretion, whether by way of supplements,
replacement pages, Franchise Bulletin disclosure, or other official
pronouncements or means (collectively the "Manuals"). The Manuals will contain
specifications, standards, policies and procedures periodically required by BCI
for Boston Market Units and information relative to your other obligations and
the operation of a Boston Market Unit. The Manuals may be periodically modified
at BCI's sole discretion to reflect changes in the System or specifications,
standards, policies and procedures for Boston Market Units, to specify brands,
types and/or models of equipment which must be used by you in the operation of
the Unit, and to specify changes in the decor, format, image, Products, services
and operations of a Boston Market Unit required by BCI or such other changes or
additions as BCI deems necessary or advisable. A copy of the table of contents
of the BCI Operations Manual, as in effect as of February 1, 1996, is attached
to this offering circular as Exhibit O. (Section 5.C of the Franchise
---------
Agreement).
COMMUNICATION AND INFORMATION SYSTEM. Both before the opening of the
------------------------------------
Boston Market Unit and during the operation of the Boston Market Unit, BCI has
the same obligations to you under the Systems Agreement as are described with
respect to Developer, above/and in Item 8. (Section 4.E of the Franchise
Agreement).
During your operation of the Unit, we will:
SYSTEM STANDARDS. As more fully described in Item 9 of this offering
----------------
circular, BCI will prescribe mandatory specifications, standards and procedures
for the operation of Boston Market Units. (Section 11.D of the Franchise
Agreement)
GUIDANCE AND ASSISTANCE. BCI may, in its sole discretion, furnish guidance
-----------------------
to you with respect to: (1) recipes, methods, specifications, standards and
operating procedures utilized by Boston Market Units and any modifications
thereof; and (2) purchasing approved equipment, fixtures, furnishings, signs,
Products, and materials and supplies; and (3) development and implementation of
local advertising and promotional programs; and (4) general operating and
management procedures of Boston Market Units; and (5) establishing and
conducting employee training programs at the Boston Market Unit; and (6) opening
the Boston Market Unit. Such guidance will, in the discretion of BCI, be
furnished in the form of BCI's Manuals (as defined above), bulletins, video or
audio cassette tapes, computer diskettes, written materials, reports and
recommendations, other materials and intangibles, refresher training programs
and/or telephonic consultations or consultations at the offices of BCI or at the
Boston Market Unit. (Section 5.B of the Franchise Agreement)
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<PAGE>
REIMBURSEMENT OF EXPENSES AND INDEMNIFICATION. Under the Franchise
---------------------------------------------
Agreement, BCI will indemnify you and reimburse you with respect to costs and
damages related to the Marks, and will reimburse you for certain expenses
related to protection of the Copyrighted Works, on substantially the same terms
and conditions as contained in the Development Agreement. See the discussion
above in Item 9 of this offering circular for a description of the comparable
terms contained in the Development Agreement. (Sections 6.C., 6.E. and 7.C. of
the Franchise Agreement)
MALL SITES. BCI may offer you the opportunity to develop Mall Sites within
----------
the Territory. (See Item 12 of this offering circular and Section 2.D. of the
Franchise Agreement)
CONVERSION SITES. BCI may offer you the right to purchase Conversion Sites
----------------
within the Territory. (See Item 12 of this offering circular and Section 2.E.
of the Franchise Agreement)
OPENING OF THE UNIT.
-------------------
BCI estimates there will be an interval of approximately thirty (30) to one
hundred eighty (180) days between the execution of the Franchise Agreement and
the opening of a Boston Market Unit, but the interval may vary based upon such
factors as weather, the location and condition of the site and the construction
schedule for the Boston Market Unit. You may not open the Boston Market Unit
for business until: (1) BCI notifies you in writing that all of your
development obligations have been fulfilled; (2) pre-opening training of
personnel has been completed to BCI's satisfaction; (3) all amounts then due to
BCI have been paid; (4) BCI has been furnished with copies of all insurance
policies required under the Franchise Agreement, or such other evidence of
insurance coverage and payment of premiums as BCI requests. You must comply
with these conditions and be prepared to open the Boston Market Unit for
business within one hundred and eighty (180) days after the date of the
Franchise Agreement. If you are a Developer and have already opened a Boston
Market Unit under the Development Agreement, you must ensure that the foregoing
conditions are met within one hundred twenty (120) days after the date of the
Franchise Agreement. You must open the Boston Market Unit for business and
commence conduct of business at the Boston Market Unit under the Franchise
Agreement within five (5) days after BCI gives notice to you stating that the
Boston Market Unit is ready for opening. (Section 4.F of the Franchise
Agreement)
INSPECTIONS AND AUDITS.
----------------------
See Item 6 of this offering circular, the discussion above in Item 9 of
this offering circular and Section 14 of the Franchise Agreement.
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<PAGE>
ADVERTISING PROGRAMS.
--------------------
BCI's advertising program consists of print, radio and television
advertising and merchandising activities. Such advertising is local, regional
and national in scope. Most of BCI's advertising is produced by its national
advertising agency, although a portion is produced by BCI's in-house marketing
personnel.
Before their use by you, samples of all advertising and promotional
materials not prepared or previously approved by BCI must be submitted to BCI
for approval, in the form and manner periodically required by BCI. If written
approval is not granted by BCI within fifteen (15) days from the date of receipt
by BCI of such materials, BCI will be deemed to have disapproved the submitted
materials. You may not use any advertising or promotional materials that BCI
has not approved, has disapproved or that do not include the copyright
registration notices and trademark registration notices designated by BCI. In
its sole discretion, BCI may disapprove on a prospective basis materials which
BCI had previously approved. BCI does not utilize an advertising council
composed of Franchise Owners.
LOCAL AD FUNDS. All franchisees of BCI in a particular Market Area (which
--------------
is usually a television market) must participate in a local advertising fund (a
"Local Ad Fund") for that Market Area. Local Ad Funds will operate in
substantially the same manner as the Marketing Fund (described below). You must
contribute to the appropriate Local Ad Fund four percent (4%) of your Boston
Market Unit's Royalty Base Revenue for each Accounting Period in which you
participate in the Local Ad Fund. BCI has the right to periodically require you
to increase your contributions to the Local Ad Fund. However, the required
contributions will not exceed 4.25% before 1998, 4.5% before 1999, 4.75% before
2000 and 5% during the remaining term of the Franchise Agreement. However, if
you are a Developer, under the Development Agreement, you must cause each Boston
Market Unit you own, and cause each Authorized Entity which owns one or more
Boston Market Units to cause each one of its Units, to contribute to the Local
Ad Fund an amount equal to the greater of: (1) the standard Local Ad Fund
contribution required under the applicable Franchise Agreement or (2) an amount
which, when aggregated with the Local Ad Fund contributions of the other Boston
Market Units in the Market Area will be sufficient to enable you, through the
Local Ad Fund, to commence Required Television Advertising within one year of
the opening of the first Boston Market Unit and to continue Required Television
Advertising thereafter throughout the full term of the Development Agreement.
"Required Television Advertising" means television advertising in the Dominant
Marketing Area ("DMA") (as periodically determined by the Nielsen Ratings
Company) in which the Development Area is located at a minimum level of 150
gross ratings points for a minimum of thirty-five (35) weeks per calendar year,
at least one-half ( 1/2) of which gross ratings points must be in prime
television viewing time. BCI may, in its sole discretion, periodically use a
market designation comparable to, but different from, the Dominant Marketing
Area for purposes of this definition.
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Local Ad Funds are administered by BCI and are not governed by written
documents, other than the terms of the Development Agreement and Franchise
Agreements. BCI prepares unaudited financial statements for each Local Ad Fund
for each Accounting Period and disseminates them to the Franchise Owners who
participate in that Local Ad Fund. Under the Franchise Agreement, BCI is obliged
to prepare annual summary financial statements for each Local Ad Fund and to
make them available to participants in that fund upon their written request. BCI
may require Local Ad Funds to be formed, changed, dissolved or merged.
MARKETING FUND. Franchise Owners of Boston Market Units and Boston Market
--------------
Units which are owned by BCI or its affiliate, to the extent that BCI has the
right to require its Franchise Owners and affiliates to do so, must contribute
to BCI's national marketing fund (the "Marketing Fund"). Those Boston Market
Units owned by BCI and its affiliates will contribute to the Marketing Fund on
the same basis as Franchise Owners do.
You must contribute to the Marketing Fund two percent (2%) of the Royalty
Base Revenue of your Boston Market Unit at the same time and in the same manner
as the Royalty Fees payable under the Franchise Agreement. All Franchise Owners
of Boston Market Units are required to contribute to the Marketing Fund at the
same rate.
BCI will direct all advertising, media placement, marketing and public
relations programs and activities financed by the Marketing Fund, with sole
discretion over the strategic direction, creative concepts, materials and
endorsements used therein, and the geographic, market, and media placement and
allocation thereof. The Marketing Fund may be used to pay various costs and
expenses, including preparing and producing video, audio and written advertising
materials; interest on borrowed funds; sponsorship of sporting, charitable or
similar events; reasonable salaries and expenses of employees of BCI or its
affiliates working for or for the Marketing Fund or on advertising, marketing,
public relations materials, programs or activities or promotions for the benefit
of the Marketing Fund and administrative costs and overhead of BCI or its
affiliates incurred in activities reasonably related to the administration and
activities of the Marketing Fund; administering advertising programs, including,
without limitation, purchasing direct mail and other media advertising and
employing advertising agencies to assist therewith; and supporting public
relations, market research and other advertising, promotional and marketing
activities, including testing and test marketing programs, fulfillment charges,
and development, implementation, and testing of trade dress and design
prototypes. You must par ticipate in all advertising, marketing, promotions,
research and public relations programs instituted by the Marketing Fund.
The Marketing Fund will furnish you with reasonable quantities of
marketing, advertising and promotional formats and sample materials at cost.
The Marketing Fund will be accounted for separately, but will not be
required to be segregated, from the other funds of BCI and will not be used to
defray any of BCI's general operating expenses, except for such reasonable
salaries, administrative costs and overhead as
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BCI may incur in activities reasonably related to the administration and
activities of the Marketing Fund and creation or conduct of its marketing
programs including conducting market research, preparing advertising and
marketing materials and collecting and accounting for contributions to the
Marketing Fund. BCI may spend in a fiscal year an amount greater or less than
the aggregate contribution of all Boston Market Units to the Marketing Fund in
that year. The Marketing Fund may borrow from BCI or other lenders at standard
commercial interest rates to cover deficits of the Marketing Fund or invest any
surplus for its future use. All interest earned on monies contributed to the
Marketing Fund will be used to pay costs of the Marketing Fund before other
assets of the Marketing Fund are expended. Although the Marketing Fund
contributions BCI collects are covered by BCI's annual audit, separate audited
financial statements are not prepared for the Marketing Fund. BCI will prepare a
summary statement of monies collected and costs incurred by the Marketing Fund
each year for BCI's immediately preceding fiscal year of BCI and will make it
available to you upon your written request. The Marketing Fund may be
incorporated or operated through an entity separate from BCI at such time as BCI
deems appropriate, and such successor entity will have all rights and duties of
BCI as described in this offering circular.
Any Promotional Allowances (defined in Item 8.B. of this offering circular)
collected by BCI for remission to the Marketing Fund (as more fully described
below in Item 8.B. of this offering circular) will not be credited toward your
required contribution to the Marketing Fund. Under no circumstances will BCI or
its affiliates be required to contribute to the Marketing Fund any profits made
or collected by BCI or its affiliates from sales to or purchases by you of any
goods or services.
BCI may, in its sole discretion, suspend contributions to and operations of
the Marketing Fund for such periods that it determines to be appropriate and
terminate the Marketing Fund upon written notice to you. All unspent monies on
the date of termination will be distributed to BCI and Franchise Owners in
proportion to their respective contributions to the Marketing Fund during the
preceding 12 month period. BCI may reinstate the Marketing Fund upon the same
terms and conditions described above upon 30 days' prior written notice to
Franchise.
MARKETING FUND AND LOCAL AD FUND PURPOSES. The Marketing Fund and the
-----------------------------------------
Local Ad Fund are intended to maximize recognition of the Marks and patronage of
Boston Market Units generally, with respect to the Marketing Fund, and in the
Market Area, with respect to the Local Ad Fund. Although BCI will endeavor to
utilize the Marketing Fund and the Local Ad Fund to develop advertising and
marketing materials and programs and to place advertising in order to benefit
all Boston Market Units whose franchise owners contribute to those funds, BCI
undertakes no obligation to ensure that any Boston Market Unit will benefit
directly or in-directly or in proportion to its contribution to the Marketing
Fund or the Local Ad Fund from the development of advertising and marketing
materials or the placement of advertising by such funds. Your failure to derive
any benefit in this manner will not serve as a basis for a reduction or
elimination of your obligation to contribute to the funds. Except as expressly
described
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above, BCI assumes no direct or indirect liability or obligation to you with
respect to the maintenance, direction, or administration of the Marketing Fund
or the Local Ad Fund.
Marketing Fund monies were spent in the following manner in 1996:
Ad Production 13.5%
Media Placement & Promotion 70.0%
Administration 5.8%
Other:
Market Research & Product Testing 4.4%
Public Relations 1.1%
Customer Service 2.0%
Interest (Income)/Expense 3.2%
TOTAL 100.00%
As noted above, BCI receives payment for providing services to the Marketing
Fund in that the salaries of certain BCI employees who work in the marketing
area are paid out of the Marketing Fund. No monies from the Marketing Fund are
used for advertising that is principally a solicitation for the sale of
franchises. If all monies in the Marketing Fund are not spent in the fiscal year
in which they accrue, those monies will be retained in the Marketing Fund and
carried over to be used for expenditures in the following fiscal year. See Items
6 and 9 of this offering circular for a comprehensive discussion of BCI's
advertising programs.
COMPUTER SYSTEMS.
----------------
You must purchase computer equipment that falls into two general
categories -- "front of the house" and "back office".
For the front of the house, you must purchase point of sale devices (the
number of which may vary depending on the sales volume of the Unit, the presence
of a drive-through, etc.). Each of these point of sale devices is itself a
computer, which incorporates a touch-screen entry panel, a central processing
unit and software designed to provide cash register-like functionality.
Peripheral equipment is also associated with the point of sale devices,
including cash drawers, receipt printers and kitchen display units (for drive-
through and/or service line locations).
In the back office, a computer is provided to facilitate the performance of
Unit management functions, including activities like production scheduling,
inventory management and cash reconciliation. Included with the back office
computer system is a printer for the generation of paper reports, a tape drive
that is used to make backup copies of computer data and a modem that is used to
transfer data and programs between the Unit and other locations (for example,
BCI's office).
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Miscellaneous computer-related equipment that must be purchased by you
includes cables and equipment to connect all of the point of sale devices to the
back office computer system, various power cables, an uninterruptible power
supply, etc.
The following identifies each hardware component and software program by
brand, type and principal functions.
<TABLE>
<CAPTION>
COMPONENT BRAND TYPE PRINCIPAL FUNCTIONS
========================================================================================
<S> <C> <C> <C>
Point of sale device NCR 7450 Point of sale/cash register
_______________________________________________________________________________________
Back office computer NCR 3349 Computer-assisted store
management
________________________________________________________________________________________
Printer Hewlett-Packard LaserJet Printing of reports
________________________________________________________________________________________
Modem USRobotics 14400 Data communications
Sportster
________________________________________________________________________________________
Point of sale software Compris V2.10 Cash register-like
functionality for point of
sale devices
________________________________________________________________________________________
Back office software IntelliStore(TM) V1.0 Software to facilitate
(Boston store
Chicken) management activities
=========================================================================================
</TABLE>
No organization has the contractual right or obligation to provide
maintenance for any of the hardware components. However, the approximate annual
cost for an optional maintenance contract on all of the hardware components is
$2,315.00.
BCI is responsible for providing ongoing maintenance, upgrades and updates
for the Licensed Program. In addition to the initial one-time software license
fee of $15,000 per Unit and your reimbursement to us of the per Unit fees we pay
to the software suppliers, the ongoing annual cost for this support service is
$3,876. BCI is not responsible for providing maintenance, upgrades or updates
for software that is not part of the Licensed Program.
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NCR is the only supplier of the approved hardware components. The entire
collection of hardware is sold as a complete package by NCR. The hardware
components have been in continuous use since approximately March, 1994. NCR's
address is:
NCR / AT&T GIS
2000 S. Colorado Blvd.
Denver, CO 80222
(303) 758-3334
The Compris software is the only approved software for the point of sale
devices. This software is licensed through BCI, from:
Compris Technologies Inc.,
1000 Cobb Place Blvd., Suite 300
Kennesaw, GA 30144
(770) 795-3300
The other software components are the proprietary property of Boston
Chicken.
Compatible equivalent hardware components exist only for the back office
computer system (virtually any IBM-compatible 80486-based computer system may be
compatible). Except for these hardware components, no components, other than
those components described in the chart above in this Item 11, have been
approved for use as part of the back office computer system.
You may be required to upgrade or update any of the hardware components or
software programs described above. There are no contractual limitations on the
frequency or costs associated with this obligation.
The point of sale hardware and software will be used to track individual
sales transactions that take place at the Unit. This equipment is also used for
the tracking of employees' hours of work (i.e., employees punch-in and punch-out
using the point of sale equipment). Detailed records regarding every in-Unit
sales transaction and every employee punch-in and punch-out are maintained.
The back office computer system is used to generate and/or maintain
production schedules, vendor orders, inventory lists, food cost analyses,
employee records and other collections of data related to the day-to-day
operation of the store. All of this data is stored on the back office computer
system. BCI has independent access to all of this information and data. There
are no contractual limitations on BCI's right to access this information and
data.
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TRAINING PROGRAMS.
-----------------
If you are a Developer, BCI will periodically make available, at times and
locations designated by BCI, a management training program for certain of your
management personnel. The management training program will be made available at
no charge to your initial Chief Operating Officer, Development Director,
Training Director and Marketing Director and, at your request and at BCI's then-
current standard charges, including travel and lodging expenses of BCI personnel
for training not conducted at BCI's principal offices, additional personnel and
any replacement or substitute Chief Operating Officer, Development Director,
Training Director and/or Marketing Director, subject to space availability in
BCI's regularly scheduled management training programs.
BCI or its designee will provide, without charge, an initial management
training program for the operation of a Boston Market Unit for the Unit Manager
and the Additional Manager of the first three Boston Market Units developed
under the Development Agreement at such time (subject to space availability in
BCI's or its designee's regularly scheduled classes) and for such duration as
BCI may designate, and at BCI's designated training facility and/or at a BCI-
owned or franchised Boston Market Unit. Thereafter, BCI, at its option and in
its sole discretion, may: (1) require your Training Director to provide such
initial management training program (including a facility maintained by you if
BCI so requires) to the Unit Manager and Additional Manager of each Boston
Market Unit at a training facility (including a facility maintained by you if
BCI so requires) certified and accredited by BCI in accordance with BCI's
requirements, as long as the Training Director currently is certified to provide
such training; or (2) provide, or designate a third party to provide, such
initial management training program to the Unit Manager and Additional Manager
of each Boston Market Unit at BCI's then-current standard charges, at such time
(subject to space availability in BCI's regularly scheduled classes and/or
availability of BCI's training personnel) and for such duration as BCI may
designate, and at BCI's designated training facility and/or at BCI-owned or
franchised Boston Market Units. You will be responsible for travel and lodging
expenses of BCI personnel if such training is not conducted at BCI's principal
offices. If you provide such training, BCI or its approved supplier may provide
you with appropriate training materials or refresher or updated training
materials at the then-current standard charges therefor. (Section 11.F of
Development Agreement.)
Before the commencement of the operation of the Boston Market Unit, the
Unit Manager and the Additional Manager, appointed by you in accordance with the
Franchise Agreement must attend and complete to BCI's satisfaction a BCI
accredited and certified initial management training program in the operation of
a Boston Market Unit. This training program may include classroom training,
instruction at designated facilities and hands-on training in an operating
Boston Market Unit. If the Boston Market Unit is not one of the first three
Boston Market Units to be developed under the Development Agreement, BCI may, in
its sole discretion, require on 30 days' prior written notice to you that your
Training Director provide such training program at your training facilities in
accordance with BCI's requirements if your Training Director is currently
certified to provide such training program under the terms of the Development
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Agreement. If such training program is provided by BCI or its designee, it will
be provided at such time (subject to space availability in BCI's or its
designee's regularly scheduled classes) as BCI may designate at a training
facility and/or at a BCI-owned or franchised Boston Market Unit in the Denver,
Colorado, area or such other location which BCI designates and will last for
approximately 1 to 10 weeks. At your request, BCI or its designee may provide
the training program to additional personnel at BCI's then-current standard
charges, including, without limitation, applicable travel and lodging expenses,
subject to space availability in BCI's or its designee's regularly scheduled
training classes and/or availability of BCI's or its designee's training
personnel. In addition, whether you, or BCI's designee is providing this
training, BCI may, in its sole discretion as it deems necessary, require the
Unit Manager and/or the Additional Manager to work full-time without
compensation by BCI or its designee and at your expense for up to 10 weeks at a
Boston Market Unit selected by BCI.
BCI or its designee may periodically offer additional or refresher training
programs to any Unit Manager or Additional Manager appointed at a later date and
the Unit's assistant managers at per diem charges periodically established by
BCI and at such times as BCI may designate to you. BCI may, in its sole
discretion as it deems necessary, require the Unit Manager, Additional Manager
or assistant managers of the Boston Market Unit or you to attend or to
participate in, at BCI's per diem charges and at your expense, including,
without limitation, travel and lodging expenses of training personnel for
training other than at the trainers' principal offices, additional or refresher
training programs at locations designated by BCI during the term of the
Franchise Agreement. If a certified Unit Manager and/or Additional Manager
ceases to hold such position at the Unit, you will have 30 days in which to
appoint a substitute or replacement Unit Manager and/or Additional Manager, who
must attend and complete to BCI's satisfaction the initial management training
program as specified above promptly after appointment. If BCI in its sole
discretion determines that the Unit Manager or Additional Manager or any Unit
Manager or Additional Manager appointed at a later date has failed to
satisfactorily complete the initial management training program or any
additional or refresher training program, you must immediately hire a substitute
Unit Manager or Additional Manager and promptly arrange for such person to
complete the initial management training program to BCI's satisfaction. (Section
5.A. of the Franchise Agreement)
The training program and other training will be conducted by training
personnel under the direction of Ms. Diane Kessel whose experience is described
in Section 2 of this offering circular. Certain Developers are authorized to
provide training. A Developer's personnel providing this training will be BCI-
certified trainers. The Manuals and other written materials will be used along
with the training program. (Section 5.A. of the Franchise Agreement.)
Training courses for Unit Managers and Additional Managers are began every
two to three weeks. Training courses for Developer management personnel are held
on an as-needed basis.
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DEVELOPER LEVEL TRAINING
<TABLE>
<CAPTION>
===================================================================================================================================
HRS. OF
HRS. OF ON THE
CLASSROOM JOB
SUBJECT TIME BEGUN INSTRUCTIONAL MATERIAL TRAINING TRAINING INSTRUCTOR
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Orientation 8 a.m. - 5 p.m. Wings Guides (Management 8 hrs. Training Manager and/or
(8 hrs.) Development Training Director of Training
Manual)
___________________________________________________________________________________________________________________________________
Recruiting and Selecting 8 a.m. - 12 p.m. BC Selection System 4 hrs. Training Manager and/or
Employees (4 hrs.) Director of training
___________________________________________________________________________________________________________________________________
Trainer Certification 1 p.m. - 5 p.m. Employee Skills Training 4 hrs. Training Manager and/or
(4 hrs.) Program and Wings Director of Training
___________________________________________________________________________________________________________________________________
Store Administration 1 p.m. - 5 p.m. Systems Reference Guide 4 hrs. General Manager and/or
(4 hrs.) and Managing Partner
Operations Manual
___________________________________________________________________________________________________________________________________
Chicken Handling 8 a.m. - 6 p.m. Wings Guides and 10 hrs. Certified Hourly Trainer
(10 hrs.) Operations
Manual
___________________________________________________________________________________________________________________________________
Production 8 a.m. - 6 p.m. Wings Guides and 20 hrs. Certified Hourly Trainer
(10 hrs.) Operations
Manual
___________________________________________________________________________________________________________________________________
Back-Up 8 a.m. - 6 p.m. Wings Guides and 20 hrs. Certified Hourly Trainer
(10 hrs.) Operations
2 p.m. - 12 a.m. Manual
(10 hrs.)
___________________________________________________________________________________________________________________________________
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
HRS. OF
HRS. OF ON THE
CLASSROOM JOB
SUBJECT TIME BEGUN INSTRUCTIONAL MATERIAL TRAINING TRAINING INSTRUCTOR
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Cooking and Cutting 8 a.m. - 6 p.m. Wings Guides and 20 hrs. Certified Hourly Trainer
(10 hrs.) Operations
2 p.m. - 12 a.m. Manual
(10 hrs.)
___________________________________________________________________________________________________________________________________
Retail 10 a.m. - 8 p.m. Wings Guides and 10 hrs. Certified hourly Trainer
(10 hrs.) Operations
Manual
___________________________________________________________________________________________________________________________________
Shift Management- 7:30 a.m. - Wings Guides and 30 hrs. Store Manager or
Opening 5:30 p.m. (10 hrs.) Operations General Manager
Manual
____________________________________________________________________________________________________________________________________
Management-Closing 2 p.m. - 12 a.m. Wings Guides and 30 hrs. Store Manager or
(10 hrs.) Operations General Manager
Manual
==================================================================================================================================
</TABLE>
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<PAGE>
UNIT LEVEL TRAINING
<TABLE>
<CAPTION>
===================================================================================================================================
HOURS OF HOURS OF
CLASSROOM OTJ
SUBJECT TIME BEGUN INSTRUCTIONAL MATERIAL TRAINING TRAINING
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Classroom Orientation & In- Day 1 Wings Guides 8 0
Store Orientation
___________________________________________________________________________________________________________________________________
Retail Days 2-4 Employee Skills Training Program and Wings Guides 0 24
___________________________________________________________________________________________________________________________________
Prep Days 5-7 Employee Skills Training Program and Wings Guides 0 24
___________________________________________________________________________________________________________________________________
Achieving Service Day 8 Wings Guides 8 0
Excellence & Managing
Valuable People
___________________________________________________________________________________________________________________________________
Carver Days 10-12, 14 Employee Skills Training Program and Wings Guides 0 32
___________________________________________________________________________________________________________________________________
Handler Day 9 Employee Skills Training Program and Wings Guides 0 8
___________________________________________________________________________________________________________________________________
Market Specific Class Day 13 Wings Guides 8 0
(Production Cooking forms)
and Sexual Harassment
Training
___________________________________________________________________________________________________________________________________
Backup Days 15-17, 19 Employee Skills Training Program and Wings Guides 0 32
___________________________________________________________________________________________________________________________________
Recruiting & Selection; and Day 18 BC Selection System and Wings Guides 8 0
Trainer Certification
___________________________________________________________________________________________________________________________________
Individual Development Day Day 20 Wings Guides 8 0
___________________________________________________________________________________________________________________________________
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
HOURS OF HOURS OF
CLASSROOM OTJ
SUBJECT TIME BEGUN INSTRUCTIONAL MATERIAL TRAINING TRAINING
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Open Days 21-22, Wings/Operations Manual 0 24
24-27
___________________________________________________________________________________________________________________________________
Midshift Days 28-29 Wings Guides/Operations Manual 0 16
___________________________________________________________________________________________________________________________________
Close Day 30-35 Wings Guides/Operations Manual 0 48
Bridge Week Days 36-40 Wings Guides 0 40
====================================================================================================================================
</TABLE>
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<PAGE>
ITEM 12
-------
TERRITORY
DEVELOPMENT AGREEMENT
- ---------------------
TERRITORIAL RIGHTS.
------------------
The Development Agreement grants you (or Authorized Entities) during the
Development Term, the right to develop and operate Boston Market Units in the
Development Area, which consists of one or more Sub-Areas. Except as otherwise
expressly provided in the Development Agreement, and if you are in full
compliance with the Development Agreement and you and your Authorized Entities
are in full compliance with all Franchise Agreements, BCI and its affiliates
will not during the Sub-Area Term for such Sub-Area operate or grant franchises
for the operation of Boston Market Units within such Sub-Area. Your rights under
the Development Agreement are limited to the applicable number of Units and the
schedule and timing of the opening of Units in the respective Sub-Areas during
the respective Sub-Area Terms and you are not granted any rights to develop or
operate, and you may not develop or operate, Boston Market Units outside the
respective Sub-Areas, except under rights granted to you under other agreements
entered into with BCI, and you will also not offer Catering Service or Delivery
Service or operate Special Distribution Arrangements, within the Development
Area, except as provided in the Development Agreement.
The continuation of your right to develop Units within each of the Sub-
Areas is dependent upon your satisfaction of the Development Obligations set
forth in the Development Agreement for such Sub-Area and of all of your other
obligations and the obligations of your Owners under the Development Agreement.
Upon termination or expiration of the Agreement Term, the Development Term or
the Sub-Area Term for a particular Sub-Area, and as expressly provided in the
Development Agreement during the Agreement Term, BCI and its affiliates will
have the right to develop and operate, and to grant to others development rights
and franchises to develop and operate, Boston Market Units within such Sub-Area,
subject only to the territorial rights, if any, under the Franchise Agreements
entered into by you (or an Authorized Entity) for Units in the Sub-Area. The
Development Area and the Sub-Areas may not be altered except by the mutual
written agreement of you and BCI or by termination of some or all of your rights
as a result of your breach of the Development Agreement.
You must prepare a Market Real Estate Development Plan for development of
Boston Market Units in the Development Area and must open and have in operation
in each Sub-Area the number of Boston Market Units set forth in the Development
Schedule attached as an exhibit to the Development Agreement by the opening
dates specified in the Development Schedule. You may develop in the Sub-Area
only the number of Boston Market Units set forth on such exhibit. A Unit which
is closed for more than 5 days (not counting BCI-approved holidays) during any
period of 12 months will not be counted as open and in operation for purposes of
the
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Development Quota as of the next Unit opening date after such closing for
purposes of determining your compliance with the Development Schedule for the
Sub-Area in which such Unit is located.
BCI'S RESERVATION OF RIGHTS.
---------------------------
Except as expressly limited in the Development Agreement, BCI (for itself,
its affiliates and its designees) retains all rights with respect to Boston
Market Units, the Marks, the Copyrighted Works (defined in Item 14 below), and
the sale of Products and any other products and services, anywhere in the world,
including, without limitation: (1) the right to operate or grant others the
right to operate food service businesses, including, without limitation, Boston
Market Units and/or Rotisserie Units (defined below), at such locations within
and/or outside the Development Area and each Sub-Area and on such terms and
conditions as BCI, in its sole discretion, deems appropriate; and (2) the right,
and the right to grant others the right, to develop, manufacture, market,
distribute and/or sell Products and/or any other product or service within
and/or outside the Development Area and each Sub-Area through any channel of
distribution, whether wholesale, retail or otherwise, including through Special
Distribution Arrangements, Delivery Service and Catering Service under or in
association with the Marks or any other trademarks and/or to own or operate any
other business under the Marks or any other trademarks; and (3) subject to your
options to develop Target Sites and purchase Conversion Sites under the
Development Agreement, the right to acquire and operate any business, including,
without limitation, a business operating one or more food service businesses
located or operating within and/or outside of the Development Area and any Sub-
Area. A "Rotisserie Unit" is a food service business, including a Boston Market
Unit, which derives a significant portion of its revenue from the sale of
rotisserie roasted chicken and/or potpies.
YOUR OPTION TO DEVELOP TARGET SITES.
-----------------------------------
If during the Sub-Area Term of a particular Sub-Area BCI locates a site
suitable for a Boston Market Unit within such Sub-Area (a "Target Site"), BCI
will notify you in writing of such Target Site if BCI intends that such Target
Site be developed and operated as a Boston Market Unit. Within 10 days after
your receipt of BCI's notice regarding such Target Site (including any relevant
site-related materials in BCI's possession), you must notify BCI if you desire
to develop and operate a Boston Market Unit at such Target Site. If you fail to
so notify BCI within such time period, then BCI or its designee may develop and
operate a Boston Market Unit at such Target Site.
If you timely notify BCI in writing that you desire to develop and operate
a Boston Market Unit at such Target Site and BCI has fully negotiated a lease or
purchase agreement for such Target Site, then you (or an Authorized Entity) must
(1) obtain the consent of the landlord to execute and execute such lease, if
applicable, or (2) execute a purchase agreement or an assignment of purchase
agreement, if applicable, and (3) execute BCI's then current form of standard
franchise agreement (containing BCI's then current fee and expenditure
requirements)
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<PAGE>
and such ancillary documents (including guarantees) as are then customarily used
by BCI in the grant of franchises for Boston Market Units (collectively,
"Franchise Documents") as modified for use along with a Target Site, as
necessary, and (4) pay BCI the Site Location and Negotiation Fee, plus BCI's
reasonable out-of-pocket expenses incurred in securing the Target Site, within
10 business days after BCI's delivery to you of the lease or purchase agreement,
as the case may be, and the Franchise Documents. BCI will fully cooperate with
you in obtaining the landlord's consent to execute such lease or the seller's
consent to execute such purchase agreement or assignment of purchase agreement.
If you timely notify BCI in writing that you desire to develop and operate
a Boston Market Unit at such Target Site and BCI has not fully negotiated a
lease or purchase agreement for such Target Site, then you will have 30 days in
which to negotiate and deliver to BCI a lease or purchase agreement for such
Target Site in form for execution. If BCI disapproves the lease or purchase
agreement for failure to meet BCI's requirements, you will have ten (10) days
within which to negotiate and deliver to BCI a revised lease or purchase
agreement for such Target Site in form for execution. If the revised lease or
purchase agreement fails to meet BCI's requirements, or if you fail to negotiate
and deliver to BCI a lease or purchase agreement within the aforementioned 30
day period, then BCI or its designee may develop and operate a Boston Market
Unit at such Target Site. If BCI approves the lease or the purchase agreement
for such Target Site, then you (or an Authorized Entity) will (1) execute such
lease or purchase agreement, as applicable, (2) execute the Franchise Documents,
and (3) pay the Site Location Fee, plus BCI's reasonable out-of-pocket expenses
incurred in securing the Target Site, all within 10 business days after BCI's
delivery of the Franchise Documents to you.
If you (or an Authorized Entity) fail to timely execute the lease or
purchase agreement and Franchise Documents for a Target Site and pay the Target
Site Fee, then BCI or its designee may develop and operate a Boston Market Unit
at such Target Site.
Any Target Site for which you (or an Authorized Entity) execute Franchise
Documents and develop and open a Boston Market Unit will count toward the Sub-
Area Quota for the Sub-Area in which such Target Site is located, under the
condition that if such Target Site is a Mall Site, such Target Site will not
count toward such Sub-Area Quota. BCI is not required to give notice to you or
offer to you a franchise to develop a Boston Market Unit with regard to any
suitable Target Site or Conversion Site (defined below) in a Sub-Area that BCI
desires to develop and operate as a Boston Market Unit after the total number of
sites for which you or an Authorized Entity have executed a Franchise Agreement
and accepted as Target Sites or Conversion Sites equals the cumulative number of
Units required to be open and operating on or before the last opening date for
the last Unit required to be opened in such Sub-Area. As an alternative to
terminating the Development Agreement, BCI has the right to terminate your
option to develop Target Sites.
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YOUR OPTION TO PURCHASE CONVERSION SITES.
----------------------------------------
If during the applicable Sub-Area Term for a particular Sub-Area BCI
acquires the shares or assets (which may include, by way of illustration and not
by way of limitation, furniture, fixtures, equipment, leasehold improvements
and/or leasehold interests) of any business operating at one or more sites
located within such Sub-Area which meet BCI's specifications and standards as in
effect periodically for conversion to Boston Market Units (the "Conversion
Sites"), and BCI determines in its sole discretion to convert such Conversion
Sites to Boston Market Units, BCI will offer to sell such Conversion Sites to
you or, at your option, to an Authorized Entity, for the price paid therefor by
BCI, if: (1) such sale will not conflict with any existing legal obligation of
BCI or the business being acquired; and (2) such sale will not preclude the
completion of the acquisition on the terms agreed to by BCI; and (3) such sale
will not interfere with any other legal agreement, arrangement or combination;
and (4) you agree to execute, or cause an Authorized Entity to execute,
concurrently with your purchase, the Franchise Documents, as modified for use
along with a Conversion Site, as necessary, for each and every such Conversion
Site and convert each such Conversion Site to a Boston Market Unit as soon as
practicable thereafter in accordance with BCI's standards and specifications.
You will have 30 days after receipt of BCI's offer in which to accept or reject
the offer by written notice to BCI. Any Conversion Site for which Developer (or
an Authorized Entity) executes the Franchise Documents and develops and opens a
Boston Market Unit will count toward the Sub-Area Quota for the Sub-Area in
which such Conversion Site is located. If you reject or fail to timely accept
BCI's offer to sell such Conversion Sites or BCI is unable to extend the offer
for any of the reasons noted above, and if you and your Authorized Entities are
in full compliance with the Development Agreement and all Franchise Agreements
to which you or your Authorized Entities are parties, BCI will not utilize the
Marks at such Conversion Sites (whether owned or franchised by BCI) for one year
following BCI's acquisition thereof. BCI may, however, operate, alter, modify,
refurbish, remodel, promote and market any such Conversion Sites during such one
year period. As an alternative to terminating the Development Agreement, BCI has
the right to terminate your option to develop Conversion Sites.
DEFINITIONS. As described below, BCI may, in its sole discretion, (a)
-----------
offer the opportunity to a Boston Market Unit to offer Delivery Service and/or
Catering Service and require a Boston Market Unit to offer Delivery Service
and/or (b) approve a franchise owner to offer Special Distribution Arrangements.
(1) DELIVERY SERVICE. "Delivery Service" is the delivery of Products
----------------
prepared at a Boston Market Unit or a separate delivery facility approved
by BCI (such a facility is referred to in this document as a "Delivery
Facility") to customers in a Delivery Area (defined below) in accordance
with BCI's standards and specifications for the provision of such service
and BCI's prototype plans and layout for a delivery staging area within a
Boston Market Unit or in a separate facility, if any, approved by BCI,
where (1) the Products are intended to serve fewer than 15 persons, and (2)
such service involves the
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provision of no services other than the delivery of Products to a customer
at a particular location within the Delivery Area. A "Delivery Area" is the
geographic area in which BCI, in its sole discretion may authorize you to
provide Delivery Service under a Delivery Rider (defined below). Your
Delivery Area, if any, may be the same as, smaller than, larger than or
different from the prescribed territory of your Boston Market Unit (the
"Territory"). (The Territory of a Boston Market Unit is more fully
described in Item 12 of this offering circular). A "Delivery Rider" is the
form of rider to a Franchise Agreement used by BCI to authorize or require,
in its sole discretion, you to offer Delivery Service within a Delivery
Area. A copy of BCI's current form of Delivery Rider is attached to this
offering circular as Exhibit C. BCI may, at any time and in its sole
discretion, require that you provide Delivery Service from one or more
Units. If you fail to provide Delivery Service, you will forfeit to BCI or
its designees the right to provide such Delivery Service. The terms and
conditions for Delivery Service are more fully described below.
(2) CATERING SERVICE. "Catering Service" is the delivery of Products
----------------
prepared at a Boston Market Unit or a separate facility approved by BCI (an
approved facility is referred to as a "Catering Facility") to customers in
the Catering Area (defined below) under the BCI's standards and
specifications for the provision of that service and BCI's prototype plans
and layout for a catering staging facility, where (1) the Products are
intended to serve 15 or more persons, or (2) in addition to the delivery of
Products, ancillary services are provided to a customer at a location
within the Catering Area, including, by way of example, the setting up for
serving or distribution of Products. The "Catering Area" is the geographic
area in which BCI, in its sole discretion, may authorize you to provide
Catering Service under a Catering Rider (defined below). Your Catering
Area, if any, may be the same as, smaller than, larger than or different
from the Territory of a Boston Market Unit. A "Catering Rider" is the form
of rider to a Franchise Agreement used by BCI to authorize, in its sole
discretion, you to offer Catering Service within a Catering Area. A copy of
BCI's current form of Catering Rider is attached to this offering circular
as Exhibit D. If you fail to provide Catering Service, you will forfeit to
BCI or its designees the right to provide such Catering Service. The terms
and conditions for Catering Service are more fully described below.
(3) SPECIAL DISTRIBUTION ARRANGEMENTS. A "Special Distribution
---------------------------------
Arrangement" is the sale of Products at or from a Special Distribution
Location (defined below), whether or not by or through on-premises food
service facilities or concessions, in accordance with BCI's standards and
specifications for such sales. A "Special Distribution Location" is a
facility or location, such as a school, hospital, office, work site,
military facility, grocery store, convenience store, supermarket,
entertainment or sporting facility or event, bus or train station, park,
toll road or limited access highway facility, shopping mall or other
similar facility, at or from which BCI, in its sole discretion, authorizes
a Special Distribution Arrangement under a Special Distribution Agreement
(defined below). A Special Distribution Location may be located within or
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outside the Territory. A "Special Distribution Agreement" is a separate
agreement in which BCI authorizes you to operate a Special Distribution
Arrangement at a Special Distribution Location designated by BCI. BCI will
propose the terms of a Special Distribution Agreement at such time, if any,
as it proposes a Special Distribution Arrangement to you. Special
Distribution Arrangements are more fully described below. BCI is not
generally obligated to offer Special Distribution Arrangements to you and
may operate or grant others the right to operate Special Distribution
Arrangements in the Territory of a Unit or the Development Area or a Sub-
Area.
SPECIAL DISTRIBUTION ARRANGEMENTS.
---------------------------------
You are not granted any rights to operate Special Distribution Arrangements
within or outside the Development Area under the Development Agreement. The
right to operate or grant to others the right to operate Special Distribution
Arrangements is expressly reserved to BCI. BCI has no obligation to offer to you
the right to operate Special Distribution Arrangements, and BCI or its designees
may instead operate or grant to others the right to operate Special Distribution
Arrangements within and/or outside the Development Area. However, if BCI, at any
time and in its sole discretion, determines to offer Developer (or an
appropriate Authorized Entity that is a franchise owner of a Boston Market Unit)
the right to operate a Special Distribution Arrangement at a Special
Distribution Location designated by BCI, BCI will notify you (or such Authorized
Entity) by delivering to you (or such Authorized Entity) a Special Distribution
Agreement authorizing you (or such Authorized Entity) to conduct a Special
Distribution Arrangement at such Special Distribution Location. You (or such
Authorized Entity) will have 15 days to execute and return to BCI such Special
Distribution Agreement after your (or such Authorized Entity's) receipt thereof.
Such Special Distribution Agreement will provide that you (or such Authorized
Entity) shall commence such Special Distribution Arrangement from the designated
Special Distribution Location(s) within the time period specified by BCI in the
Special Distribution Agreement. If you (or such Authorized Entity) fail to
execute and return to BCI such Special Distribution Agreement within such 15 day
period or commence such Special Distribution Arrangement within the specified
period, then you (or such Authorized Entity) will have no right to operate such
Special Distribution Arrangement thereafter. If you (or such Authorized Entity)
have executed a Special Distribution Agreement, BCI may, at any time and in its
sole discretion with or without cause and regardless of the investment made by
you (or such Authorized Entity) in establishing or operating the Special
Distribution Arrangement or the length of time the Special Distribution
Arrangement has been in effect, suspend or terminate your (or such Authorized
Entity's) right to operate the Special Distribution Arrangement.
DELIVERY SERVICE.
----------------
You are not granted any rights within or outside the Development Area or
the Sub-Areas to offer Delivery Service from any of the Units under the
Development Agreement and BCI has no obligation to offer to you the right to
provide Delivery Service. However, if BCI, at any
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time and in its sole discretion, determines to offer Delivery Service in a
designated Delivery Area in which a Unit developed under the Development
Agreement is located, BCI will offer you (or an Authorized Entity that is the
franchise owner of such Unit) the right to offer Delivery Service by delivering
to you (or such Authorized Entity) a Delivery Rider to the applicable Franchise
Agreement for such Unit authorizing the offer of Delivery Service within such
designated Delivery Area. You (or such Authorized Entity) will have 15 days to
execute and return to BCI such Delivery Rider after your (or such Authorized
Entity's) receipt thereof. Such Delivery Rider will provide that you (or such
Authorized Entity) will commence Delivery Service from such Unit or, in BCI's
sole discretion, from a Delivery Facility within the time period specified by
BCI in the Delivery Rider. If you (or such Authorized Entity) fail to execute
and return to BCI such Delivery Rider within such 15 day period or commence
Delivery Service within the specified period, then you (or such Authorized
Entity) will have no right to provide Delivery Service at any such Unit
thereafter and BCI or its designee will have the right to offer Delivery Service
within such designated Delivery Area. Regardless of the foregoing, if BCI
determines in its sole discretion that all franchise owners of Boston Market
Units in the trade area where such Unit is located, as such trade area is
determined by BCI in its sole discretion and which under any circumstance will
not exceed the Market Area, must offer Delivery Service, BCI will notify you (or
such Authorized Entity) and will deliver to you (or such Authorized Entity) a
Delivery Rider to the applicable Franchise Agreement which you (or such
Authorized Entity) must execute and return to BCI within 15 days of its receipt.
CATERING SERVICE.
----------------
You are not granted any rights within or outside the Development Area or
the Sub-Areas to offer Catering Service from such Units or from other locations
under the Development Agreement and BCI has no obligation to offer to you the
right to provide Catering Service. However, if BCI, at any time and in its sole
discretion, determines to offer Catering Service in a designated Catering Area
in which a Unit developed under the Development Agreement is located, BCI will
offer you (or an Authorized Entity that is the franchise owner of such Unit) the
right to offer Catering Service by delivering to you (or the Authorized Entity)
a Catering Rider to the applicable Franchise Agreement for such Unit authorizing
the offer of Catering Service within such designated Catering Area. You (or the
Authorized Entity) will have 15 days to execute and return to BCI such Catering
Rider after your (or the Authorized Entity's) receipt thereof. Such Catering
Rider will provide that you (or the Authorized Entity) will commence Catering
Service from one or more Units or one or more Catering Facilities, as BCI may
determine in its sole discretion, within the time period specified by BCI in the
Catering Rider. If you (or the Authorized Entity) fail to execute and return to
BCI such Catering Rider within such 15 day period or commence Catering Service
within the specified period, then you (or the Authorized Entity) will have no
right to provide Catering Service within the designated Catering Area thereafter
and BCI or its designee will have the right to offer Catering Service within
such designated Catering Area.
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FRANCHISE AGREEMENT.
- -------------------
TERRITORIAL RIGHTS.
------------------
The Franchise is granted for a specified location, the Site, identified in
an exhibit to the Franchise Agreement. Depending on the Site, BCI may or may not
grant you a protected territory (the "Territory"). For example, there may be no
Territory for mall or urban locations. Suburban or rural Sites may have a
Territory consisting of the area within a circle having the front door of the
Site on the day it first opens for business at its center and a radius of up to
one mile. If BCI grants you a Territory then, except as otherwise provided in
the Franchise Agreement and conditioned upon you being in full compliance with
the Franchise Agreement, BCI and its affiliates will not during the term of the
Franchise Agreement operate or grant franchises for the operation of Boston
Market Units within such Territory. You may not conduct the business of the Unit
from any location other than the Site, except as otherwise provided under the
Franchise Agreement, and may not offer Catering Service, Delivery Service or
Special Distribution Arrangements within or outside the Territory, except as
expressly provided in the Franchise Agreement.
The exclusivity of the Territory, if any, is not dependent upon the
achievement of any certain sales volume or market penetration. The Territory may
not be altered except by the mutual written agreement of you and BCI or
termination of the Franchise Agreement.
BCI'S RESERVATION OF RIGHTS.
---------------------------
Except as expressly limited in the Franchise Agreement, BCI (for itself,
its affiliates and its designees) retains all rights with respect to Boston
Market Units, the Marks, the Copyrighted Works and the sale of Products and any
other products and services, anywhere in the world, including: (1) the right to
operate or grant others the right to operate food service businesses, including,
without limitation, Boston Market Units and/or Rotisserie Units, at such
locations within and/or outside the Territory and on such terms and conditions
as BCI, in its sole discretion, deems appropriate; (2) the right, and the right
to grant others the right, to develop, manufacture, market, distribute and/or
sell Products and/or any other product or service within and/or outside the
Territory through any channel of distribution, whether wholesale, retail or
otherwise, including, without limitation, through Special Distribution
Arrangements, Delivery Service and Catering Service under or in association with
the Marks or any other trademark and/or to own or operate any other business
under the Marks or any other trademarks; and (3) subject to Sections 2.E. and
2.F. of the Franchise Agreement, the right to acquire and operate any business,
including, without limitation, a business operating one or more food service
businesses located or operating within and/or outside the Territory.
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YOUR OPTION TO DEVELOP MALL SITES.
---------------------------------
If during the term of the Franchise Agreement BCI identifies a site
suitable for a Boston Market Unit in a regional shopping mall within the
Territory (a "Mall Site"), BCI will notify you in writing of such Mall Site if
BCI intends that such Mall Site be developed and operated as a Boston Market
Unit (as appropriately modified to accommodate the dimensions of such Mall
Site). Within 10 days after your receipt of BCI's notice regarding such Mall
Site (including any relevant site-related materials in BCI's possession), you
must notify BCI if you desire to develop and operate a Boston Market Unit at
such Mall Site. If you fail to so notify BCI within such time period, then BCI
or its designee may develop and operate a Boston Market Unit at such Mall Site.
If you timely notify BCI in writing that you desire to develop and operate
a Boston Market Unit at such Mall Site and BCI has fully negotiated a lease or
purchase agreement as modified for use along with a Mall Site, then you must (a)
obtain the consent of the landlord and execute such lease, if applicable, or (b)
execute a purchase agreement or assignment of purchase agreement, if applicable,
and (c) execute the Franchise Documents as modified for use along with the Mall
Site, and (d) pay BCI the Mall Site Fee, all within ten (10) business days after
BCI's delivery of the lease or purchase agreement and Franchise Documents to
you. BCI will fully cooperate with you in obtaining the landlord's consent to
execute such lease or the seller's consent to execute such purchase agreement or
assignment of purchase agreement.
If you timely notify BCI in writing that you desire to develop and operate
a Boston Market Unit at such Mall Site and BCI has not fully negotiated a lease
or purchase agreement for such Mall Site, then you will have 30 days in which to
negotiate and deliver to BCI a lease or purchase agreement for such Mall Site in
form for execution. If BCI disapproves the lease or purchase agreement for
failure to meet BCI's requirements, you will have 10 days within which to
negotiate and deliver to BCI a revised lease or purchase agreement for such Mall
Site in form for execution. If the revised lease or purchase agreement fails to
meet BCI's requirements, or if you fail to negotiate and deliver to BCI a lease
or purchase agreement within the aforementioned 30 day period, then BCI may
develop and operate a Boston Market Unit at such Mall Site. If BCI approves the
lease or purchase agreement for such Mall Site as meeting BCI's requirements,
then you must (a) execute such lease or purchase agreement, as applicable, and
(b) execute the Franchise Documents, and (c) pay the Mall Site Fee, all within
10 business days after BCI's delivery of the Franchise Documents to you.
If you fail to timely execute the lease or purchase agreement and the
Franchise Documents for a Mall Site and pay the Mall Site Fee, then BCI or its
designee may develop and operate a Boston Market Unit at such Mall Site.
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<PAGE>
YOUR OPTION TO PURCHASE CONVERSION SITES.
----------------------------------------
See the preceding part of this Item 12 under "Developer's Option to
Purchase Conversion Sites." The applicable terms of the Franchise Agreement are
comparable to those in the Development Agreement, except that the terms of the
Franchise Agreement apply solely to the Territory and if you fail to timely
accept or reject BCI's offer to sell such Conversion Sites or BCI is unable to
extend such offer for any reason, BCI will not utilize the Marks at such
Conversion Site for one year following BCI's acquisition thereof, if you are in
full compliance with the Franchise Agreement. BCI may, however, operate, alter,
modify, refurbish, remodel, promote or market any such Conversion Site during
such one year period.
SPECIAL DISTRIBUTION ARRANGEMENTS.
---------------------------------
See the preceding part of this Item 12 concerning the Development
Agreement. The applicable terms of the Franchise Agreement are comparable to
those in the Development Agreement.
DELIVERY SERVICE.
----------------
See the preceding part of this Item 12 concerning the Development
Agreement. The applicable terms of the Franchise Agreement concerning Delivery
Service are comparable to those in the Development Agreement.
CATERING SERVICE.
----------------
See the preceding part of this Item 12 concerning the Development
Agreement. The applicable terms of the Franchise Agreement concerning Catering
Service are comparable to those in the Development Agreement.
RELOCATION OF THE UNIT.
----------------------
If your lease or sublease for the Site of the Boston Market Unit expires or
terminates without your fault, if the Site is damaged, condemned or otherwise
rendered unusable as a Boston Market Unit in accordance with the Franchise
Agreement, or if, in BCI's and your judgment, there is a change in the character
of the location of the Site sufficiently detrimental to its business potential
to warrant its relocation, BCI will not unreasonably withhold permission for
relocation of the Boston Market Unit to a site within the Territory which meets
BCI's then-current site criteria, subject to the rights of existing Boston
Market franchisees under their franchise agreements with BCI. Any such
relocation will be at your sole expense. The Boston Market Unit is required to
re-open at the replacement Site as soon as reasonably practicable but under any
circumstance no more than 90 days after the closing of the original location.
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ITEM 13
-------
TRADEMARKS
BCI owns all right, title and interest in and to certain Marks registered
with the U.S. Patent and Trademark Office on the principal register, including
the following:
<TABLE>
<CAPTION>
===============================================================================
NAME OR MARK REGISTRATION CLASS REGISTRATION
NUMBER DATE
________________________________________________________________________________
<S> <C> <C> <C>
THE BOSTON CHICKEN 1,517,660 42 12/20/88
_______________________________________________________________________________
BOSTON CHICKEN 1,628,747 42 12/18/90
_______________________________________________________________________________
BOSTON CHICKEN 1,819,092 29, 30 02/01/94
_______________________________________________________________________________
BOSTON CHICKEN (Stylized in Red) 1,859,018 42 10/18/94
_______________________________________________________________________________
BOSTON MARKET 1,940,179 42 12/05/95
________________________________________________________________________________
Boston Chicken Rotisserie Logo 1,942,467 29, 42 12/19/95
(Outline)
================================================================================
</TABLE>
BCI has also applied for the registration of certain Marks with the U.S.
Patent and Trademark Office on the principal register, including the following:
<TABLE>
<CAPTION>
==============================================================================
NAME OR MARK APPLICATION CLASS APPLICATION
NUMBER DATE
________________________________________________________________________________
<S> <C> <C> <C>
BOSTON MARKET HOME STYLE 74/631892 42 02/09/95
MEALS and Design
________________________________________________________________________________
BOSTON MARKET HOME STYLE 74/631854 29 02/09/95
MEALS and Design
================================================================================
</TABLE>
There are no currently effective material determinations of the U.S. Patent
and Trademark Office, the Trademark Trial and Appeal Board, the trademark
administrator of any state, or any court, nor any pending infringement,
opposition, or cancellation proceeding, or any pending material litigation,
involving the Marks.
There are no agreements currently in effect which significantly limit BCI's
rights to use or license the use of the Marks in any manner material to you.
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<PAGE>
You must immediately notify BCI of any apparent infringement of or
challenge to your use of any Mark, or claim by any person of any rights in any
Mark. You may not communicate with anyone except BCI and its counsel with
respect to any such infringement, challenge or claim. BCI will have sole
discretion to take such action as it deems appropriate along with any such
infringement, challenge or claim, and the sole right to control exclusively any
litigation or other proceeding arising out of any infringement, challenge or
claim under any Mark. You must 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 in order to protect and maintain BCI's
interests in any litigation or proceeding or otherwise to protect and maintain
BCI's interests in the Marks. BCI will reimburse you for the reasonable out-of-
pocket expenses incurred and paid by them in complying with these requirements.
Neither the Franchise Agreement nor the Development Agreement require BCI to
take affirmative action in response to any apparent infringement of or challenge
to your use of any Mark, or claim by any person of any rights in any Mark.
BCI will indemnify you against and reimburse you for all damages for which
you are held liable in any proceeding arising out of your authorized use of any
Mark, under and in compliance with the applicable agreement, and for all costs
you reasonably incur in the defense of any such claim in which you are named as
a party, while you have timely notified BCI of the claim, have given BCI sole
control of the defense and settlement of any such claim and have otherwise
complied with the applicable agreement.
If it becomes advisable at any time in BCI's sole judgment for you to
modify or discontinue the use of any Mark and/or for the Unit to use one or more
additional or substitute trade or service marks, you must immediately comply
with BCI's directions to modify or otherwise discontinue the use of the Mark,
and/or to use one or more additional or substitute trademarks, service marks,
logos or commercial symbols or substitute trade dress after BCI's notice to you.
Neither BCI nor its affiliates will have any obligation to reimburse you for any
expenditures made by you because of any such discontinuance or modification.
There are no infringing uses actually known to Company that could
materially affect Developer's or Franchise Owner's use of the Marks, except as
noted below:
1. BCI is aware of a franchise system operating under the name Long
John Silver's Restaurant, Inc. ("LJS"), whose franchisees have been using
the mark MAXIT in connection with a special promotion which offers to
double the amount of meat normally contained in a soft tortilla stuffed
with chicken, fish or shrimp. BCI notified LJS by correspondence dated
January 17, 1997 of BCI's prior rights in and to the mark MAXIT, and
demanded that LJS cease infringing on BCI's rights. The parties are
currently negotiating settlement of this matter.
2. BCI is aware of a restaurant located at 1536 Tremont Street,
Boston, Massachusetts and operating under the name BOSTON KITCHEN. In about
January of
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1997, the owner of the restaurant contacted BCI requesting that BCI
purchase the restaurant. BCI is currently investigating this matter and
considering filing a trademark infringement action against this party.
3. BCI is aware of a restaurant located at 300 Third Street, Number
824, San Francisco, California, which is operated by Boston Deli Group,
Inc. d/b/a BOSTON CAFE. BCI has had extensive correspondence with the owner
of BOSTON CAFE, in which BCI has notified Boston Deli Group of BCI's
trademark rights and demanded that Boston Deli Group cease and desist from
infringing on BCI's rights. BCI is currently involved in negotiations for
settlement of this matter.
4. BCI is currently involved in two proceedings in the U.S. Patent and
Trademark Office against a Canadian company named Boston Pizza
International Inc. ("BPI"). On August 30, 1996, BCI filed a petition to
cancel BPI's registration number 1,838,006 for BOSTON'S THE GOURMET PIZZA,
and on February 10, 1997, BPI filed an answer and a counterclaim against
BCI's registration numbers 1,517,660; 1,628,747; and 1,819,092. On February
26, 1997, BCI filed a Notice of Opposition against application number
74/628,476 for BOSTON PIZZA QUICK EXPRESS, and is awaiting BPI's answer.
5. BCI is aware of an application that was filed in the U.S. Patent
and Trademark Office by American Value Brands, Inc. for registration of the
mark BOSTON KITCHEN for "chocolate syrup, fruits in juice, jellies, jams,
preserves, mayonnaise and viscous dressings" in Class 29, and "mustard,
ketchup and barbecue sauce, peanut butter, pickles, relish, canned olives,
canned vegetables, salad dressing, spices and seasonings" in Class 30. On
December 1, 1995, BCI filed a notice of opposition against the mark (Opp.
No. 100,426). American Value Brands has filed its answer and has responded
to BCI's discovery requests. The testimony and briefing periods have not
yet begun.
ITEM 14
-------
PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
PATENTS.
-------
BCI has no patents that are material to the Franchise.
COPYRIGHTS.
----------
BCI claims copyright protection covering various materials used in its
business and the operation of Boston Market Units ("Copyrighted Works"). Under
the applicable agreement, BCI may authorize you to use certain Copyrighted
Works, which are the valuable property of BCI
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<PAGE>
or its affiliates and of which BCI or its affiliate is the owner if you comply
with the terms of the applicable agreement. BCI owns or is the licensee of the
owner of the Copyrighted Works and may create, acquire or obtain licenses for
certain copyrights in various works of authorship used for the operation of
Boston Market Units, including, the Development Manual, the Manuals,
advertisements, promotional materials, labels, menus, coupons, gift
certificates, posters and signs, and may include all or part of the Marks,
Licensed Program, trade dress and other portions of the System.
You must 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 and you may not communicate with any person
other than BCI and its counsel for with any such infringement, challenge or
claim. BCI will have the sole discretion to take such action as it deems
appropriate in response to 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 under the
Copyrighted Works. BCI is under no obligation to participate in your defense
and/or indemnify you for damages or expenses incurred if you are a party to any
administrative or judicial proceeding involving the Copyrighted Work.
If it becomes advisable at any time in BCI's sole judgment for you to
modify or discontinue use of any of the Copyrighted Works and/or for you to use
one or more additional or substitute copyrighted or copyrightable items, you
must immediately comply with BCI's directions to modify or otherwise discontinue
the use of the copyrighted materials and/or to use one or more substitute
materials.
There are currently no effective determinations of the United States
Copyright Office or any court regarding any Copyrighted Works of BCI, nor are
such proceedings pending, nor are there any currently effective agreements
between BCI and third parties pertaining to BCI's Copyrighted Works that will or
may significantly limit your use of BCI's Copyrighted Works. BCI is not
obligated under the Development Agreement or the Franchise Agreement or
otherwise to protect or defend its copyrights. BCI knows of no infringements of
the Copyrighted Works that could materially affect your use of the Copyrighted
Works. BCI has not registered any of the Copyrighted Works.
THE LICENSED PROGRAM.
--------------------
See Item 8 of this Offering Circular.
CONFIDENTIAL INFORMATION.
------------------------
BCI possesses and will further develop and acquire certain confidential and
proprietary information and trade secrets including the following categories of
information, methods, techniques, procedures and knowledge developed or to be
developed by BCI or its affiliates or their consultants, contractors, or
designees and/or franchise owners and developers (the
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<PAGE>
"Confidential Information") including: (1) methods, techniques, equipment,
specifications, standards, policies, procedures, information, concepts and
systems on and knowledge of and experience in the development, operation and
franchising of Boston Market Units; and (2) marketing and promotional programs
for Boston Market Units; and (3) knowledge concerning computer software programs
which BCI authorizes for use along with the operation of Boston Market Units
(including the Licensed Program), and all additions, modifications and
enhancements made to those programs, and all data generated from use of such
programs, including the logic, structure and operation of database file
structures containing such data and all additions, modifications and
enhancements made to those items; and (4) sales data and information concerning
consumer preferences and inventory requirements for Products, materials and
supplies, and specifications for and suppliers of certain materials, equipment
and fixtures for Boston Market Units; and (5) ingredients, formulas, marinades,
mixes, spices, seasonings, sauces, recipes for and methods of preparation,
cooking, serving, packaging, catering and delivery of, Products sold at Boston
Market Units; and (6) information concerning Product sales, operating results,
financial performance and other financial data of Boston Market Units; and (7)
the Development Manual and the Manuals; and (8) customer lists and Product sales
of the Units; and (9) employee selection procedures, training and staffing
levels.
Under the Development Agreement, BCI will disclose such parts of the
Confidential Information to you as BCI periodically deems necessary or advisable
for the development of Boston Market Units during training and in guidance and
assistance furnished to you under the Development Agreement and you may learn or
otherwise obtain from BCI additional Confidential Information during the
Agreement Term. Under the Franchise Agreement, BCI will also disclose such parts
of the Confidential Information as BCI periodically deems necessary or advisable
for the operation of a Boston Market Unit to you during training and in guidance
and assistance furnished to you during the term of the Franchise Agreement, and
you may learn or otherwise obtain from BCI additional Confidential Information
of BCI during the term of the Franchise Agreement. You must agree to disclose
the Confidential Information to your Owners and employees only to the extent
reasonably necessary and if such individuals have agreed to maintain such
information in confidence in an agreement enforceable by BCI.
The Confidential Information is confidential to and a valuable asset of
BCI, is proprietary, includes trade secrets of BCI and is disclosed to you on
the condition that you, and your Owners and employees who have access to the
Confidential Information agree that during and after the term of the applicable
agreement they: (1) will not use the Confidential Information in any other
business or capacity; (2) will maintain the absolute confidentiality of the
Confidential Information; (3) will not make unauthorized copies of any portion
of the Confidential Information disclosed in written or other tangible form; and
(4) will adopt and implement all reasonable procedures periodically required by
BCI to prevent unauthorized use or disclosure of the Confidential Information
including requiring employees and Owners who have access to such Confidential
Information to execute non-competition and confidentiality agreements in the
forms attached to the Development Agreement and Franchise Agreement or as
otherwise required by BCI, periodically, and provide BCI, at its request, with
signed copies
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of each of those agreements. Nothing contained in the Development Agreement or
Franchise Agreement will be construed to prohibit you from using the
Confidential Information in the operation of other Boston Market Units, under
the a Franchise Agreement or Development Agreement with BCI.
The restrictions on the disclosure and use of the Confidential Information
will not apply to the following: (a) information, methods, procedures,
techniques and knowledge which are or become generally known in the food service
business within the Development Area or Territory, other than through disclosure
(whether deliberate or inadvertent) by you; and (b) the disclosure of the
Confidential Information in judicial or administrative proceedings to the extent
that you are legally compelled to disclose such information, if you have
notified BCI before disclosure and used your best efforts, and afforded BCI the
opportunity, to obtain an appropriate protective order or other assurance
satisfactory to BCI of confidential treatment for the information required to be
so disclosed.
You must disclose to BCI all ideas, concepts, methods, techniques and
products under the development and operation of Boston Market Units conceived or
developed by you or your employees during the term of the applicable agreement.
You must grant to BCI and agree to procure from your affiliates, owners or
employees a perpetual, non-exclusive and worldwide right to use same in all food
service businesses operated by BCI, its affiliates and its franchise owners. BCI
will have no obligation to you to make any lump sum or on-going payments to you
with respect to any such idea, concept, method, technique or product. You must
agree that you will not use nor will you allow any other person or entity to use
any such concept, method, technique or product without obtaining BCI's prior
written approval.
ITEM 15
-------
OBLIGATION TO PARTICIPATE IN THE
ACTUAL OPERATION OF THE FRANCHISE BUSINESS
DEVELOPMENT AGREEMENT
- ---------------------
FULL TIME SUPERVISION.
---------------------
You (or your designated Principal Owner(s) approved by BCI) and the Chief
Operating Officer (defined below) must exert full-time efforts to fulfill your
obligations under the Development Agreement and may not engage in any other
business or other activity, directly or indirectly, that requires any
significant management responsibility or time commitments, or that may otherwise
conflict with your obligations under the Development Agreement.
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CHIEF OPERATING OFFICER.
-----------------------
Concurrently with the execution of the Development Agreement, you must
designate a person (other than the persons serving as the Development Director
(defined below), the Training Director (defined below) and the Marketing
Director (defined below)) acceptable to BCI to act as the Chief Operating
Officer of the business conducted by you under the Development Agreement (the
"Chief Operating Officer"). The Chief Operating Officer must have appropriate
multi-unit food service experience and be an Owner holding a significant, direct
equity interest in you at all times during the Agreement Term. If your
relationship with the Chief Operating Officer terminates or if the proposed
Chief Operating Officer is unable to satisfactorily complete BCI's management
training program, you must promptly designate a replacement Chief Operating
Officer acceptable to BCI, who shall at your expense and subject to BCI's then-
current training charges, satisfactorily complete the management training
program.
DEVELOPMENT DIRECTOR AND REAL ESTATE MANAGERS.
---------------------------------------------
Upon BCI's written request, you must designate a person (other than the
persons serving as the Chief Operating Officer, the Training Director and the
Marketing Director) acceptable to BCI to act as your Development Director (the
"Development Director") during the Development Term. If your relationship with
the Development Director terminates, you must promptly designate a replacement
Development Director acceptable to BCI. The Development Director's duties will
include: (1) the preparation and implementation of a development plan for the
Development Area in form satisfactory to BCI; and (2) consulting with BCI
concerning the adaptation of BCI's existing site criteria and lease requirements
for the Development Area; and (3) directing and coordinating your site
evaluation efforts; and (4) negotiating leases for proposed Unit sites; and (5)
development of Units in the Development Area. You are also obliged to hire and
maintain the number of real estate managers meeting BCI's qualifications as BCI
shall specify.
TRAINING DIRECTOR.
-----------------
Upon BCI's written request, you must designate a person (other than the
persons serving as the Chief Operating Officer, the Development Director or the
Marketing Director) acceptable to BCI to act as your Training Director (the
"Training Director") who must satisfactorily complete BCI's management training
program. If the proposed Training Director completes the management training
program to BCI's satisfaction, BCI will certify him to fulfill the duties of the
Training Director. Thereafter, you agree to send, periodically, as determined by
BCI, the Training Director to one or more locations which BCI designates for a
period to be determined by BCI in order for BCI to re-certify the Training
Director. While the Training Director's certification is current, the Training
Director will train the employees of each Unit (other than the Unit Manager and
the Additional Manager of each Unit) and may, at the request of BCI, train the
Unit Manager and the Additional Manager of each Unit in accordance with the
terms
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of the Franchise Agreement at your training facility; this will apply only if
(i) you are authorized in writing by BCI to operate such a facility and (ii)
such facility meets the specifications BCI requires for training facilities as
BCI, in its sole discretion, prescribes in the Development Manual or otherwise
in writing periodically, and must have been approved by BCI in writing. If the
Training Director ceases to be an employee of yours or if the proposed Training
Director is unable to satisfactorily complete the management training program or
any later training program, you must promptly designate a replacement Training
Director acceptable to BCI, who must, at your expense and subject to BCI's then-
current standard charges, satisfactorily complete BCI's management training
program and be certified by BCI as provided above. BCI may, in its sole
discretion as it deems necessary, require the Training Director to attend or to
participate in, at your expense, additional or refresher training programs at
locations designated by BCI during the term of the Development Agreement. The
Training Director's duties will include: (1) training and supervision of Unit
personnel; and (2) furnishing on-site assistance to the personnel of Units in
accordance with the opening of Units; and (3) ongoing consultation with BCI and
management personnel of Units concerning training matters; and (4) periodic
reporting to BCI concerning your training programs established and operated by
you.
If authorized and required by BCI, in its sole discretion, you must
develop, operate and maintain a training program for employees other than
management personnel and, to the extent authorized and approved in writing by
BCI periodically, train management personnel of the Units in the use of the
System throughout the Agreement Term in accordance with specifications
periodically required by BCI.
MARKETING DIRECTOR.
------------------
Upon BCI's written request, you must designate a person (other than the
persons serving as the Chief Operating Officer, the Development Director and the
Training Director) acceptable to BCI to act as your Marketing Director (the
"Marketing Director"). If your relationship with the Marketing Director
terminates, you agree to promptly designate a replacement Marketing Director
acceptable to BCI. The Marketing Director's duties will include, without
limitation: (1) consulting with BCI concerning the adaptation of BCI's existing
marketing programs and materials for the Development Area; and (2) preparation
and implementation of marketing plans for the grand opening of the Units; and
(3) preparation and implementation of local marketing plans and marketing
budgets for the Units and the Development Area; and (4) coordinating the
direction and administration of any local marketing efforts of the Units; and
(5) reporting periodically to BCI concerning your local marketing programs in
the Development Area.
MANAGEMENT PERSONNEL AND TRAINING.
---------------------------------
In addition to hiring, training and maintaining the personnel specified
above, you must hire, train and maintain the number and level of management
personnel required for the conduct of business under the Development Agreement
which will depend on the number of Units to be developed and the qualifications
of the personnel selected by you. You also must ensure that
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a full-time Unit Manager and Additional Manager is hired and maintained at each
Unit, as well as maintain adequate management and supervision of all Units in
accordance with guidelines periodically established by BCI. You must keep BCI
advised of the identities of such personnel. You are responsible for ensuring
that such personnel are properly trained to perform their duties. BCI, at its
option and in its sole discretion, may require your Training Director to provide
such initial management training program to the Unit Manager and Additional
Manager of each Unit at a training facility certified and accredited by BCI in
accordance with BCI's requirements; this will apply only if the Training
Director currently is certified to provide such training. As described in Item
14 above, BCI requires you to obtain confidentiality agreements from certain of
your employees.
GUARANTY.
--------
Each Principal Owner and the spouse of each Principal Owner must sign an
agreement (which is attached as an Exhibit to the Development Agreement)
assuming and agreeing to discharge all of your obligations under the Development
Agreement.
FRANCHISE AGREEMENT
- -------------------
MANAGEMENT AND PERSONNEL OF THE UNIT.
------------------------------------
You (or your supervising Principal Owner(s)) are required to supervise and
oversee the operation of the Unit. You also are required to employ and maintain
at all times during the term of the Franchise Agreement at least one (1) Unit
Manager and one (1) Additional Manager at the Unit. The Unit Manager will be the
full-time manager of the Unit and the Additional Manager will perform on a full-
time basis such other operations for you as BCI may reasonably and periodically
specify, and both must successfully complete to BCI's satisfaction a BCI
certified initial management training program for the operation of the Unit. You
also are required to employ the number of assistant managers required for
adequate staffing of the Unit, and must at all times keep BCI advised of the
identities of the Unit Manager, Additional Manager and assistant managers. BCI
may deal with the Unit Manager, Additional Manager and assistant managers on
matters pertaining to day-to-day operations of, and reporting requirements for,
the Unit. The Unit at all times must be under the direct, on-site supervision of
the Unit Manager, Additional Manager or an assistant manager who has completed a
training program conducted by BCI or you (if applicable and if your Training
Director is certified under the terms of the Development Agreement). BCI may
require at any time during the term of the Franchise Agreement that the then-
current Unit Manager have an equity interest in the Unit. You must hire all
employees of the Unit and are exclusively responsible for the terms of their
employment and compensation and for the proper training of such employees in the
operation of the Unit. As described in Item 14 above, BCI requires you to obtain
confidentiality agreements from certain of your employees.
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GUARANTY.
--------
Each Principal Owner and the spouse of each Principal Owner must sign an
agreement (which is attached as an Exhibit to the Franchise Agreement) assuming
and agreeing to discharge all of your obligations under the Franchise Agreement.
DELEGATION OF CERTAIN FUNCTIONS
- -------------------------------
Under the Development Agreement and the Franchise Agreement, you may use a
management company that is affiliated with you to perform certain management
services. However, to do this, you must comply with these conditions: (1) BCI
must approve the management services, the management company and the terms of
the management agreement; and (2) the management company must sign a
confidentiality agreement acceptable to BCI. BCI may withhold its approvals in
its sole discretion.
ITEM 16
-------
RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
DEVELOPMENT AGREEMENT.
---------------------
There is no provision in the Development Agreement authorizing or
restricting the goods or services offered by you. However, you will be bound by
the noncompete provisions of the Development Agreement as well as the provisions
of the Franchise Agreements executed under the Development Agreement with
respect to restrictions on goods and services offered by Boston Market Units
developed under the Development Agreement.
FRANCHISE AGREEMENT.
-------------------
The Franchise Agreement provides that you must offer all the Products that
BCI periodically authorizes for Boston Market Units and will make available all
services that BCI periodically prescribes for Boston Market Units. BCI has the
right, in its sole discretion, to change the types of Products and services and
there is no limit on this right. You are prohibited from offering at your Boston
Market Unit or any other location or otherwise in accordance with the Marks any
other products or services which have not been approved for Boston Market Units.
The Franchise Agreement contains no restrictions on the customers to whom you
may sell the goods and services offered by your Boston Market Unit, except that
you only may deliver or cater under an effective Dining Rider or Catering Rider
and then only within the Territory required in the applicable Rider, all as
described in Item 12 above.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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ITEM 17
-------
RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
This table lists certain important provisions of the franchise and related
agreements. You should read these provisions in the agreements attached to this
offering circular.
<TABLE>
<CAPTION>
==================================================================================================================================
SECTIONS IN FRANCHISE AGREEMENT AND
PROVISION DEVELOPMENT AGREEMENT SUMMARY
___________________________________________________________________________________________________________________________________
<S> <C> <C>
(a) Term of franchise and Section 2.A of Franchise Agreement/Sections 15 years under Franchise Agreement. Under
development rights 3.A and 3.C of Development Agreement Development Agreement 2-5 years for development
rights only, until expiration of last Franchise
Agreement for all other rights and obligations
___________________________________________________________________________________________________________________________________
(b) Renewal or extension of Sections 16.A-16.C of Franchise Agreement If you are and have been in good standing, you
the term can acquire successor franchise on BCI's
then-current terms for 5 years. No renewal of
Development Agreement
___________________________________________________________________________________________________________________________________
(c) Requirements for you to Sections 16.A-16.C of Franchise Agreement Give proper notice, maintain premises or secure
renew or extend substitute premises, remodel and/or expand, sign
new agreement and pay fee, sign release
____________________________________________________________________________________________________________________________________
(d) Termination by you Section 17.A of Franchise Agreement/Section If BCI breaches Agreement and does not cure or
13.A of Development Agreement begin to cure within stated periods
____________________________________________________________________________________________________________________________________
(e) Termination by BCI None See Footnote (1)
without cause
____________________________________________________________________________________________________________________________________
(f) Termination by BCI with Sections 17.B and 17.C of Franchise BCI can terminate if you commit a violation
cause Agreement/Sections 13.B and 13.C of specified in the agreement
Development Agreement See Footnote (1)
___________________________________________________________________________________________________________________________________
</TABLE>
107
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
SECTIONS IN FRANCHISE AGREEMENT AND
PROVISION DEVELOPMENT AGREEMENT SUMMARY
___________________________________________________________________________________________________________________________________
<S> <C> <C>
(g) "Cause" defined -- Section 17.B of Franchise Agreement/Section 10 days to begin required Catering Service,
defaults which can be cured 13.B of Development Agreement Delivery Service or Special Distribution
Arrangements; 10 days to correct erroneous
Royalty, Advertising/Marketing payments and
purchases from BCI or its affiliates; 30 days to
cure or begin to cure standard/specification
violations or other violations; 24 hours to 5
days to cure health, safety or sanitation
problems; 10 days to cure failure to adhere to
the required only)
___________________________________________________________________________________________________________________________________
(h) "Cause" defined -- Section 17.B of Franchise Agreement/Section Franchise Agreement: failure to commence
defaults which cannot be 13.B of Development Agreement -------------------
cured operation on time; abandonment or a transfer
without BCI's approval; misrepresentation or
omission in application for the Franchise or for
approval of a transfer; conviction or guilty plea
relating to a felony or other serious crime; an
Authorized Entity ceases to be controlled by the
Developer; misuse or challenge to BCI's
intellectual property rights; loss of right to
possess the Site; insolvency; violation by you or
your Owners of confidentiality or noncompete
agreements; uncured default under lease for Site;
3 or more defaults in a 24-month period; 2 or
more defaults in a 12-month period; 3 or more (or
50% or more) of the franchise agreements under
the applicable Development Agreement are
terminated; you or your affiliates terminate a
franchise agreement with BCI without cause.
---------------------------------------------------
Development Agreement: failure to develop the
---------------------
required number of Boston Market Units; BCI
delivers to you notice of termination of a
franchise agreement; you terminate a franchise
agreement without cause; other defaults similar
to the non-curable defaults under the franchise
agreement.
____________________________________________________________________________________________________________________________________
</TABLE>
108
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
SECTIONS IN FRANCHISE AGREEMENT AND
PROVISION DEVELOPMENT AGREEMENT SUMMARY
___________________________________________________________________________________________________________________________________
<S> <C> <C>
(i) Your obligations on Sections 18.A-18.F of Franchise Pay money owed, complete deidentification, return
termination/non-renewal Agreement/Sections 14.A-14.E of Development confidential information, (also, see (o) and (r)
Agreement below)
____________________________________________________________________________________________________________________________________
(j) Assignment of contract Section 15.A of Franchise Agreement/Section No restrictions on BCI's right to assign.
by BCI 12.A of Development Agreement
___________________________________________________________________________________________________________________________________
(k) "Transfer" by you -- Section 15.B of Franchise Agreement/Section Includes transfer or pledge of Agreement, lease,
definition 12.B of Development Agreement assets or ownership change
___________________________________________________________________________________________________________________________________
(l) BCI's approval of Sections 15.B, 15.C and 21 of Franchise BCI has the right to approve transfers, providers
transfer by franchisee Agreement/Sections 12.B, 12.C and 18 of of management services and management service
Development Agreement agreements
____________________________________________________________________________________________________________________________________
(m) Conditions for BCI Section 15.C of Franchise Agreement/Section Franchise Agreement: you and your owners in full
approval of transfer 12.C of Development Agreement -------------------
compliance; transferee meets qualifications; new
owners agree to all provisions applicable to
Owners; transferor releases BCI; transferor pay
all amounts owed; transferee meets training
obligations; transferee must perform all
obligations under existing franchise agreement
or, at BCI's option, under BCI's new form of
agreement; payment of $5,000 transfer fee; BCI
approves the terms of the transfer; transferee's
obligations to lenders are subordinate to
obligations to BCI; transferors sign non-compete
agreements; transferee acknowledges BCI does not
guaranty the transfer is suitable or the business
will be successful; transfer must comply with law.
___________________________________________________________________________________________________________________________________
</TABLE>
109
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
SECTIONS IN FRANCHISE AGREEMENT AND
PROVISION DEVELOPMENT AGREEMENT SUMMARY
___________________________________________________________________________________________________________________________________
<S> <C> <C>
(m) Conditions for BCI Development Agreement: transfer of a Boston
approval of transfer ---------------------
(continued) Market Unit under a Development Agreement can
only be made in accordance with transfer of the
Development Agreement; transfer of Developer or
Development Agreement only permissible if all
related franchise agreements and Boston Market
Units transferred to the same transferee; other
requirements similar to those under the franchise
agreement.
___________________________________________________________________________________________________________________________________
(n) BCI's right of first Section 15.H of Franchise Agreement/Section BCI can match any offer for your business, assets
refusal to acquire your 12.G of Development Agreement or an ownership interest
business
___________________________________________________________________________________________________________________________________
(o) BCI's option to Section 18.F of Franchise Agreement BCI has the option to buy the Unit after
purchase your business termination or expiration of the Franchise
Agreement
___________________________________________________________________________________________________________________________________
(p) Your death or disability Section 15.E of Franchise Agreement/Section Franchise or ownership interest must be assigned
12.D of Development Agreement to an approved buyer within 9 months
___________________________________________________________________________________________________________________________________
(q) Non-competition Section 9.B of Franchise Agreement/Section 8 No direct or indirect involvement in a competing
covenants during the term of Development Agreement business anywhere; no solicitation of employees
of the franchise of BCI or its franchisees
___________________________________________________________________________________________________________________________________
(r) Non-competition Section 18.D of Franchise Agreement/Section Franchise Agreement: No direct or indirect
covenants after the 14.D of Development Agreement -------------------
franchise is terminated or involvement in a competing business at the Site,
expires within 5 miles from a Boston Market Unit or in
the Market Area; no diversion of business of a
Boston Market Unit or of employees of a Unit or
of BCI.
Development Agreement: Similar to Franchise
---------------------
Agreement.
____________________________________________________________________________________________________________________________________
(s) Modification of the Sections 5.C and 19.K of Franchise Modifications in writing only. Operations
agreement Agreement/Sections 11.J and 16.K of Manuals may change
Development Agreement
___________________________________________________________________________________________________________________________________
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
SECTIONS IN FRANCHISE AGREEMENT AND
PROVISION DEVELOPMENT AGREEMENT SUMMARY
___________________________________________________________________________________________________________________________________
<S> <C> <C>
(t) Integration/merger Section 19.L of Franchise Agreement/Section Only the terms of the Agreement are binding.
clause 16.L of Development Agreement Other promises may not be enforceable
___________________________________________________________________________________________________________________________________
(u) Dispute resolution by None
arbitration or mediation
___________________________________________________________________________________________________________________________________
(v) Choice of forum Section 19.G of Franchise Agreement/Section Litigation must be in Jefferson County, Colorado
16.G of Development Agreement state court or federal district of Colorado
___________________________________________________________________________________________________________________________________
(w) Choice of law Section 19.F of Franchise Agreement/Section Colorado law applies
16.F of Development Agreement
===================================================================================================================================
</TABLE>
1
These states have statutes which may supersede the franchise agreement in
your relationship with the franchisor including the areas of termination and
renewal of your franchise: ARKANSAS [Stat. Section 72-204], CALIFORNIA [Sections
20021, 20025, 20026, 20030], CONNECTICUT [Gen. Stat. Section 42-133f], DELAWARE
[Code Sections 2551-2556], HAWAII [Rev. Stat. Section 482E-6], ILLINOIS [815
ILCS 705/19, 705/20], INDIANA [Stat. Sections 1 (7) and (8); and 23-2-2.7], IOWA
[Code Sections 523H.7; 523H.8], MICHIGAN [Stat. Section 445.1527(c)-(d)],
MINNESOTA [Stat. Section 80C.14], MISSISSIPPI [Code Section 75-24-53], MISSOURI
[Stat. Section 407.405], NEBRASKA [Rev. Stat. Section 87-404], NEW JERSEY [Stat.
Section 56:10-5], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code
13.1-557-574-13.1-564], WASHINGTON [Code Section 19.100.180(i)-(j)], WISCONSIN
[Stat. Sections 135.03; 135.04]. These and other states may have court decisions
which may supersede the franchise agreement in your relationship with the
franchisor including the areas of termination and renewal of your franchise.
ITEM 18
-------
PUBLIC FIGURES
BCI does not use any public figure to promote its franchise.
- ----------
1 The Delivery Rider, Catering Rider and Flagship/Satellite Rider contain
provisions regarding termination.
111
<PAGE>
ITEM 19
-------
EARNINGS CLAIMS
BCI does not furnish or authorize its salespersons to furnish any oral or
written information concerning the actual or potential sales, costs, income or
profits of a Boston Market Unit. Actual results vary from Unit to Unit and BCI
cannot estimate the results of any particular franchise.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
112
<PAGE>
ITEM 20
-------
LIST OF OUTLETS
FRANCHISED STORE
STATUS SUMMARY FOR
YEARS 1996/1995/1994/(1)/
<TABLE>
<CAPTION>
===================================================================================================================================
STATE TRANSFERS CANCELLED NOT REACQUIRED LEFT THE TOTAL FROM FRANCHISES
OR RENEWED BY SYSTEM LEFT OPERATING AT
TERMINATED FRANCHISOR OTHER COLUMNS/(2)/ YEAR END
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Alaska 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Arizona 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 17/15/10
____________________________________________________________________________________________________________________________________
Arkansas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
California 7/31/0 7/0/0 0/0/0 0/0/0 0/0/0 14/31/0 135/79/13
____________________________________________________________________________________________________________________________________
Colorado 2/0/0 1/0/0 0/0/0 0/0/0 0/0/0 3/0/0 22/20/19
____________________________________________________________________________________________________________________________________
Connecticut 23/0/0 25/1/0 0/0/0 0/0/0 0/0/0 48/1/0 29/24/18
____________________________________________________________________________________________________________________________________
Delaware 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/8/3
____________________________________________________________________________________________________________________________________
D.C. 0/0/4 0/0/4 0/0/0 0/0/0 0/0/0 0/0/8 0/6/4
____________________________________________________________________________________________________________________________________
Florida 0/0/0 4/1/0 0/0/0 0/0/0 0/0/0 4/1/0 99/96/79
___________________________________________________________________________________________________________________________________
Georgia 10/0/9 11/0/10 0/0/0 0/0/0 0/0/0 21/0/19 12/10/9
___________________________________________________________________________________________________________________________________
Hawaii 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
</TABLE>
(1) Note: The numbers for 1996 are as of December 31; for 1995 as of December
31; and for 1994 as of December 25
(2) The numbers in the "Total" column may exceed the number of Units affected
because several events may have affected the same Unit. For example, the same
Unit may have had multiple owners.
113
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
STATE TRANSFERS CANCELLED NOT REACQUIRED LEFT THE TOTAL FROM FRANCHISES
OR RENEWED BY SYSTEM LEFT OPERATING AT
TERMINATED FRANCHISOR OTHER COLUMNS/(2)/ YEAR END
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Idaho 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/0/0
____________________________________________________________________________________________________________________________________
Illinois 0/46/0 0/2/0 0/0/0 0/0/0 0/0/0 0/48/0 57/50/39
____________________________________________________________________________________________________________________________________
Indiana 1/11/0 2/1/0 0/0/0 0/0/0 0/8/0 0/20/0 13/11/9
____________________________________________________________________________________________________________________________________
Iowa 0/5/0 0/0/0 0/0/0 0/0/0 0/0/0 0/5/0 6/5/0
____________________________________________________________________________________________________________________________________
Kansas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 10/9/0
____________________________________________________________________________________________________________________________________
Kentucky 6/0/0 6/0/0 0/0/0 0/0/0 0/0/0 12/0/0 10/5/0
____________________________________________________________________________________________________________________________________
Louisiana 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Maine 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Maryland 12/11/0 12/0/0 0/0/0 1/0/0 0/0/0 25/11/0 25/19/14
____________________________________________________________________________________________________________________________________
Massachusetts 0/0/0 1/2/20 0/0/0 0/9/12 0/0/0 1/11/32 43/38/36
____________________________________________________________________________________________________________________________________
Michigan 0/26/0 0/0/10 0/0/0 0/0/9 0/3/0 0/29/19 38/36/21
____________________________________________________________________________________________________________________________________
Minnesota 0/15/0 1/0/0 0/0/0 0/0/0 0/0/0 1/15/0 26/16/0
____________________________________________________________________________________________________________________________________
Mississippi 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Missouri 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 16/11/0
____________________________________________________________________________________________________________________________________
Montana 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Nebraska 0/10/0 1/0/0 0/0/0 0/0/0 0/0/0 1/10/0 9/10/0
____________________________________________________________________________________________________________________________________
Nevada 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 8/2/0
____________________________________________________________________________________________________________________________________
New Hampshire 0/0/0 0/0/1 0/0/0 0/0/0 0/0/0 0/0/1 6/3/3
____________________________________________________________________________________________________________________________________
New Jersey 0/1/0 16/0/1 0/0/0 15/4/0 0/0/0 31/5/1 44/49/16
____________________________________________________________________________________________________________________________________
New Mexico 0/0/0 1/0/0 0/0/0 0/0/0 0/0/0 1/0/0 2/3/3
____________________________________________________________________________________________________________________________________
</TABLE>
114
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
STATE TRANSFERS CANCELLED NOT REACQUIRED LEFT THE TOTAL FROM FRANCHISES
OR RENEWED BY SYSTEM LEFT OPERATING AT
TERMINATED FRANCHISOR OTHER COLUMNS/(2)/ YEAR END
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
New York 23/6/0 22/1/1 0/0/0 0/13/0 0/0/0 45/20/1 77/56/38
___________________________________________________________________________________________________________________________________
North Carolina 26/0/0 27/1/0 0/0/0 0/0/0 0/0/0 53/1/0 27/25/20
___________________________________________________________________________________________________________________________________
North Dakota 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Ohio 24/5/0 26/0/0 0/0/0 7/0/0 0/0/0 57/5/0 52/42/35
___________________________________________________________________________________________________________________________________
Oklahoma 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Oregon 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 17/8/0
___________________________________________________________________________________________________________________________________
Pennsylvania 0/0/2 15/2/2 0/0/0 13/0/1 0/0/0 28/2/5 14/67/44
___________________________________________________________________________________________________________________________________
Rhode Island 0/0/0 0/0/2 0/0/0 0/0/2 0/0/0 0/0/4 4/2/2
___________________________________________________________________________________________________________________________________
South Carolina 3/0/0 3/0/0 0/0/0 0/0/0 0/0/0 6/0/0 5/3/2
___________________________________________________________________________________________________________________________________
South Dakota 0/1/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/0 1/1/0
___________________________________________________________________________________________________________________________________
Tennessee 3/0/0 2/0/0 0/0/0 0/0/0 0/0/0 5/0/0 7/2/0
___________________________________________________________________________________________________________________________________
Texas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 60/44/30
___________________________________________________________________________________________________________________________________
Utah 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 10/2/0
___________________________________________________________________________________________________________________________________
Vermont 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Virginia 2/0/9 2/1/10 0/0/0 0/0/0 0/0/0 4/1/19 32/23/19
___________________________________________________________________________________________________________________________________
Washington 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 31/16/2
___________________________________________________________________________________________________________________________________
Wisconsin 0/7/0 0/0/0 0/0/0 0/0/0 0/0/0 0/7/0 10/9/95
___________________________________________________________________________________________________________________________________
Wyoming 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/0
===================================================================================================================================
TOTAL: 142/175/24 185/12/61 0/0/0 36/26/24 0/11/0 363/224/109 982/826/493
============================================================================================================================
</TABLE>
115
<PAGE>
STATUS OF COMPANY OWNED STORES
FOR YEARS ENDING 1996/1995/1994
<TABLE>
<CAPTION>
===================================================================================================================================
TOTAL STORES
STATE STORES CLOSED DURING YEAR STORES OPENED DURING YEAR OPERATING AT YEAR END
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Alabama 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Alaska 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Arizona 0/0/0 0/0/6 0/0/0
____________________________________________________________________________________________________________________________________
Arkansas 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
California 0/0/0 0/0/6 0/0/6
___________________________________________________________________________________________________________________________________
Colorado 0/0/0 0/0/9 1/3/2
___________________________________________________________________________________________________________________________________
Connecticut 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Delaware 0/0/0 0/0/0 8/0/0
___________________________________________________________________________________________________________________________________
District of Columbia 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Florida 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Georgia 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Hawaii 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Idaho 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Illinois 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Indiana 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Iowa 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Kansas 0/0/0 0/0/2 0/0/2
___________________________________________________________________________________________________________________________________
Kentucky 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
Louisiana 0/0/0 0/0/0 0/0/0
___________________________________________________________________________________________________________________________________
</TABLE>
116
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
TOTAL STORES
STATE STORES CLOSED DURING YEAR STORES OPENED DURING YEAR OPERATING AT YEAR END
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Maine 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Maryland 0/1/0 0/0/0 1/0/0
____________________________________________________________________________________________________________________________________
Massachusetts 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Michigan 0/1/0 0/0/1 0/0/9
____________________________________________________________________________________________________________________________________
Minnesota 0/0/0 0/0/5 0/0/5
____________________________________________________________________________________________________________________________________
Mississippi 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Missouri 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Montana 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Nebraska 0/0/0 0/0/7 0/0/7
____________________________________________________________________________________________________________________________________
Nevada 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
New Hampshire 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
New Jersey 0/0/0 7/0/2 30/0/8
____________________________________________________________________________________________________________________________________
New Mexico 0/0/0 0/0/2 0/0/0
____________________________________________________________________________________________________________________________________
New York 0/0/0 0/0/2 0/0/2
____________________________________________________________________________________________________________________________________
North Carolina 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
North Dakota 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Ohio 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Oklahoma 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Oregon 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Pennsylvania 0/0/0 12/0/0 65/0/0
____________________________________________________________________________________________________________________________________
Rhode Island 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
TOTAL STORES
STATE STORES CLOSED DURING YEAR STORES OPENED DURING YEAR OPERATING AT YEAR END
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
South Carolina 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
South Dakota 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Tennessee 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Texas 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Utah 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Vermont 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Virginia 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
West Virginia 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Wisconsin 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
Wyoming 0/0/0 0/0/0 0/0/0
____________________________________________________________________________________________________________________________________
TOTALS 0/2/0 19/0/42 105/3/41
====================================================================================================================================
</TABLE>
118
<PAGE>
PROJECTED SYSTEMWIDE OPENINGS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
================================================================================
STATE FRANCHISE PROJECTED PROJECTED
AGREEMENTS FRANCHISED NEW COMPANY OWNED
SIGNED BUT STORE STORES IN THE OPENINGS NEXT
NOT OPEN/(1)/ NEXT FISCAL YEAR YEAR
________________________________________________________________________________
<S> <C> <C> <C>
Alabama 0 6 0
________________________________________________________________________________
Arizona 0 8 0
________________________________________________________________________________
California 5 60 0
________________________________________________________________________________
Colorado 1 8 1
________________________________________________________________________________
Connecticut 0 6 0
________________________________________________________________________________
Delaware 0 2 0
________________________________________________________________________________
Florida 0 10 0
________________________________________________________________________________
Georgia 0 8 0
________________________________________________________________________________
Idaho 0 2 0
________________________________________________________________________________
Illinois 0 13 0
________________________________________________________________________________
Indiana 0 10 0
________________________________________________________________________________
Iowa 0 1 0
________________________________________________________________________________
Kansas 0 5 0
________________________________________________________________________________
Kentucky 1 8 0
________________________________________________________________________________
Maine 0 3 0
________________________________________________________________________________
Maryland 0 13 0
________________________________________________________________________________
Massachusetts 1 13 0
________________________________________________________________________________
Michigan 0 10 0
________________________________________________________________________________
Minnesota 0 5 0
________________________________________________________________________________
Mississippi 0 1 0
________________________________________________________________________________
Missouri 0 12 0
________________________________________________________________________________
Nevada 0 4 0
________________________________________________________________________________
</TABLE>
119
<PAGE>
<TABLE>
<CAPTION>
================================================================================
STATE FRANCHISE PROJECTED PROJECTED
AGREEMENTS FRANCHISED NEW COMPANY OWNED
SIGNED BUT STORE STORES IN THE OPENINGS NEXT
NOT OPEN/(1)/ NEXT FISCAL YEAR YEAR
________________________________________________________________________________
<S> <C> <C> <C>
New Hampshire 0 3 0
________________________________________________________________________________
New Jersey 1 16 0
________________________________________________________________________________
New Mexico 0 2 0
________________________________________________________________________________
New York 2 36 0
________________________________________________________________________________
North Carolina 0 2 0
________________________________________________________________________________
Ohio 0 10 0
________________________________________________________________________________
Oregon 0 3 0
________________________________________________________________________________
Pennsylvania 0 11 0
________________________________________________________________________________
Rhode Island 0 3 0
________________________________________________________________________________
South Carolina 0 1 0
________________________________________________________________________________
Tennessee 2 12 0
________________________________________________________________________________
Texas 0 28 0
________________________________________________________________________________
Utah 0 4 0
________________________________________________________________________________
Virginia 0 10 0
________________________________________________________________________________
Washington 1 6 0
________________________________________________________________________________
Wisconsin 1 2 0
================================================================================
</TABLE>
(1) Units identified in this column are not included in the second column of
this table.
ITEM 21
-------
FINANCIAL STATEMENTS
Attached as Exhibit J are BCI's audited financial statements (balance
sheets, statements of operations, stockholders' equity and cash flows and
supplemental schedules) for the fiscal years ending December 29, 1996, December
31, 1995 and, December 25, 1994.
120
<PAGE>
ITEM 22
-------
CONTRACTS
Attached to this offering circular are the following standard forms of
agreements currently used by BCI:
EXHIBITS
--------
EXHIBIT A BOSTON CHICKEN, INC. DEVELOPMENT AGREEMENT
EXHIBIT B BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
EXHIBIT C BOSTON CHICKEN, INC. DELIVERY RIDER
EXHIBIT D BOSTON CHICKEN, INC. CATERING RIDER
EXHIBIT K SECURED LOAN AGREEMENT
EXHIBIT K-1 INDUCEMENT AGREEMENT
EXHIBIT K-2 FORM OF GECC SUBLEASE
EXHIBIT L FRANCHISE SUBLEASE
EXHIBIT M FRANCHISE LEASE
EXHIBIT M-1 SPECIAL PURPOSES ADDENDUM TO FRANCHISE LEASE
EXHIBIT M-2 THIRD PARTY LEASE
EXHIBIT N COMPUTER AND COMMUNICATIONS SYSTEMS AGREEMENT
ITEM 23
-------
RECEIPT
(See last page of this Offering Circular)
121
<PAGE>
EXHIBIT 1
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
AGENTS FOR SERVICE OF PROCESS
-----------------------------
Exhibit 1 - 1
<PAGE>
EXHIBIT 1
---------
LIST OF STATE AGENCIES/AGENTS
-----------------------------
FOR SERVICE OF PROCESS
----------------------
Listed here are the names, addresses and telephone numbers of the state
agencies having responsibility for franchising disclosure/registration laws.
CALIFORNIA HAWAII
Department of Corporations: Securities Examiner
1010 Richards Street
Los Angeles Honolulu, Hawaii 96813
(808) 548-2021
Suite 600 ILLINOIS
3700 Wilshire Boulevard
Los Angeles, California 90010 Franchise Division
(213) 736-2741 Office of Attorney General
500 South Second Street
Sacramento Springfield, Illinois 62706
(217) 782-4465
1115 Eleventh Street
Sacramento, California 95814 INDIANA
(916) 445-7205
(agent for service of process)
San Diego
Indiana Secretary of State
1350 Front Street 201 State House
San Diego, California 92101 200 West Washington Street
(619) 525-4044 Indianapolis, Indiana 46204
(317) 232-6531
San Francisco
(state administrator)
1390 Market Street
San Francisco, California 94102 Indiana Secretary of State
(415) 557-3787 Securities Division
Room E-111
302 West Washington Street
Indianapolis, Indiana 46204
(317) 232-6681
1
<PAGE>
MARYLAND NEW YORK
(state agency) (state agency)
Office of the Attorney General- New York State Department of Law
Securities Division Bureau of Investor Protection and Securities
20th Floor 120 Broadway
200 St. Paul Place New York, New York 10271
Baltimore, Maryland 21202-2021 (212) 416-8000
(410) 576-7044
(for service of process)
(for service of process)
Secretary of the State of New York
Maryland Securities Commissioner 162 Washington Street
at the Office of Attorney General- Albany, New York 11231
Securities Division (518) 474-4750
20th Floor
200 St. Paul Place NORTH DAKOTA
Baltimore, Maryland 21202-2021
(410) 576-7044 Office of Securities Commissioner
Fifth Floor
MICHIGAN 600 East Boulevard
Bismarck, North Dakota 58505
Consumer Protection Division (701) 328-4712
Antitrust and Franchise Unit
Michigan Department of
Attorney General OREGON
670 Law Building
Lansing, Michigan 48913 Department of Insurance and Finance
(517) 373-7177 Corporate Securities Section
Labor and Industries Building
MINNESOTA Salem, Oregon 97310
(503) 378-4387
Minnesota Department of Commerce
133 East Seventh Street RHODE ISLAND
St. Paul, Minnesota 55101
(612) 296-6328 Division of Securities
Suite 232
233 Richmond Street
Providence, Rhode Island 02903
(401) 277-3048
2
<PAGE>
SOUTH DAKOTA WASHINGTON
Division of Securities (for service of process)
c/o State Capitol
118 West Capitol Director
Pierre, South Dakota 57501 Department of Financial Institutions
(605) 773-4013 Securities Division
General Admin. Bldg. 3rd Floor
VIRGINIA 210-11th Avenue S.W.
Olympia, Washington 98504
(for service of process)
(for other matters)
Clerk, State Corporation Commission
1300 East Main Street Department of Financial Institutions
Richmond, Virginia 23219 Securities Division
(804) 371-9672 P.O. Box 9033
Olympia, Washington 98507-9033
(for other matters) (206) 902-8760
State Corporation Commission
Division of Securities and WISCONSIN
Retail Franchising
1300 East Main Street Securities and Franchise Registration
Ninth Floor Wisconsin Securities Commission
Richmond, Virginia 23219 101 East Wilson Street, 4th Floor
(804) 371-9051 Madison, Wisconsin 53701
(608) 266-3431
3
<PAGE>
EXHIBIT A
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
DEVELOPMENT AGREEMENT
---------------------
A-1
<PAGE>
BOSTON CHICKEN, INC.
DEVELOPMENT AGREEMENT
---------------------
------------------------------------
DEVELOPER
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
<S> <C> <C>
1. PREAMBLES................................................ 1
2. CERTAIN DEFINITIONS...................................... 2
3. DEVELOPMENT RIGHTS AND OBLIGATIONS....................... 9
A. GRANT OF DEVELOPMENT RIGHTS;
PRINCIPAL OWNERS' GUARANTY........................... 9
B. TERRITORIAL RIGHTS................................... 10
C. DEVELOPMENT OBLIGATIONS.............................. 10
D. RIGHTS RETAINED BY COMPANY........................... 11
E. DEVELOPER'S OPTION TO DEVELOP TARGET SITES........... 11
F. DEVELOPER'S OPTION TO PURCHASE CONVERSION SITES...... 13
4. OTHER DISTRIBUTION METHODS............................... 14
A. SPECIAL DISTRIBUTION ARRANGEMENTS.................... 14
B. DELIVERY SERVICE..................................... 15
C. CATERING SERVICE..................................... 16
5. GRANT OF FRANCHISES AND ADVERTISING REQUIREMENT.......... 17
A. SITE REVIEW AND APPROVAL............................. 17
B. LEASE AND PURCHASE OF APPROVED SITES................. 18
C. EXECUTION OF FRANCHISE AGREEMENTS.................... 19
D. INITIAL FRANCHISE AND ROYALTY FEES................... 20
E. ADVERTISING EXPENDITURES............................. 20
6. INITIAL PAYMENTS......................................... 20
A. DEVELOPMENT FEE...................................... 20
B. DEPOSIT.............................................. 20
7. CONFIDENTIAL INFORMATION................................. 21
8. EXCLUSIVE RELATIONSHIP................................... 23
9. MARKS.................................................... 25
A. GOODWILL AND OWNERSHIP OF MARKS...................... 25
B. LIMITATIONS ON DEVELOPER'S USE OF MARKS.............. 25
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS............. 26
D. DISCONTINUANCE OF USE OF MARKS....................... 26
E. INDEMNIFICATION OF DEVELOPER......................... 26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
10. COPYRIGHTS............................................... 27
A. OWNERSHIP OF COPYRIGHTS.............................. 27
B. LIMITATION ON DEVELOPER'S USE OF COPYRIGHTS.......... 27
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS............. 28
D. DISCONTINUANCE OF USE................................ 28
11. OBLIGATIONS OF DEVELOPER................................. 28
A. FULL TIME SUPERVISION................................ 28
B. CHIEF OPERATING OFFICER.............................. 29
C. DEVELOPMENT DIRECTOR AND REAL ESTATE MANAGERS........ 29
D. TRAINING DIRECTOR.................................... 30
E. MARKETING DIRECTOR................................... 31
F. MANAGEMENT PERSONNEL AND TRAINING.................... 31
G. FINANCIAL CAPACITY................................... 32
H. INSURANCE............................................ 33
I. RECORDS AND REPORTS.................................. 33
J. DEVELOPMENT MANUAL................................... 35
K. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES..... 36
L. COMMUNICATION AND INFORMATION SYSTEMS................ 36
12. TRANSFER................................................. 37
A. BY COMPANY........................................... 37
B. DEVELOPER AND ITS OWNERS MAY NOT
TRANSFER WITHOUT APPROVAL OF COMPANY................. 37
C. CONDITIONS FOR APPROVAL OF TRANSFER.................. 39
D. DEATH OR INCAPACITY OF DEVELOPER..................... 43
E. PUBLIC OR PRIVATE OFFERINGS.......................... 43
F. EFFECT OF CONSENT TO TRANSFER........................ 45
G. COMPANY'S RIGHT OF FIRST REFUSAL..................... 45
H. OWNERSHIP STRUCTURE AND INITIAL CAPITALIZATION....... 46
I. DELEGATION BY COMPANY................................ 46
13. TERMINATION OF AGREEMENT................................. 46
A. BY DEVELOPER......................................... 46
B. BY COMPANY........................................... 47
C. TERMINATION OF THE DEVELOPMENT
TERM AND CERTAIN RIGHTS OF DEVELOPER................. 48
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
14. RIGHTS AND OBLIGATIONS OF COMPANY AND
DEVELOPER UPON TERMINATION OF THIS
AGREEMENT OR EXPIRATION OF THE AGREEMENT TERM........ 49
A. PAYMENT OF AMOUNTS OWED TO COMPANY................... 49
B. MARKS AND COPYRIGHTED WORKS.......................... 50
C. CONFIDENTIAL INFORMATION............................. 50
D. COVENANT NOT TO COMPETE.............................. 51
E. CONTINUING OBLIGATIONS............................... 52
15. INDEPENDENT CONTRACTORS/INDEMNIFICATION.................. 52
16. ENFORCEMENT.............................................. 53
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.... 53
B. WAIVER OF OBLIGATIONS................................ 54
C. INJUNCTIVE RELIEF.................................... 56
D. RIGHTS OF PARTIES ARE CUMULATIVE..................... 56
E. COSTS AND LEGAL FEES................................. 56
F. GOVERNING LAW........................................ 56
G. CONSENT TO JURISDICTION/CHOICE OF FORUM.............. 57
H. LIMITATIONS OF CLAIMS................................ 57
I. WAIVER OF PUNITIVE DAMAGES........................... 57
J. WAIVER OF JURY TRIAL................................. 57
K. BINDING EFFECT....................................... 58
L. CONSTRUCTION......................................... 58
M. REASONABLENESS....................................... 58
17. NOTICES AND PAYMENTS..................................... 58
18. DELEGATION OF CERTAIN FUNCTIONS.......................... 59
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS AND ATTACHMENTS
------------------------
<S> <C> <C>
EXHIBIT A - DEVELOPER ACKNOWLEDGEMENTS AND
REPRESENTATIONS STATEMENT
EXHIBIT B - DEVELOPMENT AREA(S)
EXHIBIT C - DEVELOPMENT SCHEDULE
EXHIBIT D - DEVELOPMENT FEE AND DEPOSIT
EXHIBIT E - PRINCIPAL OWNERS, OTHER OWNERS, MANAGEMENT
PERMITTED COMPETITIVE BUSINESSES, MARKET REAL
ESTATE DEVELOPMENT PLAN AND INITIAL
CAPITALIZATION
EXHIBIT F - CONFIDENTIALITY AND NON-COMPETE AGREEMENT
EXHIBIT G - [INTENTIONALLY OMITTED]
EXHIBIT H - GUARANTY AND ASSUMPTION OF DEVELOPER'S
OBLIGATIONS
EXHIBIT I - FORM FRANCHISE AGREEMENT
</TABLE>
APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE
INFORMATION CONTAINED IN THIS DEVELOPMENT AGREEMENT. THESE ADDITIONAL
DISCLOSURES, IF ANY, APPEAR IN AN ADDENDUM AS A RIDER TO THE AREA DEVELOPMENT
AGREEMENT.
iv
<PAGE>
BOSTON CHICKEN, INC.
DEVELOPMENT AGREEMENT
---------------------
THIS AGREEMENT is made and entered into this day of ,
----- ----------------
199 (the "EFFECTIVE DATE"), by and between BOSTON CHICKEN, INC., a Delaware
corporation ("COMPANY"), and DEVELOPER (defined below).
"DEVELOPER":
-----------------------------------------------------------
-----------------------------------------------------------
a----------------------------------------------------------
Principal Address:
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
1. PREAMBLES.
---------
COMPANY and its Affiliates (as defined below) have developed and continue
to develop methods of operating food service businesses, including the food
service business referred to in this Agreement as a "BOSTON MARKET UNIT"
(defined below), which feature Products (defined below) for on-premises and
carry-out dining. In addition to on-premises and carry-out dining, COMPANY may,
in its sole discretion, (a) offer to a BOSTON MARKET Unit the right to offer
and/or require a BOSTON MARKET Unit to offer Delivery Service (defined below)
and/or (b) approve a franchise owner and/or developer of a BOSTON MARKET Unit to
offer Catering Service (defined below) or to operate Special Distribution
Arrangements (defined below). BOSTON MARKET Units operate at locations that
feature a distinctive food service format and trade dress and utilize
distinctive business formats, specifications, employee selection and training
programs, signs, equipment, layouts, systems, recipes, methods, procedures,
designs and marketing and advertising standards and formats, all of which
COMPANY may modify from time to time in its sole discretion (the "BOSTON MARKET
SYSTEM"). COMPANY operates, and franchises others to operate, BOSTON MARKET
Units using the BOSTON MARKET System and the Marks (defined below).
COMPANY grants to certain qualified persons or entities who meet COMPANY's
qualifications and who are willing to undertake the investment and effort, the
right to develop a specified number of BOSTON MARKET Units within a defined
geographic area. This Agreement governs the right and obligation of DEVELOPER
and Authorized Entities (defined below) to develop BOSTON MARKET units within
the Development Area (defined below) in
<PAGE>
accordance with the Development Schedule (defined below). The operation of each
BOSTON MARKET Unit will be governed by a Franchise Agreement (defined below).
2. CERTAIN DEFINITIONS.
-------------------
For purposes of this Agreement, the terms listed below have the meanings
that follow them. Other terms used in this Agreement are defined and construed
in the context in which they occur.
"ACCOUNTING PERIOD" - One of thirteen periods of four consecutive weeks in
-----------------
each year that is designated by COMPANY as an accounting period.
"AFFILIATE" - Any person or legal entity that directly or indirectly owns
---------
or controls COMPANY, that is directly or indirectly owned or controlled by
COMPANY, or that is under common control with COMPANY. For purposes of this
definition, "control" means the power to direct or cause the direction of the
management and policies of an entity.
"AGREEMENT TERM" - The period commencing upon the Effective Date and ending
--------------
upon the expiration or termination of the last to expire or terminate of the
Franchises (defined below) and successor Franchises granted to DEVELOPER and
Authorized Entities pursuant to this Agreement, unless terminated sooner in
accordance with the provisions of this Agreement.
"APPROVED SITE" - A site which COMPANY has approved as meeting its minimum
-------------
criteria for the development and operation of a BOSTON MARKET Unit.
"AUTHORIZED ENTITY" - A legal entity that is controlled by DEVELOPER and
-----------------
meets COMPANY's then-current standards and requirements for BOSTON MARKET Unit
franchise owners, including, without limitation, financial requirements, limits
on the total number of holders of equity interests and requirements for owners
of non-controlling Ownership Interests (defined below). For purposes of this
definition, an entity shall be deemed to be controlled by DEVELOPER if and only
during such times as:
1. DEVELOPER owns not less than a majority of all the Ownership
Interests in such entity; and
2. DEVELOPER has at least the percentage of voting power required
under applicable law to authorize a merger, liquidation or transfer of
substantially all of the assets of the entity and to control or determine
any other vote or decision of the entity without the vote or approval of
any other party; and
3. if the entity is a partnership, DEVELOPER is the sole general
partner of a limited partnership or managing partner of a general
partnership; and
2
<PAGE>
4. if the entity is a limited liability company, DEVELOPER is the
sole Manager, or DEVELOPER owns at least a majority of all the Ownership
Interests in the sole Manager, of the limited liability company; or
DEVELOPER owns at least a majority of the membership interests in the
limited liability company and
5. DEVELOPER establishes to the satisfaction of COMPANY that
DEVELOPER has, and, during the term of the Franchise Agreement for the UNIT
to be owned and operated by such entity, will have, the sole right and
power to direct the management policies and operation of such entity and
the sale or other disposition of such UNIT.
"BOSTON MARKET UNIT" - A food service business that:
------------------
(a) offers Products for consumer consumption through on-premises and
carry-out dining, provided that COMPANY may, in its sole discretion,
authorize and/or require such business to offer Delivery Service pursuant
to a Delivery Rider (defined below) and/or approve the franchise owner of
such business to offer Catering Service pursuant to a Catering Rider
(defined below) or to operate Special Distribution Arrangements pursuant to
a Special Distribution Agreement (defined below); and
(b) operates using the BOSTON MARKET System and the Marks; and
(c) is either operated by COMPANY or its Affiliates or pursuant to a
valid franchise from COMPANY.
"CATERING AREA" - The geographic area in which COMPANY, in its sole
-------------
discretion, authorizes the owner of a Franchise to provide Catering Service
pursuant to a Catering Rider, which area may be the same as, smaller than,
larger than or different from the Territory (defined in the Franchise Agreement)
of a BOSTON MARKET Unit. COMPANY may, at any time and in its sole discretion,
with or without cause and regardless of the investment made by DEVELOPER in
establishing or conducting Catering Service or the length of time DEVELOPER has
offered Catering Service: (1) reduce, modify or expand the Catering Area from
time to time; or (2) suspend or terminate DEVELOPER's right to offer Catering
Service.
"CATERING RIDER" - The form of rider to a Franchise Agreement used by
--------------
COMPANY from time to time to authorize in its sole discretion a franchise owner
of a BOSTON MARKET UNIT to offer Catering Service within the applicable Catering
Area.
"CATERING SERVICE" - The delivery of Products prepared at a BOSTON MARKET
----------------
Unit or a separate facility approved by COMPANY in writing (such approved
facility is referred to herein as a "CATERING FACILITY") to customers in the
Catering Area pursuant to COMPANY's standards and specifications for the
provision of such service, which COMPANY may change from time to time in its
sole discretion, where
3
<PAGE>
(1) such Products are intended to serve fifteen (15) or more
persons, or
(2) in addition to the delivery of Products, DEVELOPER (or an
Authorized Entity) provides ancillary services to a customer at such
location within the Catering Area, including, by way of example and without
limitation, the setting up for serving or distribution of Products.
"COMPETITIVE BUSINESS" - A business or enterprise, other than a BOSTON
--------------------
MARKET Unit, that:
(1) offers food products, which are the same as or similar to the
Products, for consumer consumption through on-premises dining, carry-out
dining, delivery service, catering service or other distribution channels;
or
(2) grants or has granted franchises or licenses or establishes or
has established joint ventures, for the development and/or operation of a
business or enterprise described in the foregoing clause (1).
"COMPUTER SYSTEM" - Those brands, types, makes, and/or models of
---------------
communications and computer systems and hardware specified or required by
COMPANY for use by, between, or among UNITS and/or DEVELOPER 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 UNITS and/or
DEVELOPER, between or among UNITS and/or DEVELOPER between or among UNITS
and/or DEVELOPER and COMPANY;
(2) security systems;
(3) printers; and
(4) archival and back-up systems.
"CONTROLLING INTEREST" - If DEVELOPER is a:
--------------------
(1) corporation, such number of the voting shares of DEVELOPER as (a)
shall permit voting control of DEVELOPER on any issue and (b) shall prevent
any other person, group, combination, or entity from blocking voting
control on any issue or exercising any veto power; and
(2) a general partnership, a managing partnership interest or such
percentage of the general partnership interests in DEVELOPER as (a) shall
permit determination of the outcome on any issue and (b) shall prevent any
other person, group, combination, or entity from blocking voting control on
any issue or exercising any veto power;
4
<PAGE>
(3) limited partnership, a general partnership interest or such
percentage of limited partnership interests as shall permit the replacement
or removal of any general partner; and
(4) a limited liability company such percentage of the membership
interests as (a) shall permit determination of the outcome on any issue and
(b) shall prevent any other person, group, combination or entity from
blocking voting control on any issue or exercising any veto power.
"DELIVERY AREA" - The geographic area in which COMPANY, in its sole
-------------
discretion, authorizes a franchise owner to provide Delivery Service pursuant to
a Delivery Rider, which area may be the same as, smaller than, larger than or
different from the Territory of a BOSTON MARKET Unit. COMPANY may, at any time
and in its sole discretion, with or without cause and regardless of the
investment made by DEVELOPER in establishing and conducting Delivery Service or
the length of time DEVELOPER has offered Delivery Service: (1) reduce, modify
or expand the Delivery Area from time to time; or (2) suspend or terminate
DEVELOPER's (or Authorized Entity's) right to offer Delivery Service.
"DELIVERY RIDER" - The form of rider to a Franchise Agreement used by
--------------
COMPANY from time to time to authorize or require in its sole discretion a
franchise owner of a BOSTON MARKET Unit to offer Delivery Service within the
applicable Delivery Area.
"DELIVERY SERVICE" - The delivery of Products prepared at a BOSTON MARKET
----------------
Unit or a separate delivery facility approved by COMPANY (such approved facility
is referred to herein as a "DELIVERY FACILITY") to customers in the Delivery
Area pursuant to COMPANY's standards and specifications for the provision of
such service, which COMPANY may change from time to time in its sole discretion,
where
(1) such Products are intended to serve fewer than fifteen (15)
persons, and
(2) such service involves the provision of no services other than the
delivery of Products to a customer at a location within the Delivery Area.
"DEVELOPMENT AREA" - The aggregate of the geographic areas described in
----------------
Exhibit B to this Agreement.
- ---------
"DEVELOPMENT SCHEDULE" - The schedule of the number of BOSTON MARKET Units
--------------------
required to be open and operational at specified dates in each Sub-Area and the
required opening dates for each of them set forth in Exhibit C to this
---------
Agreement.
"DEVELOPMENT TERM" - The period during which DEVELOPER is authorized and
----------------
required to develop BOSTON MARKET Units pursuant to this Agreement, which will
commence on the Effective Date and will expire, unless terminated earlier in
accordance with the terms of this Agreement, on the earlier to occur of (i) the
last opening date set forth in
5
<PAGE>
Exhibit C to this Agreement; or (ii) the first date on which the number of UNITS
- ---------
(excluding designated Mall Sites) for which a Franchise Agreement has been
executed and delivered for a location in the Development Area is equal to the
Total Development Quota set forth in Exhibit C.
---------
"FRANCHISE" - The right to operate a BOSTON MARKET Unit at a particular
---------
location and to use the Marks and the BOSTON MARKET System in the operation
thereof.
"FRANCHISE AGREEMENT" - The form of franchise agreement (including all
-------------------
exhibits, riders, guarantees and other agreements used in connection therewith)
used by COMPANY from time to time in the offering and granting of Franchises in
the United States of America; a copy of the current form of such franchise
agreement is attached hereto as Exhibit I.
---------
"IMMEDIATE FAMILY" - (1) The spouse of a person; and (2) the natural and
----------------
adoptive parents and natural and adopted children and siblings of such person
and their spouses; and (3) the natural and adoptive parents and natural and
adopted children and siblings of the spouse of such person; and (4) any other
member of the household of such person.
"LICENSED PROGRAM" - The computer software programs developed by or for
-----------------
COMPANY and designated by COMPANY from time to time as specified or required in
connection with utilization of the Computer System, which may include, without
limitation, COMPANY's required point-of-sale, bookkeeping, inventory, training,
marketing, employee selection, operations and financial information, collection
and retrieval systems (including COMPANY's required general ledger system
utilizing the standard chart of accounts prescribed by COMPANY from time to
time) for use in connection with the operation of BOSTON MARKET Units or
franchise owners' and developers' businesses, including any updates,
supplements, modifications or enhancements thereto made from time to time, all
related documentation, the tangible media upon which such program is recorded,
and the database file structure thereof, but excluding any data or databases
owned or compiled by COMPANY or its Affiliates for use with the Licensed Program
or otherwise or any data generated by the use of the Licensed Program.
"MALL SITE" - A site that is suitable for a BOSTON MARKET Unit and that is
---------
located in a regional shopping mall.
"MARKS" - The trademarks, service marks, logos and other commercial symbols
-----
which COMPANY authorizes DEVELOPER and its Authorized Entities to use to
identify the services and/or products offered by BOSTON MARKET Units, including
the mark "BOSTON MARKET" and the Trade Dress (defined in the Franchise
Agreement); provided that such trademarks, service marks, logos, other
commercial symbols, and the Trade Dress are subject to modification and
discontinuance at COMPANY's sole discretion and may include additional or
substitute trademarks, service marks, logos, commercial symbols and trade dress
as provided in this Agreement.
6
<PAGE>
"OWNER" - Each person or entity holding direct or indirect, legal or
------
beneficial Ownership Interests in DEVELOPER, and each person who has other
direct or indirect property rights in DEVELOPER or this Agreement.
"OWNERSHIP INTERESTS" - In relation to a: (i) corporation, the legal or
-------------------
beneficial ownership of shares in the corporation; (ii) partnership, the legal
or beneficial ownership of a general or limited partnership interest; (iii)
limited liability company, the legal or beneficial ownership of units of
membership interests in the limited liability company; or (iv) trust, the
ownership of a beneficial interest of such trust.
"PERMITTED COMPETITIVE BUSINESS" - A business which constitutes a
------------------------------
Competitive Business on the date of this Agreement and is disclosed in Exhibit E
---------
to this Agreement, provided that such business (1) is not on the date of this
Agreement and does not at any time thereafter become a Rotisserie Unit, and (2)
does not offer rotisserie-cooked chicken or potpies on its menu, provided that
if such business is a franchised or licensed business of a franchisor which,
after the date of this Agreement, specifies that such business offer rotisserie-
cooked chicken or potpies as a required menu item, it shall continue to be
deemed a Permitted Competitive Business so long as it does not become a
Rotisserie Unit.
"PRINCIPAL OWNER" - Each Owner which:
---------------
(1) is a general partner in DEVELOPER; or
(2) has a direct or indirect equity interest:
(a) in DEVELOPER of five percent (5%) or more (regardless of
whether such Owner is entitled to vote thereon); or
(b) in any BOSTON MARKET Unit other than the UNITS, or any
developer and/or franchise owner of BOSTON MARKET Units other than
DEVELOPER (or its Authorized Entities); or
(3) is designated as a Principal Owner in Section 2 of Exhibit E to
---------
this Agreement;
provided, however, that a reduction in a Principal Owner's equity interest in
DEVELOPER below five percent (5%) shall not affect his/her/its status as a
Principal Owner unless such reduction is the result of the transfer of all
his/her/its equity interests in DEVELOPER in compliance with this Agreement.
"PRODUCTS" - Products approved or required by COMPANY from time to time, in
--------
its sole discretion, for sale at or from BOSTON MARKET Units, including, without
limitation, rotisserie roasted chicken, other chicken specialties, potpies,
roasted turkey, baked ham, meatloaf, soups, salads, vegetables, desserts, baked
goods, private label packaged goods,
7
<PAGE>
beverages and other food products, provided that the foregoing products are
subject to modification or discontinuance in COMPANY's sole discretion, from
time to time, and may include additional or substitute products.
"REQUIRED TELEVISION ADVERTISING" - Television advertising in the Dominant
-------------------------------
Marketing Area (as determined by the Nielsen Ratings Company from time to time)
in which the Development Area is located at a minimum level of 150 gross ratings
points for a minimum of thirty-five (35) weeks per calendar year, at least one-
half of which gross ratings points must be in prime television viewing time,
provided that COMPANY may, in its sole discretion, from time to time use a
market designation comparable to, but different from, the Dominant Marketing
Area for purposes of this definition.
"ROTISSERIE UNIT" - A food service business, including a BOSTON MARKET
---------------
Unit, which derives a significant portion of its revenue from the sale of
rotisserie-cooked chicken and/or potpies.
"SPECIAL DISTRIBUTION AGREEMENT" - A separate agreement whereby COMPANY
------------------------------
authorizes a franchise owner of a BOSTON MARKET Unit to operate a Special
Distribution Arrangement at a Special Distribution Location designated by
COMPANY.
"SPECIAL DISTRIBUTION ARRANGEMENT" - The sale of Products at or from a
--------------------------------
Special Distribution Location (defined below), whether or not by or through on-
premises food service facilities or concessions, pursuant to COMPANY's standards
and specifications for such sales, which COMPANY may change from time to time in
its sole discretion.
"SPECIAL DISTRIBUTION LOCATION" - A facility or location, such as by way of
-----------------------------
example and without limitation, a school, hospital, office, work site, military
facility, grocery store, convenience store, supermarket, entertainment or
sporting facility or event, bus or train station, park, toll road or limited
access highway facility, shopping mall or other similar facility, at or from
which COMPANY, in its sole discretion, authorizes the operation of a Special
Distribution Arrangement pursuant to a Special Distribution Agreement, which
facility may be located within or outside the Development Area or any Sub-Area.
"SPECIFIED SOFTWARE" - Such software, programming, and services other than
------------------
the Licensed Program, which COMPANY from time to time specifies or requires in
connection with utilization of the Computer System.
"SUB-AREAS" - The geographic areas designated as Sub-Areas in Exhibit B to
--------- ---------
this Agreement which, taken together, make up the Development Area.
"SUB-AREA TERM" - The period during which DEVELOPER is authorized and
-------------
required to develop BOSTON MARKET units in a given Sub-Area pursuant to this
Agreement, which will commence on the Effective Date and will expire, unless
terminated earlier in accordance with the terms of this Agreement, on the
earlier to occur of: (i) the last opening date set forth
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<PAGE>
in Exhibit C to this Agreement for that Sub-Area; or (ii) the first date on
---------
which the number of UNITS (excluding designated Mall Sites) in the Sub-Area for
which a Franchise Agreement has been executed and delivered is equal to the Sub-
Area Quota (as set forth in Exhibit C) for that Sub-Area.
---------
"UNIT" - A BOSTON MARKET Unit developed, owned and operated by DEVELOPER or
----
an Authorized Entity pursuant to this Agreement and a Franchise Agreement.
3. DEVELOPMENT RIGHTS AND OBLIGATIONS.
----------------------------------
3.A. GRANT OF DEVELOPMENT RIGHTS;
PRINCIPAL OWNERS' GUARANTY.
--------------------------
DEVELOPER has applied to COMPANY for and COMPANY has agreed to grant to
DEVELOPER, the right to develop, own and operate, strictly in accordance with
the Development Quota (as defined below in Paragraph 3.C.), BOSTON MARKET Units
in the Development Area. DEVELOPER's application has been approved by COMPANY
in reliance upon all of the representations made by DEVELOPER and its Owners in
such application and the Developer Acknowledgements and Representations
Statement, a copy of which is attached to this Agreement as Exhibit A and which
---------
shall be executed by DEVELOPER concurrently with this Agreement. DEVELOPER
agrees to prepare and submit to COMPANY for review, amendment, and approval a
real estate development plan for developing BOSTON MARKET Units in the
Development Area (the "MARKET REAL ESTATE DEVELOPMENT PLAN") (which shall
utilize, among other sources, information from the Market Plans (defined below
in Paragraph 5.A.) which DEVELOPER purchases from COMPANY. Provided that
DEVELOPER is in full compliance with all of the terms and conditions of this
Agreement, including, without limitation, the development obligations contained
in Paragraph 3.C. hereof, and DEVELOPER and all Authorized Entities are in full
compliance with all of their obligations under all Franchise Agreements executed
pursuant hereto, COMPANY will grant to DEVELOPER (or Authorized Entities) during
the Development Term and in accordance with Sections 4 and 5 hereof, the right
to develop and operate BOSTON MARKET Units in the Development Area.
Notwithstanding any other provision of this Agreement or the Franchise
Agreement, COMPANY reserves the right in its sole discretion to grant Franchises
pursuant to this Agreement only to DEVELOPER and not to Authorized Entities of
DEVELOPER.
DEVELOPER shall cause all Principal Owners and their spouses as of the
Effective Date to execute and deliver to COMPANY concurrently with the execution
of this Agreement and all persons or entities that become Principal Owners after
the Effective Date and their spouses to promptly thereafter execute and deliver
to COMPANY, the form of Guaranty and Assumption of Developer's Obligations
("GUARANTY") attached hereto as Exhibit H.
---------
9
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3.B. TERRITORIAL RIGHTS.
------------------
Except as otherwise provided in Section 4 and Paragraphs 3.E. and 3.F., and
provided that DEVELOPER is in full compliance with this Agreement and DEVELOPER
and its Authorized Entities are in full compliance with all Franchise
Agreements, COMPANY and its Affiliates will not during the Sub-Area Term for
such Sub-Area operate or grant franchises for the operation of BOSTON MARKET
Units within such Sub-Area. DEVELOPER acknowledges and agrees that DEVELOPER's
rights under this Agreement are limited to the applicable number of UNITS and
the schedule and timing of the opening of UNITS in the respective Sub-Areas
during the respective Sub-Area Terms and DEVELOPER is not granted any rights to
develop or operate, and DEVELOPER will not develop or operate, BOSTON MARKET
Units outside the respective Sub-Areas, except pursuant to rights granted to
DEVELOPER under other agreements entered into with COMPANY and will not offer
Catering Service or Delivery Service or operate Special Distribution
Arrangements, within the Development Area, except as provided in Section 4.
Upon the termination or expiration of the Agreement Term or the Development
Term, and during the Agreement Term as expressly provided in this Agreement,
COMPANY and its Affiliates shall have the right to develop and operate, and to
grant to others development rights and franchises to develop and operate, BOSTON
MARKET Units within the Development Area. Furthermore, upon the termination or
expiration of the Sub-Area Term for a given Sub-Area, and as expressly provided
in this Agreement during the Sub-Area Term, COMPANY and its Affiliates shall
have the right to develop and operate, and to grant others development rights
and franchises to develop and operate, BOSTON MARKET Units within such Sub-Area.
3.C. DEVELOPMENT OBLIGATIONS.
-----------------------
DEVELOPER agrees that during the Development Term, it will continuously
exert its best efforts to promote and enhance the development of BOSTON MARKET
Units within the Development Area. Without limiting the foregoing obligation,
DEVELOPER agrees to have open and in operation in each Sub-Area the number of
BOSTON MARKET Units set forth for the respective Sub-Area Quota in Exhibit C
---------
attached hereto by the opening dates specified therein. DEVELOPER acknowledges
and agrees that a BOSTON MARKET Unit that closes for more than five (5) days
(not counting COMPANY-approved holidays) during any period of twelve (12) months
shall not be counted as open and in operation as of the next UNIT opening date
after such closing for purposes of determining DEVELOPER's compliance with the
Development Schedule for the Sub-Area in which such UNIT is located. Developer
also agrees that it will at all times faithfully, honestly and diligently
perform its obligations under this Agreement and that it will update the Market
Real Estate Development Plan as COMPANY requires from time to time. DEVELOPER
acknowledges that COMPANY makes no representations or warranties that the
Development Area or the Sub-Areas can support, or there are sufficient sites
for, the number of BOSTON MARKET Units specified in the Development Schedule.
DEVELOPER acknowledges and agrees that DEVELOPER shall have the right to
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<PAGE>
develop in each Sub-Area only the number of BOSTON MARKET units set forth on
Exhibit C to this Agreement.
- ---------
3.D. RIGHTS RETAINED BY COMPANY.
--------------------------
Except as expressly limited by Paragraph 3.B., COMPANY (on behalf of
itself, its Affiliates and its designees) retains all rights with respect to
BOSTON MARKET Units, the Marks, the Copyrighted Works, and the sale of Products
and any other products and services, anywhere in the world, including, without
limitation:
(1) the right to operate or grant others the right to operate food
service businesses, including, without limitation, BOSTON MARKET Units
and/or Rotisserie Units, at such locations within and/or outside the
Development Area and each Sub-Area and on such terms and conditions as
COMPANY, in its sole discretion, deems appropriate; and
(2) the right, and the right to grant others the right, to develop,
manufacture, market, distribute and/or sell Products and/or any other
product or service within and/or outside the Development Area and each Sub-
Area through any channel of distribution, whether wholesale, retail or
otherwise, including, without limitation, through Special Distribution
Arrangements, Delivery Service and Catering Service under or in association
with the Marks or any other trademarks and/or to own or operate any other
business under the Marks or any other trademarks; and
(3) subject to Paragraphs 3.E. and 3.F. below, the right to acquire
and operate any business, including, without limitation, a business
operating one or more food service businesses located or operating within
and/or outside the Development Area and any Sub-Area.
3.E. DEVELOPER'S OPTION TO DEVELOP TARGET SITES.
------------------------------------------
Notwithstanding anything to the contrary in this Agreement, if during the
Sub-Area Term of a particular Sub-Area COMPANY locates a site suitable for a
BOSTON MARKET Unit within such Sub-Area (a "TARGET SITE"), COMPANY shall notify
DEVELOPER in writing of such Target Site if COMPANY intends that such Target
Site be developed and operated as a BOSTON MARKET Units. Within ten (10) days
after DEVELOPER's receipt of COMPANY's notice regarding such Target Site
(including any relevant site-related materials in COMPANY'S possession),
DEVELOPER shall notify COMPANY if DEVELOPER desires to develop and operate a
BOSTON MARKET Unit at such Target Site. If DEVELOPER fails to so notify COMPANY
within such time period, then COMPANY or its designee shall have the right to
develop and operate a BOSTON MARKET Unit at such Target Site.
If DEVELOPER timely notifies COMPANY in writing that DEVELOPER desires to
develop and operate a BOSTON MARKET Unit at such Target Site and COMPANY has
fully
11
<PAGE>
negotiated a lease or purchase agreement for such Target Site, then DEVELOPER
(or an Authorized Entity) shall (1) obtain the consent of the landlord to
execute and execute such lease, if applicable, or (2) execute a purchase
agreement or an assignment of purchase agreement, if applicable, and (3) execute
COMPANY's then current form of standard franchise agreement containing COMPANY's
then current fees and expense requirements and such ancillary documents
(including guarantees) as are then customarily used by COMPANY in the grant of
franchises for BOSTON MARKET Units (collectively, the "FRANCHISE DOCUMENTS") as
modified for use in connection with the Target Site, as necessary, and (4) pay
COMPANY a site location and negotiation fee (the "SITE LOCATION AND NEGOTIATION
FEE") equal to Twenty Thousand Dollars ($20,000.00) plus COMPANY's reasonable
out-of-pocket expenses incurred in locating such Target Site and negotiating the
lease or purchase agreement, all within ten (10) business days after COMPANY's
delivery to DEVELOPER of the lease or purchase agreement, as the case may be,
and the Franchise Documents to DEVELOPER. The Site Location and Negotiation Fee
is paid to compensate COMPANY for the internal costs of the site location
services it provides. COMPANY shall fully cooperate with DEVELOPER in obtaining
the landlord's consent to execute such lease or the seller's consent to execute
such purchase agreement or assignment of purchase agreement as the case may be.
If DEVELOPER timely notifies COMPANY in writing that DEVELOPER desires to
develop and operate a BOSTON MARKET Unit at such Target Site and COMPANY has not
fully negotiated a lease or purchase agreement for such Target Site, then
DEVELOPER will have thirty (30) days in which to negotiate and deliver to
COMPANY a lease or purchase agreement for such Target Site in form for
execution. If COMPANY disapproves the lease or purchase agreement for failure
to meet COMPANY's requirements, DEVELOPER will have ten (10) business days
within which to negotiate and deliver to COMPANY a revised lease or purchase
agreement for such Target Site in form for execution. If the revised lease or
purchase agreement fails to meet COMPANY's requirements, or if DEVELOPER fails
to negotiate and deliver to COMPANY a lease or purchase agreement within the
aforementioned thirty (30) day period, then COMPANY or its designee may develop
and operate a BOSTON MARKET Unit at such Target Site. If COMPANY approves the
lease or the purchase agreement for such Target Site, then DEVELOPER (or an
Authorized Entity) will (1) execute such lease or purchase agreement, as
applicable, and (2) execute the Franchise Documents, and (3) pay to COMPANY a
site location fee (the "SITE LOCATION FEE") equal to Ten Thousand Dollars
($10,000.00), plus COMPANY's reasonable out-of-pocket expenses in locating such
Target Site and, to the degree applicable, partially negotiating the lease or
purchase agreement, all within ten business (10) days after COMPANY's delivery
of the Franchise Documents to DEVELOPER.
If DEVELOPER (or an Authorized Entity) fails to timely execute the lease or
purchase agreement and Franchise Documents for a Target Site and pay the
applicable fee as provided herein, then COMPANY or its designee may develop and
operate a BOSTON MARKET Unit at such Target Site.
Any Target Site for which DEVELOPER (or an Authorized Entity) executes the
Franchise Documents and develops and opens a BOSTON MARKET Unit will count
toward
12
<PAGE>
the Sub-Area Quota for the Sub-Area in which such Target Site is located,
provided that if such Target Site is a Mall Site, such Target Site will not
count toward such Sub-Area Quota. COMPANY will not be required to give notice to
DEVELOPER or offer to DEVELOPER a franchise to develop a BOSTON MARKET Unit with
regard to any suitable Target Site or Conversion Site (defined below) in a Sub-
Area that COMPANY desires to develop and operate as a BOSTON MARKET Unit after
the total number of sites for which DEVELOPER or an Authorized Entity has
executed a Franchise Agreement and accepted as Target Sites or Conversion Sites
for that Sub-Area equals the Sub-Area Quota.
3.F. DEVELOPER'S OPTION TO PURCHASE CONVERSION SITES.
-----------------------------------------------
If during the applicable Sub-Area Term for a particular Sub-Area COMPANY
acquires the shares or assets (which may include, by way of illustration and not
by way of limitation, furniture, fixtures, equipment, leasehold improvements
and/or leasehold interests) of any business operating at one or more sites
located within such Sub-Area which meet COMPANY's specifications and standards
as in effect from time to time for conversion to BOSTON MARKET Units (the
"Conversion Sites"), and COMPANY determines in its sole discretion to convert
such Conversion Sites to BOSTON MARKET Units, COMPANY agrees to offer to sell
such Conversion Sites to DEVELOPER or, at DEVELOPER's option, to an Authorized
Entity, for the price paid therefor by COMPANY. Such price will include that
portion of the direct and indirect costs and liabilities allocated to such
Conversion Sites incurred or assumed by COMPANY in making such acquisition
whether paid or owed to the seller of such Conversion Sites, COMPANY, its
Affiliates or third parties and other expenses allocated to such Conversion
Sites (including losses, whether from continuing operations or closing acquired
units) plus interest at the COMPANY's cost of money on the balance of such
amounts from time to time, provided that:
(1) such sale will not conflict with any existing legal obligation of
COMPANY or the business being acquired; and
(2) such sale will not preclude the completion of the acquisition on
the terms agreed to by COMPANY; and
(3) such sale will not interfere with any other legal agreement,
arrangement or combination; and
(4) DEVELOPER agrees to execute, or cause an Authorized Entity to
execute, concurrently with DEVELOPER's purchase, the Franchise Documents,
as modified for use in connection with a Conversion Site as necessary, for
each and every such Conversion Site and convert each such Conversion Site
to a BOSTON MARKET Unit as soon as practicable thereafter in accordance
with COMPANY's standards and specifications.
13
<PAGE>
DEVELOPER shall have thirty (30) days after receipt of COMPANY's offer in which
to accept or reject such offer by written notice to COMPANY.
In the event DEVELOPER rejects or fails to timely accept COMPANY's offer to
sell such Conversion Sites or COMPANY is unable to extend such offer for any of
the aforementioned reasons, COMPANY agrees that, provided DEVELOPER and its
Authorized Entities are in full compliance with this Agreement and all Franchise
Agreements to which they are parties, it will not utilize the Marks at such
Conversion Sites (whether owned or franchised by COMPANY) for one (1) year
following COMPANY's acquisition thereof, provided that DEVELOPER is in full
compliance with this Agreement, and provided that COMPANY may operate, alter,
modify, refurbish, remodel, promote and market any such Conversion Sites during
such one (1) year period. For purposes of this Paragraph 3.F., all references
to COMPANY shall be deemed to include its Affiliates.
Any Conversion Site for which DEVELOPER (or an Authorized Entity) executes
the Franchise Documents and develops and opens a BOSTON MARKET Unit shall count
toward the Sub-Area Quota for the Sub-Area in which such Conversion Site is
located.
4. OTHER DISTRIBUTION METHODS.
--------------------------
4.A. SPECIAL DISTRIBUTION ARRANGEMENTS.
---------------------------------
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not granted any
rights to operate Special Distribution Arrangements within or outside the
Development Area or the Sub-Areas pursuant to this Agreement; and (2) the right
to operate or grant to others the right to operate Special Distribution
Arrangements is reserved to COMPANY; and (3) COMPANY has no obligation to offer
to DEVELOPER the right to operate Special Distribution Arrangements; and (4)
COMPANY or its designees may instead operate or grant to others the right to
operate Special Distribution Arrangements within and/or outside the Development
Area. Notwithstanding the foregoing, if COMPANY, at any time and in its sole
discretion, determines to offer DEVELOPER (or an Authorized Entity that is a
franchise owner of a BOSTON MARKET Unit) the right to operate a Special
Distribution Arrangement at a Special Distribution Location designated by
COMPANY, COMPANY will so notify DEVELOPER (or such Authorized Entity) by
delivering to DEVELOPER (or such Authorized Entity) a Special Distribution
Agreement authorizing DEVELOPER (or such Authorized Entity) to operate a
Special Distribution Arrangement at such Special Distribution Location.
DEVELOPER (or such Authorized Entity) will have fifteen (15) days to execute and
return to COMPANY such Special Distribution Agreement after DEVELOPER's (or such
Authorized Entity's) receipt thereof. Such Special Distribution Agreement will
provide that DEVELOPER (or such Authorized Entity) shall commence such Special
Distribution Arrangement from the designated Special Distribution Location
within the time period specified by COMPANY in the Special Distribution
Agreement. If DEVELOPER (or such Authorized Entity) fails to execute and return
to COMPANY such Special Distribution Agreement within such fifteen (15) day
period or commence such Special Distribution Arrangement within the specified
period, then DEVELOPER (or such Authorized
14
<PAGE>
Entity) shall have no right to operate such Special Distribution Arrangement
thereafter. If DEVELOPER (or such Authorized Entity) has executed a Special
Distribution Agreement, COMPANY reserves the right, at any time and in its sole
discretion with or without cause and regardless of the investment made by
DEVELOPER (or such Authorized Entity) in establishing or operating the Special
Distribution Arrangement or the length of time the Special Distribution
Arrangement has been in effect, to suspend or terminate DEVELOPER's (or such
Authorized Entity's) right to operate the Special Distribution Arrangement,
effective one hundred eighty (180) days after COMPANY's written notice to
DEVELOPER, and may otherwise terminate the Special Distribution Arrangement on
the terms of the Special Distribution Agreement.
4.B. DELIVERY SERVICE.
----------------
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not granted any
rights within or outside the Development Area or the Sub-Areas to offer Delivery
Service from any of the UNITS pursuant to this Agreement; (2) COMPANY has no
obligation to offer to DEVELOPER the right to provide Delivery Service from any
of the UNITS; and (3) COMPANY or its designees may instead provide Delivery
Service within and/or outside the Development Area or the Sub-Areas.
Notwithstanding the foregoing, if Company, at any time and in its sole
discretion, determines to offer Delivery Service in a designated Delivery Area
in which a UNIT is located, COMPANY will offer DEVELOPER (or an Authorized
Entity that is the franchise owner of such UNIT) the right to offer Delivery
Service by delivering to DEVELOPER (or such Authorized Entity) a Delivery Rider
to the applicable Franchise Agreement authorizing the offer of Delivery Service
within such designated Delivery Area. DEVELOPER (or such Authorized Entity)
will have fifteen (15) days to execute and return to COMPANY such Delivery Rider
after DEVELOPER's (or such Authorized Entity's) receipt thereof. Such Delivery
Rider will provide that DEVELOPER (or such Authorized Entity) shall commence
Delivery Service from such UNIT or, in COMPANY's sole discretion, from a
Delivery Facility within the time period specified by COMPANY in the Delivery
Rider. A Delivery Facility will not be counted as a separate UNIT for purposes
of the Sub-Area Quotas or the Total Development Quota set forth in the
Development Schedule. If DEVELOPER (or such Authorized Entity) fails to execute
and return to COMPANY such Delivery Rider within such fifteen (15) day period or
commence Delivery Service within the specified period, then DEVELOPER (or such
Authorized Entity) shall have no right to provide Delivery Service at such UNIT
thereafter and COMPANY or its designee will have the right to offer Delivery
Service within such designated Delivery Area. Notwithstanding the foregoing, if
COMPANY determines in its sole discretion that all franchise owners of BOSTON
MARKET Units in the trade area where a UNIT is located, as such trade area is
determined by COMPANY in its sole discretion and which in no event shall exceed
the Market Area (as defined in the Franchise Agreement), shall offer Delivery
Service, COMPANY will notify DEVELOPER (or such Authorized Entity) and will
deliver to DEVELOPER (or such Authorized Entity) a Delivery Rider to the
Franchise Agreement which DEVELOPER (or its Authorized Entity) shall execute and
return to COMPANY within fifteen (15) days after its receipt. If DEVELOPER (or
an Authorized Entity) has executed a Delivery Rider, COMPANY reserves the right,
at any time and in its sole discretion, with or without cause and regardless of
the investment made by
15
<PAGE>
DEVELOPER (or an Authorized Entity) in establishing and conducting Delivery
Service or the length of time DEVELOPER (or an Authorized Entity) has offered
Delivery Service: (1) to reduce, modify or expand the Delivery Area effective
upon COMPANY's written notice to DEVELOPER; or (2) to suspend or terminate
DEVELOPER's (or the Authorized Entity's) right to offer Delivery Service,
effective one hundred eighty (180) days after COMPANY's written notice to
DEVELOPER; and COMPANY may otherwise terminate DEVELOPER's right to offer
Delivery Service on the terms of the Delivery Rider. In the event that COMPANY
suspends or terminates DEVELOPER's right to offer Delivery Service, COMPANY
reserves the right to require DEVELOPER to reinstate Delivery Service upon
fifteen (15) days' prior written notice to DEVELOPER.
4.C. CATERING SERVICE.
----------------
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not granted any
rights within or outside the Development Area or the Sub-Areas to offer Catering
Service from any of the UNITS pursuant to this Agreement; and (2) COMPANY has no
obligation to offer to DEVELOPER the right to provide Catering Service from any
of the UNITS; and (3) COMPANY or its designees may instead provide Catering
Service within and/or outside the Development Area or the Sub-Areas.
Notwithstanding the foregoing, if COMPANY, at any time and in its sole
discretion, determines to offer Catering Service in a designated Catering Area
in which a Unit developed under this Agreement is located, COMPANY will offer
DEVELOPER or an Authorized Entity that is the franchise owner of such Unit the
right to offer Catering Service by delivering to DEVELOPER (or such Authorized
Entity) a Catering Rider to the applicable Franchise Agreement authorizing the
offer of Catering Service within such designated Catering Area. DEVELOPER (or
such Authorized Entity) will have fifteen (15) days to execute and return to
COMPANY such Catering Rider after DEVELOPER's (or such Authorized Entity's)
receipt thereof. Such Catering Rider will provide that DEVELOPER (or such
Authorized Entity) shall commence Catering Service from one or more UNITS or one
or more Catering Facilities, as COMPANY may determine in its sole discretion,
within the time period specified by COMPANY in the Catering Rider. A Catering
Facility will not be counted as a separate UNIT for purposes of the Sub-Area
Quotas or the Total Development Quota set forth in the Development Schedule. If
DEVELOPER (or such Authorized Entity) fails to execute and return to COMPANY
such Catering Rider within such fifteen (15) day period or commence Catering
Service within the specified period, then DEVELOPER (or such Authorized Entity)
shall have no right to provide Catering Service within the designated Catering
Area thereafter and COMPANY or its designee will have the right to offer
Catering Service within such Catering Area. If DEVELOPER (or an Authorized
Entity) has executed a Catering Rider, COMPANY reserves the right, at any time
and in its sole discretion, with or without cause and regardless of the
investment made by DEVELOPER (or an Authorized Entity) in establishing and
conducting Catering Service or the length of time DEVELOPER (or an Authorized
Entity) has offered Catering Service: (1) to reduce, modify or expand the
Catering Area effective upon COMPANY's written notice to DEVELOPER; or (2) to
suspend or terminate DEVELOPER's (or such Authorized Entity's) right to offer
Catering Service, effective one hundred eighty (180) days after COMPANY's
written notice to DEVELOPER (in which case, DEVELOPER will not
16
<PAGE>
fill any orders for Catering Service after the expiration of such one hundred
eighty (180) day period); and COMPANY may otherwise terminate DEVELOPER's right
to offer Catering Service pursuant to the terms of the Catering Rider. In the
event that COMPANY terminates or suspends FRANCHISE OWNER's right to offer
Catering Service, COMPANY reserves the right to require FRANCHISE OWNER to
reinstate Catering Service upon fifteen (15) days' prior written notice.
5. GRANT OF FRANCHISES AND ADVERTISING REQUIREMENT.
-----------------------------------------------
5.A. SITE REVIEW AND APPROVAL.
------------------------
Annually throughout the Development Term, DEVELOPER shall purchase from
COMPANY demographic detail reports on the demographics of each Sub-Area ("MARKET
PLANS") in which DEVELOPER retains the right to develop UNITS. Such Market
Plans shall be available to DEVELOPER at COMPANY's then-current charges. At
DEVELOPER's request, Company may provide other demographic services at COMPANY's
then current charges. Those charges will vary with the type of service
requested.
At DEVELOPER's request, COMPANY will provide to DEVELOPER, at COMPANY's
then-current charges, a report and grid map containing certain demographic
information concerning a proposed site and surrounding area, which report and
grid map may be prepared by COMPANY or by an independent demographic statistics
service at COMPANY's direction.
DEVELOPER shall comply with COMPANY's specifications and requirements
regarding site selection, development and construction, including, without
limitation, those concerning relations with and use of approved general
contractors, subcontractors, real estate developers and lessors and, if
requested by COMPANY, real estate broker(s). DEVELOPER shall submit to COMPANY
a complete site approval request package and location feasibility analysis (a
"SITE PACKAGE") on COMPANY's specified forms (containing such demographic,
commercial, and other information and photographs as COMPANY may require from
time to time) for each site at which DEVELOPER proposes and intends in good
faith to establish and operate a BOSTON MARKET Unit and which DEVELOPER
reasonably believes to conform to certain minimum site selection criteria
established by COMPANY from time to time in its sole discretion. In approving
or disapproving any proposed site, COMPANY may consider such matters as it deems
material from time to time, which factors may (but are not required) to include,
without limitation, demographic characteristics, traffic patterns, parking,
visibility, allowed signage, the predominant character of the neighborhood,
competition from other businesses providing similar services within the area
(including other BOSTON MARKET Units), the proximity to other businesses, the
exclusivity granted to other franchise owners or developers of BOSTON MARKET
Units, the nature of other businesses in proximity to the site, and other
commercial characteristics (including the purchase price or rental obligations
and other lease terms for the proposed site) and the size, appearance, and other
physical characteristics of the proposed site. DEVELOPER acknowledges and
agrees that COMPANY may alter the criteria or impose
17
<PAGE>
additional criteria for acceptable sites for BOSTON MARKET Units at any time or
from time to time in its sole discretion, that DEVELOPER shall abide by such
site criteria as they exist from time to time and comply with its development
obligations hereunder (including, but not limited to, Exhibit C hereof) and that
---------
no extension or alteration of the Required Opening Date of any BOSTON MARKET
Unit shall arise by reason of such altered or additional site criteria.
COMPANY will approve or disapprove sites by delivery of written notice to
DEVELOPER. COMPANY agrees to exert its reasonable best efforts to deliver such
notification to DEVELOPER within thirty (30) days after receipt by COMPANY of a
complete Site Package and such other materials requested by COMPANY from time to
time, containing all information required by COMPANY. COMPANY shall have the
right in its sole discretion to approve or disapprove a site, and DEVELOPER
acknowledges and agrees that COMPANY shall have no liability therefor.
Notwithstanding any other provision of this Agreement, COMPANY's failure to
provide DEVELOPER with notice of its approval or disapproval of one or more
proposed sites shall in no event constitute a waiver of COMPANY's right to
approve or disapprove such sites or cause any extension of the applicable
Development Schedule.
5.B. LEASE AND PURCHASE OF APPROVED SITES.
------------------------------------
DEVELOPER acknowledges that COMPANY has developed a standard form lease
(the "FORM UNIT LEASE"), and a standard form real estate purchase and sale
agreement (the "FORM PURCHASE AND SALE AGREEMENT"). COMPANY will furnish
DEVELOPER with a copy of the current forms of Form Unit Lease and Form Purchase
and Sale Agreement and Company's standards and DEVELOPER acknowledges that
COMPANY may modify such forms from time to time in its sole discretion.
DEVELOPER shall present the Form Unit Lease or Form Purchase and Sale Agreement
to the lessor or seller of an Approved Site, as applicable, and use its best
efforts to cause the lessor or seller of such Approved Site to execute the Form
Unit Lease or Form Purchase and Sale Agreement as the lease, sublease,
assignment of lease or purchase agreement (referred to herein as the "SITE
AGREEMENT"), as applicable, for such Approved Site. If DEVELOPER fails to
obtain the lessor's or seller's agreement to use the Form Unit Lease or Form
Purchase and Sale Agreement as the Site Agreement, DEVELOPER shall cause the
lessor or seller to include in the Site Agreement the standard terms which
COMPANY requires from time to time in its sole discretion, and such other terms
as COMPANY may require or as it may specifically approve in writing.
After receiving a copy of a proposed Site Agreement in form for execution,
COMPANY shall have the right, in its sole discretion, to approve, approve with
modification or disapprove such proposed Site Agreement, and DEVELOPER
acknowledges and agrees that COMPANY shall have no liability therefor. COMPANY
agrees to exert its best efforts to deliver such notification to DEVELOPER
within twenty (20) days after receipt by COMPANY of the proposed Site Agreement.
DEVELOPER agrees that it will not execute a Site Agreement without the prior
written approval of COMPANY, and any such Site Agreement shall contain the
express condition precedent of COMPANY's prior written approval thereof.
DEVELOPER shall deliver to COMPANY a copy of the fully signed Site Agreement as
previously approved
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<PAGE>
within fifteen (15) days after its full execution. DEVELOPER further agrees that
it will not execute or agree to any modification of the Site Agreement which
would affect COMPANY's rights without the prior written approval of COMPANY.
If DEVELOPER or an Authorized Entity fails to obtain lawful possession of
an Approved Site (through acquisition, lease, sublease or assignment) within
sixty (60) days after delivery of COMPANY's approval of the Approved Site,
COMPANY may, in its sole discretion, withdraw approval of such site at any time.
COMPANY also may withdraw its offer to grant a Franchise for a BOSTON MARKET
Unit at an Approved Site and withdraw COMPANY's approval of such site at any
time prior to COMPANY's receipt of all applicable payments and COMPANY's
execution of the Franchise Agreement therefor.
At the request of COMPANY, if DEVELOPER owns an Approved Site, DEVELOPER
will enter into a lease with COMPANY under COMPANY's then-current form of lease
for a term equal to the term of the Franchise and for a rental equal to the
Approved Site's fair market rental value, and will sublease the Approved Site
from COMPANY on the same terms as the prime lease. If DEVELOPER and COMPANY
cannot agree on the fair market rental value of such an Approved Site, then such
rental value shall be determined by an independent appraiser selected by COMPANY
and DEVELOPER, and if they are unable to agree on an independent appraiser,
COMPANY and DEVELOPER shall each select an independent appraiser, who shall
select a third independent appraiser, and the fair market rental value shall be
deemed to be the average of the three (3) independent appraisals made by such
appraisers.
5.C. EXECUTION OF FRANCHISE AGREEMENTS.
---------------------------------
Provided that (1) DEVELOPER is then in full compliance with all of the
terms and conditions of this Agreement, (2) DEVELOPER and its Authorized
Entities are in full compliance with all Franchise Agreements they have entered
into, and (3) DEVELOPER (or an Authorized Entity) has obtained legal possession
of an Approved Site, COMPANY agrees to offer to DEVELOPER or an Authorized
Entity a Franchise to operate a BOSTON MARKET Unit at such Approved Site by
delivering to DEVELOPER a Franchise Agreement in form for execution by DEVELOPER
and its Principal Owners or such Authorized Entity and its Principal Owners.
Such Franchise Agreement shall be executed and returned to COMPANY at the
earlier of fifteen (15) days after COMPANY's delivery thereof, or prior to the
opening of the BOSTON MARKET Unit, together with the fees required to be paid
upon execution thereof. In addition, DEVELOPER and its Principal Owners must
guarantee all obligations of an Authorized Entity under any Franchise Agreement
issued to such an Authorized Entity and the Principal Owners and their spouses
must guaranty the obligations of DEVELOPER under any Franchise Agreement entered
into by DEVELOPER. COMPANY may withdraw its offer to grant a Franchise for a
BOSTON MARKET Unit at such Approved Site and withdraw its approval of such site
at any time prior to COMPANY's receipt of all applicable payments and COMPANY's
execution of the Franchise Agreement. In no event may a BOSTON MARKET Unit
developed hereunder be opened for business prior to DEVELOPER's receipt of
written notice from COMPANY authorizing the opening of such UNIT.
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5.D. INITIAL FRANCHISE AND ROYALTY FEES.
----------------------------------
For each Franchise granted pursuant to this Agreement during the
Development Term or the applicable Sub-Area thereon: (1) the Initial Franchise
Fee (defined in the Franchise Agreement) shall be Thirty-Five Thousand Dollars
($35,000.00); and (2) the Royalty Fee (as defined in the Franchise Agreement)
shall equal five percent (5%) of the UNIT's Gross Revenue (as defined in the
Franchise Agreement).
5.E. ADVERTISING EXPENDITURES
------------------------
DEVELOPER shall cause each UNIT it owns, and shall cause each
Authorized Entity which owns one or more UNITS to cause each UNIT it owns,
to contribute to the Local Ad Fund (as defined in the Franchise Agreement)
for such UNIT an amount equal to the greater of:
(1) the standard Local Ad Fund contribution required pursuant to the
applicable Franchise Agreement; or
(2) an amount which, when aggregated with the Local Ad Fund
contributions of the other UNITS, will be sufficient to enable DEVELOPER,
through the Local Ad Fund, to commence Required Television Advertising
within one year of the opening of the first UNIT and to continue Required
Television Advertising thereafter throughout the Agreement Term.
6. INITIAL PAYMENTS.
----------------
6.A. DEVELOPMENT FEE.
---------------
Concurrently with the execution of this Agreement, DEVELOPER shall pay to
COMPANY the sum set forth on Exhibit D hereof as a nonrefundable development fee
---------
(the "DEVELOPMENT FEE") which shall be deemed fully earned by COMPANY upon
execution of this Agreement. The Development Fee shall equal the sum derived by
multiplying the number of Franchises to be developed under this Agreement, as
set forth on Exhibit C, by Five Thousand Dollars ($5,000.00). The Development
---------
Fee is paid to compensate COMPANY for its services in connection with this
Agreement, including but not limited to providing assistance in the development
of DEVELOPER's Market Real Estate Development Plan and providing initial
orientation training programs.
6.B. DEPOSIT.
-------
Concurrently with the execution of this Agreement, DEVELOPER shall pay to
COMPANY the sum set forth on Exhibit D of this Agreement as a nonrefundable
---------
deposit (the "Deposit") toward the Initial Franchise Fees payable by DEVELOPER
or Authorized Entities under Franchise Agreements to be executed pursuant to
this Agreement. The Deposit shall be
20
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Five Thousand Dollars ($5,000.00) for each Franchise to be granted to DEVELOPER
or Authorized Entities under the terms of this Agreement. The Deposit shall be
applied as a credit in the amount of Five Thousand Dollars ($5,000.00) toward
the Initial Franchise Fee payable under each Franchise Agreement executed
pursuant to this Agreement.
7. CONFIDENTIAL INFORMATION.
------------------------
COMPANY possesses and will further develop and acquire certain confidential
and proprietary information and trade secrets, including, but not limited to,
the following categories of information, methods, techniques, procedures and
knowledge developed or to be developed by COMPANY or its Affiliates or their
consultants, contractors or designees, and/or franchise owners and developers
(the "CONFIDENTIAL INFORMATION"):
(1) methods, techniques, equipment, specifications, standards,
policies, procedures, information, concepts and systems relating to and
knowledge of and experience in the development, operation and franchising
of BOSTON MARKET Units; and
(2) marketing and promotional programs for BOSTON MARKET Units; and
(3) knowledge concerning the logic, structure and operation of
computer software programs which COMPANY authorizes for use in connection
with the operation of BOSTON MARKET Units (including, without limitation,
the Licensed Program (defined in the Franchise Agreement)), and all
additions, modifications and enhancements thereof, and all data generated
from use of such programs, including, without limitation, the logic,
structure and operation of database file structures containing such data
and all additions, modifications and enhancements thereof; and
(4) sales data and information concerning consumer preferences and
inventory requirements for Products, materials and supplies, and
specifications for and suppliers of certain materials, equipment and
fixtures for BOSTON MARKET Units; and
(5) ingredients, formulas, marinades, mixes, spices, seasonings,
sauces, recipes for and methods of preparation, cooking, serving,
packaging, catering and delivery of, Products sold at BOSTON MARKET Units;
and
(6) information concerning Product sales, operating results,
financial performance and other financial data of BOSTON MARKET units; and
(7) the Development Manual (defined in Paragraph 11.J. of this
Agreement) and the Manuals (defined in the Franchise Agreement); and
(8) customer lists and Product sales of the UNITS; and
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(9) employee selection procedures, training and staffing levels.
COMPANY will disclose such parts of the Confidential Information as COMPANY
deems necessary or advisable from time to time in its sole discretion for the
development of BOSTON MARKET Units to DEVELOPER in providing training, and in
guidance and assistance furnished to DEVELOPER under this Agreement and
DEVELOPER may learn or otherwise obtain from COMPANY additional Confidential
Information during the Agreement Term. DEVELOPER acknowledges and agrees that
neither DEVELOPER nor any other person or entity will acquire by or through
DEVELOPER any interest in or right to use the Confidential Information, other
than the right to use it in the development of BOSTON MARKET Units pursuant to
this Agreement, and that the use or duplication of the Confidential Information
in any other business would constitute an unfair method of competition with
COMPANY and with other BOSTON MARKET Unit developers and franchise owners.
DEVELOPER agrees to disclose the Confidential Information to Owners and to its
employees only to the extent reasonably necessary for the development of BOSTON
MARKET Units pursuant to this Agreement and if such individuals have agreed to
maintain such information in confidence in an agreement enforceable by COMPANY.
DEVELOPER acknowledges and agrees that the Confidential Information is
confidential to and a valuable asset of COMPANY, is proprietary, includes trade
secrets of COMPANY and is disclosed to DEVELOPER solely on the condition that
DEVELOPER, its Owners and employees who have access to the Confidential
Information agree, and DEVELOPER does hereby agree that, during and after the
Agreement Term, DEVELOPER, its Owners and such employees:
(a) will not use the Confidential Information in any other business
or capacity; and
(b) will maintain the absolute 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; and
(d) will adopt and implement all reasonable procedures prescribed
from time to time by COMPANY to prevent unauthorized use or disclosure of
the Confidential Information, including, without limitation, requiring
employees and Owners who will have access to such information to execute
non-competition and confidentiality agreements in the form attached hereto
as Exhibit F (the "CONFIDENTIALITY AND NON-COMPETITION AGREEMENT").
DEVELOPER shall provide COMPANY, at its request, executed originals of each
such Confidentiality and Non-Competition Agreement.
Nothing contained in this Agreement shall be construed to prohibit
DEVELOPER from using the Confidential Information in connection with the
operation of any BOSTON MARKET
22
<PAGE>
Unit pursuant to a Franchise Agreement or pursuant to another development
agreement between COMPANY and DEVELOPER.
Notwithstanding anything to the contrary contained in this Agreement and
provided DEVELOPER shall have obtained COMPANY's prior written consent, the
restrictions on DEVELOPER's disclosure and use of the Confidential Information
shall not apply to the following:
(i) information, methods, procedures, techniques and knowledge which
are or become generally known in the food service business within the
Development Area, other than through disclosure (whether deliberate or
inadvertent) by DEVELOPER; and
(ii) the disclosure of the Confidential Information in judicial or
administrative proceedings to the extent that DEVELOPER is legally
compelled to disclose such information, provided DEVELOPER has notified
COMPANY prior to disclosure and shall have used its best efforts to obtain,
and shall have afforded COMPANY the opportunity to obtain an appropriate
protective order or other assurance satisfactory to COMPANY of confidential
treatment for the information required to be so disclosed.
DEVELOPER agrees to disclose to COMPANY all ideas, concepts, methods,
techniques and products conceived or developed by DEVELOPER and its Authorized
Entities, Owners, affiliates or employees thereof during the Agreement Term
relating to the development and operation of BOSTON MARKET Units, provided that
the aforementioned parties will not be obligated to make such disclosures if
doing so would violate any contractual obligations of DEVELOPER which:
(A) arose prior to DEVELOPER's execution of this Agreement; and
(B) DEVELOPER disclosed to COMPANY in writing prior to the Effective
Date.
DEVELOPER hereby grants to COMPANY and agrees to procure from its Authorized
Entities, Owners, affiliates and employees a perpetual, non-exclusive and
worldwide right to use same in all food service businesses operated by COMPANY,
its Affiliates, franchise owners and designees. COMPANY shall have no
obligation to make any lump sum or on-going payments to DEVELOPER with respect
to any such idea, concept, method, technique or product. DEVELOPER agrees that
DEVELOPER will not use nor will it allow any other person or entity to use any
such concept, method, technique or product without obtaining COMPANY's prior
written approval.
8. EXCLUSIVE RELATIONSHIP.
----------------------
DEVELOPER acknowledges and agrees that COMPANY would be unable to protect
the Confidential Information against unauthorized use or disclosure and would be
unable to
23
<PAGE>
encourage a free exchange of ideas and information among franchise owners and
developers of BOSTON MARKET Units, if developers, franchise owners and their
Principal Owners (and members of their immediate families) were permitted to
engage in, hold interests in or perform services for Competitive Businesses.
DEVELOPER further acknowledges and agrees that the restrictions contained in
this Section will not hinder its activities or the activities of its Principal
Owners under this Agreement or in general. COMPANY has entered into this
Agreement with DEVELOPER on the express condition that, with respect to the
development and operation of food service businesses that sell Products,
DEVELOPER and its Principal Owners and members of their respective immediate
families will deal exclusively with COMPANY. DEVELOPER therefore agrees that,
during the Agreement Term, neither DEVELOPER nor any Principal Owner of
DEVELOPER, nor any member of the Immediate Family of DEVELOPER or a Principal
Owner of DEVELOPER shall directly or indirectly:
(a) have any interest as a record or beneficial owner in any
Competitive Business (this restriction shall not be applicable to the
ownership of shares of a class of securities listed on a stock exchange or
traded on the over-the-counter market and quoted by a national inter-dealer
quotation system that represent less than three percent (3%) of the number
of shares of that class of securities issued and outstanding); or
(b) divert or attempt to divert any business or any customers of any
BOSTON MARKET Units to any Competitive Business; or
(c) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any Competitive
Business.
DEVELOPER furthermore agrees that, during the Agreement Term, neither DEVELOPER
nor any Principal Owner of DEVELOPER, nor any member of the Immediate Family of
DEVELOPER or a Principal Owner of DEVELOPER shall directly or indirectly employ
or seek to employ any person who is employed by COMPANY, its Affiliates or by
any other developer or franchise owner of BOSTON MARKET Units, nor induce nor
attempt to induce any such person to leave said employment without the prior
written consent of such person's employer.
Furthermore, if DEVELOPER is a corporation, partnership or limited
liability company, it will not engage in any business or other activity,
directly or indirectly, other than the development and operation of UNITS.
DEVELOPER acknowledges and agrees that the failure of any person or entity
restricted pursuant to this Section to comply with the restrictions of this
Section (regardless of whether that person or entity actually has executed this
Agreement) or a Confidentiality and Non-Competition Agreement shall constitute a
breach of this Agreement.
The restrictions of this Section shall not be construed to prohibit
DEVELOPER, any Principal Owner of DEVELOPER, or any member of the Immediate
Family of DEVELOPER or its Principal Owners from having a direct or indirect
Ownership Interest in any BOSTON
24
<PAGE>
MARKET Units, development agreements or franchise agreements for the development
or operation of BOSTON MARKET Units, or any entity owning, controlling or
operating BOSTON MARKET Units, or from providing services to any such BOSTON
MARKET Units pursuant to other agreements with COMPANY. Furthermore, the
restrictions of this Section shall not prohibit DEVELOPER, any Principal Owner
or any member of the Immediate Family of DEVELOPER or a Principal Owner (to the
extent such person(s) is an individual) from performing services for or having
an Ownership Interest in a Permitted Competitive Business, or from conducting
customary promotion and advertising of a Permitted Competitive Business. Such
person(s) and business(es), if any, are identified on Exhibit E attached hereto.
---------
9. MARKS.
-----
9.A. GOODWILL AND OWNERSHIP OF MARKS.
-------------------------------
DEVELOPER acknowledges that DEVELOPER's right to use the Marks is limited
solely to uses directly connected with the development of UNITS by DEVELOPER
during the Development Term pursuant to and in compliance with this Agreement
and all applicable standards, specifications, and operating procedures
prescribed by COMPANY from time to time, and is derived solely from this
Agreement. Any unauthorized use of the Marks by DEVELOPER shall constitute a
breach of this Agreement and an infringement of the rights of COMPANY in and to
the Marks. DEVELOPER acknowledges and agrees that all usage of the Marks by
DEVELOPER and any goodwill established thereby shall inure to the exclusive
benefit of COMPANY and that this Agreement does not confer any goodwill or other
interests in the Marks upon DEVELOPER (other than the right to develop UNITS in
compliance with this Agreement). All provisions of this Agreement applicable to
the Marks shall apply to any other trademarks, service marks, commercial symbols
and trade dress hereafter authorized, in writing (including by inclusion in
COMPANY's Identification Standards Manual or any Trademark or Advertising
Compliance Guide issued to franchise owners or developers), for use by and
licensed to DEVELOPER by COMPANY.
9.B. LIMITATIONS ON DEVELOPER'S USE OF MARKS.
---------------------------------------
DEVELOPER shall not use any Mark as part of any corporate name or other
name of DEVELOPER or with any prefix, suffix, or other modifying words, terms,
designs, or symbols, or in any modified form, nor may DEVELOPER use any Mark in
connection with the performance or sale of any unauthorized services or products
or in any other manner not expressly authorized in writing by COMPANY.
DEVELOPER agrees to display the Marks prominently in the manner prescribed by
COMPANY. DEVELOPER agrees to give such notices of trademark and service mark
registrations as COMPANY specifies and to obtain such business name
registrations as may be required under applicable law.
25
<PAGE>
9.C NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
DEVELOPER shall immediately notify COMPANY of any apparent infringement of
or challenge to DEVELOPER's use of any Mark, or claim by any person of any
rights in any Mark, and DEVELOPER shall not communicate with any person other
than COMPANY and its counsel with respect to any such infringement, challenge or
claim. COMPANY shall have 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 Patent and Trademark
Office or other proceeding arising out of any such alleged infringement,
challenge or claim or otherwise relating to any Mark. DEVELOPER agrees to
execute any and all instruments and documents, render such assistance, and do
such acts and things as may, in the opinion of COMPANY's counsel, be necessary
or advisable to protect and maintain the interests of COMPANY in any litigation
or other proceeding or to otherwise protect and maintain the interests of
COMPANY in the Marks. COMPANY will reimburse DEVELOPER for the reasonable out-
of-pocket expenses incurred and paid by DEVELOPER in complying with the
requirements imposed by this Paragraph.
9.D. DISCONTINUANCE OF USE OF MARKS.
------------------------------
If it becomes advisable at any time in COMPANY's sole judgment for the
DEVELOPER to modify or discontinue use of any Mark and/or for the DEVELOPER to
use one or more additional or substitute trademarks or service marks or an
additional or substitute type of trade dress, DEVELOPER agrees to immediately
comply with COMPANY's directions to modify or otherwise discontinue the use of
such Mark, and/or to use one or more additional or substitute trademarks,
service marks, logos or commercial symbols or additional or substitute trade
dress after notice thereof by COMPANY. Neither COMPANY nor its Affiliates shall
have any obligation to reimburse DEVELOPER for any expenditures made by
DEVELOPER to modify or discontinue the use of a Mark or to adopt additional or
substitute marks for discontinued Marks, including, without limitation, any
expenditures relating to advertising or promotional materials or to compensate
DEVELOPER for any goodwill related to the discontinued Mark.
9.E. INDEMNIFICATION OF DEVELOPER.
----------------------------
COMPANY agrees to indemnify DEVELOPER against and to reimburse DEVELOPER
for all damages for which DEVELOPER is held liable in any proceeding arising out
of DEVELOPER's authorized use of any Mark, pursuant to and in compliance with
this Agreement, and for all costs reasonably incurred by DEVELOPER in the
defense of any such claim brought against DEVELOPER or in any such proceeding in
which DEVELOPER is named as a party, provided that DEVELOPER has timely notified
COMPANY of such claim or proceeding, has given COMPANY sole control of the
defense and settlement of any such claim, and has otherwise complied with this
Agreement.
26
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10. COPYRIGHTS.
----------
10.A. OWNERSHIP OF COPYRIGHTS.
-----------------------
DEVELOPER and COMPANY acknowledge and agree (1) that COMPANY may authorize
DEVELOPER to use certain copyrighted or copyrightable works (the "Copyrighted
Works"), (2) that the Copyrighted Works are the valuable property of COMPANY or
its Affiliates and (3) that the rights herein are granted to DEVELOPER solely on
the condition that DEVELOPER complies with the terms of this Section. DEVELOPER
acknowledges and agrees that COMPANY 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 BOSTON MARKET Units, including, but not limited to, all categories
of works eligible for protection under the United States copyright laws, all of
which shall be deemed to be Copyrighted Works under this Agreement. Such
Copyrighted Works include, but are not limited to, the Development Manual,
advertisements, promotional materials, labels, menus, posters, signs, coupons,
gift certificates and may include all or part of the Marks, Trade Dress (defined
in the Franchise Agreement), Licensed Program and other portions of the BOSTON
MARKET System. COMPANY intends that all works of authorship related to the
BOSTON MARKET System and created in the future will be owned by it or its
Affiliates.
10.B. LIMITATION ON DEVELOPER'S USE OF COPYRIGHTS.
-------------------------------------------
DEVELOPER acknowledges that DEVELOPER's right to use the Copyrighted Works
is limited solely to uses directly connected with the development of UNITS by
DEVELOPER during the Development Term pursuant to and in compliance with this
Agreement and all applicable standards, specifications, and operating procedures
prescribed by COMPANY from time to time, and is derived solely from this
Agreement. DEVELOPER shall ensure that all Copyrighted Works used hereunder
shall bear an appropriate copyright notice under the Universal Copyright
Convention or other copyright laws prescribed by COMPANY specifying that COMPANY
or an Affiliate of COMPANY 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 COMPANY in and to the
Copyrighted Works. DEVELOPER acknowledges that this Agreement does not confer
any interest in the Copyrighted Works upon DEVELOPER, other than the right to
operate the UNITS in compliance with this Agreement. If COMPANY authorizes
DEVELOPER to prepare any adaptation, translation or work derived from the
Copyrighted Works, or if DEVELOPER prepares any Copyrighted Works such as menus,
advertisements, posters or promotional materials, DEVELOPER hereby agrees that
such adaptation, translation, derivative work or Copyrighted Work shall be the
property of COMPANY and DEVELOPER hereby assigns all its right, title and
interest therein to COMPANY. DEVELOPER agrees to execute any documents, in
recordable form, which COMPANY determines are necessary to reflect such
27
<PAGE>
ownership. DEVELOPER shall submit all such adaptations, translations,
derivative works and Copyrighted Works to COMPANY for approval prior to use.
10.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
DEVELOPER shall immediately notify COMPANY 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. DEVELOPER shall not communicate
with any person other than COMPANY and its counsel in connection with any such
infringement, challenge or claims. COMPANY 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. DEVELOPER
agrees to execute any and all instruments and documents, render such assistance,
and do such acts and things as may, in the opinion of COMPANY's counsel, be
necessary or advisable to protect and maintain the interests of COMPANY in any
litigation or other proceeding or to otherwise protect and maintain the
interests of COMPANY in the Copyrighted Works. COMPANY will reimburse DEVELOPER
for the reasonable out-of-pocket expenses incurred and paid by DEVELOPER in
complying with the requirements imposed by this Paragraph.
10.D. DISCONTINUANCE OF USE.
---------------------
If it becomes advisable at any time in COMPANY's sole judgment for
DEVELOPER to modify or discontinue use of any of the Copyrighted Works and/or
for DEVELOPER to use one or more additional or substitute copyrighted or
copyrightable items, DEVELOPER agrees to immediately comply with COMPANY's
directions to modify or otherwise discontinue the use of the copyrighted
materials and/or to use one or more substitute materials. Neither COMPANY nor
its Affiliates shall have any obligation to reimburse FRANCHISE OWNER for any
expenditures made by FRANCHISE OWNER to modify or discontinue the use of any
Copyrighted Work or to adopt additional or substitute copyrighted or
copyrightable items.
11. OBLIGATIONS OF DEVELOPER.
------------------------
11.A. FULL TIME SUPERVISION.
---------------------
DEVELOPER (or the Principal Owner(s) designated in Exhibit E of this
---------
Agreement and approved by COMPANY) and the Chief Operating Officer (as defined
below) shall exert full-time efforts to fulfill the obligations of DEVELOPER
under this Agreement and shall not engage in any other business or other
activity, directly or indirectly, that requires any significant management
responsibility or time commitments, or that may otherwise conflict with
DEVELOPER's obligations under this Agreement.
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11.B. CHIEF OPERATING OFFICER.
-----------------------
Concurrently with the execution of this Agreement, DEVELOPER shall
designate a person (other than the persons serving as the Development Director
(defined below), the Training Director (defined below) and the Marketing
Director (defined below)) acceptable to COMPANY in its sole discretion to act as
the Chief Operating Officer of the business conducted by DEVELOPER pursuant to
this Agreement (the "CHIEF OPERATING OFFICER"). The Chief Operating Officer
shall be identified in Exhibit E of this Agreement. The Chief Operating Officer
---------
shall have appropriate multi-unit food service experience and be an Owner
holding a significant, direct equity interest in DEVELOPER at all times during
the Agreement Term. If the relationship of the Chief Operating Officer with
DEVELOPER terminates or if the proposed Chief Operating Officer is unable to
satisfactorily complete COMPANY's management training program, DEVELOPER agrees
to promptly designate a replacement Chief Operating Officer acceptable to
COMPANY in its sole discretion, who shall at DEVELOPER's expense and subject to
COMPANY's then-current training charges, satisfactorily complete the management
training program.
11.C. DEVELOPMENT DIRECTOR AND REAL ESTATE MANAGERS.
---------------------------------------------
Upon COMPANY's written request, DEVELOPER shall designate a person (other
than the persons serving as the Chief Operating Officer, the Training Director
and the Marketing Director ) acceptable to COMPANY to act as the Development
Director of DEVELOPER (the "DEVELOPMENT DIRECTOR") during the Development Term.
If the relationship of the Development Director with DEVELOPER terminates,
DEVELOPER agrees to promptly designate a replacement Development Director
acceptable to COMPANY.
The Development Director's duties will include, without limitation:
(1) the preparation and implementation of a development plan for the
Development Area in form satisfactory to COMPANY; and
(2) consulting with COMPANY concerning the adaptation of COMPANY's
existing site criteria and lease (or purchase) requirements for the
Development Area; and
(3) directing and coordinating the site evaluation efforts of
DEVELOPER; and
(4) negotiating leases or purchase agreements for proposed UNIT
sites; and
(5) development of UNITS in the Development Area.
DEVELOPER shall also hire and maintain the number of real estate managers
meeting COMPANY's qualifications as COMPANY shall specify.
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11.D. TRAINING DIRECTOR.
-----------------
Upon COMPANY's written request, DEVELOPER shall designate a person (other
than the persons serving as the Chief Operating Officer, the Development
Director or the Marketing Director) acceptable to COMPANY to act as the
Training Director of DEVELOPER (the "TRAINING DIRECTOR") who must satisfactorily
complete COMPANY's management training program. If the proposed Training
Director completes the management training program to COMPANY's satisfaction,
COMPANY will certify him to fulfill the duties of the Training Director.
Thereafter, DEVELOPER agrees to send, from time to time as determined by
COMPANY, the Training Director to one or more locations which COMPANY designates
for a period to be determined by COMPANY in order for COMPANY to re-certify the
Training Director. So long as the Training Director's certification is current,
the Training Director shall train the employees of each UNIT (other than the
Unit Manager (defined in the Franchise Agreement) and the Additional Manager
(defined in the Franchise Agreement) of each UNIT) and shall, at the request of
COMPANY, train the Unit Manager and the Additional Manager of each UNIT in
accordance with the terms of the Franchise Agreement at DEVELOPER's training
facility, provided that (i) DEVELOPER is authorized in writing by COMPANY to
operate such a facility and (ii) such facility shall meet the specifications
COMPANY requires for training facilities as COMPANY, in its sole discretion,
prescribes in the Development Manual or otherwise in writing from time to time,
and shall have been approved by COMPANY in writing. If the Training Director
ceases to be an employee of DEVELOPER or if the proposed Training Director is
unable to satisfactorily complete the management training program or any
subsequent training program, DEVELOPER agrees to promptly designate a
replacement Training Director acceptable to COMPANY, who must, at DEVELOPER's
expense and subject to COMPANY's then-current standard charges, satisfactorily
complete COMPANY's management training program and be certified by COMPANY as
provided above. COMPANY may, in its sole discretion as it deems necessary,
require the Training Director to attend or to participate in, at DEVELOPER's
expense, additional or refresher training programs at locations designated by
COMPANY during the term of this Agreement.
The Training Director's duties will include, without limitation:
(1) training and supervision of UNIT personnel; and
(2) furnishing on-site assistance to the personnel of UNITS in
connection with the opening of UNITS; and
(3) ongoing consultation with COMPANY and management personnel of
UNITS concerning training matters; and
(4) periodic reporting to COMPANY concerning DEVELOPER's training
programs established and operated by DEVELOPER.
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DEVELOPER agrees, if authorized and required by COMPANY, in its sole
discretion, to develop, operate and maintain a training program (including
appropriate training facilities) for employees other than management personnel
and, to the extent authorized and approved in writing by COMPANY from time to
time, training of management personnel of the UNITS in the use of the BOSTON
MARKET System throughout the Agreement Term in accordance with specifications
prescribed by COMPANY from time to time.
11.E. MARKETING DIRECTOR.
------------------
Upon COMPANY's written request, DEVELOPER shall designate a person (other
than the persons serving as the Chief Operating Officer, the Development
Director and the Training Director) acceptable to COMPANY to act as the
Marketing Director of DEVELOPER (the "MARKETING DIRECTOR"). If the relationship
of the Marketing Director with DEVELOPER terminates, DEVELOPER agrees to
promptly designate a replacement Marketing Director acceptable to COMPANY.
The Marketing Director's duties will include, without limitation:
(1) consulting with COMPANY concerning the adaptation of COMPANY's
existing marketing programs and materials for the Development Area; and
(2) preparation and implementation of marketing plans for the grand
opening of the UNITS approved by COMPANY; and
(3) preparation and implementation of local marketing plans and
marketing budgets for the UNITS and the Development Area; and
(4) coordinating the direction and administration of any local
marketing efforts of the UNITS; and
(5) reporting periodically to COMPANY concerning local marketing
programs of DEVELOPER in the Development Area.
11.F. MANAGEMENT PERSONNEL AND TRAINING.
---------------------------------
In addition to hiring, training and maintaining the personnel described in
Paragraphs 11.B. through 11.E. of this Section, DEVELOPER shall hire, train and
maintain the number and level of management personnel required for the conduct
of its business pursuant to this Agreement, which will depend on the number of
UNITS to be developed and the qualifications of the personnel selected by
DEVELOPER. DEVELOPER also shall ensure that a full-time Unit Manager and
Additional Manager are hired and maintained for each UNIT granted pursuant to
this Agreement, as well as maintain adequate management and supervision of all
UNITS in accordance with guidelines established from time to time by COMPANY.
DEVELOPER shall keep COMPANY advised of the identities of such personnel.
DEVELOPER
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shall be responsible for ensuring that such personnel are properly trained to
perform their duties. COMPANY will from time to time make available a management
training program for such personnel at times and locations designated by
COMPANY. Such management training program will be made available at no charge to
DEVELOPER's initial Chief Operating Officer, Development Director, Training
Director and Marketing Director and, at DEVELOPER's request and at COMPANY's
then-current standard charges, including, without limitation, travel and lodging
expenses of COMPANY personnel for training not conducted at COMPANY's principal
offices, additional DEVELOPER personnel and any replacement or substitute Chief
Operating Officer, Development Director, Training Director and/or Marketing
Director, subject to space availability in COMPANY's regularly scheduled
management training programs. All management personnel shall be required to
complete to COMPANY's satisfaction either COMPANY's management training program,
a management training program provided by DEVELOPER and approved by COMPANY or
another management training program certified and accredited by COMPANY.
COMPANY shall provide, without charge, an initial management training
program for the operation of a BOSTON MARKET Unit for the Unit Manager and the
Additional Manager of the first three (3) UNITS developed under this Agreement
at such time (subject to space availability in COMPANY's regularly scheduled
classes) and for such duration as COMPANY may designate, and at COMPANY's
designated training facility and/or at a COMPANY-owned or franchised BOSTON
MARKET Unit. Thereafter, COMPANY, at its option and in its sole discretion,
may: (1) require DEVELOPER's Training Director to provide such initial
management training program (including a facility maintained by DEVELOPER if
COMPANY so requires) to the Unit Manager and Additional Manager of each UNIT at
a training facility (including a facility maintained by DEVELOPER if COMPANY so
requires) certified and accredited by COMPANY in accordance with COMPANY's
requirements therefor, provided that the Training Director currently is
certified to provide such training; or (2) provide such initial management
training program to the Unit Manager and Additional Manager of each UNIT at
COMPANY's then-current standard charges, at such time (subject to space
availability in COMPANY's regularly scheduled classes and/or availability of
COMPANY's training personnel) and for such duration as COMPANY may designate,
and at COMPANY's designated training facility and/or at COMPANY-owned or
franchised BOSTON MARKET Units. DEVELOPER shall be responsible for travel and
lodging expenses of COMPANY personnel if such training is not conducted at
COMPANY's principal offices. If DEVELOPER provides such training, COMPANY will
provide DEVELOPER with appropriate training materials or refresher or updated
training materials at COMPANY's then-current standard charges therefor.
DEVELOPER shall be responsible for all travel and living expenses and
compensation of its personnel who attend COMPANY's training programs.
11.G. FINANCIAL CAPACITY.
------------------
DEVELOPER shall maintain sufficient financial resources to fulfill its
obligations under this Agreement and under Franchise Agreements executed
pursuant to this Agreement.
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DEVELOPER must submit for approval, from time to time at COMPANY's request, a
written plan for DEVELOPER's financing, which plan shall be reasonably
acceptable to COMPANY and which shall include details of the sources and terms
of such financing and such other information or documents required by COMPANY.
Among other factors, COMPANY may consider DEVELOPER's proposed debt/equity ratio
and amount of indebtedness in reviewing such plan. Once a plan is approved by
COMPANY, DEVELOPER must execute and adhere to the plan. The plan shall be
subject to periodic review by COMPANY which may require, in its sole discretion,
modifications to meet its then current minimum standards for developer financing
plans.
11.H. INSURANCE.
---------
During the Agreement Term, in addition to insurance required to be
maintained in connection with the development and operation of each UNIT,
DEVELOPER agrees to maintain under policies of insurance issued by insurers
rated "A-" or better by Alfred M. Best Company, Inc. and approved by Company:
(1) such insurance as is necessary to comply with all legal
requirements concerning insurance coverage (including, without limitation,
workers' compensation requirements) for persons attending COMPANY training
programs; and
(2) general and motor vehicle (whether or not such vehicles are owned
by DEVELOPER or any Authorized Entity) liability insurance against claims
for bodily and personal injury, death and property damage caused by or
occurring in conjunction with the conduct of business by DEVELOPER pursuant
to this Agreement, under one or more policies of insurance containing
minimum liability coverage prescribed by COMPANY from time to time.
Each insurance policy shall name COMPANY as an additional named insured, shall
contain a waiver of all subrogation rights against COMPANY, its Affiliates, and
their successors and assigns, and shall provide for thirty (30) days' prior
written notice to COMPANY of any material modification, cancellation, or
expiration of such policy. Upon execution of this Agreement, DEVELOPER shall
provide COMPANY with evidence of such insurance; thereafter, DEVELOPER shall
furnish to COMPANY annually and upon the replacement of any policy providing
coverage under this Agreement, a copy of the certificate of insurance or other
evidence requested by COMPANY that such insurance coverage is in force. The
maintenance of sufficient insurance coverage shall be the responsibility of
DEVELOPER.
11.I. RECORDS AND REPORTS.
-------------------
DEVELOPER shall transmit information to, or allow the electronic collection
of information by, COMPANY through the Computer System. DEVELOPER agrees, at
its expense, to maintain and preserve at its principal office, full, complete
and accurate records and reports and, if required by COMPANY, computer diskettes
and databases in the form specified
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by COMPANY from time to time pertaining to the development and operation of
UNITS and the performance by DEVELOPER of its obligations under this Agreement,
including but not limited to, records and information relating to the following:
site reports, Site Agreements for UNITS, supervisory reports relating to
operation of UNITS, records reflecting the financial condition and performance
of DEVELOPER and any Authorized Entity (including, without limitation,
requirements for a general ledger system which utilizes a standard chart of
accounts prescribed by COMPANY from time to time and timely entry of information
into data bases of the Computer System and periodic printouts of reports
generated from the Computer System), information relating to employee turnover
and such other records and reports as may be prescribed by COMPANY from time to
time. To determine whether DEVELOPER is complying with this Agreement, COMPANY
or its agents shall have the right, at any reasonable time to inspect, audit and
copy any books, records, reports, computer data bases and documents pertaining
to DEVELOPER's obligations hereunder. DEVELOPER agrees to cooperate fully with
COMPANY in connection with any such inspection or audit.
In addition to the reports and information required in connection with the
operation of UNITS, DEVELOPER shall adopt a fiscal year consistent with such
fiscal year adopted by COMPANY from time to time and furnish to COMPANY in the
form from time to time prescribed by COMPANY (including, without limitation, via
computer diskette and restated in accordance with COMPANY's financial reporting
periods and consistent with COMPANY's then-current financial reporting periods
and accounting practices and procedures):
(1) weekly sales reports for the UNITS each Monday (for the preceding
Monday through Sunday period) and, if requested by COMPANY, daily sales
reports for the UNITS, by facsimile or telephone no later than 10:00 a.m.
Central time on the following day; and
(2) by the twentieth (20th) day of each Accounting Period, a report
(in such form as COMPANY may request from time to time) on DEVELOPER's
financing plan and DEVELOPER's activities during the immediately preceding
Accounting Period including, but not limited to, DEVELOPER's activities in
locating and developing sites and monitoring the operation of UNITS,
training activities, employee statistics and violations of health codes and
other laws; and
(3) within sixty (60) days after the end of DEVELOPER's fiscal year,
a fiscal year end balance sheet, an income statement for such fiscal year,
and a statement of changes in cash flow reflecting all year-end
adjustments, prepared in accordance with generally accepted accounting
principles consistently applied and in the format prescribed by COMPANY
from time to time; and
(4) at least sixty (60) days prior to each required opening date on
the Development Schedule, DEVELOPER shall furnish to COMPANY the
anticipated development program/plan for the next succeeding required
opening date in form prescribed by COMPANY from time to time; and
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(5) upon request by COMPANY, such other data, reports, information
and supporting records as COMPANY may from time to time prescribe
(including, without limitation, daily sales reports by means of telephonic,
facsimile or other reporting system).
DEVELOPER shall immediately report to COMPANY any events or developments
which may have a significant or material adverse impact on the operation of any
UNIT, the performance of DEVELOPER under this Agreement, or the goodwill
associated with the Marks and BOSTON MARKET Units. Each such report and
financial statement submitted by DEVELOPER shall be signed by DEVELOPER and
verified as correct in the manner prescribed in COMPANY.
DEVELOPER shall submit all reports required under this Agreement in the
form and format specified by COMPANY from time to time.
11.J. DEVELOPMENT MANUAL.
------------------
COMPANY will loan to DEVELOPER for DEVELOPER's sole use during the
Agreement Term one (1) copy of a confidential manual relating to the development
and operation of BOSTON MARKET Units, which may consist of one or more volumes,
handbooks, manuals, written materials, video or audio cassette tapes, computer
diskettes, and other materials and intangibles, as may be modified, added,
replaced or supplemented by COMPANY from time to time in its sole discretion,
whether by way of supplements, replacement pages, Franchise Bulletin disclosure,
or other official pronouncements or means (collectively the "DEVELOPMENT
MANUAL"). (COMPANY also will loan to DEVELOPER for its or an Authorized
Entity's use during the term of each Franchise Agreement one (1) copy of the
Manuals for each UNIT developed and opened by DEVELOPER under this Agreement
(the Manuals for the first UNIT to be developed under this Agreement will be
made available to DEVELOPER promptly after execution of this Agreement).) The
Development Manual shall contain specifications, standards, policies and
procedures prescribed from time to time by COMPANY for developers of BOSTON
MARKET Units and information relative to other obligations of DEVELOPER
hereunder and the operation of BOSTON MARKET Units. The Development Manual may
be modified from time to time in COMPANY's sole discretion to reflect changes in
the BOSTON MARKET System or specifications, standards, policies and procedures
for BOSTON MARKET Units or such other changes or additions as COMPANY deems
necessary or advisable. DEVELOPER shall keep its copy of the Development Manual
current by immediately inserting all modified pages or materials furnished by
COMPANY. In the event of a dispute about the contents of the Development
Manual, the master copies maintained by COMPANY at its principal office shall be
controlling. DEVELOPER acknowledges that the Development Manual is proprietary
and confidential and, therefore, agrees that it will not, at any time, disclose,
copy or distribute any part of the Development Manual.
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11.K. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
------------------------------------------------
DEVELOPER shall secure and maintain in force in its name all required
licenses, permits, and certificates relating to the conduct of its business
pursuant to this Agreement. DEVELOPER shall comply with all applicable laws,
ordinances and regulations, including, without limitation, laws and governmental
regulations relating to the preparation, purchase and handling of food products,
provision of catering and delivery service, occupational hazards, health, safety
and sanitation, worker's compensation insurance, unemployment insurance, and
withholding and payment of all taxes. All advertising by DEVELOPER shall be
approved by COMPANY, completely factual, in good taste in the judgment of
COMPANY, and conform to high standards of ethical advertising. DEVELOPER shall
in all dealings with its customers, suppliers, COMPANY and public officials
adhere to high standards of honesty, integrity, fair dealing and ethical
conduct. DEVELOPER agrees to refrain from any business or advertising practice
which may be injurious to the business of COMPANY and the goodwill associated
with the Marks and BOSTON MARKET Units. DEVELOPER shall notify COMPANY in
writing:
(1) within three (3) days after the commencement of any action, suit,
or proceeding, and of the issuance of any order, writ, injunction, award,
or decree of any court, agency, or other governmental instrumentality,
which may adversely affect the operation or financial condition of
DEVELOPER or the UNITS; or
(2) immediately after receipt of any notice of violation of any law,
ordinance or regulation relating to health, sanitation or the operation of
the UNITS.
11.L. COMMUNICATION AND INFORMATION SYSTEMS.
-------------------------------------
DEVELOPER agrees to install at its head office and use in performing its
obligations under this Agreement those brands, types, makes, and/or models of
communications and computer systems or hardware which COMPANY has from time to
time specified or required for the Computer System and the Specified Software
and the Licensed Program, as comprised from time to time in accordance with the
specifications and requirements of COMPANY. DEVELOPER acknowledges that COMPANY
and its Affiliates and designees are in the process of completing the
development of the Licensed Program and COMPANY is in the process of completing
the development of specifications for certain components of the Computer System
and may modify such specifications and the components of the Licensed Program
and the Computer System from time to time. During the term hereof, COMPANY may
require DEVELOPER to obtain specified computer hardware and/or software,
including, without limitation, the Computer System, the Specified Software, and
a license to use the Licensed Program from COMPANY or its designee under a
separate agreement after COMPANY notifies DEVELOPER to commence use thereof.
COMPANY's development and/or modification of such specifications for the
components of the Computer System, the Specified Software, and the Licensed
Program may require DEVELOPER to incur costs to purchase, lease and/or license
new or modified computer hardware and/or software and to obtain service and
support for the Computer System, the Specified Software, and the Licensed
Program during the term of this
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Agreement. DEVELOPER acknowledges that COMPANY cannot estimate the costs of
future additions, enhancements and modifications to the Computer System, the
Specified Software, and the Licensed Program and that the cost to DEVELOPER of
obtaining the additions, enhancements and modifications thereto, may not be
fully amortizable over the remaining term of this Agreement. Nonetheless,
DEVELOPER agrees to incur such costs in connection with obtaining the Computer
System, Specified Software, Licensed Program, and any additions, enhancements or
modifications thereto, provided that the Computer System, the Specified
Software, and the Licensed Program that COMPANY specifies for use by DEVELOPER
is substantially the same Computer System, Specified Software and Licensed
Program which COMPANY is then currently specifying for use in COMPANY-owned
BOSTON MARKET Units. Such portion of the Computer System, Specified Software,
and Licensed Program as is purchased from COMPANY or its agents or affiliates
may involve one-time and periodic fees or payments to COMPANY. Within one
hundred twenty (120) days after DEVELOPER receives notice from COMPANY,
DEVELOPER shall obtain the components of the Computer System, the Specified
Software, and the Licensed Program which COMPANY designates and requires.
DEVELOPER further acknowledges and agrees that COMPANY has the right to require
DEVELOPER to pay to COMPANY or its designee a reasonable periodic systems fee
for modifications and enhancements made to the Licensed Program and other
maintenance and support services provided to DEVELOPER related to operating the
Licensed Program, Specified Software, and the Computer System.
12. TRANSFER.
--------
12.A. BY COMPANY.
----------
This Agreement is fully transferable by COMPANY and shall inure to the
benefit of any assignee or other legal successor to the interests of COMPANY
herein.
12.B. DEVELOPER AND ITS OWNERS MAY NOT
TRANSFER WITHOUT APPROVAL OF COMPANY.
------------------------------------
DEVELOPER understands and acknowledges (and hereby represents and warrants
that its Owners understand) that the rights and duties created by this Agreement
are personal to DEVELOPER and its Owners and that COMPANY has entered into this
Agreement in reliance upon the individual or collective character, skill,
aptitude, attitude, business ability, and financial capacity of DEVELOPER and
its Owners. Therefore, except as described in Paragraph 12.D. below, no
obligations of DEVELOPER under this Agreement and no interest in (i) this
Agreement, (ii) a Franchise Agreement executed pursuant to this Agreement, (iii)
a Franchise, (iv) a UNIT, (v) the lease for the premises of a UNIT, (vi) some or
all of the assets of a UNIT (other than sales of inventory, equipment financing,
or otherwise in the ordinary course of business) or (vii) DEVELOPER or an
Authorized Entity, may be transferred during the Agreement Term without the
prior written approval of COMPANY. Any transfer in violation of this Section
shall constitute a breach of this Agreement and convey no rights to or interests
in this Agreement,
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such Franchise Agreement, such UNIT, the lease for such UNIT, the assets of such
UNIT, DEVELOPER or such Authorized Entity.
As used in this Agreement, the term "TRANSFER" shall include, without
limitation, the following, whether voluntary or involuntary, direct or indirect:
(1) an assignment, sale, gift or pledge; and
(2) the grant of a mortgage, lien or security interest, including,
without limitation, the grant of a collateral assignment; and
(3) a merger or consolidation, or issuance of additional Ownership
Interests or securities representing or potentially representing Ownership
Interests or redemption of Ownership Interests; and
(4) a sale of voting shares or securities convertible to voting
shares, or an agreement granting the right to exercise or control the
exercise of voting rights of any holder of an Ownership Interest; and
(5) a management agreement whereby DEVELOPER or an Authorized Entity
delegates (a) any of its obligations under this Agreement or a Franchise
Agreement; or (b) any or all of the management function with respect to a
UNIT or the business to be conducted by DEVELOPER pursuant to this
Agreement; and
(6) a transfer which occurs as a result of divorce, insolvency,
corporate, partnership or limited liability company dissolution, or upon
death, by will, intestate succession or by declaration of trust.
Notwithstanding the foregoing, the restrictions or transfers set forth in
this Section shall not apply to:
(1) a transfer of Ownership Interests in DEVELOPER by an Owner who is
not a Principal Owner, provided that:
(a) DEVELOPER has given COMPANY written notice of the proposed
transfer at least ten (10) days in advance of the effective date of
the transfer;
(b) the transfer is not to a Competitive Business or to a direct
or indirect owner of a Competitive Business; and
(c) the proposed transfer does not, by itself or in conjunction
with other transfers, result in the transfer of a Controlling Interest
in DEVELOPER
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or a change in the composition of the group holding a Controlling
Interest in DEVELOPER; or
(2) any transfer of stock options that does not, by itself or in
combination with other transfers, result in the transfer of a Controlling
Interest in DEVELOPER or a change in the composition of the group holding a
Controlling Interest in DEVELOPER.
12.C. CONDITIONS FOR APPROVAL OF TRANSFER.
-----------------------------------
Subject to COMPANY's right of first refusal under this Section, COMPANY's
approval of a transfer may be withheld if DEVELOPER, its Owners, the proposed
transferee or any of its owners, fails to satisfy or comply with any reasonable
conditions imposed by COMPANY, including, without limitation, the following:
(1) DEVELOPER (and its Authorized Entities) and its Owners shall be
in full compliance with this Agreement and any other agreements with
COMPANY and its Affiliates; and
(2) the proposed transferee and its owners must be of good moral
character and otherwise meet COMPANY's then applicable standards and if the
proposed transferee, its owners, or its affiliates have any other franchise
agreements or development agreements with COMPANY, they must be in full
compliance with any such agreements and comply with Subparagraph (8) below;
and
(3) a transfer of an Ownership Interest in a UNIT, some or all of
the assets of a UNIT (other than in connection with the financing of
authorized equipment for the UNIT, the sale of inventory items or otherwise
in the ordinary course of business), a Franchise Agreement or an Authorized
Entity may only be made in conjunction with a transfer of this Agreement;
and
(4) a transfer of an Ownership Interest in DEVELOPER or this
Agreement may be made only in connection with the transfer of all of
DEVELOPER's interests in every UNIT, the assets of such UNITS, the
Franchise Agreements for such UNITS and the Authorized Entities that own
such UNITS to a single transferee. The transferee's name and relevant
information shall be added to Exhibit E hereto, the transferee shall then
---------
be bound by all provisions applicable to Owners and if, after giving effect
to the transfer, the transferee qualifies as a Principal Owner,, or if
COMPANY designates the transferee as a Principal Owner, then the transferee
shall execute the form of Guarantee and Assumption of Developer's
Obligations attached hereto; and
(5) DEVELOPER and/or the transferring Owner and the transferee (if
it is then a developer or franchise owner of COMPANY or owner thereof) must
execute a general release and consent agreement, in form satisfactory to
COMPANY, of any and
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all claims against COMPANY, its Affiliates, and their respective
shareholders, officers, directors, employees, and agents.
If the transfer includes this Agreement, a Principal Owner's interest in
DEVELOPER or a Controlling Interest in DEVELOPER, is one of a series of
transfers which in the aggregate constitute the transfer of this Agreement or a
Controlling Interest in DEVELOPER, or COMPANY determines, in its sole discretion
that such transfer results in the transfer or elimination of a Controlling
Interest or a change in the composition of any group of Owners who previously
together possessed a Controlling Interest then, in addition to the conditions
set forth above, all of the following conditions also must be met prior to, or
concurrently with, the effective date of the transfer:
(6) the transferee must have sufficient business experience,
aptitude, and financial resources to perform the transferring Principal
Owner's obligations under this Agreement and neither the transferee nor its
owners may be engaged in or have the intent to engage in a Competitive
Business; and
(7) all obligations of the transferring Principal Owner incurred in
connection with this Agreement and any Franchise Agreements executed
pursuant hereto shall be assumed by the transferee and its owners, in a
manner satisfactory to COMPANY; and
(8) DEVELOPER, the transferor and the transferee (if it is then a
developer or franchise owner of COMPANY) shall have paid all amounts owed
to COMPANY or its Affiliates which are then due and unpaid; and
(9) the transferee and/or its personnel, at COMPANY's request, must
complete at DEVELOPER's expense COMPANY's training program to COMPANY's
satisfaction prior to the transfer at the time specified by COMPANY and the
transferee must have paid COMPANY's then-current standard training charges;
and
(10) all interests of such Principal Owner in all Franchise
Agreements between COMPANY and DEVELOPER or any Authorized Entity must be
transferred, in a manner satisfactory to COMPANY, to the transferee; and
(11) DEVELOPER or the transferee must have paid to COMPANY a
transfer fee in the amount of Five Thousand Dollars ($5,000.00) plus an
amount equal to COMPANY's reasonable out-of-pocket expenses in connection
with the transfer; and
(12) COMPANY must approve the material terms and conditions of such
transfer, including, without limitation, that the price and terms of
payment are not so burdensome as to adversely affect COMPANY's rights and
interests under this Agreement and the Franchise Agreements; and
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(13) if the transferor finances any part of the sale price of the
transferred interest, the transferor must agree, in a manner satisfactory
to COMPANY, that all obligations of the transferee under or pursuant to any
promissory notes, agreements or security interests reserved by the
transferor in the assets of any UNIT shall be subordinate to the
obligations of the transferee to pay all amounts due to COMPANY and its
Affiliates pursuant to this Agreement, any new development agreement
entered into by COMPANY and the transferee and all Franchise Agreements
executed pursuant to this Agreement and any such new development agreement,
and to the obligations of the transferee to otherwise comply with this
Agreement or the Franchise Agreements executed under this Agreement; and
(14) DEVELOPER and its Principal Owners (in the case of a transfer
of this Agreement) or its transferring Principal Owners must execute a non-
competition agreement in favor of COMPANY and the transferee, providing
that neither DEVELOPER, its Principal Owner(s) nor its transferring
Principal Owner(s) (whichever is applicable) shall directly or indirectly
(through a member of the Immediate Family of DEVELOPER, its Principal
Owner(s) or the transferring Principal Owner(s) of DEVELOPER, or
otherwise), for a period of two (2) years commencing on the effective date
of such transfer:
(a) have any interest as a disclosed or beneficial owner in
any Competitive Business located or operating:
(i) within a five (5) mile radius of any BOSTON MARKET
Unit in operation or under development in the Development Area
on the effective date of the transfer; or
(ii) within a five (5) mile radius of any other BOSTON
MARKET Unit in operation or under development on the effective
date of the transfer; or
(iii) within the Development Area; or
(iv) within the state(s) where the Development Area is
located;
or
(b) perform services as a director, officer, manager,
employee, consultant, representative, agent or otherwise for any
Competitive Business located or operating:
(i) within a five (5) mile radius of any BOSTON MARKET
Unit in operation or under development in the Development Area
on the effective date of the transfer; or
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(ii) within a five (5) mile radius of any other BOSTON
MARKET Unit in operation or under development on the effective
date of the transfer; or
(iii) within the Development Area; or
(iv) within the state(s) where the Development Area is
located; or
(c) divert or attempt to divert any business or any customers
of any BOSTON MARKET Unit to any Competitive Business;
or
(d) employ or seek to employ any person who is employed by
COMPANY, its Affiliates or by any other developer or franchise owner
of COMPANY, nor induce nor attempt to induce any such person to leave
said employment without the prior written consent of such person's
employer; and
(15) the transferee and its owners, at COMPANY's option, must agree,
in a manner satisfactory to COMPANY, to be bound by all terms and
conditions of this Agreement for the remainder of its term or, at COMPANY's
option, execute COMPANY's then-current form of standard development
agreement and such ancillary documents (including guarantees) as are then
used by COMPANY at such time in the grant of development rights for BOSTON
MARKET Units, modified as necessary to provide for the same fees required
hereunder and a term equal to the remaining term of this Agreement; and
(16) the transferee and DEVELOPER shall acknowledge and agree that
COMPANY's approval of the proposed transfer indicates only that the
transferee meets or COMPANY has waived the acceptable criteria established
by COMPANY for developers as of the time of such transfer and that
COMPANY's approval thereof does not constitute a warranty or guaranty by
COMPANY, express or implied, of the suitability of the terms of sale or of
the successful operation or profitability of the UNITS by the transferee;
and
(17) the transfer must be made in compliance with all applicable
laws.
A transfer of an Owner's interest shall not be required to meet the
conditions set forth in Subparagraphs (6) through (17) above if the Owner is not
a Principal Owner, the transfer does not itself or, together with prior or
concurrent transfers, involve the transfer of a Controlling Interest in
DEVELOPER and COMPANY determines in its sole discretion that such transfer does
not result in the transfer or elimination of a Controlling Interest or a change
in the composition of any group of Owners who previously together possessed a
Controlling Interest.
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Subparagraph (11) shall not apply to transfers by gift, bequest, or inheritance.
DEVELOPER acknowledges and agrees that the failure of any person or entity
restricted pursuant to Subparagraph (14) to comply with this Section, including,
without limitation, the restrictions of Subparagraph (14), shall constitute a
breach of this Agreement. The restrictions of Subparagraph (14)(a) shall not be
applicable to the ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market and quoted by a national
inter-dealer quotation system that represent less than three percent (3%) of the
number of shares of that class of securities issued and outstanding nor shall
they be construed to prohibit DEVELOPER, any Principal Owner of DEVELOPER, or
any member of the Immediate Family of DEVELOPER or any Principal Owner from
having a direct or indirect Ownership Interest in any BOSTON MARKET Unit,
development agreements or franchise agreements for the development or operation
of BOSTON MARKET Units, or any entity owning, controlling or operating BOSTON
MARKET Units, or from providing services to BOSTON MARKET Units pursuant to
other agreements with COMPANY. Furthermore, the restrictions of Subparagraph
(14) shall not prohibit DEVELOPER, any Principal Owner of DEVELOPER, or any
member of the Immediate Family of DEVELOPER or a Principal Owner of DEVELOPER
(to the extent any such person(s) is an individual) from performing services for
or having an Ownership Interest in a Permitted Competitive Business or from
conducting customary promotion and advertising of such Permitted Competitive
Business.
The rights of DEVELOPER and its Owners to transfer interests in this
Agreement, the Franchise Agreements, the Franchises, DEVELOPER, a UNIT (or the
assets of a UNIT), a lease for the premises of a UNIT or of an Authorized Entity
may be exercised only by the DEVELOPER or its Owners and shall not be
exercisable by a receiver, trustee, liquidator or other person acting in a
comparable capacity with respect to the assets or ownership of DEVELOPER.
12.D. DEATH OR INCAPACITY OF DEVELOPER.
--------------------------------
Upon the death of DEVELOPER or the permanent incapacity of DEVELOPER or, if
DEVELOPER is a corporation, partnership or limited liability company, upon the
death or permanent incapacity of a Principal Owner of DEVELOPER, all of such
person's interest in this Agreement, or such interest in DEVELOPER shall be
transferred to a transferee approved by COMPANY. Such disposition of this
Agreement or such interest in DEVELOPER (including, without limitation, transfer
by bequest or inheritance), shall be completed within a reasonable time, not to
exceed nine (9) months from the date of death or permanent disability and shall
be subject to all the terms and conditions applicable to transfers contained in
this Section. Failure to so transfer the interest in this Agreement or such
interest in DEVELOPER, within said period of time shall constitute a breach of
this Agreement.
12.E. PUBLIC OR PRIVATE OFFERINGS.
---------------------------
Notwithstanding anything in this Section to the contrary, securities (debt
or equity) of DEVELOPER or an entity owning a direct or indirect equity interest
in DEVELOPER or this
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Agreement, or any UNIT or Franchise Agreement may not be offered pursuant to a
private or public offering of securities or any governmentally-regulated
offering of securities without the prior written consent of COMPANY, which
consent may be withheld in COMPANY's sole discretion. Notwithstanding the
foregoing, DEVELOPER may make a private placement of securities if:
(1) such private placement complies with all applicable federal,
state and local laws governing offerings of securities;
(2) such private placement complies with each of the relevant
transfer procedures, requirements, and limitations contained herein other
than the limitation in this Section 12.E preceding this provision;
(3) such private placement does not result in any change in
operating control of DEVELOPER or any UNIT or in the individual or
individuals controlling the management, policies, or any decision of
DEVELOPER or any UNIT, and each such entity or individual receiving
securities in such private placement shall have been identified and be
reasonably acceptable to COMPANY;
(4) any offering memorandum or information used in connection with
any such private placement is submitted to COMPANY for review and comment a
reasonable time prior to its use and the reasonable comments and
suggestions of COMPANY thereon are given due consideration;
(5) any offering memorandum or other information used in connection
with any such private placement shall clearly identify that it is not an
offering of COMPANY and that COMPANY has not supplied any financial
information, projections, budgets, cost estimates, or similar information
contained therein, all of which shall be the sole responsibility of
DEVELOPER;
(6) each recipient of information relating to such private placement
shall agree to maintain it in confidence;
(7) the structure, timing, allocation and nature of such private
placement shall be reasonably acceptable to COMPANY;
(8) COMPANY is indemnified by DEVELOPER for any and all costs,
expenses, claims, actions, judgments, and liabilities (including, but not
limited to costs and expenses related to legal defense) arising from or
relating to such private placement; and
(9) DEVELOPER shall not become a Reporting Company by virtue of
Section 12(b), 12(g) or 15(d) of the Securities Exchange Act of 1934, as
amended.
44
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DEVELOPER shall reimburse COMPANY for its reasonable expenses incurred in
connection with any offering or proposed offering restricted pursuant to this
paragraph (including attorneys' fees) and shall comply with all requirements of
COMPANY in connection with such offering, including, without limitation, adding
appropriate disclaimers to the offering documents and execution of appropriate
indemnification agreements.
12.F. EFFECT OF CONSENT TO TRANSFER.
-----------------------------
COMPANY's consent to a transfer of this Agreement or any interest subject
to the restrictions of this Section shall not constitute a waiver of any claims
it may have against DEVELOPER (or its Owners), nor shall it be deemed a waiver
of COMPANY's right to demand full compliance with any of the terms or conditions
of this Agreement by the transferee.
12.G. COMPANY'S RIGHT OF FIRST REFUSAL.
--------------------------------
If DEVELOPER or any of its Owner(s) desire to make a transfer of an
interest that is permitted under this Agreement, DEVELOPER or its Owner(s) shall
obtain a bona fide, arms length executed purchase agreement (and any proposed
ancillary agreements) in complete and definitive form and not subject to any
financing or other material, substantive contingency and an earnest money
deposit (in the amount of five percent (5%) or more of the purchase price) from
a qualified, responsible, bona fide and fully disclosed purchaser. A true and
complete copy of such purchase agreement (conditioned on COMPANY's first refusal
rights) and any proposed ancillary agreements shall immediately be submitted to
COMPANY by DEVELOPER, such Owner(s), or both. The purchase agreement must apply
only to an interest which is permitted to be transferred under this Agreement,
may not include the purchase of any other property or rights of DEVELOPER (or
such Owner(s)) and the price and terms of purchase offered to DEVELOPER (or such
Owner(s)) in the purchase agreement for the aforementioned interests will
reflect the bona fide price offered therefor and shall not reflect any value for
any other property or rights. If the proposed purchaser proposes to buy any
other property or rights from DEVELOPER (or such Owner(s)) under a separate,
contemporaneous purchase agreement, DEVELOPER shall submit to COMPANY a true and
complete copy of a bona fide, arms length executed purchase agreement (and any
proposed ancillary agreements) in complete and definitive form and not subject
to any financing or other material, substantive contingency. COMPANY shall have
the right, exercisable by written notice delivered to DEVELOPER (or such
Owner(s)) within thirty (30) days from the date of receipt by COMPANY of an
exact copy of such purchase agreement, together with payment of any applicable
transfer fee, and a completed executed application for COMPANY's consent to the
transfer, to purchase such interest for the price and on the terms and
conditions contained in such purchase agreement, provided that COMPANY may
substitute cash, a cash equivalent, or marketable securities of equivalent value
for any form of payment proposed in such purchase agreement, COMPANY's credit
shall be deemed equal to the credit of any proposed purchaser, and COMPANY shall
have not less than sixty (60) days to prepare for closing. Regardless of
whether included in the purchase agreement, COMPANY shall be entitled to all
customary representations and warranties given by the seller of a business,
including, without limitation, representations and warranties as to:
45
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(i) ownership, condition and title to stock and/or assets; (ii) liens and
encumbrances relating to the stock and/or assets; and (iii) validity of
contracts and liabilities, contingent or otherwise, of any corporation whose
stock is purchased. If COMPANY does not exercise its right of first refusal,
DEVELOPER (or such Owner(s)) may complete the sale to such purchaser pursuant to
and on the exact terms of the purchase agreement, subject to the conditions set
forth in Paragraph 12.C., provided that if the sale to such purchaser is not
completed within one hundred twenty (120) days after receipt of such purchase
agreement by COMPANY, or there is a change in the terms of the sale, COMPANY
shall again have an additional right of first refusal for thirty (30) days as
set forth in this Agreement on the modified or initial terms and conditions of
sale.
12.H. OWNERSHIP STRUCTURE AND INITIAL CAPITALIZATION.
----------------------------------------------
DEVELOPER represents and warrants that its owners are as set forth on
Exhibit E and covenants that DEVELOPER will not vary from that ownership
- ---------
structure without the prior written approval of COMPANY.
12.I. DELEGATION BY COMPANY.
---------------------
DEVELOPER agrees that COMPANY shall have the right, from time to time, to
delegate the performance of any portion or all of its obligations and duties
under this Agreement to designees, whether the same are agents of COMPANY or
independent contractors with which COMPANY has contracted to provide such
services.
13. TERMINATION OF AGREEMENT.
------------------------
13.A. BY DEVELOPER.
------------
If DEVELOPER and any Authorized Entities are in full compliance with this
Agreement and with all Franchise Agreements and COMPANY materially breaches this
Agreement, DEVELOPER may terminate this Agreement effective thirty (30) days
after COMPANY's receipt of written notice of termination if DEVELOPER gives
written notice of such breach to COMPANY and COMPANY does not:
(1) correct such breach within thirty (30) days after COMPANY's
receipt of such notice of material breach; or
(2) if such breach cannot reasonably be cured within thirty (30)
days after COMPANY's receipt of such notice, undertake within thirty (30)
days after COMPANY's receipt of such notice, and continue until completion,
reasonable efforts to cure such breach.
Any termination of this Agreement by DEVELOPER other than as provided in this
Paragraph 13.A. shall be deemed a termination by DEVELOPER without cause.
46
<PAGE>
13.B. BY COMPANY.
----------
COMPANY may terminate this Agreement, effective upon delivery of notice of
termination to DEVELOPER or, where expressly applicable, upon failure to cure to
COMPANY's satisfaction any breach of this Agreement before the expiration of any
period of time within which such breach may be cured in accordance with the
provisions set forth below, if:
(1) DEVELOPER fails to satisfy the development obligations for the
Development Area or any Sub-Area set forth in Paragraph 3.C. of this
Agreement; or
(2) any person or entity makes an assignment or transfer in
violation of this Agreement; or
(3) DEVELOPER (or any Owner of DEVELOPER) has made any material
misrepresentation or omission in its application for this Agreement or in
connection with any transfer hereunder or is convicted by a trial court of
or pleads guilty or no contest to a felony, or to any other crime or
offense that may adversely affect the reputation of BOSTON MARKET Units or
the goodwill associated with the Marks, or engages in any misconduct which
may adversely affect the reputation of BOSTON MARKET Units or the goodwill
associated with the Marks; or
(4) DEVELOPER (or any of its Owners or employees) makes any
unauthorized use of the Marks, or unauthorized use, disclosure or
duplication of the Confidential Information, Development Manual or the
Copyrighted Works, or challenges or seeks to challenge the validity of the
Marks or the Copyrighted Works; or
(5) DEVELOPER, its Principal Owners, or members of their immediate
families violate the restrictions on the operation of Competitive
Businesses during the Agreement Term set forth in Section 8 of this
Agreement or Owners who have access to the Confidential Information violate
the covenants concerning competition and confidentiality contained in the
form of Confidentiality and Non-Competition Agreement attached hereto as
Exhibit F (regardless of whether any such party has executed this Agreement
---------
or a Confidentiality and Non-Competition Agreement); or
(6) DEVELOPER fails to adhere to the financing plan required
pursuant to Paragraph 11.G. of this Agreement and does not correct such
failure within ten (10) days after written notice of such failure is
delivered to DEVELOPER; or
(7) DEVELOPER (or an Authorized Entity) fails to timely commence or
provide:
47
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(a) Delivery Service if required pursuant to this Agreement or
a Delivery Rider executed by COMPANY and DEVELOPER (or such
Authorized Entity); or
(b) Catering Service pursuant to a Catering Rider executed by
COMPANY and DEVELOPER (or such Authorized Entity); or
(c) Special Distribution Arrangements if required and consented
to pursuant to a Special Distribution Agreement executed by COMPANY
and DEVELOPER (or such Authorized Entity),
in accordance with COMPANY's standards, specifications and procedures
therefor, and does not correct such failure within ten (10) days after
written notice of such failure is delivered to DEVELOPER (or such
Authorized Entity and DEVELOPER); or
(8) DEVELOPER (or any of its Owners) fails: (a) to comply with any
other provision of this Agreement, and does not correct such failure within
thirty (30) days after DEVELOPER's receipt of COMPANY's written notice of
such failure to comply; or (b) if such failure cannot reasonably be
corrected within the aforesaid thirty (30) day period but can be corrected
within a reasonably short time (not to exceed an additional thirty (30)
days), undertake within ten (10) days after DEVELOPER's receipt of
COMPANY's written notice, and continue until completion, best efforts to
correct such failure within such reasonably short time (not to exceed an
additional thirty (30) days) and furnish proof acceptable to COMPANY, upon
its request, of such efforts and the date full compliance will be achieved;
or
(9) DEVELOPER (or any of its Owners) fails on three (3) or more
separate occasions within any period of twenty four (24) consecutive months
to comply with this Agreement, whether or not such failures to comply are
corrected after written notice thereof is delivered to DEVELOPER; or
(10) COMPANY has delivered a notice of termination of a Franchise
Agreement executed pursuant to this Agreement in accordance with its terms
and conditions or DEVELOPER (or an Authorized Entity) has terminated a
Franchise Agreement with COMPANY without cause; or
(11) DEVELOPER becomes insolvent in the sense that DEVELOPER is
unable to pay its bills as they become due.
13.C. TERMINATION OF THE DEVELOPMENT
TERM AND CERTAIN RIGHTS OF DEVELOPER.
------------------------------------
48
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In the event COMPANY is entitled to terminate this Agreement in accordance
with Paragraph 13.B., COMPANY, in its sole discretion, shall have the option, to
terminate any one or more of the following instead of terminating this
Agreement:
(1) DEVELOPER's right to develop BOSTON MARKET Units for which no
Franchise Agreement has been executed under Paragraph 3.A.; and
(2) DEVELOPER's territorial rights granted pursuant to Paragraph
3.A. in some or all of the Sub-Areas; and
(3) DEVELOPER's option to develop BOSTON MARKET Units at Target
Sites under Paragraph 3.E.; and
(4) DEVELOPER's option to purchase, and develop and operate BOSTON
MARKET Units at, Conversion Sites under Paragraph 3.F.; and
(5) any Delivery Rider(s) in effect between COMPANY and DEVELOPER (or
an Authorized Entity); and
(6) any Catering Rider(s) in effect between COMPANY and DEVELOPER
(or an Authorized Entity); and
(7) any Special Distribution Arrangement in effect between COMPANY
and DEVELOPER (or an Authorized Entity),
effective ten (10) days after delivery of written notice thereof to DEVELOPER.
If any of such rights, options or arrangements are terminated in accordance with
this Paragraph, such termination shall be without prejudice to COMPANY's right
to terminate this Agreement or other such rights, options or arrangements at any
time thereafter as a result of additional defaults of this Agreement in
accordance with Paragraph 13.B.
14. RIGHTS AND OBLIGATIONS OF COMPANY AND
DEVELOPER UPON TERMINATION OF THIS
AGREEMENT OR EXPIRATION OF THE AGREEMENT TERM.
---------------------------------------------
14.A. PAYMENT OF AMOUNTS OWED TO COMPANY.
----------------------------------
DEVELOPER shall immediately pay to COMPANY upon termination of this
Agreement or upon expiration of the Agreement Term any amounts owed by DEVELOPER
(or any Authorized Entity) to COMPANY or its Affiliates which are then unpaid
plus interest due on any of the foregoing.
49
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14.B. MARKS AND COPYRIGHTED WORKS.
---------------------------
Upon the termination of this Agreement or expiration of the Agreement Term,
DEVELOPER shall:
(1) not thereafter directly or indirectly at any time or in any
manner identify itself or any business as a current or former developer of
or as otherwise associated with COMPANY, or use any Mark, any colorable
imitation thereof or use any mark substantially identical to or deceptively
similar to any Mark in any manner or for any purpose, or utilize for any
purpose any trade name, trademark or service mark or other commercial
symbol or trade dress that suggests or indicates a connection or
association with COMPANY; and
(2) immediately remove all signs containing any Mark, and return to
COMPANY or destroy all forms, advertising and promotional materials and
other materials containing any Mark or otherwise identifying or relating to
the Marks; and
(3) immediately take such action as may be required to cancel or, at
COMPANY's option, to transfer to COMPANY or its designee, all fictitious or
assumed name or equivalent registrations relating to its use of any Mark;
and
(4) immediately cease use of all Copyrighted Works which were
furnished and/or licensed to DEVELOPER by COMPANY pursuant to this
Agreement and return to COMPANY or destroy, at COMPANY's option, all forms,
advertising and promotional materials or other materials containing such
Copyrighted Works.
DEVELOPER shall furnish to COMPANY within thirty (30) days after the effective
date of termination or expiration, evidence satisfactory to COMPANY of
DEVELOPER's compliance with all of the foregoing obligations. Notwithstanding
the foregoing, DEVELOPER shall continue to have the right to use the Marks and
Copyrighted Works pursuant to any Franchise Agreements it has entered into
pursuant to this Agreement which are then in effect.
14.C. CONFIDENTIAL INFORMATION.
------------------------
DEVELOPER agrees that upon termination of this Agreement or expiration of
the Agreement Term:
(1) it, and all of its Authorized Entities, Owners, employees,
agents or other representatives, will immediately cease to use and will
maintain the absolute confidentiality of any Confidential Information of
COMPANY disclosed to or otherwise learned or acquired by DEVELOPER and will
refrain from using such Confidential Information in any business or
otherwise; and
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<PAGE>
(2) it will return to COMPANY all copies of the Development Manual
and any other confidential materials which have been loaned or made
available to it by COMPANY pursuant to this Agreement.
14.D. COVENANT NOT TO COMPETE.
-----------------------
Upon expiration of the Agreement Term or termination of this Agreement by
COMPANY or by DEVELOPER, other than pursuant to Paragraph 13.A., neither
DEVELOPER nor any of its Principal Owners shall directly or indirectly (through
a member of the Immediate Family of DEVELOPER or a Principal Owner of DEVELOPER,
or otherwise) for a period of two (2) years commencing on the effective date of
such termination or expiration or the date on which DEVELOPER ceases to conduct
its activities hereunder, whichever is later:
(1) have any interest as a disclosed or beneficial owner in any
Competitive Business located or operating:
(a) within a five (5) mile radius of any BOSTON MARKET Unit in
operation or under development in the Development Area on the
effective date of termination or expiration of this Agreement; or
(b) within a five (5) mile radius of any other BOSTON MARKET
Unit in operation or under development on the effective date of
termination or expiration of this Agreement; or
(c) within the Development Area; or
(d) within the state(s) where the Development Area is located;
or
(2) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for any Competitive Business
located or operating:
(a) within a five (5) mile radius of any BOSTON MARKET Unit in
operation or under development in the Development Area on the
effective date of termination or expiration of this Agreement; or
(b) within a five (5) mile radius of any other BOSTON MARKET
Unit in operation or under development on the effective date of
termination or expiration of this Agreement; or
(c) within the Development Area; or
(d) within the state(s) where the Development Area is located;
or
51
<PAGE>
(3) divert or attempt to divert any business or any customers of any
BOSTON MARKET Unit to any Competitive Business;
(4) employ or seek to employ any person who is employed by COMPANY,
its Affiliates or by any other developer or franchise owner of COMPANY, nor
induce nor attempt to induce any such person to leave said employment
without the prior written consent of such person's employer.
The restrictions of Subparagraph (1) of this Paragraph 14.D. will not be
applicable to the ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market and quoted by a national
inter-dealer quotation system that represent less than three percent (3%) of the
number of shares of that class of securities issued and outstanding nor shall
they be construed to prohibit DEVELOPER, any Principal Owner of Developer or any
member of the Immediate Family of DEVELOPER or any Principal Owner from having a
direct or indirect Ownership Interest in any BOSTON MARKET Unit, development
agreements or franchise agreements for the development or operation of BOSTON
MARKET Units, or any entity owning, controlling or operating BOSTON MARKET
Units, or from providing services to BOSTON MARKET Units pursuant to other
agreements with COMPANY. Furthermore, the restrictions of this Paragraph 14.D.
shall not prohibit DEVELOPER, any Principal Owner of DEVELOPER, or any member of
the Immediate Family of DEVELOPER or a Principal Owner of DEVELOPER (to the
extent any such person(s) is an individual) from performing services for or
having an Ownership Interest in a Permitted Competitive Business, or from
conducting customary promotion and advertising of a Permitted Competitive
Business.
14.E. CONTINUING OBLIGATIONS.
----------------------
All obligations of COMPANY and DEVELOPER under this Agreement which
expressly or by their nature survive or are intended to survive the termination
of this Agreement or expiration of the Agreement Term shall continue in full
force and effect subsequent to and notwithstanding its expiration or termination
and until they are satisfied in full or by their nature expire.
15. INDEPENDENT CONTRACTORS/INDEMNIFICATION.
---------------------------------------
COMPANY and DEVELOPER are independent contractors. Neither COMPANY nor
DEVELOPER shall be obligated by or have any liability under any agreements,
representations, or warranties made by the other that are not expressly
authorized hereunder, nor shall COMPANY be obligated for any damages to any
person or property directly or indirectly arising out of the operation of
DEVELOPER's business conducted pursuant to this Agreement or the operation of
BOSTON MARKET Units by DEVELOPER or Authorized Entities, whether or not caused
by DEVELOPER's negligent or willful action or failure to act. COMPANY shall
have no liability for any value added, sales, service, use, excise, income,
gross receipts, property, payroll, employee withholding or other taxes levied
upon DEVELOPER or its assets or upon COMPANY in connection with the business
conducted by DEVELOPER, or any payments made
52
<PAGE>
by DEVELOPER to COMPANY pursuant to this Agreement or any Franchise Agreement.
DEVELOPER agrees to defend and hold COMPANY, its Affiliates and their respective
shareholders, directors, officers, employees, agents and assignees harmless
against and to reimburse them for:
(a) all claims, losses, obligations and damages described in this
Section, any and all claims and liabilities of customers and others
directly or indirectly arising out of this Agreement, the development or
operation of any BOSTON MARKET Units pursuant to this Agreement (including,
without limitation, breach or violation of any agreement, contract or
commitment by DEVELOPER resulting from DEVELOPER's execution and delivery
of this Agreement or performance of any of its obligations hereunder or
liabilities asserted by Owners or employees, agents or other
representatives of DEVELOPER arising in connection with training provided
by COMPANY or its Affiliates or designees or otherwise), the conduct of
Catering Service or Delivery Service, the operation of Special Distribution
Arrangements, unauthorized activities conducted in association with the
Marks, the transfer of any interest in this Agreement, any BOSTON MARKET
Units, or any Authorized Entity which holds a Franchise, to the extent that
such claims, obligations, damages, losses or liabilities do not arise
solely from the gross negligence or wrongful conduct of COMPANY; and
(b) all value added, sales, use, service, occupation, excise, gross
receipts, income, property, payroll, employee withholding or other taxes,
whether levied upon DEVELOPER, any BOSTON MARKET Unit or DEVELOPER's property or
upon COMPANY in connection with the sales made or business conducted by
DEVELOPER (except any taxes COMPANY is required by law to collect from DEVELOPER
with respect to purchases from COMPANY).
For purposes of this indemnification, "claims" shall mean and include all
obligations, actual, consequential, special, and punitive damages and costs
reasonably incurred in the defense of any such claim against COMPANY, including,
without limitation, reasonable accountants', attorneys', attorney assistants',
arbitrators' and expert witness fees, cost of investigation and proof of facts,
court costs, other litigation expenses, and travel and living expenses. COMPANY
shall have the right to defend any such claim against it in such manner as
COMPANY deems appropriate or desirable in its sole discretion. This indemnity
shall continue in full force and effect subsequent to and notwithstanding the
expiration or termination of this Agreement.
16. ENFORCEMENT.
-----------
16.A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
-------------------------------------------------
If any provision of this Agreement relating to the in-term exclusive
dealing covenants is declared or made invalid or unenforceable by judicial
action, legislation or other government action, COMPANY may, if it believes in
its sole discretion that the continuation of this
53
<PAGE>
Agreement would not be in its best interests, terminate this Agreement effective
upon sixty (60) days' prior written notice to DEVELOPER.
All other provisions of this Agreement are 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. To the extent
the post-transfer restrictive covenants or post-termination/post-expiration
restrictive covenants contained herein are deemed unenforceable by virtue of
their scope in terms of geographic area, business activity prohibited, or length
of time, but may be made enforceable by reductions or alterations of either or
any thereof, DEVELOPER and COMPANY agree that same shall be enforced to the
fullest extent permissible under the laws and public policies applied in the
jurisdiction in which enforcement is sought. If any applicable and binding law
or rule of any jurisdiction requires a greater prior notice of the termination
of this Agreement than is required hereunder, 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 COMPANY 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 COMPANY 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 shall be enforced as originally made and
entered into in all other jurisdictions.
16.B. WAIVER OF OBLIGATIONS.
---------------------
COMPANY and DEVELOPER may by written instrument unilaterally waive or
reduce any obligation of or restriction upon the other under this Agreement,
effective upon delivery of written notice thereof to the other or such other
effective date stated in the notice of waiver. Whenever this Agreement requires
COMPANY's prior approval or consent, DEVELOPER shall make a timely written
request therefor and such approval shall be obtained in writing.
With respect to this Agreement, the Franchise Agreements, the relationship
of the parties, the UNITS, Catering Service, Delivery Service, Special
Distribution Arrangements or any other matter, COMPANY makes no warranties or
guarantees upon which DEVELOPER may rely, and assumes no liability or obligation
to DEVELOPER, by granting any waiver, approval, or consent to DEVELOPER, or by
reason of any neglect, delay, or denial of any request therefor. Any waiver
granted by COMPANY: (1) shall be without prejudice to any other rights COMPANY
may have, (2) will be subject to continuing review by COMPANY, and (3) as to
continuing waivers, may be revoked prospectively, in COMPANY's sole discretion,
at any time and for any reason, effective upon delivery to DEVELOPER of ten (10)
days' prior written notice.
COMPANY and DEVELOPER shall not be deemed to have waived or impaired any
right, power or option reserved by this Agreement (including, without
limitation, the right to
54
<PAGE>
demand full compliance with every term, condition and covenant in this
Agreement, or to declare any breach thereof to be a default and to terminate
this Agreement prior to the expiration of its term), by virtue of any:
(i) custom or practice of the parties at variance with the terms
hereof; or
(ii) any failure, refusal, or neglect of COMPANY or DEVELOPER to
exercise any right under this Agreement or to insist upon full compliance
by the other with its obligations hereunder, including, without limitation,
any mandatory specification, standard or operating procedure; or
(iii) any waiver, forbearance, delay, failure, or omission by
COMPANY to exercise any right, power, or option, whether of the same,
similar or different nature, with respect to any BOSTON MARKET Unit or any
development or franchise agreement therefor; or
(iv) any grant of a Franchise Agreement to DEVELOPER or an
Authorized Entity; or
(v) the acceptance by COMPANY of any payment from DEVELOPER after
any breach of this Agreement.
Neither COMPANY nor DEVELOPER shall be liable for loss or damage or deemed
to be in breach of this Agreement if its failure to perform its obligations
results from any of the following and is not caused by the non-performing party:
(vi) acts of God; or
(vii) acts of war or insurrection; or
(viii) strikes, lockouts, boycotts, fire and other casualties.
Any delay resulting from any of said causes shall extend the time allowed for
performance accordingly or excuse performance, in whole or in part, as may be
reasonable for the UNIT(S) directly affected thereby, except that such causes
shall not excuse payment of amounts owed at the time of such occurrence or
payment of any fees thereafter nor otherwise affect the Development Schedule or
the development of other BOSTON MARKET Units to be developed under this
Agreement, and as soon as performance is possible the non-performing party shall
immediately resume performance and, in no event, shall non-performance be
excused for more than six (6) months.
55
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16.C. INJUNCTIVE RELIEF.
-----------------
Nothing in this Agreement shall bar COMPANY's right to seek specific
performance of the provisions of this Agreement and injunctive relief against
threatened conduct that will cause it loss or damages under customary equity
rules, including applicable rules for obtaining restraining orders and
preliminary injunctions. DEVELOPER agrees that COMPANY may obtain such
injunctive relief in addition to such further or other relief as may be
available at law or in equity. DEVELOPER agrees that COMPANY will not be
required to post a bond to obtain any injunctive relief and that DEVELOPER's
only remedy if an injunction is entered against DEVELOPER 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). Any such action shall be brought as provided in Paragraph 16.G
of this Section.
16.D. RIGHTS OF PARTIES ARE CUMULATIVE.
--------------------------------
The rights of COMPANY and DEVELOPER hereunder are cumulative and no
exercise or enforcement by COMPANY or DEVELOPER of any right or remedy hereunder
shall preclude the exercise or enforcement by COMPANY or DEVELOPER of any other
right or remedy hereunder or to which COMPANY or DEVELOPER is entitled by law.
16.E. COSTS AND LEGAL FEES.
--------------------
If COMPANY engages legal counsel in connection with any failure by
DEVELOPER to comply with this Agreement, DEVELOPER shall reimburse COMPANY for
costs and expenses incurred by COMPANY, including, without limitation,
reasonable accountants', attorneys', attorneys assistants', arbitrators' and
expert witness fees, cost of investigation and proof of facts, court costs,
other litigation expenses and travel and living expenses, whether incurred prior
to, in preparation for, in contemplation of or in connection with the filing of
any judicial or arbitration proceeding to enforce this Agreement.
16.F. GOVERNING LAW.
-------------
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946
(LANHAM ACT, 15 U.S.C. (S)(S) 1051 ET SEQ.), THIS AGREEMENT AND THE RELATIONSHIP
------
BETWEEN THE PARTIES HERETO SHALL 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 CONFLICT 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 PARAGRAPH.
56
<PAGE>
16.G. CONSENT TO JURISDICTION/CHOICE OF FORUM.
---------------------------------------
DEVELOPER AGREES THAT DEVELOPER SHALL, AND COMPANY 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
COMPANY'S EXECUTIVE OFFICE AT THE TIME SUCH ACTION IS FILED. DEVELOPER
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND WAIVES ANY
OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF ANY SUCH COURT.
16.H. LIMITATIONS OF CLAIMS.
---------------------
EXCEPT FOR CLAIMS BROUGHT BY COMPANY WITH REGARD TO DEVELOPER'S OBLIGATIONS
TO MAKE PAYMENTS TO COMPANY PURSUANT TO THIS AGREEMENT OR TO INDEMNIFY COMPANY
PURSUANT TO SECTION 15, ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE RELATIONSHIP OF DEVELOPER AND COMPANY PURSUANT HERETO SHALL BE
BARRED UNLESS AN ACTION IS COMMENCED WITHIN: (1) TWO (2) YEARS FROM THE DATE ON
WHICH THE ACT OR EVENT GIVING RISE TO THE CLAIM OCCURRED, OR (2) ONE (1) YEAR
FROM THE DATE ON WHICH DEVELOPER OR COMPANY KNEW OR SHOULD HAVE KNOWN, IN THE
EXERCISE OF REASONABLE DILIGENCE, OF THE FACTS GIVING RISE TO SUCH CLAIMS,
WHICHEVER OCCURS FIRST.
16.I. WAIVER OF PUNITIVE DAMAGES.
--------------------------
COMPANY AND DEVELOPER HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT OR CLAIM FOR ANY PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR SPECULATIVE
DAMAGES AGAINST THE OTHER AND AGREE THAT IN THE EVENT OF A DISPUTE BETWEEN THEM,
EXCEPT AS OTHERWISE PROVIDED HEREIN, EACH SHALL BE LIMITED TO THE RECOVERY OF
ACTUAL DAMAGES SUSTAINED BY IT.
16.J. WAIVER OF JURY TRIAL.
--------------------
COMPANY AND DEVELOPER IRREVOCABLY WAIVE TRIAL BY JURY ON ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
57
<PAGE>
16.K. 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 DEVELOPER and
COMPANY.
16.L. CONSTRUCTION.
------------
The preambles and exhibits are a part of this Agreement, which constitutes
the entire agreement of the parties, and there are no other oral or written
understandings or agreements between COMPANY and DEVELOPER relating to the
subject matter of this Agreement. Except as otherwise set forth 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. The
term "DEVELOPER" as used in this Agreement is applicable to one or more persons,
a corporation, a partnership or a limited liability company, 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
DEVELOPER hereunder, whether or not as partners or joint venturers, their
obligations and liabilities to COMPANY shall be joint and several. This
Agreement shall be executed in multiple copies, each of which shall be deemed an
original.
16. M. REASONABLENESS.
--------------
COMPANY and DEVELOPER agree to act reasonably in all dealings with each
other pursuant to this Agreement. Whenever the consent or approval of either
party is required or contemplated hereunder, the party whose consent is required
agrees not to unreasonably withhold the same, unless such consent is expressly
subject to such party's sole discretion pursuant to the terms of this Agreement.
17. NOTICES AND PAYMENTS.
--------------------
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement or of the Development Manual shall be deemed so
delivered at the time delivered by hand, one (1) business day after transmission
by telegraph or telex or by telefacsimile 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 COMPANY at 14103 Denver West Parkway, P.O. Box 4086,
Golden, Colorado 80401-4086, to the attention of the President, or its most
current principal business address of which DEVELOPER has been notified, or to
DEVELOPER at DEVELOPER's most current principal business address of which
COMPANY has been notified, as applicable. All payments and reports required by
this Agreement shall be directed to COMPANY at the above address, or to such
other persons and places as COMPANY may direct from time to time. Any
58
<PAGE>
required payment or report not actually received by COMPANY during regular
business hours on the date due (or postmarked by postal authorities at least two
(2) days prior thereto) shall be deemed delinquent.
18. DELEGATION OF CERTAIN FUNCTIONS.
-------------------------------
Notwithstanding Sections 11.A. and 12.B. of this Agreement, COMPANY and
DEVELOPER acknowledge and agree that DEVELOPER may enter into a management
services agreement (the "Management Agreement") with a management service
provider affiliated with DEVELOPER (the "Management Company") providing for the
Management Company to furnish to DEVELOPER certain management services approved
by COMPANY, provided that: (a) COMPANY has approved the Management Company; (b)
COMPANY has approved the Management Agreement; and (c) the Management Company
has entered into a confidentiality agreement with COMPANY and DEVELOPER in form
and substance acceptable to COMPANY. COMPANY may withhold any of the foregoing
approvals in its sole discretion.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in multiple originals on the day and year first above written and
COMPANY has accepted this Agreement in Jefferson County, Colorado.
BOSTON CHICKEN, INC. _____________________________________
DEVELOPER
By:___________________________ By:_________________________________
Title:_____________________ Title:___________________________
59
<PAGE>
EXHIBIT A
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________
DATED ______________________
DEVELOPER ACKNOWLEDGMENTS AND REPRESENTATIONS STATEMENT
-------------------------------------------------------
<PAGE>
DEVELOPER ACKNOWLEDGMENTS AND REPRESENTATIONS STATEMENT
-------------------------------------------------------
1. DEVELOPER acknowledges that it has read the Development Agreement (the
"AGREEMENT") between Boston Chicken, Inc. ("COMPANY") and DEVELOPER dated as of
the date hereof and COMPANY's Franchise Offering Circular in their entirety and
that it understands and accepts the terms, conditions and covenants contained in
the Agreement as being reasonably necessary to maintain COMPANY's high standards
of quality and service and the uniformity of those standards at all BOSTON
MARKET Units in order to protect and preserve the goodwill of the Marks.
(Capitalized terms not defined herein shall have the respective meanings set
forth in the Agreement.) DEVELOPER acknowledges that: (1) COMPANY delivered and
DEVELOPER received a copy of COMPANY's Franchise Offering Circular at the
earlier of (a) DEVELOPER's first personal meeting with COMPANY or (b) ten
business days prior to the execution of the Agreement or the payment of any
consideration by DEVELOPER in connection with the transaction contemplated in
the Agreement; and (2) COMPANY delivered and DEVELOPER received the Agreement in
form for execution at least five (5) business days prior to the execution of the
Agreement.
2. Attached to COMPANY's Franchise Offering Circular is a copy of the
current form of Franchise Agreement. DEVELOPER acknowledges that the Franchise
Agreement attached to COMPANY's Franchise Offering Circular is the current form
of Franchise Agreement and that COMPANY, at its sole discretion, may from time
to time modify or amend in any respect the standard form of Franchise Agreement
used by COMPANY in offering or granting a BOSTON MARKET Unit franchise.
3. DEVELOPER acknowledges that the food service business is a highly
competitive industry, with constantly changing market conditions. DEVELOPER
acknowledges that it has conducted an independent investigation of the business
contemplated by the Agreement and recognizes that, like any other business, the
nature of the business conducted by BOSTON MARKET Units may change over time,
that an investment in a BOSTON MARKET Unit involves business risks, and that the
success of the venture is largely dependent upon the business abilities and
efforts of DEVELOPER.
4. DEVELOPER acknowledges that COMPANY, has not made any representations
or statements of actual, average, projected or forecasted sales, profits or
earnings with respect to BOSTON MARKET Units or the business contemplated by the
Agreement. Neither COMPANY's sales personnel nor any employee or officer of
COMPANY is authorized to make any claims or statements as to the earnings, sales
or profits or prospects or chances of success that any developer or franchisee
can expect or that present or past developers or franchisees have had. COMPANY
specifically instructs its sales personnel, agents, employees and officers that
they are not permitted to make such claims or statements as to the earnings,
sales or profits or the prospects or chances of success, nor are they authorized
to represent or estimate amounts of sales, revenue, costs, profits, earnings,
cash flow or other measures as to any aspect of the operation of BOSTON MARKET
Units. COMPANY recommends that applicants for development rights make their own
investigations and determine whether or not the business contemplated by this
Agreement is profitable. COMPANY will not be bound by any unauthorized
representations as to DEVELOPER's earnings, sales, profits or prospects or
chances of success. COMPANY recommends that each applicant for development
rights consult with an attorney of
A-1
<PAGE>
its choosing and further be represented by legal counsel at the time of its
closing. DEVELOPER acknowledges that it has had ample opportunity to consult
with legal counsel and other professional advisors. DEVELOPER acknowledges that
it has not received or relied on any representations about the development
rights granted in the Agreement by COMPANY, or its officers, directors,
employees or agents, that are contrary to the statements made in COMPANY's
Franchise Offering Circular.
5. DEVELOPER hereby acknowledges and agrees that COMPANY's approval of a
proposed site or Site Agreement for a BOSTON MARKET Unit does not constitute an
assurance, representation or warranty of any kind, express or implied, as to the
suitability of the proposed site or Site Agreement for a BOSTON MARKET Unit or
the successful operation or profitability of a BOSTON MARKET Unit operated at
such site. COMPANY's approval of any such site or Site Agreement indicates only
that COMPANY believes that such site or Site Agreement falls within acceptable
minimum criteria established by COMPANY solely for COMPANY's purposes at the
time of COMPANY's approval thereof. Both DEVELOPER and COMPANY acknowledge that
application of criteria that have been effective with respect to other sites and
premises may not be predictive of potential for all sites and that, subsequent
to COMPANY's approval of a proposed site, demographic and/or economic factors,
such as competition from other similar businesses, included in or excluded from
COMPANY's criteria could change, thereby altering the potential of a proposed
site. Such factors are unpredictable and are beyond COMPANY's control. COMPANY
shall not be responsible for the failure of a site approved by COMPANY to meet
DEVELOPER's expectations as to revenue or operational criteria. DEVELOPER
further acknowledges and agrees that its acceptance of a franchise for the
operation of a BOSTON MARKET Unit at any such site is based on its own
independent investigation of the suitability of the site.
6. DEVELOPER acknowledges that COMPANY's approval of a financing plan for
DEVELOPER's development and operation of the UNITS under the Agreement does not
constitute any assurance that such financing plan is adequate, favorable or not
unduly burdensome, or that such UNITS will be successful if the financing plan
is implemented by DEVELOPER. COMPANY's approval of the financing plan indicates
only that such financing plan meets or that COMPANY has waived COMPANY's then-
current minimum standards established by COMPANY solely for its own purposes at
the time of approval thereof.
7. DEVELOPER acknowledges that in all of COMPANY's dealings with
DEVELOPER, the officers, directors, employees and agents of COMPANY act only in
a representative capacity and not in an individual capacity. DEVELOPER further
acknowledges that the Agreement, and all business dealings between DEVELOPER and
such individuals as a result of the Agreement, are solely between DEVELOPER and
COMPANY. DEVELOPER further represents to COMPANY, as an inducement to its entry
into this Agreement, that neither DEVELOPER nor its Owners have made any
misrepresentations in obtaining the rights granted under the Agreement.
8. If DEVELOPER is a legal entity, DEVELOPER:
A. represents that it is duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization, is
qualified to do business in all jurisdictions in which its business
activities or the nature of properties owned by
A-2
<PAGE>
DEVELOPER requires such qualification, and has the authority to execute and
deliver the Agreement and perform all of DEVELOPER's obligations under the
Agreement; and
B. agrees that all certificates representing Ownership Interests of
DEVELOPER now outstanding or hereafter issued will be endorsed with a
legend in form approved by COMPANY reciting that the transfer of Ownership
Interests in DEVELOPER is subject to restrictions contained in the
Agreement.
9. DEVELOPER, whether or not a legal entity, represents and warrants that
DEVELOPER is not subject to any restriction, agreement, contract, commitment,
law, judgment or decree which would prohibit or be breached or violated by
DEVELOPER's execution and delivery of the Agreement or performance of its
obligations thereunder. At COMPANY's request, DEVELOPER shall furnish an
opinion of counsel to COMPANY, in form and substance satisfactory to COMPANY, to
the effect that the Agreement is a valid and binding agreement of DEVELOPER,
enforceable against DEVELOPER in accordance with its terms, and that DEVELOPER
is not subject to any restriction, agreement, law, judgment or decree which
would prohibit or be violated by DEVELOPER's execution and delivery of the
Agreement and performance of its obligations thereunder.
10. DEVELOPER further represents and warrants that all Owners of DEVELOPER
and their interests therein are completely and accurately listed in Exhibit E to
---------
the Agreement and that DEVELOPER will make, execute and deliver to COMPANY such
revisions thereto as may be necessary during the term of the Agreement to
reflect any changes in the information contained therein.
11. DEVELOPER represents and warrants that its domicile is as set forth
below:
___________________________________________________________________
Address
__________________________________________________________________
City and State
Dated:_______________________________
_____________________________________
DEVELOPER
By:__________________________________
Title:____________________________
A-3
<PAGE>
EXHIBIT B
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________________
DATED ______________________
DEVELOPMENT AREA
----------------
<PAGE>
DEVELOPMENT AREA
----------------
The Development Area referred to in Section 2 of this Agreement shall
consist of the aggregate of the Sub-Areas described as follows:
SUB-AREA NO. 1
--------------
B-1
<PAGE>
SUB-AREA NO. 2
--------------
B-2
<PAGE>
SUB-AREA NO. 3
--------------
____________________________________
BOSTON CHICKEN, INC. DEVELOPER
By:___________________________ By:_________________________________
Title:_____________________ Title:______________________________
B-3
<PAGE>
EXHIBIT C
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________________
DATED _________________________
DEVELOPMENT SCHEDULE
--------------------
<PAGE>
DEVELOPMENT SCHEDULE
--------------------
1. UNIT DEVELOPMENT. DEVELOPER agrees to develop a total of ____________
----------------
_____ (_____) UNITS in accordance with the terms of this Agreement.
2. DEVELOPMENT OBLIGATIONS. DEVELOPER agrees to have each UNIT specified
-----------------------
below open on or before the specified "OPENING DATE" shown below and to have
open and in operation in each Sub-Area indicated, on or before the Opening Dates
specified below, the cumulative numbers of UNITS shown below:
<TABLE>
<CAPTION>
SUB-AREA NO. 1
--------------
<S> <C> <C>
CUMULATIVE NUMBER
OF UNITS TO BE
UNIT OPENING OPEN AND IN OPERATION
NUMBER DATE (THE "SUB-AREA QUOTA")
- -------- ------- ----------------------
SUB-AREA NO. 2
--------------
CUMULATIVE NUMBER
OF UNITS TO BE
UNIT OPENING OPEN AND IN OPERATION
NUMBER DATE (THE "SUB-AREA QUOTA")
- -------- ------- ----------------------
</TABLE>
C-1
<PAGE>
SUB-AREA NO. 3
--------------
CUMULATIVE NUMBER
OF UNITS TO BE
UNIT OPENING OPEN AND IN OPERATION
NUMBER DATE (THE "SUB-AREA QUOTA")
- ---------- ------- ----------------------
TOTAL DEVELOPMENT QUOTA FOR THE DEVELOPMENT AREA
(THE "TOTAL DEVELOPMENT QUOTA"):
------------------
____________________________________
BOSTON CHICKEN, INC. DEVELOPER
By:__________________________ By:_________________________________
Title:____________________ Title:___________________________
C-2
<PAGE>
EXHIBIT D
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND ___________________________________________
DATED _____________________________
DEVELOPMENT FEE AND DEPOSIT
---------------------------
<PAGE>
DEVELOPMENT FEE AND DEPOSIT
---------------------------
1. DEVELOPMENT FEE. The Development Fee referred to in Paragraph 6.A. of
---------------
this Agreement shall be _________________________ Thousand Dollars ($_________).
2. DEPOSIT. The amount of the Deposit referred to in Paragraph 6.B. of
-------
this Agreement shall be _________________________ Thousand Dollars ($_________).
BOSTON CHICKEN, INC. ____________________________________
DEVELOPER
By:__________________________ By:_________________________________
Title:____________________ Title:___________________________
D-1
<PAGE>
EXHIBIT E
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________________
DATED __________________
PRINCIPAL OWNERS, OTHER OWNERS, MANAGEMENT,
PERMITTED COMPETITIVE BUSINESSES,
MARKET REAL ESTATE DEVELOPMENT PLAN,
AND INITIAL CAPITALIZATION
--------------------------
<PAGE>
PRINCIPAL OWNERS, OTHER OWNERS, MANAGEMENT,
PERMITTED COMPETITIVE BUSINESSES,
MARKET REAL ESTATE DEVELOPMENT PLAN,
AND INITIAL CAPITALIZATION
--------------------------
1. PRINCIPAL OWNERS: Listed below are the full name and mailing address
----------------
of each person or entity who is a Principal Owner of DEVELOPER, and a
description of the nature of such Principal Owner's direct or indirect equity or
voting interest in DEVELOPER:
Name:___________________________ Number of Shares Owned:________________
Address:________________________ % of Total Shares:_____________________
________________________________ Number of Shares Owner is Entitled to
________________________________ Vote:__________________________________
________________________________ Other Interest (Describe):_____________
________________________________ _______________________________________
Name:___________________________ Number of Shares Owned:________________
Address:________________________ % of Total Shares:_____________________
________________________________ Number of Shares Owner is Entitled to
________________________________ Vote:__________________________________
________________________________ Other Interest (Describe):_____________
________________________________ _______________________________________
Name:___________________________ Number of Shares Owned:________________
Address:________________________ % of Total Shares:_____________________
________________________________ Number of Shares Owner is Entitled to
________________________________ Vote:__________________________________
________________________________ Other Interest (Describe):_____________
________________________________ _______________________________________
Name:___________________________ Number of Shares Owned:________________
Address:________________________ % of Total Shares:_____________________
________________________________ Number of Shares Owner is Entitled to
________________________________ Vote:__________________________________
________________________________ Other Interest (Describe):_____________
________________________________ _______________________________________
E-1
<PAGE>
2. DESIGNATED PRINCIPAL OWNERS: The following individuals named in
---------------------------
Paragraph 2 above are designated as Principal Owners based upon their business
experience, financial capacity or other personal attributes:
Name:___________________________ Name:__________________________________
Name:___________________________ Name:__________________________________
3. OTHER OWNERS. Listed below are the full name and mailing address of
------------
each person or entity, other than the Principal Owners, who directly or
indirectly owns an equity or voting interest in DEVELOPER and a description of
the nature of the interest (attach additional sheet if required):
Name:___________________________ Number of Shares Owned:________________
Address:________________________ % of Total Shares:_____________________
________________________________ Number of Shares Owner is Entitled to
________________________________ Vote:__________________________________
________________________________ Other Interest (Describe):_____________
________________________________ _______________________________________
Name:___________________________ Number of Shares Owned:________________
Address:________________________ % of Total Shares:_____________________
________________________________ Number of Shares Owner is Entitled to
________________________________ Vote:__________________________________
________________________________ Other Interest (Describe):_____________
________________________________ _______________________________________
4. MANAGEMENT: As required pursuant to Paragraphs 11.A. and 11.B. of
----------
this Agreement, the following Principal Owners and the Chief Operating Officer
shall exert full-time efforts to fulfill the obligations of DEVELOPER under this
Agreement:
Name:___________________________ Name:__________________________________
(Principal Owner) (Chief Operating Officer)
Name:___________________________
(Principal Owner)
5. OWNERS OF PERMITTED COMPETITIVE BUSINESSES: Listed below are the
------------------------------------------
Permitted Competitive Businesses and the owners who are permitted hereunder to
engage in those businesses.
E-2
<PAGE>
NAME OF OWNER: NAME OF OWNER:
________________________________ _______________________________________
Name of Competitive Business: Name of Competitive Business:
________________________________ _______________________________________
Address of Competitive Business: Address of Competitive Business:
________________________________ _______________________________________
________________________________ _______________________________________
NAME OF OWNER: NAME OF OWNER:
________________________________ _______________________________________
Name of Competitive Business: Name of Competitive Business:
________________________________ _______________________________________
________________________________ _______________________________________
Address of Competitive Business: Address of Competitive Business:
________________________________ _______________________________________
________________________________ _______________________________________
DEVELOPER and its Owners represent and warrant that they have previously
provided to COMPANY a true, correct, complete and detailed description of all
Competitive Businesses in which they own interests and that all such Competitive
Businesses are disclosed in this Exhibit E. DEVELOPER and its owners
---------
acknowledge that COMPANY has relied on the aforementioned description of such
Competitive Businesses in entering into this Agreement with DEVELOPER.
E-3
<PAGE>
6. INITIAL CAPITALIZATION. DEVELOPER: (a) represents and warrants
----------------------
that it has developed and previously provided to COMPANY a description of its
initial capital structure (the "Initial Capital Structure") which is a true,
correct, complete and detailed description of DEVELOPER's capital structure; (b)
covenants that it will not deviate from the Initial Capital Structure without
COMPANY's prior written consent; and (c) acknowledges that COMPANY has relied on
the Initial Capital Structure in entering into this Agreement.
_____________________________________
BOSTON CHICKEN, INC. DEVELOPER
By:___________________________ By:__________________________________
Title:_____________________ Title:____________________________
E-4
<PAGE>
EXHIBIT F
TO THE BOSTON CHICKEN, INC.
DEVELOPMENT AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND _______________________________
DATED _________________________________
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
-----------------------------------------
<PAGE>
BOSTON CHICKEN, INC.
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
-----------------------------------------
WHEREAS, the undersigned (the "Undersigned") is a current or prospective
employee ("Employee"), owner ("Owner"), or supplier, agent, researcher,
consultant, service provider, or vendor ("Vendor") of Boston Chicken, 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 concept, 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, any or the foregoing
items developed by the Undersigned with or for the Company and/or Related Party,
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
<PAGE>
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.
3. Disclosure and Use of Proprietary Information. The undesigned shall
----------------------------------------------
hold in strict confidence 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. Neither the Undersigned nor its employees
or agents shall disclose Proprietary Information to any other person or entity
or use Proprietary Information for its or their benefit or for any purpose not
expressly agreed upon in writing by the Company and/or Related Party, as the
case may be. The obligations hereunder to maintain the confidentiality of
Proprietary Information and to refrain from use of Proprietary Information for
any purpose not expressly agreed upon by the Company and/or Related Party, as
the case may be, 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, to allow
the Company and/or Related Party to seek a protective order therefor, and the
Undersigned agrees to consent to and comply with any such protective order.
5. Return of Documents, Proprietary Information and Property. 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, as well as all other software, equipment, and other
property, received form the Company and/or the Related Party signatory hereto,
as the case may be, including all copies and reproductions of Proprietary
Information and software.
6. Non-Compete. The obligations of the Undersigned set forth in this
------------
Section 6 are separate from and in addition to those obligations set forth in
any other sections of this Agreement. During the Applicable Term (as defined in
Section 10 hereof) and for two years
2
<PAGE>
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 5%
of its revenues from, rotisserie roasted chicken, roasted turkey, baked ham,
meatloaf, or pot pies, or (B) any food service establishment, at least 15% of
the revenue of which is derived either from items which include chicken products
or from any other product which accounts for at least 15% of the revenue of any
Boston Chicken or Boston Market 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 significantly increases its ownership, management, or
other participation therin, 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 stanard metropolitan statistical area or ADI 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 an Owner, to comply
with the confidentiality and non-compete provisions in any applicable Area
Development Agreement (Sections 7, 8 and 14.C and D in the Company's current
form) as if Owner were Developer or to comply with the confidentiality and non-
compete provisions in any applicable Franchise Agreement (Sections 9 and 18.C
and D in Company's current form) as if Owner were Franchise Owner, in each case
within the geographic area therein specified, and (Y) agrees if an Owner or
Vendor, 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 prevent the Undersigned from participating as an investor, officer, or
director in any restaurant venture not covered by the foregoing applicable
restrictions, and does not prevent the Undersigned from investing so as to hold
less than 2% 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,
3
<PAGE>
sent by facsimile transmission or registered or certified mail, postage prepaid,
or overnight delivery service, as follows:
If to the Company, addressed to:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
If to the Related Party signatory hereto, addressed to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Of to the Undersigned, addressed to:
------------------------------------ (Company Name)
------------------------------------ (Address)
------------------------------------ (City, State, Zip)
------------------------------------ (Attention)
------------------------------------ (Phone Number)
------------------------------------ (Fax Number)
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.
4
<PAGE>
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.
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
---- --------- __.
BOSTON CHICKEN, INC. UNDERSIGNED
(e.g., Employee, Consultant, Vendor)
By: By:
----------------------------- ---------------------------------
(Entity Name, if any)
Title:
------------------------ ------------------------------
Print Name
Title:
------------------------
RELATED PARTY
(e.g., Area Developer)
- --------------------------------
(Name)
By:
-----------------------------
Title:
-----------------------
5
<PAGE>
EXHIBIT G
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________________
DATED ____________________
[INTENTIONALLY OMITTED]
-----------------------
<PAGE>
EXHIBIT H
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND ______________________________________
DATED ____________________
GUARANTY AND ASSUMPTION OF DEVELOPER'S OBLIGATIONS
--------------------------------------------------
<PAGE>
GUARANTY AND ASSUMPTION OF DEVELOPER'S OBLIGATIONS
--------------------------------------------------
THIS GUARANTY AND ASSUMPTION OF DEVELOPER'S OBLIGATIONS is given this
___________ day of ________________________, 19__ , by the undersigned.
DEVELOPER:________________________________
(NAME)
Date of Development Agreement:__________________________
In consideration of, and as an inducement to, the execution of the above-
mentioned Boston Chicken, Inc. Development Agreement (the "AGREEMENT") by BOSTON
CHICKEN, INC. ("COMPANY"), each of the undersigned and any other parties who
sign counterparts of this guaranty (referred to herein individually as a
"GUARANTOR" and collectively as "GUARANTORS") hereby personally and
unconditionally: (a) guarantees to COMPANY, and its successors and assigns, for
the term of the Agreement and thereafter as provided in the Agreement, that
DEVELOPER shall punctually pay and perform each and every undertaking, agreement
and covenant set forth in the Agreement; and (b) agrees to be personally bound
by, and personally liable for the breach of, each and every provision in the
Agreement, both monetary obligations and other obligations, including without
limitation, the obligation to pay costs and legal fees as provided in the
Agreement and the obligation to take or refrain from taking specific actions or
to engage or refrain from engaging in specific activities, including without
limitation the provisions of the Agreement relating to competitive activities.
Each Guarantor waives:
1. acceptance and notice of acceptance by COMPANY of the foregoing
undertakings; and
2. notice of demand for payment of any indebtedness or nonperformance
of any obligations hereby guaranteed; and
3. protest and notice of default to any party with respect to the
indebtedness or nonperformance of any obligations hereby guaranteed; and
4. any right he may have to require that an action be brought against
DEVELOPER or any other person as a condition of liability; and
H-1
<PAGE>
5. all rights to payments and claims for reimbursement or subrogation
which he may have against DEVELOPER arising as a result of his execution of
and performance under this guaranty by the undersigned (including by way of
counterparts); and
6. any and all other notices and legal or equitable defenses to which
he may be entitled.
Each Guarantor consents and agrees that:
(A) his direct and immediate liability under this guaranty shall be
joint and several not only with DEVELOPER, but also among the Guarantors;
and
(B) he shall render any payment or performance required under the
Agreement upon demand if DEVELOPER fails or refuses punctually to do so;
and
(C) such liability shall not be contingent or conditioned upon
pursuit by COMPANY of any remedies against DEVELOPER or any other person;
and
(D) such liability shall not be diminished, relieved or otherwise
affected by any subsequent rider or amendment to the Agreement or by any
extension of time, credit or other indulgence which COMPANY may from time
to time grant to DEVELOPER or to any other person, including, without
limitation, the acceptance of any partial payment or performance, or the
compromise or release of any claims, none of which shall in any way modify
or amend this guaranty, which shall be continuing and irrevocable
throughout the term of the Agreement and for so long thereafter as there
are any monies or obligations owing by DEVELOPER to COMPANY under the
Agreement; and
(E) the written acknowledgment of DEVELOPER, accepted in writing by
COMPANY, or the judgment of any court or arbitration panel of competent
jurisdiction establishing the amount due from DEVELOPER shall be conclusive
and binding on the undersigned as guarantors.
If COMPANY is required to enforce this guaranty in a judicial or
arbitration proceeding, and prevails in such proceeding, it shall be entitled to
reimbursement of its costs and expenses, including, but not limited to,
reasonable accountants', attorneys', attorneys' assistants', arbitrators' and
expert witness fees, costs of investigation and proof of facts, court costs,
other litigation expenses and travel and living expenses, whether incurred prior
to, in preparation for or in contemplation of the filing of any such proceeding.
If COMPANY is required to engage legal counsel in connection with any failure by
the undersigned to comply with this Guaranty, the Guarantors shall reimburse
COMPANY for any of the above-listed costs and expenses incurred by it.
H-2
<PAGE>
Each of the undersigned Guarantors represents and warrants that, if no
signature appears below for such Guarantor's spouse, such guarantor is either
not married or, if married, is a resident of a state which does not require the
consent of both spouses to encumber the assets of a marital estate.
IN WITNESS WHEREOF, each Guarantor has hereunto affixed his signature on
the same day and year as the Agreement was executed.
GUARANTOR(S)
- ------------
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
_______________________________ SPOUSE:____________________________
H-3
<PAGE>
EXHIBIT I
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________________
DATED ________________
FORM OF FRANCHISE AGREEMENT
---------------------------
<PAGE>
FORM OF FRANCHISE AGREEMENT
---------------------------
Attached hereto is the current form of Franchise Agreement used by COMPANY
in the offer and grant of franchises for the ownership and operation of BOSTON
MARKET Units.
__________________________________
BOSTON CHICKEN, INC. DEVELOPER
By:____________________________ By:_______________________________
Title:______________________ Title:_________________________
I-1
<PAGE>
EXHIBIT B
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
FRANCHISE AGREEMENT
-------------------
B-1
<PAGE>
EXHIBIT B
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-------------------
BOSTON CHICKEN, INC.
FRANCHISE AGREEMENT
-------------------
---------------------------
FRANCHISE OWNER
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. INTRODUCTION AND CERTAIN DEFINITIONS .................................... 1
A. INTRODUCTION.......................................................... 1
B. DEFINITIONS........................................................... 2
2. GRANT OF FRANCHISE....................................................... 8
A. GRANT OF FRANCHISE; TERM; PRINCIPAL OWNERS' GUARANTY.................. 8
B. TERRITORIAL RIGHTS.................................................... 9
C. RIGHTS RETAINED BY COMPANY............................................ 9
D. FRANCHISE OWNER'S OPTION TO DEVELOP MALL SITES........................ 9
E. FRANCHISE OWNER'S OPTION TO PURCHASE CONVERSION SITES................. 10
3. OTHER DISTRIBUTION METHODS............................................... 11
A. SPECIAL DISTRIBUTION ARRANGEMENTS.................................... 11
B. DELIVERY SERVICE..................................................... 12
C. CATERING SERVICE..................................................... 13
4. DEVELOPMENT AND OPENING OF THE UNIT...................................... 14
A. SITE SELECTION AND LEASE............................................. 14
B. UNIT DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS.................... 15
C. DEVELOPMENT OF THE UNIT.............................................. 16
D. EQUIPMENT, FIXTURES, FURNISHINGS AND SIGNS........................... 16
E. COMMUNICATION AND INFORMATION SYSTEMS................................ 17
F. UNIT OPENING......................................................... 18
G. GRAND OPENING PROGRAM................................................ 18
H. RELOCATION OF UNIT SITE.............................................. 19
I. FINANCING PLAN....................................................... 19
5. TRAINING AND GUIDANCE.................................................... 19
A. TRAINING............................................................ 19
B. GUIDANCE AND ASSISTANCE............................................. 21
C. MANUALS............................................................. 22
6 MARKS.................................................................... 22
A. GOODWILL AND OWNERSHIP OF MARKS...................................... 22
B. LIMITATIONS ON FRANCHISE OWNER'S USE OF MARKS....................... 23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS............................ 23
D. DISCONTINUANCE OF USE OF MARKS ..................................... 23
E. INDEMNIFICATION OF FRANCHISE OWNER.................................. 24
7. COPYRIGHTS.............................................................. 24
A. OWNERSHIP OF COPYRIGHTS............................................. 24
B. LIMITATION ON FRANCHISE OWNER'S USE OF COPYRIGHTS................... 24
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS............................ 25
D. DISCONTINUANCE OF USE............................................... 25
8. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION............................. 26
A. INDEPENDENT CONTRACTORS............................................. 26
B. NO LIABILITY FOR ACTS OF OTHER PARTY................................ 26
C. TAXES............................................................... 26
D. INDEMNIFICATION..................................................... 26
9. CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP........................ 27
A. CONFIDENTIAL INFORMATION............................................ 27
B. EXCLUSIVE RELATIONSHIP.............................................. 30
10. FEES.................................................................... 31
A. INITIAL FRANCHISE FEE............................................... 31
B. ROYALTY FEE......................................................... 32
C. DEFINITION OF "ROYALTY BASE REVENUE"................................ 32
D. INTEREST ON LATE PAYMENTS........................................... 32
E. APPLICATION OF PAYMENTS............................................. 33
F. ELECTRONIC FUNDS TRANSFER........................................... 33
11. UNIT IMAGE AND OPERATION................................................ 34
A. CONDITION AND APPEARANCE OF THE UNIT................................ 34
B. UNIT MENU AND SERVICES.............................................. 35
C. APPROVED PRODUCTS, DISTRIBUTORS AND SUPPLIERS....................... 37
D. SPECIFICATIONS, STANDARDS AND PROCEDURES............................ 39
E. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.................... 41
F. MANAGEMENT AND PERSONNEL OF THE UNIT................................ 41
G. INSURANCE........................................................... 42
H. CREDIT CARDS AND OTHER METHODS OF PAYMENT........................... 43
12. ADVERTISING............................................................. 43
A. MARKETING FUND...................................................... 43
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
B. LOCAL ADVERTISING FUND............................................. 45
C. ADVERTISING BY FRANCHISE OWNER..................................... 48
13. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.......................... 49
14. INSPECTIONS AND AUDITS................................................. 50
A. COMPANY'S RIGHT TO INSPECT THE UNIT................................. 50
B. COMPANY'S RIGHT TO AUDIT............................................ 51
15. TRANSFER............................................................... 51
A. BY COMPANY.......................................................... 51
B. FRANCHISE OWNER MAY NOT TRANSFER
WITHOUT APPROVAL OF COMPANY......................................... 52
C. CONDITIONS FOR APPROVAL OF TRANSFER................................. 53
D. TRANSFER TO A WHOLLY-OWNED CORPORATION.............................. 57
E. DEATH OR INCAPACITY OF FRANCHISE OWNER ............................. 58
F. PUBLIC OR PRIVATE OFFERING.......................................... 58
G. EFFECT OF CONSENT TO TRANSFER....................................... 59
H. COMPANY'S RIGHT OF FIRST REFUSAL ................................... 59
I. OWNERSHIP STRUCTURE................................................. 60
J. DELEGATION BY COMPANY............................................... 61
16. GRANT OF SUCCESSOR FRANCHISES........................................... 61
A. FRANCHISE OWNER'S RIGHT TO A SUCCESSOR FRANCHISE ................... 61
B. NOTICES............................................................. 62
C. SUCCESSOR FRANCHISE AGREEMENT/RELEASES.............................. 62
17. TERMINATION OF THE FRANCHISE............................................ 63
A. BY FRANCHISE OWNER................................................. 63
B. BY COMPANY......................................................... 63
C. TERMINATION OF CERTAIN RIGHTS OF FRANCHISE OWNER................... 66
18. RIGHTS AND OBLIGATIONS OF COMPANY AND FRANCHISE
OWNER UPON TERMINATION OR EXPIRATION OF THE AGREEMENT.................. 67
A. PAYMENT OF AMOUNTS OWED TO COMPANY................................. 67
B. MARKS, TRADE DRESS, AND COPYRIGHTED WORKS.......................... 67
C. CONFIDENTIAL INFORMATION........................................... 69
D. COVENANT NOT TO COMPETE............................................ 69
E. CONTINUING OBLIGATIONS............................................. 70
F. COMPANY'S RIGHT TO PURCHASE ASSETS OF THE UNIT..................... 71
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
19. ENFORCEMENT............................................................ 72
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.................. 72
B. WAIVER OF OBLIGATIONS.............................................. 73
C. INJUNCTIVE RELIEF.................................................. 74
D. RIGHTS OF PARTIES ARE CUMULATIVE................................... 74
E. COSTS AND LEGAL FEES............................................... 75
F. GOVERNING LAW...................................................... 75
G. CONSENT TO JURISDICTION/CHOICE OF FORUM............................ 75
H. LIMITATIONS OF CLAIMS.............................................. 75
I. WAIVER OF PUNITIVE DAMAGES......................................... 76
J. WAIVER OF JURY TRIAL............................................... 76
K. BINDING EFFECT..................................................... 76
L. CONSTRUCTION....................................................... 76
M. REASONABLENESS..................................................... 77
20. NOTICES AND PAYMENTS................................................... 77
21. DELEGATION OF CERTAIN FUNCTIONS........................................ 77
</TABLE>
iv
<PAGE>
EXHIBITS AND ATTACHMENTS
- ------------------------
FLAGSHIP/SATELLITE RIDER
EXHIBIT A - FRANCHISE OWNER ACKNOWLEDGMENTS AND
REPRESENTATIONS STATEMENT
EXHIBIT B - SITE AND TERRITORY
EXHIBIT C - PERMITTED COMPETITIVE BUSINESSES,
FORM DEVELOPMENT AGREEMENT (FOR
SINGLE-UNIT FRANCHISES) AND IDENTITY
OF DEVELOPER AND DATE OF DEVELOPMENT AGREEMENT
EXHIBIT D - AUTHORIZATION AGREEMENT FOR
PREARRANGED PAYMENTS (DIRECT DEBITS)
EXHIBIT E - PRINCIPAL OWNERS, OTHER OWNERS,
DESIGNATED PRINCIPAL OWNERS,
UNIT MANAGER, SUPERVISING OWNERS AND
INITIAL CAPITALIZATION
EXHIBIT F - CONFIDENTIALITY AND NON-COMPETE AGREEMENT
EXHIBIT G - [INTENTIONALLY OMITTED]
EXHIBIT H - GUARANTY AND ASSUMPTION OF FRANCHISE OWNER'S
OBLIGATIONS
EXHIBIT I - COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS
AND LISTINGS
APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO
THE INFORMATION CONTAINED IN THIS FRANCHISE AGREEMENT. THESE ADDITIONAL
DISCLOSURES, IF ANY, APPEAR IN AN ADDENDUM AS A RIDER TO
THE FRANCHISE AGREEMENT.
v
<PAGE>
BOSTON CHICKEN, INC.
FRANCHISE AGREEMENT
-------------------
THIS AGREEMENT is made and entered into this ____ day of______ , 199_
(the "Effective Date"), by and between BOSTON CHICKEN, INC., a Delaware
corporation ("COMPANY"), and FRANCHISE OWNER (as defined below).
"FRANCHISE OWNER":______________________________________________________________
_______________________________________________________________________________,
a_______________________________________________________________________________
Principal Address:______________________________________________________________
______________________________________________________________
______________________________________________________________
1. INTRODUCTION AND CERTAIN DEFINITIONS.
------------------------------------
1.A. INTRODUCTION.
------------
COMPANY and its Affiliates (as defined below) have developed and continue
to develop methods of operating food service businesses, including the food
service business referred to in this Agreement as a "BOSTON MARKET Unit"
(defined below), which feature Products (defined below) for carry-out and on-
premises dining. In addition to carry-out and on-premises dining, COMPANY may,
in its sole discretion, (a) offer to a BOSTON MARKET Unit the right to offer
Delivery Service (defined below); and/or (b) approve a franchise owner of a
BOSTON MARKET Unit to offer Catering Service (defined below) or to operate
Special Distribution Arrangements (defined below). BOSTON MARKET Units operate
at locations that feature a distinctive food service format and Trade Dress
(defined below) and utilize distinctive business formats, specifications,
employee selection and training programs, signs, equipment, layouts, systems,
recipes, methods, procedures, designs and marketing and advertising standards
and formats, all of which COMPANY may modify from time to time in its sole
discretion (the "BOSTON MARKET System"). COMPANY operates, and franchises
certain qualified persons and entities to own and operate, BOSTON MARKET Units
using the BOSTON MARKET System and the Marks (defined below).
FRANCHISE OWNER has applied for a franchise to own and operate a BOSTON
MARKET Unit at the Site (defined below). FRANCHISE OWNER's application and the
Site have been approved by COMPANY in reliance upon all of the representations
made in such application and the Franchise Owner Acknowledgments and
Representations Statement, a copy
<PAGE>
of which is attached hereto as Exhibit A, which shall be executed by FRANCHISE
---------
OWNER concurrently with this Agreement.
Pursuant to the terms of the Development Agreement (defined below), if any,
COMPANY has granted to the person or entity identified in Exhibit C attached
---------
hereto ("DEVELOPER"), the right to own and operate one (1) or more BOSTON MARKET
Units, either directly or through Authorized Entities (defined below).
1.B. DEFINITIONS.
-----------
For purposes of this Agreement, the terms listed below have the meanings
that follow them. Other terms used in this Agreement are defined and construed
in the context in which they occur.
"Accounting Period" - One of thirteen periods of four consecutive weeks in
-----------------
each year that is designated by COMPANY as an accounting period.
"Affiliate" - Any person or legal entity that directly or indirectly owns
---------
or controls COMPANY, that is directly or indirectly owned or controlled by
COMPANY, or that is under common control with COMPANY. For purposes of this
definition, "control" means the power to direct or cause the direction of the
management and policies of an entity.
"Authorized Entity" - A legal entity that is controlled by DEVELOPER and
-----------------
meets COMPANY's then-current standards and requirements for BOSTON MARKET Unit
franchise owners, including, without limitation, financial requirements, limits
on the total number of holders of equity interests and requirements for owners
of non-controlling Ownership Interests (defined below). For purposes of this
definition, an entity shall be deemed to be controlled by DEVELOPER if and only
during such times as:
(1) DEVELOPER owns not less than a majority of all the Ownership
Interests in such entity; and
(2) DEVELOPER has at least the percentage of voting power required
under applicable law to authorize a merger, liquidation or transfer of
substantially all of the assets of the entity and to control or determine
any other vote or decision of the entity without the vote or approval of
any other party; and
(3) if the entity is a partnership, DEVELOPER is the sole general
partner of a limited partnership or managing partner of a general
partnership; and
(4) if the entity is a limited liability company, DEVELOPER is the
sole Manager, or DEVELOPER owns at least a majority of all the Ownership
Interests in the sole Manager, of the limited liability company or
DEVELOPER owns at least a majority of the membership interests in the
limited liability company; and
2
<PAGE>
(5) DEVELOPER establishes to the satisfaction of COMPANY that
DEVELOPER has, and, during the term of the Franchise Agreement for the
BOSTON MARKET Unit to be owned and operated by such entity, will have, the
sole right and power to direct the management policies and operation of
such entity and the sale or other disposition of such BOSTON MARKET Unit.
"BOSTON MARKET Unit" - A food service business that:
------------------
(1) offers Products for consumer consumption through on-premises and
carry-out dining, provided that COMPANY may, in its sole discretion,
authorize and/or require such business to offer Delivery Service pursuant
to a Delivery Rider (defined below) and/or approve the franchise owner of
such business to offer Catering Service pursuant to a Catering Rider
(defined below) or to operate Special Distribution Arrangements pursuant to
a Special Distribution Agreement (defined below); and
(2) operates using the BOSTON MARKET System and the Marks; and
(3) is either operated by COMPANY or its Affiliates or pursuant to a
valid franchise from COMPANY.
"Catering Area" - The geographic area in which COMPANY, in its sole
-------------
discretion, authorizes FRANCHISE OWNER to provide Catering Service pursuant to a
Catering Rider, which area may be the same as, smaller than, larger than or
different from the Territory (defined below) of a BOSTON MARKET Unit. COMPANY
reserves the right, at any time and in its sole discretion with or without cause
and regardless of the investment made by FRANCHISE OWNER in establishing and
conducting Catering Service or the length of time FRANCHISE OWNER has offered
Catering Service: (1) to reduce, modify or expand the Catering Area from time to
time; or (2) suspend or terminate FRANCHISE OWNER's right to offer Catering
Service.
"Catering Rider" - The form of rider to a Franchise Agreement (as defined
--------------
in the Development Agreement) used by COMPANY from time to time to authorize in
its sole discretion a franchise owner of a BOSTON MARKET Unit to offer Catering
Service within the applicable Catering Area.
"Catering Service" - The delivery of Products prepared at a BOSTON MARKET
----------------
Unit or a separate facility approved by COMPANY in writing (such approved
facility or unit is referred to herein as a "Catering Facility") to customers in
the Catering Area pursuant to COMPANY's standards and specifications for the
provision of such service, which COMPANY may change from time to time in its
sole discretion, where
(1) such Products are intended to serve fifteen (15) or more persons,
or
3
<PAGE>
(2) in addition to the delivery of Products, FRANCHISE OWNER provides
ancillary services to a customer at a location within the Catering Area,
including, by way of example and without limitation, the setting up for
serving or distribution of Products.
"Competitive Business" - A business or enterprise, other than a BOSTON
--------------------
MARKET Unit, that:
(1) offers food products, which are the same as or similar to the
Products, for consumer consumption through on-premises or carry-out dining,
delivery service, catering service or other distribution channels; or
(2) grants or has granted franchises or licenses or establishes or
has established joint ventures, for the development and/or operation of a
business or an enterprise described in the foregoing clause (1).
"Computer System" - Those brands, types, makes, and/or models of
---------------
communications and computer systems and hardware specified or required by
COMPANY for use by, between, or among BOSTON MARKET 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 the UNIT,
between or among BOSTON MARKET Units, and between and among UNIT and
COMPANY and/or FRANCHISE OWNER;
(2) security systems;
(3) printers; and
(4) archival and back-up systems.
"Controlling Interest" - If FRANCHISE OWNER is a:
--------------------
(1) corporation, such number of the voting shares of FRANCHISE OWNER
as (a) shall permit voting control of FRANCHISE OWNER on any issue and (b)
shall prevent any other person, group, combination, or entity from blocking
voting control on any issue or exercising any veto power; and
(2) a general partnership, a managing partnership interest or such
percentage of the general partnership interests in FRANCHISE OWNER as (a)
shall permit determination of the outcome on any issue and (b) shall
prevent any other person, group, combination, or entity from blocking
voting control on any issue or exercising any veto power; and
4
<PAGE>
(3) limited partnership, a general partnership interest or such
percentage of limited partnership interests as shall permit the replacement
or removal of any general partner; and
(4) a limited liability company, such percentage of the membership
interests as (a) shall permit determination of the outcome on any issue and
(b) shall prevent any other person, group, combination or entity from
blocking voting control on any issue or exercising any veto power.
"Delivery Area" - The geographic area in which COMPANY, in its sole
-------------
discretion, authorizes FRANCHISE OWNER to provide Delivery Service pursuant to a
Delivery Rider, which area may be the same as, smaller than, larger than or
different from the Territory of a BOSTON MARKET Unit. COMPANY reserves the
right, at any time and in its sole discretion with or without cause and
regardless of the investment made by FRANCHISE OWNER in establishing and
conducting Delivery Service or the length of time FRANCHISE OWNER has offered
Delivery Service: (1) to reduce, modify or expand the Delivery Area; or (2) to
suspend or terminate Franchise Owner's right to offer Delivery Service.
"Delivery Rider" - The form of rider to a Franchise Agreement used by
--------------
COMPANY from time to time to authorize or require in its sole discretion a
franchise owner of a BOSTON MARKET Unit to offer Delivery Service within the
applicable Delivery Area.
"Delivery Service" - The delivery of Products prepared at a BOSTON MARKET
----------------
Unit or a separate delivery facility approved by COMPANY (such approved facility
is referred to herein as a "Delivery Facility") to customers in the Delivery
Area pursuant to COMPANY's standards and specifications for the provision of
such service, which COMPANY may change from time to time in its sole discretion,
where
(1) such Products are intended to serve fewer than fifteen (15)
persons, and
(2) such service involves the provision of no services other than the
delivery of Products to a customer at a particular location within the
Delivery Area.
"Development Agreement" - The Boston Chicken, Inc. Development Agreement
---------------------
executed by COMPANY and DEVELOPER, if any, dated as of the date stated in
Exhibit C attached hereto, pursuant to which DEVELOPER was granted the right to
- ---------
develop one (1) or more BOSTON MARKET Unit(s) in a geographic area in which the
UNIT is located.
"Immediate Family" - (1) The spouse of a person; and (2) the natural and
----------------
adoptive parents and natural and adopted children and siblings of such person
and their spouses; and (3) the natural and adoptive parents and natural and
adopted children and siblings of the spouse of such person; and (4) any other
member of the household of such person.
"Licensed Program" - The computer software programs developed by or for
----------------
COMPANY and designated by COMPANY from time to time as specified or required in
5
<PAGE>
connection with utilization of the Computer System, which may include, without
limitation, COMPANY's required point-of-sale, bookkeeping, inventory, training,
marketing, employee selection, operations and financial information, collection
and retrieval systems (including COMPANY's required general ledger system
utilizing the standard chart of accounts prescribed by COMPANY from time to
time) for use in connection with the operation of BOSTON MARKET Units or
franchise owners' and developers' businesses, including any updates,
supplements, modifications or enhancements thereto made from time to time, all
related documentation, the tangible media upon which such program is recorded,
and the database file structure thereof, but excluding any data or databases
owned or compiled by COMPANY or its Affiliates for use with the Licensed Program
or otherwise or any data generated by the use of the Licensed Program.
"Market Area" - The geographic market in which the UNIT is located as
-----------
determined by COMPANY from time to time in its sole discretion. In making such
determination, COMPANY may take into consideration:
(1) information obtained from the Arbitron Ratings Company or its
successor; or
(2) penetration of various forms of media such as radio, cable
television, broadcast television, local and regional newspapers and similar
media; or
(3) demographic characteristics (for example, urban versus suburban);
or
(4) political, man-made, or natural boundaries (for example, city,
county or other political boundaries, expressways, canals, or railroad
crossings, and rivers, elevation changes, and parks); or
(5) other reasonable factors, including, without limitation, any
combination of the foregoing.
"Marks" - The trademarks, service marks, logos and other commercial symbols
-----
which COMPANY authorizes FRANCHISE OWNER to use to identify the services and/or
products offered by BOSTON MARKET Units, including the mark "BOSTON CHICKEN" and
the Trade Dress (defined below); provided that such trademarks, service marks,
logos, other commercial symbols, and the Trade Dress are subject to modification
and discontinuance at COMPANY's sole discretion and may include additional or
substitute trademarks, service marks, logos, commercial symbols and trade dress
as provided in this Agreement.
"Ownership Interests" - In relation to a: (i) corporation, the legal or
-------------------
beneficial ownership of shares in the corporation; (ii) partnership, the legal
or beneficial ownership of a general or limited partnership interest; (iii)
limited liability company, the legal or beneficial ownership of units of
membership interests in the limited liability company; or (iv) trust, the
ownership of a beneficial interest of such trust.
6
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"Owner" - Each person or entity holding direct or indirect, legal or
-----
beneficial Ownership Interests in FRANCHISE OWNER and each person who has other
direct or indirect property rights in FRANCHISE OWNER, this Agreement, the
Franchise or the UNIT.
"Permitted Competitive Business" - A business which constitutes a
------------------------------
Competitive Business on the date of the Development Agreement and is disclosed
in Exhibit E to the Development Agreement, provided that such business (1) was
---------
not on the date of the Development Agreement and does not at any time thereafter
become a Rotisserie Unit, and (2) does not offer rotisserie-cooked chicken or
potpies on its menu, provided that if such business is a franchised or licensed
business of a franchisor which, after the date of the Development Agreement,
specifies that such business offer rotisserie-cooked chicken or potpies as a
required menu item, it shall be deemed a Permitted Competitive Business so long
as it does not become a Rotisserie Unit. If this Agreement is not executed
pursuant to a Development Agreement, references in this Agreement to Exhibit E
---------
or a Permitted Competitive Business identified in Exhibit E to a Development
---------
Agreement shall refer to a Permitted Competitive Business identified in Exhibit
-------
C attached hereto, which shall be made by FRANCHISE OWNER and Owners as of the
- -
date of this Agreement.
"Principal Owner" - Each Owner which:
---------------
(1) is a general partner in FRANCHISE OWNER; or
(2) has a direct or indirect equity interest:
(a) in FRANCHISE OWNER of five percent (5%) or more (regardless
of whether such Owner is entitled to vote thereon); or
(b) in any BOSTON MARKET Units other than the UNIT, or any
developer and/or franchise owner of a BOSTON MARKET Unit other than
DEVELOPER or FRANCHISE OWNER; or
(3) is designated as a Principal Owner in Section 1 of Exhibit E of
---------
this Agreement;
provided, however, that a reduction in a Principal Owner's equity interest in
FRANCHISE OWNER below five percent (5%) shall not affect his/her/its status as a
Principal Owner unless such reduction is the result of the transfer of all
his/her/its interests in FRANCHISE OWNER in compliance with this Agreement.
"Products" - Products approved or required by COMPANY from time to time in
--------
its sole discretion for sale at or from BOSTON MARKET Units, including, without
limitation, rotisserie roasted chicken, other chicken specialties, potpies,
roasted turkey, baked ham, meatloaf, soups, salads, vegetables, desserts, baked
goods, private label packaged goods, beverages and other food products, provided
that the foregoing products are subject to modification or discontinuance
7
<PAGE>
in COMPANY's sole discretion from time to time and may include additional or
substitute products.
"Rotisserie Unit" - A food service business, including a BOSTON MARKET
---------------
Unit, which derives a significant portion of its revenue from the sale of
rotisserie-cooked chicken and/or potpies.
"Site" - The location identified in Exhibit B of this Agreement. As used
---- ---------
herein, the term "Site" also refers to the interior and exterior of the
structure housing the UNIT.
"Special Distribution Agreement" - A separate agreement whereby COMPANY
------------------------------
authorizes a franchise owner of a BOSTON MARKET Unit to operate a Special
Distribution Arrangement at a Special Distribution Location designated by
COMPANY.
"Special Distribution Arrangement" - The sale of Products at or from a
--------------------------------
Special Distribution Location (defined below), whether or not by or through on-
premises food service facilities or concessions, pursuant to COMPANY's standards
and specifications for such sales, which COMPANY may change from time to time in
its sole discretion.
"Special Distribution Location" - A facility or location, such as by way
-----------------------------
of example and without limitation, a school, hospital, office, work site,
military facility, grocery store, convenience store, supermarket, entertainment
or sporting facility or event, bus or train station, park, toll road or limited
access highway facility, shopping mall or other similar facility, at or from
which COMPANY, in its sole discretion, authorizes the operation of a Special
Distribution Arrangement pursuant to a Special Distribution Agreement, which
facility may be located within or outside the Territory.
"Specified Software" - Such software, programming, and services other than
------------------
the Licensed Program, which COMPANY from time to time specifies or requires in
connection with utilization of the Computer System.
"Territory" - The geographic area described in Exhibit B of this Agreement.
--------- ---------
"Trade Dress" - The unit design, decor and image which COMPANY authorizes
-----------
and requires FRANCHISE OWNER to use in connection with the operation of BOSTON
MARKET Units, as it may be revised and further developed by COMPANY or its
Affiliates from time to time and as further described in the Manuals.
"UNIT" - The BOSTON MARKET Unit which FRANCHISE OWNER is franchised to
----
operate at the Site pursuant to this Agreement.
8
<PAGE>
2. GRANT OF FRANCHISE.
------------------
2.A. GRANT OF FRANCHISE; TERM; PRINCIPAL OWNERS' GUARANTY.
----------------------------------------------------
Subject to the provisions of this Agreement, COMPANY hereby grants to
FRANCHISE OWNER a franchise (the "Franchise") to operate the UNIT at the Site,
and to use the Marks and BOSTON MARKET System in the operation thereof, for a
term of fifteen (15) years commencing on the date of this Agreement.
Termination or expiration of this Agreement shall constitute a termination or
expiration of the Franchise and any and all licenses granted herein. FRANCHISE
OWNER agrees that it will at all times faithfully, honestly and diligently
perform its obligations hereunder, and that it will continuously exert its best
efforts to promote and enhance the business of the UNIT and the goodwill of the
Marks. FRANCHISE OWNER shall not conduct the business of the UNIT from any
location other than the Site, except as otherwise provided under this Agreement,
and will not offer Catering Service, Delivery Service or Special Distribution
Arrangements within or outside the Territory, except as provided in Section 3 of
this Agreement. FRANCHISE OWNER shall cause all Principal Owners, and their
spouses, as of the Effective Date to execute and deliver to COMPANY concurrently
with this Agreement, and all persons or entities which become Principal Owners,
and their spouses, thereafter to execute and deliver to COMPANY promptly
thereafter, the form of Guaranty and Assumption of Franchise Owner's Obligations
("Guaranty") attached hereto as Exhibit H.
---------
2.B. TERRITORIAL RIGHTS.
------------------
Except as otherwise provided in Section 3 and Paragraphs 2.D. and 2.E. and
provided that FRANCHISE OWNER is in full compliance with this Agreement, COMPANY
and its Affiliates will not during the term of this Agreement operate or grant
franchises for the operation of BOSTON MARKET Units within the Territory other
than the Franchise granted to FRANCHISE OWNER pursuant to this Agreement.
2.C. RIGHTS RETAINED BY COMPANY.
--------------------------
Except as expressly limited by Paragraph 2.B, COMPANY (on behalf of itself,
its Affiliates and its designees) retains all rights with respect to BOSTON
MARKET Units, the Marks, Copyrighted Marks, and the sale of Products and any
other products and services, anywhere in the world, including, without
limitation:
(1) the right to operate or grant others the right to operate food
service businesses, including, without limitation, BOSTON MARKET Units
and/or Rotisserie Units, at such locations within and/or outside the
Territory and on such terms and conditions as COMPANY, in its sole
discretion, deems appropriate; and
(2) the right, and the right to grant others the right, to develop,
manufacture, market, distribute and/or sell Products and/or any other
product or service within and/or outside the Territory through any channel
of distribution, whether wholesale, retail or otherwise, including, without
limitation, through Special Distribution Arrangements,
9
<PAGE>
Delivery Service and Catering Service under or in association with the
Marks or any other trademark and/or to own or operate any other business
under the Marks or any other trademarks; and
(3) subject to Paragraphs 2.D. and 2.E. below, the right to acquire
and operate any business, including, without limitation, a business
operating one or more food service businesses located or operating within
and/or outside the Territory.
2.D. FRANCHISE OWNER'S OPTION TO DEVELOP MALL SITES.
----------------------------------------------
Notwithstanding anything to the contrary in this Agreement, if during the
term of this Agreement COMPANY identifies a site suitable for a BOSTON MARKET
Units in a regional shopping mall within the Territory (a "Mall Site"), COMPANY
shall notify FRANCHISE OWNER in writing of such Mall Site if COMPANY intends
that such Mall Site be developed and operated as a BOSTON MARKET Unit (as
appropriately modified to accommodate the dimensions of such Mall Site). Within
ten (10) days after FRANCHISE OWNER's receipt of COMPANY's notice regarding such
Mall Site (including any relevant site-related materials in COMPANY's
possession), FRANCHISE OWNER shall notify COMPANY if FRANCHISE OWNER desires to
develop and operate a BOSTON MARKET Unit at such Mall Site. If FRANCHISE OWNER
fails to so notify COMPANY within such time period, then COMPANY or its designee
shall have the right to develop and operate a BOSTON MARKET Unit at such Mall
Site.
If FRANCHISE OWNER timely notifies COMPANY in writing that FRANCHISE OWNER
desires to develop and operate a BOSTON MARKET Unit at such Mall Site and
Company has fully negotiated a lease or purchase agreement for such Mall Site,
then FRANCHISE OWNER shall (1) obtain the consent of the landlord to execute
such lease and execute such lease, if applicable, or (2) execute a purchase
agreement or an assignment of purchase agreement, if applicable, and (3) execute
COMPANY's then-current form of standard franchise agreement (containing
COMPANY's then-current fees and expense requirements) and such ancillary
documents (including guarantees) as are then customarily used by COMPANY in the
grant of franchises for BOSTON MARKET Units (collectively, the "Franchise
Documents") as modified for use in connection with a Mall Site, as necessary,
and (4) pay COMPANY a site location fee (the "Mall Site Fee") equal to Five
Thousand Dollars ($5,000.00) plus COMPANY's reasonable out-of-pocket expenses
incurred in locating such Mall Site and negotiating the lease or purchase
agreement, all within ten (10) business days after COMPANY's delivery to
FRANCHISE OWNER of the lease or purchase agreement, as applicable, and the
Franchise Documents. COMPANY will fully cooperate with FRANCHISE OWNER in
obtaining the landlord's consent to execute such lease or the seller's consent
to execute such purchase agreement or assignment of purchase agreement as the
case may be.
If FRANCHISE OWNER timely notifies COMPANY in writing that FRANCHISE OWNER
desires to develop and operate a BOSTON MARKET Unit at such Mall Site and
COMPANY has not fully negotiated a lease or purchase agreement for such Mall
Site, then FRANCHISE OWNER will have thirty (30) days in which to negotiate and
deliver to
10
<PAGE>
COMPANY a lease or purchase agreement for such Mall Site in form for execution.
If COMPANY disapproves the lease or purchase agreement for failure to meet
COMPANY's requirements, FRANCHISE OWNER will have ten (10) days within which to
negotiate and deliver to COMPANY a revised lease or purchase agreement for such
Mall Site in form for execution. If the revised lease or purchase agreement
fails to meet COMPANY's requirements, or if FRANCHISE OWNER fails to negotiate
and deliver to COMPANY a lease or purchase agreement within the aforementioned
thirty (30) day period, then COMPANY or its designees may develop and operate a
BOSTON MARKET Unit at such Mall Site. If COMPANY approves the lease or purchase
agreement for such Mall Site as meeting COMPANY's requirements under the
Development Agreement, then FRANCHISE OWNER will (a) execute such lease or
purchase agreement, as applicable, (b) execute the Franchise Documents, and (c)
pay the Mall Site Fee, all within ten (10) business days after COMPANY's
delivery to FRANCHISE OWNER of the lease or purchase agreement, as applicable,
and the Franchise Documents.
If FRANCHISE OWNER fails to timely execute the lease or purchase agreement
and Franchise Documents for a Mall Site and pay the Mall Site Fee as provided
herein, then COMPANY or its designee may develop and operate a BOSTON MARKET
Unit at such Mall Site.
2.E. FRANCHISE OWNER'S OPTION TO PURCHASE CONVERSION SITES.
-----------------------------------------------------
If, during the term of this Agreement, COMPANY acquires the shares or
assets (which may include, by way of illustration and not by way of limitation,
furniture, fixtures, equipment, leasehold improvements and/or leasehold
interests) of any business operating at one or more sites located within the
Territory which meet COMPANY's specifications and standards as in effect from
time to time for conversion to BOSTON MARKET Units (the "Conversion Sites"), and
COMPANY determines to convert such Conversion Sites to BOSTON MARKET Units,
COMPANY agrees to offer to sell such Conversion Sites to FRANCHISE OWNER for the
price paid therefor by COMPANY. Such price will include that portion of the
direct and indirect costs and liabilities allocated to such Conversion Sites
incurred or assumed by COMPANY in making such acquisition whether paid or owed
to the seller of such Conversion Sites, COMPANY, its Affiliates or third parties
and other expenses allocated to such Conversion Sites (including losses, whether
from continuing operations or closing acquired units) plus interest at COMPANY's
cost of money on the balance of such amounts from time to time, provided that:
(1) such sale will not conflict with any existing legal obligation of
COMPANY or the business being acquired; and
(2) such sale will not preclude the completion of the acquisition on
the terms agreed to by COMPANY; and
(3) such sale will not interfere with any other legal agreement,
arrangement or combination; and
11
<PAGE>
(4) FRANCHISE OWNER agrees to execute, concurrently with FRANCHISE
OWNER's purchase, the Franchise Documents, as modified for use in
connection with a Conversion Site as necessary, for each and every such
Conversion Site and convert each such Conversion Site to a BOSTON MARKET
Unit as soon as practicable thereafter in accordance with COMPANY's
standards and specifications.
FRANCHISE OWNER shall have thirty (30) days after receipt of COMPANY's offer in
which to accept or reject such offer by written notice to COMPANY.
In the event FRANCHISE OWNER rejects or fails to timely accept COMPANY's
offer to sell such Conversion Sites or COMPANY is unable to extend such offer
for any of the aforementioned reasons, COMPANY agrees that, provided that
FRANCHISE OWNER is in full compliance with this Agreement, it will not utilize
the Marks at such Conversion Sites (whether owned or franchised by COMPANY) for
a period of one (1) year following COMPANY's acquisition thereof, provided that
COMPANY may operate, alter, modify, refurbish, remodel, promote or market any
such Conversion Sites during such one (1) year period. For purposes of this
Paragraph 2.E., all references to COMPANY shall be deemed to include its
Affiliates.
3. OTHER DISTRIBUTION METHODS.
--------------------------
3.A. SPECIAL DISTRIBUTION ARRANGEMENTS.
---------------------------------
FRANCHISE OWNER acknowledges and agrees that: (1) FRANCHISE OWNER is not
granted any rights to operate Special Distribution Arrangements within or
outside the Territory pursuant to this Agreement; and (2) the right to operate
or grant to others the right to operate Special Distribution Arrangements is
reserved to COMPANY; and (3) COMPANY has no obligation to offer to FRANCHISE
OWNER the right to operate Special Distribution Arrangements; and (4) COMPANY or
its designees may instead operate or grant to others the right to operate
Special Distribution Arrangements within and/or outside the Territory.
Notwithstanding the foregoing, if COMPANY, at any time and in its sole
discretion, determines to offer FRANCHISE OWNER the right to operate a Special
Distribution Arrangement at a Special Distribution Location designated by
COMPANY, COMPANY will so notify FRANCHISE OWNER by delivering to FRANCHISE OWNER
a Special Distribution Agreement authorizing FRANCHISE OWNER to operate such
Special Distribution Arrangement at such Special Distribution Location.
FRANCHISE OWNER will have fifteen (15) days to execute and return to COMPANY
such Special Distribution Agreement after FRANCHISE OWNER's receipt thereof.
Such Special Distribution Agreement will provide that FRANCHISE OWNER shall
commence such Special Distribution Arrangement from the designated Special
Distribution Location within the time period specified by COMPANY in the Special
Distribution Agreement. If FRANCHISE OWNER fails to execute and return to
COMPANY such Special Distribution Agreement within such fifteen (15) day period
or commence such Special Distribution Arrangement within the specified period,
then FRANCHISE OWNER shall have no right to operate such Special Distribution
Arrangement thereafter. If FRANCHISE OWNER has executed a Special Distribution
Agreement, COMPANY reserves the right, at any time and in its sole discretion
with or without cause and regardless of the investment made by
12
<PAGE>
FRANCHISE OWNER establishing or operating the Special Distribution Arrangement
or the length of time the Special Distribution Arrangement has been in effect,
to suspend or terminate FRANCHISE OWNER's right to operate the Special
Distribution Arrangement, effective one hundred eighty (180) days after
COMPANY's written notice to FRANCHISE OWNER; and COMPANY may otherwise terminate
the Special Distribution Arrangement pursuant to the terms of the Special
Distribution Agreement.
3.B. DELIVERY SERVICE.
----------------
FRANCHISE OWNER acknowledges and agrees that: (1) FRANCHISE OWNER is not
granted any rights within or outside the Territory to offer Delivery Service
from the UNIT pursuant to this Agreement; (2) COMPANY has no obligation to offer
to FRANCHISE OWNER the right to provide Delivery Service at the UNIT; and (3)
COMPANY or its designees may instead provide Delivery Service within and/or
outside the Territory. Notwithstanding the foregoing, if COMPANY, at any time
and in its sole discretion, determines to offer Delivery Service in a designated
Delivery Area in which the UNIT is located, COMPANY will offer FRANCHISE OWNER
or DEVELOPER, pursuant to the Development Agreement pursuant to which this
Agreement was issued, the right to offer Delivery Service by delivering to
FRANCHISE OWNER (or DEVELOPER) a Delivery Rider to this Agreement authorizing
the offer of Delivery Service within such designated Delivery Area. FRANCHISE
OWNER (or DEVELOPER) will have fifteen (15) days to execute and return to
COMPANY such Delivery Rider after FRANCHISE OWNER's (or DEVELOPER's) receipt
thereof. Such Delivery Rider will provide that FRANCHISE OWNER (or DEVELOPER)
shall commence Delivery Service from the UNIT or, if required by COMPANY in its
sole discretion, from a Delivery Facility within the time period specified by
COMPANY in the Delivery Rider. If FRANCHISE OWNER (or DEVELOPER) fails to
execute and return such Delivery Rider to COMPANY within such fifteen (15) day
period or commence Delivery Service within the specified period, then FRANCHISE
OWNER (or DEVELOPER) shall have no right to provide Delivery Service at the UNIT
thereafter and COMPANY or its designee will have the right to offer Delivery
Service within such designated Delivery Area. Notwithstanding the foregoing, if
COMPANY determines in its sole discretion that all franchise owners of BOSTON
MARKET Units in the trade area where the UNIT is located, as such trade area is
determined by COMPANY in its sole discretion and which in no event shall exceed
the Market Area, shall offer Delivery Service, COMPANY will notify FRANCHISE
OWNER (or DEVELOPER) and will deliver to FRANCHISE OWNER (or DEVELOPER) a
Delivery Rider to this Agreement which FRANCHISE OWNER (or DEVELOPER) shall
execute and return to COMPANY within fifteen (15) days after its receipt. If
FRANCHISE OWNER (or DEVELOPER) has executed a Delivery Rider, COMPANY reserves
the right, at any time and in its sole discretion, with or without cause and
regardless of the investment made by FRANCHISE OWNER (or DEVELOPER) in
establishing and conducting Delivery Service or the length of time FRANCHISE
OWNER (or DEVELOPER) has offered Delivery Service: (1) to reduce, modify or
expand the Delivery Area effective upon COMPANY's written notice to FRANCHISE
OWNER (or DEVELOPER); or (2) to suspend or terminate FRANCHISE OWNER's (or
DEVELOPER's) right to offer Delivery Service, effective one hundred eighty (180)
days after COMPANY's written notice to FRANCHISE OWNER (or DEVELOPER); and
COMPANY may otherwise terminate FRANCHISE OWNER's (or DEVELOPER's) right to
offer Delivery Service pursuant to the terms of the Delivery Rider. In the
event that COMPANY suspends or terminates FRANCHISE
13
<PAGE>
OWNER's (or DEVELOPER's) right to offer Delivery Service, COMPANY reserves the
right to require FRANCHISE OWNER (or DEVELOPER) to reinstate Delivery Service
upon fifteen (15) days' prior written notice to FRANCHISE OWNER (or DEVELOPER).
3.C. CATERING SERVICE.
----------------
FRANCHISE OWNER acknowledges and agrees that: (1) FRANCHISE OWNER is not
granted under this Agreement any rights within or outside the Territory to offer
Catering Service from the UNIT pursuant to this Agreement; and (2) COMPANY has
no obligation to offer to FRANCHISE OWNER the right to provide Catering Service
from the UNIT; and (3) COMPANY or its designees may instead provide Catering
Service within and/or outside the Territory. Notwithstanding the foregoing, if
COMPANY, at any time and in its sole discretion, determines to offer Catering
Service in a designated Catering Area in which the Unit is located, COMPANY will
offer FRANCHISE OWNER or DEVELOPER, pursuant to the Development Agreement
pursuant to which this Agreement was issued, the right to offer Catering Service
by delivering to FRANCHISE OWNER (or DEVELOPER) a Catering Rider to this
Agreement authorizing the offer of Catering Service within such designated
Catering Area. FRANCHISE OWNER (or DEVELOPER) will have fifteen (15) days to
execute and return to COMPANY the Catering Rider after FRANCHISE OWNER's (or
DEVELOPER's) receipt thereof. Such Catering Rider will provide that FRANCHISE
OWNER (or DEVELOPER) shall commence Catering Service from the UNIT or, in
COMPANY's sole discretion, from a Catering Facility, within the time period
specified by COMPANY in the Catering Rider. If FRANCHISE OWNER (or DEVELOPER)
fails to execute and return such Catering Rider to COMPANY within such fifteen
(15) day period or commence Catering Service within the specified period, then
FRANCHISE OWNER (or DEVELOPER) shall have no right to provide Catering Service
within the designated Catering Area thereafter and COMPANY or its designee will
have the right to offer Catering Service within such designated Catering Area.
If FRANCHISE OWNER (or DEVELOPER) has executed a Catering Rider, COMPANY
reserves the right, at any time and in its sole discretion, with or without
cause and regardless of the investment made by FRANCHISE OWNER (or DEVELOPER) in
establishing and conducting Catering Service or the length of time FRANCHISE
OWNER (or DEVELOPER) has offered Catering Service: (1) to reduce, modify or
expand the Catering Area effective upon COMPANY's written notice to FRANCHISE
OWNER (or DEVELOPER); or (ii) to suspend or terminate FRANCHISE OWNER's (or
DEVELOPER's) right to offer Catering Service, effective one hundred eighty (180)
days after COMPANY's written notice to FRANCHISE OWNER (or DEVELOPER) (in which
case FRANCHISE OWNER (or DEVELOPER) will not fill any orders for Catering
Service after the expiration of such one hundred eighty (180) day period); and
COMPANY may otherwise terminate FRANCHISE OWNER's (or DEVELOPER's) right to
offer Catering Service pursuant to the terms of the Catering Rider. In the
event that COMPANY terminates or suspends FRANCHISE OWNER's (or DEVELOPER's)
right to offer Catering Service, COMPANY reserves the right to require FRANCHISE
OWNER (or DEVELOPER) to reinstate Catering Service upon fifteen (15) days' prior
written notice to FRANCHISE OWNER (or DEVELOPER).
14
<PAGE>
4. DEVELOPMENT AND OPENING OF THE UNIT.
-----------------------------------
4.A. SITE SELECTION AND LEASE.
------------------------
Prior to execution of this Agreement, FRANCHISE OWNER shall have obtained
COMPANY's approval of and the legal right of possession of the Site in
accordance with the terms of the Development Agreement. If this Agreement is
not executed pursuant to a Development Agreement, then FRANCHISE OWNER shall be
required to comply with the site review and lease approval provisions specified
in the most recent applicable Offering Circular of COMPANY for the state in
which the site will be located delivered to FRANCHISE OWNER.
FRANCHISE OWNER acknowledges that COMPANY has developed a standard form
lease (the "Form Unit Lease"), and a standard form real estate purchase and sale
agreement (the "Form Purchase and Sale Agreement"). COMPANY will furnish
FRANCHISE OWNER with a copy of the current forms of Form Unit Lease and Form
Purchase and Sale Agreement and FRANCHISE OWNER acknowledges that COMPANY may
modify such forms from time to time in its sole discretion. FRANCHISE OWNER
shall present the Form Unit Lease or Form Purchase and Sale Agreement to the
lessor or seller of an Approved Site, as applicable, and use its best efforts to
cause the lessor or seller of such Approved Site to execute the Form Unit Lease
or Form Purchase and Sale Agreement as the lease, sublease, assignment of lease
or purchase agreement (referred to herein as the "Site Agreement"), as
applicable, for such Approved Site. If FRANCHISE OWNER fails to obtain the
lessor's or seller's agreement to use the Form Unit Lease or Form Purchase and
Sale Agreement as the Site Agreement, FRANCHISE OWNER shall cause the lessor or
seller to include in the Site Agreement the standard terms which COMPANY
requires from time to time in its sole discretion, and such other terms as
COMPANY may require or as it may specifically approve in writing.
After receiving a copy of a proposed Site Agreement in form for execution,
COMPANY shall have the right, in its sole discretion, to approve, approve with
modification or disapprove such proposed Site Agreement, and FRANCHISE OWNER
acknowledges and agrees that COMPANY shall have no liability therefor. COMPANY
agrees to exert its best efforts to deliver such notification to FRANCHISE OWNER
within twenty (20) days after receipt by COMPANY of the proposed Site Agreement.
FRANCHISE OWNER agrees that it will not execute a Site Agreement without the
prior written approval of COMPANY, and any such Site Agreement shall contain the
express condition precedent of COMPANY's prior written approval thereof.
FRANCHISE OWNER shall deliver to COMPANY a copy of the fully signed Site
Agreement as previously approved within fifteen (15) days after its full
execution. FRANCHISE OWNER further agrees that it will not execute or agree to
any modification of the Site Agreement which would affect COMPANY's rights
without the prior written approval of COMPANY.
If FRANCHISE OWNER or an Authorized Entity fails to obtain lawful
possession of an Approved Site (through acquisition, lease, sublease or
assignment) within sixty (60) days after delivery of COMPANY's approval of the
Approved Site, COMPANY may, in its sole discretion, withdraw approval of such
site at any time. COMPANY also may withdraw its offer to grant a Franchise for
a BOSTON MARKET Unit at an Approved Site and withdraw
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COMPANY's approval of such site at any time prior to COMPANY's receipt of all
applicable payments and COMPANY's execution of the Franchise Agreement therefor.
At the request of COMPANY, if FRANCHISE OWNER owns an Approved Site,
FRANCHISE OWNER will enter into a lease with COMPANY under COMPANY's then-
current form of lease for a term equal to the term of the Franchise and for a
rental equal to the Approved Site's fair market rental value, and will sublease
the Approved Site from COMPANY on the same terms as the prime lease. If
FRANCHISE OWNER and COMPANY cannot agree on the fair market rental value of such
an Approved Site, then such rental value shall be determined by an independent
appraiser selected by COMPANY and FRANCHISE OWNER, and if they are unable to
agree on an independent appraiser, COMPANY and FRANCHISE OWNER shall each select
an independent appraiser, who shall select a third independent appraiser, and
the fair market rental value shall be deemed to be the average of the three (3)
independent appraisals made by such appraisers.
4.B. UNIT DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS.
-------------------------------------------------
COMPANY will furnish to FRANCHISE OWNER specifications of COMPANY's
requirements for design, decoration, layout, equipment, furnishings, seating for
On-Premises Dining (if any), fixtures and signs for BOSTON MARKET Units (the
"Design Specifications"). FRANCHISE OWNER acknowledges and agrees that the
Design Specifications are an integral part of the BOSTON MARKET System and
include the Trade Dress and that, therefore, the UNIT will be designed and
constructed in accordance with the Design Specifications. FRANCHISE OWNER will
cause to be prepared the preliminary layout for the UNIT (if not already
submitted to COMPANY) and detailed construction plans and specifications and
space plans for the UNIT (the "Construction Plans") that comply with the Design
Specifications and all applicable ordinances, building codes, permit
requirements, and lease requirements and restrictions. If FRANCHISE OWNER
requests in writing, COMPANY will prepare the preliminary layout for the UNIT
for FRANCHISE OWNER at COMPANY's then current charges.
4.C. DEVELOPMENT OF THE UNIT.
-----------------------
Within one hundred eighty (180) days after the date of execution of this
Agreement, FRANCHISE OWNER agrees at its expense to do or cause to be done the
following:
(1) secure all financing required to fully develop the UNIT in
accordance with this Section; and
(2) submit the Construction Plans to COMPANY for approval; and
(3) obtain all required zoning changes, planning consents, building,
utility, sign, health, sanitation and business permits, licenses and
approvals and any other required permits and licenses; and
16
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(4) construct all required improvements in compliance with
Construction Plans approved by COMPANY; and
(5) decorate and lay out the UNIT in compliance with Design
Specifications and plans and specifications approved by COMPANY; and
(6) purchase or lease the computer hardware designated by COMPANY
from time to time and obtain a license for the Licensed Program (such
computer hardware and the Licensed Program are referred to herein as the
"Computer System"); and
(7) purchase or lease and install all required equipment, vehicles,
furnishings, fixtures and signs; and
(8) purchase an adequate opening inventory of Products, materials and
supplies; and
(9) obtain all customary contractors' sworn statements and partial
and final waivers of lien for construction, remodeling, decorating and
installation services; and
(10) open the UNIT for business and thereafter operate the UNIT on a
regular and continuing basis for the term hereof.
If DEVELOPER has already opened a BOSTON MARKET Unit pursuant to the Development
Agreement, FRANCHISE OWNER shall do or cause to be done the foregoing within one
hundred twenty (120) days after the date of this Agreement.
4.D. EQUIPMENT, FIXTURES, FURNISHINGS AND SIGNS.
------------------------------------------
FRANCHISE OWNER agrees to use in the development and operation of the UNIT
only those brands, types and/or models of equipment, vehicles, signs displaying
the Marks, fixtures and furnishings which meet COMPANY's specifications.
FRANCHISE OWNER may purchase approved brands, types and/or models of equipment,
fixtures and signs which meet the COMPANY's specifications only from suppliers
designated or approved by COMPANY, which may include COMPANY. COMPANY will from
time to time supply FRANCHISE OWNER with a list of suppliers who sell items
which meet COMPANY's specifications, at FRANCHISE OWNER's request.
4.E. COMMUNICATION AND INFORMATION SYSTEMS.
-------------------------------------
FRANCHISE OWNER agrees to use in the development and operation of the UNIT
only those brands, types, makes, and/or models of communications and computer
systems or hardware which COMPANY has from time to time specified or required
for the Computer System. FRANCHISE OWNER also agrees to use in the development
and operation of the UNIT only the Specified Software and the Licensed Program,
as comprised from time to time in accordance with the specifications and
requirements of COMPANY. FRANCHISE OWNER
17
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acknowledges that COMPANY and its Affiliates and designees are in the process of
completing the development of the Licensed Program and COMPANY is in the process
of completing the development of specifications for certain components of the
Computer System and may modify such specifications and the components of the
Licensed Program and the Computer System from time to time. During the term
hereof, COMPANY may require FRANCHISE OWNER to obtain specified computer
hardware and/or software, including, without limitation, the Computer System,
the Specified Software, and a license to use the Licensed Program from COMPANY
or its designee under a separate agreement after COMPANY notifies FRANCHISE
OWNER to commence use thereof. COMPANY's development and/or modification of such
specifications for the components of the Computer System, the Specified
Software, and the Licensed Program may require FRANCHISE OWNER to incur costs to
purchase, lease and/or license new or modified computer hardware and/or software
and to obtain service and support for the Computer System, the Specified
Software, and the Licensed Program during the term of this Agreement. FRANCHISE
OWNER acknowledges that COMPANY cannot estimate the costs of future additions,
enhancements and modifications to the Computer System, the Specified Software,
and the Licensed Program and that the cost to FRANCHISE OWNER of obtaining the
additions, enhancements and modifications thereto may not be fully amortizable
over the remaining term of this Agreement. Nonetheless, FRANCHISE OWNER agrees
to incur such costs in connection with obtaining the Computer System, the
Specified Software, and the Licensed Program and any additions, enhancements or
modifications thereto, provided that the Computer System, the Specified
Software, and the Licensed Program that COMPANY specifies for use by FRANCHISE
OWNER is substantially the same Computer System, Specified Software, and
Licensed Program which COMPANY is then currently specifying for use in COMPANY-
owned BOSTON MARKET Units. Such portion of the Computer System, Specified
Software, and Licensed Program as is purchased from COMPANY or its agents or
affiliates may involve one-time and periodic fees or payments to COMPANY. Within
one hundred twenty (120) days after FRANCHISE OWNER receives notice from
COMPANY, FRANCHISE OWNER shall obtain the components of the Computer System, the
Specified Software, and the Licensed Program which COMPANY designates and
requires. FRANCHISE OWNER further acknowledges and agrees that COMPANY has the
right to require FRANCHISE OWNER to pay to COMPANY or its designee a reasonable
periodic systems fee for modifications and enhancements made to the Licensed
Program and reasonable periodic fees for other maintenance and support services
provided to FRANCHISE OWNER related to the Specified Software and the Computer
System.
4.F. UNIT OPENING.
------------
FRANCHISE OWNER agrees not to open the UNIT for business until:
(1) COMPANY notifies FRANCHISE OWNER in writing that all of FRANCHISE
OWNER's obligations pursuant to Paragraphs B and C of this Section have
been fulfilled; and
(2) pre-opening training of UNIT personnel has been completed to
COMPANY's satisfaction; and
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<PAGE>
(3) all amounts then due to COMPANY have been paid and all required
Guaranties are executed and delivered to COMPANY; and
(4) COMPANY has been furnished with copies of all insurance policies
required pursuant to this Agreement, or such other evidence of insurance
coverage and payment of premiums as COMPANY requests.
FRANCHISE OWNER agrees to comply with these conditions and to be prepared to
open the UNIT for business within one hundred and eighty (180) days after the
date of this Agreement. COMPANY's determination that FRANCHISE OWNER has met
all of COMPANY's pre-opening requirements shall not constitute a waiver of non-
compliance by FRANCHISE OWNER or of COMPANY's right to demand full compliance
with such requirements. If DEVELOPER has already opened a BOSTON MARKET Unit
pursuant to the Development Agreement, FRANCHISE OWNER shall do or cause to be
done the foregoing within one hundred twenty (120) days after the date of this
Agreement. FRANCHISE OWNER further agrees to open the UNIT for business and
commence conduct of business at the UNIT pursuant to this Agreement within five
(5) days after COMPANY gives notice to FRANCHISE OWNER stating that the UNIT is
ready for opening.
4.G. GRAND OPENING PROGRAM.
---------------------
FRANCHISE OWNER agrees to conduct a grand opening advertising and
promotional pro gram for the UNIT during the period commencing ten (10) days
prior to, and ending ninety (90) days after, the opening of the UNIT and to
expend no less than Ten Thousand Dollars ($10,000.00) on such advertising and
promotion during such period. FRANCHISE OWNER shall pay COMPANY Ten Thousand
Dollars ($10,000.00) in a lump sum upon execution of the Franchise Agreement.
Such payment will be expended by COMPANY at FRANCHISE OWNER's direction (or, if
FRANCHISE OWNER does not give COMPANY timely direction, at COMPANY's direction
within the applicable time frame) on such grand opening advertising and
promotion program. Such advertising and promotion program shall:
(1) be in addition to advertising and promotion conducted pursuant to
Section 12 of this Agreement; and
(2) utilize marketing and public relations programs and media and
advertising materials approved by COMPANY; and
(3) be conducted in accordance with COMPANY's specifications and
standards and pursuant to a grand opening plan which FRANCHISE OWNER shall
prepare and submit to COMPANY for approval at least thirty (30) days prior
to the opening date of the UNIT. If FRANCHISE OWNER does not prepare a
grand opening program and obtain COMPANY's approval of such plan, COMPANY
may prepare the grand opening plan for the UNIT.
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4.H. RELOCATION OF UNIT SITE.
-----------------------
If FRANCHISE OWNER's lease or sublease for the Site of the UNIT expires or
terminates without fault of FRANCHISE OWNER, if the Site is damaged, condemned
or otherwise rendered unusable as a BOSTON MARKET Unit in accordance with this
Agreement, or if, in the judgment of COMPANY and FRANCHISE OWNER, there is a
change in the character of the location of the Site sufficiently detrimental to
its business potential to warrant its relocation, COMPANY will not unreasonably
withhold permission for relocation of the UNIT to a site within the Territory
which meets COMPANY's then-current site criteria, subject to the rights of
existing BOSTON CHICKEN franchisees under their franchise agreements with
COMPANY. Any such relocation shall be at FRANCHISE OWNER's sole expense. The
UNIT shall re-open at the replacement Site as soon as reasonably practicable but
in no event more than ninety (90) days after the closing of the original
location.
4.I. FINANCING PLAN.
--------------
FRANCHISE OWNER must submit a written plan for FRANCHISE OWNER's financing
which plan shall be reasonably acceptable to COMPANY which shall include details
of the sources and terms of such financing and such other information or
documents required by COMPANY from time to time. FRANCHISE OWNER may not begin
development of the UNIT until COMPANY has given its approval of such plan, which
approval COMPANY may give or withhold in its sole discretion. Among other
factors, COMPANY may consider FRANCHISE OWNER's debt/equity ratio and amount of
indebtedness in reviewing such plan. Once a plan is approved by COMPANY,
FRANCHISE OWNER must execute and adhere to the plan.
5. TRAINING AND GUIDANCE.
---------------------
5.A. TRAINING.
--------
Prior to the commencement of the operation of the UNIT, the manager of the
UNIT (the "Unit Manager") and one (1) other management level employee (the
"Additional Manager"), appointed by FRANCHISE OWNER in accordance with this
Agreement and identified in Section 4 of Exhibit E, must attend and complete to
---------
COMPANY's satisfaction a COMPANY accredited and certified initial management
training program in the operation of a BOSTON MARKET Unit. Such training
program may include classroom training, instruction at designated facilities and
hands-on training in an operating BOSTON MARKET Unit. If this Agreement is not
executed pursuant to a Development Agreement, COMPANY will provide such training
program without charge to the Unit Manager and Additional Manager. If this
Agreement is executed pursuant to a Development Agreement, such training program
will be provided by COMPANY to the Unit Manager and Additional Manager without
charge if the UNIT is one of the first three (3) BOSTON MARKET Unit developed
under the Development Agreement and at COMPANY's then-current standard charges
if the UNIT is not one of the first three (3) UNITS to be developed under the
Development Agreement. Notwithstanding the foregoing, if the UNIT is not one of
the first three (3) BOSTON MARKET Units to be
20
<PAGE>
developed under the Development Agreement, COMPANY may, in its sole discretion,
require on thirty (30) days' prior written notice to DEVELOPER that DEVELOPER's
Training Director provide such training program at DEVELOPER's training
facilities in accordance with COMPANY's requirements therefor, provided that
DEVELOPER's Training Director is currently certified to provide such training
program under the terms of the Development Agreement. If such training program
is provided by COMPANY, it will be provided at such time (subject to space
availability in COMPANY's regularly scheduled classes) and for such duration as
COMPANY may designate and at a training facility designated by COMPANY and/or at
a COMPANY-owned or franchised BOSTON MARKET Unit. At FRANCHISE OWNER's request,
COMPANY may provide such training program to additional UNIT personnel at
COMPANY's then-current standard charges, subject to space availability in
COMPANY's regularly scheduled training classes and/or availability of COMPANY's
training personnel. FRANCHISE OWNER shall be responsible for travel and lodging
expenses of COMPANY personnel if such training is not conducted at COMPANY's
principal offices. In addition, whether DEVELOPER or COMPANY is providing such
training, COMPANY may, in its sole discretion as it deems necessary, require the
Unit Manager and/or the Additional Manager to work full-time without
compensation by COMPANY and at FRANCHISE OWNER's expense for up to ten (10)
weeks at a BOSTON MARKET Unit selected by COMPANY.
COMPANY may offer from time to time additional or refresher training
programs to FRANCHISE OWNER at such times as COMPANY shall designate and may, in
its sole discretion as it deems necessary, require the Unit Manager, Additional
Manager or assistant managers of the UNIT or FRANCHISE OWNER to attend or to
participate in, at COMPANY's per diem charges and at FRANCHISE OWNER's expense,
such additional or refresher training programs at locations designated by
COMPANY during the term of this Agreement. COMPANY also may charge for updated,
additional or refresher training materials supplied to FRANCHISE OWNER or its
personnel.
In the event the certified Unit Manager and/or Additional Manager ceases to
hold such position at the UNIT, FRANCHISE OWNER shall have thirty (30) days in
which to appoint a substitute or replacement Unit Manager and/or Additional
Manager, who must attend and complete to COMPANY's satisfaction the initial
management training program as specified above promptly after appointment. If
COMPANY in its sole discretion determines that the Unit Manager or Additional
Manager or any subsequently appointed Unit Manager or Additional Manager has
failed to satisfactorily complete the initial management training program or any
additional or refresher training program, FRANCHISE OWNER agrees to immediately
hire a substitute Unit Manager or Additional Manager and promptly arrange for
such person to complete the initial management training program to the
satisfaction of COMPANY. If COMPANY provides such training, whether for a
substitute or replacement Unit Manager and/or Additional Manager or for such
manager who has failed to complete any training program to COMPANY's
satisfaction, FRANCHISE OWNER shall pay COMPANY its then-current standard
charges.
FRANCHISE OWNER shall be responsible for the travel, living and other
expenses (including, without limitation, local transportation expenses) and
compensation of FRANCHISE
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OWNER, the Unit Manager, the Additional Manager, assistant managers, and any
other agents or employees of FRANCHISE OWNER incurred in connection with
attendance at training programs or work at BOSTON MARKET Units that is part of
their training.
5.B. GUIDANCE AND ASSISTANCE.
-----------------------
COMPANY shall, in its sole discretion, furnish guidance to FRANCHISE OWNER
with respect to:
(1) recipes, methods, specifications, standards and operating
procedures utilized by BOSTON MARKET Units and any modifications thereof;
and
(2) purchasing approved equipment, fixtures, furnishings, signs,
Products, and materials and supplies; and
(3) development and implementation of local advertising and
promotional programs; and
(4) general operating and management procedures of BOSTON MARKET
Units; and
(5) establishing and conducting employee training programs at the
UNIT; and
(6) opening the Unit.
Such guidance shall, in the discretion of COMPANY, be furnished in the form of
COMPANY's Manuals (defined below in this Section), bulletins, video or audio
cassette tapes, computer diskettes, written materials, reports and
recommendations, other materials and intangibles, refresher training programs
and/or telephonic consultations or consultations at the offices of COMPANY or at
the UNIT. If special training of UNIT personnel or other assistance in
operating the UNIT is requested by FRANCHISE OWNER and COMPANY determines in its
sole discretion that such training or assistance or assistance should take place
at the UNIT, all expenses for such training or assistance shall be paid by
FRANCHISE OWNER, including, without limitation, COMPANY's per diem charges and
travel and living expenses for COMPANY personnel.
5.C. MANUALS.
-------
COMPANY shall loan to FRANCHISE OWNER, for its sole use, one (1) copy of a
set of COMPANY's confidential manuals relating to the development and operation
of BOSTON MARKET Units, which may consist of one or more volumes, handbooks,
manuals, written materials, video or audio cassette tapes, computer diskettes or
any other materials or intangibles, as may be modified, added, replaced or
supplemented by COMPANY from time to time in its sole discretion, whether by way
of supplements, replacement pages, Franchise Bulletin disclosures, or other
official pronouncements or means (collectively the "Manuals"). The
22
<PAGE>
Manuals shall contain specifications, standards, policies and procedures
prescribed from time to time by COMPANY for BOSTON MARKET Units and information
relative to other obligations of FRANCHISE OWNER hereunder and the operation of
a BOSTON MARKET Unit. The Manuals may be modified from time to time at COMPANY's
sole discretion to reflect changes in the BOSTON MARKET System or
specifications, standards, policies and procedures for BOSTON MARKET Units, to
specify brands, types and/or models of equipment which must be used by FRANCHISE
OWNER in the operation of the UNIT, and to specify changes in the decor, format,
image, Products, services and operations of a BOSTON MARKET Unit prescribed by
COMPANY or such other changes or additions as COMPANY deems necessary or
advisable. FRANCHISE OWNER shall keep its copy of the Manuals current by
immediately inserting all modified pages or materials furnished by COMPANY. In
the event of a dispute about the contents of the Manuals, the master copies
maintained by COMPANY at its principal office shall be controlling. FRANCHISE
OWNER acknowledges that the Manuals are proprietary and confidential and,
therefore, agrees that it will not, at any time, disclose, copy or distribute
any part of the Manuals.
6. MARKS.
-----
6.A. GOODWILL AND OWNERSHIP OF MARKS.
-------------------------------
FRANCHISE OWNER acknowledges that FRANCHISE OWNER's right to use the Marks
is limited to the development and operation of the UNIT by FRANCHISE OWNER
pursuant to and in compliance with this Agreement and all applicable standards,
specifications, and operating procedures prescribed by COMPANY from time to
time during the term of the Franchise, and is derived solely from this
Agreement. Any unauthorized use of the Marks by FRANCHISE OWNER shall
constitute a breach of this Agreement and an infringement of the rights of
COMPANY in and to the Marks. FRANCHISE OWNER acknowledges and agrees that all
usage of the Marks by FRANCHISE OWNER and any goodwill established thereby shall
inure to the exclusive benefit of COMPANY and that this Agreement does not
confer any goodwill or other interests in the Marks upon FRANCHISE OWNER (other
than the right to operate the UNIT in compliance with this Agreement). All
provisions of this Agreement applicable to the Marks shall apply to any other
trademarks, service marks, commercial symbols and trade dress hereafter
authorized, in writing (including by inclusion in COMPANY's Identification
Standards Manual or any Trademark or Advertising Compliance Guide issued to
franchise owners by COMPANY), for use by and licensed to FRANCHISE OWNER by
COMPANY.
6.B. LIMITATIONS ON FRANCHISE OWNER'S USE OF MARKS.
---------------------------------------------
FRANCHISE OWNER agrees to use the Marks as the sole trade identification of
the UNIT, provided that FRANCHISE OWNER shall identify itself as the independent
owner of the UNIT in the manner prescribed by COMPANY. FRANCHISE OWNER shall
not use any Mark as part of any corporate name or other name of FRANCHISE OWNER
or with any prefix, suffix, or other modifying words, terms, designs, or
symbols, or in any modified form, nor may FRANCHISE OWNER use any Mark in
connection with the performance or sale of any
23
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unauthorized services or products or in any other manner not expressly
authorized in writing by COMPANY. FRANCHISE OWNER agrees to display the Marks
prominently in the manner prescribed by COMPANY at the UNIT and in connection
with advertising and marketing materials. FRANCHISE OWNER agrees to give such
notices of trademark and service mark registrations as COMPANY specifies and to
obtain such business name registrations as may be required under applicable law.
6.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
FRANCHISE OWNER shall immediately notify COMPANY of any apparent
infringement of or challenge to FRANCHISE OWNER's authorized use of any Mark, or
claim by any person of any rights in any Mark, and FRANCHISE OWNER shall not
communicate with any person other than COMPANY and its counsel in connection
with any such infringement, challenge or claim. COMPANY shall have 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 Patent and Trademark Office or other proceeding arising out of
any such alleged infringement, challenge or claim or otherwise relating to any
Mark. FRANCHISE OWNER agrees to execute any and all instruments and documents,
render such assistance, and do such acts and things as may, in the opinion of
COMPANY's counsel, be necessary or advisable to protect and maintain the
interests of COMPANY in any litigation or other proceeding or to otherwise
protect and maintain the interests of COMPANY in the Marks. COMPANY will
reimburse FRANCHISE OWNER for the reasonable out-of-pocket expenses incurred and
paid by FRANCHISE OWNER in complying with the requirements imposed by this
Paragraph.
6.D. DISCONTINUANCE OF USE OF MARKS.
------------------------------
If it becomes advisable at any time in COMPANY's sole judgment for the UNIT
to modify or discontinue use of any Mark and/or for the UNIT to use one or more
additional or substitute trademarks or service marks or an additional or
substitute type of trade dress, FRANCHISE OWNER agrees to immediately comply
with COMPANY's directions to modify or otherwise discontinue the use of such
Mark, and/or to use one or more additional or substitute trademarks, service
marks, logos or commercial symbols or additional or substitute trade dress after
notice thereof by COMPANY. Neither COMPANY nor its Affiliates shall have any
obligation to reimburse FRANCHISE OWNER for any expenditures made by FRANCHISE
OWNER to modify or discontinue the use of a Mark or to adopt additional marks or
substitutes for a discontinued Mark, including, without limitation, any
expenditures relating to advertising or promotional materials or to compensate
FRANCHISE OWNER for any goodwill related to the discontinued Mark.
6.E. INDEMNIFICATION OF FRANCHISE OWNER.
----------------------------------
COMPANY agrees to indemnify FRANCHISE OWNER against and to reimburse
FRANCHISE OWNER for all damages for which FRANCHISE OWNER is held liable in any
proceeding arising out of FRANCHISE OWNER's authorized use of any Mark, pursuant
to and in compliance with this Agreement, and for all costs reasonably incurred
by FRANCHISE
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OWNER in the defense of any such claim brought against FRANCHISE OWNER or in any
such proceeding in which FRANCHISE OWNER is named as a party, provided that
FRANCHISE OWNER has timely notified COMPANY of such claim or proceeding, has
given COMPANY sole control of the defense and settlement of any such claim, and
has otherwise complied with this Agreement.
7. COPYRIGHTS.
----------
7.A. OWNERSHIP OF COPYRIGHTS.
-----------------------
FRANCHISE OWNER and COMPANY acknowledge and agree (1) that COMPANY may
authorize FRANCHISE OWNER to use certain copyrighted or copyrightable works (the
"Copyrighted Works"), (2) that the Copyrighted Works are the valuable property
of COMPANY or its Affiliates and (3) that the FRANCHISE OWNER's rights to use
the Copyrighted Works are granted to FRANCHISE OWNER solely on the condition
that FRANCHISE OWNER complies with the terms of this Section. FRANCHISE OWNER
acknowledges and agrees that COMPANY 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 BOSTON MARKET Units, 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, advertisements,
promotional materials, labels, menus, posters, coupons, gift certificates, and
signs and may include all or part of the Marks, Licensed Program, Trade Dress
and other portions of the BOSTON MARKET System. COMPANY intends that all works
of authorship related to the BOSTON MARKET System which are created in the
future will be owned by it or its Affiliates.
7.B. LIMITATION ON FRANCHISE OWNER'S USE OF COPYRIGHTS.
-------------------------------------------------
FRANCHISE OWNER acknowledges that FRANCHISE OWNER's right to use the
Copyrighted Works is limited to the use of such Copyrighted Works pursuant to
and in compliance with this Agreement and all applicable standards,
specifications, and operating procedures prescribed by COMPANY from time to time
during the term of this Agreement, and is derived solely from this Agreement.
FRANCHISE OWNER shall ensure that all Copyrighted Works used hereunder shall
bear an appropriate copyright notice under the Universal Copyright Convention or
other copyright laws prescribed by COMPANY specifying that COMPANY or an
Affiliate of COMPANY 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 COMPANY in and to the
Copyrighted Works. FRANCHISE OWNER acknowledges that this Agreement does not
confer any interest in the Copyrighted Works upon FRANCHISE OWNER, other than
the right to operate the UNIT in compliance with this Agreement. If COMPANY
authorizes FRANCHISE
25
<PAGE>
OWNER to prepare any adaptation, translation or work derived from the
Copyrighted Works, or if FRANCHISE OWNER prepares any Copyrighted Works such as
menus, advertisements, posters or promotional material, FRANCHISE OWNER hereby
agrees that such adaptation, translation, derivative work or Copyrighted Work
shall be the property of COMPANY and FRANCHISE OWNER hereby assigns all its
right, title and interest therein to COMPANY. FRANCHISE OWNER agrees to execute
any documents, in recordable form, which COMPANY determines are necessary to
reflect such ownership. FRANCHISE OWNER shall submit all such adaptations,
translations, derivative works and Copyrighted Works to COMPANY for approval
prior to use.
7.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
FRANCHISE OWNER shall immediately notify COMPANY 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. FRANCHISE OWNER shall not
communicate with any person other than COMPANY and its counsel in connection
with any such infringement, challenge or claims. COMPANY 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.
FRANCHISE OWNER agrees to execute any and all instruments and documents, render
such assistance, and do such acts and things as may, in the opinion of COMPANY's
counsel, be necessary or advisable to protect and maintain the interests of
COMPANY in any litigation or other proceeding or to otherwise protect and
maintain the interests of COMPANY in the Copyrighted Works. COMPANY will
reimburse FRANCHISE OWNER for the reasonable out-of-pocket expenses incurred and
paid by FRANCHISE OWNER in complying with the requirements imposed by this
Paragraph.
7.D. DISCONTINUANCE OF USE.
---------------------
If it becomes advisable at any time in COMPANY's sole judgment for
FRANCHISE OWNER to modify or discontinue use of any of the Copyrighted Works
and/or for FRANCHISE OWNER to use one or more additional or substitute
copyrighted or copyrightable items, FRANCHISE OWNER agrees to immediately comply
with COMPANY's directions to modify or otherwise discontinue the use of the
copyrighted materials and/or to use any substitute materials specified by
COMPANY. Neither COMPANY nor its Affiliates shall have any obligation to
reimburse FRANCHISE OWNER for any expenditures made by FRANCHISE OWNER to modify
or discontinue the use of any Copyrighted Work or to adopt additional or
substitute copyrighted or copyrightable items.
26
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8. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
-------------------------------------------
8.A. INDEPENDENT CONTRACTORS.
-----------------------
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them, that COMPANY and FRANCHISE
OWNER are and shall be independent contractors, and that 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. FRANCHISE OWNER
shall conspicuously identify itself in all dealings with customers, suppliers,
vendors, public officials, FRANCHISE OWNER personnel, and others as the owner of
the UNIT under a franchise granted by COMPANY and shall conspicuously and
prominently place such other notices of independent ownership on the Site and on
such forms, business cards, stationery, advertising, and other materials as
COMPANY may require from time to time.
8.B. NO LIABILITY FOR ACTS OF OTHER PARTY.
------------------------------------
FRANCHISE OWNER shall not employ any of the Marks in signing any contract,
application for any license or permit, or in a manner that may result in
liability of COMPANY or its Affiliates for any indebtedness or obligation of
FRANCHISE OWNER, nor will FRANCHISE OWNER use the Marks in any way not expressly
authorized herein. Except as expressly authorized in writing, neither COMPANY
nor FRANCHISE OWNER shall make any express or implied agreements, warranties,
guarantees or representations, or incur any debt in the name of or on behalf of
the other, or represent that their relationship is other than franchisor and
franchise owner, and neither COMPANY nor FRANCHISE OWNER shall be obligated by
or have any liability under any agreements or representations made by the other
that are not expressly authorized in writing, nor shall COMPANY be obligated for
any damages to any person or property directly or indirectly arising out of the
operation of the UNIT or FRANCHISE OWNER's business authorized by or conducted
pursuant to the Franchise.
8.C. TAXES.
-----
COMPANY shall have no liability for any sales, value added, use, service,
occupation, excise, gross receipts, income, property, payroll, employee
withholding or other taxes, whether levied upon this Agreement, FRANCHISE OWNER,
the UNIT or FRANCHISE OWNER's property, or upon COMPANY, in connection with the
sales made or business conducted by FRANCHISE OWNER (except any taxes COMPANY is
required by law to collect from FRANCHISE OWNER with respect to purchases from
COMPANY). Payment of all such taxes shall be the responsibility of FRANCHISE
OWNER.
8.D. INDEMNIFICATION.
---------------
FRANCHISE OWNER agrees to indemnify, defend and hold COMPANY, its
Affiliates, and their respective shareholders, directors, officers, employees,
agents, successors and assignees harm less against and to reimburse them for (1)
all claims, obligations and damages described in this Section, (2) any and all
taxes described in Paragraph C of this Section, and
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(3) any and all claims and liabilities directly or indirectly arising out of the
development or operation of the UNIT (including, without limitation, breach or
violation of any agreement, contract or commitment by FRANCHISE OWNER resulting
from FRANCHISE OWNER's execution and delivery of this Agreement or performance
of any of its obligations hereunder or liabilities asserted by owners or
employees, agents or other representatives of FRANCHISE OWNER arising in
connection with training provided by COMPANY or its Affiliates or designees or
otherwise), the conduct of Catering Service or Delivery Service, the operation
of Special Distribution Arrangements, unauthorized activities conducted in
association with the Marks, or the transfer of any interest in this Agreement,
the Franchise, the UNIT, some or all of the assets of the UNIT (other than sales
in the ordinary course of business) or FRANCHISE OWNER, in any manner not in
accordance with this Agreement, to the extent that such claims, obligations,
damages, taxes, losses or liabilities do not arise solely from the gross
negligence or wrongful conduct of COMPANY. For purposes of this indemnification,
"claims" shall mean and include all obligations to customers and others, actual,
consequential, special, and punitive damages, and costs incurred in the defense
of any claim against COMPANY, including, without limitation, reasonable
accountants', attorneys', attorney assistants', arbitrators' and expert witness
fees, costs of investigation and proof of facts, court costs, other litigation
expenses, and travel and living expenses. COMPANY shall have the right to defend
any such claim against it in such manner as COMPANY deems appropriate or
desirable in its sole discretion. This indemnity shall continue in full force
and effect subsequent to and notwithstanding the expiration or termination of
this Agreement.
9. CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP.
------------------------------------------------
9.A. CONFIDENTIAL INFORMATION.
------------------------
COMPANY possesses and will further develop and acquire certain confidential
and proprietary information and trade secrets including, but not limited to, the
following categories of information, methods, techniques, procedures and
knowledge developed or to be developed by COMPANY, its consultants or
contractors, its Affiliates or its designees, and/or franchise owners and
developers (the "Confidential Information"):
(1) methods, techniques, equipment, specifications, standards,
policies, procedures, information, concepts and systems relating to and
knowledge of and experience in the development, operation and franchising
of BOSTON MARKET Units; and
(2) marketing and promotional programs for BOSTON MARKET Units; and
(3) knowledge concerning the logic, structure and operation of
computer software programs which COMPANY authorizes for use in connection
with the operation of BOSTON MARKET Units (including, without limitation,
the Licensed Program) and all additions, modifications and enhancements
thereof, and all data generated from use of such programs, including,
without limitation, the logic, structure and operation of the data base
file structures containing such data and all additions, modifications and
enhancements thereof; and
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(4) sales data and information concerning consumer preferences and
inventory requirements for Products, materials and supplies, and
specifications for and knowledge of suppliers of certain materials,
equipment and fixtures for BOSTON MARKET Units; and
(5) ingredients, formulas, marinades, mixes, spices, seasonings,
sauces, recipes for, and methods of preparation, cooking, serving,
packaging, catering and delivery of, Products sold at BOSTON MARKET Units;
and
(6) information concerning Product sales, operating results,
financial performance and other financial data of BOSTON MARKET Units; and
(7) the Manuals and the Development Manual (defined in the
Development Agreement); and
(8) customer lists and Product sales of the UNIT; and
(9) employee selection procedures, training and staffing levels.
COMPANY will disclose such parts of the Confidential Information as COMPANY
deems necessary or advisable from time to time in its sole discretion for the
operation of a BOSTON MARKET Unit to FRANCHISE OWNER during training, and in
guidance and assistance furnished to FRANCHISE OWNER during the term of the
Franchise, and FRANCHISE OWNER may learn or otherwise obtain from COMPANY
additional Confidential Information of COMPANY during the term of the Franchise.
FRANCHISE OWNER acknowledges and agrees that neither FRANCHISE OWNER nor any
other person or entity will acquire by or through FRANCHISE OWNER any interest
in or right to use the Confidential Information other than the FRANCHISE OWNER's
right to utilize it in the operation of the UNIT, and that the use or
duplication of the Confidential Information in any other business would
constitute an unfair method of competition with COMPANY and other BOSTON MARKET
Unit developers and franchise owners. FRANCHISE OWNER agrees to disclose the
Confidential Information to its Owners and to employees of the UNIT only to the
extent reasonably necessary for the operation of the UNIT and if such
individuals have agreed to maintain such information in confidence in an
agreement enforceable by COMPANY.
FRANCHISE OWNER acknowledges and agrees that the Confidential Information
is confidential to and a valuable asset of COMPANY, is proprietary, includes
trade secrets of COMPANY, and is disclosed to FRANCHISE OWNER solely on the
condition that FRANCHISE OWNER, its Owners and its employees who have access to
the Confidential Information agree, and FRANCHISE OWNER does hereby agree, that,
during and after the term of this Agreement, FRANCHISE OWNER, its Owners and
such employees:
(a) will not use the Confidential Information in any other business
or capacity; and
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(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; and
(d) will adopt and implement all reasonable procedures prescribed
from time to time by COMPANY to prevent unauthorized use or disclosure of
or access to the Confidential Information, including, without limitation,
requiring employees and Owners who will have access to such information to
execute non-competition and confidentiality agreements in the form attached
hereto as Exhibit F (the "Confidentiality and Non-Competition Agreement").
---------
FRANCHISE OWNER shall provide COMPANY, at its request, executed originals
of each such Confidentiality and Non-Competition Agreement.
Notwithstanding the foregoing and any other provision of this Agreement,
FRANCHISE OWNER may use the Confidential Information in connection with the
operation of other BOSTON MARKET Units (in addition to the UNIT) pursuant to
other franchise agreements with COMPANY.
Notwithstanding anything to the contrary contained in this Agreement and
provided FRANCHISE OWNER shall have obtained COMPANY's prior written consent,
the restrictions on FRANCHISE OWNER's disclosure and use of the Confidential
Information shall not apply to the following:
(i) information, methods, procedures, techniques and knowledge which
are or become generally known in the food service business in the
Territory, other than through disclosure (whether deliberate or
inadvertent) by FRANCHISE OWNER; and
(ii) the disclosure of the Confidential Information in judicial or
administrative proceedings to the extent that FRANCHISE OWNER is legally
compelled to disclose such information, provided FRANCHISE OWNER has
notified COMPANY prior to disclosure and shall have used its best efforts
to obtain, and shall have afforded COMPANY the opportunity to obtain an
appropriate protective order or other assurance satisfactory to COMPANY of
confidential treatment for the information required to be so disclosed.
FRANCHISE OWNER agrees to disclose to COMPANY all ideas, concepts, methods,
techniques and products conceived or developed by FRANCHISE OWNER, its
affiliates, Owners or employees during the term of this Agreement relating to
the development and operation of BOSTON MARKET Units, provided that FRANCHISE
OWNER will not be obligated to make such disclosures if doing so would violate
any contractual obligations of FRANCHISE OWNER (or DEVELOPER, if applicable)
which:
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(A) arose prior to DEVELOPER's execution of the Development Agreement
(or, if there is no Development Agreement, then which arose prior to
FRANCHISE OWNER's execution of this Agreement); and
(B) DEVELOPER disclosed to COMPANY in writing prior to or upon
execution of the Development Agreement (if there is no Development
Agreement, then which FRANCHISE OWNER disclosed to COMPANY in writing prior
to or upon execution of this Agreement).
FRANCHISE OWNER hereby grants to COMPANY and agrees to procure from its
Affiliates, Owners or employees a perpetual, non-exclusive, and worldwide right
to use same in all food service businesses operated by COMPANY or its
Affiliates, franchisees and designees. COMPANY shall have no obligation to make
any lump sum or on-going payments to FRANCHISE OWNER with respect to any such
idea, concept, method, technique or product. FRANCHISE OWNER agrees that
FRANCHISE OWNER will not use nor will it allow any other person or entity to use
any such concept, method, technique or product without obtaining COMPANY's prior
written approval.
9.B. EXCLUSIVE RELATIONSHIP.
----------------------
FRANCHISE OWNER acknowledges and agrees that COMPANY would be unable to
protect the Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information among
franchise owners and developers of BOSTON MARKET Units, if franchise owners,
developers and their Principal Owners (and members of their immediate families)
were permitted to engage in, hold interests in or perform services for
Competitive Businesses. FRANCHISE OWNER further acknowledges and agrees that
the restrictions contained in this Paragraph B will not hinder its activities or
the activities of its Principal Owners under this Agreement or in general.
COMPANY has entered into this Agreement with FRANCHISE OWNER on the express
condition that, with respect to the operation of food service businesses that
sell Products, FRANCHISE OWNER and its Principal Owners and members of their
respective immediate families will deal exclusively with COMPANY. FRANCHISE
OWNER therefore agrees that during the term of this Agreement, neither FRANCHISE
OWNER nor any Principal Owner of FRANCHISE OWNER, nor any member of the
Immediate Family of FRANCHISE OWNER or any Principal Owner of FRANCHISE OWNER,
shall directly or indirectly:
(1) have any interest as a record or beneficial owner in any
Competitive Business (this restriction shall not be applicable to the
ownership of shares of a class of securities listed on a stock exchange or
traded on the over-the-counter market and quoted on a national inter-dealer
quotation system that represent less than three percent (3%) of the number
of shares of that class of securities issued and outstanding);
(2) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any Competitive
Business; or
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(3) divert or attempt to divert any business or any customers of any
BOSTON MARKET Unit to any Competitive Business.
FRANCHISE OWNER also agrees that, during the term of this Agreement, neither
FRANCHISE OWNER nor any Principal Owner of FRANCHISE OWNER, nor any member of
the Immediate Family of FRANCHISE OWNER nor a Principal Owner of FRANCHISE OWNER
shall directly or indirectly employ or seek to employ any person who is employed
by COMPANY, its Affiliates or by any other developer or franchise owner of
BOSTON MARKET Units, nor induce any such person to leave said employment without
the prior written consent of such person's employer. Furthermore, if FRANCHISE
OWNER is a corporation, partnership or limited liability company, it will not
engage in any business or other activity, directly or indirectly, other than the
development and operation of the UNIT and other BOSTON MARKET Units developed
and operated pursuant to other agreements with COMPANY.
FRANCHISE OWNER acknowledges and agrees that the failure of any person or
entity restricted pursuant to this Paragraph B to comply with the restrictions
of this Paragraph B (regardless of whether that person or entity actually has
executed this Agreement) or a Confidentiality and Non-Competition Agreement
shall constitute a breach of this Agreement.
The restrictions of this Paragraph B shall not be construed to prohibit
FRANCHISE OWNER, any Principal Owner of FRANCHISE OWNER, or any member of the
Immediate Family of FRANCHISE OWNER or its Principal Owners from having a direct
or indirect ownership interest in any BOSTON MARKET Unit, development agreements
or franchise agreements for the development or operation of BOSTON MARKET Units,
or any entity owning, controlling or operating BOSTON MARKET Units, or from
providing services to any such BOSTON MARKET Units pursuant to other agreements
with COMPANY. Furthermore, the restrictions of this Paragraph B shall not
prohibit FRANCHISE OWNER, any Principal Owner, or any member of the Immediate
Family of FRANCHISE OWNER or a Principal Owner (to the extent any such person(s)
is an individual) from performing services for or having an ownership interest
in a Permitted Competitive Business, or from conducting customary promotion and
advertising of a Permitted Competitive Business. Such person(s) and
business(es), if any, are identified in Exhibit E of the Development Agreement
---------
(or, if there is no Development Agreement, then such person(s) and business(es),
if any, are identified in Exhibit C attached to this Agreement as provided above
---------
in the definition of Permitted Competitive Business).
10. FEES.
----
10.A. INITIAL FRANCHISE FEE.
---------------------
FRANCHISE OWNER agrees to pay to COMPANY upon execution of this Agreement
an initial franchise fee (the "Initial Franchise Fee") in the amount of Thirty-
Five Thousand Dollars ($35,000.00), less any applicable deposits to be applied
pursuant to the terms of the Development Agreement. The Initial Franchise Fee
(and any deposits applicable thereto under the Development Agreement) shall be
fully earned by COMPANY upon the earlier of payment
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thereof or execution of this Agreement. The Initial Franchise Fee is non-
refundable in whole or in part. The Initial Franchise Fee is paid to compensate
COMPANY for various services provided to FRANCHISE OWNER, including but not
limited to providing initial training, furnishing plans and specifications for
the UNIT and inspecting the UNIT prior to opening, and not as compensation for
the use of the Copyrighted Works, Marks or Trade Dress.
10.B. ROYALTY FEE.
-----------
FRANCHISE OWNER agrees to pay to COMPANY a continuing royalty fee (the
"Royalty Fee") in the amount of five percent (5%) of the UNIT's Royalty Base
Revenue (as defined in Paragraph C. of this Section). The Royalty Fee shall be
payable to COMPANY on or before the twentieth (20th) day of each Accounting
Period on the UNIT's Royalty Base Revenue for the immediately preceding
Accounting Period. The Royalty Fee is paid, in part, to compensate COMPANY for
various services provided to FRANCHISE OWNER after the UNIT opens, including,
but not limited to, quality, service, and cleanliness inspections. COMPANY, upon
written notice to FRANCHISE OWNER shall have the right to change the timing of
FRANCHISE OWNER's payments of Royalty Fees and Marketing Contributions (as
defined below) due under this Agreement, provided that COMPANY shall make such
payments due no more frequently than twice each Accounting Period. FRANCHISE
OWNER shall not subordinate to any other obligation its obligation to pay the
Royalty Fee or any other fee or charge hereunder.
10.C. DEFINITION OF "ROYALTY BASE REVENUE".
-----------------------------------
As used in this Agreement, the term "Royalty Base Revenue" shall mean and
include the gross revenue from all sales of Products and all other products and
services sold or performed by or for FRANCHISE OWNER or the UNIT in, upon, from,
or away from the UNIT, or through or by means of the business conducted pursuant
to this Agreement, whether for cash or credit, including any assumed gross
revenue calculated for the purpose of an insurance claim for lost profits to the
extent such claim is paid by the insurer, but excluding: (1) all sales or
service taxes collected from customers and paid or payable to the appropriate
taxing authority; (2) all customer refunds, valid discounts and coupons, and
credits made by the UNIT (such exclusions shall not include any reductions for
credit card user fees, returned checks or reserves for bad credit or doubtful
accounts); and (3) any portion of employee meals for which FRANCHISE OWNER does
not charge the employee.
10.D. INTEREST ON LATE PAYMENTS.
-------------------------
All Royalty Fees, contributions to the Marketing Fund (as defined below)
and the Local Ad Fund (defined below) (contributions to the Marketing Fund and
Local Ad Fund are collectively referred to herein as "Marketing Contributions"),
amounts due for purchases by FRANCHISE OWNER from COMPANY or its Affiliates, and
other amounts which FRANCHISE OWNER owes to COMPANY or its Affiliates, shall
bear interest after due date at a rate equal to the lesser of: (1) eighteen
percent (18%) per annum for the number of days which such payment is overdue; or
(2) the highest legal rate permitted by applicable law.
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FRANCHISE OWNER acknowledges that this Paragraph shall not constitute COMPANY's
agreement to accept such payments after same are due or a commitment by COMPANY
to extend credit to, or otherwise finance FRANCHISE OWNER's operation of the
UNIT. Further, FRANCHISE OWNER acknowledges that failure to pay all such amounts
when due shall, notwithstanding the provisions of this Paragraph, constitute
grounds for termination of this Agreement, as provided in this Agreement.
10.E. APPLICATION OF PAYMENTS.
-----------------------
Notwithstanding any designation by FRANCHISE OWNER, COMPANY shall have sole
discretion to apply any payments received from FRANCHISE OWNER or any
indebtedness of COMPANY to FRANCHISE OWNER, to any past due indebtedness of
FRANCHISE OWNER for Royalty Fees, Marketing Contributions, purchases from
COMPANY or its Affiliates, interest, or any other indebtedness of FRANCHISE
OWNER to COMPANY or its Affiliates.
10.F. ELECTRONIC FUNDS TRANSFER.
-------------------------
COMPANY reserves the right to require FRANCHISE OWNER to remit Royalty
Fees, Marketing Contributions and any other amounts due to COMPANY hereunder via
electronic funds transfer or other similar means utilizing the Computer System
or otherwise. If COMPANY notifies FRANCHISE OWNER to use such payment method,
FRANCHISE OWNER agrees to comply with procedures specified by COMPANY in this
Paragraph and the Manuals, and/or perform such acts and deliver and execute such
documents as may be necessary to assist in or accomplish payment by the method
described in this Paragraph. On the twentieth (20th) day of each Accounting
Period or at such other times directed by COMPANY in accordance with the terms
of this Agreement, FRANCHISE OWNER shall report to COMPANY by telephone or
electronic means the true and correct Royalty Base Revenue of the UNIT for the
immediately preceding Accounting Period. FRANCHISE OWNER shall give COMPANY
authorization (in the form attached hereto as Exhibit D or such other form as
---------
COMPANY shall accept) for direct debits from FRANCHISE OWNER's business bank
operating account. Under this procedure FRANCHISE OWNER shall authorize COMPANY
to initiate debit entries and/or credit correction entries to a designated
checking or savings account for payments of Royalty Fees, Marketing
Contributions and other amounts payable under this Agreement and any interest
charges due thereon. FRANCHISE OWNER shall make the funds available to COMPANY
for withdrawal by electronic transfer no later than the due date for payment
therefor. The amount actually transferred from FRANCHISE OWNER's account shall
be based on the UNIT's Royalty Base Revenue indicated on the Computer System or
on FRANCHISE OWNER's reports to COMPANY as required hereunder. If FRANCHISE
OWNER has not reported the UNIT's Royalty Base Revenue to COMPANY for any
reporting period as required above, then COMPANY shall be authorized to debit
FRANCHISE OWNER's account in an amount equal to the fees transferred from
FRANCHISE OWNER's account for the last reporting period for which a report of
the UNIT's Royalty Base Revenue was provided to COMPANY as required hereunder.
At COMPANY's option, FRANCHISE OWNER agrees that COMPANY also may base the
amount of such debit on information retrieved from the Computer System. If, at
any time, COMPANY determines that FRANCHISE OWNER has
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<PAGE>
underreported the UNIT's Royalty Base Revenue, or underpaid Royalty Fees,
Marketing Contributions or other amounts due hereunder, COMPANY shall be
authorized to initiate immediately a debit to FRANCHISE OWNER's account in the
appropriate amount in accordance with the foregoing procedure, plus interest as
provided for in this Agreement. Any overpayment shall be credited to FRANCHISE
OWNER's account through a credit effective as of the first reporting date after
FRANCHISE OWNER and COMPANY determine that such credit is due.
11. UNIT IMAGE AND OPERATION.
------------------------
11.A. CONDITION AND APPEARANCE OF THE UNIT.
------------------------------------
FRANCHISE OWNER agrees that:
(1) neither the UNIT nor the Site will be used for any purpose other
than the operation of a BOSTON MARKET Unit in full compliance with this
Agreement or other agreements with COMPANY; and
(2) FRANCHISE OWNER will maintain the condition and appearance of
the UNIT, its equipment, furnishings, fixtures, signs and vehicles in
accordance with the specifications and standards of COMPANY and consistent
with the image of a BOSTON MARKET Unit as a first-class, clean, sanitary,
attractive and efficiently operated food service business; and
(3) FRANCHISE OWNER will perform such maintenance (including,
without limitation, maintenance procedures and routines which COMPANY
prescribes from time to time) with respect to the decor, equipment,
fixtures, furnishings, vehicles, and signs of the UNIT and the Site, as may
be required or directed by COMPANY from time to time to maintain such
condition, appearance, and efficient operation, including, without
limitation:
(a) continuous and thorough cleaning and sanitation of the
interior and exterior of the UNIT; and
(b) thorough repainting and redecorating of the interior and
exterior of the UNIT and/or the Site at reasonable intervals; and
(c) interior and exterior repair of the UNIT and/or the Site;
and
(d) repair or replacement of damaged, worn out or obsolete
furnishings, equipment, vehicles, fixtures and signs, provided that
COMPANY will not require FRANCHISE OWNER to replace any obsolete
equipment unless COMPANY has initiated a program to replace such
equipment as it becomes necessary in other BOSTON MARKET Units
operated within the Market Area to the extent COMPANY has a
contractual right to require such replacements at such BOSTON MARKET
Units; and
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(4) FRANCHISE OWNER will not make any material alterations to the
Site, or to the appearance of the UNIT as originally developed, without
prior approval in writing by COMPANY; and
(5) subject to approval by COMPANY of plans, layouts and designs,
FRANCHISE OWNER will remodel, expand, redecorate, re-equip and refurnish
the Site and the UNIT at reasonable intervals determined by COMPANY to
reflect changes in the operation of BOSTON MARKET Units prescribed by
COMPANY and required of new BOSTON MARKET Unit franchise owners, provided
that:
(a) COMPANY has initiated a program to begin such changes with
respect to other BOSTON MARKET Unit operated within the Market Area,
to the extent COMPANY has the contractual right to require any such
BOSTON MARKET Units to do so; and
(b) FRANCHISE OWNER shall have a reasonable time period (not
less than five (5) years) to amortize the costs of such improvements,
or equipment, vehicles, fixtures and furnishings;
it being understood and agreed by FRANCHISE OWNER that the provision of
Delivery Service from the UNIT and/or Catering Service from a Catering
Facility, if authorized or required by COMPANY, may require FRANCHISE OWNER
to incur additional costs to obtain equipment, vehicles, fixtures,
furnishings and furniture and improve the UNIT to provide such services in
accordance with COMPANY's standards and specifications therefor; and
(6) FRANCHISE OWNER will place or display at the UNIT (interior and
exterior) only such signs, emblems, lettering, logos, and display and
advertising materials that are from time to time approved by COMPANY.
In addition to COMPANY's rights to terminate this Agreement as set forth
herein, if FRANCHISE OWNER does not maintain the condition and appearance of the
UNIT as herein required, COMPANY may, upon not less than ten (10) days' written
notice (or, in cases of health or sanitation hazards or other public
endangerment, immediately on oral or written notice) to FRANCHISE OWNER:
(i) arrange for the necessary cleaning or sanitation, repair,
remodeling, upgrading, painting or decorating; or
(ii) replace the necessary fixtures, furnishings, equipment,
vehicles, or signs. FRANCHISE OWNER shall pay the entire cost thereof on or
before the fifth (5th) day following the receipt of a bill for such work
from COMPANY.
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11.B. UNIT MENU AND SERVICES.
----------------------
FRANCHISE OWNER agrees that the UNIT shall (1) offer for sale all Products
(and no other products) and (2) provide only the following services (and no
other services) (a) the carry-out service and on-premises dining that COMPANY
authorizes and requires, (b) the Delivery Service that COMPANY, in its sole
discretion, may authorize and/or require from time to time for the UNIT pursuant
to a Delivery Rider and (c) the Catering Service that COMPANY in its sole
discretion may authorize FRANCHISE OWNER to provide from the UNIT (or a Catering
Facility) pursuant to a Catering Rider. FRANCHISE OWNER agrees that the UNIT
shall not offer for sale or sell any products or services at or from the UNIT
which have not been approved in writing by COMPANY or use the Site or UNIT for
any purpose other than the operation of a BOSTON MARKET Unit. FRANCHISE OWNER
shall be required to meet COMPANY's specifications, standards and procedures for
carry-out service and on-premises dining and Delivery Service, if applicable,
which COMPANY prescribes from time to time in the Manuals or otherwise in
writing. FRANCHISE OWNER acknowledges that not all BOSTON MARKET Units shall be
authorized by COMPANY to provide Catering Service and/or Delivery Service.
FRANCHISE OWNER agrees that the UNIT shall not provide any such services at,
from or away from the Site until COMPANY, in its sole discretion, has approved
the UNIT (or a Catering Facility) in writing for the conduct of such services
and COMPANY and FRANCHISE OWNER have executed the applicable Rider to this
Agreement. FRANCHISE OWNER also acknowledges and agrees that the packaging of
Products for purposes of carry-out service, on-premises dining, Delivery Service
and Catering Service is important to the image of the BOSTON MARKET System, and
that therefore FRANCHISE OWNER shall not sell any Products that have not been
packaged in accordance with COMPANY's specifications, standards and procedures
prescribed in the Manuals or otherwise in writing. FRANCHISE OWNER also
acknowledges and agrees that if COMPANY requires the UNIT to offer Delivery
Service as provided herein, or requires the UNIT and other BOSTON MARKET Units
in the Market Area (or, in COMPANY's sole discretion, the trade area of the UNIT
as determined by COMPANY in its reasonable discretion) to offer new or
substitute products not currently offered at BOSTON MARKET Units in the Market
Area (or such trade area), FRANCHISE OWNER agrees to offer such services and/or
products in compliance with COMPANY's specifications, standards and procedures
prescribed in the Manuals or otherwise in writing and to diligently pursue
obtaining any permits and take such actions (including, without limitation,
constructing improvements and acquiring fixtures, furnishings, equipment,
supplies and materials) required to offer such products and/or services.
FRANCHISE OWNER acknowledges and understands that such modifications to the
services and/or products to be offered by the UNIT may require FRANCHISE OWNER
to incur additional costs and expenses to operate the UNIT, including, without
limitation, the purchase and/or lease of additional or substitute furnishings,
furniture, fixtures, vehicles or equipment for Catering Service and/or Delivery
Service, and FRANCHISE OWNER agrees to incur such expenses in connection
therewith.
FRANCHISE OWNER acknowledges that COMPANY may conduct quality, service,
cleanliness, and other inspections of the UNIT from time to time to determine
compliance with this Agreement and the standards and specifications applied by
COMPANY from time to time
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and that satisfactory performance in such inspections is required hereunder.
COMPANY also may designate an independent evaluation service to conduct a
"mystery shopper" quality control and evaluation program with respect to
COMPANY-owned and franchised BOSTON MARKET Units. FRANCHISE OWNER agrees that
the UNIT will participate in such mystery shopper program, as prescribed and
required by COMPANY and as may be more fully described in the Manuals or in
writing by COMPANY, provided that COMPANY-owned and franchised BOSTON MARKET
Units also will participate in such program to the extent COMPANY has the right
to require such participation. FRANCHISE OWNER agrees to timely pay the then-
current charges imposed by such evaluation service for the UNIT's participation
in such program.
11.C. APPROVED PRODUCTS, DISTRIBUTORS AND SUPPLIERS.
---------------------------------------------
The reputation and goodwill of all BOSTON MARKET Units are based upon, and
can only be maintained by, the sale of distinctive, high-quality Products, and
the presentation, packaging and service of Products in an efficient and
appealing manner. COMPANY has developed and shall continue to develop certain
proprietary food products which will be prepared by or for COMPANY according to
COMPANY's proprietary recipes and formulas. COMPANY also has developed and shall
continue to develop standards and specifications for chicken and other food
products, ingredients, seasonings, spices, sauces, mixes, marinades, beverages,
materials and supplies incorporated in or used in the preparation, cooking,
serving, packaging, catering and delivery of prepared food products authorized
for sale at or from BOSTON MARKET Units.
COMPANY has approved and shall review and continue to approve suppliers and
distributors of the foregoing products, supplies and materials that meet its
standards and requirements including, without limitation, standards and
requirements relating to quality, quantity and portions, prices, volume
capability, frequency of delivery, distribution methods and locations, standards
of service, including prompt attention to complaints, consistency, reliability,
financial capability, labor and customer relations and other criteria.
FRANCHISE OWNER agrees that the UNIT shall:
(1) purchase those Products which are COMPANY's private label food
products, materials, supplies and proprietary food products developed by or
for COMPANY or its Affiliates whether or not pursuant to a special recipe
or formula or bearing the Marks (collectively "Proprietary Items") only
from COMPANY or designees required and licensed by COMPANY to manufacture,
prepare, distribute and/or sell such products;
(2) purchase only from distributors and suppliers approved or
required by COMPANY all other goods and items authorized to be sold in the
Unit, and other materials and supplies used in the preparation, baking,
cooking, serving, packaging, delivery and catering of Products and
equipment, menus, forms, paper and plastic products, packaging or other
materials (collectively "Supplies and Materials"); and
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(3) purchase only from distributors and suppliers approved or
required by COMPANY all Products, materials, supplies and food products
other than Proprietary Items ("Non-Proprietary Items").
COMPANY may, in its sole discretion, designate which Products constitute
Proprietary Items, and which of such Proprietary Items: (a) are required to be
purchased from COMPANY or its designated suppliers; or (b) may be produced
and/or prepared at the UNIT. COMPANY may from time to time modify the list of
approved or required suppliers and distributors, and may designate itself or an
Affiliate as a required manufacturer, supplier and/or distributor of certain
equipment, products, materials, supplies or other items. FRANCHISE OWNER shall
not, after receipt in writing of such modification, reorder any item from any
supplier or distributor that is no longer approved. COMPANY may approve or
require a single distributor or supplier for any products, materials or supplies
and may approve or require a distributor or supplier only as to certain
products, materials and supplies, and such approval may be temporary pending a
further evaluation of such distributor or supplier by COMPANY. COMPANY may
concentrate purchases with one or more distributors or suppliers to obtain lower
prices and/or advertising support and/or services for the benefit of the BOSTON
MARKET System and/or BOSTON MARKET Units. COMPANY may establish COMPANY or
Affiliate-owned and operated food commissaries and distribution facilities which
COMPANY may designate as an approved or required distributor or supplier.
FRANCHISE OWNER shall notify COMPANY and submit to COMPANY such
information, specifications and samples as COMPANY requests if the FRANCHISE
OWNER proposes to purchase any goods, food products, ingredients, seasonings,
spices, sauces, mixes, marinades, beverages, menus, equipment, forms, paper or
plastic products, packaging or other materials or utensils from a distributor or
supplier whom COMPANY has disapproved or not previously approved. COMPANY shall
use its reasonable best efforts to notify FRANCHISE OWNER within one hundred
twenty (120) days after receipt of all requested information and materials
whether FRANCHISE OWNER is authorized to purchase such products from such
distributor or supplier. If FRANCHISE OWNER fails to receive a notice of
approval or disapproval within such one hundred twenty (120) day period,
FRANCHISE OWNER may purchase such products from such distributor or supplier,
provided that COMPANY's failure to give its approval or disapproval will not be
deemed to constitute COMPANY's approval thereof. COMPANY may require FRANCHISE
OWNER to reimburse COMPANY for its reasonable costs incurred in connection with
the evaluation, inspection and supervision of such distributor or supplier.
FRANCHISE OWNER shall at all times maintain an adequate inventory of
approved food and paper products, beverages, ingredients and other products
sufficient in quality and variety to realize the full potential of the UNIT.
FRANCHISE OWNER acknowledges and agrees that COMPANY may, in its sole
discretion, collect and retain all allowances, benefits, credits, monies,
payments or rebates (collectively "Promotional Allowances") offered to FRANCHISE
OWNER or COMPANY or its Affiliates by manufacturers, suppliers and distributors
for promotional or advertising purposes based upon FRANCHISE OWNER's purchases
of Proprietary Items, Supplies and Materials and
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Non-Proprietary Items. FRANCHISE OWNER assigns to COMPANY or its designee all of
FRANCHISE OWNER's right, title and interest in and to any and all such
Promotional Allowances and authorizes COMPANY or its designee to collect any
such Promotional Allowances for remission to: (a) the Marketing Fund (defined
below) to the extent based on FRANCHISE OWNER's purchase of Non-Proprietary
Items and Supplies and Materials, except as provided in clause (b) following;
and (b) the general operating funds of COMPANY to the extent based on FRANCHISE
OWNER's purchases of Proprietary Items, regardless of where purchased, as well
as Non-Proprietary Items and Supplies and Materials purchased from COMPANY or
its Affiliates. FRANCHISE OWNER acknowledges and agrees that under no
circumstances will COMPANY or its Affiliates be required to contribute to the
Marketing Fund any revenue made or collected by COMPANY or its Affiliates from
sales to or purchases by FRANCHISE OWNER of any goods or services.
11.D. SPECIFICATIONS, STANDARDS AND PROCEDURES.
----------------------------------------
FRANCHISE OWNER acknowledges that the operation of the UNIT in strict
compliance with COMPANY's high standards is important to COMPANY and other
BOSTON MARKET Units and FRANCHISE OWNER agrees to maintain such high standards
in the operation of the UNIT. The UNIT and all Products used and offered for
sale at the UNIT shall at all times be maintained in a safe and sanitary
condition. FRANCHISE OWNER agrees to comply strictly with all of COMPANY's
mandatory specifications, standards and operating procedures relating to the
appearance, function, cleanliness, days and hours of operation (days and hours
of operation may vary somewhat among BOSTON MARKET Units based on COMPANY's
reasonable judgment of the requirements of the UNIT's trade area and whether
COMPANY has approved any special services to be offered at or from a site), and
operation of a BOSTON MARKET Unit, including, but not limited to:
(1) type, brand, quality, taste, weight, dimensions, ingredients,
uniformity, manner of preparation, preservation and sale of all food
products and beverages sold by the UNIT and all other products used in the
packaging and sale thereof, including, without limitation, those pertaining
to poultry items; and
(2) sales and marketing procedures and customer service; and
(3) advertising and promotional programs; and
(4) layout, decor and color scheme of the UNIT; and
(5) recruitment, selection, training, appearance and dress of
employees, including, without limitation, use of COMPANY's employee
selection and training materials; and
(6) safety, maintenance, appearance, cleanliness, sanitation,
standards of service and operation of the UNIT; and
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(7) submission of requests for approval of brands of food and
packaging products, supplies and suppliers; and
(8) use and illumination of signs, posters, displays, standard
formats and similar items; and
(9) identification of FRANCHISE OWNER as the owner of the UNIT; and
(10) types of fixtures, furnishings, equipment, computer hardware and
software, vehicles, and signs; and
(11) carry-out dining, on-premises dining and Delivery Service (if
authorized or required by COMPANY) and Catering Service and Special
Distribution Arrangements (if authorized by COMPANY and agreed to by
FRANCHISE OWNER); and
(12) days and hours of operation; and
(13) required and approved menu items; and
(14) general staffing levels for the UNIT and number, type and
qualifications of UNIT personnel; and
(15) participation in market research and test programs required or
approved by COMPANY concerning various aspects of the BOSTON MARKET System,
including, without limitation, procedures, systems, techniques,
furnishings, fixtures, equipment, ingredients, signs, labels, trade dress,
logos, packaging, supplies, marketing materials and strategies,
merchandising and new menu items and services. FRANCHISE OWNER agrees, if
requested by COMPANY, to participate in COMPANY's customer surveys and
market research programs.
FRANCHISE OWNER acknowledges and agrees that all mandatory specifications,
standards and operating and inspection procedures prescribed from time to time
by COMPANY in the Manuals or otherwise communicated to FRANCHISE OWNER in
writing, shall constitute binding obligations on the part of FRANCHISE OWNER as
if fully set forth herein, and any failure by FRANCHISE OWNER to adhere to such
mandatory specifications, standards and operating and inspection procedures or
to pass COMPANY's periodic quality control inspections shall constitute grounds
for termination of this Agreement by COMPANY, as provided for herein. All
references herein to this Agreement shall include all such mandatory
specifications, standards, and operating procedures.
11.E. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
------------------------------------------------
FRANCHISE OWNER shall secure and maintain in force in its name all required
licenses, permits, and certificates relating to the conduct of its business
pursuant to this Agreement. FRANCHISE OWNER shall operate the UNIT in full
compliance with all
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applicable laws, ordinances and regulations, including, without limitation, laws
and governmental regulations relating to the preparation, purchase and handling
of food products, provision of catering and delivery service, occupational
hazards, health, safety and sanitation, worker's compensation insurance,
unemployment insurance, and withholding and payment of all taxes. All
advertising by FRANCHISE OWNER shall be approved by COMPANY, completely factual,
in good taste in the judgment of COMPANY, and shall conform to high standards of
ethical advertising. FRANCHISE OWNER shall in all dealings with its customers,
suppliers, COMPANY, and public officials adhere to high standards of honesty,
integrity, fair dealing and ethical conduct. FRANCHISE OWNER agrees to refrain
from any business or advertising practice which may be injurious to the business
of COMPANY and the goodwill associated with the Marks and other BOSTON MARKET
Units. FRANCHISE OWNER shall notify COMPANY in writing:
(1) within three (3) days after the commencement of any action,
suit, proceeding or issuance of any order, writ, injunction, award, or
decree of any court, agency, or other governmental instrumentality, which
may adversely affect the operation or financial condition of FRANCHISE
OWNER or the UNIT; or
(2) immediately of the receipt of any notice of violation of any
law, ordinance or regulation relating to health, sanitation or the
operation of the UNIT.
11.F. MANAGEMENT AND PERSONNEL OF THE UNIT.
------------------------------------
FRANCHISE OWNER (or the Principal Owner(s) of FRANCHISE OWNER listed as
supervising Owners in Exhibit E hereto) shall supervise and oversee the
---------
operation of the UNIT. FRANCHISE OWNER shall employ and maintain at all times
during the term of this Agreement at least one (1) Unit Manager and one (1)
Additional Manager at the UNIT. The Unit Manager shall be the full-time manager
of the UNIT and the Additional Manager shall perform on a full-time basis such
other operations for FRANCHISE OWNER as COMPANY may reasonably specify from time
to time and both must successfully complete to COMPANY's satisfaction a COMPANY
certified initial management training program for the operation of the UNIT.
FRANCHISE OWNER also shall employ the number of assistant managers required for
adequate staffing of the UNIT, and shall at all times keep COMPANY advised of
the identities of the Unit Manager, Additional Manager and assistant managers.
COMPANY shall have the right to deal with the Unit Manager, Additional Manager
and assistant managers on matters pertaining to day-to-day operations of, and
reporting requirements for, the UNIT. The UNIT at all times shall be under the
direct, on-site supervision of the Unit Manager, Additional Manager or an
assistant manager who has completed a training program conducted by COMPANY or
DEVELOPER (if applicable) and who has been certified under the terms of the
Development Agreement. FRANCHISE OWNER shall provide the Unit Manager with a
compensation program reasonably acceptable to COMPANY designed to provide an
incentive to the Unit Manager to use diligent efforts to cause the UNIT to be
operated in a profitable manner.
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FRANCHISE OWNER shall hire all employees of the UNIT and shall be
exclusively responsible for the terms of their employment and compensation and
for the proper training of such employees in the operation of the UNIT.
11.G. INSURANCE.
---------
During the term of this Agreement, FRANCHISE OWNER shall maintain in force,
under policies of insurance issued by insurers rated "A-" or better by Alfred M.
Best & Company, Inc. and approved by COMPANY:
(1) commercial general liability insurance (including, but not
limited to, coverage for motor vehicles used in the operation of the UNIT,
whether or not owned by FRANCHISE OWNER), against claims for bodily and
personal injury, death and property damage caused by or occurring in
conjunction with the operation of the UNIT or otherwise in conjunction with
the conduct of business by FRANCHISE OWNER pursuant to this Agreement,
under one or more policies of insurance containing minimum liability
coverage prescribed by COMPANY from time to time; and
(2) all risk property and casualty insurance for the replacement
value of the UNIT and its contents (including leasehold improvements,
furnishings, fixtures, equipment, signs, inventory, supplies, and
materials).
FRANCHISE OWNER shall also maintain such insurance as is necessary to comply
with all legal requirements concerning insurance coverage (including, without
limitation, worker's compensation requirements), including, without limitation,
coverage for persons attending COMPANY training programs on behalf of FRANCHISE
OWNER. COMPANY may periodically increase the amounts of coverage required under
such insurance policies and require different or additional kinds of insurance
at any time, including excess liability insurance, to reflect inflation,
identification of new risks, changes in law or standards of liability, higher
damage awards, or other relevant changes in circumstances. Each insurance
policy shall name COMPANY as an additional named insured, shall contain a waiver
of all subrogation rights against COMPANY, its Affiliates, and their successors
and assigns, and shall provide for thirty (30) days' prior written notice to
COMPANY of any material modification, cancellation, or expiration of such
policy. The maintenance of sufficient insurance coverage shall be the
responsibility of FRANCHISE OWNER.
Upon execution of this Agreement, FRANCHISE OWNER shall provide COMPANY
with evidence of the insurance required under this Agreement. Thereafter, prior
to the expiration of the term of each insurance policy, FRANCHISE OWNER shall
furnish COMPANY with a copy of each renewal or replacement insurance policy to
be maintained by FRANCHISE OWNER for the immediately following term and evidence
of the payment of the premium therefor. If FRANCHISE OWNER fails or refuses to
maintain required insurance coverage, or to furnish satisfactory evidence
thereof and the payment of the premiums therefor, COMPANY, at its option and in
addition to its other rights and remedies under this Agreement, may obtain such
insurance coverage on behalf of FRANCHISE OWNER and FRANCHISE
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OWNER shall fully cooperate with COMPANY in its effort to obtain such insurance
policies, promptly execute all forms or instruments required to obtain or
maintain any such insurance, allow any inspections of the UNIT or vehicles which
are required to obtain or maintain such insurance, and pay to COMPANY, on
demand, any costs and premiums incurred by COMPANY.
FRANCHISE OWNER's obligations to maintain insurance coverage as herein
described shall not be affected in any manner by reason of any separate
insurance maintained by COMPANY, nor shall the maintenance of such insurance
relieve FRANCHISE OWNER of any indemnification obligations under this Agreement.
11.H. CREDIT CARDS AND OTHER METHODS OF PAYMENT.
-----------------------------------------
FRANCHISE OWNER shall at all times have arrangements in existence with a
full range of credit and debit card issuers or sponsors, check verification
services and electronic fund transfer systems as COMPANY designates in its sole
discretion from time to time in order that the UNIT may accept customers' credit
and debit cards, checks and other methods of payment. FRANCHISE OWNER shall use
only such methods of payment which COMPANY authorizes or approves.
12. ADVERTISING.
-----------
12.A. MARKETING FUND.
--------------
Recognizing the value of advertising and marketing to the goodwill and
public image of BOSTON MARKET Units, COMPANY has instituted and FRANCHISE OWNER
agrees that COMPANY or its designee shall maintain and administer a national
marketing fund (the "Marketing Fund") for such advertising, media placement,
marketing and public relations programs, research and related activities as
COMPANY, in its sole discretion, may deem necessary or appropriate to promote
BOSTON MARKET Units. FRANCHISE OWNER shall contribute to the Marketing Fund two
percent (2%) of the UNIT's Royalty Base Revenue, payable to COMPANY by separate
check or transfer at the same time and in the same manner as the Royalty Fees
due hereunder. BOSTON MARKET Units which are owned by COMPANY or its
Affiliates, to the extent COMPANY has the right to require such Affiliates to do
so, shall contribute to the Marketing Fund on the same basis as FRANCHISE OWNER.
COMPANY shall direct all advertising, media placement, marketing and public
relations programs and activities financed by the Marketing Fund, with sole
discretion over the strategic direction, creative concepts, materials and
endorsements used therein, and the geographic, market, and media placement and
allocation thereof. FRANCHISE OWNER agrees that the Marketing Fund may be used
to pay various costs and expenses, including, by way of example and without
limitation: preparing and producing video, audio and written advertising
materials; interest on borrowed funds; sponsorship of sporting, charitable or
similar events; reasonable salaries and expenses of employees of COMPANY or its
Affiliates working for or on behalf of the Marketing Fund or on advertising,
marketing, public relations materials, programs, or
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activities or promotions for the benefit of the Marketing Fund and
administrative costs and overhead of COMPANY or its Affiliates incurred in
activities reasonably related to the administration of the Marketing Fund;
administering advertising programs, including, without limitation, purchasing
direct mail and other media advertising and employing advertising agencies to
assist therewith; and supporting public relations, market research and other
advertising, promotional and marketing activities, including testing and test
marketing programs, fulfillment charges, and development, implementation and
testing of Trade Dress and design prototypes. FRANCHISE OWNER agrees to
participate in all advertising, marketing, promotions, research and public
relations programs instituted by the Marketing Fund. The Marketing Fund shall
furnish FRANCHISE OWNER with reasonable quantities of marketing, advertising
and promotional formats and sample materials at cost.
The Marketing Fund shall be accounted for separately, but shall not be
required to be segregated, from the other funds of COMPANY and shall not be used
to defray any of COMPANY's general operating expenses, except for such
reasonable salaries, administrative costs and overhead as COMPANY may incur in
activities reasonably related to the administration and activities of the
Marketing Fund and creation or conduct of its marketing programs including,
without limitation, conducting market research, preparing advertising and
marketing materials and collecting and accounting for contributions to the
Marketing Fund. COMPANY may spend in a fiscal year an amount greater or less
than the aggregate contributions of all BOSTON MARKET Units to the Marketing
Fund in that year. The Marketing Fund may borrow from COMPANY or other lenders
at standard commercial interest rates to cover deficits of the Marketing Fund or
cause the Marketing Fund to invest any surplus for future use by the Marketing
Fund. All interest earned on monies contributed to the Marketing Fund will be
used to pay costs of the Marketing Fund before other assets of the Marketing
Fund are expended. A summary statement of monies collected and costs incurred by
the Marketing Fund for COMPANY's immediately preceding fiscal year shall be made
available to FRANCHISE OWNER upon FRANCHISE OWNER's written request. COMPANY
will have the right to cause the Marketing Fund to be incorporated or operated
through an entity separate from COMPANY at such time as COMPANY deems
appropriate, and such successor entity shall have all rights and duties of
COMPANY pursuant to this Paragraph 12.A.
Any Promotional Allowances collected by COMPANY for remission to the
Marketing Fund based on FRANCHISE OWNER's purchases of Other Products and
Materials from vendors other than COMPANY or its Affiliates, as more fully
described above in Paragraph 11.C. shall not be credited toward FRANCHISE
OWNER's required contribution to the Marketing Fund. Notwithstanding anything
in this Agreement to the contrary, under no circumstances will COMPANY or its
Affiliates be required to contribute to the Marketing Fund any profits made or
collected by COMPANY or its Affiliates from sales to or purchases by FRANCHISE
OWNER of any goods or services.
FRANCHISE OWNER understands and acknowledges that the Marketing Fund is
intended to maximize recognition of the Marks and patronage of BOSTON MARKET
Units generally. Although COMPANY will endeavor to utilize the Marketing Fund
to develop advertising and marketing materials and programs, and to place
advertising in order to benefit
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all BOSTON MARKET Units, COMPANY undertakes no obligation to ensure that
expenditures by the Marketing Fund in or affecting any geographic area are
proportionate or equivalent to the contributions to the Marketing Fund by BOSTON
MARKET Units operating in that geographic area or that any BOSTON MARKET Unit
will benefit directly or in proportion to its contribution to the Marketing Fund
from the development of advertising and marketing materials or the placement of
advertising. FRANCHISE OWNER acknowledges that its failure to derive any such
benefit will not serve as a basis for a reduction or elimination of its
obligation to contribute to the Marketing Fund. FRANCHISE OWNER further
acknowledges and agrees that the failure of any other franchise owner to make
the appropriate amount of contributions to the Marketing Fund shall not in any
way release FRANCHISE OWNER from or reduce FRANCHISE OWNER's obligations under
this Paragraph 12.A., such obligations being separate and independent
obligations of FRANCHISE OWNER under this Agreement. Except as expressly
provided in this Paragraph 12.A., COMPANY assumes no direct or indirect
liability or obligation to FRANCHISE OWNER with respect to the maintenance,
direction, or administration of the Marketing Fund.
COMPANY reserves the right, in its sole discretion, to suspend
contributions to and operations of the Marketing Fund for such periods that it
determines to be appropriate and to terminate the Marketing Fund upon written
notice to FRANCHISE OWNER. All unspent monies on the date of termination shall
be distributed to COMPANY and franchise owners in proportion to their respective
contributions to the Marketing Fund during the preceding twelve (12) month
period. COMPANY has the right to reinstate the Marketing Fund upon the same
terms and conditions set forth herein upon thirty (30) days' prior written
notice to FRANCHISE OWNER.
12.B. LOCAL ADVERTISING FUND.
----------------------
FRANCHISE OWNER agrees that, unless otherwise notified by COMPANY, in its
sole discretion, FRANCHISE OWNER shall participate in a local advertising fund
(a "Local Ad Fund") comprised of the BOSTON MARKET Unit(s) (including those
owned by COMPANY or its Affiliates, or other franchise owners, to the extent
COMPANY has the right to require any such Affiliate or franchise owner to do so)
located in the same Market Area (subject to the rights of other BOSTON CHICKEN
franchise owners under their franchise agreements with COMPANY). COMPANY shall
establish, maintain and administer the Local Ad Fund for such advertising, media
placement, marketing and public relations programs and related activities as
COMPANY, in its sole discretion, may deem necessary or appropriate to promote
BOSTON MARKET Units in the Market Area. FRANCHISE OWNER shall contribute to
such Local Ad Fund three and one-half percent (3.5%) of the UNIT's Royalty Base
Revenue for each Accounting Period in which it participates in the Local Ad
Fund.
COMPANY shall have the right to require FRANCHISE OWNER from time to time
to increase FRANCHISE OWNER's Local Ad Fund contributions, provided that such
required Local Ad Fund contributions shall not exceed more than 4.25% prior to
1998, 4.5% prior to 1999, 4.75% prior to 2000, and 5% during any remaining term
of this Agreement. Amounts paid to such Local Ad Fund by FRANCHISE OWNER shall
be payable to COMPANY by
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separate check or transfer at the same time and in the same manner as the
Royalty Fees and Marketing Contributions due under this Agreement. BOSTON MARKET
Units located in the same Market Area which are owned by COMPANY or its
Affiliates, to the extent COMPANY has the right to require such Affiliates to do
so, shall contribute to such Local Ad Fund on the same basis as franchise owners
who are members of such Local Ad Fund. Notwithstanding the foregoing, FRANCHISE
OWNER acknowledges and agrees that it may be required from time to time to
contribute to the Local Ad Fund an amount greater than that provided for herein
to enable DEVELOPER to commence and continue Required Television Advertising (as
defined in the Development Agreement) as required pursuant to the Development
Agreement.
COMPANY or its designee shall direct all advertising, media placement,
marketing and public relations programs and activities of the Local Ad Fund,
with sole discretion over the strategic direction, creative concepts, materials
and endorsements used therein, and the geographic, market, and media placement
and allocation thereof within the Market Area. FRANCHISE OWNER may consult with
and advise COMPANY concerning activities of the Local Ad Fund. FRANCHISE OWNER
agrees that the Local Ad Fund may be used to pay the costs of: preparing,
adapting and producing video, audio and written advertising materials; interest
on borrowed funds; sponsorship of sporting, charitable or similar events;
reasonable salaries and expenses of employees of COMPANY or its Affiliates
working for or on behalf of the Local Ad Fund or on advertising, marketing,
public relations materials, programs, or activities or promotions for the
benefit of the Local Ad Fund and administrative costs and overhead of COMPANY or
its Affiliates incurred in activities reasonably related to the administration
or activities of the Local Ad Fund; administering advertising programs,
including, without limitation, purchasing direct mail and other media
advertising and employing advertising agencies to assist therewith; and
supporting public relations, market research and other advertising, promotional
and marketing activities, including testing and test marketing, fulfillment
charges and development, implementation, and testing of Trade Dress and design
prototypes. FRANCHISE OWNER agrees to participate in all advertising,
promotional events and public relations programs instituted by the Local Ad
Fund.
The Local Ad Fund shall be accounted for separately, but shall not be
required to be segregated, from the other funds of COMPANY and shall not be used
to defray any of COMPANY's general operating expenses, except for such
reasonable salaries, administrative costs and overhead as COMPANY may incur in
activities reasonably related to the administration or activities of the Local
Ad Fund and creation or conduct of its marketing programs (including, without
limitation, conducting marketing research, preparing advertising and marketing
materials and collecting and accounting for contributions to the Local Ad Fund).
COMPANY may spend in any fiscal year an amount greater or less than the
aggregate contributions of all BOSTON MARKET Units to the Local Ad Fund in that
year. The Local Ad Fund may borrow from COMPANY or other lenders at standard
commercial interest rates to cover deficits of the Local Ad Fund or cause the
Local Ad Fund to invest any surplus for its future use. All interest earned on
monies contributed to the Local Ad Fund will be used to pay costs of the Local
Ad Fund before other assets are expended. A summary statement of monies
collected and costs incurred by the Local Ad Fund for COMPANY's immediately
preceding fiscal year shall be made available to FRANCHISE OWNER upon FRANCHISE
OWNER's written request. COMPANY
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will have the right to cause the Local Ad Fund to be incorporated or operated
through an entity separate from COMPANY at such time as COMPANY deems
appropriate, and such successor entity shall have all rights and duties of
COMPANY pursuant to this Paragraph 12.B.
FRANCHISE OWNER understands and acknowledges that the Local Ad Fund is
intended to maximize recognition of the Marks and patronage of BOSTON MARKET
Units in the Market Area. Although COMPANY will endeavor to utilize the Local
Ad Fund to develop advertising and marketing materials and programs, and to
place advertising in order to benefit all BOSTON MARKET Units in the Market
Area, COMPANY undertakes no obligation to ensure that any BOSTON MARKET Unit in
the Market Area will benefit directly or in proportion to its contribution to
the Local Ad Fund from the development of advertising and marketing materials or
the placement of advertising by the Local Ad Fund. FRANCHISE OWNER acknowledges
that its failure to derive any such benefit will not serve as a basis for a
reduction or elimination of its obligation to contribute to the Local Ad Fund.
FRANCHISE OWNER further acknowledges and agrees that the failure of any other
franchise owner to make the appropriate amount of contributions to the Local Ad
Fund shall not in any way release FRANCHISE OWNER from or reduce FRANCHISE
OWNER's obligations under this Paragraph 12.B., such obligations being separate
and independent obligations of FRANCHISE OWNER under this Agreement. Except as
expressly provided in this Para graph 12.B., COMPANY assumes no direct or
indirect liability or obligation to FRANCHISE OWNER with respect to the
maintenance, direction, or administration of the Local Ad Fund.
COMPANY reserves the right, in its sole discretion, to suspend
contributions to and operations of the Local Ad Fund for such periods that it
determines to be appropriate and to terminate the Local Ad Fund upon written
notice to FRANCHISE OWNER. All unspent monies on the date of termination shall
be distributed to COMPANY and franchise owners in proportion to their respective
contributions to the Local Ad Fund during the preceding twelve (12) month
period. COMPANY has the right to reinstate the Local Ad Fund upon the same
terms and conditions set forth herein upon thirty (30) days' prior written
notice to FRANCHISE OWNER. In the event that COMPANY terminates or suspends
operation of the Local Ad Fund, FRANCHISE OWNER shall spend as Local
Expenditures (defined below) at least such percentage of the Royalty Base
Revenue of the UNIT as shall be equal to the percentage which could have been
required to be paid to the Local Ad Fund under this Section 12.B.
12.C. ADVERTISING BY FRANCHISE OWNER.
------------------------------
During each Accounting Period during the term of this Agreement in which
the UNIT does not participate in a Local Ad Fund during such Accounting Period,
FRANCHISE OWNER shall conduct local advertising and promotion for the UNIT.
Expenditures for such required advertising and promotion are referred to herein
as "Local Expenditures". FRANCHISE OWNER shall make Local Expenditures during
each Accounting Period during which the UNIT does not participate in the Local
Ad Fund of at least such percentage of the UNIT's Royalty Base Revenue as shall
be equal to the percentage which could have been required to be paid to the
Local Ad Fund under Section 12.B, above for such Accounting Period. The
following shall not count as Local Expenditures: (1) moneys spent on classified
telephone directory listings and
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advertisements, advertising and promotional expenses required under the lease
for the UNIT and discounts and the redemption of coupons; and (2) the cost of
goods or services supplied without charge. If required by COMPANY, within
fifteen (15) days after the end of each Accounting Period during the term of
this Agreement, FRANCHISE OWNER shall submit, in form prescribed by COMPANY,
verification of its Local Expenditures for the previous Accounting Period.
Amounts spent for local advertising and promotion of the UNIT shall not be
credited toward FRANCHISE OWNER's Local Expenditures under this Agreement to the
extent that FRANCHISE OWNER is reimbursed for such expenditures by, or such
expenditures are made by, a supplier of the UNIT.
Prior to their use by FRANCHISE OWNER, samples of all advertising and
promotional materials not prepared or previously approved by COMPANY shall be
submitted to COMPANY for approval, in the form and manner prescribed by COMPANY
from time to time. If written approval is not granted by COMPANY within fifteen
(15) days from the date of receipt by COMPANY of such materials, COMPANY shall
be deemed to have disapproved the submitted materials. FRANCHISE OWNER shall
not use any advertising or promotional materials that COMPANY has not approved,
has disapproved or that do not include the copyright registration notices and
trademark registration notices designated by COMPANY. COMPANY, in its sole
discretion, may disapprove on a prospective basis materials that COMPANY had
previously approved.
13. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.
--------------------------------------------
FRANCHISE OWNER shall install and use at the UNIT the Computer System in
such form as is specified by COMPANY from time to time at the UNIT and transmit
to or permit the electronic collection of information by COMPANY through use of
the Computer System. FRANCHISE OWNER, at its own expense, shall establish and
maintain at the UNIT, (i) a telephone modem and dedicated line that COMPANY may
use to access the Computer System, (ii) full, complete and accurate records and
reports and, (iii) if required by COMPANY, computer diskettes and databases in
the form specified by COMPANY pertaining to the operation of the UNIT,
including, but not limited to, site reports on the UNIT prepared by FRANCHISE
OWNER and submitted to COMPANY, the Site Agreement (defined in the Development
Agreement), supervisory reports relating to UNIT operations, a bookkeeping,
accounting, recordkeeping and records retention system conforming to the
requirements prescribed by COMPANY from time to time (including, without
limitation, requirements for a general ledger system which utilizes the standard
chart of accounts prescribed by COMPANY from time to time and for timely entry
of information into data bases of the Computer System and periodic printouts of
reports generated from the Computer System), information relating to employee
turnover and such other records, reports and information as COMPANY shall
prescribe from time to time. Each transaction of the UNIT shall be processed on
the Computer System in the manner prescribed by COMPANY from time to time.
COMPANY shall have, at all times, the right to access and retrieve information
from and data processed on the Computer System with respect to the UNIT, and
FRANCHISE OWNER shall take such action as may be necessary to provide such
access to COMPANY.
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With respect to the operation and financial condition of the UNIT,
FRANCHISE OWNER shall adopt, until otherwise specified by COMPANY, a fiscal year
consisting of thirteen (13) four-week accounting periods which coincides with
COMPANY's then current fiscal year, as specified by COMPANY and furnish to
COMPANY in the form prescribed by COMPANY from time to time, including, without
limitation, via computer diskette and/or restated in accordance with COMPANY's
financial reporting periods consistent with COMPANY's then-current financial
reporting periods and accounting practices and procedures:
(1) weekly reports of the UNIT's sales and Royalty Base Revenue each
Monday (for the preceding Monday through Sunday period) and, if requested by
COMPANY, daily reports of UNIT's sales and Royalty Base Revenue and, by
facsimile or telephone no later than 10:00 a.m. Central time on the
following day; and
(2) upon request by COMPANY, such other data, information, and
supporting records for such periods as COMPANY from time to time requires
(including, without limitation, daily and weekly reports of Product and/or
service sales by category by means of telephonic, facsimile or other
transmission system);
(3) within thirty (30) days after the end of each quarter of FRANCHISE
OWNER's fiscal year, FRANCHISE OWNER shall submit reports of those income
and expense items of the UNIT which COMPANY specifies from time to time for
use in any revenue, earnings, and/or cost summary it chooses to furnish to
prospective franchise owners, provided that COMPANY will not identify to
prospective franchise owners any specific financial results of the UNIT; and
(4) within sixty (60) days after the end of FRANCHISE OWNER's fiscal
year, a fiscal year-end balance sheet, an income statement of the UNIT for
such fiscal year reflecting all year-end adjustments, and a statement of
changes in cash flow of FRANCHISE OWNER, prepared in accordance with
generally accepted accounting principles consistently applied and in the
format prescribed by COMPANY from time to time.
Each report and financial statement submitted by FRANCHISE OWNER to COMPANY
shall be signed by FRANCHISE OWNER and verified as correct in the manner
prescribed by COMPANY.
FRANCHISE OWNER agrees to maintain and to furnish to COMPANY upon request
complete copies of all income, sales, value added, use and service tax returns,
and employee withholding, worker's compensation, and similar reports filed by
FRANCHISE OWNER reflecting activities of the UNIT.
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14. INSPECTIONS AND AUDITS.
----------------------
14.A. COMPANY'S RIGHT TO INSPECT THE UNIT.
-----------------------------------
To determine whether FRANCHISE OWNER and the UNIT are complying with this
Agreement and with specifications, standards and operating procedures prescribed
by COMPANY for the operation of BOSTON MARKET Units, COMPANY or its agents shall
have the right, at any reasonable time to: (1) inspect the Site, the Computer
System and other equipment, furnishings, fixtures, signs, vehicles, operating
materials and supplies of the UNIT; (2) observe, photograph and video tape the
operations of the UNIT for such consecutive or intermittent periods as COMPANY
deems necessary; (3) remove samples of any Products, materials, supplies or
other products for testing and analysis; (4) interview personnel of the UNIT;
(5) interview customers of the UNIT; and (6) inspect and copy any books,
records, reports, computer data bases and documents relating to the operation of
the UNIT. FRANCHISE OWNER agrees to cooperate fully with COMPANY in connection
with any such inspections, observations, photographing and video taping, product
removal and interviews. FRANCHISE OWNER shall present to its customers such
evaluation forms as are periodically prescribed by COMPANY and shall participate
and/or request its customers to participate in any surveys performed by or on
behalf of COMPANY. FRANCHISE OWNER shall promptly install and maintain a
telephone modem in accordance with COMPANY's specifications to permit COMPANY
telephone access to the Computer System after FRANCHISE OWNER commences use
thereof. FRANCHISE OWNER agrees that COMPANY may inspect and monitor
electronically information concerning FRANCHISE OWNER's sales and the UNIT's
Royalty Base Revenue, and such other information as may be contained or stored
in the Computer System. COMPANY shall have telephone access as provided herein
at such times and in such manner as COMPANY shall from time to time specify.
14.B. COMPANY'S RIGHT TO AUDIT.
------------------------
COMPANY shall have the right at any time during business hours, and
with reasonable notice to FRANCHISE OWNER, to inspect and audit, or cause to be
inspected and audited, the business records, bookkeeping and accounting records,
computer data bases, value added, sales, use, service, payroll, employee
withholding, worker's compensation, and income tax records and returns, and
other records of the UNIT, DEVELOPER, and FRANCHISE OWNER (if different than
DEVELOPER) and the books and records of FRANCHISE OWNER if a corporation,
partnership or limited liability company. FRANCHISE OWNER shall fully cooperate
with representatives of COMPANY and independent accountants hired by COMPANY to
conduct any such inspection or audit. COMPANY's right to audit shall also
include COMPANY's right to access the Computer System by telephone as provided
in this Section. In the event any such inspection or audit shall disclose an
understatement of the UNIT's Royalty Base Revenue, FRANCHISE OWNER shall pay to
COMPANY, within fifteen (15) days after receipt of the inspection or audit
report, the Royalty Fees and Marketing Contributions due on the amount of such
understatement, plus interest (at the rate and on the terms provided for herein)
from the date originally due until the date of payment. Further, in the event
such inspection or audit is made necessary by the failure of FRANCHISE OWNER to
furnish reports,
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supporting records, other information or financial statements, as herein
required, or to furnish such reports, records, information or financial
statements on a timely basis, or if an understatement of Royalty Base Revenue
for the period of any audit is determined by any such audit or inspection to be
greater than two percent (2%), FRANCHISE OWNER shall reimburse COMPANY for the
cost of such inspection or audit, including, without limitation, legal fees and
accountants' fees, and the travel expenses, room and board and applicable per
diem charges for employees of COMPANY. The foregoing remedies shall be in
addition to all other remedies and rights of COMPANY hereunder or under
applicable law.
15. TRANSFER.
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15.A. BY COMPANY.
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This Agreement is fully transferable by COMPANY and shall inure to
the benefit of any transferee or other legal successor to the interests of
COMPANY herein.
15.B. FRANCHISE OWNER MAY NOT TRANSFER
WITHOUT APPROVAL OF COMPANY.
---------------------------
FRANCHISE OWNER understands and acknowledges that the rights and
duties created by this Agreement are personal to FRANCHISE OWNER and its Owners
and that COMPANY has granted the rights hereunder to FRANCHISE OWNER in reliance
upon the individual or collective character, skill, aptitude, attitude, business
ability and financial capacity of FRANCHISE OWNER and its Owners. Therefore, no
obligations of FRANCHISE OWNER under this Agreement and no interest in (1) this
Agreement, (2) FRANCHISE OWNER, (3) the Franchise, (4) the UNIT, (5) the lease
for the premises of the UNIT or (6) some or all of the assets of the UNIT (other
than in connection with the financing of authorized equipment for the UNIT, the
sale of inventory or otherwise in the ordinary course of business), may be
transferred without the prior written approval of COMPANY. Any transfer in
violation of this Section shall constitute a breach of this Agreement and convey
no rights to or interests in this Agreement, the Franchise, FRANCHISE OWNER, the
lease for the premises of the UNIT, the UNIT or the assets of the UNIT.
As used in this Agreement, the term "transfer" shall include,
without limitation, the following whether voluntary or involuntary, conditional,
direct or indirect:
(i) an assignment, sale, gift or pledge; and
(ii) the grant of a mortgage, charge, lien or security interest,
including, without limitation, the grant of a collateral assignment; and
(iii) a merger or consolidation, issuance of additional Ownership
Interests or securities representing or potentially representing Ownership
Interests, or redemption of Ownership Interests; and
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(iv) a sale of voting shares or securities convertible to voting
shares, or an agreement granting the right to exercise or control the
exercise of the voting rights of any holder of an ownership interest or to
control the operations or affairs of FRANCHISE OWNER; and
(v) a management agreement whereby FRANCHISE OWNER delegates (a)
any of its obligations under this Agreement; or (b) any or all of the
management function with respect to the UNIT or the business to be
conducted by FRANCHISE OWNER pursuant to this Agreement; and
(vi) a transfer which occurs as a result of divorce, insolvency,
corporate, partnership or limited liability dissolution, or upon death of
FRANCHISE OWNER or an Owner of FRANCHISE OWNER, by will, intestate
succession or declaration of or transfer in trust.
Notwithstanding the foregoing, the restrictions on transfers set forth
above shall not apply to:
(1) a transfer of Ownership Interests in FRANCHISE OWNER by an
Owner who is not a Principal Owner; provided that:
(a) FRANCHISE OWNER has given COMPANY written notice of
the proposed transfer at least ten (10) days in advance of the
effective date of the transfer;
(b) the transfer is not to a Competitive Business or to
a direct or indirect owner of a Competitive Business; and
(c) the proposed transfer does not, by itself or in
conjunction with other transfers, result in the transfer of a
Controlling Interest in FRANCHISE OWNER or a change in the
composition of the group holding a Controlling Interest in FRANCHISE
OWNER; or
(2) any transfer of stock options that does not, by itself or in
combination with other transfers, result in the transfer of a Controlling
Interest in FRANCHISE OWNER or a change in the composition of the group
holding a Controlling Interest in FRANCHISE OWNER.
15.C. CONDITIONS FOR APPROVAL OF TRANSFER.
-----------------------------------
Subject to COMPANY's right of first refusal under this Section, COMPANY
will not unreasonably withhold its approval of a transfer of an interest in this
Agreement, the FRANCHISE OWNER, the Franchise or the UNIT (or any of its assets)
that meets all the applicable requirements of this Paragraph. All of the
following conditions must be met prior to, or concurrently with, the effective
date of any transfer:
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(1) FRANCHISE OWNER and its Owners shall be in full compliance
with this Agreement and any other agreements with COMPANY and its
Affiliates; and
(2) the proposed transferee and its owners must be individuals
of good moral character and otherwise meet COMPANY's then applicable
standards for BOSTON MARKET Unit franchise owners and if the proposed
transferee, its owners or affiliates have any other franchise agreements or
development agreements with COMPANY, they must be in full compliance with
any such agreements and comply with subparagraph (7) below; and
(3) if the transfer is of an Ownership Interest in the UNIT or
the assets of the UNIT (other than in connection with the financing of
authorized equipment for the UNIT, the sale of inventory or otherwise in
the ordinary course of business), the transfer may only be made in
conjunction with a transfer of this Agreement; and
(4) if a transfer of an Owner's interest in the FRANCHISE OWNER,
the transferee's name and relevant information shall be added to the list
of Owners on Exhibit E hereto and the transferee shall agree to be bound by
---------
all provisions applicable to Owners and if, after giving effect to the
transfer, the transferee qualifies as a Principal Owner, or if COMPANY
designates the transferee as a Principal Owner, then the transferee shall
execute the form of Guaranty and Assumption of Franchise Owner's
Obligations attached hereto; and
(5) FRANCHISE OWNER and its Owners or the transferring Owner(s)
and the transferee (if it is then a developer or franchise owner of BOSTON
MARKET Units) must execute a general release and consent agreement, in form
satisfactory to COMPANY, of any and all claims against COMPANY, its
Affiliates and their respective shareholders, officers, directors,
employees and agents.
If the transfer includes this Agreement, a Principal Owner's interest, or a
Controlling Interest in FRANCHISE OWNER, or is one of a series of transfers
which in the aggregate constitute the transfer of this Agreement or a
Controlling Interest in FRANCHISE OWNER, or COMPANY determines in its sole
discretion, that such transfer results in the transfer or elimination of a
Controlling Interest or a change in the composition of any group of Owners who
previously together possessed a Controlling Interest, then, in addition to the
conditions set forth above, all of the following conditions must also be met
prior to, or concurrently with, the effective date of the transfer:
(6) the transferee must have sufficient business experience,
aptitude and financial resources to operate the UNIT and perform the
obligations of the transferor under this Agreement and neither the
transferee nor its owners may be engaged in or have the intent to engage in
a Competitive Business; and
(7) FRANCHISE OWNER, the transferor and the transferee (if it
is then a developer or franchise owner of COMPANY) must pay such Royalty
Fees, Marketing
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Contributions, amounts owed for purchases by FRANCHISE OWNER or such
transferee from COMPANY and its Affiliates, and all other amounts owed to
COMPANY or its Affiliates, which are then due and unpaid; and
(8) the transferee agrees to cause its designated Unit Manager
and Additional Manager to complete to COMPANY's satisfaction COMPANY's
initial management training program in the operation of a BOSTON MARKET
Unit prior to the transfer at the time specified by COMPANY and the
transferee must have paid COMPANY's then-current standard training charges;
and
(9) the transferee and its owners, at COMPANY's option, must
agree, in a manner satisfactory to COMPANY, to be bound by all terms and
conditions of this Agreement for the remainder of its term or execute
COMPANY's then-current form of standard franchise agreement and such
ancillary documents (including guarantees) as are then customarily used by
COMPANY in the grant of franchises for BOSTON MARKET Units, modified as
necessary to provide for the same Royalty Fees required hereunder and a
term equal to the remaining term of this Agreement; and
(10) FRANCHISE OWNER or the transferee must have paid COMPANY a
transfer fee of Five Thousand Dollars ($5,000.00) plus an amount equal to
COMPANY's reasonable out-of-pocket costs in connection with the transfer;
and
(11) COMPANY must approve the material terms and conditions of
such transfer, including, without limitation, that the price and terms of
payment are not so burdensome as to adversely affect COMPANY's rights and
interests under this Agreement; and
(12) if the transferor finances any part of the sale price of the
transferred interest, the transferor must agree, in a manner satisfactory
to COMPANY, that all obligations of the transferee under or pursuant to any
promissory notes, agreements or security interests reserved by the
transferor in the assets of the UNIT shall be subordinate to the
obligations of the transferee to pay Royalty Fees, Marketing Contributions
and other amounts due to COMPANY and its Affiliates under this Agreement,
any other agreements entered into by COMPANY and the transferee, and to the
obligations of the transferee to otherwise comply with this Agreement or
the franchise agreement executed by the transferee; and
(13) FRANCHISE OWNER and its Principal Owners (in the case of a
transfer of this Agreement, the Franchise, the UNIT or some or all of the
assets of the UNIT other than in the ordinary course of business) or its
transferring Principal Owner(s) must execute a non competition agreement in
favor of COMPANY and the transferee, providing that neither FRANCHISE
OWNER, its Principal Owner(s) nor its transferring Principal Owner(s)
(whichever is applicable), shall directly or indirectly (through a member
of the Immediate Family of FRANCHISE OWNER, its Principal Owners or the
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transferring Principal Owner(s) of FRANCHISE OWNER, or otherwise) for a
period of two (2) years commencing on the effective date of such transfer:
(a) have any direct or indirect interest as a disclosed or
beneficial owner in any Competitive Business located or operating:
(i) at the Site; or
(ii) within a five (5) mile radius of the Site; or
(iii) within a five (5) mile radius of any other BOSTON
MARKET Unit in operation or under development on the effective date of
the transfer; or
(iv) within the Market Area; or
(b) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any Competitive
Business located or operating:
(i) at the Site; or
(ii) within a five (5) mile radius of the Site; or
(iii) within a five (5) mile radius of any other BOSTON
MARKET Unit in operation or under development on the effective
date of the transfer; or
(iv) within the Market Area; or
(c) divert or attempt to divert any business or any customers of
any BOSTON MARKET Unit to any Competitive Business; or
(d) employ or seek to employ, any person who is employed by
COMPANY, its Affiliates or any developer or franchise owner of COMPANY,
nor induce nor attempt to induce any such person to leave said employment
without the prior written consent of such person's employer; and
(14) the transferee and FRANCHISE OWNER shall acknowledge and agree that
COMPANY's approval of the proposed transfer indicates only that the transferee
meets or COMPANY has waived the criteria established by COMPANY for franchise
owners as of the time of such transfer and that COMPANY's approval thereof does
not constitute a warranty or guaranty by COMPANY, express or implied, of the
suitability of the terms of sale or of the successful operation or profitability
of the UNIT by the transferee; and
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(15) the transfer must be made in compliance with all applicable laws.
A transfer of an Owner's interest shall not be required to meet the
conditions set forth in Subparagraphs (6) through (15) if the Owner is not a
Principal Owner and the transfer does not itself, or together with prior or
concurrent transfers involve the transfer of a Controlling Interest in FRANCHISE
OWNER and COMPANY determines in its sole discretion that such transfer does not
result in the transfer or elimination of a Controlling Interest or a change in
the composition of any group of Owners who previously together possessed a
Controlling Interest. Subparagraph (10) shall not apply to transfers by gift,
bequest, or inheritance. FRANCHISE OWNER acknowledges and agrees that the
failure of any person or entity restricted pursuant to Subparagraph (13) to
comply with this Section 14, including, without limitation, the restrictions of
Subparagraph (13), shall constitute a breach of this Agreement. The restrictions
of Subparagraph (13)(a) shall not be applicable to the ownership of shares of a
class of securities listed on a stock exchange or traded on the over-the-counter
market and quoted by a national inter-dealer quotation system that represent
less than three percent (3%) of the number of shares of that class of securities
issued and outstanding nor shall they be construed to prohibit FRANCHISE OWNER,
any Principal Owner of FRANCHISE OWNER, or any member of the Immediate Family of
FRANCHISE OWNER or any Principal Owner from having a direct or indirect
ownership interest in any BOSTON MARKET Unit, development agreement or franchise
agreement for the development or operation of any BOSTON MARKET Unit, or any
entity owning, controlling or operating a BOSTON MARKET Unit, or from providing
services to a BOSTON MARKET Unit. Furthermore, the restrictions of Subparagraph
(13) shall not prohibit FRANCHISE OWNER, any Principal Owner of FRANCHISE OWNER,
or any member of the Immediate Family of FRANCHISE OWNER or a Principal Owner of
FRANCHISE OWNER (to the extent any such person(s) is an individual) from
performing services for or having an ownership interest in a Permitted
Competitive Business, or from conducting customary promotion and advertising of
a Permitted Competitive Business.
The rights of FRANCHISE OWNER and its Owners to transfer interests in
this Agreement, the Franchise, FRANCHISE OWNER, the UNIT (or the assets of the
UNIT) or the lease for the premises of the UNIT may be exercised only by the
FRANCHISE OWNER or its Owners and shall not be exercisable by a receiver,
trustee, liquidator or other person acting in a comparable capacity with respect
to the assets or ownership of FRANCHISE OWNER.
15.D. TRANSFER TO A WHOLLY-OWNED CORPORATION.
--------------------------------------
If FRANCHISE OWNER is in full compliance with this Agreement, COMPANY
shall not unreasonably withhold its approval of a transfer in the case of a
proposed assignment or transfer of this Agreement, the Franchise, the UNIT, and
the lease for the premises of the UNIT to a corporation which conducts no
business other than the UNIT, which is actually managed day-to-day by the Unit
Manager under the supervision of FRANCHISE OWNER, in which FRANCHISE OWNER
maintains management control and owns and controls one hundred percent (100%) of
the equity and voting power of all issued and outstanding capital stock. All
certificates representing shares of stock of such corporation must be endorsed
with a legend in form approved by COMPANY reciting that the transfer of shares
in FRANCHISE OWNER are
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subject to the restrictions of this Agreement. Such an assignment shall not
relieve FRANCHISE OWNER of his obligations hereunder, and FRANCHISE OWNER shall
remain jointly and severally liable to COMPANY for all obligations hereunder.
15.E. DEATH OR INCAPACITY OF FRANCHISE OWNER.
--------------------------------------
Upon the death of FRANCHISE OWNER or the permanent incapacity of
FRANCHISE OWNER to conduct business affairs or, if FRANCHISE OWNER is a
corporation, a partnership or a limited liability company, upon the death or
permanent incapacity of a Principal Owner of FRAN CHISE OWNER, all of such
person's interest in this Agreement, or such interest in FRANCHISE OWNER shall
be transferred to a transferee approved by COMPANY. Such disposition of this
Agreement or such interest in FRANCHISE OWNER (including, without limitation,
transfer by bequest or inheritance), shall be completed within a reasonable
time, not to exceed nine (9) months from the date of death or permanent
disability and shall be subject to all the terms and conditions applicable to
transfers contained in this Section. Failure to so transfer the interest in
this Agreement or such interest in FRANCHISE OWNER, within said period of time
shall constitute a breach of this Agreement.
15.F. PUBLIC OR PRIVATE OFFERING.
--------------------------
Notwithstanding anything in this Section to the contrary, securities
(debt or equity) of FRANCHISE OWNER or an entity owning a direct or indirect
equity interest in FRANCHISE OWNER, this Agreement, the Franchise or the UNIT
may not be offered to the public pursuant to a private or public or governmental
regulated offering without the prior written consent of COMPANY, which consent
may be withheld in COMPANY's sole discretion. Notwithstanding the foregoing,
FRANCHISE OWNER may make a private placement of securities without COMPANY's
consent if:
(1) such private placement complies with all applicable federal,
state and local laws governing offerings of securities;
(2) such private placement complies with each of the relevant transfer
procedures, requirements, and limitations contained herein other than the
limitation in Section 15.E preceding this provision;
(3) such private placement does not result in any change in operating
control of FRANCHISE OWNER or any UNIT or in the individual or individuals
controlling the management, policies, or any decision of FRANCHISE OWNER or
any UNIT, and each such entity or individual receiving securities in such
private placement shall have been identified and be reasonably acceptable to
COMPANY;
(4) any offering memorandum or other information used in connection
with any such private placement is submitted to COMPANY for review and
comment a reasonable time prior to its use and the reasonable comments and
suggestions of COMPANY thereon are given due consideration;
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(5) any offering memorandum or information used in connection with any
such private placement shall clearly identify that it is not an offering of
COMPANY and that COMPANY has not supplied any financial information,
projections, budgets, cost estimates, or similar information contained
therein, all of which shall be the sole responsibility of FRANCHISE OWNER;
(6) each recipient of information relating to such private placement
shall agree to maintain it in confidence;
(7) the structure, timing, allocation and nature of such private
placement shall be reasonably acceptable to COMPANY;
(8) COMPANY is indemnified by FRANCHISE OWNER for any and all costs,
expenses, claims, actions, judgments, and liabilities (including, but not
limited to costs and expenses relating to legal defense) arising from or
relating to such private placement; and
(9) FRANCHISE OWNER shall not become a Reporting Company by virtue of
Section 12(b), 12(g) or 15(d) of the Securities Exchange Act of 1934, as
amended.
FRANCHISE OWNER shall reimburse COMPANY for its reasonable expenses
incurred in connection with any offering or proposed offering restricted
pursuant to this paragraph (including attorneys' fees) and shall comply with all
requirements of COMPANY in connection with such offering, including, without
limitation, adding appropriate disclaimers to the offering documents and
execution of appropriate indemnification agreements.
15.G. EFFECT OF CONSENT TO TRANSFER.
-----------------------------
COMPANY's consent to a transfer of this Agreement or any interest in
FRANCHISE OWNER, the UNIT, or the assets of the UNIT shall not constitute a
waiver of any claims it may have against FRANCHISE OWNER (or its Owners), nor
shall it be deemed a waiver of COMPANY's right to demand full compliance with
any of the terms or conditions of this Agreement by the transferee.
15.H. COMPANY'S RIGHT OF FIRST REFUSAL.
--------------------------------
If FRANCHISE OWNER or any of its Owners shall at any time determine to
sell an interest in this Agreement, the Franchise, the UNIT, some or all of the
assets of the UNIT (other than in the ordinary course of business) or an
ownership interest in FRANCHISE OWNER, FRANCHISE OWNER or its Owner(s) shall
obtain a bona fide, arms length, executed purchase agreement (and any ancillary
agreements) in complete and definitive form and not subject to any financing
contingency or other material, substantive contingency and earnest money deposit
(in the amount of five percent (5%) or more of the purchase price) from a
qualified, responsible, bona fide and fully disclosed purchaser. A true and
complete copy of such purchase agreement (conditioned on COMPANY's right of
first refusal) and any proposed
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ancillary agreements shall immediately be submitted to COMPANY by FRANCHISE
OWNER, such Owner(s) or both. The purchase agreement must apply only to an
interest which is permitted to be transferred under this Agreement and may not
include the purchase of any other property or rights of FRANCHISE OWNER (or such
Owner(s)) and the price and terms of purchase offered to FRANCHISE OWNER (or
such Owner(s)) in the purchase agreement for the aforementioned interests shall
reflect the bona fide price offered therefor and shall not reflect any value for
any other property or rights. If the purchaser proposes to buy any other
property or rights from FRANCHISE OWNER (or such Owner(s)) under a separate,
contemporaneous purchase agreement, FRANCHISE OWNER shall submit a true and
complete copy of a bona fide, arms length executed purchase agreement (and any
proposed ancillary agreements) in complete and definitive form and not subject
to any financing or other material, substantive contingency. COMPANY shall have
the right, exercisable by written notice delivered to FRANCHISE OWNER or such
Owner(s) within thirty (30) days from the date of receipt by COMPANY of an exact
copy of such purchase agreement, together with payment of any applicable
transfer fee and a completed and executed application for COMPANY's consent to
transfer such interest for the price and on the terms and conditions contained
in such purchase agreement, provided that COMPANY may substitute cash, a cash
equivalent, or marketable securities of equivalent value for any form of payment
proposed in such purchase agreement, COMPANY's credit shall be deemed equal to
the credit of any proposed purchaser, and COMPANY shall have not less than sixty
(60) days to prepare for closing. Regardless of whether included in the purchase
agreement, COMPANY shall be entitled to all customary representations and
warranties given by the seller of a business, including, without limitation,
representations and warranties as to: (1) ownership, condition and title to
stock and/or assets; (2) liens and encumbrances relating to the stock and/or
assets; and (3) validity of contracts and liabilities, contingent or otherwise,
of any corporation whose stock is purchased. If COMPANY does not exercise its
right of first refusal, FRANCHISE OWNER or such Owner(s) may complete the sale
to such purchaser pursuant to and on the exact terms of such purchase agreement,
subject to COMPANY's approval of the transfer, as provided for herein, provided
that if the sale to such purchaser is not completed within one hundred twenty
(120) days after receipt of such purchase agreement by COMPANY, or if there is a
change in the terms of the sale, COMPANY shall have an additional right of first
refusal for thirty (30) days as set forth herein on the modified or initial
terms and conditions of sale.
15.I. OWNERSHIP STRUCTURE.
-------------------
FRANCHISE OWNER represents and warrants that its owners are as set
forth on Exhibit E attached to this Agreement and covenants that it will not
---------
vary from that ownership structure without the prior written approval of
COMPANY.
15.J. DELEGATION BY COMPANY.
---------------------
FRANCHISE OWNER agrees that COMPANY shall have the right, from time to
time, to delegate the performance of any portion or all of its obligations and
duties under this Agreement to designees, whether the same are agents of COMPANY
or independent contractors with which COMPANY has contracted to provide such
services.
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16. GRANT OF SUCCESSOR FRANCHISES.
-----------------------------
16.A. FRANCHISE OWNER'S RIGHT TO A SUCCESSOR FRANCHISE.
------------------------------------------------
Subject to the provisions of Paragraphs B and C of this Section, upon
expiration of the initial term of this Agreement, if:
(1) FRANCHISE OWNER and its Owners have complied with this
Agreement during the initial term of this Agreement in all material
respects; and
(2) FRANCHISE OWNER and its Owners are then in full compliance
with this Agreement; and
(3) (a) FRANCHISE OWNER maintains possession of the Site and
agrees to remodel and/or expand the UNIT, add or replace equipment,
furnishings, fixtures, and signs and otherwise modify the UNIT to bring it
into compliance with specifications and standards then applicable under
new or successor franchises for BOSTON MARKET Units; or
(b) if FRANCHISE OWNER is unable to maintain possession
of the Site, or if, in the judgment of COMPANY, the UNIT should be
relocated within the Territory, FRANCHISE OWNER secures a substitute site
within the Territory approved by COMPANY and agrees to develop
expeditiously such substitute site in compliance with specifications and
standards then applicable under new or successor franchises for BOSTON
MARKET Units;
then FRANCHISE OWNER shall have the right to obtain a successor franchise to
operate a BOSTON MARKET Unit at the Site (a "Successor Franchise") for a term of
five (5) years. In consideration of the grant of the Successor Franchise,
FRANCHISE OWNER shall pay to COMPANY a fee in an amount equal to thirty-three
and one-third percent (33-1/3%) of the then-current initial franchise fee
charged by COMPANY in connection with the grant of a single BOSTON MARKET Unit
franchise. As additional consideration for the grant of a Successor Fran chise,
FRANCHISE OWNER agrees to execute a general release in form prescribed by
COMPANY in accordance with this Section.
16.B. NOTICES.
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FRANCHISE OWNER shall give COMPANY written notice of its election to
obtain a Successor Franchise not more than twenty-four (24) months, and not less
than twelve (12) months, prior to the expiration of this Agreement. COMPANY
agrees to give FRANCHISE OWNER written notice, not more than ninety (90) days
after receipt of FRANCHISE OWNER's notice, of (a) COMPANY's determination
whether or not it will grant FRANCHISE OWNER a Successor Franchise pursuant to
this Section and/or (b) any deficiencies in FRANCHISE OWNER's operation of the
UNIT (or any other failure to comply with the terms of this Agreement) which
could cause COMPANY to refuse to grant a Successor Franchise. Such notice
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shall state what actions FRANCHISE OWNER must take to correct the deficiencies
and shall specify the time period in which such deficiencies must be corrected.
COMPANY shall give FRANCHISE OWNER written notice of a decision not to grant a
Successor Franchise based upon FRANCHISE OWNER's failure to cure deficiencies
not less than ninety (90) days prior to the expiration of the initial term of
this Agreement. Such notice shall state the reasons for COMPANY's refusal to
grant a Successor Franchise. In the event COMPANY fails to give FRANCHISE OWNER
(a) notice of deficiencies in the UNIT, or in FRANCHISE OWNER's operation of the
UNIT, within ninety (90) days after receipt of FRANCHISE OWNER's timely election
to obtain a Successor Franchise, or (b) notice of COMPANY's decision not to
grant a Successor Franchise at least ninety (90) days prior to the expiration of
the term of this Agreement, COMPANY may extend the term of this Agreement for
such period of time as is necessary in order to provide FRANCHISE OWNER
reasonable time to cure deficiencies or to provide ninety (90) days' notice of
COMPANY's determination not to grant a Successor Franchise. The grant of a
Successor Franchise shall be conditioned upon FRANCHISE OWNER's continued
compliance with all the terms and conditions of this Agreement up to the date of
expiration.
16.C. SUCCESSOR FRANCHISE AGREEMENT/RELEASES.
--------------------------------------
To obtain a Successor Franchise, COMPANY, FRANCHISE OWNER and its
Owners shall execute the form of franchise agreement and any ancillary
agreements then customarily used by COMPANY in the grant of franchises for the
operation of BOSTON MARKET Units (with appropriate modifications to the term,
the successor franchise provisions, and other appropriate provisions to reflect
the fact that the agreement relates to a Successor Franchise) which may provide
for higher or additional royalty and other fees, and FRANCHISE OWNER and its
Owners shall execute general releases, in form satisfactory to COMPANY, of any
and all claims against COMPANY and its Affiliates and their respective
shareholders, officers, directors, employees, agents, successors and assigns.
The franchise agreement for a Successor Franchise will not include any right to
any further renewal, extension, or successor franchise rights. Failure by
FRANCHISE OWNER and its Owners to sign and deliver to COMPANY, such agreements
and releases within thirty (30) days after delivery thereof to FRANCHISE OWNER
shall be deemed an election by FRANCHISE OWNER not to obtain a Successor
Franchise.
17. TERMINATION OF THE FRANCHISE.
----------------------------
17.A. BY FRANCHISE OWNER.
------------------
If FRANCHISE OWNER is in full compliance with this Agreement and COMPANY
materially breaches this Agreement, FRANCHISE OWNER may terminate this
Agreement effective thirty (30) days after COMPANY's receipt of written notice
of termination if FRANCHISE OWNER gives written notice of such breach to COMPANY
and COMPANY does not:
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(1) correct such failure within thirty (30) days after COMPANY's
receipt of such notice of material breach; or
(2) if such breach cannot reasonably be cured within thirty (30)
days after COMPANY's receipt of such notice, undertake within thirty (30)
days after COMPANY'S receipt of such notice, and continue until
completion, reasonable efforts to cure such breach.
Any termination of this Agreement by FRANCHISE OWNER other than as provided in
this Paragraph A shall be deemed a termination by FRANCHISE OWNER without cause.
17.B. BY COMPANY.
----------
COMPANY may terminate this Agreement, effective upon delivery of notice
of termination to FRANCHISE OWNER, or, where expressly applicable, upon failure
to cure to COMPANY's satisfaction any breach by the expiration of any period of
time within which such breach may be cured in accordance with the provisions set
forth below, if:
(1) FRANCHISE OWNER fails to develop the UNIT in accordance with
this Agreement and commence operation of business within the time
provided in this Agreement; or
(2) FRANCHISE OWNER or any of its Owners fails to operate,
abandons, surrenders or transfers control of the operation of the UNIT
without prior written approval of COMPANY; or
(3) FRANCHISE OWNER or any of its Owners has made any material
misrep resentation or omission in the application for the Franchise or
in materials submitted relating to a transfer; or
(4) FRANCHISE OWNER or any of its Owners is convicted by a trial
court of or pleads guilty or no contest to a felony, or to another crime
or offense that may adversely affect the reputation of FRANCHISE OWNER or
the UNIT or the goodwill associated with the Marks or engages in any
misconduct which may adversely affect the reputation of any BOSTON MARKET
Unit or the goodwill associated with the Marks; or
(5) FRANCHISE OWNER or any of its Owners makes an assignment or
transfer in violation of this Agreement or, if applicable, FRANCHISE OWNER
is an Authorized Entity and ceases to be controlled by DEVELOPER as set
forth in the Development Agreement; or
(6) FRANCHISE OWNER (or any of its Owners or employees) makes any
unauthorized use or disclosure of or duplicates any copy of any
Confidential Information, makes any unauthorized use of the Marks or
Copyrighted Works, or uses, duplicates, or
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or discloses any portion of the Manuals or Copyrighted Works, or
challenges or seeks to challenge the validity of the Marks or Copyrighted
Works; or
(7) FRANCHISE OWNER loses the right to possession of the Site and
does not relocate the UNIT to another site in accordance with this
Agreement; or
(8) FRANCHISE OWNER fails to timely commence or provide:
(a) Catering Service if consented to pursuant to a
Catering Rider executed by COMPANY and FRANCHISE OWNER; or
(b) Delivery Service if required pursuant to this
Agreement or to a Delivery Rider executed by COMPANY and FRANCHISE
OWNER; or
(c) Special Distribution Arrangements if consented to
pursuant to a Special Distribution Agreement executed by COMPANY and
FRANCHISE OWNER,
in accordance with COMPANY's standards, specifications or procedures therefor,
and does not correct such failure within ten (10) days after written notice of
such failure is delivered to FRANCHISE OWNER; or
(9) FRANCHISE OWNER becomes insolvent in the sense that FRANCHISE
OWNER is unable to pay its bills as they become due; or
(10) FRANCHISE OWNER, its Principal Owners or members of their
immediate families violate the restrictions on the operation of
Competitive Businesses during the term of this Agreement set forth in
Paragraph 9.B. of this Agreement or Owners who have had access to the
Confidential Information violate the covenants concerning competition and
confidentiality contained in the form of Confidentiality and Non-
Competition Agreement attached hereto as Exhibit F (regardless of whether
---------
any such party has executed this Agreement or a Confidentiality and
Non-Competition Agreement); or
(11) FRANCHISE OWNER or any of its Owners fail to report
accurately the UNIT's Royalty Base Revenue or fail to make payments of any
amounts due COMPANY for Royalty Fees, Marketing Contributions, purchases
from COMPANY or its Affiliates, or any other amounts due to COMPANY or its
Affiliates, and do not correct such failure within ten (10) days after
written notice of such failure is delivered to FRANCHISE OWNER; or
(12) FRANCHISE OWNER causes or permits to exist a default under
the lease or sublease for the Site and fails to cure such default within
the applicable cure period set forth in the lease or sublease; or
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(13) FRANCHISE OWNER (or any of its Owners) fails on three or more
separate occasions within any period of twenty-four (24) consecutive
months to comply with this Agreement, whether or not such failures to
comply are corrected after notice of default is given, or fail on two (2)
or more separate occasions within any period of twelve (12) consecutive
months to comply with the same requirement under this Agreement, whether
or not such failures to comply are corrected after notice of default is
given; or
(14) FRANCHISE OWNER or any of its Owners fails to comply with
any other provision of this Agreement or any mandatory specification,
standard, or operating or inspection procedure prescribed by COMPANY or to
pass COMPANY's quality control inspection and does not: (a) correct such
failure within thirty (30) days after FRANCHISE OWNER's receipt of
COMPANY's written notice of such failure to comply; or (b) if such failure
cannot reasonably be corrected within the aforesaid thirty (30) day period
but can be corrected within a reasonably short time (not to exceed an
additional thirty (30) days), under take within ten (10) days after
FRANCHISE OWNER's receipt of COMPANY's written notice, and continue until
completion within such reasonably short time (not to exceed an additional
thirty (30) days), best efforts to bring the UNIT into full compliance,
and furnish proof acceptable to COMPANY upon its request of such efforts
and the date full compliance will be achieved; or
(15) FRANCHISE OWNER or any of its Owners fails or refuses to
follow or comply with any mandatory specification, standard or operating
procedure prescribed by COMPANY relating to the cleanliness or sanitation
of the UNIT or receives a notice of violation from a governmental
authority or violates any health, safety or sanitation law, ordinance or
regulation and does not: (a) correct such failure or refusal within
twenty-four (24) hours after written notice thereof is delivered to
FRANCHISE OWNER; or (b) if such failure can be corrected within five (5)
days but cannot reasonably be corrected within twenty-four (24) hours
after such written notice is received by FRANCHISE OWNER, undertake
corrective action within twenty-four (24) hours and achieve full
compliance within five (5) days after written notice thereof; or
(16) The lesser of (a) three (3) or more, or (b) fifty percent
(50%) or more, of the Franchise Agreements granted (to FRANCHISE OWNER,
DEVELOPER and/or Authorized Entities) in accordance with the terms of the
Development Agreement are terminated by COMPANY in accordance with their
terms, excluding the permanent closing of any BOSTON MARKET Units with the
prior written approval of COMPANY; or
(17) FRANCHISE OWNER or any Authorized Entities of DEVELOPER, if
any, have terminated a Franchise Agreement with COMPANY without cause.
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17.C. TERMINATION OF CERTAIN RIGHTS OF FRANCHISE OWNER.
------------------------------------------------
If COMPANY is entitled to terminate this Agreement in accordance with
Paragraph 17.B. of this Agreement, COMPANY shall have the option to terminate
any one or more of the following instead of terminating this Agreement:
(1) FRANCHISE OWNER's option to develop BOSTON MARKET Units at
Mall Sites under Paragraph 2.D.; and
(2) FRANCHISE OWNER's option to purchase and develop BOSTON
MARKET Units at Conversion Sites under Paragraph 2.E.; and
(3) any Delivery Rider in effect between COMPANY and FRANCHISE
OWNER; and
(4) any Catering Rider in effect between COMPANY and FRANCHISE
OWNER; and
(5) any Special Distribution Agreement in effect between COMPANY
and FRANCHISE OWNER,
effective ten (10) days after delivery of written notice thereof to FRANCHISE
OWNER. If any of such rights, options or arrangements are terminated in
accordance with this Paragraph 17.C., such termination shall be without
prejudice to COMPANY's right to terminate this Agreement or other rights,
options or arrangements at any time thereafter as a result of any additional
defaults of the terms of this Agreement in accordance with Paragraph 17.B.
18. RIGHTS AND OBLIGATIONS OF COMPANY AND FRANCHISE
OWNER UPON TERMINATION OR EXPIRATION OF THE AGREEMENT.
-----------------------------------------------------
18.A. PAYMENT OF AMOUNTS OWED TO COMPANY.
----------------------------------
FRANCHISE OWNER shall immediately pay to COMPANY upon termination or
expiration of this Agreement such Royalty Fees, Marketing Contributions and
amounts owed for purchases by FRANCHISE OWNER from COMPANY or its Affiliates,
interest due on any of the foregoing, and all other amounts owed to COMPANY or
its Affiliates which are then unpaid.
18.B. MARKS, TRADE DRESS, AND COPYRIGHTED WORKS.
-----------------------------------------
Upon the termination or expiration of this Agreement, FRANCHISE OWNER
shall:
(1) not thereafter directly or indirectly at any time or in any
manner identify itself or any business as a current or former BOSTON
MARKET Unit, or as a current or former franchise owner of or as
otherwise associated with COMPANY, or use any
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Mark, any colorable imitation thereof or any mark substantially identical to or
deceptively similar to any Mark in any manner or for any purpose, or utilize for
any purpose any trade name, trademark or service mark, or other commercial
symbol or trade dress that suggests or indicates a connection or association
with COMPANY; and
(2) immediately remove from the Site all signs containing any
Mark, remove the Marks from all vehicles, fixtures, furnishings, decor items and
other objects displaying any Mark at the Site and return to COMPANY or destroy
all packaging materials and forms, advertising and promotional materials,
catalogs, invoices and other materials containing any Mark or otherwise
identifying or relating to a BOSTON MARKET Unit; and
(3) immediately take such action as may be required to cancel
or, at COMPANY's option, to transfer to COMPANY or its designee, all fictitious
or assumed name or equivalent registrations relating to its use of any Mark; and
(4) immediately cease use of all Copyrighted Works which were
furnished and/or licensed to FRANCHISE OWNER by COMPANY pursuant to this
Agreement and return to COMPANY or destroy, at COMPANY's option, all forms,
advertising and promotional materials or other materials containing such
Copyrighted Works; and
(5) immediately take all such actions as may be necessary to
transfer any telephone number and any telephone directory listings associated
with the Marks to COMPANY. FRANCHISE OWNER acknowledges that, as between COMPANY
and FRANCHISE OWNER, COMPANY has the sole right to and interest in all telephone
numbers and directory listings associated with the Marks. FRANCHISE OWNER
concurrently with the execution of this Agreement shall execute COMPANY's form
of collateral assignment of telephone numbers and listings (the "Telephone
Number Assignment"), the current form of which is attached to this Agreement as
Exhibit F. FRANCHISE OWNER, by executing this Agreement, authorizes and appoints
- ---------
COMPANY and any officer of COMPANY as his attorney in fact, to direct the
telephone company and all listing agencies to transfer such telephone numbers
and listings to COMPANY, at COMPANY's direction, should FRANCHISE OWNER fail or
refuse to do so upon receipt of COMPANY's termination notice or other written
request. FRANCHISE OWNER acknowledges and agrees that the telephone company and
all listing agencies may accept this Agreement and/or the Telephone Number
Assignment as conclusive evidence of the exclusive right of the COMPANY in such
telephone numbers and directory listings and its authority to direct their
transfer; and
(6) if COMPANY does not purchase the UNIT as provided in
Paragraph 18.F., at FRANCHISE OWNER's expense, immediately make such
modifications and alterations, including removal of all distinctive physical and
structural features associated with the Trade Dress of BOSTON MARKET Units, as
may be necessary to distinguish the Site and the UNIT so clearly from its former
appearance and from other BOSTON MARKET Units as to prevent any possibility that
the public will associate the
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Site with BOSTON MARKET Units and to prevent confusion created by such
association. Such modifications and altera tions shall include, but not be
limited to, removing or covering the distinctive decor and color scheme on
all walls, signage, counters, displays, equipment, vehicles, fixtures and
furnishings, as well as the exterior of the UNIT. If FRANCHISE OWNER fails
to initiate immediately or complete such modifications, alterations and/or
removals within such time as COMPANY deems appropriate, FRANCHISE OWNER
agrees that COMPANY or its designated agents may enter the UNIT and
adjacent areas without prior notice to make such modifications, alterations
and/or removals, at FRANCHISE OWNER's expense, without liability for
trespass or damages. FRANCHISE OWNER expressly acknowledges that its
failure to make such alterations will cause irreparable injury to COMPANY
and consents to entry, at FRANCHISE OWNER's expense, of an ex-parte order
by any court of competent jurisdiction authorizing COMPANY or its agents to
take such action, if COMPANY seeks such an order.
FRANCHISE OWNER shall furnish to COMPANY (i) within thirty (30) days after the
effective date of termination or expiration, evidence satisfactory to COMPANY of
FRANCHISE OWNER's compliance with Subparagraphs (1), (3) and (4) of the
foregoing obligations, and (ii) within thirty (30) days after the later of
expiration of COMPANY's option to purchase the UNIT, as provided in this
Section, or receipt of notice that COMPANY elects not to purchase the UNIT
pursuant to this Section, evidence satisfactory to COMPANY of FRANCHISE OWNER's
compliance with all of the foregoing obligations. If COMPANY exercises its
option to purchase the UNIT under this Section, COMPANY, in its sole discretion,
shall direct FRANCHISE OWNER regarding which, if any, of the above requirements
FRANCHISE OWNER shall observe.
18.C. CONFIDENTIAL INFORMATION.
------------------------
FRANCHISE OWNER agrees that upon termination or expiration of the Franchise
(without grant of a Successor Franchise):
(1) it, and all of its affiliates, OWNERS, employees, agents or
other representatives, will immediately cease to use and will maintain the
absolute confidentiality of any Confidential Information of COMPANY
disclosed to or otherwise learned or acquired by FRANCHISE OWNER and will
refrain from using such Confidential Information in any business or
otherwise; and
(2) it will return to COMPANY all copies of the Manuals and any
other confidential materials which have been loaned or made available to it
by COMPANY.
18.D. COVENANT NOT TO COMPETE.
-----------------------
Upon expiration or termination of this Agreement by COMPANY or by FRANCHISE
OWNER, other than pursuant to Paragraph 17.A., neither FRANCHISE OWNER nor any
of its Principal Owners shall directly or indirectly (through a member of the
Immediate Family of
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FRANCHISE OWNER or a Principal Owner or otherwise) for a period of two (2) years
commencing on the effective date of such termination or expiration, or the date
on which FRANCHISE OWNER ceases to operate the UNIT, whichever is later:
(1) have any interest as a disclosed or beneficial owner in any
Competitive Business located or operating:
(a) at the Site; or
(b) within a five (5) mile radius of the Site; or
(c) within a five (5) mile radius of any other BOSTON MARKET
Unit in operation or under development on the effective date of
termination or expiration of this Agreement; or
(d) within the Market Area; or
(2) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for any Competitive Business
located or operating:
(a) at the Site; or
(b) within a five (5) mile radius of the Site; or
(c) within a five (5) mile radius of any other BOSTON MARKET
Unit in operation or under development on the effective date of
termination or expiration of this Agreement; or
(d) within the Market Area; or
(3) divert or attempt to divert any business or any customers of any
BOSTON MARKET Unit to any Competitive Business; or
(4) employ or seek to employ, any person who is employed by COMPANY,
its Affiliates or any developer or franchise owner of COMPANY, nor induce
nor attempt to induce any such person to leave said employment without the
prior written consent of such person's employer.
The restrictions of Subparagraph (1) of this Paragraph 18.D. will not be
applicable to the ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market and quoted on a national
inter-dealer quotation system that represent less than three percent (3%) of the
number of shares of that class of securities issued and outstanding nor shall
they be construed to prohibit FRANCHISE OWNER, any Principal Owner of FRANCHISE
OWNER, or any member of the Immediate Family of FRANCHISE OWNER or any Principal
Owner from having a direct or indirect ownership interest in any BOSTON
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MARKET Unit, development agreement or franchise agreement for the development or
operation of any BOSTON MARKET Unit, or any entity owning, controlling or
operating a BOSTON MARKET Unit, or from providing services to a BOSTON MARKET
Unit. Furthermore, the restrictions of this Paragraph 18.D. shall not prohibit
FRANCHISE OWNER, any Principal Owner of FRANCHISE OWNER, or any member of the
Immediate Family of FRANCHISE OWNER or a Principal Owner of FRANCHISE OWNER (to
the extent any such person(s) is an individual) from performing services for or
having an ownership interest in a Permitted Competitive Business, or from
conducting customary promotion and advertising of a Permitted Competitive
Business.
18.E. CONTINUING OBLIGATIONS.
----------------------
All obligations of COMPANY and FRANCHISE OWNER which expressly or by their
nature survive or are intended to survive the expiration or termination of this
Agreement shall continue in full force and effect subsequent to and
notwithstanding its expiration or termination and until they are satisfied in
full or by their nature expire.
18.F. COMPANY'S RIGHT TO PURCHASE ASSETS OF THE UNIT.
----------------------------------------------
Upon termination of this Agreement by COMPANY in accordance with its terms
and conditions, upon termination of this Agreement by FRANCHISE OWNER without
cause, or upon expiration of this Agreement (without the grant of a Successor
Franchise), COMPANY shall have the option, exercisable by giving written notice
thereof within sixty (60) days from the date of such expiration or termination,
to purchase from FRANCHISE OWNER all the assets used in the UNIT. As used in
this Paragraph, "assets" shall mean and include, without limitation, leasehold
improvements, equipment, vehicles, furnishings, fixtures, signs, inventory (non-
perishable products, materials and supplies) and the lease or sublease for the
Site. COMPANY shall have the unrestricted right to assign this option to
purchase. COMPANY or its assignee shall be entitled to all customary warranties
and representations given by the seller of a business including, without
limitation, representations and warranties as to: (1) ownership, condition and
title to assets; (2) liens and encumbrances relating to the assets; and (3)
validity of contracts and liabilities, inuring to COMPANY or affecting the
assets, contingent or otherwise.
The purchase price for the assets of the UNIT shall be the fair market
value, determined as of the date of termination or expiration of this Agreement
in a manner consistent with reasonable depreciation of leasehold improvements
owned by FRANCHISE OWNER and the equipment, vehicles, furnishings, fixtures,
signs and inventory of the UNIT, provided that the purchase price shall take
into account the termination or expiration of the Franchise granted hereunder
and this Agreement and shall not contain any factor or increment for any
trademark, service mark or other commercial symbol used in connection with the
operation of the UNIT or any goodwill or "going concern" value for the UNIT and
further provided that COMPANY may exclude from the assets purchased hereunder
any equipment, vehicles, furnishings, fixtures, signs and inventory that are not
approved as meeting then-current quality standards for BOSTON MARKET Units. The
length of the remaining term of the lease or sublease for the
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Site of the UNIT shall also be considered in deter mining the fair market value
hereunder. If COMPANY and FRANCHISE OWNER are unable to agree on the fair market
value of the assets, the fair market value shall be determined by an independent
appraiser selected by COMPANY and FRANCHISE OWNER, and if they are unable to
agree on an independent appraiser, COMPANY and FRANCHISE OWNER shall each select
one independent appraiser, who shall select a third independent appraiser, and
the fair market value shall be deemed to be the average of the three (3)
independent appraisals. The appraisers so selected shall value the leasehold
improvements, equipment, furnishings, fixtures, signs and inventory in
accordance with the standards of this Paragraph.
The purchase price shall be paid in cash, a cash equivalent, or marketable
securities of equivalent value at the closing of the purchase, which shall take
place no later than ninety (90) days after receipt by FRANCHISE OWNER of notice
of exercise of this option to purchase, at which time FRANCHISE OWNER shall
deliver instruments transferring to COMPANY or its assignee: (i) good and
merchantable title to the assets purchased, free and clear of all liens and
encumbrances (other than liens and security interests acceptable to COMPANY or
its assignee), with all sales and other transfer taxes paid by FRANCHISE OWNER;
(ii) all licenses and permits of the UNIT which may be assigned or transferred;
and (iii) the lease or sublease for the Site. In the event that FRANCHISE OWNER
cannot deliver clear title to all of the purchased assets as aforesaid, or in
the event there shall be other unresolved issues, the closing of the sale shall
be accomplished through an escrow. Further, FRANCHISE OWNER and COMPANY shall,
prior to closing, comply with all applicable legal requirements, including the
bulk sales provisions of the Uniform Commercial Code of the state in which the
UNIT is located and the bulk sales provisions of any applicable tax laws and
regulations. FRANCHISE OWNER shall, prior to or simultaneously with the closing
of the purchase, pay all tax liabilities incurred in connection with the
operation of the UNIT. COMPANY shall have the right to set off against and
reduce the purchase price by any and all amounts owed by FRANCHISE OWNER to
COMPANY, and the amount of any encumbrances or liens against the assets or any
obligations assumed by COMPANY.
If COMPANY or its assignee exercises this option to purchase, pending the
closing of such purchase as hereinabove provided, COMPANY shall have the right
to appoint a manager to maintain the operation of the UNIT. Alternatively,
COMPANY may require FRANCHISE OWNER to close the UNIT during such time period
without removing any assets from the UNIT. FRANCHISE OWNER shall maintain in
force all insurance policies required pursuant to this Agreement, through the
date of closing. If the Site is leased, COMPANY agrees to use reasonable efforts
to effect a termination of the existing lease for the Site and enter into a new
lease on reasonable terms with the landlord. In the event COMPANY is unable to
enter into a new lease and FRANCHISE OWNER's rights under the lease for the Site
are assigned to COMPANY or COMPANY subleases the Site from FRANCHISE OWNER,
COMPANY will indemnify and hold harmless FRANCHISE OWNER from any ongoing
liability under the lease from the date COMPANY assumes possession of the Site.
19. ENFORCEMENT.
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19.A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
-------------------------------------------------
If any provision of this Agreement relating to the in-term exclusive
dealing covenants is declared or made invalid or unenforceable by judicial
action, legislation or other government action, COMPANY 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 FRANCHISE OWNER.
All other provisions of this Agreement are 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. To the extent
the post-transfer restrictive covenants or post-termination/post-expiration
restrictive covenants contained herein are deemed unenforceable by virtue of
their scope in terms of geographic area, business activity prohibited and/or
length of time, but may be made enforceable by reductions or alterations of
either or any thereof, FRANCHISE OWNER and COMPANY agree that the same shall be
enforced to the fullest extent permissible under the laws and public policies
applied in the jurisdiction in which enforcement is sought. If any applicable
and binding law or rule of any juris diction requires a greater prior notice of
the termination of this Agreement or refusal to grant a Successor Franchise than
is required hereunder, 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 COMPANY 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 COMPANY 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.
19.B. WAIVER OF OBLIGATIONS.
---------------------
COMPANY and FRANCHISE OWNER may by written instrument unilaterally waive or
reduce any obligation of or restriction upon the other under this Agreement,
effective upon delivery of written notice thereof to the other or such other
effective date stated in the notice of waiver. Whenever this Agreement requires
COMPANY's prior approval or consent, FRANCHISE OWNER shall make a timely written
request therefor and such approval shall be obtained in writing.
With respect to this Agreement, the relationship of the parties, the UNIT,
Catering Service, Delivery Service, Special Distribution Arrangements or any
other matter, COMPANY makes no warranties or guaranties upon which FRANCHISE
OWNER may rely, and assumes no liability or obligation to FRANCHISE OWNER, by
granting any waiver, approval, or consent to FRANCHISE OWNER or by reason of any
neglect, delay, or denial of any request therefor. Any waiver granted by COMPANY
(1) shall be without prejudice to any other rights COMPANY may have, (2) will be
subject to continuing review by COMPANY, and (3) as to
72
<PAGE>
continuing waivers, may be revoked prospectively, in COMPANY's sole discretion,
at any time and for any reason, effective upon delivery to FRANCHISE OWNER of
ten (10) days' prior written notice.
COMPANY and FRANCHISE OWNER shall not be deemed to have waived or impaired
any right, power, or option reserved by this Agreement (including, without
limitation, the right to demand full compliance with every term, condition, and
covenant in this Agreement, or to declare any breach thereof to be a default and
to terminate this Agreement prior to the expiration of its term), by virtue of
any:
(i) custom or practice of the parties at variance with the terms
hereof; or
(ii) any failure, refusal, or neglect of COMPANY or FRANCHISE OWNER
to exercise any right under this Agreement or to insist upon full
compliance by the other with its obligations hereunder, including, without
limitation, any mandatory specification, standard or operating procedure;
or
(iii) any waiver, forebearance, delay, failure, or omission by
COMPANY to exercise any right, power, or option, whether of the same,
similar or different nature, with respect to any other BOSTON MARKET Unit
or any development or franchise agreement therefor; or
(iv) the acceptance by COMPANY of any payments from FRANCHISE OWNER
after any breach by FRANCHISE OWNER of this Agreement.
Neither COMPANY nor FRANCHISE OWNER shall be liable for loss or damage or
deemed to be in breach of this Agreement if its failure to perform its
obligations results from any of the following and is not caused by the non-
performing party:
(v) acts of God; or
(vi) acts of war or insurrection; or
(viii) strikes, lockouts, boycotts, fires and other casualties.
Any delay resulting from any of said causes shall extend the time allowed for
performance or excuse performance, in whole or in part, as may be reasonable,
except that said causes shall not excuse payments of amounts owed at the time of
such occurrence or payment of Royalty Fees or other fees thereafter and as soon
as performance is possible the non-performing party shall immediately resume
performance and, in no event, shall non-performance be excused for more than six
(6) months.
73
<PAGE>
19.C. INJUNCTIVE RELIEF.
-----------------
Nothing in this Agreement shall bar COMPANY's right to seek specific
performance of the provisions of this Agreement and injunctive relief against
threatened conduct that will cause it loss or damages under customary equity
rules, including applicable rules for obtaining restraining orders and
preliminary injunctions. FRANCHISE OWNER agrees that COMPANY may obtain such
injunctive relief in addition to such further or other relief as may be
available at law or in equity. FRANCHISE OWNER agrees that COMPANY will not be
required to post a bond to obtain any injunctive relief and that FRANCHISE
OWNER's only remedy if an injunction is entered against FRANCHISE OWNER 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). Any such action shall be brought as provided in
Paragraph 19.G. of this Section.
19.D. RIGHTS OF PARTIES ARE CUMULATIVE.
--------------------------------
The rights of COMPANY and FRANCHISE OWNER hereunder are cumulative and no
exercise or enforcement by COMPANY or FRANCHISE OWNER of any right or remedy
hereunder shall preclude the exercise or enforcement by COMPANY or FRANCHISE
OWNER of any other right or remedy hereunder or to which COMPANY or FRANCHISE
OWNER is entitled by law.
19.E. COSTS AND LEGAL FEES.
--------------------
If COMPANY engages legal counsel in connection with any failure by
FRANCHISE OWNER to comply with this Agreement, FRANCHISE OWNER shall reimburse
COMPANY for costs and expenses incurred by COMPANY, including, without
limitation, reasonable accountants, attorneys', attorneys assistants',
arbitrators' and expert witness fees, cost of investigation and proof of facts,
court costs, other litigation expenses and travel and living expenses, whether
incurred prior to, in preparation for, in contemplation of or in connection with
the filing of any judicial or arbitration proceeding to enforce this Agreement.
19.F. GOVERNING LAW.
-------------
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946
(LANHAM ACT, 15 U.S.C. (S)(S) 1051 ET SEQ.), THIS AGREEMENT AND THE RELATIONSHIP
------
BETWEEN THE PARTIES HERETO SHALL 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 PARAGRAPH.
74
<PAGE>
19.G. CONSENT TO JURISDICTION/CHOICE OF FORUM.
---------------------------------------
FRANCHISE OWNER AGREES THAT FRANCHISE OWNER SHALL, AND COMPANY MAY, AT ITS
OPTION, INSTITUTE ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
STATE COURT OF GENERAL JURISDIC TION 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
COMPANY'S EXECUTIVE OFFICE AT THE TIME SUCH ACTION IS FILED. FRANCHISE OWNER
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND WAIVES ANY
OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF ANY SUCH COURT.
19.H. LIMITATIONS OF CLAIMS.
---------------------
EXCEPT FOR CLAIMS BROUGHT BY COMPANY WITH REGARD TO FRANCHISE OWNER'S
OBLIGATIONS TO MAKE PAYMENTS TO COMPANY PURSUANT TO THIS AGREEMENT OR TO
INDEMNIFY COMPANY PURSUANT TO PARAGRAPH 8.D., ANY AND ALL CLAIMS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE RELATIONSHIP OF FRANCHISE OWNER AND COMPANY
PURSUANT TO THIS AGREEMENT SHALL BE BARRED UNLESS AN ACTION IS COMMENCED WITHIN:
(1) TWO (2) YEARS FROM THE DATE ON WHICH THE ACT OR EVENT GIVING RISE TO THE
CLAIM OCCURRED OR (2) ONE (1) YEAR FROM THE DATE ON WHICH FRANCHISE OWNER OR
COMPANY KNEW OR SHOULD HAVE KNOWN, IN THE EXERCISE OF REASONABLE DILIGENCE, OF
THE FACTS GIVING RISE TO SUCH CLAIMS, WHICHEVER OCCURS FIRST.
19.I. WAIVER OF PUNITIVE DAMAGES.
--------------------------
COMPANY AND FRANCHISE OWNER HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR
SPECULATIVE DAMAGES AGAINST THE OTHER AND AGREE THAT IN THE EVENT OF A DISPUTE
BETWEEN THEM, EXCEPT AS OTHERWISE PROVIDED HEREIN, EACH SHALL BE LIMITED TO THE
RECOVERY OF ACTUAL DAMAGES SUSTAINED BY IT.
19.J. WAIVER OF JURY TRIAL.
--------------------
COMPANY AND FRANCHISE OWNER HEREBY IRREVOCABLY WAIVE TRIAL BY JURY ON ANY
ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY
EITHER OF THEM.
75
<PAGE>
19.K. 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 FRANCHISE OWNER and
COMPANY.
19.L. CONSTRUCTION.
------------
The preambles and exhibits are a part of this Agreement, which constitutes
the entire agreement of the parties, and there are no other oral or written
understandings or agreements between COMPANY and FRANCHISE OWNER relating to the
subject matter of this Agreement. 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. The
term "FRANCHISE OWNER" as used in this Agreement is 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 FRANCHISE OWNER hereunder, whether
or not as partners or joint venturers, their obligations and liabilities to
COMPANY shall be joint and several. This Agreement shall be executed in
multiple copies, each of which shall be deemed an original.
19.M. REASONABLENESS.
--------------
COMPANY and FRANCHISE OWNER agree to act reasonably in all dealings with
each other pursuant to this Agreement. Whenever the consent or approval of
either party is required or contemplated hereunder, the party whose consent is
required agrees not to unreasonably withhold the same, unless such consent is
expressly subject to such party's sole discretion pursuant to the terms of this
Agreement.
20. NOTICES AND PAYMENTS.
--------------------
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement or of the Manuals shall be deemed so delivered
at the time delivered by hand, one (1) business day after transmission by
telegraph or telex or 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 COMPANY at 14103 Denver West Parkway, P.O. Box 4086, Golden,
Colorado 80401-4086, to the attention of the President, or at its most current
principal business address of which FRANCHISE OWNER has been notified or to
FRANCHISE OWNER at FRANCHISE OWNER's most current principal business address of
which COMPANY has been notified, as applicable. All payments and reports
required by this Agreement shall be directed to
76
<PAGE>
COMPANY at the above address, or to such other persons and places as COMPANY may
direct from time to time. Any required payment or report not actually received
by COMPANY during regular business hours on the date due (or postmarked by
postal authorities at least two (2) days prior thereto) shall be deemed
delinquent.
21. DELEGATION OF CERTAIN FUNCTIONS.
-------------------------------
Notwithstanding Sections 11.F. and 15.B. of this Agreement, COMPANY and
FRANCHISE OWNER acknowledge and agree that FRANCHISE OWNER may enter into a
management services agreement (the "Management Agreement") with a management
service provider affiliated with FRANCHISE OWNER (the "Management Company")
providing for the Management Company to furnish to FRANCHISE OWNER certain
management services approved by COMPANY, provided that: (a) COMPANY has
approved the Management Company; (b) COMPANY has approved the Management
Agreement; and (c) the Management Company has entered into a confidentiality
agreement with COMPANY and FRANCHISE OWNER in form and substance acceptable to
COMPANY. COMPANY may withhold any of the foregoing approvals in its sole
discretion.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in multiple originals on the day and year first above written and
COMPANY has accepted this Agreement in Jefferson County, Colorado.
BOSTON CHICKEN, INC. ----------------------------------
FRANCHISE OWNER
By: By:
----------------------------- -------------------------------
Title: Title:
------------------------- ---------------------------
77
<PAGE>
FLAGSHIP/SATELLITE RIDER
TO THE BOSTON CHICKEN, INC.
FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND
DATED
THIS FLAGSHIP/SATELLITE RIDER is to the Boston Chicken, Inc. Franchise
Agreement (the "Agreement"), dated __________, 199__ by and between Boston
Chicken, Inc. ("COMPANY") and ____________ (hereinafter referred to as
"FRANCHISE OWNER").
The following shall amend and be incorporated into the Agreement. In
the event of any conflict between the terms of the Agreement and the terms of
this Addendum, then the terms of this Addendum shall control. All capitalized
terms not defined in this Addendum shall have the respective meanings set forth
in the Agreement.
1. Section 1.A is hereby amended by adding the following at the end
thereof:
The UNIT shall be operated as a (check one, if applicable):
Flagship Store
-----
Satellite Store
-----
For purposes hereof, the terms "Flagship Store" and "Satellite Store"
shall have the meanings given to them in COMPANY's Uniform Franchise
Offering Circular previously delivered to FRANCHISE OWNER. COMPANY
reserves the right, at any time and in its sole discretion, with or
without cause and regardless of the investment made by FRANCHISE OWNER
in establishing the UNIT as a Flagship Store or Satellite Store or the
length of time FRANCHISE OWNER has operated the UNIT as a Flagship
Store or Satellite Store, to terminate FRANCHISE OWNER's right to
operate the UNIT as a Flagship Store or Satellite Store, as
applicable.
2. Section 10.C is hereby amended by adding the following at the end
thereof:
COMPANY and FRANCHISE OWNER hereby acknowledge and agree that the
term "Royalty Base Revenue" with respect to the UNIT shall not
include revenue, if any, derived from FRANCHISE OWNER's or the
UNIT's sale of products to a Satellite Store owned and operated by
FRANCHISE OWNER; provided such products are intended for resale at
such Satellite Store.
<PAGE>
3. Section 11.D is hereby amended by adding the following at the end
thereof:
FRANCHISE OWNER agrees to operate the Flagship Store or Satellite
Store, as applicable, in accordance with the standards, specifications
and procedures for Flagship Stores or Satellite Stores which COMPANY
prescribes, and which COMPANY may change from time to time in its sole
discretion, in the Manuals or otherwise in writing, including without
limitation, requirements for delivery drivers, delivery vehicles (owned
and non-owned), training of personnel involved in delivery, design,
layout, equipment, fixtures, signage, product packaging, materials and
supplies, and COMPANY's prototype plans and layout for a Flagship Store
or Satellite Store, as applicable. In particular, and without limiting
the foregoing, FRANCHISE OWNER shall:
a. require all delivery drivers to strictly comply with all
regulations, laws and ordinances applicable to the operation of motor
vehicles and use due care, taking into consideration road conditions,
when performing delivery services;
b. require all delivery drivers to maintain adequate motor
vehicle liability insurance that complies with all applicable laws and
regulations and that extends to the operation of a motor vehicle for
use for commercial delivery;
c. maintain or cause drivers to maintain all delivery vehicles in
good and safe operating condition in full compliance with all
applicable laws and regulations;
d. conduct initial and periodic (at least once every six months)
driving record checks on all delivery drivers;
e. require all delivery drivers to possess and maintain a valid
driver's license and driving records free of disqualifying violations;
and
f. suspend, or where appropriate under COMPANY's specifications
and standards as in effect from time to time, terminate any delivery
driver who does not conform to COMPANY's standards and specifications
for delivery of products.
FRANCHISE OWNER shall maintain the condition and appearance of, and
perform maintenance with respect to the delivery vehicles, facilities,
fixtures and equipment used in connection with the operation of the
Flagship Store or Satellite Store, as applicable, in accordance with
COMPANY's standards, specifications and procedures, and consistent
2
<PAGE>
with the image of BOSTON MARKET Units as first class, clean, sanitary,
attractive and efficiently operated food service businesses.
4. Section 17.B. is hereby amended by adding the following at the end
thereof:
If FRANCHISE OWNER fails to operate the Flagship Store or Satellite
Store, as applicable, in accordance with this Rider, FRANCHISE OWNER
acknowledges and agrees that COMPANY shall have the right to terminate:
(a) this Agreement pursuant to and in accordance with this Section
17.B., or (b) FRANCHISE OWNER's right to operate the UNIT as a Flagship
Store or Satellite Store, as applicable.
Notwithstanding the foregoing, COMPANY reserves the right, at any time
and in its sole discretion, with or without cause and regardless of:
(a) the investment made by FRANCHISE OWNER; (b) the length of time
FRANCHISE OWNER has operated the UNIT as a Flagship Store or Satellite
Store, as applicable; or (c)(i) the fact that Satellite Stores receive
products from the Flagship Store, if applicable, or (ii) the fact that
the Satellite Store receives products from a Flagship Store, to suspend
or terminate FRANCHISE OWNER's right to operate the Flagship Store or
Satellite Store, as applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Flagship/Satellite Rider in duplicate as of
the date written below.
DATE: DATE:
------------------- ---------------------
COMPANY: FRANCHISE OWNER:
BOSTON CHICKEN, INC.
--------------------------
By: By:
--------------------- -----------------------
Its: Its:
------------------ --------------------
3
<PAGE>
EXHIBIT A
TO THE BOSTON CHICKEN, INC.
FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _______________________________
DATED ________________________
FRANCHISE OWNER ACKNOWLEDGEMENTS
AND REPRESENTATIONS STATEMENT
-----------------------------
<PAGE>
EXHIBIT A
FRANCHISE OWNER ACKNOWLEDGEMENTS
AND REPRESENTATIONS STATEMENT
-----------------------------
See Exhibit A To Development Agreement
<PAGE>
EXHIBIT B
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____ ("FRANCHISE OWNER")
DATED ____________
SITE AND TERRITORY
------------------
<PAGE>
SITE AND TERRITORY
------------------
1. Site. The Site of the UNIT will be as follows:
----
2. Territory. The Territory shall be as follows:
---------
BOSTON CHICKEN, INC. ------------------------------
FRANCHISE OWNER
By: By:
------------------------- ---------------------------
Title: Title:
-------------------- ----------------------
B-1
<PAGE>
EXHIBIT C
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________ ("FRANCHISE OWNER")
DATED _________________
PERMITTED COMPETITIVE BUSINESSES,
FORM DEVELOPMENT AGREEMENT (FOR
SINGLE-UNIT FRANCHISES), IDENTITY OF
DEVELOPER AND DATE OF DEVELOPMENT AGREEMENT
-------------------------------------------
<PAGE>
PERMITTED COMPETITIVE BUSINESSES,
FORM DEVELOPMENT AGREEMENT (FOR
SINGLE-UNIT FRANCHISES), IDENTITY OF
DEVELOPER AND DATE OF DEVELOPMENT AGREEMENT
-------------------------------------------
1. Applicability. If this Agreement is not executed pursuant to a
-------------
Development Agreement, Section 2 of this Exhibit shall be completed by the
parties and Sections 2 and 3 of this Exhibit shall be incorporated into this
Agreement. If this Agreement is executed pursuant to a Development Agreement,
Section 4 of this Exhibit shall be completed by the parties and incorporated
into this Agreement.
2. Owners in Permitted Competitive Businesses. Subject to Section 1 of
------------------------------------------
this Exhibit and as specified in Paragraph B of Section 9 of this Agreement,
the following persons currently perform services for or have an ownership
interest in a Permitted Competitive Business as of the date of this Agreement.
Name of Owner: Name of Owner:
------------------------------ -----------------------------
Name of Competitive Business: Name of Competitive Business:
------------------------------ -----------------------------
Address of Competitive Business: Address of Competitive Business:
------------------------------ -----------------------------
------------------------------ -----------------------------
Name of Owner: Name of Owner:
------------------------------ -----------------------------
Name of Competitive Business: Name of Competitive Business:
------------------------------ -----------------------------
Address of Competitive Business: Address of Competitive Business:
------------------------------ -----------------------------
------------------------------ -----------------------------
C-1
<PAGE>
3. Development Agreement. Subject to Section 1 of this Exhibit,
---------------------
FRANCHISE OWNER has received the form of Development Agreement contained in
COMPANY's Uniform Franchise Offering Circular in effect as of the date of this
Agreement.
4. Date of Development Agreement and Identity of Developer. Subject to
-------------------------------------------------------
Section 1 of this Exhibit, the date of the Development Agreement and the
identity of DEVELOPER under the Development Agreement is as follows:
-------------------------------
DEVELOPER
-------------------------------
DATE
BOSTON CHICKEN, INC. ---------------------------------
FRANCHISE OWNER
By: By:
--------------------------- --------------------------
Title: Title:
---------------------- ---------------------
C-2
<PAGE>
EXHIBIT D
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND ______________________ ("FRANCHISE OWNER")
DATED _________________________
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
-------------
<PAGE>
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
-------------
(Name of Person or Legal Entity)(ID Number)
----------------------------------- ----
The undersigned depositor ("DEPOSITOR") hereby authorizes Boston Chicken, Inc.
("COMPANY") to initiate debit entries and/or credit correction entries to the
undersigned's checking and/or savings account(s) indicated below and the
depository designated below ("DEPOSITORY") to debit such account pursuant to
COMPANY's instructions.
----------------------------------- ------------------------------------
DEPOSITORY Branch
------------------ ------------------ -------------------------
City State Zip Code
-------------------------------- ------------------------------------
Bank Transit/ABA Number Account Number
-----------------------------------------------------------------------------
This authority is to remain in full and force and effect until DEPOSITORY has
received joint written notification from COMPANY and DEPOSITOR of the
DEPOSITOR's termination of such authority in such time and in such manner as
to afford DEPOSITORY a reasonable opportunity to act on it. Notwithstanding
the foregoing, DEPOSITORY shall provide COMPANY and DEPOSITOR with thirty (30)
days' prior written notice of the termination of this authority. If an
erroneous debit entry is initiated to DEPOSITOR's account, DEPOSITOR shall
have the right to have the amount of such entry credited to such account by
DEPOSITORY, if (a) within fifteen (15) calendar days following the date on
which DEPOSITORY sent to DEPOSITOR a statement of account or a written notice
pertaining to such entry or (b) forty-five (45) days after posting, which ever
occurs first, DEPOSITOR shall have sent to DEPOSITORY a written notice
identifying such entry, stating that such entry was in error and requesting
DEPOSITORY to credit the amount thereof to such account. These rights are in
addition to any rights DEPOSITOR may have under federal and state banking
laws.
------------------------------------ --------------------------------------
DEPOSITOR DEPOSITORY
By: By:
--------------------------------- -----------------------------------
Title: Title:
--------------------------- -----------------------------
Date: Date:
------------------------------- ---------------------------------
D-1
<PAGE>
EXHIBIT E
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND ________________________ ("FRANCHISE OWNER")
DATED ___________________________
PRINCIPAL OWNERS, OTHER OWNERS,
DESIGNATED PRINCIPAL OWNERS,
UNIT AND ADDITIONAL MANAGERS, SUPERVISING OWNERS
AND INITIAL CAPITALIZATION
--------------------------
<PAGE>
PRINCIPAL OWNERS, OTHER OWNERS,
DESIGNATED PRINCIPAL OWNERS,
UNIT AND ADDITIONAL MANAGERS, SUPERVISING OWNERS
AND INITIAL CAPITALIZATION
--------------------------
1. Principal Owners: Listed below is the full name (and mailing address)
----------------
of each person or entity who is a Principal Owner of FRANCHISE OWNER
(including a designated Principal Owner so designated based on their business
experience, financial capacity or other personal attributes), and a
description of the nature of such Principal Owner's direct or indirect equity
or voting interest in FRANCHISE OWNER:
___ (Check here if the following statement is applicable and do not
complete the rest of this Section 1.) The Principal Owners of FRANCHISE OWNER
and their respective equity and voting interests in FRANCHISE OWNER are the
same as indicated in the Development Agreement with respect to the Principal
Owners and their interests in DEVELOPER.
Name: Number of Shares Owned:
---------------------- -----------------------
Address: % of Total Shares:
------------------- ----------------------------
Number of Shares Owner is Entitled
--------------------------- to Vote:
--------------------------------------
--------------------------- Other Interest (Describe):
--------------------
---------------------------
----------------------------------------------
Name: Number of Shares Owned:
---------------------- -----------------------
Address: % of Total Shares:
------------------- ----------------------------
Number of Shares Owner is Entitled
--------------------------- to Vote:
--------------------------------------
--------------------------- Other Interest (Describe):
--------------------
---------------------------
----------------------------------------------
Name: Number of Shares Owned:
---------------------- -----------------------
Address: % of Total Shares:
------------------- ----------------------------
Number of Shares Owner is Entitled
--------------------------- to Vote:
--------------------------------------
--------------------------- Other Interest (Describe):
--------------------
---------------------------
----------------------------------------------
Name: Number of Shares Owned:
---------------------- -----------------------
Address: % of Total Shares:
------------------- ----------------------------
Number of Shares Owner is Entitled
--------------------------- to Vote:
--------------------------------------
--------------------------- Other Interest (Describe):
--------------------
---------------------------
----------------------------------------------
E-1
<PAGE>
2. Other Owners. Listed below is the full name (and mailing address)
------------
of each person or entity, other than the Principal Owners, who directly or
indirectly owns an equity voting interest in FRANCHISE OWNER and a description
of the nature of the interest (attach additional sheets if necessary):
____ (Check here if the following statement is applicable and do not
complete the rest of this Section 2.) The Owners of FRANCHISE OWNER and their
respective equity and voting interests in FRANCHISE OWNER are the same as
indicated in the Development Agreement with respect to the Principal Owners
and their interests in DEVELOPER.
Name: Number of Shares Owned:
---------------------- -----------------------
Address: % of Total Shares:
------------------- ----------------------------
Number of Shares Owner is Entitled
--------------------------- to Vote:
--------------------------------------
--------------------------- Other Interest (Describe):
--------------------
---------------------------
----------------------------------------------
Name: Number of Shares Owned:
---------------------- -----------------------
Address: % of Total Shares:
------------------- ----------------------------
Number of Shares Owner is Entitled
--------------------------- to Vote:
--------------------------------------
--------------------------- Other Interest (Describe):
--------------------
---------------------------
----------------------------------------------
3. Unit Manager and Additional Manager: As required pursuant to this
-----------------------------------
Agree ment, the following person shall attend the training program as the
initial Unit Manager and the initial Additional Manager of the UNIT:
Name: Name:
------------------------------ ---------------------------------
(Unit Manager) (Additional Manager)
4. Supervising Owners: As required pursuant to this Agreement, the
------------------
following Principal Owners shall supervise the operation of the UNIT:
Name: Name:
-------------------------------- ---------------------------------
Name: Name:
-------------------------------- ---------------------------------
E-2
<PAGE>
5. Initial Capitalization. FRANCHISE OWNER: (a) represents and
----------------------
warrants that it has developed and previously provided to COMPANY a
description of its initial capital structure (the "Initial Capital Structure")
which is a true, correct, complete and detailed description of FRANCHISE
OWNER's capital structure; (b) covenants that it will not deviate from the
Initial Capital Structure without COMPANY's prior written consent; and (c)
acknowledges that COMPANY has relied on the Initial Capital Structure in
entering into this Agreement.
BOSTON CHICKEN, INC. ---------------------------------
FRANCHISE OWNER
By: By:
--------------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------
E-3
<PAGE>
EXHIBIT F
TO THE BOSTON CHICKEN, INC.
FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND ___________________________________
DATED ________________
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
-----------------------------------------
<PAGE>
EXHIBIT F
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
-----------------------------------------
See Exhibit F to Development Agreement
<PAGE>
EXHIBIT G
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _____________________________________________
DATED ____________________
[INTENTIONALLY OMITTED]
-----------------------
<PAGE>
EXHIBIT H
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _______________________ ("FRANCHISE OWNER")
DATED ___________________
GUARANTY AND ASSUMPTION OF FRANCHISE OWNER'S OBLIGATIONS
--------------------------------------------------------
<PAGE>
EXHIBIT H
GUARANTY AND ASSUMPTION OF FRANCHISE OWNER'S OBLIGATIONS
--------------------------------------------------------
See Exhibit H To Development Agreement
<PAGE>
EXHIBIT I
TO THE FRANCHISE AGREEMENT
BY AND BETWEEN BOSTON CHICKEN, INC.
AND _________________("FRANCHISE OWNER")
___________________ DATED _________________
COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
-------------------------------------------------------
<PAGE>
COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
-------------------------------------------------------
THIS ASSIGNMENT is entered into this ___ day of _____________, 19__, in
accordance with the terms of that certain Boston Chicken, Inc. Franchise
Agreement (the "Franchise Agreement") between _________________________
("FRANCHISE OWNER") and Boston Chicken, Inc., a Delaware corporation
("COMPANY"), executed concurrently with this Assignment, under which COMPANY
granted FRANCHISE OWNER the right to own and operate a BOSTON MARKET Unit
located at _______________________________________ (the "UNIT").
FOR VALUE RECEIVED, FRANCHISE OWNER hereby assigns to COMPANY, all of
FRANCHISE OWNER's right, title and interest in and to those certain telephone
numbers and regular, classified or other telephone directory listings
(collectively, the "Telephone Numbers and Listings") associated with COMPANY's
trade and service marks and used from time to time in connection with the
operation of the UNIT at the address provided above. This Assignment is for
collateral purposes only and, except as specified herein, COMPANY shall have no
liability or obligation of any kind whatsoever arising from or in connection
with this Assignment, unless COMPANY shall notify the telephone company and/or
the listing agencies with which FRANCHISE OWNER has placed telephone directory
listings (all such entities are collectively referred to herein as the
"Telephone Company") to effectuate the assignment pursuant to the terms hereof.
Upon termination or expiration of the Franchise Agreement (without renewal
or extension), COMPANY shall have the right and is hereby empowered to
effectuate the assignment of the Telephone Numbers and Listings, and, in such
event, FRANCHISE OWNER shall have no further right, title or interest in the
Telephone Numbers and Listings and shall remain liable to the Telephone Company
for all past due fees owing to the Telephone Company on or before the effective
date of the assignment hereunder.
FRANCHISE OWNER agrees and acknowledges that as between COMPANY and
FRANCHISE OWNER, upon termination or expiration of the Franchise Agreement,
COMPANY shall have the sole right to and interest in the Telephone Numbers and
Listings, and FRANCHISEE appoints COMPANY as FRANCHISE OWNER's true and lawful
attorney-in-fact to direct the Telephone Company to assign same to COMPANY, and
execute such documents and take such actions as may be necessary to effectuate
the assignment. Upon such event, FRANCHISE OWNER shall immediately notify the
Telephone Company to assign the Telephone Numbers and Listings to COMPANY. If
FRANCHISE OWNER fails to promptly direct the Telephone Company to assign the
Telephone Numbers and Listings to COMPANY, COMPANY shall direct the Telephone
Company to effectuate the assignment contemplated hereunder to COMPANY. The
parties agree that the Telephone Company may accept COMPANY's written direction,
the Franchise Agreement or this Assignment as conclusive proof of COMPANY's
exclusive rights in and to the Telephone Numbers and Listings upon such
termination or expiration and that such assignment shall be made automatically
and effective immediately upon
I-1
<PAGE>
Telephone Company's receipt of such notice from COMPANY or FRANCHISE OWNER. The
parties further agree that if the Telephone Company requires that the parties
execute the Telephone Company's assignment forms or other documentation at the
time of termination or expiration of the Franchise Agreement, COMPANY's
execution of such forms or documentation on behalf of FRANCHISE OWNER shall
effectuate FRANCHISE OWNER's consent and agreement to the assignment. The
parties agree that at any time after the date hereof, they will perform such
acts and execute and deliver such documents as may be necessary to assist in or
accomplish the assignment described herein upon termination or expiration of the
Franchise Agreement.
ASSIGNEE: ASSIGNOR:
- -------- --------
BOSTON CHICKEN, INC. ---------------------------------------
(FRANCHISE OWNER)
By: By:
------------------------------- ------------------------------------
Its: Its:
--------------------------- --------------------------------
ACCEPTED AND AGREED TO BY:
- ----------------------------------
(Telephone Company Authorized
Representative)
- ----------------------------------
(Name of Telephone Company)
I-2
<PAGE>
EXHIBIT C
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
DELIVERY RIDER
--------------
C-1
<PAGE>
DELIVERY RIDER
TO THE BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND ___________________________________________
DATED ___________________________
<PAGE>
EXHIBIT C
TO THE
BOSTON CHICKEN,INC.
OFFERING CIRCULAR
DELIVERY RIDER
TO THE BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN,INC.
AND ___________________________________________
DATED ___________________________
<PAGE>
DELIVERY RIDER
--------------
THIS RIDER is made as of this _________________ day of _____________, 19___
by and between BOSTON CHICKEN, INC., a Delaware corporation ("COMPANY"), and
________________________________________________________________________________
___________________, a _____________________________________________________
("FRANCHISE OWNER"), and is attached to and incorporated into the Boston
Chicken, Inc. Franchise Agreement by and between COMPANY and FRANCHISE OWNER
(the "Agreement") dated as of _________________________________. All
capitalized terms not defined in this Rider shall have the respective meanings
set forth in the Agreement. To the extent that the terms of this Rider are
inconsistent with any of the terms of the Agreement, the terms of this Rider
shall supersede and govern.
1. Delivery Service. FRANCHISE OWNER agrees that, within
----------------
_____________________ (________________) days after the execution date of this
Rider and thereafter during the remainder of the term of the Agreement, subject
to earlier termination by COMPANY as provided below in this Rider, FRANCHISE
OWNER will offer and provide Delivery Service (defined below) from the UNIT or,
if required by COMPANY its sole discretion, from a separate delivery facility
approved by COMPANY in writing ("Delivery Facility"), to customers located
within the geographic area described in Schedule A attached hereto ("Delivery
----------
Area"). COMPANY reserves the right, at any time and in its sole discretion,
with or without cause and regardless of the investment made by FRANCHISE OWNER
in establishing and conducting Delivery Service or the length of time FRANCHISE
OWNER has offered Delivery Service, to reduce, modify or expand the Delivery
Area. As used herein, "Delivery Service" shall mean the delivery of Products
prepared at the UNIT or a Delivery Facility to customers in the Delivery Area,
where (a) such Products are intended to serve fewer than fifteen (15) persons,
and (b) such service involves the provision of no services other than the
delivery of Products to a customer at a location within the Delivery Area.
FRANCHISE OWNER acknowledges and agrees that Delivery Service shall not include
Catering Service, as defined in the Agreement. FRANCHISE OWNER, at its sole
expense, shall take such actions (including, without limitation, constructing
such improvements and acquiring fixtures, equipment, delivery vehicles, and
other materials and supplies) and obtain such permits as required to commence
Delivery Service within the ___________________________ (__________________) day
period specified above.
2. Delivery Service Standards. FRANCHISE OWNER agrees to provide Delivery
--------------------------
Service in accordance with the standards, specifications and procedures for
Delivery Service which COMPANY prescribes, and which COMPANY may change from
time to time in its sole discretion, in the Manuals or otherwise in writing,
including, without limitation, requirements for delivery drivers, delivery
vehicles (owned and non-owned), delivery response time, training of personnel
involved in Delivery Service, design, layout, equipment, fixtures, signage,
product packaging, materials and supplies, and COMPANY's prototype plans and
layout for a delivery
DR-1
<PAGE>
staging area within a BOSTON MARKET Unit or for a Delivery Facility, if any,
approved by COMPANY.
In particular, and without limiting the foregoing, FRANCHISE OWNER shall:
a. require all delivery drivers to strictly comply with all
regulations, laws and ordinances applicable to the operation of motor
vehicles and use due care, taking into consideration road conditions, when
performing delivery services;
b. require all delivery drivers to maintain adequate motor vehicle
liability insurance that complies with all applicable laws and regulations
and that extends to the operation of a motor vehicle for use for commercial
delivery;
c. maintain or cause drivers to maintain all delivery vehicles in
good and safe operating condition in full compliance with all applicable
laws and regulations;
d. conduct initial and periodic (at least once every six months)
driving record checks on all delivery drivers;
e. not guarantee to customers delivery within any specified time or
advertise or promote refunds or discounts for FRANCHISE OWNER's failure to
deliver within any specified time;
f. require all delivery drivers to possess and maintain valid drivers
licenses and driving records free of disqualifying violations; and
g. suspend, or where appropriate under COMPANY's specifications and
standards as in effect from time to time, terminate any delivery driver who
does not conform to COMPANY's standards and specifications for Delivery
Service.
FRANCHISE OWNER shall maintain the condition and appearance of, and perform
maintenance with respect to the delivery vehicles, facilities, fixtures and
equipment used in connection with the provision of Delivery Service in
accordance with COMPANY's standards, specifications and procedures, and
consistent with the image of BOSTON MARKET Units as first class, clean,
sanitary, attractive and efficiently operated food service businesses.
3. Company's Right to Terminate the Agreement or Delivery Service. If
--------------------------------------------------------------
FRANCHISE OWNER fails to provide Delivery Service as required pursuant to this
Rider, FRANCHISE OWNER acknowledges and agrees COMPANY shall have the right to
terminate (a) the Agreement pursuant to and in accordance with Paragraph 17.B.
of the Agreement, or (b) FRANCHISE OWNER's right to provide Delivery Service,
among other rights, pursuant to and in accordance with Paragraph 17.C. of the
Agreement. If COMPANY terminates
DR-2
<PAGE>
FRANCHISE OWNER's right to perform Delivery Service pursuant to this Paragraph
3, COMPANY or its designee will have the right to offer Delivery Service within
the Territory of the UNIT from and after COMPANY's delivery of written notice of
such termination to FRANCHISE OWNER.
Notwithstanding the foregoing, COMPANY reserves the right, at any time and
in its sole discretion, with or without cause and regardless of the investment
made by FRANCHISE OWNER in establishing and conducting Delivery Service or the
length of time FRANCHISE OWNER has offered Delivery Service: (a) to reduce,
modify or expend the Delivery Area, effective upon COMPANY's written notice to
FRANCHISE OWNER, or (b) to suspend or terminate FRANCHISE OWNER's right to offer
Delivery Service, effective one hundred eighty (180) days after COMPANY's
written notice to FRANCHISE OWNER. In the event of such suspension or
termination, COMPANY reserves the right to require FRANCHISE OWNER to reinstate
Delivery Service upon fifteen (15) days' prior written notice to FRANCHISE
OWNER.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Rider in multiple originals as of the date of the Agreement.
BOSTON CHICKEN, INC.
---------------------------------------
(FRANCHISE OWNER)
By:
----------------------------- ---------------------------------------
Its:
--------------------------- ---------------------------------------
DR-3
<PAGE>
SCHEDULE A
TO THE DELIVERY RIDER
TO THE BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND __________________________________________
DATED ________________________
DELIVERY AREA
-------------
1. Delivery Area. The Delivery Area of the UNIT will be as follows:
-------------
, provided that COMPANY may, and FRANCHISE OWNER acknowledges and agrees that
COMPANY may, at any time and in its sole discretion with or without cause and
regardless of the investment made by FRANCHISE OWNER in establishing and
conducting Delivery Service or the length of time FRANCHISE OWNER has offered
Delivery Service, reduce, modify or expand the Delivery Area.
BOSTON CHICKEN, INC.,
----------------------------------
FRANCHISE OWNER
By: By:
------------------------------- -------------------------------
Its: Its:
----------------------------- -----------------------------
A-1
<PAGE>
EXHIBIT D
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
CATERING RIDER
--------------
D-1
<PAGE>
CATERING RIDER
TO THE BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND ________________________________
DATED _______________________
<PAGE>
EXHIBIT D
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
CATERING RIDER
TO THE BOSTON CHICKEN, INC.FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND ____________________________
DATED ___________________
<PAGE>
CATERING RIDER
--------------
THIS RIDER is made as of this _________________ day of _____________,
19____ by and between BOSTON CHICKEN, INC., a Delaware corporation ("COMPANY"),
and
________________________________________________________________________________
________________________, a ____________________________________________
("FRANCHISE OWNER"), and is attached to and incorporated into the Boston
Chicken, Inc. Franchise Agreement by and between COMPANY and FRANCHISE OWNER
(the "Agreement") dated as of ______________________________________________.
All capitalized terms not defined in this Rider shall have the respective
meanings set forth in the Agreement. To the extent that the terms of this Rider
are inconsistent with any of the terms of the Agreement, the terms of this Rider
shall supersede and govern.
1. Catering Service. FRANCHISE OWNER agrees that, within
----------------
_________________________ (____________) days after the execution date of this
Rider and thereafter during the remainder of the term of the Agreement, subject
to earlier termination by COMPANY as provided below in this Rider, FRANCHISE
OWNER will offer and provide Catering Service (defined below) from the UNIT or,
if required by COMPANY in its sole discretion, from a catering facility
("Catering Facility") to customers located within the geographic area described
in Schedule A attached hereto ("Catering Area"). COMPANY reserves the right,
----------
at any time and in its sole discretion, with or without cause and regardless of
the investment made by FRANCHISE OWNER in establishing and conducting Catering
Service or the length of time FRANCHISE OWNER has offered Catering Service, to
reduce, modify or expand the Catering Area. As used herein, "Catering
Service" shall mean the delivery of Products prepared at the UNIT or a Catering
Facility to customers in the Catering Area, where (a) such Products are intended
to serve fifteen (15) or more persons, or (b) in addition to the delivery of
Products, FRANCHISE OWNER provides ancillary services to a customer at a
location within the Catering Area, including, by way of example and without
limitation, setting up for serving or other distribution of Products. The UNIT
or the Catering Facility, whichever is used for the conduct of Catering Service
by FRANCHISE OWNER, shall be referred to herein as the "Catering Location" and
shall be identified in Schedule A attached hereto immediately after COMPANY
----------
approves such Catering Facility in writing pursuant to the requirements of
Paragraph 2 below. FRANCHISE OWNER acknowledges and agrees that Catering
Service shall not include Delivery Service, as defined in the Agreement.
FRANCHISE OWNER, at its sole expense, shall take such actions (including,
without limitation, constructing such improvements and acquiring fixtures,
equipment, vehicles, and other materials and supplies) and obtain such permits
as are required to commence Catering Service from the Catering Location within
the _________________________ (___________) day period specified above.
2. Catering Service Standards. FRANCHISE OWNER agrees to provide Catering
--------------------------
Service in accordance with the standards, specifications and procedures for
Catering Service
CR-1
<PAGE>
which COMPANY prescribes, and may change from time to time in its sole
discretion, in the Manuals or otherwise in writing, including, without
limitation, requirements for catering vehicles (owned and non-owned), training
and conduct of personnel involved in Catering Service, design, layout,
equipment, fixtures, furniture, signage, product packaging, materials and
supplies, and COMPANY's prototype plans and layout for a Catering Location.
In particular, and without limiting the foregoing, FRANCHISE OWNER shall:
a. require all catering drivers to strictly comply with all
regulations, laws and ordinances applicable to the operation of motor
vehicles and use due care, taking into consideration road conditions, when
performing catering services;
b. require all catering drivers to maintain adequate motor vehicle
liability insurance that complies with all applicable laws and regulations
and that extends to the operation of a motor vehicle for use for commercial
delivery;
c. maintain or cause drivers to maintain all catering vehicles in
good and safe operating condition in full compliance with all applicable
laws and regulations;
d. conduct initial and periodic (at least once every six months)
driving record checks on all catering drivers;
e. require all catering drivers to possess and maintain valid drivers
licenses and driving records free of disqualifying violations;
f. suspend, or where appropriate under COMPANY's specifications and
standards as in effect from time to time, terminate any catering driver who
does not conform to COMPANY's standards and specifications for Catering
Service; and
g. obtain and maintain all licenses, permits and other governmental
approvals necessary or advisable for the provision of Catering Services,
and the conduct of such Catering Service in a manner which complies with
all sanitary, safety and food preparation and holding period standards.
FRANCHISE OWNER shall maintain the condition and appearance of, and perform
maintenance with respect to, the Catering Location, catering vehicles,
furniture, fixtures and equipment used in connection with the provision of
Catering Service in accordance with COMPANY's standards, specifications and
procedures, and consistent with the image of BOSTON MARKET Units and related
facilities as first class, clean, sanitary, attractive and efficiently operated
food service businesses.
CR-2
<PAGE>
3. Company's Review and Approval of the Catering Facility. FRANCHISE
------------------------------------------------------
OWNER shall comply with COMPANY's specifications and requirements regarding site
selection (if applicable), development and construction of the Catering
Facility. FRANCHISE OWNER shall promptly submit to COMPANY after the execution
date of this Rider a complete site evaluation report and feasibility analysis
(the "Catering Facility Site Package") on COMPANY's specified form (containing
such commercial and other information and photographs as COMPANY may require
from time to time) for the site at which FRANCHISE OWNER proposes and intends in
good faith to establish and operate the Catering Facility and which FRANCHISE
OWNER reasonably believes to conform to certain minimum site criteria for
catering facilities established by COMPANY from time to time in its sole
discretion. In approving or disapproving any proposed site for the Catering
Facility, COMPANY will consider such matters as it deems material, including,
without limitation, the effect Catering Service will have on the carry-out and
on-premises dining services and Delivery Service (if any) conducted at or from
the UNIT, traffic patterns, parking, the predominant character of the
neighborhood, the nature of other businesses in proximity to the site, and other
commercial characteristics (including the purchase price or rental obligations
and other lease terms for the proposed site, if applicable) and the size,
appearance, and other physical characteristics of the proposed site.
COMPANY will approve or disapprove a proposed site for the Catering
Facility by delivery of written notice to FRANCHISE OWNER. COMPANY agrees to
exert its best efforts to deliver such notification to FRANCHISE OWNER within
twenty (20) days after receipt by COMPANY of a complete Catering Facility Site
Package and such other materials requested by COMPANY from time to time,
containing all information required by COMPANY. COMPANY shall have the right in
its sole discretion to approve or disapprove a proposed site for the Catering
Facility, and FRANCHISE OWNER acknowledges and agrees that COMPANY shall have no
liability therefor. Notwithstanding any other provision of this Rider,
COMPANY's failure to provide FRANCHISE OWNER with notice of its approval or
disapproval of one or more proposed sites shall in no event constitute a waiver
of COMPANY's right to approve or disapprove the site for the Catering Facility.
4. Company's Right to Terminate the Agreement or Catering Service. If
--------------------------------------------------------------
FRANCHISE OWNER fails to provide Catering Service as required pursuant to this
Rider, FRANCHISE OWNER acknowledges and agrees COMPANY shall have the right to
(a) terminate the Agreement pursuant to and in accordance with the terms
specified in Paragraph 17.B. of the Agreement, or (b) FRANCHISE OWNER's right to
provide Catering Service, among other rights, pursuant to and in accordance with
the terms specified in Paragraph 17.C. of the Agreement. If COMPANY terminates
FRANCHISE OWNER's right to perform Catering Service pursuant to this Paragraph
4, COMPANY or its designee will have the right to offer Catering Service within
the Territory of the UNIT from and after COMPANY's delivery of written notice of
such termination to FRANCHISE OWNER.
CR-3
<PAGE>
Notwithstanding the foregoing, COMPANY reserves the right, at any time and
in its sole discretion, with or without cause and regardless of the investment
made by FRANCHISE OWNER in establishing and conducting Catering Service or the
length of time FRANCHISE OWNER has offered Catering Service: (1) to reduce,
modify or expand the Catering Area, effective upon COMPANY's written notice to
FRANCHISE OWNER; or (2) to suspend or terminate FRANCHISE OWNER's right to offer
Catering Service, effective one hundred eighty (180) days after COMPANY's
written notice to FRANCHISE OWNER (in which case, FRANCHISE OWNER will not file
any orders for Catering Service after the expiration of such one hundred eighty
(180) day period). In the event of such suspension or termination, COMPANY
reserves the right to require FRANCHISE OWNER to reinstate Catering Service upon
fifteen (15) days' prior written notice to FRANCHISE OWNER.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Rider in multiple originals as of the date of the Agreement.
BOSTON CHICKEN, INC. --------------------------
FRANCHISE OWNER
By:--------------------- --------------------------
Its:------------------- --------------------------
CR-4
<PAGE>
SCHEDULE A
TO THE CATERING RIDER
TO THE BOSTON CHICKEN, INC. FRANCHISE AGREEMENT
BY AND BETWEEN
BOSTON CHICKEN, INC.
AND __________________________
DATED _________________
CATERING AREA AND CATERING FACILITY
-----------------------------------
1. Catering Area. The Catering Area will be as follows:
-------------
, provided that COMPANY may, at any time and in its sole discretion, with or
without cause and regardless of the investment made by FRANCHISE OWNER in
establishing and conducting Catering Service or the length of time FRANCHISE
OWNER has offered Catering Service, reduce, modify or expand the Catering Area.
2. Catering Facility. The Catering Facility will be located at the
-----------------
following address:
----------------------------------------------------------------
----------------------------------------------------------------
BOSTON CHICKEN, INC., ------------------------------
FRANCHISE OWNER
By:_________________________________ By:___________________________
Its:_______________________________ Its:_________________________
A-1
<PAGE>
EXHIBIT E
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
ADDENDUM TO LEASE
-----------------
E-1
<PAGE>
ADDENDUM TO LEASE
-----------------
THIS ADDENDUM is to the foregoing lease (the "Lease"), dated as of
________________________, 199__ by and between ________________________________
_______________________________________________________________________________
______________________ ("Tenant") and _________________________________________
_______________________________________________________________________________
________________ ("Landlord").
The following shall amend and be incorporated into the Lease. In the event
of any conflict between the terms of the Lease and the terms of this Addendum,
then the terms of this Addendum shall control. All capitalized terms not defined
in this Addendum shall have the respective meanings set forth in the Lease.
1. CONDITIONS PRECEDENT. Tenant proposes to use the Property for the
--------------------
construction and operation of a free standing Boston Market restaurant,
including, but not limited to, a drive-thru service facility, carry-out and
delivery service, and off-street parking incident thereto, together with curb-
cuts and signage acceptable to Tenant ("Tenant's Proposed Use"). Tenant's
obligation to lease the Property is contingent on the satisfaction in Tenant's
sole discretion or waiver by Tenant of the following conditions ("Conditions
Precedent") within one hundred eighty (180) days after the date that both Tenant
and Landlord have signed this Lease and Tenant has received a fully executed
counterpart of the Lease from Landlord ("Effective Date"):
(a) Tenant obtaining a survey, bearing a legal description, made by a
licensed surveyor, selected by Tenant, in accordance with the "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys" jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992 and such other survey
standards as required by Tenant ("Survey"), and certified to Tenant and the
Title Company and such other parties requested by Tenant, showing the area,
dimensions and location of the Property to the nearest monuments, streets,
alleys on all sides, the topography, the location of all available
utilities in adjoining streets, alleys or property, the location of all
improvements and encroachments, the location of all recorded easements
against or appurtenant to the Property, stating the flood zone of the
Property, and not disclosing any condition rendering the Property unusable
for Tenant's Proposed Use.
(b) Tenant obtaining boring, percolation, and other soil tests ("Soil
Tests") conducted by a licensed engineer selected by Tenant determining the
physical characteristics of the sub-strata of the Property and showing that
the soil and ground water are not contaminated and that the Property is
satisfactory for Tenant's Proposed Use.
(c) Tenant obtaining a written Phase I Environmental Assessment
("Assessment") of the Property, which Assessment shall be prepared by an
environmental professional selected by Tenant and comply with the terms and
provisions of the "Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process," ASTM Standard 1527-93 as
presently in effect and promulgated by the American Society of Testing and
Materials and Tenant's Guidance Document and Service Agreement therefor.
If the assessment discloses any known or suspected environmental
contamination, Tenant, at Landlord's expense, may order additional tests
<PAGE>
and investigations to determine if the Property is satisfactory for
Tenant's Proposed Use if the presence of such environmental contamination
is confirmed, Tenant shall either (i) request, and Landlord agrees to,
remediate such environmental contamination, or (ii) terminate this Lease,
in which event the parties shall be released from further liability.
(d) Tenant obtaining the requisite executive corporate approval of
this Lease from Boston Chicken, Inc. ("Approval").
(e) The receipt by Tenant of a non-disturbance agreement in the form
attached hereto as Exhibit C or such other form satisfactory to Tenant.
(f) Tenant obtaining all approvals, permits, easements and licenses
("Permits") for Tenant's Proposed Use in accordance with Tenant's plans and
specifications therefor, including, without limitation, signage, trade
dress, curb cuts, access, parking and drive-thru as required by Tenant. In
the event that the Property is restricted by any state, county, municipal
or other governmental law, ordinance, rule or regulation which prohibit,
limit or restrict the use of the Property for Tenant's Proposed Use, Tenant
shall undertake to secure rezoning, special use permits, variances,
subdivision, lot split, lot tie or replat ("Authorizations") so that the
Property may be used for Tenant's Proposed Use. The cost of securing the
Authorizations shall be at Landlord's expense to be deducted by Tenant from
Rent. Such expenses may include, but are not limited to, attorney,
engineer, architect or other professional and/or consultant fees. Landlord
agrees to cooperate fully with Tenant in securing the Authorizations and
Permits and grants permission to Tenant to make application for the
Authorizations and Permits in the name of Landlord. Landlord shall execute
any necessary documents in connection with Tenant's application for the
Authorizations and Permits. The determination of the necessity for
obtaining the Authorizations and Permits and the adequacy of the
Authorizations and Permits granted shall be within the sole discretion of
Tenant. Landlord further agrees to dedicate or grant any easements for
public ways and to diligently perform and pay for any improvements located
off the Property required as a condition of the Permits and Authorizations.
(g) Tenant obtaining easements from Landlord and any other applicable
party with respect to the Property required by Tenant, in its sole
discretion, for Tenant's Proposed Use relating to ingress and egress,
parking and utilities to be executed on forms provided by Tenant.
(h) Tenant obtaining from Landlord an agreement protecting the
visibility of Tenant's Property and signage and prohibiting any building in
or changes to the area designated by Tenant during the term and any renewal
term to protect Tenant's ingress and egress and parking rights. The form
of this agreement shall be provided by Tenant.
In the event the Conditions Precedent are not satisfied in Tenant's sole
discretion or waived by Tenant within said one hundred eighty (180) day period,
Tenant shall have two (2) successive ninety (90) day extensions within which to
secure the Authorizations and Permits, upon payment to Landlord of One Thousand
Two Hundred Fifty Dollars ($1,250.00) for each ninety (90) day period. All of
such payments are understood to be credited against Rent payments due from and
after the Commencement Date. In the event any of the Conditions Precedent are
not satisfied, approved or waived by Tenant, in its sole discretion, then at any
time within one hundred and eighty (180) days after the Effective Date, as may
have been
2
<PAGE>
extended pursuant to this Section 7, Tenant may terminate this Lease in which
event the parties shall be released from further liability. In the event this
Lease is terminated by Tenant, either by default or election, on or prior to the
Commencement Date, except for the failure of Landlord to convey marketable and
insurable leasehold title, Tenant shall not be entitled to reimbursement for the
cost of the Survey, Assessment and Soil Tests. On or prior to the Commencement
Date, Landlord shall reimburse Tenant for the cost of the Survey, Assessment and
Soil Tests. In the event Tenant does not receive the reimbursement described in
the preceding sentence on or prior to the Commencement Date, Tenant may deduct
such amount from the next succeeding payments of Rent. Landlord hereby grants to
Tenant, its agents and contractors, the right to enter upon the Property to make
the Soil Tests, Assessment and Survey and to install the signage as provided
herein.
2. NON-DISTURBANCE AND ATTORNMENT. Landlord, within sixty (60) days
------------------------------
after the Effective Date, will obtain from every senior landlord, mortgagee and
holder of a deed of trust or mortgage upon the Property, an agreement in
recordable form and substantially in the form of Exhibit C attached hereto and
made a part hereof, acceptable to Tenant wherein the senior landlord(s),
mortgagee(s) and holder(s) of the deed(s) of trust or mortgage(s) agree not to
disturb Tenant's possession, deprive Tenant of any rights and increase Tenant's
obligations under this Lease ("Non-Disturbance and Attornment Agreement").
Landlord shall not further mortgage or encumber the fee or the leasehold estate
from the Effective Date to the date of recording of a Memorandum of Lease unless
Landlord obtains for the benefit of Tenant a Non-Disturbance and Attornment
Agreement. Upon the failure of Landlord to provide Tenant with an acceptable
Non-Disturbance and Attornment Agreement pertaining to every senior lease,
mortgage and deed of trust prior to Tenant's commencement of construction or
reconstruction of the building on the Property, Tenant may terminate this Lease
and the parties shall be released from further liability.
3. RESTRICTIVE COVENANT. As a material inducement for Tenant to enter
--------------------
into this Lease, Landlord acknowledges and agrees that no property presently or
hereafter owned, leased or controlled directly or indirectly by Landlord within
two (2) miles of the Property shall be sold, leased, managed, used or occupied
for a restaurant or food service property. Landlord shall deliver to Tenant on
or prior to the Effective Date documentation, in recordable form, containing
such restriction on all property presently owned, leased or controlled by
Landlord. In the event of a breach by Landlord under the terms of this Section,
Tenant shall be entitled to injunctive relief as well as all other remedies
available at law or in equity, Landlord acknowledging and agreeing that Tenant
does not have an adequate remedy at law for breach of this provision.
4. IMPROVEMENTS, ALTERATIONS AND SIGNAGE.
-------------------------------------
(a) Landlord covenants that upon Tenant's request, it shall
immediately demolish and remove any existing building and/or other
improvements on the Property and shall fill, grade and compact the Property
to Tenant's standards and specifications within fifteen (15) days after the
date Tenant delivers to Landlord (i) notice that all Conditions Precedent
have been satisfied in Tenant's sole discretion, or waived by Tenant, and
(ii) Tenant's demolition standards and specifications for fill, grading and
compaction. In the event Landlord fails to perform its obligations pursuant
to this Section 10(a) within the time provided, Tenant may, at its
election, perform such work and the costs shall be deducted by Tenant from
Rent.
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(b) From and after the Effective Date, Tenant shall have the right
from time to time to construct and/or reconstruct a building and/or other
improvements upon the Property and to alter, renovate, add, remodel,
modify, change and/or demolish the building and/or other improvements upon
the Property as Tenant may deem desirable. The building and/or other
improvements upon the Property shall be and remain the property of Tenant
as the case may be, during the Term and any Extensions, and for a period of
fifteen (15) days after the termination of this Lease. Tenant shall not be
required to remove the building and/or other improvements upon the Property
and Tenant's failure to do so after the expiration of such period shall be
deemed to be an abandonment thereof, whereby title shall become vested in
the Landlord.
(c) It is expressly understood and agreed that as an inducement for
Tenant to enter into this Lease,Landlord acknowledges and agrees that it
has previously consented to and approved Tenant's plans and specifications,
standard signage package and any other requirements for the Property.
5. TENANT'S PROPERTY AND WAIVER OF LANDLORD'S LIEN.
-----------------------------------------------
(a) Any personal property, equipment, furniture, inventory,
trademarked items, signs, decorative soffit, counters, shelving, showcases,
mirrors and other movable trade fixtures installed in or on the Property by
Tenant, including, but not limited to, walk-in coolers, exhaust hoods,
sinks and preparation areas ("Tenant's Property"), shall remain the
property of the Tenant. Landlord agrees that Tenant shall have the right,
at any time or from time to time, to remove any and all of Tenant's
Property. Tenant, at its expense, shall immediately repair any damage
occasioned by the removal of Tenant's Property and upon expiration or
earlier termination of this Lease, shall leave the Property in a neat and
clean condition, normal wear and tear excepted. Tenant shall pay before
delinquency all taxes, assessments, license fees and public charges levied,
assessed or imposed upon its business operation in the Property as well as
upon Tenant's Property. If any such items of property are assessed with
property of Landlord, then such assessment shall be equitably divided
between Landlord and Tenant.
(b) In the event Tenant or a Subtenant acquires and/or leases
Tenant's Property to be installed and used upon the Property subject to a
title retainage agreement, conditional sale contract, chattel mortgage or
other security agreement or lease, Landlord agrees to execute and deliver
to any such secured creditor and/or lessor a waiver of any lien Landlord
may have upon Tenant's Property. Such waiver will be on a form provided by
Tenant authorizing the secured creditor and/or lessor to enter upon the
Property and remove Tenant's Property in the event of default under the
terms of the security agreement and/or lease.
6. LEASEHOLD MORTGAGE.
------------------
(a) Tenant may mortgage, collaterally assign or otherwise encumber
any interest that Tenant has in this Lease or in the improvements located
on the Property ("Mortgage") as security for an indebtedness ("Debt").
Landlord shall make such changes or modifications to this Lease, with the
exception of those provisions of this Lease concerning the Rent and the
length of the Term, including any Extensions, as are reasonably requested
by any potential Mortgagee to facilitate the mortgaging of the leasehold
estate. Landlord shall execute such instruments as may be required by each
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mortgagee or collateral assignee ("Mortgagee") in order to subordinate the
rights and interest of Landlord to the lien of each Mortgage, including the
fee simple title interest of Landlord in the Property; provided, however,
the subordination of Landlord's interest shall be on a non-recourse basis.
(b) If a Mortgagee notifies Landlord of the execution of a Mortgage
and names the place for service of notice upon Mortgagee, then:
(i) Landlord will give to any Mortgagee, simultaneously with
service on Tenant, notices of all demands made by Landlord on Tenant
and no such notice to Tenant shall be effective unless a copy is so
served upon Mortgagee.
(ii) Mortgagee shall have the privilege of performing any of
Tenant's covenants, curing any defaults by Tenant, and exercising any
election, option or privilege conferred upon Tenant by the terms of
this Lease.
(iii) Landlord shall not terminate this Lease or Tenant's right
of possession for any default of Tenant if, within a period of thirty
(30) days after the expiration of the period of time within which
Tenant might cure such default, such default is cured or caused to be
cured by Mortgagee or, if within a period of thirty (30) days after
the expiration of the period of time within which Tenant might
commence to eliminate the cause of such default, Mortgagee diligently
commences to eliminate the cause of such default.
(iv) No liability for the payment of Rent or the performance of
any of Tenant's covenants and obligations of this Lease shall attach
to or be imposed upon any Mortgagee, while not in possession of the
Property, all such liability being hereby expressly waived by
Landlord.
(v) No provision of this Lease which restricts the use of the
Property to less than for any lawful purpose, requires the Property to
be used for a particular purpose, inhibits free assignment or
subletting or requires or implies specified times of business
operation shall be binding upon a Mortgagee in possession or its
successors in interest.
7. TENANT ASSIGNMENT AND SUBLETTING. Tenant shall have the free right to
--------------------------------
sublet, assign or otherwise transfer its interest in this Lease or to delegate
any duties or obligations of Tenant hereunder or possession of the property to
any party without Landlord's approval, written or otherwise. However, any such
assignment, transfer, delegation or subletting shall not relieve Tenant of its
obligations hereunder.
8. ESTOPPEL CERTIFICATE. Tenant and Landlord agree at any time and from
--------------------
time to time, upon not less than ten (10) business days' prior written request
from the other party or from Franchisor, to execute, acknowledge and deliver to
the requesting party a statement in writing, in form and content reasonably
acceptable to both parties, an estoppel certificate certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), the dates to which Rent has been paid and certifying that it is
not in default (or if a default is alleged, stating the nature of the alleged
default), and further certifying such other matters as the requesting party
shall require. It is intended that any such statement delivered pursuant to this
Section may be relied upon by any prospective purchaser, lender, subtenant,
assignee or any entity which is a party to a potential merger, consolidation or
acquisition of
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substantially all of the assets of or with Landlord or Tenant of the Property.
In the event either party shall fail to execute and deliver any such instrument
within the foregoing time period as requested, such party hereby irrevocably
appoints the requesting party as its attorney-in-fact to execute such instrument
as its name, it being agreed that such assignment is one coupled with an
interest and the statements contained in such instrument shall be deemed to be
true and correct, binding on such party, who shall be estopped from denying or
contesting the facts contained in such instrument.
9. TENANT'S CONDUCT OF BUSINESS. Notwithstanding anything herein to the
----------------------------
contrary, nothing herein shall be construed as an obligation for Tenant to open
or operate its business in the Property. Tenant shall have the right to remove
Tenant's Property and cease operations in the Property at any time and at
Tenant's sole discretion. However, the right to cease to operate its business
shall not affect Tenant's obligation to pay all amounts due hereunder and to
perform all covenants and obligations hereunder.
10. COLLATERAL ASSIGNMENT OF LEASE. Concurrently with the execution of
------------------------------
this Lease, Tenant shall collaterally assign the Lease to Franchisor. Landlord
hereby consents to the collateral assignment of this Lease to Franchisor and to
any entity which is a party to a potential merger or consolidation with or to
the acquisition of substantially all of the assets or stock of Tenant or
Franchisor and to a further collateral assignment or hypothecation by Franchisor
of the interest so assigned by Tenant, all in accordance with that certain
Collateral Assignment of Lease attached hereto as Exhibit "D" (the "Collateral
-----------
Assignment"). If requested by Tenant, Landlord agrees promptly to execute any
documents evidencing Landlord's consent to such assignment or assignments. The
execution and delivery of such Collateral Assignment by and between Franchisor
and Tenant shall be a condition precedent to Tenant's obligations under this
Lease.
11. LANDLORD'S CONSENT TO COLLATERAL ASSIGNMENTS. In order to preserve
--------------------------------------------
Franchisor's rights in connection with Landlord's consent to the Collateral
Assignment, Landlord agrees to all of the following:
(a) to notify Franchisor in writing of and upon the failure of Tenant
to cure any default by Tenant under the Lease;
(b) that Franchisor shall have the right, but shall not be obligated,
to cure any default by Tenant under the Lease within thirty (30) days after
the later to occur of (i) the expiration of Tenant's cure period under the
Lease, and (ii) delivery by Landlord of notice thereof in accordance with
Section (a) above;
(c) that Landlord agrees that if Franchisor shall take possession of
the Property and confirm to Landlord the assumption of the Lease by
Franchisor as tenant thereunder, Landlord shall recognize Franchisor as the
tenant under the Lease, provided that Franchisor cures any default by
Tenant under the Lease within the thirty (30) day cure period noted above,
except that if Franchisor is diligently pursuing curing such default and
cannot do so within the thirty (30) day cure period, then Franchisor shall
have a reasonable extension of time to cure the default;
(d) that Franchisor: (i) shall have the absolute right to assign,
sublet or otherwise transfer its right, title, estate and interest in the
Lease and all its proprietary interest arising therefrom to any entity
affiliated with Franchisor or any licensee or
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franchisee of Franchisor provided that Franchisor shall not be released
from its obligations under the Lease (upon assignment) and such successor
tenant expressly assumes liability for Franchisor's duties and obligations
under the Lease; and (ii) may assign the Lease to a person or entity who
shall agree to assume the Tenant's obligations under the Lease and who is
reasonably acceptable to Landlord, and upon such assignment, Franchisor
shall have no further liability or obligation under the Lease as assignee,
tenant or otherwise; and
(e) that Landlord, if Franchisor does not exercise its rights under
the Collateral Assignment, shall not lease the Property to any person or
entity for the purpose of operating a food service business which engages
primarily in the sale of rotisserie-cooked chicken or potpies for a period
of two (2) years after termination or expiration of Tenant's Franchise
Agreement with Franchisor and Tenant's rights under this Lease.
12. FRANCHISE AGREEMENT. Landlord acknowledges and agrees that the
-------------------
Property may be used for the operation of a Boston Market Unit in accordance
with the terms of a Boston Chicken, Inc. Franchise Agreement to be entered into
between Franchisor and Tenant (the "Franchise Agreement"). If Franchisor does
not exercise its right of first refusal to purchase the assets of Tenant's
Boston Market Unit under the terms of the Franchise Agreement, the Tenant
agrees, at Tenant's sole expense, to make such modifications and alterations,
including removal of all distinctive physical and structural features associated
with the trade dress of Boston Market Units, as may be necessary to distinguish
the Property so clearly from its former appearance and from other Boston Market
Units as to prevent any possibility that the public will associate the Property
with Boston Market Units and any confusion created by such association. (Such
modifications and alterations shall include, but not be limited to, removing or
covering the distinctive decor and color scheme on all walls, counters, fixtures
and furnishings, as well as the exterior of the Property.) If Tenant fails to
immediately make such modifications, alterations and/or removals, Landlord and
Tenant agree that Franchisor or its designated agents may enter the Property to
make such modifications, alterations and/or removals, at Tenant's expense, and
that such entry and actions by Franchisor shall not constitute a breach of this
Lease. It is expressly acknowledged and agreed by Landlord and Tenant that
Franchisor shall have the right to obtain the remedy of specific performance or
other injunctive relief in order to enforce the provisions of this Section and
that Franchisor has no adequate remedy available at law for any breach of this
Section. Landlord acknowledges and agrees that Franchisor is a third-party
beneficiary of this Lease.
13. NO SOLICITATION. Landlord agrees that upon its execution of this
---------------
Agreement neither it nor its agents or employees (a) will initiate, encourage
the initiation by others of discussions or negotiations with third parties or
respond to solicitations by third parties relating to the Property or any part
thereof, (b) fail to immediately notify Tenant if any third party attempts to
initiate any such solicitation, discussion or negotiation with Landlord and (c)
will enter into an agreement with any third party with respect to the Property
or any part thereof.
14. CONFIDENTIALITY. Landlord and its agents, representatives, employees,
---------------
partners, officers and directors will not disclose the subject matter or terms
of the transaction contemplated by this Agreement unless prior written consent
to such disclosure is obtained from Tenant, which consent may be withheld at
Tenant's sole discretion.
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15. USE. The Property shall be used and occupied for the preparation and
---
sale of food, including, but not limited to, chicken and chicken products, pasta
products, prepared foods, all types of pot pies, and other items customarily
found in Boston Market stores or for any other lawful use. At any time during
the Term or an Extension, Tenant shall also have the right to have a drive
through facility located on the Property.
16. INDEMNIFICATION. Landlord hereby indemnifies and holds Tenant,
---------------
Tenant's nominees, officers, directors, agents, employees, successors and
assigns harmless from and against any and all claims, demands, liabilities, and
expenses, including attorneys' fees and litigation expenses, arising from the
negligence or wilful acts of Landlord or its agents, employees, or contractors
occurring on the Property, except to the extent caused by Tenant's negligence or
wilful misconduct. In the event any action or proceeding shall be brought
against Tenant by reason of any such claim, Landlord shall defend the same at
Landlord's expense by counsel selected by Tenant.
17. REPRESENTATIONS AND WARRANTIES. To induce Tenant to execute, deliver
------------------------------
and perform this Agreement and without regard to any independent investigations
made by Tenant, Landlord represents and warrants to Tenant on and as of the date
of execution and delivery of this Lease as follows:
(a) TITLE. Landlord owns the Property in fee simple, free of any liens,
-----
claims or encumbrances other than the title exceptions acceptable to Tenant.
(b) AUTHORIZATION. Landlord has full capacity, right, power and authority
-------------
to execute, deliver and perform this Lease and all documents to be executed by
Landlord pursuant hereto, and all required action and approvals therefor have
been duly taken and obtained. The individuals signing this Lease and all other
documents executed or to be executed pursuant hereto on behalf of Landlord are
and shall be duly authorized to sign the same on Landlord's behalf and to bind
Landlord thereto. This Lease and all documents to be executed pursuant hereto by
Landlord are and shall be binding upon and enforceable against Landlord in
accordance with their respective terms, and the transaction contemplated hereby
will not result in a breach of, or constitute a default or permit acceleration
of maturity under, any indenture, mortgage, deed of trust, loan agreement or
other agreement to which Landlord or the Property is subject or by which
Landlord or the Property is bound.
(c) LITIGATION. There are no claims, causes of action or other litigation
----------
or proceedings pending or, to the best of Landlord's knowledge, threatened in
respect to the ownership, operation or environmental condition of the Property
or any part thereof (including disputes with mortgagees, governmental
authorities, utility companies, contractors, adjoining land owners or suppliers
of goods or services), except for claims which are fully insured and as to which
the insurer has accepted defense without reservation.
(d) VIOLATION. There are no violations of any health, safety, pollution,
---------
zoning or other laws, ordinances, rules or regulations with respect to the
Property, which have not been heretofore entirely corrected. In the event
Landlord has knowledge of any such violations, Landlord shall cure such
violations prior to the date that Tenant takes possession of the Property.
(e) ZONING. The Property is currently zoned to permit the development of
------
the Property for Tenant's Proposed Use.
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18. LANDLORD'S INSURANCE. Landlord shall at no cost to Tenant all times
--------------------
maintain fire and extended coverage insurance on the improvements located on the
Shopping Center in amounts equal to the full replacement cost of said
improvements and public liability insurance covering the common areas. Upon
notice from Tenant, Landlord shall deliver to Tenant a certificate from
Landlord's insurer declaring such insurance to be in full force and effect.
Landlord and Tenant hereby release and waive any claim or right of recovery
against the other for any loss resulting from insurable causes arising out of or
in connection with the Shopping Center or the Property.
19. MEMORANDUM OF LEASE. Tenant shall not record this Lease. The parties
-------------------
shall join in the execution of a memorandum or so-called "short-form" of this
Lease for the purpose of recordation in accordance with the form attached hereto
as Exhibit "A" and made a part hereof. Any recording costs associated with the
memorandum or short-form of this Lease shall be borne by the party requesting
recordation.
20. TITLE INSURANCE.
---------------
(a) Prior to the Effective Date, Landlord has delivered to Tenant a
current abstract of title or existing title policy on the Property and
appurtenant easements. Tenant shall order a title insurance commitment on
the Property prepared by a title company ("Title Company") selected by
Tenant insuring Tenant against loss or damage from and after the Effective
Date in the amount set forth in Section 1, subject only to the title
exceptions acceptable to Tenant, in its sole discretion. Landlord shall pay
for any cost incurred in searching title and, contemporaneously with the
execution of this Lease, shall pay for an ALTA form Leasehold Title
Insurance Policy ("Title") approved by Tenant, with extended coverage over
all general exceptions in the amount set forth in Section 1 and any title
endorsements required by Tenant. The Property shall be leased to Tenant
free, clear and unencumbered of all tenancies and parties in possession on
the Effective Date.
(b) In the event the title insurance commitment shall reflect
encumbrances or other conditions not acceptable to Tenant ("Defects"),
then, Landlord, upon Tenant's notification of the Defects, shall
immediately and diligently proceed to cure same and shall have thirty (30)
days from the date of notice of Defects within which to cure the Defects to
Tenant's satisfaction. If, after the exercise of all reasonable diligence,
Landlord is unable to remove or obtain a title endorsement over the
Defects, then Tenant may accept the Defects or Tenant may terminate this
Lease and the parties shall be released from further liability.
IN THE EVENT THE PROPERTY BEING LEASED IS PART OF A SHOPPING CENTER, THE
FOLLOWING PARAGRAPHS SHOULD BE INSERTED:
1. PROPERTY.
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A. The Property, together with all improvements and
appurtenant easements, if any, is located in a portion of a shopping
center (the "Shopping Center") shown on the site plan ("Site Plan")
attached as Exhibit B hereto and made a part hereof and is described
on the Site Plan as "Parcel 1".
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B. The legal description of the Shopping Center (excluding
the Property) is described in Exhibit C attached hereto and made a
part hereof and is shown on Exhibit B as "Parcel 2."
2. RESTRICTIVE COVENANTS.
---------------------
Landlord agrees that no portion of the Shopping Center, other
than the Property, shall be sold, leased, used or occupied for a
parking intensive use. Tenant has leased or will lease the Property in
reliance upon representations by Landlord that the Shopping Center is
and will remain a first-class retail shopping center, and, further, no
part of same shall be used as a theater, auditorium, meeting hall,
school or other place of public assembly, gymnasium, health club,
exercise or dance studio, dance hall, bar, off-track betting business,
billiard or pool hall; for bingo or similar games of chance; as a
massage parlor, video game arcade, bowling alley, skating rink, car
wash, car repair or car rental agency, blood bank or other medical
care office; night-club or adult book or adult video store (which are
defined as stores in which any portion of the inventory is not
available for sale or rental to children under eighteen (18) years old
because such inventory explicitly deals with or depicts human
sexuality). In the event of a breach by Landlord of this restrictive
covenant, Landlord acknowledges and agrees that Tenant does not have
an adequate remedy at law and Tenant shall be entitled to injunctive
relief as well as all other remedies available at law or in equity.
3. EASEMENT FOR PARKING AND INGRESS AND EGRESS.
-------------------------------------------
Landlord shall grant and convey to Tenant and to Tenant's
officers, directors, partners, lenders, agents, employees,
contractors, lessees, licensees, concessionaires, customers, business
guests and invitees (such persons or entities are collectively called
"Permittees") a perpetual, non-exclusive easement appurtenant to the
Property for vehicular parking and vehicular and pedestrian ingress
and egress, to and from the Property, over, upon and across the
parking areas, driveways, exits and entrances, sidewalks and walkways,
and other common areas, as such areas now exist on Parcel 2, as shown
on Exhibit B.
4. EASEMENTS FOR UTILITIES AND DRAINAGE.
------------------------------------
A. Landlord also shall grant and convey to Tenant perpetual,
non-exclusive easements, appurtenant to the Property, for the purpose
of installing, operating, maintaining, repairing, replacing and
renewing any and all utility lines and related facilities, over,
above, along, under, in and across Parcel 2, wherever such utility
lines may be located necessary for the operation of the improvements
constructed or to be constructed on the Property. No trees, permanent
buildings or other structure shall be placed in or allowed to encroach
upon the easements, and no change of grade elevation or excavation
shall be made thereon without Tenant's prior written approval.
Landlord grants to Tenant, Tenant's lessees, lenders, successors and
assigns, the right to use, coupled with its easement, such utilities
and related facilities. Landlord covenants to maintain the utility
lines and all related facilities located on Parcel 2 in good condition
and repair.
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B. Landlord also shall grant and convey to Tenant a
perpetual, non-exclusive easement, appurtenant to the Property, to tap
into and use, at no cost or expense to Tenant, the storm sewer lines
and related facilities located on or serving Parcel 2 for the purpose
of draining any and all surface water runoff from the Property and the
improvements which may, from time to time, be located on the Property.
In lieu of tapping into the storm sewer lines on Parcel 2, Tenant may,
at its option and at no cost or expense to Tenant, surface drain its
surface water runoff onto Parcel 2.
5. MAINTENANCE.
-----------
Landlord, at Landlord's expense, shall maintain and keep in good
condition and repair, or cause to be maintained and kept in good order
and repair, the parking, driveways and other improved or landscaped
common areas situated on Parcel 2, all in compliance with applicable
law. The foregoing obligation of Landlord shall, without limiting its
generality, include the following:
A. Maintaining the surfaces at such grades and levels for use
and enjoyment as contiguous and homogeneous common areas, and
maintaining (and, if necessary, resurfacing) the surfaces in a level,
smooth and evenly-covered condition with the type of surfacing
material originally installed or of similar appearance, quality, use
and durability, free of all chuckholes, fissures, cracks and
settlement; and
B. Removing all papers, debris, snow, ice, standing water,
filth and refuse and thoroughly sweeping the areas to the extent
reasonably necessary to keep the areas in a neat, clean, sightly,
sanitary and orderly condition; and
C. Placing, keeping in repair and replacing as necessary
appropriate directional signs, striping markers and lines; and
operating, keeping in repair and replacing, as necessary, such
artificial lighting facilities as required by this Addendum; and
D. Maintaining any perimeter walls and retaining walls in
good condition and state of repair; and
E. Maintaining all landscaped areas, making such replacements
of shrubs and other landscaping as is necessary, and keeping the areas
at all times adequately mowed, weeded, pruned, fertilized and watered;
and
F. Demolishing any damaged or destroyed buildings not
intended to be rebuilt, removing all debris and rubble and landscaping
such areas in a clean and sightly condition.
6. BARRIERS.
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Tenant and Landlord may erect curbs, fences and landscaping on
their respective parcels in order to define the Property and Parcel 2,
so long as such curbs, fences and landscaping do not detract from the
mutual and common parking and access rights of the Tenant and Landlord
or prevent, hinder or
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interfere in any way with the free flow and passage of vehicular and
pedestrian traffic and parking over, to, from and between the Property
and Parcel 2 or adversely affect the visibility of the Property.
7. PARKING RATIO AND CHANGES TO SHOPPING CENTER.
--------------------------------------------
Landlord agrees that the Shopping Center (including the common
areas) shall be operated as a single mercantile unit, and that no
buildings, structures, improvements, fences, barriers, or other
obstructions, except improvements incidental to the operation and
maintenance of the common areas or as provided herein, shall be
placed, constructed, or maintained in the Shopping Center except as
shown on the Site Plan as permitted building areas. In no event shall
the ratio of the number of parking spaces available for standard size
American cars to the amount of the gross square footage of all
buildings located in the Shopping Center (whether or not leased or
occupied) be reduced below five (5) parking spaces for each one
thousand (1,000) square feet of gross square footage, nor shall there
be any interference in the access to the Property from the abutting
public thoroughfares and the parking and common areas, and the
visibility of the Property from the common areas and from the abutting
public thoroughfares shall not be obstructed in any way.
8. RULES AND REGULATIONS.
---------------------
Tenant and Landlord shall have the right to enact reasonable
rules concerning the conduct and operation of the parking areas and
spaces, driveways and other common areas situated on their respective
properties. Landlord shall not allow its employees or employees of the
other tenants of the Shopping Center to park on the Property or within
fifty (50) feet of its boundaries.
9. COMPLIANCE WITH LAWS/INDEMNIFICATION/INSURANCE.
----------------------------------------------
With respect to its own property, Tenant and Landlord each shall
comply with all laws, rules, regulations and requirements of all
public authorities. Tenant and Landlord also agree to indemnify,
defend and hold each other harmless against all claims, demands, loss,
damage, liabilities and expenses and all suits, actions and judgments
(including, but not limited to, costs and attorneys' fees) arising out
of occurrences on their respective properties, unless caused by the
negligence of the party seeking indemnification under this paragraph.
Tenant and Landlord shall give prompt and timely notice of any claim
made or suit or action commenced against the other party which in any
way would result in indemnification under this paragraph. Tenant and
Landlord also agree to maintain primary public liability and property
damage insurance covering their respective properties in reasonable
limits, but no less than $500,000 for bodily injury or death or
property damage of any one person and $1,000,000 for any one
occurrence. Tenant and Landlord, for themselves, and for all parties
claiming under them, mutually release and discharge each other from
all claims and liabilities arising from any occurrence covered or
required hereunder to be covered in whole or in part by the foregoing
insurance, and also waive any right of subrogation which might
otherwise exist in or accrue to any person on account thereof.
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10. MAINTENANCE EXPENSES.
--------------------
Landlord and Tenant each shall pay the expense of maintaining and
repairing the parking, ingress, egress and other improved and
landscaped common areas situated on their respective properties,
including the payment of all real estate taxes and assessments,
subject only to the right to defer payment in a manner provided by law
and/or in connection with a bona fide contest of such tax or
assessment, so long as the rights of the other party shall not be
jeopardized by such deferring of payment.
11. DEFAULT.
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If either party fails to perform any agreement to be performed by
it and such failure continues for thirty (30) days, or involves
potential danger to the health or safety of persons, or may result in
substantial deterioration of the Property or Parcel 2, or may
adversely affect the business conducted by Tenant on the Property,
then in each case after written notice to such party specifying the
default, the other party may, at its election, cure such failure or
breach for and on behalf of the defaulting party. Any amount which
the party so electing to cure shall expend for such purpose, or which
shall otherwise be due by either party to the other, shall be paid to
the entitled party on demand, without contest, upon delivery of its
invoice, together with interest at the lower of (i) the rate of ten
percent (10%) per annum, or (ii) the maximum rate permissible from
time to time under applicable law, from the date of the expenditure or
the date when it shall have become due to the date of payment in full.
The provisions of this paragraph shall be in all respects subject and
subordinate to the lien of any mortgages or deeds of trusts at any
time or from time to time on the land of the defaulting party and the
rights of the holder or holders of such mortgages or deeds of trust.
12. COVENANTS RUNNING WITH THE LAND.
-------------------------------
The right to use and exercise the rights and easements contained
in this Addendum shall run with the land and inure to, and be for the
benefit of, Tenant and Landlord, their successors and assigns, lenders
and Permittees. In addition, the grant and the use, benefit and
enjoyment of such easements shall always be without charge, cost, fee
or assessment of any kind whatsoever.
13. RECORDING AND TITLE INSURANCE.
-----------------------------
A separate easement and restrictive covenant agreement embodying
the above provisions and agreements in recordable form against the
Shopping Center shall be prepared for Landlord's execution and
delivery at closing, which shall be recorded at Lease execution. The
title insurance requirements contained in the Addendum shall also
insure these easements, and Landlord agrees to obtain non-disturbance
agreements, consents, waivers and other agreements from lien holders,
mortgagees, tenants and any other party with superior rights that
might interfere with the rights, duties and obligations contemplated
by this Addendum.
13
<PAGE>
14. PARKING LOT LIGHTS.
------------------
Landlord agrees to provide adequate lighting of the common areas
of Parcel 2 including the parking lot from thirty (30) minutes before
dusk until at least one and one-half (1-1/2) hours after Tenant closes
its business on the Property, which lighting shall include the
illumination of any pylon or monument sign advertising Tenant's
business conducted on the Property as well as lighting for the other
signage and awnings utilized by Tenant in advertising the business
conducted by Tenant on the Property if not separately metered and
controlled by Tenant. Tenant shall have the right to approve any
changes or alterations to the parking lot lights located on Parcel 2
or which might affect the Property.
15. INITIAL CONSTRUCTION OF SHOPPING CENTER.
---------------------------------------
Landlord shall construct, at its own cost and expense, (in the
event the Shopping Center is not completely developed at the time the
Lease is signed) the other buildings and improvements shown on the
Site Plan and in accordance with plans and specifications approved and
initialed by Tenant. If Landlord has not completed the parking,
driveways, utility facilities, signage and other common areas of the
Shopping Center as shown on the Site Plan in accordance with approved
plans and all applicable governmental laws, regulations and
requirements prior to delivery of possession of the Property to
Tenant, Tenant may, at its option, (a) construct such parking,
driveways, signage, utility facilities and other common areas adjacent
to the Property as Tenant may deem necessary to conduct its business
and if not reimbursed for such cost by Landlord on demand, deduct all
costs and expenses incurred in such construction from rent and all
other charges payable under the Lease or (b) terminate the Lease, in
which case all out of pocket costs spent by Tenant in developing the
Property shall be refunded or reimbursed to Tenant, as the case may
be, and the parties shall be released from further liability.
14
<PAGE>
IN WITNESS WHEREOF, Landlord has caused this Lease to be executed and
sealed this ____ day of _________________________, 19___.
WITNESSES:
__________________________________ ________________________________________
__________________________________ ________________________________________
LANDLORD
WITNESSES:
__________________________________ ________________________________________
__________________________________ ________________________________________
TENANT
15
<PAGE>
EXHIBIT A
---------
MEMORANDUM OF LEASE
-------------------
WHEN RECORDED MAIL TO:
_____________________
_____________________
_____________________
MEMORANDUM OF LEASE
-------------------
This Memorandum of Lease is by and between _______________________________
______________________________, a corporation ("Landlord") and ________________
________________________________, a ___________________ corporation ("Tenant"),
pursuant to which Landlord has demised to Tenant, and Tenant has accepted such
demise from Landlord, the Property (later defined) upon the following terms:
Date of Lease: ________________, ______
Description of Property: See Exhibit A attached hereto
---------
Commencement Date: The Term of this Lease shall begin on the date Tenant
opens a restaurant located on the Property for business to the general
public.
Expiration Date: ______________________
Term: sixty (60) full calendar months.
Renewal Option(s): ______ (__), five (5) year renewal options.
Exclusive: As a material inducement for Tenant to enter into this Lease,
Landlord acknowledges and agrees that during the Term and any Extension no
property presently or hereafter owned, leased or controlled directly or
indirectly by Landlord within two (2) miles in any direction from the
boundary lines of the Property shall be sold, leased, managed, used or
occupied for a restaurant or food service property. Landlord shall deliver
to Tenant on or prior to the Effective Date binding documentation, in
recordable form, containing such restriction on all property presently
owned, leased or controlled by Landlord and shall be subject to a
continuing obligation to deliver similar documentation in recordable form
to bind property subsequently acquired, leased or controlled by Landlord
which falls within said two mile restriction area. In the event of a breach
by Landlord under the terms of the Lease, Tenant shall be entitled to
injunctive relief as well as all other remedies available at law or in
equity, Landlord acknowledging and agreeing that Tenant does not have an
adequate remedy at law for breach of this provision.
Shopping Center General Use Restrictions: Landlord agrees that no portion
of Shopping Center other than the Property shall be sold, leased, used or
occupied for a parking intensive use. Tenant has entered into this Lease in
reliance upon representations by Landlord that the Shopping Center is and
will remain a first-class retail Shopping Center, and, further, the
Landlord agrees that no part of the
16
<PAGE>
Shopping Center shall be used as a theater, auditorium, meeting hall,
school or other place of public assembly, gymnasium, health club, exercise
or dance studio, dance hall, bar, off-track betting business, billiard or
pool hall; for bingo or similar games of chance; as a massage parlor, video
game arcade, bowling alley, skating rink, car wash, car repair or car
rental agency, block bank or other medical care office; night club or adult
book or adult video store (which are defined as stores in which any portion
of the inventory is not available for sale or rental to children under
eighteen (18) years old because such inventory explicitly deals with or
depicts human sexuality).
Consent to Collateral Assignment of Lease: Tenant has collaterally assigned
the Lease to Boston Chicken, Inc. ("Franchisor"). Landlord has agreed and
consented to Tenant collaterally assigning the Lease to Franchisor and by
Franchisor to any lender or any entity which is a party to a merger or
consolidation with or to the acquisition of substantially all of the assets
or stock of or with Tenant or Franchisor.
The purpose of this Memorandum of Lease is to give record notice of the
lease and of the rights created thereby, all of which are hereby confirmed.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as
of the dates set forth in their respective acknowledgements.
WITNESS: TENANT:
__________________________________ ________________________________________
________________________________________
__________________________________
Date: __________________________________
WITNESS: LANDLORD:
__________________________________ ________________________________________
________________________________________
__________________________________
Date: __________________________________
17
<PAGE>
EXHIBIT A TO MEMORANDUM OF LEASE
--------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ___________________________
Address of Property: ____________________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
18
<PAGE>
[Acknowledgment of Landlord]
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of _______________,
19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:_______________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of _______________,
19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of _______________,
19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:______________________
19
<PAGE>
[Acknowledgment of Tenant]
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________________
20
<PAGE>
EXHIBIT B
---------
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT, made this ______ day of ________________, 19____, by and
between __________________________________________________, a _________________
corporation (herein "Landlord") and ____________________, a ___________________
corporation (herein "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant have entered into that certain Lease dated
_____________, ____ ("Lease") for the property located in ______________,
__________; and
WHEREAS, Landlord and Tenant wish to set forth their agreements as to the
commencement of the Term of this Lease.
NOW, THEREFORE, in consideration of the Demised Premises as described in
this Lease and the covenants set forth therein, Landlord and Tenant agree as
follows:
1. The Term of this Lease commenced on ___________________, 19___.
2. The initial or base term of this Lease shall expire on
________________, 19___.
3. Tenant has _________ options of five (5) years each.
4. The Commencement Date for purposes of paying Rent under this Lease
Agreement is ___________________, 19___.
5. Square footage of the Property is _______________ square feet.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
LANDLORD: TENANT:
__________________________________ ________________________________________
__________________________________ ________________________________________
21
<PAGE>
EXHIBIT A TO TERM COMMENCEMENT AGREEMENT
----------------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ________________________________
Address of Property: ____________________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
22
<PAGE>
[Acknowledgment of Landlord]
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of _______________,
19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:_______________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of _______________,
19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of _______________,
19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:______________________
23
<PAGE>
[Acknowledgment of Tenant]
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________________
STATE OF __________________________)
)
COUNTY OF _________________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________________
24
<PAGE>
EXHIBIT B
---------
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT, made this ______ day of ________________, 19____, by and
between _________________________________________, a _________________________
corporation (herein "Landlord") and ____________________, a __________________
corporation (herein "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant have entered into that certain Lease dated
_____________, ____ ("Lease") for the property located in ___________________,
__________; and
WHEREAS, Landlord and Tenant wish to set forth their agreements as to the
commencement of the Term of this Lease.
NOW, THEREFORE, in consideration of the Demised Premises as described in
this Lease and the covenants set forth therein, Landlord and Tenant agree as
follows:
1. The Term of this Lease commenced on ___________________, 19___.
2. The initial or base term of this Lease shall expire on _____________,
19___.
3. Tenant has _________ options of five (5) years each.
4. The Commencement Date for purposes of paying Rent under this Lease
Agreement is ___________________, 19___.
5. Square footage of the Property is _______________ square feet.
6. Monthly rents payable during the first Lease Year are as follows:
(a) Rent: ___________________________________________________
(b) Taxes: ___________________________________________________
(c) Insurance: ___________________________________________________
(d) Other: ___________________________________________________
TOTAL MONTHLY: $
===================================================
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
LANDLORD: TENANT:
__________________________________ ________________________________________
__________________________________ ________________________________________
25
<PAGE>
EXHIBIT A TO TERM COMMENCEMENT AGREEMENT
----------------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ___________________________
Address of Property: _______________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
26
<PAGE>
[Acknowledgment of Landlord]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: __________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:____________________
27
<PAGE>
[Acknowledgment of Tenant]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of _____________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
28
<PAGE>
EXHIBIT C
---------
RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:
________________________
________________________
________________________
________________________
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
----------------------------------------
THIS NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and
entered into this the _________ day of ____________________, 19____ by and
between ______________________________ ("Tenant") and _______________________ a
______________________ ("Lender") and _______________________________________
("Landlord").
R E C I T A L S:
- - - - - - - -
WHEREAS, Landlord and Tenant executed a Lease dated as of _______________,
19___ (the "Lease"), a memorandum of which may be recorded simultaneously
herewith, covering a certain Premises therein described located on a parcel of
real estate, a legal description of which is attached hereto and incorporated
herein by this reference as Exhibit "A" (said parcel of real estate and the
-----------
Premises being sometimes collectively referred to herein as the "Property"); and
WHEREAS, Landlord has executed a ____________________ (the "Mortgage")
dated __________________, 19___ and recorded on __________________, 19_____ at
Volume __________, Page ________, of the ___________________ Records of
________________ County, ____________________ in favor of Lender, payable upon
the terms and conditions described therein; and
WHEREAS, it is a condition to the Mortgage shall unconditionally be and
remain at all times a lien or charge upon the Property, prior and superior to
the Lease and to the leasehold estate created thereby; and
WHEREAS, the parties hereto desire to assure Tenant's possession and
control of the Property under the Lease upon the terms and conditions therein
contained;
NOW, THEREFORE, for and in consideration of the mutual covenants and
premises herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed by the parties
hereto, the parties hereto do hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
1. The Lease is and shall be subject and subordinate to the Mortgage, and
to all renewals, modifications, consolidations, replacements and extensions
thereof, and to all future advances made thereunder.
2. Should Lender become the owner of the Property, or should the Property
be sold by reason of foreclosure, or other proceedings brought to enforce the
Mortgage which encumbers the Property, or should the Property be transferred by
deed in lieu of foreclosure, or should any portion of the Property be sold under
a trustee's sale, the Lease shall continue in full force and effect as a direct
lease between the then owner of the Property covered by the Mortgage and Tenant,
upon, and subject to, all of the terms, covenants and conditions of the Lease
for the balance of the term thereof remaining, including any extensions therein
provided. Tenant does hereby agree to attorn to Lender or to any such owner as
its landlord, and Lender hereby agrees that it will accept such attornment.
29
<PAGE>
3. Notwithstanding any other provision of this Agreement, Lender shall not
be (a) liable for any default of any landlord under the Lease (including
Landlord), except that Lender agrees to cure any default of Landlord that is
continuing as of the date Lender forecloses the Property within thirty (30) days
from the date Tenant delivers written notice to Lender of such continuing
default, unless such default is of such a nature to reasonably require more than
thirty (30) days to cure and then Lender shall be permitted such additional time
as is reasonably necessary to effect such cure, provided Lender diligently and
continuously proceeds to cure such default; (b) subject to any offsets or
defenses which have accrued prior to the date of foreclosure, unless Tenant
shall have delivered to Lender written notice of the default which gave rise to
such offset or defense and permitted Lender the same right to cure such default
as permitted Landlord under the Lease; (c) bound by any rent that Tenant may
have paid under the Lease more than one month in advance; (d) bound by any
amendment or modification of the Lease hereafter made without Lender's prior
written consent; and (e) responsible for the return of any security deposit
delivered to Landlord under the Lease and not subsequently received by Lender.
4. If Lender sends written notice to Tenant to direct its rent payments
under the Lease to Lender instead of Landlord, then Tenant agrees to follow the
instructions set forth in such written instructions and deliver Rent payments to
Lender; however, Landlord and Lender agree that Tenant shall be credited under
the Lease for any Rent payments sent to Lender pursuant to such written notice.
5. All notices which may or are required to be sent under this Agreement
shall be in writing and shall be sent by certified or registered U.S. mail,
postage prepaid, return receipt requested, and sent to the party at the address
appearing below or such other address as any party shall hereafter inform the
other party by written notice given as set forth above:
Tenant: _____________________________________
_____________________________________
_____________________________________
_____________________________________
with a copy to: _____________________________________
_____________________________________
_____________________________________
_____________________________________
Lender: _____________________________________
_____________________________________
_____________________________________
_____________________________________
All notices delivered as set forth above shall be deemed effective three (3)
days from the date deposited in the U.S. mail
6. Said Mortgage shall not cover or encumber and shall not be construed as
subjecting in any manner to the lien thereof any of Tenant's improvements or
trade fixtures, furniture, equipment or other personal property at any time
placed or installed in the Property. In the event the Property or any part
thereof shall be taken for public purposes by condemnation or transfer in lieu
thereof or the same are damaged or destroyed, the rights of the parties to any
condemnation award or insurance proceeds shall be determined and controlled by
the applicable provisions of this Lease.
7. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors in interest, heirs and assigns and any
subsequent owner of the Property secured by the Mortgage.
8. Should any action or proceeding be commenced to enforce any of the
provisions of this Agreement or in connection with its meaning, the prevailing
party in such action shall be awarded, in addition to any other relief it may
obtain, its reasonable costs and expenses, not limited to taxable costs, and
reasonable attorney's fees.
30
<PAGE>
9. Tenant shall not be enjoined as a party/defendant in any action or
proceeding which may be instituted or taken by reason or under any default by
Landlord in the performance of the terms, covenants, conditions and agreements
set forth in the Mortgage.
IN WITNESS WHEREOF, the parties hereto have caused this Non-Disturbance
Agreement to be executed as of the day and year first above written.
WITNESS: LENDER:
___________________________________________
__________________________________ a__________________________________________
__________________________________
By:________________________________________
Name:____________________________________
Title:___________________________________
WITNESS: TENANT:
___________________________________________
_________________________________ ___________________________________________
_________________________________ By:________________________________________
Name:______________________________________
Title:__________________________________
WITNESS: LANDLORD:
___________________________________________
_________________________________ ___________________________________________
_________________________________
By:________________________________________
Name:____________________________________
Title:___________________________________
31
<PAGE>
EXHIBIT A TO NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-----------------------------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ___________________________
Address of Property: _______________________
Thid document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
32
<PAGE>
[Acknowledgment of Landlord]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:____________________
33
<PAGE>
[Acknowledgment of Tenant]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
______________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
34
<PAGE>
[Acknowledgment of Lender]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_____________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
35
<PAGE>
EXHIBIT "D" TO LEASE
--------------------
LOCATION:
STORE NUMBER:
COLLATERAL ASSIGNMENT OF LEASE
------------------------------
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns, transfers
and sets over unto BOSTON CHICKEN, INC., a Delaware corporation ("Assignee"),
all of Assignor's right, title and interest in, to and under that certain lease
("Lease") dated________between Assignor, as tenant, and_________("Landlord")
respecting the premises demised in the Lease ("Premises") and legally described
on Exhibit A attached hereto and made a part hereof. This Assignment is for
collateral purposes only and except as specified herein, Assignee shall have no
liability or obligation of any kind whatsoever arising from or in connection
with this Assignment or the Lease unless Assignee shall take possession of the
Premises pursuant to the terms hereof and shall assume the obligations of
Assignor thereunder.
Assignor represents and warrants to Assignee that Assignor has (i) full
power and authority to so assign the Lease and its interest therein, and (i) not
assigned or transferred, and is not obligated to assign or transfer, any of its
interest in the Lease or the Premises.
Upon a default by Assignor under the Lease or under the Boston Chicken,
Inc. Franchise Agreement between Assignee and Assignor for a Boston Market Unit
("Franchise Agreement"), or in the event of a default by Assignor under any
document or instrument securing the Franchise Agreement, Assignee shall have the
right and is hereby empowered to take possession of the Premises, expel Assignor
therefrom, and, in such event, Assignor shall have no further right, title or
interest in the Lease and Premises and shall remain liable to Assignee for all
past due rents and other charges, agreements and obligations set forth in the
Lease which Assignee shall be required either to pay to Landlord or perform
thereunder.
Assignor agrees that it will not suffer or permit any surrender,
termination, amendment or modification of the Lease without the prior written
consent of Assignee. Throughout the term of the Franchise Agreement, Assignor
agrees that it shall elect and exercise all options to extend the term of or
renew the Lease not less than thirty (30) days prior to the last day that said
option must be exercised, unless Assignee otherwise agrees in writing. Assignor
shall send Assignee a copy of the notice of exercise concurrently with
Assignor's exercise of the option. Upon failure of Assignee to otherwise agree
in writing, or upon failure of Assignor to so elect to extend or renew the Lease
as aforesaid, Assignor hereby appoints Assignee as its true and lawful attorney-
in-fact to exercise such extension or renewal options in the name, place and
stead of Assignor for the sole purpose of effecting such extension or renewal,
provided that Assignee shall have the right but not the obligation to exercise
such extension or renewal options.
This Assignment shall inure to the benefit of Assignee and its successors
and assigns and shall be binding upon Assignor, and Assignor's heirs, personal
representatives, officers, partners, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date set forth below their respective signatures.
WITNESSES: ASSIGNOR:
____________________________________ _______________________________________
____________________________________ By:____________________________________
Name:__________________________________
36
<PAGE>
Title:_____________________________________
Date:___________________, 19_______________
WITNESSES: ASSIGNEE:
_________________________________ ___________________________________________
_________________________________ By:________________________________________
Name:______________________________________
Title:_____________________________________
Date:___________________, 19_______________
WITNESSES: BOSTON CHICKEN, INC., a
Delaware corporation
_________________________________ ___________________________________________
_________________________________ By:________________________________________
Name:______________________________________
Title:_____________________________________
Date:___________________, 19_______________
37
<PAGE>
State of )
) SS.
County of )
I,_____________, a Notary Public in and for the County and State aforesaid,
DO HEREBY CERTIFY that _____________________, personally known to me to be the
__________________________, whose name is subscribed to the within instrument,
appeared before me this day in person and acknowledged that as such
__________________________ he signed and delivered the said instrument of said
corporation as the free and voluntary act and deed of said
_________________________________, for the uses and purposes set forth therein.
GIVEN under my hand and notarial seal this day of _____________, 19__.
My Commission expires:______________________ _________________________
Notary Public
State of )
) SS.
County of )
I,_____________, a Notary Public in and for the County and State aforesaid,
DO HEREBY CERTIFY that _____________________, personally known to me to be the
__________________________, whose name is subscribed to the within instrument,
appeared before me this day in person and acknowledged that as such
__________________________ he signed and delivered the said instrument of said
corporation as the free and voluntary act and deed of said
_________________________________, for the uses and purposes set forth therein.
GIVEN under my hand and notarial seal this day of _____________, 19__.
My Commission expires:______________________ ______________________________
Notary Public
38
<PAGE>
State of Colorado )
) SS.
County of Jefferson )
I,_____________, a Notary Public in and for the County and State aforesaid,
DO HEREBY CERTIFY that _________________________________, personally known to me
to be the ______________________ of Boston Chicken, Inc., a corporation of the
State of Delaware, whose name is subscribed to the within instrument, appeared
before me this day in person and acknowledged that as such Vice President, he
signed and delivered the said instrument of said corporation as his free and
voluntary act and as the free and voluntary act and deed of said corporation,
for the uses and purposes set forth therein.
GIVEN under my hand and notarial seal this day of __________________,
19___.
My Commission expires:_____________________ ________________________________
Notary Public
39
<PAGE>
EXHIBIT A TO COLLATERAL ASSIGNMENT OF LEASE
-------------------------------------------
LEGAL DESCRIPTION
Property Address: ___________________________________
___________________________________
Store No. ______________
Permanent Index No. _____________________________________
This instrument was prepared by and should be
returned to:
Alan J. Williger, Esq.
Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, CO 80401-4086
40
<PAGE>
EXHIBIT F
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
ADDENDUM TO IN-LINE SHOPPING CENTER LEASE
-----------------------------------------
F-1
<PAGE>
ADDENDUM TO IN LINE SHOPPING CENTER LEASE
-----------------------------------------
THIS ADDENDUM is to the foregoing lease (the "Lease"), dated as of
________________________, 199__ by and between ________________________________
___________________________________________________________________ ("Tenant")
and ___________________________________________________________________________
________________ ("Landlord").
The following shall amend and be incorporated into the Lease. In the event
of any conflict between the terms of the Lease and the terms of this Addendum,
then the terms of this Addendum shall control. All capitalized terms not
defined in this Addendum shall have the respective meanings set forth in the
Lease.
1. TITLE INSURANCE.
---------------
(a) Prior to the Effective Date (as hereinafter defined), Landlord
shall deliver to Tenant a current abstract of title or existing title
policy on the Shopping Center and all appurtenant easements. Tenant may
order a title insurance commitment on the Shopping Center and/or the
Demised Premises prepared by a title company ("Title Company") selected by
Tenant, insuring Tenant against loss or damage from and after the Effective
Date in the amount of $_____ subject only to title exceptions acceptable to
Tenant, in its sole discretion. Landlord shall pay for any cost incurred
in searching title and, contemporaneously with the execution of this Lease,
if requested by Tenant, shall pay for an ALTA form Leasehold Title
Insurance Policy ("Title") approved by Tenant, with extended coverage over
all general exceptions in the amount set forth above and any title
endorsements required by Tenant. The Demised Premises shall be leased to
Tenant free, clear and unencumbered of all tenancies and parties in
possession on the Effective Date.
(b) In the event the title insurance commitment shall reflect
encumbrances or other conditions not acceptable to Tenant in Tenant's sole
discretion ("Defects"), then, Landlord, upon Tenant's notification of the
Defects, shall immediately and diligently proceed to cure same and shall
have thirty (30) days from the date of Tenant's notice within which to cure
the Defects to Tenant's satisfaction. If, after the exercise of all
reasonable diligence, Landlord is unable to remove or obtain a title
endorsement over the Defects within such thirty (30) day period, then
Tenant may accept the Defects or Tenant may terminate this Lease and the
parties shall be released from further liability.
2. CONDITIONS PRECEDENT. Tenant proposes to use the Property for the
--------------------
construction and operation of a free standing "Boston Market" restaurant,
including, but not limited to, a drive-thru service facility, carry-out and
delivery service, and off-street parking incident thereto, together with curb-
cuts and signage acceptable to Tenant ("Tenant's Proposed Use"). Tenant's
obligation to lease the Property is contingent on the satisfaction in Tenant's
sole discretion or waiver by Tenant of the following conditions ("Conditions
Precedent") within one hundred eighty (180) days ("Conditions Approval Period")
after the date that both Tenant and Landlord have signed this Lease and Tenant
has received a fully executed counterpart of the Lease from Landlord ("Effective
Date"):
(a) Tenant obtaining a survey, bearing a legal description, made by a
licensed surveyor, selected by Tenant, in accordance with the "Minimum
Standard Detail
1
<PAGE>
Requirements for ALTA/ACSM Land Title Surveys" jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992 and such other survey standards as required
by Tenant ("Survey"), and certified to Tenant and the Title Company and
such other parties requested by Tenant, showing the area, dimensions and
location of the Property to the nearest monuments, streets, alleys on all
sides, the topography, the location of all available utilities in adjoining
streets, alleys or property, the location of all improvements and
encroachments, the location of all recorded easements against or
appurtenant to the Property, stating the flood zone of the Property, and
not disclosing any condition rendering the Property unusable for Tenant's
Proposed Use.
(b) Tenant obtaining a written Phase I Environmental Assessment
("Assessment") of the Property, which Assessment shall be prepared by an
environmental professional selected by Tenant and comply with the terms and
provisions of the "Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process", ASTM Standard 1527-93 as
presently in effect and promulgated by the American Society of Testing and
Materials and Tenant's Guidance Document and Service Agreement therefor.
If the assessment discloses any known or suspected environmental
contamination, Tenant, at Landlord's expense, may order additional tests
and investigations to determine if the Property is satisfactory for
Tenant's Proposed Use if the presence of such environmental contamination
is confirmed, Tenant shall either (i) request, and Landlord agrees to,
remediate such environmental contamination, or (ii) terminate this Lease,
in which event the parties shall be released from further liability.
(c) Tenant obtaining the requisite executive corporate approval
("Approval") of this Lease from Boston Chicken, Inc. ("Franchisor").
(d) The receipt by Tenant of a non-disturbance agreement in the form
attached hereto as Exhibit C or such other form satisfactory to Tenant.
(e) Tenant obtaining all approvals, permits, easements and licenses
("Permits") for Tenant's Proposed Use in accordance with Tenant's plans and
specifications therefor, including, without limitation, signage, trade
dress, curb cuts, access, parking and drive-thru as required by Tenant. In
the event that the Property is restricted by any state, county, municipal
or other governmental law, ordinance, rule or regulation which prohibit,
limit or restrict the use of the Property for Tenant's Proposed Use, Tenant
shall undertake to secure rezoning, special use permits, variances,
subdivision, lot split, lot tie or replat ("Authorizations") so that the
Property may be used for Tenant's Proposed Use. The cost of securing the
Authorizations shall be at Landlord's expense to be deducted by Tenant from
Rent. Such expenses may include, but are not limited to, attorney,
engineer, architect or other professional and/or consultant fees. Landlord
agrees to cooperate fully with Tenant in securing the Authorizations and
Permits and grants permission to Tenant to make application for the
Authorizations and Permits in the name of Landlord. Landlord shall execute
any necessary documents in connection with Tenant's application for the
Authorizations and Permits. The determination of the necessity for
obtaining the Authorizations and Permits and the adequacy of the
Authorizations and Permits granted shall be within the sole discretion of
Tenant. Landlord further agrees to dedicate or grant any easements for
public ways and to
2
<PAGE>
diligently perform and pay for any improvements located off the Property
required as a condition of the Permits and Authorizations.
(f) Tenant obtaining from Landlord an agreement protecting the
visibility of Tenant's Property and signage and prohibiting any building in
or changes to the area designated by Tenant during the term and any renewal
term to protect Tenant's ingress and egress and parking rights. The form
of this agreement shall be provided by Tenant.
In the event the Conditions Precedent are not satisfied in Tenant's sole
discretion or waived by Tenant within the Conditions Approval Period, Tenant may
extend the Conditions Approval Period for two (2) successive ninety (90) day
periods each to continue Tenant's efforts to obtain the Authorizations and
Permits, upon payment to Landlord of One Thousand Two Hundred Fifty Dollars
($1,250.00) for each ninety (90) day extension. Landlord shall apply such
payments against Rent due from and after the Commencement Date. In the event
any of the Conditions Precedent are not satisfied, approved or waived by Tenant,
in its sole discretion, then at any time within the Conditions Approval Period
(as extended pursuant to this Section 2), Tenant may terminate this Lease in
which event the parties shall be released from further liability. In the event
this Lease is terminated by Tenant, either by default or election, on or prior
to the Commencement Date, except for the failure of Landlord to convey
marketable and insurable leasehold title, Tenant shall not be entitled to
reimbursement for the cost of the Assessment but the extension payments referred
to above shall be returned to Tenant within ten (10) days after the termination
date. On or prior to the Commencement Date, Landlord shall reimburse Tenant for
the cost of the Assessment and if not reimbursed, Tenant may deduct such cost
from the next payment of Rent. Landlord hereby grants to Tenant, its agents and
contractors, the right to enter upon the Shopping Center to make the Assessment,
inspect and test the Demised Premises and to install the signage as provided
herein.
3. NON-DISTURBANCE AND ATTORNMENT. Landlord, within sixty (60) days
------------------------------
after the Effective Date, will obtain from every senior landlord, mortgagee and
holder of a deed of trust or mortgage upon the Property, an agreement in
recordable form and substantially in the form of Exhibit C attached hereto and
made a part hereof, acceptable to Tenant wherein the senior landlord(s),
mortgagee(s) and holder(s) of the deed(s) of trust or mortgage(s) agree not to
disturb Tenant's possession, deprive Tenant of any rights and increase Tenant's
obligations under this Lease ("Non-Disturbance and Attornment Agreement").
Landlord shall not further mortgage or encumber the fee or the leasehold estate
from the Effective Date to the date of recording of a Memorandum of Lease unless
Landlord obtains for the benefit of Tenant a Non-Disturbance and Attornment
Agreement. Upon the failure of Landlord to provide Tenant with an acceptable
Non-Disturbance and Attornment Agreement pertaining to every senior lease,
mortgage and deed of trust prior to Tenant's commencement of construction or
reconstruction of the building on the Property, Tenant may terminate this Lease
and the parties shall be released from further liability.
4. RESTRICTIVE COVENANT. As a material inducement for Tenant to enter
--------------------
into this Lease, Landlord acknowledges and agrees that no property presently or
hereafter owned, leased or controlled directly or indirectly by Landlord within
two (2) miles of the Property shall be sold, leased, managed, used or occupied
for a restaurant or food service property. Landlord shall deliver to Tenant on
or prior to the Effective Date documentation, in recordable form, containing
such restriction on all property presently owned, leased or controlled by
Landlord. In the event of a breach by Landlord under the terms of this Section,
Tenant shall be entitled to injunctive relief as well as all other remedies
available at law or in equity,
3
<PAGE>
Landlord acknowledging and agreeing that Tenant does not have an adequate remedy
at law for breach of this provision.
5. IMPROVEMENTS, ALTERATIONS AND SIGNAGE.
-------------------------------------
(a) From and after the Effective Date, Tenant shall have the right
from time to time to alter, renovate, add, remodel, modify and/or change
the Demised Premises as Tenant may deem desirable. Tenant shall be
permitted to affix its fascia signs, canopies, awnings and/or flags on the
exterior of the Demised Premises from time to time during the Term and any
Extension(s).
(b) It is expressly understood and agreed that as an inducement for
Tenant to enter into this Lease, Landlord acknowledges and agrees that it
has previously consented to and approved Tenant's concept plans and outline
specifications for an in-line store, signage package and other customary
design requirements for the Demised Premises.
6. TENANT'S PROPERTY AND WAIVER OF LANDLORD'S LIEN.
-----------------------------------------------
(a) Any personal property, equipment, furniture, inventory,
trademarked items, signs, decorative soffit, counters, shelving, showcases,
mirrors and other movable trade fixtures installed in or on the Property by
Tenant, including, but not limited to, walk-in coolers, exhaust hoods,
sinks and preparation areas ("Tenant's Property"), shall remain the
property of the Tenant. Landlord agrees that Tenant shall have the right,
at any time or from time to time, to remove any and all of Tenant's
Property. Tenant, at its expense, shall immediately repair any damage
occasioned by the removal of Tenant's Property and upon expiration or
earlier termination of this Lease, shall leave the Property in a neat and
clean condition, normal wear and tear excepted. Tenant shall pay before
delinquency all taxes, assessments, license fees and public charges levied,
assessed or imposed upon its business operation in the Property as well as
upon Tenant's Property. If any such items of property are assessed with
property of Landlord, then such assessment shall be equitably divided
between Landlord and Tenant.
(b) In the event Tenant or a subtenant acquires and/or leases Tenant's
Property to be installed and used upon the Property subject to a title
retainage agreement, conditional sale contract, chattel mortgage or other
security agreement or lease, Landlord agrees to execute and deliver to any
such secured creditor and/or lessor a waiver of any lien Landlord may have
upon Tenant's Property. Such waiver will be on a form provided by Tenant
authorizing the secured creditor and/or lessor to enter upon the Property
and remove Tenant's Property in the event of default under the terms of the
security agreement and/or lease.
(c) From time to time, some or all of Tenant's Property may be
financed or owned by someone other than Tenant. To the extent that any of
Tenant's Property is financed or owned by someone other than Tenant,
Landlord agrees that such Tenant's Property is not Landlord's property no
matter how the same is affixed to the Demised Premises or used by Tenant
and agrees to recognize the rights of the lender or owner of Tenant's
Property. Landlord waives any claim arising by way of any Landlord's lien
(whether created by statute or by contract) or otherwise with respect to
Tenant's Property and agrees to sign and deliver to any lender, secured
creditor or lessor a waiver of any
4
<PAGE>
lien Landlord may have on Tenant's Property if required by such lender,
secured creditor or lessor.
7. LEASEHOLD MORTGAGE.
------------------
(a) Tenant may mortgage, collaterally assign or otherwise encumber
any interest that Tenant has in this Lease or in the improvements located
on the Demised Premises ("Mortgage") as security for an indebtedness
("Debt"). Landlord shall make such changes or modifications to this Lease,
with the exception of those provisions of this Lease concerning Rent and
other economic terms or the length of the Term, including any Extension(s),
as are reasonably requested by any potential Mortgagee (hereinafter
defined) to facilitate the mortgaging of the leasehold estate. Landlord
shall execute such instruments as may be required by each mortgagee or
collateral assignee ("Mortgagee") in order to recognize the Mortgage and
the interest of the Mortgagee.
(b) If a Mortgagee notifies Landlord of the execution of a Mortgage
and names the place for service of notice upon Mortgagee, then:
(i) Landlord shall give to any Mortgagee, simultaneously with
service on Tenant, notices of all demands made by Landlord on Tenant
and no such notice to Tenant shall be effective unless a copy is so
served upon Mortgagee.
(ii) Mortgagee shall have the privilege of performing any of
Tenant's covenants, curing any defaults by Tenant, and exercising any
election, option or privilege conferred upon Tenant by the terms of
this Lease.
(iii) Landlord shall not terminate this Lease or Tenant's right
of possession for any default of Tenant if, within a period of thirty
(30) days after the expiration of the period of time within which
Tenant might cure such default, such default is cured by Mortgagee or,
if within a period of thirty (30) days after the expiration of the
period of time within which Tenant might commence to eliminate the
cause of such default, Mortgagee diligently commences to eliminate the
cause of such default.
(iv) No liability for the payment of Rent or any other payments
due Landlord by the terms of this Lease or the performance of any of
Tenant's covenants and obligations of this Lease shall attach to or be
imposed upon any Mortgagee, while not in possession of the Demised
Premises, all such liability being hereby expressly waived by
Landlord.
(v) No provision of this Lease which restricts the use of the
Demised Premises to less than for any lawful purpose, requires the
Demised Premises to be used for a particular purpose, inhibits free
assignment or subletting or requires or implies specified times of
business operation shall be binding upon a Mortgagee in possession or
its successors in interest.
8. TENANT ASSIGNMENT AND SUBLETTING. Tenant shall have the free right to
--------------------------------
sublet, assign or otherwise transfer its interest in this Lease or to delegate
any duties or obligations of Tenant hereunder or possession of the Demised
Premises to any party without
5
<PAGE>
Landlord's approval, written or otherwise. However, any such assignment,
transfer, delegation or subletting shall not relieve Tenant of its obligations
hereunder.
9. ESTOPPEL CERTIFICATE. Tenant and Landlord agree at any time and from
--------------------
time to time, upon not less than ten (10) business days' prior written request
from the other party or from Franchisor, to execute, acknowledge and deliver to
the requesting party a statement in writing, in form and content reasonably
acceptable to both parties, an estoppel certificate certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), the dates to which Rent has been paid and certifying that it is
not in default (or if a default is alleged, stating the nature of the alleged
default), and further certifying such other matters as the requesting party
shall require. It is intended that any such statement delivered pursuant to
this Section may be relied upon by any prospective purchaser, lender, subtenant,
assignee or any entity which is a party to a potential merger, consolidation or
acquisition of substantially all of the assets of or with Landlord or Tenant of
the Property. In the event either party shall fail to execute and deliver any
such instrument within the foregoing time period as requested, such party hereby
irrevocably appoints the requesting party as its attorney-in-fact to execute
such instrument as its name, it being agreed that such assignment is one coupled
with an interest and the statements contained in such instrument shall be deemed
to be true and correct, binding on such party, who shall be estopped from
denying or contesting the facts contained in such instrument.
10. TENANT'S CONDUCT OF BUSINESS. Notwithstanding anything herein to the
----------------------------
contrary, nothing herein shall be construed as an obligation for Tenant to open
or operate its business in the Property. Tenant shall have the right to remove
Tenant's Property and cease operations in the Property at any time and at
Tenant's sole discretion. However, the right to cease to operate its business
shall not affect Tenant's obligation to pay all amounts due hereunder and to
perform all covenants and obligations hereunder.
11. COLLATERAL ASSIGNMENT OF LEASE. Concurrently with the execution of
------------------------------
this Lease, Tenant shall collaterally assign the Lease to Franchisor. Landlord
hereby consents to the collateral assignment of this Lease to Franchisor or any
entity which is a party to a potential merger, consolidation with or to the
acquisition of substantially all of the assets or stock of Tenant or Franchisor
and to a further collateral assignment or hypothecation by Franchisor of the
interest so assigned by Tenant, all in accordance with that certain Collateral
Assignment of Lease attached hereto as Exhibit "D" (the "Collateral
Assignment"). If requested by Tenant, Landlord agrees to execute any documents
evidencing Landlord's consent to such assignment. The execution and delivery of
such Collateral Assignment by and between Franchisor and Tenant shall be a
condition precedent to Tenant's obligations under this Lease.
12. LANDLORD'S CONSENT TO COLLATERAL ASSIGNMENTS. In order to preserve
--------------------------------------------
Franchisor's rights in connection with Landlord's consent to the Collateral
Assignment, Landlord agrees to all of the following:
(a) to notify Franchisor in writing of and upon the failure of Tenant
to cure any default by Tenant under the Lease;
6
<PAGE>
(b) that Franchisor shall have the right, but shall not be obligated,
to cure any default by Tenant under the Lease within thirty (30) days after
the later to occur of (i) the expiration of Tenant's cure period under the
Lease, and (ii) delivery by Landlord of notice thereof in accordance with
Section (a) above;
(c) that Landlord agrees that if Franchisor shall take possession of
the Property and confirm to Landlord the assumption of the Lease by
Franchisor as tenant thereunder, Landlord shall recognize Franchisor as the
tenant under the Lease, provided that Franchisor cures any default by
Tenant under the Lease within the thirty (30) day cure period noted above,
except that if Franchisor is diligently pursuing curing such default and
cannot do so within the thirty (30) day cure period, then Franchisor shall
have a reasonable extension of time to cure the default;
(d) that Franchisor: (i) shall have the absolute right to assign,
sublet or otherwise transfer its right, title, estate and interest in the
Lease and all its proprietary interest arising therefrom to any entity
affiliated with Franchisor or any licensee or franchisee of Franchisor
provided that Franchisor shall not be released from its obligations under
the Lease (upon assignment) and such successor tenant expressly assumes
liability for Franchisor's duties and obligations under the Lease; and (ii)
may assign the Lease to a person or entity who shall agree to assume the
Tenant's obligations under the Lease and who is reasonably acceptable to
Landlord, and upon such assignment, Franchisor shall have no further
liability or obligation under the Lease as assignee, tenant or otherwise;
and
(e) that Landlord, if Franchisor does not exercise its rights under
the Collateral Assignment, shall not lease the Property to any person or
entity for the purpose of operating a food service business which engages
primarily in the sale of rotisserie-cooked chicken or potpies for a period
of two (2) years after termination or expiration of Tenant's Franchise
Agreement with Franchisor and Tenant's rights under this Lease.
13. FRANCHISE AGREEMENT. Landlord acknowledges and agrees that the
-------------------
Property may be used for the operation of a Boston Market Unit in accordance
with the terms of a Boston Chicken, Inc. Franchise Agreement to be entered into
between Franchisor and Tenant (the "Franchise Agreement"). If Franchisor does
not exercise its right of first refusal to purchase the assets of Tenant's
Boston Market Unit under the terms of the Franchise Agreement, the Tenant
agrees, at Tenant's sole expense, to make such modifications and alterations,
including removal of all distinctive physical and structural features associated
with the trade dress of Boston Market Units, as may be necessary to distinguish
the Property so clearly from its former appearance and from other Boston Market
Units as to prevent any possibility that the public will associate the Property
with Boston Market Units and any confusion created by such association. (Such
modifications and alterations shall include, but not be limited to, removing or
covering the distinctive decor and color scheme on all walls, counters, fixtures
and furnishings, as well as the exterior of the Property.) If Tenant fails to
immediately make such modifications, alterations and/or removals, Landlord and
Tenant agree that Franchisor or its designated agents may enter the Property to
make such modifications, alterations and/or removals, at Tenant's expense, and
that such entry and actions by Franchisor shall not constitute a breach of this
Lease. It is expressly acknowledged and agreed by Landlord and Tenant that
Franchisor shall have the right to obtain the remedy of specific performance or
other injunctive relief in order to enforce the provisions of this Section and
that Franchisor has no adequate
7
<PAGE>
remedy available at law for any breach of this Section. Landlord acknowledges
and agrees that Franchisor is a third-party beneficiary of this Lease.
14. NO SOLICITATION. Landlord agrees that upon its execution of this
---------------
Agreement neither it nor its agents or employees (a) will initiate, encourage
the initiation by others of discussions or negotiations with third parties or
respond to solicitations by third parties relating to the Property or any part
thereof, (b) fail to immediately notify Tenant if any third party attempts to
initiate any such solicitation, discussion or negotiation with Landlord and (c)
will enter into an agreement with any third party with respect to the Property
or any part thereof.
15. CONFIDENTIALITY. Landlord and its agents, representatives, employees,
---------------
partners, officers and directors will not disclose the subject matter or terms
of the transaction contemplated by this Agreement unless prior written consent
to such disclosure is obtained from Tenant, which consent may be withheld at
Tenant's sole discretion.
16. USE. The Property shall be used and occupied for the preparation and
---
sale of food, including, but not limited to, chicken and chicken products, pasta
products, prepared foods, all types of pot pies, and other items customarily
found in "Boston Market" stores or for any other lawful use. At any time during
the Term or an Extension, Tenant shall also have the right to have a drive
through facility located on the Property.
17. INDEMNIFICATION. Landlord hereby indemnifies and holds Tenant,
---------------
Tenant's nominees, officers, directors, agents, employees, successors and
assigns harmless from and against any and all claims, demands, liabilities, and
expenses, including attorneys' fees and litigation expenses, arising from the
negligence or wilful acts of Landlord or its agents, employees, or contractors
occurring on the Property, except to the extent caused by Tenant's negligence or
wilful misconduct. In the event any action or proceeding shall be brought
against Tenant by reason of any such claim, Landlord shall defend the same at
Landlord's expense by counsel selected by Tenant.
18. REPRESENTATIONS AND WARRANTIES. To induce Tenant to execute, deliver
------------------------------
and perform this Agreement and without regard to any independent investigations
made by Tenant, Landlord represents and warrants to Tenant on and as of the date
of execution and delivery of this Lease as follows:
(a) TITLE. Landlord owns the Property in fee simple, free of any liens,
-----
claims or encumbrances other than the title exceptions acceptable to Tenant.
(b) AUTHORIZATION. Landlord has full capacity, right, power and authority
-------------
to execute, deliver and perform this Lease and all documents to be executed by
Landlord pursuant hereto, and all required action and approvals therefor have
been duly taken and obtained. The individuals signing this Lease and all other
documents executed or to be executed pursuant hereto on behalf of Landlord are
and shall be duly authorized to sign the same on Landlord's behalf and to bind
Landlord thereto. This Lease and all documents to be executed pursuant hereto
by Landlord are and shall be binding upon and enforceable against Landlord in
accordance with their respective terms, and the transaction contemplated hereby
will not result in a breach of, or constitute a default or permit acceleration
of maturity under, any indenture, mortgage, deed of trust, loan agreement or
other agreement to which Landlord or the Property is subject or by which
Landlord or the Property is bound.
8
<PAGE>
(c) LITIGATION. There are no claims, causes of action or other litigation
----------
or proceedings pending or, to the best of Landlord's knowledge, threatened in
respect to the ownership, operation or environmental condition of the Property
or any part thereof (including disputes with mortgagees, governmental
authorities, utility companies, contractors, adjoining land owners or suppliers
of goods or services), except for claims which are fully insured and as to which
the insurer has accepted defense without reservation.
(d) VIOLATION. There are no violations of any health, safety, pollution,
---------
zoning or other laws, ordinances, rules or regulations with respect to the
Property, which have not been heretofore entirely corrected. In the event
Landlord has knowledge of any such violations, Landlord shall cure such
violations prior to the date that Tenant takes possession of the Property.
(e) ZONING. The Property is currently zoned to permit the development of
------
the Property for Tenant's Proposed Use.
19. LANDLORD'S INSURANCE. Landlord shall at no cost to Tenant all times
--------------------
maintain fire and extended coverage insurance on the improvements located on the
Shopping Center in amounts equal to the full replacement cost of said
improvements and public liability insurance covering the common areas. Upon
notice from Tenant, Landlord shall deliver to Tenant a certificate from
Landlord's insurer declaring such insurance to be in full force and effect.
Landlord and Tenant hereby release and waive any claim or right of recovery
against the other for any loss resulting from insurable causes arising out of or
in connection with the Shopping Center or the Property.
20. COMMON AREAS.
------------
(a) The term "Common Areas" shall mean and consist of all parking
areas, landscaped areas, streets, sidewalks, driveways, loading platforms,
washrooms, lounges and shelters, and other facilities available for joint
use, all as they may from time to time exist and be available to all
Occupants in the Shopping Center and their Permittees. All costs for
Common Areas shall be based upon competitive charges for similar services
and/or materials that are available in the general vicinity of the Shopping
Center.
(b) Landlord shall maintain, repair, replace, restore, and repaint
the Common Areas and keep them in good order and repair and in neat, clean
and well maintained condition in accordance with the highest standard of
maintenance for shopping centers similar in size and use to the Shopping
Center in the general metropolitan area in which the Shopping Center is
located. Landlord's obligation shall, without limitation, include:
(i) resurfacing, including keeping the parking surfaces and
access drives in a level, smooth, and evenly covered condition with
the type of surfacing material originally installed or a substitute
material comparable in all respects in quality, use, and durability;
(ii) cleaning, striping, lighting, and all other tasks
necessary to maintain the parking and Common Areas in a clean, safe,
and orderly condition, including removal of trash, rubbish, garbage,
and other refuse;
(iii) maintaining any perimeter wall in good condition and
repair;
9
<PAGE>
(iv) placing, keeping in repair, and replacing any directional
signs, markers, and keeping in repair, and replacing when necessary
such artificial lighting facilities as are required to keep the Common
Areas lit, as required by Section 20(c);
(v) maintaining, repairing and replacing all utility lines,
mains and facilities and stormwater detention areas; and
(vi) maintaining all landscaped areas, making such replacements
of shrubs and other landscaping as is necessary, and keeping those
areas at all times adequately weeded, fertilized, and watered.
(c) Landlord agrees to provide adequate lighting of the Common Areas
including the parking lot from thirty (30) minutes before dusk until at
least one and one-half (1-1/2) hours after Tenant closes its business in
the Demised Premises, which lighting shall include the illumination of any
pylon or monument sign advertising Tenant's business conducted in the
Demised Premises, as well as lighting for the other signage and awnings
utilized by Tenant in advertising the business conducted by Tenant in the
Demised Premises if not separately metered and controlled by Tenant.
(d) Except in the case of emergency, in which event Tenant may
perform such maintenance immediately, if Landlord fails or refuses to
fulfill adequately any of its obligations under this Section 20 within
fifteen (15) days after written demand by Tenant to do so, Tenant may, but
shall not be obligated to perform such obligations and Landlord shall pay
to Tenant on demand the cost plus interest on such costs at the Default
Rate until paid; or Tenant may, at its option, deduct the cost (as so
adjusted) plus interest from the next ensuing Rent payments and all other
payments due Landlord by the terms of this Lease until said amount has been
paid in full.
(e) Landlord agrees that the Shopping Center (including the Common
Areas) shall be operated as a single mercantile unit, and that no
buildings, structures, improvements, fences, barriers, or other
obstructions, except improvements incidental to the operation and
maintenance of the Common Areas, shall be placed, constructed, or
maintained in the Shopping Center except as shown on Exhibit B, and in no
event shall (i) the ratio of the number of parking spaces available for
standard size American cars to the amount of square footage of ground floor
space within the buildings comprising the Shopping Center be reduced below
five (5) parking spaces for each one thousand (1,000) square feet of gross
leaseable area, (ii) there be any interference in the access to the Demised
Premises from the abutting public thoroughfares and the parking and Common
Areas, and (iii) the visibility of the Demised Premises from the Common
Areas and from the abutting public thoroughfares be obstructed in any way.
21. RESTRICTION ON ADJACENT PROPERTY. Tenant has entered into this Lease
--------------------------------
in reliance upon representations by Landlord that the Shopping Center is and
will remain retail in character, and, further, no part of same shall be used as
a theater, auditorium, meeting hall, school or other place of public assembly,
gymnasium, health club, exercise or dance studio, dance hall, bar, off-track
betting business, billiard or pool hall; for bingo or similar games of chance,
or, as a massage parlor, video game arcade, bowling alley, skating rink, car
wash, car repair or car rental agency, blood bank or other medical care office,
night-club or adult book or adult video tape store (which are defined as stores
in which any portion of the inventory is
10
<PAGE>
not available for sale or rental to children under 18 years old because such
inventory explicitly deals with or depicts human sexuality).
22. MEMORANDUM OF LEASE. Tenant shall not record this Lease. The parties
-------------------
shall join in the execution of a memorandum or so-called "short-form" of this
Lease for the purpose of recordation in accordance with the form attached hereto
as Exhibit "A" and made a part hereof. Any recording costs associated with the
memorandum or short-form of this Lease shall be borne by the party requesting
recordation.
IN WITNESS WHEREOF, Landlord has caused this Lease to be executed and
sealed this ____ day of _________________________, 19___.
WITNESSES:
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
LANDLORD
IN WITNESS WHEREOF, Tenant has caused this Lease to be executed and sealed
this ____ day of _________________________, 19___.
WITNESSES:
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
TENANT
11
<PAGE>
EXHIBIT A
---------
MEMORANDUM OF LEASE
-------------------
WHEN RECORDED MAIL TO:
- ------------------
- ------------------
- ------------------
MEMORANDUM OF LEASE
-------------------
This Memorandum of Lease is by and between ________________________________
_________________, a corporation ("Landlord") __________________________________
and ________________________________________________, a ________________________
corporation ("Tenant"), pursuant to which Landlord has demised to Tenant, and
Tenant has accepted such demise from Landlord, the Property (later defined) upon
the following terms:
Date of Lease: _____________, ____
Description of Property: See Exhibit A attached hereto
---------
Commencement Date: The Term of this Lease shall begin on the date Tenant
opens a restaurant located on the Property for business to the general
public.
Expiration Date: ______________________
Term: sixty (60) full calendar months.
Renewal Option(s): _____ (__), five (5) year renewal options.
Exclusive: As a material inducement for Tenant to enter into this Lease,
Landlord acknowledges and agrees that during the Term and any Extension no
property presently or hereafter owned, leased or controlled directly or
indirectly by Landlord within two (2) miles in any direction from the
boundary lines of the Property shall be sold, leased, managed, used or
occupied for a restaurant or food service property. Landlord shall deliver
to Tenant on or prior to the Effective Date binding documentation, in
recordable form, containing such restriction on all property presently
owned, leased or controlled by Landlord and shall be subject to a
continuing obligation to deliver similar documentation in recordable form
to bind property subsequently acquired, leased or controlled by Landlord
which falls within said two mile restriction area. In the event of a breach
by Landlord under the terms of the Lease, Tenant shall be entitled to
injunctive relief as well as all other remedies available at law or in
equity, Landlord acknowledging and agreeing that Tenant does not have an
adequate remedy at law for breach of this provision.
Shopping Center General Use Restrictions: Tenant has entered into this
Lease in reliance upon representations by Landlord that the Shopping Center
is and will remain retail in character, and, further, the Landlord agrees
that no part of the Shopping Center shall be used as a theater, auditorium,
meeting hall, school or other place of public assembly, gymnasium, health
club, exercise or dance studio, dance
12
<PAGE>
hall, bar, off-track betting business, billiard or pool hall; for bingo or
similar games of chance; as a massage parlor, video game arcade, bowling
alley, skating rink, car wash, car repair or car rental agency, blood bank
or other medical care office; night club or adult book or adult video store
(which are defined as stores in which any portion of the inventory is not
available for sale or rental to children under eighteen (18) years old
because such inventory explicitly deals with or depicts human sexuality).
Consent to Collateral Assignment of Lease: Tenant has collaterally assigned
the Lease to Boston Chicken, Inc. ("Franchisor"). Landlord has agreed and
consented to Tenant collaterally assigning the Lease to Franchisor and by
Franchisor to any lender or any entity which is a party to a merger or
consolidation with or to the acquisition of substantially all of the assets
or stock of or with Tenant or Franchisor.
The purpose of this Memorandum of Lease is to give record notice of the
lease and of the rights created thereby, all of which are hereby confirmed.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as
of the dates set forth in their respective acknowledgements.
WITNESS: TENANT:
- --------------------------------- -----------------------------------
-----------------------------------
- --------------------------------- Date:
------------------------------
WITNESS: LANDLORD:
- --------------------------------- -----------------------------------
-----------------------------------
- --------------------------------- Date:
------------------------------
13
<PAGE>
EXHIBIT A TO MEMORANDUM OF LEASE
--------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ________________________________
Address of Property: ____________________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
14
<PAGE>
[Acknowledgment of Landlord]
STATE OF _____________________)
)
COUNTY OF ____________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
STATE OF _____________________)
)
COUNTY OF ____________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
STATE OF _____________________)
)
COUNTY OF ____________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:______________
15
<PAGE>
[Acknowledgment of Tenant]
STATE OF ________________________)
)
COUNTY OF _______________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
__________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
STATE OF _____________________)
)
COUNTY OF ____________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:
STATE OF _____________________)
)
COUNTY OF ____________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:______________
16
<PAGE>
EXHIBIT B
---------
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT, made this ______ day of ________________, 19____, by and
between __________________________________________________, a
____________________ corporation (herein "Landlord") and ____________________, a
__________ corporation (herein "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant have entered into that certain Lease dated
_____________, ____ ("Lease") for the property located in ______________,
__________; and
WHEREAS, Landlord and Tenant wish to set forth their agreements as to the
commencement of the Term of this Lease.
NOW, THEREFORE, in consideration of the Demised Premises as described in
this Lease and the covenants set forth therein, Landlord and Tenant agree as
follows:
1. The Term of this Lease commenced on ___________________, 19___.
2. The initial or base term of this Lease shall expire on _______, 19___.
3. Tenant has _________ options of five (5) years each.
4. The Commencement Date for purposes of paying Rent under this Lease
Agreement is ____________, 19___.
5. Square footage of the Property is _______________ square feet.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
LANDLORD: TENANT:
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
17
<PAGE>
EXHIBIT A TO TERM COMMENCEMENT AGREEMENT
----------------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ________________________________
Address of Property: ____________________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
18
<PAGE>
[Acknowledgment of Landlord]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
19
<PAGE>
[Acknowledgment of Tenant]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
20
<PAGE>
EXHIBIT B
---------
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT, made this ______ day of ________________, 19____, by and
between __________________________________________________, a
____________________ corporation (herein "Landlord") and ____________________, a
__________ corporation (herein "Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant have entered into that certain Lease dated
_____________, ____ ("Lease") for the property located in ______________,
__________; and
WHEREAS, Landlord and Tenant wish to set forth their agreements as to the
commencement of the Term of this Lease.
NOW, THEREFORE, in consideration of the Demised Premises as described in
this Lease and the covenants set forth therein, Landlord and Tenant agree as
follows:
1. The Term of this Lease commenced on ___________________, 19___.
2. The initial or base term of this Lease shall expire on _______, 19___.
3. Tenant has _________ options of five (5) years each.
4. The Commencement Date for purposes of paying Rent under this Lease
Agreement is ________, 19___.
5. Square footage of the Property is _______________ square feet.
6. Monthly rents payable during the first Lease Year are as follows:
(a) Rent: _________________________________________________
(b) Taxes: _________________________________________________
(c) Insurance: _________________________________________________
(d) Other: _________________________________________________
TOTAL MONTHLY: $
=======================================================
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
LANDLORD: TENANT:
- --------------------------- ---------------------------
- --------------------------- ---------------------------
21
<PAGE>
EXHIBIT A TO TERM COMMENCEMENT AGREEMENT
----------------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ________________________________
Address of Property: ____________________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
22
<PAGE>
[Acknowledgment of Landlord]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires: _____________
23
<PAGE>
[Acknowledgment of Tenant]
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
__________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
STATE OF __________________)
)
COUNTY OF _________________)
Personally appeared before me, a Notary Public in and for the above
County and State, _______________________ known personally by me and
acknowledged by me to be on the date of execution, _____________________ of
___________________________, a ___________________ and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
_________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires: _____________
24
<PAGE>
EXHIBIT C
---------
RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:
- ----------------------
- ----------------------
- ----------------------
- ----------------------
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
----------------------------------------
THIS NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and
entered into this the _________ day of ____________________, 19____ by and
between ______________________________ ("Tenant") and
___________________________________________________ a __________________________
("Lender") and _______________________________________________________
("Landlord").
R E C I T A L S:
---------------
WHEREAS, Landlord and Tenant executed a Lease dated as of _______________,
19___ (the "Lease"), a memorandum of which may be recorded simultaneously
herewith, covering a certain Premises therein described located on a parcel of
real estate, a legal description of which is attached hereto and incorporated
herein by this reference as Exhibit "A" (said parcel of real estate and the
-----------
Premises being sometimes collectively referred to herein as the "Property"); and
WHEREAS, Landlord has executed a ____________________ (the "Mortgage")
dated __________________, 19___ and recorded on __________________, 19_____ at
Volume __________, Page ________, of the ___________________ Records of
________________ County, ____________________ in favor of Lender, payable upon
the terms and conditions described therein; and
WHEREAS, it is a condition to the Mortgage shall unconditionally be and
remain at all times a lien or charge upon the Property, prior and superior to
the Lease and to the leasehold estate created thereby; and
WHEREAS, the parties hereto desire to assure Tenant's possession and
control of the Property under the Lease upon the terms and conditions therein
contained;
NOW, THEREFORE, for and in consideration of the mutual covenants and
premises herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed by the parties
hereto, the parties hereto do hereby agree as follows:
A G R E E M E N T:
-----------------
1. The Lease is and shall be subject and subordinate to the Mortgage, and
to all renewals, modifications, consolidations, replacements and extensions
thereof, and to all future advances made thereunder.
2. Should Lender become the owner of the Property, or should the Property
be sold by reason of foreclosure, or other proceedings brought to enforce the
Mortgage which encumbers the Property, or should the Property be transferred by
deed in lieu of foreclosure, or should any portion of the Property be sold under
a trustee's sale, the Lease shall continue in full force and effect as a direct
lease between the then owner of the Property covered by the Mortgage and Tenant,
upon, and subject to, all of the terms, covenants and conditions
25
<PAGE>
of the Lease for the balance of the term thereof remaining, including any
extensions therein provided. Tenant does hereby agree to attorn to Lender or to
any such owner as its landlord, and Lender hereby agrees that it will accept
such attornment.
3. Notwithstanding any other provision of this Agreement, Lender shall
not be (a) liable for any default of any landlord under the Lease (including
Landlord), except that Lender agrees to cure any default of Landlord that is
continuing as of the date Lender forecloses the Property within thirty (30) days
from the date Tenant delivers written notice to Lender of such continuing
default, unless such default is of such a nature to reasonably require more than
thirty (30) days to cure and then Lender shall be permitted such additional time
as is reasonably necessary to effect such cure, provided Lender diligently and
continuously proceeds to cure such default; (b) subject to any offsets or
defenses which have accrued prior to the date of foreclosure, unless Tenant
shall have delivered to Lender written notice of the default which gave rise to
such offset or defense and permitted Lender the same right to cure such default
as permitted Landlord under the Lease; (c) bound by any rent that Tenant may
have paid under the Lease more than one month in advance; (d) bound by any
amendment or modification of the Lease hereafter made without Lender's prior
written consent; and (e) responsible for the return of any security deposit
delivered to Landlord under the Lease and not subsequently received by Lender.
4. If Lender sends written notice to Tenant to direct its rent payments
under the Lease to Lender instead of Landlord, then Tenant agrees to follow the
instructions set forth in such written instructions and deliver Rent payments to
Lender; however, Landlord and Lender agree that Tenant shall be credited under
the Lease for any Rent payments sent to Lender pursuant to such written notice.
5. All notices which may or are required to be sent under this Agreement
shall be in writing and shall be sent by certified or registered U.S. mail,
postage prepaid, return receipt requested, and sent to the party at the address
appearing below or such other address as any party shall hereafter inform the
other party by written notice given as set forth above:
Tenant:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
with a copy to:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Lender:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
All notices delivered as set forth above shall be deemed effective three (3)
days from the date deposited in the U.S. mail
6. Said Mortgage shall not cover or encumber and shall not be construed as
subjecting in any manner to the lien thereof any of Tenant's improvements or
trade fixtures, furniture, equipment or other personal property at any time
placed or installed in the Property. In the event the Property or any part
thereof shall be taken for public purposes by condemnation or transfer in lieu
thereof or the same are damaged or destroyed, the rights of the parties to any
condemnation award or insurance proceeds shall be determined and controlled by
the applicable provisions of this Lease.
7. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors in interest, heirs and assigns and any
subsequent owner of the Property secured by the Mortgage.
26
<PAGE>
8. Should any action or proceeding be commenced to enforce any of the
provisions of this Agreement or in connection with its meaning, the prevailing
party in such action shall be awarded, in addition to any other relief it may
obtain, its reasonable costs and expenses, not limited to taxable costs, and
reasonable attorney's fees.
9. Tenant shall not be enjoined as a party/defendant in any action or
proceeding which may be instituted or taken by reason or under any default by
Landlord in the performance of the terms, covenants, conditions and agreements
set forth in the Mortgage.
IN WITNESS WHEREOF, the parties hereto have caused this Non-Disturbance
Agreement to be executed as of the day and year first above written.
WITNESS: LENDER:
------------------------------------------
- ---------------------------------- a
-----------------------------------------
- ----------------------------------
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
WITNESS: TENANT:
------------------------------------------
- ----------------------------------
------------------------------------------
- ----------------------------------
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
WITNESS: LANDLORD:
------------------------------------------
- ----------------------------------
------------------------------------------
- ----------------------------------
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
27
<PAGE>
EXHIBIT A TO NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-----------------------------------------------------
LEGAL DESCRIPTION OF THE PROPERTY
---------------------------------
TAX I.D. NUMBER: ___________________________
Address of Property: ____________________________
This document prepared by and after
recording should be returned to:
James T. Mayer, Esq.
Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601-1293
(312) 368-4000
28
<PAGE>
[Acknowledgment of Landlord]
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:________________________
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:________________________
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _____________________________________________________ known
personally by me and acknowledged by me to be the same persons who executed the
foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
________________________________________
Notary Public in and for the
State an County aforesaid
My commission expires:________________________
29
<PAGE>
[Acknowledgment of Tenant]
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________
_________________, a ___________________ and he/she executed the foregoing for
and on behalf of said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:________________________
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________
_________________, a ___________________ and he/she executed the foregoing for
and on behalf of said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:________________________
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________
_________________, a ___________________ and he/she executed the foregoing for
and on behalf of said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:________________________
30
<PAGE>
[Acknowledgment of Lender]
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
STATE OF ____________________)
)
COUNTY OF ___________________)
Personally appeared before me, a Notary Public in and for the above County
and State, _______________________ known personally by me and acknowledged by me
to be on the date of execution, _____________________ of ______________________,
a ___________________ and he/she executed the foregoing for and on behalf of
said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of ______________,
19_____.
___________________________________________
Notary Public in and for the
State and County aforesaid
My commission expires:____________________
31
<PAGE>
EXHIBIT "D" TO LEASE
--------------------
LOCATION:
STORE NUMBER:
COLLATERAL ASSIGNMENT OF LEASE
------------------------------
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns, transfers
and sets over unto BOSTON CHICKEN, INC., a Delaware corporation ("Assignee"),
all of Assignor's right, title and interest in, to and under that certain lease
("Lease") dated ________________ between Assignor, as tenant, and ____________
("Landlord") respecting the premises demised in the Lease ("Premises") and
legally described on Exhibit A attached hereto and made a part hereof. This
Assignment is for collateral purposes only and except as specified herein,
Assignee shall have no liability or obligation of any kind whatsoever arising
from or in connection with this Assignment or the Lease unless Assignee shall
take possession of the Premises pursuant to the terms hereof and shall assume
the obligations of Assignor thereunder.
Assignor represents and warrants to Assignee that Assignor has (i) full
power and authority to so assign the Lease and its interest therein, and (i) not
assigned or transferred, and is not obligated to assign or transfer, any of its
interest in the Lease or the Premises.
Upon a default by Assignor under the Lease or under the Boston Chicken,
Inc. Franchise Agreement between Assignee and Assignor for a Boston Market Unit
("Franchise Agreement"), or in the event of a default by Assignor under any
document or instrument securing the Franchise Agreement, Assignee shall have the
right and is hereby empowered to take possession of the Premises, expel Assignor
therefrom, and, in such event, Assignor shall have no further right, title or
interest in the Lease and Premises and shall remain liable to Assignee for all
past due rents and other charges, agreements and obligations set forth in the
Lease which Assignee shall be required either to pay to Landlord or perform
thereunder.
Assignor agrees that it will not suffer or permit any surrender,
termination, amendment or modification of the Lease without the prior written
consent of Assignee. Throughout the term of the Franchise Agreement, Assignor
agrees that it shall elect and exercise all options to extend the term of or
renew the Lease not less than thirty (30) days prior to the last day that said
option must be exercised, unless Assignee otherwise agrees in writing. Assignor
shall send Assignee a copy of the notice of exercise concurrently with
Assignor's exercise of the option. Upon failure of Assignee to otherwise agree
in writing, or upon failure of Assignor to so elect to extend or renew the Lease
as aforesaid, Assignor hereby appoints Assignee as its true and lawful attorney-
in-fact to exercise such extension or renewal options in the name, place and
stead of Assignor for the sole purpose of effecting such extension or renewal,
provided that Assignee shall have the right but not the obligation to exercise
such extension or renewal options.
This Assignment shall inure to the benefit of Assignee and its successors
and assigns and shall be binding upon Assignor, and Assignor's heirs, personal
representatives, officers, partners, successors and assigns.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date set forth below their respective signatures.
WITNESSES: ASSIGNOR:
- ------------------------------------ ---------------------------------------
By:
- ------------------------------------ ------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date: , 19
-------------------------- ----
WITNESSES: ASSIGNEE:
- ------------------------------------ ---------------------------------------
By:
- ------------------------------------ ------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date: , 19
-------------------------- ----
33
<PAGE>
State of )
) SS.
County of )
I, ______________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that _____________________, personally known to me
to be the __________________________, whose name is subscribed to the within
instrument, appeared before me this day in person and acknowledged that as such
__________________________ he signed and delivered the said instrument of said
corporation as the free and voluntary act and deed of said ____________________,
for the uses and purposes set forth therein.
GIVEN under my hand and notarial seal this ______day of _______________,
19__.
My Commission expires:___________ __________________________________
Notary Public
State of )
) SS.
County of )
I, ______________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that _____________________, personally known to me
to be the __________________________, whose name is subscribed to the within
instrument, appeared before me this day in person and acknowledged that as such
__________________________ he signed and delivered the said instrument of said
corporation as the free and voluntary act and deed of said ____________________,
for the uses and purposes set forth therein.
GIVEN under my hand and notarial seal this ______day of _______________,
19__.
My Commission expires:___________ __________________________________
Notary Public
34
<PAGE>
State of Colorado )
) SS.
County of Jefferson )
I, _________________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that ___________________________, personally known
to me to be the ______________________ of Boston Chicken, Inc., a corporation of
the State of Delaware, whose name is subscribed to the within instrument,
appeared before me this day in person and acknowledged that as such Vice
President, he signed and delivered the said instrument of said corporation as
his free and voluntary act and as the free and voluntary act and deed of said
corporation, for the uses and purposes set forth therein.
GIVEN under my hand and notarial seal this _______ day of _______________,
19___.
My Commission expires:___________ __________________________________
Notary Public
35
<PAGE>
EXHIBIT A TO COLLATERAL ASSIGNMENT OF LEASE
-------------------------------------------
LEGAL DESCRIPTION
Property Address: ___________________________________
___________________________________
Store No. ______________
Permanent Index No. _____________________________________
This instrument was prepared by and should be
returned to:
Alan J. Williger, Esq.
Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, CO 80401-4086
36
<PAGE>
EXHIBIT G
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
ADDENDUM TO PURCHASE AND SALE AGREEMENT
---------------------------------------
G-1
<PAGE>
ADDENDUM TO PURCHASE AND SALE AGREEMENT
---------------------------------------
THIS ADDENDUM is to the foregoing purchase and sale agreement (the
"Agreement"), dated as of _______________________________, 199___ by and between
_________________________________________________________________ ("Seller") and
__________________________________________________________________("Purchaser").
The following shall amend and be incorporated into the Agreement. In the
event of any conflict between the terms of the Agreement and the terms of this
Addendum, then the terms of this Addendum shall control. All capitalized terms
not defined in this Addendum shall have the respective meanings set forth in the
Agreement.
1. TITLE INSURANCE.
---------------
(a) Upon execution and delivery of this Agreement, Seller shall provide a
current abstract of title or existing title policy to Purchaser. Purchaser
shall order a title insurance commitment on the Property prepared by the Title
Company. Seller shall pay for any cost incurred in title searches and, at
closing, shall pay for an ALTA Form B Owner's Title Insurance Policy ("Title")
approved by Purchaser, with extended coverage over all general exceptions, in
the amount of the Purchase Price and any title endorsements required by
Purchaser. Seller will convey good and marketable title to the Property at
closing, and except as provided for herein, the Property shall be conveyed free,
clear and unencumbered of all tenancies and parties in possession on the date of
closing.
(b) In the event the title insurance commitment shall reflect
encumbrances or other conditions not acceptable to Purchaser ("Defects"), then
Seller, upon Purchaser's notification of the Defects, shall immediately and
diligently proceed to cure same and shall have thirty (30) days from the date of
such notice of Defects within which to cure the Defects to Purchaser's
satisfaction. If, after the exercise of all reasonable diligence, Seller is
unable to remove or obtain a title endorsement over the Defects, then Purchaser
may accept the Defects or Purchaser may terminate the Agreement in which case
Purchaser shall be entitled to the return of the Earnest Money Deposit and any
and all additional deposits in escrow and the parties shall be released from
further liability.
2. CONDITIONS PRECEDENT. Purchaser proposes to use the Property for the
--------------------
construction and operation of a free standing "Boston Market" restaurant,
including, but not limited to, a drive-thru service facility, carry-out and
delivery service, and off-street parking incident thereto, together with curb-
cuts and signage acceptable to Purchaser ("Purchaser's Proposed Use").
Purchaser's obligation to purchase the Property is contingent on the
satisfaction, in Purchaser's sole discretion, or waiver by Purchaser of the
following conditions ("Conditions Precedent") within one hundred eighty (180)
days after the date of the Earnest Money Deposit:
(a) Purchaser obtaining from Seller and any other applicable party
easements with respect to the Property required by Purchaser, in its sole
discretion, for Purchaser's proposed use relating to ingress and egress,
parking and utilities to be executed on terms provided by Purchaser.
(b) Purchaser obtaining from Seller an agreement protecting the
visibility of Purchaser's Property and prohibiting any building in or
changes to the area designated by Purchaser to protect Purchaser's ingress
and egress and parking rights. The form of this agreement shall be
provided by Purchaser.
(c) Purchaser obtaining a survey, bearing a legal description, made
by a licensed surveyor selected by Purchaser, in accordance with the
"Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys"
jointly established and adopted by the American Land Title Association and
the American Congress on Surveying and Mapping in 1992 and such other
survey standards as required by Purchaser ("Survey"), certified to
Purchaser and the Title Company and such other parties requested by
Purchaser, showing the area, dimensions and location of the Property to the
nearest monuments, streets, alleys on all sides, the topography, the
location of all available utilities in adjoining streets, alleys or
property, the location of all improvements and
1
<PAGE>
encroachments, the location of all recorded easements against or
appurtenant to the Property, stating the flood zone of the Property, and
not disclosing any condition rendering the Property unusable for
Purchaser's Proposed Use.
(d) Purchaser obtaining boring, percolation, and other soil tests
("Soil Tests") conducted by a licensed engineer selected by Purchaser
determining the physical characteristics of the sub-strata of the Property
and showing that the soil and ground water are not contaminated and that
the Property is satisfactory for Purchaser's Proposed Use.
(e) Purchaser obtaining a written Phase I Environmental Assessment
("Assessment") of the Property, which Assessment shall be prepared by an
environmental professional selected by Purchaser and comply with the terms
and provisions of the "Standard Practice for Environmental Site
Assessments: Phase I Environmental Site Assessment Process", ASTM Standard
1527-93 as presently in effect and promulgated by the American Society of
Testing and Materials and Purchaser's Guidance Document and Service
Agreement therefor. If the Assessment discloses any known or suspected
environmental contamination, Purchaser, at Seller's expense, may order
additional tests and investigations to determine if the Property is
satisfactory for Purchaser's Proposed Use or Purchaser may terminate the
Agreement and this Addendum, in which event the Earnest Money Deposit and
all additional deposits in escrow shall promptly be returned to Purchaser
and the parties shall be released from further liability.
(f) The water and gas mains, electric power lines and sanitary and
storm sewers, telephone, natural gas and other necessary public utilities
(collectively, "Utilities") being immediately on or contiguous to the
Property, and being adequate and available for hook-up and connection for
Purchaser's Proposed Use. If any of the Utilities are not located as
required by Purchaser's plans and specifications or interfere with
Purchaser's development of the Property, Seller agrees to extend and/or
relocate any of the Utilities at Seller's cost, in accordance with
Purchaser's plans and specifications therefor, in the public right-of-way
or other location approved by Purchaser, within thirty (30) days after
Purchaser notifies Seller that all other Conditions Precedent have been met
and Purchaser, at its sole discretion, may extend the closing date until
such time as the relocation and/or extension of Utilities has been
accomplished. Seller agrees, at its expense, to obtain any perpetual
easements in recordable form acceptable to Purchaser and to obtain any
required consents to relocate existing easements for Utilities required by
Purchaser. In the event all Utilities are not available or adequate as
required hereunder and/or Seller has not extended or relocated Utilities,
if required, pursuant this Section 2(f), Purchaser may, at its option,
elect to either (i) escrow one hundred fifty percent (150%) of the
estimated cost of extensions or relocations and all other associated costs
so as to enable the Utilities to comply with Purchaser's plans and
specifications, and deduct said costs from the amount owed hereunder to
Seller at closing, or (ii) terminate the Agreement and this Addendum, in
which event Purchaser shall be entitled to the return of the Earnest Money
Deposit and all additional deposits in escrow and the parties shall be
released from further liability.
(g) Purchaser obtaining the requisite senior management approval
("Approval") of the Property for Purchaser's Proposed Use from Boston
Chicken, Inc.
(h) Purchaser obtaining all approvals, permits, easements and
licenses ("Permits") for Purchaser's Proposed Use in accordance with
Purchaser's plans and specifications therefor, including, without
limitation, signage, trade dress, satellite dish, curb-cuts, access,
parking and drive-thru as required by Purchaser. In the event that the
Property is restricted by any state, county, municipal or other
governmental law, ordinance, rule or regulation which prohibits, limits or
restricts the use of the Property for Purchaser's Proposed Use, Purchaser
shall undertake to secure rezoning, special use permits, variances,
subdivision, lot split, lot tie or replat ("Authorizations") so that the
Property may be used for Purchaser's Proposed Use. The cost of securing the
Authorizations shall be at Seller's expense for which Purchaser shall
receive a credit at closing. Such cost may include, but is not limited to,
attorney, engineer, architect or other professional and/or consulting fees.
Seller agrees to cooperate fully with Purchaser in securing the
Authorizations and Permits and grants permission to
2
<PAGE>
Purchaser to make application for the Authorizations and Permits in the
name of Seller. Seller shall execute any necessary documents in connection
with Purchaser's application for the Authorizations and Permits. The
determination of the necessity for obtaining the Authorizations and Permits
and the adequacy of the Authorizations and Permits granted shall be within
the sole discretion of Purchaser. Seller further agrees to dedicate or
grant any easements for public or private ways and to diligently perform
and pay for any improvements located off the Property required as a
condition of the Permits and Authorizations.
(i) Purchaser's total off-site and extraordinary costs ("Costs")
not exceeding $_________________. "Off-site and extraordinary costs" shall
be defined as all costs and expenses other than construction costs for
Purchaser's standard building and site improvements. If Purchaser
determines that the Costs shall exceed the amount stated above, Purchaser
may, at its option, declare the Agreement and this Addendum to be null and
void and of no further force and effect, whereupon the Earnest Money
Deposit and all additional deposits in escrow shall be promptly refunded to
Purchaser. If Purchaser does not terminate the Agreement and this Addendum
as provided for herein, Purchaser may, but shall not be obligated to,
perform such work and Seller shall pay all Costs in connection with the
development of the Property for Purchaser's Proposed Use. At Purchaser's
option, Purchaser may elect to escrow one hundred fifty percent (150%) of
the estimated amount of the Costs and deduct such escrow funds from the
amount owed hereunder to Seller at closing, and if any additional amounts
are owing to Purchaser, Seller shall reimburse Purchaser for such costs at
closing. If any additional amounts are not known by Purchaser at closing,
Seller's reimbursement obligation hereunder shall survive the closing and
Seller shall pay such amounts to Purchaser upon delivery to Seller of a
bill therefor.
In the event the Conditions Precedent are not satisfied in Purchaser's sole
discretion or waived by Purchaser within said one hundred eighty (180) day
period, Purchaser shall have two (2) successive ninety (90) day extensions of
this Addendum within which to secure Authorizations and Permits upon payment to
Seller of One Thousand Two Hundred Fifty Dollars ($1,250.00) for each ninety
(90) day period. All of such payments are understood to be part of the Earnest
Money Deposit to be credited against the Purchase Price at closing, retained by
Seller as liquidated damages in the event of a default without cure by Purchaser
as provided in the Agreement or refunded to Purchaser if Purchaser elects to
terminate the Agreement and this Addendum as provided herein. In the event any
of the Conditions Precedent are not satisfied, approved or waived by Purchaser,
in its sole discretion, then at any time within one hundred eighty (180) days
after the date of the Earnest Money Deposit, as such date may have been extended
pursuant to this Section 2, Purchaser may terminate the Agreement and this
Addendum in which event the Earnest Money Deposit and all additional deposits in
escrow shall be promptly refunded to Purchaser and the parties shall be released
from further liability. In the event the Agreement and this Addendum are
terminated by Purchaser, either by default or election, except for the failure
of Seller to convey marketable and insurable title, Purchaser shall not be
entitled to reimbursement for the cost of the Survey and Soil Tests. At
closing, Seller shall reimburse Purchaser for the cost of the Survey, Assessment
and Soil Tests. Seller hereby grants to Purchaser, its agents and contractors,
the right to enter upon the Property to make the Soil Tests, Assessment and
Survey and install the signage as provided herein.
3. RESTRICTIVE COVENANT. As a material inducement for Purchaser to enter
--------------------
into this Agreement, Seller acknowledges and agrees that no property presently
or hereafter owned, leased or controlled directly or indirectly by Seller within
two (2) miles in any direction from the boundary lines of the Property shall be
sold, leased, managed, used or occupied for a restaurant or food service
property. Seller shall deliver to Purchaser at closing documentation, in
recordable form, containing such restriction on all property presently owned,
leased or controlled by Seller.
4. ASSIGNMENT. Purchaser shall have the right to assign this Agreement
----------
at any time.
5. NO SOLICITATION. Seller agrees that upon its execution of this
---------------
Agreement neither it nor its agents or employees (a) will initiate, encourage
the initiation by others of discussions or negotiations with third parties or
respond to solicitations by third parties relating to the Property or any part
thereof, (b) fail to immediately notify Purchaser if any third party attempts to
initiate any such solicitation, discussion or negotiation with Seller and (c)
will enter into an agreement with any third party with respect to the Property
or any part thereof.
3
<PAGE>
6. CONFIDENTIALITY. Seller and its agents, representatives, employees,
---------------
partners, officers and directors will not disclose the subject matter or terms
of the transaction contemplated by this Agreement unless prior written consent
to such disclosure is obtained from Purchaser, which consent may be withheld at
Purchaser's sole discretion.
IN THE EVENT THE PROPERTY BEING PURCHASED IS PART OF A SHOPPING CENTER, THE
FOLLOWING PARAGRAPHS SHOULD BE INSERTED:
1. PROPERTY.
--------
A. The Property, together with all improvements and
appurtenant easements, if any, is located in a portion of a shopping
center (the "Shopping Center") shown on the site plan ("Site Plan")
attached as Exhibit B hereto and made a part hereof and is described
on the Site Plan as "Parcel 1".
B. The legal description of the Shopping Center (excluding
the Property) is described in Exhibit C attached hereto and made a
part hereof and is shown on Exhibit B as "Parcel 2."
2. RESTRICTIVE COVENANTS.
---------------------
Seller agrees that no portion of the Shopping Center, other
than the Property, shall be sold, leased, used or occupied for a
parking intensive use. Purchaser has acquired or will acquire the
Property in reliance upon representations by Seller that the Shopping
Center is and will remain a first-class retail shopping center, and,
further, no part of same shall be used as a theater, auditorium,
meeting hall, school or other place of public assembly, gymnasium,
health club, exercise or dance studio, dance hall, bar, off-track
betting business, billiard or pool hall; for bingo or similar games
of chance; as a massage parlor, video game arcade, bowling alley,
skating rink, car wash, car repair or car rental agency, blood bank
or other medical care office; night-club or adult book or adult video
store (which are defined as stores in which any portion of the
inventory is not available for sale or rental to children under
eighteen (18) years old because such inventory explicitly deals with
or depicts human sexuality). In the event of a breach by Seller of
this restrictive covenant, Seller acknowledges and agrees that
Purchaser does not have an adequate remedy at law and Purchaser shall
be entitled to injunctive relief as well as all other remedies
available at law or in equity.
3. EASEMENT FOR PARKING AND INGRESS AND EGRESS.
-------------------------------------------
Seller shall grant and convey to Purchaser and to Purchaser's
officers, directors, partners, lenders, agents, employees,
contractors, lessees, licensees, concessionaires, customers, business
guests and invitees (such persons or entities are collectively called
"Permittees") a perpetual, non-exclusive easement appurtenant to the
Property for vehicular parking and vehicular and pedestrian ingress
and egress, to and from the Property, over, upon and across the
parking areas, driveways, exits and entrances, sidewalks and
walkways, and other common areas, as such areas now exist on Parcel
2, as shown on Exhibit B.
4. EASEMENTS FOR UTILITIES AND DRAINAGE.
------------------------------------
A. Seller also shall grant and convey to Purchaser
perpetual, non-exclusive easements, appurtenant to the Property, for
the purpose of installing, operating, maintaining, repairing,
replacing and renewing any and all utility lines and related
facilities, over, above, along, under, in and across Parcel 2,
wherever such utility lines may be located necessary for the
operation of the improvements constructed or to be constructed on the
Property. No trees, permanent buildings or other structure shall be
placed in or allowed to encroach upon the easements, and no change of
grade elevation or excavation shall be made thereon without
Purchaser's prior written approval. Seller grants to Purchaser,
Purchaser's lessees,
4
<PAGE>
lenders, successors and assigns, the right to use, coupled with its
easement, such utilities and related facilities. Seller covenants to
maintain the utility lines and all related facilities located on
Parcel 2 in good condition and repair.
B. Seller also shall grant and convey to Purchaser a
perpetual, non-exclusive easement, appurtenant to the Property, to
tap into and use, at no cost or expense to Purchaser, the storm sewer
lines and related facilities located on or serving Parcel 2 for the
purpose of draining any and all surface water runoff from the
Property and the improvements which may, from time to time, be
located on the Property. In lieu of tapping into the storm sewer
lines on Parcel 2, Purchaser may, at its option and at no cost or
expense to Purchaser, surface drain its surface water runoff onto
Parcel 2.
5. MAINTENANCE.
-----------
Seller, at Seller's expense, shall maintain and keep in good
condition and repair, or cause to be maintained and kept in good
order and repair, the parking, driveways and other improved or
landscaped common areas situated on Parcel 2, all in compliance with
applicable law. The foregoing obligation of Seller shall, without
limiting its generality, include the following:
A. Maintaining the surfaces at such grades and levels for
use and enjoyment as contiguous and homogeneous common areas, and
maintaining (and, if necessary, resurfacing) the surfaces in a level,
smooth and evenly-covered condition with the type of surfacing
material originally installed or of similar appearance, quality, use
and durability, free of all chuckholes, fissures, cracks and
settlement; and
B. Removing all papers, debris, snow, ice, standing water,
filth and refuse and thoroughly sweeping the areas to the extent
reasonably necessary to keep the areas in a neat, clean, sightly,
sanitary and orderly condition; and
C. Placing, keeping in repair and replacing as necessary
appropriate directional signs, striping markers and lines; and
operating, keeping in repair and replacing, as necessary, such
artificial lighting facilities as required by this Addendum; and
D. Maintaining any perimeter walls and retaining walls in
good condition and state of repair; and
E. Maintaining all landscaped areas, making such
replacements of shrubs and other landscaping as is necessary, and
keeping the areas at all times adequately mowed, weeded, pruned,
fertilized and watered; and
F. Demolishing any damaged or destroyed buildings not
intended to be rebuilt, removing all debris and rubble and
landscaping such areas in a clean and sightly condition.
6. BARRIERS.
--------
Purchaser and Seller may erect curbs, fences and landscaping on
their respective parcels in order to define the Property and Parcel
2, so long as such curbs, fences and landscaping do not detract from
the mutual and common parking and access rights of the Purchaser and
Seller or prevent, hinder or interfere in any way with the free flow
and passage of vehicular and pedestrian traffic and parking over, to,
from and between the Property and Parcel 2 or adversely affect the
visibility of the Property.
5
<PAGE>
7. PARKING RATIO AND CHANGES TO SHOPPING CENTER.
--------------------------------------------
Seller agrees that the Shopping Center (including the common
areas) shall be operated as a single mercantile unit, and that no
buildings, structures, improvements, fences, barriers, or other
obstructions, except improvements incidental to the operation and
maintenance of the common areas or as provided herein, shall be
placed, constructed, or maintained in the Shopping Center except as
shown on the Site Plan as permitted building areas. In no event shall
the ratio of the number of parking spaces available for standard size
American cars to the amount of the gross square footage of all
buildings located in the Shopping Center (whether or not leased or
occupied) be reduced below five (5) parking spaces for each one
thousand (1,000) square feet of gross square footage, nor shall there
be any interference in the access to the Property from the abutting
public thoroughfares and the parking and common areas, and the
visibility of the Property from the common areas and from the
abutting public thoroughfares shall not be obstructed in any way.
8. RULES AND REGULATIONS.
---------------------
Purchaser and Seller shall have the right to enact reasonable
rules concerning the conduct and operation of the parking areas and
spaces, driveways and other common areas situated on their respective
properties. Seller shall not allow its employees or employees of the
other tenants of the Shopping Center to park on the Property or
within fifty (50) feet of its boundaries.
9. COMPLIANCE WITH LAWS/INDEMNIFICATION/INSURANCE.
----------------------------------------------
With respect to its own property, Purchaser and Seller each
shall comply with all laws, rules, regulations and requirements of
all public authorities. Purchaser and Seller also agree to indemnify,
defend and hold each other harmless against all claims, demands,
loss, damage, liabilities and expenses and all suits, actions and
judgments (including, but not limited to, costs and attorneys' fees)
arising out of occurrences on their respective properties, unless
caused by the negligence of the party seeking indemnification under
this paragraph. Purchaser and Seller shall give prompt and timely
notice of any claim made or suit or action commenced against the
other party which in any way would result in indemnification under
this paragraph. Purchaser and Seller also agree to maintain primary
public liability and property damage insurance covering their
respective properties in reasonable limits, but no less than $500,000
for bodily injury or death or property damage of any one person and
$1,000,000 for any one occurrence. Purchaser and Seller, for
themselves, and for all parties claiming under them, mutually release
and discharge each other from all claims and liabilities arising from
any occurrence covered or required hereunder to be covered in whole
or in part by the foregoing insurance, and also waive any right of
subrogation which might otherwise exist in or accrue to any person on
account thereof.
10. MAINTENANCE EXPENSES.
--------------------
Seller and Purchaser each shall pay the expense of maintaining
and repairing the parking, ingress, egress and other improved and
landscaped common areas situated on their respective properties,
including the payment of all real estate taxes and assessments,
subject only to the right to defer payment in a manner provided by
law and/or in connection with a bona fide contest of such tax or
assessment, so long as the rights of the other party shall not be
jeopardized by such deferring of payment.
11. DEFAULT.
-------
If either party fails to perform any agreement to be performed
by it and such failure continues for thirty (30) days, or involves
potential danger to the health or safety of persons, or may result in
substantial deterioration of the Property or Parcel 2, or may
adversely affect the business conducted by
6
<PAGE>
Purchaser on the Property, then in each case after written notice to
such party specifying the default, the other party may, at its
election, cure such failure or breach for and on behalf of the
defaulting party. Any amount which the party so electing to cure
shall expend for such purpose, or which shall otherwise be due by
either party to the other, shall be paid to the entitled party on
demand, without contest, upon delivery of its invoice, together with
interest at the lower of (i) the rate of ten percent (10%) per annum,
or (ii) the maximum rate permissible from time to time under
applicable law, from the date of the expenditure or the date when it
shall have become due to the date of payment in full. The provisions
of this paragraph shall be in all respects subject and subordinate to
the lien of any mortgages or deeds of trusts at any time or from time
to time on the land of the defaulting party and the rights of the
holder or holders of such mortgages or deeds of trust.
12. COVENANTS RUNNING WITH THE LAND.
-------------------------------
The right to use and exercise the rights and easements
contained in this Addendum shall run with the land and inure to, and
be for the benefit of, Purchaser and Seller, their successors and
assigns, lenders and Permittees. In addition, the grant and the use,
benefit and enjoyment of such easements shall always be without
charge, cost, fee or assessment of any kind whatsoever.
13. RECORDING AND TITLE INSURANCE.
-----------------------------
All of the terms and conditions of the above easement
provisions shall be contained in and appear with the legal
description of the Property conveyed in the deed required to be
delivered by Seller to Purchaser under the Agreement. In addition, a
separate easement and restrictive covenant agreement embodying the
above provisions and agreements in recordable form against the
Shopping Center shall be prepared for Seller's execution and delivery
at closing. The title insurance requirements contained in the
Addendum shall also insure these easements, and Seller agrees to
obtain non-disturbance agreements, consents, waivers and other
agreements from lien holders, mortgagees, tenants and any other party
with superior rights that might interfere with the rights, duties and
obligations contemplated by this Addendum.
14. PARKING LOT LIGHTS.
------------------
Seller agrees to provide adequate lighting of the common areas
of Parcel 2 including the parking lot from thirty (30) minutes before
dusk until at least one and one-half (1-1/2) hours after Purchaser
closes its business on the Property, which lighting shall include the
illumination of any pylon or monument sign advertising Purchaser's
business conducted on the Property as well as lighting for the other
signage and awnings utilized by Purchaser in advertising the business
conducted by Purchaser on the Property if not separately metered and
controlled by Purchaser. Purchaser shall have the right to approve
any changes or alterations to the parking lot lights located on
Parcel 2 or which might affect the Property.
15. INITIAL CONSTRUCTION OF SHOPPING CENTER.
---------------------------------------
Seller shall construct, at its own cost and expense, in the
event the Shopping Center is not completely developed at the time of
closing, the other buildings and improvements shown on the Site in
accordance with plans and specifications approved and initialed by
Purchaser. If Seller has not completed the parking, driveways,
utility facilities, signage and other common areas of the Shopping
Center as shown on the Site Plan in accordance with approved plans
and all applicable governmental laws, regulations and requirements
prior to closing, Purchaser may, at its option, (a) deduct and retain
sufficient funds from the purchase price at closing so that Purchaser
may construct such parking, driveways, signage, utility facilities
and other common areas adjacent to the Property as Purchaser may deem
7
<PAGE>
necessary to conduct its business or (b) terminate the Agreement in
which case all earnest money deposited by Purchaser and all out of
pocket costs spent by Purchaser in developing the Property shall be
refunded or reimbursed to Purchaser, as the case may be, and the
parties shall be released from further liability.
IN WITNESS WHEREOF, the Seller has caused this Addendum to be executed and
sealed this ____ day of ________________________, 19___.
WITNESSES:
By:
- ----------------------------------- --------------------------------------
Name:
------------------------------------
Its:
- ----------------------------------- -------------------------------------
SELLER
(SEAL)
Attest:
-----------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
8
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this Addendum to be executed
and sealed this ____ day of ________________, 19___.
WITNESSES:
By:
- ----------------------------------- --------------------------------------
Name:
------------------------------------
Its:
- ----------------------------------- -------------------------------
PURCHASER
(SEAL)
Attest:
-----------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
9
<PAGE>
EXHIBIT H
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
LIST OF FRANCHISES
(Current as of December 31, 1996)
---------------------------------
H-1
<PAGE>
BOSTON CHICKEN, INC.
Franchisee Address List
As of December 31, 1996
Exhibit H
---------
<TABLE>
<CAPTION>
ARIZONA
- -------
<S> <C> <C>
BCE West, L.P. *
4110 North Scottsdale Road, Suite 235, Scottsdale, AZ 85251 Phone: (602) 994-4000
Contacts: Larry Hohl, Troy Cooper Fax: (602)994-0044
Unit Locations:
8001 N. 19th Avenue, Phoenix, AZ 85021 Phone: (602) 944-7000 0272
6665 West Bell Road, Glendale, AZ 85306 Phone: (602) 979-4949 0282
4716 East Ray Road, Phoenix, AZ 85044 Phone: (602) 893-9000 0284
1804 East Elliot Road, Tempe, AZ 85283 Phone: (602) 838-5522 0301
6960 East 22nd Street, Tucson, AZ 85710 Phone: (602) 745-5600 0302
3435 South McClintock Drive, Tempe, AZ 85282 Phone: (602) 831-8822 0426
4002 East Thunderbird Road, Phoenix, AZ 85032 Phone: (602) 867-3344 0442
6501 East Grant Road, Tucson, AZ 85715 Phone: (602) 886-7788 0443
1903 East Speedway Boulevard, Tucson, AZ 85719 Phone: (602) 322-6677 0444
4405 North First Avenue, Tucson, AZ 85719 Phone: (602) 888-0022 0476
5101 North Central Avenue, Phoenix, AZ 85012 Phone: (602) 266-0202 0525
1105 North Higley Road, Mesa, AZ 85205 Phone: (602) 832-1500 0649
236 East Bell Road, Phoenix, AZ 85022 Phone: (602) 866-3311 0698
1010 North Alma School Road, Chandler, AZ 85224 Phone: (602) 786-3535 0880
2712 North Scottsdale Road, Scottsdale, AZ 85251 Phone: (602) 949-6689 0918
6977 North Hayden, Scottsdale, AZ 85258 Phone: (602) 905-9445 1136
15784 North Frank Lloyd Wright Blvd., Scottsdale, AZ 85260 Phone: (602) 614-9744 1137
CALIFORNIA
- ----------
BC Golden Gate, L.L.C.*
2105 Bascom Ave., Suite 135, Campbell, CA 95008 Phone: (408) 558-6400
Contact: John L. Cutter Fax: (408) 558-6419 Fax
Unit Locations:
1491 Covell, Davis, CA 95616 Phone: (916) 759-8244 0360
804 Southampton Road, Benicia, CA 94510 Phone: (707) 746-5994 0417
4644 Madison Avenue, Sacramento, CA 95841 Phone: (916) 331-2500 0428
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
2300 Sunrise Boulevard, Rancho Cordova, CA 95670 Phone: (916) 858-2300 0453
2300 Fair Oaks Boulevard, Sacramento, CA 95825 Phone: (916) 568-6300 0454
7171 Stockton Boulevard, Sacramento, CA 95823 Phone: (916) 421-8282 0455
3901-B Santa Rita Road, Pleasanton, CA 94588 Phone: (510) 224-9871 0497
110 East Bullard, Fresno, CA 93711 Phone: (209) 436-4455 0510
1850 Shaw Avenue, Clovis, CA 93611 Phone: (209) 322-2003 0529
1920 West 11th Street, Tracy, CA 95376 Phone: (209) 833-7300 0538
5003 Foothills Boulevard, Roseville, CA 95678 Phone: (916) 783-9300 0578
7601 Sunrise Avenue, Citrus Heights, CA 95610 Phone: (916) 721-9288 0595
1300 Standiford Avenue, Modesto, CA 95355 Phone: (209) 527-1111 0634
830 West Lacey Boulevard, Hanford, CA 93230 Phone: (209) 852-0700 0635
1039 A El Monte Avenue, Mt. View, CA 94043 Phone: (415) 428-1333 0659
514 West Kettleman, Lodi, CA 95242 Phone: (209) 366-0181 0660
2100 Market Street, San Francisco, CA 94114 Phone: (415) 863-4900 0670
637 East Nees, Fresno, CA 93720 Phone: (209) 440-0500 0671
7400 Fairoaks Boulevard, Carmichael, CA 95608 Phone: (916) 483-8100 0691
10285 S. DeAnza Boulevard, Cupertino, CA 95014 Phone: (408) 973-9493 0717
2180 41st Avenue, Capitola, CA 95010 Phone: (408) 477-0100 0794
2175 Chestnut Street, San Francisco, CA 94123 Phone: (415) 673-3100 0811
83 Westlake Mall, Daly City, CA 94015 Phone: (415) 757-6200 0972
1000 Metro Center Boulevard, Daly City, CA 94015 Phone: (415) 757-6200 0991
3962 Mowry Lane, Fremont, CA 94538 Phone: (510) 791-1191 0994#
3331 Shaw, Fresno, CA 93711 Phone: (209) 229-1300 0995
1608 Polk Street, San Francisco, CA 94109 Phone: (415) 567-6660 1122
1750 Divisadero Street, San Francisco, CA 94115 Phone: (415) 440-4442 1123
880 Blossom Hill Road, San Jose, CA 95123 Phone: (408) 972-8900 1126
1855 Hillsdale Avenue, San Jose, CA 95124 Phone: (408) 445-9666 1127
5399 Prospect Road, San Jose, CA 95130 Phone: (408) 253-3999 1128
145 Laurel Street, Santa Cruz, CA 95060 Phone: (408) 471-9777 1134
2601 Geer Road, Turlock, CA 95382 Phone: (209) 668-6262 1162
5152 Broadway, Oakland, CA 94612 Phone: (510) 601-0300 1297
1559 Sloat Boulevard, San Francisco, CA 94132 Phone: (415) 566-1900 1298
2505 March Lane, Stockton, CA 95207 Phone: (209) 952-3800 1299
2006 El Camino Real, Santa Clara, CA 95050 Phone: (408) 247-7333 1300
624 Blossom Hill Road, Los Gatos, CA 95032 Phone: (408) 358-9887 1332
1554 South Bascom Avenue, San Jose, CA 95125 Phone: (408) 369-7900 1334
1976 North Main Street, Salinas, CA 93906 Phone: (408) 443-5100 1349
5180 East Stevens Creek Boulevard, San Jose, CA 95129 Phone: (408) 244-5554 1376
3369 Castro Valley Boulevard, Castro Valley, CA 94546 Phone: (510) 538-1511 1377
332 Gellert Boulevard, Daly City, CA 94015 Phone: (415) 755-3700 1384
2300 16th Street, Suite 100, San Francisco, CA 94103 Phone: (415) 864-7666 1386
1480 First Street, Livermore, CA 94550 Phone: (510) 449-5557 1557
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
5261 Hazel Avenue, Fair Oaks, CA 95628 Phone: (916) 536-0111 1565
1310A & B El Camino Real, San Druno, CA 94066 Phone: (415) 866-4800 1587
4300 Sonoma Boulevard, Vallejo, CA 94589 Phone: (707) 642-7600 1605
613 West Olive Avenue, Merced, CA 95340 Phone: (209) 723-1600 1617
2810 Marconi Avenue, Sacramento, CA 95821 Phone: (916) 972-1700 1907
2180 Conra Costa Boulevard, Pleasant Hill, CA 94523 Phone: (510) 691-5900 1961
3060 East 9th Street, Suite E, Oakland, CA 94601 Phone: (510) 261-1995 2288
Boston West, L.L.C.*
222 South Harbor Boulevard, Suite 300, Anaheim, CA 92805 Phone: (714) 518-2700
Contact: Alan Palmieri Fax: (714) 518-2718 Fax
Unit Locations:
18951 Brookhurst, Fountain Valley, CA 92708 Phone: (714) 964-0012 0427
268 North El Camino Real, Encinitas, CA 92708 Phone: (619) 436-8080 0484
3050 East Pacific Coast Highway, Corona Del Mar, CA 92625 Phone: (714) 721-8777 0520
7800 White Lane, Bakersfield, CA 93307 Phone: (805) 397-9507 0563
3972A Barranca Parkway, Irvine, CA 92715 Phone: (714) 551-0122 0570
13465 Poway Road, Poway, CA 92064 Phone: (619) 486-9222 0577
140 Town Center Parkway, Santee, CA 92071 Phone: (619) 449-4200 0581
32022 Camino Capistrano C, San Juan Capistrano, CA 92690 Phone: (714) 493-5500 0590
203 West Imperial Highway, Brea, CA 92622 Phone: (714) 529-1900 0591
10406 Friars Road, San Diego, CA 92120 Phone: (619) 282-8600 0612
24215 Crenshaw Boulevard, Torrance, CA 90505 Phone: (310) 325-9988 0618
14960 La Mirada Boulevard, LaMirada, CA 90638 Phone: (714) 670-2000 0619
25533 Marguerite Parkway, Mission Viejo, CA 92692 Phone: (714) 837-8600 0620
13125 Jamboree Road, Tustin, CA 92680 Phone: (714) 505-3600 0624
14480 Sherman Way, Van Nuys, CA 91405 Phone: (818) 994-0700 0631
2606 El Camino Real, Carlsbad, CA 92008 Phone: (619) 434-8885 0637
16972 Goldenwest Street, Huntington, CA 92647 Phone: (714) 841-3511 0647
10595 Tierransanta Boulevard, San Diego, CA 92124 Phone: (619) 560-2999 0648
6095 Cajon Boulevard, San Diego, CA 92115 Phone: (619) 265-7888 0651
19765 East Colima Road, Rowland Heights, CA 91748 Phone: (909) 594-8812 0655
2020 Atlantic Boulevard, Monterey Park, CA 91754 Phone: (213) 887-7500 0664
12150 Central Avenue, Chino, CA 91710 Phone: (909) 902-6900 0665
4694 North University Parkway, San Bernardino, CA 92407 Phone: (909) 880-9788 0678
615 College Avenue, Oceanside, CA 92057 Phone: (619) 630-4100 0686
31775 North Date Palm Drive, Cathedral City, CA 92235 Phone: (619) 328-0011 0687
19720-B Beach Boulevard, Huntington, CA 92648 Phone: (714) 964-8517 0690
15122 Bear Valley Road, Victorville, CA 92392 Phone: (619) 245-2300 0692
1037 West Avenue P, Palmdale, CA 93551 Phone: (805) 272-9339 0694
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
412 Washington Street, San Diego, CA 92103 Phone: (619) 542-0333 0703
1436 North "H" Street, Lompoc, CA 93436 Phone: (805) 735-5944 0708
1725 S. Victoria Avenue, Ventura, CA 93003 Phone: (805) 639-4004 0721
706 Fletcher Parkway, El Cajon, CA 92020 Phone: (619) 447-6669 0735
1377 East Los Angeles Avenue, Simi Valley, CA 93065 Phone: (805) 581-2333 0737
5430 Topanga Canyon Boulevard, Woodland Hills, CA 91364 Phone: (818) 992-0660 0755
235 North Pacific Coast Highway, Redondo Beach, CA 90277 Phone: (310) 374-4487 0757
1510 West Valley Parkway, Escondido, CA 92029 Phone: (619) 737-5100 0817
10890 Foothill Boulevard, Rancho Curamonga, CA 91730 Phone: (909) 989-1252 0842
8901 South Sepulveda Boulevard, Westchester, CA 90045 Phone: (310) 410-0111 0850
777 Otay Lakes Road, Chula Vista, CA 91910 Phone: (619) 482-8082 0863
1070 Huntington Drive, Duarte, CA 91010 Phone: (818) 358-2699 0865
72-423 Highway 111, Palm Desert, CA 92260 Phone: (619) 340-1941 0869
27100 Alicia Parkway, Laguna Niguel, CA 92677 Phone: (714) 360-9860 0873
4501 Campus Drive, Irvine, CA 92715 Phone: (714) 854-5552 0917
6001 Lincoln Avenue, Buena Park, CA 90620 Phone: (714) 952-2400 0951
2799 Harbor Boulevard, Costa Mesa, CA 92626 Phone: (714) 437-0034 0969
3370 Yorba Linda Boulevard, Fullerton, CA 92631 Phone: (714) 961-1005 0998
13242 Harbor Boulevard, Garden Grove, CA 92643 Phone: (714) 534-1100 1000
16906 B-3 San Fernando Mission, Granada Hills, CA 91344 Phone: (818) 831-2335 1002
7070 West Sunset, Hollywood, CA 90028 Phone: (213) 962-7300 1018
78-752 Highway 111, La Quinta, CA 92253 Phone: (619) 771-1192 1035
4895 Candlewood, Lakewood, CA 90712 Phone: (310) 630-3600 1040
17100 Hawthorne Boulevard, Lawndale, CA 90260 Phone: (310) 214-3318 1050
18540 Devonshire Street, Northridge, CA 91325 Phone: (818) 363-6774 1082
3733 East Foothill Boulevard, Pasadena, CA 91107 Phone: (818) 351-1636 1093
635 Orange Avenue, Redlands, CA 92374 Phone: (909) 798-5758 1105
48 Peninsula Center, Rolling Hills Estate, CA 90274 Phone: (310) 541-2200 1113
856 Grand Avenue, San Diego, CA 92109 Phone: (619) 490-6222 1120
952 Arrow Highway, San Dimas, CA 91773 Phone: (909) 592-7003 1121
1006 North Western Avenue, San Pedro, CA 90732 Phone: (310) 732-1114 1129
26543 Bouquet Canyon Road, Santa Clarita, CA 91350 Phone: (805) 297-4447 1133
2430 South Broadway, Santa Maria, CA 93454 Phone: (805) 739-0370 1135
1730 University Drive, Vista, CA 92083 Phone: (619) 758-3444 1167
9618 West Pico, Los Angeles, CA 90035 Phone: (310) 247-9005 1168
13515 Whittier Boulevard, Whittier, CA 90605 Phone: (310) 693-4095 1184
22960 Victory Boulevard, Woodland Hills, CA 91367 Phone: (818) 884-0550 1188
20305 Yorba Linda Boulevard, Yorba Linda, CA 92686 Phone: (714) 701-0303 1190
502 Broadway, Chula Vista, CA 91910 Phone: (619) 498-0444 1226
8250 G Mira Mesa Boulevard, San Diego, CA 92126 Phone: (619) 536-8100 1307
5502 Balboa Avenue, San Diego, CA 92117 Phone: (619) 292-0099 1333
8920-A West Sunset Boulevard, West Hollywood, CA 90069 Phone: (310) 247-0500 1350
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
5767 Calle Real, Goleta, CA 93117 Phone: (805) 683-6155 1358
10759 West Pico Boulevard, Los Angeles, CA 90064 Phone: (310) 475-0010 1494
191 Ventura Boulevard, Camarillo, CA 93010 Phone: (805) 388-6033 1515#
17660 Ventura Blvd., Suite 100, Encino, CA 91316 Phone: (818) 774-0447 1535
8606 Fireston Boulevard, Downey, CA 90241 Phone: (310) 923-5247 1551
2984 State Street, Santa Barbara, CA 93015 Phone: (805) 898-9300 1553
2231 Rosecrans Avenue, El Segundo, CA 90245 Phone: (310) 643-6334 1639
1800 Grand Avenue, Grover Beach, CA 93433 Phone: (805) 473-0700 1607#
8010 Fletcher Parkway, La Mesa, CA 91942 Phone: Not assigned 1693#
1000 Wilshire Boulevard, Santa Monica, CA 90401 Phone: (310) 394-3566 1718
1092 North Montain, Upland CA 91786 Phone: (909) 985-8090 1754
3850 Atlantic Boulevard, Long Beach, CA 90807 Phone: (310) 595-9699 1759
17288 Saticoy Street, Van Nuys, CA 91406 Phone: (818) 757-7002 1792
2018 West Avenue K, Lancaster, CA 93536 Phone: (805) 948-7633 1880
4320 Riverside Drive, Burbank, CA 91505 Phone: (818) 238-9300 1890
24802 Orchard Village Road, Suite A, Santa Clarita, CA 91380 Phone: (805) 254-5900 2016#
428 East 17th Street, Costa Mesa, CA 92627 Phone: (714) 515-8333 2026
29037 Thousand Oaks Boulevard, Agoura Hills, CA 91301 Phone: (818) 889-0003 2041
COLORADO
- --------
BCE West, L.P.*
4110 North Scottsdale Road, Suite 235, Scottsdale, AZ 85251 Phone: (602) 944-4000
Contacts: Larry Hohl, Troy Cooper Fax: (602) 994-0044
Unit Locations:
7515 South University, Littleton, CO 80122 Phone: (303) 795-9001 0122
16796 East Smokey Hill Road, Aurora, CO 80015 Phone: (303) 680-4700 0173
1100 South Colorado Boulevard, Denver, CO 80222 Phone: (303) 759-9440 0203
8243 South Quebec, Englewood, CO 80112 Phone: (303) 694-6976 0204
12040 Colorado Boulevard, Thornton, CO 80214 Phone: (303) 451-0400 0206
8607 East Arapahoe Road, Greenwood Village, CO 80111 Phone: (303) 689-0040 0207
6485 West 120th Avenue, Broomfield, CO 80020 Phone: (303) 460-0600 0209
7400 East Hampden, Denver, CO 80231 Phone: (303) 779-0060 0214
8500 West Crestline, Denver, CO 80123 Phone: (303) 979-4919 0218
3519 South College Avenue, Ft. Collins, CO 80525 Phone: (303) 223-7300 0238
6964 North Academy, Colorado Springs, CO 80918 Phone: (303) 599-9688 0247
7630 West 8th Avenue, Arvada, CO 80005 Phone: (303) 421-4663 0278
900 South Lemay, Ft. Collins, CO 80521 Phone: (303) 482-4434 0298
1015 North Academy, Colorado Springs, CO 80909 Phone: (719) 573-1901 0375
825 US Highway 50 West, Pueblo, CO 81008 Phone: (719) 545-9950 0413
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
10951 South Parker Road, Parker, CO 80134 Phone: (303) 841-8488 0446
955 South Hoover Road, Longmont, CO 80501 Phone: (303) 684-0998 0458
540 Highway 105, Monument, CO 80132 Phone: (719) 481-0001 0459
700 Colorado Boulevard, Denver, CO 80220 Phone: (303) 320-1022 0460
9269 Sheridan Boulevard, Westminster, CO 80030 Phone: (303) 426-9110 0498
3820 North Wadsworth Boulevard, Wheat Ridge, CO 80033 Phone: (303) 420-3444 1182
14110 East Iliff Avenue, Aurora, CO 80014 Phone: (303) 755-4032 1755#
500 Grant Street, Denver, CO 80203 Phone: (303) 715-3747 1990
<CAPTION>
CONNECTICUT
- -----------
<S> <C> <C>
BC New York, L.L.C. *
400 Lanidex Plaza, Parsippany, NJ 07054 Phone: (201) 739-8801
Contact: Robert P. Anarumo Fax: (201) 515-7319
Unit Locations:
61 Newton Road, Danbury, CT 06810 Phone: (203) 792-4968 0056
1345 East Putnam Avenue, Greenwich, CT 06870 Phone: (203) 637-4088 0092
52 Danbury Road, Ridgefield, CT 06877 Phone: (203) 438-1212 0095
1982 Black Rock Turnpike, Fairfield, CT 06430 Phone: (203) 382-8090 0117
1081 High Ridge Road, Stamford, CT 06904 Phone: (203) 321-1410 0118
964 Post Road, Darien, CT 06820 Phone: (203) 655-9770 0128
390 Post Road East, Westport, CT 06880 Phone: (203) 221-8733 0129
CVS Center, 1240 Farmington Road, West Hartford, CT 06107 Phone: (203) 561-6150 0148
2542 Albany Avenue, West Hartford, CT 06107 Phone: (203) 586-7404 0320
135 Washington Avenue, North Haven, CT 06473 Phone: (203) 234-0188 0372
607 Bridgeport Ave.- Liberty Rock, Milford, CT 06460 Phone: (203) 874-6046 0535
1542 Pleasant Valley Road, Manchester, CT 06040 Phone: (203) 648-2471 0572
973 Wolcott Street, Waterbury, CT 06705 Phone: (203) 756-0009 0580
935 Barnum Avenue, Stratford, CT 06497 Phone: (203) 378-8508 0582
2495 Berlin Turnpike, Newington, CT 06111 Phone: (203) 665-7524 0596
2834 Main Street, Glastonbury, CT 06033 Phone: (203) 659-2850 0606
1780 Silas Deane Highway, Rocky Hill, CT 06067 Phone: (203) 529-8498 0645
96 Frontage Road, East Haven, CT 06512 Phone: (203) 467-4472 0672
45 Farmington Avenue, Bristol, CT 06010 Phone: (203) 314-0102 0700
395 Cottage Grove Road, Bloomfield, CT 06002 Phone: (203) 243-3400 0701
755 East Main Street, Meriden, CT 06450 Phone: (203) 634-7677 0786
597 Long Hill Road, Groton, CT 06340 Phone: (203) 448-3755 0793
1475 Whalley Avenue, New Haven, CT 06510 Phone: (203) 389-0588 1079
129 Danbury Road, New Milford, CT 06776 Phone: (860) 210-2090 1296
232 West Main Street, Avon, CT 06001 Phone: (860) 677-2899 1601
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
1454-60 Boston Post Road, Milford, CT 06460 Phone: (203) 878-4500 1786
900 White Plains Road, Trumbull, CT 06611 Phone: (203) 459-1544 1810
14 Danbury Road, Wilton, CT 06897 Phone: (203) 834-2400 1841
EFT, Inc.
6 River Park Drive, Cromwell, CT 06416 Phone: (860) 635-7528
Contacts: Alan Ebstein, Barbara Ebstein Fax: (860) 632-5950
Unit Location:
34 Shunpike Road, Cromwell, CT 06416 Phone: (860) 632-2011 0065
<CAPTION>
FLORIDA
- -------
<S> <C> <C>
R & A Food Services, L.P. *
1801 Clint Moore Road, Ste. 215, Boca Raton, FL 33487 Phone: (407) 995-2223
Contact: Phillip W. DuPree Fax: (407) 995-0343
Unit Locations:
5501 East Fowler Avenue Temple Terrace, FL 33617 Phone: (813) 988-3188 0080
2300 Gulf to Bay Road, Clearwater, FL 34624 Phone: (813) 726-8200 0097
12705 North Dale Mabry, Tampa, FL 33617 Phone: (813) 960-8116 0100
1847 Enterprise Road East, Safety Harbor, FL 34695 Phone: (813) 725-8232 0101
7555 West Waters Avenue, Tampa, FL 33615 Phone: (813) 886-4422 0113
4302 West Kennedy Boulevard, Tampa, FL 33609 Phone: (813) 282-8755 0114
2451 North Federal Highway, Pompano, FL 33069 Phone: (305) 785-1922 0123
1981 South Federal Highway, Stuart, FL 34994 Phone: (407) 287-1047 0124
1401 West Brandon Boulevard, Brandon, FL 33511 Phone: (813) 651-1107 0131
9929 Military Trail, Boynton Beach, FL 33436 Phone: (407) 731-4441 0132
840 North Orlando Avenue, Winter Park, FL 32789 Phone: (407) 644-0020 0140
1500 South Federal Highway, Ft. Lauderdale, FL 33316 Phone: (305) 525-1413 0141
5002 Cortez Road, West, Bradenton, FL 34210 Phone: (813) 792-8366 0162
3740 4th Street, North, St. Petersburg, FL 33713 Phone: (813) 528-2827 0163
12792 Forest Hills Boulevard, Wellington, FL 33414 Phone: (407) 791-2584 0172
2525 University Drive, Coral Springs, FL 33065 Phone: (305) 341-3661 0175
429 West S.R. 436, Altamonte Springs, FL 32714 Phone: (407) 862-8327 0177
3875 South Tamiami Trail, Sarasota, FL 34233 Phone: (813) 362-4909 0178
5355 Red Bug Lake Road, Winter Springs, FL 32708 Phone: (407) 699-5516 0179
12141 Collegiate Way, Orlando, FL 32817 Phone: (407) 381-8339 0186
18601 South Dixie Highway, Miami, FL 33157 Phone: (305) 251-9107 0190
850 Ives Dairy Road, N. Miami, FL 33179 Phone: (305) 651-6130 0191
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
9959 West Glades Road, Boca Raton, FL 33434 Phone: (407) 451-3918 0192
8559 Pines Boulevard, Pembroke Pines, FL 33024 Phone: (305) 435-4280 0193
16251 North Dixie Highway, N. Miami Beach, FL 33168 Phone: (305) 947-5069 0194
33163 US Highway 19 North, Palm Harbor, FL 34684 Phone: (813) 786-5336 0196
7895 SW 40th Street, Miami, FL 33155 Phone: (305) 261-4440 0197
4335 West Lake Mary Boulevard, Lake Mary, FL 32746 Phone: (407) 322-9699 0212
3251 Hollywood Boulevard, Hollywood, FL 33021 Phone: (305) 966-6959 0213
2015 Aloma Avenue, Winter Park, FL 32782 Phone: (407) 657-1766 0228
1781 East Commercial Boulevard, Ft. Lauderdale, FL 33334 Phone: (305) 938-9073 0230
120 West Mitchell Hammock, Oviedo, FL 32765 Phone: (407) 359-0502 0231
5815 North University Boulevard, Tamarac, FL 33321 Phone: (305) 722-7906 0253
2708 North Martin Luther King Boulevard, Tampa, FL 33609 Phone: (813) 872-7929 0257
2024 North Military Trail, West Palm Beach, FL 33409 Phone: (407) 790-0818 0258
1435 Northpark Drive, Ft. Lauderdale, FL 33326 Phone: (305) 389-6896 0267
2309 North Federal Highway, Ft. Lauderdale, FL 33305 Phone: (305) 561-5310 0268
12916 South Cleveland Avenue, Ft. Myers, FL 33907 Phone: (813) 275-1779 0269
12500 Biscayne Boulevard, North Miami, FL 33168 Phone: (305) 892-8867 0273
16215 North Dale Mabry, Tampa, FL 33618 Phone: (813) 962-2621 0274
4701 Babcock Street, NE, Tampa, FL 33618 Phone: (813) 962-2621 0275
9710 Kendall Drive, Miami, FL 33176 Phone: (305) 270-6830 0276
330 South University Drive, Plantation, FL 33324 Phone: (305) 472-5360 0279
2223 Del Prado Boulevard, Cape Coral, FL 33909 Phone: (813) 458-7811 0287
799 North Federal Highway, Boca Raton, FL 33432 Phone: (407) 391-9262 0296
4380 Forest Hill Boulevard, West Palm Beach, FL 33406 Phone: (407) 966-2519 0337
2704 North Roosevelt Boulevard, Key West, FL 33040 Phone: (305) 292-1428 0341
14695 South Dixie Highway, Miami, FL 33176 Phone: (305) 255-0677 0346
1951 West SR 434, Longwood, FL 32750 Phone: (407) 767-8808 0347
250 East Michigan Street, Orlando, FL 32806 Phone: (407) 648-0568 0348
2450 North Wickham Road, Melbourne, FL 32934 Phone: (407) 254-6549 0349
1901 South Dale Mabry, Tampa, FL 33629 Phone: (813) 251-2873 0354
5680 West Atlantic Bouelvard, Margate, FL 33063 Phone: (305) 974-9572 0357
238 West Alexander Street, Plant City, FL 33566 Phone: (813) 759-2652 0358
7995 West Flagler Street, Miami, FL 33144 Phone: (305) 261-3294 0407
1271 Pasadena Avenue, Pasadena, FL 33707 Phone: (813) 347-1433 0408
3102 West Commercial Boulevard, Tamarac, FL 33309 Phone: (305) 485-7428 0416
13704 SW 56th Street, Miami, FL 33183 Phone: (305) 383-0385 0434
80 Intracoastal Pointe Drive, Jupiter, FL 33477 Phone: (407) 747-3552 0437
5635 14th Street, Bradenton, FL 34207 Phone: (813) 758-8968 0471
4625 South Florida Avenue, Lakeland, FL 33813 Phone: (813) 647-9480 0472
7512 Dr. Phillips Boulevard, Orlando, FL 32819 Phone: (407) 354-1420 0473
7020 Beracasa Way, Boca Raton, FL 33433 Phone: (407) 392-2795 0474
1797 North Congress Avenue, Boynton Beach, FL 33426 Phone: (407) 736-3393 0478
</TABLE>
8
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<TABLE>
<S> <C> <C>
16709 NW 67th Avenue, Hialeah, FL 33014 Phone: (305) 362-0985 0489
10457 South US 1, Port St. Lucie, FL 34952 Phone: (407) 337-1363 0503
10131 San Jose Boulevard, Jacksonville, FL 32257 Phone: (904) 292-2254 0505
12260 West Sunrise Boulevard, Plantation, FL 33323 Phone: (305) 424-0512 0506
9595 4th Street North, St. Petersburg, FL 33702 Phone: (813) 577-6622 0516
50 South Flamingo Road, Pembroke Pines, FL 33029 Phone: (305) 450-0494 0537
901-8 So. Royal Poinciana Blvd., Miami Springs, FL 33166 Phone: (305) 889-9983 0547
13600 SW 152nd Street, Miami, FL 33177 Phone: (305) 235-2319 0550
6483 Newberry Road, Gainesville, FL 32605 Phone: (904) 331-1519 0559
3251 West Vine Street, Kissimmee, FL 34741 Phone: (407) 935-1263 0560
5088 Airport Road N, Naples, FL 33942 Phone: (813) 263-3933 0569
150 Cypress Gardens Boulevard SE, Winter Haven, FL 33880 Phone: (813) 293-6907 0609
869 SW 107th Avenue, Miami, FL 33130 Phone: (305) 559-5953 0615
8070 NW 36th Street, Miami, FL 33166 Phone: (305) 716-0056 0636
2095 U.S. 1 South, St. Augustine, FL 32086 Phone: (904) 823-0701 0667
1750 Alton Road, Miami Beach, FL 33139 Phone: (305) 673-9336 0704
3398 Capital Circle, N.E., Tallahassee, FL 32308 Phone: (904) 297-2183 0706
1037 Dunlawton Avenue, Port Orange, FL 32127 Phone: (904) 322-6801 0734
405 West 49th Street, Hialeah, FL 33012 Phone: (305) 557-7682 0739
2650 SW College Road, Ocala, FL 34474 Phone: (904) 873-1115 0763
4001 East Bay Drive, Clearwater, FL 34624 Phone: (813) 524-6603 0766
9203 US Highway 19, Port Richey, FL 34668 Phone: (813) 841-6228 0768
317 Marsh Landing Parkway, Jacksonville Beach, FL 32250 Phone: (904) 273-1121 0769
4201 East Colonial Drive, Orlando, FL 32803 Phone: (407) 896-3682 0770
2329 North Monroe Street, Tallahassee, FL 32303 Phone: (904) 297-2178 0810
7820 - 113th Street, Seminole, FL 34642 Phone: (813) 319-3911 0859
4621 South Kirkman Road, Orlando, FL 32811-28 Phone: (407) 292-0504 0920
1665 East Hallandale Beach Boulevard, Hallandale, FL 33023 Phone: (954) 455-8535 1007
6520 Lake Worth Road, Lake Worth, FL 33467 Phone: (407) 963-7272 1039
10150 Ulmerton Road, Largo, FL 34641 Phone: (813) 588-0415 1043
3600 Southwest 22nd Street, Miami, FL 33145 Phone: (305) 444-0209 1067
390 Blanding Boulevard, Orange Park, FL 32073 Phone: (904) 276-0551 1086
4547 South Semoran Boulevard, Orlando, FL 32822 Phone: (407) 273-4957 1088
1775 US Highway 1, Vero Beach, FL 32960 Phone: (561) 564-0485 1164
1425 West Granada Boulevard, Ormand Beach, FL 32174 Phone: (904) 673-9040 1430
<CAPTION>
GEORGIA
- -------
<S> <C> <C>
Platinum Rotisserie, L.L.C. *
100 Cambridge Park, Suite B, Winston-Salem, NC 27104 Phone: (910) 659-5000
Contact: Anthony D. Wedo Fax: (910) 659-6760
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Unit Locations:
<S> <C> <C>
4774 Lawrenceville Highway, Lilburn, GA 30247 Phone: (404) 717-0609 0210
1555 Holcomb Bridge Road, Roswell, GA 30076 Phone: (404) 640-0110 0240
5506 Chamblee, Dunwoody, GA 30338 Phone: (404) 673-0048 0245
980 East Piedmont Road, Marietta, GA 30062 Phone: (404) 977-1220 0251
4754 Redan Road, Stone Mountain, GA 30083 Phone: (404) 508-0031 0262
1084 Johnson Ferry Road, Marietta, GA 30068 Phone: (404) 509-0066 0263
3606 Sandy Plains Road, Marietta, GA 30066 Phone: (404) 509-0009 0334
4215 Pleasant Hill Road, Marietta, GA 30066 Phone: (404) 509-0009 0513
5170 Stone Mountain Highway, Stone Mountain, GA 30087 Phone: (404) 879-8211 0553
5903 Roswell Road, Atlanta, Georgia 30328 Phone: (404) 851-1400 0934
2014 Powers Ferry Road, Atlanta, GA 30339 Phone: (770) 988-9020 1602
6135 Peachtree Parkway, Norcross, GA 30092 Phone: (770) 209-9090 1814
<CAPTION>
IDAHO
- -----
<S> <C> <C>
BC Northwest, L.P.*
1601-114th Avenue, SE, Suite 130, Bellevue, WA 98008 Phone: (206) 454-8665
Contact: Dennis B. Mullen Fax: (206) 454-9198
Unit Locations:
155 Neider Avenue, Couer d'Alene, ID 83814 Phone: (208) 665-9100 1765
<CAPTION>
ILLINOIS
- --------
<S> <C> <C>
BC Great Lakes, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
260 Danada Square West, Wheaton, IL 60187 Phone: (708) 665-5505 0042
10059 Skokie Boulevard, Skokie, IL 60077 Phone: (708) 674-6742 0050
2619 North Clark, Chicago, IL 60614 Phone: (312) 404-5505 0067
2201 North Halsted Avenue, Chicago, IL 60614 Phone: (312) 549-5100 0093
1007 East Ogden Avenue, Naperville, IL 60563 Phone: (708) 527-9600 0099
160C South Waukegan Road, Deerfield, IL 60015 Phone: (708) 272-9221 0152
7130 Dempster Street, Morton Grove, IL 60053 Phone: (708) 966-0900 0155
7112 West North Avenue, Chicago, IL 60635 Phone: (312) 637-2800 0158
101 West Ogden Avenue, Westmont, IL 60559 Phone: (708) 964-1600 0166
2242 Bloomingdale Road, Glendale Heights, IL 60139 Phone: (708) 980-4600 0168
</TABLE>
10
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<TABLE>
<CAPTION>
<S> <C> <C>
150 North McHenry Road, Buffalo Grove, IL 60089 Phone: (708) 459-9777 0170
1840 West Army Trail Road, Hanover Park, IL 60103 Phone: (708) 372-0500 0171
2580 West Schaumburg Road, Schaumburg, IL 60194 Phone: (708) 310-1500 0184
800 East Devon Avenue, Park Ridge, IL 60068 Phone: (708) 292-3000 0205
797 West Main Street, Lake Zurich, IL 60647 Phone: (708) 550-0800 0236
790 West Northwest Highway, Palatine, IL 60067 Phone: (708) 776-8300 0237
24 West Golf Road, Schaumburg, IL 60173 Phone: (708) 519-9500 0260
1309 South Naper Boulevard, Naperville, IL 60563 Phone: (708) 637-0300 0290
2 West Division, Chicago, IL 60610 Phone: (312) 654-1110 0291
1562 North Wells, Chicago, IL 60614 Phone: (312) 751-0100 0300
150 East Roosevelt Road, Lombard, IL 60148 Phone: (708) 620-0400 0309
160 Douglas, Oswego, IL 60538 Phone: (708) 906-0606 0419
1000 South Elmhurst, Mt. Prospect, IL 60058 Phone: (708) 364-6300 0421
375 East Palatine Road, Arlington Heights, IL 60004 Phone: (708) 797-0500 0422
17855 South Halsted Street, Homewood, IL 60430 Phone: (708) 922-1200 0435
905-919 Greenbay Road, Waukegan, IL 60085 Phone: (708) 623-7000 0440
2733 Pfingsten, Glenview, IL 60025 Phone: (708) 509-0089 0475
6000 Northwest Highway, Crystal Lake, IL 60014 Phone: (815) 356-6700 0485
4559 West 211th Street, Matteson, IL 60443 Phone: (708) 503-8888 0486
1330 Torrence Avenue, Calumet City, IL 60409 Phone: (708) 862-8100 0515
4221 North Harlem, Norridge, IL 60634 Phone: (708) 457-8100 0518
6415 Grand Avenue, Gurnee, IL 60031 Phone: (708) 855-0003 0528
9267 South Cicero Avenue, Oak Lawn, IL 60453 Phone: (708) 229-0900 0558
1866 Jefferson, Joliet, IL 60436 Phone: (815) 741-0330 0565
1272 North Lake, Aurora, IL 60506 Phone: (708) 807-1700 0573
7211 West Lake Street, River Forest, IL 60305 Phone: (708) 771-0455 0575
966 North Illinois, Route 59, Aurora, IL 60504 Phone: (708) 851-2009 0601
380 East Rollins Road, Round Lake, IL 60073 Phone: (708) 546-8200 0640
13201 South Cicero Avenue, Crestwood, IL 60445 Phone: (708) 385-9300 0668
3647 West Dempster, Skokie, IL 60076 Phone: (708) 329-0377 0718
1401 Waukegan Road, Glenview, IL 60025 Phone: (708) 724-8000 0720
830 West North Avenue, Melrose Park, IL 60160 Phone: (708) 865-8900 0822
1424-28 East 53rd, Chicago, IL 60615 Phone: (312) 288-2600 0825
285 North Naperville, Bolingbrook, IL 60440 Phone: (708) 759-9900 0831
205 South Randall Road, Elgin, IL 60123 Phone: (708) 608-8700 0833
2577 Sycamore Road, DeKalb, IL 60115 Phone: (815) 758-6453 0910
1250 North Kidzie, Bradley, IL 60915 Phone: (815) 936-1300 0948
55 East Wacker Place, Chicago, IL 60601-7201 Phone: (312) 726-7900 0959
7360 West 159th Street, Orland Park, IL 60462 Phone: (708) 633-1414 1087
203 North Eight Street, West Dundee, IL 60118 Phone: (708) 836-6688 1175
625 South County Farm Road, Wheaton, IL 60187 Phone: (708) 871-0100 1181
102 Biesterfield Road, Elk Grove Village, IL 60007 Phone: (847) 952-8922 1640
</TABLE>
11
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<TABLE>
<S> <C> <C>
1873 South Randal Road, Geneva, IL 60134 Phone: (630) 262-8855 1823
9645 South Western Avenue, Chicago, IL 60643 Phone: (312) 233-6900 1837
20 Plainfield Road, Countryside, IL 60525 Phone: (708) 482-7236 1863
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contact: Robert L. Sirkis Fax: (913) 344-1610
Unit Locations:
6535 North Illinois, Fairview Heights, IL 62208 Phone: (619) 397-2797 0986
3455 23rd Avenue, Moline, IL 61265 Phone: (309) 764-1234 1071
INDIANA
- -------
BC Great Lakes, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
1939 East 80th Avenue, Hobart, IN 46342 Phone: (219) 736-2888 0607
8032 Calumet Avenue, Munster, IN 46321 Phone: (219) 836-2888 0669
5000 Highway 421, Michigan City, IN 46360 Phone: (219) 879-0599 1068
BC Heartland, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
3730 East 82nd Street, Indianapolis, IN 46240 Phone: (317) 595-0900 0310
250 South State Road 135, Greenwood, IN 46142 Phone: (317) 888-7800 0322
1244 West 86th Street, Indianapolis, IN 46260 Phone: (317) 844-9020 0333
11820 Allisonville Road, Fishers, IN 46038 Phone: (317) 595-8808 0352
615 East Carmel Drive, Carmel, IN 46032 Phone: (317) 844-5299 0353
9961 East Washington Street, Indianapolis, IN 46229 Phone: (317) 895-5853 0439
3704 South Reed Road, Kokomo, IN 46901 Phone: (317) 455-3070 0500
7554 Shadeland Avenue, Indianapolis, IN 46250 Phone: (317) 578-1119 0638
1416 McGalliard Road, Muncie, IN 47304 Phone: (317) 282-0000 1073
</TABLE>
12
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<TABLE>
<CAPTION>
<S> <C> <C>
BC Superior, L.L.C.*
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 208151 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
301 East Highway 131, Clarksville, IN 47129 Phone: (812) 288-8800 0964
<CAPTION>
IOWA
- ----
<S> <C> <C>
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contact: Robert L. Sirkis Fax: (913) 344-1610
Unit Locations:
6351 S.E. 14th Street, Des Moines, IA 50320 Phone: (515) 285-0000 0621
2009 Crossroads Boulevard, Waterloo, IA 50701 Phone: (319) 236-6666 0722
3300 Hillcrest, Dubuque, IA 52002 Phone: (319) 588-2500 0828
1880 86th Street, Clive, IA 50325 Phone: (515) 276-2200 0843
1535 East Euclid Avenue, Des Moines, IA 50313 Phone: (515) 266-2999 0975
302 Lincoln Way, Ames, IA 50010 Phone: (515) 232-1600 1304
<CAPTION>
KANSAS
- ------
<S> <C> <C>
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contact: Robert L. Sirkis Fax: (913) 344-1610
Unit Locations:
11600 Shawnee Mission Parkway, Shawnee, KS 66203 Phone: (913) 631-3777 0566
8900 West Central Avenue, Wichita, KS 67212 Phone: (316) 729-9992 0574
3015 North Rock Road, Wichita, KS 67226 Phone: (316) 636-5115 0586
12120 College Boulevard, Overland Park, KS 66211 Phone: (913) 663-1888 0625
2110 Southwest Wanamaker, Topeka, KS 66614 Phone: (913) 272-6000 0715
1210 West Pawnee, Wichita, KS 67213 Phone: (316) 263-7373 0738
12005 Metcalf, Overland Park, KS 66209 Phone: (913) 469-5252 0808
1801 East 17th Street, Hutchinson, KS 67501 Phone: (316) 728-0200 1024
2055 East Santa Fe, Olathe, KS 66062 Phone: (913) 768-7700 1085
9222 Metcalf, Overland Park, KS 66212 Phone: (913) 341-3393 1091
</TABLE>
13
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<TABLE>
<CAPTION>
KENTUCKY
- --------
<S> <C> <C>
BC Superior, L.L.C. *
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 20815 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
2379 Buttermilk Crossing, Crescent Springs, KY 41017 Phone: (606) 331-7800 0829
3044 Dixie Highway, Erlander, KY 41018 Phone: (606) 578-7100 0844
3601 Redding Court, Lexington, KY 40517 Phone: (606) 273-4400 1055
2730 South Hurstborne Parkway, Louisville, KY 40220 Phone: (502) 493-0490 1058
2415 Lime Kiln Lane, Louisville, KY 40220 Phone: (502) 493-0490 1059
4259 Outer Loop Road, Louisville, KY 40219 Phone: (502) 968-4766 1344
4123 Shelbyville Road, Louisville, KY 40207 Phone: (502) 894-8664 1345
12903 Shelbyville Road, Middletown, KY 40243 Phone: (502) 254-9800 1346#
3061 Fieldstone Way, Lexington, KY 40513 Phone: (606) 296-0606 1425
110 North Locust Hill Drive, Lexington, KY 40502 Phone: (606) 266-4422 1432
2401 Bardstown Road, Louisville, KY 40205 Phone: (502) 485-1415 1616
MARYLAND
- --------
BC Superior, L.L.C. *
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 20815 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
600 Marketplace Drive, Bel Air, MD 21014 Phone: (410) 638-1530 0939
10301 Westlake Drive, Bethesda, MD 20814 Phone: (301) 983-9700 1420
Mayfair Partners, L.P.*
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 208151 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
1605 Rockville Pike, Rockville, MD 20852 Phone: (301) 770-1122 0037
822 Dulaney Valley Road, Towson, MD 21204 Phone: (410) 825-2222 0044
6420 Freetown Road, Hickory Ridge Ctr., Columbia, MD 21044 Phone: (410) 531-6700 0053
2307A Forest Drive, Annapolis, MD 21401 Phone: (410) 573-0033 0137
9380 Baltimore National Pike, Ellicott City, MD 21043 Phone: (410) 313-8400 0153
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
1801 Village Mart, Olney, MD 20832 Phone: (301) 924-4442 0220
4870 Bethesda Avenue, Bethesda, MD 20814 Phone: (301) 215-9222 0223
586 Governor Ritchie Highway, Severna Park, MD 21146 Phone: (410) 315-8150 0246
7931 `A' Governor Ritchie Highway, Glen Burnie, MD 21061 Phone: (410) 760-2800 0321
9061 Snowden River Parkway, Columbia, MD 21045 Phone: (410) 312-0800 0331
1317 Reistertown Road, Pikesville, MD 21208 Phone: (410) 484-2400 0432
10237 Reistertown Road, Owings Mills, MD 21117 Phone: (410) 581-2011 0433
6224 Baltimore National Pike, Catonsville, MD 21228 Phone: (410) 455-5145 0488
6336 York Road, Baltimore, MD 21212 Phone: (410) 372-0220 0683
Route 40, Frederick, MD 21702 Phone: (301) 620-8600 0693
6228-A Greenbelt Road, Greenbelt, MD 20770 Phone: (301) 220-4445 0705
3825 Aspen Hill Road, Aspen Hill, MD 20906 Phone: (301) 871-0660 0796
913 Quince Orchard Road, Gaithersburg, MD 20878 Phone: (301) 670-5600 0877
15501 Annapolis Road, Bowie, MD 20715 Phone: (301) 352-2800 0947
596 B Frederick Avenue, Gaithersburg, MD 20877 Phone: (301) 869-9600 0999
5290 Randolph Road, Rockville, MD 20852 Phone: (301) 984-0990 1031
1025 Washington Boulevard, Laurel, MD 20707 Phone: (301) 604-8100 1049
11297 New Hampshire Avenue, Silver Spring, MD 20904 Phone: (301) 593-0083 1140
MASSACHUSETTS
- -------------
BC Boston, L.P. *
100 Cummings Park, Woburn, MA 01801 Phone: (617) 933-3971
Contact: Patrick McDonnell Fax: (617) 933-7711
Unit Locations:
822 Somerville Avenue, Cambridge, MA 02138 Phone: (617) 864-8686 0001
111 Lenox Street, Norwood, MA 02062 Phone: (617) 255-0480 0003
Twin City Plaza, South Street, Fitchburg, MA 01420 Phone: (508) 342-8329 0004
1940 Beacon Street, Brookline, MA 02146 Phone: (617) 739-6500 0008
1201 Highland Avenue, Needham, MA 02192 Phone: (617) 449-2449 0009
1293 Massachusetts Avenue, Arlington, MA 02174 Phone: (617) 643-3500 0010
95 Sharon Street, Stoughton, MA 02072 Phone: (617) 341-3600 0011
Woburn Plaza, 344-A Cambridge Road, Woburn, MA 01801 Phone: (617) 932-9464 0012
1099 Lexington Street, Waltham, MA 02164 Phone: (617) 647-3600 0013
756 Belmont Street, Brockton, MA 02401 Phone: (508) 580-8551 0014
194 Park Avenue, Worchester, MA 01609 Phone: (508) 752-1230 0016
207 Cambridge Street, Boston, MA 02114 Phone: (617) 227-9866 0017
14 Maple Street, East Longmeadow, MA 01028 Phone: (413) 525-1789 0023
645 VFW Parkway, West Roxbury, MA 02167 Phone: (617) 469-4445 0026
168 Broadway Street, Saugus, MA 01906 Phone: (617) 231-1400 0029
</TABLE>
15
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<TABLE>
<S> <C> <C>
1223 Commonwealth Avenue, Allston, MA 02134 Phone: (617) 254-6137 0034
43 Dodge Street, Beverly, MA 01915 Phone: (508) 927-4765 0038
550 Arsenal Street, Watertown, MA 02172 Phone: (617) 924-0300 0048
1608 Memorial Drive, Chicopee, MA 07446 Phone: (413) 534-0333 0062
Dedham Plaza, 739 Providence Highway, Dedham, MA 02026 Phone: (617) 461-1323 0064
14 Austin Street, Newtonville, MA 02160 Phone: (617) 527-7720 0069
103 Pearl Street, Braintree, MA 02184 Phone: (617) 843-2449 0073
31 Boston-Worcester Turnpike, Shrewsbury, MA 01545 Phone: (508) 795-1230 0081
836 Washington Street, Weymouth, MA 02188 Phone: (617) 335-0777 0089
345 Broadway, Somerville, MA 02145 Phone: (617) 776-5060 0130
239 Washington Street, Wellesley Hills, MA 02181 Phone: (617) 235-5300 0151
1387 Boston Road, Springfield, MA 01119 Phone: (413) 783-1900 0329
100 Granite Street, Quincy, MA 02169 Phone: (617) 774-1155 0594
1 Edgell Road, Framingham, MA 01701 Phone: (508) 620-5456 0764
435 Winthrop Road, Lawrence, MA 01845 Phone: (508) 725-8100 0782
185 Boston Post Road West, Marlborough, MA 01752 Phone: (508) 229-2525 0812
616 Fellsway, Medford, MA 02155 Phone: (617) 393-0413 1064
886 Main Street, Melrose, MA 02176 Phone: (617) 662-0636 1065
505 Paradise Road, Swampscott, MA 01907 Phone: (617) 592-8883 1157
1186 Main Street, Haverhill, MA 01830 Phone: (508) 374-2950 1522
245 Mass Avenue, Boston, MA 02115 Phone: (617) 236-4447 1782
1203 Walnut Street, Newton, MA 02161 Phone: (617) 969-8090 1816
1010 Morrissey Boulevard, Dorchester, MA 02122 Phone: (617) 822-3525 1959
421 New State Highway, Raynham, MA 02768 Phone: (508) 824-5474 2047#
CM Ventures, Inc.
341 Cochituate Road, Framingham, MA 01701 Phone: (508) 879-5585
Contact: Charles Coffman Fax: (508) 620-9464
Unit Location:
341 Cochituate Road, Framingham, MA 01701 Phone: (508) 879-5585 0015
Fowl Players, Inc.
One Sandas Trail, Acton, MA 01720 Phone: (508) 263-7044
Contacts: Gary Wehr, Dianne Wehr
Unit Location:
174 Littleton Road, Westford, MA 01886 Phone: (508) 692-9464 0020
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C>
Gourmet Chicken, Inc.
36 Maolis Road, Nahant, MA 01908 Phone: (617) 273-2205
Contact: Jeff Bromberg
Unit Location:
91 Middlesex Turnpike, Burlington, MA 01803 Phone: (617) 273-2205 0051
Harper-Rice Partnership
725 Centre Street, Jamaica Plain, MA 02130 Phone: (617) 665-7845
Contacts: Dave Rice, Gary Harper (617) 489-1734
Unit Location:
725 Centre Street, Jamaica Plain, MA 02130 Phone: (617) 524-9695 0018
Project One, Inc.
642 Centre Street, Newton, MA 02159 Phone: (617) 332-9101
Contact: Christopher Bauer
Unit Location:
65 Main Street, Stoneham, MA 02180 Phone: (617) 438-0259 0049
MICHIGAN
- --------
BC Great Lakes, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
37104 Six Mile Road, Livonia, MI 48150 Phone: (313) 591-8400 0052
20195 Mack Road, Grosse Pointe Woods, MI 48236 Phone: (313) 885-6480 0059
221 Twelve Mile Road, Royal Oak, MI 48073 Phone: (810) 398-6300 0066
26021-23 Hoover Road, Warren, MI 48089 Phone: (810) 757-9970 0068
29940 Southfield Road, Southfield, MI 48076 Phone: (810) 557-7020 0077
1577 South Woodward Avenue, Birmingham, MA 48009 Phone: (810) 646-4350 0082
2502 Woodward Avenue, Bloomfield Hills, MI 48304 Phone: (810) 334-5559 0094
560 West Ann Arbor Road, Plymouth, MI 48170 Phone: (313) 416-1600 0105
136 North Telegraph Road, Dearborn, MI 48124 Phone: (313) 278-0700 0133
37105 Gratiot Avenue, Clinton Township, MI 48038 Phone: (810) 463-8320 0135
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
3200 Walton Boulevard, Rochester, MI 48309 Phone: (810) 375-5700 0136
13993 & 13995 Hall Road, Shelby, MI 48315 Phone: (810) 566-7170 0169
3325 Washtenaw Avenue, Ann Arbor, MI 48104 Phone: (313) 971-5100 0183
5137 Rochester Road, Troy, MI 48098 Phone: (810) 689-5350 0185
5160 Highland, Waterford, MI 48327 Phone: (810) 674-8867 0248
6580 Dixie Highway, Clarkston, MI 48346 Phone: (810) 620-8660 0256
28268 Dequindre, Warren, MI 48091 Phone: (810) 751-0100 0265
19055 Middlebelt Road, Livonia, MI 48152 Phone: (810) 442-7790 0289
28670 North West Highway, Southfield, MI 48034 Phone: (810) 799-3060 0297
17700-50 Grand River, Detroit, MI 48227 Phone: (313) 270-4300 0304
4051 15 Mile Road, Sterling Heights, MI 48310 Phone: (810) 795-1777 0430
13400 East 15 Mile Road, Sterling Heights, MI 48312 Phone: (810) 795-0060 0431
31960 Gratiot, Roseville, MI 48066 Phone: (810) 293-2800 0456
43450 Ford Road, Canton, MI 48187 Phone: (313) 844-1200 0501
3555 West Street, Trenton, MI 48163 Phone: (313) 692-8300 0527
36440 Ford Road, Westland, MI 48185 Phone: (313) 728-7676 0539
26582 Ford Road, Dearborn Heights, MI 48127 Phone: (313) 278-1770 0540
5651 Mercury, Dearborn, MI 48126 Phone: (313) 441-3200 0543
15424 Southfield, Allen Park, MI 48101 Phone: (313) 381-8600 0600
6753 Orchard Lake Road, West Bloomfiled, MI 48322 Phone: (810) 626-4685 0754
2245 West Stadium, Ann Arbor, MI 48103 Phone: (313) 662-4666 0930
18610 Livernois, Detroit, MI 48221 Phone: (313) 341-0111 0976
43363 Cresent Boulevard, Novi, MI 48376 Phone: (810) 449-6311 1083
19135 Telegraph Road, Detroit, MI 48219 Phone: (313) 541-4455 1838
17137 Harper, Detroit, MI 48224 Phone: (313) 640-4100 1926
BC Heartland, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
1881 West Grand River Road, Okemos, MI 48864 Phone: (517) 347-2200 0502
638 16th Street-East, Holland, MI 49423 Phone: (616) 395-9535 0562
1558 28th Street, S.W., Wyoming, MI 49509 Phone: (616) 530-1990 0632
MINNESOTA
- ---------
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contact: Robert L. Sirkis Fax: (913) 344-1610
</TABLE>
18
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<TABLE>
<S> <C> <C>
Unit Locations:
15101 Cedar Avenue, Apple Valley, MN 55124 Phone: (612) 891-4100 0557
2071 Cliff Road, Eagan, MN 55122 Phone: (612) 683-9900 0589
1526 Robert Street, West St. Paul, MN 55118 Phone: (612) 457-3000 0593
1048 Meadowlands Drive, White Bear, MN 55127 Phone: (612) 426-7777 0603
2082 Ford Parkway, St. Paul, MN 55116 Phone: (612) 690-0000 0626
13111 Riverdale Drive NW, Coon Rapid, MN 55448 Phone: (612) 576-9000 0630
6800 56th Avenue North, Crystal, MN 55428 Phone: (612) 535-0000 0652
5300 Excelsior Boulevard, St. Louis Park, MN 55416 Phone: (612) 928-9999 0719
3130 2nd Street South, St. Cloud, MN 56301 Phone: (612) 252-7000 0789
963 West 78th Street, Chanhassen, MN 55317 Phone: (612) 474-3800 0807
5050 Central Avenue, Columbia Heights, MN 55421 Phone: (612) 571-7500 0820
8061 Brooklyn Boulevard, Brooklyn Park, MN 55445 Phone: (612) 391-7444 0867
1580 Madison Avenue, Mankato, MN 56001 Phone: (507) 388-8575 0876
1905 County Road 42 West, Burnsville, MN 55306 Phone: (612) 892-5000 0878
590 Prairie Center Drive, Eden Prairie, MN 55344 Phone: (612) 943-1000 0881
1201 South Broadway, #60, Rochester, MN 55904 Phone: (507) 289-7000 0924
101 - 89th Avenue, Blaine, MN 55434 Phone: (612) 786-1111 0942
2440 White Bear Avenue, Maplewood, MN 55109 Phone: (612) 777-2800 1063
700 West 78th Street, Richfield, MN 55423 Phone: (612) 861-0101 1107
12967 Ridgedale Drive, Minnetonka, MN 55345 Phone: (612) 540-0123 1111
2720 Lincoln Drive, Roseville, MN 55113 Phone: (612) 631-1110 1114
2133A Hudson Road, St. Paul, MN 55119 Phone: (612) 739-3300 1150
2600 East Lake Street, Minneapolis, MN 55406 Phone: (612) 721-5500 1379
7650 Olson Memorial Highway, Golden Valley, MN 55427 Phone: (612) 542-8898 1501
7979 Wedgewood Lane North, Golden Valley, MN 55427 Phone: (612) 542-8898 1675
8362 Tamarack Village, Woodbury, MN 55125 Phone: (612) 702-0979 1676
MISSOURI
- --------
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contacts: Robert L. Sirkis Fax: (913) 344-1610
Unit Locations:
1615 Jungermann Road, St. Charles, MO 63304 Phone: (314) 939-0177 0716
10018 Manchester Road, Glendale, MO 63122 Phone: (314) 821-7577 0756
13965 Manchester Road, Ballwin, MO 63011 Phone: (314) 230-0081 0784
14171 East 40 Highway, Kansas City, MO 64136 Phone: (816) 373-4561 0792
1928 Zumbehl Road, St. Charles, MO 63303 Phone: (314) 947-3444 0836
</TABLE>
19
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<TABLE>
<S> <C> <C>
12710 Olive Boulevard, Creve Coeur, MO 63141 Phone: (314) 205-2229 0855
9310 East 350 Highway, Raytown, MO 64133 Phone: (816) 353-7979 0921
1051 South 7 Highway, Blue Springs, MO 64015 Phone: (816) 220-7727 0944
111 North Range Line, Joplin, MO 64801 Phone: (417) 626-8585 1026
4040 Mill Street, Kansas City, MO 64111 Phone: (816) 960-0600 1027
1027 N.E. Rice Road, Lee's Summit, MO 64086 Phone: (816) 524-4224 1053
3757 South Glenstone, Springfield, MO 65804 Phone: (417) 886-4700 1146
5905 South Lindberg Boulevard, St. Louis, MO 63123 Phone: (314) 894-4404 1148
15631 Manchester Road, Ellisville, MO 63011 Phone: (314) 227-7797 1400
301 North Belt Highway, St. Joseph, MO 64506 Phone: (816) 387-8111 1497
2375 North Highway 67, Florissant, MO 63033 Phone: (314) 830-0888 1625
NEBRASKA
- --------
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contact: Robert L. Sirkis Fax: (913) 344-1610
Unit Locations:
4144 South 50th, Omaha, NE 68117 Phone: (402) 734-7900 0295
1601 Q Street, Lincoln, NE 68508 Phone: (402) 438-4100 0324
4524 Dodge Street, Omaha, NE 68132 Phone: (402) 556-9800 0338
704 North 114th Street, Omaha, NE 68154 Phone: (402) 493-3800 0424
3029 North 90th Street, Omaha, NE 68134 Phone: (402) 571-3900 0532
12423 West Center Road, Omaha, NE 68144 Phone: (402) 334-6800 0549
500 North 48th Street, Lincoln, NE 68504 Phone: (402) 466-3111 0673
3406 West State Street, Grand Island, NE 68803 Phone: (308) 381-8811 0806
3410 North 27th Street, Lincoln, NE 68521 Phone: (402) 465-4600 0838
NEVADA
- ------
BC Golden Gate, L.L.C.*
2105 Bascom Avenue, Suite 135, Campbell, CA 95008 Phone: (408) 558-6400
Contact: John L. Cutter Fax: (408) 558-6419
Unit Locations:
4801 Kietzke Lane, Reno, NV 89502 Phone: (702) 827-5900 1588
</TABLE>
20
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<TABLE>
<S> <C> <C>
BCE West, L.P.*
4110 North Scottsdale Road, Suite 235, Scottsdale, AZ 85251 Phone: (602) 994-4000
Contacts: Larry Hohl, Troy Cooper Fax: (602) 994-0044
Unit Locations:
2081 West Sunset Road, Henderson, NV 89014 Phone: (702) 435-4022 0909
2650 West Sahara, Las Vegas, NV 89102 Phone: (702) 221-4114 1045
7291 West Lake Mead Boulevard, Las Vegas, NV 89128 Phone: (702) 233-1111 1047
2565 East Tropicana, Las Vegas, NV 85191 Phone: (702) 456-3355 1048
280 North Nellis Boulevard, Las Vegas, NV 89115 Phone: (702) 452-8550 1635
2680 South Maryland Parkway, Las Vegas, NV 89109 Phone: (702) 734-0900 1791
9031 West Sahara Avenue, #100, Las Vegas, NV 89117 Phone: (702) 254-3393 1903
NEW HAMPSHIRE
- -------------
BC Boston, L.P. *
100 Cummings Park, Woburn, MA 01801 Phone: (617) 933-3971
Contact: Patrick McDonnell Fax: (617) 933-7711
Unit Locations:
10 Fort Eddy Road, Concord, MA 03301 Phone: (603) 225-9723 1831
33 Winchester Street, Keene, NH 03431 Phone: (603) 352-9742 1916
Route 12A (South Main Street), West Lebanon, NH 03784 Phone: (603) 298-0170 1963
H & A Enterprises, Inc.
14 March Avenue, Manchester, NH 03103 Phone: (203) 523-1167
Contact: Howard Gelin
Unit Locations:
TJ Maxx Plaza, 14 March Avenue, Manchester, NH 03103 Phone: (603) 641-9464 0027
375 Amherst Street, Nashua, NH 03063 Phone: (603) 882-5553 0058
8 Durgin Square, Portsmouth, NH 03801 Phone: (603) 436-8770 0252
NEW JERSEY
- ----------
BC New York, L.L.C.*
400 Lanidex Plaza, Parsippany, NJ 07054 Phone: (201) 739-8801
Contact: Robert P. Anarumo Fax: (201) 515-7319
</TABLE>
21
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<TABLE>
<S> <C> <C>
Unit Locations:
91 East Mt. Pleasant Avenue, Livingston, NJ 07039 Phone: (201) 994-1199 0025
278 North Avenue, Westfield, NJ 07090 Phone: (908) 232-1188 0055
561 US Route 1, Store A-1, Edison, NJ 08817 Phone: (908) 985-7030 0078
247 Route 10 East, Succasunna, NJ 07876 Phone: (201) 584-9200 0119
1605 Lemoine Avenue, Fort Lee, NJ 07024 Phone: (201) 944-1500 0121
222 Mountain Avenue, Springfield, NJ 07081 Phone: (201) 379-7775 0134
384 Springfield Avenue, Berkley Heights, NJ 07922 Phone: (908) 665-4222 0142
523 Chestnut Street, Union, NJ 07083 Phone: (908) 687-1700 0195
743 Route 17S, Paramus, NJ 07652 Phone: (201) 445-6633 0277
422 Washington Avenue, Hoboken, NJ 07030 Phone: (201) 795-5300 0303
300 Route 18 North, East Brunswick, NJ 08816 Phone: (908) 432-0404 0316
314 Essex Street, Hackensack, NJ 07644 Phone: (201) 845-7778 0323
4925 Stelton Road, South Plainfield, NJ 07080 Phone: (908) 754-9777 0604
950 Route 22 East, Somerville, NJ 08876 Phone: (908) 526-5800 0605
1587-1595 Oak Tree Road, Woodbridge Township, NJ 08830 Phone: (908) 906-8281 0611
649 Route 206 North, Belle Mead, NJ 08502 Phone: (908) 359-6069 0643
491-493 Ridge Road, North Arlington, NJ 07032 Phone: (201) 997-1006 0696
1076 Highway 9 South, Old Bridge, NJ 08857 Phone: (908) 316-0200 0798
641 Shunpike Road, Chatham, NJ 07928 Phone: (201) 660-0077 0871
1342 Clifton Avenue, Clifton, NJ 07013 Phone: (201) 778-7879 0965
900 Easton Avenue, Somerset, NJ 08873 Phone: (908) 214-1144 0993
10 Route 22 West, Greenbrook, NJ 08812 Phone: (908) 755-1221 1003
#3 Route 57, Hackettstown, NJ 07840 Phone: (908) 979-9600 1005
6 Wanaque Avenue, Pompton Lakes, NJ 07442 Phone: (201) 616-7007 1098
199 Route 46W, Rockaway Boro, NJ 07866 Phone: (201) 625-8777 1112
1172 Hamburg Turnpike, Wayne, NJ 07470 Phone: (201) 633-0570 1382
350 West St. George Avenue, Linden, NJ 07036 Phone: (908) 925-9595 1594
522 Broadway, Bayonne, NJ 07002 Phone: (201) 339-0202 1606
1560 St. Georges Avenue, Avenel, NJ 07001 Phone: (908) 381-8833 1658
1160 US Route 46 West, Clifton, NJ 07011 Phone: (201) 591-0111 1659
447 Central Avenue, East Orange, NJ 07019 Phone: (201) 678-1616 1660
878 US Route 1 Northbound, Edison, NJ 08817 Phone: (908) 248-3080 1661
2120 Broadway, Fairlawn, NJ 07410 Phone: (201) 794-2100 1662
180 Hackensack Avenue, Hackensack, NJ 07602 Phone: (201) 457-0707 1664
300-02 Route 46, Little Ferry, NJ 07643 Phone: (201) 329-7700 1665
395 Route 17 North, Mahwah, NJ 07430 Phone: Not assigned 1667#
1411 US Route 1, Menlo Park, NJ 08817 Phone: (908) 603-9555 1668
2650 Route 22, Union, NJ 07083 Phone: (908) 687-8400 1671
321 Broad Avenue, Ridgefield, NJ 07657 Phone: (201) 945-0303 2092
</TABLE>
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<S> <C> <C>
Family Style Restaurant Corporation
303 Molnar Drive, Elmwood Park, NJ 07407 Phone: (201) 797-4100
Contacts: Jim Hufnagel, William Hufnagel
Unit Locations:
Ramsey Food Corporation
128 East Main Street, Ramsey, NJ 07446 Phone: (201) 327-1155 0061
Park Ridge Restaurant Corporation
150 Kindermack Road, Park Ridge, NJ 07656 Phone: (201) 391-1600 0106
Waldwick Food Corporation
20 Wyckoff Avenue, Waldwick, NJ 07463 Phone: (201) 447-3300 0174
Emerson Food Corporation
175 Kinderkamack, Emerson, NJ 07463 Phone: (201) 599-0500 0319
Northvale Food Corporation
275 Livingston Avenue, Northvale, NJ 07647 Phone: (201) 784-1177 0662
East Hanover Food Corporation
332 Route 10 West, East Hanover, NJ 07936 Phone: (201) 884-7200 1728
NEW MEXICO
- ----------
BCE West, L.P. *
4110 North Scottsdale Road, Suite 235, Scottsdale, AZ 85251 Phone: (602) 994-4000
Contacts: Larry Hohl, Troy Cooper Fax: (602) 994-0044
Unit Locations:
340 Eubank, Albuquerque, NM 87102 Phone: (505) 299-1100 0447
5640 Wyoming Boulevard, Albuquerque, NM 87109 Phone: (505) 857-0700 0554
NEW YORK
- --------
BC Boston, L.P.*
100 Cummings Park, Woburn, MA 01801 Phone: (617) 933-3971
Contact: Patrick McDonnell Fax: (617) 933-7711
Unit Locations:
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C>
Village Plaza, Clifton Park, NY 12065 Phone: (518) 373-0026 0036
195 Broadway, Saratoga Springs, NY 12866 Phone: (518) 587-3414 0126
1720 Union Street, Schenectady, NY 12309 Phone: (518) 346-2376 0127
753 New London, Latham, NY 12110 Phone: (518) 785-7509 0232
1 Elsmere Avenue, Delmar, NY 12054 Phone: (518) 478-0338 0548
1235 Western Avenue, Albany, NY 12203 Phone: (518) 446-9101 1833
BC New York, L.L.C.*
400 Lanidex Plaza, Parsippany, New Jersey 07054 Phone: (201) 739-8801
Contact: Robert P. Anarumo Fax: (201) 515-7319
Unit Locations:
430 Woodbury Road, Plainview, NY 11803 Phone: (516) 931-8200 0022
2093 Merrick Road, Merrick, NY 11566 Phone: (516) 379-9400 0033
130 North Bedford Road, Mt. Kisco, NY 10549 Phone: (914) 241-8800 0054
22H Shore Road, Port Washington, NY 11050 Phone: (516) 944-7705 0075
77 Quaker Ridge Road, New Rochelle, NY 10804 Phone: (914) 235-0550 0108
818-820 Hicksville Road, North Massepequa, NY 11758 Phone: (516) 541-5446 0144
2295 Hempstead Turnpike, East Meadow, NY 11554 Phone: (516) 579-1700 0145
153-35A Cross Island Parkway, Whitestone, NY 11357 Phone: (718) 746-4181 0181
667 Boston Post Road, Mamaroneck, NY 10543 Phone: (914) 777-1017 0211
2091 Hillside Avenue, New Hyde Park, NY 11042 Phone: (516) 328-2424 0225
964-966 Middle Country Road, Selden, NY 11784 Phone: (516) 736-4577 0234
67 Glen Street, Glen Cove, NY 11542 Phone: (516) 759-9793 0254
1625 Hempstead Turnpike, Elmont, NY 11003 Phone: (516) 352-8603 0255
168 West Merrick Road, Valley Stream, NY 11563 Phone: (516) 561-5539 0280
3962 Hempstead Turnpike, Bethpage, NY 11714 Phone: (516) 579-0779 0311
Newdon Plaza, 32 North Main Street, New City, NY 10956 Phone: (914) 638-3847 0340
32 Xavier Drive, Yonkers, NY 10701 Phone: (914) 963-1305 0373
168 Atlantic Avenue, Freeport, NY 11520 Phone: (516) 377-4220 0418
23-90 Bell Boulevard, Bayside, NY 11360 Phone: (718) 224-1747 0423
Broadway, Parcel No. 3005, Hicksville, NY 11801 Phone: (516) 822-1484 0463
1605 Deer Park Avenue, Deer Park, NY 11729 Phone: (516) 254-0922 0464
555 Long Beach Road, Long Beach, NY 11561 Phone: (516) 431-6700 0465
652-654 Central Avenue, Scarsdale, NY 10583 Phone: (914) 472-5038 0533
47 Cold Spring Road, Syosset, NY 10791 Phone: (516) 496-7257 0534
5124 Northern Boulevard, Woodside, NY 11377 Phone: (718) 533-6200 0546
254-65 Horace Harding Boulevard, Little Neck, NY 11362 Phone: (718) 225-3446 0585
2028 Rockaway Parkway, Brooklyn, NY 11236 Phone: (718) 531-8700 0592
163 East Montauk Highway, Lindenhurst, NY 11757 Phone: (516) 957-7046 0597
171-50 Northern Boulevard, Flushing, NY 11358 Phone: (718) 445-0425 0608
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
61-45 188th Street, Fresh Meadows, NY 11365 Phone: (718) 264-7137 0641
1465 Forest Avenue, Staten Island, NY 10302 Phone: (718) 815-1198 0663
271 West 23rd Street, New York, NY 10011 Phone: (212) 206-1221 0695
275 Route 25A, Miller Place, NY 11764 Phone: (516) 474-5000 0758
803 Montauk Highway, Shirley, NY 11967 Phone: (516) 395-5015 0852
23 Montauk Highway, East Islip, NY 11730 Phone: (516) 277-3232 0875
60-18 Metropolitan Avenue, Ridgewood, NY 11385 Phone: (718) 386-5858 0879
343 Rockaway Turnpike, Lawrence, NY 11559 Phone: (516) 239-0357 0915
2426 Eastchester Road, Bronx, NY 10469 Phone: (718) 654-3200 0923
3371-85 East Tremont Avenue, Bronx, NY 10465 Phone: (718) 824-0440 0950
106-24 71st Avenue, Forest Hills, NY 11375 Phone: (718) 261-0500 0990
75-31 & 75-33 - 31st Avenue, Jackson Heights, NY 11370 Phone: (718) 205-5800 1025
83-02 Atlantic Avenue, Ozone Park, NY 11416 Phone: (718) 647-4700 1092
2530 Hylan Boulevard, Staten Island, NY 10306 Phone: (718) 980-4300 1152
854 Arthur Kill Road, Staten Island, NY 10312 Phone: (718) 227-8200 1153
400 Route 211 East, Middletown, NY 10940 Phone: (914) 344-1817 1169
1180 Route 9 South, Wappinger Falls, NY 12590 Phone: (914) 298-9999 1170
419 Old Country Road, Westbury, NY 11590 Phone: (516) 997-0777 1179
948 Second Avenue, New York, NY 10022 Phone: (212) 355-2000 1390
2411 Broadway, New York, NY 10024 Phone: (212) 579-5551 1395
85-25 126th Street, Richmond Hill, NY 11415 Phone: (718) 849-4000 1438
401 Value Drive, Kingston, NY 12401 Phone: (914) 336-0300 1439
1972 Ralph Avenue, Brooklyn, NY 11234 Phone: (718) 241-5700 1589
50-01 Queens Boulevard, Queens, NY 11377 Phone: (718) 779-3700 1669
603 Hempstead Turnpike, West Hempstead, NY 11552 Phone: (516) 539-0500 1672
90 Broadhollow Road, Farmingdale, NY 11735 Phone: (516) 753-3777 1775
80 East Main Street, Smithtown, NY 11787 Phone: (516) 361-7070 1777
2010 Bartow Avenue, Bronx, NY 10470 Phone: Not assigned 1889#
605 Portion Road, Lake Ronkonkoma, NY 11779 Phone: (516) 471-4800 2096#
2450 Route 9, Fishkill, NY 12524 Phone: (914) 896-1212 2238
Charles Dalsgard
22 Glen Drive, Goshen, NY 10924 Phone: (914) 294-9588
Contact: Charles Dalsgard
Unit Locations:
Hudson Valley NBC Corporation
7 Matthews Street, Goshen, NY 10924 Phone: (914) 294-9662 0043
Middletown NBC Corporation
125 Dolson Avenue, Middletown, NY 10940 Phone: (914) 342-2678 0074
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C>
P & L Food Services, L.L.C.*
1740 Washington Road, Pittsburgh, PA 15241 Phone: (412) 835-4411
Contacts: Lawrence Beck, Patrick McDonnell Fax: (412) 835-6010
Unit Locations:
6709 Pittsford-Palmyra Road, Fairport, NY 14450 Phone: (716) 425-3000 0235
1900 Empire Boulevard, Penfield, NY 14580 Phone: (716) 787-0330 0526
8292 Niagara Falls Boulevard, Niagara Falls, NY 14304 Phone: (716) 283-2866 0610
8160 Transit, Amherst, NY 14221 Phone: (716) 688-1948 0614
2380 Delaware Avenue, Buffalo, NY 14216 Phone: (716) 873-4548 0617
4940 Transit Road, Cheektowa, NY 14043 Phone: (716) 656-8477 0629
2700 West Ridge Road, Greece, NY 14626 Phone: (716) 453-0570 0661
4185 Maple Road, Amherst, NY 14226 Phone: (716) 834-2320 0805
3823 Union Road, Cheektowaga, NY 14225 Phone: (716) 651-4629 0956
5849 South Transit Road, Lockport, NY 14094 Phone: (716) 439-5486 1303
4408 Milestrip Road, Blasdell, NY 14219 Phone: (716) 823-2818 1809
Welco of Rye
75 Theodore Fremd Avenue, Rye, NY 10573 Phone: (914) 967-1111
Contacts: Ed Hoberman, Walter Rubin Fax: (914) 967-4171
Unit Location:
75 Theodore Fremd Avenue, Rye, NY 10573 Phone: (914) 967-1111 0028
NORTH CAROLINA
- --------------
Platinum Rotisserie, L.L.C.*
100 Cambridge Park, Suite B, Winston-Salem, NC 27104 Phone: (910) 659-5000
Contact: Anthony D. Wedo Fax: (910) 659-5116
Unit Locations:
9500 Strickland Road, Raleigh, NC 27615 Phone: (919) 676-7609 0198
3029 Auto Drive, Durham, NC 27707 Phone: (919) 490-8677 0199
5615 West Friendly Avenue, Greensboro, NC 27410 Phone: (910) 292-6336 0239
1909 Skibo Road, Fayetteville, NC 28314 Phone: (910) 864-1666 0292
4408 Falls of Neuse Road, Raleigh, NC 27609 Phone: (919) 876-7769 0305
4558-A Capital Boulevard, Raleigh, NC 27604 Phone: (919) 981-7450 0306
110 North Summit Square Drive, Winston-Salem, NC 27105 Phone: (910) 377-3444 0307
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
6109 Glenwood Avenue, Raleigh, NC 27612 Phone: (919) 782-7335 0326
6200 Albemarle Road, Charlotte, NC 28212 Phone: (704) 531-2133 0342
829 Providence Road, Charlotte, NC 28207 Phone: (704) 358-8505 0359
1800 East Franklin Street, Chapel Hill, NC 27514 Phone: (919) 942-4600 0414
9550 East Independence Boulevard, Matthews, NC 28105 Phone: (704) 849-2850 0436
1203 Silas Creek Parkway, Winston-Salem, NC 27127 Phone: (910) 777-0711 0451
1397 Kildaire Farm Road, Cary, NC 27511 Phone: (919) 319-3818 0480
299 Jonestown Road, Winston-Salem, NC 27104 Phone: (910) 659-1035 0499
205 South Stratford Road, Winston-Salem, NC 27103 Phone: (910) 724-0153 0509
1705 Raleigh Road, West, Wilson, NC 27893 Phone: (919) 206-1700 0512
204 S.West Greenville Boulevard, Greenville, NC 27834 Phone: (919) 321-1700 0519
4150 Fayetteville Road, Raleigh, NC 27529 Phone: (919) 772-6003 0555
1644 Hendersonville Highway, Asheville, NC 28803 Phone: (704) 274-8955 0561
7721 Pineville-Matthews Road, Charlotte, NC 28226 Phone: (704) 543-0782 0653
801 South Main Street, Kernersville, NC 27284 Phone: (910) 996-9797 0679
3090 East Franklin Boulevard, Gastonia, NC 28054 Phone: (704) 865-9333 0788
1001 Chancellor Park Drive, Charlotte, NC 28213 Phone: (704) 597-5688 0791
2300-C North Main, High Point, NC 27262 Phone: (910) 889-9461 0866
8020 Providence Road, Charlotte, NC 28277 Phone: (704) 544-8989 1560
2740 South Church Street, Burlington, NC 27215 Phone: (910) 538-1700 1836
OHIO
- ----
BC Great Lakes, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
6550 Airport Highway, Holland, OH 43528 Phone: (419) 868-7811 0249
3808 Secor Road, Toledo, OH 43606 Phone: (419) 292-0060 0250
917 Conant Street, Maumee, OH 43537 Phone: (419) 893-0001 0469
5812 Alexis Road, Sylvania, OH 43560 Phone: (419) 885-8805 0470
930 West Alexis Road Toledo, OH 43612 Phone: (419) 478-2241 0524
BC Superior, L.L.C. *
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 20815 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
7704 Montgomery Road, Cincinnati, OH 45236 Phone: (513) 792-8180 0224
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
2692 Madison Road, Suite A-1, Cincinnati, OH 45208 Phone: (513) 841-5990 0285
9430 Fields Ertel Road, Cincinnati, OH 45249 Phone: (513) 583-4220 0330
725 Nilles Road, Fairfield, OH 45014 Phone: (513) 829-1282 0355
1095 SR 28 Bypass, Milford, OH 45150 Phone: (513) 248-5800 0449
8565 Winton Road, Cincinnati, OH 45231 Phone: (513) 728-4600 0462
5201 Delhi Pike, Cincinnati, OH 45238 Phone: (513) 347-2999 0504
5774 Springboro Pike, Moraine, OH 45449 Phone: (513) 643-7265 0522
7480 Old Troy Pike, Huber Heights, OH 45424 Phone: (513) 237-6620 0531
6270 Wilmington Pike, Sugar Creek Towns, OH 45459 Phone: (513) 848-6500 0616
7806 Kingland Drive, West Chester, OH 45069 Phone: (513) 755-5800 0628
2853 Centre Drive, Beavercreek, OH 45324 Phone: (513) 320-5565 0656
1195 West Kemper Road, Forest Park, OH 45240 Phone: (513) 589-3350 0680
4397 Glen Este-Withamsville, Cincinnati, OH 45245 Phone: (513) 943-3550 0689
810 Kemper Commons Circle, Cincinnati, OH 45246 Phone: (513) 671-1172 0961
126 West McMillan Street, Cincinnati, OH 45219 Phone: (513) 475-5900 0962
4110 Far Hills Avenue, Kettering, OH 45429 Phone: (513) 643-9800 1033
3359 Pendleton Circle, Middletown, OH 45005 Phone: (513) 422-4400 1070
1775 West Main Street, Troy, OH 45373 Phone: (513) 339-9866 1161
1516 Miamisburg Centerville Road, Dayton, OH 45459 Phone: (937) 291-2232 1646
8284 Beechmont Avenue, Cincinnati, OH 45230 Phone: (513) 474-7727 1789
P & L Food Services, L.L.C. *
1740 Washington Road, Pittsburgh, PA 15241 Phone: (412) 835-4411
Contacts: Lawrence Beck, Patrick McDonnell Fax: (412) 835-6010
Unit Locations:
2741 East Main Street, Bexley, OH 43209 Phone: (614) 237-5015 0035
16773 Chargin Boulevard, Shaker Heights, OH 44120 Phone: (216) 991-0300 0076
3137 Kingsdale Shopping Center, Shaker Heights, OH 44120 Phone: (216) 991-0300 0088
Ridge Park Square, 4742 Ridge Road, Brooklyn, OH 44144 Phone: (216) 459-1500 0090
3750 West Market Street, Unit F, Fairlawn, OH 44333 Phone: (216) 666-6997 0115
5096 Mayfield Road, Lyndhurst, OH 44124 Phone: (216) 460-0505 0139
113 West Schrock Road, Westerville, OH 43081 Phone: (614) 899-2449 0143
1350 West Pleasant Valley Road, Parma, OH 44134 Phone: (216) 845-9700 0167
699 Howe Avenue, Cuyahoga Falls, OH 44221 Phone: (216) 922-3333 0202
24195 Chagrin Boulevard, Beachwood, OH 44122 Phone: (216) 591-1990 0216
34295 Aurora Road, Solon, OH 44138 Phone: (216) 498-0088 0259
14375 Pearl Road, Strongsville, OH 44136 Phone: (216) 846-0003 0261
9361 Mentor Avenue, Mentor, OH 44060 Phone: (216) 974-7333 0264
6330 Tussing Road, Columbus, OH 43068 Phone: (614) 861-2585 0312
5150 Tuttle Crossing Boulevard, Dublin, OH 43017 Phone: (614) 766-5885 0409
</TABLE>
28
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<TABLE>
<S> <C> <C>
21665 Center Ridge Road, Rocky River, OH 44116 Phone: (216) 331-0060 0452
2184 Warrensville Center Road, University Heights, OH 44118 Phone: (216) 321-2219 0483
435 Boardman - Poland Road, Boardman, OH 44512 Phone: (216) 726-4066 0507
26440 Lorain Road, N. Olmsted, OH 44070 Phone: (216) 779-0800 0576
4310 West Broad Street, Columbus, OH 43228 Phone: (614) 274-9300 0613
683 East Aurora, Macedonia, OH 44056 Phone: (216) 467-5333 0767
6515 Sawmill Road, Dublin, OH 43017 Phone: (614) 798-1166 0824
413 Northfield Road, Bedford, OH 44146 Phone: (216) 439-4350 0938
4474 Everhard Road, Canton, OH 44718 Phone: (216) 497-8330 0954
14833 Detroit Avenue, Lakewood, OH 44107 Phone: (216) 228-1236 1466
960 North Court Street, Lakewood, OH 44107 Phone: (216) 228-1236 1505
OREGON
- ------
BC Northwest, L.P.*
1601-114 Avenue, SE, Ste. 130, Bellevue, WA 98008 Phone: (206) 454-8665
Contact: Dennis B. Mullen Fax: (206) 454-9198
Unit Locations:
19009 Beavercreek Road, Oregon City, OR 97045 Phone: (503) 655-5566 0587
13935 SW Pacific Highway, Tigard, OR 97223 Phone: (503) 968-6700 0707
1650 NE 8th Street, Gresham, OR 97030 Phone: (503) 667-5080 0713
8308 SE Powell, Portland, OR 97206 Phone: (503) 771-1800 0714
10112 NE Halsey, Portland, OR 97220 Phone: (503) 252-9922 0816
407 Lancaster Drive NE, Salem, OR 97301 Phone: (503) 581-1122 0834
2121 West Burnside, Portland, OR 97210 Phone: (503) 221-0700 0922
10500 SE 82nd Avenue, Clackamas, OR 97266 Phone: (503) 771-0800 0963
2145 N.W. Town Center Drive, Beaverton, OR 97006 Phone: (503) 690-7100 1017
4940 Commercial Street SE, Salem, OR 97302 Phone: (503) 362-9900 1117
2625 SW Cedar Hills Boulevard, Beaverton, OR 97005 Phone: (503) 646-7777 1306
12700 SW North Dakota, Suite 100, Tigard, OR 97223 Phone: (503) 590-5900 1404
15780 Boones Ferry Road, Lake Oswego, OR 97035 Phone: (503) 635-5500 1424
1250 Biddle Road, Space A, Medford, OR 97504 Phone: (541) 770-5100 1552
550 NE Circle Boulevard, Corvallis, OR 97330 Phone: (541) 766-8848 1561
15009 SE McLoughlin Boulevard, Milwaukie, OR 97267 Phone: (503) 654-1787 1708
575 SE 10th Avenue, Hillsboro, OR 97123 Phone: (503) 640-5300 1988
</TABLE>
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<TABLE>
<CAPTION>
PENNSYLVANIA
- ------------
<S> <C> <C>
P & L Food Services, L.L.C. *
1740 Washington Road, Pittsburgh, PA 15241 Phone: (412) 835-4411
Contacts: Lawrence Beck, Patrick McDonnell Fax: (412) 835-6010
Unit Locations:
1736 Washington, Pittsburgh, PA 15241 Phone: (412) 854-5840 0060
3776 William Penn Highway, Monroeville, PA 15146 Phone: (412) 373-7010 0146
5889 Forbes Avenue, Pittsburgh, PA 15217 Phone: (412) 521-8550 0147
4826 McKnight Road, Pittsburgh, PA 15237 Phone: (412) 369-7750 0160
98 Clairton Road, Pleasant Hills, PA 15236 Phone: (412) 653-9490 0266
5200 Baum Boulevard, Pittsburgh, PA 15224 Phone: (412) 683-9752 0270
978 Greentree Road, Greentree, PA 15220 Phone: (412) 928-0716 0410
20290 Route 19, Mars, PA 16046 Phone: (412) 779-1120 0411
1000 East Pittsburgh Street, Greensburg, PA 15601 Phone: (412) 838-9864 0450
1635 McFarland Road, Pittsburgh, PA 15216 Phone: (412) 571-9034 0508
4618 Route 8, Pittsburgh, PA 15216 Phone: (412) 571-9034 0797
5933 Peach Street, Erie, PA 16509 Phone: (814) 864-7715 0982
2390 East State Street, Hermitage, PA 16148 Phone: (412) 983-0760 1465
201 Tarentum Bridge Road, New Kensington, PA 15068 Phone: (412) 334-6640 1619
RHODE ISLAND
- ------------
BC Boston, L.P.*
100 Cummings Park, Woburn, MA 01801 Phone: (617) 933-3971
Contact: Patrick McDonnell Fax: (617) 933-7711
Unit Locations:
258 Bellvue, Newport, RI 02840 Phone: (401) 849-8990 0030
185 Sockanosset Cross Road, Cranston, RI 02920 Phone: (401) 946-2449 0096
633 North Main Street, Providence, RI 02904 Phone: (401) 273-9690 1103
1670 Mineral Springs Avenue, North Providence, RI 02904 Phone: (401) 353-6009 1815
SOUTH CAROLINA
- --------------
Platinum Rotisserie, L.L.C.*
100 Cambridge Park, Suite B, Winston-Salem, NC 27104 Phone: (910) 659-5000
Contact: Anthony D. Wedo Fax: (910) 659-5116
</TABLE>
30
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<TABLE>
<CAPTION>
Unit Locations:
<S> <C> <C>
101 Brown Road, Anderson, SC 29621 Phone: (803) 224-1855 0545
3619 Pelham Road, Greenville, SC 29615 Phone: (803) 987-0650 0564
1751 East Main Street, Spartanburg, SC 29302 Phone: (864) 582-3999 0726
2475 Laurens Road, Greenville, SC 29607 Phone: (803) 627-8600 0800
2099 West Evans Street, Florence, SC 29501 Phone: (803) 629-0900 0988
SOUTH DAKOTA
- ------------
Finest Foodservice, L.L.C.*
8717 West 110th Street, Suite 600, Overland Park, KS 66211 Phone: (913) 344-1600
Contact: Robert L. Sirkis Fax: (913) 344-1610
Unit Location:
1900 West 41st Street, Sioux Falls, SD 57105 Phone: (605) 331-4545 1141
TENNESSEE
- ---------
BC Superior, L.L.C.*
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 208151 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
330 Franklin Road, Suite 400-E, Brentwood, TN 37027 Phone: (615) 661-8766 0839
166 Johnny Cash Parkway, Hendersonville, TN 37075 Phone: (615) 822-9944 1014
760 North West Broad Street, Murfreesboro, TN 37130 Phone: (615) 848-2500 1074
4097 Nolensville Pike, Nashville, TN 37211 Phone: (615) 832-8200 1076
402 21st Avenue South, Nashville, TN 37212 Phone: (615) 322-5350 1077
4014 Hillsboro Circle, Nashville, TN 37215 Phone: (615) 297-3800 1496
1708 Galleria Boulevard, Franklin, TN 37014 Phone: (615) 771-6800 2319
1905 Gallatin Pike North, Nashville, TN 37115 Phone: (615) 851-0700 2320#
3061 Wilma Rudolph Boulevard, Clarksville, TN 37042 Phone: (615) 553-4000 2321#
TEXAS
- -----
BC Texas, Inc. *
14275 Midway Road, Suite 315, Dallas, TX 75244 Phone: (214) 663-8300
Contact: Mike Donovan Fax: (214) 520-7321
</TABLE>
31
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<CAPTION>
Unit Locations:
<S> <C> <C>
4216 Oak Lawn Avenue, Highland Park, TX 75219 Phone: (214) 528-0555 0084
1230 Town East Boulevard, Mesquite, TX 75150 Phone: (214) 681-0600 0098
5941 Forest Lane, Mesquite, TX 75150 Phone: (214) 681-0600 0103
730 West Centerville Road, Mesquite, TX 75150 Phone: (214) 681-0600 0104
789 Wheatland Road, Duncanville, TX 75116 Phone: (214) 709-0926 0112
4402 Little Road, Arlington, TX 76017 Phone: (817) 478-8878 0120
4635 Frankford Road, Arlington, TX 76017 Phone: (817) 478-8878 0157
2705 North Beltline Road, Irving, TX 75062 Phone: (214) 594-6014 0188
841 East Lamar Road, Arlington, TX 76011 Phone: (817) 276-9900 0200
5944 West Northwest Highway, Dallas, TX 75225 Phone: (214) 691-6869 0208
6353 Camp Bowie Boulevard, Fort Worth, TX 76116 Phone: (817) 377-3300 0217
4960 South Cooper Street, Arlington, TX 76017 Phone: (817) 472-5500 0226
1570 West Main Street, Lewisville, TX 75067 Phone: (214) 436-8199 0227
701 West 15th Street, Plano, TX 75075 Phone: (214) 578-7997 0281
494 Grapevine Highway, Hurst, TX 76054 Phone: (817) 581-9999 0293
3797 Forest Lane, Dallas, TX 75244 Phone: (214) 484-0101 0325
2104 Preston Road, Plano, TX 75093 Phone: (214) 612-2625 0328
6000 Rufe Snow, N. Richland Hills, TX 76180 Phone: (817) 788-8008 0332
1810 West University, McKinney, TX 75069 Phone: (214) 542-3322 0344
6917 Independence Parkway, Plano, TX 75023 Phone: (214) 491-0800 0351
804 MacArthur, Coppell, TX 7501 Phone: (214) 304-0064 0356
1230 East Beltline, Richardson, TX 75081 Phone: (214) 231-7799 0429
15050 Marsh Lane, Addison, TX 75234 Phone: (214) 488-9700 0445
1501 William D. Tate Avenue, Grapevine, TX 76051 Phone: (817) 488-0666 0481
2561 East Pioneer Parkway, Arlington, TX 76010 Phone: (817) 274-2121 0482
1909 Texoma Parkway, Sherman, TX 75090 Phone: (903) 892-2200 0487
4406 Kingwood Drive, Kingwood, TX 77339 Phone: (713) 360-0799 0541
9110 Gosling, The Woodlands, TX 77381 Phone: (713) 292-7700 0542
14750 Preston Road, Dallas, TX 75240 Phone: (214) 233-2400 0584
3012 West Berry, Ft. Worth, TX 76109 Phone: (817) 921-4466 0598
7616 Westheimer, Houston, TX 77063 Phone: (713) 780-7995 0623
7910 FM 1960 West, Houston, TX 77070 Phone: (713) 807-9044 0654
14535 Memorial, Houston, TX 77079 Phone: (713) 493-9490 0658
7086 Highway 6 North, Houston, TX 77095 Phone: (713) 855-0899 0674
9403 Garland Road, Dallas, TX 75218 Phone: (214) 328-9844 0675
9460 Jones Road, Houston, TX 77064 Phone: (713) 897-8820 0723
10703 Westheimer, Houston, TX 77042 Phone: (713) 266-8210 0787
505 Bay Area Boulevard, Houston, TX 77058 Phone: (713) 280-9898 0813
405 Fry Road, Houston, TX 77450 Phone: (713) 398-8421 0870
3047 Old Denton Road, Carrolton, TX 75007 Phone: (214) 245-2727 0908
</TABLE>
32
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<TABLE>
<CAPTION>
<S> <C> <C>
2200 Airport Freeway #505, Bedford, TX 76022 Phone: (817) 571-8700 0937
6333 East Mockingbird Lane, Dallas, TX 75214 Phone: (214) 887-9341 0971
6030 South Hulen, Fort Worth, TX 76132 Phone: (817) 263-6400 0997
4557 Garth Road, Baytown, TX 77520 Phone: (713) 422-0344 1019
2410 Highway 6, Sugarland, TX 77479 Phone: (713) 277-1666 1020
7107 Highway 6 South, Houston, TX 77083 Phone: (713) 564-6220 1021
735 East Pleasant Run Road, Desoto, TX 75115 Phone: (214) 224-5588 1292
5195 West 34th Street, Houston, TX 77092 Phone: (713) 680-9919 1293
2835 Ridge Road, Rockwall, TX 75087 Phone: (972) 722-0808 1360
11323 Fuqua Street, Houston, TX 77089 Phone: (713) 910-4956 1528
8670 Skillman, Dallas, TX 75243 Phone: (214) 349-8571 1632
370 Uvalde Road, Houston, TX 77015 Phone: (713) 450-9616 1633
4841 Louetta Road, Spring, TX 77388 Phone: (713) 288-2111 1647
4672 Beechnut Street, Houston, TX 77096 Phone: (713) 667-8800 1723
1612 South Friendswood Drive, Friendswood, TX 77546 Phone: (713) 992-8444 1736
117-D West Highway 332, Lake Jackson, TX 77566 Phone: (409) 285-0537 1756
3474 Palmer Highway, Texas City, TX 77590 Phone: (409) 945-3737 1769
115 Louis Henna Boulevard, Round Rock, TX 78664 Phone: (512) 238-0999 1898
3201 Bee Caves Road #100, Austin, TX 78746 Phone: (512) 306-7222 1933
4539 FM, 1960 West, Houston, TX 77069 Phone: (281) 537-9955 2031
UTAH
- ----
BCE West, L.P. *
4110 North Scottsdale Road, Suite 235, Scottsdale, AZ 85251 Phone: (602) 944-4000
Contacts: Larry Hohl, Troy Cooper Fax: (602) 994-0044
Unit Locations:
3432 West 3500 South, West Valley City, UT 84119 Phone: (801) 966-9922 0837
7121 Redwood Road, West Jordan, Utah 84084 Phone: (801) 566-7780 0926
210 West 500 South, Bountiful, UT 84010 Phone: (801) 299-9069 0946
7184 South Union Park, Midvale, UT 84047 Phone: (801) 567-1991 1118
60 East 10600 South, Sandy, UT 84070 Phone: (801) 523-8700 1130
1083 West Riverdale, Riverdale, UT 84405 Phone: (801) 629-0660 1275
481 East South Temple, Salt Lake City, UT 84111 Phone: (801) 322-5017 1381
4835 South Highland Drive, #1245, Holladay, UT 84117 Phone: (801) 274-0425 1923
1293 East Draper Parkway, Draper, UT 84020 Phone: (801) 571-6744 1976
115 North State Street, Suite A, Orem, UT 84057 Phone: (801) 227-0633 2310
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
VIRGINIA
- --------
<S> <C> <C>
Mayfair Partners, L.P. *
5454 Wisconsin Avenue, Suite 810, Chevey Chase, MD 20815 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
4809 North Beauregard, Alexandria, VA 22312 Phone: (703) 642-1300 0087
13059 Lee Jackson Memorial Highway, Chantilly, VA 22033 Phone: (703) 263-1234 0102
6198 Arlington Boulevard, Falls Church, VA 22044 Phone: (703) 237-7300 0159
8366 Sudley Road, Manassas, VA 22110 Phone: (703) 368-0222 0161
13354 Franklin Road, Herndon, VA 22071 Phone: (703) 709-0123 0165
1492 Reston Parkway, Reston, VA 22094 Phone: (703) 709-5666 0180
5709 Burke Centre Parkway, Burke, VA 22015 Phone: (703) 764-4400 0222
414-A Maple Avenue, East, Vienna, VA 22180 Phone: (703) 242-1500 0299
913 West Broad Street, Falls Church, VA 22046 Phone: (703) 534-4900 0336
3051 Plank Road, Falls Church, VA 22046 Phone: (703) 534-4900 0374
9278-A Old Keene Mill Road, Burke, VA 22015 Phone: (703) 913-0999 0448
2046 Wilson Boulevard, Arlington, VA 22216 Phone: (703) 312-9300 0467
3233 Columbia Pike, Arlington, VA 22204 Phone: (703) 685-7400 0468
8221 Leesburg Pike, Arlington, VA 22204 Phone: (703) 685-7400 0521
46286 Cranston Street, Sterling, VA 20165 Phone: (703) 506-6111 0536
9502 Main Street, Fairfax, VA 22030 Phone: (703) 425-1600 0552
3231 Duke Street, Alexandria, VA 22314 Phone: (703) 751-5800 0579
1133 Emmit Street (Rt. 29), Charlottesville, VA 22903 Phone: (804) 296-4200 0622
13815 Smoketown Road, Woodbridge, VA 22192 Phone: (703) 878-7200 0646
6650 Jefferson Davis Highway, Alexandria, VA 22306 Phone: (703) 765-1838 0676
1408 Chain Bridge Road, McLean, VA 22101 Phone: (703) 848-9700 0761
4090 Jermantown Road, Fairfax, VA 22030 Phone: (703) 246-9800 0984
2988 Gallows Road, Falls Church, VA 22042 Phone: (703) 204-4500 0987
9450 West Broad Street, Richmond, VA 23294 Phone: (804) 967-9200 1110
9004 Quioccasin Road, Richmond, VA 23229 Phone: (804) 741-2600 1230
11500 Midlothian Turnpike, Suite 2, Richmond, VA 23235 Phone: (804) 379-4400 1426
10827 Hull Street Road, Suite 101, Midlothian, VA 23112 Phone: (804) 276-4700 1867
Platinum Rotisserie, L.L.C.*
100 Cambridge Park, Suite B, Winston-Salem, NC 27104 Phone: (910) 659-5000
Contact: Anthony D. Wedo Fax: (910) 659-5116
</TABLE>
Unit Locations:
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
2034 Coliseum Drive, Hampton, VA 23666 Phone: (804) 838-0300 1009
3981 Virginia Beach Boulevard, Virginia Beach, VA 23452 Phone: (804) 498-7900 1165
1010 Independence Boulevard, Virginia Beach, VA 23455 Phone: (804) 363-7400 1166
1300 Greenbrie Parkway, Chesapeake VA 23320 Phone: (804) 382-9552 1225
1572 Mill Dam Road, Virginia Beach, VA 23454 Phone: (804) 481-4500 1642
WASHINGTON
- ----------
BC Northwest, L.P. *
1601-114 Avenue, SE, Suite 130, Bellevue, WA 98008 Phone: (206) 454-8665
Contact: Dennis B. Mullen Fax: (206) 454-9198
Unit Locations:
10002 Aurora Avenue North #24, Seattle, WA 98133 Phone: (206) 527-8495 0511
11505-A NE 4th Plain Road, Vancouver, WA 98662 Phone: (206) 944-4488 0588
6917 Coal Creek Parkway, Newcastle, WA 98059 Phone: (206) 6464-4499 0684
19705 South Highway 99, Lynnwood, WA 98036 Phone: (206) 712-8200 0685
9511 Bridgeport Way SW, Tacoma, WA 98499 Phone: (206) 852-8222 0702
7407 Evergreen Way, Everett, WA 98203 Phone: (206) 513-5600 0710
775 NW Gilman Boulevard, Issaquah, WA 98027 Phone: (206) 313-9000 0783
7650 NE Fourth Plain Road, Vancouver, WA 98662 Phone: (360) 892-4442 0785
1600 East Olive Way, Seattle, WA 98102 Phone: (206) 325-1600 0809
1301 South 320th, Federal Way, WA 98003 Phone: (206) 946-9400 0815
707 Rainier Avenue South, Renton, WA 98055 Phone: (206) 226-2300 0818
10433 Carr Road, Renton, WA 98055 Phone: (206) 228-3400 0830
3500 Southwest Avalon Way, Seattle, WA 98116 Phone: (206) 932-5200 0862
2820 Harrison Avenue NW, Olympia, WA 98502 Phone: (360) 352-4100 0864
311 Bucklin Hill Road, Silverdale, WA 98383 Phone: (360) 692-1300 0882
1202 Auburn Way North, Auburn, WA 98002 Phone: (206) 735-6600 0936
14504 NE 20th, Bellevue, WA 98007 Phone: (206) 641-6600 0940
5265 State Highway 303 NE, Bremerton, WA 98311 Phone: (360) 479-0100 0949
15482 1st Avenue South, Burien, WA 98148 Phone: (206) 431-5500 0952
16760 Redmond Way, Redmond, WA 98052 Phone: (206) 883-0066 1106
25941 Pac Avenue, Redmond, WA 98052 Phone: (206) 883-0066 1116
5025 25th Avenue NE, Seattle, WA 98105 Phone: (206) 522-0900 1138
East 13920 Sprague Avenue, Spokane, WA 99212 Phone: (509) 891-8900 1144
North 2026 Argonne Road, Spokane, WA 99212 Phone: (509) 891-0500 1145
17101 140th Avenue NE, Woodinville, WA 98072 Phone: (206) 806-8370 1187
1234 State Avenue NE, Marysville, WA 98270 Phone: (360) 658-7979 1378
2320 North 45th Street, Seattle, WA 98103 Phone: (206) 545-7400 1433
3458 Southeast Mile Hill Drive, Port Orchard, WA 98366 Phone: (360) 871-4000 1586#
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
14803 Pacific Avenue South, Tacoma, WA 98445 Phone: (206) 531-2422 1618
15704 Mill Creek Boulevard #1, Mill Creek, WA 98012 Phone: (206) 337-5700 1710
6740 North Division Street, Spokane, WA 99208 Phone: (509) 482-0200 1767
12507 116th Avenue, NE, Kirkland, WA 98034 Phone: (206) 814-0400 1943
WASHINGTON D.C.
- ---------------
Mayfair Partners, L.P. *
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 20815 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
4455 Connecticut Avenue, Washington D.C. 20008 Phone: (202) 244-1313 0233
2448 Wisconsin Avenue, Washington D.C. 20007 Phone: (202) 298-7888 0412
1635 Connecticut Avenue, Washington D.C. 20036 Phone: (202) 588-5900 0420
5600 Connecticut Avenue, Washington D.C. 20015 Phone: (202) 364-1200 0517
1801 Columbia Road, N.W., Washington D.C. 20009 Phone: (202) 319-0700 0760
3131 M Street, Washington D.C. 20007 Phone: (202) 337-4900 0919
WEST VIRGINIA
- -------------
Mayfair Partners, L.P. *
5454 Wisconsin Avenue, Suite 810, Chevy Chase, MD 20815 Phone: (301) 215-9054
Contact: Steven J. Quamme Fax: (301) 215-9063
Unit Locations:
WISCONSIN
- ---------
BC Great Lakes, L.L.C.*
770 Pasquinelli Drive, Suite 400, Westmont, IL 60559 Phone: (708) 887-2601
Contact: John B. Morlock Fax: (708) 887-9931
Unit Locations:
5470 Port Washington Road, Glendale, WI 53217 Phone: (414) 961-2511 0415
18340 West Bluemound Road, Brookfield, WI 53005 Phone: (414) 821-1600 0425
15505 West National Avenue, New Berlin, WI 53151 Phone: (414) 827-1717 0477
4859 South 76th Street, Greenfield, WI 53220 Phone: (414) 325-6400 0514
5205 Washington Avenue, Racine, WI 53406 Phone: (414) 632-4333 0633
1150 South Koeller Street, Oshkosh, WI 54901 Phone: (414) 232-7333 0711
2388 South Oneida Street, Ashwauben, WI 54304 Phone: (414) 592-9222 0712
3555 South 27th Street, Milwaukee, WI 53221 Phone: (414) 671-6200 0762
2678 South 108th Street, West Allis. WI 53227 Phone: (414) 329-0909 1173
3600 West College Avenue, Grand Chute, WI 54911 Phone: (414) 993-1777 1437
8300 West Brown Deer Road, WI 53224 Phone: (414) 365-9270 1977#
WYOMING
- -------
BCE West, L.P.*
4110 North Scottsdale Road, Suite 235, Scottsdale, AZ 85251 Phone: (602) 944-4000
Contracts: Larry Hohl, Troy Cooper Fax: (602) 994-0044
Unit Location:
1830 Dell Range Boulevard, Cheyenne, WY 82001 Phone: (307) 632-3200 0644
</TABLE>
* This list of franchisees includes Franchise Owners and Developers of Boston
Chicken Units. Developers are noted with an asterisk throughout this Exhibit.
# Throughout this Exhibit, a pound sign (#) denotes a location for which there
is an executed contract but the store is not yet open.
36
<PAGE>
EXHIBIT I
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
LIST OF FORMER FRANCHISEES
(For the Period 12/31/95 to 12/29/96)
-------------------------------------
A Fare of the Hearth, Inc.
Andrew Filipowski
100 Cambridge Plaza Drive
Winston-Salem, NC 27104
(919) 659-5000
Atlantic Foods Limited Partnership
Henry C. Huth, Timothy Nolan,
Peter MacKenzie, H. Andrew Fox
860 Canal Street
Stamford, CT 06902
(203) 977-1600
BCE West, L.P
Larry Hohl
4110 North Scottsdale Road, Suite 315
Scottsdale, AZ 85251
(602) 994-4000
B.C. Superior, L.L.C.
Steven J. Quamme
5454 Wisconsin Avenue, Suite 810
Chevy Chase, MD 20815
(703) 820-7100
BC TKO Limited Partnership
Michael Forgus
7767 Montgomery Road, Suite 2-A
Cincinnati, OH 45236
(513) 791-9400
Boston West, L.L.C.
Alan Palmieri
222 South Harbor Boulevard, Suite 300
Anaheim, CA 92805
(714) 778-7132
Chicken Specialties Group, Inc.
Richard Einhorn
1515 Lake Shore Drive, Suite 225
Columbus, OH 43204
(614) 486-1224
Finest Foodservice, L.L.C.
Robert Sirkis
8717 West 110th Street, Suite 600
Overland Park, KS 66211
(913) 344-1600
Good Friends Enterprises, Inc.
Richard Kleger
115 Martins Run
Media, PA 19063
(215) 356-4655
Mid-Atlantic Restaurant Systems L.P
Anthony D. Wedo
999 West Chester Pike, Suite 200
West Chester. PA 19382
(610) 701-6000
New Jersey Rose, L.L.C.
Harold T. Rose
3 Terry Drive, Suite 103
Newtown, PA 18940
(215) 579-9220
Platinum Rotisserie Corporation
Andrew Filipowski
100 Cambridge Plaza Drive
Winston-Salem, NC 27104
(919) 659-5000
Platinum Rotisserie, L.L.C.
Andrew Filipowski
100 Cambridge Plaza Drive
Winston-Salem, NC 27104
(919) 659-5000
R & A Food Services, Inc.
Robert Hartnett
1801 Clint Moore Road, Suite 215
Boca Raton, FL 33487
(407) 995-2223
The Spengler Group, Inc.
Tom Spengler
9605 White Cedar Court
Vienna, VA 22181
(703) 255-5322
I-1
<PAGE>
EXHIBIT J
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
BOSTON CHICKEN, INC. FINANCIAL STATEMENTS
-----------------------------------------
J-1
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 310,436 $ 100,800
Accounts receivable, net........................... 13,445 22,438
Due from affiliates................................ 9,614 10,246
Notes receivable................................... 5,462 --
Prepaid expenses and other current assets.......... 1,536 4,050
Deferred income taxes.............................. 3,322 8,928
---------- ----------
Total current assets............................. 343,815 146,462
Property and Equipment, net.......................... 258,550 334,748
Notes Receivable..................................... 450,572 800,519
Deferred Financing Costs, net........................ 15,745 13,361
Goodwill, net........................................ -- 190,439
Other Assets, net.................................... 5,195 58,087
---------- ----------
Total assets..................................... $1,073,877 $1,543,616
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................... $ 12,292 $ 40,430
Accrued expenses................................... 9,095 36,547
Deferred franchise revenue......................... 8,945 10,656
---------- ----------
Total current liabilities........................ 30,332 87,633
Deferred Franchise Revenue........................... 2,072 7,740
Convertible Subordinated Debt........................ 129,872 129,841
Liquid Yield Option Notes............................ 177,306 182,613
Deferred Income Taxes................................ 16,631 40,216
Other Noncurrent Liabilities......................... 833 6,292
Minority Interest.................................... -- 153,441
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock--$.01 par value; authorized
20,000,000 shares; no shares issued and
outstanding....................................... -- --
Common Stock--$.01 par value; authorized
480,000,000 shares; issued and outstanding:
59,129,301 shares in 1995 and 64,245,868 in 1996.. 591 642
Additional paid-in capital......................... 675,611 827,611
Retained earnings.................................. 40,629 107,587
---------- ----------
716,831 935,840
---------- ----------
Total liabilities and stockholders' equity....... $1,073,877 $1,543,616
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-3
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
------------ ------------ ------------
(53 WEEKS)
<S> <C> <C> <C>
Revenue:
Royalties and franchise related fees.. $43,603 $ 74,662 $115,510
Company stores........................ 40,916 51,566 83,950
Interest income....................... 11,632 33,251 65,048
------- -------- --------
Total revenue....................... 96,151 159,479 264,508
Costs and Expenses:
Cost of products sold................. 15,876 19,737 31,160
Salaries and benefits................. 22,637 31,137 42,172
General and administrative............ 27,930 41,367 99,847
Provision for relocation.............. 5,097 -- --
------- -------- --------
Total costs and expenses............ 71,540 92,241 173,179
------- -------- --------
Income From Operations.................. 24,611 67,238 91,329
Other Income (Expense):
Interest expense, net................. (4,235) (13,179) (14,446)
Gain on issuances of subsidiary's
stock................................ -- -- 38,163
Other income, net..................... 74 314 137
------- -------- --------
Total other income (expense)........ (4,161) (12,865) 23,854
------- -------- --------
Income Before Income Taxes and Minority
Interest............................... 20,450 54,373 115,183
Income Taxes............................ 4,277 20,814 42,990
Minority Interest in (Earnings) of
Subsidiary............................. -- -- (5,235)
------- -------- --------
Net Income.............................. $16,173 $ 33,559 $ 66,958
======= ======== ========
Net Income Per Common and Equivalent
Share.................................. $ 0.38 $ 0.66 $ 1.01
======= ======== ========
Weighted Average Number of Common and
Equivalent Shares Outstanding.......... 42,861 50,972 66,501
======= ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year.......... $ 347 $ 447 $ 591
Issuance of common stock.............. 85 125 30
Conversion of convertible debt into
common stock......................... -- 1 --
Conversion of liquid yield option
notes into common stock.............. -- 1 3
Issuance of common stock in connection
with acquisitions.................... 11 12 5
Exercise of stock options............. 4 5 13
-------- -------- --------
Balance at end of year................ $ 447 $ 591 $ 642
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year.......... $103,662 $252,298 $675,611
Issuance of common stock, net of
offering cost of $1,475 in 1994,
$13,851 in 1995, and $848 in 1996.... 124,905 383,784 100,232
Conversion of convertible debt into
common stock......................... -- 127 31
Conversion of liquid yield option
notes into common stock.............. -- 3,232 8,192
Issuance of common stock in connection
with acquisitions.................... 19,920 30,675 14,709
Issuance of warrants.................. -- -- 8,373
Exercise of stock options, including
income tax benefits of $3,102 in
1994, $4,049 in 1995 and $15,204 in
1996................................. 3,811 5,495 20,463
-------- -------- --------
Balance at end of year................ $252,298 $675,611 $827,611
======== ======== ========
RETAINED EARNINGS (DEFICIT)
Balance at beginning of year.......... $ (9,103) $ 7,070 $ 40,629
Net income............................ 16,173 33,559 66,958
-------- -------- --------
Balance at end of year................ $ 7,070 $ 40,629 $107,587
======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 16,173 $ 33,559 $ 66,958
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 6,074 11,442 22,887
Interest on liquid yield option notes. -- 8,075 13,793
Gain on issuances of subsidiary's
stock................................ -- -- (38,163)
Deferred income taxes................. 4,277 12,133 14,059
Minority interest..................... -- -- 5,235
Provision for write-down of assets.... -- -- 14,550
Loss (gain) on disposal of assets..... (368) 231 68
Changes in assets and liabilities,
excluding effects from acquisitions:
Accounts receivable and due from
affiliates........................... (7,800) (10,057) (7,193)
Accounts payable and accrued expenses. 13,724 3,661 48,674
Deferred franchise revenue............ 5,926 (303) 3,174
Other assets and liabilities.......... (2,088) (3,265) 868
--------- --------- -----------
Net cash provided by operating
activities........................... 35,918 55,476 144,910
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..... (163,622) (145,756) (115,062)
Proceeds from the sale of assets....... 62,342 80,910 86,320
Acquisition of other assets............ (5,175) (3,475) (22,370)
Issuance of notes receivable........... (225,282) (661,033) (1,467,065)
Repayment of notes receivable.......... 68,498 407,499 993,151
--------- --------- -----------
Net cash used in investing activities. (263,239) (321,855) (525,026)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
and warrants.......................... 125,703 385,360 112,863
Proceeds from issuance of subsidiary's
common stock.......................... -- -- 135,422
Proceeds from issuance of convertible
subordinated debt..................... 130,000 -- --
Proceeds from issuance of liquid yield
option notes.......................... -- 172,464 --
Increase in deferred financing costs... (7,615) (6,313) (3,799)
Proceeds from revolving credit
facilities............................ 96,130 229,240 43,250
Repayments of revolving credit
facilities............................ (96,130) (229,240) (117,256)
--------- --------- -----------
Net cash provided by financing
activities........................... 248,088 551,511 170,480
--------- --------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents...................... 20,767 285,132 (209,636)
Cash and Cash Equivalents, beginning
of year.............................. 4,537 25,304 310,436
--------- --------- -----------
Cash and Cash Equivalents, end of
year................................. $ 25,304 $ 310,436 $ 100,800
========= ========= ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.......................... $ 3,395 $ 7,195 $ 7,131
========= ========= ===========
Income taxes paid...................... $ -- $ 3,299 $ 5,055
========= ========= ===========
NON-CASH TRANSACTIONS:
Tax benefit of stock options exercised. $ 3,102 $ 4,049 $ 15,204
========= ========= ===========
Conversion of notes receivable into
equity interests...................... $ -- $ -- $ 123,500
========= ========= ===========
Conversion of convertible subordinated
notes and liquid yield option notes,
net of related deferred financing
costs, into common stock.............. $ -- $ 3,361 $ 8,226
========= ========= ===========
Issuance of common stock and note
payable for net assets acquired....... $ 19,931 $ 30,687 $ 21,562
========= ========= ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Boston Chicken, Inc. ("BCI") franchises and operates food service stores
under the Boston Market brand name which specialize in fresh, convenient meal
solutions featuring home style entrees, sandwiches, freshly prepared
vegetables, salads, and other side dishes. BCI's majority-owned subsidiary,
Einstein/Noah Bagel Corp. ("ENBC"), operates and franchises specialty retail
stores that feature fresh-baked bagels, proprietary cream cheeses, specialty
coffees and teas, and creative soups, salads, and sandwiches. Unless otherwise
indicated, BCI and its subsidiaries (excluding ENBC), are hereinafter referred
to collectively as the "Company".
At December 29, 1996, there were 1,087 Boston Market stores systemwide in
the United States, consisting of 982 franchise stores and 105 Company stores.
In 1994 and 1995, in connection with its practice of opening new stores to
seed development in targeted markets, the Company sold 54 and 91 Company
stores, respectively, to area developers or franchisees of the Company. At
December 29, 1996, there were 315 ENBC stores systemwide in the United States,
consisting of 301 franchise stores and 14 ENBC company stores. In 1996, ENBC
sold 59 ENBC company stores (since conversion of the Company's loan to ENBC on
June 17, 1996) to its area developers. The Company discontinued its practice
of seeding stores in new markets in 1995, and ENBC anticipates discontinuing
its practice of seeding stores in new markets in 1997. Pursuant to the
provisions of its franchise agreements, the Company is obligated to allow
franchisees to utilize its trademarks, copyrights, recipes, operating
procedures, and other elements of the Boston Market system in the operation of
franchised Boston Market stores. ENBC has a similar obligation under its
franchise agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries (including ENBC). All material intercompany
accounts and transactions have been eliminated in consolidation.
Fiscal Year
The Company's and ENBC'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.
Fiscal years 1994 and 1996 each contained 52 weeks, or 13 four-week periods.
Fiscal year 1995 contained 53 weeks.
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, which are classified in prepaid expenses and other current
assets, 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 with buildings and improvements
being depreciated over 15 to 30 years, leasehold improvements being amortized
over the lesser of their useful lives or their lease term, including option
periods, furniture, fixtures, equipment, and computer software being
depreciated over three to eight years, and pre-opening costs being depreciated
over one year.
F-7
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment additions include acquisitions of property and
equipment, costs incurred in the development and construction of new stores,
major improvements to existing stores, and costs incurred in the development
and purchase of computer software. Pre-opening costs consist primarily of
salaries and other direct expenses relating to the set-up, initial stocking,
training, and general store management activities incurred prior to the
opening of new stores.
Expenditures for maintenance and repairs are charged to expense as incurred.
Development costs for franchised stores are expensed when the store opens.
Long-Lived Assets
The Company and ENBC evaluate whether events and circumstances have occurred
that indicate revision to the remaining useful life or the remaining balances
of long-lived assets may be appropriate. Such events and circumstances
include, but are not limited to, change in business strategy or change in
current and long-term projected operating performance. When factors indicate
that the carrying amount of an asset may not be recoverable, the Company
estimates the future cash flows expected to result from the use of such asset
and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount
of the asset, the Company will recognize an impairment loss equal to the
excess of the carrying amount over the fair value of the asset.
Deferred Financing Costs
Deferred financing costs are amortized over the period of the related
financing, which ranges from two to 20 years.
Revenue Recognition
Revenue from Company stores and from ENBC company stores is recognized in
the period during which related food and beverage products are sold. Royalties
are recognized in the same period that related franchise store revenue is
generated. Revenue derived from initial franchise fees and area development
fees is recognized when the franchised store opens. Interest, real estate
services, and software maintenance fees are recognized as earned. Lease income
is recognized over the life of the lease on a straight-line basis. Software
license income is recognized as the software is placed in service. The
components of royalties and franchise related fees are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------
DEC. DEC.
25, 31, DEC. 29,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Royalties........................................... $17,421 $34,841 $ 55,821
Initial franchise and area development fees......... 13,057 13,712 18,715
Lease and real estate services income............... 5,361 17,939 27,537
Software license and maintenance fees............... 6,480 7,723 13,104
Other............................................... 1,284 447 333
------- ------- --------
Total royalties and franchise related fees...... $43,603 $74,662 $115,510
======= ======= ========
</TABLE>
Per Share Data
Earnings per share are computed based upon the weighted average number of
common stock and common equivalent shares outstanding during the period.
F-8
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Issuances of Subsidiaries' Stock
Changes in the Company's proportionate interest in the net assets of its
subsidiaries that result from issuances of the subsidiaries' stock are
recognized in earnings as gains or losses in the period during which such
issuances occur.
Advertising Costs
Advertising costs are expensed in the period incurred.
Employee Stock Options
The Company and ENBC account for their employee stock options in accordance
with the intrinsic value method prescribed by Accounting Principles Board No.
25. Required pro forma disclosures of compensation expense determined under
the fair value method of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), are presented in
Note 11.
Employee Benefit Plan
The Company and ENBC each have a 401(k) plan to which neither the Company
nor ENBC makes a contribution.
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.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 amounts to
conform with the 1996 presentation.
3. ACQUISITIONS
In April 1996, the Company delivered 450,640 shares of common stock with a
market value of approximately $15.0 million and a $6.8 million promissory note
to acquire the equity interests of certain investors in Mid-Atlantic
Restaurant Systems L.P. ("Mid-Atlantic"), its Boston Market area developer for
the Philadelphia area. As part of this transaction, the Company assumed $38.5
million in liabilities owed to third parties. The transaction resulted in the
Company acquiring a 93% equity interest in Mid-Atlantic. Subsequent to the
Company acquiring its interest in Mid-Atlantic, Mid-Atlantic acquired 100% of
the equity interest in New Jersey Rose, L.L.C., the Boston Market area
developer for the southern New Jersey area ("New Jersey Rose") for a purchase
price of $13.4 million, including the assumption of $1.1 million in
liabilities owed to third parties. Also, in June 1996, the Company converted
its $120.0 million loan to ENBC into shares of common stock of ENBC and
subsequently invested an additional $45.9 million in ENBC common stock,
resulting in an ownership interest of approximately 53% of the outstanding
shares of common stock of ENBC as of March 7, 1997. These transactions have
been accounted for as purchases, and, accordingly, the purchase prices were
allocated to identified assets and liabilities based upon their fair values at
the date of the transactions, resulting in goodwill of $110.1 million on the
ENBC transactions and $81.4 million on the Mid-Atlantic transactions, both of
which are being amortized over a 35-year life. The operating results of each
acquisition are included in consolidated net income from the date of
acquisition.
F-9
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following represents the unaudited pro forma results of operations as if
the purchase transactions described above had occurred at the beginning of the
periods presented (in thousands of dollars, except per share data):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Revenue............................................... $257,248 $326,758
Net income (loss)..................................... $(11,025) $ 53,733
Net income (loss) per share........................... $ (0.23) $ 0.80
</TABLE>
This pro forma information does not purport to be indicative of the results
of operations that actually would have been reported if the transactions had
occurred at the beginning of the periods presented. The pro forma information
is not intended to be a projection of future results or trends.
4. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT DATA
Accounts receivable are net of an allowance for doubtful accounts of
$486,000 at December 31, 1995 and $424,000 at December 29, 1996.
<TABLE>
<CAPTION>
DEC. 31, 1995 DEC. 29, 1996
------------- -------------
<S> <C> <C>
Property and equipment consist of (in
thousands of dollars):
Land..................................... $106,244 $104,914
Buildings and improvements............... 92,935 148,642
Furniture, fixtures, equipment, and
computer
software................................ 64,338 98,817
Development in progress.................. 5,170 5,184
Pre-opening costs........................ 163 248
-------- --------
268,850 357,805
Less: Accumulated depreciation and
amortization............................ (10,300) (23,057)
-------- --------
Total property and equipment, net...... $258,550 $334,748
======== ========
</TABLE>
Included in land and buildings and improvements are $171.0 million (net of
accumulated depreciation and amortization of $3.7 million) and $183.1 million
(net of accumulated depreciation and amortization of $6.1 million) of assets
leased to others at December 31, 1995 and December 29, 1996, respectively.
Accumulated amortization at December 29, 1996 on goodwill was $4.3 million.
<TABLE>
<CAPTION>
DEC. 31, 1995 DEC. 29, 1996
------------- -------------
<S> <C> <C>
Accrued expenses consist of (in thousands
of dollars):
Accrued payroll and fringe benefits...... $1,556 $ 4,090
Accrued interest......................... 2,538 2,888
Accrued F.A.S.T. Track conversion costs.. -- 14,778
Accrued real estate disposition costs.... -- 5,866
Accrued other............................ 5,001 8,925
------ -------
Total accrued expenses................. $9,095 $36,547
====== =======
</TABLE>
F-10
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------
DEC.
25, DEC. 31, DEC. 29,
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Interest expense, net consists of (in thousands
of
dollars):
Interest income................................ $ 1,592 $ 2,173 $ 6,427
Interest expense............................... (5,827) (15,352) (20,873)
------- -------- --------
Interest expense, net........................ $(4,235) $(13,179) $(14,446)
======= ======== ========
</TABLE>
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
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 notes receivable, including the conversion
option (See Note 10), is based on the discounted value of the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings.
Debt
The fair value of debt instruments is based on prices as quoted on the
Nasdaq SmallCap Market as reported by the Wall Street Journal (Western
Edition).
The estimated fair values of the Company's financial instruments are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 29, 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents............... $310,436 $310,436 $100,800 $100,800
Notes Receivable........................ 456,034 456,034 800,519 800,519
Convertible Subordinated Debt........... 129,872 154,872 129,841 163,600
Liquid Yield Option Notes............... 177,306 228,148 182,613 232,334
</TABLE>
6. DEBT
The Company and ENBC each have a revolving bank credit facility. The
Company's facility provides for borrowings of up to $110.0 million through
December 1, 1999, and ENBC's facility provides for borrowings up to $45.0
million through April 30, 1998. Borrowings under the Company's facility are
subject to a borrowing formula and may be either floating rate loans with
interest at the agent's base rate plus an applicable margin or eurodollar rate
loans with interest at the eurodollar rate plus an applicable margin.
Borrowings under ENBC's facility may be either floating rate loans with
interest at the agent's base rate plus an applicable margin or eurodollar rate
loans with interest at the eurodollar rate plus an applicable margin. In
addition, a commitment fee applicable to each facility (.25% for the Company's
facility and .5% for ENBC's facility) of the average daily unused portion of
the loan is required. The credit facility agreements contain covenants that,
among other things, restrict other borrowings, prohibit cash dividends,
require specified store-level sales, and require maintenance of specified cash
flow ratios. As of December 29, 1996, no amount was outstanding under either
facility. The Company's facility and its 1996 master lease facility (See Note
9) are collateralized by assets with a net book value of $795.4 million and
ENBC's facility is collateralized by substantially all of its assets.
F-11
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In February 1994, the Company issued $130.0 million of 4 1/2% convertible
subordinated debentures due February 1, 2004. Interest is payable semiannually
on February 1 and August 1 of each year. The debentures are convertible at any
time prior to maturity into shares of the Company's common stock at a
conversion rate of $27.969 per share, subject to adjustment under certain
conditions. The debentures may be redeemed at the option of the Company
initially at 103.15% of their principal amount and at declining prices
thereafter, plus accrued interest. In 1995 and 1996, $128,000 and $31,000 of
convertible subordinated debentures were converted into 4,576 shares and 1,107
shares of common stock, respectively.
In June 1995, the Company completed the sale of $828.0 million aggregate
principal amount at maturity of Liquid Yield Option Notes due June 1, 2015
("LYONs") for which the Company received gross proceeds of approximately
$172.5 million. The LYONs are zero-coupon subordinated notes that were sold at
an issue price of $208.29 per $1,000 principal amount due at maturity,
representing an 8% yield. Each LYON is convertible at the option of the holder
at any time on or prior to maturity into 8.532 shares of common stock of the
Company. In the event the holder exercises the option to convert, the holder
will not receive any payment for the accrued original issue discount. The
Company will purchase the LYONs at the option of the holder as of June 1,
2000, June 1, 2005, and June 1, 2010, for a purchase price per LYON of
$308.32, $456.39, and $675.57, respectively. The Company may elect to pay the
purchase price in cash or common stock or a combination thereof. Commencing on
June 1, 2000, the LYONs are redeemable at the option of the Company for cash,
at a price equal to the original issue price plus accrued original issue
discount through the redemption date. In 1995 and 1996, $3.2 million and $8.2
million of LYONs were converted into 127,980 shares and 328,942 shares of
common stock, respectively.
7. INCOME TAXES
The primary components that comprise the deferred tax assets and liabilities
at December 31, 1995 and December 29, 1996 are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
DEC. 31, 1995 DEC. 29, 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Accounts payable and accrued expenses........... $ 841 $ 7,502
Deferred franchise revenue...................... 3,495 6,355
Other noncurrent liabilities.................... 181 730
ENBC net operating loss carryforward............ -- 6,648
Write-off of intangible assets that are
amortizable for tax............................ -- 1,582
Alternative minimum tax credit.................. 827 --
Other........................................... 651 1,411
-------- --------
Total deferred tax assets..................... 5,995 24,228
Deferred tax liabilities:
Gain on issuances of subsidiary's stock......... -- (14,883)
Property and equipment.......................... (18,340) (13,400)
Goodwill........................................ -- (8,678)
Other........................................... (964) (8,273)
-------- --------
Total deferred tax liabilities................ (19,304) (45,234)
-------- --------
(13,309) (21,006)
Valuation allowance............................. -- (10,282)
-------- --------
Net deferred tax liability.................... $(13,309) $(31,288)
======== ========
</TABLE>
F-12
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income taxes consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------
DEC. DEC. DEC.
25, 31, 29,
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Current:
Federal................................................ $ -- $ 7,784 $24,359
State.................................................. -- 897 4,572
------ ------- -------
-- 8,681 28,931
Deferred:
Federal................................................ 3,614 10,743 11,841
State.................................................. 663 1,390 2,218
------ ------- -------
4,277 12,133 14,059
------ ------- -------
$4,277 $20,814 $42,990
====== ======= =======
</TABLE>
For the years ended December 25, 1994, December 31, 1995, and December 29,
1996, the Company recognized income tax benefits pertaining to the exercise of
stock options of $3,102,000, $4,049,000, and $15,204,000, respectively, which
are accounted for as a direct increase to additional paid-in capital and do
not reduce reported income tax expense.
The Company's conversion of its loan to ENBC resulted in the recognition of
a deferred tax asset of $14.8 million, which amount has been offset by a
valuation allowance due to the uncertainty in realizing the benefits of the
deferred tax asset. During 1996, the Company recognized $2.5 million of the
deferred tax asset as a reduction of the goodwill which resulted from the ENBC
loan conversion. As of December 29, 1996, the Company had a deferred tax asset
of $10.3 million associated with ENBC's temporary differences, which amount
has been offset by a valuation allowance. The decrease in the valuation
allowance from the date of conversion to December 29, 1996 results from
realization of a portion of the deferred tax asset. ENBC files a separate tax
return from the Company. As of December 29, 1996, ENBC has a net operating
loss carryforward of $17.0 million that begins to expire in 2010.
The difference between the Company's actual tax provision and the tax
provision that would result from applying the statutory federal income tax
rate to income before income taxes and minority interest is attributable to
the following (in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------
DEC. DEC. DEC.
25, 31, 29,
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Income tax expense at statutory rate.............. $ 6,953 $19,031 $40,314
State taxes, net of Federal benefit............... 818 1,740 4,492
Tax attributes of minority interest in earnings of
subsidiary....................................... -- -- (2,042)
Other............................................. 26 43 226
Change in valuation allowance..................... (3,520) -- --
------- ------- -------
Provision for income taxes........................ $ 4,277 $20,814 $42,990
======= ======= =======
</TABLE>
8. NATIONAL AND LOCAL ADVERTISING FUNDS
The Company administers a National Advertising Fund (the "Fund") to which
all 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. In addition, the Company
maintains Local
F-13
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Advertising Funds ("LAFs") that provide comprehensive advertising and sales
promotion support (primarily television and radio media time) for stores in
particular markets. Periodic contributions are made by all stores (a minimum
of 4% of net revenue). The Company disburses funds and accounts for all
transactions related to such Fund and LAFs. Such amounts are not segregated
from the cash resources of the Company; however, consistent with Statement of
Financial Accounting Standards No. 45 "Accounting for Franchise Fee Revenue",
such amounts are accounted for separately and are not included in the
financial statements of the Company because the Company acts only as an agent
for its franchisees in placing orders for advertising and paying related
invoices out of such accounts.
The Fund had an accumulated deficit of $9.6 million at December 31, 1995 and
$15.2 million at December 29, 1996, which were funded by advances from the
Company, $9.6 million and $10.2 million of which were recorded in Due from
Affiliates at December 31, 1995 and December 29, 1996, respectively, and $5.0
million of which was recorded in Notes Receivable at December 29, 1996. The
amounts classified in Due from Affiliates are short term advances to the Fund
to be repaid within the next fiscal year. The amount classified in Notes
Receivable is due October 1998 and bears interest at the applicable reference
rate of Bank of America Illinois as established from time to time (8.25% at
December 29, 1996) and is payable each four-week period.
ENBC, as agent for its franchisees, administers similar national and local
advertising funds. ENBC accounts for these funds in a similar manner.
9. COMMITMENTS AND CONTINGENCIES
Through December 29, 1996, BC Equity Funding, L.L.C. ("BCEF") had invested
an aggregate of $58.3 million in certain Boston Market area developers in the
form of 10% cumulative preferred equity, redeemable by the area developers at
a premium initially equal to 10% of the initial issue price, to be increased
by 2% each year up to a maximum of 20% of the initial issue price plus accrued
dividends (the "Redemption Price"). In the event the Company's conversion and
option rights under its secured loan agreement with any of these area
developers expire unexercised (See Note 10) and the Company does not consent
to an area developer's request to undertake a firm commitment underwritten
public offering of the stock of such area developer, the Company has agreed to
purchase the preferred equity of such area developer from BCEF at the
Redemption Price.
Through December 29, 1996, Bagel Store Development Funding, L.L.C. ("Bagel
Funding") had invested an aggregate of $70.2 million in ENBC's area developers
in the form of common equity. ENBC is obligated to purchase Bagel Funding's
equity interest in an area developer at a formula price in the event that the
area developer fails to fulfill its obligation to redeem such interests at
such price in any one of the following circumstances: (i) ENBC converts its
loan into or otherwise acquires a majority equity interest in the area
developer; (ii) ENBC does not consent to the area developer's request to
undertake a firm commitment underwritten public offering of stock of the area
developer after ENBC's conversion and option rights under its loan agreement
with the area developer have expired unexercised; or (iii) ENBC does not
consent to the area developer's request to terminate the area developer's area
development and franchise agreements with ENBC after ENBC's conversion and
option rights under its loan agreement with the area developer have expired
unexercised.
The Company has entered into two master lease facilities (the "1995
Facility" and the "1996 Facility") for the purpose of leasing equipment and
real estate for stores owned by the Company and its area developers. Financing
available under the 1995 Facility is $95.6 million and financing available
under the 1996 Facility is $190.0 million. Both the 1995 Facility and the 1996
Facility bear interest at LIBOR plus an applicable margin and have terms,
including renewal options, of between three and five years and contain a
purchase option. The 1996 Facility is cross-collateralized and cross-defaulted
with the Company's revolving credit facility (See Note 6). The Company
subleases a majority of the leased assets to its area developers. The
subleases to area developers contain substantially the same terms as the
master leases. The Company would be contingently liable for $192.6 million if
it utilized the entire amount available under the facilities and elected not
to purchase the leased assets or renew the leases. Such contingent obligation
would be reduced by a portion of the proceeds received by the lessor on the
sale of the leased assets and payments received from the sublessees.
F-14
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company leases sites for stores and for its support center in Golden,
Colorado. Lease terms are generally five years, with two or three five-year
renewal options. Most of the leases contain escalation clauses and common area
maintenance charges.
The Company also purchases or leases real estate and equipment that it then
leases, subleases, or assigns to an area developer or franchisee. The leases,
subleases, and assignment terms to area developers and franchisees are
negotiated at arm's length on commercially reasonable terms. The Company is
contingently liable for all lease costs, including common area maintenance
charges.
The following is a schedule of future minimum rental payments that are
required under operating leases that have initial or remaining noncancellable
lease terms in excess of one year, sublease proceeds, guarantees and
assignments, and rental receipts due under leases on property and equipment
owned by the Company as of December 29, 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
MINIMUM
NET RENTAL RECEIPTS
MINIMUM MINIMUM GUARANTEES ON PROPERTY AND
RENTAL SUBLEASE RENTAL AND EQUIPMENT OWNED
PAYMENTS PROCEEDS PAYMENTS ASSIGNMENTS BY THE COMPANY
-------- -------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1997..................... $ 73,802 $ 74,095 $ -- $ 12,822 $ 18,675
1998..................... 57,114 57,178 -- 12,048 18,359
1999..................... 24,003 23,153 850 11,089 18,475
2000..................... 22,032 20,942 1,090 10,591 19,003
2001..................... 18,373 17,924 449 16,640 19,465
Later Years.............. 82,802 68,432 14,370 67,552 88,323
-------- -------- ------- -------- --------
$278,126 $261,724 $16,759 $130,742 $182,300
======== ======== ======= ======== ========
</TABLE>
Rent expense, net of sublease income, under operating leases was $3,242,000,
$4,495,000, and $4,637,000 for fiscal years 1994, 1995, and 1996,
respectively.
The Company has entered into an agreement with a poultry supplier relating
to the production of two chicken processing facilities. The agreement expires
in 2001, and contains two two-year and one one-year renewal options.
ENBC 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 ENBC, 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.
The Company has become subject to various lawsuits, claims, and other legal
matters in the course of conducting its business, including its business as a
franchisor. The Company believes that the outcome of such lawsuits, claims,
and other legal matters will not have a material impact on the consolidated
financial position or results of operations.
10. AREA DEVELOPER FINANCING
The Company currently offers convertible secured debt financing to certain
Boston Market area developers to partially finance store development and
working capital needs. Only developers that are developing a significant
portion of an area of dominant influence or metropolitan area of a major city
and that meet all of the Company's requirements are eligible for such financing.
Area developer financing generally requires the developer to expend at least 75%
of its contributed capital toward developing stores prior to drawing on its
revolving loan facility provided by the Company, with advances permitted during
a two-or three-year draw period (or additional draw period in the event of a
loan amendment) in a predetermined maximum amount, generally equal to three to
four times the amount of the area developer's contributed capital. Upon
expiration of
F-15
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the draw period, the loan converts to an amortizing term loan payable over
four to five years in periodic installments, sometimes with a final balloon
payment. The Company may extend the draw and repayment periods, subject to the
area developer purchasing additional development rights, contributing
additional capital, or in connection with other amendments to the loan
agreement. Interest is set at the applicable reference rate of Bank of America
Illinois as established from time to time (8.25% at December 29, 1996 and an
average rate of 8.27% for 1996) plus 1%, and is payable each four-week period.
The loan is secured by a pledge of substantially all of the assets of the area
developer and generally by a pledge of the equity interests of the owners of
the developer.
ENBC offers secured debt financings to its area developers to partially
finance store development and working capital needs on terms similar to those
offered by the Company to Boston Market area developers.
(A) LOAN CONVERSION OPTION
The Company may convert all or any portion of the loan amount after a
moratorium period (generally two years from execution or subsequent amendment
of the loan) and generally after the area developer has completed not less
than 80% of its area developer commitment or in the event of the defaults set
forth below and generally up to the later of full repayment of the loan or a
specified date in the agreement, into equity in the area developer at the
conversion price set forth in the loan agreement, which is at a premium over
the per unit price paid by investors in the area developer for their equity
investments made concurrently with the execution of the loan agreement or
subsequent amendments thereto. Default provisions contained in the area
developer loans typically include default in payment of principal and
interest, breach of a representation or warranty or of any covenant contained
in the loan agreement or security instruments, bankruptcy or bankruptcy-
related act of the borrower, resignation or termination of key management
personnel, default under the area development agreement, termination of three
or more franchise agreements, dissolution or liquidation, material adverse
change in financial condition, default of other indebtedness, the master
lease, sublease or any real estate lease, a judgment in excess of $100,000
(not satisfied, vacated or covered by insurance) and the invalidity or
termination of any security instrument. The conversion price is negotiated at
arms' length with each area developer and, at December 29, 1996, the average
conversion premium was approximately 17% 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 or subsequent amendments thereto. The
maximum loan amount is established to give the Company majority ownership of
the developer upon conversion, provided the Company exercises its right to
participate in any intervening financing by the developer. 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.
ENBC's loan agreements with its area developers contain conversion and
option features similar to the Company's loan agreements with its Boston
Market area developers. The conversion price is negotiated at arms' length
with each area developer and, at December 29, 1996, the average conversion
premium was approximately 12% over the per unit price paid by the investors in
the ENBC area developer for their equity investment made concurrently with the
execution of the loan agreement or subsequent amendment thereto.
In March 1997, the Company converted its loan to BC New York, L.L.C.
("BCNY") into a majority equity interest in BCNY. Additionally, the Company
has agreed to acquire an additional 11% of the equity of BCNY from the current
BCNY equity holders for approximately $15.0 million. After giving effect to
the conversion, and assuming the Company purchases the additional 11% of the
equity of BCNY, the Company will have an equity interest in BCNY of
approximately 84%. The BCNY transaction added 118 Boston Market stores,
operating in the metropolitan New York area, northern New Jersey, and
Connecticut, to the Company store base. As of the date of conversion, total
loan advances to BCNY were $80.0 million.
There can be no assurance that the Company or ENBC will exercise future
rights to convert their loans to any other area developers or acquire an
equity interest in any other area developers to which they provide financing,
or that such exercise or acquisition will result in a majority interest in
such area developer.
F-16
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(B) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING
The following tables summarize loan commitments, loan availability,
outstanding loan balances (included in Notes Receivable on the Company's
balance sheets) and contributed capital for Boston Market and ENBC area
developers (in thousands of dollars, except number of area developers):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
BOSTON MARKET:
Number of area developers receiving financing...... 17 15
Loan commitments................................... $ 614,094 $ 838,043
Loan availability.................................. (202,676) (190,778)
--------- ---------
Loans outstanding (included in Notes Receivable)... $ 411,418 $ 647,265
========= =========
Contributed capital................................ $ 200,268 $ 286,413
========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 29,
1996
------------
<S> <C>
ENBC:
Number of area developers receiving financing................... 11
Loan commitments................................................ $ 283,200
Loan availability............................................... (142,446)
---------
Loans outstanding (included in Notes Receivable)................ $ 140,754
=========
Contributed capital............................................. $ 75,765
=========
</TABLE>
The following tables summarize area developer financing activity of Boston
Market area developers during fiscal years 1995 and 1996 and of ENBC area
developers from conversion (June 17, 1996) through December 29, 1996 (in
thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
BOSTON MARKET:
Area developer loan balances, beginning of year... $ 201,266 $ 411,418
Additional loan advances.......................... 549,174 1,044,861
Loan repayments................................... (339,022) (766,114)
Loans converted into equity or eliminated in
consolidation..................................... -- (42,900)
--------- ----------
Area developer loan balances, end of year......... $ 411,418 $ 647,265
========= ==========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
DECEMBER 29,
1996
------------
<S> <C>
ENBC:
Area developer loan balances, at conversion (June 17, 1996) of
the Company loan.............................................. $ 41,224
Loan advances.................................................. 153,961
Loan repayments................................................ (54,431)
----------
Area developer loan balances, end of year...................... $ 140,754
==========
</TABLE>
The majority of the loan advance and repayment activity reflects the
revolving nature of the loans, that is, amounts are drawn and repaid on a
regular basis to optimize cash management.
F-17
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The principal maturities of the aforementioned receivables are as follows
(in thousands of dollars):
<TABLE>
<S> <C>
1997............................................................. $ --
1998............................................................. 16,471
1999............................................................. 61,006
2000............................................................. 71,004
2001............................................................. 78,802
Thereafter....................................................... 560,736
--------
$788,019
========
</TABLE>
(C) CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Three Boston Market area developers accounted for approximately 14%, 13%,
and 12% of the Boston Market area developers' notes receivable balance at
December 29, 1996 and no other Boston Market area developer individually
accounted for 10% or more of such notes receivable balance as of such date.
Five ENBC area developers accounted for approximately 21%, 17%, 15%, 10%, and
10% of the ENBC area developers' notes receivable balance at December 29, 1996
and no other ENBC area developer individually accounted for 10% or more of
such notes receivable balance as of such date.
The allowance for Boston Market and ENBC financed area developers' loan
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 use of loan proceeds, adherence to store
development schedules, store performance trends, type and amount of collateral
securing the loan, prevailing economic conditions, and other factors that
management deems relevant at the time. Based upon this review and analysis, no
allowance for loan losses was required as of December 31, 1995 and December
29, 1996.
The following table sets forth certain combined financial information as of
the dates indicated provided to the Company by Boston Market financed area
developers. During 1995, six financed area developers were formed, and their
data have been included in the table for 1995 from the dates of their
respective formation. During 1996, two financed area developers were formed,
and their data have been included in the table for 1996 from the dates of
their respective formation and two financed area developers combined with two
other financed area developers with geographically contiguous territories. The
table excludes Mid-Atlantic and New Jersey Rose for both years and BCNY for
1996, the loans to which have been converted into equity or eliminated in
consolidation (in thousands, except number of financed area developers and
store data):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
BOSTON MARKET FINANCED AREA DEVELOPERS:
Total number of financed area developers............ 15 14
Total number of financed area developer stores open. 627 841
Balance sheet data:
Total gross assets................................ $513,926 $ 640,534
Total debt:
To the Company.................................. 372,071 555,105
To third parties (including capital lease obli-
gations)....................................... 14,456 23,797
Total other liabilities (including trade
payables)........................................ 105,129 105,635
Total stockholder/partner/member deficit.......... (9,891) (102,754)
</TABLE>
F-18
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Statement of operations data:
Gross revenue.................................... $ 491,341 $ 865,082
Income (loss) from continuing operations......... (148,338) (156,505)
Statement of cash flows data:
Cash flows from (used in) operating activities... $ (76,926) $(128,819)
Cash flows from (used in) investing activities... (193,100) (82,307)
Cash flows from (used in) financing activities... 269,746 212,366
--------- ---------
Net change in cash............................. $ (280) $ 1,240
========= =========
</TABLE>
The following table sets forth certain combined financial information as of
the dates indicated provided to ENBC by its financed area developers (in
thousands, except number of financial area developers and store data). During
1995, two financed area developers were formed, and their data have been
included in the table for 1995 from the dates of their respective formation.
During 1996, ten financed area developers were formed, and their data have
been included in the table for 1996 from the dates of their respective
formation, and one financed area developer combined with one other financed
area developer with geographically contiguous territory.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
ENBC FINANCED AREA DEVELOPERS:
Total number of financed area developers.......... 2 11
Total number of financed area developer stores
open............................................. 13 301
Balance sheet data:
Total gross assets.............................. $ 9,262 $ 221,156
Total debt:
To ENBC....................................... 3,538 140,754
To third parties.............................. -- --
Total other liabilities (including trade
payables)...................................... 3,011 37,033
Total partner/member equity..................... 2,676 33,847
<CAPTION>
FISCAL YEAR ENDED
-------------------------
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Statement of operations data:
Gross revenue................................... $ 768 $ 109,940
Income (loss) from continuing operations........ (1,324) (40,592)
Statement of cash flows data:
Cash flows from (used in) operating activities.. $ 1,616 $ (16,382)
Cash flows from (used in) investing activities.. (8,064) (187,955)
Cash flows from (used in) financing activities.. 7,038 205,756
------- ---------
Net change in cash............................ $ 590 $ 1,419
======= =========
</TABLE>
11. STOCKHOLDERS' EQUITY
In August 1994, the Company completed the public sale of 6,900,000 shares of
its common stock, receiving net proceeds of approximately $120.0 million.
In November 1994, the Company sold to BC Midwest L.P. 1,542,852 shares of
common stock, receiving net proceeds of approximately $4.5 million.
F-19
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In December 1995, the Company completed the public sale of 10,350,000 shares
of its common stock, receiving net proceeds of approximately $342.0 million.
Warrants
The Company has issued warrants to purchase 819,600 shares of common stock
to third parties exercisable at prices ranging from $25.00 to $37.75. The
warrants expire at various dates through December 2001.
Stock Option Plans
The Company has employee stock option plans (the "Employee Plans") under
which options to purchase up to 12,240,000 shares of common stock may be
granted. Under the terms of the Employee Plans, the Company may annually grant
options 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. The options 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.
The Company also maintains a stock option plan for non-employee directors
(the "Directors Plan") under which options to purchase up to 360,000 shares of
common stock may be granted. Under the terms of the Directors Plan, the
Company automatically grants to each director who is not an officer or
employee of the Company, options to purchase shares having a fair market value
of $200,000 at the date of grant, each time they are elected or reelected as a
director of the Company. The option price is equal to the fair market value of
the stock on the date of grant and each option generally has a term of ten
years. The options are exercisable at the end of one year of service from the
date of grant.
ENBC has an employee stock option plan under which options to purchase up to
5,500,000 shares of common stock of ENBC may be granted. ENBC also has a stock
option plan for non-employee directors under which options to purchase up to
100,000 shares of common stock of ENBC may be granted. The terms of these
plans are similar to the Company's plans, however, option grants to each
director who is not an officer or employee of the Company are limited to a
market value of $50,000 at the date of grant.
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the Company's stock
option plans. Had employee compensation expense for the Company's plans been
determined based on the fair value at the grant date for awards in 1995 and
1996 consistent with the provisions of SFAS No. 123, the Company's net income
and net income per common and equivalent share would have been reduced to the
pro forma amounts indicated below (in thousands, except per share data):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Net income--as reported................................... $33,559 $66,958
Net income--pro forma..................................... $33,015 $62,638
Net income per common and equivalent share--as reported... $ 0.66 $ 1.01
Net income per common and equivalent share--pro forma..... $ 0.65 $ 0.95
</TABLE>
F-20
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Expected volatility..................................... 38.0% 37.1%
Risk-free interest rate................................. 6.8% 6.3%
Expected lives.......................................... 5 years 5 years
Dividend yield.......................................... 0 0
</TABLE>
Activity under the option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF COMPANY OPTIONS SHARE EXERCISE PRICE
-------------------------------- --------------------
1994 1995 1996 1994 1995 1996
--------- --------- ---------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Company plans:
Options outstanding at
beginning of fiscal
year................. 6,698,024 8,140,421 8,668,265 $ 2.59 $ 5.81 $ 8.36
Options Granted....... 2,362,133 1,141,955 1,647,550 14.70 24.37 26.31
Options Exercised..... (384,905) (539,899) (1,343,647) 1.85 2.68 3.94
Options Forfeited..... (534,831) (74,212) (267,787) 4.19 21.07 15.13
--------- --------- ---------- ------ ------ ------
Options outstanding at
end of fiscal year..... 8,140,421 8,668,265 8,704,381 $ 5.81 $ 8.36 $12.33
========= ========= ========== ====== ====== ======
Options exercisable at
end of fiscal year..... 1,302,984 2,693,143 4,152,163
========= ========= ==========
</TABLE>
Information on options outstanding and options exercisable as of December
29, 1996, is as follows:
<TABLE>
<CAPTION>
COMPANY OPTIONS
COMPANY OPTIONS OUTSTANDING EXERCISABLE
------------------------------ ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
REMAINING WEIGHTED EXERCISE
CONTRACTUAL AVERAGE PRICE
NUMBER OF LIFE EXERCISE NUMBER OF PER
RANGE OF EXERCISE PRICES OPTIONS (YEARS) PRICE OPTIONS SHARE
- ------------------------ --------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 1.00-$ 3.00................ 2,752,263 5.27 $ 1.56 2,707,263 $ 1.55
$ 3.00-$ 6.00................ 1,721,579 6.29 4.02 860,402 4.11
$12.00-$15.00................ 940,955 7.92 14.88 256,131 14.88
$15.01-$18.00................ 871,962 7.55 17.43 199,973 17.37
$18.01-$21.00................ 178,940 7.66 19.59 47,695 19.54
$21.01-$24.00................ 53,662 8.58 23.32 13,486 22.67
$24.01-$27.00................ 971,085 9.50 25.36 4,529 24.97
$27.01-$30.00................ 313,109 9.05 27.96 237 29.69
$30.01-$33.00................ 711,133 9.02 31.24 60,497 31.00
$33.01-$36.00................ 186,042 9.28 34.66 1,950 34.78
$36.01-$39.00................ 3,651 9.30 36.36 -- --
--------- ---- ------ --------- ------
8,704,381 7.06 $12.33 4,152,163 $ 4.41
========= ==== ====== ========= ======
</TABLE>
F-21
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE SHARE
ENBC EXERCISE
OPTIONS PRICE
--------- -------------
<S> <C> <C>
ENBC plans:
Outstanding as of the date of conversion (June 17,
1996).............................................. 3,410,734 $ 6.50
Granted........................................... 239,714 12.57
Exercised......................................... (47,440) 5.89
Canceled.......................................... (124,933) 7.98
--------- ------
Outstanding as of December 29, 1996................. 3,478,075 $ 6.87
========= ======
Exercisable as of December 29, 1996................... 275,824 $ 5.93
========= ======
</TABLE>
Information on options outstanding and exercisable as of December 29, 1996,
is as follows:
<TABLE>
<CAPTION>
ENBC OPTIONS
ENBC OPTIONS OUTSTANDING EXERCISABLE
------------------------------ ----------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
REMAINING WEIGHTED EXERCISE
CONTRACTUAL AVERAGE NUMBER PRICE
NUMBER OF LIFE EXERCISE OF PER
RANGE OF EXERCISE PRICES OPTIONS (YEARS) PRICE OPTIONS SHARE
- ------------------------ --------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 5.88......................... 1,616,739 8.46 $ 5.88 257,700 $5.88
$ 6.00-$ 9.00.................. 1,433,755 9.04 6.58 18,124 6.54
$ 9.01-$12.00.................. 417,411 9.41 11.36 -- --
$12.01-$15.00.................. 8,109 9.58 15.00 -- --
$27.01-$30.00.................. 685 9.70 29.13 -- --
$30.01-$33.00.................. 1,376 9.76 32.63 -- --
--------- ---- ------ ------- -----
3,478,075 8.81 $ 6.87 275,824 $5.93
========= ==== ====== ======= =====
</TABLE>
As of December 29, 1996, the Company had 22,328,419 shares of common stock
reserved for issuance upon exercise of stock options and warrants and
conversion of convertible subordinated debentures and LYONs.
12. RELATED-PARTY TRANSACTIONS
The Company and ENBC have entered into secured loan, area development and
franchise agreements with certain area developers in which certain directors
and certain current and former officers of the Company, ENBC and members of
their families have a direct or indirect equity interest. In addition, certain
officers and directors of the Company, and members of their immediate
families, have a direct or indirect equity interest in ENBC. The Company has
also entered into loan agreements with ENBC. These entities have paid
approximately $11.3 million, $20.0 million, and $41.0 million in national and
local advertising contributions in 1994, 1995, and 1996. The Company and ENBC
(since conversion on June 17, 1996) have also sold to certain of these
entities, stores, inventory, equipment, and other miscellaneous assets,
including reimbursement of the Company's and ENBC's general and administrative
costs and expenses, common stock, and warrants to purchase common stock for
which they received approximately $47.1 million, $14.6 million, and $30.5
million in 1994, 1995, and 1996, respectively. The Company believes that the
terms of these agreements are as favorable to the Company as those with other
area developers of the Company.
The Company has paid to one of these area developers $146,000 in 1994 and
$100,000 in 1995 for various services.
Pursuant to Statement of Financial Accounting Standards No. 57, all Company
and ENBC financed area developers may be deemed to be related parties as a
result of the lending and franchise relationships with their
F-22
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
area developers. Total royalties and franchise related fees earned from all
financed area developers were $27.9 million, $59.9 million, and $110.9 million
in 1994, 1995, and 1996, respectively. Total interest income earned from all
financed area developers was $11.6 million, $32.0 million, and $57.1 million,
in 1994, 1995, and 1996, respectively. Total notes receivable from all
financed area developers were $411.4 million and $788.0 million at December
31, 1995 and December 29, 1996, respectively.
Certain officers and directors of the Company have an equity interest in
ENBC. For the Company's 1995 fiscal year, ENBC paid to the Company
approximately $1.2 million for the purchase of furniture, equipment, and other
miscellaneous assets. In addition, ENBC paid to the Company approximately $3.0
million and $7.6 million in software license, software maintenance, real
estate, financial advisory, accounting fees, and interest on its loan with the
Company during fiscal 1995 and 1996 (prior to conversion on June 17, 1996),
respectively.
Certain officers and directors of the Company are officers and minority
investors in BCEF, having invested $7.3 million of an aggregate of $60.0
million at December 29, 1996. The Company has been engaged by BCEF to be its
manager for which it received fees of $375,000 in 1995 and $125,000 in 1996.
Neither the Company nor ENBC has an equity interest in BCEF.
Certain officers and directors of the Company are investors in Bagel
Funding, having invested $15.2 million of an aggregate of $75.0 million at
December 29, 1996. ENBC is the manager of Bagel Funding. Bagel Funding paid
$250,000 to ENBC (since conversion on June 17, 1996) in its capacity as
manager during 1996. Neither the Company nor ENBC has an equity interest in
Bagel Funding.
Certain officers and directors of the Company have an equity interest in
Market Partners, L.L.C. ("Market Partners"), having invested $9.0 million of
an aggregate of $38.3 million at December 29, 1996. As of such date, Market
Partners had invested $35.6 million in certain area developers of the Company.
Neither the Company nor ENBC has an equity interest in Market Partners.
A director/officer and a former director/officer of the Company control BC
Midwest Trust, successor to the interests previously held by BC Midwest L.P.
During 1994, 1995, and 1996, the Company paid approximately $528,000,
$662,000, and $282,000, respectively, to Bowana Aviation, Inc. ("Bowana") for
the use of aircraft. The Company's chief executive officer and a relative
owned Bowana. The Company believes that the amounts charged are at rates at
least comparable to those charged by third parties.
13. ENBC EQUITY OFFERINGS
During 1996, from the date of the conversion of the Company's loan to ENBC,
ENBC issued approximately 8.9 million shares of its common stock to third
parties pursuant to an initial and a subsequent public offering, a concurrent
non-underwritten public offering, and through the exercise of stock options
and warrants at prices ranging from $5.88 per share to $28.58 per share. Prior
to these transactions, the Company held approximately a 70% interest in ENBC,
and subsequent to these transactions at December 29, 1996, the Company held
approximately a 54% interest in ENBC. These transactions generated a pretax
gain of approximately $38.2 million as a result of ENBC issuing shares of
common stock at prices per share greater than the Company's carrying value.
Deferred income taxes have been provided on the gain.
14. RELOCATION
In September 1994, the Company consolidated its four Chicago-based support
center facilities into a single facility and relocated to Golden, Colorado.
The cost of the relocation, including moving personnel and facilities,
severance payments, and the write-off of vacated leasehold improvements, was
$5.1 million.
F-23
<PAGE>
EXHIBIT K
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
SECURED LOAN AGREEMENT
----------------------
K-1
<PAGE>
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into as
of the _____ day of __________, 199__ between ___________________, L.L.C., a
Delaware limited liability company (the "Company"), and Boston Chicken, Inc., a
Delaware corporation ("Boston Chicken").
Recitals
--------
The Company and Boston Chicken have entered into an area development
agreement ("Development Agreement"), pursuant to which the Company is required
to establish and operate Boston Market retail food service outlets (the
"Stores") in the area specified in the Development Agreement (the "Development
Area") in compliance with a development schedule set forth therein and to enter
into individual franchise agreements (each, a "Franchise Agreement") for such
specific Stores. In order to facilitate the development of the Stores, the
Company desires to enter into this Agreement and to borrow up to
$_______________ from Boston Chicken, and Boston Chicken desires to enter into
this Agreement and 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, to advance at any time and
from time to time during the period commencing on the date hereof and ending on
the last day of the ________ Retail Period (as defined below) in Boston
Chicken's fiscal year _____ (the "Draw Loan Termination Date"), amounts
requested by the Company in an aggregate principal amount not to exceed
$___________ (the "Loan"). Each advance of the Loan (an "Advance") shall be in a
minimum amount of $100,000, and shall be made by wire transfer of Boston Chicken
to the account of the Company. The Loan shall be evidenced by a promissory note
(the "Note") of even date herewith in the form attached hereto as Exhibit A.
<PAGE>
1.2 Maximum Principal Balance. The aggregate outstanding principal
-------------------------
balance of the Loan shall not exceed $_____________, less 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." 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 only 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 (as defined below) 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 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
-2-
<PAGE>
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 __________ Retail Period in
Boston Chicken's fiscal year _____ and continuing until the first day of the
_______________ Retail Period in Boston Chicken's fiscal year 20___, 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 and all covenants and
----------------------
agreements of the Company 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 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 Common Membership
Units (as defined in the limited liability company agreement of the Company
dated as of _____________, 19__ (the "LLC Agreement")) in the Company (herein
called the "Units"), at any time and from time to time after both of the
following have occurred: (i) _________________, ____, and (ii) such time as the
Company has completed not less than 80% of the Development Schedule set forth in
the Development Agreement, and up to the later of (x) the date on which the
Company has properly repaid the outstanding principal balance of the Loan and
all accrued interest thereon in full or (y) the first day of the ________ Retail
Period in the Company's fiscal year ______; provided, however, that nothing
herein shall impair, restrict or prohibit the exercise of remedies, including
exercise of the conversion right, under Section 8.2 hereof upon the occurrence
of a Default. Upon such conversion, that portion of principal so converted shall
be deemed to be paid in full. 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 through the date of conversion on the portion of the
principal balance of the Loan so converted. In no event shall interest be
convertible into Units of ownership interest 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) The Company shall have the option, at any time and from
------
time to time after both of the following have occurred: (i) _______________,
199__, and (ii) such time as the Company has completed not less than 80% of the
Development Schedule set forth in the Development Agreement, and up to the later
of (x) the date on which the Company has properly repaid the outstanding
principal balance of the Loan and all accrued interest thereon in
-3-
<PAGE>
full or (y) the first day of the _______ Retail Period in the Company's fiscal
year 20__, to purchase at the Conversion Price (as defined in the Note) up to
that number of units of ownership of the Company equal to (A) the Option Amount,
divided by (B) the Conversion Price (the "Option"); provided, however, that
nothing herein shall impair, restrict or prohibit the exercise of remedies,
including exercise of the Option, under Section 8.2 hereof upon the occurrence
of a Default. 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. The Company agrees that in the event Boston Chicken shall fail
to fund the Loan as and to the extent required hereby solely as a result of the
unavailability to Boston Chicken of cash and/or credit resources to fund the
Loan and not as a result of any failure of the Company to satisfy the conditions
precedent to Advances or of the occurrence of a Default or Event of Default
hereunder (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 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. (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.
-4-
<PAGE>
(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 Loan if
the Company does not pay interest when due.
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 all other obligations of the
Company to Boston Chicken, whether now existing or hereafter arising, 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, lease hold 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, documents of title, and equity interests in any
Subsidiary (as defined in Section 6.11 hereof) of the Company;
(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 Section 2.2, being referred to
collectively as the "Collateral").
2.2 Pledge of Units. In addition to the security interest in the
---------------
Collateral, the Company's obligations hereunder and under the Note and all other
obligations of the Company to Boston Chicken shall be secured by the security
interests created pursuant to a pledge agreement (the "Unit Pledge Agreement" or
the "Pledge Agreement") between Boston Chicken and all of the members holding
common membership Units of the Company (the "Members"), substantially in the
form attached hereto as Exhibit C, pursuant to which the Members shall grant a
security interest to Boston Chicken in and to all of the Units owned by them.
2.3 Subsidiary Security Documents. The Company shall cause each person or
-----------------------------
entity becoming a Subsidiary of the Company from time to time to execute and
deliver to Boston
-5-
<PAGE>
Chicken, within five days after such person or entity becomes a Subsidiary, a
security agreement substantially in the form attached hereto as Exhibit D,
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
pledge agreement substantially in the form of Exhibit C-1 and modified
appropriately (or other agreement collaterally assigning all equity interest in
such Subsidiary), pursuant to which the Company shall grant a security interest
in favor of Boston Chicken in and to all shares of capital stock (or other
equity interests) of such Subsidiary, together with the stock certificates or
other evidence of ownership and accompanied by a stock power executed in blank.
Any such pledge or other collateral 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 by the Company or any Subsidiary of
any property 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.
-6-
<PAGE>
(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 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 Units and common stock 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 ten (10) business days prior to the day an advance is to be made
hereunder, (a) a written request from the manager of the Company, duly
authorized, for an advance in a specific amount, (b) with respect to the initial
Advance hereunder, a certificate of the Company in the form attached hereto as
Exhibit B-1, which shall be signed by a duly authorized officer of the manager
of the Company, and with respect to subsequent Advances hereunder, a certificate
of the Company in the form attached hereto as Exhibit B-2, which shall be signed
by a duly authorized officer of the manager of the Company, and (c) 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 in the
--------------------------
financial condition, results of operations, assets, or business of the Company
and its Subsidiaries, taken as a whole, shall have occurred at any time or times
subsequent to the date hereof, or, in the event such a material adverse change
shall have occurred, such change shall have been fully remedied without any
material adverse effect on the financial condition, results of operations,
assets or business of the Company and its Subsidiaries taken as a whole to the
satisfaction of Boston Chicken in its sole discretion.
-7-
<PAGE>
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 Representations 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 Area Development Agreement. The Company is in compliance with the
--------------------------
Development Schedule (as defined in the Development Agreement).
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 manager of the Company, duly
authorized, 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 the 60-day period immediately following
the receipt of the Advance for Store 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.
3.8 Annual Budget. The Company shall be substantially in compliance with
-------------
its Annual Budget (as defined in Section 5.19).
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 (subject, in the case of
financial statements covering less than one full fiscal year, to normal,
recurring year-end adjustments).
4.2 Member Interests. The Company has previously furnished to Boston
----------------
Chicken a true and correct copy of the certificate of formation of the Company
and the LLC Agreement, including in each case all amendments thereto through the
date of this Agreement. The
-8-
<PAGE>
holders of record (and beneficial owners, if any) of Units in the Company and
the preferred membership units, and the number of Units and preferred membership
units owned of record by each such holder and beneficially owned by each such
beneficial owner, are set forth on Exhibit A to the LLC Agreement, and the
number of Units and preferred membership units set forth on such Exhibit A
constitute 100% of the issued and outstanding ownership interests in the
Company. Except for options granted under the Company's 1996 Unit 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 Units or preferred membership units in the Company
or for the issuance or sale of any other member interests or obligations of the
Company or for the purchase by the Company of any of its member interests.
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, or,
in the event such a material adverse change shall have occurred, such change
shall have been fully remedied without any material adverse effect on the
financial condition, results of operations, assets or business of the Company
and its Subsidiaries taken as a whole to the satisfaction of Boston Chicken in
its sole discretion.
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 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 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
Note and incur the indebtedness to be evidenced thereby. The Company 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 Note have each been duly authorized by all
required action on the part of the Company, and each of this Agreement and the
Note has been duly exe cuted 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 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 formation of the Company
or the LLC Agreement or any agreement or instrument to which the Company is a
party or by which it or its assets is bound.
-9-
<PAGE>
(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 inception, the Company and each Subsidiary
-------------------
has conducted its business and operations in a manner consistent with that of a
franchisee of Boston Chicken and has not engaged in any business other than the
business of establishing, opening, and operating Boston Market 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, (c) obligations under contracts and agreements entered into in the
ordinary course of business.
4.8 Tax Matters. (a) 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.
(b) The Company will be recognized for tax purposes as a partnership
within the meaning of Section 7701(a)(2) of the Code, and the Company is not a
"publicly traded partnership" within the meaning of Section 7704 of the Code.
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 (i) any purchase money security interest (including
pursuant to a financing lease) in any equipment for the Company's Boston Chicken
or Boston Market Stores, (ii) any lien arising in connection with an Equipment
Sublease (as defined in Section 6.5) or (iii) in the event Boston
-10-
<PAGE>
Chicken has consented to subordinate the Company's obligations to it hereunder
in accordance with Section 9.11 hereof, any security interest pursuant to such
specific subordination.
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 __________, 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 "__________________" and the
Company operates under no other names, other than the name "Boston Market" on
its store locations pursuant to and in accordance with any applicable Franchise
Agreement.
4.11 Location of Inventory, Fixtures, Machinery, and Equipment. (a) All
---------------------------------------------------------
Collateral consisting of inventory, fixtures, machinery, or equipment is located
within the Development Area, 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.
(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. The Company has no Subsidiaries as of the date of this
------------
Agreement.
ARTICLE V
Affirmative Covenants
---------------------
The Company covenants and agrees that so long as this Agreement remains in
effect:
-11-
<PAGE>
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 flow 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 manager 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 manager 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 (i) 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, and (ii) the Company is substantially in
compliance with the Annual Budget. 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
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<PAGE>
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 or other entity 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 unless and to the extent that the validity
thereof is being contested by the Company in good faith and by appropriate
proceedings and for which the Company has provided adequate reserves.
(c) The Company shall, and shall cause each Subsidiary to, conduct its
business and operations in a manner consistent with that of a franchisee of
Boston Chicken, and shall not, and shall not permit any Subsidiary to engage in
any business other than the business of establishing, opening, and operating
Boston Market Stores in the Development Area.
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 and each
Subsidiary irrevocably appoints Boston Chicken (and all officers, employees, or
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<PAGE>
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 give
--------------------------------------------
written notice to Boston Chicken of the following (a) as soon as possible, and
in any event within five business days after the Company receives actual notice
of 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) as soon as possible and in any event within five business days after the
Company learns of 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 net proceeds from the Loan solely to finance
the purchase, design, construction, and equipment of Boston Market Stores in the
Development Area, and for Store 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 Registration of Units. The Company covenants that if any Units in the
---------------------
Company issued 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 units may be issued upon such conversion or exercise, the
Company will, at its expense and as expeditiously as possible, cause such Units
to be duly registered or approved, as the case may be.
5.8 Additional Members. The Company agrees to cause each person other
------------------
than Boston Chicken becoming a Member of the Company from time to time after the
date of the Unit Pledge Agreement to execute and deliver to Boston Chicken
within five days after such person becomes a member of the Company, a copy of
the Unit Pledge Agreement.
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<PAGE>
5.9 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 Chicken
under this Agreement aggregate at least 75% of the Maximum Principal Balance of
the Loan, 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 5.9 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,
which preemptive right may be satisfied, at Boston Chicken's option, by
increasing the Maximum Principal Balance available to be borrowed by the Company
hereunder (with corresponding increases in Boston Chicken's conversion and
Option rights) rather than purchasing or otherwise participating in the
instrument or security to be offered by the Company. 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 Units in the Company subject to all outstanding options and
warrants, including Units in the Company 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 5.9 within the time period specified shall be deemed
to constitute a waiver of its rights under such provision.
5.10 Additional Covenants. In the event Boston Chicken has agreed to
--------------------
subordinate the Loan pursuant to and in accordance with the provisions of
Section 9.11 hereof, (a) the Company will not permit total Senior Indebtedness
to at any time exceed 30% of Total Capitalization, and (b) the Company shall at
all times have Cash Flow during each fiscal quarter which is at least equal to
the Prospective Fixed Charges for the next succeeding fiscal quarter. For this
purpose, the term "Senior Indebtedness" shall mean all indebtedness to which the
Loan is subordinate, and the term "Total Capitalization" shall mean all equity
and indebtedness of the Company (other than trade payables), including all
Senior Indebtedness, the outstanding principal balance of the Loan, any
subordinated debt, members' equity (both common and preferred), and all
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<PAGE>
leases which, in accordance with generally accepted accounting principles, are,
or are required to be, capitalized on the books of the Company. The term "Cash
Flow" for any fiscal quarter shall mean the sum of Net Earnings during such
fiscal quarter plus all charges made by the Company during such quarter for
depreciation and amortization in respect of its fixed assets, income taxes, and
interest on the Loan, any Senior Indebtedness, and any other long-term
indebtedness, all as determined in accordance with generally accepted accounting
principles consistently applied. The term "Net Earnings" shall mean the net
income of the Company during such period as computed in accordance with
generally accepted accounting principles consistently applied, and, without
limiting the foregoing, after deduction from gross income of all charges and
reserves, including charges and reserves for all taxes on or measured by income,
but excluding any profits or losses on the sale or other disposition not in the
ordinary course of business of fixed or capital assets or on the acquisition,
retirement, sale, or other disposition of shares of capital stock or securities
of the Company, and also excluding any taxes on such profits and any tax
deductions or credits on account of any such losses. The term "Prospective Fixed
Charges" shall mean as of any date the same are to be determined one fourth of
the sum of (x) any principal payments on the Loan, any Senior Indebtedness and
any other long term indebtedness (determined in accordance with generally
accepted accounting principles consistently applied) scheduled to become due
within the ensuing 12-month period and (y) interest to be paid during such
period on the Loan, any Senior Indebtedness and any other long-term
indebtedness. In the event any interest required by this Section 5.10 to be
included in the calculation of Prospective Fixed Charges is charged on a
floating-rate basis which cannot be determined as to the future, then such
interest shall be calculated for such period at the rate then in effect.
5.11 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 additional indebtedness or create any additional lien which
would cause Boston Chicken to be in default of the BC Credit Line.
5.12 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.
5.13 Company Subsidiaries. Each corporation or other entity becoming
--------------------
a Subsidiary of the Company after the date hereof will be duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
organization 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 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.
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<PAGE>
5.14 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.
5.15 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
---------------------------------------------------------
All Collateral consisting of inventory, fixtures, machinery, and equipment shall
at all times be located within the Development Area 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.
5.16 Partnership Status for Tax Purposes. The Company will maintain
-----------------------------------
at all times its status for tax purposes as a "partnership" within the meaning
of Section 7701(a)(2) of the Code, and the Company will not take any action or
omit to take any action that would cause the Company to become a "publicly
traded partnership" within the meaning of Section 7704 of the Code.
5.17 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.
5.18 Company's Fiscal Year. The Company shall adopt a fiscal year
---------------------
consistent with the fiscal year adopted by Boston Chicken from time to time. As
of the date of this Agreement, the Company acknowledges that Boston Chicken's
fiscal year is the 52/53-week period ending on the last Sunday in December and
consists of 13 four-week periods.
5.19 Annual Budget. The Company shall deliver to Boston Chicken, as
-------------
soon as practicable and in any event no later than the last day of the first
Retail Period of each fiscal year,
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<PAGE>
an operating and development budget for the Company for such fiscal year (the
"Annual Budget").
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; Loans; etc. The Company shall not, and shall not
-----------------------
permit any Subsidiary to (a) 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
busi ness, or (b) make loans or advances to any person.
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.
6.3 Compensation to Members and Related Parties. Other than
-------------------------------------------
reasonable salaries and normal benefits (including options pursuant to the 1996
Unit Option Plan), which salaries and benefits must be approved by Boston
Chicken, the Company shall not pay any compensation, bonuses, fees, options, or
other amounts to any Member or to any of the stockholders, affiliates or
immediate family members of any such Member. The Company shall not, without the
prior written consent of Boston Chicken, amend its 1996 Unit Option Plan.
6.4 Distributions and Redemptions. The Company shall not, directly
-----------------------------
or indirectly, (a) redeem, purchase, or otherwise retire any of the Units or any
preferred membership units in the Company, except as expressly required under
the LLC Agreement with respect to the preferred membership units in the Company,
(b) make any distributions, except distributions expressly required to be paid
under the LLC Agreement with respect to the preferred membership units in the
Company, or (c) return capital of the Company to its members, except that the
Company shall (i) make cash distributions (if permitted under the laws of the
state of its organization) after the satisfactory completion of the Development
Schedule under each Development Agreement between the Company and Boston
Chicken, as each such Development Agreement may be amended from time to time,
and after establishment of reasonably adequate reserves for working capital and
foreseeable contingencies so long as the Company continues to observe and
perform the covenants set forth in clause (b) of Section 5.10 hereof,
irrespective of whether Boston Chicken has agreed to subordinate the Company's
debt in accordance with Section
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<PAGE>
9.11 hereof at the time of the payment of such distribution), and (ii) make cash
distributions during or within 75 days after the end of any taxable year in an
amount equal to (A) the excess of (1) the total amount of taxable income
allocated to its Members during such taxable year, over (2) the amount, if any,
by which the sum of all items of deduction and loss allocated to its members for
all prior taxable years exceeds the sum of all items of taxable income allocated
to its members for all prior taxable years, multiplied by (B) a tax rate
reasonably selected by the Company as the highest effective combined statutory
rate of federal and state income tax imposed on net income of the Company
allocated to the Members.
6.5 Additional Indebtedness. 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, other than (a) as provided in Section 5.9 and 9.11 hereof, (b) the
subleasing by the Company of equipment used in the operation of its Stores
pursuant to certain subleases intended as security between the Company and
Boston Chicken (the "Equipment Subleases"), (c) trade payables in the ordinary
course of business, and (d) real estate lease obligations for Stores arising in
the ordinary course of business.
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 5.10 hereof); (c) except as provided in Sections 5.9 and 9.11 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 of
another corporation, partnership, or other business organization; (e) engage in
any other business than the operation of Boston Market Stores; or (f) liquidate
or dissolve or take any action with a view toward liquidation or dissolution.
6.7 Certificate of Formation and LLC Agreement; Manager. The Company
---------------------------------------------------
shall not make any changes in or amendments to its certificate of formation or
the LLC Agreement as they are in effect as of the date hereof; except that the
Company may amend the LLC Agreement to the extent necessary to consummate any
financing as to which Boston Chicken has waived its rights pursuant to and in
accordance with Section 5.9 hereof. The Company shall not, without the prior
written consent of Boston Chicken, change its manager[s] or managing member.
6.8 Issuance of Units. Except for (a) Units which may be issued upon
-----------------
(i) exercise of options granted under the Company's 1996 Unit Option Plan, (ii)
exercise of the Option, (iii) conversion of any portion of the outstanding
principal balance of the Loan as provided in the Note, (iv) consummation of any
financing after advances of debt and purchases of equity by Boston Chicken under
this Agreement aggregate at least 75% of the Maximum Principal Balance and as to
which Boston Chicken has waived its rights pursuant to and in accordance with
Section 5.9 hereof, and (b) options granted under the Company's 1996 Unit Option
Plan, the Company will not issue any additional Units or preferred membership
units in the Company.
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,
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<PAGE>
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 and Section 9.11 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 as otherwise expressly
permitted under this Agreement and 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. (a) Boston Chicken shall have received on
------------------
the Closing Date from ____________________ an opinion, dated the Closing Date,
in the form attached hereto as Exhibit E, with the blanks appropriately
completed.
(b) Boston Chicken shall have received on the Closing Date from
_________________ an opinion, dated the Closing date, that the Company will be
taxed as a partnership within the meaning of Section 7701(a)(2) of the Code and
that the Company will not be a "publicly traded partnership" within the meaning
of Section 7704 of the Code.
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 proceedings in connection with such transaction and compliance with the
conditions set forth in this Article VII, in form and substance sat isfactory to
Boston Chicken and its counsel.
7.3 Executed Documents. The Company, and to the extent applicable,
------------------
the Members and their respective spouses and the Stockholders and their
respective spouses, shall have
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<PAGE>
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 Pledge Agreement;
(d) the Accounting Services Agreement in the form
attached hereto as Exhibit F;
(e) the Investor Representation Letter in the form attached
hereto as Exhibit G from each investor in the Company; 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,
including without limitation financing statements executed
by each Member.
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 formation 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
the manager of the Company;
(b) the LLC Agreement, as in force and effect on the Closing
Date, certified as true and correct by the manager of the Company;
(c) certificate of good standing of the Company from the
Secretary of State of the States of Delaware, __________, ___________ and
_________ dated within five days prior to the Closing Date; and
(d) evidence satisfactory in form and substance to Boston
Chicken of all required action taken by the Company to authorize, among other
things, the execution, delivery, and performance by the Company of this
Agreement, the Note, and the Security Instruments and the Accounting Services
Agreement and the consummation of the transactions contemplated hereby,
including authorization of the Company to enter into the Area Development
Agreement and any Franchise Agreement pursuant thereto and to issue Units of
ownership interest 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 manager of the Company.
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<PAGE>
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 Members' 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 members' equity of at least
$___________.
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 Accounting Services Agreement, the Pledge 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 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;
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<PAGE>
(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,
6.8, 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;
(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 employment with the Company or substantially reduces
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 individuals with multi-unit food operating experience who is
acceptable to Boston Chicken in its sole discretion;
(i) the Company's default under, or breach of any provision of,
the Development Agreement (other than a default which constitutes a default
under Section 8.1(p) hereof);
(j) termination of the lesser of (1) 50% or (2) three of the
Franchise Agreements to which the Company or its affiliates and Boston Chicken
are parties;
(k) dissolution or liquidation of the Company;
(l) 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, or in the event such a material adverse change
shall have occurred, such change shall have been fully remedied without any
material adverse effect on the financial condition, results of operations,
assets
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<PAGE>
or business of the Company and its Subsidiaries taken as a whole to the
satisfaction of Boston Chicken in its sole discretion.
(m) 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 or subleases of real property;
(n) 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, escrowed, stayed or bonded pending appeal
or covered in full by insurance;
(o) 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 Boston Chicken the benefits purported to be
created thereby; or
(p) The Company fails to satisfy its development obligations
for the Development Area or any Sub-Area (as defined in the Development
Agreement) as set forth in Paragraph 3.C of the Development Agreement, so long
as during the 180-day period immediately preceding the event giving rise to the
default under this Section 8.1(p), both (i) there has been no Funding Default by
Boston Chicken hereunder, and (ii) the Company has had (A) access to capital,
either equity or debt, either directly or through sources provided by Boston
Chicken, on commercially reasonable terms for a similarly situated restaurant
business, or (B) income from operations, sufficient in either case to complete
its development obligations through the date of non-compliance with such
development obligations. Availability of funds hereunder is deemed to satisfy
the requirement of Section 8.1(p)(ii)(A) above for access to capital on
commercially reasonable terms.
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;
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<PAGE>
(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 units of ownership interest 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, and provided further, that in the case of any event described
in Section 8.1(p), Boston Chicken's sole and exclusive remedies shall be the
remedies described in subparagraphs (iv) and (v) above.
(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 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.
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<PAGE>
(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, and the Pledge Agreement), (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 or 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 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, Section 9.11 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.
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<PAGE>
(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 con nection 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:
Attention:
Facsimile:
with a copy to:
Attention:
Facsimile:
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 T. Metzger
Facsimile: (312) 372-2098
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<PAGE>
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
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.
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<PAGE>
9.11 Agreement to Subordinate. (a) Boston Chicken agrees to
------------------------
subordinate all debts, liabilities, and obligations of the Company owed to it
hereunder to any debt incurred by the Company after the date hereof only if all
of the following events have occurred:
(i) The Company has complied in all respects with its
obligations under Section 5.9 hereof and Boston Chicken has waived its
rights thereunder with respect to all (or, if permitted in such instance, a
portion) of such financing;
(ii) No Default or Event of Default has occurred and is
continuing;
(iii) The Company has requested and Boston Chicken has
advanced to the Company, or Boston Chicken has converted, or exercised its
Option with respect to, at least 90% of the Maximum Principal Balance;
(iv) The Company has furnished to Boston Chicken evidence, in
reasonable detail, satisfactory to Boston Chicken and certified by the
chief financial officer of the Company, that after such debt is incurred
the Company will be in compliance with Section 5.10 hereof;
(v) The Company has furnished to Boston Chicken satisfactory
evidence that the Company has expended at least 90% of its Members' equity
for Store working capital and for the purchase, design, construction,
equipment and operation of Boston Market Stores in the Development Area;
(vii) The transaction pursuant to which such debt will
be incurred has been negotiated at arms' length with a bank or other
commercial financial institution or with an individual or other entity,
which individual or other entity is reasonably satisfactory to Boston
Chicken;
(viii) The subordination agreement to be executed by
Boston Chicken is, in all respects, reasonably satisfactory to Boston
Chicken; and
(ix) The Company shall pay all costs and expenses of Boston
Chicken, including without limitation, reasonable attorneys' fees, incurred
in connection with such subordination.
(b) In the event Boston Chicken agrees to subordinate the
Company's obligations to it as set forth in this Section 9.11, the Company
agrees to provide to Boston Chicken, within 30 days after the end of each fiscal
quarter, a certificate of the Company's manager setting forth in reasonable
detail the calculations used to determine compliance with Section 5.10 hereof.
9.12 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
"Indemnitees"), harmless from and against any and all other liabilities,
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<PAGE>
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, the Note, the Pledge 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 Indemnitees or any of them. The provisions of the
undertakings and indemnification set out in this Section 9.12 shall survive
satisfaction and payment of the Company's obligations hereunder and termination
of this Agreement.
9.13 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, provided that nothing herein shall limit or otherwise restrict the
Company's obligation to pay fees under the Accounting Services Agreement or pay
royalties, advertising fund contributions, fees, and all other payments that may
become due under the Development Agreement or any Franchise Agreement entered
into pursuant thereto.
9.14 Submission to Jurisdiction. The Company agrees that any
--------------------------
legal action or proceeding with respect to this Agreement, the Note, the Pledge
Agreement, the Accounting Services 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 serve 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.
9.15 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,
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proceeding, counterclaim, or any other litigation procedure based upon, or
arising out of this Agreement, the Note, the Pledge Agreement, the Accounting
Services 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 9.15 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 BOSTON CHICKEN IN ENTERING INTO THIS
AGREEMENT.
* * * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
_______________________________
By: ________________________
Its: Manager
By: ________________________
Title: Vice President
BOSTON CHICKEN, INC.
By: ________________________
Title: Vice President
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<PAGE>
EXHIBIT A
CONVERTIBLE SECURED NOTE
<PAGE>
CONVERTIBLE SECURED NOTE
$____________ __________________, 199__
FOR VALUE RECEIVED, _________________, L.L.C., a Delaware limited
liability company (the "Company"), promises to pay to the order of Boston
Chicken, Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan
Agreement (as hereinafter defined) at such place as Boston Chicken may from time
to time designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of ______________ DOLLARS
($___________) 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).
<PAGE>
During the Interest Payment Period the Company shall pay to Boston
Chicken interest only 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 first
day of the ___________ Retail Period in Boston Chicken's fiscal year 19__.
Thereafter the Company shall pay principal and interest as provided below.
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 ____________ Retail Period in Boston Chicken's fiscal
year 19___ and continuing until the first day of the ____________ Retail Period
in Boston Chicken's fiscal year 20___, when the entire principal balance of the
Loan and all interest accrued thereon shall be due and payable.
This Note may be prepaid at any time without premium or penalty. 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, to convert, subject to the terms, conditions and provisions of this
Article I, the outstanding principal balance of this Note or any portion thereof
into units of common membership interest in the Company (the "Units") at the
price of $______ per unit for any conversion of (or Option exercise (as provided
in the Loan Agreement) for) the principal amount of the Loan, 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"), at any time after both of the following have occurred: (i)
____________, _____ and (ii) such time as the Company has completed not less
than 80% of the Development Schedule set forth in the Development Agreement, and
up to the later of (y) the date on which the Company has properly repaid the
outstanding principal balance of the Loan and all accrued interest thereon in
full or (z) the first day
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<PAGE>
of the fifth Retail Period in Boston Chicken's fiscal year 2005; provided,
however, that nothing shall impair, restrict or prohibit the exercise of
remedies, including the exercise of the conversion right, under Section 8.2 of
the Loan Agreement upon the occurrence of a Default. In the event the
outstanding principal balance of this Note is to be converted, the holder shall
surrender this Note 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 Units in accordance with the
provisions of this Article I, and specifying the name or names in which the
Units 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 Units.
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, or other evidence of ownership if the
Units are uncertificated, representing the number of Units in 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 Units of ownership interest in the Company upon conversion of
this Note shall be treated for all purposes as having become the record holder
or holders of such Units at such time, and such conversion shall be at the
Conversion Price in effect at such time. 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 Units
issuable upon conversion of this Note, or in case of any consolidation or merger
of the Company with or into any partnership, corporation, limited liability
company, 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 Units, other than a change in number of Units 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
Units, 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 Units issuable upon conversion of this Note immediately prior
to such reclassification, change, consolidation, merger, sale, or conveyance,
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<PAGE>
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 Units outstanding or (ii) make
a distribution in cash, in kind, or in securities of any kind, other than cash
distributions permitted pursuant to the provisions of Section 6.4 of the Loan
Agreement ("Permitted Distributions"). In the event the Company makes a
subdivision of Units or makes a distribution in cash, in kind, or in securities
of any kind (other than Permitted Distributions), 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 Units 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 members 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 if any Units of ownership interest in the
Company 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 Units may be issued upon conversion, the Company will, at its expense and
as expeditiously as possible, cause such Units to be duly registered or
approved, as the case may be.
(d) Any issuance of certificates, or other evidence of ownership if the
Units are uncertificated, for Units of ownership interest in the Company 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, or other
evidence of ownership if the Units are uncertificated, and such certificates, or
other evidence of ownership if the Units are uncertificated, 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, or other evidence of ownership if the Units
are uncertificated, 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, or
other evidence of ownership if the Units are uncertificated, 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.
(e) 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.
-4-
<PAGE>
(f) To the extent that any portion of this Note is not converted into
Units of ownership interest in the Company, 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 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
-------------
-5-
<PAGE>
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,
(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 Agree ment, 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.
* * * * * *
-6-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its name by the undersigned officer, thereunto duly authorized.
________________________
By: _______________________
Its: Manager
By: ___________________________
Title:
-7-
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE TO ACCOMPANY INITIAL ADVANCE
<PAGE>
CERTIFICATE TO ACCOMPANY INITIAL ADVANCE
The undersigned, the _____________ of _____________________, manager of
_____________________ (the "Company"), borrower under that certain Secured Loan
Agreement dated as of __________________, _____, as amended from time to time
(the "Loan Agreement") between the Company and Boston Chicken, Inc. ("Boston
Chicken"), hereby requests an Advance under the Loan Agreement in the amount of
$_______________ to be made on ____________, 19__. In support of this request,
the Company hereby represents, warrants and certifies to Boston Chicken as
follows:
1. 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 the Advance is made pursuant to this Certificate.
2. No Default or Event of Default has occurred and is continuing.
3. There has been no material adverse change in the financial conditions,
results of operations, assets or business of the Company since ____________,
19__.
4. The Company is in compliance with the Development Schedule (as defined in
the Development Agreement).
5. The amount of the Advance is required and will be used by the Company
for the purposes permitted under in the Loan Agreement and for no other purpose.
The amount of the Advance is the amount the Company reasonably expects to expend
within the 60-day period immediately following the date hereof for Store (as
defined in the Loan Agreement) working capital and to purchase, design,
construct, and equip Stores in accordance with the provisions of the Loan
Agreement that are scheduled to open within six months of the date hereof or, in
the case of free-standing Stores for which a building must be constructed, nine
months from the date hereof.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
_______________________________
By: ______________, its manager
By:____________________________
Its: ________________________________
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE TO ACCOMPANY ADVANCES
<PAGE>
CERTIFICATE
The undersigned, the ________________ of ______________, manager of
___________________ (the "Company"), borrower under that certain Secured Loan
Agreement dated as of _______________, 19__ (the "Loan Agreement") between the
Company and Boston Chicken, Inc. ("Boston Chicken"), hereby certifies to Boston
Chicken as follows:
1. Loan proceeds in the aggregate amount of $_______________ were disbursed
by Boston Chicken for the benefit of the Company under the Loan Agreement during
the two-week borrowing period ended ____________, 199__ (the "Borrowing
Period"). The Company confirms that (a) Boston Chicken was authorized to
disburse such amount on behalf of the Company, and (b) such amount was required
and used by the Company for the purposes permitted under the Loan Agreement and
for no other purpose.
2. As of _______________, 199___, the outstanding principal balance of the
Loan is $____________________.
3. The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith were
true and correct at all times during the Borrowing Period, are true and correct
on and as of the date hereof, and will be true and correct at all times during
the next succeeding two-week borrowing period.
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 ________________,
______.
6. The Company is in compliance with the Development Schedule (as defined in
the Development Agreement).
7. Boston Chicken is entitled to rely on this Certificate and the
representations contained herein when disbursing loan proceeds during the next
succeeding two-week borrowing period.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
__________________________
By: ______________, manager
By: ____________________________
Its: __________________________
<PAGE>
EXHIBIT C-1
UNIT PLEDGE AGREEMENT
<PAGE>
UNIT PLEDGE AGREEMENT
This Unit Pledge Agreement ("Pledge Agreement"), dated as of _____________,
_____, is made and entered into by and between Boston Chicken, Inc., a Delaware
corporation ("Boston Chicken"), and all of the holders of the outstanding common
membership units of ________________, L.L.C., a Delaware limited liability
company (the "Company"), and the spouses of the individual members listed on the
signature pages hereof and any other persons who, after the date of this Pledge
Agreement, become holders of common membership units of the Company and their
spouses (collectively, the "Members").
Recitals
--------
1. The Members own 100% of the common membership units in the Company,
in the amounts set forth on Schedule A hereto.
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 convertible secured 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 Members have 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 units of ownership interest in the Company.
NOW, THEREFORE, Boston Chicken 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.
"Common Membership Units" and "Preferred Membership Units" shall have
the meanings ascribed thereto in the LLC agreement of the Company dated
__________________, ________.
<PAGE>
"Collateral" shall mean the Pledged Units 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.
"Pledged Units" shall mean all the common membership units of in the
Company, now owned or hereafter acquired by the Members.
"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 Boston
--------------------------
Chicken a security interest in all of their right, title, and interest in and to
the Pledged Units. The Members further grant to Boston Chicken a security
interest in any rights to subscribe, rights to convert, liquidating
distributions, distributions paid in units of ownership interest, 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 cash distributions permitted pursuant to the provisions of Section
6.4 of the Loan Agreement. If the Members receive additional property of such
nature, they 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 Members grant a further security interest to
Boston Chicken 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 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 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, each of the Members represents and warrants for
itself 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
entered into 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.
-2-
<PAGE>
(c) The Pledged Units constitute one hundred percent (100%)
of the issued and outstanding common membership interest of the Company.
(d) The Pledged Units are fully paid and nonassessable.
(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. Boston Chicken, 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, 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 Members 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 Units.
---------------------------------------
(a) The Members shall continue to be the owners 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
expressly permitted under the Loan Agreement, and, so long as no Default has
occurred, may exercise their 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 Boston Chicken.
The Members who are owners of the Preferred Units shall not convert, attempt to
convert or take any action to cause the conversion of the Preferred Units into
Common Units of the Company, without the prior 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 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 Boston Chicken. Any such transfer
shall be subject to the transferee member'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 member's execution of this Pledge Agreement. The
parties agree that a sale or transfer of Pledged Units or other Collateral
pursuant to and in accordance with the terms and provisions of each Development
Agreement and Franchise Agreement relating thereto between the Company and
Boston Chicken shall be deemed to be a sale or transfer of such Pledged Units or
Collateral with
-3-
<PAGE>
Boston Chicken's prior express written consent hereunder, provided that any such
transferee agrees to and does pledge to Boston Chicken such Pledged Units or
Collateral as provided herein.
(c) Boston Chicken, 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
Boston Chicken 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 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 Units and other
Collateral hereunder. The Members 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 Units and other Collateral to remove the managers of the Company, or
any of them, and to elect new managers of the Company, who may thereafter manage
the affairs of the Company, 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 Company, and the pledge of its assets to
secure such borrowing.
8. Issuance or Acquisition of New Units; Mergers, Sales and Other
--------------------------------------------------------------
Disposition of Assets. The Members shall not permit the Company to (a) issue new
- ---------------------
units of ownership interest in the Company, or any options, subscription rights,
or warrants with respect thereto (except options granted under the Company's
1996 Unit Option Plan), (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 Boston
Chicken's prior written consent.
9. Delivery of Certificates. If the Pledged Units are at any time
------------------------
represented by certificates, the Members shall deliver to Boston Chicken such
certificates in form suitable for transfer together with executed blank
assignment or transfer documents. If for any reason any of the Members acquires
any interest in any additional units of ownership interest in the Company and
such additional units are certificated, such Member shall immediately deliver
certificates representing those units in form suitable for transfer and blank
assignment or transfer documents to Boston Chicken to be held by Boston Chicken
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 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,
-4-
<PAGE>
and the Company hereby authorizes Boston Chicken 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 Boston Chicken) and
then to the payment of the other Secured Obligations. Boston Chicken 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 Boston Chicken. Boston Chicken shall be under no obligation
to preserve rights against prior parties.
(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.
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. If certificates representing the Pledged Units
--------------------
shall at any time have been delivered to Boston Chicken hereunder, Boston
Chicken 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
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 follows:
-5-
<PAGE>
If to the Members:
At the addresses set forth below their signatures on
the attached signature pages
with a copy to:
Attention:
Facsimile:
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 W. Madison Street
Suite 3300
Chicago, Illinois 60602
Attention: Paul T. Metzger
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.
15. Further Assurances. The Members shall sign any such other documents
------------------
or instruments, including UCC financing statements, 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.
-6-
<PAGE>
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 Members shall bind their
successors and assigns. The Members acknowledge 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 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,
stock powers, stock certificates, conveyances, powers of attorney, and
assurances as may be required to sell the Pledged Units as
-7-
<PAGE>
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 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 each Member or by the
mailing thereof by registered or certified mail, postage prepaid addressed to
each Member 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 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 BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
* * * * * *
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement
to be effective as of the date and year first above written.
MEMBERS
Signature pages attached
BOSTON CHICKEN, INC.
By: _________________________________
Title: Vice President
-9-
<PAGE>
Schedule A
----------
To
Pledge Agreement
----------------
Pledged Units at _____________, ____
Certificate No. of Issued
No. Units To
- ----------- ------ ------
<PAGE>
EXHIBIT D
SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of __________, 19___ (this "Security
Agreement"), is made by ________________, a _____________________ corporation
(the "Company"), in favor of Boston Chicken, Inc., a Delaware corporation
("Boston Chicken").
WITNESSETH:
WHEREAS, _________________________, L.L.C., a Delaware limited liability
company (the "Borrower") has entered into a Secured Loan Agreement, dated as of
_____________, 19__ (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
________________ ($_______________), together with interest thereon, in
accordance with the terms of a convertible secured promissory note dated
___________, 1996, 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
-1-
<PAGE>
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, chattel paper, leasehold improvements, contract
rights (including its rights as lessee under all leases of real property),
general intangibles, deposit accounts, tax refunds, 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 Chickens 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 paper,
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 of the Company is_____________________, and the Company operates under
no other names
-2-
<PAGE>
[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. 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 this paragraph 1(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) 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 Default specified in the
-----------------
Loan Agreement shall be deemed a 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 not limited
-4-
<PAGE>
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 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
-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.
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:________________________
-7-
<PAGE>
EXHIBIT E
FORM OF OPINION OF COUNSEL
-1-
<PAGE>
[Form of Opinion of Counsel]
[Date]
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Ladies and Gentlemen:
We have acted as counsel for ___________________, 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 Illinois 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 Pledge Agreement, dated of even date herewith, between
the Members and Boston Chicken delivered pursuant to the Agreement (the
"Pledge Agreement");
(d) the Boston Chicken, Inc. Development Agreement, of even
date herewith, by and between the Company and Boston Chicken (the
"Development Agreement");
(e) the Addendum to the Development Agreement, of even date
herewith, by and between the Company and Boston Chicken; and
(f) [other documents as applicable]
<PAGE>
(ii) A certificate of the ____________ of the Company
certifying as to (A) the Certificate of Formation and Operating Agreement
of the Company and (B) evidence of authorization of the transactions
contemplated by the Documents;
(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
__________________ 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 States
of Delaware and ___________ dated ________________, attesting to the
continued existence and good standing of the Company in that state.]
We have also examined such other 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 managers 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 its
formation, with power and authority to enter into the Agreement and to
issue the Note and incur the indebtedness to be evidenced thereby.
2. Each of the Documents has been duly authorized by all required
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 pursuant to the
provisions of (a) its Certificate of Formation or Operating Agreement, (b)
any of the Other Agreements and Court Orders, or (c) any law, rule, or
regulation applicable to the Company or its business.
-2-
<PAGE>
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. Under applicable law, the Company's Certificate of Formation
and Operating Agreement, 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.
6. 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.
7. 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.
8. 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
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
- -------------------
* 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.
- -------------
-3-
<PAGE>
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.
9. 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 agreements in the Documents to pay compound
interest or interest on overdue interest;
(ii) the Company's agreement in the Agreement to indemnify you
against costs, expenses, or liability notwithstanding your acts of gross
negligence or willful misconduct;
(iii) 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;
-4-
<PAGE>
(iv) 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;
(v) 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
(vi) 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:
-5-
<PAGE>
(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:
(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 limited liability company law of the state
of the Company's formation if different than the opining jurisdiction] and the
federal laws of the United States, and we do not
-6-
<PAGE>
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 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,
-7-
<PAGE>
Annex 1
UCC-1 Financing Statement filings to perfect a security interest in collateral
not constituting fixtures:
State Filing Office Reporting Publication
- ----- ------------- ---------------------
Exhibit A
---------
Certificate
-----------
The undersigned hereby certifies that he is the _____________________ of
___________________, a ______________ 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: __________________
_________________________
Manager
<PAGE>
EXHIBIT F
ACCOUNTING SERVICES AGREEMENT
<PAGE>
ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
------------------------------------------------
This Accounting and Administrative Services Agreement ("Agreement") is
made as of the 27th day of February, 1997, by and between Boston Chicken, Inc.,
a Delaware corporation (the "Company"), and
______________________________________________________, a ________________ (the
"Developer").
Recitals
--------
1. The Company and the Developer have entered into an Area
Development Agreement dated _____________________________________, as amended
(the "ADA"), and have entered into or propose to enter into one or more
Franchise Agreements (each a "Franchise Agreement" and, collectively, the
"Franchise Agreements"), each providing for the franchise by the Company to the
Developer or its authorized designee of the right to operate a Boston Chicken
Unit (as defined in the Franchise Agreement, now d/b/a Boston Market).
2. Pursuant to the ADA and/or the Franchise Agreements, the
Developer is required to maintain certain accounting records and provide to the
Company certain periodic financial reports and other data.
3. Developer has requested and the Company has offered that the
Company assist the Developer in maintaining certain accounting records and
preparing certain financial reports required under the ADA and/or the Franchise
Agreements.
4. The Developer desires to enter into an agreement pursuant to
which the Company would perform such services for Developer upon the terms and
subject to the conditions hereinafter provided.
Agreements
----------
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for 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, the Company shall provide to the Developer for each Boston
Chicken Unit operated by the Developer and for the Developer's Entity as a whole
the following accounting services (the "Services"):
<PAGE>
(a) per-unit calculation of revenue and expenses by accounting
category per the Company's standard chart of accounts and calculation of Royalty
Based Revenue and Royalty Fees (as each term is defined in the Franchise
Agreements);
(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 Developer's Boston Chicken Units, either
through the Company's designated payroll service bureau or through in-house
technology;
(c) administration of accounts payable (including check
generation and wire transfers);
(d) administration of recurring cash transfers between the
Developer's applicable Unit and corporate bank accounts;
(e) maintenance of lease files and compliance with reporting
and disbursement obligations thereunder;
(f) administration and maintenance of a Developer general
ledger trial balance, balance sheet, income statement and certain other
corporate and Unit reports by accounting category per the Company's standard
chart of accounts and consistent with periodic reports the Company customarily
prepares in the normal course of business to manage its financial affairs, and
periodic distribution of such reports to Developer using the Company's standard
report distribution system;
(g) maintenance of all accounting records supporting Developer
financial statements (consistent with the Company's record retention program) in
reasonable fashion separate and discrete from the accounting records of the
Company; and
(h) preparation of period end reconciliations and associated
period end journal entries for all Developer balance sheet accounts.
1.2 The Services shall not include any of the following, each of
which is the sole responsibility of Developer:
(a) selection of accounting policies to be applied to the
Developer's books and records; however, the Company will consistently apply the
appropriate policies selected by Developer;
(b) negotiation of terms and conditions between Developer and
its suppliers, vendors, and others, such as remittance due dates and discounts;
-2-
<PAGE>
(c) quarterly review and edit of the Developer's vendor
masterfile for current and accurate data; however, the Company will
appropriately apply updates to the vendor masterfile as directed by the
Developer;
(d) signature and final release of trade accounts payable
disbursement checks in excess of $____________________________;
(e) final review and approval of annual financial statements;
(f) cash investment activities; however, the Company will
initiate and manage repetitive and/or fixed cash management activities as
directed in writing by the Developer;
(g) approval and coding of invoices for disbursement;
(h) preparation of budgets (except that the Company will
develop a budget process and calendar to facilitate the preparation of annual
budgets by the Developer); and
(i) preparation, filing, or signing of any tax returns required
to be filed by Developer, with the exception of sales and use tax returns which
will be prepared, but not, however, filed or signed by the Company.
1.3 Developer agrees to supply the Company all information,
materials, data, and documents necessary or advisable to properly perform the
Services in such form, format, or media as the Company may reasonably request,
to make available the officers of the Developer to answer any inquiries in
connection therewith, and to cooperate with the Company by effectively applying
locally the policies and procedures defined in the Company'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, which actions
and compliance shall be a condition to the Company's obligations hereunder.
1.4 Developer agrees to utilize the Company's designated
auditors and tax consultants for annual audit and tax return preparation
activities.
1.5 Developer agrees to utilize the Company's designated bankers
(except for Unit bank accounts) and credit card processors for all corporate
cash management activities.
2. Administrative Services.
------------------------
-3-
<PAGE>
2.1 Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall provide to Developer 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
Developer and for each covered employee thereof;
(b) Bid, negotiate, establish, and administer a Directors and
Officers Liability Insurance program annually on behalf of Developer, as
requested;
(c) Bid, negotiate, establish, and administer property,
liability, umbrella and related insurance programs annually on behalf of
Developer;
(d) Bid, negotiate, establish, and administer a Workers
Compensation insurance program annually on behalf of Developer;
(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 Developer;
(g) Perform year-end accrual analyses for health, dental,
and FLEX Plans on behalf of Developer.
2.2 Developer agrees to supply Company all information,
materials, data, and documents necessary or advisable to properly perform the
Admin. Items in such form, format, or media as Company may reasonably request,
to make available the officers of Developer to answer any inquiries in
connection therewith, and to cooperate with Company in the performance of its
duties.
3. Fees for Services and Expense Reimbursement.
-------------------------------------------
3.1 In consideration of the Services, Developer agrees to pay to
Company accounting and administrative fees, separate and apart from any fee
otherwise payable under the ADA or any Franchise Agreement, as follows:
(a) During the time prior to the opening of the thirtieth
Boston Chicken unit accounted for pursuant to this Agreement, the fee payable by
the Developer for each accounting period ("Accounting Period") in accordance
with the
-4-
<PAGE>
Company's fiscal year of thirteen four-week accounting periods shall be $750 per
Unit for all Units operated by the Developer.
(b) Upon the opening of the thirtieth Boston Chicken Unit
accounted for pursuant to this Agreement and prior to the opening of the
fiftieth Boston Chicken Unit accounted for pursuant to this Agreement, the fee
payable by the Developer for each Accounting Period shall be $650 per Unit for
all Units operated by the Developer.
(c) Upon the opening of the fiftieth Boston Chicken Unit
accounted for pursuant to this Agreement and prior to the opening of the
hundredth Boston Chicken Unit accounted for pursuant to this Agreement, the fee
payable by the Developer for each Accounting Period shall be $550 per Unit for
all Units operated by the Developer.
(d) Upon the opening of the hundredth Boston Chicken Unit
accounted for pursuant to this Agreement and prior to the opening of the two
hundredth Boston Chicken Unit accounted for pursuant to this Agreement, the fee
payable by the Developer for each Accounting Period shall be $450 per Unit for
all Units operated by the Developer.
(e) Upon the opening of the two hundredth Boston Chicken Unit
accounted for pursuant to this Agreement and for all Units opened thereafter,
the fee payable by the Developer for each Accounting Period shall be $350 per
Unit for all Units operated by the Developer.
In the event that the Developer and the Boston Chicken Units meet certain
reporting requirements, administrative procedure compliance requirements, and
timeliness deadlines as the Company may establish and announce from time to time
in its sole discretion, the unit fees set forth in (a) through (e), above shall
be reduced to $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, the Developer shall reimburse the Company for all non-
ordinary, out-of-pocket expenses incurred by the Company or its affiliates in
connection with the 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, however,
must be approved by Developer prior to incurring such expense. Expenses payable
under this Section 3.2 shall be paid in the manner specified in Section 5.1 of
this Agreement. These expenses will not include any expenses associated with
computer system enhancements at the Company's Support Center, except as
otherwise agreed to by the parties.
3.3 In addition to the Services and Admin. Items, Company may agree
in its sole discretion to provide other accounting and administrative services
to
-5-
<PAGE>
Developer from time to time of a nature not specifically delineated herein on
such terms and for such fees as shall be mutually determined by Company and
Developer.
4. Term of Services.
----------------
4.1 The term of this Agreement shall be for one year 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 the Company may terminate this Agreement without notice and cease rendering
the Services hereunder upon any non-payment by the Developer of the fees and
expenses provided for herein when such fees and expenses are due and payable.
4.2 Termination of this Agreement shall terminate the Company's
obligations to provide the Services. Upon termination of this Agreement, the
Developer shall pay to the Company the fees due the Company in accordance with
Section 3.1 hereof for the Services rendered by the Company through the date of
termination and reimburse the Company in accordance with Section 3.2 hereof for
expenses incurred by the Company in connection with the Services rendered by the
Company through the date of termination.
5. Payment of Amounts due Hereunder; Liability.
-------------------------------------------
5.1 The Company will calculate and collect through electronic
funds transfer the total dollar amount of all fees and expenses due to the
Company hereunder, at the end of each Accounting Period.
5.2 The Company shall not be liable for any cost, damage,
expense, or loss of Developer, its 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 the
Company to perform any of the Services or Admin. Items for Developer, 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 the Company'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 Company's insurance
applicable thereto), or (ii) reliance by Developer, the Units, or employees of
any of them on any data or advice Company may provide pursuant to this
Agreement. In no event will Company be liable for indirect, incidental,
consequential, special, speculative, exemplary, or punitive damages (including,
but not limited to, loss of revenue or profit).
5.3 COMPANY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS
OR IMPLIED, WITH RESPECT TO THE
-6-
<PAGE>
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 set forth in this Agreement, the
Company will have neither express or implied power to execute agreements on
behalf of the Developer or in any manner bind the Developer 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:
If to the Developer:
If to the Company:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: Stuart Fullinwider
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.
-7-
<PAGE>
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.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
------------------------------------
By:
--------------------------------
Title:
-----------------------------
BOSTON CHICKEN, INC.
By:
--------------------------------
Title:
-----------------------------
acctsv97.doc
-8-
<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. (the "Company") in connection with and as an inducement to and of the
consummation of certain transactions with __________________, a Delaware limited
liability company (the "Developer"):
The undersigned has conducted an investigation of the Developer, including the
management and current and proposed operations of the Developer, and of the
locations, characteristics, and demographics of (i) the Boston Market Stores in
the Development Area (as defined in the Development Agreement by and between the
Company and the Developer of even date herewith) (the "Stores"), (ii) the sites
for Boston Market Stores in the Development Area subject to executed leases or
purchase contracts (the "Leased and Contracted Sites"), and (iii) the potential
sites for Boston Market Stores being negotiated in the Development Area (the
"Sites in Progress"). The undersigned has reviewed all of the documents,
records, reports, and other available materials relating to the Developer'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 Developer'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 Developer, 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 the Company or its officers, directors, agents, representatives, or
attorneys.
Very truly yours,
-1-
<PAGE>
EXHIBIT K-1
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
INDUCEMENT AGREEMENT
--------------------
K-1-1
<PAGE>
[SECOND] AMENDED AND RESTATED
INDUCEMENT AGREEMENT*/
between
BOSTON CHICKEN, INC.
and
---------------
Dated as of
December ___, 1996
- ------------------------
*/ Those FADs that have already entered into Amended and Restated
Inducement Agreements will each enter into a "Second Amended and
Restated Inducement Agreement."
<PAGE>
[SECOND] AMENDED AND RESTATED
INDUCEMENT AGREEMENT
THIS [SECOND] AMENDED AND RESTATED INDUCEMENT AGREEMENT, dated as of
December ___, 1996 (this "Agreement"), is made by and between BOSTON CHICKEN,
INC., a Delaware corporation ("BCI"), and the Company, whose name appears on the
signature page hereof (the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and BCI have entered into an area development
agreement, as amended (as it may be further modified, amended, restated or
replaced, the "Development Agreement"), pursuant to which the Company is
required to establish and operate Boston Market retail food service outlets or
flagship stores and to enter into individual franchise agreements; and
WHEREAS, to help it meet its obligations under the Development
Agreement, the Company has previously entered into a secured loan agreement with
BCI, as modified, amended or restated, described on Schedule A (as it may be
----------
further modified, amended, restated or replaced, the "Secured Loan Agreement");
and
WHEREAS, the Company has a continuing need for financing to meet its
obligations under the Development Agreement, and has asked and induced BCI to
enter into the Operative Documents from time to time to assist the Company in
obtaining such financing; and
WHEREAS, the Operative Documents provide or contemplate that (i) a
Lessor will make Advances to BCI in connection with the Lessor's acquisition of
certain Lease Assets; (ii) Lessor will purchase (x) the Equipment from or on
behalf of BCI and certain of its Area Developers ("ADs"), including the Company,
and (y) certain fee property and leasehold improvements previously acquired by
certain ADs (the "Acquired Property") from such ADs[, including the Company];
(iii) BCI, BC Real Estate Investments, Inc. ("BCRE") and the ADs, as Agents,
will purchase the Real Estate (other than the Acquired Property) in accordance
with the terms and conditions of the Agency Agreement; (iv) the Lessor will pay
the Purchase Price for the Equipment and the Acquired Property to BCI for the
benefit of the applicable AD, whereupon BCI will provide to such AD a payment or
credit against amounts owed by such AD to BCI or expended by such AD for such
Equipment or Acquired Property, which payment or credit will be equal to the
value received by BCI on account of the Equipment and/or Acquired Property sold
by such AD to Lessor; (v) the Lessor will reimburse BCI for the benefit of the
applicable Agent for the Purchase Price of any Real Estate paid by such Agent
pursuant to the Agency Agreement and, if such Agent is an AD, BCI will provide
to such AD a payment or credit against amounts owed by such AD to BCI or
expended by such AD for such Real Estate; (vi)(x) the Equipment or Acquired
Property purchased from the AD (and, if
<PAGE>
2
applicable, any new Equipment acquired directly from BCI or from a third party
vendor) and (y) the Real Estate (other than the Acquired Property) purchased by
the Agent and acquired by the Lessor, in each case, will be leased by the Lessor
to BCI pursuant to the Lease; and (vii) BCI will simultaneously sublease such
Lease Assets to ADs entering into a Sublease with BCI; and
WHEREAS, the execution of this Agreement by the Company is a
precondition to BCI's execution of any Schedule with respect to the Lease Assets
to be leased by BCI and subleased by the Company;
WHEREAS, capitalized terms used but not otherwise defined herein
(including those used in the foregoing recitals) shall have the meanings
specified in Appendix I annexed hereto; and
[WHEREAS, the Company previously entered into that certain Inducement
Agreement dated as of _______ with BCI (the "Original Inducement Agreement"),
and the parties hereto wish to amend and restate the Original Inducement
Agreement in its entirety as provided herein.]
[WHEREAS, the Company previously entered into that certain Inducement
Agreement dated as of ___________ with BCI, which was amended and restated
pursuant to that certain Amended and Restated Inducement Agreement dated as of
_______ (the "Restated Inducement Agreement"), and the parties hereto wish to
amend and restate the Restated Inducement Agreement in its entirety as provided
herein.]
NOW THEREFORE, 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 BCI, and the rental of
Lease Assets by BCI hereunder, the parties hereto agree that the
[Original][Restated] Inducement Agreement is hereby superseded, amended and
restated in its entirety to read as follows:
ARTICLE I
GENERAL PROVISIONS
------------------
1.1 Effective Date. This Agreement shall become effective on
---------------
December ___, 1996.
1.2 Amendment and Restatement. In consideration of the premises and
--------------------------
mutual agreements herein contained, and in accordance with [Section 10.4] of the
[Original] [Restated] Inducement Agreement, the parties to this Agreement hereby
<PAGE>
3
agree that the [Original] [Restated] Inducement Agreement is hereby superseded,
amended and restated as set forth herein.
1.3 Consent. This Agreement constitutes BCI's written (i) consent to
-------
the transactions contemplated herein and in the Subleases, and (ii) waiver of
any default under or breach of any representation, warranty or covenant
contained in the Development Documents and the Associated Documents as a result
of the Company's execution and delivery of and its performance of its
obligations under this Agreement, any Sublease or any document or certificate to
be delivered by the Company in connection therewith.
1.4 Advance Dates. Upon receipt of notice from BCI of an anticipated
-------------
Advance Date, and in no event later than four (4) Business Days prior to the
date BCI is obligated to provide any Advance Request to Lessor in connection
with such Advance Date, the Company will provide to BCI a description of the
Items of Lease Assets the Company desires to have purchased or acquired on its
behalf, the location thereof and the Purchase Price therefor, together with such
other documentation pertaining to such Items of Lease Assets as BCI may request
(a "Delivery Request"). BCI shall, in its sole discretion, decide whether to
include such Items of Lease Assets in an Advance Request. If BCI decides to
include any such Item of Lease Assets in an Advance Request and to lease such
Item of Lease Assets from Lessor, the Company shall simultaneously sublease from
BCI such Item of Lease Assets.
1.5 Nature of Transactions. It is the intent of BCI and the Company
----------------------
that: (a) any Lease from Lessor to BCI constitutes an operating lease for
purposes of BCI's financial reporting; (b) any Sublease from BCI to the Company
constitutes an operating lease for purposes of the Company's financial
reporting; (c) the Company will be treated as the owner of the Lease Assets
subleased to it for purposes of Federal and state income tax; and (d) any
Sublease between BCI and the Company grants to BCI a security interest or lien,
as the case may be, in the Lease Assets covered by such Sublease (which security
interest will be assigned to the Lessor), which lien is junior and subordinate
in all respects to the lien previously granted by BCI to the Lessor in such
Lease Assets. The Company acknowledges and agrees that BCI has made no
representations or warranties concerning the tax, accounting or legal
characteristics of these transactions, and the Company has obtained and relied
upon such tax, accounting and legal advice as it deems appropriate.
1.6 No Obligation. The Company acknowledges that BCI may at any time
-------------
decline to include in an Advance Request the Company's request for any Item of
Lease Assets or all such Items of Lease Assets. The Company agrees that any such
denial will not constitute a breach of this Agreement, and shall not give rise
to any claim or cause of action against, or liability of, BCI whatsoever,
including, without limitation, any liability in fraud or any other tort.
<PAGE>
4
ARTICLE II
ADVANCES AND RENT PAYMENTS
--------------------------
2.1 Payments. On the terms and subject to the conditions set forth
--------
herein, BCI may from time to time include the Company's request for Lease Assets
in an Advance Request and, upon satisfaction or waiver of the provisions of
Section 3.1 hereof, provide funds for the Company's benefit which shall be
- -----------
applied in accordance with Section 2.2 of this Agreement.
-----------
2.2 Application of Advances. Funds provided to or credits applied
-----------------------
for the benefit of the Company in connection with the transactions contemplated
hereunder shall be applied (i) to reimburse BCI for expenditures made by it to
purchase any Items of Lease Assets, or for advances made by BCI to the Company
under any loan agreement to enable the Company to purchase Items of Lease Assets
(including any Real Estate purchased by an Agent), (ii) to reimburse the Company
for expenditures made by it to purchase any Items of Lease Assets (including any
Real Estate purchased by the Company as Agent), or (iii) directly to pay a
vendor or Lessor for the purchase of any Items of Lease Assets.
2.3 Computation of Rent. (a) On each Sublease Schedule, BCI shall
-------------------
include an amortization schedule setting forth the scheduled repayments under
the Sublease of all payments from Lessor made on or prior to the date thereof to
or for the benefit of the Company (or to BCI in repayment of amounts advanced by
BCI to the Company), together with any other costs assignable to the Company, as
calculated by BCI.
(b) The amount of rent payable under the Sublease on each
Sublease Payment Date (the "Basic Sublease Rent") shall be calculated as to any
Lease Assets in the manner set forth in the applicable Sublease Schedule.
(c) In the event that BCI includes the Company's request for
any Item of Lease Assets in an Advance Request, and BCI incurs any expense or
cost (including, without limitation, payment of any interest), because the
Advance Date shall not have occurred on the date specified in such Advance
Request or because such Item of Lease Assets is not included in any such Advance
Request, the Company shall pay to BCI its pro rata share of such expenses and
costs, as determined by BCI in its reasonable discretion, which payment will be
made on the occurrence of the postponed Advance Date and shall be an additional
condition precedent to the delivery of any Item of Lease Assets to the Company
on such Advance Date.
2.4 Ledger Account. BCI shall maintain an account recording any
--------------
funds provided to, or credits applied for, the benefit of the Company as
provided in Section 2.2, and all payments made by the Company pursuant to this
-----------
Agreement and
<PAGE>
5
any Sublease; provided, however, the failure to maintain such account or record
-------- -------
any payments therein shall not relieve the Company of its obligations to repay
the outstanding amount of rent, all accrued interest thereon, and any amount
payable with respect thereto in accordance with the terms of this Agreement and
any Sublease.
ARTICLE III
CONDITIONS OF ADVANCES
----------------------
3.1 Conditions Precedent. The making of any payments to the Company
--------------------
in connection with the Lessor's acquisition of the Lease Assets to be subleased
by BCI to the Company shall be conditioned on, shall not exceed the amount of,
and shall not precede BCI's receipt of an Advance on an Advance Date. The making
of any such payment to the Company and the inclusion by BCI in an Advance
Request of any Items of Lease Assets covered by a Delivery Request are further
conditioned on and subject to the following:
(a) Delivery Request. The Company shall have timely delivered
----------------
to BCI, and BCI shall have accepted, a Delivery Request prepared and delivered
in accordance with Section 1.4 hereof.
-----------
(b) Performance. The Company shall have performed and complied
-----------
with all agreements and conditions contained herein and in any Sublease, the
Development Agreement, the Franchise Agreements between BCI and the Company
(such Franchise Agreements collectively, the "Franchise Agreement"), and all
other agreements required by or relating to the Development Agreement or the
Franchise Agreement (the Development Agreement, the Franchise Agreement and such
other agreements hereinafter collectively referred to as the "Development
Documents"), and in the Secured Loan Agreement, any other loan agreement with
BCI, the Security Instruments (as defined in the Secured Loan Agreement), any
note issued by the Company, or any instrument evidencing a debt of the Company
to BCI (such agreements and instruments hereinafter collectively referred to as
the "Associated Documents") required to be performed or complied with by it.
(c) Consents and Approvals. All Governmental Actions and other
----------------------
approvals and consents required to be taken, given or obtained, as the case may
be, by or from any Authority or another Person, or by or from any trustee or
holder of any indebtedness or obligation of the Company, that are necessary, in
connection with the execution, delivery and performance of this Agreement, any
Sublease, the Development Documents and the Associated Documents, shall have
been taken, given or obtained, as the case may be, shall be in full force and
effect, and the time for appeal with respect thereto shall have expired (or, if
an appeal shall have been taken, the same shall have been dismissed) and shall
not be subject to any pending proceedings or appeals (administrative, judicial
or otherwise).
<PAGE>
6
(d) Representations and Warranties True; Absence of Defaults
--------------------------------------------------------
and Material Adverse Effect. Each representation and warranty of the Company
- ---------------------------
contained herein or in any Sublease, the Development Documents and the
Associated Documents shall be true and correct in all material respects on and
as of such Advance Date as if made on and as of such Advance Date, except that
any such representation or warranty which is expressly made only as of a
specified date need be true and correct in all material respects on and only as
of such date. No Default or Event of Default under this Agreement, default or
event of default under the Development Documents or the Associated Documents,
and no Sublease Default or Sublease Event of Default, shall have occurred and be
continuing. Since the date hereof, no Material Adverse Effect shall have
occurred.
(e) Officer's Certificate. BCI shall have received an
---------------------
Officer's Certificate of the Company in form and substance satisfactory to BCI,
stating that (i) each and every representation and warranty of the Company
contained in this Agreement, any Sublease, the Development Documents and the
Associated Documents is true and correct in all material respects on and as of
such Advance Date as though made on and as of such Advance Date, except that any
such representation or warranty which is expressly made only as of a specified
date need be true and correct in all material respects on and as of such date;
(ii) no Default or Event of Default under this Agreement, default or event of
default under the Development Documents or the Associated Documents, and no
Sublease Default or Sublease Event of Default, has occurred and is continuing;
(iii) each of this Agreement, any Sublease, the Development Documents and the
Associated Documents is in full force and effect with respect to it; and (iv)
the Company has duly performed and complied with all covenants, agreements and
conditions contained herein and in any Sublease, the Development Documents and
the Associated Documents required to be performed or complied with by it on or
prior to such Advance Date.
(f) Filings and Recordings. (1) All filings or recordings
----------------------
reasonably requested by BCI, including precautionary financing statements, to
perfect the rights, title and interests of BCI in the property and interests in
property described in Sections 4.1 and 4.4 of this Agreement, shall have been
------------ ---
made by the Company, and all recording and filing fees and taxes with respect to
such recordings or filings shall have been paid in full by the Company, and
satisfactory evidence thereof shall have been delivered to BCI.
(2) All filings or recordings requested by BCI, including
precautionary financing statements, to perfect the rights and title in the Lease
Assets or any other Collateral of any Person entitled to such filings or
recordings pursuant to any Operative Document, shall have been made by the
Company, and all recording and filing fees and taxes with respect to such
recordings or filings shall have been paid in full by the Company, and
satisfactory evidence thereof shall have been delivered to BCI;
<PAGE>
7
(g) Searches. BCI shall have received reports acceptable to BCI (i)
--------
as to the Company, by the offices of the Secretary of State of the states, or by
the appropriate filing or recording office of each county, parish or town, in
which the Equipment or the Real Estate to be funded on such Advance Date is to
be located, each dated as close to the relevant Advance Date as practicable,
(ii) in respect of a search of the applicable UCC files maintained by such
offices and (iii) in respect of a search, or an update of a search previously
received by BCI from the Company, of the applicable UCC files and any indices of
Liens maintained by such offices (including, if applicable, indices of judgment,
revenue and tax liens);
(h) Sublease. The Company and BCI shall have executed the relevant
--------
Sublease and a Sublease Schedule with respect to any Items of Lease Assets to be
funded on an Advance Date, both in form and substance satisfactory to BCI, and
prior to or concurrent with the execution of such Sublease, the Company shall
have obtained and delivered to BCI consents from the Company's landlords and/or
mortgagees in form and content acceptable to, and as required by, BCI. The
Company shall deliver to BCI (i) a description of the Items of Lease Assets to
be leased under the Sublease and (ii) the street address, city, county and state
of the Boston Market Unit where any Equipment comprising such Lease Assets are
to be located during the term of the Sublease; and the Company shall have
executed such other documents as BCI may request from time to time.
(i) Agency Agreement. If the Delivery Request includes Real Estate
----------------
(other than Acquired Property), the Agent purchasing such Real Estate shall have
complied with all applicable terms and provisions of the Agency Agreement.
(j) General Release. The Company shall have executed and delivered
---------------
to BCI a General Release Agreement substantially in the form of Exhibit 1
---------
hereto.
(k) Other Requirements. BCI shall have received from the Company, at
------------------
the Company's cost and expense, in form and substance satisfactory to BCI, all
certificates, consents, affidavits, schedules, instruments and other documents,
which BCI may reasonably request including, without limitation, (i) releases of
liens, termination statements and consents from landlords and mortgagees of the
Boston Market Units; (ii) evidence that insurance complying with the relevant
provisions of the applicable Sublease is in full force and effect; (iii)
Sublease Schedules; (iv) bills of sale; (v) manufacturer's invoices; (vi) local
counsel opinions; (vii) appraisals; (viii) deeds of conveyance and assignments
of contracts in respect of any Real Estate; and (ix) opinion of Company's
counsel.
<PAGE>
8
ARTICLE IV
SECURITY AND COLLATERAL
-----------------------
4.1 Security Interest. The Company acknowledges and confirms that,
-----------------
to secure payment and performance of its obligations to BCI under the Associated
Documents and the Development Documents, the Company has granted to BCI a
continuing security interest in and to the property and interests in property,
whether now owned or hereafter acquired by the Company and wheresoever located,
listed below. The Company further acknowledges and confirms that such continuing
security interest secures the Company's obligations to BCI under this Agreement,
any Sublease and all other obligations of the Company to BCI, including all
obligations under the Associated Documents, whether now existing or hereafter
arising, and that the existence and preservation of such continuing security
interest constitutes a part of the inducement for BCI to enter into the
Operative Documents. Subject to the provisions of paragraph (e) hereof, such
property and interests in property include:
(a) all 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 accessions 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 Section 4.2 and Section 4.4,
----------- -----------
being referred to collectively as the "Inducement Collateral").
(e) Notwithstanding any provision herein to the contrary, the
Company and BCI acknowledge and confirm that the continuing security interest
previously granted to BCI by the Company under the Secured Loan Agreement shall
not include any Item of Equipment or any Leasehold Improvements subject to any
Sublease, and BCI may file or cause to be filed following the date hereof a UCC-
3 financing statement releasing such previously granted security interest in
such Items of Equipment or such Leasehold Improvements; provided, however, that
-------- -------
the Company hereby agrees to grant to BCI a security interest in each such Item
of Equipment or such Leasehold Improvements immediately upon the release of such
Item of
<PAGE>
9
Equipment or such Leasehold Improvements from the terms and scope of any
Sublease and from all liens held by a Lessor thereon.
4.2 Additional Security. The Company acknowledges and confirms that,
-------------------
in addition to the security interest described in Section 4.1 above, the
-----------
Company's obligations to BCI under the Associated Documents and the Development
Documents are secured by the security interest created pursuant to the
agreements set forth in Schedule B hereto. The Company further acknowledges and
----------
confirms, and the partners, the stockholders of the general partner, the holders
of membership units of a limited liability company, or the stockholders of the
holders of preferred partnership or membership units of a limited liability
company, as applicable, shall, by executing Officer's Certificates, acknowledge
and confirm, that the security interest created pursuant to the agreements set
forth in Schedule B secures the Company's obligations to BCI under this
----------
Agreement, the Sublease and all other obligations of the Company to BCI,
including the obligations under the Associated Documents and the Development
Documents, and that such security interest constitutes a part of the inducement
for the Company to enter into the Operative Documents.
4.3 Subsidiary Associated Documents. The Company shall cause each
-------------------------------
person or entity becoming a Subsidiary of the Company from time to time to
execute and deliver to BCI within five days after such person or entity becomes
a Subsidiary, a security agreement substantially in the form attached as Exhibit
E to the Secured Loan Agreement, together with all financing statements and
other related documents (including real estate mortgages) as BCI may request and
such closing documents with respect to such Subsidiary of the type described in
Article VII of the Secured Loan Agreement as BCI may request, sufficient to
- -----------
grant to BCI liens and security interests in all assets of each Subsidiary of
the type described in Section 4.1 hereof. The Company shall from time to time
-----------
execute and deliver to BCI within five days after a person or entity becomes a
Subsidiary of the Company, a stock pledge agreement in the form acceptable to
BCI and modified appropriately, pursuant to which the Company shall grant a
security interest in favor of BCI 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
"Associated Documents" used herein and the stock and assets of such Subsidiary
covered by such Associated Documents shall be included in the term "Inducement
Collateral" used herein.
4.4 Preservation of Inducement Collateral and Perfection of Security
----------------------------------------------------------------
Interests Therein. (a) The Company shall execute and deliver to BCI, and cause
- -----------------
any Subsidiary to do likewise, concurrently with the execution of this
Agreement, and shall execute and deliver to BCI at any time or times hereafter
at the request of BCI, all financing statements or other documents, including
mortgages on real estate owned
<PAGE>
10
by the Company, and pay the cost of filing or recording the same in all public
offices deemed necessary or advisable by BCI, as BCI may request, in forms
satisfactory to BCI, and take all further action that BCI may request, or which
may be reasonably necessary or desirable, to perfect and keep perfected the
security interest in the Inducement Collateral granted by the Company to BCI, or
otherwise to protect and preserve the Inducement Collateral and BCI's security
interest therein. Should the Company fail to do so, BCI is authorized to sign
any such financing statements or documents as the Company's agent.
(b) The Company will furnish to BCI from time to time
statements and schedules further identifying and describing the Inducement
Collateral and such other reports in connection with the Inducement Collateral
as BCI may reasonably request, all in reasonable detail.
(c) The Company shall notify BCI, 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 BCI, 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 BCI.
(d) The Company shall cause all tangible Inducement 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 recommendations.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Incorporation of Representations and Warranties. The
-----------------------------------------------
representations and warranties set forth in Article IV of the Secured Loan
Agreement are true and correct as if made on this date and each Advance Date,
and are hereby incorporated by reference in their entirety, and appropriate
alterations shall be deemed to have been made to such Article IV and this
Article V, and references in such Article IV to "Boston Chicken" shall be deemed
- ---------
to refer to BCI. The representations and warranties hereby incorporated by
reference shall survive the consummation of any and all transactions
contemplated in, or the termination of, the Secured Loan Agreement. The
representations and warranties set forth in Section 4.1 of Article IV of the
Secured Loan Agreement, incorporated by reference herein, are true and accurate
with respect to all financial statements heretofore or hereafter furnished. As
of the date hereof and each Advance Date, the Company makes to BCI the following
additional representations and warranties:
<PAGE>
11
(a) Valid Organization, Due Authorization, Valid and Binding
--------------------------------------------------------
Agreement. (i) The Company is duly organized, validly existing, and in good
- ---------
standing under the laws of the State in which it is registered as a corporation,
limited partnership or limited liability company, as the case may be, with power
and authority to enter into and perform this Agreement and the Sublease, and the
Company is qualified to do business as a foreign corporation, foreign limited
partnership or a foreign limited liability company, as the case may be, and is
in good standing in the State(s) and in each jurisdiction in which failure to so
qualify could have a Material Adverse Effect on its property, business,
operations or prospects.
(ii) If the Company is a partnership, the general
partner thereof is a corporation duly organized, validly existing, and in good
standing under the laws of its state of incorporation, with corporate power and
authority to enter into and perform this Agreement and the Sublease. The general
partner 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 Effect on its property, business, operations or prospects.
(iii) This Agreement and the Sublease have each been duly
authorized by all required action on the part of the Company, and each of this
Agreement and the Sublease 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.
(iv) The execution and delivery of this Agreement and
the Sublease and the performance by the Company of its obligations hereunder and
thereunder 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 or in
the Sublease) upon any of the property of the Company pursuant to any of the
provisions of the Company's articles of incorporation, charter or by-laws, if
the Company is a corporation, the Company's partnership agreement, if the
Company is a partnership, or the Company's certificate of formation, if the
Company is a limited liability company, or any agreement or instrument to which
the Company is a party or by which it or its assets is bound.
(v) 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 Sublease.
(b) Title. With respect to any Item of Equipment or Acquired
-----
Property to be purchased from the Company by any Person entitled to purchase
such Equipment or Acquired Property pursuant to any Operative Document, the
Company has good and marketable title to such Item of Equipment and Acquired
<PAGE>
12
Property and all such Items of Equipment and Acquired Property are free from all
Liens except for liens permitted pursuant to the applicable Lease. The Company
has not taken or caused to be taken any action which would have a Material
Adverse Effect on the Lessor's title to any Item of Equipment or Acquired
Property.
(c) Security. On each Advance Date, except for such filings or
--------
recordings as shall have been duly made on or before the applicable Advance
Date, or shall have been arranged to be made promptly thereafter (including,
without limitation, the payment of any fees or taxes relating to any of the
foregoing) in a manner satisfactory to BCI, no other filings or recordings are
necessary.
(d) Rights in Respect of the Equipment and Real Estate. There
--------------------------------------------------
is no agreement, understanding, contract or document to which the Company is a
party (x) which is necessary in order to test, maintain, repair, use or operate
any Equipment or (y) which grants to any party other than BCI, BCRE or Lessor
any option, right of first refusal or other contractual right to purchase,
acquire or lease any Real Estate.
(e) Federal Reserve Regulations. Neither the Company nor any
---------------------------
Affiliate of the Company will, directly or indirectly, use any of the funds
received by it pursuant to Section 2.1 hereof for the purpose of purchasing or
-----------
carrying any "margin security" or "margin stock" within the meaning of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System,
respectively, or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry a margin security or margin stock,
or for any other purpose which might cause any of the transactions contemplated
by this Agreement, the Sublease or any of the Development Documents or the
Associated Documents to constitute a "purpose credit" within the meaning of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System;
and neither the Company nor any Affiliate of the Company has taken or will
otherwise take or permit any action by the Company or any of its Affiliates in
connection with any of the transactions contemplated by this Agreement, the
Sublease or any of the Development Documents or the Associated Documents which
would involve a violation of Regulation G, T, U, or X, or any other regulation
of the Board of Governors of the Federal Reserve System.
(f) Compliance With Laws and Regulations. The Items of Lease
------------------------------------
Assets subject to the Sublease, their location and the current operation thereof
and thereon do not violate any laws, rules, regulations, or orders of any
Authorities that are applicable thereto, including, without limitation, any
thereof relating to matters of occupational safety and health or Environmental
Laws, except for such violations as would not have, individually or in the
aggregate, a Material Adverse Effect.
(g) No Event of Default, Casualty, etc. As of each Advance
-----------------------------------
Date, no Default or Event of Default hereunder or any default or event of
default
<PAGE>
13
under the Development Documents or the Associated Documents has occurred and is
continuing, and no Sublease Default or Sublease Event of Default has occurred
and is continuing; and no condition exists that constitutes, or with the giving
of notice or lapse of time or both would constitute, a Default or an Event of
Default, or default or event of default, under this Agreement, the Development
Documents, or the Associated Documents, or would constitute a Sublease Default
or Sublease Event of Default, and no Casualty with respect to an Item of Lease
Assets to be funded on such Advance Date has occurred and is continuing.
(h) Solvency. The Company is not entering into this Agreement
--------
with the actual intent to hinder, delay or defraud its current or future
creditors, nor does the Company intend to or believe that it will incur, as a
result of entering into this Agreement, the Sublease, the Development Documents
or the Associated Documents, debts beyond its ability to repay. The Company is
not as of the date of this Agreement "insolvent" as that term is defined in 11
U.S.C. (S) 101(34) or under the fraudulent conveyance laws of the State of the
Company's principal place of business nor will the consummation of the
transactions contemplated by this Agreement and the Subleases render the Company
insolvent (giving effect to the fair valuation of its assets) or result in the
Company having unreasonably small capital for the conduct of its business.
(i) No Transfer Taxes. No sales, use, excise, transfer or
-----------------
other tax, fee or imposition shall result from the sale, transfer or purchase of
any Item of Lease Assets pursuant to Article II, except such taxes, fees or
----------
impositions that have been paid in full on or prior to the applicable Advance
Date.
ARTICLE VI
COVENANTS OF THE COMPANY
------------------------
6.1 Incorporation of Covenants. The Company will comply with
--------------------------
the affirmative and negative covenants of the Secured Loan Agreement described
in Schedule C hereto, and such affirmative and negative covenants are hereby
----------
incorporated by reference into this Agreement in their entirety, which
incorporation shall survive any termination of the Secured Loan Agreement.
Appropriate alteration shall be deemed to have been made to such sections set
forth in Schedule C and references in such sections to "Boston Chicken" shall be
----------
deemed to refer to BCI.
6.2 Compliance Certificates.
-----------------------
(a) Defaults. The Company shall furnish to BCI,
--------
following the date hereof and until the termination of this Agreement and any
Sublease, a certificate of the Company signed by a Responsible Officer of the
Company promptly after the Company obtains knowledge that there exists a Default
or Event of Default
<PAGE>
14
under this Agreement, any Sublease Default or Event of Default, or any default
or event of default under any Development Agreement or any Associated Document,
which certificate shall describe such Default or Event of Default or default or
event of default, in reasonable detail, with a statement of what action the
Company has taken or is taking or proposes to take with respect thereto.
(b) Periodic Certificates. Concurrently and with each
---------------------
delivery of financial statements pursuant to Section 5.1 of the Secured Loan
Agreement and this Article VI, the Company shall deliver to BCI a certificate
signed by a Responsible Officer of the Company to the effect that, as of the
date of such certificate, no event which constitutes a Default or Event of
Default has occurred and is continuing under this Agreement, or default or event
of default has occurred and is continuing under any Development Document or any
Associated Document, and no Sublease Default or Sublease Event of Default has
occurred and is continuing, and no Casualty has occurred and is continuing under
any Sublease or, if any such condition or event existed or exists, specifying
the nature and period of existence thereof and what action the Company has taken
or is taking or proposes to take with respect thereto.
6.3 Investigation by Authorities. The Company shall deliver notice
----------------------------
to BCI promptly upon the Company's receiving notice that an Authority will (a)
take an action which would constitute a Casualty, (b) investigate any Boston
Market Unit for a material violation of any Applicable Laws and Regulations on
or at such Boston Market Unit, including any Environmental Law, or (c)
investigate any Boston Market Unit (other than routine fire, health, life-safety
and similar inspections) for any violation of Applicable Laws and Regulations
under which criminal liability may be imposed upon the Company, BCI or any third
party.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 General Indemnification. The Company agrees to indemnify, pay,
-----------------------
and hold BCI and the officers, directors, employees, agents and affiliates of
BCI (collectively, the "Indemnitees"), harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, taxes (whether Federal, state or local), 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 or any Sublease, Operative Document or Bank of America Document
(including, without limitation, Sections 7.1 and 7.2 of the
<PAGE>
15
Bank of America Participation Agreement, in the event that the Company has
subleased Items of Equipment subject to the Bank of America Sublease), and the
exhibits, annexes and appendices thereto or any other agreements or documents
executed and delivered by BCI in connection therewith, or the consummation of
any of the transactions contemplated by any thereof (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 Indemnitees or any of them. The provisions of the undertakings
and indemnification set out in this Section 7.1 shall survive satisfaction and
-----------
payment of the Company's obligations hereunder and termination of this
Agreement, the Subleases, the Operative Documents or the Bank of America
Documents; provided, however, that the Company's obligations to indemnify, pay
-------- -------
and hold harmless the Indemnitees with respect to the Operative Documents and
the Bank of America Documents shall be limited to the Company's payment of the
greater of (a) the total amount paid by or claimed against the Indemnitee by any
person in connection with this Agreement, any Sublease, any Bank of America
Sublease and related documents executed between the Company and BCI, or (b) the
amount resulting when the total amount paid by or claimed against the
Indemnitees is multiplied by the fraction the numerator of which is equal to the
aggregate Purchase Price of all Items of Lease Assets subleased by the Company
from BCI and the denominator of which is the aggregate Purchase Price of the
Lease Assets, each as calculated by BCI.
7.2 Expenses. Without limiting the generality of Section 7.1, the
--------
Company agrees to pay any Indemnitee, promptly upon demand, for such fees and
expenses, including, but not limited to, reasonable attorneys' fees and
expenses, incurred in connection with the negotiation of or enforcement of, or
the preservation of any rights in or under this Agreement.
7.3 Costs. If any event shall occur under any Lease or Operative
-----
Document that results in the payment of any increased amount by BCI under such
Lease or Operative Document or in connection with the transactions contemplated
therein, then the Company shall pay its pro rata share of such increase to BCI,
--- ----
as calculated by BCI in its reasonable discretion.
<PAGE>
16
ARTICLE VIII
DEFAULTS/REMEDIES
-----------------
8.1 Default. The occurrence of any of the following events or acts
-------
shall constitute an event of default ("Event of Default") under this Agreement:
(a) the Company shall be in default under, or breach any
provision of, the Associated Documents;
(b) the Company shall be in default under, or breach any
provision of, any Sublease or shall have assigned or subleased its interests
therein to any other Person;
(c) any representation or warranty now or hereafter made in
this Agreement, any Sublease, the Associated Documents, the Development
Documents 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 BCI shall be materially
inaccurate;
(d) the breach of, or failure to perform or observe, any
covenant, condition or agreement of this Agreement;
(e) dissolution or liquidation of the Company;
(f) 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;
(g) the Company or any Subsidiary shall (i) fail to pay any
indebtedness for borrowed money 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 (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 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;
(h) 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 twenty (20) consecutive days
without being vacated, discharged, satisfied, escrowed, stayed, or bonded
pending appeal; or
<PAGE>
17
(i) any Security Instrument, any other security document, or
the security interests created under the Secured Loan Agreement and continued
hereunder shall be terminated, invalidated, or set aside or be declared
ineffective or inoperative or in any way cease to give or provide to BCI the
benefits purported to be created thereby.
8.2 Remedies. If any Event of Default shall exist or occur, BCI may
--------
exercise in any order one or more or all of the remedies set forth in this
Section 8.2 (it being understood that no remedy herein conferred is intended to
be exclusive of any other remedy or remedies, but each and every remedy shall be
cumulative and shall be in addition to every other remedy given herein or now or
hereafter existing at law or in equity or by statute). BCI may:
(a) terminate any or all Subleases and exercise its rights and
remedies thereunder;
(b) with respect to any Inducement Collateral, exercise any
one or more of the rights and remedies accruing to a secured party under the UCC
and any other Applicable Law and Regulations upon default by a debtor; or
(c) terminate and exercise its rights under the Development
Documents and/or the Associated Documents.
8.3 No Waiver. BCI'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 BCI thereafter
to demand such strict compliance or performance therewith. Any suspension or
waiver by BCI of an Event of Default by the Company under this Agreement or any
Sublease Event of Default (or any other sublease executed between the Company
and BCI), shall not suspend, waive, or affect any other Event of Default by the
Company under this Agreement, whether the same is prior or subsequent thereto
and whether of the same or of a different kind of character. None of the
undertakings, agreements, warranties, covenants, and representations of the
Company contained in this Agreement and no Event of Default by the Company under
this Agreement shall be deemed to have been suspended or waived by BCI unless
such suspension or waiver is in writing signed by an officer of BCI.
ARTICLE IX
AMENDMENTS TO THE SECURED LOAN AGREEMENT
----------------------------------------
9.1 Amendments to Secured Loan Agreement. The Company and BC
------------------------------------
I agree that the Secured Loan Agreement is hereby amended as is set forth on
Schedule D hereto.
- ----------
<PAGE>
18
9.2 Effectiveness of Amendments to the Secured Loan Agreement.
---------------------------------------------------------
The Company and BCI agree that the amendments to the Secured Loan Agreement set
forth in Section 9.1 hereof shall remain in effect until such time as the
-----------
Company has fulfilled and discharged its obligations and commitments under this
Agreement and the Subleases, at which time the Secured Loan Agreement shall,
without any action by the Company or BCI, automatically be amended to read in
its entirety as it did prior to [the signature date of the Original Inducement
Agreement, prior to its amendment and restatement] [the signature date of the
Restated Inducement Agreement], as if the amendments set forth in Section 9.1
-----------
hereof had not been made.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Survival of Agreements. The representations, warranties,
----------------------
covenants, indemnities and agreements of the parties provided in this Agreement
and the parties' obligations hereunder shall survive the execution and delivery
and the termination or expiration of this Agreement.
10.2 Notices. All communications and notices provided for in this
-------
Agreement 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 Schedule E. 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.
10.3 Counterparts. This Agreement may be executed by BCI and the
------------
Company in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same agreement.
10.4 Amendments. This Agreement and the terms hereof may be
----------
terminated, amended, restated, supplemented, waived or modified only by an
<PAGE>
19
instrument in writing executed jointly by an authorized officer of each of BCI
and the Company hereto.
10.5 Headings, etc. The headings of the various Articles and Sections
-------------
of this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
10.6 GOVERNING LAW. THIS INDUCEMENT AGREEMENT SHALL IN ALL RESPECTS
-------------
BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO (EXCLUDING ANY CONFLICT-OF-LAW
OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS
OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
10.7 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.
10.8 Successors and Assigns. This Agreement shall be binding upon
----------------------
the parties hereto, their respective successors and assigns, and shall inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
10.9 Submission to Jurisdiction. The Company agrees that any legal
--------------------------
action or proceeding with respect to this 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 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 Schedule E hereof. Nothing in this paragraph shall
----------
affect the right of BCI to serve process in any other manner permitted by law or
limit the rights of BCI 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.
10.10 WAIVER OF JURY TRIAL. BCI AND THE COMPANY HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
20
10.11 Costs and Attorneys' Fees. In any action not founded solely on
-------------------------
grounds covered by Section 7.2 hereof, 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.
[remainder of page intentionally left blank]
<PAGE>
21
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
BOSTON CHICKEN, INC.
By:
---------------------------------
Name:
Title:
[ ]
By:
By:
---------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Secured Loan Agreement
----------------------
<PAGE>
SCHEDULE B
Security Instruments
--------------------
<PAGE>
SCHEDULE C
Company Covenants in the Secured Loan Agreement
-----------------------------------------------
Incorporated by Reference
-------------------------
Affirmative Covenants: Article V.
Negative Covenants: Article VI.
<PAGE>
SCHEDULE D
Amendments to the Secured Loan Agreement/1/
-------------------------------------------
1. Section 2.1 of the Secured Loan Agreement is amended by adding a
-----------
new paragraph (e) which reads in its entirety as follows:
"(e) Notwithstanding any provision herein to the contrary, the
Company and Boston Chicken acknowledge and confirm that the continuing
security interest granted to Boston Chicken hereunder shall not include any
Item of Equipment or any Leasehold Improvements (as each such term is
defined in that certain [Second] Amended and Restated Inducement Agreement
(the "Inducement Agreement") dated November __, 1996 between Boston Chicken
and the Company, as it may from time to time be modified, amended or
restated) subject to any Sublease (as hereinafter defined), [and that a
UCC-3 financing statement may be filed to release Boston Chicken's security
interest in such Items of Equipment or such Leasehold Improvements];/2/
provided, however, that the Company hereby agrees to grant to Boston
-------- -------
Chicken a security interest in each such Item of Equipment or such
Leasehold Improvements immediately upon the release of such Item of
Equipment or such Leasehold Improvements from the terms and scope of the
relevant Sublease and from all liens held by a Lessor (as such term is
defined in the Inducement Agreement) thereon."
2. Section 2.5 of the Secured Loan Agreement is deleted in its
-----------
entirety and replaced by the following:
"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 Credit
Agreement, dated November __, 1996, among Boston Chicken, the lenders named
therein, and the Bank, as agent for the lenders ("Agent"), (as it may be
modified, amended or restated 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
- --------------------------
/1/ Based on the Secured Loan Agreement with BC Superior, L.L.C.
/2/ Bracketed language does not appear in Schedule E to the Inducement
Agreement with BC Superior.
<PAGE>
2
Agreement, and references herein to such security, pledges, and deliveries
thereof to Boston Chicken may be deemed to refer to the Agent, as
appropriate."
3. Section 4.9 of the Secured Loan Agreement is amended by (x)
-----------
deleting the word "Equipment" before the word "Subleases" in clause (ii) of the
first sentence thereof and (y) deleting the last sentence thereof and replacing
it with the following:
Notwithstanding the foregoing provisions of this Section
4.9, clauses (b) and (c) of the first sentence of this Section 4.9 and the
immediately preceding sentence of this Section 4.9 shall not be inaccurate
by reason of (i) any purchase money security interest (including pursuant
to a financing lease) in any equipment or real property for the Company's
Boston Market Stores [or (ii) any Sublease or the other equipment leases or
indebtedness described on Schedule 6.5 attached hereto].
------------
4. Section 5.6 of the Secured Loan Agreement is amended by deleting
-----------
the word "Equipment" before the word "Subleases" in the first sentence thereof.
5. Section 5.10 of the Secured Loan Agreement is deleted in its
------------
entirety.
6. Section 6.5 is deleted in its entirety and is replaced by the
-----------
following:
"6.5 Additional Indebtedness. 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, other than (a) as provided in Section 5.9
hereof, (b) the subleasing by the Company of equipment and/or real property
used in the operation of its Stores pursuant to certain subleases intended
as security between the Company and Boston Chicken (the "Subleases"), (c)
the equipment leases and indebtedness existing on the date hereof and
described on Schedule 6.5 attached hereto, (d) trade payables in the
------------
ordinary course of business, and (e) real estate lease obligations for
Stores arising in the ordinary course of business."
7. Article VI of the Secured Loan Agreement is amended by adding a
----------
new Section 6.12 which reads in its entirety:
------------
"6.12 No Debt. The Company shall not, after the effective
-------
date of the Inducement Agreement, incur any debt other than debt incurred
hereunder or pursuant to such Inducement Agreement and any Sublease, unless
prior to or concurrent with the execution of the documents evidencing such
debt (i) the Company elects to repurchase all of the Equipment or all of
the
<PAGE>
3
Lease Assets (each as defined in the relevant Sublease) in accordance
with the applicable provisions of the relevant Sublease, (ii) Boston
Chicken has received documentation acceptable to it that such Equipment or
Lease Assets have been released from the relevant Lease, and (iii) the
Company complies with all other provisions of this Agreement with respect
to the incurrence of additional debt."
8. Article VIII of the Secured Loan Agreement is amended by deleting
------------
the word "or" at the end of paragraph (p), deleting the period at the end of
paragraph (q) of Section 8.1 and replacing it with a semicolon, and by adding to
-----------
Section 8.1 a new paragraph (r) and a new paragraph (s) which read in their
- -----------
entirety:
"(r) the Company's default under, or breach of any provision of,
the Inducement Agreement; or
"(s) the Company's default under, or breach of any provision of,
any Sublease."
9. Section 9.11 of the Secured Loan Agreement is deleted in its
------------
entirety. The Secured Loan Agreement is further amended by deleting therein all
references to Section 9.11.
------------
<PAGE>
SCHEDULE E
Notices
-------
To the Company:
with a copy to:
To BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401-4086
Attn: General Counsel
Facsimile: (303) 384-5339
<PAGE>
EXHIBIT K-2
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
FORM OF GENERAL ELECTRIC CAPITAL CORPORATION SUBLEASE
-----------------------------------------------------
K-2-1
<PAGE>
SUBLEASE AGREEMENT NO. 2
between
BOSTON CHICKEN, INC.
as Sublessor
[ ]
as Sublessee
This Sublease is subject to a senior lien in favor of General Electric Capital
Corporation, for Itself and as Agent for Certain Participants ("GECC"), as
Lessor, under the Master Lease Agreement No. 2, dated as of December __, 1996,
between GECC and Boston Chicken, Inc. This Sublease has been executed in
several counterparts. To the extent, if any, that this Sublease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no lien on this Sublease may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by GECC on the signature
page hereof.
<PAGE>
SUBLEASE AGREEMENT NO. 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. LEASING.................................................................1
II. TERM, RENT AND PAYMENT..................................................7
III. TAXES...................................................................8
IV. REPORTS................................................................10
V. DELIVERY, USE AND OPERATION, SUBSTITUTION..............................11
VI. SERVICE................................................................17
VII. LOSS OR DAMAGE; STIPULATED LOSS VALUE..................................18
VIII. RISK OF LOSS...........................................................21
IX. INSURANCE..............................................................21
X. RETURN OF LEASE ASSETS.................................................22
XI. DEFAULT................................................................23
XII. ASSIGNMENT; SUB-LETTING................................................27
XIII. NET LEASE; NO SET-OFF, ETC.............................................27
XIV. INDEMNIFICATION........................................................28
XV. DISCLAIMER.............................................................30
XVI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBLESSEE.................31
XVII. OWNERSHIP FOR TAX PURPOSES, ETC.; GRANT OF SECURITY
INTEREST; USURY SAVINGS...............................................34
XVIII. END OF SUBLEASE OPTIONS........................................37
(a) Extension......................................................38
(b) Renewal........................................................39
(c) Return.........................................................39
(d) Purchase.......................................................40
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(e) Sublessor's Return Option.....................................40
(f) Purchase in Connection with Default Under the Master Lease....41
(g) Notice of Election............................................41
XIX. MISCELLANEOUS.........................................................42
XX. CHOICE OF LAW; JURISDICTION...........................................44
XXI. CHATTEL PAPER.........................................................45
XXII. EARLY TERMINATION.....................................................46
EXHIBIT NO. 1 - FORM OF SCHEDULE
ANNEX A - DESCRIPTION OF LEASE ASSETS
ANNEX B - BILL OF SALE
ANNEX C - CERTIFICATE OF ACCEPTANCE
ANNEX D - STIPULATED LOSS AND TERMINATION VALUE
TABLE
ANNEX E - AMORTIZATION SCHEDULE
ANNEX F - RETURN PROVISIONS
</TABLE>
ii
<PAGE>
SUBLEASE AGREEMENT NO. 2
THIS SUBLEASE AGREEMENT NO. 2 is made as of the ___ day of December,
1996 ("Sublease" or "Agreement"), between BOSTON CHICKEN, INC., a Delaware
corporation with its mailing address and chief place of business at 14103 Denver
West Parkway, Golden, Colorado 80401-4086 (hereinafter called "BCI" or
"Sublessor"), and the Company whose name and principal address appear on the
signature pages hereof (the "Company" or "Sublessee").
WITNESSETH:
WHEREAS, BCI has entered into the Master Lease Agreement No. 2 (as the
same may be amended or supplemented from time to time, the "Master Lease") dated
as of December __, 1996 between General Electric Capital Corporation, for Itself
and as Agent for Certain Participants (the "Lessor"), and BCI, and certain
related documents (the "Master Lease Documents");
AND WHEREAS, BCI desires to sublease to the Company, and the Company
desires to sublease from BCI, the Lease Assets (as hereinafter defined) located
at each Lease Assets Location (as hereinafter defined) (specified in each
applicable Schedule (as hereinafter defined)) and as described in Annex A to any
such Schedule;
AND WHEREAS, to secure Sublessee's obligations under this Sublease,
Sublessee has granted to Sublessor a security interest in the Lease Assets
(which security interest together with this Sublease has been assigned by
Sublessor to Lessor to secure Sublessor's performance under the Master Lease and
the Master Lease Documents).
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
I. LEASING:
(a) This Agreement shall be effective from and after the date of execution
hereof. Subject to the terms and conditions set forth below, Sublessor will (a)
sublease to Sublessee certain parcels of real property, including land,
buildings and/or other improvements constructed or made thereon (collectively,
the "Fee Property"), (b) sublease to Sublessee certain improvements
(collectively, the "Ground-Lease Leasehold Improvements") located on real
property leased by Sublessee pursuant to ground leases (collectively, the
"Ground Leases"), (c) sublease to Sublessee certain
<PAGE>
improvements (collectively, the "Premises-Lease Leasehold Improvements") to be
made to or installed in complete buildings leased by Sublessee pursuant to
premises leases (collectively, the "Premises Leases") and (d) sublease to
Sublessee certain items of equipment (collectively, the "Equipment"). The
Ground-Lease Leasehold Improvements and the Premises-Lease Leasehold
Improvements are hereinafter sometimes collectively referred to as the
"Leasehold Improvements". The Leasehold Improvements subleased hereunder shall
be limited to (1) new improvements, and (2) improvements which were completed
not more than two (2) years prior to the date on which such Leasehold
Improvements are subleased hereunder. The Fee Property and the Leasehold
Improvements are hereinafter sometimes collectively referred to as the "Real
Estate". The Real Estate and the Equipment are sometimes hereinafter
collectively referred to as the "Lease Assets". The Real Estate shall be limited
to those locations at which the Equipment will be installed and operated by
Sublessee as a "Boston Market" or "Boston Carver" location; provided, however,
that a portion of any such location may be further subleased for the operation
of an "Einstein Bros. Bagels" or "Noah's New York Bagels" location. Sublessor
shall sublease to Sublessee only such Lease Assets as are, or shall from time to
time be, described in Annex A to any schedule hereto (which schedule shall be in
substantially the form attached hereto as Exhibit No. 1 (the "Schedule")). Terms
specified in a Schedule and not otherwise defined or specified herein shall have
the meanings ascribed to them in such Schedule.
(b) Lessor, BCI, BC Real Estate Investments, Inc. ("BCRE") and certain
financed area developers (collectively, the "FADs"), including the Company, have
heretofore entered into that certain Agency Agreement dated as of September 25,
1996 (as the same may from time to time be amended, modified, or extended, the
"Agency Agreement"), pursuant to which Lessor appointed BCI, BCRE and the FADs,
including the Company, as its agents to acquire and pay for, in the name and on
behalf of Lessor, the Real Estate in accordance with the terms and conditions of
the Agency Agreement.
(c) The obligation of Sublessor to sublease the Lease Assets to Sublessee
shall be subject to (1) Sublessor being satisfied that there shall have been no
material adverse change in the condition (financial or otherwise), business
operations or prospects of Sublessee from the date of execution hereof, and (2)
receipt by Sublessor, on or prior to the earlier of the Sublease Commencement
Date (as hereinafter defined) or Last Delivery Date therefor, of each of the
following documents in form and substance satisfactory to Sublessor (provided,
however, that Sections I(c)(vii) through (xviii) shall not be applicable with
respect to Lease Assets comprised solely of Equipment):
Schedules relating to the Lease Assets then to be subleased hereunder
(including separate Schedules for each Fee Property);
2
<PAGE>
(ii) a Bill of Sale with respect to the applicable Equipment and/or
Leasehold Improvements executed by Sublessee in favor of Lessor, in the form of
Annex B to the applicable Schedule;
(iii) evidence of insurance with respect to the Lease Assets then to
be subleased hereunder, which complies with the applicable requirements of
Section IX hereof;
(iv) an Estoppel/Waiver Agreement (each an "Estoppel/Waiver
Agreement"), in substantially the form of Exhibit No. 2 attached to the Master
Lease, from the Landlord with respect to those locations at which Equipment is
located and with respect to which Sublessee does not provide to Lessor a
Landlord's Waiver (as hereinafter defined) or an opinion of local counsel
(reasonably satisfactory to Sublessor);
(v) a certificate of an authorized officer of Sublessee stating
that he has reviewed the activities of Sublessee and that, to the best of his
knowledge and without personal liability, there exists no Default (as
hereinafter defined) or event which, with the giving of notice or the lapse of
time (or both), would become such a Default hereunder;
(vi) such Uniform Commercial Code financing statements, and
statements of termination, release or partial release with respect to the
Equipment, as Sublessor reasonably may require;
(vii) for any Ground-Lease Leasehold Improvements, a copy of the
Ground Lease of the real property upon which such Ground-Lease Leasehold
Improvements have been constructed, which Ground Lease shall expressly (1)
permit a collateral assignment or leasehold mortgage to, and re-assignment by,
Lessor and Sublessor, (2) provide for an initial lease term of not less than
five (5) years and renewal terms which may be entered into in the discretion of
Sublessee such that the total number of years covered by the initial term and
discretionary renewal terms shall be not less than ten (10) years, and (3)
otherwise be in form and content reasonably satisfactory to Sublessor in all
respects (provided, however, that the requirements of clauses (1) and (2) hereof
shall not be applicable if the Landlord's Waiver (as hereinafter defined) is
delivered to Lessor or Sublessor with respect to such Ground Lease);
(viii) with respect to any Premises-Lease Leasehold Improvements, a
copy of the Premises Lease for the premises in which such Leasehold Improvements
are to be placed or constructed, which Premises Lease shall (1) permit a
collateral assignment to, and re-assignment by Lessor and Sublessor, (2) provide
for an initial lease term and discretionary renewal terms such that the total
number of years covered by the initial term and discretionary renewal terms
shall be not less than the total term (including any renewal terms) of the
applicable Schedule, and (3) otherwise
3
<PAGE>
be in form and content reasonably satisfactory to Sublessor in all respects
(provided, however, that the requirements of clauses (1) and (2) hereof shall
not be applicable if the Landlord's Waiver is delivered with respect to such
Premises Lease);
(ix) with respect to any Ground-Lease Leasehold Improvements, an
ALTA title insurance policy (or marked-up title insurance commitment) issued by
First American Title Insurance Company or such other title insurance company
reasonably acceptable to Sublessor, which policy or commitment shall meet the
requirements specified in clause (xiii) of Section I(c) of the Master Lease;
(x) with respect to any Real Estate, an affidavit or certificate
from Sublessee as to zoning compliance, copies of a use and occupancy permit and
all other necessary permits or governmental approvals, and evidence reasonably
satisfactory to Sublessor of completion of the construction of the Leasehold
Improvements or the improvements to be constructed on the Fee Property (the "Fee
Improvements") and the installation of the Equipment on the Real Estate such
that the Real Estate is suitable for operation by Sublessee as a "Boston Market"
or "Boston Carver" location subject to the right of Sublessee to further
sublease a portion of such Real Estate for the operation of an "Einstein Bros.
Bagels" or "Noah's New York Bagels" location;
(xi) a certificate or affidavit from Sublessee that the Leasehold
Improvements, as constructed, comply in all respects with the requirements of
the applicable Ground Lease or Premises Lease;
(xii) a Phase I environmental audit with respect to any Fee Property
and any real property upon which the Ground-Lease Leasehold Improvements are to
be made (and such further environmental audits or evidence of the absence of
hazardous wastes as Sublessor shall deem necessary), which audit must be
satisfactory in Sublessor's sole discretion as to form and substance;
(xiii) an appraisal of any Fee Property acquired by Sublessee more
than one year prior to the Lease Commencement Date with respect to such Fee
Property;
(xiv) with respect to any Fee Property or any real property subject
to a Ground Lease, if required by Sublessor, a current ALTA/ALSM survey meeting
the requirements specified in clause (xviii) of Section I(c) of the Master
Lease;
(xv) for any Leasehold Improvements, a collateral assignment of
lease from Sublessee covering the applicable Ground Lease or Premises Lease
(each a "Collateral Assignment of Lease"), in substantially the form of Exhibit
No. 4 attached to the Master Lease, with such changes as reasonably may be
necessary (in the case of any Ground Lease) to record such Collateral Assignment
of Lease among the land records of the jurisdiction in which the Leasehold
Improvements are located;
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(xvi) a Landlord's Agreement (each a "Landlord's Waiver"), in
substantially the form of Exhibit No. 5A (for any Ground Lease) or Exhibit No.
5B (for any Premises Lease) attached to the Master Lease, duly executed by the
landlord of the real property upon which the Leasehold Improvements are located,
or evidence satisfactory to Sublessor in all respects that the Ground Lease or
Premises Lease (as applicable) expressly permits the collateral assignment of
such lease to Lessor, gives Lessor appropriate notice and cure rights and
permits the assignment of such lease by Lessor without further consent from or
notice to the Landlord or subject only to such restrictions as are acceptable to
Sublessor in all respects; provided, however, that such Landlord's Waivers may
be provided within thirty (30) days after the Lease Commencement Date of the
applicable Schedule;
(xvii) evidence that all real estate taxes on the Real Estate which
are then due and payable (or, if permissible under applicable law, all
installments thereof which are then due and payable) have been paid unless any
such taxes are being contested by Sublessee in accordance with Section III(c);
(xviii) lien waivers signed by the general contractor and all major
subcontractors and suppliers for all work done and materials furnished in
connection with the construction of Leasehold Improvements or the Fee
Improvements and the installation of the Equipment therein; provided, however,
that in the event that Sublessee shall not, as a result of Sublessee's good
faith dispute with any general contractor or subcontractor, have obtained a lien
waiver from the same, Sublessee shall be deemed to have complied with the
provisions of this clause (xviii), (1) if the amount in dispute is not greater
than $50,000.00 and Sublessee is diligently attempting to resolve such dispute,
or (2) if the amount in dispute is bonded or guaranteed by a surety in
accordance with applicable laws;
(xix) an opinion of counsel for Sublessee in form and substance
satisfactory to Sublessor;
(xx) Sublessee's Resolution certified by the Secretary or similar
officer of Sublessee;
(xxi) such Uniform Commercial Code financing statements or statements
of termination, release, or partial release related to the Mortgages as
Sublessor reasonably may require;
(xxii) if any portion of the Lease Assets are subleased by Sublessee,
a subordination agreement executed by the applicable sublessee, which
subordination agreement shall be in form and substance satisfactory to
Sublessor; and
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(xxiii) such other documents as Sublessor reasonably may request to
carry out the intent and purpose of this Agreement.
Simultaneously with the execution of the Bill of Sale, Sublessee shall
execute a Certificate of Acceptance, in the form of Annex C to the applicable
Schedule, covering all of the Equipment and/or Leasehold Improvements described
in the Bill of Sale. Upon execution by Sublessee of any Certificate of
Acceptance, the Lease Assets described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Sublessee for sublease hereunder.
(d) Anything in the foregoing to the contrary notwithstanding, Sublessor
will sublease to Sublessee certain Real Estate and related Equipment in
locations which are not yet completed and ready to commence operations (such
Real Estate and Equipment being hereinafter called "Incomplete Store Assets"),
subject to the following conditions:
(i) Sublessor shall be satisfied that there shall have been no
material adverse change in the condition (financial or otherwise), business
operations or prospects of Sublessee from the date of execution hereof;
(ii) Sublessor shall receive, for each location upon which any
Incomplete Store Assets are located, evidence satisfactory to Sublessor in all
respects, that the construction has commenced, and that Sublessee has the
ability to complete all Leasehold Improvements, install all necessary Equipment,
and obtain all necessary licenses and permits in order to commence operations
within 120 days after the date on which such Incomplete Store Assets are
subleased hereunder;
(iii) Sublessor shall have received all of the items listed in
Section I(c) hereof, except that (1) Sublessee shall be required to deliver lien
waivers only for work completed prior to the date of funding, and (2) Sublessee
shall not be required to deliver a use and occupancy permit or other evidence of
final completion; and
(iv) within one hundred and twenty (120) days after the date on which
such Incomplete Store Assets are subleased hereunder, Sublessee shall complete
all Leasehold Improvements, install all necessary Equipment, obtain all
necessary permits to commence operations, and provide Sublessor evidence of the
same, and Sublessee shall either (1) request Sublessor to sublease to Sublessee
all of the new or newly-completed Lease Assets at such Lease Assets Location
pursuant to the terms of this Agreement (if Sublessor is then able to lease such
Lease Assets under the Master Lease and Sublessee meets all of the conditions
set forth herein), or (2) provide to Sublessor evidence that Sublessee has paid
for all of the Leasehold Improvements and Equipment located at such Lease Assets
Location (other than the
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Incomplete Store Assets leased by Sublessor under the Master Lease and subleased
to Sublessee pursuant hereto), and provide to Sublessor a security interest in
all such Leasehold Improvements and Equipment. In connection therewith,
Sublessee shall execute and deliver to Sublessor such security agreements,
mortgages or deeds of trust, financing statements, and other documents and
instruments as Sublessor reasonably shall require in order perfect such lien and
security interest (to be recorded at Sublessee's expense).
In the event that Sublessee is unable to commence operations within
such one hundred and twenty (120) day period, Sublessee shall, if required by
Sublessor, purchase the Incomplete Store Assets from Sublessor on the next Rent
Payment Date, for a price equal to the Termination Value of such Incomplete
Store Assets, together with all taxes and charges upon transfer, and all other
reasonable and documented expenses incurred by Sublessor in connection with such
transfer.
(e) Sublessor shall have the right to assign, and Sublessee acknowledges
that Sublessor has assigned to Lessor pursuant to the Master Lease and granted
to Lessor, a security interest in, this Agreement (including the security
interest granted under Section XVII(b)(1)) and in the Equipment and Leasehold
Improvements. Such assignment and grant shall (i) be superior to Sublessee's
rights hereunder; (ii) not relieve Sublessor of any of its obligations
hereunder; and (iii) not be construed to be an assumption by Lessor of any
obligations of Sublessor hereunder. Sublessee shall, upon request, execute and
deliver such instruments and take such other action as may reasonably be
requested to protect Sublessor's or Lessor's interests, including (without
limitation) the perfection and priority of Lessor's security interest. Sublessee
acknowledges the assignments and grants of security interests described in this
Section I(e) and that Sublessee's interest in the Equipment and Leasehold
Improvements is subject and subordinated in all respects to the security
interest and liens in the Equipment and Leasehold Improvements assigned to
Lessor by Sublessor under the Master Lease.
(f) Sublessee acknowledges that this Agreement is in all respects subject
and subordinate to the Master Lease and the liens created thereby. Without
limiting the foregoing, if for any reason Lessor shall exercise rights or
remedies thereunder, such exercise may include the termination hereof,
notwithstanding, to the maximum extent permitted by law, any right of Sublessee
hereunder. Upon the occurrence of a default under the Master Lease and notice to
Sublessor, Sublessee shall, upon the direction of the Lessor, attorn to Lessor
as lessor under this Agreement.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder (the "Rent") and Sublessee's right to use
the Lease Assets shall commence on the date of execution by Sublessee of the
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Certificate of Acceptance for such Lease Assets ("Sublease Commencement Date").
The term of sublease pursuant to this Agreement and the applicable Schedule (the
"Term") shall be the period specified in the applicable Schedule. If any Term is
extended or renewed, the word "Term" shall be deemed to refer to all extended or
renewed terms, and all provisions of this Agreement shall apply during any
extended or renewed terms, except as may be otherwise specifically provided in
writing.
(b) Rent shall be paid to Sublessor by wire transfer of immediately
available funds or other means acceptable to Sublessor for receipt prior to 9:30
a.m. Denver time to Sublessor pursuant to instructions provided from time to
time to Sublessee or such other account as Lessor may direct in writing; and
shall be effective upon receipt. Payments of Rent shall be in the amount set
forth in, and due in accordance with, the provisions of the applicable Schedule.
In no event shall any Rent payments be refunded to Sublessee. If Rent is not
paid within one (1) day of its due date, Sublessee agrees to pay a late charge
of Five Cents ($0.05) per dollar on, and in addition to, the amount of such Rent
but not exceeding the lawful maximum, if any. If at any time after the
termination of this Agreement (other than following Sublessee's purchase of the
Lease Assets) Sublessee shall remain in possession of the Lease Assets,
Sublessee shall continue to pay the Rent. Upon termination of the Master Lease
pursuant to Section XI(c) thereof, and upon written notice to Sublessor and
receipt by Sublessee of written demand from Lessor, payments of all amounts
payable hereunder, shall be made as directed by Lessor. All payments due under
this Agreement whether or not specifically denominated as Rent shall be
collectible in the same manner as Rent.
III. TAXES:
(a) Taxes in General. Sublessee shall have no liability for taxes imposed
by the United States of America or any state or political subdivision thereof
which are on or measured by the net income of Sublessor. Sublessee shall report
(to the extent that it is legally permissible) and, subject to Section III (b)
hereof, pay promptly all other taxes, fees and assessments due, imposed,
assessed or levied against any Lease Assets (or the purchase, ownership,
delivery, leasing, possession, use or operation thereof), this Agreement (or any
rentals or receipts hereunder), any Schedule, Sublessor (to the extent relating
to the transactions contemplated by this Agreement) or Sublessee by any foreign,
Federal, state or local government or taxing authority during or related to the
term of this Agreement, including, without limitation, all license and
registration fees, and all sales, use, personal property, real property, excise,
gross receipts, franchise, transfer, recordation, stamp or other taxes, imposts,
duties and charges (including those related to the original acquisition of any
Lease Assets, any transfer of any interest in any Lease Assets, the granting of
any lien by Sublessee, or the sale of any Lease Assets to any third party
pursuant to the terms
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hereof), together with any penalties, fines or interest thereon (all hereinafter
called "Taxes"). Sublessee shall (i) reimburse Sublessor upon receipt of written
request for reimbursement for any Taxes charged to or assessed against Sublessor
and submission of written evidence of payment, (ii) on request of Sublessor,
submit to Lessor written evidence of Sublessee's payment of Taxes, (iii) on all
reports or returns with respect to personal property taxes show the ownership of
the Lease Assets by Sublessee, and (iv) send a copy of all reports or returns
pertaining to personal property taxes to Sublessor.
(b) Special Provisions Related to Real Estate Taxes. Unless paid directly
to the landlord of the real property on which Leasehold Improvements are
located, from and after the date of each Schedule relating to Real Estate,
Sublessee shall pay directly to the appropriate taxing authority all Real Estate
Taxes (as hereinafter defined) applicable to such Real Estate. If the Term of
such Schedule expires or otherwise terminates at any time other than the
beginning of a taxable year, Sublessee's obligation to pay Real Estate Taxes
shall be prorated on the basis of a 365-day year so as to include only that
portion of the taxable year which is part of the Term of such Schedule. Unless
the termination of a Schedule results from the purchase of the Real Estate
pursuant to Section XVIII(d) below, any Real Estate Taxes levied against any
Real Estate which accrue during the Term of such Schedule but which would not
yet be due and payable to the appropriate taxing authority until after the
expiration of the Term of such Schedule shall be paid by Sublessee to Sublessor
upon termination of such Schedule. Sublessee shall pay such amounts to the
appropriate taxing authority on a timely basis. Unless the termination of a
Schedule results from the purchase of the Real Estate pursuant to Section
XVIII(d) hereof, or unless a Default or event which, with the giving of notice,
or the lapse of time, or both, would constitute a Default has then occurred
hereunder, all Real Estate Taxes paid by Sublessee with respect to the Real
Estate described on such Schedule prior to such termination, but attributable to
the period following such termination, shall be paid by Sublessor to Sublessee
upon such termination.
Except to the extent that Real Estate Tax bills are sent directly to
Sublessee by the taxing authorities, upon receipt by Sublessor of such tax bills
or statements, Sublessor shall use reasonable efforts to advise Sublessee
promptly in writing of all Real Estate Taxes and shall use reasonable efforts
promptly (but not less than (15) days prior to delinquency) to deliver copies of
all applicable tax bills or statements to Sublessee. Sublessee shall, subject to
Section III(c) below, pay directly to the taxing authority all Real Estate Taxes
prior to the earlier of (i) thirty (30) days after receipt by Sublessee of a
copy of the applicable tax bills or statements, or (ii) five (5) days prior to
delinquency. Sublessor shall use reasonable efforts to direct the appropriate
taxing authority to send Real Estate Tax bills directly to Sublessee. As used
herein, "Real Estate Taxes" shall mean any and all taxes, governmental fees and
similar charges and assessments levied or assessed against the Real Estate,
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including, without limitation, ad valorem taxes and special assessments
applicable to the Real Estate.
(c) Right to Contest. Sublessee shall not be required to pay any Real
Estate Taxes or other Taxes for which Sublessee is liable hereunder so long as
(i) Sublessee is contesting the same in good faith and by appropriate
proceedings, which postpone the collection thereof, (ii) Sublessee has provided
to Sublessor evidence that the position taken by Sublessee would have a
realistic possibility of success if litigated, such evidence to be satisfactory
to Sublessor in its sole discretion, (iii) Sublessee provides, if required under
applicable law, a bond or similar surety pending appeal, in a manner acceptable
to the appropriate taxing authority, if approval is required, prior to the time
when penalty attaches for non-payments, (iv) such proceedings do not involve any
substantial danger (as determined in Sublessor's sole discretion) of the sale,
forfeiture or loss of the Lease Assets or any interest therein, and (v)
Sublessee shall indemnify and hold Sublessor harmless from and against any costs
and expenses incurred in connection with the contest of such taxes, and any
interest, fees, or penalties attaching with respect thereto.
IV. REPORTS:
(a) Sublessee will notify Sublessor in writing, within five (5) days after
Sublessee becomes aware that any tax or other lien (other than a Permitted Lien,
as hereinafter defined) shall attach to any Lease Assets, of the full
particulars thereof and of the location of such Lease Assets on the date of such
notification.
(b) Sublessee will permit (i) Sublessor or its designated employee(s) or
agent(s) or (ii) Lessor or its designated employee(s) or agent(s) to inspect any
Lease Assets during normal business hours upon reasonable notice (provided,
however, that if a Default has then occurred and is continuing, Sublessor or
Lessor may, at Sublessee's expense, inspect any Lease Assets without
restriction).
(c) Subject to the other terms of this Agreement, Sublessee will keep the
Equipment at one of its stores and will effect the relocation of any Equipment
to another of its stores only upon the prior consent in writing of the
Sublessor. Upon the written request of Sublessor, Sublessee will notify
Sublessor forthwith in writing of the location of any Equipment as of the date
of such notification.
(d) Sublessee will promptly and fully report to Sublessor in writing if
any Lease Assets are lost or damaged (where the estimated repair costs would
exceed $5,000 per Lease Assets Location, or is otherwise involved in an accident
causing personal injury or property damage which is likely to result in
liability to Lessor in
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excess of $5,000). As used herein, "Lease Assets Location" means the location at
which the Lease Assets initially are located as specified in the applicable
Schedule.
(e) Sublessee promptly will give Sublessor copies of any notices received
by Sublessee from the landlord under any Ground Lease or Premises Lease.
(f) Within twenty (20) days after any request by Sublessor, Sublessee will
furnish a certificate of an authorized officer of Sublessee (an "Officer's
Certificate") stating that he or she has reviewed the activities of Sublessee
and that, to the best of his or her knowledge and without personal liability,
there exists no Default (as hereinafter defined) or event which, with the giving
of notice or the lapse of time (or both), would become such a Default.
(g) Promptly thereafter, Sublessee will notify Sublessor of the existence
of any Default or event which, with the giving of notice or the lapse of time
(or both), would become such a Default.
V. DELIVERY, USE AND OPERATION, SUBSTITUTION:
(a) Sublessee agrees that the Lease Assets will be used by Sublessee
solely in the conduct of its business and in a manner complying with all
applicable Federal, state, and local laws and regulations, and any applicable
insurance policies, and Sublessee shall not discontinue use of the Lease Assets,
except (i) as provided in Sections V(e) and VII hereof, and (ii) that Sublessee
may, with the prior written consent of Sublessor, temporarily discontinue use of
and store Equipment or temporarily discontinue use of other Lease Assets, in
either case only in connection with the closing or relocation of Sublessee's
store for a period not to exceed thirty (30) days.
(b) Sublessee agrees that the Lease Assets will not be used by Sublessee
outside the continental United States.
(c) Sublessee will keep the Lease Assets free and clear of all liens and
encumbrances other than (1) those which result from acts of Lessor, the Loan
Agent (as defined in the Facilities Agreement, dated as of the date hereof,
among BCI, Lessor and Bank of America Illinois, as agent for the lenders party
thereto) and Sublessor, (2) those arising from the rights and interest of Lessor
or Sublessor in any Sublease which shall have been assigned to Lessor, (3) liens
for fees, taxes, levies, duties or other governmental charges of any kind, liens
of mechanics, materialmen, laborers, employees or suppliers and similar liens
arising by operation of law incurred by Sublessee in the ordinary course of
business for sums that are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which
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suspend the collection thereof (provided, however, that such proceedings do not
involve any substantial danger (as determined in Sublessor's sole discretion) of
the sale, forfeiture or loss of the Lease Assets or any interest therein), (4)
liens arising out of any judgments or awards against Sublessee which have been
adequately bonded to protect Lessor's and Sublessor's interest or with respect
to which a stay of execution has been obtained pending an appeal or a proceeding
for review, (5) any collateral assignment of lease in respect of any Premises
Lease or Ground Lease made by a Sublessee to Sublessor, and (6) minor
encumbrances (including, without limitation, easements, rights of way,
covenants, zoning variances and similar encumbrances) which do not materially
affect the value of the Lease Assets. The liens and encumbrances described in
clauses (1) through (6) hereof are referred to as "Permitted Liens". Sublessee
will defend, at its own expense, Lessor's and Sublessor's interest in the Lease
Assets from such claims, liens or legal processes. Sublessee will also notify
Sublessor immediately upon receipt of notice of any lien, attachment or judicial
proceeding affecting the Lease Assets in whole or in part.
(d) Sublessee shall comply with each and every covenant, term and
condition of each applicable Ground Lease and Premises Lease.
(e) Provided that no Default shall then have occurred and be continuing,
at Sublessee's expense, Sublessee may elect to replace a unit of Equipment (a
"Substituted Item") with another unit of Equipment (a "Replacement Item"), due
to the obsolescence of the Substituted Item (in accordance with the provisions
of this Paragraph) or upon the occurrence of a Casualty Occurrence (as
hereinafter defined); provided, however, that (i) any replacement pursuant
hereto shall be made upon thirty (30) days' written notice to Sublessor, which
written notice shall identify the Substituted Items and the Replacement Items
per Lease Assets Location, and (ii) replacements of items of Equipment having a
Capitalized Sublessor's Cost per item in excess of $10,000 shall be subject to
Sublessor's prior consent in writing. Each Replacement Item shall be free and
clear of all liens and encumbrances (other than Permitted Liens) and shall have
at least the value, residual value, utility and remaining useful life and be in
as good an operating condition as the Substituted Item, assuming that the
Substituted Item had been maintained in accordance with the provisions of this
Agreement. Sublessee shall provide to Sublessor such substantiation with respect
to the lien status, the value, residual value, utility and remaining useful
life, and the operating condition, of the Replacement Item as reasonably may be
required by Sublessor and such substitution is expressly conditioned upon
Sublessor having determined to its reasonable satisfaction that the conditions
specified in this paragraph have been satisfied.
(1) If a Boston Market Unit (as hereinafter defined) at a particular
Lease Assets Location operated by Sublessee has been closed and the Equipment
previously used at such Lease Assets Location has been relocated in accordance
with
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the provisions of Section V(h) hereof, then Sublessee may elect to substitute
for the Real Estate at such Lease Assets Location fee simple property and/or
leasehold improvements ("Replacement Real Estate"), as applicable, having an
equal or greater value (as determined to the reasonable satisfaction of
Sublessor), with respect to such new Lease Assets Location, provided that the
acquisition of such Replacement Real Estate satisfies the conditions for
acquisition of the original Real Estate so replaced, and Sublessee shall be
responsible for all costs and expenses incurred by Sublessor in connection with
such substitution and provided, further, that any substitution of Real Estate
pursuant hereto (i) shall be made upon thirty days' written notice to Sublessor,
which written notice shall identify the substituted Real Estate and the
Replacement Real Estate per Lease Assets Location, and (ii) shall be subject to
Sublessor's prior written consent.
(2) Sublessee shall execute and deliver to Lessor a Bill of Sale,
special or limited warranty deed and related documents, copy of any applicable
Ground Lease or Premises Lease, Collateral Assignment of Lease, Landlord's
Waiver, Estoppel/Waiver Agreement (all as applicable), and an amended Annex A to
the applicable Schedule with respect to each Replacement Item and any
Replacement Real Estate, together with such documents and instruments as may be
required by Sublessor in connection with such replacement, including (without
limitation) title insurance policies, environmental audits, surveys, Uniform
Commercial Code financing statements and mortgage documents, if applicable, to
be filed at Sublessee's expense, all of such documents and instruments to be in
form and substance satisfactory to Sublessor.
(3) Upon compliance by Sublessee with the provisions hereof, and upon
receipt from Lessor of documentation acceptable to Sublessor releasing the
Substituted Items and/or the substituted Real Estate from the Agreement,
provided that no Default shall then have occurred and be continuing, Sublessor
will transfer to Sublessee, on an AS IS BASIS, without recourse or warranty,
express or implied, of any kind whatsoever, all of Sublessor's interest in and
to the Substituted Item and/or the substituted Real Estate. Sublessor shall not
be required to make and may specifically disclaim any representation or warranty
as to the condition of the Substituted Item and/or the substituted Real Estate
and any other matters (except that Sublessor shall warrant that it conveyed
whatever interest it received in such Substituted Item and/or the substituted
Real Estate free and clear of any lien or encumbrance created by Sublessor).
Sublessor shall, at Sublessee's expense, execute and deliver to Sublessee such
Uniform Commercial Code statements of termination and other documents and
instruments, as reasonably may be required in order to terminate any interest of
Sublessor in and to such Substituted Item and/or the substituted Real Estate. If
Sublessee requests that Sublessor cause Lessor to replace a Substituted Item
with a Replacement Item or substituted Real Estate with Replacement Real Estate,
and Lessor purchases such Replacement Item and/or Replacement Real
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Estate and leases same to Sublessor, Sublessor shall sublease to Sublessee such
Replacement Item and/or Replacement Real Estate. Without limiting the foregoing,
Sublessee shall not remove the Substituted Item from the Lease Assets Location
at which such Substituted Item is located or dispose of the substituted Real
Estate until such time as Sublessor is satisfied that Sublessee has executed all
documents requested by Sublessor to perfect the security interests of Lessor and
Sublessor in the Replacement Item and the Replacement Real Estate.
(f) Upon the written request of Sublessor and at Sublessee's expense,
Sublessee shall, in accordance with Section XVI(n), replace all Affected
Equipment (as hereinafter defined) with other Equipment, on the following terms
and conditions:
(A) The new Equipment shall: (i) be free and clear of all liens and
encumbrances (other than Permitted Liens); (ii) have at least the value, utility
and remaining useful life and be in as good an operating condition as the
Equipment which is replaced, assuming that the Equipment which is replaced had
been maintained in accordance with the provisions of this Agreement; (iii)
constitute all of the equipment used at the new Lease Assets Location; and (iv)
be less than twelve (12) months old. Sublessee shall provide to Sublessor such
substantiation with respect to the requirements specified in this Paragraph (A)
as reasonably may be required by Sublessor.
(B) Sublessee shall execute and deliver to Lessor a Bill of Sale, an
Estoppel/Waiver Agreement and an amended Annex A to the applicable Schedule with
respect to the new Equipment, together with such documents and instruments as
reasonably may be required by Sublessor in connection with such replacement,
including (without limitation) Uniform Commercial Code financing statements to
be filed at Sublessee's expense, all of such documents and instruments to be in
form and substance reasonably satisfactory to Sublessor. Sublessee shall be
responsible for all costs and expenses incurred by Sublessor in connection with
such substitution.
(C) Upon compliance by Sublessee with the provisions hereof, and upon
receipt from Lessor of documentation acceptable to Sublessor, provided that no
Default shall then have occurred and be continuing, Sublessor will transfer to
Sublessee, on an AS IS BASIS, without recourse or warranty, express or implied,
of any kind whatsoever, all of Sublessor's interest in and to the replaced
Equipment. Sublessor shall not be required to make and may specifically disclaim
any representation or warranty as to the condition of the replaced Equipment and
any other matters (except that the Sublessor shall warrant that it conveyed
whatever interest it received in such replaced Equipment, free and clear of any
lien or encumbrance created by Sublessor). Sublessor shall, at Lessee's expense,
execute and deliver to Sublessee such Uniform Commercial Code Statements of
Termination and
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other documents and instruments, as reasonably may be required in order to
terminate or convey any interest of Sublessor in and to such replaced Equipment.
(g) If Sublessee defaults under any Ground Lease or any Premises Lease, or
there occurs a default by Sublessee under any Collateral Assignment of Lease,
any Mortgage (as defined in the Master Lease), or other document executed by
Sublessee in connection with the Real Estate and such default has not been
waived or cured and all applicable waiver or cure periods with respect thereto
have then expired, then, within five (5) days of Sublessee's receipt of a
written request from Sublessor, Sublessee shall replace all of the Lease Assets
with respect to which such default has occurred, on the following terms and
conditions:
(A) The new Lease Assets shall (i) be free and clear of all liens and
encumbrances other than Permitted Liens; (ii) have at least the value, utility
and remaining useful life and be in as good an operating condition as the Lease
Assets which are replaced, assuming that the Lease Assets which are replaced had
been maintained in accordance with the provisions of this Agreement or, if such
new Lease Assets are not of the same type as the Lease Assets to be replaced,
having a value, utility and remaining useful life, and being in such operating
condition, as is acceptable to Sublessor; (iii) constitute all of the Lease
Assets used at the new Lease Assets Location; (iv) be less than twelve (12)
months old; and (v) the acquisition of any such substituted Real Estate
satisfies the conditions for acquisition of any original Real Estate so
replaced. Sublessee shall provide to Sublessor such substantiation with respect
to the requirements specified in this Paragraph (A) as may be required by
Sublessor.
(B) Sublessee shall execute and deliver to Lessor a Bill of Sale,
special or limited warranty deed and related documents, copy of any applicable
Ground Lease or Premises Lease, Collateral Assignment of Lease, Landlord's
Waiver, Estoppel/Waiver Agreement (all as applicable) and an amended Annex A to
the applicable Schedule with respect to the new Lease Assets, together with such
documents and instruments as reasonably may be required by Sublessor in
connection with such replacement, including (without limitation) title insurance
policies, environmental audits, surveys, Uniform Commercial Code financing
statements and mortgage documents, if applicable, to be filed at Sublessee's
expense, all of such documents and instruments to be in form and substance
reasonably satisfactory to Sublessor. Sublessee shall be responsible for all
costs and expenses incurred by Sublessor in connection with such substitution.
(C) Upon compliance by Sublessee with the provisions hereof, and upon
receipt from Lessor of documentation acceptable to Sublessor, provided that no
Default shall then have occurred and be continuing, Sublessor will transfer to
Sublessee, on an AS IS BASIS, without recourse or warranty, express or implied,
of
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any kind whatsoever, all of Sublessor's interest in and to the replaced Lease
Assets. Sublessor shall not be required to make and may specifically disclaim
any representation or warranty as to the condition of the replaced Lease Assets
and any other matters (except that Sublessor shall warrant that it conveyed
whatever interest it received in such replaced Lease Assets, free and clear of
any lien or encumbrance created by Sublessor). Sublessor shall, at Sublessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
Statements of Termination and other documents and instruments, as reasonably may
be required in order to terminate or convey any interest of Sublessor in and to
such replaced Lease Assets.
(h)(i) Upon a Store Closure (as hereinafter defined) of a Boston Market
Unit (as hereinafter defined) operated by Sublessee at which Lease Assets are
located, Sublessee shall, within the sixty (60) day period immediately following
such Store Closure and in accordance with Sublessor's instructions, relocate any
such items of Equipment constituting such Lease Assets to another Boston Market
Unit operated by Sublessee. In connection with any such relocation, Sublessee
shall deliver to Lessor such documents and instruments as may be required by
Sublessor in connection with such relocation, including, in each case if
necessary, an Estoppel/Waiver Agreement with respect to the new Lease Assets
Location or an opinion of local counsel satisfactory to Sublessor, and Uniform
Commercial Code financing statements to be filed at Sublessee's expense. If
Sublessee determines it is impracticable to relocate such items of Equipment as
provided in the first sentence of this clause (h)(i), Sublessee shall deliver to
Sublessor within such sixty (60) day period an Officer's Certificate certifying
that (x) such Boston Market Unit has been permanently closed, (y) it is
impracticable to transfer such items of Equipment to any to any other Boston
Market Unit operated by Sublessee and (z) Sublessee desires to remove such items
of Equipment and the other Lease Assets (other than any Real Estate not acquired
pursuant to the Agency Agreement) located at such Boston Market Unit from this
Sublease. If such Sublessee delivers the Officer's Certificate described in the
preceding sentence, and Sublessor accepts such Officer's Certificate, Sublessee
shall, in accordance with Sublessor's instructions and prior to the expiration
of such sixty (60) day period, pay to Sublessor in immediately available funds
an amount equal to the purchase price for each such item of Equipment and such
other Lease Assets to be released from the Sublease, determined as hereinafter
provided. The purchase price of such items of Equipment and such other Lease
Assets shall be an amount equal to the sum of (A) the Termination Value
(calculated as of the Special Termination Date (as defined in the Master Lease))
for such Lease Assets, plus (B) all taxes and charges upon sale, plus (C) all
rent and other sums due and unpaid under this Agreement as of the Special
Termination Date, plus (D) any applicable Special Payment Premium (as defined in
the Master Lease). Upon Sublessee's payment to Sublessor of such amounts,
Sublessor will, upon receipt from Lessor of documentation acceptable to
Sublessor releasing such Lease Assets from the Lease, execute and deliver to
Sublessee, at Sublessee's expense, such documents and instruments as Sublessor
may
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deem appropriate to release such Lease Assets from the term and scope of this
Sublease.
(ii) A "Store Closure" shall mean, as to a Boston Market Unit, the date
that (x) Sublessee notifies Sublessor in writing that such store has ceased
selling products authorized by Sublessor to be sold at such store, (y) such
store shall be abandoned, or (z) there is a termination of the lease for, or the
operator of such store losses possession of, the premises for such store and
such possession is not immediately assumed by the Sublessor or a substitute
sublessor. "Boston Market Unit" shall mean an open and operating "Boston Market"
store or "Boston Carver" store or Boston Market flagship store which is operated
either directly by BCI or by a franchisee of BCI that has entered into an
agreement with BCI to develop and operate Boston Market Units (an "Authorized
Entity") pursuant to a franchise agreement between BCI and such Authorized
Entity.
VI. SERVICE:
(a) Sublessee will, at its sole expense, maintain all Lease Assets in good
operating order, repair, condition and appearance in accordance with, with
respect to Equipment, manufacturer's recommendations, and with respect to other
Lease Assets, Sublessee's customary practices which are intended to ensure the
continuing utility of such Lease Assets to Sublessee's business (but in no event
less than industry standards) normal wear and tear excepted. Sublessee shall pay
all costs, expenses, fees and charges incurred during the Term of a Schedule in
connection with the use, occupancy, construction, installation, repair,
maintenance, or replacement of any of the Lease Assets described on such
Schedule.
(b) Sublessee will not, without the prior consent of Sublessor, affix or
install any accessory, equipment or device on any Lease Assets if such addition
will impair the value, utility, residual value, useful life, originally intended
function or use of such Lease Assets. Notwithstanding the foregoing, Sublessee,
from time to time, at its own expense: (1) may affix or install any equipment,
device or accessory or make any improvements to the Lease Assets in connection
with any remodeling, or similar undertaking in the ordinary course of business,
of such Lease Assets so long as such remodeling or undertaking does not impair
the value, utility, or residual value of or useful life of the Lease Assets; and
(2) shall affix or install any accessory, equipment or device on any Lease
Assets, and shall make any alterations or modifications to the Lease Assets,
that may be necessary, from time to time, to comply in all material respects
with any applicable laws, rules or regulations or any provision of any insurance
policy required to be kept under Section IX hereof; provided, however, that in
connection with Sublessee's obligations under the foregoing clause (2),
Sublessee may contest by appropriate proceedings or actions,
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diligently conducted in good faith, the validity or application of any law or
regulation or provisions of any insurance policy, provided that any such delay
in compliance therewith will not result in the incurrence of any lien or any
charge of any kind against the Lease Assets and will not subject Sublessor to
any criminal liability for failure so to comply. All additions and repairs made,
and all parts, supplies, accessories, equipment, and devices furnished, attached
or affixed to any Lease Assets which are not readily removable shall be made or
furnished, attached or affixed only in compliance with applicable law, shall be
free and clear of all liens, encumbrances or rights of others (other than
Permitted Liens), and shall become subject to the interest of Lessor and
Sublessor.
(c) Any alterations or modifications to the Lease Assets that may, at any
time during the Term, be required to comply with any applicable law, rule,
regulation, or insurance policy, shall be made at the expense of Sublessee.
Sublessor shall not be required to build any improvements, make any repairs,
replacements, alterations or renewals of any nature or description, or make any
expenditure in connection with this Agreement or to maintain the Lease Assets.
Sublessee waives any right to (i) require Sublessor to maintain, repair, or
rebuild all or any of the Lease Assets, or (ii) make repairs at the expense of
Sublessor pursuant to any applicable law, contract, insurance agreement or other
covenant at any time in effect.
VII. LOSS OR DAMAGE; STIPULATED LOSS VALUE:
If any Lease Assets shall be or become worn out, lost, stolen, destroyed,
irreparably damaged in the reasonable determination of Sublessee, or permanently
rendered unfit for use from any cause whatsoever, including but not limited to
an exercise of eminent domain or condemnation rights (such occurrences being
hereinafter called "Casualty Occurrences"), Sublessee shall promptly and fully
notify Sublessor in writing thereof if the aggregate original Capitalized
Sublessor's Cost of all Lease Assets at any single Lease Assets Location subject
to Casualty Occurrences is in excess of $5,000.
(a) With respect to any unit of Equipment having suffered a Casualty
Occurrence, on the Rent Payment Date next succeeding the later of the Casualty
Occurrence or twenty (20) days after such Casualty Occurrence (but in no event
later than the date of expiration of the Term with respect to such unit of
Equipment having suffered the Casualty Occurrence) (the "Equipment Payment
Date"), Sublessee shall (regardless of whether Sublessee is required to notify
Sublessor thereof pursuant hereto) either (as selected by Sublessee, if
applicable):
(1) so long as no Default or event which, with the giving of notice
or the lapse of time (or both) would become such a Default has then occurred
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hereunder and the Real Estate upon which the Equipment having suffered the
Casualty Occurrence is installed has not also suffered a Casualty Occurrence,
request Sublessor to cause Lessor to replace the unit of Equipment having
suffered the Casualty Occurrence with equipment of at least the value, utility
and remaining useful life and in as good an operating condition as the unit of
Equipment having suffered the Casualty Occurrence immediately before the
Casualty Occurrence, assuming that such unit of Equipment had been maintained in
accordance with the provisions of this Agreement, and otherwise in accordance
with the provisions of Section V(e) hereof; or
(2) pay Sublessor the sum of (x) the Stipulated Loss Value of such
unit of Equipment calculated in accordance with Annex D to the applicable
Schedule as of the Rent Payment Date next preceding such Casualty Occurrence
(the "Equipment Calculation Date"); and (y) all Rents and other amounts which
are due hereunder as of the Equipment Payment Date. Upon payment of all sums due
hereunder, the Term as to such unit of Equipment shall terminate and (except in
the case of the loss, theft or complete destruction of such of Equipment)
Sublessee shall be entitled to recover possession of such unit of Equipment and,
to the extent not previously applied toward the payment of such sums, to receive
and keep all insurance and/or condemnation proceeds paid to Sublessee (or
Sublessor) on account of such Casualty Occurrence.
(b) With respect to any Real Estate having suffered a Casualty Occurrence,
on the Rent Payment Date next succeeding the later of the Casualty Occurrence or
sixty (60) days after such Casualty Occurrence (but in no event later than the
date of expiration of the Term with respect to such unit of Equipment having
suffered the Casualty Occurrence) (the "Real Estate Payment Date"), Sublessee
shall (regardless of whether Sublessee is required to notify Sublessor thereof
pursuant hereto) either:
(1) proceed to repair, rebuild, or replace such Real Estate (and
replace any Equipment located thereon in accordance with Section V(e) hereof),
subject to the terms and conditions set forth herein (provided that such repair,
rebuilding or replacement is completed within one (1) year after the Real Estate
Payment Date); or
(2) pay Sublessor the sum of (x) the Stipulated Loss Value of such
Real Estate calculated in accordance with Annex D to the applicable Schedule as
of the Rent Payment Date next preceding such Casualty Occurrence (the "Real
Estate Calculation Date"); and (y) all Rents and other amounts which are due
hereunder as of the Real Estate Payment Date. Upon payment of all sums due
hereunder, the Term as to such Real Estate shall terminate and Sublessee shall
be entitled to recover possession of such Real Estate and, to the extent not
previously applied toward the
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payment of such sums, to receive and keep all insurance and/or condemnation
proceeds paid to Sublessee (or Sublessor) on account of such Casualty
Occurrence.
Sublessee shall have the option of repairing, rebuilding or replacing
damaged or destroyed Real Estate only if (x) Sublessor consents thereto in
writing (which consent may be withheld by Sublessor in its sole discretion) and
(y):
(i) no Default or event which, with the giving of notice or the
lapse of time (or both), would become such a Default has then occurred
hereunder;
(ii) such restoration or replacement is permitted by the terms of the
Ground Lease or Premises Lease (if applicable) or the landlord under such Ground
Lease or Premises Lease otherwise consents in writing to such restoration or
replacement;
(iii) restoration or replacement of the damaged Real Estate will not
result in any decrease in value or other impairment of the Real Estate; and
(iv) the funds available for any restoration or replacement
(including, without limitation, any insurance or condemnation proceeds) are
sufficient to pay the cost of restoration or replacement of the damaged Real
Estate.
If Sublessee chooses to repair, rebuild, or replace the Real Estate,
any condemnation proceeds or the proceeds of any casualty insurance covering
such Real Estate may be applied to the restoration or replacement if all of the
following conditions are met, to the satisfaction of Sublessor in its sole
discretion:
(A) the proceeds and, if deemed necessary by Sublessor,
additional deposits made by Sublessee which may be necessary to restore or
replace the Real Estate to substantially the same condition as existed
immediately prior to the damage, shall be deposited in an interest-bearing
escrow account as provided in clause (2)(A) of Section VII(b) of the Master
Lease;
(B) Sublessee promptly shall proceed to restore or replace that
portion of the Real Estate so damaged to substantially the same condition as
existed prior to the Casualty Occurrence, with such non-material changes,
alterations and modifications (including the substitution and addition of other
property) as may be desired by Sublessee, permitted by the Ground Lease or
Premises Lease (if any), and approved by Sublessor;
(C) all work shall be performed in accordance with all
applicable laws and regulations;
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(D) Sublessee will request Sublessor to cause withdrawals to be
made from the escrow account to pay the costs of such restoration or replacement
as the work progresses, as certified by an architect or engineer reasonably
acceptable to Sublessor, by submitting to Sublessor such requisitions and
accompanying documents as Sublessor shall require; and
(E) Sublessee promptly will replace any lost or damaged
Equipment located on or in such Real Estate in accordance with the provisions of
Section V(e) hereof.
VIII. RISK OF LOSS:
Sublessee hereby assumes and shall bear the entire risk of any loss,
theft, damage to, or destruction of, any Equipment from any cause whatsoever
from the time the Equipment is shipped or delivered to Sublessee, and Sublessee
hereby assumes and shall bear the entire risk of any loss, theft, damage to, or
destruction of, any Real Estate from any cause whatsoever from the time
Sublessee enters into a Ground Lease or Premises Lease, or from the time a deed
is delivered under the Agency Agreement, as applicable during the Term of a
Schedule with respect to the Lease Assets described on such Schedule unless
Sublessee shall not be in actual possession of such Lease Assets by reason of
Sublessor's exercise of its remedies of repossession or dispossession pursuant
to Article XI hereof and such loss, theft, damage to, or destruction of, such
Lease Assets was not caused by acts or omissions prior to any such repossession
or dispossession. No loss of or damage to the Lease Assets or any item thereof
shall impair any obligation of Sublessee hereunder or under the Agency
Agreement, and all such obligations of Sublessee shall continue in full force
and effect.
IX. INSURANCE:
Sublessee agrees, at its own expense, to keep: (a) all Equipment
insured for such amounts as specified in Paragraph D of the applicable Schedule
and against such hazards as Sublessor may require, including, but not limited
to, insurance for damage to or loss of such Equipment, with a loss payable
clause in favor of Lessor and Sublessor, as their interests may appear,
irrespective of any breach of warranty or other act or omission of Sublessee;
(b) all Real Estate insured in an amount at least equal to the replacement value
of such Real Estate, against such hazards as Sublessor shall require, including
(but not limited to) loss or damage resulting from fire and other risks insured
against by extended coverage, with a standard mortgagee's endorsement in favor
of Lessor and Sublessor, as their interests may appear, irrespective of any
breach of warranty or act or omission of Sublessee;
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(c) in full force and effect liability coverage against personal injuries, death
or property damage, relating to the Lease Assets for such amounts as specified
in Paragraph D of the applicable Schedule, with Lessor and Sublessor named as
additional insured; and (d) in full force and effect a flood insurance policy in
an amount equal to the maximum limit of coverage available with respect to any
Real Estate located in a special flood hazard area; provided that Sublessee
shall not be required to have such flood insurance policy with respect to such
Real Estate if Sublessor receives an acceptable flood zone determination from
Transamerica, a registered land surveyor, or another reputable flood
certification company reasonably acceptable to Sublessor to the effect that such
Real Estate is not located in a special flood hazard area. All such policies
shall be with companies, and on terms, satisfactory to Sublessor. All insurance
required hereunder may be subject to such deductibles as reasonably are
acceptable to Sublessor. Sublessee agrees to deliver to Sublessor evidence of
insurance satisfactory to Sublessor. No insurance shall be subject to any co-
insurance clause. Sublessee hereby appoints Sublessor as Sublessee's
attorney-in-fact to make proof of loss and claim for insurance, and to make
adjustments with insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a result of such
insurance policies to the extent that they cover the Lease Assets. Any expense
of Sublessor in adjusting or collecting insurance shall be borne by Sublessee.
Sublessee will not make adjustments with insurers except (i) with respect to
claims for damage to any Lease Assets at any one Lease Assets Location where the
repair costs do not exceed $25,000, or (ii) with Sublessor's written consent.
Said policies shall provide that the insurance may not be altered or canceled by
the insurer until after thirty (30) days written notice to Sublessor. Provided
that Sublessee is not then in Default, Sublessor will (subject to Sublessee's
election pursuant to Section VII hereof) apply any insurance proceeds received
by Sublessor on account of a Casualty Occurrence to the cost of repairing or
replacing the Lease Assets having suffered such Casualty Occurrence or to
Sublessee's obligation to pay the Stipulated Loss Value pursuant to Sections
VII(a)(2) or VII(b)(3) hereof. After Default, Sublessor may, at its option,
apply proceeds of insurance, in whole or in part, to (i) repair or replace Lease
Assets or any portion thereof, or (ii) satisfy any obligation of Sublessee to
Sublessor hereunder.
X. RETURN OF LEASE ASSETS:
(a) Upon the expiration or termination of the Term of any Schedule, or
upon exercise of Sublessor's option to return the Lease Assets pursuant to
Section XVIII(c) of the Master Lease, unless Sublessee shall have exercised its
extension option pursuant to Section XVIII(a) hereof, or its purchase option
pursuant to Section XVIII(d) hereof or unless Sublessee shall be deemed to have
elected to exercise its purchase option pursuant to Section XVIII(e) hereof,
Sublessee shall promptly, at its
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own cost and expense: (i) perform any testing and repairs required to place the
affected units of Equipment in the same condition and appearance as when
received by Sublessee (reasonable wear and tear excepted) and in good working
order for their originally intended purpose; (ii) if deinstallation, disassembly
or crating is required, cause such units of Equipment to be deinstalled,
disassembled and crated by an authorized manufacturer's representative or such
other service person as is satisfactory to Sublessor; (iii) return such units of
Equipment, free and clear of all liens and encumbrances (other than those
described in Section V(c)(1) hereof), to a location within the continental
United States as Sublessor shall direct; (iv) remove all debris and rubbish and
such items of furniture and equipment owned by Sublessee and placed on any Real
Estate as Sublessor shall require to be removed, and (v) surrender possession of
the Real Estate and (if applicable) assign the applicable Ground Lease or
Premises Lease to Sublessor. In addition, Sublessee shall comply with the
provisions of Annex F to the applicable Schedule. At Sublessor's sole
discretion, Sublessor may elect to abandon any or all of the Real Estate upon
written notice to Sublessee; whereupon all interest of Sublessor in such Real
Estate shall be conveyed to Sublessee.
(b) If Sublessee is required to comply with the requirements of Paragraph
(a) above, until Sublessee has fully complied with the requirements of Paragraph
(a) above, Sublessee's Rent payment obligation with respect to the applicable
Lease Assets and all other obligations under this Agreement shall continue from
month to month notwithstanding any expiration or termination of the Term.
Sublessor may terminate such continued leasehold interest upon five (5) days'
written notice to Sublessee. In addition to these Rents, Lessor shall have all
of its other rights and remedies available as a result of such nonperformance.
The delivery of keys to any Real Estate other than in connection with the
termination of this Agreement or any Schedule or pursuant to any termination
option validly exercised by Sublessee, shall not constitute a surrender of such
Real Estate or effect a termination of the Lease as to such Real Estate, whether
or not such keys are retained by Sublessor. The return of Lease Assets, whether
or not accepted by Sublessor, or the mutual termination of this Agreement, shall
not work a merger and, at the option of Sublessor, shall operate as an
assignment to Sublessor of all subleases or subtenancies.
(c) Sublessee hereby waives, to the extent permitted by law, all claims
for damages or other liability in connection with Sublessor's re-entering and
taking possession of the Lease Assets after the occurrence of a Default
hereunder, and Sublessee shall indemnify, defend, protect, and hold Sublessor
harmless from and against any such claims, damages, or other liability, and no
such re-entry shall be considered or construed to be a forcible entry, nor shall
Sublessor be guilty of forcible entry or forcible detainer.
XI. DEFAULT; REMEDIES:
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(a) Sublessor may in writing declare this Agreement in default ("Default")
if: (1) Sublessee breaches its obligation to pay Rent or any other sum to
Sublessor when due and payable and fails to cure the breach within one (1) day;
(2) Sublessee breaches any of its insurance obligations under Section IX hereof,
or its obligations under Sections V(g) or the second sentence of XVI(n) hereof,
or its payment obligations under Section III hereof; (3) Sublessee breaches any
of its other obligations hereunder and fails to cure that breach within twenty
(20) days after written notice thereof; (4) any representation or warranty made
by Sublessee in connection with this Sublease shall be false or misleading in
any material respect; (5) Sublessee becomes insolvent or ceases to do business
as a going concern; (6) a petition is filed by or against Sublessee under any
bankruptcy or insolvency laws and, if such petition is filed against Sublessee,
such petition has not been dismissed in 60 days; (7) Sublessee shall have
terminated its existence, consolidated with, merged into, or conveyed or leased
substantially all of its assets as an entirety to any person without Sublessor's
prior consent in writing; (8) Sublessee shall be in default ("Material
Indebtedness Default") under any material obligation for borrowed money, for the
deferred purchase price of property or any lease agreement for an amount in
excess of One Million Dollars ($1,000,000) ("Material Indebtedness") and such
Material Indebtedness Default is not cured within the applicable grace period,
if any (provided, however, that if such Material Indebtedness is accelerated by
the creditor with respect thereto as a result of the Material Indebtedness
Default, then such Material Indebtedness Default immediately shall constitute a
Default hereunder); (9) Sublessee shall be in default under, or breach any
provision of, the Associated Documents (as defined in the [Second] Amended and
Restated Inducement Agreement, dated as of the date hereof, between Sublessor
and Sublessee); (10) there shall have occurred any default or violation or
breach in the performance or observation of any obligation or condition to be
performed or observed by Sublessee under any agreement between Sublessor and
Sublessee; or (11) this Agreement or any document executed and delivered in
connection herewith shall (except in accordance with the terms thereof) cease to
be effective, or any security interest or lien granted in connection herewith
shall (except as a result of any action taken by Sublessor or a failure by
Sublessor to file a continuation statement) cease to be a perfected first lien.
Such declaration of Default shall apply to all Schedules. IN CONNECTION WITH THE
DECLARATION OF ANY DEFAULT HEREUNDER, SUBLESSEE HEREBY WAIVES (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) ANY REQUIREMENT UNDER APPLICABLE LAW OR REGULATIONS
THAT A NOTICE FROM SUBLESSOR NOT BECOME EFFECTIVE UNTIL A PERIOD OF DAYS HAS
ELAPSED.
(b) After a Default, Sublessee shall, without further demand, forthwith
pay to Sublessor (i) as liquidated damages for loss of a bargain and not as a
penalty, the Stipulated Loss Value of the Lease Assets (calculated in accordance
with Annex D to the applicable Schedule(s) as of the Rent Payment Date next
preceding the declaration
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of Default), (ii) all Rents and other sums then due hereunder (iii) its
allocable share of any other costs incurred by Sublessor as a result of such
Default (including its allocable share of breakage expenses paid by Sublessor to
Lessor pursuant to Section XI(b) of the Master Lease). If Sublessee fails to pay
the amounts specified in the preceding sentence, then in addition to the
obligation to pay such amounts, at the request of Sublessor, Sublessee shall
comply with the provisions of Section X hereof relating to the return of Lease
Assets. Sublessee hereby authorizes Sublessor to enter, with or without legal
process, any Real Estate or Lease Assets Location and take possession of the
Lease Assets. Sublessor may, but shall not be required to, sell Lease Assets at
private or public sale, in bulk or in parcels, with or without notice, and
without having the Lease Assets present at the place of sale; or Sublessor may,
but shall not be required to, lease, otherwise dispose of or keep idle all or
part of the Lease Assets and Sublessor may use Sublessee's premises for the
foregoing without liability for rent, costs, damages or otherwise. Sublessor may
also exercise any and all available remedies under any collateral assignment of
lease made by Sublessee to Sublessor or Lessor including, without limitation,
the Collateral Assignments of Lease, including (but not limited to) selling,
transferring or assigning the leasehold estate created by the Ground Leases or
the Premises Leases. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (1) to pay Sublessee's
pro rata share of any amounts owed by Sublessor to Lessor under the Master
Lease; then (2) to pay all of Sublessor's costs, charges and expenses incurred
in taking, removing, holding, repairing and selling, leasing or otherwise
disposing of Lease Assets; then, (3) to the extent not previously paid by
Sublessee, to pay Sublessor all sums due from Sublessee hereunder; and (4) any
surplus shall be paid to Sublessee. Sublessee shall pay any deficiency in
clauses (1), (2) and (3) forthwith. Upon the occurrence of any Default
hereunder, Sublessor shall have a period of twenty-four (24) months in which to
sell the Equipment and Leasehold Improvements on site at the Lease Assets
Locations which are Fee Properties. During such period, Sublessee shall continue
to insure and maintain the Lease Assets as provided herein (but shall not be
required to pay Rent with respect thereto) and shall provide Sublessor and its
authorized representatives and prospective purchasers access to the Lease Assets
for remarketing purposes.
(c) In addition to the foregoing rights, after a Default, Sublessor may,
by notice to Sublessee, rescind or terminate this Agreement as to any or all of
the Lease Assets; provided, however, that (1) no reletting, reentry or taking
possession of any of the Lease Assets by Sublessor shall be construed as an
election on Sublessor's part to terminate this Agreement, (2) notwithstanding
any reletting, reentry, or taking of possession, Sublessor may at any time
thereafter elect to terminate this Agreement for a continuing Default, and (3)
no agreement accepting a surrender of any or all of the Lease Assets shall be
valid unless the same be made in writing and executed by the Sublessor.
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(d) After a Default, Sublessor may, at its option, elect not to terminate
this Agreement and continue to collect all Rent payments and other amounts due
hereunder and enforce Sublessee's obligations hereunder as and when the same
become due, or are to be performed, provided that it does not require Sublessee
to return any of the Lease Assets or to pay the amounts specified in the first
sentence of Section XI(b) hereof; and at the option of Sublessor, upon any
abandonment of the Lease Assets by Sublessee or reentry of same by Sublessor,
Sublessor may, at its sole discretion, make necessary repairs in order to relet
the Leased Assets, and relet the Leased Assets (or any part thereof) for such
term or terms (which may be for a term extending beyond the Term of this
Agreement) and at such rental or rentals, and upon such other terms and
conditions as Sublessor in its discretion shall deem advisable; and upon such
reletting, all rentals actually received by Sublessor shall be applied to
Sublessee's obligations hereunder in the order set forth in the sixth sentence
of Section XI(b) hereof. Anything in this Agreement or applicable law to the
contrary notwithstanding Sublessor shall have no obligation to relet the Lease
Assets after a Default.
(e) After a Default, and only if Sublessee fails to pay the amounts
specified in the first sentence of Section XI(b) hereof, separate suits may be
brought to collect any damages for any periods, and such suits shall not in any
manner prejudice Sublessor's right to collect any such damages for any
subsequent periods, or Sublessor may defer any such suits until after the
expiration of the Term, in which event the right to bring such suits shall not
be deemed to have accrued until the end of the Term.
(f) After a Default, and only if Sublessee fails to pay the amounts
specified in the first sentence of Section XI(b) hereof, Sublessor may, as a
matter of right and without notice to Sublessee, and without regard to the value
of the Lease Assets or the solvency of Sublessee, apply to any court having
jurisdiction to appoint a receiver or receivers of the Lease Assets, and
Sublessee irrevocably consents to any such appointment. Any such receiver(s)
shall have all of the usual powers of receivers in similar cases and all of the
powers and duties of Sublessor in case of entry, and shall continue to have such
powers until confirmation of the sale of the Lease Assets, unless such
receivership is sooner terminated.
(g) After a Default, and only if Sublessee fails to pay the amounts
specified in the first sentence of Section XI(b) hereof, Sublessor may require
any subtenant or other person in possession of any or all of the Lease Assets to
attorn to Sublessor, in which event Sublessor shall undertake the obligations of
Sublessee under any sublease; provided, however, that Sublessor shall not be
liable for any amounts paid by a subtenant to Sublessee or for any defaults by
Sublessee.
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(h) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies which may be
available at law, in equity, or under statute and Sublessor may exercise any or
all such remedies to enforce the terms hereof or recover damages for breach
hereof. Sublessee waives notice of sale or other disposition (and the time and
place thereof), and the manner and place of any advertising. If permitted by
law, Sublessee shall pay reasonable attorney's fees actually incurred by
Sublessor in enforcing the provisions of this Agreement and any ancillary
documents. Waiver of any Default shall not be a waiver of any other or
subsequent Default.
(i) Any Default under the terms of this Agreement may be declared by
Sublessor a default under any other agreement between Sublessor and Sublessee.
WAIVER OF CERTAIN RIGHTS. IF THIS AGREEMENT OR ANY SCHEDULE SHALL BE TERMINATED
AS HEREIN ABOVE SET FORTH, SUBLESSEE WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, (A) ANY NOTICE OF RE-ENTRY OR THE INSTITUTION OF LEGAL PROCEEDINGS TO
OBTAIN RE-ENTRY OR REPOSSESSION; (B) ANY RIGHT OF REDEMPTION, RE-ENTRY OR
REPOSSESSION; AND (C) THE BENEFIT OF ANY LAW NOW OR HEREAFTER EXEMPTING PROPERTY
FROM LIABILITY FOR RENT OR FOR DEBT OR LIMITING LESSOR WITH RESPECT TO THE
ELECTION OF REMEDIES.
XII. ASSIGNMENT; SUB-LETTING:
(a) EXCEPT AS EXPRESSLY PROVIDED HEREIN (INCLUDING, WITHOUT LIMITATION,
SUBLEASING A PORTION OF ANY REAL ESTATE FOR OPERATION OF AN "EINSTEIN BROS.
BAGELS" OR "NOAH'S NEW YORK BAGELS" LOCATION), SUBLESSEE SHALL NOT ASSIGN,
MORTGAGE, SUBLET OR HYPOTHECATE ANY LEASE ASSETS OR THE INTEREST OF SUBLESSEE
HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF SUBLESSOR WHICH MAY BE WITHHELD
IN SUBLESSOR'S SOLE AND ABSOLUTE DISCRETION.
(b) Subject always to the foregoing, this Agreement inures to the benefit
of, and is binding upon, the successors and assigns of the parties hereto.
XII. NET LEASE; NO SET-OFF, ETC.:
This Agreement is a net lease. Sublessee's obligation to pay Rent and other
amounts due hereunder shall be absolute and unconditional. Sublessee shall not
be
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entitled to any abatement or reductions of, or set-offs against, said Rent or
other amounts, including, without limitation, those arising or allegedly arising
out of claims (present or future, alleged or actual, and including claims
arising out of strict liability in tort or negligence of Sublessor) of Sublessee
against Sublessor under this Agreement or otherwise. This Agreement shall not
terminate and the obligations of Sublessee shall not be affected by reason of
any defect in or damage to, or loss of possession, use or destruction of, any
Lease Assets from whatsoever cause. It is the intention of the parties that
Rents and other amounts due hereunder shall continue to be payable in all events
in the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.
XIV. INDEMNIFICATION:
(a) Sublessee hereby agrees to indemnify, save and keep harmless Sublessor
and its Affiliates, successors and assigns, directors, officers, employees and
agents, from and against any and all losses, damages, penalties, injuries,
claims, actions and suits, including legal expenses, of whatsoever kind and
nature, in contract or tort, and including, but not limited to, Sublessor's
strict liability in tort, arising out of (i) the selection, manufacture,
purchase, construction, acceptance or rejection of Lease Assets, the ownership
of Lease Assets during the Term, and the delivery, lease, possession,
maintenance, uses, condition, return or operation of the Lease Assets
(including, without limitation, latent and other defects, whether or not
discoverable by Sublessor or Sublessee and any claim for patent, trademark or
copyright infringement or environmental damage), or (ii) the condition of Lease
Assets sold or disposed of after use by Sublessee or employees of Sublessee;
provided, however, that Sublessee shall have no obligation hereunder to
Sublessor or its agents, employees, successors and assigns to the extent that
any of the foregoing results from the gross negligence or willful misconduct of
Sublessor. Sublessee shall, upon request, defend any actions based on, or
arising out of, any of the foregoing.
(b) Sublessee shall defend, indemnify and hold harmless Sublessor and its
Affiliates, successors and assigns, directors, officers, employees and agents,
from and against any Environmental Claim or Environmental Loss and Sublessee
shall fully and promptly pay, perform and discharge any such Environmental Claim
or Environmental Loss; provided, however, that Sublessee shall have no
obligation hereunder with respect to any Environmental Claim or Environmental
Loss (i) to the extent any of the foregoing arises from the gross negligence or
willful misconduct of Sublessor or any of its Affiliates or (ii) for any use,
generation, storage, Environmental Emission, or presence in violation of any
Environmental Laws of any Contaminant initially introduced onto a Lease Assets
Location after (x) Sublessor's exercise of its remedies of repossession or
dispossession pursuant to Section XI hereof with respect to such Lease Assets
Location, or (y) the return or surrender of the Real
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Estate at such Lease Assets Location by Sublessee in accordance with Section X
hereof.
As used herein,
(1) "Adverse Environmental Condition" shall refer to (i) the
existence or the continuation of the existence, of an Environmental
Emission (including, without limitation, a sudden or non-sudden accidental
or non-accidental Environmental Emission), of, or exposure to, any
Contaminant, odor or audible noise in violation of any applicable
Environmental Law, at, in, by, from or related to any Lease Assets, (ii)
the environmental aspect of the transportation, storage, treatment or
disposal of materials in connection with the operation of any Lease Assets
in violation of any applicable Environmental Law, or (iii) the violation,
or alleged violation, of any Environmental Law connected with any Lease
Assets.
(2) "Affiliate" shall refer, with respect to any given Person, to any
Person that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(3) "Contaminant" shall refer to those substances which are regulated
by or form the basis of liability under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls ("PCBs"), and
radioactive substances.
(4) "Environmental Claim" shall refer to any accusation, allegation,
notice of violation, claim, demand, abatement or other order or direction
(conditional or otherwise) by any governmental authority or any Person for
personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment or other adverse
effects on the environment, or for fines, penalties or restrictions,
resulting from or based upon any Adverse Environmental Condition.
(5) "Environmental Emission" shall refer to any actual or threatened
release, spill, omission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any of the Lease Assets, including, without
limitation, the movement of any Contaminant or other substance through or
in the air, soil, surface water, groundwater, or property.
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(6) "Environmental Law" shall mean any Federal, foreign, state or
local law, rule or regulation pertaining to the protection of the
environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section
9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section
1801 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section
1251 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 1361
et seq.), and the Occupational Safety and Health Act (19 U.S.C. Section 651
et seq.), as these laws have been or may hereafter be amended or
supplemented, and any analogous foreign, Federal, state or local statutes,
and the regulations promulgated pursuant thereto.
(7) "Environmental Loss" shall mean any loss, cost, damage,
liability, deficiency, fine, penalty or expense (including, without
limitation, reasonable attorneys' fees, engineering and other professional
or expert fees), investigation, removal, cleanup and remedial costs
(voluntarily or involuntarily incurred to the extent required by
Environmental Laws) and damages to, loss of the use of or decrease in value
of the Lease Assets arising out of or related to any Adverse Environmental
Condition.
(8) "Person" shall include any individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority, or other
entity of whatever nature.
(c) All of Sublessor's rights, privileges and indemnities contained in
this Section shall survive the expiration or other termination of this Agreement
and the rights, privileges and indemnities contained herein are expressly made
for the benefit of, and shall be enforceable by Sublessor and its successors and
assigns.
XV. DISCLAIMER:
(a) SUBLESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE LEASE ASSETS WITHOUT
ANY ASSISTANCE FROM SUBLESSOR OR ITS AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS. SUBLESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE
OR HAVE MADE, ANY WARRANTY OR
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REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT SUBLEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Sublessor and Sublessee, are to be borne by Sublessee.
Without limiting the foregoing, Sublessor shall have no responsibility or
liability to Sublessee or any other person with respect to any of the following
(i) any liability, loss or damage caused or alleged to be caused directly or
indirectly by any Lease Assets, any inadequacy thereof, any deficiency or defect
(latent or otherwise) therein, or any other circumstance in connection
therewith; (ii) the use, operation or performance of any Lease Assets or any
risks relating thereto; (iii) any interruption of service, loss of business or
anticipated profits or consequential damages; or (iv) the delivery, operation,
servicing, maintenance, repair, improvement or replacement of any Lease Assets.
If, and so long as, no Default exists under this Agreement, Sublessee shall be,
and hereby is, authorized during the term of this Agreement to assert and
enforce, at Sublessee's sole cost and expense, from time to time, in the name of
and for the account of Sublessor and/or Sublessee, as their interests may
appear, whatever claims and rights Sublessor may have against any supplier of
the Lease Assets. In no event shall Lessor be deemed to be a supplier of Lease
Assets for purposes of this Section XV(a).
(b) In the absence of a Default under this Agreement or a Lease Default
(as hereinafter defined) and subject to the provisions of Sections I(e) and I(f)
hereof, neither Sublessor nor any person acting by, through or under Sublessor,
shall take any actions to interfere with Sublessee's quiet enjoyment of the
Lease Assets during the Term.
(c) Sublessee acknowledges and agrees that Sublessor assumes no obligation
or liability with respect to this Agreement or the delivery of any document
referred to herein, and Sublessee agrees that it shall look solely to Sublessor
for the performance of such obligations, except in the event that Sublessee,
upon the direction of Lessor, shall attorn to such Lessor as lessor under this
Sublease or Lessor has otherwise assumed Sublessor's responsibilities hereunder.
XVI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBLESSEE:
Sublessee hereby represents, warrants and covenants to Sublessor that on
the date hereof and on the date of execution of each Schedule:
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(a) Sublessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "Documents") and
is duly qualified to do business wherever necessary to carry on its present
business and operations, including the jurisdictions where the Equipment or
other Lease Assets are (or are to be) located.
(b) The Documents have been duly authorized, executed and delivered by
Sublessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into or
performance by Sublessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Sublessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Sublessee or
any provision of Sublessee's articles of incorporation, charter or by-laws, if
Sublessee is a corporation, or Sublessee's partnership agreement, if Sublessee
is a partnership, or Sublessee's certificate of formation and operating
agreement, if Sublessee is a limited liability company; or (ii) result in any
breach of, constitute a default (which breaches or default would have,
individually or in the aggregate, a material adverse effect) under or result in
the creation of any lien, charge, security interest or other encumbrance upon
any Lease Assets pursuant to any agreement, indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument (other than this Agreement) to
which Sublessee is a party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Sublessee, which will adversely affect the ability of Sublessee to fulfill its
obligations under this Agreement.
(f) Sublessee is a corporation, limited liability company or partnership,
as the case may be, duly organized, validly existing and in good standing under
the laws of the State of its organization (specified in the first sentence of
this Sublease).
(g) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property, regardless of the degree of its annexation to
any real property and shall not by reason of any installation in, or affixation
to, real or personal property become a part thereof. Any Leasehold Improvements
which do not constitute personal property shall be affixed only to the real
property leased to
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Sublessee pursuant to Ground Leases or Premises Leases which have been duly and
validly collaterally assigned to Lessor or Sublessor.
(h) The Lease Assets will at all times be used for commercial or business
purposes.
(i) Sublessee is in compliance in all material respects with all
applicable Environmental Laws with respect to the Real Estate and each Lease
Assets Location where Leasehold Improvements are located and, to Sublessee's
knowledge, no circumstances exist which would prevent or interfere with such
compliance. Except as set forth in any Phase I environmental audit delivered to
Lessor and Sublessor in connection with the acquisition of Real Estate after the
date hereof, to the knowledge of Sublessee, (1) there are no pending or
threatened Environmental Claims related to any of the Real Estate or any of the
Lease Assets Locations where Leasehold Improvements are located which, if
adversely determined, would have a material adverse effect on Sublessee, (2) no
Contaminants are present on any of the Real Estate or Lease Assets Locations
where Leasehold Improvements are located other than such materials as (i) are
handled or stored in accordance with all applicable Environmental Laws, or (ii)
would not require the conduct of investigative or remedial action pursuant to
Environmental Laws, and (3) Sublessee has not transported, disposed of, or
arranged for the disposal of any Contaminants on any of the Real Estate or Lease
Assets Locations where Leasehold Improvements are located except (i) in
accordance with all applicable Environmental Laws, or (ii) in concentrations or
conditions which would not require the conduct of investigative or remedial
action pursuant to Environmental Laws.
(j) The current and proposed use of the Real Estate is authorized under
all applicable laws and regulations which, absent such authorization, would have
a material adverse effect on the operations of Sublessee, and Sublessee has
obtained all licenses and permits necessary for the operation of each unit of
Real Estate and each Lease Assets Location as a "Boston Market" or "Boston
Carver" location. Sublessee shall not modify or rescind any such licenses or
permits or take any action which would cause the loss of such licenses or
permits. Sublessee shall take all action to obtain all necessary extensions or
renewals of such licenses and permits.
(k) Each unit of Real Estate is connected to and serviced by all water,
sewage, disposal, gas and electrical facilities necessary for the operation of
such unit of Real Estate.
(l) There are no claims for payment for labor performed or materials
furnished to any of the Real Estate which could give rise to a mechanic's lien
or materialman's lien on such Real Estate except those being contested in good
faith, for which Sublessee has obtained a bond pending appeal.
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(m) All Leasehold Improvements and Fee Improvements have been constructed
in a good and workmanlike manner, substantially in accordance with (1) approved
prototype plans, (2) all land use and construction permits and approvals and (3)
all applicable laws and regulations, including all zoning rules and the
Americans with Disabilities Act.
(n) Sublessee represents to Sublessor that it has good title to the
Equipment and/or the Leasehold Improvements described in any Bill of Sale
delivered hereunder, free and clear of all liens and encumbrances (subject only
to Sublessor's security interest therein and to Permitted Liens). In the event
Sublessor determines that such representation as to title by Sublessee shall
prove untrue in any material respect, then, within five (5) days of written
notice from Sublessor to Sublessee of such occurrence (the date on which
Sublessee receives such notice from Sublessor is referred to as the "Notice
Date"), Sublessee shall either (i) purchase all units of the Equipment (the
"Affected Equipment") with respect to which such representation is untrue for a
purchase price equal to the then Stipulated Loss Value of such units of the
Affected Equipment or (ii) if Sublessor requires, replace such Equipment
pursuant to Section V(f) hereof.
(o) Sublessee 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.
XVII. OWNERSHIP FOR TAX PURPOSES, ETC.; GRANT OF SECURITY INTEREST; USURY
SAVINGS:
(a) For income tax purposes, Sublessor will treat Sublessee as the owner
of the Lease Assets. Accordingly, Sublessor agrees (i) to treat Sublessee as the
owner of the Lease Assets on its Federal income tax return, (ii) not to take
actions or positions inconsistent with such treatment on or with respect to its
Federal income tax return, and not claim any tax benefits available to an owner
of the Lease Assets on or with respect to its Federal income tax return. The
foregoing undertakings by Sublessor shall not be violated by Sublessor's taking
a tax position through inadvertence so long as such inadvertent tax position is
reversed by Sublessor promptly upon its discovery. Sublessor shall in no event
be liable to Sublessee if Sublessee fails to secure any of the tax benefits
available to the owner of the Lease Assets. It is the intent of the parties
hereto that: (i) for the purposes of Sublessee's financial reporting, the
transaction contemplated hereby shall be treated by Sublessee as an operating
lease from Sublessor to Sublessee, (ii) for other purposes, including Federal
and state income tax, bankruptcy and Uniform Commercial Code purposes (1)
Sublessee shall be treated as the owner of the Lease Assets, (2) this Agreement
grants a security interest or lien, as the case may be, in the Lease Assets and
other collateral to
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Sublessor, and (3) the obligations of Sublessee to pay Rent shall be treated as
payments of principal and interest to Sublessor by Sublessee.
(b) In order to secure the prompt payment of the Rent and all of the other
amounts from time to time outstanding hereunder and with respect to the
Schedules, and the performance and observance by Sublessee of all the
agreements, covenants and provisions hereof and thereof (including, without
limitation, all of the agreements, covenants and provisions hereof that are
incorporated in the Schedules):
(1) Sublessee hereby grants to Sublessor a security interest in the
Equipment and Leasehold Improvements subleased hereunder, together with all
additions, attachments, accessories and accessions thereto whether or not
furnished by the supplier of the Equipment or Leasehold Improvements and any and
all substitutions or replacements therefor, in each such case in which Sublessee
shall from time to time acquire an interest, and any and all insurance and/or
other proceeds (but without Sublessee having any power of sale) of the property
in and against which a security interest is granted hereunder;
(2) to the extent the Equipment and Leasehold Improvements may
constitute or be deemed to be Sublessee's inventory (the "Inventory"), Sublessee
hereby grants to sublessor a security interest in such Inventory, which shall
mean all Equipment and Leasehold Improvements offered or furnished under any
contract of service or intended for sale or lease, any and all additions,
attachments, accessories and accessions thereto, any and all substitutions,
replacements or exchanges therefor, any and all leases, subleases, rentals,
accounts and contracts with respect to the Equipment and Leasehold Improvements
which may now exist or hereafter arise, together with all rights thereunder and
all rental and other payments and purchase options due and to become due
thereunder, any and all sales proceeds payable for such property, all insurance,
bonds and/or other proceeds of the property and all returned or repossessed
Equipment and Leasehold Improvements now or at any time or times hereafter in
the possession or under the control of Sublessee or Sublessor;
(3) Sublessee hereby grants to Sublessor a security interest in, and
assigns, sets over and transfers to Sublessor, its successors and assigns, all
(except as otherwise provided herein) of its right, title and interest in and to
each Ground Lease and Premises Lease and all extensions and renewals thereof;
and, in furtherance thereof, shall execute and deliver to Sublessor a Collateral
Assignment of Lease with respect to each Ground Lease and Premises Lease;
provided, however, that Sublessee shall continue to pay and perform all
obligations required to be paid and performed by Sublessee, pursuant to the
Ground Leases and Premises Leases notwithstanding such assignment for collateral
security purposes; and provided, further, that Sublessor shall not exercise its
rights hereunder unless and until a Default or event which, with
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notice or the lapse of time or both, would constitute a Default hereunder has
occurred and is continuing.
(4) Upon Sublessee's request, and upon receipt from Lessor of
documentation acceptable to Sublessor, Sublessor shall at such time as all of
the obligations with respect to Lease Assets under this Agreement have been
indefeasibly paid or performed in full (including, without limitation, the
payment in full of all amounts required pursuant to the first sentence of
Section XI(b) hereof) execute and deliver termination statements and other
appropriate documentation reasonably requested by Sublessee, all at Sublessee's
expense, to evidence Sublessor's release of its security interest in such Lease
Assets and the related Inventory.
(5) Notwithstanding anything to the contrary set forth herein, the
parties acknowledge and agree that (a) solely with respect to any Schedule
describing Lease Assets located in any of the States of California, Florida,
Tennessee or Maryland (each such Schedule being hereinafter referred to as an
"Allocated Schedule" and, collectively, as the "Allocated Schedules"), the
security interest granted herein with respect to any collateral described in an
Allocated Schedule or relating to the Lease Assets described in such Allocated
Schedule separately shall secure only the prompt payment and performance of the
obligations of Sublessee pursuant to such separate Allocated Schedule (including
the provisions of this Agreement to the extent incorporated by reference in such
separate Allocated Schedule), and (b) any Collateral Assignment of Lease
executed and delivered by Sublessee in connection with a Ground Lease or
Premises Lease of property located in the States of California, Florida,
Tennessee or Maryland shall secure only the prompt payment and performance of
the obligations of Sublessee pursuant to the Allocated Schedule describing the
Lease Assets located at such property.
(c) To the extent that any Uniform Commercial Code financing statement
filed pursuant to this Agreement inadvertently covers property which Sublessee
specifically identifies and demonstrates, to the reasonable satisfaction of
Sublessor, is not intended to be subject to the security interest granted
pursuant to this Agreement, Sublessor shall, at Sublessee's sole cost and
expense, execute such instruments as are provided to it by Sublessee and as
reasonably may be necessary to release such property from such financing
statements, without representation or warranty, except that such property is
free and clear of any liens in favor of Sublessor or arising by reason of any
act or omission of Sublessor.
(d) It is the intention of the parties hereto to comply with any
applicable usury laws to the extent that any Schedule is determined to be
subject to such laws; accordingly, it is agreed that, notwithstanding any
provision to the contrary in any Schedule or the Agreement, in no event shall
any Schedule require the payment or permit the collection of interest in excess
of the maximum amount permitted by
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applicable law. If any such excess interest is contracted for, charged or
received under any Schedule or the Agreement, or in the event that all of the
principal balance shall be prepaid, so that under any of such circumstances the
amount of interest contracted for, charged or received under any Schedule or the
Agreement shall exceed the maximum amount of interest permitted by applicable
law, then in such event (1) the provisions of this paragraph shall govern and
control, (2) neither Sublessee nor any other person or entity now or hereafter
liable for the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount of interest
permitted by applicable law, (3) any such excess which may have been collected
shall be either applied as a credit against the then unpaid principal balance or
refunded to Sublessee, at the option of the Sublessor, and (4) the effective
rate of interest automatically shall be reduced to the maximum lawful contract
rate allowed under applicable law as now or hereafter construed by the courts
having jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under any Schedule or the Agreement which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate, shall be
made, to the extent permitted by applicable law, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the indebtedness evidenced hereby, all interest at any time contracted
for, charged or received from Sublessee or otherwise by Sublessor in connection
with such indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any applicable state
law, so that it becomes lawful for Sublessor to receive a greater interest per
annum rate than is presently allowed, Sublessee agrees that, on the effective
date of such amendment or preemption, as the case may be, the lawful maximum
hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America (but not in
excess of the interest rate contemplated hereunder).
XVIII. END OF SUBLEASE OPTIONS.
Upon the expiration of the Basic Term or any Renewal Term, as applicable,
of each Schedule, Sublessee shall, provided Sublessee is not then in default
under this Agreement, return, or purchase, or renew (if applicable) the Term
with respect to, all (but not less than all) of the Lease Assets (i) subleased
under all Schedules executed hereunder during any calendar year (if Sublessee
returns the Lease Assets) or (ii) subleased under all Schedules of a particular
series executed hereunder during any calendar year if Sublessee elects to
purchase, or renew the Term with respect to, the Lease Assets) (the Schedules
having the same Maximum Sublease Term executed hereunder during each calendar
year shall be designated as being Schedules of a particular series) upon the
following terms and conditions. The parties acknowledge and agree that the
options set forth in Section XVIII(c) hereof are exercisable by
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Sublessee with respect to all (but not less than all) of the Lease Assets leased
under all Schedules executed hereunder during any calendar year and the options
set forth in Sections XVIII(a), (b), and (d) hereof are exercisable by Sublessee
with respect to all (but not less than all) of the Lease Assets leased under all
Schedules of a particular series executed hereunder during any calendar year and
that the options applicable with respect to the first Schedule of such series
automatically shall be applicable with respect to all Schedules of such series.
(a) Extension. So long as Sublessee shall not have exercised its option
to return the Lease Assets, or its purchase option pursuant to this Section, and
provided that Sublessee shall have exercised its option to renew this Agreement
pursuant to this Section with respect to all applicable Renewal Terms, with
Sublessor's and Lessor's prior written consent (which consent may be withheld at
their sole discretion) Sublessee shall have the option, upon the expiration of
the applicable Renewal Term of the first Schedule of a particular series to be
executed under this Agreement, to extend the Agreement with respect to all, but
not less than all, of the Lease Assets leased under all Schedules of such series
for an additional term of one (1) year (the "Extension Term") at a quarterly
rental to be paid in arrears on the same day of each quarter on which the prior
Renewal Term Rent installment was paid, and calculated as the product of (i) the
Capitalized Sublessor's Cost, times (ii) a lease rate factor calculated by
Sublessor, which when so multiplied times the Capitalized Sublessor's Cost, will
result in a product that is equal to the amount necessary fully to repay to
Sublessor any unpaid balance of the Capitalized Sublessor's Cost (determined as
of the date on which such Renewal Term expired), together with interest thereon
at the Interest Rate, in four (4) equal quarterly installments. At the end of
the Extension Term, provided that Sublessee is not then in Default under this
Agreement or any other agreement between Sublessor and Sublessee, Sublessee
shall purchase all, and not less than all, such Lease Assets, for $1.00 cash,
together with all Rent and other sums then due on such date, plus all taxes and
charges upon transfer and all other reasonable and documented expenses incurred
by Sublessor in connection with such transfer. Upon satisfaction of the
conditions specified in this Paragraph, and upon receipt from Lessor of
documentation acceptable to Sublessor, Sublessor will transfer to the purchaser
of such Lease Assets, on an AS IS, WHERE IS BASIS, without recourse to or
warranty from Sublessor, express or implied, of any kind whatsoever ("AS IS
BASIS"), all of Sublessor's interest in and to such Lease Assets and assign
Sublessee's rights under the applicable Ground Leases and Premises Leases.
Sublessor shall not be required to make and may specifically disclaim any
representation or warranty as to the condition of such Lease Assets and any
other matters (except that Sublessor shall warrant that it has conveyed whatever
interest it received in such Lease Assets free and clear of any lien or
encumbrance created by Sublessor). Sublessor shall, at Sublessee's expense,
execute and deliver to Sublessee such Uniform Commercial Code statements of
termination and other documents and
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instruments as reasonably may be required in order to terminate or convey any
interest of Sublessor in and to such Lease Assets.
(b) Renewal. So long as Sublessee shall not have exercised its option to
return the Lease Assets or its purchase option pursuant to this Section, and so
long as Sublessor shall not have exercised its option to return the Lease Assets
pursuant to Section XVIII(c) of the Master Lease, nor its purchase option
pursuant to Section XVIII(d) thereof, Sublessee shall have the option, upon the
expiration of the Basic Term of the first Schedule of a particular series
executed hereunder, or the initial Renewal Term, as applicable, to renew the
Agreement with respect to all, but not less than all, of the Lease Assets leased
under all Schedules of such series, for the Renewal Term at the Renewal Term
Rent. Including the Renewal Term, the maximum term of any Schedule of a
particular series executed hereunder shall be the Maximum Sublease Term.
(c) Return. Unless Sublessee shall have exercised its extension option or
its purchase option pursuant to this Section, and so long as Sublessor shall not
have exercised its option to return the Lease Assets pursuant to Section
XVIII(c) of the Master Lease, nor its purchase option pursuant to Section
XVIII(d) thereof, and subject to Sections XVIII(e) and (f) hereof, upon the
expiration of the Term of each Schedule of a particular series executed
hereunder, Sublessee shall return to Sublessor all (but not less than all) of
the Lease Assets described on all Schedules of a particular series executed
hereunder, upon the following terms and conditions: Sublessee shall (i) pay to
Sublessor on the last day of the Term of this Agreement with respect to each
individual Schedule of that particular series, in addition to the scheduled Rent
then due on such date and all other sums then due hereunder, a terminal rental
adjustment amount equal to the Sublessee's Obligation with respect to such Lease
Assets, (ii) return the Lease Assets to Sublessor in accordance with Section X
hereof, and (iii) assign the applicable Ground Leases and Premises Leases to
Sublessor or its assignee. Thereafter, upon return of all of the Lease Assets
described on all Schedules of such series, Sublessor and Sublessee shall arrange
for the commercially reasonable sale, scrap or other disposition of such Lease
Assets and the assignment of Sublessee's rights under the applicable Ground
Leases and Premises Leases. Upon satisfaction of the conditions specified in
this Paragraph, Sublessor will transfer to the purchaser of such Lease Assets,
on an AS IS BASIS, all of Sublessor's interest in and to such Lease Assets and
assign Sublessee's rights under the applicable Ground Leases and Premises
Leases. Sublessor shall not be required to make and may specifically disclaim
any representation or warranty as the condition of such Lease Assets and other
matters (except that Sublessor shall warrant that it has conveyed whatever
interest it received in such Lease Assets free and clear of any liens or
encumbrances created by Sublessor). Sublessor shall, at Sublessee's expense,
execute and deliver to Sublessee such Uniform Commercial Code statements of
termination and other documents and instruments, as reasonably may be required
in
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order to terminate or convey any interest of Sublessor in and to such Lease
Assets. Upon the sale, scrap or other disposition of such Lease Assets the net
sales proceeds with respect to such Lease Assets sold will be paid to, and held
and applied by, Sublessor as follows: Sublessor shall promptly thereafter pay
to Sublessee an amount equal to the net proceeds, if any, of such sale (less all
reasonable costs, expenses and fees, including storage, reasonable and necessary
maintenance and other remarketing fees incurred by Sublessor in connection with
the sale, scrap, or disposition of such Lease Assets) in excess of the Residual
Risk Amount of such Lease Assets and applicable taxes, if any.
(d) Purchase. So long as Sublessee shall not have exercised its extension
option or its option to return the Lease Assets pursuant to this Section, and so
long as Sublessor shall not have exercised its option to return the Lease Assets
pursuant to Section XVIII(c) of the Master Lease, nor its purchase option
pursuant to Section XVIII(d) thereof, and subject to Section XVIII(f) hereof,
Sublessee shall have the option, upon the expiration of the Term of the first
Schedule of a particular series, to purchase all (but not less than all) of the
Lease Assets described on all Schedules of such series (other than any Real
Estate not acquired pursuant to the Agency Agreement) upon the following terms
and conditions: If Sublessee desires to exercise this option, Sublessee shall
pay to Sublessor on the last day of the Term with respect to each individual
Schedule of such series, in addition to the scheduled Rent (if any) then due on
such date and all other sums then due hereunder, in cash the purchase price for
the Lease Assets so purchased, determined as hereinafter provided. The purchase
price of the Lease Assets shall be an amount equal to the Fixed Purchase Price
of such Lease Assets, plus all taxes and charges upon sale and all other
reasonable and documented expenses incurred by Sublessor in connection with such
sale, including, without limitation, any such expenses incurred based on a
notice from Sublessee to Sublessor that Sublessee intended to return any such
items of Lease Assets. Upon satisfaction of the conditions specified in this
Paragraph, and upon receipt from Lessor of documentation acceptable to
Sublessor, Sublessor will transfer, on an AS IS BASIS, all of Sublessor's
interest in and to such Lease Assets and release the applicable Collateral
Assignment of Lease. Sublessor shall not be required to make and may
specifically disclaim any representation or warranty as to the condition of such
Lease Assets and other matters (except that Sublessor shall warrant that it has
conveyed whatever interest it received in such Lease Assets free and clear of
any lien or encumbrance created by Sublessor). Sublessor shall, at Sublessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
statements of termination and other documents and instruments, as reasonably may
be required in order to terminate or convey any interest of Sublessor in and to
such Lease Assets.
(e) Sublessor's Return Option. In the event that Sublessor exercises its
option to return the Lease Assets pursuant to Section XVIII(c) of the Master
Lease,
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Sublessee shall return the Lease Assets to Sublessor in accordance with Sections
X and XVIII(c) hereof.
(f) Purchase in Connection with Default Under the Master Lease. Within
fifteen (15) days of Sublessee's receipt of written notice from Lessor that a
default under the Master Lease (a "Master Lease Default") has occurred,
Sublessee may, provided there has not occurred a Default under this Agreement,
by written irrevocable notice to Lessor, indicate its intention to purchase
Lessor's right, title and interest in the Lease Assets (other than any Real
Estate not acquired pursuant to the Agency Agreement). Any such purchase must
be completed no later than ninety (90) calendar days (the "Purchase Period")
from the date Sublessee receives the written notice from Lessor of such Master
Lease Default. The purchase price for such Lease Assets shall be an amount
equal to the Stipulated Loss Value of such Lease Assets, plus all Rents (as such
term is defined in the Master Lease) and other sums then due under the Master
Lease with respect to such Lease Assets, plus the allocated portion of any
breakage expense actually incurred by Lessor or any Participant (as such term is
defined in the Master Lease) in connection with such Master Lease Default
(allocated on the basis of the Capitalized Lessor's Cost of such Lease Assets to
the Capitalized Lessor's Cost of all Lease Assets (as such term is defined in
the Master Lease) lease pursuant to the Master Lease), plus all taxes and
charges upon sale and all other reasonable and documented expenses incurred by
Lessor in connection with such sale. Sublessee shall be unconditionally
obligated to purchase such Lease Assets upon the expiration of the Purchase
Period. Upon satisfaction of the conditons specified in this Paragraph,
including payment to Lessor of all amounts required hereunder, Lessor will
transfer to Sublessee, on an AS IS BASIS, all of Lessor's interest in and to
such Lease Assets. Lessor shall not be required to make and may specifically
disclaim any representation or warranty as to the condition of the Lease Assets
and other matters (except that Lessor shall warrant that it has conveyed
whatever interest it received in such Lease Assets free and clear of any lien or
encumbrance created by Lessor). Lessor shall execute and deliver to Sublessee
such Uniform Commercial Code statements of termination and other documents and
instruments as reasonably may be required in order to terminate or convey any
interest of Lessor in and to such Lease Assets.
(g) Notice of Election. Sublessee shall give Sublessor written notice of
its election of the options specified in this Section not less than two hundred
and forty (240) days nor more than three hundred sixty-five (365) days before
the expiration of the Basic Term or the Renewal Term of the first Schedule of a
particular series to be executed under this Agreement. Such election shall be
effective with respect to all Lease Assets described on all Schedules of such
series. If Sublessee fails timely to provide such notice, without further
action Sublessee automatically shall be deemed to have elected (1) to renew the
term of this Agreement pursuant to Paragraph (b) of this Section if a Renewal
Term is then available hereunder, or (2) to
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purchase the Lease Assets pursuant to Paragraph (d) of this Section if a Renewal
Term is not then available hereunder.
XIX. MISCELLANEOUS:
(a) EACH OF SUBLESSOR AND SUBLESSEE HEREBY UNCONDITIONALLY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF, DIRECTLY OR INDIRECTLY, THIS SUBLEASE, ANY OF THE RELATED DOCUMENTS, ANY
DEALINGS BETWEEN SUBLESSEE AND SUBLESSOR RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED BETWEEN SUBLESSEE AND SUBLESSOR. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court (including, without limitation, contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims). 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 LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
(b) Any cancellation or termination by Sublessor, pursuant to the
provisions of this Agreement, any Schedule, supplement or amendment hereto shall
not release Sublessee from any then outstanding obligations to Sublessor
hereunder.
(c) Time is of the essence of this Agreement. Sublessor's failure at any
time to require strict performance by Sublessee of any of the provisions hereof
shall not waive or diminish Sublessor's right thereafter to demand strict
compliance therewith.
(d) Sublessee agrees, upon Lessor's or Sublessor's request, to execute any
instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor or Sublessor. Sublessor shall, to the extent reasonably
requested by Sublessee, cooperate with Sublessee to allow Sublessee to obtain
the contemplated tax benefits of this Agreement, including, without limitation,
the filing of any statement with respect to any tax abatements or other
requirements.
(e) All notices required to be given hereunder shall be in writing,
personally delivered, delivered by overnight courier service, sent by facsimile
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transmission (with confirmation of receipt), or sent by certified mail, return
receipt requested, addressed to the other party at its respective address stated
above or at such other address as such party shall from time to time designate
in writing to the other party; and shall be effective from the date of receipt.
(f) This Agreement and its exhibits, and any Schedule and Annexes thereto,
and the Agency Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof. If there is any inconsistency between the
terms of the Agency Agreement and this Agreement, this Agreement shall control.
NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS
PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. Any provision of this
Agreement 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 hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(g) The representations, warranties and covenants of Sublessee herein
shall be deemed to survive the closing hereunder. The acquisition and
subleasing to Sublessee by Sublessor of specific Lease Assets shall be
conditioned upon Sublessee providing to Sublessor such information with respect
to Sublessee's financial condition as Sublessor may require, and Sublessor being
satisfied that there shall have been no material adverse change in the business
or financial condition of Sublessee from the date of execution hereof. The
obligations of Sublessee under Sections III, X, XIV, XVIII(c) and XIX(k) hereof
which accrue during the Term of this Agreement and obligations which by their
express terms survive the termination of this Agreement, shall survive the
termination of this Agreement.
(h) In case of a failure of Sublessee to comply with any provision of this
Agreement, Sublessor shall have the right, but shall not be obligated, to effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Sublessor in effecting such compliance
(together with interest thereon at the rate specified in Paragraph (i) of this
Section) shall constitute additional Rent due to Sublessor within five (5) days
after the date Sublessor sends notice to Sublessee requesting payment.
Sublessor's effecting such compliance shall not be a waiver of Sublessee's
default.
(i) Any Rent or other amount not paid to Sublessor when due hereunder
shall, in addition to the late charge as provided in Section II(b) hereof, bear
interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
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(j) Any provisions in this Agreement and any Schedule which are in
conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.
(k) Sublessee agrees to pay on demand all reasonable costs and expenses
incurred by Sublessor in connection with the preparation, execution, delivery,
filing, recording, and administration of any of the Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for Sublessor, and all costs and expenses, if any, in connection with the
enforcement of any of the Documents. In addition, Sublessee shall pay any and
all stamp and other taxes and fees payable or determined to be payable by
Sublessor in connection with the execution, delivery, filing and recording of
any of the Documents and the other documents to be delivered then under, and
agrees to save Sublessor harmless from and against any and all liabilities with
respect to or resulting from any delay attributed to Sublessee in paying or
failing to pay such taxes and fees.
(l) Sublessee agrees to pay on demand its pro-rata share of any interest
paid by Sublessor to Lessor in connection with the pre-closing funding of the
Participants' Purchase Price on the Funding Date (as such terms are defined in
that certain Participation Agreement, dated as of the date hereof, among Lessor
and the financial institutions now or hereafter specified therein (the
"Participation Agreement")). In addition, if the funding by Lessor of the
Capitalized Lessor's Cost (as defined in the Master Lease) of the Lease Assets
on the Closing Date (as defined in the Participation Agreement) relating to such
Funding Date does not occur on the Closing Date as a result of any failure to
satisfy the conditions specified in Section I(c) hereof or Section I(c) of the
Master Lease, then Sublessee agrees to pay on demand its pro rata share of any
costs incurred by Sublessor as a result thereof.
(m) Sublessee waives, and agrees that it will not assert against Lessor or
Sublessor, or any successor or assignee of Lessor or Sublessor, any defense,
set-off, recoupment, claim or counterclaim which Sublessee may at any time have
against Lessor or Sublessor for any reason whatsoever.
XX. CHOICE OF LAW; JURISDICTION:
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE LEASE ASSETS.
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(b) Each party hereto irrevocably and unconditionally:
(1) submits for itself and its property in any legal action or
proceeding relating to this Sublease, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of any
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(2) consents that any such action or proceeding may be brought to
such court, and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or any objection that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(3) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such party at its
address set forth in the Preamble hereto or referred to herein or at such other
address of which the other parties hereto shall have been notified pursuant to
Section XIX(f); and
(4) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
XXI. CHATTEL PAPER:
To the extent that any Schedule would constitute chattel paper, as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest therein may be created through the transfer
or possession of this Agreement in and of itself without the transfer or
possession of the original of a Schedule executed pursuant to this Agreement and
incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
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XXII. EARLY TERMINATION:
(a) If Sublessor exercises its early termination option pursuant to
Section XXII(a) of the Master Lease, Sublessor shall provide thirty (30) days'
prior written notice to Sublessee. Within twenty (20) days after receipt of
such notice, Sublessee shall, in a written notice to Sublessor, specify whether
Sublessee elects to purchase the Lease Assets (other than any Real Estate not
acquired pursuant to the Agency Agreement) pursuant to Paragraph (ii) hereof, or
to cause the Lease Assets to be sold to a third party pursuant to Paragraph (i)
hereof.
(i) If Sublessee elects to cause the Lease Assets to be sold to a
third party, Sublessee shall cooperate with Sublessor in soliciting cash bids
for the Lease Assets on an AS IS BASIS. Prior to the Termination Date (as
defined in the Master Lease), Sublessee shall (1) certify to Sublessor any bids
received by Sublessee and (2) pay to Sublessor the sum of (A) the Termination
Value (calculated as of the Termination Date) for the Lease Assets, plus (B) all
Rent and other sums due and unpaid as of the Termination Date, plus (C) any
applicable Prepayment Premium (as defined in the Master Lease). Provided that
all amounts due hereunder have been paid on or before the Termination Date,
Sublessor and Sublessee shall sell the Lease Assets on an AS IS BASIS for cash
to the bidder specified by Sublessor and Sublessor shall refund to Sublessee the
proceeds of such sale (net of any related expenses incurred by Sublessor) up to
the amount of the Termination Value. Sublessor shall not be required to make and
may specifically disclaim any representation or warranty as to the condition of
the Lease Assets and any other matters (except that Sublessor shall warrant that
it has conveyed whatever interest it received in such Lease Assets free and
clear of any lien or encumbrance created by, through or under Sublessor). If
such sale is not consummated, no termination shall occur and (provided that no
Default shall then have occurred and be continuing) Sublessor shall refund to
Sublessee an amount equal to the sum of (A) the Termination Value and (B) any
applicable Prepayment Premium (less any expenses incurred by Sublessor).
(ii) If Sublessee elects to purchase such Lease Assets, on the
Termination Date, Sublessee shall pay to Sublessor in cash the purchase price
for such Lease Assets, determined as hereinafter provided. The purchase price
of such Lease Assets shall be an amount equal to the sum of (A) the Termination
Value (calculated as of the Termination Date) for the Lease Assets, plus (B) all
taxes and charges upon sale, plus (C) all Rent and other sums due and unpaid as
of the Termination Date, plus (D) any applicable Prepayment Premium (as defined
in the Master Lease). Upon satisfaction of the conditions specified in this
Paragraph (ii), Sublessor will transfer, on an AS IS BASIS, all of Sublessor's
interest in and to the Lease Assets. Sublessor shall not be required to make
and may specifically disclaim any representation or warranty as to the condition
of such Lease Assets and other matters. Sublessor shall, at Sublessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
statements of termination and other documents and
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instruments, as reasonably may be required in order to terminate or convey any
interest of Sublessor in and to the Lease Assets.
(b) If Sublessor exercises its termination option pursuant to Section
XXII(c) of the Master Lease, Sublessor shall provide thirty (30) days' prior
written notice to Sublessee. Within twenty (20) days after receipt of such
notice, Sublessee shall, in a written notice to Sublessor, specify whether
Sublessee elects to purchase the Lease Assets (other than any Real Estate not
acquired pursuant to the Agency Agreement) pursuant to Paragraph (ii) hereof, or
to cause the Lease Assets to be sold to a third party pursuant to Paragraph (i)
hereof.
(i) If Sublessee elects to cause such Lease Assets to be sold to a
third party, Sublessee shall cooperate with Sublessor in soliciting cash bids
for the Lease Assets on an AS IS BASIS. Prior to the FAD Special Termination
Date (as defined in the Master Lease), Sublessee shall (1) certify to Sublessor
any bids received by Sublessee and (2) pay to Sublessor the sum of (A) the
Termination Value (calculated as of the FAD Special Termination Date) for such
Lease Assets, plus (B) all Rent and other sums due and unpaid as of the FAD
Special Termination Date. Provided that all amounts due hereunder have been paid
on or before the FAD Special Termination Date, Sublessor and Sublessee shall
sell the Lease Assets on an AS IS BASIS for cash to the bidder specified by
Sublessor and Sublessor shall refund to Sublessee the proceeds of such sale (net
of any related expenses incurred by Sublessor) up to the amount of the
Termination Value. Sublessor shall not be required to make and may specifically
disclaim any representation or warranty as to the condition of the Lease Assets
and any other matters (except that Sublessor shall warrant that it has conveyed
whatever interest it received in such Lease Assets free and clear of any lien or
encumbrance created by, through or under Sublessor). If such sale is not
consummated, no termination shall occur and (provided that no Default shall then
have occurred and be continuing) Sublessor shall refund to Sublessee an amount
equal to the Termination Value (less any expenses incurred by Sublessor).
(ii) If Sublessee elects to purchase such Lease Assets, on the
Termination Date, Sublessee shall pay to Sublessor in cash the purchase price
for such Lease Assets, determined as hereinafter provided. The purchase price of
such Lease Assets shall be an amount equal to the sum of (A) the Termination
Value (calculated as of the FAD Special Termination Date) for such Lease Assets,
plus (B) all taxes and charges upon sale, plus (C) all Rent and other sums due
and unpaid as of the FAD Special Termination Date. Upon satisfaction of the
conditions specified in this Paragraph (ii), Sublessor will transfer, on an AS
IS BASIS, all of Sublessor's interest in and to such Lease Assets. Sublessor
shall not be required to make and may specifically disclaim any representation
or warranty as to the condition of such Lease Assets and other matters.
Sublessor shall, at Sublessee's expense, execute and deliver to Sublessee such
Uniform Commercial Code statements of termination and
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other documents and instruments, as reasonably may be required in order to
terminate or convey any interest of Sublessor in and to such Lease Assets.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Sublessee and Sublessor have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
SUBLESSOR: SUBLESSEE:
BOSTON CHICKEN, INC. [ ]
By: By:
-------------------------- -------------------------
Name: Name:
------------------------ -----------------------
Title: Title:
----------------------- ----------------------
Receipt of this original counterpart of the foregoing Sublease Agreement
is hereby acknowledged on this __ day of December, 1996.
GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS
By: _________________________________
Name Printed:
Title:
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<PAGE>
EXHIBIT NO. 1
SCHEDULE
SCHEDULE SERIES NO.C-EQUIPMENT-1
DATED THIS ____ DAY OF ___________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
Sublessor & Mailing Address: Sublessee & Mailing Address:
BOSTON CHICKEN, INC.
14103 Denver West Parkway
Golden, Colorado 80401-4086
This Schedule is executed pursuant to, and incorporates by reference the terms
and conditions of, and capitalized terms not defined herein shall have the
meanings assigned to them in, the Sublease Agreement No. 2 identified above
("Agreement;" said Agreement and this Schedule being collectively referred to as
"Sublease"). This Schedule, incorporating by reference the Agreement,
constitutes a separate instrument of lease. This Schedule is designated as a
Series C-Equipment Schedule.
A. Lease Assets.
Pursuant to the terms of the Sublease, Sublessor agrees to sublease to
Sublessee the Lease Assets listed on Annex A attached hereto and made a part
hereof.
B. Financial Terms.
(1) Capitalized Sublessor's Cost: $
(2) Basic Term Sublease Rate Factor: N/A
(3) Daily Sublease Rate Factor: %.
(4) Basic Term: Two (2) years.
(5) Basic Term Commencement Date:
(6) Lease Assets Location: See attachment to Annex A
(7) Sublessee Federal Tax ID No.:
(8) Suppliers: Various.
(9) Last Delivery Date:
(10) Sublessee agrees and acknowledges that the Capitalized Sublessor's Cost
of the Equipment as stated on the Schedule is equal to the fair market
value of the Equipment on the date hereof plus ________% (______% of the
additional _________% being herein called the "Transaction Costs").
(11) Renewal Term: Three (3) one-year terms.
(12) Maximum Sublease Term: Five (5) years.
<PAGE>
(13) Stipulated Loss Values: See Annex D.
(14) Termination Values: See Annex D.
.C. Term and Rent.
1. Interim Rent. For the period from and including the Sublease
Commencement Date to the Basic Term Commencement Date ("Interim Period"),
Sublessee shall pay as rent ("Interim Rent"), the product of the Daily Sublease
Rate Factor times the Capitalized Sublessor's Cost of the Lease Assets times the
number of days in the Interim Period. Interim Rent shall be due on
______________ (the "Interim Rent Payment Date").
2. Basic Term and Renewal Term Rent. Commencing on January 1, 1997,
and on the third day of each fiscal quarter of Sublessor thereafter (each, a
"Rent Payment Date") during the Basic Term ("Basic Term Rent") and any Renewal
Term ("Renewal Term Rent"), Sublessee shall pay as rent quarterly installments
of principal and interest, in arrears, each installment in the principal amount
specified on the attached Amortization Schedule together with interest on the
Unamortized Principal Balance (specified on the attached Amortization Schedule)
as of the immediately preceding Rent Payment Date (after application of the Rent
paid on such date) at the Interest Rate for the Interest Period following such
immediately preceding Rent Payment Date. Interest shall be calculated on the
basis of a 360 day year for the actual number of days elapsed. Said Rent
consists of principal and interest components, such principal components being
as provided in the Amortization Schedule attached hereto.
3. Contingent Rent. Contingent Rent calculated as hereinafter
specified shall accrue on a quarterly basis and shall be payable by Sublessee to
Sublessor upon return of the Lease Assets pursuant to Section XVIII(c) of the
Sublease. As used herein, "Contingent Rent" shall be calculated as the product
of (x) ninety-five percent (95%) of any per annum increase in the Consumer Price
Index for all items as published by the Department of Labor Bureau of Economics
and Statistics reported during the preceding calendar quarter, and (y) the
Capitalized Sublessor's Cost of the Lease Assets; provided, however, that the
maximum Contingent Rent shall not exceed that amount calculated as twenty
percent (20%) of the Capitalized Sublessor's Cost of the Lease Assets.
As used herein, the following terms shall have the following meanings:
"Interest Period" shall mean the period beginning on the Sublease
Commencement Date and ending on the next Rent Payment Date (provided, however,
that if such Rent Payment Date is not a Business Day, then the Interest Period
shall end on the immediately preceding Business Day), and each subsequent
quarterly period ending on the next Rent Payment Date (provided, however, that
if such Rent Payment Date is not a Business Day, then the Interest Period shall
end on the immediately preceding Business Day).
<PAGE>
"Interest Rate" shall mean that percentage per annum calculated as the
sum of (a) the LIBOR Rate redetermined quarterly, plus (b) 385 basis points (or
485 basis points during any Extension Term).
"LIBOR Rate" shall mean, with respect to any Interest Period occurring
during the term of the Sublease, an interest rate per annum equal at all times
during such Interest Period to the quotient of (1) the rate per annum as
determined on the basis of the average of offered rates for deposits in U.S.
dollars for ninety (90) days, which appears on Telerate Page 3750 as of 11:00
a.m., London, England time on the date that is two (2) Business Days prior to
the first day of such Interest Period, divided by (2) a number equal to 1.00
minus the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the LIBOR Reserve Requirements current on the date that is two (2)
Business Days prior to the first day of the Interest Period; provided, however,
that if Telerate Page 3750 is not available, then the Rueters Rate shall be used
in lieu thereof.
"LIBOR Reserve Requirements" shall mean the daily average for the
applicable Interest Period of the maximum rate applicable to Lessor or its
Participants at which reserves (including, without limitation, any supplemental,
marginal and emergency reserves) are imposed during such Interest Period by the
Board of Governors of the Federal Reserve System (or any successor) on
"Eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that include deposits by reference
to which the interest rates on Eurodollar loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any lender to United States residents), having a term equal to such
Interest Period, subject to any amendments of such reserve requirement by such
Board or its successor, taking into account any transitional adjustments
thereto.
"Rueters Rate" means a rate equal to the arithmetic average of the rates
of interest per annum (rounded upwards, if necessary to the nearest 1/100 of 1%)
for deposits in U.S. dollars for ninety (90) days, which appears on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace the LIBO page on the service for the purpose of
displaying London interbank offered rates of major banks) as of 11:00 a.m.,
London, England time on the date which is two (2) Business Days prior to the
first day of such Interest Period; provided, however, that the Reuters Rate
shall not be calculated if fewer than two (2) such offered rates appear on such
Reuters Screen LIBO Page.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).
If at any time Lessor or any Participant determines that either adequate
and reasonable means do not exist for ascertaining the LIBOR Rate, or it becomes
impractical for Lessor or any Participant to obtain funds to make or maintain
the financing hereunder with interest at the LIBOR Rate, or Lessor or any
Participant shall have determined that the LIBOR Rate will not adequately and
fairly reflect the cost to Lessor or any Participant of making, maintaining, or
<PAGE>
funding the transaction hereunder at the LIBOR Rate, or Lessor or any
Participant reasonably determines that, as a result of changes to applicable law
after the date of execution of the Agreement, or the adoption or making after
such date of any interpretations, directives or regulations (whether or not
having the force of law) by any court, governmental authority or reserve bank
charged with the interpretation or administration thereof, it shall be or become
unlawful or impossible to make, maintain, or fund the transaction hereunder at
the LIBOR Rate, and Lessor has given notice to Sublessor of such determination,
and Lessor and Sublessor have negotiated in good faith a mutually acceptable
alternative method of calculating the Interest Rate, Sublessor shall notify
Sublessee thereof and Sublessor and Sublessee shall execute and deliver such
documents as reasonably may be required to incorporate such alternative method
of calculating the Interest Rate in this Schedule, within thirty (30) days after
the date of Sublessor's notice to Sublessee. If Lessor and Sublessor are unable
mutually to agree to such alternative method of calculating the Interest Rate in
a timely fashion, on the Rent Payment Date next succeeding the expiration of
such thirty (30) day period Sublessee shall purchase all (but not less than all)
of the Lease Assets described on all Schedules executed pursuant to the Sublease
and shall pay to Sublessor, in cash, the purchase price for the Lease Assets so
purchased, determined as hereinafter provided. The purchase price of such Lease
Assets shall be an amount equal to the Stipulated Loss Value of such Lease
Assets calculated in accordance with Annex D as of the date of payment, together
with all rent and other sums then due on such date, plus all taxes and charges
upon sale and all other reasonable and documented expenses incurred by Sublessor
in connection with such sale. Upon satisfaction of the conditions specified in
this paragraph, and upon receipt of documentation from Lessor acceptable to
Sublessor, Sublessor will transfer, on an AS IS BASIS, all of Sublessor's
interest in and to the Lease Assets. Sublessor shall not be required to make
and may specifically disclaim any representation or warranty as to the condition
of the Lease Assets and other matters. Sublessor shall execute and deliver to
Sublessee such Uniform Commercial Code statements of termination as reasonably
may be required in order to terminate any interest of Sublessor in and to the
Lease Assets.
4. If the Interim Rent Payment Date or any Rent Payment Date is not a
Business Day, the Rent otherwise due on such date shall be payable on the
immediately preceding Business Day. As used herein, "Business Day" shall mean
any day other than Saturday, Sunday, and any day on which banking institutions
located in the States of Connecticut, New York or Colorado or in London, England
are authorized by law or other governmental action to close.
5. Sublessee shall pay to Sublessor from time to time the amounts Lessor
is required to pay for the account of each Participant as such Participant may
determine to be necessary to compensate it for any costs which such Participant
determines are attributable to its making or maintaining its interest in the
Lease and the Lease Assets (the "Interest") or any reduction in any amount
receivable by such Participant in respect of any such interest (such increases
in costs and reductions in amounts receivable being herein called "Additional
Costs") resulting from any Regulatory Change (as defined below) which:
(i) changes the basis of taxation of any amounts payable to Lessor for
the account of such Participant in respect of such Interest (other than
taxes imposed on or
<PAGE>
measured by the overall net income of such Participant in respect of the
Interest by the jurisdiction in which such Participant has its principal
office or its lending office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, such Participant; or
(iii) imposes any other condition adversely affecting the Lease or any
Interest.
For purposes hereof, "Regulatory Change" shall mean any change after the
date of the Lease and this Sublease in United States Federal, state or foreign
law or regulations (including, without limitation, Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as amended or
supplemented from time to time) or the adoption or making after such date of any
interpretation, directive or request applying to a class of banks including any
Participant or under any United States Federal, state or foreign law (and
whether or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
Without limiting the effect of the foregoing paragraph (but without
duplication), Sublessee shall pay to Sublessor, from time to time on request
such amounts as Sublessor was required to pay, for the account of any
Participant, to compensate such Participant (or, without duplication, the bank
holding company of which such Participant is a subsidiary) for any costs which
it determines are attributable to the maintenance by such Participant (or any
lending office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law) of any court or governmental or monetary authority (i) following any
Regulatory Change or (ii) implementing any risk-based capital guideline or
requirement (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) heretofore or hereafter issued by
any government or governmental or supervisory authority implementing at the
national level the Basle Accord (including, without limitation, the Final Risk-
Based Capital Guidelines of the Board of Governors of the Federal Reserve System
(12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final
Risk-Based Capital Guidelines of the Office of the Comptroller of the Currency
(12 C.F.R. Part 3, Appendix A)), of capital in respect of such Participant's
Interest (such compensation to include, without limitation, an amount equal to
any reduction of the rate of return on assets or equity of such Participant (or
any lending office or bank holding company) to a level below that which such
Participant (or any lending office or bank holding company could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this paragraph, "Basle Accord" shall mean the proposals for risk-
based capital framework described by the Basle Committee on Banking Regulations
and Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
Notwithstanding the foregoing, Sublessee shall not be required to pay such
amounts if Lessor was not required to pay them to the extent that such costs are
already included in the interest rate calculation hereunder.
<PAGE>
Lessee shall furnish to Sublessee a copy of any notice or certificate
Lessee receives from any Participant with respect to compensation payable
pursuant to the preceding two paragraphs. Determinations and allocations by each
Participant for purposes of the preceding two paragraphs shall be conclusive,
absent manifest error.
If a Lessee notifies Sublessee of receipt of notice from a Participant of
the occurrence of any event, as contemplated in the proceeding paragraph, then
Sublessee may, so long as no Default exists under the Sublease, elect to prepay
all (but not less than all) of such Participant's interest in the Sublease, as
of a Rent Payment Date (the "Prepayment Date"), upon at least thirty (30) days
prior written irrevocable notice to Sublessor. On the Prepayment Date, Sublessee
shall pay to Sublessor the amount calculated by Sublessor as is required to
prepay in full such Participant's interest in the Lease, together with any
required breakage or make-whole amount, if any.
D. Insurance.
(1) Public Liability: $2,000,000, total liability per occurrence.
(2) Casualty and Property Damage: An amount equal to the higher of
the Stipulated Loss Value or the full replacement cost of the
Equipment
E. Fixed Purchase Price, Sublessee's Obligation and Residual Risk
Amount.
Fixed Sublessee's Residual
End of Term Purchase Price Obligation Risk Amount
- ----------- -------------- ----------- -----------
Basic Term 98.0000 77.344 20.656
First Renewal Term 97.0000 86.221 10.7790
Second Renewal Term 77.5813 66.912 10.6693
Third Renewal Term 58.1626 49.629 8.5336
expressed as a percentage of the Capitalized Lessor's Cost of the Lease Assets.
Notwithstanding anything herein or in the Sublease to the contrary, in
the event Sublessee exercises its option to return the Lease Assets under
Section XVIII(c), Sublessee shall pay to Sublessor the unamortized portion of
the Transaction Costs, provided, that any unamortized portion of the Transaction
Costs paid to Sublessor as provided herein shall be credited against the
Sublessee's Obligation.
This Schedule is not binding or effective with respect to the Agreement
or the Lease Assets until executed on behalf of Sublessor and Sublessee by
authorized representatives of Sublessor and Sublessee, respectively.
<PAGE>
IN WITNESS WHEREOF, Sublessee and Sublessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
Sublessor: Sublessee:
BOSTON CHICKEN, INC.
By: _____________________ By: ________________________
Name: ___________________ Name: ______________________
Title: __________________ Title: _____________________
<PAGE>
ANNEX A
TO
SCHEDULE SERIES NO.C-EQUIPMENT-
DATED THIS ____ DAY OF ______________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
DESCRIPTION OF LEASE ASSETS
[See attached]
<PAGE>
ANNEX B
TO
SCHEDULE SERIES NO.C-EQUIPMENT-
DATED THIS ____ DAY OF ________________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS: Mayfair Partners, L.P. ("Seller"), for and
in consideration of the sum of One Dollar ($l) and other good and valuable
consideration, provided by GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS ("Buyer"), with offices at 4 Northpark Drive,
Suite 500, Hunt Valley, Maryland 21030, the receipt of which is hereby
acknowledged, does hereby sell, assign, transfer, set over and convey to Buyer
the Lease Assets (the "Lease Assets") leased under Schedule No.C-Equipment-__
dated as of ________________, 1996, between Boston Chicken, Inc. ("Lessee") and
Buyer, executed pursuant to the Master Lease Agreement No. 2 (the "Lease"),
dated as of December 9, 1996, between Lessee and Buyer. The Lease Assets is to
be subleased under Schedule No.C-__, dated as of ____________, 1996, between
Lessee and Seller, executed pursuant to the Sublease Agreement No. 2, dated as
of December 9, 1996 ("Sublease"), between Lessee, as sublessor, and Seller, as
sublessee:
Buyer and Seller agree and acknowledge that the sale and conveyance
contemplated hereby is solely for the purpose of granting to Buyer a security
interest in the Lease Assets and Seller shall retain legal title to such Lease
Assets. All Lease Assets in which an interest is conveyed hereby shall remain
in the possession of Seller pursuant to the Sublease.
Buyer is purchasing the Lease Assets described above in reliance upon its
personal inspection and knowledge of the Lease Assets and in an "AS-IS, WHERE-
IS", condition.
SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE
EXCEPT THAT (1) SELLER HAS GOOD TITLE TO THE LEASE ASSETS, FREE AND CLEAR OF ALL
LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY TO LESSEE'S SECURITY INTEREST
THEREIN, WHICH SECURITY INTEREST SHALL BE RELEASED UPON LESSEE'S EXECUTION AND
DELIVERY OF A CERTIFICATE OF ACCEPTANCE RELATING THERETO, AND TO PERMITTED LIENS
(AS SUCH TERM IS DEFINED IN THE SUBLEASE)), (2) BUYER WILL ACQUIRE ITS INTEREST
IN THE LEASE ASSETS FREE FROM ALL LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY
TO PERMITTED LIENS AND TO THE LIEN OF THE LEASE AND THE SUBLEASE), AND (3)
SELLER HAS THE RIGHT TO SELL AND CONVEY THE LEASE ASSETS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SELLER MAKES NO WARRANTIES WITH RESPECT TO THE
QUALITY, CONTENT, CONDITION, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE OF THE LEASE ASSETS AND NO WARRANTIES AGAINST PATENT INFRINGEMENT OR THE
LIKE.
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have executed this Bill of Sale this
____ day of December, 1996.
BUYER: SELLER:
GENERAL ELECTRIC CAPITAL
CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN
PARTICIPANTS
By: _________________________ By: __________________________
Name: _________________________ Name: __________________________
Title: _________________________ Title:__________________________
<PAGE>
ANNEX C
TO
SCHEDULE SERIES NO.C-__
DATED THIS ____ DAY OF ______________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
CERTIFICATE OF ACCEPTANCE
To: Boston Chicken, Inc.
Pursuant to the provisions of the above Schedule and Sublease Agreement No.
2 (collectively, the "Sublease"), Sublessee hereby certifies and warrants that
(a) all Lease Assets described on Annex A to the Schedule are in good condition
and appearance, installed (if applicable), and in working order; and (b)
Sublessee accepts the Lease Assets for all purposes of the Sublease and all
attendant documents.
Sublessee does further certify that as of the date hereof (i) Sublessee is
not in default under the Sublease; and (ii) the representations and warranties
made by Sublessee pursuant to or under the Sublease are true and correct on the
date hereof.
_________________________________
Sublessee's Authorized
Representative
Dated: _______________, 1996
<PAGE>
ANNEX D
TO
SCHEDULE SERIES NO.C-EQUIPMENT-
DATED THIS _______ DAY OF ______________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
STIPULATED LOSS AND TERMINATION VALUE TABLE*
<TABLE>
<CAPTION>
RENT PAYMENT STIPULATED TERMINATION
DATE LOSS VALUE VALUE
---- ---------- -----
<S> <C> <C> <C>
1/1/97 101.000000 100.0000000000%
4/23/97 100.704559 99.7500000000%
7/16/97 100.408282 99.5000000000%
10/8/97 100.111149 99.2500000000%
12/31/97 99.813141 99.0000000000%
4/22/98 99.514240 98.7500000000%
7/15/98 99.214425 98.5000000000%
10/7/98 98.913676 98.2500000000%
12/30/98 98.611973 98.0000000000%
4/22/99 98.309294 97.7500000000%
7/14/99 98.005618 97.5000000000%
10/6/99 97.700923 97.2500000000%
12/29/99 97.395186 97.0000000000%
4/19/00 92.483709 92.1453251626%
7/12/00 87.574255 87.2906503251%
10/4/00 82.666870 82.4359754877%
1/3/01 77.761598 77.5813006502%
4/25/01 72.858487 72.7266258128%
7/18/01 67.957585 67.8719509753%
10/10/01 63.058939 63.0172761379%
1/2/02 58.162601 58.1626013004%
</TABLE>
- -------------------------
* The Stipulated Loss and Termination Value for any Lease Assets shall be
equal to the Capitalized Sublessor's Cost of such unit multiplied by the
appropriate percentage derived from the above table. In the event that the
Sublease is for any reason extended, then the last percentage figure shown above
shall control throughout any such extended term.
<PAGE>
ANNEX E
TO
SCHEDULE SERIES NO.C-EQUIPMENT-
DATED THIS _____ DAY OF________________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
AMORTIZATION SCHEDULE*
<TABLE>
<CAPTION>
RENT PAYMENT PRINCIPAL* UNAMORTIZED
DATE ---------- PRINCIPAL
---- BALANCE*
--------
<S> <C> <C>
1/1/97 0.0000000000% 100.0000000000%
4/23/97 0.2500000000% 99.7500000000%
7/16/97 0.2500000000% 99.5000000000%
10/8/97 0.2500000000% 99.2500000000%
12/31/97 0.2500000000% 99.0000000000%
4/22/98 0.2500000000% 98.7500000000%
7/15/98 0.2500000000% 98.5000000000%
10/7/98 0.2500000000% 98.2500000000%
12/30/98 0.2500000000% 98.0000000000%
4/22/99 0.2500000000% 97.7500000000%
7/14/99 0.2500000000% 97.5000000000%
10/6/99 0.2500000000% 97.2500000000%
12/29/99 0.2500000000% 97.0000000000%
4/19/00 4.8546748375% 92.1453251626%
7/12/00 4.8546748375% 87.2906503251%
10/4/00 4.8546748375% 82.4359754877%
1/3/01 4.8546748375% 77.5813006502%
4/25/01 4.854674375% 72.7266258128%
7/18/01 4.854674375% 67.8719509753%
10/10/01 4.854674375% 63.0172761379%
1/2/02 4.854674375% 58.1626013004%
</TABLE>
*The Principal and Unamortized Principal Balance as of any Rent Payment Date
shall be equal to the Capitalized Sublessor's Cost of such unit multiplied by
the appropriate percentage derived from the above table.
<PAGE>
ANNEX F
TO
SCHEDULE SERIES NO.C-EQUIPMENT-
DATED THIS _____ DAY OF______________, 1996
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
RETURN PROVISIONS: In addition to the provisions provided for in Section X of
the Sublease, and provided that Sublessee has elected not to exercise its
extension option pursuant to Section XVIII(a) of the Sublease or its purchase
option pursuant to Section XVIII(d) of the Sublease, Sublessee shall, at its
expense:
(A) At least one hundred eighty (180) days and not more than two hundred
forty (240) days prior to expiration or earlier termination of the Sublease,
provide to Sublessor a detailed inventory of all components of the Equipment.
The inventory should include, but not be limited to, a listing of model, serial
numbers and size description (length, width, height, diameter) for all
components comprising the Equipment.
(B) At least one hundred eighty (180) days prior to expiration or earlier
termination of the Sublease, upon receiving reasonable notice from Sublessor,
provide or cause the vendor(s) or manufacturer(s) to provide to Sublessor the
following documents: (1) one set of service manuals, blue prints, process flow
diagrams and operating manuals including replacements and/or additions thereto,
such that all documentation is completely up-to-date; and (2) one set of
documents, detailing equipment configuration, operating requirements,
maintenance records, and other technical data concerning the set-up and
operation of the Equipment, including replacements and/or additions thereto,
such that all documentation is completely up-to-date.
(C) At least one hundred eighty (180) days prior to expiration or earlier
termination of the Sublease, upon receiving reasonable notice from Sublessor,
make the Equipment available for on-site operational inspections by potential
purchasers, under power, and provide personnel, power and other requirements
necessary to demonstrate electrical, mechanical and functionality of each item
of the Equipment.
(D) At least forty-five (45) days prior to expiration or earlier
termination of the Sublease, cause the manufacturer's representative(s) or
qualified equipment maintenance provider(s), acceptable to Sublessor, to perform
a comprehensive physical inspection, including testing all material and
workmanship of the Equipment. The authorized inspector should ensure the
equipment is clean and cosmetically acceptable, and in such condition so that it
may be immediately installed and placed into use in a similar retail store
environment. There shall be no missing screws, bolts, fasteners, etc. The
equipment will be free from all large scratches, marks, gouges, dents,
discoloration or stains. There shall be no evidence of extreme use or
overloading, i.e. bowed or sagging shelves, etc. If during such inspection,
examination and test, the authorized inspector finds any of the material or
workmanship to be defective or the Equipment not operating within manufacturer's
specifications, then Sublessee shall repair or replace such
<PAGE>
defective material and, after corrective measures are completed, Sublessee will
provide for a follow-up inspection of the Equipment by the authorized inspector
as outlined in the preceding clause.
(E) Have each item of Equipment returned with an in-depth field service
report detailing said inspection as outlined in Section D of this Annex F. The
report shall certify that the Equipment has been properly inspected, examined
and tested and is operating within the manufacturer's specifications.
(F) Properly remove all Sublessee installed markings which are not
necessary for the operation, maintenance or repair of the Equipment.
(G) Ensure all Equipment and Equipment operations conform to all
applicable local, state, and federal laws, health and safety guidelines.
(H) The Equipment shall be redelivered with all component parts in good
operating condition. All components must meet or exceed the manufacturer's
minimum recommended specifications unless otherwise specified.
(I) Provide for the deinstallation, packing, transporting, and certifying
of the Equipment to include, but not be limited to, the following: (1) the
manufacturer's representative shall de-install all Equipment (including all
wire, cable and mounting hardware) in accordance with the specifications of the
manufacturer; (2) each item of the Equipment will be returned with a certificate
supplied by the manufacturer's representative qualifying the Equipment to be in
good condition and (where applicable) to be eligible for the manufacturer's
maintenance plan; the certificate of eligibility shall be transferable to
another operator of the Equipment; (3) the Equipment shall be packed properly
and in accordance with the manufacturer's recommendations; and (4) Sublessee
shall transport the Equipment in a manner consistent with the manufacturer's
recommendations and practices.
(J) Upon sale of the Equipment to a third party, provide transportation to
any locations anywhere in the continental United States selected by Sublessor.
(K) Obtain and pay for a policy of transit insurance for the redelivery
period in an amount equal to the replacement value of the Equipment and
Sublessor shall be named as the loss payee on all such policies of insurance.
(L) Promptly deliver to Sublessor any Real Estate, clean and in good
condition, reasonable wear and tear expected.
(M) Promptly remove from the Real Estate all of Sublessee's property, and
all trash and debris, and repair any damage caused by or during the removal of
Sublessee's property.
(N) Promptly deliver to Sublessor all keys to the Real Estate and any
improvements located thereon, and all combinations to any vaults, secure areas,
and security systems.
<PAGE>
(O) Permit Sublessor and its authorized representatives to enter the Real
Estate at all reasonable times to inspect or show the Real Estate, or make any
repairs thereto.
(P) Deliver to Sublessor any personal property, licenses, permits, and
other instruments as reasonably are necessary to continue to operate the Real
Estate as a retail food establishment, together with such assignments, consents,
and other documents as shall be necessary to transfer any such property,
licenses, permits, or other instruments to Sublessor or its nominee.
<PAGE>
EXHIBIT L
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
FRANCHISE SUBLEASE
------------------
L-1
<PAGE>
LOCATION:
STORE NO.:
FRANCHISE SUBLEASE
------------------
THIS SUBLEASE (this "Sublease") is made and entered into as of the ____ day
of _____________, 19___ (the "Effective Date"), by and between BOSTON CHICKEN,
INC., a Delaware corporation as Sublandlord ("Landlord"), and
_________________________, a _____________ corporation as Subtenant ("Tenant").
1
---
SCHEDULE OF BASIC DATA
----------------------
The following sets forth basic data referred to in this Sublease, and where
appropriate, constitutes definitions of the terms listed below:
1.1 Landlord: Boston Chicken, Inc., a Delaware corporation
1.2 Landlord's Notice Address: Boston Chicken, Inc., 14103 Denver West
Parkway, P.O. Box 4086, Golden, CO 80401-4086 Attention: Legal Services
Department
1.3 Tenant: ______, a_______________ corporation
1.4 Tenant's Notice Address: ___________________________________________
______________________________________________________________________
1.5 Franchisor: Boston Chicken, Inc., a Delaware corporation, its
successors and assigns
1.6 Franchisor's Notice Address: 14103 Denver West Parkway, P.O. Box
4086, Golden, CO 80401-4086, Attention: Real Estate Services Department
1.7 Street Address of the Demised Premises: ____________________________
________________________________________________________________________________
1.8 Base Annual Rent: As set forth in Section 7.1.
1.9 Master Lease Terms: A primary term of __ years commencing on , 199__
and terminating on _____________, with _______ separate options to extend the
term of the Master Lease for __ year periods.
2
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SCHEDULE OF DEFINED TERMS
-------------------------
For purposes of this Sublease, the following terms shall have the meanings
given to such terms in this Article 2:
2.1 Boston Chicken/Market Unit: a food service business that (i) offers
products for consumer consumption through, among other things, on-premises
dining and/or carry-out dining, (ii) operates using Franchisor's system and
trademarks, and (iii) is operated by Tenant strictly in accordance with the
Franchise Agreement, as hereinafter defined.
2.2 Building: the building constructed or to be constructed on the Land.
2.3 Commencement Date: the date that is the later of (a) the date the
primary term of the Master Lease commences or (b) the Effective Date of this
Sublease.
2.4 Default Rate: the lesser of (i) a rate of interest per annum equal
to three (3) percentage points above the prime rate as published in the eastern
edition of the Wall Street Journal, or a comparable newspaper if the Wall Street
Journal shall not publish the prime rate during such period, or (ii) the highest
rate of interest authorized by law in the jurisdiction in which the Demised
Premises are located.
2.5 Demised Premises: the Land, Building and any and all other
improvements, fixtures and component parts located on said Land, together with
any and all rights, ways, easements and servitudes appurtenant thereto subject
to the terms and conditions thereof and of the Master Lease.
-1-
<PAGE>
2.6 Expiration Date: the date which is the earlier of (a) the day
before the expiration or earlier termination of the primary term of the Master
Lease, or (b) the day of expiration or earlier termination of the term of the
Franchise Agreement, unless otherwise specifically set forth herein, but in no
event later than the date that is the tenth (10th) anniversary of the
Commencement Date hereof.
2.7 Force Majeure Delay: the period of time that either Landlord or
Tenant is delayed, hindered in or prevented from performing any nonmonetary
obligations hereunder as the result of a Force Majeure Event, provided, however,
that (i) any extension of time for a Force Majeure Delay shall be conditioned
upon the party seeking an extension of time delivering written notice of such
Force Majeure Delay to the other party within ten (10) days after the discovery
of the Force Majeure Delay, (ii) the maximum period of time which Landlord or
Tenant may delay any act or performance of work due to a Force Majeure Delay
shall be sixty (60) days, and (iii) a Force Majeure Delay shall not include
delays resulting from the failure to perform for financial reasons.
2.8 Force Majeure Event: strikes, lockouts, labor troubles, failure of
utility services, riots, insurrection, war, acts of God, and other reasons of
like nature not the fault of the party delayed in performing work or doing acts,
excluding therefrom lack of funds or available financing.
2.9 Franchise Agreement: that certain Franchise Agreement which
Franchisor and Tenant have entered into or will enter into under which Tenant
has been or will be granted a franchise to own and operate a Boston
Chicken/Market Unit from the Demised Premises.
2.10 Impositions: as defined in Section 8.1.
2.11 Land: the land legally described on Exhibit "A" attached hereto and
made a part hereof.
2.12 Landlord's Property Insurance: any insurance carried by Landlord
pursuant to the terms and requirements of the Master Lease, including without
limitation, casualty insurance, property damage insurance and general liability
insurance for the Demised Premises, rent loss insurance and business
interruption insurance.
2.13 Lease Year: for the Primary Term, the twelve (12) month period
commencing on the Commencement Date and each succeeding twelve (12) month period
during the Primary Term (provided, however, the final Lease Year during the
Primary Term shall be extended or shortened, if necessary, in order for the said
Lease Year to expire on the Expiration Date), and for the Renewal Term, the
twelve (12) month period commencing on the day following the Expiration Date and
each succeeding twelve (12) month period during the Renewal Term.
2.14 Master Lease: that certain Lease dated , 199 , between
Master Landlord as landlord and Boston Chicken, Inc. as tenant demising the
Demised Premises, together with any and all amendments, modifications and
supplements thereto made as of this date or during the term of this Sublease.
2.15 Master Landlord: .
2.16 Mortgage: any mortgage or trust deed encumbering the Demised
Premises.
2.17 Mortgagee: the mortgagee under any mortgage or the beneficiary
under any trust deed encumbering the Demised Premises.
2.18 Percentage Rent: if provided for in the Master Lease, as provided
in said Master Lease.
2.19 Primary Term: the period of time commencing on the Commencement
Date and ending on the Expiration Date unless sooner terminated as provided in
this Sublease.
2.20 Real Estate Taxes: as defined in Section 8.1.
2.21 Renewal Term: in the event the Expiration Date is a date prior to
the expiration of the Franchise Agreement, the periods of time commencing on the
day prior to the expiration date of the primary term or preceding extension term
under the Master Lease and ending on the day that is the earlier of (a) the day
prior to the expiration of any such extension or renewal term under the Master
Lease if exercised by Landlord, or (b) the expiration date of the Franchise
Agreement (such periods of time being collectively referred to as the "Renewal
Term"). The specific primary term and available renewal terms under said Master
Lease are set forth in Section 1.9 hereof.
2.22 Rent: Base Annual Rent and all other charges, costs and sums
required to be paid by Tenant under this Sublease, including, without
limitation, Real Estate Taxes and Impositions, Percentage Rent, if any, and
Landlord's Property Insurance.
<PAGE>
2.23 Rent Commencement Date: the date that is the earlier of (a) the
day the Boston Chicken/Market Unit opens for business to the general public at
the Demised Premises, and (b) the first day after the Commencement Date that
rent is due and payable under the Master Lease.
2.24 Secured Loan Agreement: That certain Secured Loan Agreement dated
___________________, 19__ between Franchisor and Tenant.
2.25 Tenant's Property: as defined in Section 19.2.
2.26 Term: the Primary Term, and if Tenant exercises any option(s) to
renew this Sublease for the Renewal Term, the Renewal Term.
3
THE DEMISE
----------
3.1 The Demise. Landlord, for and in consideration of the covenants and
agreements hereinafter set forth to be kept and performed by both parties, and
subject to the terms and conditions of the Master Lease, does hereby demise and
sublease the Demised Premises to Tenant and Tenant hereby accepts such demise
and subleases the Demised Premises from Landlord for the Term.
3.2 Subject to Master Lease. In addition to the terms, conditions and
provisions of this Sublease, Tenant understands and agrees that this Sublease is
subject to each and all of the terms, conditions, and provisions of the Master
Lease and of the rights of Master Landlord, and any person or entity claiming
by, through or under Master Landlord, thereunder, which terms, conditions and
provisions are expressly incorporated herein and made a part hereof. Unless
otherwise specifically set forth herein, Tenant covenants and agrees to perform,
and hereby assumes, all of the obligations of the tenant set forth in said
Master Lease as if Tenant were tenant thereunder and Landlord were landlord
thereunder, and, in turn, Landlord shall have all of the rights and privileges
of Master Landlord as if Landlord were landlord under said Master Lease.
Notwithstanding the foregoing, it is understood and agreed that Landlord does
not assume the obligations of Master Landlord under the Master Lease, such
obligations remaining with Master Landlord, and that Landlord shall have no
obligation to Tenant to perform any of the obligations of Master Landlord under
the Master Lease or to pay any sums of money required of Master Landlord under
the Master Lease, except as may be otherwise specifically set forth herein. The
terms, conditions and provisions of the Master Lease are intended to be
supplemental and in addition to the terms hereof, and shall not supersede or
replace the terms and conditions hereof. Notwithstanding the foregoing, in the
event the terms, conditions and provisions of this Sublease grant to Tenant
rights or privileges which are prohibited by or not granted to Landlord in the
Master Lease, the terms, conditions and provisions of the Master Lease shall
govern with respect thereto. Tenant hereby acknowledges that it has received
and read a copy of the Master Lease and any and all amendments thereto, and
Tenant fully understands the same and agrees, subject to the terms of this
Sublease, to be bound by the terms of said Master Lease.
So long as Tenant is not in default under any provisions of this Sublease,
Landlord agrees to perform all of its obligations under the Master Lease, if
any, not specifically assumed herein by Tenant, and during the Term of this
Sublease, Tenant shall have quiet enjoyment of the Demised Premises (subject to
the Master Lease, this Sublease, the Franchise Agreement and the Secured Loan
Agreement); provided, however, notwithstanding anything contained herein or in
this Sublease to the contrary, Landlord shall not be liable to Tenant or any
employee, affiliate, sub-subtenant, franchisee, assignee, agent or licensee of
Tenant in the event that this Sublease shall be terminated by reason of the
cancellation of the Master Lease, which cancellation is not caused by any
default by Landlord as tenant thereunder.
4
TERM
----
4.1 Primary Term. The Primary Term shall begin on the Commencement Date
and shall end on the Expiration Date. Notwithstanding the foregoing, if (a)
Tenant and Franchisor have not entered into a Franchise Agreement on or before
the Commencement Date, or (b) the Primary Term of this Sublease does not
commence within two (2) years from the Effective Date hereof, Landlord, at its
option, may terminate this Sublease by written notice given to Tenant.
4.2 Renewal Term. Tenant shall have two (2) options to renew this
Sublease (collectively, the "Renewal Option") for a period of five (5) years
each, under the same the terms and conditions set forth in the Master Lease;
provided, however, (a) Tenant must send written notice to Landlord of its intent
to exercise such Renewal Option at least sixty (60) days prior to the date
written notice of any option to renew or extend is due by Landlord under the
Master Lease, and (b) the Renewal Option shall not be made available to Tenant
unless (i) there is no Event of Default under this Sublease, the Franchise
Agreement or the Secured Loan Agreement at the time of the exercise of the
Renewal Option or at the commencement of the Renewal Term and (ii) the
Expiration Date hereof falls on a date prior to the expiration of the Franchise
Agreement. Notwithstanding the foregoing, if the terms of either the Master
Lease or the Franchise Agreement do not allow two (2) additional five (5) year
extensions, Landlord, at its option may modify the terms of such Renewal Option
so that the Renewal Term hereof will be coterminous with both the Master Lease
and the Franchise Agreement. In the event Tenant timely notifies Landlord as
required herein, subject to Section 3.2 hereof and the foregoing, Landlord
covenants and agrees to timely exercise any renewal or option rights granted to
it under the Master Lease. The Renewal Option shall automatically expire and
become null and void upon the first to occur of the following: (i) the
termination of the Master Lease or this Sublease or Tenant's right to possession
of the Demised Premises; (ii) the assignment of this Sublease or the
<PAGE>
subletting of the Demised Premises by Tenant, in whole or in part (excluding,
however, any assignment or sublease for which Landlord's consent is not required
and any collateral assignment of this Sublease to Franchisor), (iii) the
recapture by Landlord of all or any part of the Demised Premises pursuant to
this Sublease, (iv) the failure of Tenant to timely or properly exercise the
Renewal Option, or (v) the termination or expiration of the term of the
Franchise Agreement, or the occurrence of an event of default thereunder or
under the Secured Loan Agreement.
4.3 Term Commencement Agreement. Landlord and Tenant agree to execute a
Term Commencement Agreement and/or Memorandum of Term Commencement Agreement in
the forms attached hereto as Exhibits "C" and "D", respectively. The Term
Commencement Agreement shall set forth, among other things, the Commencement
Date, the Expiration Date and the Base Annual Rent. The Memorandum of Term
Commencement Agreement shall contain the same information as the Term
Commencement Agreement except the Base Annual Rent shall be omitted therefrom.
The Term Commencement Agreement and the Memorandum of Term Commencement
Agreement shall be conclusive evidence of the information contained therein.
The Term Commencement Agreement shall not be recorded by either party but the
Memorandum of Term Commencement Agreement may be recorded by either party.
5
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USE
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5.1 Permitted Use. The Demised Premises shall be used and occupied
solely for the retail sale of prepared foods permitted or required to be
prepared and sold by Tenant from time to time under the Franchise Agreement and
for no other purpose.
5.2 Continuous Use and Operation. Tenant shall operate a Boston
Chicken/Market Unit from the entire Demised Premises continuously at all times
during the Term in accordance with the uses permitted in Section 5.1. Tenant
shall operate the Demised Premises in a first class manner in strict conformity
with the requirements of the Franchise Agreement. Tenant's business at the
Demised Premises shall be operated under the trade name required by the
Franchise Agreement, and Tenant shall not change this trade name without the
prior written consent of Franchisor.
6
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CONDITION OF PREMISES AND ORIGINAL CONSTRUCTION
-----------------------------------------------
6.1 Condition of the Demised Premises. Landlord hereby tenders
possession of the Demised Premises to Tenant on the Commencement Date hereof,
unless delivery of said Demised Premises has not been made to Landlord by the
Master Landlord, in which case delivery shall be made by Landlord simultaneously
with Landlord's receipt thereof. Tenant acknowledges that Tenant has had or
shall have full opportunity to investigate and inspect the Demised Premises,
including, without limitation, the surface and subsurface soil conditions of the
Land and physical condition of all improvements located on the Demised Premises,
the environmental condition of the Demised Premises, the availability of
utilities at the Demised Premises, the availability of access to the Demised
Premises, the zoning of the Demised Premises and the availability of permits for
Tenant's use of the Demised Premises. Consequently, Tenant accepts or shall
accept the Demised Premises in their "AS-IS" condition with all faults.
Landlord makes no representation or warranty, whether express or implied, as to
the fitness of the Demised Premises for any particular purpose or as to the
suitability, success or profitability of the Demised Premises as a Boston
Chicken/Market Unit, and to the fullest extent permitted by law, Tenant releases
Landlord and anyone claiming by, through or under Landlord from any loss,
liability, injury, damage, legal responsibility or loss of economic opportunity
arising from or relating to the existing condition or location of the Demised
Premises, except to the extent such legal responsibility arises out of the
negligence or intentional misconduct of Landlord.
6.2 Construction of Building. In the event the Boston Chicken/Market
Unit is not yet opened to the general public as of the Effective Date hereof,
Tenant shall, at its sole cost and expense, but subject to reimbursement by
Franchisor as set forth below, construct and open said Boston Chicken/Market
Unit in accordance with and as required by the terms and conditions of the
Franchise Agreement and the current announced construction policies and
procedures of Franchisor. Construction of said Boston Chicken/Market Unit shall
be in compliance with all applicable laws, codes, ordinances, rules and
regulations and shall be commenced and completed in accordance with the
Franchise Agreement. Tenant shall be solely responsible for and have control
over construction means, methods, techniques, sequences and procedures and for
coordinating all portions of all such construction and neither Landlord nor
Franchisor shall have any responsibility therefor. Tenant also shall be solely
responsible for the design of the building and the preparation of approved
Design Specifications (as defined in the Franchise Agreement). Tenant
acknowledges that any design materials furnished to Tenant by Landlord or
Franchisor and any review by Landlord or Franchisor of Tenant's plans and
specifications shall be for the sole purpose of insuring a uniform appearance of
all Boston Chicken/Market Units and neither Landlord nor Franchisor shall have
any responsible for nor any liability in connection with Tenant's plans and
specifications. Notwithstanding anything contained in this Sublease to the
contrary, in the event Tenant does not complete construction of the Boston
Chicken/Market Unit and open for business to the general public within four (4)
years from the Effective Date hereof, either party may terminate this Sublease
by sending written notice to the other. As set forth below, upon completion of
the construction and opening for business of the Boston Chicken/Market Unit to
the general public, Franchisor shall reimburse Tenant for all construction and
development costs incurred by Tenant
<PAGE>
in locating, developing and building the Boston Chicken/Market Unit on the
Demised Premises, including without limitation construction costs, utilities
costs, materials costs, attorney's fees, architect's fees, consultant's fees,
surveyor's fees, engineer's fees, soil and environmental testing and remediation
costs, title premiums, brokerage commissions, and any other "soft costs" of
every type or nature incurred by Tenant in locating, developing and constructing
a Boston Chicken/Market Unit on the Demised Premises (hereinafter, collectively,
the "Building and Improvement Costs"), including without limitation any Building
and Improvement Costs incurred by Tenant prior to the Effective Date of the
Franchise Sublease. Tenant may submit its request for reimbursement of such
Building and Improvement Costs at any time within one (1) year after the opening
of the Boston Chicken/Market Unit to the general public. Tenant, however, shall
not submit such a request for reimbursement for Building and Improvement Costs
until all Building and Improvement Costs have been finally paid by Tenant and
any such request shall be accompanied by any and all reasonable evidence
requested by Franchisor reflecting such final payment. In the event Tenant
incurs any additional Building and Improvement Costs after having received the
requested reimbursement from Franchisor, such Building and Improvement Costs
shall be the sole and exclusive responsibility of Tenant.
7
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PAYMENT OF RENT
---------------
7.1 Base Annual Rent. During the Term and beginning on the Rent
Commencement Date, Tenant shall pay to Landlord, for the use and occupancy of
the Demised Premises, Base Annual Rent consisting of three (3) components: (a)
"Building Rent", being eleven (11%) percent of all construction and development
costs incurred by Franchisor on behalf of Tenant in locating, developing and
building a Boston Chicken/Market Unit on the Demised Premises, including without
limitation construction costs, utility costs, materials costs, attorney's fees,
architect's fees, consultant's fees, surveyor's fees, engineer's fees, soil and
environmental testing and remediation costs, title premiums, brokerage
commissions, and any other "soft costs" of every type or nature incurred by
Franchisor in locating, developing and constructing a Boston Chicken/Market Unit
on the Demised Premises as the same are shown on the financial books of
Franchisor; (b) a "Real Estate Fee" of $2,750.00 per year; and (c) "Ground
Rent", being all rent charged to Landlord as tenant under the Master Lease, as
shown on Exhibit "B" attached hereto and made a part hereof. Tenant shall pay
Base Annual Rent to Landlord in U.S. Dollars, in advance, in monthly
installments as set forth in Exhibit "B", on the Rent Commencement Date, and on
the first day of each calendar month of the Term. Notwithstanding the foregoing,
if the Boston Chicken/Market Unit located or to be located at the Demised
Premises is not open for business as of the Rent Commencement Date, Tenant shall
only pay to Landlord the Ground Rent and Real Estate Fee components of Base
Annual Rent, unless and until said Boston Chicken/Market Unit opens for business
to the general public at the Demised Premises, at which time the Building Rent
component of Base Annual Rent shall also become due and payable. In the event
the Building Rent component becomes due and payable before Landlord can
reasonably determine the final amount of such component, the amount of such
Building Rent shall be determined by the books and records of Franchisor at the
time of commencement of payment of such component, in which case Landlord, at
its option, may adjust the Building Rent component of Base Annual Rent at any
time during the first Lease Year based upon the actual amount of such Building
Rent as reflected by the books and records of Franchisor. In any event, the
Building Rent and Real Estate Fee components of Base Annual Rent shall increase
by fifteen (15%) percent every five (5) years upon the fifth (5th), tenth (10th)
and fifteenth (15th) anniversary of the Rent Commencement Date hereof, unless
this Sublease is sooner terminated or expires. If the Rent Commencement Date is
other than the first day of a month, then the Base Annual Rent for the period
from the Rent Commencement Date until the first day of the month next following
shall be prorated on a per diem basis and paid on the Rent Commencement Date.
7.2 Percentage Rent. In the event the Master Lease provides for payment
of Percentage Rent, Tenant shall be responsible for paying the same and
submitting all sales reports as required thereunder, in which case Landlord, at
its option and subject to the Master Lease, may direct Tenant to pay such
Percentage Rent to Landlord or directly to Master Landlord. Tenant shall also
provide all sales reports required under said Master Lease, in strict conformity
with the requirements thereunder, to Landlord, and at Landlord's option,
directly to Master Landlord.
7.3 Place for Payment of Rent. Unless otherwise specifically provided
herein, all Rent due under this Sublease shall be paid by checks payable to the
order of Landlord, which checks shall be mailed or delivered to Landlord at
Landlord's Address as set forth in Section 1.2 or in such other manner or at
such other place as Landlord may from time to time designate to Tenant. If
Landlord is maintaining Tenant's books and records, Landlord may, at Landlord's
option, deduct the amount of Rent owed by Tenant to Landlord from Tenant's
account with Landlord, and Landlord may, at Landlord's option, declare Base
Annual Rent to be payable in advance, in thirteen (13) equal installments per
year, at the beginning of each of Franchisor's accounting periods. Rent will be
prorated on a per diem basis for partial months or years within the Term for
which Rent is payable. Rent shall be payable without demand, notice, offset or
deduction, except as otherwise specifically provided in this Sublease, and
Tenant's covenant to pay Rent shall be independent of every other covenant in
this Sublease.
7.4 Late Rent. If Tenant shall fail to pay, when the same is due and
payable, any Rent required to be paid by Tenant under this Sublease, such unpaid
amounts shall bear interest from the date when due until the date when paid at
the Default Rate. If any installment of Rent is delinquent by more than fifteen
(15) days, Tenant shall also pay to Landlord a late charge in an amount equal to
five percent (5%) of the amount of such delinquent installment, which late
charge shall be immediately due and payable without notice or demand from
Landlord.
<PAGE>
8
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TAXES AND OTHER IMPOSITIONS
---------------------------
8.1 Real Estate Taxes and Impositions. In addition to the Base Annual
Rent, Tenant shall pay as additional Rent all Real Estate Taxes and Impositions
charged to Landlord under the Master Lease or levied or assessed against the
Demised Premises under the Master Lease or otherwise charged against Landlord's
interest in the Demised Premises at any time during the Term in accordance with
the terms and provisions of this Article 8. For the purposes of this Sublease,
the term "Real Estate Taxes" shall include all general real estate taxes and
special assessments, water and sewer rents, transfer taxes and lease transaction
taxes, sales taxes on rents, and other governmental impositions and charges of
every kind and nature whatsoever, extraordinary as well as ordinary, foreseen
and unforeseen, and each and every installment thereof which shall or may be
levied, assessed, or imposed against, become due and payable, or become liens
upon the Demised Premises, this Sublease or the rents payable by Tenant under
this Sublease during the Term. Real Estate Taxes shall also include all costs
incurred by Landlord in contesting or negotiating Real Estate Taxes with
governmental authorities, and if determined by Landlord, the cost of any tax
service company engaged by Landlord to handle payments of Real Estate Taxes
levied against the Demised Premises. Nothing contained in this Sublease shall
be construed to include any inheritance, estate, succession, gift, franchise,
corporation, income or profit tax or capital levy that is or may be imposed upon
Landlord; provided, however, that, if at any time during the Term the methods of
taxation prevailing at the Rent Commencement Date shall be altered so that in
lieu of or as an addition to the whole or any part of the Real Estate Taxes now
levied, assessed or imposed on real estate as such, there shall be levied,
assessed or imposed (i) a tax on the rents received from the Demised Premises,
(ii) a license fee measured by the rents receivable by Landlord from the Demised
Premises or any portion thereof, or (iii) a tax or license fee imposed upon
Landlord which is otherwise measured by or based in whole or in part upon the
Demised Premises or any portion thereof, then such taxes and fees shall be
included in the computation of Real Estate Taxes as if the amount of such tax or
fee so payable were that due if the Demised Premises were the only property of
Landlord subject thereto. No Real Estate Taxes, assessments, fees or charges
referred to in this Section 8.1 shall be considered as taxes under the
provisions of Section 8.4. For purposes of this Sublease, "Impositions" shall
mean all impositions other than Real Estate Taxes which may be assessed against
the Demised Premises or against Landlord with respect to the Demised Premises at
any time during the Term, including, without limitation, common area maintenance
charges, merchants association or marketing fund dues or charges, assessments or
charges payable under any reciprocal easement agreement, business park
development agreement or similar agreement, the cost of Landlord's Property
Insurance, any insurance assessments charged by Master Landlord under the Master
Lease, as well as any other charges, expenses, assessments, or costs levied by
Master Landlord against Landlord or the Demised Premises under the Master Lease,
or any other charges under any Mortgage.
8.2 Payment of Real Estate Taxes. Except as otherwise provided in this
Article 8, all Real Estate Taxes and Impositions shall be paid by Tenant to
Landlord within five (5) days after demand therefor by Landlord. If the Demised
Premises are assessed as a separate and distinct tax parcel, then unless the
Master Lease provides otherwise or unless Landlord delivers to Tenant a written
notice requiring Tenant to begin paying monthly installments to Landlord on
account of Real Estate Taxes as provided in Section 8.3, Tenant shall pay all
Real Estate Taxes accruing against the Demised Premises during the Term directly
to the taxing authority on or before the date on which such Real Estate Taxes
become delinquent and Tenant shall promptly furnish Landlord with a copy of the
paid tax bill or, if not readily available, other evidence of payment acceptable
to Landlord. If the Demised Premises are assessed as part of a larger tax
parcel, then, except as otherwise set forth below, Tenant shall pay Real Estate
Taxes to Landlord in accordance with the terms of the Master Lease. If directed
by Landlord, Tenant shall pay Impositions directly to the party collecting such
Impositions on or before the date such Impositions become due and payable, and
Tenant shall promptly furnish to Landlord evidence of payment of such
Impositions.
8.3 Monthly Payments of Real Estate Taxes. During any period of the
Term that the Demised Premises are not assessed as a separate and distinct tax
parcel or if otherwise required by Landlord in Landlord's sole discretion, on
the first day of each month of each calendar year during the Term following
delivery of written notice from Landlord, Tenant shall pay to Landlord one-
twelfth (1/12) of the Real Estate Taxes for the calendar year based upon
Landlord's reasonable estimate thereof. Upon receipt of all tax bills and
assessment bills attributed to the calendar year, Landlord shall furnish Tenant
with a written statement of the actual amount of the Real Estate Taxes for such
year or part thereof together with a copy of such tax bills. If such actual
amount is more than the estimated payments paid to Landlord over such calendar
year, then Tenant shall pay the deficiency to Landlord within thirty (30) days
after the receipt of such statement by Tenant. If such actual amount is less
than the estimated payments made by Tenant over the preceding year, then
Landlord shall reimburse to Tenant the excess within thirty (30) days after the
date Landlord delivers to Tenant such statement. A copy of a tax bill or
assessment bill submitted by Landlord to Tenant shall at all times be sufficient
evidence of the amount of Real Estate Taxes levied or assessed against the
property to which such bill relates.
8.4 Personal Property Taxes. Tenant shall pay before delinquency all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon its business operation in the Demised Premises as well as upon Tenant's
Property (as hereinafter defined). If any such items of property are assessed
with property of Landlord, then such assessment shall be equitably divided
between Landlord and Tenant to the end that Tenant shall pay only its equitable
portion of such assessment. Landlord shall determine the basis of prorating any
such assessments and such determination shall be binding upon both Landlord and
Tenant. No tax assessments, fees or charges referred to in this paragraph shall
be considered as Real Estate Taxes under the provisions of Section 8.1.
<PAGE>
9
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REPAIRS AND ALTERATIONS
-----------------------
9.1 Repairs and Maintenance. Tenant shall, at its sole cost and
expense, put, keep and maintain the make all repairs to the Demised Premises
required by Landlord as tenant under the Master Lease, as well as any other
repairs or alterations required to meet the standards specified in the Franchise
Agreement for the condition and appearance of a Boston Chicken/Market Unit.
Tenant acknowledges the importance placed by Franchisor on maintaining a uniform
approved image for all Boston Chicken/Market Units. Tenant shall keep,
maintain, repair and replace the fixtures, furnishings, equipment, interior
lighting and decor in good condition and repair. If Tenant shall fail to comply
with the maintenance, replacement, upgrade or remodeling obligations required by
this Section 9.1 within thirty (30) days after receiving written notice from
Landlord, then Landlord shall have the right to perform such maintenance,
replacement, upgrade or remodeling obligation and the cost thereof plus an
administrative fee of fifteen percent (15%) of the cost thereof (together with
interest thereon at the Default Rate) shall be considered additional Rent due
Landlord, payable upon written demand by Landlord. Tenant acknowledges that
Landlord shall have no obligation to make or perform any repairs to,
replacements of, upgrades to or remodeling of the Demised Premises.
9.2 Alterations. Tenant shall not make any exterior or structural
alterations in any portion of the Demised Premises, nor any alterations in the
storefront or the exterior of the Demised Premises, nor any upgrades or
remodeling of the Demised Premises, without, in each instance, first obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, all alterations to the Demised
Premises, whether exterior or interior, shall require the prior written consent
of Franchisor, which consent may be granted or withheld by Franchisor in
Franchisor's sole and absolute discretion, and Landlord shall not withhold its
consent to any proposed alterations, upgrades and remodeling approved by
Franchisor provided that the alterations, upgrades and remodeling do not reduce
the value of the Demised Premises. Alterations shall be performed in all cases,
subject to the following requirements:
(a) If so required under the Master Lease, Tenant shall have first
obtained the consent of Master Landlord;
(b) Tenant shall submit to Landlord and Franchisor for approval
detailed plans and specifications for the proposed alterations, and all
alterations shall be completed strictly in accordance with the plans and
specifications approved by Landlord and Franchisor;
(c) All materials and equipment shall be of good quality;
(d) No alteration shall be undertaken until Tenant shall have procured
and paid for all permits and authorizations of the various governmental
bodies and departments having jurisdiction of the Demised Premises required
to be obtained prior to commencement of construction;
(e) All work done in connection with any alteration shall be done in a
good and workmanlike manner and in compliance with the terms and conditions
of the Master Lease and with all building and zoning laws of the place in
which the Demised Premises are situated, and with all laws, ordinances,
orders, rules, regulations and requirements of all federal, state and
municipal governments and appropriate departments, commissions, boards and
officers thereof and all covenants and restrictions affecting the Demised
Premises;
(f) During the performance of the alterations, Tenant shall maintain
the insurance coverage set forth in Exhibit "E" attached hereto and made a
part hereof;
(g) All alterations shall comply with the requirements of the
Franchise Agreement governing the condition and appearance of a Boston
Chicken/Market Unit, and if Landlord or Franchisor so requires, the
alterations shall comply with the requirements of the Workletter, if any.
9.3 Liens. Tenant shall not permit to be created nor to remain
undischarged any lien, encumbrance or charge arising out of any work or work
claim of any contractor, mechanic, laborer of Tenant or material supplied by a
materialman to Tenant which might be, or become, a lien or encumbrance or charge
upon the Demised Premises. If any lien or notice of lien on account of an
alleged debt of Tenant or any notice of contract by a party engaged by Tenant or
Tenant's contractor to work in the Demised Premises shall be filed against the
Demised Premises, Tenant shall, within thirty (30) days after notice of the
filing thereof, cause the same to be discharged of record by payment, deposit or
bond. Tenant may contest any lien claim or proceeding which Tenant believes is
improper, if Tenant diligently pursues the contest and posts security acceptable
to Landlord, in Landlord's sole discretion, which security may be used by
Landlord to pay the lien in full if the dispute or contest is resolved
unfavorably to Tenant.
<PAGE>
10
----
LAWS AND ORDINANCES
-------------------
10.1 Compliance with Laws and Ordinances. Tenant, at Tenant's sole cost
and expense, shall comply with all laws, ordinances, orders, rules, codes,
permits and regulations regarding the use and occupancy of the Demised Premises
and the cleanliness, safety and operation thereof, including, without
limitation, any requirements imposed by The Americans with Disabilities Act
which are applicable to the Demised Premises and the improvements thereon and
the conduct of Tenant's business therefrom. Tenant, at Tenant's sole cost and
expense, shall comply with the regulations and requirements of any insurance
underwriter, fire inspection bureau or similar agency with respect to the
Demised Premises.
10.2 Maintain Permits. Tenant shall, at its sole cost and expense,
obtain and keep in full force and effect, and upon request shall deliver to
Landlord copies of, any and all necessary permits, licenses, certificates or
other authorizations (collectively, "Permits") required in connection with the
use, occupancy, operation and management of the Demised Premises and the signs
at the Demised Premises. Tenant shall indemnify and hold harmless Landlord from
and against all claims, liability, damages, loss, costs and expenses (including,
without limitation, reasonable attorneys' fees) in connection therewith. Upon
the expiration or earlier termination of the Term, Tenant shall promptly deliver
to Landlord all Permits which relate to the Demised Premises and which were
obtained by or issued to Tenant and are then in force, together with an
assignment or conveyance thereof to Landlord, in such form and substance as
Landlord shall reasonably require.
10.3 Unpermitted Uses. Tenant shall not (i) permit any illegal or
immoral practice to be carried on or committed on the Demised Premises; (ii)
make use of or allow the Demised Premises to be used for any purpose that might
invalidate or increase the rate of insurance therefor; (iii) keep or use or
permit to be kept or used on the Demised Premises any flammable fluids, gases,
or explosives without the prior written permission of Landlord except for normal
cleaning products specified by Franchisor; (iv) use the Demised Premises for any
purpose whatsoever which might create a nuisance or which is not in keeping with
the Franchise Agreement; (v) deface or injure the Demised Premises; (vi)
overload the floor or roof; (vii) commit or suffer any waste; (viii) install any
equipment that overloads utility lines, or (ix) commit or permit any act which
may damage the name, reputation or goodwill of Landlord or Franchisor.
11
----
ENVIRONMENTAL MATTERS
---------------------
11.1 Hazardous Substances. The term "Hazardous Substances", as used in
this Article 11, shall include, without limitation, flammables, explosives,
radioactive materials, asbestos, polychlorinated biphenyls (PCBs), chemicals
known to cause cancer or reproductive toxicity, pollutants, contaminants,
hazardous wastes, toxic substances or related materials, petroleum and petroleum
products, and substances declared to be hazardous or toxic under any law or
regulation now or hereafter enacted or promulgated by any governmental
authority.
11.2 No Violation of Environmental Laws. Tenant shall not cause or
permit to occur:
(a) any violation of any federal, state, or local law, ordinance, or
regulation now or hereafter enacted, related to environmental conditions
on, under, or about the Demised Premises, or arising from Tenant's use or
occupancy of the Demised Premises, including, but not limited to, soil and
ground water conditions; or
(b) the use, generation, release, manufacture, refining, production,
processing, storage, or disposal of any Hazardous Substance on, under, or
about the Demised Premises, or the transportation to or from the Demised
Premises of any Hazardous Substance; provided, however, that Tenant may use
and/or store such items which have been approved by Franchisor for use in
the operation of a Boston Chicken/Market Unit, to the extent such use
and/or storage is in full compliance with all applicable Environmental Laws
(as hereinafter defined).
11.3 Compliance with Environmental Laws. Tenant shall, at Tenant's
expense:
(a) comply with all laws, statutes, ordinances, rules, regulations and
orders regulating the use, generation, storage, transportation, or disposal
of Hazardous Substances applicable to the Demised Premises (the
"Environmental Laws");
(b) make all submissions to, provide all information required by, and
comply with all requirements of all governmental authorities (the
"Authorities") under the Environmental Laws;
(c) prepare and submit the required plans and all related bonds and
other financial assurances, if any Authority or any third party demands
that a clean-up plan be prepared or that a clean-up be undertaken because
of any deposit, spill, discharge, or other release of Hazardous Substances
that occurs during the Term, at or from the Demised Premises, or which
arises at any time from Tenant's use or occupancy of the Demised Premises;
and Tenant shall carry out all work required by such clean-up plans;
provided however, that if said deposit, spill, discharge or other release
was caused
<PAGE>
solely by Landlord or Landlord's agents, then Tenant shall not be required
to clean-up said deposit, spill, discharge or other release; and
(d) promptly provide all information regarding the use, generation,
storage, transportation or disposal of Hazardous Substances that is
requested by Landlord.
If Tenant fails to fulfill any duty imposed under this Section 11.3, within a
reasonable time, Landlord may do so; and in such case, Tenant shall cooperate
with Landlord as Landlord deems necessary or appropriate to determine the
applicability of the Environmental Laws to the Demised Premises and Tenant's use
thereof, and for compliance therewith, and Tenant shall execute all documents
promptly upon Landlord's request. No such action by Landlord and no attempt
made by Landlord to mitigate damages under any Environmental Law shall
constitute a waiver of any of Tenant's obligations under this Section 11.3.
Tenant's obligations and liabilities under this Section 11.3 shall survive the
expiration or termination of this Sublease.
11.4 Indemnity and Release. Tenant shall indemnify, defend, and hold
harmless Landlord and Franchisor and their respective officers, directors,
shareholders, employees, representatives, agents and consultants from all fines,
suits, procedures, claims, and actions of every kind and all costs, associated
therewith (including attorneys and consultants fees) arising out of or in any
way connected with any deposit, spill, discharge, or other release of Hazardous
Substances that occurs prior to or during the Term, at or from the Demised
Premises or which migrates to the Demised Premises from other property, or which
arises at any time from Tenant's use or occupancy of the Demised Premises
(except to the extent caused by Landlord or Landlord's agents) or from Tenant's
failure to provide all information, make all submissions, and take all actions
required by all Authorities under the Environmental Laws. Tenant hereby
releases Landlord and anyone claiming by, through or under Landlord for any
loss, liability, injury or damage arising from or in any way connected with the
presence of Hazardous Substances at the Demised Premises or any violation of any
of the Environmental Laws. Tenant's obligations and liabilities under this
Section 11.4. shall survive the expiration or earlier termination of this
Sublease.
12
----
SIGNAGE
-------
12.1 Approved Signage. Tenant shall not install any signage on the
exterior or interior of the Demised Premises which has not first been approved
in writing by Landlord and if required by the Master Lease, approved by Master
Landlord; provided, however, it is expressly understood and agreed that Tenant
shall, at Tenant's sole cost and expense, subject to applicable governmental
regulations and Master Lease, install maximum allowable signage approved by
Franchisor which is customarily used in connection with the operation of a
Boston Chicken/Market Unit. Such signage shall comply with the specifications
prescribed therefor by Franchisor.
12.2 Sign Approvals. Landlord shall, at Tenant's sole cost and expense,
fully cooperate with Tenant in filing any required signage application, permit
and/or variance for said signage or with respect to the Demised Premises
generally. Tenant shall, subject to the Master Lease and at Tenant's cost and
expense, install all upgraded or remodeled signage in the Demised Premises which
Franchisor shall require Tenant to install under the Franchise Agreement.
13
----
SERVICES
--------
13.1 Utility Services. Tenant shall be solely responsible for and shall
promptly pay all charges for the use and consumption of sewer, gas, electricity,
water, telephone, data and all other utility services used within the Demised
Premises unless the same is not separately metered under the Master Lease, in
which case such utility costs shall be included in Rent payable hereunder.
14
----
INSURANCE
---------
14.1 Tenant's Insurance. During the Term, Tenant shall maintain
insurance coverage as required under the Master Lease naming Landlord as an
additional insured. In addition, Tenant shall also maintain the following
insurance coverages:
(a) commercial general liability insurance naming Landlord and
Franchisor as additional insureds with a combined single limit of not less
that One Million Dollars ($1,000,000.00) per occurrence (or such higher
limits which Landlord or Franchisor may reasonably require) insuring
against claims for personal injury, bodily injury, death or property damage
including, without limitation, that occurring on, in or about the Demised
Premises and the adjoining streets, sidewalks, parking lots and
passageways, which insurance shall include products liability coverage and
contractual liability coverage insuring the indemnity set forth in Section
14.3;
<PAGE>
(b) "all risk" physical damage insurance, including fire, sprinkler
leakage, malicious mischief, vandalism and other extended coverage perils,
insuring against physical damage to Tenant's Property for the full
replacement value thereof;
(c) business interruption or rent loss insurance in such amounts as
shall be sufficient to pay all Rent due under this Sublease for a period of
not less than twelve (12) months; and
(d) such other insurance that Tenant is required to maintain under the
Franchise Agreement.
Prior to the Rent Commencement Date, Tenant shall provide Landlord certificates
of insurance providing evidence that the insurance required to be maintained by
Tenant under this Section 14.1 is in full force and effect. Prior to the
expiration of any insurance coverage, Tenant shall provide Landlord with new
certificates of insurance providing evidence of the renewal of the expiring
insurance coverage. The insurance certificates furnished to Landlord shall
include a provision which requires that thirty (30) days prior written notice to
Landlord be given by the insurance company prior to cancellation, non-renewal,
termination or change in such insurance. The insurance coverage required to be
maintained by Tenant under this Section 14.1 shall be issued by insurance
companies which are reasonably satisfactory to Landlord and Franchisor. No
insurance required to be maintained by Tenant under this Sublease shall be made
on a "claims made" basis without the prior written consent of Landlord. Any
aggregate limit under Tenant's liability insurance policy shall by endorsement
apply to the Demised Premises separately.
14.2 Waiver of Subrogation. Each party releases and discharges the
other party and waives all claims for recovery from the other party for any loss
or damage to any of its property, including loss of use thereof, which is
insured under valid and collectible insurance policies on the Demised Premises
or Tenant's Property or which is required to be insured under this Sublease, and
each party shall use good faith efforts to have any and all physical damage
insurance affecting the Demised Premises or Tenant's Property, as the case may
be, endorsed to include a clause containing the substance and having the same
effect as the following: "This insurance shall not be invalidated should the
insured waive in writing prior to a loss any or all right of recovery against
any party for loss occurring to the property described herein". In addition,
each party shall cause its physical damage insurance policy to include a
provision or endorsement by which the insurer expressly waives all rights of
subrogation which such insurers might have had against the other party.
14.3 Indemnification. Tenant hereby indemnifies Landlord and Franchisor
and shall hold Landlord and Franchisor and their respective officers, directors,
shareholders, employees, representatives, agents and consultants harmless from
and against any and all claims, demands, liabilities, and expenses, including
attorneys' fees and costs, arising (i) from any accident, injury, death, loss or
damage to or of any person(s) or property occurring in, on or about the Demised
Premises, (ii) out of the negligence or willful misconduct of Tenant or its
agents, employees, or contractors, or (iii) from any breach or default by Tenant
of this Sublease, except to the extent caused by Landlord's negligence or
willful misconduct. In the event any action or proceeding shall be brought
against Landlord or Franchisor by reason of any such claim, Tenant shall defend
Landlord and Franchisor against such claim at Tenant's sole cost and expense by
counsel reasonably satisfactory to Landlord and Franchisor.
14.4 Demised Premises Security. Tenant assumes full responsibility for
(i) protecting the Demised Premises from theft, robbery and pilferage, (ii)
keeping the Demised Premises secure, and (iii) locking the doors in and to the
Demised Premises. All property belonging to Tenant or any other person in the
Demised Premises shall be there at the risk of Tenant or such other person only.
Landlord, its agent and their respective officers and employees shall not be
liable for damage, theft, or misappropriation thereof.
<PAGE>
15
ASSIGNMENT AND SUBLETTING
-------------------------
15.1 Consent Required. Tenant shall not assign, sublease, transfer,
mortgage, encumber or otherwise hypothecate this Sublease without Landlord's
prior written consent, which consent may be withheld by Landlord at its sole and
absolute discretion, and if so required under the Master Lease, without Master
Landlord's prior consent; provided, however, Landlord's consent shall not be
required for (i) any transfer approved by Franchisor pursuant to the Franchise
Agreement, (ii) any assignment of this Sublease to Franchisor, or (iii) if
Franchisor succeeds to the interest of Tenant under this Sublease, then (A) any
assignment of this Sublease or sublease of the Demised Premises by Tenant to a
franchisee of Tenant, or (B) any transfer to an entity which succeeds to the
interest of Tenant by merger or which acquires all or substantially all of the
assets of Tenant or a controlling interest in the stock of Tenant. Tenant shall
promptly notify Landlord of any assignment or other transfer which did not
require, and was made without, the prior written consent of Landlord. For
purposes of this Sublease, "assignment" shall be considered to include a change
in the majority ownership or control of Tenant if Tenant is a corporation or a
partnership. Any attempt to assign, sublease, transfer, mortgage, encumber or
hypothecate this Sublease without the prior written consent of Landlord and/or
Master Landlord (if such consent is required under this Section 15.1) shall be
null and void. The consent by Landlord to any assignment, mortgage,
hypothecation, encumbrance, subletting or use of the Demised Premises by others
shall not constitute a waiver of Landlord's right to withhold its consent to any
other or further assignment, subletting, mortgage, encumbrance or use of the
Demised Premises by others. Without the prior written consent of Landlord, this
Sublease and the interest of Tenant in the Demised Premises shall not pass by
operation of law or otherwise (except as provided in this Section 15.1), and
shall not be subject to garnishment or sale under execution in any suit or
proceeding which may be brought by or against Tenant or any assignee of Tenant.
The absolute and unconditional prohibitions contained in this Article 15 and
Tenant's agreement thereto are material inducements to Landlord to enter into
this Sublease with Tenant and any breach thereof shall constitute a material
default under this Sublease permitting Landlord to exercise all remedies
provided for in this Sublease or by law or in equity on a default of Tenant,
including, without limitation, injunctive relief. In no event shall any
assignment or subletting to which Landlord may consent, release or relieve
Tenant from its obligations to fully observe or perform all of the terms,
covenants and conditions of this Sublease on its part to be observed or
performed.
15.2 Request for Consent. If Tenant requests Landlord's consent to an
assignment of this Sublease or a sub-sublease of the Demised Premises, Tenant
shall submit to Landlord a written notice ("Tenant's Notice") containing (i) the
name of the proposed assignee or subtenant; (ii) the terms of the proposed
assignment or sub-sublease; (iii) the nature of business of the proposed
assignee or subtenant and its business experience; (iv) such information as to
the financial responsibility and general reputation of the proposed assignee or
subtenant as Landlord may require; and (v) a summary of plans and specifications
for revising the floor layout of the Demised Premises. Upon the receipt of a
Tenant's Notice from Tenant, Landlord shall have the option, to be exercised by
written notice to Tenant given within thirty (30) days after such receipt, to
cancel and terminate this Sublease as of the date set forth in Landlord's notice
of exercise of such option; provided, however, Landlord shall not have the right
to cancel or terminate this Sublease with respect to any assignment, sub-
sublease or transfer for which Landlord's consent is not required under Section
15.1. If Landlord shall cancel this Sublease, Tenant shall surrender possession
of the Demised Premises on the date set forth in such Landlord's notice in
accordance with the provisions of this Sublease relating to surrender of the
Demised Premises. If Landlord shall cancel this Sublease, Landlord may relet
the Demised Premises to any third party tenant, including, without limitation,
the proposed assignee or subtenant of Tenant, without any liability to Tenant.
If Landlord elects not to cancel this Sublease, then Landlord shall grant or
withhold its consent to the proposed assignment or sub-sublease within thirty
(30) days after Landlord's receipt of Tenant's Notice.
15.3 Excess Consideration. If Tenant shall assign this Sublease or sub-
sublet the Demised Premises pursuant to the terms of this Article 15, or if
Tenant, as debtor or debtor in possession, or a trustee in bankruptcy for Tenant
pursuant to the Bankruptcy Code (as hereinafter defined), shall assign this
Sublease or sublet the Demised Premises, then Tenant shall pay Landlord as
additional Rent, all of the excess payments or other economic consideration
whether denominated as rent or otherwise (together with escalations) payable to
Tenant under the sublease or assignment which might be in excess of the Rent
payable to Landlord under this Sublease (or, if only a portion of the Demised
Premises is being sub-sublet, the excess payments or other economic
consideration allocable on a rentable square footage basis to the space sub-
sublet). This Section 15.3 shall not apply to any assignment or sub-sublease
for which Landlord's consent is not required.
15.4 Tenant Financing. Notwithstanding anything to the contrary
contained in this Article 15, Tenant shall have the absolute right from time to
time during the Term and without Landlord's approval, written or otherwise, to
grant and assign a mortgage or other security interest in Tenant's interest in
Tenant's Property to Tenant's lenders in connection with Tenant's financing
arrangements. Landlord agrees to execute such confirmation, certificates and
other documents (except amendments to this Sublease unless Landlord hereafter
consents) as Tenant's lenders may reasonably request in connection with any such
financing.
<PAGE>
16
ACCESS TO PREMISES
------------------
Upon reasonable prior notice, but in no event less than twenty-four (24)
hours (except in the case of an emergency), Landlord may enter the Demised
Premises during Tenant's business hours for purposes of inspection.
Notwithstanding the foregoing, Franchisor may enter the Demised Premises without
prior notice to the extent permitted under the Franchise Agreement. In addition,
Landlord may enter the Demised Premises to make changes to the Demised Premises
and the surrounding development, which changes shall not require the prior
consent of Tenant; provided, however, such changes shall not materially
adversely affect access to, visibility of, or the parking located at the Demised
Premises.
17
DEFAULTS BY Tenant
------------------
17.1 Events of Default. Each of the following events shall constitute
an "Event of Default":
(a) Any failure by Tenant to pay Rent or make any other payment
required to be made by Tenant hereunder within five (5) days after receipt
of written notice from Landlord; or
(b) If Tenant violates or fails to perform or otherwise breaches any
agreement, term, covenant or condition contained in this Sublease within
thirty (30) days after receipt of written notice from Landlord; provided,
however, said thirty (30) day period shall be subject to extension for
Force Majeure Delays; or
(c) If Tenant vacates or abandons the Demised Premises, or fails to
open the Demised Premises for business on a timely basis as required under
the Franchise Agreement, or fails to continuously operate a Boston
Chicken/Market Unit from the Demised Premises as required by this Sublease;
or if Tenant removes or attempts to remove Tenant's goods or property
therefrom other than in the ordinary course of business without having
first paid to Landlord in full all Rent that may have become due as well as
all Rent which will become due thereafter; or
(d) If Tenant becomes insolvent or bankrupt or makes an assignment or
arrangement for the benefit of creditors, or if a petition in bankruptcy or
for reorganization or for an arrangement with creditors under any federal
or state law is filed by or against Tenant, or Tenant is adjudicated
insolvent pursuant to the provisions of any present or future insolvency
law of any state having jurisdiction, or a bill in equity or other
proceeding for the appointment of a receiver, trustee, liquidator,
custodian, conservator or similar official for any of Tenant's assets is
commenced, under any federal or state law by reason of Tenant's inability
to pay its debts as they become due or otherwise, or if Tenant's estate by
this Sublease or any real or personal property of Tenant shall be levied
upon; provided, however, that any proceeding brought by anyone other than
the parties to this Sublease under any bankruptcy, reorganization,
arrangement, insolvency, readjustment, receivership or similar law shall
not constitute a default until such proceeding, decree, judgment or order
has continued unstayed for more than sixty (60) consecutive days; or
(e) If Tenant (or any successor or assign of Tenant) defaults under
the Franchise Agreement, the Secured Loan Agreement or the Master Lease
(beyond the applicable notice and cure periods, if any, granted therein).
17.2 Landlord Remedies. Upon the occurrence of an Event of Default,
Landlord shall have the following rights:
(a) Landlord may accelerate the whole or any part of the Rent for the
entire unexpired balance of the Term, and any Rent if so accelerated shall,
in addition to any and all installments of Rent already due and payable and
in arrears, be deemed due and payable as if, by the terms and provisions of
this Sublease, such accelerated Rent was on that date payable in advance.
For such purposes, all items of Rent due hereunder, which are not then
capable of precise determination, shall be estimated by Landlord, in
Landlord's reasonable judgment, for the balance of the Term.
(b) Landlord may enter the Demised Premises and without further
demand or notice proceed to distress and sell the goods, chattels and
personal property there found, and to levy the Rent, and Tenant shall pay
all costs and officers' commissions which are permitted by law, including
watchmen's wages and sums chargeable to Landlord, and further including
five percent (5%) commissions to the officer or other person making the
levy, and in such case all costs, officers' commissions and other charges
shall immediately attach and become part of the claim of Landlord for Rent,
and any tender of Rent without said costs, commissions and charges made
after the issuance of a warrant of distress, shall not be sufficient to
satisfy the claim of Landlord.
(c) Landlord may re-enter the Demised Premises, together with all
additions, alterations and improvements, and, at the option of Landlord,
remove all persons and all or any property therefrom, either by summary
dispossession proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable for prosecution or damages
therefor, and repossess and enjoy the Demised Premises. Upon recovering
possession of the
<PAGE>
Demised Premises by reason of or based upon or arising out of a default on
the part of Tenant, Landlord may, at Landlord's option, either terminate
this Sublease or terminate Tenant's right to possession of the Demised
Premises without terminating this Sublease, and in either such event, make
such alterations and repairs as may be necessary in order to relet the
Demised Premises and thereafter relet the Demised Premises, either in
Landlord's name or otherwise, for a term or terms which may, at Landlord's
option, be less than or exceed the period which would otherwise have
constituted the balance of the Term and at such rent or rents and upon such
other terms and conditions as Landlord in Landlord's sole discretion may
deem advisable and to such person or persons as Landlord in Landlord's sole
discretion may deem best. Upon each such reletting, all rents received by
Landlord from such reletting shall be applied first, to the payment of any
costs and expenses of such reletting, including brokerage fees and
attorneys' fees and all costs of such alterations and repairs; second, to
the payment of any indebtedness other than Rent due hereunder from Tenant
to Landlord; third, to the payment of Rent due and unpaid hereunder; and
the residue, if any, shall be held by Landlord and applied in payment of
future Rent as it may become due and payable hereunder. If such rentals
received from such reletting during any month shall be less than that to be
paid during that month by Tenant, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No such re-
entry or taking possession of the Demised Premises or the making of
alterations or improvements thereto or the reletting thereof shall be
construed as an election on the part of Landlord to terminate this Sublease
unless written notice of such intention be given to Tenant. Landlord shall
in no event be liable in any way whatsoever for failure to relet the
Demised Premises or, in the event that the Demised Premises are relet, for
failure to collect the rent thereof under such reletting. Tenant, for
Tenant and Tenant's successors and assigns, hereby irrevocably constitutes
and appoints Landlord as Tenant's and their agent to collect the rents due
and to become due under all subleases of the Demised Premises or any parts
thereof without in any way affecting Tenant's obligation to pay any unpaid
balance of Rent due or to become due hereunder. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this Sublease for such previous breach.
(d) Landlord may terminate this Sublease and the Term without any
right on the part of Tenant to waive the forfeiture by payment of any sum
due or by other performance of any condition, term or covenant broken,
whereupon Landlord shall be entitled to recover, in addition to any and all
sums and damages for violation of Tenant's obligations hereunder in
existence at the time of such termination, damages for Tenant's default in
an amount equal to the amount of the Rent reserved for the balance of the
Term, discounted at the rate of six percent (6%) per annum to its then
present worth, less the fair market rental value (as determined by
Landlord) of the Demised Premises for the remainder of the Term (allowing
for a reasonable period of exposure on the open market before realization
of such fair market rental value and deducting the then fair market tenant
concessions such as rent abatements and improvement allowances), also
discounted at the rate of six percent (6%) per annum to its then present
worth, plus the cost of making standard improvements and a standard
commission for releasing the Demised Premises, all of which amount shall be
immediately due and payable from Tenant to Landlord.
17.3 Landlord's Right to Perform Tenant's Obligations. If an Event of
Default shall occur, then Landlord, at Landlord's option, may, but shall not be
obligated to, expend such sum, on behalf of Tenant, as may be necessary to cure
such Event of Default. Any and all sums so expended by Landlord (plus an
administrative fee of fifteen percent [15%] of the amount thereof), plus
interest thereon at the Default Rate from the day of such expenditure, shall be
additional Rent, and shall be repaid by Tenant to Landlord on demand, but no
such expenditure by Landlord shall be deemed a waiver of Tenant's default or
shall affect any other remedy of Landlord by reason of such default.
17.4 No Waiver. No waiver by Landlord of any breach by Tenant or any of
Tenant's obligations, agreements or covenants under this Sublease shall be a
waiver of any subsequent breach or of any obligation, agreement or covenant, nor
shall any forbearance by Landlord to seek a remedy for any breach by Tenant be a
waiver by Landlord of any rights and remedies with respect to such or any
subsequent breach. No surrender of the Demised Premises by Tenant shall be
affected by Landlord's acceptance of Rent or by other means whatsoever unless
the same is evidenced by Landlord's written acceptance of the surrender.
17.5 Remedies Cumulative. No right or remedy conferred upon or reserved
to Landlord under this Sublease is intended to be exclusive of any other right
or remedy provided under this Sublease or by law, but each shall be cumulative
and in addition to every other right or remedy given under this Sublease or now
or hereafter existing at law or in equity or by statute.
17.6 Attorneys' Fees. In the event that at any time during the Term
either Landlord or Tenant shall institute any action or proceeding against the
other relating to the provisions of this Sublease, or any default hereunder, the
unsuccessful party in such action or proceeding agrees to reimburse the
successful party for the reasonable expenses of attorneys' fees and paralegal
fees and disbursements incurred therein by the successful party. Such
reimbursement shall include all legal expenses incurred prior to trial, at trial
and at all levels of appeal and post judgment proceedings.
17.7 Bankruptcy or Insolvency. The following shall apply in the event
of the bankruptcy or insolvency of Tenant:
(a) Neither Tenant's interest in this Sublease nor any estate hereby
created in Tenant shall pass to any trustee (except as may specifically be
provided pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. 101
et seq. (the "Bankruptcy Code")) or receiver or assignee for the benefit of
creditors or otherwise by operation of law.
(b) Except as otherwise required by the Bankruptcy Code, in the event
the interest or estate created in Tenant hereby shall be taken in execution
or by other process of law, if Tenant is adjudicated insolvent by a court
of competent jurisdiction, or if a receiver or trustee of the property of
Tenant shall be appointed by reason of the insolvency of Tenant or
inability to pay its debts, or if any assignment shall be made of the
property of Tenant for the benefit of creditors,
<PAGE>
then and in any such event, Tenant shall have committed an Event of Default
and Landlord may terminate this Sublease or terminate Tenant's right of
possession as provided in Section 17.2.
(c) No default of this Sublease by Tenant, either prior to or
subsequent to the filing of a petition under the Bankruptcy Code, shall be
deemed to have been waived unless expressly done so in writing by Landlord.
(d) If Tenant or a trustee elects to assume this Sublease subsequent
to the filing of a petition under the Bankruptcy Code, Tenant, as debtor or
as debtor in possession, and any trustee who may be appointed shall comply
with Section 365(b)(1) of the Bankruptcy Code and shall provide adequate
assurance of Tenant's future performance in connection therewith, which
shall include, without limitation, the following: (a) the deposit of an
additional sum equal to two (2) month's rent to be held (without any
allowance for interest thereon) to secure Tenant's obligations under this
Sublease; (b) the production to Landlord of written documentation
establishing that Tenant has sufficient present and anticipated financial
ability to perform each and every obligation of Tenant under this Sublease;
and (c) assurances, in form acceptable to Landlord, as to all matters
listed in Section 365(b)(3) of the Bankruptcy Code.
(e) If Tenant assumes this Sublease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, then notice of such
proposed assignment, setting forth (a) the name and address of such person,
(b) all the terms and conditions of such offer, and (c) the adequate
assurance to be provided Landlord to assure such person's future
performance under this Sublease, including, without limitation, the
assurance referred to in Section 365(b)(3) of the Bankruptcy Code, shall
promptly be given to Landlord by Tenant, and Landlord shall thereupon have
the prior right and option, to be exercised by notice to Tenant given at
any time prior to the effective date of such proposed assignment, to accept
an assignment of this Sublease upon the same terms and conditions. Any
person or entity to which this Sublease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Sublease on
and after the date of such assignment. Any such assignee shall upon demand
from Landlord execute and deliver to Landlord an instrument confirming such
assumption.
18
DEFAULTS BY LANDLORD
--------------------
Tenant shall not exercise any remedy for any default by Landlord in the
performance of any of its obligations under this Sublease, unless Tenant has
given to Landlord written notice specifying the default, and Landlord has failed
to cure the default within thirty (30) days after receipt of Tenant's notice;
provided, however, if Landlord commences the cure of the default with said
thirty (30) period but the default is not reasonably susceptible of being cured
within thirty (30) days, said thirty (30) day period shall be extended during
such period of time that Landlord is diligently pursuing the steps necessary to
cure the default. Tenant's sole and exclusive remedies for a default by Landlord
under this Sublease shall be (i) the right to sue Landlord for direct damages or
(ii) the right to seek specific performance or injunctive relief. Tenant waives
the right to terminate this Sublease or seek consequential or speculative
damages from Landlord in the event of any default by Landlord under this
Sublease.
19
SURRENDER OF PREMISES
---------------------
19.1 Surrender. Upon the expiration of the Term, or any earlier
termination of this Sublease or Tenant's right to possession of the Demised
Premises for any cause, Tenant shall surrender possession and vacate the Demised
Premises and surrender possession of the Demised Premises to Landlord in
accordance with the terms and conditions of the Master Lease. If directed by
Landlord or Franchisor and allowed under the Master Lease, Tenant shall remove
from the Demised Premises, at Tenant's cost and expense, any distinctive
structural or physical features which identify the Demised Premises as a Boston
Chicken/Market Unit, and Tenant shall remove all marks and other trade dress
required to be removed by the Franchise Agreement. If Tenant fails to remove
such marks and trade dress, Landlord shall have the right to remove same, and
Tenant shall reimburse Landlord on demand for the cost thereof (plus an
administrative fee of fifteen percent (15%) of the cost thereof), plus interest
thereon at the Default Rate from the day of such expenditure.
19.2 Tenant's Property. Provided Tenant is not in default under this
Sublease, Tenant may remove upon the expiration of the Term (i) Tenant's
furniture and movable trade fixtures and equipment and other personal property
not permanently affixed to the Demised Premises; and (ii) the alterations,
additions and signs made by Tenant to the Demised Premises that Landlord permits
Tenant to remove (collectively, "Tenant's Property"), subject to, however, and
in accordance with the Franchise Agreement and the Master Lease.
20
20.1 Franchise Agreement. If Franchisor does not exercise its right of
first refusal to purchase the assets of Tenant's Boston Chicken/Market Unit
under the terms of the Franchise Agreement, then Tenant agrees, at Tenant's sole
expense and
<PAGE>
subject to the terms and conditions of the Master Lease, to make such
modifications and alterations, including removal of all distinctive physical and
structural features associated with the trade dress of Boston Chicken/Market
Units, as may be necessary to distinguish the Demised Premises so clearly from
its former appearance and from other Boston Chicken/Market Units as to prevent
any possibility that the public will associate the Demised Premises with Boston
Chicken/Market Units and any confusion created by such association (such
modifications and alterations shall include, but not be limited to, removing or
covering the distinctive decor and color scheme on all walls, counters, fixtures
and furnishings, as well as the exterior of the Demised Premises). If Tenant
fails to immediately make such modifications, alterations and/or removals,
Landlord and Tenant agree that, subject to the terms of the Master Lease,
Franchisor or its designated agents may enter the Demised Premises to make such
modifications, alterations and/or removals, at Tenant's expense, and that such
entry and actions by Franchisor shall not constitute a breach of this Sublease.
It is expressly acknowledged and agreed by Landlord and Tenant that Franchisor
shall have the right to obtain the remedy of specific performance or other
injunctive relief in order to enforce the provisions of this Section 20.1 and
that Franchisor has no adequate remedy available at law for any breach of this
Section 20.1. Landlord acknowledges and agrees that Franchisor is a third-party
beneficiary of this Sublease.
20.2 Waiver of Landlord's Lien. Franchisor and Tenant have entered into
a Secured Loan Agreement (which agreement and all documents delivered in
connection therewith, together with all renewals, amendments and replacements,
are collectively referred to as the "Loan Agreement") providing for Franchisor
to lend money to or for the benefit of Tenant. To secure Tenant's obligations
to Franchisor under the Loan Agreement ("Borrower's Liabilities"), Tenant has
granted to Franchisor a first priority security interest in and to all personal
property, inventory, equipment, furnishings, fixtures, books and records now
owned or hereafter acquired by Tenant (the "Collateral"), all or some of which
is now or hereafter may be located at the Demised Premises. Landlord waives all
rights which Landlord now has, or hereafter may have, under the laws of the
State in which the Demised Premises are located, other governmental
jurisdictions or by virtue of the Sublease or Tenant's occupation of the Demised
Premises, to levy or distrain for rent or for any monetary obligation arising by
reason of default under the Sublease, or to assert any lien, right, claim or
title to the Collateral. Landlord acknowledges that Franchisor's security
interest in the Collateral pursuant to the Loan Agreement is superior to any
lien, right, claim or title which Landlord now has or hereafter may have or
assert in or to the Collateral. For purposes of the Sublease, Landlord agrees
that the Collateral shall include, but not be limited to, all of Tenant's
movable personal property and trade fixtures on or about the Demised Premises,
which shall not be deemed fixtures. Collateral shall not include any leasehold
improvements which are permanently attached to the Demised Premises or which are
owned by Landlord. If Tenant defaults under the Loan Agreement, Franchisor may
remove the Collateral or any part thereof from the Demised Premises in
accordance with the terms and conditions of the Loan Agreement 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 Tenant, Landlord agrees that, at Franchisor's option, the Collateral
may remain at the Demised Premises for a period not exceeding one (1) month
following the expiration of Franchisor's period to cure Tenant's defaults
contained in the Franchise Agreement, provided Franchisor pays to Landlord any
rent that is unpaid for the Demised Premises at the same monthly rate imposed
upon Tenant. Franchisor may, without affecting the validity of the Sublease,
extend, amend and 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. Notwithstanding anything herein to the contrary,
Franchisor's security interest in the Collateral shall not be deemed a mortgage
of or lien upon Landlord's fee title to the Demised Premises.
21
MISCELLANEOUS
-------------
21.1 Notices. All notices, demands, or other communications of any type
given by Landlord or by Tenant, whether required by this Sublease or in any way
related to this Sublease, shall be void and of no effect unless given in
accordance with the provisions of this Sublease. All notices shall be legible
and in writing and shall be delivered personally to the addressee with a receipt
requested therefor or shall be sent by a recognized overnight courier service
for next day delivery or by United States certified mail, return receipt
requested, postage prepaid and addressed to Landlord at Landlord's Address as
set forth in Section 1.2, to Tenant at Tenant's Address as set forth in Section
1.4, and to Franchisor at Franchisor's Address as set forth in Section 1.6.
Notices sent in compliance with this Section 21.1 shall be effective (a) upon
receipt or refusal if delivered personally; (b) one (1) business day after
depositing with such an overnight courier service; or (c) three (3) business
days after deposit in the mails if mailed. Landlord and Tenant may change the
address for notice and the person to whom notices are sent by giving Franchisor
and the other party ten (10) days advance written notice of such change of
address. Franchisor may change the address for notice and the person to whom
notices are sent by giving Landlord and Tenant ten (10) days advance written
notice of such change of address.
21.2 Successors and Assigns. All covenants, promises, conditions,
representations and agreements contained in this Sublease shall be binding upon,
apply and inure to the parties hereto and their respective heirs, executors,
administrators, successors and assigns; it being understood and agreed, however,
that the provisions of Article 15 are in not in any way impaired by this Section
21.2.
21.3 Force Majeure Events. In the event that either party is delayed,
hindered in or prevented from the performance of any obligation hereunder by
reason of a Force Majeure Event, the time for the performance of such obligation
shall be extended for the corresponding Force Majeure Delay; provided, however,
in no event shall a Force Majeure Event excuse or delay the obligation of Tenant
to pay Rent under this Sublease.
21.4 Landlord and Tenant. Landlord and Tenant agree that it is their
intention to create only the relationship of Landlord and Tenant, and no
provision of this Sublease, or act of either Landlord or Tenant, shall ever be
construed as creating the relationship of principal and agent, or a partnership,
or a joint venture or enterprise between Landlord and Tenant.
<PAGE>
21.5 Quiet Enjoyment. Landlord covenants that it has full right, power
and authority to make this Sublease, subject to the rights of Master Landlord
and Mortgagees and the terms, provisions and conditions of any covenants,
conditions or restrictions of record, and that, subject to the terms of the
Master Lease, Tenant or any permitted assignee or sub-subtenant of Tenant, upon
the payment of the Rent and the performance of the covenants required to be
performed by Tenant hereunder, shall and may peaceably and quietly have, hold
and enjoy the Demised Premises and improvements thereon during the Term.
21.6 Rules and Regulations. Landlord reserves the right to adopt rules
and regulations with respect to the conduct of Tenant's activities in the
Demised Premises which, upon adoption, shall be deemed incorporated herein;
provided, however, such rules and regulations shall not become effective until
Tenant has been given notice thereof, and Tenant shall not be bound by any rules
and regulations which are not consistent with the standards and methods of
operation of a Boston Chicken/Market Unit in the jurisdiction in which the
Demised Premises are located.
21.7 Estoppel Certificate.
(a) Tenant shall, from time to time, upon the written request of
Landlord or Franchisor, deliver to the requesting party, within fifteen
(15) days after the request therefor, a statement in writing certifying (i)
that this Sublease is unmodified and in full force and effect (or if there
have been modifications that the same is in full force and effect as
modified and identifying the modifications); (ii) the dates to which the
Rent and other charges have been paid; (iii) that Landlord is not in
default under any provision of this Sublease (or if a default is alleged,
stating the nature of the alleged default); (iv) no payments other than as
currently due have been made; (v) that Tenant has accepted the Demised
Premises and the condition of Demised Premises and has no claims against
Landlord or any other party with respect to the Demised Premises; (vi) that
Tenant is entitled to no offsets, defenses or counterclaims with respect to
the terms, covenants and conditions of this Sublease to be performed by
Landlord; and (vii) such other matters as may reasonably be requested by
the requesting party.
(b) Landlord shall, from time to time, upon the written request of
Tenant or Franchisor, deliver to the requesting party, within fifteen (15)
days after the request therefor, a statement in writing certifying (i) that
this Sublease is unmodified and in full force and effect (or if there have
been modifications that the same is in full force and effect as modified
and identifying the modifications), (ii) the dates to which the Rent and
other charges have been paid; and (iii) that Tenant is not in default under
any provision of this Sublease (or if a default is alleged, stating the
nature of the alleged default).
(c) It is intended that any statement delivered pursuant to this
Section 21.7 may be relied upon by Franchisor and any prospective
Mortgagee, purchaser, lender, subtenant, assignee or any entity which is a
party to a potential merger, consolidation with or to the acquisition of
all or substantially all of the assets or stock of the requesting party.
If such statement is not executed by the requested party and delivered to
the requesting party within said fifteen (15) day period, the requesting
party may prepare said statement on behalf of the requested party, and the
requested party hereby irrevocably appoints the requesting party as its
attorney-in-fact, in the requested party's name, to execute such statement
and deliver same on the requested party's behalf.
21.8 Memorandum of Lease. Tenant shall not record this Sublease. Unless
the Master Lease prohibits recordation of a "short form" or memorandum of lease,
the parties shall join in the execution of a memorandum or so-called "short-
form" of this Sublease for the purposes of recordation in accordance with the
form provided for in the Master Lease and made a part hereof. Any recording
costs associated with the memorandum or short form of this Sublease shall be
borne by the party requesting recordation.
21.9 Conflict Between Lease and Franchise Agreement. In the event of
any conflict between this Sublease and the Franchise Agreement, the Franchise
Agreement shall govern, prevail and control.
21.10 Assignment by Landlord. Subject to the terms of the Master Lease,
Landlord shall have the right to transfer, assign and convey, in whole or in
part, any or all of the right, title and interest of Landlord in and to the
Demised Premises under the Master Lease, and, in such event, Landlord shall be
relieved from and after the date of such transfer, assignment or conveyance of
all liability under this Sublease for obligations accruing thereafter. Should
any prospective Mortgagee, or purchaser of the Landlord's interest in Demised
Premises require a modification or modifications of this Sublease, which
modification or modifications will not modify the permitted use of the Demised
Premises, the Term, the Renewal Option or the Rent payable by Tenant under this
Sublease and will not bring about any increased cost or expense to Tenant or in
any other way substantially change the rights and obligations of Tenant under
this Sublease, then Tenant agrees that this Sublease may be so modified. Tenant
further agrees to execute and deliver any documents requested to evidence such
modification within ten (10) days following such request.
21.11 Limitation of Landlord's Liability. Notwithstanding anything to
the contrary contained in this Sublease, in the event of any default or breach
by Landlord with respect to any of the terms, covenants and conditions of this
Sublease to be observed, honored or performed by Landlord, Tenant shall look
solely to the estate and property of Landlord in the Land and Building owned by
Landlord comprising the Demised Premises for the collection of any judgment (or
any other judicial procedures requiring the payment of money by Landlord) and no
other property or assets of Landlord shall be subject to levy, execution, or
other procedures for satisfaction of Tenant's remedies.
21.12 Severability. Any provision of this Sublease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provisions shall remain in full force and
effect.
<PAGE>
21.13 Governing Law and Venue. This Sublease shall be governed by the
laws of the state in which the Demised Premises is located. Tenant acknowledges
and agrees that proper venue for all legal and equitable actions which may be
brought by Landlord or Tenant under, arising out of or in connection with this
Sublease is the United States District Court for the District of Colorado or the
District Court of Jefferson County, Colorado and that Tenant is subject to the
jurisdiction of said courts.
21.14 Waiver of Trial by Jury. To the extent permitted by law, Tenant
hereby waives the right to trial by jury in any action, proceeding or
counterclaim on any matter whatsoever arising out of or in any way connected
with this Sublease.
21.15 Brokers. Landlord and Tenant represent and warrant to each other
that they have not had any dealing with any real estate brokers, finders or
agents in connection with the negotiation of this Sublease. Each party shall
indemnify and hold the other party harmless from and against any and all
liability and cost which the other party may suffer in connection with real
estate brokers, finders or agents claiming by, through, or under such party
seeking any commission, fee or payment in connection with this Sublease.
21.16 Survival. The following obligations shall survive the expiration
or termination of this Sublease: (a) any obligation under this Sublease which
is permitted to be performed after the expiration or termination of this
Sublease; (b) any obligation under this Sublease which is not reasonably
susceptible of performance prior to the expiration or termination of this
Sublease; and (c) any obligation under this Sublease which is required to be
performed under this Sublease on or before the expiration of the Term but which
is not so performed.
21.17 Time is of the Essence. Time is of the essence of this Sublease
and each provision; provided, however, if the final (but not any interim) date
of any period set forth herein falls on a Saturday, Sunday or legal holiday
under the laws of the United States of America, the final date of such period
shall be extended to the next business day.
21.18 Number and Gender. All terms and words used in this Sublease,
regardless of the number and gender in which they are used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context or sense of this Sublease or any
portion of this Sublease may require, the same as if such words had been fully
and properly written in the number and gender.
21.19 Counterparts. This Sublease may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute but one and the same
instrument.
21.20 Captions and Headings. The headings to the Articles and Sections
of this Sublease are inserted only as a matter of convenience and for reference,
and in no way expand, modify, confine, limit or proscribe the scope or intent of
any Article and Section of this Sublease, nor in any way affect this Sublease.
21.21 Construction. Each party hereto has reviewed and revised (or
requested revisions of) this Sublease, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a particular
party shall not be applicable in the construction and interpretation of this
Agreement or any Exhibits hereto.
21.22 Trademarks. The parties hereto acknowledge that any plans or
specifications of Tenant and Tenant's and Franchisor's trademarks and service
marks, including without limitation, "Boston Market", are the sole property of
Tenant and/or Franchisor, as the case may be, and this Sublease and tenancy
created by this Sublease shall not be construed as granting to any party any
rights to same.
21.23 Entire Agreement. Any and all discussions and negotiations
between Landlord and Tenant have been merged into this Sublease. No rights are
conferred upon either party until this Sublease has been executed by both
Landlord and Tenant. Any and all representations and agreements by either of
the parties or their agents made during negotiations prior to execution of this
Sublease and which representations are not contained in this Sublease shall not
be binding upon either of the parties. This Sublease may be amended or added to
only by an agreement in writing signed by the parties hereto or their respective
successors in interest.
21.24 Satellite Dish Installation. Subject to the terms of the Master
Lease, Landlord hereby grants to Tenant and Tenant's agents, employees and
contractors the right, at Tenant's sole cost and expense, to install, maintain
and operate at the Demised Premises a mast mounted satellite dish antenna (the
"Dish") and related equipment, including, without limitation, cables from the
exterior of the Demised Premises to equipment inside the Demised Premises, which
is necessary to the operation of the Dish, as part of Franchisor's integrated
satellite business network. Tenant may relocate the Dish to some other location
on or about the Demised Premises for purposes of adequate reception, subject to
applicable law, codes and regulations and to the terms of the Master Lease.
Tenant will ensure that the Dish, and each part of it, will be installed in
accordance with all local and building rules of construction and codes. Tenant
will obtain all FCC and other licenses or approvals required to install and
operate the Dish. The Dish is and shall remain the property of Tenant or
Tenant's assignee, transferee or subtenant, and Landlord and Tenant agree that
the Dish is not, and installation of the Dish at the Demised Premises shall not
cause the Dish to become, a fixture pursuant to this Sublease or by operation of
law. Tenant shall be responsible for the repair and maintenance of the Dish
during the Term, at Tenant's sole cost and expense, and upon the expiration of
the Term or earlier termination of this Sublease, Tenant shall remove the Dish
and repair any and all damage to the Demised Premises (including but not limited
to the roof of the Demised Premises) caused as a result of such removal.
<PAGE>
21.25 Exhibits. The exhibits listed below and attached to this Sublease
are incorporated in this Sublease by reference:
EXHIBIT "A" - Legal Description of the Demised Premises
EXHIBIT "B" - Ground Rent Component Schedule
EXHIBIT "C" - Term Commencement Agreement
EXHIBIT "D" - Memorandum of Term Commencement Agreement
EXHIBIT "E" - Insurance Required During Construction
IN WITNESS WHEREOF, Landlord and Tenant have caused this Sublease to be
executed and sealed as of the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___.
____________________________________________
Witness:
_______________________________ By:_________________________________________
Name:____________________________________
Title:___________________________________
Dated this ________ day LANDLORD:
of _______________, 19___.
BOSTON CHICKEN, INC.,
a Delaware corporation
Witness:
_______________________________ By:_________________________________________
Name:____________________________________
_______________________________ Title:___________________________________
<PAGE>
EXHIBIT "A"
[Attach Legal Description]
<PAGE>
EXHIBIT "B"
(Ground Rent Component Schedule)
Primary Term Annually Monthly
- ------------ -------- -------
Lease Year to
------- ------- -------------- -------------
Lease Year to
------- ------- -------------- -------------
Lease Year to
------- ------- -------------- -------------
Renewal Term Annually Monthly
- ------------ -------- -------
Lease Year to
------- ------- -------------- -------------
Lease Year to
------- ------- -------------- -------------
<PAGE>
EXHIBIT "C"
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT is made and entered into as of the ____ day of __________,
19___, by and between BOSTON CHICKEN, INC., a Delaware corporation ("Landlord"),
and ________________________________, a __________ corporation ("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord and Tenant have entered into a certain Franchise Sublease
dated __________________________, 19____ (the "Sublease") for a Boston
Chicken/Market Unit located in __________________, _________________ County,
___________; and
WHEREAS, Landlord and Tenant desire to enter into this Agreement to
confirm the Commencement Date, the Expiration Date, the Renewal Term, Base
Annual Rent and other matters set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:
22 Defined Terms. All capitalized terms used in this Agreement but not
defined in this Agreement shall have the meanings given to such terms under the
Sublease.
23 Confirmation of Term and Rent. Landlord and Tenant each acknowledge,
agree and confirm the following:
23.1 The Commencement Date is _________________, 19____;
23.2 The Expiration Date is _________________, 20____;
23.3 Tenant first opened the Demised Premises for business to the
public on _________________, 19____;
23.4 Tenant has ______ (__) options to renew the Sublease for
_______ (__) Renewal Terms of five (5) years each;
23.5 The Demised Premises contains __________ square feet of space;
23.6 Base Annual Rent (consisting of finally determined Building
Rent, Ground Rent and Real Estate Fee) under the Sublease shall be as
follows:
<TABLE>
<CAPTION>
Period Base Annual Rent Monthly Installment
------ ---------------- -------------------
<S> <C> <C>
___/___/___ - ___/___/___ $____________ $_______________________________
___/___/___ - ___/___/___ $____________ $_______________________________
___/___/___ - ___/___/___ $____________ $_______________________________
Renewal Term $____________ $_______________________________
</TABLE>
23.7 All Rent, including Base Annual Rent, Percentage Rent, Real
Estate Taxes and Impositions, if any, and all other charges, costs, rents and
assessments set forth in the Master Lease became payable on _________________
_________, _______________.
24 Conclusive Evidence. For purposes of the Sublease, this Agreement
shall be conclusive evidence of the information contained in this Agreement.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___.
____________________________
Witness:
______________________________ By:______________________________
Name:____________________________
______________________________ Title:____________________________
Dated this ________ day LANDLORD:
of _______________, 19___.
BOSTON CHICKEN, INC., a Delaware corporation
Witness:
______________________________ By:______________________________
Name:____________________________
______________________________ Title:____________________________
<PAGE>
EXHIBIT "D"
THIS DOCUMENT PREPARED BY
AND AFTER RECORDING RETURN TO:
Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, CO 80401-4086
Attention: Real Estate Services Department LOCATION:
STORE NUMBER:
EXHIBIT "D"
-----------
MEMORANDUM OF TERM COMMENCEMENT AGREEMENT
-----------------------------------------
THIS AGREEMENT is made and entered into as of the ____ day of
__________, 19___, by and between BOSTON CHICKEN, INC., a Delaware corporation
("Landlord"), and ________________________________, a __________ corporation
("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord and Tenant have entered into a certain Franchise
Sublease dated __________________________, 19____ (the "Sublease") for a Boston
Chicken/Market Unit located in __________, ___________ County, ___________, and
legally described on Exhibit A attached hereto and made a part hereof; and
WHEREAS, a Memorandum of Franchise Sublease was recorded with the
County Recorder of _______ County, _______, as ______ Document _________; and
WHEREAS, Landlord and Tenant desire to enter into this Agreement to
confirm the Commencement Date, the Expiration Date, the Renewal Term and other
matters set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant
hereby agree as follows:
25 Defined Terms. All capitalized terms used in this Agreement but not
defined in this Agreement shall have the meanings given to such terms under the
Sublease.
26 Confirmation of Term and Rent. Landlord and Tenant each
acknowledge, agree and confirm the following:
.1 The Commencement Date is _________________, 19____;
.2 The Expiration Date is _________________, 20____;
.3 Tenant first opened the Demised Premises for business to the
public on _________________, 19____;
.4 Tenant has ________ (__) options to renew the Sublease for
________ (__) Renewal Terms of five (5) years each;
.5 The Demised Premises contains __________ square feet of space.
27 Conclusive Evidence. For purposes of the Sublease, this Agreement
shall be conclusive evidence of the information contained in this Agreement.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___. ____________________________
Witness:
<PAGE>
By:
- --------------------------------- -----------------------------------
Name:
------------------------------
Title:
- --------------------------------- -----------------------------
Dated this _______day LANDLORD:
of___________, 19____.
BOSTON CHICKEN, INC., a Delaware
corporation
Witness:
By:
- --------------------------------- -----------------------------------
Name:
------------------------------
Title:
- --------------------------------- -----------------------------
<PAGE>
STATE OF COLORADO )
)
COUNTY OF JEFFERSON )
Personally appeared before me, a Notary Public in and for the above County
and State, _________________________________, known personally by me and
acknowledged by me to be on the date of execution, _________________________ of
BOSTON CHICKEN, INC., a Delaware corporation, and he/she executed the foregoing
for and on behalf of said Corporation by authority of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of _____________
19____.
------------------------------
Notary Public
My Commission Expires:
STATE OF ___________________________ )
)
COUNTY OF ___________ )
Personally appeared before me, a Notary Public in and for the above County
and State, __________________________________, known personally by me and
acknowledged by me to be on the date of execution, the ___________________ of
____________________, a _______________ corporation, and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of _____________
19___.
------------------------------
Notary Public
My Commission Expires:
<PAGE>
EXHIBIT "E"
INSURANCE REQUIRED DURING CONSTRUCTION
--------------------------------------
In addition to any insurance which may be required under the Master
Lease, Subtenant shall secure, pay for and maintain or cause Subtenant's
contractors to secure, pay for and maintain during construction of the following
insurance coverages:
27.1 Commercial General Liability Insurance with a combined single limit
of not less than One Million Dollars ($1,000,000.00) per occurrence insuring
against bodily injury, death or property damage occurring at or about the
Demised Premises. The Commercial General Liability Insurance shall name
Subtenant and Landlord and Landlord's directors, officers, shareholders,
employees and agents as additional insureds and shall include all major
divisions of coverage and shall be written on a comprehensive basis including,
without limitation, the following:
(a) Premises/Operations (including XCU coverage as applicable);
(b) Independent Contractors Protective;
(c) Products and Completed Operations (which shall be kept in effect for
two (2) years after completion of construction);
(d) Personal Injury Liability (with Employment Exclusion deleted);
(e) Blanket Contractual Liability (which shall include the indemnity
contained in Section 14.3 of the Lease); and
(f) Broad Form Property Damage.
Any aggregate limit under the contractor's liability insurance shall by
endorsement apply to this project separately. Subtenant acknowledges that
Landlord's liability insurance shall be excess of the liability insurance
required hereunder.
27.2 Commercial Automobile Liability Insurance insuring all owned, non-
owned and hired vehicles with a combined single limit of not less than One
Million Dollars ($1,000,000.00) per occurrence.
27.3 Worker's Compensation Insurance with limits as required by statute
and Employers' Liability Insurance with coverage B limits not less than
$300,000.00 each accident, $300,000.00 disease - each employee and $500,000.00
disease - policy limit.
27.4 "All Risk" Builder's Risk Insurance insuring the interest of Master
Landlord, Landlord, Subtenant and Subtenant's Contractor's in the Demised
Premises against the perils of fire and extended coverage and physical loss or
damage including, without duplication of coverage, theft, vandalism and
malicious mischief, to the full insurable value of the Demised Premises. If
materials are stored off the Demised Premises or in transit to the Demised
Premises and are not covered under said "all-risk" builder's risk insurance,
then Subtenant shall secure and maintain similar property insurance on such
materials. Any loss insured under said "all-risk" builder's risk insurance is
to be adjusted by Landlord and made payable to Landlord as trustee for the
insureds as their interests may appear.
-1-
<PAGE>
EXHIBIT M
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
FRANCHISE LEASE
---------------
M-1
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
FRANCHISE LEASE
BC REAL ESTATE INVESTMENTS, INC.
LANDLORD
AND
___________________________________
TENANT
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1 SCHEDULE OF BASIC DATA................................................. 1
1.1 Landlord.......................................................... 1
1.2 Landlord's Address................................................ 1
1.3 Tenant............................................................ 1
1.4 Tenant's Address.................................................. 1
1.5 Franchisor........................................................ 1
1.6 Franchisor's Address.............................................. 1
1.7 Street Address of
the Demised Premises.............................................. 1
1.8 Base Annual Rent.................................................. 2
1.9 Landlord's Allowance.............................................. 2
1.10 Date for Commencement
of Construction................................................... 2
1.11 Date for Completion
of Construction................................................... 2
1.12 Guarantor......................................................... 2
2 SCHEDULE OF DEFINED TERMS.............................................. 2
2.1 Boston Market Unit................................................ 2
2.2 Building.......................................................... 2
2.3 Commencement Date................................................. 2
2.4 Default Rate...................................................... 3
2.5 Delivery Date..................................................... 3
2.6 Demised Premises.................................................. 3
2.7 Escrowee.......................................................... 3
2.8 Expiration Date................................................... 3
2.9 Force Majeure Delay............................................... 3
2.10 Force Majeure Event............................................... 3
2.11 Franchise Agreement............................................... 3
2.12 Ground Lease...................................................... 3
2.13 Ground Lessor..................................................... 4
2.14 Impositions....................................................... 4
2.15 Land.............................................................. 4
2.16 Landlord's Property Insurance..................................... 4
2.17 Lease Year........................................................ 4
2.18 Mortgage.......................................................... 4
2.19 Mortgagee......................................................... 4
2.20 Primary Term...................................................... 4
</TABLE>
i
<PAGE>
2.21 Real Estate Taxes ........................................... 4
2.22 Renewal Term ................................................ 4
2.23 Rent ........................................................ 4
2.24 Tenant's Property ........................................... 4
2.25 Tenant's Work ............................................... 4
2.26 Term ........................................................ 4
2.27 Workletter .................................................. 5
3 THE DEMISE ......................................................... 5
3.1 The Demise .................................................. 5
3.2 Appurtenant Rights .......................................... 5
3.3 Acquisition of Title ........................................ 5
4 TERM ............................................................... 5
4.1 Primary Term ................................................ 5
4.2 Renewal Term ................................................ 5
4.3 Term Commencement Agreement ................................. 6
5 USE ................................................................ 6
5.1 Permitted Use ............................................... 6
5.2 Continuous Use and Operation ................................ 7
6 CONDITION OF PREMISES AND ORIGINAL CONSTRUCTION .................... 7
6.1 Condition of the Demised Premises ........................... 7
6.2 Construction of Building .................................... 7
6.3 Construction Escrow ......................................... 8
7 PAYMENT OF RENT .................................................... 8
7.1 Base Annual Rent ............................................ 8
7.2 Place for Payment of Rent ................................... 9
7.3 Late Rent ................................................... 9
7.4 Net Lease ................................................... 9
8 TAXES AND OTHER IMPOSITIONS ........................................ 10
8.1 Real Estate Taxes and Impositions ........................... 10
8.2 Payment of Real Estate Taxes ................................ 10
8.3 Monthly Payments of Real Estate Taxes ....................... 11
8.4 Reductions in Real Estate Taxes ............................. 11
8.5 Personal Property Taxes ..................................... 12
9 REPAIRS AND ALTERATIONS ............................................ 12
9.1 Repairs and Maintenance ..................................... 12
ii
<PAGE>
9.2 Alterations ................................................. 13
9.3 Liens ....................................................... 14
10 LAWS AND ORDINANCES ................................................ 14
10.1 Compliance with Laws and Ordinances ......................... 14
10.2 Maintain Permits ............................................ 14
10.3 Unpermitted Uses ............................................ 14
11 ENVIRONMENTAL MATTERS .............................................. 15
11.1 Hazardous Substances ........................................ 15
11.2 No Violation of Environmental Laws .......................... 15
11.3 Compliance with Environmental Laws .......................... 15
11.4 Indemnity and Release ....................................... 16
12 SIGNAGE ............................................................ 17
12.1 Approved Signage ............................................ 17
12.2 Sign Approvals .............................................. 17
12.3 Grand Opening ............................................... 17
13 SERVICES ........................................................... 17
13.1 Utility Services ............................................ 17
13.2 Garbage ..................................................... 17
13.3 Interruption of Services .................................... 18
13.4 Electrical Equipment ........................................ 18
14 INSURANCE .......................................................... 18
14.1 Landlord's Insurance ........................................ 18
14.2 Tenant's Insurance .......................................... 19
14.3 Waiver of Subrogation ....................................... 19
14.4 Indemnification ............................................. 20
14.5 Demised Premises Security ................................... 20
15 DAMAGE TO DEMISED PREMISES ......................................... 20
15.1 Notice of Damage ............................................ 20
15.2 Tenant's Obligation to Rebuild .............................. 21
15.3 Restoration Proceeds ........................................ 22
15.4 No Abatement of Rent ........................................ 22
16 EMINENT DOMAIN ..................................................... 22
16.1 Landlord's Right to Terminate Lease ......................... 22
16.2 Proration of Rent ........................................... 23
16.3 Restoration of Demised Premises ............................. 23
iii
<PAGE>
16.4 Condemnation Award .......................................... 23
17 ASSIGNMENT AND SUBLETTING .......................................... 23
17.1 Consent Required ............................................ 23
17.2 Request for Consent ......................................... 24
17.3 Excess Consideration ........................................ 25
17.4 Tenant Financing ............................................ 25
18 MORTGAGEE AND GROUND LESSOR PROTECTION ............................. 25
18.1 Subordination and Attornment ................................ 25
18.2 Right to Cure Landlord Defaults ............................. 26
19 ACCESS TO PREMISES ................................................. 26
20 DEFAULTS BY TENANT ................................................. 27
20.1 Events of Default ........................................... 27
20.2 Landlord Remedies ........................................... 28
20.3 Landlord's Right to Perform Tenant's Obligations ............ 29
20.4 No Waiver ................................................... 29
20.5 Remedies Cumulative ......................................... 30
20.6 Attorneys' Fees ............................................. 30
20.7 Bankruptcy or Insolvency .................................... 30
21 DEFAULTS BY LANDLORD ............................................... 31
22 SURRENDER OF PREMISES .............................................. 32
22.1 Surrender ................................................... 32
22.2 Tenant's Property ........................................... 32
22.3 Holding Over ................................................ 33
23 COLLATERAL ASSIGNMENT AND FRANCHISE AGREEMENT ...................... 33
23.1 Collateral Assignment ....................................... 33
23.2 Landlord's Consent to Collateral Assignments ................ 33
23.3 Franchise Agreement ......................................... 34
24 MISCELLANEOUS ...................................................... 35
24.1 Notices ..................................................... 35
24.2 Successors and Assigns ...................................... 35
24.3 Force Majeure Events ........................................ 35
24.4 Landlord and Tenant ......................................... 35
24.5 Quiet Enjoyment ............................................. 35
24.6 Rules and Regulations ....................................... 36
iv
<PAGE>
24.7 Estoppel Certificate ........................................ 36
24.8 Memorandum of Lease ......................................... 37
24.9 Conflict Between Lease and Franchise Agreement .............. 37
24.10 Assignment by Landlord ...................................... 37
24.11 Limitation of Landlord's Liability .......................... 37
24.12 Severability ................................................ 37
24.13 Governing Law and Venue ..................................... 37
24.14 Waiver of Trial by Jury ..................................... 38
24.15 Brokers ..................................................... 38
24.16 Survival .................................................... 38
24.17 Time is of the Essence ...................................... 38
24.18 Number and Gender ........................................... 38
24.19 Counterparts ................................................ 38
24.20 Captions and Headings ....................................... 38
24.21 Construction ................................................ 39
24.22 Trademarks .................................................. 39
24.23 Entire Agreement ............................................ 39
24.24 Satellite Dish Installation ................................. 39
24.25 Guaranty .................................................... 39
24.26 Exhibits .................................................... 40
EXHIBITS
EXHIBIT "A" - Legal Description of the Demised Premises
EXHIBIT "B" - Workletter Agreement
EXHIBIT "C" - Term Commencement Agreement
EXHIBIT "D" - Memorandum of Term Commencement Agreement
EXHIBIT "E" - Certificate of Substantial Completion
EXHIBIT "F" - Escrow Instructions
EXHIBIT "G" - Insurance Required During Construction
EXHIBIT "H" - Collateral Assignment of Lease
EXHIBIT "I" - Memorandum of Lease
EXHIBIT "J" - Guaranty of Franchise Lease
v
<PAGE>
FRANCHISE LEASE
---------------
THIS LEASE is made and entered into as of the ____ day of _____________,
19___, by and between BC REAL ESTATE INVESTMENTS, INC., a Delaware corporation
("Landlord"), and _________________________, a _____________ corporation
("Tenant").
ARTICLE 1
---------
SCHEDULE OF BASIC DATA
----------------------
The following sets forth basic data referred to in this Lease, and where
appropriate, constitutes definitions of the terms listed below:
1.1 Landlord: BC Real Estate Investments, Inc., a Delaware
corporation
1.2 Landlord's Address: c/o Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attention: Real Estate Services Department
1.3 Tenant: ____________________, a __________
corporation
1.4 Tenant's Address: ___________________________________________
___________________________________________
___________________________________________
___________________________________________
1.5 Franchisor: Boston Chicken, Inc., a Delaware corporation,
its successors and assigns
1.6 Franchisor's Address: 14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attention: Real Estate Services Department
1.7 Street Address of
the Demised Premises: ___________________________________________
___________________________________________
<PAGE>
1.8 Base Annual Rent: For the following Lease Years during the Term, the
following amounts per year payable in the following monthly installments:
Lease Year Base Annual Rent Monthly Installment
---------- ---------------- -------------------
(a) 1-5 $____________ $______________
(b) 6-10 $____________ $______________
(c) 11-15 $____________ $______________
(d) 16-20 (Renewal Term) $____________ $______________
1.9 Landlord's Allowance: _______________________________Dollars
($_________________)
1.10 Date for Commencement
of Construction: Within __________ (___) days after the
Delivery Date.
1.11 Date for Completion
of Construction: Within __________ (___) days after the
Delivery Date.
1.12 Guarantor: ______________________________________
ARTICLE 2
---------
SCHEDULE OF DEFINED TERMS
-------------------------
For purposes of this Lease, the following terms shall have the meanings
given to such terms in this Article 2:
2.1 Boston Market Unit: a food service business that (i) offers products
for consumer consumption through, among other things, on-premises dining and
carry-out dining, (ii) operates using Franchisor's system and trademarks, and
(iii) is operated by Tenant pursuant to the Franchise Agreement, all as more
particularly defined in the Franchise Agreement.
2.2 Building: the building constructed or to be constructed on the Land.
2.3 Commencement Date: the earlier to occur of (i) the date on which
Tenant first opens the Demised Premises for business to the public or (ii) the
date which is two (2) calendar months after the Delivery Date; provided,
however, if the Demised Premises are open for
2
<PAGE>
business to the public on the Delivery Date, then the Commencement Date shall be
the Delivery Date.
2.4 Default Rate: the lesser of (i) a rate of interest per annum equal
to three (3) percentage points above the prime rate as published in the eastern
edition of the Wall Street Journal, or a comparable newspaper if the Wall Street
Journal shall not publish the prime rate during such period, or (ii) the highest
rate of interest authorized by law in the jurisdiction in which the Demised
Premises are located.
2.5 Delivery Date: the date on which Landlord delivers possession of
the Demised Premises to Tenant.
2.6 Demised Premises: the Land and the Building.
2.7 Escrowee: Chicago Title and Trust Company, 171 North Clark Street,
Chicago, Illinois 60601 or such other escrow trustee as may be selected by
Landlord from time to time.
2.8 Expiration Date: the date which is the day before the fifteenth
(15th) anniversary of the Franchise Agreement.
2.9 Force Majeure Delay: the period of time that either Landlord or
Tenant is delayed, hindered in or prevented from performing its obligations
hereunder as the result of a Force Majeure Event, provided, however, that (i)
any extension of time for a Force Majeure Delay shall be conditioned upon the
party seeking an extension of time delivering written notice of such Force
Majeure Delay to the other party within ten (10) days after the discovery of the
Force Majeure Delay, (ii) the maximum period of time which Landlord or Tenant
may delay any act or performance of work due to a Force Majeure Delay shall be
sixty (60) days, and (iii) a Force Majeure Delay shall not include delays
resulting from the failure to perform for financial reasons.
2.10 Force Majeure Event: strikes, lockouts, labor troubles, failure of
power, riots, insurrection, war, acts of God, and other reasons of like nature
not the fault of the party delayed in performing work or doing acts.
2.11 Franchise Agreement: that certain Franchise Agreement which
Franchisor and Tenant have entered into or will enter into under which Tenant
has been or will be granted a franchise to own and operate a Boston Market Unit
from the Demised Premises and all documents delivered in connection therewith,
together with all renewals, amendments and replacements.
2.12 Ground Lease: any ground lease of the Land or any other lease
entered into by Landlord affecting the Demised Premises as part of a so-called
"sale/leaseback" transaction.
3
<PAGE>
2.13 Ground Lessor: the landlord under a Ground Lease.
2.14 Impositions: as defined in Section 8.1.
2.15 Land: the land legally described on Exhibit "A" attached hereto and
made a part hereof.
2.16 Landlord's Property Insurance: as defined in Section 14.1.
2.17 Lease Year: for the Primary Term, the twelve (12) month period
commencing on the Commencement Date and each succeeding twelve (12) month period
during the Primary Term (provided, however, the fifteenth (15th) Lease Year
shall be extended or shortened, if necessary, in order for the fifteenth (15th)
Lease Year to expire on the Expiration Date), and for the Renewal Term, the
twelve (12) month period commencing on the day following the Expiration Date and
each succeeding twelve (12) month period during the Renewal Term.
2.18 Mortgage: any mortgage or trust deed encumbering the Demised
Premises.
2.19 Mortgagee: the mortgagee under any mortgage or the beneficiary
under any trust deed encumbering the Demised Premises.
2.20 Primary Term: the period of time commencing on the Commencement
Date and ending on the Expiration Date unless sooner terminated as provided in
this Lease.
2.21 Real Estate Taxes: as defined in Section 8.1.
2.22 Renewal Term: the period of time commencing on the day following
the Expiration Date and ending on the fifth (5th) anniversary of the Expiration
Date unless sooner terminated as provided in this Lease.
2.23 Rent: Base Annual Rent and all other charges, costs and sums
required to be paid by Tenant under this Lease, including, without limitation,
Real Estate Taxes, Impositions and Landlord's Property Insurance.
2.24 Tenant's Property: as defined in Section 22.2.
2.25 Tenant's Work: the tenant improvement work to be performed by
Tenant under the Workletter in accordance with plans and specifications approved
by Landlord and Franchisor.
2.26 Term: the Primary Term, and if Tenant exercises its option to renew
this Lease for the Renewal Term, the Renewal Term.
4
<PAGE>
2.27 Workletter: the Workletter Agreement attached hereto and made a
part hereof as Exhibit "B".
ARTICLE 3
---------
THE DEMISE
----------
3.1 The Demise. Landlord, for and in consideration of the covenants and
agreements hereinafter set forth to be kept and performed by both parties, does
hereby demise and lease the Demised Premises to Tenant and Tenant hereby accepts
such demise and leases the Demised Premises from Landlord for the Term.
3.2 Appurtenant Rights. Landlord also grants to Tenant and to Tenant's
agents, employees and customers the right to use all easements, rights and
privileges appurtenant to the Demised Premises, subject to the restrictions and
limitations set forth in such easements, rights and restrictions, including,
without limitation, the non-exclusive right, in common with Landlord and those
to whom Landlord may grant such rights, to use the driveways, roads, alleys and
other means of ingress and egress to and from the Demised Premises.
3.3 Acquisition of Title. If Landlord has not acquired title to the
Demised Premises as of the date of this Lease, this Lease shall be subject to
Landlord having acquired title to the Demised Premises. If Landlord has not
acquired title to the Demised Premises within twelve (12) months after the date
of this Lease, Landlord may terminate this Lease by written notice to Tenant.
ARTICLE 4
---------
TERM
----
4.1 Primary Term. The Primary Term shall begin on the Commencement Date
and shall end on the Expiration Date. Notwithstanding the foregoing, if Tenant
and Franchisor have not entered into a Franchise Agreement on or before the
Commencement Date, Landlord may terminate this Lease by written notice given to
Tenant.
4.2 Renewal Term. Tenant shall have the option to renew this Lease (the
"Renewal Option") for the Renewal Term on the terms and conditions set forth in
this Section 4.2; provided, however, the Renewal Option shall not be made
available to Tenant unless (A) there is no Event of Default under this Lease at
the time of the exercise of the Renewal Option or at the commencement of the
Renewal Term and (B) Tenant obtains a successor franchise from Franchisor to
operate a Boston Market Unit from the Demised Premises during the Renewal
5
<PAGE>
Term. The exercise of Renewal Option shall be automatic and the parties shall be
bound by this Lease during the Renewal Term unless (i) Tenant gives Landlord
notice, at least nine (9) months prior to the Expiration Date, that Tenant does
not intend to exercise the Renewal Option or (ii) the Renewal Option is not made
available to Tenant or is rendered null and void on or before the expiration of
the Primary Term pursuant to this Section 4.2, in either of which events the
Term shall expire on the Expiration Date, unless sooner terminated as provided
in this Lease. During the Renewal Term, the Demised Premises shall be leased on
the same terms and conditions provided in this Lease for the Primary Term,
except that Landlord shall have no obligation to pay Landlord's Allowance and
Tenant shall pay Base Annual Rent during the Renewal Term at an annual rate
equal to that specified in Section 1.8(d). The Renewal Option shall
automatically expire and become null and void upon the first to occur of the
following: (i) the termination of this Lease or Tenant's right to possession of
the Demised Premises; (ii) the assignment of this Lease or the subletting of the
Demised Premises by Tenant, in whole or in part (excluding, however, any
assignment or sublease for which Landlord's consent is not required and the
collateral assignment of this Lease to Franchisor pursuant to Section 23.1),
(iii) the recapture by Landlord of all or any part of the Demised Premises
pursuant to this Lease, (iv) the failure of Tenant to timely or properly
exercise the Renewal Option, or (v) the termination or expiration of the term of
the Franchise Agreement.
4.3 Term Commencement Agreement. Landlord and Tenant agree to execute
(i) a Term Commencement Agreement in form substantially similar to Exhibit "C"
attached hereto and (ii) a Memorandum of Term Commencement Agreement in form
substantially similar to Exhibit "D" attached hereto. The Term Commencement
Agreement shall set forth, among other things, the Commencement Date, the
Expiration Date and the Base Annual Rent. The Memorandum of Term Commencement
Agreement shall contain the same information as the Term Commencement Agreement
except the Base Annual Rent shall be omitted therefrom. The Term Commencement
Agreement and the Memorandum of Term Commencement Agreement shall be conclusive
evidence of the information contained therein. The Term Commencement Agreement
shall not be recorded by either party but the Memorandum of Term Commencement
Agreement may be recorded by either party.
ARTICLE 5
---------
USE
---
5.1 Permitted Use. The Demised Premises shall be used and occupied
solely for the sale of retail prepared foods permitted or required to be
prepared and sold by Tenant from time to time under the Franchise Agreement,
including, but not limited to, chicken and chicken products, pasta products, all
types of pot pies, turkey, ham, meatloaf and other items customarily found in a
Boston Market Unit and for no other purpose.
6
<PAGE>
5.2 Continuous Use and Operation. Tenant shall operate a Boston Market
Unit from the entire Demised Premises continuously at all times during the Term
in accordance with the uses permitted in Section 5.1. Tenant shall operate the
Demised Premises in a first class manner in strict conformity with the
requirements of the Franchise Agreement. Tenant's business at the Demised
Premises shall be operated under the trade name required by the Franchise
Agreement, and Tenant shall not change this trade name without the prior written
consent of Franchisor.
ARTICLE 6
---------
CONDITION OF PREMISES AND ORIGINAL CONSTRUCTION
-----------------------------------------------
6.1 Condition of the Demised Premises. Landlord shall tender possession
of the Demised Premises to Tenant on the Delivery Date. Tenant acknowledges that
Tenant has had full opportunity to investigate and inspect the Demised Premises,
including, without limitation, the surface and subsurface soil conditions of the
Land and physical condition of all improvements located on the Demised Premises,
the environmental condition of the Demised Premises, the availability of
utilities at the Demised Premises, the availability of access to the Demised
Premises, the zoning of the Demised Premises and the availability of permits for
Tenant's use of the Demised Premises. Consequently, Tenant accepts the Demised
Premises in their "AS-IS" condition with all faults. Landlord makes no
representation or warranty, whether express or implied, as to the fitness of the
Demised Premises for any particular purpose or as to the suitability, success or
profitability of the Demised Premises as a Boston Market Unit, and to the
fullest extent permitted by law, Tenant releases Landlord and anyone claiming
by, through or under Landlord from any loss, liability, injury, damage, legal
responsibility or loss of economic opportunity arising from or relating to the
existing condition or location of the Demised Premises, except to the extent
such legal responsibility arises out of the negligence or intentional misconduct
of Landlord.
6.2 Construction of Building. Tenant shall, at Tenant's sole cost and
expense (with the exception of the payment of Landlord's Allowance pursuant to
Section 6.3), construct Tenant's Work in accordance with the terms, provisions
and conditions set forth in the Workletter and the Franchise Agreement, in a
good and workmanlike manner and in compliance with all applicable laws, codes,
ordinances, rules and regulations. Tenant's Work shall include, without
limitation, all work required to construct a new Building or remodel the
existing Building and all fixtures, furnishings and equipment required for
operation of the Demised Premises as a Boston Market Unit. Subject to the terms
and conditions set forth in the Workletter, Tenant shall commence construction
of Tenant's Work on or before the date set forth in Section 1.10 and shall
achieve Substantial Completion (as hereinafter defined) of Tenant's Work,
subject to Force Majeure Delays, on or before the date set forth in Section
1.11. Tenant shall have achieved "Substantial Completion" of Tenant's Work when
Tenant's Work is sufficiently complete in accordance with the Workletter so that
Tenant can occupy and use the
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Demised Premises as a Boston Market Unit, as evidenced by (i) the issuance of a
certificate of substantial completion in the form attached hereto as Exhibit "E"
by Tenant's architect and (ii) confirmation thereof by Landlord's construction
representative. Tenant shall be solely responsible for and have control over
construction means, methods, techniques, sequences and procedures and for
coordinating all portions of Tenant's Work and neither Landlord nor Franchisor
shall have any responsibility therefor. Tenant also shall be solely responsible
for the design of the Building and the preparation of approved plans and
specifications. Tenant acknowledges that any design materials furnished to
Tenant by Landlord or Franchisor and any review by Landlord or Franchisor of
Tenant's plans and specifications shall be for the sole purpose of ensuring a
uniform appearance for all Boston Market Units, and neither Landlord nor
Franchisor shall have any responsibility for nor any liability in connection
with Tenant's plans and specifications.
6.3 Construction Escrow. All payments made by Tenant on account of
Tenant's Work shall be disbursed through a construction escrow established with
Escrowee (the "Escrow") pursuant to escrow instructions in the form of Exhibit
"F" attached hereto (the "Escrow Instructions"). Concurrently with the execution
of this Lease, Tenant shall provide evidence to Landlord that Tenant has funds
sufficient in Landlord's determination to complete construction of Tenant's
Work, less the amount of Landlord's Allowance set forth in Section 1.9.
Disbursements from the Escrow shall be made periodically, but not more
frequently than once per month. Each progress payment shall be in an amount not
to exceed ninety percent (90%) of the costs incurred on account of Tenant's Work
through the date of disbursement for which Tenant has provided the supporting
documentation required by the Workletter and the Escrow Instructions, less the
amount of prior disbursements, if any. After (i) Tenant has achieved Substantial
Completion of Tenant's Work; (ii) Tenant has occupied the Demised Premises and
opened the Demised Premises for business to the public and delivered to Landlord
copies of the Permits (as defined in Section 10.2); (iii) Escrowee has issued or
is prepared to issue the final date down endorsement to Landlord's title
insurance policy, as required by the Escrow Instructions; and (iv) Tenant has
provided the supporting documentation required by the Workletter and the Escrow
Instructions, Landlord shall deposit Landlord's Allowance into the Escrow for
disbursement pursuant to the Escrow Instructions and final disbursement shall be
made from the Escrow.
ARTICLE 7
---------
PAYMENT OF RENT
---------------
7.1 Base Annual Rent. During the Term, Tenant shall pay to Landlord,
for the use and occupancy of the Demised Premises, Base Annual Rent in the
annual amounts set forth in Section 1.8. Tenant shall pay Base Annual Rent to
Landlord in U.S. Dollars, in advance, in monthly installments as set forth in
Section 1.8, on the Commencement Date, and on the first
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day of each calendar month of the Term. If the Commencement Date is other than
the first day of a month, then the Base Annual Rent for the period from the
Commencement Date until the first day of the month next following shall be
prorated on a per diem basis and paid on the Commencement Date. Notwithstanding
anything to the contrary contained in this Lease, the increases in Base Annual
Rent scheduled to occur at the commencement of the sixth, eleventh and sixteenth
Lease Years shall (i) commence on the first day of the calendar months in which
the sixth, eleventh and sixteenth Lease Years, respectively, commence if the
sixth, eleventh and sixteenth Lease Years commence on or before the fifteenth
day of a calendar month, and (ii) commence on the first day of the calendar
months following the calendar months in which the sixth, eleventh and sixteenth
Lease Years, respectively, commence if the sixth, eleventh and sixteenth Lease
Years commence on or following the sixteenth day of a calendar month.
7.2 Place for Payment of Rent. All Rent due under this Lease shall be
paid by checks payable to the order of Landlord, which checks shall be mailed or
delivered to Landlord at Landlord's Address as set forth in Section 1.2 or in
such other manner or at such other place as Landlord may from time to time
designate to Tenant. If Landlord is maintaining Tenant's books and records,
Landlord may, at Landlord's option, deduct the amount of Rent owed by Tenant to
Landlord from Tenant's account with Landlord, and Landlord may, at Landlord's
option, declare Base Annual Rent to be payable in advance, in thirteen (13)
equal installments per year, at the beginning of each of Franchisor's accounting
periods. Rent will be prorated on a per diem basis for partial months or years
within the Term for which Rent is payable. Rent shall be payable without demand,
notice, offset or deduction, except as otherwise specifically provided in this
Lease, and Tenant's covenant to pay Rent shall be independent of every other
covenant in this Lease.
7.3 Late Rent. If Tenant shall fail to pay, when the same is due and
payable, any Rent required to be paid by Tenant under this Lease, such unpaid
amounts shall bear interest from the date when due until the date when paid at
the Default Rate. If any installment of Rent is delinquent by more than fifteen
(15) days, Tenant shall also pay to Landlord a late charge in an amount equal to
five percent (5%) of the amount of such delinquent installment, which late
charge shall be immediately due and payable without notice or demand from
Landlord.
7.4 Net Lease. This Lease is intended to be a triple net "care-free"
lease. Except as expressly set forth herein, all costs and expenses associated
with the Demised Premises, including, without limitation, Real Estate Taxes,
Impositions, Landlord's Property Insurance and repairs and replacements, are to
be borne by Tenant.
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ARTICLE 8
---------
TAXES AND OTHER IMPOSITIONS
---------------------------
8.1 Real Estate Taxes and Impositions. In addition to the Base
Annual Rent, Tenant shall pay as additional Rent all Real Estate Taxes and
Impositions levied or assessed against the Demised Premises at any time during
the Term in accordance with the terms and provisions of this Article 8. For the
purposes of this Lease, the term "Real Estate Taxes" shall include all general
real estate taxes and special assessments, water and sewer rents, transfer taxes
and lease transaction taxes, sales taxes on rents, and other governmental
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen and unforeseen, and each and every installment
thereof which shall or may be levied, assessed, or imposed against, become due
and payable, or become liens upon the Demised Premises, this Lease or the rents
payable by Tenant under this Lease during the Term. Real Estate Taxes shall also
include all costs incurred by Landlord in contesting or negotiating Real Estate
Taxes with governmental authorities, and if determined by Landlord, the cost of
any tax service company engaged by Landlord to handle payments of Real Estate
Taxes levied against the Demised Premises. Nothing contained in this Lease shall
be construed to include any inheritance, estate, succession, gift, franchise,
corporation, income or profit tax or capital levy that is or may be imposed upon
Landlord; provided, however, that, if at any time during the Term the methods of
taxation prevailing at the Commencement Date shall be altered so that in lieu of
or as an addition to the whole or any part of the Real Estate Taxes now levied,
assessed or imposed on real estate as such, there shall be levied, assessed or
imposed (i) a tax on the rents received from the Demised Premises, (ii) a
license fee measured by the rents receivable by Landlord from the Demised
Premises or any portion thereof, or (iii) a tax or license fee imposed upon
Landlord which is otherwise measured by or based in whole or in part upon the
Demised Premises or any portion thereof, then such taxes and fees shall be
included in the computation of Real Estate Taxes as if the amount of such tax or
fee so payable were that due if the Demised Premises were the only property of
Landlord subject thereto. No Real Estate Taxes, assessments, fees or charges
referred to in this Section 8.1 shall be considered as taxes under the
provisions of Section 8.5. For purposes of this Lease, "Impositions" shall mean
all impositions other than Real Estate Taxes which may be assessed against the
Demised Premises or against Landlord with respect to the Demised Premises at any
time during the Term, including, without limitation, common area maintenance
charges, merchants association or marketing fund dues or charges, assessments or
charges payable under any reciprocal easement agreement, business park
development agreement or similar agreement, or charges under any Ground Lease or
Mortgage.
8.2 Payment of Real Estate Taxes. Except as otherwise provided in
this Article 8, all Real Estate Taxes and Impositions shall be paid by Tenant to
Landlord within fifteen (15) days after demand therefor by Landlord. If the
Demised Premises are assessed as a separate and distinct tax parcel, then unless
Landlord delivers to Tenant a written notice requiring Tenant to begin paying
monthly installments to Landlord on account of Real Estate Taxes as provided in
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Section 8.3, Tenant shall pay all Real Estate Taxes accruing against the Demised
Premises during the Term directly to the taxing authority on or before the date
on which such Real Estate Taxes become delinquent and Tenant shall promptly
furnish Landlord with a copy of the paid tax bill or, if not readily available,
other evidence of payment acceptable to Landlord. If the Demised Premises are
assessed as part of a larger tax parcel, then Tenant shall pay a pro rata share
of the Real Estate Taxes assessed against the larger tax parcel based on (x) the
gross square footage of the Land to the gross square footage of all of the land
included in the larger tax parcel (provided, however, if either the Demised
Premises or the remainder of the larger tax parcel is vacant, the Real Estate
Taxes so prorated shall include only that portion based on the land assessment,
and that portion of Real Estate Taxes based on improvements shall be allocated
to the portion of the tax parcel on which the improvements are situated) or (y)
such other reasonable formula as Landlord may determine. If directed by
Landlord, Tenant shall pay Impositions directly to the party collecting such
Impositions on or before the date such Impositions become due and payable, and
Tenant shall promptly furnish to Landlord evidence of payment of such
Impositions.
8.3 Monthly Payments of Real Estate Taxes. During any period of the
Term that the Demised Premises are not assessed as a separate and distinct tax
parcel or if otherwise required by Landlord in Landlord's sole discretion, on
the first day of each month of each calendar year during the Term following
delivery of written notice from Landlord, Tenant shall pay to Landlord one-
twelfth (1/12) of the Real Estate Taxes for the calendar year based upon
Landlord's reasonable estimate thereof. Upon receipt of all tax bills and
assessment bills attributed to the calendar year, Landlord shall furnish Tenant
with a written statement of the actual amount of the Real Estate Taxes for such
year or part thereof together with a copy of such tax bills. If such actual
amount is more than the estimated payments paid to Landlord over such calendar
year, then Tenant shall pay the deficiency to Landlord within thirty (30) days
after the receipt of such statement by Tenant. If such actual amount is less
than the estimated payments made by Tenant over the preceding year, then
Landlord shall reimburse to Tenant the excess within thirty (30) days after the
date Landlord delivers to Tenant such statement. A copy of a tax bill or
assessment bill submitted by Landlord to Tenant shall at all times be sufficient
evidence of the amount of Real Estate Taxes levied or assessed against the
property to which such bill relates.
8.4 Reductions in Real Estate Taxes. In the event that Tenant
desires to seek a reduction in Real Estate Taxes, Tenant, with the prior written
consent of Landlord, which consent shall not be unreasonably withheld, may
initiate and prosecute, at Tenant's sole cost expense, proceedings permitted by
law for the purpose of obtaining an abatement of or otherwise contesting the
validity or amount of Real Estate Taxes assessed or levied against the Demised
Premises. At Landlord's option, Landlord may initiate and prosecute such
proceedings at Tenant's cost and expense. Tenant shall indemnify and save
Landlord harmless from all loss, cost, damage and expense incurred by or to be
incurred by Landlord as a result of such
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proceedings, and Tenant shall, at Landlord's request, escrow or post a bond for
the full amount of Real Estate Taxes claimed pending such proceedings.
8.5 Personal Property Taxes. Tenant shall pay before delinquency all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon its business operation in the Demised Premises as well as upon Tenant's
Property (as hereinafter defined). If any such items of property are assessed
with property of Landlord, then such assessment shall be equitably divided
between Landlord and Tenant to the end that Tenant shall pay only its equitable
portion of such assessment. Landlord shall determine the basis of prorating any
such assessments and such determination shall be binding upon both Landlord and
Tenant. No tax assessments, fees or charges referred to in this paragraph shall
be considered as Real Estate Taxes under the provisions of Section 8.1.
ARTICLE 9
---------
REPAIRS AND ALTERATIONS
-----------------------
9.1 Repairs and Maintenance. Tenant shall, at its sole cost and
expense, put, keep and maintain the entire exterior and interior of the Demised
Premises (both structural and non-structural), specifically including, without
limitation, the maintenance, repair and replacement of (i) the exterior paint,
(ii) the heating, ventilating and air conditioning systems, the mechanical and
electrical systems, and the utilities and plumbing systems serving the Demised
Premises, (iii) the sprinkler mains, if any, (iv) the trash enclosures, and (v)
structural systems including, without limitation, the foundations, roof, roof
membrane, roof covering (including interior ceiling if damaged by leakage),
load-bearing walls, floor slabs and masonry walls. Tenant shall repair, maintain
and replace the interior, non-structural portions of the Building and the
storefront, ceilings, floor coverings and wall coverings, plate glass, doors and
locks in good condition and repair, to the standard specified in the Franchise
Agreement for the condition and appearance of a Boston Market Unit. Tenant
acknowledges the importance placed by Franchisor on maintaining a uniform
approved image for all Boston Market Units. Tenant shall keep, maintain, repair
and replace the fixtures, furnishings, equipment, interior lighting and decor in
good condition and repair. In addition, Tenant shall maintain or cause to be
maintained the parking areas, landscaped areas, sidewalks, driveways, parking
lot lighting and exterior lighting and all signage and awnings located on the
Demised Premises in good condition and repair. Tenant also agrees, at its
expense, to install any upgrades or perform any remodeling required by
Franchisor under the Franchise Agreement. Tenant shall keep the parking lot and
the exterior of the Building illuminated during normal business hours. If Tenant
shall fail to comply with the maintenance, replacement, upgrade or remodeling
obligations required by this Section 9.1 within thirty (30) days after receiving
written notice from Landlord, then Landlord shall have the right to perform such
maintenance, replacement, upgrade or remodeling obligation and the cost thereof
plus an administrative fee of fifteen percent (15%) of the cost thereof
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(together with interest thereon at the Default Rate) shall be considered
additional Rent due Landlord, payable upon written demand by Landlord. Tenant
acknowledges that Landlord shall have no obligation to make or perform any
repairs to, replacements of, upgrades to or remodeling of the Demised Premises.
9.2 Alterations. Tenant shall not make any exterior or structural
alterations in any portion of the Demised Premises, nor any alterations in the
storefront or the exterior of the Demised Premises, nor any upgrades or
remodeling of the Demised Premises, without, in each instance, first obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, all alterations to the Demised
Premises, whether exterior or interior, shall require the prior written consent
of Franchisor, which consent may be granted or withheld by Franchisor in
Franchisor's sole and absolute discretion, and Landlord shall not withhold its
consent to any proposed alterations, upgrades and remodeling approved by
Franchisor provided that the alterations, upgrades and remodeling do not reduce
the value of the Demised Premises. Alterations shall be performed in all cases,
subject to the following requirements:
(a) Tenant shall submit to Landlord and Franchisor for approval
detailed plans and specifications for the proposed alterations, and all
alterations shall be completed strictly in accordance with the plans and
specifications approved by Landlord and Franchisor;
(b) All materials and equipment shall be of good quality;
(c) No alteration shall be undertaken until Tenant shall have procured
and paid for all permits and authorizations of the various governmental
bodies and departments having jurisdiction of the Demised Premises required
to be obtained prior to commencement of construction;
(d) All work done in connection with any alteration shall be done in a
good and workmanlike manner and in compliance with all building and zoning
laws of the place in which the Demised Premises are situated, and with all
laws, ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments and appropriate departments,
commissions, boards and officers thereof and all covenants and restrictions
affecting the Demised Premises;
(e) During the performance of the alterations, Tenant shall maintain
the insurance coverage set forth in Exhibit "G" attached hereto and made a
part hereof;
(f) All alterations other than Tenant's Property, made or installed by
Tenant, shall, upon the expiration of the Term, become the property of
Landlord without payment
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therefor by Landlord, and shall be surrendered to Landlord upon the
expiration of the Term; and
(g) All alterations shall comply with the requirements of the
Franchise Agreement governing the condition and appearance of a Boston
Market Unit, and if Landlord or Franchisor so requires, the alterations
shall comply with the requirements of the Workletter, if any.
9.3 Liens. Tenant shall not permit to be created nor to remain
undischarged any lien, encumbrance or charge arising out of any work or work
claim of any contractor, mechanic, laborer of Tenant or material supplied by a
materialman to Tenant which might be, or become, a lien or encumbrance or charge
upon the Demised Premises. If any lien or notice of lien on account of an
alleged debt of Tenant or any notice of contract by a party engaged by Tenant or
Tenant's contractor to work in the Demised Premises shall be filed against the
Demised Premises, Tenant shall, within thirty (30) days after notice of the
filing thereof, cause the same to be discharged of record by payment, deposit or
bond. Tenant may contest any lien claim or proceeding which Tenant believes is
improper, if Tenant diligently pursues the contest and posts security acceptable
to Landlord, in Landlord's sole discretion, which security may be used by
Landlord to pay the lien in full if the dispute or contest is resolved
unfavorably to Tenant.
ARTICLE 10
----------
LAWS AND ORDINANCES
-------------------
10.1 Compliance with Laws and Ordinances. Tenant, at Tenant's sole cost
and expense, shall comply with all laws, ordinances, orders, rules, codes,
permits and regulations regarding the use and occupancy of the Demised Premises
and the cleanliness, safety and operation thereof, including, without
limitation, any requirements imposed by The Americans with Disabilities Act
which are applicable to the Demised Premises and the improvements thereon and
the conduct of Tenant's business therefrom. Tenant, at Tenant's sole cost and
expense, shall comply with the regulations and requirements of any insurance
underwriter, fire inspection bureau or similar agency with respect to the
Demised Premises.
10.2 Maintain Permits. Tenant shall, at its sole cost and expense,
obtain and keep in full force and effect, and upon request shall deliver to
Landlord copies of, any and all necessary permits, licenses, certificates or
other authorizations (collectively, "Permits") required in connection with the
use, occupancy, operation and management of the Demised Premises and the signs
at the Demised Premises. Tenant shall indemnify and hold harmless Landlord from
and against all claims, liability, damages, loss, costs and expenses (including,
without limitation, reasonable attorneys' fees) in connection therewith. Upon
the expiration or earlier termination of the Term, Tenant shall promptly deliver
to Landlord all Permits which relate to the Demised
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Premises and which were obtained by or issued to Tenant and are then in force,
together with an assignment or conveyance thereof to Landlord, in such form and
substance as Landlord shall reasonably require.
10.3 Unpermitted Uses. Tenant shall not (i) permit any illegal or
immoral practice to be carried on or committed on the Demised Premises; (ii)
make use of or allow the Demised Premises to be used for any purpose that might
invalidate or increase the rate of insurance therefor; (iii) keep or use or
permit to be kept or used on the Demised Premises any flammable fluids, gases,
or explosives without the prior written permission of Landlord except for normal
cleaning products specified by Franchisor; (iv) use the Demised Premises for any
purpose whatsoever which might create a nuisance or which is not in keeping with
the Franchise Agreement; (v) deface or injure the Demised Premises; (vi)
overload the floor or roof; (vii) commit or suffer any waste; (viii) install any
equipment that overloads utility lines, or (ix) commit or permit any act which
may damage the name, reputation or goodwill of Landlord or Franchisor.
ARTICLE 11
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ENVIRONMENTAL MATTERS
---------------------
11.1 Hazardous Substances. The term "Hazardous Substances", as used in
this Article 11, shall include, without limitation, flammables, explosives,
radioactive materials, asbestos, polychlorinated biphenyls (PCBs), chemicals
known to cause cancer or reproductive toxicity, pollutants, contaminants,
hazardous wastes, toxic substances or related materials, petroleum and petroleum
products, and substances declared to be hazardous or toxic under any law or
regulation now or hereafter enacted or promulgated by any governmental
authority.
11.2 No Violation of Environmental Laws. Tenant shall not cause or
permit to occur:
(a) any violation of any federal, state, or local law, ordinance, or
regulation now or hereafter enacted, related to environmental conditions
on, under, or about the Demised Premises, or arising from Tenant's use or
occupancy of the Demised Premises, including, but not limited to, soil and
ground water conditions; or
(b) the use, generation, release, manufacture, refining, production,
processing, storage, or disposal of any Hazardous Substance on, under, or
about the Demised Premises, or the transportation to or from the Demised
Premises of any Hazardous Substance; provided, however, that Tenant may use
and/or store such items which have been approved by Franchisor for use in
the operation of a Boston Market Unit, to the extent such use and/or
storage is in full compliance with all applicable Environmental Laws (as
hereinafter defined).
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11.3 Compliance with Environmental Laws. Tenant shall, at Tenant's
expense:
(a) comply with all laws, statutes, ordinances, rules, regulations and
orders regulating the use, generation, storage, transportation, or disposal
of Hazardous Substances applicable to the Demised Premises (the
"Environmental Laws");
(b) make all submissions to, provide all information required by, and
comply with all requirements of all governmental authorities (the
"Authorities") under the Environmental Laws;
(c) prepare and submit the required plans and all related bonds and
other financial assurances, if any Authority or any third party demands
that a clean-up plan be prepared or that a clean-up be undertaken because
of any deposit, spill, discharge, or other release of Hazardous Substances
that occurs during the Term, at or from the Demised Premises, or which
arises at any time from Tenant's use or occupancy of the Demised Premises;
and Tenant shall carry out all work required by such clean-up plans;
provided however, that if said deposit, spill, discharge or other release
was caused solely by Landlord or Landlord's agents, then Tenant shall not
be required to clean-up said deposit, spill, discharge or other release;
and
(d) promptly provide all information regarding the use, generation,
storage, transportation or disposal of Hazardous Substances that is
requested by Landlord.
If Tenant fails to fulfill any duty imposed under this Section 11.3, within a
reasonable time, Landlord may do so; and in such case, Tenant shall cooperate
with Landlord as Landlord deems necessary or appropriate to determine the
applicability of the Environmental Laws to the Demised Premises and Tenant's use
thereof, and for compliance therewith, and Tenant shall execute all documents
promptly upon Landlord's request. No such action by Landlord and no attempt
made by Landlord to mitigate damages under any Environmental Law shall
constitute a waiver of any of Tenant's obligations under this Section 11.3.
Tenant's obligations and liabilities under this Section 11.3 shall survive the
expiration or termination of this Lease.
11.4 Indemnity and Release. Tenant shall indemnify, defend, and hold
harmless Landlord and Franchisor and their respective officers, directors,
shareholders, employees, representatives, agents and consultants from all fines,
suits, procedures, claims, and actions of every kind and all costs, associated
therewith (including attorneys and consultants fees) arising out of or in any
way connected with any deposit, spill, discharge, or other release of Hazardous
Substances that occurs prior to or during the Term, at or from the Demised
Premises or which migrates to the Demised Premises from other property, or which
arises at any time from Tenant's use or occupancy of the Demised Premises
(except to the extent caused by Landlord or Landlord's agents) or from Tenant's
failure to provide all information, make all submissions, and take all actions
required by all Authorities under the Environmental Laws. Tenant hereby
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releases Landlord and anyone claiming by, through or under Landlord for any
loss, liability, injury or damage arising from or in any way connected with the
presence of Hazardous Substances at the Demised Premises or any violation of any
of the Environmental Laws. Tenant's obligations and liabilities under this
Section 11.4. shall survive the expiration or earlier termination of this Lease.
ARTICLE 12
----------
SIGNAGE
-------
12.1 Approved Signage. Tenant shall not install any signage on the
exterior or interior of the Demised Premises which has not first been approved
in writing by Landlord; provided, however, it is expressly understood and agreed
that Tenant shall, at Tenant's sole cost and expense, subject to applicable
governmental regulations, install maximum allowable signage approved by
Franchisor which is customarily used in connection with the operation of a
Boston Market Unit. Such signage shall comply with the specifications
prescribed therefor by Franchisor.
12.2 Sign Approvals. Landlord shall, at Tenant's sole cost and expense,
fully cooperate with Tenant in filing any required signage application, permit
and/or variance for said signage or with respect to the Demised Premises
generally. Tenant shall, at Tenant's cost and expense, install all upgraded or
remodeled signage in the Demised Premises which Franchisor shall require Tenant
to install under the Franchise Agreement. Tenant shall display, maintain and
clean such signage in a manner which maximizes visibility of the Demised
Premises. Tenant shall keep its exterior and interior signage illuminated
continuously in accordance with standards established by Franchisor.
12.3 Grand Opening. Tenant shall have the right at any time after the
Delivery Date to post "Boston Market Coming Soon" and "Grand Opening" signs on
the windows or exterior of the Demised Premises.
ARTICLE 13
----------
SERVICES
--------
13.1 Utility Services. Tenant, as part of Tenant's Work, shall cause
the necessary mains, conduits and other facilities to be provided to make water,
sewer, gas, telephone and electricity service available to the Demised Premises
in the capacities required to operate a Boston Market Unit. All utility services
described in Section 13.1 shall be separately metered and all costs of
consumption shall be billed directly to Tenant. Tenant shall be solely
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responsible for and shall promptly pay all charges for the use and consumption
of sewer, gas, electricity, water, telephone, data and all other utility
services used within the Demised Premises.
13.2 Garbage. Tenant shall be responsible for obtaining a reputable and
professional service for the collection of refuse and garbage. Tenant shall
arrange for the appropriate storage, pick-up and disposal of grease generated at
the Demised Premises. Tenant shall keep and maintain the Demised Premises in a
clean and sightly manner at all times.
13.3 Interruption of Services. Landlord shall not be liable to Tenant
in damages or otherwise if any utility service is interrupted or terminated
because of necessary repairs, installations, or improvements, or any other
cause, nor shall any such interruption or termination relieve Tenant of the
performance of any of its obligations hereunder; provided, however, if such
interruption or termination continues for five (5) consecutive days and is
caused by the negligence or willful misconduct of Landlord, Base Annual Rent
shall abate from the sixth day until the date on which services are restored.
13.4 Electrical Equipment. Tenant shall not install any equipment which
may exceed the capacity of any utility facilities currently serving the Demised
Premises, and if any equipment installed by Tenant requires additional utility
facilities, Tenant shall install such facilities at Tenant's sole cost and
expense in compliance with all code requirements and plans and specifications
which must be approved in writing by Landlord and Franchisor. In connection with
the installation of any electrical equipment, Tenant shall, at Tenant's own
expense, make from time to time whatever changes are necessary to comply with
Franchisor's requirements and the requirements of the insurance inspectors,
underwriters, government authorities and codes.
ARTICLE 14
----------
INSURANCE
---------
14.1 Landlord's Insurance. During the Term, Landlord shall maintain
"all risk" physical damage insurance, including fire, sprinkler leakage,
malicious mischief, vandalism and other extended coverage perils, insuring
against physical damage to the Demised Premises, including the Building and the
improvements and betterments located on the Demised Premises, but excluding
Tenant's Property, for the full replacement value thereof ("Landlord's Property
Insurance"). Landlord may maintain Landlord's Property Insurance under (i) an
individual policy covering only the Demised Premises, (ii) a blanket policy of
insurance covering the Demised Premises and other properties owned by Landlord,
or (iii) a program of self-insurance. During the Term, Tenant shall reimburse
Landlord for the annual costs for the premiums for
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Landlord's Property Insurance (as reasonably determined by Landlord) within
thirty (30) days after the date Tenant receives Landlord's written request for
such reimbursement.
14.2 Tenant's Insurance. During the Term, Tenant shall maintain the
following insurance coverages:
(a) commercial general liability insurance naming Landlord and Franchisor
as additional insureds with a combined single limit of not less that One Million
Dollars ($1,000,000.00) per occurrence (or such higher limits which Landlord or
Franchisor may reasonably require) insuring against claims for personal injury,
bodily injury, death or property damage including, without limitation, that
occurring on, in or about the Demised Premises and the adjoining streets,
sidewalks, parking lots and passageways, which insurance shall include products
liability coverage and contractual liability coverage insuring the indemnity set
forth in Section 14.4;
(b) "all risk" physical damage insurance, including fire, sprinkler
leakage, malicious mischief, vandalism and other extended coverage perils,
insuring against physical damage to Tenant's Property for the full replacement
value thereof;
(c) business interruption or rent loss insurance in such amounts as shall
be sufficient to pay all Rent due under this Lease for a period of not less than
twelve (12) months; and
(d) such other insurance that Tenant is required to maintain under the
Franchise Agreement.
Prior to the Commencement Date, Tenant shall provide Landlord certificates of
insurance providing evidence that the insurance required to be maintained by
Tenant under this Section 14.2 is in full force and effect. Prior to the
expiration of any insurance coverage, Tenant shall provide Landlord with new
certificates of insurance providing evidence of the renewal of the expiring
insurance coverage. The insurance certificates furnished to Landlord shall
include a provision which requires that thirty (30) days prior written notice to
Landlord be given by the insurance company prior to cancellation, non-renewal,
termination or change in such insurance. The insurance coverage required to be
maintained by Tenant under this Section 14.2 shall be issued by insurance
companies which are reasonably satisfactory to Landlord and Franchisor. No
insurance required to be maintained by Tenant under this Lease shall be made on
a "claims made" basis without the prior written consent of Landlord. Any
aggregate limit under Tenant's liability insurance policy shall by endorsement
apply to the Demised Premises separately.
14.3 Waiver of Subrogation. Each party releases and discharges the other
party and waives all claims for recovery from the other party for any loss or
damage to any of its
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property, including loss of use thereof, which is insured under valid and
collectible insurance policies on the Demised Premises or Tenant's Property or
which is required to be insured under this Lease, and each party shall use good
faith efforts to have any and all physical damage insurance affecting the
Demised Premises or Tenant's Property, as the case may be, endorsed to include a
clause containing the substance and having the same effect as the following:
"This insurance shall not be invalidated should the insured waive in writing
prior to a loss any or all right of recovery against any party for loss
occurring to the property described herein". In addition, each party shall cause
its physical damage insurance policy to include a provision or endorsement by
which the insurer expressly waives all rights of subrogation which such insurers
might have had against the other party.
14.4 Indemnification. Tenant hereby indemnifies Landlord and Franchisor
and shall hold Landlord and Franchisor and their respective officers, directors,
shareholders, employees, representatives, agents and consultants harmless from
and against any and all claims, demands, liabilities, and expenses, including
attorneys' fees and costs, arising (i) from any accident, injury, death, loss or
damage to or of any person(s) or property occurring in, on or about the Demised
Premises, (ii) out of the negligence or willful misconduct of Tenant or its
agents, employees, or contractors, or (iii) from any breach or default by Tenant
of this Lease, except to the extent caused by Landlord's negligence or willful
misconduct. In the event any action or proceeding shall be brought against
Landlord or Franchisor by reason of any such claim, Tenant shall defend Landlord
and Franchisor against such claim at Tenant's sole cost and expense by counsel
reasonably satisfactory to Landlord and Franchisor.
14.5 Demised Premises Security. Tenant assumes full responsibility for
(i) protecting the Demised Premises from theft, robbery and pilferage, (ii)
keeping the Demised Premises secure, and (iii) locking the doors in and to the
Demised Premises. All property belonging to Tenant or any other person in the
Demised Premises shall be there at the risk of Tenant or such other person only.
Landlord, its agent and their respective officers and employees shall not be
liable for damage, theft, or misappropriation thereof.
ARTICLE 15
----------
DAMAGE TO DEMISED PREMISES
--------------------------
15.1 Notice of Damage. If the Building, or any part thereof, shall be
damaged by fire or other casualty, Tenant shall give immediate notice thereof to
Landlord and this Lease shall continue in full force and effect; provided,
however, Landlord may terminate this Lease effective as of the date of the
casualty by written notice given to Tenant within ninety (90) days after the
date of the casualty if (i) fifty percent (50%) or more of the Building is
destroyed or rendered untenantable by fire or other casualty during the last two
(2) years of the Primary Term or during the last two (2) years of the Renewal
Term (based upon the cost to repair and restore the
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Building as compared with the market value of the Building immediately prior to
such fire or other casualty as shown by a certificate of Landlord's architect)
or (ii) the fire or other casualty is not covered in full by Landlord's Property
Insurance, and in either such event Landlord shall retain all proceeds of
Landlord's Property Insurance which are made available as a result of the fire
or other casualty. Notwithstanding the foregoing, Landlord shall have no right
to terminate this Lease under subclause (i) of this Section 15.1 in the event
Tenant exercises its Renewal Option on or before thirty (30) days following such
fire or other casualty. Further, Landlord shall have no right to terminate this
Lease under subclause (ii) of this Section 15.1 in the event that either (a) the
insufficiency of insurance proceeds results from Landlord's failure to maintain
the Landlord's Property Insurance required hereunder, or (b) Tenant agrees, in
writing (herein, "Tenant's Restoration Notice"), that it will pay all excess
costs of restoration over the amount covered by insurance as and when required
under Section 15.2 below, and provided that Tenant furnishes Landlord,
concurrently with Tenant's delivery of the Tenant's Restoration Notice, with
evidence reasonably satisfactory to Landlord assuring Tenant's ability to pay
such excess amounts. Any such Tenant's Restoration Notice, to be effective, must
be delivered to Landlord within five (5) days following Tenant's receipt of
notice (the "Insurance Insufficiency Notice") that the insurance proceeds will
be insufficient to pay the entire cost of the requisite Restoration Work (as
hereinafter defined). Without limitation on the foregoing terms of this Section
15.1, if Landlord delivers an Insurance Sufficiency Notice to Tenant, and if the
insufficiency in insurance coverage is either (A) caused by Landlord's failure
to maintain the Landlord's Property Insurance required hereunder, or (B) in an
amount in excess of the greater of (i) ten percent (10%) of the total estimated
cost to perform the Restoration Work, with such estimate being determined by
Landlord in its good faith judgment, or (ii) Fifty Thousand Dollars ($50,000)
(as such amount may be increased from time to time, as determined by Landlord,
to adjust for inflation following the date of this Lease based upon increases in
the consumer price index or a comparable index selected by Landlord), then, in
either such event, Tenant shall have the right to terminate this Lease by
written notice thereof to Landlord given no later than twenty (20) days
following Landlord's delivery of the Insurance Insufficiency Notice. Tenant's
failure to timely deliver such notice of termination shall be deemed a waiver of
Tenant's termination right under this Section 15.1.
15.2 Tenant's Obligation to Rebuild. Unless Landlord or Tenant
terminates this Lease pursuant to Section 15.1, in case of damage to or
destruction of the Building by fire or otherwise, Tenant shall promptly, at its
sole expense, perform all work to restore, repair, replace and rebuild the
Building as nearly as possible to the condition that the Building was in
immediately prior to such damage or destruction with such changes or alterations
that (i) are approved by Landlord and Franchisor or (ii) may be required to keep
within Franchisor's then current image (the "Restoration Work"). The Restoration
Work shall be performed in accordance with the provisions of this Section 15.2
and the provisions of Section 9.2. All insurance proceeds payable on account of
such damage or destruction shall be applied to the payment of the costs of the
Restoration Work, and subject to the provisions of any Mortgage or Ground Lease,
such proceeds shall be adjusted by Landlord and held by Landlord. If the
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insurance proceeds shall be insufficient to pay the entire costs of the
Restoration Work, Tenant shall deposit with Landlord the excess within thirty
(30) days after the date of the determination of the cost of the Restoration
Work. Landlord may elect, at its option, to deposit the insurance proceeds and
excess funds deposited by Tenant (the "Restoration Proceeds") in a construction
escrow established with Escrowee.
15.3 Restoration Proceeds. The Restoration Proceeds shall be disbursed
to Tenant from time to time, but not more frequently than monthly, in amounts
equal to ninety percent (90%) of the value of labor, materials and equipment
then incorporated into and used in the Restoration Work. Prior to each
disbursement, Tenant shall deliver to Landlord (and Escrowee) a certificate of a
registered architect certifying (i) that the amounts to be paid to Tenant are
payable to Tenant in accordance with the provisions of Section 15.2 and that
such amounts are then due and payable by Tenant or have theretofore been paid by
Tenant; (ii) the progress of the Restoration Work; (iii) that the Restoration
Work has been performed in accordance with the plans and specifications therefor
and all applicable legal requirements and insurance requirements; (iv) that the
sum requested when added to all sums previously paid out under this Section 15.3
for the Restoration Work does not exceed the value of the labor, fixtures,
equipment and material done or installed to the date of such certificate; and
(v) the estimated cost of completing the Restoration Work. With each
certificate, Tenant shall deliver to Landlord (and Escrowee) (A) contractors'
affidavits that the contractor(s) and all of the subcontractors, if any, and
materialmen have been paid in full for work done and materials supplied and paid
for out of the immediately preceding payment, and (B) lien waivers signed by the
contractor, subcontractors and materialmen for all work done or materials
supplied. The ten percent (10%) retainage provided for above shall be paid to
Tenant upon (x) delivery to Landlord (and Escrowee) of a certificate signed by
the architect stating that the Restoration Work has been fully completed in
accordance with the approved plans and specifications therefor and all
applicable legal requirements and insurance requirements, (y) delivery to
Landlord (and Escrowee) of appropriate lien waivers and the final contractor's
affidavit and (z) if requested by Landlord, delivery of title insurance insuring
against mechanic's liens which may arise out of the Restoration Work. Upon
completion of the Restoration Work and delivery of the required lien waivers and
affidavits, Tenant shall be entitled to any remaining Restoration Proceeds.
15.4 No Abatement of Rent. In the event of any such damage or
destruction by fire or other casualty, the provisions of this Lease shall be
unaffected and Tenant shall remain and continue liable for the payment of all
Rent and other charges required hereunder to be paid by Tenant, as though no
such damage or destruction had occurred.
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ARTICLE 16
----------
EMINENT DOMAIN
--------------
16.1 Landlord's Right to Terminate Lease. In the event that any
portion of the Building shall be appropriated or taken under the power of
eminent domain by any public or quasi-public authority, then Landlord, at
Landlord's option, shall have the right to terminate this Lease as of the date
on which possession of the Demised Premises is surrendered to the condemning
authority, and both Landlord and Tenant shall thereupon be released from any
liability thereafter accruing under this Lease. For the purpose of this Article
16, a voluntary sale or conveyance in lieu of condemnation, but under threat of
condemnation shall be deemed an appropriation or taking under the power of
eminent domain.
16.2 Proration of Rent. If this Lease is terminated pursuant to this
Article 16, all items of Rent and other charges for the last month of Tenant's
occupancy shall be prorated and Landlord agrees to refund to Tenant any Rent or
other charges paid in advance.
16.3 Restoration of Demised Premises. If this Lease is not
terminated pursuant to Section 16.1, Tenant shall remain in that portion of the
Demised Premises which shall not have been appropriated or taken, and as soon as
reasonably possible, Landlord shall, at Landlord's cost and expense, restore the
remaining portion of the Demised Premises to a complete unit of like quality and
character as existed prior to such appropriation or taking, and thereafter Base
Annual Rent shall be reduced by an amount which (i) during Lease Years 1 through
5, inclusive, shall equal eleven percent (11%) of the amount (the "Abatement
Base") by which the condemnation award exceeds the cost of the renovation, (ii)
during Lease Years 6 through 10, inclusive, shall equal twelve and 65/100
percent (12.65%) of the Abatement Base, (iii) during Lease Years 11 through 15,
inclusive, shall equal fourteen and 55/100 percent (14.55%) of the Abatement
Base, and (iv) during Lease Years 16 through 20, inclusive, shall equal sixteen
and 73/100 percent (16.73%) of the Abatement Base.
16.4 Condemnation Award. As between Landlord and Tenant, all
compensation, awards and damages from any eminent domain proceeding, including,
without limitation, all awards and damages as compensation for diminution in
value of the leasehold, reversion and fee of the Demised Premises and Tenant's
Work shall belong to Landlord without any deduction therefrom for any present or
future estate of Tenant, and Tenant hereby assigns to Landlord all its right,
title and interest to any such award. Tenant shall have the right to pursue a
separate claim for damages for Tenant's Property in connection with any eminent
domain proceeding provided that such separate claim does not in any way diminish
or prejudice Landlord's claim in such eminent domain proceeding.
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ARTICLE 17
----------
ASSIGNMENT AND SUBLETTING
-------------------------
17.1 Consent Required. Tenant shall not assign, sublease, transfer,
mortgage, encumber or otherwise hypothecate this Lease without Landlord's prior
written consent, which consent may be withheld by Landlord at its sole and
absolute discretion; provided, however, Landlord's consent shall not be required
for (i) any transfer approved by Franchisor pursuant to the Franchise Agreement,
(ii) any assignment of this Lease to Franchisor, or (iii) if Franchisor succeeds
to the interest of Tenant under this Lease, then (A) any assignment of this
Lease or sublease of the Demised Premises by Tenant to a franchisee of Tenant,
or (B) any transfer to an entity which succeeds to the interest of Tenant by
merger or which acquires all or substantially all of the assets of Tenant or a
controlling interest in the stock of Tenant. Tenant shall promptly notify
Landlord of any assignment or other transfer which did not require, and was made
without, the prior written consent of Landlord. For purposes of this Lease,
"assignment" shall be considered to include a change in the majority ownership
or control of Tenant if Tenant is a corporation, partnership or a limited
liability company. Any attempt to assign, sublease, transfer, mortgage,
encumber or hypothecate this Lease without the prior written consent of Landlord
(if such consent is required under this Section 17.1) shall be null and void.
The consent by Landlord to any assignment, mortgage, hypothecation, encumbrance,
subletting or use of the Demised Premises by others shall not constitute a
waiver of Landlord's right to withhold its consent to any other or further
assignment, subletting, mortgage, encumbrance or use of the Demised Premises by
others. Without the prior written consent of Landlord, this Lease and the
interest of Tenant in the Demised Premises shall not pass by operation of law or
otherwise (except as provided in this Section 17.1), and shall not be subject to
garnishment or sale under execution in any suit or proceeding which may be
brought by or against Tenant or any assignee of Tenant. The absolute and
unconditional prohibitions contained in this Article 17 and Tenant's agreement
thereto are material inducements to Landlord to enter into this Lease with
Tenant and any breach thereof shall constitute a material default under this
Lease permitting Landlord to exercise all remedies provided for in this Lease or
by law or in equity on a default of Tenant, including, without limitation,
injunctive relief. In no event shall any assignment or subletting to which
Landlord may consent, release or relieve Tenant from its obligations to fully
observe or perform all of the terms, covenants and conditions of this Lease on
its part to be observed or performed.
17.2 Request for Consent. If Tenant requests Landlord's consent to
an assignment of this Lease or a sublease of the Demised Premises, Tenant shall
submit to Landlord a written notice ("Tenant's Notice") containing (i) the name
of the proposed assignee or subtenant; (ii) the terms of the proposed assignment
or sublease; (iii) the nature of business of the proposed assignee or subtenant
and its business experience; (iv) such information as to the financial
responsibility and general reputation of the proposed assignee or subtenant as
Landlord may require; and (v) a summary of plans and specifications for revising
the floor layout of the
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Demised Premises. Upon the receipt of a Tenant's Notice from Tenant, Landlord
shall have the option, to be exercised by written notice to Tenant given within
thirty (30) days after such receipt, to cancel and terminate this Lease as of
the date set forth in Landlord's notice of exercise of such option; provided,
however, Landlord shall not have the right to cancel or terminate this Lease
with respect to any assignment, sublease or transfer for which Landlord's
consent is not required under Section 17.1. If Landlord shall cancel this
Lease, Tenant shall surrender possession of the Demised Premises on the date set
forth in such Landlord's notice in accordance with the provisions of this Lease
relating to surrender of the Demised Premises. If Landlord shall cancel this
Lease, Landlord may relet the Demised Premises to any third party tenant,
including, without limitation, the proposed assignee or subtenant of Tenant,
without any liability to Tenant. If Landlord elects not to cancel this Lease,
then Landlord shall grant or withhold its consent to the proposed assignment or
sublease within thirty (30) days after Landlord's receipt of Tenant's Notice.
17.3 Excess Consideration. If Tenant shall assign this Lease or
sublet the Demised Premises pursuant to the terms of this Article 17, or if
Tenant, as debtor or debtor in possession, or a trustee in bankruptcy for Tenant
pursuant to the Bankruptcy Code (as hereinafter defined), shall assign this
Lease or sublet the Demised Premises, then Tenant shall pay Landlord as
additional Rent, all of the excess payments or other economic consideration
whether denominated as rent or otherwise (together with escalations) payable to
Tenant under the sublease or assignment which might be in excess of the Rent
payable to Landlord under this Lease (or, if only a portion of the Demised
Premises is being sublet, the excess payments or other economic consideration
allocable on a rentable square footage basis to the space sublet). This Section
17.3 shall not apply to any assignment or sublease for which Landlord's consent
is not required.
17.4 Tenant Financing. Notwithstanding anything to the contrary
contained in this Article 17, Tenant shall have the absolute right from time to
time during the Term and without Landlord's approval, written or otherwise, to
grant and assign a mortgage or other security interest in Tenant's interest in
Tenant's Property to Tenant's lenders in connection with Tenant's financing
arrangements. Landlord agrees to execute such confirmation, certificates and
other documents (except amendments to this Lease unless Landlord hereafter
consents) as Tenant's lenders may reasonably request in connection with any such
financing.
ARTICLE 18
----------
MORTGAGEE AND GROUND LESSOR PROTECTION
--------------------------------------
18.1 Subordination and Attornment. This Lease and all rights of
Tenant under this Lease and in the Building and appurtenant improvements are and
shall be expressly subject and subordinate at all times to (a) any present or
future Ground Lease, and to all amendments, renewals and modifications to any
such Ground Lease, (b) the lien of any present or future
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Mortgage, and (c) any covenants, easements or restrictions which currently
encumber the Demised Premises or which may encumber the Demised Premises in the
future; provided, however, that the Ground Lessor of any Ground Lease or the
Mortgagee of any Mortgage created after this Lease shall agree not to disturb
the possession of Tenant as long as Tenant is not in default under this Lease.
If any such Mortgage be foreclosed, or if any such Ground Lease be terminated,
upon request of the Mortgagee or Ground Lessor, as the case may be, Tenant will
attorn to the purchaser at the foreclosure sale or to the Ground Lessor, as the
case may be. The foregoing provisions are declared to be self-operative and no
further instruments shall be required to effect such subordination and
attornment; provided, however, upon request by any such Mortgagee, Ground Lessor
or purchaser at foreclosure, as the case may be, Tenant shall execute such
subordination and attornment instruments as may be required by such person to
confirm such subordination and attornment in the form customarily used by such
person. Notwithstanding the foregoing, any such Mortgagee or Ground Lessor may
elect to give the rights and interests of Tenant under this Lease (excluding
rights in and to insurance proceeds and condemnation awards) priority over the
lien of its Mortgage or the estate of its Ground Lease, as the case may be. In
the event of such election and upon the Mortgagee or Ground Lessor notifying
Tenant of such election, the rights and interests of Tenant under this Lease
shall be deemed superior to and to have priority over the lien of said Mortgage
or the estate of such Ground Lease, as the case may be, whether this Lease is
dated prior to or subsequent to the date of such Mortgage or Ground Lease. In
such event, Tenant shall execute and deliver whatever instruments may be
required by such Mortgagee or Ground Lessor to confirm such superiority in the
form customarily used by such person. If Tenant fails to execute any instrument
required to be executed by Tenant under this Section 18.1 within ten (10) days
after request, Tenant irrevocably appoints Landlord as its attorney-in-fact, in
Tenant's name, to execute such instrument.
18.2 Right to Cure Landlord Defaults. In the event of any default by
act or omission by Landlord which would give Tenant the right to terminate this
Lease or to claim a partial or total eviction, Tenant shall not exercise any
such right until it has notified in writing the holder of any Mortgage which at
the time shall be a lien on all or any portion of the Demised Premises and the
Ground Lessor of any Ground Lease encumbering the Demised Premises (if the name
and address of such Mortgagee or Ground Lessor shall previously have been
furnished by written notice to Tenant) of such default, and until a reasonable
period for curing such default shall have elapsed following the giving of such
notice, during which period the Mortgagee or Ground Lessor shall have failed to
commence and continue to cure such default or to cause the same to be remedied
or cured.
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ARTICLE 19
----------
ACCESS TO PREMISES
------------------
Upon reasonable prior notice, but in no event less than twenty-four
(24) hours (except in the case of an emergency), Landlord may enter the Demised
Premises during Tenant's business hours for purposes of inspection or to show
the Demised Premises to prospective purchasers, lenders and tenants.
Notwithstanding the foregoing, Franchisor may enter the Demised Premises without
prior notice to the extent permitted under the Franchise Agreement. In
addition, Landlord may enter the Demised Premises to make changes to the Demised
Premises and the surrounding development, which changes shall not require the
prior consent of Tenant; provided, however, such changes shall not materially
adversely affect access to, visibility of, or the parking located at the Demised
Premises.
ARTICLE 20
----------
DEFAULTS BY TENANT
------------------
20.1 Events of Default. Each of the following events shall constitute
an "Event of Default":
(a) Any failure by Tenant to pay Rent or make any other payment
required to be made by Tenant hereunder within five (5) days after receipt
of written notice from Landlord; or
(b) If Tenant violates or fails to perform or otherwise breaches any
agreement, term, covenant or condition contained in this Lease within
thirty (30) days after receipt of written notice from Landlord; provided,
however, said thirty (30) day period shall be subject to extension for
Force Majeure Delays; or
(c) If Tenant vacates or abandons the Demised Premises, or fails to
open the Demised Premises for business within ten (10) days after the date
set forth in Section 1.11, or fails to continuously operate a Boston Market
Unit from the Demised Premises as required by this Lease; or if Tenant
removes or attempts to remove Tenant's goods or property therefrom other
than in the ordinary course of business without having first paid to
Landlord in full all Rent that may have become due as well as all Rent
which will become due thereafter; or
(d) If Tenant becomes insolvent or bankrupt or makes an assignment or
arrangement for the benefit of creditors, or if a petition in bankruptcy or
for reorganization or for an arrangement with creditors under any federal
or state law is filed
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by or against Tenant, or Tenant is adjudicated insolvent pursuant to the
provisions of any present or future insolvency law of any state having
jurisdiction, or a bill in equity or other proceeding for the appointment
of a receiver, trustee, liquidator, custodian, conservator or similar
official for any of Tenant's assets is commenced, under any federal or
state law by reason of Tenant's inability to pay its debts as they become
due or otherwise, or if Tenant's estate by this Lease or any real or
personal property of Tenant shall be levied upon; provided, however, that
any proceeding brought by anyone other than the parties to this Lease under
any bankruptcy, reorganization, arrangement, insolvency, readjustment,
receivership or similar law shall not constitute a default until such
proceeding, decree, judgment or order has continued unstayed for more than
sixty (60) consecutive days; or
(e) If Tenant (or any successor or assign of Tenant) defaults under
the Franchise Agreement (beyond the applicable notice and cure periods, if
any, granted therein) and Franchisor elects not to cure, waive or extend
the period of time for Tenant to cure such default.
20.2 Landlord Remedies. Upon the occurrence of an Event of Default,
Landlord shall have the following rights:
(a) Landlord may accelerate the whole or any part of the Rent for the
entire unexpired balance of the Term, and any Rent if so accelerated shall,
in addition to any and all installments of Rent already due and payable and
in arrears, be deemed due and payable as if, by the terms and provisions of
this Lease, such accelerated Rent was on that date payable in advance. For
such purposes, all items of Rent due hereunder, which are not then capable
of precise determination, shall be estimated by Landlord, in Landlord's
reasonable judgment, for the balance of the Term.
(b) Landlord may enter the Demised Premises and without further
demand or notice proceed to distress and sell the goods, chattels and
personal property there found, and to levy the Rent, and Tenant shall pay
all costs and officers' commissions which are permitted by law, including
watchmen's wages and sums chargeable to Landlord, and further including
five percent (5%) commissions to the officer or other person making the
levy, and in such case all costs, officers' commissions and other charges
shall immediately attach and become part of the claim of Landlord for Rent,
and any tender of Rent without said costs, commissions and charges made
after the issuance of a warrant of distress, shall not be sufficient to
satisfy the claim of Landlord.
(c) Landlord may re-enter the Demised Premises, together with all
additions, alterations and improvements, and, at the option of Landlord,
remove all persons and all or any property therefrom, either by summary
dispossession proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable for
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prosecution or damages therefor, and repossess and enjoy the Demised
Premises. Upon recovering possession of the Demised Premises by reason of
or based upon or arising out of a default on the part of Tenant, Landlord
may, at Landlord's option, either terminate this Lease or terminate
Tenant's right to possession of the Demised Premises without terminating
this Lease, and in either such event, make such alterations and repairs as
may be necessary in order to relet the Demised Premises and thereafter
relet the Demised Premises, either in Landlord's name or otherwise, for a
term or terms which may, at Landlord's option, be less than or exceed the
period which would otherwise have constituted the balance of the Term and
at such rent or rents and upon such other terms and conditions as Landlord
in Landlord's sole discretion may deem advisable and to such person or
persons as Landlord in Landlord's sole discretion may deem best. Upon each
such reletting, all rents received by Landlord from such reletting shall be
applied first, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees and all costs of such
alterations and repairs; second, to the payment of any indebtedness other
than Rent due hereunder from Tenant to Landlord; third, to the payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future Rent as it may become due and
payable hereunder. If such rentals received from such reletting during any
month shall be less than that to be paid during that month by Tenant,
Tenant shall pay any such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. No such re-entry or taking possession of the
Demised Premises or the making of alterations or improvements thereto or
the reletting thereof shall be construed as an election on the part of
Landlord to terminate this Lease unless written notice of such intention be
given to Tenant. Landlord shall in no event be liable in any way
whatsoever for failure to relet the Demised Premises or, in the event that
the Demised Premises are relet, for failure to collect the rent thereof
under such reletting. Tenant, for Tenant and Tenant's successors and
assigns, hereby irrevocably constitutes and appoints Landlord as Tenant's
and their agent to collect the rents due and to become due under all
subleases of the Demised Premises or any parts thereof without in any way
affecting Tenant's obligation to pay any unpaid balance of Rent due or to
become due hereunder. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous breach.
(d) Landlord may terminate this Lease and the Term without any right
on the part of Tenant to waive the forfeiture by payment of any sum due or
by other performance of any condition, term or covenant broken, whereupon
Landlord shall be entitled to recover, in addition to any and all sums and
damages for violation of Tenant's obligations hereunder in existence at the
time of such termination, damages for Tenant's default in an amount equal
to the amount of the Rent reserved for the balance of the Term, discounted
at the rate of six percent (6%) per annum to its then present worth, less
the fair market rental value (as determined by Landlord) of the Demised
Premises for the remainder of the Term (allowing for a reasonable period of
exposure on the open
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market before realization of such fair market rental value and deducting
the then fair market tenant concessions such as rent abatements and
improvement allowances), also discounted at the rate of six percent (6%)
per annum to its then present worth, plus the cost of making standard
improvements and a standard commission for releasing the Demised Premises,
all of which amount shall be immediately due and payable from Tenant to
Landlord.
20.3 Landlord's Right to Perform Tenant's Obligations. If an Event of
Default shall occur, then Landlord, at Landlord's option, may, but shall not be
obligated to, expend such sum, on behalf of Tenant, as may be necessary to cure
such Event of Default. Any and all sums so expended by Landlord (plus an
administrative fee of fifteen percent [15%] of the amount thereof), plus
interest thereon at the Default Rate from the day of such expenditure, shall be
additional Rent, and shall be repaid by Tenant to Landlord on demand, but no
such expenditure by Landlord shall be deemed a waiver of Tenant's default or
shall affect any other remedy of Landlord by reason of such default.
20.4 No Waiver. No waiver by Landlord of any breach by Tenant or any of
Tenant's obligations, agreements or covenants under this Lease shall be a waiver
of any subsequent breach or of any obligation, agreement or covenant, nor shall
any forbearance by Landlord to seek a remedy for any breach by Tenant be a
waiver by Landlord of any rights and remedies with respect to such or any
subsequent breach. No surrender of the Demised Premises by Tenant shall be
affected by Landlord's acceptance of Rent or by other means whatsoever unless
the same is evidenced by Landlord's written acceptance of the surrender.
20.5 Remedies Cumulative. No right or remedy conferred upon or reserved
to Landlord under this Lease is intended to be exclusive of any other right or
remedy provided under this Lease or by law, but each shall be cumulative and in
addition to every other right or remedy given under this Lease or now or
hereafter existing at law or in equity or by statute.
20.6 Attorneys' Fees. In the event that at any time during the Term
either Landlord or Tenant shall institute any action or proceeding against the
other relating to the provisions of this Lease, or any default hereunder, the
unsuccessful party in such action or proceeding agrees to reimburse the
successful party for the reasonable expenses of attorneys' fees and paralegal
fees and disbursements incurred therein by the successful party. Such
reimbursement shall include all legal expenses incurred prior to trial, at trial
and at all levels of appeal and post judgment proceedings.
20.7 Bankruptcy or Insolvency. The following shall apply in the event
of the bankruptcy or insolvency of Tenant:
(a) Neither Tenant's interest in this Lease nor any estate hereby
created in Tenant shall pass to any trustee (except as may specifically be
provided pursuant to the
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provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq. (the "Bankruptcy
Code")) or receiver or assignee for the benefit of creditors or otherwise
by operation of law.
(b) Except as otherwise required by the Bankruptcy Code, in the event
the interest or estate created in Tenant hereby shall be taken in execution
or by other process of law, if Tenant is adjudicated insolvent by a court
of competent jurisdiction, or if a receiver or trustee of the property of
Tenant shall be appointed by reason of the insolvency of Tenant or
inability to pay its debts, or if any assignment shall be made of the
property of Tenant for the benefit of creditors, then and in any such
event, Tenant shall have committed an Event of Default and Landlord may
terminate this Lease or terminate Tenant's right of possession as provided
in Section 20.2.
(c) No default of this Lease by Tenant, either prior to or subsequent
to the filing of a petition under the Bankruptcy Code, shall be deemed to
have been waived unless expressly done so in writing by Landlord.
(d) If Tenant or a trustee elects to assume this Lease subsequent to
the filing of a petition under the Bankruptcy Code, Tenant, as debtor or as
debtor in possession, and any trustee who may be appointed shall comply
with Section 365(b)(1) of the Bankruptcy Code and shall provide adequate
assurance of Tenant's future performance in connection therewith, which
shall include, without limitation, the following: (a) the deposit of an
additional sum equal to two (2) month's rent to be held (without any
allowance for interest thereon) to secure Tenant's obligations under this
Lease; (b) the production to Landlord of written documentation establishing
that Tenant has sufficient present and anticipated financial ability to
perform each and every obligation of Tenant under this Lease; and (c)
assurances, in form acceptable to Landlord, as to all matters listed in
Section 365(b)(3) of the Bankruptcy Code.
(e) If Tenant assumes this Lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, then notice of such
proposed assignment, setting forth (a) the name and address of such person,
(b) all the terms and conditions of such offer, and (c) the adequate
assurance to be provided Landlord to assure such person's future
performance under this Lease, including, without limitation, the assurance
referred to in Section 365(b)(3) of the Bankruptcy Code, shall promptly be
given to Landlord by Tenant, and Landlord shall thereupon have the prior
right and option, to be exercised by notice to Tenant given at any time
prior to the effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions. Any person or
entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to have assumed
all of the obligations arising under this Lease on and after the date of
such assignment. Any such assignee shall upon demand from Landlord execute
and deliver to Landlord an instrument confirming such assumption.
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ARTICLE 21
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DEFAULTS BY LANDLORD
--------------------
Tenant shall not exercise any remedy for any default by Landlord in the
performance of any of its obligations under this Lease, unless Tenant has given
to Landlord written notice specifying the default, and Landlord has failed to
cure the default within thirty (30) days after receipt of Tenant's notice;
provided, however, if Landlord commences the cure of the default with said
thirty (30) period but the default is not reasonably susceptible of being cured
within thirty (30) days, said thirty (30) day period shall be extended during
such period of time that Landlord is diligently pursuing the steps necessary to
cure the default. Tenant's sole and exclusive remedies for a default by
Landlord under this Lease shall be (i) the right to sue Landlord for direct
damages or (ii) the right to seek specific performance or injunctive relief.
Tenant waives the right to terminate this Lease or seek consequential or
speculative damages from Landlord in the event of any default by Landlord under
this Lease.
ARTICLE 22
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SURRENDER OF PREMISES
---------------------
22.1 Surrender. Upon the expiration of the Term, or any earlier
termination of this Lease or Tenant's right to possession of the Demised
Premises for any cause, Tenant shall surrender possession and vacate the Demised
Premises and surrender possession of the Demised Premises to Landlord. Tenant
shall deliver the Demised Premises and all alterations, improvements and other
additions to the Demised Premises (other than Tenant's Property which remains
the property of Tenant as provided in Section 22.2), in good order and
condition, ordinary wear and tear excepted. If directed by Landlord or
Franchisor, Tenant shall remove from the Demised Premises, at Tenant's cost and
expense, alterations, additions or improvements made by Tenant, including,
without limitation, any distinctive structural or physical features which
identify the Demised Premises as a Boston Market Unit, and Tenant shall remove
all marks and other trade dress required to be removed by the Franchise
Agreement. Tenant shall repair any damage to the Demised Premises occasioned by
such removal. If Tenant fails to remove such alterations, additions,
improvements, marks and trade dress or if Tenant fails to repair any damage to
the Demised Premises as required by this Section 22.1, Landlord shall have the
right to remove and/or repair same, and Tenant shall reimburse Landlord on
demand for the cost thereof (plus an administrative fee of fifteen percent (15%)
of the cost thereof), plus interest thereon at the Default Rate from the day of
such expenditure.
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22.2 Tenant's Property. Provided Tenant is not in default under this
Lease, Tenant may remove upon the expiration of the Term (i) Tenant's furniture
and movable trade fixtures and equipment and other personal property not
permanently affixed to the Demised Premises; and (ii) the alterations, additions
and signs made by Tenant to Demised Premises that Landlord permits Tenant to
remove (collectively, "Tenant's Property"). The Building, all leasehold
improvements, alterations and additions to the Demised Premises (except for
those that Landlord has requested or permitted Tenant to remove) and all
property which is permanently affixed to the Demised Premises, including,
without limitation, fixtures, counters, coolers and freezers, hood and exhaust
systems, floor coverings and wall coverings, and HVAC, plumbing, electrical,
mechanical and life safety systems of the Building (which, for the purpose of
this Lease, shall be deemed to be permanently affixed to the Demised Premises),
are and shall be the property of Landlord. Tenant may finance Tenant's Property
in accordance with Section 17.4 of this Lease. Any of Tenant's Property which
is not removed within ten (10) days following the expiration of the Term, the
termination of this Lease or the termination of Tenant's right to possession of
the Demised Premises shall, at Landlord's option, become the property of
Landlord, or Landlord may remove such items from the Demised Premises at the
expense of Tenant. Tenant at its expense shall immediately repair any damage
occasioned by the removal of Tenant's Property.
22.3 Holding Over. If Tenant or any party claiming under Tenant remains
in possession of the Demised Premises or any part thereof without Landlord's
prior written consent after any termination or expiration of this Lease, by
lapse of time or otherwise, Tenant shall pay Landlord the monthly Rent at double
the rate payable for the month immediately preceding said holding over, computed
on a per-month basis, for each month or part thereof (without apportionment for
any such partial month) that Tenant thus remains in possession, and in addition
thereto, Tenant shall pay Landlord all damages sustained by reason of Tenant's
retention of possession.
ARTICLE 23
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COLLATERAL ASSIGNMENT AND FRANCHISE AGREEMENT
---------------------------------------------
23.1 Collateral Assignment. Concurrently with the execution of this
Lease, Tenant shall collaterally assign the Lease to Franchisor. Landlord hereby
consents to the collateral assignment of this Lease to Franchisor and to any
entity which is a party to a merger or consolidation with or to the acquisition
of all or substantially all of the assets or stock of Franchisor and to a
further collateral assignment or hypothecation by Franchisor of the interest so
assigned by Tenant, all in accordance with that certain Collateral Assignment of
Lease attached hereto as Exhibit "H" (the "Collateral Assignment"). If requested
by Tenant, Landlord agrees promptly to execute any documents evidencing
Landlord's consent to such assignment or assignments.
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23.2 Landlord's Consent to Collateral Assignments. In order to preserve
Franchisor's rights in connection with Landlord's consent to the Collateral
Assignment, Landlord agrees as follows:
(a) to notify Franchisor in writing of and upon the failure of Tenant
to cure any default by Tenant under the Lease;
(b) that Franchisor shall have the right, but shall not be obligated,
to cure any default by Tenant under the Lease within thirty (30) days after
the later to occur of (i) the expiration of Tenant's cure period under the
Lease, and (ii) delivery by Landlord of notice thereof in accordance with
Section (a) above; provided, however, if Franchisor is diligently pursuing
curing such default and cannot do so within such thirty (30) day period,
Franchisor shall have a reasonable extension of time to cure the default;
(c) that Landlord agrees that if Franchisor shall take possession of
the Demised Premises and confirm to Landlord the assumption of the Lease by
Franchisor as tenant thereunder, Landlord shall recognize Franchisor as the
tenant under the Lease, provided that Franchisor cures any default by
Tenant under the Lease within the cure period noted above;
(d) that Franchisor: (i) shall have the absolute right to assign,
sublet or otherwise transfer its right, title, estate and interest in the
Lease and all its proprietary interest arising therefrom to any entity
affiliated with Franchisor or any licensee or franchisee of Franchisor
provided that Franchisor shall not be released from its obligations under
the Lease (upon assignment) and such successor tenant expressly assumes
liability for Franchisor's duties and obligations under the Lease; and (ii)
may assign the Lease to a person or entity who shall agree to assume the
Tenant's obligations under the Lease and who is reasonably acceptable to
Landlord, and upon such assignment, Franchisor shall have no further
liability or obligation under the Lease as assignee, tenant or otherwise;
and
(e) that Landlord, if Franchisor does not exercise its rights under
the Collateral Assignment, shall not lease the Demised Premises to any
person or entity for the purpose of operating a food service business which
engages primarily in the sale of rotisserie-cooked chicken or potpies for a
period of two (2) years after termination or expiration of the Franchise
Agreement without the prior written consent of Franchisor, which consent
may be granted or withheld by Franchisor in its sole and absolute
discretion.
23.3 Franchise Agreement. If Franchisor does not exercise its right of
first refusal to purchase the assets of Tenant's Boston Market Unit under the
terms of the Franchise Agreement, then Tenant agrees, at Tenant's sole expense,
to make such modifications and
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alterations, including removal of all distinctive physical and structural
features associated with the trade dress of Boston Market Units, as may be
necessary to distinguish the Demised Premises so clearly from its former
appearance and from other Boston Market Units as to prevent any possibility that
the public will associate the Demised Premises with Boston Market Units and any
confusion created by such association (such modifications and alterations shall
include, but not be limited to, removing or covering the distinctive decor and
color scheme on all walls, counters, fixtures and furnishings, as well as the
exterior of the Demised Premises). If Tenant fails to immediately make such
modifications, alterations and/or removals, Landlord and Tenant agree that
Franchisor or its designated agents may enter the Demised Premises to make such
modifications, alterations and/or removals, at Tenant's expense, and that such
entry and actions by Franchisor shall not constitute a breach of this Lease. It
is expressly acknowledged and agreed by Landlord and Tenant that Franchisor
shall have the right to obtain the remedy of specific performance or other
injunctive relief in order to enforce the provisions of this Section 23.3 and
that Franchisor has no adequate remedy available at law for any breach of this
Section 23.3. Landlord acknowledges and agrees that Franchisor is a third-party
beneficiary of this Lease.
ARTICLE 24
----------
MISCELLANEOUS
-------------
24.1 Notices. All notices, demands, or other communications of any type
given by Landlord or by Tenant, whether required by this Lease or in any way
related to this Lease, shall be void and of no effect unless given in accordance
with the provisions of this Lease. All notices shall be legible and in writing
and shall be delivered personally to the addressee with a receipt requested
therefor or shall be sent by a recognized overnight courier service for next day
delivery or by United States certified mail, return receipt requested, postage
prepaid and addressed to Landlord at Landlord's Address as set forth in Section
1.2, to Tenant at Tenant's Address as set forth in Section 1.4, and to
Franchisor at Franchisor's Address as set forth in Section 1.6. Notices sent in
compliance with this Section 24.1 shall be effective (a) upon receipt or refusal
if delivered personally; (b) one (1) business day after depositing with such an
overnight courier service; or (c) three (3) business days after deposit in the
mails if mailed. Landlord and Tenant may change the address for notice and the
person to whom notices are sent by giving Franchisor and the other party ten
(10) days advance written notice of such change of address. Franchisor may
change the address for notice and the person to whom notices are sent by giving
Landlord and Tenant ten (10) days advance written notice of such change of
address.
24.2 Successors and Assigns. All covenants, promises, conditions,
representations and agreements contained in this Lease shall be binding upon,
apply and inure to the parties hereto and their respective heirs, executors,
administrators, successors and assigns; it being
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understood and agreed, however, that the provisions of Article 17 are in not in
any way impaired by this Section 24.2.
24.3 Force Majeure Events. In the event that either party is delayed,
hindered in or prevented from the performance of any obligation hereunder by
reason of a Force Majeure Event, the time for the performance of such obligation
shall be extended for the corresponding Force Majeure Delay; provided, however,
in no event shall a Force Majeure Event excuse or delay the obligation of Tenant
to pay Rent under this Lease.
24.4 Landlord and Tenant. Landlord and Tenant agree that it is their
intention to create only the relationship of Landlord and Tenant, and no
provision of this Lease, or act of either Landlord or Tenant, shall ever be
construed as creating the relationship of principal and agent, or a partnership,
or a joint venture or enterprise between Landlord and Tenant.
24.5 Quiet Enjoyment. Landlord covenants that it has full right, power
and authority to make this Lease, subject to the rights of Mortgagees and Ground
Lessors and the terms, provisions and conditions of any covenants, conditions or
restrictions of record, and that Tenant or any permitted assignee or subtenant
of Tenant, upon the payment of the Rent and the performance of the covenants
required to be performed by Tenant hereunder, shall and may peaceably and
quietly have, hold and enjoy the Demised Premises and improvements thereon
during the Term.
24.6 Rules and Regulations. Landlord reserves the right to adopt rules
and regulations with respect to the conduct of Tenant's activities in the
Demised Premises which, upon adoption, shall be deemed incorporated herein;
provided, however, such rules and regulations shall not become effective until
Tenant has been given notice thereof, and Tenant shall not be bound by any rules
and regulations which are not consistent with the standards and methods of
operation of a Boston Market Unit in the jurisdiction in which the Demised
Premises are located.
24.7 Estoppel Certificate.
(a) Tenant shall, from time to time, upon the written request of
Landlord or Franchisor, deliver to the requesting party, within fifteen
(15) days after the request therefor, a statement in writing certifying (i)
that this Lease is unmodified and in full force and effect (or if there
have been modifications that the same is in full force and effect as
modified and identifying the modifications); (ii) the dates to which the
Rent and other charges have been paid; (iii) that Landlord is not in
default under any provision of this Lease (or if a default is alleged,
stating the nature of the alleged default); (iv) no payments other than as
currently due have been made; (v) that Tenant has accepted the Demised
Premises and the condition of Demised Premises and has no claims against
Landlord or any other party with respect to the Demised Premises; (vi) that
Tenant is
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entitled to no offsets, defenses or counterclaims with respect to the
terms, covenants and conditions of this Lease to be performed by Landlord;
and (vii) such other matters as may reasonably be requested by the
requesting party.
(b) Landlord shall, from time to time, upon the written request of
Tenant or Franchisor, deliver to the requesting party, within fifteen (15)
days after the request therefor, a statement in writing certifying (i) that
this Lease is unmodified and in full force and effect (or if there have
been modifications that the same is in full force and effect as modified
and identifying the modifications), (ii) the dates to which the Rent and
other charges have been paid; and (iii) that Tenant is not in default under
any provision of this Lease (or if a default is alleged, stating the nature
of the alleged default).
(c) It is intended that any statement delivered pursuant to this
Section 24.7 may be relied upon by Franchisor and any prospective
Mortgagee, Ground Lessor, purchaser, lender, subtenant, assignee or any
entity which is a party to a potential merger, consolidation with or to the
acquisition of all or substantially all of the assets or stock of the
requesting party. If such statement is not executed by the requested party
and delivered to the requesting party within said fifteen (15) day period,
the requesting party may prepare said statement on behalf of the requested
party, and the requested party hereby irrevocably appoints the requesting
party as its attorney-in-fact, in the requested party's name, to execute
such statement and deliver same on the requested party's behalf.
24.8 Memorandum of Lease. Tenant shall not record this Lease. The
parties shall join in the execution of a memorandum or so-called "short-form" of
this Lease for the purposes of recordation in accordance with the form attached
hereto as Exhibit "I" and made a part hereof. Any recording costs associated
with the memorandum or short form of this Lease shall be borne by the party
requesting recordation.
24.9 Conflict Between Lease and Franchise Agreement. In the event of
any conflict between this Lease and the Franchise Agreement, the Franchise
Agreement shall govern, prevail and control.
24.10 Assignment by Landlord. Landlord shall have the right to
transfer, assign and convey, in whole or in part, any or all of the right, title
and interest to the Demised Premises, and, in such event, Landlord shall be
relieved from and after the date of such transfer, assignment or conveyance of
all liability under this Lease for obligations accruing thereafter. Should any
prospective Mortgagee, Ground Lessor or purchaser of the Demised Premises
require a modification or modifications of this Lease, which modification or
modifications will not modify the permitted use of the Demised Premises, the
Term, the Renewal Option or the Rent payable by Tenant under this Lease and will
not bring about any increased cost or expense to Tenant or in any other way
substantially change the rights and obligations of Tenant under
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this Lease, then Tenant agrees that this Lease may be so modified. Tenant
further agrees to execute and deliver any documents requested to evidence such
modification within ten (10) days following such request.
24.11 Limitation of Landlord's Liability. Notwithstanding anything to
the contrary contained in this Lease, in the event of any default or breach by
Landlord with respect to any of the terms, covenants and conditions of this
Lease to be observed, honored or performed by Landlord, Tenant shall look solely
to the estate and property of Landlord in the Land and Building owned by
Landlord comprising the Demised Premises for the collection of any judgment (or
any other judicial procedures requiring the payment of money by Landlord) and no
other property or assets of Landlord shall be subject to levy, execution, or
other procedures for satisfaction of Tenant's remedies.
24.12 Severability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provisions shall remain in full force and
effect.
24.13 Governing Law and Venue. This Lease shall be governed by the laws
of the state in which the Demised Premises is located. Tenant acknowledges and
agrees that proper venue for all legal and equitable actions which may be
brought by Landlord or Tenant under, arising out of or in connection with this
Lease is the United States District Court for the District of Colorado or the
District Court of Jefferson County, Colorado and that Tenant is subject to the
jurisdiction of said courts.
24.14 Waiver of Trial by Jury. To the extent permitted by law, Tenant
hereby waives the right to trial by jury in any action, proceeding or
counterclaim on any matter whatsoever arising out of or in any way connected
with this Lease.
24.15 Brokers. Landlord and Tenant represent and warrant to each other
that they have not had any dealing with any real estate brokers, finders or
agents in connection with the negotiation of this Lease. Each party shall
indemnify and hold the other party harmless from and against any and all
liability and cost which the other party may suffer in connection with real
estate brokers, finders or agents claiming by, through, or under such party
seeking any commission, fee or payment in connection with this Lease.
24.16 Survival. The following obligations shall survive the expiration
or termination of this Lease: (a) any obligation under this Lease which is
permitted to be performed after the expiration or termination of this Lease; (b)
any obligation under this Lease which is not reasonably susceptible of
performance prior to the expiration or termination of this Lease; and (c) any
obligation under this Lease which is required to be performed under this Lease
on or before the expiration of the Term but which is not so performed.
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24.17 Time is of the Essence. Time is of the essence of this Lease and
each provision; provided, however, if the final (but not any interim) date of
any period set forth herein falls on a Saturday, Sunday or legal holiday under
the laws of the United States of America, the final date of such period shall be
extended to the next business day.
24.18 Number and Gender. All terms and words used in this Lease,
regardless of the number and gender in which they are used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context or sense of this Lease or any
portion of this Lease may require, the same as if such words had been fully and
properly written in the number and gender.
24.19 Counterparts. This Lease may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute but one and the same
instrument.
24.20 Captions and Headings. The headings to the Articles and Sections
of this Lease are inserted only as a matter of convenience and for reference,
and in no way expand, modify, confine, limit or proscribe the scope or intent of
any Article and Section of this Lease, nor in any way affect this Lease.
24.21 Construction. Each party hereto has reviewed and revised (or
requested revisions of) this Lease, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a particular
party shall not be applicable in the construction and interpretation of this
Agreement or any Exhibits hereto.
24.22 Trademarks. Landlord acknowledges that any plans or
specifications of Tenant and Tenant's and Franchisor's trademarks and service
marks, including without limitation, "Boston Market," is the sole property of
Tenant and/or Franchisor, as the case may be, and this Lease and tenancy created
by this Lease shall not be construed as granting to Landlord any rights to same.
24.23 Entire Agreement. Any and all discussions and negotiations
between Landlord and Tenant have been merged into this Lease. No rights are
conferred upon either party until this Lease has been executed by both Landlord
and Tenant. Any and all representations and agreements by either of the parties
or their agents made during negotiations prior to execution of this Lease and
which representations are not contained in this Lease shall not be binding upon
either of the parties. This Lease may be amended or added to only by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
24.24 Satellite Dish Installation. Landlord hereby grants to Tenant and
Tenant's agents, employees and contractors the right, at Tenant's sole cost and
expense, to install, maintain and operate at the Demised Premises a mast mounted
satellite dish antenna (the "Dish")
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and related equipment, including, without limitation, cables from the exterior
of the Demised Premises to equipment inside the Demised Premises, which is
necessary to the operation of the Dish, as part of Franchisor's integrated
satellite business network. Tenant may relocate the Dish to some other location
on or about the Demised Premises for purposes of adequate reception, subject to
applicable law, codes and regulations. Tenant will ensure that the Dish, and
each part of it, will be installed in accordance with all local and building
rules of construction and codes. Tenant will obtain all FCC and other licenses
or approvals required to install and operate the Dish. The Dish is and shall
remain the property of Tenant or Tenant's assignee, transferee or subtenant, and
Landlord and Tenant agree that the Dish is not, and installation of the Dish at
the Demised Premises shall not cause the Dish to become, a fixture pursuant to
this Lease or by operation of law. Tenant shall be responsible for the repair
and maintenance of the Dish during the Term, at Tenant's sole cost and expense,
and upon the expiration of the Term or earlier termination of this Lease, Tenant
shall remove the Dish and repair any and all damage to the Demised Premises
(including but not limited to the roof of the Demised Premises) caused as a
result of such removal.
24.25 Guaranty. Simultaneously with the execution and delivery of this
Lease, Tenant shall cause the Guarantors identified in Section 1.12, if any, to
execute and deliver to Landlord a Guaranty in the form of that attached hereto
as Exhibit "J".
24.26 Exhibits. The exhibits listed below and attached to this Lease
are incorporated in this Lease by reference:
EXHIBIT "A" - Legal Description of the Demised Premises
EXHIBIT "B" - Workletter Agreement
EXHIBIT "C" - Term Commencement Agreement
EXHIBIT "D" - Memorandum of Term Commencement Agreement
EXHIBIT "E" - Certificate of Substantial Completion
EXHIBIT "F" - Escrow Instructions
EXHIBIT "G" - Insurance Required During Construction
EXHIBIT "H" - Collateral Assignment of Lease
EXHIBIT "I" - Memorandum of Lease
EXHIBIT "J" - Guaranty of Franchise Lease
40
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed and sealed as of the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___.
_______________________________
Witness:
_____________________________ By:____________________________
Name:_______________________
_____________________________ Title:______________________
Dated this ________ day LANDLORD:
of _______________, 19____.
BC REAL ESTATE INVESTMENTS,
INC., a Delaware corporation
Witness:
_____________________________ By:____________________________
Name:_______________________
_____________________________ Title:______________________
41
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
ADDENDUM TO FRANCHISE LEASE
FOR FINANCED FRANCHISEES
------------------------
THIS ADDENDUM is attached to that certain Franchise Lease dated ,
19__ (the "Lease") by and between BC Real Estate Investments, Inc., a Delaware
corporation ("Landlord"), and , a ("Tenant"), and by this
reference, this Addendum is incorporated into the Lease as though fully set out
therein.
For and in consideration of the Lease and the mutual promises and covenants
contained therein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Landlord covenants and agrees,
notwithstanding anything to the contrary contained in the Lease, as follows:
1. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Lease.
2. Franchisor and Tenant have entered into a Secured Loan Agreement
(which agreement and all documents delivered in connection therewith, together
with all renewals, amendments and replacements, are collectively referred to as
the "Loan Agreement") providing for Franchisor to lend money to or for the
benefit of Tenant. To secure Tenant's obligations to Franchisor under the Loan
Agreement and the Franchise Agreement ("Borrower's Liabilities"), Tenant has
granted to Franchisor a first priority security interest in and to all personal
property, inventory, equipment, furnishings, fixtures, books and records now
owned or hereafter acquired by Tenant (the "Collateral"), all or some of which
is now or hereafter may be located at the Demised Premises.
3. Landlord waives all rights which Landlord now has, or hereafter may
have, under the laws of the State in which the Demised Premises are located,
other governmental jurisdictions or by virtue of the Lease or Tenant's
occupation of the Demised 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
Franchisor's security interest in the Collateral pursuant to the Loan Agreement
is superior to any lien, right, claim or title which Landlord now has or
hereafter may have or assert in or to the Collateral.
4. For purposes of the Lease, Landlord agrees that the Collateral shall
include, but not be limited to, all of Tenant's movable personal property and
trade fixtures on or about the Demised Premises, which shall not be deemed
fixtures. Collateral shall not include any
<PAGE>
leasehold improvements which are permanently attached to the Demised Premises or
which are owned by Landlord.
5. If Tenant defaults under the Loan Agreement or the Franchise
Agreement, Franchisor may remove the Collateral or any part thereof from the
Demised Premises in accordance with the terms and conditions of the Loan
Agreement, the Franchise Agreement 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 Tenant,
Landlord agrees that, at Franchisor's option, the Collateral may remain at the
Demised Premises for a period not exceeding one (1) month following the
expiration of Franchisor's period to cure Tenant's defaults contained in Section
23.2 of the Lease, provided Franchisor pays to Landlord any rent that is unpaid
for the Demised Premises at the same monthly rate imposed upon Tenant.
6. Franchisor may, without affecting the validity of the Lease, extend,
amend and 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 Addendum shall inure to the benefit of Franchisor and the
successors and assigns of Franchisor and shall be binding upon the heirs,
personal representatives, directors, officers, partners, successors and assigns
of Landlord.
8. Neither this Addendum nor Franchisor's security interest in the
Collateral shall be deemed a mortgage of or lien upon Landlord's fee title to
the Demised Premises.
IN WITNESS WHEREOF, this Addendum has been duly executed and delivered as
of the ___ day of ______________, 19___.
LANDLORD:
---------
BC REAL ESTATE INVESTMENTS,
INC., a Delaware corporation
By:______________________________
Name:_________________________
Title:________________________
2
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "A"
-----------
LEGAL DESCRIPTION OF THE DEMISED PREMISES
-----------------------------------------
A-1
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "B"
-----------
WORKLETTER AGREEMENT
--------------------
THIS WORKLETTER AGREEMENT (this "Agreement") is made and entered into as of
the ____ day of __________, 19___, by and between BC Real Estate Investments,
Inc., a Delaware corporation ("Landlord"), and ________________________________,
a __________ corporation ("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord and Tenant have entered into a certain Franchise Lease
(the "Lease"), for certain Demised Premises (as defined in the Lease) located at
________________________________________________________________________________
_______________; and
WHEREAS, certain tenant improvement work is to be completed at the Demised
Premises;
NOW, THEREFORE, for and in consideration of the agreement to lease the
Demised Premises and to pay rent and the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. DEFINED TERMS. All capitalized terms not otherwise defined in this
Agreement shall have the meanings given to such terms in the Lease.
2. TENANT'S WORK. Tenant shall perform or cause to be performed at the
Demised Premises the tenant improvement work ("Tenant's Work") described in the
Plans and Specifications (as hereinafter defined) which have been submitted to
and approved by Landlord. Tenant's Work shall be performed at Tenant's sole
cost and expense, with the exception of payment by Landlord of Landlord's
Allowance pursuant to Paragraph 9. Tenant's Work shall be constructed in a good
and workmanlike fashion, in accordance with the requirements set forth in this
Agreement, the Lease, the Franchise Agreement and the approved construction
contract, and in compliance with all applicable laws, ordinances, codes, rules,
regulations and other governmental requirements. Tenant shall commence the
construction of Tenant's Work promptly following completion of the pre-
construction activities provided for in Paragraph 3, but in no
B-1
<PAGE>
event later than the date set forth in Section 1.10 of the Lease, shall
diligently proceed with all such construction, and shall achieve Substantial
Completion of Tenant's Work on or before the date set forth in Section 1.11 of
the Lease, subject to Force Majeure Delays.
3. PRE-CONSTRUCTION ACTIVITIES.
(A) Tenant shall submit, as and when available, but in any event prior to
commencement of construction of Tenant's Work, the following information and
items to Landlord for Landlord's review and approval:
(1) A detailed bar chart or CPM construction schedule setting forth
the major components of Tenant's Work and the time required for
each, including the scheduled commencement date of construction
of Tenant's Work, milestone dates and the estimated date of
completion of construction.
(2) An itemized statement of estimated construction cost, including
permits and architectural and engineering fees.
(3) The proposed names and addresses of Tenant's design and
construction contractors (and each contractor's subcontractors)
to be engaged by Tenant for the construction of Tenant's Work
("Tenant's Contractors"). Following approval of the Plans and
Specifications, Tenant shall have the right to solicit bids from
qualified contractors for Tenant's Work, subject to Landlord's
prior approval as to the identity and qualifications of such
contractors, which approval may be granted or withheld by
Landlord in its sole and absolute discretion.
(4) If required by Landlord, payment and performance bonds from
Tenant's general contractor and the major trade contractors in
form and from a surety reasonably acceptable to Landlord.
(5) A list of subcontractors which Tenant or its general contractor
proposes to use. Landlord shall have the right to approve any
subcontractors with contracts in excess of $10,000, which
approval may be granted or withheld by Landlord in its sole and
absolute discretion. Further, notwithstanding anything contained
herein to the contrary, all of Tenant's Contractors, including
any subcontractors which are not subject to the approval of
Landlord, shall possess good labor relations and employ workers
capable of working in harmony with other contractors and
subcontractors at the Demised Premises.
B-2
<PAGE>
(6) Certified copies of insurance policies or certificates of
insurance as hereinafter described. Tenant shall not permit
Tenant's Contractors to commence Tenant's Work until the required
insurance has been obtained and certified copies of policies or
certificates have been delivered to Landlord.
(7) The Plans and Specifications for Tenant's Work, which Plans and
Specifications shall be subject to Landlord's approval in
accordance with Paragraph 3(B) below.
(B) As used herein the term "Plans and Specifications" shall mean full and
detailed architectural and engineering plans and specifications for Tenant's
Work. The Plans and Specifications shall including, without limitation,
drawings and specifications for fire protection, HVAC, electrical, mechanical,
structural and plumbing systems and detailed plans for the signage required for
a Boston Market Unit. The Plans and Specifications shall be prepared by
Tenant's architect and engineer, at Tenant's cost and expense. The Plans and
Specifications shall be subject to Landlord's approval and the approval of all
local governmental authorities requiring approval, if any. Landlord shall give
its approval or disapproval (specifying reasons in case of disapproval) of the
Plans and Specifications within fourteen (14) days after delivery of full, final
detailed Plans and Specifications to Landlord. Landlord shall cooperate with
Tenant by discussing or reviewing preliminary plans and specifications at
Tenant's request prior to completion of the full, final detailed Plans and
Specifications in order to expedite the preparation of and the subsequent
approval process concerning the final Plans and Specifications. If Landlord
notifies Tenant that changes are required to the final Plans and Specifications
submitted by Tenant, Tenant shall, within seven (7) days thereafter, submit to
Landlord for its approval, the Plans and Specifications amended in accordance
with the changes so required. The Plans and Specifications shall also be
revised, and Tenant's Work shall be changed, to incorporate any work required in
the Demised Premises by any local governmental field inspector. Tenant's
architect shall verify all field conditions and dimensions and approve all shop
drawings for Tenant's Work. Once approved by Landlord, a schedule identifying
the approved Plans and Specifications shall be attached to this Agreement as
Schedule One.
(C) Tenant shall not commence construction of Tenant's Work until:
(1) The Plans and Specifications have been submitted to and approved
by Landlord;
(2) All necessary building permits (for each applicable trade) have
been obtained by Tenant and all life safety requirements have
been satisfied and evidence thereof satisfactory to Landlord has
been delivered to Landlord;
B-3
<PAGE>
(3) All required insurance coverages have been obtained by Tenant and
evidence of such coverage has been provided to Landlord (failure
of Landlord to receive evidence of such coverage upon
commencement of construction of Tenant's Work shall not waive
Tenant's obligations to obtain such coverage);
(4) Items required to be submitted to Landlord prior to commencement
of construction of Tenant's Work have been so submitted and have
been approved, where required under this Agreement;
(5) Landlord has given written notice to Tenant that Tenant's Work
can proceed, subject to such reasonable conditions as Landlord
may impose; and
(6) All required payment and performance bonds, if any, have been
obtained and evidence thereof satisfactory to Landlord has been
delivered to Landlord.
4. CHARGES AND FEES. Subject to Paragraph 9, Tenant shall be
responsible for all costs and expenses attributable to Tenant's Work, including,
without limitation, an administrative fee established by Landlord for Landlord's
review of the Plans and Specifications and review of the construction of
Tenant's Work.
5. CHANGE ORDERS. All changes to the final Plans and Specifications
requested by Tenant must be approved by Landlord in advance of the
implementation of such changes as part of Tenant's Work, which approval may be
granted or withheld by Landlord in its sole and absolute discretion. All delays
caused by Tenant initiated change orders, including, without limitation, any
stoppage of work during the change order review process, are solely the
responsibility of Tenant and shall cause no delay in the Commencement Date or
payment of Rent and performance of other obligations set forth in the Lease.
6. PERFORMANCE OF TENANT'S WORK. All work done at the Demised Premises
by Tenant shall be done according to the standards set forth in this Paragraph
6, except as the same may be modified in the Plans and Specifications approved
by Landlord.
(A) The Plans and Specifications and all design and construction of
Tenant's Work shall strictly comply with the Franchise Agreement and all
applicable statutes, ordinances, rules, regulations, laws, codes and industry
standards, including, but not limited to, all requirements of Landlord's fire
insurance underwriters and all requirements of the Americans With Disabilities
Act. Approval by Landlord of the Plans and Specifications shall not constitute
a waiver of this requirement or assumption by Landlord of responsibility for
compliance. Where
B-4
<PAGE>
several sets of the foregoing laws, codes and standards must be met, the
strictest shall apply where not prohibited by another law, code or standard.
(B) Tenant shall, at its own cost and expense, obtain all required building
permits and, when construction has been completed, shall, at its own cost and
expense, obtain an occupancy permit for the Demised Premises, which shall be
delivered to Landlord. Tenant's failure to obtain such permits shall not cause
a delay in the Commencement Date or the payment of Rent and performance of other
obligations under the Lease.
(C) Tenant's Contractors shall be licensed contractors, possessing good
labor relations, capable of performing quality workmanship and working in
harmony with other contractors at the Demised Premises.
(D) Tenant shall use only new, first-class materials in Tenant's Work,
except where explicitly shown in the Plans and Specifications. Tenant shall use
reasonable efforts to obtain, promptly after completion of Tenant's Work,
warranties of at least one (1) year duration from the completion of Tenant's
Work against defects in workmanship and materials on all work performed and
equipment installed in the Demised Premises as part of Tenant's Work, a copy of
which warranties shall be delivered to Landlord upon Tenant's receipt of the
same.
(E) Landlord shall have the right to order Tenant or any of Tenant's
Contractors who violate the requirements imposed on Tenant or Tenant's
Contractors in constructing Tenant's Work to cease work and remove its equipment
and employees from the Demised Premises. No such action by Landlord shall delay
the Commencement Date, or the payment of Rent and performance of other
obligations under the Lease.
(F) Utility costs or charges for any service (including HVAC, hoisting or
freight elevator and the like) to the Demised Premises shall be the
responsibility of Tenant from the date Tenant is obligated to commence or
commences construction of Tenant's Work and shall be paid for by Tenant at
Landlord's rates. Tenant shall apply and pay for all utility meters required.
Tenant shall arrange and pay for removal of construction debris.
(G) Tenant shall permit access to the Demised Premises, and Tenant's Work
shall be subject to inspection by Landlord and its respective architects,
engineers, contractors and other representatives, at all times during the period
in which Tenant's Work being constructed and installed and following completion
of Tenant's Work.
(H) Tenant shall proceed with Tenant's Work expeditiously, continuously and
efficiently, from the date Landlord tenders possession of the Demised Premises
to Tenant for the construction of Tenant's Work. Tenant shall notify Landlord
upon completion of Tenant's Work and shall furnish Landlord and Landlord's title
insurance company with such further documentation as may be required under
Paragraph 9.
B-5
<PAGE>
(I) Tenant shall have no authority to deviate from the approved Plans and
Specifications in construction of Tenant's Work, except as authorized by
Landlord in writing. Tenant shall furnish to Landlord "as-built" drawings of
Tenant's Work consisting of record drawings of the installed condition of each
component of Tenant's Work completed from the Construction Documents marked up
daily in the field by the various trades. Such record drawings shall be
submitted by Tenant's general contractor to Tenant's architect, who shall
review, coordinate and submit such record drawings to Landlord in a mylar sepia
package within ninety (90) days after Substantial Completion of Tenant's Work.
(J) Tenant shall impose on and enforce all applicable terms of this
Agreement against Tenant's architect and Tenant's Contractors.
(K) Tenant shall be solely responsible for and have control over
construction means, methods, techniques, sequences and procedures and for
coordinating all portions of Tenant's Work and neither Landlord nor Franchisor
shall have any responsibility therefor.
(L) Tenant shall be solely responsible for the design of Tenant's Work and
the preparation of the approved Plans and Specifications. Tenant acknowledges
that any design materials furnished by Landlord or Franchisor and any review by
Landlord or Franchisor of the Plans and Specifications shall be for the sole
purpose of ensuring a uniform appearance for all Boston Market Units, and
neither Landlord nor Franchisor shall have any responsibility for nor any
liability in connection with the Plans and Specifications.
(M) Upon completion of Tenant's Work, Tenant shall deliver to Landlord a
land title survey of the Demised Premises reflecting the "as-built" condition of
the Demised Premises, which survey shall be prepared in accordance with "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys" jointly
established and adopted by the American Land Title Association and the American
Congress on Survey and Mapping in 1992 and pursuant to the Accuracy Standards of
an Urban Survey and shall be certified to Landlord and other parties designated
by Landlord.
7. INSURANCE. In addition to any insurance which may be required under
the Lease, Tenant shall secure, pay for and maintain or cause Tenant's
Contractors to secure, pay for and maintain during the construction of Tenant's
Work the following insurance coverages:
(A) Commercial General Liability Insurance with a combined single limit of
not less than One Million Dollars ($1,000,000.00) per occurrence insuring
against bodily injury, death or property damage occurring at or about the
Demised Premises. The Commercial General Liability Insurance shall name Tenant
and the Indemnitees (as hereinafter defined) as additional insureds and shall
include all major divisions of coverage and shall be written on a comprehensive
basis including, without limitation, the following:
B-6
<PAGE>
(1) Premises/Operations (including XCU coverage as applicable);
(2) Independent Contractors Protective;
(3) Products and Completed Operations (which shall be kept in effect
for two (2) years after completion of Tenant's Work);
(4) Personal Injury Liability (with Employment Exclusion deleted);
(5) Blanket Contractual Liability (which shall include the indemnity
contained in Paragraph 8); and
(6) Broad Form Property Damage.
Any aggregate limit under the contractor's liability insurance shall by
endorsement apply to this project separately. Tenant acknowledges that
Landlord's liability insurance shall be excess of the liability insurance
required hereunder.
(B) Commercial Automobile Liability Insurance insuring all owned, non-owned
and hired vehicles with a combined single limit of not less than One Million
Dollars ($1,000,000.00) per occurrence.
(C) Worker's Compensation Insurance with limits as required by statute and
Employers' Liability Insurance with coverage B limits not less than $300,000.00
each accident, $300,000.00 disease - each employee and $500,000.00 disease -
policy limit.
(D) "All Risk" Builder's Risk Insurance insuring the interest of Landlord,
Tenant and Tenant's Contractor's in Tenant's Work against the perils of fire and
extended coverage and physical loss or damage including, without duplication of
coverage, theft, vandalism and malicious mischief, to the full insurable value
of Tenant's Work. If portions of Tenant's Work are stored off the Demised
Premises or in transit to the Demised Premises and are not covered under said
"all-risk" builder's risk insurance, then Tenant shall secure and maintain
similar property insurance on such portions of Tenant's Work. Any loss insured
under said "all-risk" builder's risk insurance is to be adjusted by Landlord and
made payable to Landlord as trustee for the insureds as their interests may
appear.
8. INDEMNIFICATION. Without limitation of the indemnification
provisions contained in the Lease, to the fullest extent permitted by law,
Tenant shall indemnify, protect, defend and hold harmless Landlord and
Franchisor and their respective directors, officers, shareholders, employees and
agents (the "Indemnitees"), from and against all claims, liabilities, losses,
damages and expenses of whatever nature arising out of or in connection with
Tenant's Work, including, without limitation, mechanic's liens or the cost of
any repairs to the Demised
B-7
<PAGE>
Premises necessitated by activities of Tenant or Tenant's Contractors and bodily
injury to persons or damage to the property of Tenant, its employees, agents,
invitees, licensees or others, except and to the extent that such claims,
liabilities, losses, damages and expenses arise out of the negligent act or
omission of the respective Indemnitees. It is understood and agreed that the
foregoing indemnity shall be in addition to the insurance requirements set forth
above and shall not be in discharge of or in substitution for same or any other
indemnity or insurance provision of the Lease.
9. LANDLORD'S ALLOWANCE.
(A) Pursuant to the Lease, Landlord has agreed to contribute Landlord's
Allowance for application to the cost of Tenant's Work. To the extent that the
cost of Tenant's Work exceeds the amount of Landlord's Allowance, Tenant shall
have sole responsibility for the payment of such excess cost. Landlord's
Allowance and such excess cost shall be disbursed through a construction escrow
established by Landlord and Tenant pursuant to the Lease (the "Escrow").
Landlord shall not be required to deposit Landlord's Allowance in the Escrow
until the Escrowee is prepared to make final disbursement to Tenant.
(B) During the construction of Tenant's Work, Tenant may request periodic
payment (but not more frequently than once per month) of funds from the Escrow
on account of Tenant's Work. Final disbursement shall be made to Tenant when
Tenant has satisfied the requirements therefor set forth in Section 6.3 of the
Lease. Landlord reserves the right to direct Escrowee to make payment directly
to Tenant's Contractors.
(C) Each request by Tenant for payment of funds shall be accompanied by
the following:
(1) a sworn statement by Tenant disclosing the various contracts
entered into by Tenant relating to the construction of Tenant's
Work in the form required by Escrowee;
(2) a sworn statement by Tenant's Contractors to Tenant setting forth
the names and addresses of such persons furnishing labor, service
or materials, the kind of labor, service or materials to be
furnished, the amounts of the contracts, amounts paid to date, if
any, amounts of current payments, if any, and balances to become
due, if any;
(3) a report by Tenant's architect certifying that Tenant's Work has
been completed and materials are in place as indicated by
Tenant's construction draw request;
B-8
<PAGE>
(4) statements, waivers, affidavits, supporting waivers and releases
of lien from such persons and in such form as may be required by
Landlord and Landlord's title insurer for the purpose of
providing title insurance coverage covering the disbursement;
(5) sufficient funds to cover the amount of the requested
disbursement; and
(6) such other documents as may be reasonably requested by Escrowee,
Landlord or Franchisor.
(D) Upon satisfaction of the requirements for each partial disbursement,
Landlord shall direct Escrowee to disburse ninety (90%) of costs incurred on
account of Tenant's Work through the date of disbursement for which Tenant has
provided the supporting documentation required by the Lease and this Agreement,
less the amounts previously disbursed by Escrowee. Upon satisfaction of the
requirements for the final disbursement, Landlord shall deposit Landlord's
Allowance into the Escrow and direct Escrowee to make final disbursement of
funds.
10. MISCELLANEOUS.
(A) Except as herein expressly set forth or in the Lease, Landlord has no
agreement with Tenant and has no obligation to do any work with respect to the
Demised Premises.
(B) Time is of the essence under this Agreement.
(C) Any person signing this Agreement on behalf of Tenant warrants and
represents he has authority to do so.
(D) If Tenant fails to make any payment relating to Tenant's Work as
required hereunder, Landlord, at its option, may complete Tenant's Work pursuant
to the approved Plans and Specifications and continue to hold Tenant liable for
the costs thereof and all other costs due to Landlord. Tenant's failure to pay
any amounts owed by Tenant hereunder when due or Tenant's failure to perform its
obligations hereunder shall also constitute a default under the Lease and
Landlord shall have all the rights and remedies granted to Landlord under the
Lease for nonpayment of any amounts owed thereunder or failure by Tenant to
perform its obligations thereunder.
(E) Tenant shall not install any equipment in the Demised Premises unless
such Equipment has been designated or approved by Landlord.
(F) Notices under this Agreement shall be given in the same manner as under
the Lease.
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<PAGE>
(G) The liability of Landlord hereunder or under any amendment hereto or
any instrument or document executed in connection herewith (including, without
limitation, the Lease) shall be limited as provided in Section 24.11 of the
Lease.
(H) The headings set forth herein are for convenience only.
(I) This Agreement sets forth the entire agreement of Tenant and Landlord
regarding the design and construction of Tenant's Work. This Agreement may only
be amended if in writing, duly executed by both Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LANDLORD:
--------
BC REAL ESTATE INVESTMENTS, INC.,
a Delaware corporation
By:_________________________________
Name:_____________________________
Title:____________________________
TENANT:
------
____________________________________
By:_________________________________
Name:_____________________________
Title:____________________________
B-10
<PAGE>
SCHEDULE ONE TO WORKLETTER AGREEMENT
------------------------------------
APPROVED PLANS AND SPECIFICATIONS
---------------------------------
[to be attached]
Schedule One, Page 1
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "C"
-----------
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT is made and entered into as of the ____ day of __________,
19___, by and between BC Real Estate Investments, Inc., a Delaware corporation
("Landlord"), and ________________________________, a __________ corporation
("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord and Tenant have entered into a certain Franchise Lease
dated __________________________, 19____ (the "Lease") for a Boston Market Unit
located in __________, ___________ County, ___________; and
WHEREAS, Landlord and Tenant desire to enter into this Agreement to confirm
the Commencement Date, the Expiration Date, the Renewal Term, Base Annual Rent
and other matters set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:
1. Defined Terms. All capitalized terms used in this Agreement but not
defined in this Agreement shall have the meanings given to such terms under the
Lease.
2. Confirmation of Term and Rent. Landlord and Tenant each acknowledge,
agree and confirm the following:
(a) The Commencement Date is _________________, 19____;
(b) The Expiration Date is _________________, 20____;
(c) Tenant first opened the Demised Premises for business to the
public on _________________, 19____;
C-1
<PAGE>
(d) Tenant has one (1) option to renew the Lease for a Renewal Term of
five (5) years;
(e) The Demised Premises contains __________ square feet of space;
(f) Base Annual Rent under the Lease shall be as follows:
Period Base Annual Rent Monthly Installment
------ ---------------- -------------------
___/___/___ - ___/___/___ $____________ $____________
___/___/___ - ___/___/___ $____________ $____________
___/___/___ - ___/___/___ $____________ $____________
Renewal Term $____________ $____________
3. Conclusive Evidence. For purposes of the Lease, this Agreement shall
be conclusive evidence of the information contained in this Agreement.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___.
____________________________________
Witness:
___________________________________ By: ________________________________
Name: __________________________
___________________________________ Title: _________________________
Dated this ________ day LANDLORD:
of _______________, 19____.
BC REAL ESTATE INVESTMENTS,
INC., a Delaware corporation
Witness:
___________________________________ By: ________________________________
Name: __________________________
___________________________________ Title: _________________________
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<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "D"
-----------
MEMORANDUM OF TERM COMMENCEMENT AGREEMENT
-----------------------------------------
THIS AGREEMENT is made and entered into as of the ____ day of __________,
19___, by and between BC Real Estate Investments, Inc., a Delaware corporation
("Landlord"), and ________________________________, a __________ corporation
("Tenant").
W I T N E S S E T H:
-------------------
WHEREAS, Landlord and Tenant have entered into a certain Franchise Lease
dated __________________________, 19____ (the "Lease") for a Boston Market Unit
located in __________, ___________ County, ___________, and legally described
on Exhibit A attached hereto and made a part hereof; and
WHEREAS, a Memorandum of Franchise Lease was recorded with the County
Recorder of _____________ County, ______________, as Document ____________; and
WHEREAS, Landlord and Tenant desire to enter into this Agreement to confirm
the Commencement Date, the Expiration Date, the Renewal Term and other matters
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:
1. Defined Terms. All capitalized terms used in this Agreement but not
defined in this Agreement shall have the meanings given to such terms under the
Lease.
THIS DOCUMENT WAS PREPARED BY
AND AFTER RECORDING RETURN TO:
BC Real Estate Investments, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attention: Real Estate Services Department
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2. Confirmation of Term and Rent. Landlord and Tenant each acknowledge,
agree and confirm the following:
(a) The Commencement Date is _________________, 19____;
(b) The Expiration Date is _________________, 20____;
(c) Tenant first opened the Demised Premises for business to the
public on _________________, 19____;
(d) Tenant has one (1) option to renew the Lease for a Renewal Term of
five (5) years;
(e) The Demised Premises contains __________ square feet of space;
3. Conclusive Evidence. For purposes of the Lease, this Agreement shall
be conclusive evidence of the information contained in this Agreement.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___.
____________________________________
Witness:
___________________________________ By: ________________________________
Name: __________________________
___________________________________ Title: _________________________
Dated this ________ day LANDLORD:
of _______________, 19____.
BC REAL ESTATE INVESTMENTS,
INC., a Delaware corporation
Witness:
___________________________________ By: ________________________________
Name: __________________________
___________________________________ Title: _________________________
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STATE OF COLORADO )
)
COUNTY OF JEFFERSON )
Personally appeared before me, a Notary Public in and for the above County
and State, _________________________________, known personally by me and
acknowledged by me to be on the date of execution, _________________________ of
BC Real Estate Investments, Inc., a Delaware corporation, and he/she executed
the foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of _____________
19____.
____________________________________
Notary Public
My Commission Expires:
__________________________
STATE OF ____________ )
)
COUNTY OF ___________ )
Personally appeared before me, a Notary Public in and for the above County
and State, __________________________________, known personally by me and
acknowledged by me to be on the date of execution, the ___________________ of
____________________, a _______________ corporation, and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of _____________
19___.
____________________________________
Notary Public
My Commission Expires:
__________________________
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<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "E"
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CERTIFICATE OF SUBSTANTIAL COMPLETION
-------------------------------------
PROJECT: Boston Market Restaurant
____________________________________________________
__________, _______________ County, ________________
ARCHITECT: _________________________________________________
_________________________________________________
_________________________________________________
(____) ____-_____
CONTRACTOR: _________________________________________________
_________________________________________________
_________________________________________________
(____) ____-_____
TO: BC REAL ESTATE INVESTMENTS, ____________________________________________
INC. ____________________________________________
14103 Denver West Parkway ____________________________________________
P.O. Box 4086 ____________________________________________
Golden, Colorado 80401-4086 ____________________________________________
DATE OF ISSUANCE: ___________, 19___
The work performed under this Contract has been reviewed and found to be
substantially complete. The Date of Substantial Completion of the Project is
established as _________________, 19___, which is also the date of commencement
of applicable warranties required by the Contract.
The Date of Substantial Completion of the Work is the Date certified by the
Architect when construction is sufficiently complete, in accordance with the
Contract, so that Tenant can occupy or utilize the Work as a restaurant open to
the public for business as a "Boston Market" restaurant.
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A list of items to be completed or corrected, prepared by the Contractor
and verified and amended by the Architect, is attached hereto as Exhibit A (the
"Punchlist"). The failure to include any items on the Punchlist does not alter
the responsibility of the Contractor to complete all Work in accordance with the
Contract. The date of commencement of warranties for items on the Punchlist
will be one (1) year from completion unless otherwise agreed to in writing.
_____________________ ______________________ ________________
ARCHITECT BY DATE
The Contractor will complete or correct the Work on the Punchlist within 30 days
from the above Date of Substantial Completion, unless another date is specified
next to the item on the Punchlist.
_____________________ ______________________ ________________
CONTRACTOR BY DATE
The Tenant accepts the Work as substantially complete subject to completion of
the Punchlist and other items of work required by the Contract and will assume
full possession thereof at on _____________, 19___.
_____________________ ______________________ ________________
TENANT BY DATE
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<PAGE>
LOCATION: ________________________
Escrow Trust No._____________
STORE NUMBER: ________________________
Commitment No._______________
EXHIBIT "F"
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ESCROW INSTRUCTIONS
-------------------
OWNERS CONSTRUCTION ESCROW TRUST AND DISBURSING AGREEMENT
WITH TITLE INSURANCE
1. General Information.
<TABLE>
<S> <C> <C>
(A) Owner: Attorney for Owner:
BC Real Estate Investments, Inc. Rudnick & Wolfe
14103 Denver West Parkway 203 North LaSalle Street
P.O. Box 4086 Suite 1800
Golden, Colorado 80401-4086 Chicago, Illinois 60601
Attention: Real Estate Services Dept. Attention: Alan J. Salle
(303) 278-9500 (312) 368-4000
(303) 384-5339 (FAX) (312) 236-7516 (FAX)
(B) Tenant: Attorney for Tenant:
_______________________ ________________________
_______________________ ________________________
_______________________ ________________________
_______________________ ________________________
Attention:_____________ Attention:______________
(____) ____-_____ (____) ____ - _____
(____) ____-_____ (FAX) (____) ____ - _____ (FAX)
(C) Escrow Trustee: Title Insurer:
Chicago Title and Trust Company Chicago Title Insurance Company
171 North Clark Street 171 North Clark Street
Chicago, Illinois 60601 Chicago, Illinois 60601
Attention:_____________ Attention:______________
(312) 223-2000 (312) 223-2000
(312) 223-_____ (FAX) (312) 223-_____ (FAX)
</TABLE>
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<PAGE>
(D) Architect: General Contractor:
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
Attention:_________________ Attention:_________________
(____) ____-_____ (____) ____ - _____
(____) ____-_____ (FAX) (____) ____ - _____ (FAX)
(E) Project: Boston Market Store
____________________________
_________, ____________County,______________
(F) Amount of Deposits to be made by Owner: $___________
Amount of Deposits to be made by Tenant: $___________
(G) Billing Instructions: Title and escrow charges are to be billed to
Tenant.
2. Recitals.
(A) Tenant is about to commence or has commenced construction of or
rehabilitation of improvements on certain premises (the "Project") legally
described on Exhibit "A" attached hereto and made a part hereof and on Schedule
A of the Title Commitment described above;
(B) Owner has requested Escrow Trustee to act as an escrow trustee and to
provide a disbursing service for the payment of Project construction costs and
other related development costs; and
(C) Owner has ordered from Title Insurer a commitment for a Standard ALTA
Owners Title Insurance Policy and Date Down Endorsements thereof together with
Interim Mechanics' Lien Endorsements therefor to be issued periodically as
disbursements are made by Escrow Trustee.
(D) Owner, Tenant and Escrow Trustee agree as follows:
(1) Tenant will deposit or cause to be deposited and Owner may
deposit from time to time certain sums of money (the funds) in
the form of certified or cashier's checks with Escrow Trustee;
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<PAGE>
(2) Escrow Trustee will disburse the funds to pay for project
construction costs pursuant to the provisions of this Agreement as hereinafter
set forth;
(3) Escrow Trustee will disburse funds for construction payments
jointly to General Contractor and subcontractors named on any
current sworn statement. In the event that General Contractor
and any subcontractor jointly authorize Escrow Trustee to pay any
funds due one to the other, Escrow Trustee may comply with such
authorization. However, it is the intention of the parties named
herein and signatory hereto that no person not a party signatory
to this escrow shall have the right to look to Escrow Trustee for
any disbursement hereunder under a third party beneficiary theory
or otherwise, and that Escrow Trustee owes no duty to any such
third party to make any disbursement; and
(4) If required, Escrow Trustee will disburse funds for
nonconstruction costs pursuant to procedures set forth
hereinafter at Paragraph 3(B)(6).
3. Requirements.
(A) Prior to the first disbursement of funds by Escrow Trustee hereunder,
the following requirements shall have been satisfied, to wit:
(1) Escrow Trustee shall have furnished or caused to be furnished to
Owner, as the proposed insured, a current dated commitment issued
by Title Insurer for a Standard ALTA Owners Title Insurance
Policy (the Policy); and
(2) Owner shall furnish to Escrow Trustee a written approval of the
condition of title.
(B) Prior to each disbursement of funds by Escrow Trustee hereunder, it is
a requirement of this Agreement that Escrow Trustee be furnished the following:
(1) A Sworn Owner's Statement by Tenant in form acceptable to Escrow
Trustee disclosing the various contracts entered into by Tenant
relating to the construction of the Project and setting forth the
names of the contractors, their addresses, the kind of service,
work or materials to be furnished, the amounts of such contracts,
the amounts paid to date, if any, the amounts of current
payments, if any, and the balances to become due, if any;
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<PAGE>
(2) A sworn statement to Owner and Tenant by General Contractor
setting forth the name and addresses of such persons furnishing
labor, service or materials (i.e., subtrades and material
suppliers), the kind of labor, service or materials to be
furnished, the amounts of the contracts, amounts paid to date, if
any, amounts of current payments, if any, and balance to become
due, if any.
(3) A written approval by Owner of the requested disbursement;
(4) A certification by the Architect certifying that work has been
completed and materials are in place as indicated by the current
construction draw request of General Contractor;
(5) Statements, waivers, affidavits, supporting waivers, and releases
of lien from such persons and in such form as may be required by
Title Insurer for the purpose of providing the title insurance
coverage specified in this Agreement covering the current
disbursement;
(6) In the event that nonconstruction costs are to be paid by Escrow
Trustee with the funds, then Tenant shall provide written payment
directions to Escrow Trustee setting forth the names and
addresses of the payee, the amounts of the respective payments,
and the purpose of the payments (i.e., legal fees, real estate
taxes, etc.); and
(7) Sufficient funds to cover the current disbursement request.
(C) As Escrow Trustee makes a partial disbursement of funds hereunder,
Escrow Trustee will furnish Owner with Title Insurer's Date Down Endorsement #5
covering the date of the disbursement of funds together with following Interim
Mechanic Lien Endorsement for Owner:
The undersigned insures Owner to the extent of $____________ against loss
or damage which may be suffered by Owner by reason of the entry of a final
judgement or decree of a court of competent jurisdiction enforcing any
mechanics' lien claim on the premises described in its commitment number
_________ for that part of the work or materials performed and furnished as
set forth and itemized on the contractor's statements of ____________ dated
____________, 19___, and prior dates which have been certified as in place
by _______________________ and in support of which subcontractors'
statements and waivers have been deposited with Title Insurer.
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<PAGE>
(D) Prior to the final disbursement of funds hereunder, it is a
requirement of this escrow that Title Insurer be prepared to furnish the ALTA
Owner's Title Insurance Policy with extended coverage insuring over mechanics'
lien claims, subject to the usual terms, conditions and stipulations, and
exclusions from coverage contained in such policy first approved by Owner,
together with such exceptions as appear in the title commitment aforesaid. With
respect to the conditions of title, the liability of Escrow Trustee in making
any disbursement in reliance upon the title commitment is limited to insuring
that the condition of the title is correctly set forth in said title commitment
and shall not extend to the determination of whether it is acceptable to Owner,
the furnishing of funds for disbursement being considered an acceptance of title
as so reported.
4. General Conditions.
(A) Where, after the first disbursement, a further title search reveals a
mechanics' lien claim subsequently placed of record over which Title Insurer is
unwilling to insure, Escrow Trustee will notify Owner and will not disburse
Owner's current deposit unless specifically directed in writing by Owner to do
so.
(B) If Escrow Trustee discovers a misstatement in an affidavit furnished
by General Contractor to Owner or Tenant, it may stop disbursements until the
misstatement has been corrected. Escrow Trustee may, at its option, verify
information submitted by General Contractor or may require Owner to furnish
verification by subcontractors or material suppliers.
(C) Tenant represents and warrants to Escrow Trustee that on the date of
this Agreement, funds available for construction payment are ample to complete
the Project.
(D) The functions and duties assumed by Escrow Trustee include only those
described in this Agreement and Escrow Trustee is not obligated to act except in
accordance with the terms and conditions of this Agreement. Escrow Trustee does
not insure that the building will be completed, nor does it insure that the
building, when completed, will be in accordance with plans and specifications,
nor that sufficient funds will be available for completion, nor does it make the
certifications of the Architect its own, nor does it assume any liability for
same other than procurement as one of the conditions precedent to each
disbursement.
(E) Escrow Trustee has no liability for loss caused by any error in the
certification furnished it hereunder as to work in place.
(F) Escrow Trustee shall not be responsible for any loss of documents
while such documents are not in its custody. Documents deposited in the United
States Mail shall not be construed as being in custody of Escrow Trustee.
F-5
<PAGE>
(G) Deposits made pursuant to these instructions may be invested on behalf
of Tenant; provided, however, that such direction shall be in writing and be
accompanied by the taxpayer's identification number and such investment forms as
may be required. Escrow Trustee will, upon request, furnish information
concerning procedures and fee schedules for investment.
(H) Except as to deposits of funds for which Escrow Trustee has received
express written direction concerning investment or other handling, the parties
hereto agree that (i) Escrow Trustee shall be under no duty to invest or
reinvest any deposits at any time held by it hereunder and (ii) Escrow Trustee
may commingle such deposits with other deposits or with its own funds in the
manner provided for the administration of funds under Section 2-8 of the
Illinois Corporate Fiduciary Act and may use any part of all such funds for its
own benefit without obligations to any party for interest or earnings derived
thereby, if any.
(I) In the event that Escrow Trustee is requested to invest deposit
hereunder, Escrow Trustee is not to be held responsible for any loss of
principal or interest which may be incurred as a result of making the
investments or redeeming said investment for the purpose of this escrow trust
unless caused by its negligence. All earnings on any deposits shall be held in
this escrow trust until final disbursement of funds hereunder at which time such
earnings, if any, shall be disbursed to Tenant.
(J) This Agreement shall not inure to the benefit of any parties other
than the parties hereto, under a third party beneficiary theory or otherwise;
and any liability to such parties is expressly disclaimed.
F-6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
_____ day of __________, 19___.
OWNER: TENANT:
- ----- ------
BC REAL ESTATE INVESTMENTS, _________________________________________
INC.
By:_______________________________ By:______________________________________
Name:____________________________ Name:_________________________________
Title:___________________________ Title:________________________________
GENERAL CONTRACTOR: ESCROW TRUSTEE:
- ------------------ --------------
__________________________________ CHICAGO TITLE AND TRUST COMPANY
By:_______________________________ By:______________________________________
Name:____________________________ Name:___________________________________
Title:___________________________ Title:__________________________________
F-7
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "G"
-----------
INSURANCE REQUIRED DURING CONSTRUCTION
--------------------------------------
In addition to any insurance which may be required under the Lease, Tenant
shall secure, pay for and maintain or cause Tenant's contractors to secure, pay
for and maintain during construction of the following insurance coverages:
(A) Commercial General Liability Insurance with a combined single limit of
not less than One Million Dollars ($1,000,000.00) per occurrence insuring
against bodily injury, death or property damage occurring at or about the
Demised Premises. The Commercial General Liability Insurance shall name Tenant
and Landlord and Landlord's directors, officers, shareholders, employees and
agents as additional insureds and shall include all major divisions of coverage
and shall be written on a comprehensive basis including, without limitation, the
following:
(1) Premises/Operations (including XCU coverage as applicable);
(2) Independent Contractors Protective;
(3) Products and Completed Operations (which shall be kept in effect
for two (2) years after completion of construction);
(4) Personal Injury Liability (with Employment Exclusion deleted);
(5) Blanket Contractual Liability (which shall include the indemnity
contained in Section 14.4 of the Lease); and
(6) Broad Form Property Damage.
Any aggregate limit under the contractor's liability insurance shall by
endorsement apply to this project separately. Tenant acknowledges that
Landlord's liability insurance shall be excess of the liability insurance
required hereunder.
(B) Commercial Automobile Liability Insurance insuring all owned, non-
owned and hired vehicles with a combined single limit of not less than One
Million Dollars ($1,000,000.00) per occurrence.
G-1
<PAGE>
(C) Worker's Compensation Insurance with limits as required by statute and
Employers' Liability Insurance with coverage B limits not less than $300,000.00
each accident, $300,000.00 disease - each employee and $500,000.00 disease -
policy limit.
(D) "All Risk" Builder's Risk Insurance insuring the interest of Landlord,
Tenant and Tenant's Contractor's in the Demised Premises against the perils of
fire and extended coverage and physical loss or damage including, without
duplication of coverage, theft, vandalism and malicious mischief, to the full
insurable value of the Demised Premises. If materials are stored off the
Demised Premises or in transit to the Demised Premises and are not covered under
said "all-risk" builder's risk insurance, then Tenant shall secure and maintain
similar property insurance on such materials. Any loss insured under said "all-
risk" builder's risk insurance is to be adjusted by Landlord and made payable to
Landlord as trustee for the insureds as their interests may appear.
G-2
<PAGE>
LOCATION: _____________
STORE NUMBER: _____________
EXHIBIT "H"
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COLLATERAL ASSIGNMENT OF LEASE
------------------------------
THIS COLLATERAL ASSIGNMENT OF LEASE (this "Assignment") is made as of the
____ day of_______, 199_, by__________("Borrower") to BOSTON CHICKEN, INC., a
Delaware corporation ("Lender").
W I T N E S S E T H:
-------------------
WHEREAS, Lender 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 Loan Agreement (the "Loan Agreement"; terms used
herein and not otherwise defined herein shall have the meaning assigned thereto
in the Loan Agreement) between Borrower and Lender;
WHEREAS, Borrower has entered into that certain Franchise Lease dated_____,
19__, with BC Real Estate Investments, Inc., a Delaware corporation
("Landlord"), demising the property legally described on Exhibit A (the "Demised
Premises") attached hereto and made a part hereof (which lease, together with
all renewals, extensions, modifications, amendments, substitutions and
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 Demised Premises, are
hereinafter referred to as the "Lease");
WHEREAS, Lender and Borrower are parties to a certain Franchise Agreement
pursuant to which Lender granted Borrower certain rights to own and operate a
Boston Market Unit at the Demised Premises (The "Franchise Agreement");
WHEREAS, the Lease is to be collaterally assigned by Borrower to Lender as
additional security for all of Borrower's obligations to Lender arising under or
in connection with the Loan Agreement and the other loan documents (the
"Liabilities"); and
THIS DOCUMENT PREPARED BY
AND AFTER RECORDING MAIL TO:
Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attention: Real Estate Services Department
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WHEREAS, the Franchise Agreement also requires that the Lease also be
collaterally assigned by Borrower to Lender.
NOW, THEREFORE, for and in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Assignment. In order to induce Lender to make advances under the
Loan 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 Loan Agreement, in the other loan documents, and in the Franchise Agreement,
Borrower does hereby assign, set over, and transfer to Lender, 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 under Lender, 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 Loan
Agreement, in the other loan documents and in the Franchise Agreement.
2. Warranties, Representations and Covenants. Borrower hereby covenants,
represents, and warrants to Lender and agrees as follows:
A. At all times, Lender shall have the right to verify the validity,
amount of rent and other charges and any other matter relating to the
Lease, by mail, telephone, facsimile or otherwise, in the name of Borrower
or Lender, all in accordance with the terms and conditions of the Lease.
B. Unless Lender notifies Borrower in writing that it waives any one
or more of the following requirements, Borrower shall (i) notify Lender, in
writing, of any assertion of any defaults, claims, liabilities, offsets and
counterclaims under the Lease; and (ii) not permit or agree to any
termination, surrender, settlement, 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 Lender; Borrower is the lessee under the
Lease and has good title and the lawful right to collaterally assign its
interest in the same; 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 or the Demised Premises to any other
person or entity.
D. Borrower has and shall: (i) observe, perform and discharge, duly
and punctually, all the obligations, terms, covenants, conditions and
warranties of the Loan Agreement, the other loan documents, the Franchise
Agreement and the Lease, on the
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part of Borrower to be kept, observed and performed; (ii) give prompt
notice to Lender of any failure on the part of Borrower to observe, perform
and discharge same; (iii) 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, and upon request of Lender, will do so in the name and behalf
of Lender but at the expense of Borrower; and (iv) pay all costs and
expenses of Lender, including reasonable attorneys' fees, in any action or
proceeding in which Lender may appear hereunder.
E. Borrower has entered or will enter into occupancy of the Demised
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; Landlord has
completed, or will complete within the time period provided in the Lease,
all improvements required by the terms of the Lease; and the Demised
Premises are, or will be within the due course of construction completion,
open for the use of Borrower, its customers, employees and invitees.
F. Lender 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 Demised Premises nor shall Lender by entering into this
Assignment assume any additional obligation, duty or liability under the
Lease.
G. Borrower hereby agrees to indemnify and hold Lender harmless of,
from and against any and all liability, loss, damage and expense which
Lender may or might incur by reason of this Assignment. Should Lender
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 under the terms of the Loan Agreement) from the date of
Lender's payment thereof until repaid to Lender, and shall be secured
hereby.
H. The failure of Lender 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
Lender of any of its rights and remedies hereunder. The rights and
remedies of Lender under this Assignment are and shall be cumulative and in
addition to any and all rights and remedies available to Lender under the
Loan Agreement, the other loan documents and the Franchise Agreement.
I. This Assignment was executed and delivered in, and, except as
otherwise specifically stated in any given paragraph hereof, shall be
governed as to validity, interpretation, construction, effect and in all
other respects by the laws and decisions of the State of Colorado without
reference to the choice of law.
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3. Power of Attorney. Upon the occurrence of an Event of Default (as
defined in the Loan Agreement) under the terms of the Loan Agreement or a
default by Borrower under the Lease or the Franchise Agreement, Borrower further
irrevocably appoints Lender 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 Lender'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 Loan Agreement or a default by Borrower under the Lease or the
Franchise Agreement, Lender, 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 Demised
Premises or any part thereof pursuant to the terms and conditions of the
Lease, and Borrower agrees (i) to surrender possession of the same; (ii)
that Borrower shall have no further right, title or interest in the Lease
and the Demised Premises; and (iii) that Borrower shall remain liable to
Lender for all past due rents and other charges, agreements and obligations
set forth in the Lease which Lender shall be required either to pay to
Landlord or perform thereunder.
B. If such Event of Default under the Loan Agreement or default under
the Franchise Agreement occurs due to Borrower's default under the Lease,
Lender may cure any such default under the Lease within the curative times
provided in the Lease, or any longer period granted to Lender by Landlord.
C. Exercise any and all rights and remedies afforded to Lender under
the Loan Agreement, the other loan documents, the Franchise Agreement and
the Uniform Commercial Code and any and/all other applicable provisions of
law or equity, including the right to sell Borrower's interest in the Lease
at a public or private sale.
5. Exercise of Options. Throughout the term of the Franchise Agreement,
Borrower agrees that it shall elect and exercise all options to extend the term
of or renew the Lease not less than thirty (30) days prior to the last day that
said option must be exercised, unless Lender otherwise agrees in writing.
Borrower shall send Lender a copy of the notice of exercise concurrently with
Borrower's exercise of the option. Upon failure of Lender to otherwise agree in
writing, and upon failure of Borrower to so elect to extend or renew the Lease
as aforesaid, Borrower hereby appoints Lender as its true and lawful attorney-
in-fact to exercise such extension or renewal options in the name, place and
stead of Borrower for the sole purpose of effecting such extension or renewal,
provided that Lender shall have the right but not the obligation to exercise
such extension or renewal options.
H-4
<PAGE>
6. Successors and Assigns. This Assignment shall be binding upon
Borrower and its heirs, representatives, successors and assigns and shall inure
to the benefit of Lender and its heirs, representatives, successors and assigns.
IN WITNESS WHEREOF, this Assignment has been duly exercised the day and
year first above written.
BORROWER: LENDER:
- -------- ------
_______________, a ______________ BOSTON CHICKEN, INC., a Delaware
corporation
By: By:
---------------------------- -----------------------------------
Name: Name:
------------------------- --------------------------------
Its: Its:
-------------------------- ---------------------------------
STATE OF _____________________ )
) SS
COUNTY OF ____________________ )
Personally appeared before me, a Notary Public in and for the County and
State,____________, known personally by me and acknowledged by me to be on the
date of execution, the ____________ of _____________, a corporation, and he/she
executed the foregoing for and on behalf of said Corporation by authority of its
Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of _________, 19__.
-------------------------------
Notary Public
My Commission Expires:
- ----------------------
H-5
<PAGE>
STATE OF COLORADO )
) SS
COUNTY OF JEFFERSON )
Personally appeared before me, a Notary Public in and for the County and
State, ________, known personally by me and acknowledged by me to be on the date
of execution, the ____ of Boston Chicken, Inc., a Delaware corporation, and
he/she executed the foregoing for and on behalf of said Corporation by authority
of its Board of Directors.
Witnessed by hand and this notarial seal, this ____ day of _______, 19__.
--------------------------------
Notary Public
My Commission Expires:
- --------------------
H-6
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "H"
-----------
COLLATERAL ASSIGNMENT OF LEASE
------------------------------
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns, transfers
and sets over unto BOSTON CHICKEN, INC., a Delaware corporation ("Assignee") all
of Assignor's right, title and interest as tenant in, to and under that certain
Franchise Lease dated ________________, 19___, between BC Real Estate
Investments, Inc., as landlord, and Assignor, as tenant (the "Lease"),
respecting premises demised by the Lease, commonly known as _______________, and
legally described on Exhibit "A" attached hereto and made a part hereof (the
"Demised Premises"). This Assignment is for collateral purposes only and except
as specified herein, Assignee shall have no liability or obligation of any kind
whatsoever arising from or in connection with this Assignment or the Lease
unless Assignee shall take possession of the Demised Premises pursuant to the
terms hereof and shall assume the obligations of Assignor thereunder.
Assignor represents and warrants to Assignee that it has full power and
authority to so assign the Lease and its interest therein and that Assignor has
not previously, and is not obligated to, assign or transfer any of its interest
in the Lease or the Demised Premises.
Upon a default by Assignor under the Lease or under the Boston Chicken,
Inc. Franchise Agreement for a Boston Market Unit, between Assignee and Assignor
(the "Franchise Agreement"), or in the event of a default by Assignor under any
document or instrument securing said Franchise Agreement, Assignee shall have
the right and is hereby empowered to take possession of the Demised Premises,
expel Assignor therefrom, and, in such event, Assignor shall have no further
right, title or interest in the Lease or the Demised Premises and shall remain
liable to Assignee for all past due rents and other charges, agreements and
obligations set forth in the Lease which Assignee shall be required to pay to
Landlord or perform to effectuate the assignment contemplated hereunder.
THIS DOCUMENT PREPARED BY
AND AFTER RECORDING MAIL TO:
Boston Chicken, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attention: Real Estate Services Department
H-1
<PAGE>
Assignor agrees that it will not suffer or permit any surrender,
termination, amendment or modification of the Lease without the prior written
consent of Assignee. Throughout the term of the Franchise Agreement, Assignor
agrees that it shall elect and exercise all options to extend the term of or
renew the Lease not less than thirty (30) days prior to the last day that said
option must be exercised, unless Assignee otherwise agrees in writing. Upon
failure of Assignee to otherwise agree in writing, and upon failure of Assignor
to so elect to extend or renew the Lease as aforesaid, Assignor hereby appoints
Assignee as its true and lawful attorney-in-fact to exercise such extension or
renewal options in the name, place and stead of Assignor for the sole purpose of
effecting such extension or renewal, provided that Assignee shall have the right
but not the obligation to exercise such extension or renewal options.
Dated this ____ day of ASSIGNOR:
_______________, 19__.
__________________________________
Witness:
__________________________ By:_______________________________
Name:___________________________
__________________________ Title:__________________________
STATE OF ___________ )
COUNTY OF __________ )
Personally appeared before me, a Notary Public in and for the County and
State,_________, known personally by me and acknowledged by me to be on the date
of execution, the______of_______, a________corporation, and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of________, 19__.
___________________________
Notary Public
My Commission Expires:
____________________
H-2
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "I"
-----------
MEMORANDUM OF FRANCHISE LEASE
-----------------------------
THIS MEMORANDUM OF FRANCHISE LEASE (this "Memorandum") is made and
entered into as of the ____ day of __________, 19___, by and between BC Real
Estate Investments, Inc., a Delaware corporation ("Landlord"), with an address
at 14103 Denver West Parkway, P.O. Box 4086, Golden, Colorado 80401-4086, and
____________________________, a __________ corporation ("Tenant"), with an
address at ____________________________________________________________________
________________________________________________________
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord is the fee owner of certain premises (the "Demised
Premises") situated in __________, ___________ County, ___________, and legally
described on Exhibit A attached hereto and made a part hereof; and
WHEREAS, Landlord and Tenant have entered into a certain Franchise
Lease dated __________________________, 19____ (the "Lease") for a Boston Market
Unit located at the Demised Premises; and
WHEREAS, Landlord and Tenant desire to enter into this Memorandum
which is to be recorded in order that third parties may have notice of the
rights of Landlord and Tenant under the Lease and of the existence of the Lease.
NOW THEREFORE, Landlord, for and in consideration of the rents to be
paid and the obligations to be performed by Tenant as provided in the Lease,
does hereby demise and lease unto Tenant and Tenant does hereby take and hire,
upon and subject to the conditions expressed in the Lease, the Demised Premises,
and state and agree as follows:
THIS DOCUMENT PREPARED BY
AND AFTER RECORDING MAIL TO:
BC Real Estate Investments, Inc.
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attention: Real Estate Services Department
I-1
<PAGE>
1. The recitals set forth above shall be incorporated into this Memorandum
by this reference as if such recitals were written at length in this Memorandum.
2. Landlord and Tenant executed and delivered the Lease as of the date set
forth in the recitals set forth above. Copies of the Lease are being held by
both Landlord and Tenant at their respective addresses stated above. Capitalized
terms unless otherwise defined herein shall have the meanings given to them in
the Lease.
3. The Term shall commence on the earlier to occur of (i) the date on
which Tenant first opens the Demised Premises for business to the public or (ii)
the date which is two (2) months after the Delivery Date (the "Commencement
Date"); provided, however, if the Demised Premises are open for business to the
public on the Delivery Date, then the Commencement Date shall be the Delivery
Date.
4. The Term shall expire on the date which is the day before the fifteenth
(15th) anniversary of the date of the Franchise Agreement (the "Expiration
Date"), unless the Term shall be extended or earlier terminated in accordance
with the Lease.
5. Tenant has one option under the Lease to renew the Term of the Lease
for a Renewal Term of five (5) years.
6. Tenant has collaterally assigned its interest in the Lease to Boston
Chicken, Inc. and any transfer by Tenant of its interest in the Lease shall be
subject to said collateral assignment until and unless said collateral
assignment is released by Boston Chicken, Inc. Landlord has consented to said
collateral assignment.
7. All of the terms, conditions, provisions and covenants of the Lease are
incorporated in this Memorandum by reference as though written at length herein
and the Lease and this Memorandum shall be deemed to constitute a single
instrument or document. The rights and obligations of the parties hereto shall
be construed solely by reference to the provisions of the Lease and in the event
of any conflict between the provisions of the Lease and those of this
Memorandum, the provisions of the Lease shall control.
8. All notices given pursuant to the Lease must be in writing and given in
accordance with Section 24.1 of the Lease.
9. This Memorandum is only intended to provide notice of the existence of
the Lease and Tenant's leasehold estate and shall not be deemed to amend any of
the terms of the Lease.
10. This Memorandum shall inure to the benefit of and be binding upon
Landlord and Tenant and their respective successors and assigns.
I-2
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the day and year first above written.
Dated this ________ day TENANT:
of ________________, 19___.
_______________________________________
Witness:
______________________________ By:____________________________________
Name:_______________________________
______________________________ Title:______________________________
Dated this ________ day LANDLORD:
of _______________, 19____.
BC REAL ESTATE INVESTMENTS,
INC., a Delaware corporation
Witness:
______________________________ By:____________________________________
Name:_______________________________
______________________________ Title:______________________________
I-3
<PAGE>
STATE OF COLORADO )
)
COUNTY OF JEFFERSON )
Personally appeared before me, a Notary Public in and for the above County
and State, _________________________________, known personally by me and
acknowledged by me to be on the date of execution, _________________________ of
BC Real Estate Investments, Inc., a Delaware corporation, and he/she executed
the foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of _____________
19____.
____________________________________
Notary Public
My Commission Expires:
__________________________
STATE OF ____________ )
)
COUNTY OF ___________ )
Personally appeared before me, a Notary Public in and for the above County
and State, __________________________________, known personally by me and
acknowledged by me to be on the date of execution, the ___________________ of
____________________, a _______________ corporation, and he/she executed the
foregoing for and on behalf of said Corporation by authority of its Board of
Directors.
Witnessed by hand and this notarial seal, this ____ day of _____________
19___.
____________________________________
Notary Public
My Commission Expires:
__________________________
I-4
<PAGE>
LOCATION: ________________________
STORE NUMBER: ________________________
EXHIBIT "J"
-----------
GUARANTY OF FRANCHISE LEASE
---------------------------
In order to induce BC Real Estate Investments, Inc., a Delaware corporation
("Landlord") to execute that certain Franchise Lease dated _________________,
19____ (the "Lease") with ________________________________, a ____________
corporation ("Tenant"), the undersigned does hereby absolutely and
unconditionally guarantee the full performance and observance of all the
covenants, conditions and agreements provided to be performed and observed by
Tenant in said Lease, including, without limitation, the prompt payment of the
Base Annual Rent and all additional Rent (as such terms are defined in the
Lease) and all other amounts provided in said Lease to be paid by Tenant.
The undersigned hereby waives notice of non-payment, non-performance or
non-observance, and all other notices and all proof or demands.
Further, the undersigned expressly agrees that its obligations hereunder
shall not be terminated, affected or impaired by reason of the granting by
Landlord of any indulgences to Tenant or by reason of the assertion against
Tenant of any of the rights or remedies reserved to Landlord pursuant to the
provisions of said Lease or by the release of Tenant from any of Tenant's
obligations under said Lease by operation of law or otherwise, the undersigned
hereby waiving all suretyship defenses. The undersigned further covenants and
agrees that this Guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of the Lease whether or not the
undersigned shall have received any notice of or consented to such renewal,
modification or extension.
The undersigned further agrees that his liability hereunder shall be
primary, and that in any right to action which shall accrue to Landlord under
the Lease, Landlord, may at its option, proceed against the undersigned and
Tenant, jointly and severally, and may proceed against the undersigned without
having commenced any action or having obtained any judgment against Tenant.
It is agreed that the failure of Landlord to insist in any one or more
instances upon strict performance or observance of any of the terms, provisions
or covenants of the Lease or to exercise any right therein contained shall not
be construed or deemed to be a waiver or relinquishment for the future of such
term, provision, covenant or right, but the same shall continue and remain in
full force and effect. Receipt by Landlord of rent or other payments
J-1
<PAGE>
with knowledge of the breach of any provision of the Lease shall not be deemed a
waiver of such breach.
No assignment or other transfer of the Lease, or any interest therein,
shall operate to extinguish or diminish the liability of the undersigned
hereunder.
In the event that the obligations of Tenant under the Lease have been
guaranteed by another guarantor or other guarantors, the obligations of the
undersigned and such other guarantor or guarantors under the respective
guaranties shall be joint and several.
IN WITNESS WHEREOF, this Guaranty is executed this _____ day of
______________, 19___.
____________________________________
Witness:
____________________________________ By: ________________________________
Name: __________________________
____________________________________ Title: _________________________
J-2
<PAGE>
EXHIBIT M-1
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
SPECIAL PURPOSES ADDENDUM TO FRANCHISE LEASE
--------------------------------------------
M-1-1
<PAGE>
LOCATION:
STORE NO.:
SPECIAL PURPOSES ADDENDUM
TO FRANCHISE LEASE
THIS SPECIAL PURPOSES ADDENDUM TO FRANCHISE LEASE (this "Addendum"),
effective as of ____________________ (the "Effective Date") is attached to and
made part of that certain Franchise Lease by BC REAL ESTATE INVESTMENTS, INC., a
Delaware corporation (the "Landlord") and __________________________________ a
_____________________________________ (the "Tenant") (which Franchise Lease
together with all rights, renewals, options, extensions, modifications,
amendments, substitutions and replacements herein or hereinafter made is
collectively referred to as the "Lease") demising the property more particularly
described on Exhibit "A" attached hereto and made a part hereof (the "Demised
Premises"). Capitalized terms contained herein and not otherwise defined shall
have the same meanings assigned to them in the Lease. In the event of a
conflict or ambiguity between the terms and conditions of this Addendum and the
terms and conditions of the Lease, the terms and conditions of this Addendum
shall govern and control.
W I T N E S S E T H
WHEREAS, Landlord and Tenant wish to modify and amend the Lease in order to
clarify (a) the obligations of Tenant to construct a Boston Market Unit on the
Demised Premises and (b) the formula for calculating Base Annual Rent under the
Lease and the terms and conditions under which Base Annual Rent shall be due and
payable thereunder.
NOW, THEREFORE, in consideration of the considerations set forth in the
Lease, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned Landlord and Tenant hereby agree
as follows:
I. CONSTRUCTION OF BOSTON MARKET UNIT. Notwithstanding anything
contained in the Lease to the contrary in the event a Boston Market Unit is not
yet open to the general public at the Demised Premises as of the Commencement
Date, Tenant shall, subject to reimbursement by Landlord as hereinafter set
forth, construct and open said Boston Market Unit in accordance with and as
required by the terms and conditions of the Lease, this Addendum, the Franchise
Agreement and the current announced construction policies and procedures of
Franchisor. Funding by Landlord of the cost and expense of developing and
constructing said Boston Market Unit shall be subject to and in accordance with
the Franchise Agreement, the Lease and this Addendum. Construction of said
Boston Market Unit shall be in compliance with all applicable governmental laws,
codes, ordinances, rules and regulations and shall be commenced and completed in
accordance with the Franchise Agreement and Lease. Tenant shall be solely
responsible for and have control over construction means, methods, techniques,
sequences and procedures and for coordinating all portions of such construction
and neither Landlord nor Franchisor shall have any responsibility therefor.
Tenant shall also be solely responsible for the design of the Building and all
other matters related to the design,
1
<PAGE>
development and construction of the Demised Premises and the preparation of
approved Design Specifications (as defined in the Franchise Agreement). Tenant
acknowledges that any design materials, plans, specifications and documents
furnished to Tenant by Landlord or Franchisor and any review by Landlord or
Franchisor of Tenant's design materials, plans and specifications shall be for
the purpose of ensuring a uniform appearance for Boston Market Units, and
neither Landlord nor Franchisor shall have any responsibility for nor any
liability in connection with Tenant's design materials, plans and
specifications. Notwithstanding anything contained in the Lease to the contrary,
in the event Tenant does not complete construction of said Boston Market Unit
and open for business to the general public within two (2) years from the
Effective Date hereof, either party hereto may terminate the Lease by sending
written notice to the other.
II. BASE ANNUAL RENT. Notwithstanding anything contained in the Lease to
the contrary, Base Annual Rent shall be calculated, due and payable as follows:
A. General Formula. The formula for calculating Base Annual Rent
shall consist of the sum of the following components:
1. "Building Rent", consisting of eleven (11%) percent of all
construction and development costs incurred by Tenant and/or Landlord
and approved by Landlord or Franchisor in developing and building a
Boston Market Unit on the Demised Premises, including without
limitation construction costs, review, permit and connection fees,
utility costs, cost of materials, attorneys', consultants',
architects', surveyors' and engineers' fees, soil and environmental
testing and remediation costs, title insurance premiums and costs,
brokerage commissions and any other so-called "soft costs" incurred by
Tenant and/or Landlord in developing and constructing a Boston Market
Unit on the Demised Premises;
2. "Ground Rent", consisting of eleven (11%) percent of
Landlord's cost of acquiring title to the Demised Premises as shown on
Landlord's closing statement therefor; and
3. "Real Estate Fee", consisting of $2,750.00 per year.
B. Properties upon which a Boston Market Unit is Operating as of the
Effective Date hereof.
In the event a Boston Market Unit is operating on the Demised
Premises as of the Effective Date, the Commencement Date of the Lease
and the date Base Annual Rent shall become due and payable shall be
the Effective Date and Base Annual Rent shall be determined by the sum
of the Building Rent, Ground Rent and Real Estate Fee components.
Base Annual Rent shall be increased by fifteen (15%) percent every
five Lease Years as of the fifth (5th), tenth (10th) and fifteenth
(15th) anniversaries of the Commencement Date of the Lease.
2
<PAGE>
C. Properties upon which a Boston Market Unit is not open as of the
Effective Date hereof.
In the event Landlord owns the Demised Premises as of the
Effective Date hereof but a Boston Market Unit is not yet open for
business to the general public, the Commencement Date of the Lease
shall be the date that is the earlier of (i) sixty (60) days from the
Effective Date or (ii) the date upon which a Boston Market Unit opens
for business to the general public on the Demised Premises, at which
time the Ground Rent and Real Estate Fee components of the Base Annual
Rent shall become due and payable. The Building Rent component of
Base Annual Rent shall thereafter become due and payable under the
Lease upon the later of (x) the date the said Boston Market Unit opens
for business to the general public or (y) the date of reimbursement to
Tenant by Landlord of the costs of developing and constructing said
Boston Market Unit (the "Reimbursement Date"). Notwithstanding the
foregoing, in the event the Building Rent component becomes due and
payable before Landlord can reasonably determine the final amount of
such component, the amount of such Building Rent shall be determined
by the books and records of Franchisor as of the Reimbursement Date,
in which case Landlord, at its option, may adjust the Building Rent
component of the Base Annual Rent at any time within one (1) year of
the Commencement Date based upon the final determination by Landlord
of the total, final costs comprising such component as reflected on
the books and records of Franchisor. Base Annual Rent shall be
increased by fifteen (15%) percent every five Lease Years as of the
fifth (5th), tenth (10th) and fifteenth (15th) anniversaries of the
Commencement Date of the Lease.
D. Properties not yet owned by Landlord.
In the event Landlord has not yet acquired title to the Demised
Premises, but either Landlord has an enforceable purchase and sale
agreement, or Tenant has such an enforceable purchase and sale
agreement that may be assigned to Landlord, Landlord and Tenant agree
that Base Annual Rent shall not become payable until closing of the
acquisition of the Demised Premises by Landlord, in which case the
Commencement Date shall be established as the earlier of (i) sixty
(60) days after the day of closing or (ii) the date upon which the
Boston Market Unit opens for business to the general public on the
Demised Premises, at which time Base Annual Rent shall become payable
in accordance with Section II(C) above. Thereafter, Base Annual Rent
shall be increased by fifteen (15%) percent every five (5) Lease Years
as of the fifth (5th), tenth (10th) and fifteenth (15th) anniversaries
of the Commencement Date of the Lease. In the event Landlord does not
acquire title to the Demised Premises within two (2) years of the
Effective Date, Landlord, at its option, may terminate the Lease by
sending written notice to Tenant, in which case the Lease shall
automatically terminate and Landlord and Tenant shall be released from
any and all liability under the Lease occurring after the date of
termination.
3
<PAGE>
III. TERM COMMENCEMENT AGREEMENT. Notwithstanding anything contained in
the Lease to the contrary Landlord and Tenant agree that Landlord and Tenant
shall not execute a Term Commencement Agreement or Memorandum of Term
Commencement Agreement until there has been a final determination of Base Annual
Rent by Landlord, at which time the parties agree to execute such documents;
provided that the Term Commencement Agreement shall be in the form attached
hereto as Exhibit "B" and made a part hereof.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Addendum to be
executed as of the Effective Date.
TENANT:
WITNESSES: By:_______________________________
______________________________ Name:_____________________________
______________________________ Its:______________________________
Date:_____________________________
LANDLORD:
BC REAL ESTATE INVESTMENTS, INC.,
a Delaware corporation
WITNESSES: By:_______________________________
______________________________ Name:_____________________________
______________________________ Its:______________________________
Date:_____________________________
4
<PAGE>
EXHIBIT "A"
[Attach Legal Description]
<PAGE>
EXHIBIT "B"
TERM COMMENCEMENT AGREEMENT
---------------------------
THIS AGREEMENT is made and entered into as of, __________________ by and
between BC REAL ESTATE INVESTMENTS, INC., a Delaware corporation ("Landlord"),
and ___________________________ a _____________________________ ("Tenant").
W I T N E S S E T H
-------------------
WHEREAS, Landlord and Tenant have entered into that certain Franchise
Lease dated _____________ (the "Lease") for a Boston Market Unit located in
__________, ___________ County, ___________; and
WHEREAS, Landlord and Tenant desire to enter into this Agreement to confirm
the Commencement Date, the Expiration Date, the Renewal Terms, Base Annual Rent
and other matters set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:
I. Defined Terms. All capitalized terms used in this Agreement but not
defined in this Agreement shall have the meanings given to such terms under the
Lease.
II. Confirmation of Term and Rent. Landlord and Tenant each acknowledge,
agree and confirm the following:
A. The Commencement Date is ________________;
B. The Expiration Date is _________________;
C. Tenant first opened the Demised Premises for business to the
general public on ____________________;
D. Tenant has ______ (__) options to renew the Lease of five (5)
years each;
E. The Demised Premises contains __________ square feet of space;
F. Base Annual Rent (consisting of finally determined Building
Rent, Ground Rent and Real Estate Fee components) under the Lease shall be
as follows:
SEE ATTACHMENT "1", attached hereto and made a part hereof.
<PAGE>
G. All Rent, including Base Annual Rent, Real Estate Taxes and
Impositions, if any, and all other charges, costs, rents and assessments
set forth in the Lease became due and payable as of _____________.
III. Conclusive Evidence. For purposes of the Lease, this Agreement shall
be conclusive evidence of the information contained in this Agreement.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of
the date first above written.
TENANT:
WITNESSES: By:_________________________________
_______________________ Name:_______________________________
_______________________ Its:________________________________
Date:_______________________________
LANDLORD:
BC REAL ESTATE INVESTMENTS, INC.,
a Delaware corporation
WITNESSES: By:_________________________________
_______________________ Name:_______________________________
_______________________ Its:________________________________
Date:_______________________________
<PAGE>
ATTACHMENT "1"
[base annual rent]
<PAGE>
EXHIBIT M-2
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
THIRD PARTY LEASE
-----------------
M-2-1
<PAGE>
Lease No. _____
[STREET ADDRESS]
[CITY, STATE]
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of _____________, 199__,
by and between:
(i) CAPTEC NET LEASE REALTY, INC., a Michigan corporation, whose
address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box
544, Ann Arbor, Michigan 48106-0544 ("Landlord"), and
(ii) [TENANT NAME], a [TENANT ENTITY], whose address is
____________________________________
____________________________________ ("Tenant").
W I T N E S S E T H:
-------------------
Landlord leases to Tenant and Tenant rents from Landlord the following
described Premises including all improvements and structures located thereon,
whether now existing or hereafter constructed, at [STREET ADDRESS OF PREMISES]
and being legally described in Exhibit "A" attached hereto and made a part
hereof, including all heating, air conditioning, ventilating, plumbing,
electrical and mechanical systems, and utilities now or hereafter in place,
together with all rights and privileges in and about the Premises as may be
necessary or convenient to Tenant's business inclusive of all easements
benefitting the Premises and all rights, easements and appurtenances belonging
or appertaining to the Premises and all improvements and all right, title and
interest of Landlord in and to any and all roads, streets, alleys and public and
private rights of ways bounding the Premises (the "Premises").
The following additional stipulations are hereby declared to be covenants
of this Lease and shall, unless otherwise expressly stated, be applicable at all
times throughout the term of this Lease and any extension or renewal thereof:
1. DEFINITIONS. For purposes of this Lease, the following terms are
hereby defined to mean:
"Annual Rent" shall mean the minimum annual rent payable under this Lease
as set forth in Paragraph 2 of this Lease and as set forth in the Rent
Addendum attached hereto.
"Commitment Letter" shall mean that certain Commitment Letter dated April
15, 1996 by and between Landlord and Boston Chicken, Inc. ("BCI"), and
accepted by BCI on April 18, 1996.
"Effective Date" shall mean the first date set forth at the beginning of
this Lease.
<PAGE>
"Landlord" shall mean Captec Net Lease Realty, Inc., a Michigan
corporation, its successors and assigns.
"Lease" shall include any and all amendments hereto, if any, entered into
from time to time hereafter.
"Lease Year" shall mean that twelve (12) month period during the term or
any option commencing on the Effective Date or the anniversary thereof as
may be applicable; provided, however, that if the Effective Date is a day
other than the first day of a calendar month, then the first Lease Year
shall include that period of time from the Effective Date up to the first
day of the next calendar month and the following twelve (12) month period
and any subsequent Lease Year shall commence on the first day of the next
calendar month following the Effective Date.
"Partial Lease Year" shall mean a portion of a calendar year and shall be
any period during the continuance of this Lease which does not begin on
January 1st, but ends on December 31st; or begins on January 1st, but does
not end on December 31st.
"Rent Commencement Date" shall mean the Effective Date of this Lease.
"Percentage Rent" shall have the meaning set forth in the Rent Addendum
attached hereto.
2. TERM AND RENT
A. The term of this Lease shall begin on the Effective Date hereof and
shall expire on a date fifteen (15) years thereafter unless previously
terminated or renewed or extended as provided herein.
3. ALTERATIONS AND IMPROVEMENTS, INVESTMENT TAX CREDIT, MECHANIC'S LIENS,
LANDLORD'S DISCLAIMER
A. Tenant shall be permitted to install, use on and about, and remove
from the Premises at any time and from time to time all trade fixtures,
equipment and other personal property which are not a component of the building
located or to be located on the Premises, all of which at all times shall remain
the property of Tenant with the right of removal. Trade fixtures shall be
defined to include: (1) removable decor items and office equipment; (2)
building lettering, signs, sign posts and sign standards; (3) unattached food
and customer service equipment; and (4) food and customer service equipment
attached to the building by bolts and screws and/or by utility connections,
including without limitation walk-in refrigerators and freezers, remote
refrigeration systems, exhaust systems and hoods. Tenant shall have the right
to make any additions, alterations, changes and improvements, structural and
nonstructural, including but not limited to construction of additional buildings
and additions to the then existing buildings, as Tenant shall desire; provided,
however, except in the case of repair or maintenance
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(i) Tenant shall submit plans of all structural changes to Landlord at least
thirty (30) days in advance of the proposed construction commencement date, (ii)
if the cost of structural changes exceeds Fifty Thousand and No/100 Dollars
($50,000.00), Tenant shall establish a construction escrow account for such
construction pursuant to an escrow agreement and with an escrow agent acceptable
and approved by Landlord, and (iii) all such construction shall be completed in
a workmanlike manner and in full compliance with all building laws and
ordinances applicable thereto, at Tenant's expense. All such additions,
alterations, changes and improvements shall be deemed to be a part of the
Premises. Notwithstanding the foregoing, Tenant shall have the right to remodel
the interior and exterior non-structural components of its improvements,
consistent with its national trade dress, without obtaining Landlord's prior
written consent.
B. Landlord hereby grants Tenant the right and privilege of applying for
and receiving all investment tax credits, if any, under the Internal Revenue
Code which may be available with respect to its equipment and trade fixtures.
C. Tenant shall not do or suffer anything to be done whereby the
Premises, or any part thereof, may be encumbered by a mechanic's lien or similar
lien, and, if, whenever and as often as any mechanic's lien or similar lien is
filed against the Premises, or any part thereof, purporting to be for or on
account of any labor done, materials or services furnished in connection with
any work in or about the Premises, done by, for or under the authority of
Tenant, or anyone claiming by, through or under Tenant, Tenant shall discharge
the same of record within thirty (30) days after service upon Tenant of notice
of the filing thereof; provided, however, Tenant shall have the right to remove
the lien by bonding same in accordance with applicable law and to contest any
such lien; provided that Tenant shall diligently prosecute any such contest, at
all times effectively staying or preventing any official or judicial sale of the
Premises under execution or otherwise, and, if unsuccessful, satisfy any final
judgment against Tenant adjudging or enforcing such lien or, if successful,
procuring record satisfaction or release thereof.
D. Any personal property, equipment, furniture, inventory, trademarked
items, signs, decorative items, counters, shelving, showcases, mirrors and other
movable trade fixtures installed in or on the Premises by Tenant, including, but
not limited to, walk-in coolers, exhaust hoods, sinks and preparation areas
("Tenant's Property") shall remain the property of Tenant. Landlord agrees that
Tenant shall have the right, at any time or from time to time, to remove any and
all of Tenant's Property. Tenant, at its expense, shall immediately repair any
damage occasioned by the removal of Tenant's Property and upon expiration or
earlier termination of this Lease, shall leave the Premises in a neat and clean
condition, normal wear and tear excepted. Tenant shall pay before delinquency
all taxes, assessments, license fees and public charges levied, assessed or
imposed upon its business operation in the Premises as well as upon Tenant's
Property. If any such items of property are assessed with property of Landlord,
then such assessment shall be equitably divided between Landlord and Tenant.
From time to time, some or all of Tenant's Property may be financed or owned by
someone other than Tenant. To the extent that any of Tenant's Property is
financed or owned by someone
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other than Tenant, Landlord agrees that such Tenant's Property is not Landlord's
property no matter how the same is affixed to the Premises or used by Tenant and
agrees to recognize the rights of the lender, owner, secured creditor or lessor
("Secured Party") of Tenant's Property. Landlord hereby waives any claim
arising by way of any Landlord's lien (whether created by statute or by
contract) or otherwise with respect to Tenant's Property and agrees, if
confirmation of said waiver is requested by Tenant or Secured Party, to promptly
sign and deliver to any such Secured Party a waiver of any lien Landlord may
have on Tenant's Property ("Landlord's Lien Waiver"). If said confirmation is
requested by Tenant or Secured party, Landlord agrees to execute and deliver
Landlord's Lien Waiver within fifteen (15) days from Tenant's or Secured Party's
request therefore or Landlord shall have conclusively deemed to have granted
confirmation of Landlord's Lien Waiver thereafter and Landlord agrees that
Tenant and any Secured Party may thereafter rely thereon and Landlord shall be
estopped from raising any claim of lien on Tenant's Property. Landlord also
agrees that all of Tenant's Property that is not subject to an interest from
Secured Party shall be the property and remain the property of Tenant or
Tenant's assignee or transferee no matter how the same is affixed to the
Premises. Upon the request of Tenant, Landlord shall execute an Estoppel/Waiver
Agreement confirming the above in the form attached as Exhibit 1 hereto.
E. Landlord acknowledges that any plans or specifications of Tenant and
Tenant's and BCI's trademarks and service marks, including, without limitation,
"Boston Market" are the sole property of Tenant and/or BCI, as the case may be,
and Landlord shall not have any rights to same.
4. DESTRUCTION OF PREMISES; INSURANCE
A. If the Premises are damaged or destroyed by fire, flood, tornado or
other element, or by any other casualty and such damage or destruction does not
occur within the last twenty-four (24) months of the original or of any extended
or renewed term of this Lease, or the provisions of subparagraph 4(F) do not
apply, this Lease shall continue in full force and effect and Tenant shall, as
promptly as possible, restore, repair or rebuild the Premises to substantially
the same condition that they were in before their damage or destruction. Tenant
shall for this purpose use all, or such part as may be necessary, of the
insurance proceeds received from insurance policies carried on the Premises
under the provision of subparagraph 4(B) hereinbelow. Subject to subparagraph
4(F) below, if such insurance proceeds are not sufficient to pay such costs,
Tenant shall pay such deficit.
B. Tenant, at its expense and as additional rent hereunder, shall
throughout the term of this Lease and any extension or renewal thereof, keep the
building and other permanent improvements on the Premises insured against loss
or damage from those perils covered under an "all risk" insurance policy
(including earthquake and flood insurance, where applicable) for the full
replacement cost thereof, with a deductible not to exceed $10,000.00. Tenant
shall provide Landlord with copies of such policies or certificates of such
coverage which shall name Landlord and any mortgagee designated by Landlord as
loss payees (exclusive of Tenant's equipment, fixtures and other personal
property) thereunder and shall provide that all losses shall
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be payable as herein provided. All such policies of insurance shall provide
that the policies shall not be canceled or coverage reduced by the insuring
company or companies without thirty (30) days prior written notice being given
to Landlord (provided, however, if such insuring company or companies are
unwilling to give at least thirty (30) days prior written notice, as aforesaid,
without obtaining a special endorsement and/or paying an additional fee, then a
shorter period, not less than ten (10) days, shall be permitted, it being
understood that any failure of Tenant to comply with the requirements hereunder
shall not constitute a "Default" unless and until Landlord gives notice to
Tenant in accordance with the provisions of subparagraph 15(A)(v)); and that all
insurance proceeds shall be paid by check made payable to the order of Landlord,
Landlord's mortgagee (if any), Tenant and Tenant's subtenant (if any), as their
respective interests may appear. Such policy or policies of insurance may also
cover loss or damage to equipment, fixtures and other personal property and
improvements removable by Tenant at the end of the term hereof. Insurance
proceeds applicable to equipment, fixtures and other personal property are to be
paid solely to Tenant. In the event Tenant subleases the Premises, Tenant shall
have the right to cause its subtenant to carry the insurance coverage required
under this subparagraph 4(B), and to the extent the subtenant does so, Tenant
shall not be required to provide evidence that it is maintaining such coverage;
however, Tenant shall not be relieved of any obligation or responsibility under
this subparagraph 4(B).
C. Tenant shall maintain, at its own expense and as additional rent,
public liability insurance (including coverage related to serving food and
beverages, and if alcoholic beverages are served in the Premises, appropriate
liability coverage related thereto) covering the Premises and the business
conducted thereon, for the joint benefit of and insuring Tenant and Landlord,
with coverage of not less than $1,000,000.00 per occurrence, with additional
umbrella coverage in an amount not less than $20,000,000.00 per occurrence
(with a deductible not to exceed $10,000.00). Tenant shall maintain, at its own
expense and as additional rent, rental value insurance covering risk of loss due
to the occurrence of any of the hazards insured against under Tenant's "all
risk" insurance and providing coverage in an amount sufficient to permit the
payment of rents payable under this Lease for a period of not less than six (6)
months, but Tenant shall not be required to maintain rental insurance coverage
in excess of $250,000.00. All such policies of insurance or certificates
thereof shall provide that the insurance policies shall not be canceled or the
coverage reduced without at least thirty (30) days prior written notice being
given to Landlord (provided, however, if such insuring company or companies are
unwilling to give at least 30 days prior written notice, as aforesaid, without
obtaining a special endorsement and/or paying an additional fee, then a shorter
period, not less than ten (10) days, shall be permitted, it being understood
that any failure of Tenant to comply with the requirements hereunder shall not
constitute a "Default" unless and until Landlord gives notice to Tenant in
accordance with the provisions of subparagraph 15(A)(v)). A copy of the policy
or certificate of such insurance shall be delivered to Landlord and shall be
issued by a company or companies licensed to do business in the state where the
Premises are located. From time to time and at least thirty (30) days prior to
the expiration of any insurance policy required by the terms of this Section 4,
Tenant shall furnish to Landlord a renewal certificate of insurance evidencing a
continuation of the insurance coverages required by this Section. In the event
Tenant subleases the Premises, Tenant shall have the right to cause its
subtenant to carry the
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insurance coverage required under this subparagraph 4(C), and to the extent the
subtenant does so, Tenant shall not be required to provide evidence that it is
maintaining such coverage; however, Tenant shall not be relieved of any
obligation or responsibility under this subparagraph 4(C).
D. Tenant shall maintain, at its own expense and as additional rent,
rental value insurance covering risk of loss due to the occurrence of any of the
hazards insured against under Tenant's "all risk" insurance and providing
coverage in an amount sufficient to permit the payment of rents payable under
this Lease for a period of not less than six (6) months, but Tenant or any
subtenant (if applicable) shall not be required to maintain rental insurance
coverage in excess of $250,000.00. All such policies of insurance or
certificates thereof shall provide that the insurance policies shall not be
canceled or the coverage reduced without at least thirty (30) days prior written
notice being given to Landlord (provided, however, if such insuring company or
companies are unwilling to give at least thirty (30) days prior written notice,
as aforesaid, without obtaining a special endorsement and/or paying an
additional fee, then a shorter period, not less than ten (10) days, shall be
permitted, it being understood that any failure of Tenant to comply with the
requirements hereunder shall not constitute a "Default" unless and until
Landlord gives notice to Tenant in accordance with the provisions of
subparagraph 15(A)(v)). A copy of the policy or certificate of such insurance
shall be delivered to Landlord and shall be issued by a company or companies
licensed to do business in the state where the Premises are located. From time
to time and at least thirty (30) days prior to the expiration of any insurance
policy required by the terms of this Section 4, Tenant shall furnish to Landlord
a renewal certificate of insurance evidencing a continuation of the insurance
coverages required by this Section. In the event Tenant subleases all or any
portion of the Premises, Tenant shall have the right to cause its subtenant to
carry the insurance coverage required under this subparagraph 4(D), and to the
extent the subtenant does so, Tenant shall not be required to provide evidence
that it is maintaining such coverage; however, Tenant shall not be relieve of
any obligation or responsibility under this subparagraph 4(D).
E. All insurance companies shall be selected by Tenant and shall be rated
A minus (A-) or better by A.M. Best & Company, and shall be acceptable to
Landlord in Landlord's reasonable discretion.
F. Notwithstanding anything to the contrary contained in this Lease,
should the Premises be damaged or destroyed by any of the foregoing described
casualties, or by any other casualty within the last twenty-four (24) months of
the original term or of any extended or renewed term of this lease, to the
extent that they are untenantable or unsuitable, in Tenant's reasonable opinion
for continued use in the normal conduct of Tenant's business, or the cost to
repair or reconstruct the Premises shall exceed the insurance proceeds available
by at least $50,000.00, provided Tenant is in compliance with the insurance
provisions of this Paragraph 4, and Tenant is not the proximate cause of the
refusal of the insurance company to cover an otherwise compensable loss, Tenant
shall have the right, exercisable by written notice to Landlord given within
thirty (30) days after the date of such damage or destruction, of terminating
this Lease effective upon the date of such damage or destruction. If Tenant
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terminates this Lease as thus provided Landlord shall be entitled to all of the
insurance proceeds on the building up to the amount paid for originally by
Landlord with respect to the building, but not to the proceeds of insurance
carried by Tenant on its fixtures, equipment and other personal property. If
Tenant defaults in its obligation to carry insurance in the form and amount
required under subparagraph 4(B) or is the proximate cause of the refusal of
the insurance company to cover an otherwise compensable loss, then Tenant shall
be obligated to pay toward said reconstruction or to Landlord if this Lease is
canceled, but prior thereto, the difference between the amount actually covered
and the amount required to be covered under this paragraph.
5. MAINTENANCE AND REPAIR
A. Tenant shall maintain the Premises and all buildings and improvements
thereon (interior and exterior, structural and otherwise) in good order and
repair and, subject to Tenant's termination of this Lease as provided in
Paragraph 6(A), return the Premises and all buildings and improvements thereon
at the expiration of the term of this Lease (or any extension thereof) in as
reasonably as good condition as when received, ordinary wear and tear excepted.
B. Tenant agrees that Landlord shall have no obligation under this Lease
to make any repairs or replacements (including the replacement of obsolete
components) to the Premises or to make any alteration, addition, change,
substitution or improvement thereof or thereto, whether structural or otherwise.
The terms "repair" and "replacement" include the replacement of any portion of
the Premises which have outlived their useful life during the term of the Lease
(or any extensions thereof). The parties intend that the rent received by
Landlord shall be free and clear of any expense to Landlord under this Lease for
the construction, care, maintenance (including common area maintenance charges
and charges accruing under easements or other agreements relating to the
Premises), operation, repair, replacement, alteration, addition, change,
substitution and improvement of or to the Premises or any component thereof.
Upon the expiration or earlier termination of this Lease, Tenant shall remain
responsible for, and shall pay to Landlord, any cost, charge or expense for
which Tenant is otherwise responsible for hereunder attributable to any period
(prorated on a daily basis) prior to the expiration or earlier termination of
this Lease.
6. CONDEMNATION
A. In the event that the whole or any material part of the building
comprising a portion of the Premises or such a material portion of the land (for
purposes hereof, "material" shall mean a taking of any portion of the restaurant
building on the Premises or more than 20% of the parking area) shall be taken
during the term of this Lease or any extension or renewal thereof for any public
or quasi-public use under any governmental law, ordinance, regulation or by
right of eminent domain, or shall be sold to the condemning authority under
threat of condemnation or if any material access to the adjacent roadways from
the existing or comparable curb cuts shall be taken (any of such events being
hereinafter referred to as a "taking"), Tenant shall have the option of
terminating this Lease as of the earlier of the date title to such property
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passes to the governmental authority, or the date the governmental authority
shall take possession of the Premises. Notwithstanding anything to the contrary
contained herein, Tenant shall not have the right to terminate this Lease by
reason of eminent domain unless Tenant cannot, after using its reasonable best
efforts, replace the building, parking or other facilities which were taken with
facilities which are reasonably equivalent and in compliance with all
governmental laws, ordinances, statutes, codes, rules, regulations, approvals
and agreements and Tenant is able to secure all permits and approvals to
reconstruct the building parking and other facilities on the Premises by using
(i) the remainder of the Premises not taken by eminent domain, or (ii) any
parking or other rights available to Tenant under any easements over adjoining
parcels, or (iii) by using condemnation proceeds to acquire such facilities on
or over adjacent property; provided the same are acceptable to Tenant in its
reasonable discretion for the continued operation of its business on the
Premises. Notwithstanding anything herein to the contrary, if a portion of the
Premises is taken or condemned during the last two (2) years of the primary term
of this Lease, or the last two (2) years of any renewal period thereafter, which
renders the Premises unsuitable for continued use as contemplated by this Lease,
in the reasonable judgment of Tenant, then Tenant shall have the right to
terminate this Lease solely upon thirty (30) days written notice to Landlord,
which shall include a detailed explanation of the nature of the unsuitability of
the Premises.
B. In the event of any taking which does not give rise to an option to
terminate or in the event of a taking which does give rise to an option to
terminate and Tenant does not elect to terminate, Landlord shall make its award
available to Tenant and Tenant shall, to the extent of the award from such
taking (which word "award" shall mean the net proceeds after deducting expenses
of any settlement, or net purchase price under a sale in lieu of condemnation)
promptly restore or repair the Premises and all improvements thereon (except the
items which Tenant is entitled to remove) to the same condition as existed
immediately prior to such taking insofar as is reasonably possible. Such
restoration may conform to the Tenant's then current use of the Premises and
identification thereof. If the estimated cost of restoration or repair shall
exceed the amount of Landlord's award, Tenant shall pay the amount of such
excess. The award and any excess shall be held in trust and used for the
purpose of such restoration or repair. A just and proportionate part of the
Annual Rent payable hereunder shall be abated from the date of such taking until
ten (10) days after Tenant has restored same and thereafter the Annual Rent
shall be reduced in proportion to the reduction in the then rent value of the
Premises after the taking in comparison with the rent value prior to the taking.
If the award shall exceed the amount spent to effect such restoration, repair or
replacement, such excess shall unconditionally belong to Landlord and shall be
paid to Landlord.
C. In the event of any partial taking where this Lease is not terminated,
Tenant shall not be entitled (except for use in reconstruction) to any part of
the compensation or award given Landlord for the taking of the fee of the
Premises, but Tenant shall have the right to recover from the condemning
authority such compensation as is specifically awarded to Tenant (i) to
reimburse Tenant for any cost which Tenant may incur in removing, altering
and/or replacing Tenant's trade fixtures, equipment and other personalty, and
(ii) for loss of business.
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D. If this Lease is terminated by reason of a taking then Landlord shall
be entitled to receive the entire award in any such condemnation or eminent
domain proceedings or purchase in lieu thereof, provided, however, Tenant shall
be entitled to receive any award specifically made to reimburse Tenant for the
loss of its leasehold interest, relocation expenses, and for loss of business
and Tenant's property.
7. TAXES AND ASSESSMENTS
A. During the original term and all renewals or extensions of this Lease,
Tenant, as additional rent, shall pay and discharge, prior to their becoming
delinquent all taxes attributable to rent and the Premises including but not
limited to (i) all real estate ad valorem taxes levied or assessed against the
Premises, the buildings and improvements thereon, including without limitation,
assessments for public improvements made after the commencement of this Lease,
(ii) all personal property ad valorem taxes levied or assessed against Tenant's
trade fixtures, equipment and personal property used in or about the Premises,
(iii) all sales and use tax imposed on rent payable hereunder from time to time
by state law or any other governmental entity (excluding state, local, and
federal income, estate, gift and inheritance taxes), and (iv) all payments in
lieu of taxes; provided, however, in the event any special assessment taxes
shall be levied or assessed against the Premises which are payable or may be
paid in installments, Tenant shall be required to pay only such installments as
shall become due and payable during the term of this Lease. Tenant shall have
the right to contest such taxes in good faith provided Tenant posts such
security as is necessary to prevent the imposition of a lien upon the Premises.
Taxes for the first and last years of the term of this Lease (or any extended
term) shall be prorated based on the payment date which would provide the
maximum discount.
B. Upon written request of Landlord, Tenant shall deliver to Landlord
within thirty (30) days after the last day for payment (without penalty or
interest) of the taxes, assessments and other levies on the Premises,
photostatic copies of the receipts showing payment thereof.
C. During the original term and all renewals or extensions of this Lease,
Tenant shall be responsible for the performance and observance of all of the
terms, conditions and obligations, of (i) Landlord, arising under all covenants,
conditions, restrictions, easements and other matters of record (excluding any
mortgages, deeds of trust or other encumbrances made by Landlord) affecting the
Premises, as of the Effective Date of this Lease, and (ii) sublessor arising
under any existing sublease of the Premises, and shall indemnify, defend and
hold Landlord harmless from and against any violation or breach thereof.
Additionally, in the event of any such sublease, it is the intention of the
parties hereto that this Lease supplant any existing master lease of the
Premises.
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8. COMPLIANCE, UTILITIES, SURRENDER
A. Tenant at its expense will promptly comply with all governmental
requirements, restrictions, easements or other matters of record, whether or not
compliance therewith shall require structural changes in the Premises; will
procure and maintain all permits, licenses and other authorizations required for
the use of the Premises or any part thereof then being made and for the lawful
and proper installation, operation and maintenance of all equipment and
appliances necessary or appropriate for the operation and maintenance of the
Premises. Tenant shall indemnify and save Landlord harmless from all expenses
and damages by reason of any notices, orders, violations or penalties filed
against or imposed upon the Premises, or against Landlord as owner thereof,
because of Tenant's failure to comply with this Paragraph.
B. Tenant shall pay all charges for heat, water, gas, sewage, electricity
and other utilities used or consumed on the Premises and shall contract for the
same in its own name. Landlord shall not be liable for any interruption or
failure in the supply of any such utility service to the Premises.
C. Tenant shall peacefully surrender possession of the Premises, the
buildings and other improvements thereon, to Landlord at the expiration, or
earlier termination, of the original term or any extended or renewed term of
this Lease, subject to Tenant's right to remove Tenant's Property as provided
herein.
9. QUIET ENJOYMENT. Landlord covenants and warrants that Landlord has full
power and authority to enter into this Lease, and that Tenant shall have and
enjoy full, quiet and peaceful possession of the Premises, their appurtenances
and all rights and privileges incidental thereto during the term hereof and any
renewals or extensions, subject to the provisions of this Lease and any title
exceptions or defects in existence just prior to the time of the conveyance of
the Premises to Landlord. Landlord shall make no material change, alteration,
or addition to the Premises that would in any way affect access to or from the
Premises, or the visibility of the Premises or diminish the parking area or in
any other way adversely affect Tenant's operation of its business on the
Premises; provided, however, that any change, alteration or addition required by
a governmental body or resulting from a condemnation shall not be deemed to be a
violation of the foregoing covenant.
10. OPTION TO RENEW Tenant shall have five (5) successive five (5) year
options to extend this Lease for up to an additional twenty-five (25) years upon
the same terms, covenants, conditions and rent as set forth herein provided that
Tenant is not in default (beyond any applicable cure period) hereunder at the
time it exercises such renewal option. Each such five (5) year option shall be
automatic and each party shall be bound by this Lease for such options unless
Tenant gives Landlord written notice at least one hundred twenty (120) days
prior to the expiration of the term or the immediately preceding option, that
Tenant does not intend any further option to occur, in which case the term or
the option shall expire at the end of the term or the current option together
with the respective rights and obligations of Landlord and Tenant, unless
expressly stated to survive the expiration of the term or option.
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11. TENANT'S CONDUCT OF BUSINESS. The use of the Premises shall at all times
be limited to operation of a Boston Market Restaurant or other restaurant or
retail concepts (including multiple branded concepts or other retail purposes)
owned and operated by BCI and/or its affiliates or if BCI is the Guarantor of
this Lease, is or becomes the Tenant, then for any other restaurant or retail
concept, provided such other restaurant or retail concept does not violate any
applicable government zoning codes and which is not a noxious or offensive use.
The Tenant shall at all times maintain the Premises and operate its business in
compliance with all applicable regulations and requirements of all county,
municipal, state, federal and other governmental authorities, which are now in
force or which are enacted during the term of this Lease. Except as provided
otherwise herein, the Tenant shall be required to continuously operate its
business at the Premises except for cessation due to damage, destruction,
strikes, Acts of God, remodeling or repair, or due to and in accordance with the
terms of Paragraph 6 of this Lease.
LEASES GUARANTEED BY BCI
Nothing herein shall be construed as an obligation for Tenant to open or operate
its business in the Premises, and Tenant shall have the right to remove Tenant's
Property from the Premises and cease operations in the Premises at any time and
at Tenant's sole discretion. However, the right to cease to operate its
business shall not affect Tenant's obligation to pay all amounts due under the
Lease and to perform all covenants and obligations thereunder except the
covenant to operate a business at the Property. Provided however, that if the
Premises is subject to a recorded agreement which permits a third party to
purchase the Premises in the event that operations cease for some length of
time, and the Premises is then purchased by the third party holding such
repurchase right or its designee, then prior to or simultaneously with such
purchase, BCI shall either substitute another Premises pursuant to Paragraph 36
herein, or at BCI's election, BCI may pay to Landlord the difference between the
purchase price paid by the third party and the purchase price which would be
paid had [BCI] [Tenant] purchased the Premises pursuant to the Option to
Purchase.
LEASES NOT GUARANTEED BY BCI
Tenant may cease operations for any reason for a period not to exceed one
hundred eighty (180) days, excluding periods required as a result of casualty,
condemnation, force majeure, remodeling, and rebuilding, which shall not be
included in the calculation of the one hundred eighty (180) day period.
Further, at Tenant's election, rather than reopen its business on the Premises,
Tenant may, subject to repurchase rights, elect substitution as provided in
Paragraph 36 herein. Provided however, that if the Premises is subject to a
recorded agreement which permits a third party to purchase the Premises in the
event that operations cease for some length of time, and the Premises is then
purchased by the third party, holding such repurchase right or its designee,
then prior to or simultaneously with such purchase, BCI shall either substitute
another Premises pursuant to Paragraph 36 herein, or at BCI's election, BCI may
pay to Landlord the difference between the purchase price paid by the third
party and the purchase
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price which would be paid had [BCI] [Tenant] purchased the Premises pursuant to
the Option to Purchase.
12. COLLATERAL ASSIGNMENT OF LEASE. If Boston Chicken, Inc. or any successor
in interest (referred to in this Lease as "BCI") is not the Tenant hereunder,
then the Tenant shall collaterally assign this Lease to BCI. Landlord hereby
consents to the collateral assignment of this Lease to BCI, a lender or an
affiliate or related entity of BCI, or any entity which is a party to a merger,
consolidation or acquisition of substantially all of the assets of or with
Tenant or BCI in accordance with that certain Collateral Assignment of Tenant's
Rights in Lease attached hereto as Exhibit 2 (the "Collateral Assignment") and,
if requested by Tenant, Landlord agrees to execute any documents evidencing
Landlord's consent to such assignment, provided such documents are acceptable in
form and substance to Landlord.
13. LANDLORD'S CONSENT TO RESPONSIBILITIES. In order to preserve BCI's rights
in connection with Landlord's consent to the Collateral Assignment, Landlord
agrees and Tenant consents as follows:
A. To provide BCI a duplicate, in writing, of any notices of default
provided to Tenant by Landlord; and
B. That BCI shall have the right, but shall not be obligated, to cure any
default by Tenant under the Lease within Tenant's cure period under the Lease,
or within thirty (30) days after the expiration of Tenant's cure period under
the Lease, provided that prior to the expiration of Tenant's cure period under
the Lease, BCI notifies Landlord in writing that BCI intends to cure such
default;
C. That Landlord agrees that if BCI shall take possession of the Premises
and confirm to Landlord the assumption of the Lease by BCI as tenant thereunder,
Landlord shall recognize BCI as the tenant under the Lease, provided that BCI
cures any default by Tenant under the Lease within any applicable cure period
and further provided that Tenant shall not thereby be released of and from its
obligations under this Lease; and
D. That BCI shall have the absolute right, subject to the provisions of
Paragraph 17 of this Lease, to assign, sublet or otherwise transfer its right,
title, estate and interest in the Lease and all its interest arising therefrom
to any entity affiliated with BCI or any licensee or franchisee of BCI.
14. FRANCHISE AGREEMENT. Landlord acknowledges and agrees that the Premises
may be used for the operation of a Boston Chicken/Market Unit in accordance with
the terms of a Boston Chicken, Inc. Franchise Agreement to be entered into
between BCI and Tenant (the "Franchise Agreement"). If BCI does not exercise
its right of first refusal to purchase the assets of Tenant's Boston
Chicken/Market Unit under the terms of the Franchise Agreement, the Tenant
agrees, at Tenant's sole expense, to make such modifications and alterations,
including removal of all distinctive physical and structural features associated
with the trade dress of
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Boston Chicken/Market Units, as may be necessary to distinguish the Premises so
clearly from its former appearance and from other Boston Chicken/Market Units as
to prevent any possibility that the public will associate the Premises with
Boston Chicken/Market Units and any confusion created by such association.
(Such modifications and alterations shall include, but not be limited to,
removing or covering the distinctive decor and color scheme on all walls,
counters, fixtures and furnishings, as well as the exterior identifying features
of the Premises.) If Tenant fails to immediately make such modifications,
alterations and/or removals, Landlord and Tenant agree that BCI or its
designated agents may, upon ten (10) days prior written notice to Landlord,
enter the Premises to make such modifications, alterations and/or removals, at
Tenant's expense, and that such entry and actions by BCI shall not constitute a
breach of this Lease. It is expressly acknowledged and agreed by Landlord and
Tenant that BCI shall have the right to obtain the remedy of specific
performance or other injunctive relief in order to enforce the provisions of
this section and that BCI has no adequate remedy available at law for any breach
of this section. Landlord acknowledges and agrees that BCI is a third-party
beneficiary of this Lease.
15. DEFAULT
A. If any one or more of the following events occur, said event or events
shall hereby be classified as a "Default":
(i) If Tenant shall make an assignment for the benefit of creditors or
file a petition, in any federal or state court, in bankruptcy, reorganization,
composition, or make an application in any such proceedings for the appointment
of a trustee or receiver for all or any portion of its property.
(ii) If any petition shall be filed under federal or state law against
Tenant in any bankruptcy, reorganization, or insolvency proceedings, and said
proceedings shall not be dismissed or vacated within thirty (30) days after such
petition is filed.
(iii) If a receiver or trustee shall be appointed under federal or
state law for Tenant, or any guarantor of Tenant's obligations hereunder, for
all or substantially all of the property of either of them, and such
receivership or trusteeship shall not be set aside within thirty (30) days after
such appointment.
(iv) If Tenant fails to pay Annual Rent, Percentage Rent, any
additional rent, or any other charges required hereunder when the same shall
become due and payable, and such failure continues for fifteen (15) days after
receipt by Tenant of written notice from Landlord.
(v) If Tenant shall fail to perform or observe any other term,
condition, covenant, agreement, or obligation of this Lease, and such failure
continues for thirty (30) days after receipt by Tenant of written notice from
Landlord (except that such thirty (30) day period shall be automatically
extended for such additional period of time as is reasonably necessary to cure
such Default, if such Default cannot be cured within such period, provided
Tenant is in the process of diligently curing the same).
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B. Upon the happening of any one or more of the aforementioned Defaults,
Landlord shall have the right, in addition to any other rights and remedies, to:
(i) Re-enter the Premises with process of law and take possession of
the same and expel or remove Tenant and all other parties occupying the
Premises, without terminating this Lease, and at any time and from time to time
relet the Premises or any part thereof for the account of Tenant, for such term,
upon such conditions and at such rent as Landlord may deem proper. In such
event, Landlord may receive and collect the rent from such reletting and apply
it against any amounts due from Tenant hereunder (including, without limitation,
such expenses as Landlord may have incurred in recovering possession of the
Premises, placing the same in good order and condition, altering or repairing
the same for reletting, and all other expenses, commission and charges,
including reasonable attorney and paralegal fees whether or not judicial
proceedings are filed, including on appeal, which Landlord may have paid or
incurred in connection with such repossession and reletting). Landlord may
execute any lease made pursuant hereto in Landlord's name or in the name of
Tenant, as Landlord may see fit, and the lessee thereunder shall be under no
obligation to see to the application by Landlord of any rent collected by
Landlord, nor shall Tenant have any right to collect any rent thereunder.
Whether or not the Premises are relet, Tenant shall pay to Landlord all amounts
required to be paid by Tenant up to the date of Landlord's reentry, and
thereafter Tenant shall pay to Landlord until the end of the term hereof, the
amount of all rent and other charges required to be paid by Tenant hereunder,
less the proceeds of such reletting as provided above. Such payments by Tenant
shall be due at such times as are provided elsewhere in this Lease, and Landlord
need not wait until the termination of this Lease to recover them by legal
action or otherwise. Landlord shall not be deemed to have terminated this Lease
or the liability of Tenant for the total rent hereunder, by any reentry or other
act, unless Landlord shall give Tenant written notice of Landlord's election to
terminate this Lease.
(ii) Terminate this Lease by giving written notice to Tenant of
Landlord's election to so terminate, reenter the Premises with process of law
and take possession of the same, and expel or remove Tenant and all other
parties occupying the Premises. In such event, Landlord shall thereupon be
entitled to recover from Tenant:
(a) the amount of any unpaid rent which had been earned at the
time of such termination with interest at the rate of twelve percent (12%) per
annum; plus
(b) the present value of the amount by which (i) the unpaid rent
which would have been earned after termination until the time of award, exceeds
(ii) the amount of such rental loss Tenant proves could have been reasonably
avoided; plus
(c) the present value of the amount by which (i) the unpaid rent
for the balance of the term after the time of award, exceeds (ii) the amount of
such rental loss that Tenant proves could be reasonably avoided; plus
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(d) the reasonable attorney and paralegal fees and costs
(whether or not judicial proceedings are involved, including on appeal) incurred
by Landlord in enforcing the covenants and conditions of this Lease or in
connection with Tenant's failure to perform its obligations under this Lease,
together with all other amounts provided or described elsewhere in this Lease.
As used in subsections (b) and (c) above, the "present value" is computed by
using the discount rate of ten and one-half percent (10.50%) per annum.
C. The rights and remedies of Landlord set forth herein shall be in
addition to any other right and remedy now or hereinafter provided by law, and
all such rights and remedies shall be cumulative. No action or inaction by
Landlord shall constitute a waiver of a Default, and no waiver of Default shall
be effective unless it is in writing, signed by the Landlord.
D. If Tenant is delayed or prevented from performing any of its
obligations under this Lease by reason of strike, lockouts, labor troubles,
failure of power, rights, insurrection, war, acts of god, or any other cause
beyond Tenant's control, the period of such delay or such prevention shall be
deemed added to the time period herein provided for the performance of any such
obligation by Tenant.
16. HOLDING OVER. In the event Tenant remains in possession of the Premises
after the expiration of this Lease, without executing a new lease, Tenant shall
occupy the Premises as a tenant from month to month subject to all the terms
hereof, but such possession shall not limit Landlord's rights and remedies by
reason thereof nor constitute a holding over.
17. ASSIGNMENT AND SUBLETTING.
A. Tenant shall have the full and free right to sublet, assign, or
otherwise transfer its interest in this Lease and the Premises to BCI or a
subsidiary of BCI and BCI shall have the further full and free right from time
to time to sublet, assign, or otherwise transfer its interest in this Lease so
assigned, to a licensee, franchisee or any parent or operating subsidiary of BCI
or a corporation or other entity with which Tenant or BCI may merge, consolidate
or sell all or a substantial portion of its assets or stock, without Landlord's
approval, written or otherwise subject to the consent of BCI in its sole
discretion; provided however, that the use of the Premises shall comply with the
requirements of Paragraph 11 hereof and provided further, that the party
merging, consolidating or purchasing the assets or stock of Tenant or BCI shall
execute and deliver to Landlord a full unconditional guaranty of the obligations
of Tenant or BCI (as the case may be). Tenant shall not otherwise sublet,
assign, or otherwise transfer its interest in this Lease without first obtaining
Landlord's prior written consent subject to the consent of BCI in its sole
discretion, which shall not be unreasonably withheld, conditioned or delayed,
provided the Premises is used for restaurant or other retail purposes which do
not violate any applicable governmental zoning codes, and which are not noxious
or offensive uses. A noxious or offensive use, for purposes of this Lease, shall
be defined to mean a dance hall, bar serving alcoholic beverages, off-track
betting business, billiard or pool hall, bingo parlor, massage
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parlor, video game arcade, blood bank, night club, or adult book or adult video
rental store (which are defined as stores in which any part of the inventory is
not available for sale or rental to children under eighteen (18) years old,
because such inventory explicitly deals with or depicts human sexuality).
B. Notwithstanding the foregoing, if BCI becomes Tenant under this Lease
or is the Guarantor under the Lease, then BCI and Tenant shall have the full
free right to sublet, assign or otherwise transfer its interest in this Lease,
without first obtaining the prior written consent of Landlord but subject to the
consent of BCI in its sole discretion, so long as Tenant remains fully liable
for Tenant's obligations and BCI remains liable as Guarantor and the Premises is
used for a restaurant or retail purpose, which does not violate any applicable
governmental zoning codes, and is not a noxious or offensive use (as defined
above), and provided further that the use of the Premises shall comply with the
requirements of Paragraph 11 hereof.
C. In the event of any subletting or assignment to a party not affiliated
with BCI or Tenant which results in increased rental paid by non-affiliated
party to BCI or Tenant, then one-half (1/2) any such increase shall be paid to
Landlord after BCI first recovers its actual reasonable costs incurred in
obtaining a new tenant and preparing the Premises for the sublessee or assignee.
D. The Landlord may assign its rights under this Lease without Tenant's
consent in connection with a transfer of the Premises to an affiliate of
Landlord, and in such event, BCI's right of first refusal under this Lease shall
not apply to such assignment and transfer.
E. Prior to any assignment allowed hereunder, Tenant shall deliver to
Landlord (i) a copy of the assignment documents, and the name, address and
telephone number of such assignee, and (ii) a new insurance policy and binder
complying with the terms of this Lease and naming such assignee as the tenant of
the Premises. Notwithstanding anything herein to the contrary, in the event of
any assignment of this Lease or subletting of the Premises, Tenant shall not be
released from its obligations under this Lease unless specifically released by
virtue of a separate written instrument executed by Landlord, which may be
withheld in Landlord's sole discretion.
F. Landlord shall have the right without limitation (subject to the
Option to Purchase and First Right of Refusal to Purchase and Lease Agreement
between Landlord and BCI) to sell, convey, transfer or assign its interest in
the Premises or its interest in this Lease, and upon such conveyance being
completed all covenants and obligations of Landlord under this Lease accruing
thereafter shall cease, but such covenants and obligations shall run with the
land and shall be binding upon the subsequent landlord or owners of the Premises
or of this Lease.
18. LEASEHOLD MORTGAGE
A. Tenant may mortgage, collaterally assign or otherwise encumber any
interest that Tenant has in this Lease or in the improvements located on the
Premises ("Mortgage") as
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security for an indebtedness ("Debt"). Landlord agrees to execute such
documentation requested by any such mortgagee (the "Mortgagee") and Tenant
acknowledging Mortgagee has certain rights to Tenant's interest in the Premises
or in improvements located on the Premises.
B. If a Mortgagee notifies Landlord of the execution of a Mortgage and
names the place for service of notice upon Mortgagee, then:
(i) Landlord will give to any Mortgagee, simultaneously with
service on Tenant, notices of all demands made by Landlord on Tenant and no such
notice to Tenant shall be effective as to Mortgagee unless a copy is so served
upon Mortgagee.
(ii) Mortgagee shall have the privilege of performing any of
Tenant's covenants, curing any defaults by Tenant, and exercising any election,
option or privilege conferred upon Tenant by the terms of this Lease, provided
Tenant has irrevocably appointed Mortgagee to do so.
(iii) Landlord shall not terminate this Lease or Tenant's right of
possession for any default of Tenant if, within a period of thirty (30) days
after the expiration of the period of time within which Tenant might cure such
default, such default is cured or caused to be cured by Mortgagee or, if within
a period of thirty (30) days after the expiration of the period of time within
which Tenant might cure such default, Mortgagee diligently commences to cure
such default.
(iv) No liability for the payment of Rent or the performance of any
of Tenant's covenants and obligations of this Lease shall attach to or be
imposed upon any Mortgagee, while not in possession of the Premises, all such
liability being hereby expressly waived by Landlord.
19. SUBORDINATION, NON-DISTURBANCE, ATTORNMENT, ESTOPPEL CERTIFICATE
A. Upon written request of the holder of any mortgage (which term
"mortgage" shall also include deeds of trust) now or hereafter relating to the
Premises, Tenant will subordinate its rights under this Lease to the lien
thereof and to all advances made or hereafter to be made upon the security
thereof, and Tenant shall execute, acknowledge and deliver an instrument to
effect such subordination; PROVIDED, HOWEVER, as a condition of all such
subordinations, the holder of such mortgage shall be first required to agree
with Tenant that, notwithstanding the foreclosure or other exercise of rights
under any such first or other mortgage, Tenant's possession and occupancy of the
Premises and the improvements and its leasehold estate shall not be disturbed or
interfered with nor shall Tenant's rights (including, without limitation, its
rights to the proper application of any insurance proceeds or condemnation award
as provided herein) and obligations under this Lease be altered or adversely
affected thereby so long as Tenant is not in default (beyond any applicable cure
period) hereunder. As a further condition to all such subordinations, the holder
of such mortgage shall be first required to execute a non-
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disturbance agreement, and Landlord will ensure that its lender provides a non-
disturbance agreement to Tenant in substantially the form attached hereto as
Exhibit "B".
B. Notwithstanding anything set out in subparagraph (A) above to the
contrary, in the event the holder of any such mortgage elects to have this Lease
be superior to its mortgage, then upon Tenant's being notified to that effect by
such encumbrance holder, this Lease shall be deemed prior to the lien of said
mortgage, whether this Lease is dated prior or subsequent to the date of said
mortgage, and Tenant shall execute, acknowledge and deliver an instrument,
effecting such priority.
C. In the event proceedings are brought for the foreclosure of, or in the
event of the exercise of the power of sale under any mortgage made by Landlord
covering the Premises, or in the event of delivery of a deed in lieu of
foreclosure under such a mortgage Tenant will attorn to the purchaser upon any
such foreclosure or sale and recognize such purchaser as Landlord under this
Lease, and upon the request of the purchaser, Tenant shall execute, acknowledge
and deliver an instrument evidencing such attornment, provided such purchaser
agrees not to disturb Tenant and executes a non-disturbance agreement
substantially in the form attached hereto as Exhibit "B".
D. Each party agrees, within seven (7) days after written request by the
other, to execute, acknowledge and deliver to and in favor of any proposed
mortgagee, BCI, lender to tenant or purchaser of the Premises, an estoppel
certificate stating, among other things (i) whether this Lease is in full force
and effect, (ii) whether this Lease has been modified or amended and, if so,
identifying and describing any such modification or amendment, (iii) the date to
which rent and other charge has been paid, and (iv) whether the party furnishing
such certificate knows of any default on the part of the other party or has any
claim against such party and, if so, specifying the nature of such default or
claims.
E. Upon written demand by the holder of any mortgage covering the
Premises, Tenant shall forthwith execute, acknowledge and deliver an agreement
in favor of such encumbrance holder, by the terms of which Tenant will agree to
give prompt written notice to such encumbrance holder in the event of any
casualty damage to the Premises or in the event of any default on the part of
Landlord under this Lease declared by Tenant, and will agree to allow such
encumbrance holder a reasonable length of time after notice to cure or cause the
curing of such default before exercising Tenant's rights under this Lease, or
terminating or declaring a default under this Lease.
20. COOPERATION. Landlord shall fully cooperate with Tenant throughout the
term of this Lease to secure or maintain proper zoning, building and other
permits and compliance with all applicable laws and Landlord shall execute all
such petitions, requests and the like as Tenant shall reasonably request for
such purposes, provided, however, Tenant shall reimburse Landlord for its
reasonable cost (including the fees of any engineer or attorney engaged by
Landlord to review Tenant's request) incurred in doing so.
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21. NOTICES. All notices and other communications required or permitted to be
given hereunder shall be in writing and shall be delivered to the person to whom
the notice is directed, either in person with a receipt requested therefor, or
sent by a recognized overnight carrier service for next-day delivery, or by
United States Certified Mail, Return Receipt Requested, postage prepaid, and
addressed to the parties at their respective addresses set forth below.
If to Landlord: Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
Attention: Senior Vice President, Administration
with copy to: Miller, Canfield, Paddock and Stone, P.L.C.
101 N. Main Street, 7th Floor
Ann Arbor, Michigan 48104
Attention: David N. Parsigian, Esq.
If to Tenant: [TENANT NAME]
[TENANT ADDRESS]
Attention:____________________________
with copy to: Boston Chicken, Inc.
14103 Denver West Parkway
Post Office Box 4086
Golden, Colorado 80401-4086
Attention: Legal Services
Any party may change its address for notices by written notice in like manner as
provided in this Paragraph and such change of address shall be effective seven
(7) days after the date notice of such change of address is given. Notice for
purposes of this Lease shall be deemed given three (3) business days after it
shall have been deposited in the mail by the party who is giving such notice
with sufficient postage prepaid.
22. INDEMNIFICATION. Tenant does hereby indemnify and exonerate Landlord
against and from all liabilities, losses, obligations, damages, penalties,
claims, costs, charges and expenses, including reasonable architects' and
attorneys' fees, which may be imposed upon or asserted against or incurred by
Landlord by reason of any of the following occurring (excluding Landlord's
willful or negligent acts):
A. any work or thing done in respect of construction of, in or to the
Premises or any part of the improvements now or hereafter constructed on the
Premises (other than work by Landlord);
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B. any use, possession, occupation, operation, maintenance or management
of the Premises or any part hereof;
C. any failure to, or to properly, use, possess, occupy, operate,
maintain or manage the Premises or any part thereof;
D. the condition, including environmental conditions, of the Premises or
any part thereof;
E. any negligence on the part of Tenant or any of its agents,
contractors, servants, employees, licensees or invitees;
F. any accident, injury or damage to any person or property occurring in,
on or about the Premises or any part thereof including any sidewalk adjacent
thereto; or
G. any failure on the part of Tenant to perform or comply with any of the
covenants, agreements, terms or conditions contained in this Lease on its part
to be performed or complied with.
23. HOLD HARMLESS. Tenant agrees to hold Landlord harmless against any and all
claims, damages, accidents and injuries to persons or property caused by or
resulting from or in connection with anything in or pertaining to or upon the
Premises during the term of this Lease or while the Tenant is occupying the
Premises, except if such claim, damage, accident or injury shall be caused by
the negligence or willful misconduct of Landlord or its employees or agents.
Landlord shall not be liable to Tenant, Tenant's employees, agents, invitees,
licensees or any other person whomsoever for any injury to person or damage to
property on or about the Premises caused by the negligence or misconduct of the
Tenant, its agents, servants or employees or of any other person entering the
building under expressed or implied invitation by Tenant or due to any other
cause whatsoever, unless caused by the negligence or neglect or willful
misconduct of Landlord, its employees or its authorized representatives.
24. CONFIDENTIALITY. Landlord and its agents, representatives, employees,
partners, officers and directors will not disclose the subject matter or terms
of the transaction contemplated by Lease, including Percentage Rental and gross
sales information, without prior written consent to such disclosure from Tenant,
which consent may be withheld at Tenant's sole discretion, except to Landlord's
agents. Notwithstanding anything to the contrary contained herein, Landlord
may, without Tenant's consent, disclose the subject matter or terms of the
transaction contemplated by Lease to Landlord's attorneys and other third party
consultants, to auditors, regulators and underwriters, to the extent required by
law, to the extent the information is available to the public, or in defense of
a legal action between Landlord and Tenant. In addition, BCI may disclose this
Lease to lenders on other sale/leaseback transactions.
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25. LANDLORD'S LIABILITIES. The term "Landlord" as used in this Lease means
only the owner from time to time of the Premises. Landlord shall be under no
personal liability with respect to any of the provisions of this Lease and if
Landlord is in default with respect to its obligations hereunder Tenant shall
look solely to the equity of the Landlord in the Premises.
26. SUCCESSORS. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, legal representatives, successors and assigns.
27. SATELLITE DISH INSTALLATION. Landlord hereby grants to Tenant and its
agents and contractors, at Tenant's sole cost and expense, the right to install,
maintain and operate a mast-mounted satellite dish antenna (the "Dish") and
related equipment, including cables from the exterior of the roof directly above
the restaurant building located on the Premises (the "Building") to equipment
inside the Building, necessary to the operation of the Dish, as part of Tenant's
integrated satellite business network. Tenant may locate the Dish at or
relocate the Dish to some other location on or about the Premises for purposes
of adequate reception, subject to appropriate law, codes and regulations.
Tenant shall ensure that the Dish, and each part of it, shall be installed in
accordance with all local and building rules of construction and codes. Tenant
shall obtain all FCC and other licenses or approvals required to install and
operate the Dish. The Dish is and shall remain the property of Tenant or
Tenant's assignee, transferee or sublessee, and Landlord and Tenant agree that
the Dish is not, and installation of the Dish shall not cause the Dish to
become, a fixture pursuant to this Lease or by operation of law. Tenant shall
be responsible for the repair and maintenance of the Dish during the term of
this Lease, at its sole cost and expense, and upon the termination of this Lease
shall remove said Dish and repair any and all damage to the building in which
the Dish is located (including, but not limited to, the roof of such building)
caused as a result of such removal.
28. ENTIRE AGREEMENT/MEMORANDUM OF LEASE. This Lease contains the entire
agreement between the parties hereto and may not be modified in any manner
other than in writing signed by the parties hereto or their successors in
interest. A short form of this Lease shall be executed by the parties and shall
be recorded in the official records of the county where the Premises are
located.
29. GENDER. Whenever the context hereof permits or requires, words in the
singular may be regarded as in the plural and vice-versa, and personal pronouns
may be read as masculine, feminine and neuter.
30. BROKERAGE FEES. It is understood and agreed that neither party has
incurred any real estate brokerage fees or commissions arising out of this Lease
and each party agrees to hold the other harmless from and against all such fees
and commissions incurred, and costs related thereto including legal fees, as a
result of its own conduct or alleged conduct.
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31. CAPTIONS. The captions of this Lease are for convenience only, and do not
in any way define, limit, disclose, or amplify terms or provisions of this Lease
or the scope or intent thereof.
32. LANDLORD'S RIGHT TO CURE. In the event Tenant shall fail, refuse or
neglect to perform, observe or comply with any term, condition, covenant,
agreement or obligation contained in this Lease on its part to be performed or
complied with within all applicable cure periods, then the Landlord may, at its
sole option, upon giving at least ten (10) days prior written notice (except in
the case of emergency, in which case such notice shall not be necessary), enter
upon the Premises, if deemed necessary by Landlord in its sole discretion,
and/or do whatever may be deemed necessary by Landlord in its sole discretion to
cure such failure by Tenant. Tenant shall pay to Landlord within five (5) days
of Landlord's request, all costs incurred by Landlord in connection with
Landlord's curing of such failure by Tenant including, but not limited to,
reasonable attorney and paralegal fees whether or not judicial proceedings are
involved, including on appeal. In addition to the above costs, in the event
Landlord does not receive payment from Tenant within ten (10) days after the
date when due hereunder, interest at the rate of twelve percent (12%) per annum
shall be due and payable with respect to such payment from the due date thereof
until Landlord receives such payment.
33. ATTORNEY'S FEES. In the event any action or proceeding is commenced with
respect to any claim or controversy by the parties hereto arising from the
breach, interpretation, or enforcement of this Lease or the exhibits attached
hereto, the prevailing party or parties in such action or proceeding shall
receive and be entitled to recover from the non-prevailing party, in addition to
any and all other relief, all costs and expenses, including reasonable attorney
and paralegal fees whether or not judicial proceedings are involved, including
on appeal, incurred by it in such action or proceeding.
34. SECURITY ARRANGEMENT. The parties hereto agree and acknowledge that this
transaction is not intended as a security arrangement or financing secured by
real property, but shall be construed for all purposes as a true lease.
35. NET LEASE. It is the intention of the parties hereto that this Lease is
and shall be treated as an absolute triple net lease. Any present or future law
to the contrary notwithstanding, this Lease shall not terminate nor shall Tenant
be entitled to any abatement, suspension, deferment, reduction (except as
expressly provided in Paragraph 6 hereof), or set off with respect to the rent,
nor shall the obligations of Tenant hereunder be affected by reason of: any
damage to or destruction of the Premises or any part thereof (except as
otherwise expressly provided for herein); any taking of any Premises or any part
thereof or interest therein by condemnation or otherwise (except as expressly
provided in Paragraph 6 hereof); any prohibition, limitation, restriction or
prevention of Tenant's use, occupancy or enjoyment of the Premises or any part
thereof, or any interference with such use, occupancy or enjoyment by any person
(other than Landlord, its agents or employees) or for any other reason (other
than a breach of the covenant of quiet enjoyment); any title defect or
encumbrance or any matter affecting title to the Premises or any part thereof;
any eviction by paramount title or otherwise
22
<PAGE>
(other than a breach of the covenant of quiet enjoyment); the impossibility or
illegality of performance by Landlord, Tenant or both; any action of
governmental authority (other than under Paragraph 6 hereof); any defect in the
condition, quality or fitness for use of the Premises or any part thereof. The
parties intend that the obligations of Tenant hereunder shall be separate and
independent covenants and agreements and shall continue unaffected unless such
obligations shall have been modified or terminated in accordance with an express
provision of this Lease.
36. ECONOMIC SUBSTITUTION. In the event that (a) Tenant determines in its
reasonable business discretion, exercised in good faith, that the Premises are
inadequate or unprofitable for the purposes for which the same are then used
pursuant to this Lease or (b) in the event the Premises are rendered
untenantable or unsuitable by condemnation or casualty, in Tenant's reasonable
opinion, for continued use in the normal conduct of Tenant's business, then
Tenant may, at Tenant's option, during the term of this Lease or any extensions
thereof, give written notice to the Landlord of its intention to substitute
another improved property having a Boston Market restaurant located thereon,
which shall have a value no less than the then current value of the Premises as
established pursuant to the procedure specified hereinbelow and to receive in
exchange the Premises from Landlord. Such other property shall be subject to
Landlord's approval, and shall be subject to the approval of any then mortgagee
having an interest in the Premises. The terms of the related lease for such
substitute property shall be equal or more beneficial to Landlord that as
provided in this Lease, except that the term shall be for the then remainder of
the term of this Lease. Tenant shall pay all reasonable costs associated with
the closing to effect the substitution. Upon Landlord's and any mortgagee's
approval of the substitution of the Premises, a closing of title shall take
place as soon as reasonably practical thereafter, but in no event later than one
hundred eighty (180) days after Tenant is notified that Landlord has approved
the substitution; provided that such time period shall be shortened as necessary
so as not to trigger repurchase rights created under any recorded instruments
which permit a third party to purchase or repurchase the Premises as a result of
cessation of business at the Premises. If Landlord rejects the substitution,
Landlord shall within ten (10) days provide Tenant, in writing, with its reasons
for disapproval.
For purposes of determining the fair market value of the Premises above,
Landlord shall select an appraiser (at its expense) to determine the fair market
value of the Premises and Tenant shall also select an appraiser (at its
expense) to determine the fair market value of the Premises. If such appraisers
cannot agree on the fair market value of the Premises as of the date of
Landlord's receipt of written notice of Tenant' intention to substitute the
Premises, then the two (2) appraisers shall select a third appraiser (the
expense of which shall be shared equally by Tenant and Landlord) to determine
such fair market value and the average of the three appraisals shall be
conclusively considered to be the fair market value of the Premises. If one
party fails to select an appraiser within thirty (30) days after Tenant's
election to substitute the Premises has been received by Landlord, and the other
party (the "Second Party") does select an appraiser, then the Second Party may
notify the First Party that unless First Party has selected an appraiser within
ten (10) days following delivery of the said notice to the First Party, the
Second Party's appraisal shall be deemed to represent the fair market value of
the Premises.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed the day and date first above written.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
___________________________________ By: ________________________________
Print Name:
Its: _______________________
___________________________________
Print Name:
[TENANT NAME]
___________________________________ By: ________________________________
Print Name:
Its: _______________________
___________________________________
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of _____________, 199__, by
Gary A. Bruder, as Vice President of Captec Net Lease Realty, Inc., a Michigan
corporation, on behalf of the corporation.
____________________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires: _____________
STATE OF _____________ )
)ss:
COUNTY OF _________ )
Subscribed and sworn to before me this ___ day of _____________, 199__, by
________________________, as _______________________________ of [TENANT NAME],
[TENANT ENTITY], on behalf of the _________________________.
____________________________________
Notary Public
_______________ County, ____________
My Commission Expires: _____________
24
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Land in the _________ of ____________, County of _____________, State of
______________, and more particularly described as follows:
A-1
<PAGE>
EXHIBIT "B"
================================================================================
Recording Requested By And When
Recorded Return To:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
__________________________________________
CAPTEC NET LEASE REALTY, INC.,
[TENANT NAME]
AND
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
__________________________________________
Dated:
Location:
Relating to Lease No.:
================================================================================
<PAGE>
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") is made and entered into as of the ____ day of _________, 199 , by
and among (i) [TENANT NAME], [TENANT ENTITY] ("Tenant"); (ii) CAPTEC NET LEASE
REALTY, INC., a Michigan corporation ("Landlord"); and (iii) CS FIRST BOSTON
MORTGAGE CAPITAL CORP., a Delaware corporation ("Lender").
WITNESSETH:
----------
WHEREAS, Lender is or may become the holder of a certain mortgage/deed of
trust ("Mortgage/Deed of Trust") encumbering that certain parcel of real
property and the improvements thereon, commonly known as the Boston Market or
the Boston Market/Einstein's Bros. Bagels located at the address noted on the
cover page of this Agreement and more particularly described in Exhibit A
attached hereto and incorporated herein by this reference (the "Property");
WHEREAS, Lender and Landlord are (or will be) parties to the
Mortgage/Deed of Trust, pursuant to which Landlord financed (or will finance)
the Property from Lender; and
WHEREAS, Landlord and Tenant are parties to that certain Lease, dated
_________, 199 (the "Lease"), pursuant to which Tenant leased the Property from
Landlord, commencing on __________, 199 .
NOW, THEREFORE, in consideration for the mutual covenants and agreements
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Subordination. The Lease and all of the terms, covenants and
provisions thereof and all rights, remedies and options of Tenant thereunder are
hereby made, and shall at all times continue to be, subject, junior and
subordinate in all respects to the Mortgage/Deed of Trust and to the lien
thereof and to all increases, renewals, modifications, spreaders,
consolidations, replacements and extensions thereof and to the rights of Lender
thereunder and to any and all sums secured thereby, with the same force and
effect as if the Mortgage/Deed of Trust and all other such instruments had been
executed, delivered and recorded prior to the execution of the Lease.
2. Non-Disturbance. Should Lender become the owner of the Property, or
should the Property be sold by reason of foreclosure, or other proceedings
brought to enforce the Mortgage/Deed of Trust which encumbers the Property, or
should the Property be transferred by deed in lieu of foreclosure, or should any
portion of the Property be sold under a trustee's sale, the Lease shall continue
in full force and effect as a direct lease between the then owner of the
Property covered by the Mortgage/Deed of Trust and Tenant, upon, and subject to,
all
B-2 Lease No._______
<PAGE>
of the terms, covenants and conditions of the Lease for the balance of the term
thereof remaining, including any extensions therein provided. Tenant does
hereby agree to attorn to Lender or to any such owner as its landlord, and
Lender hereby agrees that it will accept such attornment.
3. Attornment. In the event that Lender or any successors in interest to
Lender shall become the owner of the Property by reason of the foreclosure of
the Mortgage/Deed of Trust or the acceptance of a deed or assignment in lieu of
foreclosure or otherwise, then:
(a) Tenant shall be bound to Lender, and Lender shall be bound to Tenant,
under all of the terms, covenants and conditions of the Lease for the balance of
the term thereof remaining, and any extensions or renewals thereof which may be
effected in accordance with any option therefor contained in the Lease, with the
same force and effect as if Lender were the original landlord under the Lease,
except that Paragraph 3(b) below and the other provisions of this Agreement
shall modify the Lease, and Tenant does hereby attorn to Lender as its landlord,
said attornment to be effective and self-operative without the execution of any
further instruments; provided, however, that within ten (10) days after receipt
of written request therefor from Lender, Tenant will execute and deliver to
Lender any instrument or other documents reasonably requested by Lender to
confirm Tenant's attornment to Lender.
(b) Notwithstanding the foregoing, however, it is agreed that in no event
shall Lender:
(1) be liable for any act or omission of any prior landlord
(including Landlord);
(2) be obligated to cure any defaults of any prior landlord
(including Landlord) which occurred prior to the date that
Lender succeeded to the interest of such prior landlord under
the Lease; provided that from and after the date Lender becomes
owner of the Property, Lender shall be obligated to cure any
continuing non-monetary default of the landlord under the Lease
to the extent such default is capable of being cured by Lender;
(3) be subject to any offsets or defenses which Tenant may be
entitled to assert against any prior landlord (including
Landlord) with respect to events occurring prior to the date
Lender succeeded to Landlord's interest;
(4) be bound by any rent or other amounts paid by Tenant to any
prior landlord (including Landlord) more than one (1) month in
advance of the date that Lender succeeded to the interest of
such prior landlord under the Lease; or
B-3 Lease No._______
<PAGE>
(5) be bound by any amendment or modification of the Lease or any
supplemental agreement made without the written consent of Lender
(which consent shall not be unreasonably withheld, conditioned or
delayed).
4. Amendments. Tenant shall not, without the prior written consent of
Lender (which consent shall not be unreasonably withheld, conditioned or
delayed) (a) enter into any agreement amending or modifying the Lease or (b)
prepay any of the rents, additional rents or other sums due under the Lease for
more than one (1) month in advance of the due date thereof, and any such
amendment, modification, or prepayment without the prior written consent of
Lender shall not be binding on Lender.
5. Tenant's Representations and Warranties. Tenant hereby represents and
warrants to Lender that as of the date hereof (a) Tenant is the owner and holder
of the tenant's interest under the Lease, (b) a true and complete copy of the
Lease is annexed hereto and made a part hereof as Exhibit B and the Lease has
not been modified or amended, (c) the Lease is in full force and effect and the
term thereof commenced on the date set forth in the third recital paragraph on
the first page of this Agreement, pursuant to the provisions thereof, (d) the
Property has been completed and Tenant has taken possession of the same on a
rent paying basis, (e) neither Tenant nor the Landlord is in default under any
of the terms, covenants or provisions of the Lease and Tenant to the best of its
knowledge knows of no event which but for the passage of time or the giving of
notice or both would constitute an event of default by Tenant or the Landlord
under the Lease, (f) neither Tenant nor the Landlord has commenced any action or
given or received any notice for the purpose of terminating the Lease, (g) all
rents, additional rents and other sums due and payable under the Lease have been
paid in full and no rents, additional rents or other sums payable under the
Lease have been paid for more than one (1) month in advance of the due dates
thereof, and (h) there are no offsets or defenses to the payment of the rents,
additional rents, or other sums payable under the Lease.
6. Payment of Rent to Lender. Tenant agrees to pay the rent and any
other payments due under the Lease to Lender upon receipt of written notice from
Lender that it has succeeded to the interest of Landlord under the Lease, and
Landlord agrees that Tenant is entitled to rely conclusively upon such notice
without any duty of inquiry.
7. Limitation on Liability of Lender. There shall be no personal
liability on the part of Lender or any officer, director, employee, shareholder
or partner of Lender for the performance of the Lease or any covenant or
agreement contained therein or in this Agreement. Tenant shall look solely to
Lender's estate and interest in the Property, if any, for the satisfaction of
every remedy of Tenant for any breach by Lender under the Lease or this
Agreement or otherwise arising out of or in connection with the Lease. Tenant
agrees that with respect to any money judgment which may be obtained or secured
by Tenant against Lender, Tenant shall look solely to the estate or interest
owned by Lender in the Property and Tenant will not collect or attempt to
collect any such claim out of any other assets of Lender.
B-4 Lease No._______
<PAGE>
8. Performance by Lender: Conflict. Nothing in this Agreement shall be
or be deemed to be an agreement by Lender to perform any obligation of Landlord
under the Lease unless and until the Lender acquires the Property, and then only
if required to do so by the terms of the Lease, as modified and limited by this
Agreement. In the event of any conflict between the terms of this Agreement and
the terms of the Lease, the terms of this Agreement shall control.
9. Notices. Any notice required or permitted to be given hereunder shall
be in writing and may be given by personal delivery, certified mail, return
receipt requested or by nationally recognized overnight courier service and if
given personally or by mail or by courier service, shall be deemed sufficiently
given if addressed to the parties at the addresses set forth below. Any party
may by notice specify a different address for notice purposes.
Addresses for Notices:
To Lender: CS First Boston Mortgage Capital Corp.
55 E. 52nd Street
New York, New York 10055
Attention: Laura Goldberg
To Landlord: Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
Attention: Gary Bruder
To Tenant: [TENANT NAME]
[TENANT ADDRESS]
Attention: _______________________
10. Successors and Assigns. This Agreement and each and every covenant
and provision contained herein shall be binding upon and shall inure to the
benefit of the parties hereto and their respective representatives, successors
and assigns.
11. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the jurisdiction in which the Property
is located.
12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY,
INTENTIONALLY AND FREELY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OTHER PARTY HERETO IN RESPECT OF ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
B-5 Lease No._______
<PAGE>
13. Tenant's Improvements. The Mortgage/Deed of Trust shall not cover or
encumber and shall not be construed as subjecting in any manner to the lien
thereof any of Tenant's improvements or trade fixtures, furniture, equipment or
other personal property at any time placed or installed in the Property. In the
event the Property or any part thereof shall be taken for public purposes by
condemnation or transfer in lieu thereof or the same are damaged or destroyed,
the rights of the parties to any condemnation award or insurance proceeds shall
be determined and controlled by the applicable provisions of the Lease.
14. Non-Joinder of Tenant. Tenant shall not be enjoined as a
party/defendant in any action or proceeding which may be instituted or taken by
reason or under any default by Landlord in the performance of the terms,
covenants, conditions and agreements set forth in the Mortgage/Deed of Trust.
[SIGNATURE PAGE FOLLOWS]
B-6 Lease No._______
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date hereinabove first written.
SIGNED AND ACKNOWLEDGED TENANT:
------
IN THE PRESENCE OF:
[TENANT NAME]
_______________________________ By____________________________
_______________________________ Its_____________________________
SIGNED AND ACKNOWLEDGED LANDLORD:
--------
IN THE PRESENCE OF:
CAPTEC NET LEASE REALTY, INC.
_______________________________ By____________________________
_______________________________ Its_____________________________
SIGNED AND ACKNOWLEDGED LENDER:
------
IN THE PRESENCE OF:
CS FIRST BOSTON MORTGAGE
CAPITAL CORP.
_______________________________ By____________________________
_______________________________ Its_____________________________
Drafted By:
Gary A. Bruder
Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Dr.
Lobby L, 4th Floor
Ann Arbor, MI 48106
B-7
<PAGE>
STATE OF _________________ )
: ss.
COUNTY OF _______________ )
BE IT REMEMBERED, that on this ___ day of _______, 1996, before me, a
notary public of the State of Colorado, personally appeared
__________________________, a _________________ of [TENANT NAME], [TENANT
ENTITY], who I am satisfied is the person who signed the within instrument, and
thereupon acknowledged that he/she/they has/have been duly authorized to do so,
and that they signed, sealed and delivered the within instrument on behalf of
the corporation for the uses and purposes therein contained.
__________________________________________
(signature of notary)
My Commission Expires on:
STATE OF MICHIGAN )
: ss.
COUNTY OF WASHTENAW )
BE IT REMEMBERED, that on this ___ day of ___________, 1996, before me, a
notary public of the State of Michigan, personally appeared Gary A. Bruder, a
Vice President of Captec Net Lease Realty, Inc., a Michigan corporation, who I
am satisfied is the person who signed the within instrument, and thereupon
acknowledged that he/she/they has/have been duly authorized to do so, and that
they signed, sealed and delivered the within instrument on behalf of the
corporation, for the uses and purposes therein contained.
__________________________________________
(signature of notary)
My Commission Expires On:
B-8
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED, that on this ___ day of ______________, 1996, before me,
a notary public of the State of New York, personally appeared
__________________________, a __________________ of CS First Boston Mortgage
Capital Corp., a Delaware corporation, who I am satisfied is the person who
signed the within instrument, and thereupon acknowledged that he/she/they
has/have been duly authorized to do so, and that they signed, sealed and
delivered the within instrument on behalf of the corporation, for the uses and
purposes therein contained.
__________________________________________
(signature of notary)
My Commission Expires On:
B-9
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Land in the _________ of ____________, County of _____________, State of
______________, and more particularly described as follows:
B-10
<PAGE>
EXHIBIT B
[Copy of the Estoppel Certificate and Lease Attached]
[Intentionally Omitted from Copy Submitted for Recording.]
B-11
<PAGE>
EXHIBIT "1"
ESTOPPEL/WAIVER AGREEMENT
Address of Property: [STREET ADDRESS]
[CITY, STATE]
Store No.: ___________________________
THIS ESTOPPEL/WAVIER AGREEMENT is made as of the date of execution hereof
by the undersigned in favor of General Electric Capital Corporation, for itself
and as Agent for certain Participants ("Equipment Lessor").
Equipment Lessor has entered into, or is about to enter into, a Master
Lease Agreement (the "Equipment Lease") with Boston Chicken, Inc. ("Lessee"),
pursuant to which the Lessee has leased, or will lease, from Equipment Lessor
certain Equipment described in the attached Annex A (such personal property,
together with any replacements thereof, the "Equipment"). Some of all of the
Equipment is, or will be, located at the Premises described above (the
"Premises"). Execution of this Agreement is a condition precedent to Equipment
Lessor's obligations under the Equipment Lease.
The undersigned agrees that: (i) the Equipment is, and shall remain,
personal property regardless of the method by which it may be, or becomes,
affixed to the Premises; (ii) Equipment Lessor's interest in the Equipment and
any proceeds thereof (including, without limitation, proceeds of any insurance
therefor) shall be, and remain, subject to the rights and interests of Equipment
Lessor (until and unless Equipment Lessor shall formally release or transfer its
interest in the Equipment of Lessee); (iii) the undersigned waives and agrees
not to assert any lien, claim or interest which the undersigned may now have or
hereafter acquire against or in the Equipment by virtue of the undersigned's
interest in the Premise; (iv) the undersigned shall not take any action that
would affect the Equipment (or the interest of Equipment Lessor therein) or
cause the Equipment to be removed from the Premises without giving Equipment
Lessor fifteen (15) days' prior written notice of such action (provided,
however, that the foregoing shall not restrict the exercise of remedies against
Lessee that do not affect the Equipment or the interest of Equipment Lessor
therein); (v) Equipment Lessor, and its employees and agents, shall have the
right with prior notice, from time to time, to enter the Premises for the
purpose of inspecting the Equipment; and (vi) Equipment Lessor, and its
employees and agents, shall have the right, upon any default by Lessee under the
Equipment Lease, to enter the Premises and remove the Equipment from the
Premises provided that Equipment Lessor reimburses the undersigned for any
damages actually caused to the Premise by Equipment Lessor, or its employees or
agents, during any such removal. The undersigned acknowledges and agrees that
Equipment Lessor is relying on this Agreement in providing the financing
pursuant to the Equipment Lease, and this Agreement shall be binding upon, and
shall inure to the benefit of, the successors and assigns of the undersigned and
Equipment Lessor.
1-1
<PAGE>
CAPTEC NET LEASE REALTY, INC.
By:__________________________
Its:___________________
Date:_____________________________
Interest in the Premises (check applicable box)
____Owner
____Mortgagee
____Landlord
____Realty Manager
1-2
<PAGE>
EXHIBIT "2"
RECORDING REQUESTED BY, AND LOCATION: ___________________________
WHEN RECORDED RETURN TO: ___________________________
McGlinchey Stafford Lang STORE NUMBER: ___________________
A Professional Limited Liability Company
Ninth Floor, One American Place
Baton Rouge, Louisiana 70825
Attention: S. Jess Sperry, Esquire
COLLATERAL ASSIGNMENT OF TENANTS RIGHTS IN LEASE
-------------------------------------------------
THIS COLLATERAL ASSIGNMENT OF TENANTS RIGHTS IN LEASE (this "Assignment")
is made as of ________________, 199_, by [TENANT NAME], ("Borrower"), to BOSTON
CHICKEN, INC., a Delaware corporation, ("Lender").
WITNESSETH:
WHEREAS, Lender 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 Loan Agreement (the "Loan Agreement"; terms used
herein and not otherwise defined herein shall have the meaning assigned thereto
in the Loan Agreement) dated ______________, 199_ between Borrower and Lender;
WHEREAS, Borrower, as tenant, has entered into that certain lease dated
___________, 199_, with Captec Net Lease Realty, Inc. ("Landlord"); demising the
property legally described on Exhibit A ("Premises") attached hereto and made a
part hereof (which lease, together with all renewals, extensions, modifications,
amendments, substitutions and replacements, all of the Borrowers 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, are hereinafter referred to as the "Lease")
WHEREAS, the Lease is to be collaterally assigned by Borrower to Lender as
additional security for all of Borrowers obligations to Lender arising under or
in connection with the Loan Agreement and the other loan documents (the
"Liabilities").
NOW, THEREFORE, for and in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
2-1
<PAGE>
1. The Assignment. In order to induce Lender to make advances under the
Loan 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 Loan Agreement and in the other loan documents, Borrower does hereby assign,
set over, and transfer to Lender, 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 under Lender, 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 Loan Agreement.
2. Warranties, Representations and Covenants. Borrower hereby covenants,
represents, and warrants to Lender and agrees as follows:
A. At all times, Lender shall have the right to verify the validity,
amount of rent and other charges and any other matter relating to the Lease, by
mail, telephone, facsimile or otherwise, in the name of Borrower or Lender, all
in accordance with the terms and conditions of the Lease.
B. Unless Lender notifies Borrower in writing that it waives any one
or more of the following requirements, Borrower shall: (i) notify Lender, in
writing, of any assertion of any defaults, claims, liabilities, offsets and
counterclaims under the Lease; and (ii) not permit or agree to any termination,
surrender, settlement, 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 Lender; Borrower is the lessee under the
Lease and has good title and the lawful right to collaterally assign its
interest in the same; 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 or Premises to any other person or entity.
D. Borrower has and shall: (i) observe, perform and discharge, duly
and punctually, all the obligations, terms, covenants, conditions and warranties
of the Loan Agreement, the other loan documents and the Lease, on the part of
Borrower to be kept, observed and performed; (ii) give prompt notice to Lender
of any failure on the part of Borrower to observe, perform and discharge same;
(iii) 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, and upon request of Lender,
will do so in the name and behalf of Lender but at the expense of Borrower; and
(iv) pay all costs and expenses of Lender, including reasonable attorneys fees,
in any action or proceeding in which Lender may appear hereunder.
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
Borrowers knowledge, Landlord is not in default in performing or complying with
any of its obligations under the Lease; Landlord has completed, or will complete
within the time period provided in the Lease, all improvements required by the
terms of the Lease; and the Premises are, or will be within the
2-2
<PAGE>
due course of construction completion, open for the use of Borrower, its
customers, employees and invitees.
F. Lender 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 Lender by entering into this Assignment assume any
additional obligation, duty or liability under the Lease.
G. Borrower hereby agrees to indemnify and hold Lender harmless of,
from and against any and all liability, loss, damage and expense which Lender
may or might incur by reason of this Assignment. Should Lender 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 under the terms of the
Loan Agreement) from the date of Lender's payment thereof until repaid to
Lender, and shall be secured hereby.
H. The failure of Lender 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 Lender of any
of its rights and remedies hereunder. The rights and remedies of Lender under
this Assignment are and shall be cumulative and in addition to any and all
rights and remedies available to Lender under the Loan Agreement or other loan
documents.
I. Upon payment in full of all of the Liabilities, this Assignment
shall become and be void and of no further effect, and Lender 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
as to validity, interpretation, construction, effect and in all other respects
by the laws and decisions of the State of ___________ without reference to the
choice of law.
3. Power of Attorney. Upon the occurrence of an Event of Default under
the terms of the Loan Agreement, Borrower further irrevocably appoints Lender 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 Lender'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 Loan Agreement, Lender, 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.
2-3 Lease No.________
<PAGE>
B. If such Event of Default under the Loan Agreement occurs due to
Borrower's default under the Lease, Lender may cure any such default under the
Lease within the curative times provided in the Lease, or any longer period
granted to Lender by Landlord.
C. Exercise any and all rights and remedies afforded to Lender under
the Loan Agreement, the other loan documents and the Uniform Commercial Code and
any and/all other applicable provisions of law or equity, including the right to
sell Borrower's interest in the Lease at a public or private sale.
5. Franchise Agreement. Upon a default by Borrower under the Lease or
under the Boston Chicken, Inc. Franchise Agreement for a Boston Market Unit,
between Lender and Borrower ("Franchise Agreement"), Lender shall have the right
and is hereby empowered to take possession of the Premises and any improvements
thereon, expel Borrower therefrom, and, in such event, Borrower shall have no
further right, title or interest in the Lease and Premises and shall remain
liable to Lender for all past due rents and other charges, agreements and
obligations set forth in the Lease which Lender shall be required either to pay
to Landlord or perform thereunder.
6. Exercise of Options. Throughout the term of the Franchise Agreement,
Borrower agrees that it shall elect and exercise all options to extend the term
of or renew the Lease not less than thirty (30) days prior to the last day that
said option must be exercised, unless Lender otherwise agrees in writing.
Borrower shall send Lender a copy of the notice of exercise concurrently with
Borrower's exercise of the option. Upon failure of Lender to otherwise agree in
writing, and upon failure of Borrower to so elect to extend or renew the Lease
as aforesaid, Borrower hereby appoints Lender as its true and lawful attorney-
in-fact to exercise such extensions or renewal options in the name, place and
stead of Borrower for the sole purpose of effecting such extension or renewal,
provided that Lender shall have the right but not the obligation to exercise
such extension or renewal options.
7. Successors and Assigns. This Assignment shall inure to the benefit of
and be binding on Borrower and Lender and the heirs, personal representatives,
officers, partners, successors and assigns of each.
IN WITNESS WHEREOF, this Assignment has been duly exercised the day and
year first above written.
BORROWER: LENDER:
[TENANT NAME] BOSTON CHICKEN, INC.
By: ________________________________ By: ________________________________
Name: ______________________________ Name: ______________________________
Title: _____________________________ Title: _____________________________
Date: _______________________, 199__ Date: _______________________, 199__
2-4
<PAGE>
STATE OF _____________________________
COUNTY OF ___________________________
On ______________________, before me, the undersigned authority, personally
appeared _____________________________ to me well known and known to me to be
the individual described in and who executed the foregoing instrument as
_________________________ of [TENANT NAME], and severally acknowledged to and
before me that he/she executed such instrument as such and ____________________
of said corporation and that the seal affixed to the foregoing instrument is the
corporate seal of said corporation, and that it was affixed to said instrument
by due and regular corporate authority, and that said instrument is the free act
and deed of said corporation.
WITNESS my hand and official seal.
(SEAL)
__________________________________________
NOTARY PUBLIC
My Commission Expires: ____________________
STATE OF _____________________________
COUNTY OF ___________________________
On ______________________, before me, the undersigned authority, personally
appeared _____________________________ to me well known and known to me to be
the individual described in and who executed the foregoing instrument as
_________________________ of BOSTON CHICKEN, INC., a Delaware corporation, and
severally acknowledged to and before me that he/she executed such instrument as
such _________________________ of said corporation and that the seal affixed to
the foregoing instrument is the corporate seal of said corporation, and that it
was affixed to said instrument by due and regular corporate authority, and that
said instrument is the free act and deed of said corporation.
WITNESS my hand and official seal.
(SEAL)
__________________________________________
NOTARY PUBLIC
My Commission Expires: ____________________
2-5 Lease No._________
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
Land in the _________ of ____________, County of _____________, State of
______________, and more particularly described as follows:
2-6
<PAGE>
Lease No. ____
[Street Address]
[City, State]
ADDENDUM TO LEASE AGREEMENT
---------------------------
THIS ADDENDUM TO LEASE AGREEMENT ("Addendum") is made and entered into as
of __________________, 199__, by and between:
(i) CAPTEC NET LEASE REALTY, INC., a Michigan corporation, whose address
is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor,
Michigan 48106-0544 ("Landlord"), and
(ii) [TENANT NAME], a [TENANT ENTITY], whose address is
________________________ ("Tenant").
W I T N E S S E T H :
---------------------
Landlord and Tenant have entered into a Lease Agreement, dated of even date
("Lease"), pursuant to which Landlord leased to Tenant and Tenant rented from
Landlord the Premises (as defined in the Lease).
Landlord and Tenant desire to amend certain terms and provisions of the
Lease. Notwithstanding any other provision to the contrary which may be
contained in the Lease, it is specifically agreed by and between Landlord and
Tenant as follows:
1. Defined Terms. All defined terms in this Addendum shall have the same
meaning as set forth in the Lease.
2. Terms and Rent. Paragraph 2 of the Lease is amended to add the
following:
B. Rent payable under this Lease shall be as set forth in the Rent
Addendum attached hereto.
3. Insurance. The second sentence of Paragraph 4(B) of the Lease is
amended to add the phrase "and additional insureds" after the phrase "as loss
payees."
4. Option to Renew. The first sentence of Paragraph 10 of the Lease is
amended and restated as follows:
Tenant shall have five (5) successive five (5) year options to extend
this Lease for up to an additional twenty-five (25) years upon the same
terms, covenants and conditions as set forth herein (subject to adjustments
in Annual Rent as set forth in the Rent Addendum); provided that Tenant is
not in default (beyond any applicable cure period) hereunder at the time
Tenant exercises such renewal option.
<PAGE>
5. Tenant's Conduct of Business. The first sentence of Paragraph 11 is
amended and restated as follows:
The use of the Premises at all times will be limited to the operation of a
Boston Market Restaurant or other restaurant or food service concept(s)
(including multiple branded restaurant or food service concepts) owned or
operated by BCI and/or its affiliates or other uses pre-approved (in
writing) by Landlord. Any other use not specified above, shall be subject
to the approval of Landlord, which approval Landlord agrees not to
unreasonably withhold, condition or delay. Landlord agrees that any such
approval shall be conclusively deemed to be given if Landlord has not
delivered its approval or disapproval within twenty (20) days of Landlord's
receipt of the written request therefore or within ten (10) days of the
receipt by Landlord of any information Landlord may reasonably request
provided Landlord requests such additional information from Tenant within
twenty (20) days of Landlord's receipt of Tenant's original request for
said approval.
The provision captioned "LEASES GUARANTEED BY BCI" is amended to add
the following at the end of the paragraph:
Notwithstanding the foregoing, Tenant shall either (1) operate a Boston
Market restaurant, or successor trade name restaurant, or other restaurant
or food service concept(s) (including multiple branded restaurant or food
service concepts) owned and operated by BCI and/or its affiliates or other
uses pre-approved (in writing) by Landlord during the last two (2) years of
the original term or the last two (2) years of any renewal thereof (if
exercised by Tenant) or, (2) operate the Premises as another permitted use
under Paragraph 11 of the Lease by Tenant or an assignee, sublessee, or
transferee permitted under the Lease for the last two (2) years of the
original term of this Lease or the last two (2) years of any renewal
thereof (if exercised by Tenant) or (3) provide a substitute property as
provided in Paragraph 36 of the Lease.
6. Landlord's Consent to Responsibilities. Paragraph 13(B) of the Lease
is amended to add the following at the end of the Paragraph:
; provided further, that, the foregoing shall not waive, excuse, delay or
modify BCI's performance under any separate guaranty agreement by BCI of
Tenant's duties and obligations under this Lease as set forth in said
separate guaranty.
7. Default. The last sentence of Paragraph 15(B) of the Lease is amended
to delete the phrase "ten and one-half percent (10.50%)" and to substitute the
phrase "nine and one-half percent (9.50%)".
-2-
<PAGE>
8. Assignment and Subletting. Paragraphs 17(A), (B), (D), (E) and (F) of
the Lease are amended and restated as follows:
A. Tenant shall have the full and free right to sublet, assign or
otherwise transfer its interest in this Lease and the Premises, without
Landlord's approval (written or otherwise) to BCI, or any parent or
majority owned subsidiary of BCI or entity with which Tenant or BCI may
merge, consolidate or sell all or a substantial portion of its assets or
controlling interest (each a "Resulting Entity") provided that the
Shareholders' Equity or Current Capital Accounts (each as determined in
accordance with generally accepted accounting principles) of the Resulting
Entity shall be equal to or greater than the Shareholders' Equity or
Current Capital Accounts (each as determined in accordance with generally
accepted accounting principles) of BCI or Tenant (as the case may be) as of
the date of this Lease. Tenant agrees to provide Landlord with written
notice thereof as required by Paragraph 17(E) below and as a condition to
such subletting, assignment or transfer, any such sublessee, assignee or
transferee shall execute and deliver to Landlord a full assumption of the
obligations of Tenant under this Lease (as required by Paragraph 17(E)
below).
Tenant shall have the full and free right to sublet, assign, or
otherwise transfer its interest in this Lease and the Premises, without
Landlord's approval (written or otherwise) to any licensee or franchisee of
BCI, provided the use of the Premises shall be for the operation of a
Boston Market Restaurant, or successor trade name restaurant, or other
restaurant or food service concept(s) (including multiple-branded
restaurant or food service concepts) owned or operated by BCI and/or its
affiliates or other use pre-approved (in writing) by Landlord. Tenant
agrees to provide Landlord with written notice thereof and as a condition
to such subletting, assignment or transfer, any such sublessee, assignee or
transferee shall execute and deliver to Landlord a full assumption of the
obligations of the Tenant under this Lease (as required by Paragraph 17(E)
below).
B. Tenant shall not otherwise sublet, assign or transfer its interest
in this Lease or Premises without first obtaining Landlord's prior written
approval, which approval Landlord agrees shall not be unreasonably
withheld, conditioned or delayed. Landlord agrees that any such approval
which may be required under this Paragraph 17 shall be conclusively deemed
to be given if Landlord has not delivered its approval or disapproval
within twenty (20) days of Landlord's receipt of the written request
therefore or within ten (10) days of the receipt by Landlord of any
information Landlord may reasonably request, provided Landlord requests
such additional information from Tenant within twenty (20) days of
Landlord's receipt of Tenant's original request for said approval.
-3-
<PAGE>
Any sublet, assignment, transfer, merger, consolidation or sale of or
by Tenant shall first be subject to the consent of BCI, which BCI may
withhold in its sole discretion. Immediately following an event of merger,
consolidation or sale of assets or controlling interest in Tenant (as
permitted under the terms of this Lease) where the other party to the
transaction is also a FAD (as defined in the commitment letter from
Landlord to BCI, dated April 15, 1996), BCI shall execute and deliver to
Landlord a guaranty (in the form required by the commitment letter) in
accordance with the following: (i) if both parties to the transaction were
Tier I FADS prior to the transaction, no guaranty will be required; (ii) if
both parties to the transaction were Tier II FADS prior to the transaction,
a Tier II guaranty will be required; (iii) if both parties to the
transaction were Tier III FADS prior to the transaction, a Tier III
guaranty will be required; (iv) if one party was a Tier I FAD and one party
was a Tier II FAD prior to the transaction, a Tier II guaranty will be
required; (v) if one party was a Tier I FAD and one party was a Tier III
FAD prior to the transaction, a Tier III guaranty will be required; and
(vi) if one party was a Tier II FAD and one party was a Tier III FAD prior
to the transaction, a Tier III guaranty will be required.
Following an event of merger, consolidation or sale of assets or
controlling interest in Tenant (as permitted under the terms of this Lease)
to a party which was not designated as a Tier I, Tier II or Tier III FAD
prior to such transaction, BCI or Tenant or Landlord may request the
recategorization of such new entity as a Tier I, II or III FAD and upon
such recategorization (to be agreed upon by BCI and Landlord, which
agreement shall not be unreasonably withheld, conditioned or delayed), BCI
shall execute and deliver to Landlord the requisite guaranty and/or
Landlord shall cancel the prior guaranty as determined by the
recategorization.
D. Subject to the rights, if any, of Tenant or BCI (as the case may
be) under the Option to Purchase and First Right of Refusal to Purchase
Agreement (as amended from time to time), the Landlord may transfer,
assign, mortgage and/or pledge its rights under this Lease without Tenant's
or BCI's consent.
E. Prior to any assignment allowed hereunder, Tenant or BCI (as the
case may be) or any other party shall deliver to Landlord (i) a copy of the
assignment documents, and the name, address and telephone number of such
assignee, (ii) a new insurance certificate or binder complying with the
terms of this Lease and naming such assignee as the tenant of the Premises,
and (iii) a copy of the assignment and assumption agreement in form
reasonably satisfactory to Tenant or BCI (as the case may be), the assignee
and Landlord. Notwithstanding anything herein to the contrary, no
assignment or subletting shall release Tenant, its successors and assigns,
from their respective obligations under
-4-
<PAGE>
this Lease unless specifically released by virtue of a separate written
instrument executed by Landlord, which may be withheld in Landlord's sole
discretion.
F. Landlord shall have the right without limitation (subject to the
rights, if any, of Tenant or BCI (as the case may be) under the Option to
Purchase and First Right of Refusal to Purchase Agreement between Landlord
and Tenant or BCI (as the case may be) (as amended from time to time)) to
sell, convey, transfer or assign its interest in the Premises or its
interest in this Lease, and upon such conveyance being completed, all
covenants and obligations of Landlord under this Lease accruing thereafter
shall cease, but such covenants and obligations shall run with the land and
shall be binding upon the subsequent landlord and owners of the Premises
and of this Lease.
9. Landlord's Right to Cure. The first sentence of Paragraph 32 of the
Lease is amended to add the phrase "but without any duty or obligation to do so"
after the phrase "at its sole option."
10. Miscellaneous. The Lease is amended to add the following three (3)
Paragraphs:
37. WAIVERS. No waiver by Landlord of any provision hereof shall be
deemed a waiver or any other provision hereof or of any subsequent breach
by Tenant of the same of any other provision. Landlord's consent to, or
approval of, any act shall not be deemed to render unnecessary the
obtaining of Landlord's consent to or approval of any subsequent act by
Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver
of any preceding breach by Tenant of any provision hereof, other than the
failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of
such rent.
38. CHOICE OF LAW. The laws of the jurisdiction in which the Premises is
located shall govern the validity, performance, and enforcement of this
Lease.
39. ENVIRONMENTAL MATTERS.
A. Notwithstanding anything to the contrary which may be contained
in this Lease, Tenant represents, warrants and covenants to Landlord as
follows:
(1) To the best of Tenant's knowledge after Due Inquiry (as
hereinafter defined), prior to the date hereof there are no and [, except
as disclosed in that certain Phase I Environmental Site Assessment, dated
_______________, prepared by _______________________ ("Assessment"),] have
been no violations of the Relevant Environmental Laws (as hereinafter
-5-
<PAGE>
defined) at the Premises and no consent orders have been entered with
respect to the Premises.
(2) To the best of Tenant's knowledge after Due Inquiry, prior
to the date hereof there are no and [, except as disclosed in the
Assessment,] have been no Hazardous Wastes (as hereinafter defined) or
Asbestos (as hereinafter defined) either at, upon, under or within, or
discharged or emitted at or from, the Premises, including, but not limited
to, the air, soil, surface, and ground water; no Hazardous Wastes or
Asbestos have flowed, blown or otherwise become present at the Premises
from neighboring land; and no Hazardous Wastes or Asbestos have been
removed from the Premises other than those Hazardous Wastes which are
necessary for the conduct of Tenant's business operated on the Premises and
which Hazardous Wastes have been, at all time prior to the date hereof, and
at all times hereafter shall be, handled and disposed of by Tenant in
compliance with all Relevant Environmental Laws.
(3) The Premises will not be used for the purpose of storing
Hazardous Wastes (other than those Hazardous Wastes which are necessary for
the conduct of Tenant's business operated on the Premises and which
Hazardous Wastes have been, at all times prior to the date hereof, and at
all times hereafter shall be, handled and disposed of by Tenant in
compliance with all Relevant Environmental Laws), and no such storage or
use will otherwise be allowed on the Premises which will cause the release
of Hazardous Wastes onto the Premises. To the best of Tenant's knowledge
after Due Inquiry, there are no underground storage tanks located on the
Premises.
(4) Tenant is not aware of any claims or litigation, and has not
received any communication other than its Due Inquiry and the Assessment
from any person (including any governmental authority), concerning the
presence or possible presence of Hazardous Wastes or Asbestos at or
adjacent to the Premises or concerning any violation or alleged violation
of the Relevant Environmental Laws respecting the Premises. Tenant shall
promptly notify Landlord of any such claims and shall furnish Landlord with
a copy of any such communications received by Tenant.
(5) Tenant shall notify Landlord promptly and in reasonable
detail in the event that Tenant becomes aware of or suspects the presence
of Hazardous Wastes (other than those Hazardous Wastes which are necessary
for the conduct of Tenant's business operated on the Premises and which
Hazardous Wastes have been, at all times prior to the date hereof, and at
all times hereafter shall be, handled and disposed of by Tenant in
compliance with all Relevant Environmental Laws) or Asbestos or a violation
of the Relevant Environmental Laws, at or adjacent to the Premises.
-6-
<PAGE>
(6) Tenant shall ensure that the Premises comply and continue to
comply with the Relevant Environmental Laws during the term of the Lease
(and any renewal terms exercised by Tenant).
(7) Upon Landlord's reasonable belief that there is a breach of
one of the environmental representations or warranties set forth above,
Landlord shall promptly notify Tenant in writing and shall provide Tenant
with an opportunity to cure such breach. If Tenant fails to cure such
breach within a period which is reasonable under the circumstances, Tenant
shall permit Landlord at its option, at any time upon five (5) days prior
written notice to Tenant, to cause or conduct a complete environmental
audit to be performed at Tenant's sole cost and expense.
B. As used herein, the following terms shall have the meanings set
forth below:
(1) The "Relevant Environmental Laws," as referred to herein,
shall mean all applicable federal, state and local laws, rules,
regulations, orders, judicial determinations, or decisions or
determinations by any judicial, legislative or executive body of any
governmental or quasi-governmental entity possessing competent jurisdiction
over the environmental matter forming the basis of such determination,
whether in the past, the present or the future, with respect to: (A) the
installation, existence, or removal of, or exposure to, Asbestos on the
Premises; (B) the existence on, discharge from, or removal from the
Premises by Tenant of Hazardous Wastes; or (C) the effects on the
environment of the Premises or of any activity now, previously, or
hereafter conducted by Tenant on the Premises. The Relevant Environmental
Laws shall include, but not be limited to, the following: (1) the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Sections 9601 et seq.; the Superfund Amendments and Reauthorization
Act, Public Law 99-499, 100 Stat. 1613; the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901 et seq.; the National Environmental
Policy Act, 42 U.S.C. Section 4321; the Safe Drinking Water Act, 42 U.S.C.
Sections 300F et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801;
the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 et seq.;
the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; and the regulations
promulgated in connection therewith; (2) Environmental Protection Agency
regulations pertaining to Asbestos (including 40 C.F.R. Part 61, Subpart
M); Occupational Safety and Health Administration regulations pertaining to
Asbestos (including 29 C.F.R. Sections 1910.1001 and 1926.58); as each may
now or hereafter be amended; and (3) any state and local laws and
regulations lawfully promulgated pertaining to Hazardous Wastes and/or
Asbestos;
-7-
<PAGE>
(2) "Asbestos," as referred to herein, shall mean materials
containing an amount of asbestos sufficient to trigger regulation by the
United States Environmental Protection Agency or any state agency with
competent jurisdiction and shall have the meanings provided under the
Relevant Environmental Laws, and shall include, but not be limited to,
asbestos fibers and friable asbestos, as such terms are regulated and
defined under the Relevant Environmental Laws;
(3) "Hazardous Wastes," as referred to herein, shall mean
reportable, actionable or unlawful amounts of any of the following as
defined by the Relevant Environmental Laws: solid wastes; petroleum and
petroleum derivatives; natural or synthetic gas, other than oxygen and
other atmospheric gases used commercially as fuel; radon gas; toxic or
hazardous substances, wastes, pollutants or contaminants (including, but
not limited to, polychlorinated biphenyls ("PCB's"), paint containing lead,
and urea formaldehyde); and discharges of toxic or hazardous sewage or
effluent; and
(4) "Due Inquiry", as referred to herein, shall mean that
pre-acquisition environmental investigation conducted by Tenant and
accepted in writing as sufficient by Landlord.
C. At its sole cost and expense, Tenant shall:
(1) Pay immediately when due the cost of compliance with
the Relevant Environmental Laws.
(2) Keep the Premises free of any lien imposed pursuant to
the Relevant Environmental Laws.
D. In the event that Tenant fails to comply with the requirements of
this Paragraph 39, after notice to Tenant and the earlier of the expiration
of any applicable cure period hereunder, or the expiration of the cure
period permitted under the Relevant Environmental Laws, if any, or such
earlier time if Landlord determines that life, person or property is in
jeopardy because of Tenant's non-compliance, Landlord may, but shall not be
obligated to, exercise its right to do one or more of the following (i)
declare that such failure constitutes a default; and/or (ii) take any and
all actions, at Tenant's expense, that Landlord deems necessary or
desirable to cure said failure of compliance; provided, however, that
Tenant shall not be required to conduct any remediation or monitoring in
connection with Hazardous Wastes or Asbestos at the Premises in excess of
that remediation or monitoring required by any governmental agency with
competent jurisdiction.
-8-
<PAGE>
Any costs incurred pursuant to this Paragraph 39(D) shall become
immediately due and payable by Tenant without notice.
E. Indemnity. Landlord shall not be liable for and Tenant shall
immediately pay to Landlord when incurred and shall indemnify, defend and
hold Landlord harmless from and against, all loss, costs, liability, damage
and expense (including, but not limited to, reasonable attorney's fees and
costs incurred in the investigation, defense and settlement of claims and
costs of investigation, remediation or monitoring of Hazardous Wastes or
Asbestos) that Landlord may suffer or incur as a result of or in connection
with Tenant's violation in its operations at the Premises during the term
of this Lease (and any renewal terms exercised by Tenant) of any of the
Relevant Environmental Laws, any environmental assessment or study of the
Premises from time to time undertaken or requested by Tenant or Landlord
based on Tenant's operations at the Premises during the term of this Lease
(and any renewal terms exercised by Tenant), or breach of any provision of
this Paragraph 39 by the Tenant.
Tenant shall not be liable for and Landlord shall immediately pay to
Tenant when incurred and shall indemnify, defend and hold Tenant harmless
from and against, all loss, costs, liability, damage and expense
(including, but not limited to, reasonable attorney's fees and costs
incurred in the investigation, defense and settlement of claims and costs
of investigation, remediation or monitoring of Hazardous Wastes or
Asbestos) that Tenant may suffer or incur as a result of or in connection
with Landlord's acts or omissions at the Premises during the term of this
Lease (and any renewal terms exercised by Tenant) or breach of any
provision of this Paragraph 39 by the Landlord.
F. Survival. The provisions of this Paragraph 39 shall survive for
a period of five years after the expiration or termination of the Lease
term of this Lease (and any renewal terms exercised by Tenant).
G. Preservation of Rights. Nothing in this Addendum shall limit in
any way Tenant's right to contest or appeal an order or decision or penalty
or other enforcement action issued or pursued by a governmental authority.
The rights, if any exist, of Landlord to assume responsibility for and
undertake any investigation, remediation or monitoring at the Premises or
to resolve or otherwise affect any dispute between Tenant and such
governmental authority do not accrue until after Tenant's contest and/or
appeal are exhausted, provided Tenant proceeds promptly and with due
diligence to contest and/or appeal such dispute with any such governmental
authority.
11. Estoppel/Waiver Agreement. Clause (vi) in the last paragraph of the
Estoppel/Waiver Agreement (attached as Exhibit "1" to the Lease) is amended to
add the phrase
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<PAGE>
"repairs all damages arising from such removal or, in the alternative" before
the phrase "reimburses the undersigned."
12. Rent Addendum. Paragraph A(v) is revised to read as follows:
At the beginning of the first, second, and third five (5) year option
periods, the Annual Rent payable under this Lease for said option period
shall be increased by an amount equal to ten (10%) percent of the Annual
Rent payable during the Lease Year immediately preceding such option. At
the beginning of the fourth and fifth option periods, the Annual Rent
payable under this Lease for said option period shall be increased to equal
the fair market rental value of the Premises. The fair market rental value
shall be determined using the same method for determining fair market value
as set forth in Paragraph 36 of this Lease.
The last sentence of Paragraph (D) of the Rent Addendum (attached to the Lease)
is amended to add the phrase "or any other amount due under the Lease" after the
phrase "does not receive rent."
[SIGNATURE PAGE FOLLOWS]
-10-
<PAGE>
Except as modified above, the terms and provisions of the Lease, the
Estoppel/Waiver Agreement and Rent Addendum remain unmodified and in full force
and effect.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
_____________________________ By:____________________________________
Print Name: Gary A. Bruder
Its: Vice President
_____________________________
Print Name:
[TENANT NAME]
_____________________________ By:____________________________________
Print Name:
Its:___________________________
_____________________________
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of _____________, 199_, by
Gary A. Bruder, as Vice President of Captec Net Lease Realty, Inc., a Michigan
corporation, on behalf of the corporation.
_______________________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires:_________________
STATE OF _____________ )
)ss:
COUNTY OF _______ )
Subscribed and sworn to before me this ___ day of _____________, 199_, by
______________________, as _________________ of _______________ a
__________________, on behalf of the __________________.
_______________________________________
Notary Public
_____________ County, _________________
My Commission Expires:_________________
-11-
<PAGE>
Lease No. ______
[STREET ADDRESS]
[CITY, STATE]
RENT ADDENDUM
to
LEASE AGREEMENT
THIS RENT ADDENDUM dated _____________, 199__, by and between CAPTEC NET
LEASE REALTY, INC., a Michigan corporation, whose address is 24 Frank Lloyd
Wright Drive, Lobby L, 4th Floor, P. O. Box 544, Ann Arbor, Michigan 48106-0544,
as "Landlord", and [TENANT NAME], a [TENANT ENTITY], whose address is
_________________________, as "Tenant", is attached to and made a part of that
certain Lease Agreement by and between Landlord and Tenant of even date herewith
(the "Lease"). Notwithstanding any other provision to the contrary which may be
contained in said Lease, it is specifically agreed by and between Landlord and
Tenant as follows:
A. Annual Rent.
(i) Beginning on the Rent Commencement Date, Tenant covenants and
agrees to pay to Landlord Annual Rent in the annual amount of _________________
____________________, payable to Landlord in equal monthly installments in the
amount of __________________________________ AND ____/DOLLARS ($______________)
monthly in advance.
(ii) [INTENTIONALLY OMITTTED]
(iii) Beginning on the sixth (6th) Lease Year, Tenant covenants and
agrees to pay to Landlord Annual Rent in the annual amount of
________________________ ____________________________, payable to Landlord in
equal monthly installments in the amount of __________________________________
AND ___/DOLLARS ($_______________) monthly in advance.
(iv) Beginning on the eleventh (11th) Lease Year, Tenant covenants
and agrees to pay to Landlord Annual Rent in the annual amount of
__________________________ _________________________, payable to Landlord in
equal monthly installments in the amount of __________________________________
AND ___/DOLLARS ($_____________________) monthly in advance.
(v) Beginning at the beginning of each option period, the Annual
Rent payable under this Lease for said option period shall be increased by an
amount equal to Ten Percent (10%) of the Annual Rent payable during the Lease
Year immediately preceding such option period.
(vi) If the Rent Commencement Date of this Lease shall fall on a day
other than the first day of a calendar month, then rental for the partial rental
month shall be prorated on a per diem basis on the rental payment set forth
above shall be paid by Tenant to Landlord for the month in which said Rent
Commencement Date shall occur. Tenant agrees to make all rental payments to
Landlord at 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P. O. Box
Lease No. ______
<PAGE>
544, Ann Arbor, Michigan 48106-0544, whose Internal Revenue Service identifying
number is 38-3206305.
B. Percentage Rent
(i) Following the expiration of the fifth (5th) Lease Year, and in
addition to the Annual Rent provided above, Tenant shall pay, as additional
rent, Percentage Rent on an annual basis equal to the difference between [four
percent (4%)/five percent (5%)] of "gross sales" (as defined in subparagraph
I.B.(v) below) for such Lease Year minus the Annual Rent payable for such Lease
Year (as adjusted in subparagraph E below, if applicable). In the case of a
Partial Lease Year, the Percentage Rent shall be calculated on a prorated basis
based on the gross sales received, and Annual Rent paid, for such period.
(ii) The Percentage Rent payments described hereinabove shall be
remitted to Landlord within ninety (90) days following the last day of each
Lease Year (or Partial Lease Year, as the case may be) ending after the
Effective Date and within thirty (30) days following the last day of each Lease
Year thereafter, together with a certified statement showing the gross sales
made by Tenant in the Premises during such Lease Year then ended and showing the
calculation of Percentage Rent due, if any. Seller/Tenant may use its fiscal
year accounting calendar for calculation of Percentage Rent.
(iii) Landlord or its duly authorized representatives may, upon at
least ten (10) days prior written notice, on regular business days and within
reasonable office hours, inspect Tenant's records of gross sales and deductions
made in the Premises, either at the Premises or elsewhere as reasonably
designated by Tenant, provided such inspection is commenced within eighteen (18)
months after a statement of gross sales is furnished to Landlord by Tenant or
should have been delivered and is limited to the period covered by such
statement. Any claim by Landlord for revision of any statement of gross sales or
for additional Percentage Rent must be made in writing to Tenant within eighteen
(18) months after the date such statement of gross sales is mailed to Landlord,
or within thirty (30) days following its inspection, whichever shall occur last,
otherwise it shall be deemed waived by Landlord.
(iv) Tenant shall pay all rentals when due without demand or notice
and without any abatement, offset or deduction. The Percentage Rent payable
hereunder shall be deemed additional rent. If Landlord inspects Tenant's records
as permitted by this Lease and if such inspection shows an error(s) in the
statements submitted by Tenant which resulted in an understatement of gross
sales by three percent (3%) or more, then in addition to paying the additional
rent due, Tenant shall pay Landlord the reasonable cost of such inspection. In
the event such inspection shows an overstatement of gross sales, then Landlord
shall refund such overpayment to Tenant.
(v) The term "gross sales" as employed in this Lease shall be
construed to mean the entire amount of the actual sales price, whether wholly or
partly for cash or on credit, of all sales of food and beverages of every type
and of merchandise of every type, and all charges made by Tenant or any one in
Tenant's behalf for the rendition of services of any kind whatsoever, and all
other receipts of all business conducted in, at or from the Premises, including
all deposits not refunded to purchasers, orders taken in or from the Premises
although said orders may be filled elsewhere, sales by any concessionaire or
licensee in or from the Premises and all uncollected or uncollectible credit
accounts. Except as hereinafter provided,
2 Lease No. ______
<PAGE>
there shall also be included in gross sales the gross receipts of coin-operated
devices which may be placed in the Premises by Tenant or under any rental
concession or percentage agreement. There shall be excluded from gross sales the
proceeds of any coin-operated device maintained exclusively for the benefit of
Tenant's employees. There shall be excluded from gross sales the percentage of
any proceeds of any coin-operated device to which an owner of such device may be
entitled under a concession or rental agreement. All sales originally made in or
at the Premises shall be considered as made and completed therein, even though
the payment of the account may be transferred to some other office of Tenant for
collection, or although delivery of food, beverages or merchandise sold at, in
or from the Premises be made from a place other than the Premises, or although
the performance of services sold or ordered at, in or from the Premises be made
from a place other than the Premises. There shall be excluded from gross sales
any sums collected and paid out for any sales, excise or other tax based upon
the sales or sale of merchandise and required by law, whether now or hereafter
in force, to be paid by Tenant or collected from its customers, to the extent
that such taxes have been added to and included in the gross sales price. The
term gross sales shall not include the transfer or exchange of merchandise
between the stores of Tenant, if any, where such transfers or exchanges are made
solely for the convenient operation of the business of Tenant and not for the
purpose of consummating a sale which has theretofore been made at, in, from or
upon the Premises or for the purpose of depriving Landlord of the benefit of a
sale which otherwise would be made at, in, from or upon the Premises; nor shall
said term include the amount of returns to shippers or manufacturers, nor the
amount of any cash or credit refund made upon any sale where the merchandise
sold or some part thereof is thereafter returned by the purchaser to and
accepted by Tenant, nor shall said term include tips or gratuities given by
customers and paid to Tenant's employees, nor shall said term include employee
meals sold at a discount, gift certificates, premiums and promotional items
(given away or sold at or about cost) nor shall said item include non-food items
sold for advertising and promotional purposes and the sale of any of Tenants
property. In the event the Premises is operated as a restaurant, there shall be
further excluded from gross sales the amounts received from the receipts from
telephones, juke boxes, cigarette machines, automated teller machines, the
amounts received from the sale of waste and salvage, or inventory other than to
customers of the Premises. Each sale upon installment or credit shall be treated
as a sale for the full price in the Lease Year during which such sale shall be
made, irrespective of the time when Tenant shall receive payment, whether full
or partial, from Tenant's customers.
C. Sales and Use Tax. Tenant shall also pay to Landlord any sales and use
tax imposed on rent payable hereunder from time to time by state law or any
other governmental entity, which sums are due monthly as to monthly rent
payments and annually as to Percentage Rent on the due date of the rent payment
under this Rent Addendum. Tenant shall also pay when due any common area
maintenance or similar expenses imposed upon the Premises.
D. Late Charge. In the event any installment of rent due under the Lease
(including Percentage Rent) is not received by Landlord within ten (10) days
after its respective due date, there shall be an automatic late charge due to
the Landlord from the Tenant in the amount of five percent (5%) of such
delinquent installment of rent. All such late charges due hereunder shall be
deemed additional rent, and are not penalties but rather are charges
attributable to administrative and collection costs arising out of such
delinquency. In addition to such late charge, in the event Landlord does not
receive rent within ten (10) days after the due date hereunder, interest at the
rate of twelve percent (12%) per annum shall be due and payable with respect to
such payment from the due date thereof until Landlord receives such payment.
3 Lease No. ______
<PAGE>
E. Unless otherwise stated in the Lease, no abatement, diminution or
reduction (a) of rent, charges or other compensation, or (b) of Tenant's other
obligations hereunder shall be allowed to Tenant or any person claiming under
Tenant, under any circumstances or for any reason whatsoever.
F. Notwithstanding anything to the contrary contained in the Lease and
this Rent Addendum, Landlord agrees that if Tenant designates the Premises as a
so-called "Flagship Store" (the "Flagship"), all sales and transfers of goods,
services, merchandise, food and beverages generated from Tenant's designated
production facility operated at the Flagship, including delivery and catering
sales, shall be excluded from the calculation of "gross sales" as that term is
defined herein. Provided, however, as a condition of the exclusion from gross
sales of the "designated production facility" Landlord and Tenant shall
reasonably agree upon the square footage of the designated production facility
(the "production facility square footage"), which production facility square
footage shall be divided by the total square footage of the Premises, and the
quotient thereof shall be the "Percentage Rent Factor." Notwithstanding anything
in Subparagraph (B)(i) above, the Annual Rent which is divided by [four percent
(4%)/five percent (5%)] to determine payment of Percentage Rent shall be
calculated by multiplying the then existing Annual Rent due under this Lease by
the Percentage Rent Factor.
[Signature Page Follows]
4 Lease No. ______
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Rent Addendum to
be executed and sealed as of the date first above written.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
By:
- -------------------------------------- --------------------------
Print Name: Gary A. Bruder
Its Vice President
- --------------------------------------
Print Name:
[TENANT NAME]
- -------------------------------------- By:
Print Name: --------------------------
Its:
-------------------
- --------------------------------------
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of _____________, 199_, by
Gary A. Bruder, as Vice President, of Captec Net Lease Realty, Inc., a Michigan
corporation, on behalf of the corporation.
----------------------------------
Notary Public
Washtenaw County, Michigan
My Commission Expires:____________
STATE OF __________ )
)ss:
COUNTY OF __________ )
Subscribed and sworn to before me this ___ day of _____________, 199_, by
______________, as _____________, of [TENANT NAME], a _______________________,
on behalf of the ___________.
----------------------------------
Notary Public
_________ County, _________
My Commission Expires:____________
5 Lease No. _________
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Land in the City of ____________, County of ________________ and State of
____________, more particularly described as follows:
Lease No. ____
A-1
<PAGE>
Lease No. _________
[Address]
[City, State]
CONSTRUCTION ADDENDUM
to
LEASE AGREEMENT
THIS CONSTRUCTION ADDENDUM TO LEASE AGREEMENT (the "Addendum") dated
__________________, 199___, by and between CAPTEC NET LEASE REALTY, INC., a
Michigan corporation, as "Landlord", and __________________________________, a
_________________, as "Tenant", for BOSTON MARKET #________, CITY, COUNTY,
STATE, is attached to and made a part of that certain Lease Agreement by and
between Landlord and Tenant of even date herewith (the "Lease").
Notwithstanding any other provision to the contrary which may be contained in
said Lease, it is specifically agreed by and between Landlord and Tenant as
follows:
1. Definitions. Capitalized terms used in the Lease shall have the same
meaning as the terms used in this Addendum unless otherwise defined. In
addition, as used herein the following terms shall have the meaning indicated:
"Project" shall mean construction of the building and all necessary
site improvements on the Premises for the initial use as a Boston Market and/or
____________________________ restaurant by Tenant.
2. Approval of Plans, Specifications and Costs. Not later than twenty-
five (25) days [NOTE: THE TIME PERIOD SHALL BE FIFTEEN (15) DAYS FOR THE
FOLLOWING PROPERTIES WHICH ARE ALREADY IN PROCESS: KANSAS CITY, MO., DELTONA,
FL., LAKE WORTH, FL., AND VERO BEACH, FL.] prior to Landlord's acquisition of
the real property constituting a portion of the Premises, Tenant shall submit
final construction plans, specifications, a construction budget and the general
construction contract (except that if the general construction contract has not
been finalized and executed by such time, it shall be delivered to Landlord
prior to closing) for the Project. Such items shall be approved by Landlord
before Landlord acquires the real property, and such approval shall not be
unreasonably withheld, delayed or conditioned. The building and improvements
shall be substantially completed in accordance with the plans and specifications
approved by Landlord, Boston Chicken, Inc. ("BCI") and Tenant. Unless
specifically stated by Landlord in writing and received by Tenant prior to
Landlord's acquisition of the real property constituting a portion of the
Premises, Landlord's approval of the plans and specifications, construction
budget and the general construction contract for the Project shall be deemed
approved if Landlord acquires such real property.
3. Authorization, Independent Contractor. Landlord hereby engages Tenant
as an independent contractor and authorizes Tenant to enter upon the Premises
and to undertake responsibilities, duties, obligations, rights and authority
expressly herein set forth and, subject
<PAGE>
to the provisions hereof, Tenant hereby accepts such appointment and agrees to
perform and fully discharge all of its duties, responsibilities and obligations
herein set forth diligently, promptly and in full compliance with and subject to
the provisions hereof.
4. Co-Tenant and Sub-Agents. Tenant may delegate the performance of any of
its responsibilities hereunder to one or more contractors, subcontractors,
consultants, co-developers or sub-agents; provided, however, that no such
delegation shall relieve Tenant of its duties, responsibilities and obligations
hereunder.
5. Specific Duties and Obligations. Tenant shall be responsible for the
complete development and construction of the Project and shall deliver a turnkey
facility to Landlord. In that connection, Tenant's duties, obligations and
responsibilities include, but shall not be limited to the following:
(a) Project Design. Procuring all necessary architectural and
engineering services related to the site work, design and engineering related to
the Project, any and all engineering and impact studies or reports related to
the construction of the Project, and processing and obtaining all required
governmental approvals.
(b) Licenses and Permits. Obtaining all licenses, permits and
approvals required to prepare the site for development, to permit construction
of the Project and to operate the Premises for its intended purposes. Such
licenses, permits and approvals shall include, but shall not be limited to,
water management district approvals, approvals required under any franchise
agreement, financing agreement or any instrument of record, building permits,
certificates of occupancy, and any other required governmental consents or
approvals.
(c) General Contractor, Construction Contracts and Purchase Orders.
Negotiating all necessary construction contracts for the benefit of Landlord,
relating to the development and construction of the Project. All construction
contracts and purchase orders for work, material or equipment shall be entered
into between Tenant as independent contractor of Landlord and its contractors or
vendors and shall be satisfactory in form and substance to Landlord, Tenant, and
legal counsel for Landlord and Tenant.
(d) Construction Coordination. Coordinating all aspects of
construction of the Project to completion, in accordance with BCI's established
construction procedures, as amended from time to time. Tenant shall monitor the
progress of construction and the compliance by all contractors with the
provisions of their construction contracts, through periodic on-site visits and
inspections and through written and other reports from the architect,
contractors and other construction supervisory personnel. Tenant shall keep
Landlord advised from time to time of the progress of construction, and shall
notify Landlord, in writing, upon the opening of the restaurant for business to
the public. Tenant shall review and approve all contractor and other payment
requests made from time to time and shall review all such requests to ensure
compliance with the construction contract and the terms hereof. Tenant shall
determine which,
2
<PAGE>
if any, contractor or subcontractor is in default under the provisions of its
applicable contract or subcontract, and what measures should be taken in
connection therewith.
(e) Funding Upon Completion. Funding to be provided by Landlord upon
completion of the Project shall be limited to all actual "hard" construction
costs of the Project and reasonable "soft" costs such as architect's fees,
survey and engineer fees, consultant fees, permits and approvals, environmental
reports and testing, exclusive of any developer's fee except for the sum not to
exceed the amount of TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00) to be
paid to BCI for BCI's development fee. All "hard" and "soft" costs shall be
estimated on the construction budget prepared by Tenant and described in
paragraph (c) above. Landlord's funding shall be disbursed to Tenant in a single
draw following completion of construction of the Project. The request for such
draw shall be submitted on AIA forms G702 and G703, and shall be received by
Landlord no later than one hundred eighty (180) days following Landlord's
acquisition of the real property constituting a portion of the Premises. The
draw request shall be accompanied by: (1) the contractor's affidavit of
completion, together with proof of payment of all subcontractors and all
materialmen, which proof shall consist of copies of final lien waivers from all
contractors, subcontractors, materialmen and others who may be entitled to file
liens for labor, services or materials provided in connection with construction
of the Project, certified as true and correct by an authorized officer of
Tenant; (2) an assignment of all manufacturer's warranties for any material,
equipment or workmanship installed as a part of the Project, to the extent
assignable; (3) an ALTA as-built survey of the completed Project certified to
Landlord and Tenant, and any title company designated by Landlord; (4)
Certificate(s) of Occupancy for the Project issued by the appropriate regulatory
agencies; (5) certificates of insurance required under the Lease; (6) a complete
certified final set of plans, specifications and working drawings for the
Project as completed; and (7) a Certificate of Franchisor executed by BCI which
certifies to Landlord, among other things, that Tenant is a licensed franchisee
in good standing with BCI, that Tenant and BCI have entered into a written
Franchisee Agreement specifically approving Tenant to operate a Boston Market
restaurant on the Premises and that no defaults then exist under said Franchise
Agreement. Landlord shall order, at Tenant's expense, an updated title search to
its title insurance policy (or other reasonable equivalent thereof if an updated
title search is not commercially available), which must show no additional
matters of record (unless consented to by Landlord) and no mechanics' liens or
other liens of record, the cost of which updated title search shall be included
in the acquisition costs funded by Landlord at the time of acquiring the
unimproved land.
Landlord and Tenant have agreed that the Landlord shall fund one hundred
percent (100%) of the cost of acquiring the unimproved land and the closing
costs related thereto (as more particularly specified in that certain Commitment
Letter dated ____, as amended between Landlord and BCI, hereinafter called the
"Commitment Letter"), but that Landlord shall not be required to fund a total
amount for the Premises and Project in excess of the amounts specified in this
paragraph. The amount funded by Landlord upon completion of the Project shall
be reduced (if necessary) so that the funding limitations set forth in this
paragraph are complied with. For purposes of the Lease and this Addendum, the
Tenant shall be considered as a "Tier
3
<PAGE>
_____ FAD" (this sentence shall not apply where BCI is the Tenant). Landlord
shall not be required to fund a total amount for the Premises and Project in
excess of the following amounts: (i) Seventy-five percent (75%) of the total
land and Project cost, plus one hundred percent (100%) of the approved
acquisition and soft costs related thereto, where Tenant is a Tier I FAD or Tier
II FAD; or (ii) One hundred percent (100%) of the total land and Project cost,
plus one hundred percent (100%) of the approved acquisition and soft costs
related thereto, where Tenant is a Tier III FAD or Tenant is BCI. The foregoing
calculation of the total amount to be paid by Landlord shall be made at the time
of funding upon completion of the Project. Tenant shall obtain no construction
financing for the Project which is secured by a lien on the Project.
Construction financing shall not include equipment financing and the Collateral
Assignment of Lease.
(f) General Construction Matters. Tenant shall commence construction
as soon as practicable after the date hereof and, after commencement and subject
to Paragraph 10 herein below, shall diligently substantially complete the
Project within one hundred eighty (180) days thereafter in a first-class,
workmanlike manner and in conformity with all applicable governmental laws,
ordinances, rules, orders, regulations and other requirements and in substantial
compliance with the plans and specifications approved by BCI, Landlord and
Tenant.
All of Tenant's records pertaining to the construction of the Project
shall be available for inspection and copying by Landlord and its agents and
employees during normal business hours until Landlord's construction funding is
complete. Following completion of the Project, Tenant shall execute such
documents and instruments as Landlord may request (in form and substance
reasonably satisfactory to Landlord, BCI and Tenant) to evidence Landlord's
ownership of and title to all improvements on the Premises comprising, in the
aggregate, the Project and shall assign to Landlord (to the extent assignable)
all warranties relating to the work and/or materials performed at or
incorporated into the Project. No approvals or inspections made, given or
conducted by Landlord (if any) shall relieve Tenant of any duties,
responsibilities, obligations or liabilities hereunder. Landlord and its agents
may inspect the improvements as reasonably necessary during the course of
construction.
(g) Ownership of Improvements. Upon completion of construction of
the Project and completion of funding by Landlord to Tenant, all improvements
shall immediately become the property of Landlord, ipso facto, without the
requirement of any further documentation.
6. Development Fee. Neither Tenant nor any affiliate (with the exception
of BCI's development fee specified elsewhere in this Addendum) shall receive a
development or construction supervision fee for its services hereunder. A third
party licensed general contractor shall be entitled to reasonable, normal and
customary overhead and profit in connection with the performance of its services
under a general construction contract. Said profit shall include reasonable,
normal and customary construction superintendent compensation.
4
<PAGE>
7. Rent Commencement Date. On the date hereof, Landlord has acquired the
Premises and simultaneously entered into the Lease and this Addendum with Tenant
pursuant to which the Tenant has agreed to lease the Premises and all
improvements now or hereafter constructed thereon. The Rent Commencement Date
shall be the date specified in the Lease, notwithstanding that the Project may
not be constructed or complete at that time. Annual Rent and Percentage Rent
shall be due and payable in monthly installments from the Rent Commencement
Date, with such monthly installments of Annual Rent calculated by multiplying
the total amount funded by Landlord at the acquisition of the real property
constituting a portion of the Premises, times ten and one-half percent (10.5%)
divided by 12. At the time Landlord has funded the Project costs as described in
Paragraph 5(e) above, Landlord shall calculate, as set forth in the Commitment
Letter, the Annual Rental amounts described in the Rent Addendum and shall
submit an amended Rent Addendum to Tenant, which shall be signed by Tenant prior
to Tenant's receipt of such funding. The amended Rent Addendum shall be deemed
an amendment to the Lease and shall be attached thereto.
8. General. This Addendum shall be governed by the laws of the state
where the Premises is located. All captions and section headings used herein are
for convenience and ease of reference only and do not constitute part of this
Addendum.
9. Landlord's Right to Complete Construction on Tenant's Default. Except
for delays caused by events described generally in Paragraph 10 of this
Addendum, failure to complete construction of the Project or to provide Landlord
with the executed Certificate of Franchisor referenced in Paragraph 5(e)(7)
hereof within one hundred eighty (180) days following the date hereof shall
constitute a default by Tenant hereunder. If, after notice is given to Tenant
and BCI in accordance with the terms of the Lease, any such default under the
Lease, or this Addendum shall not have been remedied within the curative periods
described in the Lease, except for a default that cannot be cured within such
time (provided that Tenant and/or BCI has commenced to cure such default within
such time and is diligently pursuing such cure), then Landlord may, if it elects
to do so, either: (a) take over construction of the project and, at its option,
complete such construction or cause the same to be completed, or (b) terminate
the Lease and this Addendum, in which case Tenant shall be required to purchase
the Premises from Landlord (subject to all liens, claims or encumbrances not
placed on the Premises by Landlord) at a price equal to Landlord's purchase
price of the Premises, plus all sums disbursed to Tenant pursuant to this
Addendum, plus all fees, costs and expenses paid by Landlord in connection with
its purchase of the Premises, plus interest on all such sums accruing from the
date of disbursement thereof at the rate of 10% per annum. Closing of such
purchase and sale shall take place within thirty (30) days following the date of
Landlord's notice of default to Tenant.
10. Force Majeure. The time for completion of the Project shall be
extended by the period of time, if any, that construction is delayed by virtue
of labor unrest, materials shortage, natural disaster, weather, Acts of God,
governmental action, war, insurrection, rebellion and other causes beyond the
reasonable control of the Tenant; provided, however, that no such extension
shall be permitted with respect to any delay unless written notice of the
delay
5
<PAGE>
specifying the cause of the delay and the expected time of the delay is
delivered to Landlord within fifteen (15) days after such delay is encountered.
11. Entire Agreement. This Addendum and the Lease Agreement of which this
Construction Addendum is a part constitute the entire agreement of Landlord and
Tenant with respect to construction of the Project, and supersedes any prior or
contemporaneous agreement with respect thereto. No or modification of this
Addendum shall be binding upon the parties unless made in writing and signed by
both Landlord and Tenant.
12. Confidentiality. The provisions of Paragraph 24 of the Lease
(Confidentiality) shall also apply to any information disclosed by Tenant to
Landlord under this Addendum.
13. Representations of BCI. BCI enters into this Addendum solely for the
purpose of representing and warranting to Landlord that in the event of an
uncured default by Tenant under this Addendum (which is not cured by BCI through
the exercise of its rights under the Collateral Assignment of Tenant's Rights in
Lease) and Landlord's election to terminate the Lease and this Addendum under
Paragraph 9 of this Addendum, then BCI shall purchase the Premises from Landlord
and pay all of Landlord's costs related thereto as specified in Paragraph 9 of
this Addendum. This obligation of BCI shall be a personal right solely and
exclusively in favor of and for the benefit of Landlord, its successors and
assigns, and no other person or entity, including Tenant, shall derive any
benefit or right, directly or indirectly, nor shall any other person or entity,
including Tenant, claim to be a third party beneficiary of said right. Tenant
hereby expressly waives any rights, claim of right or claim as a third party
beneficiary with respect to said right. [DELETE IF BCI IS THE TENANT]
[Signatures on Next Page]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed on their behalf as of the day and year first above written.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
By:
- ----------------------------- -------------------------
Print Name: Gary A. Bruder
Its Vice President
- -----------------------------
Print Name:
[TENANT]
By:
- ----------------------------- -------------------------
Print Name:
Its:
- ----------------------------- --------------------
Print Name:
[BOSTON CHICKEN, INC.
By:
- ----------------------------- -------------------------
Print Name:
Its: ]
- ----------------------------- --------------------
Print Name:
7
<PAGE>
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ____ day of ________, 199_, by Gary
A. Bruder, as Vice President of Captec Net Lease Realty, Inc., a Michigan
corporation, on behalf of the corporation.
-----------------------------------------
Notary Public
Washtenaw County, Michigan
My Commission Expires: __________________
STATE OF __________ )
)ss:
COUNTY OF _________ )
Subscribed and sworn to before me this ____ day of ________, 199_, by
________________________________, as _____________________ of _________________,
a _______________________, on behalf of the ___________________________________.
-----------------------------------------
Notary Public
_________ County, _______________________
My Commission Expires: __________________
STATE OF COLORADO )
)ss:
COUNTY OF JEFFERSON )
Subscribed and sworn to before me this ____ day of ________, 199_, by
______________________________, as ____________________ of Boston Chicken, Inc.,
a Delaware corporation, on behalf of the corporation.
-----------------------------------------
Notary Public
_________ County, _______________________
My Commission Expires: __________________
8
<PAGE>
REQUESTED BY:
Miller, Canfield, Paddock and Stone, P.L.C.
101 N. Main Street, 7th Floor
Ann Arbor, Michigan 48104
Attn: David N. Parsigian
AFTER RECORDATION RETURN TO:
Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
Attn: Liggie V. Perkins
RETURN BY: MAIL (X) PICK UP ( )
- --------------------------------------------------------------------------------
Lease No.___________
[Street Adress]
[City, State]
MEMORANDUM OF LEASE
This Memorandum of Lease is made as of ____________, 199__, between CAPTEC
NET LEASE REALTY, INC., a Michigan corporation, whose address is 24 Frank Lloyd
Wright Drive, Lobby L, 4th Floor, P. O. Box 544, Ann Arbor, Michigan 48106-0544,
hereinafter called "Landlord" and [TENANT NAME], a [TENANT ENTITY], whose
address is ___________________________, hereinafter called "Tenant".
In consideration of ONE AND NO/100 DOLLARS ($1.00) and other valuable
consideration paid by Tenant to Landlord and the mutual covenants contained in
that certain Lease between the parties hereto dated on even date herewith
(hereinafter called the "Lease"), Landlord has leased and does hereby lease to
Tenant, and Tenant has hired and does hereby hire from Landlord, upon the terms
and conditions set forth in said Lease, the real property more particularly
described in Exhibit "A" attached hereto and made a part hereof (the
"Premises").
[Continued on Next Page]
<PAGE>
The term of the Lease is fifteen (15) years commencing on the date hereof
and ending on ________________, 20__. Said Lease provides for options to renew
for five (5) five (5) year terms. The Tenant shall not allow any mechanic's lien
or similar type of lien to be filed against the Premises.
The Tenant has the right to collaterally assign the Lease to Boston
Chicken, Inc. ("Franchisor"). The Landlord has agreed and consented to the
Tenant collaterally assigning the Lease to the Franchisor and by the Franchisor
to any lender or any entity which is a party to a merger or consolidation with
or to the acquisition of substantially all of the assets or stock of or with the
Tenant or the Franchisor (subject to the terms and provisions of the Lease).
IN WITNESS WHEREOF, Landlord and Tenant have caused this Memorandum of
Lease to be executed and sealed as of the date first above written.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
- -------------------------------------- By:___________________________
Print Name:
Its:___________________
- --------------------------------------
Print Name:
[TENANT NAME]
- -------------------------------------- By:___________________________
Print Name:
Its:___________________
- --------------------------------------
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of _____________, 199_, by
________________________, as ______________________ of Captec Net Lease Realty,
Inc., a Michigan corporation, on behalf of the corporation.
___________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires:______
2
<PAGE>
STATE OF ___________ )
)ss:
COUNTY OF __________ )
Subscribed and sworn to before me this ___ day of _____________, 199_, by
________________________, as ________________________, of [TENANT NAME], a
__________________, on behalf of the _________________.
__________________________________
Notary Public
__________County, __________
My Commission Expires:____________
3
<PAGE>
EXHIBIT A
Memorandum of Lease
-------------------
Land in the City of ________, County of _________, State of
___________________, and more particularly described as follows:
A-1
<PAGE>
Lease No. ______
[Street Address]
[City, State]
OPTION TO PURCHASE AND
FIRST RIGHT OF REFUSAL TO PURCHASE
AGREEMENT
This Option to Purchase and First Right of Refusal to Purchase Agreement
("Agreement") is made and entered into as of ______________, 199__, by and
between CAPTEC NET LEASE REALTY, INC., a Michigan corporation, whose address is
24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P. O. Box 544, Ann Arbor,
Michigan 48106-0544, and [TENANT OR BCI NAME], a [TENANT OR BCI ENTITY],
("Tenant"/"Option Holder"), whose address is [TENANT OR BCI ADDRESS].
WITNESSETH:
WHEREAS, Landlord and [Tenant] [TENANT NAME & ENTITY], a Franchisee of
Boston Chicken, Inc., have entered into that certain Lease Agreement dated as of
___________________, 199__, (the "Lease") with respect to a parcel of land,
together with all appurtenances, rights, privileges, easements, and rights of
way (public and private) and all buildings, structures, fixtures and
improvements, including all heating, air conditioning, ventilating, plumbing,
electrical and mechanical systems, and utilities now or hereafter in place,
together with all rights and privileges in and about the premises as may be
necessary or convenient to Tenant's business inclusive of all easements
benefitting the premises and all rights, easements and appurtenances belonging
or appertaining to the premises and all improvements and all right, title and
interest of Landlord in and to any and all roads, streets, alleys and public and
private rights of ways bounding the premises (collectively the "Premises"),
which Premises is legally described in Exhibit "A", attached hereto and
incorporated herein by reference; and
WHEREAS, Landlord is agreeable to granting Tenant/Option Holder in return
for $10.00 and other good and valuable considerations the right and option to
purchase the Premises and a right of first refusal to purchase the Premises.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the promises and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and
Tenant/Option Holder do hereby agree as follows:
1. Recitals; Capitalized Terms. The foregoing recitals are incorporated
herein by reference. Capitalized terms not defined herein shall have the same
meaning as same are defined in the Lease.
2. Right of First Refusal to Purchase.
<PAGE>
(a) Presentation/Acceptance of Offer. If Landlord receives and
desires to accept a bona fide offer to purchase the Premises during the term of
the Lease or during any extension or renewal thereof, excluding an offer from an
affiliate of Landlord, an affiliate of Landlord being defined as a person or
entity which owns 10% or more of the voting securities of Landlord or a person
or entity which directly or indirectly controls or is controlled by Captec
Financial Group, Inc., a Michigan corporation, Landlord shall notify
Tenant/Option Holder as set forth below stating the name and address of such
offeror and deliver with such notice a copy of the offer and all related
correspondence and documents detailing the purchase price, terms and conditions
of such offer ("Offer") and Tenant/Option Holder shall have the right to
purchase the Premises on the same terms and conditions as set forth in the
Offer, or on the terms provided in this Agreement, or such other terms and
conditions as Landlord and Tenant/Option Holder may agree upon. The notice by
Tenant/Option Holder to Landlord of Tenant/Option Holder's election to purchase
the Premises must be given within twenty (20) days after receipt by
Tenant/Option Holder of the notice from Landlord of the Offer. If Tenant/Option
Holder does not elect to exercise its right to purchase, Landlord may sell the
Premises, provided the sale is consummated in conformance with the Offer and at
the same price and upon the same terms and conditions of the Offer.
(b) Subsequent Rights to Exercise First Refusal. If Tenant/Option
Holder does not elect to exercise its right to purchase the Premises on one or
more occasions, such election not to exercise its right shall not affect
Tenant/Option Holder's right to exercise its right to purchase regarding any
subsequent offer so long as the Lease remains in effect. Any sale or transfer of
the Premises shall be expressly made subject to all of the terms, covenants and
conditions of the Lease and such buyer shall agree to be bound by the Lease and
assume the obligations of Landlord in the Lease.
(c) Alternate Purchase Price. In lieu of the purchase price stated
in the Offer, Tenant/Option Holder may elect to purchase the Premises for the
purchase price stated below during the first (1st) through fifth (5th) lease
years:
Lease Year Purchase Price
---------- --------------
1,2 Amount equal to the total rent payable for the lease year
subsequent to the lease year in which the option is
exercised (the "Annual Rent") divided by 9.462%
3 Amount equal to the Annual Rent for Lease Year 3 divided by
9.978%
4 Amount equal to the Annual Rent for Lease Year 4 divided by
9.785%
5 Amount equal to the Annual Rent for Lease Year 5 divided by
9.580%
2
<PAGE>
(d) Closing Procedure. Upon Tenant/Option Holder's election to
purchase the Premises, Landlord shall deliver, at Landlord's expense, an ALTA
Form B Owner's Title Insurance Commitment (the "Commitment"), committing to
insure fee title to the Premises and easements thereto with extended coverage
over all general exceptions, (provided Tenant/Option Holder obtains an as-built
survey of the Premises at its expense), issued by a title company acceptable to
Tenant/Option Holder, but subject to those exceptions set forth in the Landlord
Owner's Commitment when Landlord acquired title to the Premises, attached hereto
as Exhibit B and incorporated herein by reference, and any exceptions created by
Tenant (the "Permitted Exceptions"). Tenant/Option Holder shall have fifteen
(15) days to review the Commitment and notify Landlord of any unacceptable
defects or encumbrances thereto (the "Defects") and Landlord agrees within
thirty (30) days to endeavor to cure the Defects to Tenant/Option Holder's
satisfaction, which if not cured, Tenant/Option Holder shall have the right to
waive the Defects or terminate the transaction (provided that any mortgage
liens, pending liens in an amount certain, Lis Pendens or judgments against
Landlord shall be satisfied and released at closing). At the closing, Landlord
shall deliver a Special Warranty Deed conveying good and marketable fee simple
title free and clear of all liens, encumbrances, restrictions and defects,
subject only to the Permitted Exceptions and those title matters approved by
Tenant/Option Holder and an ALTA Form B Owner's Title Insurance Policy with
extended coverage endorsements over all general exceptions acceptable to
Tenant/Option Holder. The purchase shall be closed at the local office of the
insurer of title through a Deed and Money Escrow acceptable to Tenant/Option
Holder. Landlord and Tenant/Option Holder agree to execute such reasonable and
customary documents and affidavits as requested by the insurer of title to
complete the transaction as set forth herein. Landlord shall assign all
warranties, guaranties and bonds with respect to the Premises, if any, to
Tenant/Option Holder at the closing. General and special real estate taxes
shall be prorated on the basis of 110% of the most recent ascertainable tax
bills. Transfer taxes, the escrow fee and closing costs shall be allocated as
provided in the Offer and if not allocated in the Offer, shall be divided
equally by Landlord and Tenant/Option Holder. Landlord shall use the proceeds
of the purchase price (to the extent necessary) to pay off any existing
financing placed on the Premises by Landlord and secured by a mortgage/deed of
trust on the Premises. If at the time Tenant/Option Holder exercises its right
to purchase the Premises, Tenant is in default of any of its obligations under
the Lease beyond any applicable cure periods, Tenant/Option Holder shall agree
to cure such default as a condition to the exercise of its right to purchase the
Premises.
3. Option to Purchase. Tenant/Option Holder shall have the right and
option to purchase the Premises any time after the fifth (5th) Lease Year of the
term or during any renewal or extension period provided if at the time
Tenant/Option Holder exercises its right to purchase the Premises, Tenant is in
default of any of its obligations under the Lease beyond any applicable cure
periods, Tenant/Option Holder shall agree to cure such default as a condition to
the exercise of its right to purchase the Premises upon the following terms and
conditions:
(a) Tenant/Option Holder may exercise its option hereunder by
delivering written notice to Landlord at any time after the fifth (5th)
Lease Year.
3
<PAGE>
(b) The option to purchase the Premises shall not terminate if
Tenant/Option Holder's right of first refusal becomes operative,
Tenant/Option Holder does not exercise such right, and the offer triggering
Tenant/Option Holder's right of first refusal closes.
(c) In the event Tenant/Option Holder exercises its option to
purchase during the sixth (6th) through eighth (8th) lease years, the
option purchase price shall be an amount equal to the total rent payable
for the lease year subsequent to the lease year in which the option is
exercised, divided by ten percent (10%). In the event Tenant/Option Holder
exercises its option to purchase after the eighth (8th) lease year, the
option purchase price shall be the greater of:
(1) The fair market value of the Premises as of the option
exercise date determined by an appraiser selected as described
below; or
(2) An amount equal to the total rent payable for the lease year
subsequent to the lease year in which the option is exercised,
divided by ten percent (10%).
For purposes of determining the fair market value of the Premises above,
Landlord shall select an appraiser (at its expense) to determine the fair market
value of the Premises and Tenant/Option Holder shall also select an appraiser
(at its expense) to determine the fair market value of the Premises. If such
appraisers cannot agree on the fair market value of the Premises as of the
option exercise date, then the two (2) appraisers shall select a third appraiser
(the expense of which shall be shared equally by Tenant/Option Holder and
Landlord) to determine such fair market value and the average of the three
appraisals shall be conclusively considered to be the fair market value of the
Premises. If one party fails to select an appraiser within thirty (30) days
after Tenant/Option Holder exercises its option to purchase, and the other party
(the "Second Party") does select an appraiser then the Second Party may notify
the First Party that unless First Party has selected an appraiser within ten
(10) days following delivery of said notice to the First Party, the Second
Party's appraisal shall be deemed to represent the fair market value of the
Premises.
(d) The closing procedure for Tenant/Option Holder's option to
purchase shall be as is provided in paragraph 2(d) above.
4. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be delivered to the person to
whom the notice is directed, either in person with a receipt requested therefor,
or sent by a recognized overnight carrier service for next-day delivery, or by
United States Certified Mail, Return Receipt Requested, postage prepaid, and
addressed to the parties at their respective addresses set forth below.
4
<PAGE>
If to Landlord: CAPTEC NET LEASE REALTY, INC.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
Attention: Senior Vice President, Administration
with copy to: MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.
101 N. Main Street, 7th Floor
Ann Arbor, Michigan 48104
Attention: David N. Parsigian, Esq.
If to Tenant: [TENANT NAME]
[TENANT ADDRESS]
[If to Option
Holder: BOSTON CHICKEN, INC.
14103 Denver West Highway
Golden, Colorado 80401
Attention: Legal Services]
Any party may change its address for notices by written notice in like manner as
provided in this Paragraph and such change of address shall be effective seven
(7) days after the date notice of such change of address is given. Notice for
purposes of this Lease shall be deemed given three (3) business days after it
shall have been deposited in the mail by the party who is giving such notice
with sufficient postage prepaid.
5. Waiver/Amendment. No term or condition of this Agreement will be
deemed to have been waived or amended unless expressed in writing, and the
waiver of any condition or the breach of any term will not be a waiver of any
subsequent breach of the same or any other term or condition. The Agreement
constitutes the entire agreement of the parties which incorporates and
supersedes all prior written and oral understandings. The Agreement shall be
binding upon, and inure to the benefit of, the parties, their heirs, executors,
personal representatives, nominees, successors or assigns.
6. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
such counterparts taken together shall be deemed to constitute one and the same
instrument.
7. Confidentiality. Landlord and Tenant/Option Holder and each of its
agents, representatives, employees, partners, officers and directors will not
disclose the subject matter or terms of the transaction contemplated by this
Agreement or any information exchanged by
5
<PAGE>
the parties hereto pursuant to this Agreement, unless the prior written consent
to such disclosure is obtained from the other party, which consent shall not be
unreasonably withheld. Notwithstanding anything to the contrary contained
herein,Landlord may, without Tenant/Option Holder's consent, disclose the
subject matter or terms of the transactions contemplated by this Agreement to
Landlord's attorneys and other third party consultants, to auditors, regulators,
and underwriters, to the extent required by law, to the extent the information
is available to the public, or in defense of a legal action between Landlord and
Tenant/Option Holder.
8. Memorandum of Purchase Option. Upon Tenant/Option Holder's request,
the parties agree to execute and record a Memorandum of Purchase Option in the
form attached hereto and incorporated herein by reference as Exhibit C, the cost
of recording for which shall be borne by Tenant/Option Holder.
9. Termination of Agreement. This Agreement shall automatically
terminate upon the expiration or earlier termination of the Lease.
10. Assignment. Tenant/Option Holder shall have the full and free right,
without the consent or approval of Landlord, to assign its right, title and
interest in and to this Agreement to [Boston Chicken, Inc. ("BCI") or to] a
licensee, franchisee or any parent or operating subsidiary of BCI, or to a
corporation or other entity with which Tenant/Option Holder may merge,
consolidate or sell all or a substantial portion of its assets or stock.
[Signatures on Next Page]
6
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant/Option Holder have caused this
Agreement to be executed and sealed as of the date first above written.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
_____________________________________ By: _________________________________
Print Name:
Its: _________________________
_____________________________________
Print Name:
[TENANT OR BCI NAME]
_____________________________________ By: _________________________________
Print Name:
Its: _________________________
_____________________________________
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ____ day of _____________, 199__.
_____________________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires: ______________
STATE OF ________________ )
)ss:
COUNTY OF _____________ )
Subscribed and sworn to before me this ____ day of _____________, 199__.
_____________________________________
Notary Public
______________ County, ______________
My Commission Expires: ______________
7
<PAGE>
EXHIBIT A
to
Option to Purchase and First Right of Refusal to Purchase Agreement
-------------------------------------------------------------------
Land in the City of ________________, County of ________________, State of
____________________, and more particularly described as follows:
A-1
<PAGE>
EXHIBIT B
to
Option to Purchase and First Right of Refusal to Purchase Agreement
-------------------------------------------------------------------
[Owner's Title Commitment]
B-1
<PAGE>
EXHIBIT C
to
Option to Purchase and First Right of Refusal to Purchase Agreement
-------------------------------------------------------------------
[Memorandum of Purchase Option]
RECORDATION REQUESTED BY:
Miller, Canfield, Paddock and Stone, P.L.C.
101 N. Main Street, 7th Floor
Ann Arbor, Michigan 48104
AFTER RECORDATION RETURN TO:
Liggie V. Perkins
Captec Financial Group, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
RETURN BY: MAIL (X) PICK UP ( )
- --------------------------------------------------------------------------------
[SITE ADDRESS]
[CITY, STATE]
MEMORANDUM OF PURCHASE OPTION
This Memorandum of Purchase Option is made as of ____________, 199__,
between CAPTEC NET LEASE REALTY, INC., a Michigan corporation, whose address is
24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P. O. Box 544, Ann Arbor,
Michigan 48106-0544, hereinafter called "Landlord" and [TENANT OR BCI NAME], a
[TENANT OR BCI ENTITY], having an office for business at [TENANT OR BCI
ADDRESS], hereinafter called "Tenant"/"Option Holder".
On an even date herewith Landlord and Tenant/Option Holder have entered
into that certain Option to Purchase and First Right of Refusal to Purchase
Agreement (the "Option Agreement") with respect to the real property more
particularly described in Exhibit "A" attached hereto and made a part hereof
(the "Premises"). Pursuant to the terms and conditions of the Option Agreement,
Landlord and Tenant/Option Holder have agreed that (1) Tenant/Option Holder
shall a first right of refusal to purchase the Premises, and (2) Tenant/Option
Holder shall have an option to purchase the Premises.
[Signatures on Next Page]
C-1
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant/Option Holder have caused this
Memorandum of Purchase Option to be executed and sealed as of the date first
above written.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
_____________________________ By:_______________________________
Print Name:
Its:_________________________
_____________________________
Print Name:
[TENANT OR BCI NAME]
_____________________________ By:_______________________________
Print Name:
Its:_____________________________
_____________________________
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of _____________, 199_.
__________________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires:____________
STATE OF ____________ )
)ss:
COUNTY OF _______ )
Subscribed and sworn to before me this ___ day of _____________, 199_.
__________________________________
Notary Public
_____________ County, ____________
My Commission Expires:____________
C-2
<PAGE>
EXHIBIT A
to
Memorandum of Purchase Option
-----------------------------
Land in the City of ________________, County of ________________, State of
____________________, and more particularly described as follows:
A-1
<PAGE>
Lease No. ________
[Street Address]
[City, State]
ADDENDUM TO OPTION TO PURCHASE
------------------------------
AND FIRST RIGHT OF REFUSAL TO PURCHASE AGREEMENT
------------------------------------------------
THIS ADDENDUM OPTION TO PURCHASE AND FIRST RIGHT OF REFUSAL TO PURCHASE
AGREEMENT ("Addendum") is made and entered into as of __________________, 199__,
by and between:
(i) CAPTEC NET LEASE REALTY, INC., a Michigan corporation, whose address
is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor,
Michigan 48106-0544 ("Landlord"), and
(ii) [TENANT NAME OR BCI NAME], a [TENANT OR BCI ENTITY], whose address is
________________________ ("Tenant" or "Option Holder").
W I T N E S S E T H :
---------------------
Landlord and _________________ have entered into an Option to Purchase and
First Right of Refusal to Purchase Agreement, dated of even date ("Option"),
pursuant to which Landlord granted an Option to Purchase and First Right of
Refusal to Purchase to __________________.
Landlord and _________________ desire to amend certain terms and provisions
of the Option. Notwithstanding any provision to the contrary which may be
contained in the Option, it is specifically agreed by and between Landlord and
____________________ as follows:
1. Defined Terms. All terms in this Addendum shall have the same meaning
as set forth in the Option.
2. Right of First Refusal to Purchase. Paragraph 2(a) is amended to add
the following at the end of the paragraph:
Landlord shall have the right to mortgage the Premises without making the
Right of First Refusal to Purchase operative. Further, this Right of First
Refusal to Purchase shall not become operative or apply to transfers by
Landlord to related entities of Landlord (or Captec Financial Group, Inc.),
or to transfers as part of a pooling of assets by Landlord for the purpose
of raising capital, where the pool of assets contains multiple properties,
including properties acquired by Landlord pursuant to those commitment
letters dated January 30, 1996 and April 15, 1996, between Landlord and BCI
and/or Tenant. Notwithstanding the foregoing, if Tenant/Option Holder does
not exercise its Right of First Refusal to Purchase the
<PAGE>
Premises and the Premises is sold to the party that made the offer, then
the Right of First Refusal shall terminate as to the Premises.
3. Option to Purchase. Paragraph 3 of the Option is deleted and replaced
with the following.
Tenant/Option Holder shall have the right and option to purchase the
Premises at any time during the sixth, seventh and eighth Lease Year of the
Term, by providing Landlord with ninety (90) days' prior written notice of
its election, or at any time during the last ninety (90) days of the
primary Lease Term, the third option to extend or the fifth option to
extend, by providing Landlord with notice of its election at least ninety
(90) days prior to the end of the primary Lease Term, third option to
extend or fifth option to extend and closing shall take place within a
reasonable time period thereafter (not to exceed forty-five [45] days),
provided if at the time Tenant/Option Holder exercises its right to
purchase the Premises, Tenant is in default of any of its obligations under
the Lease beyond any applicable cure periods, and BCI has not elected to
cure said default under Paragraph 13 of the Lease, Tenant/Option Holder
shall cure such default as a condition to the exercise of its right to
purchase the Premises upon the following terms and conditions:
(a) The option to purchase the Premises shall not terminate if
Tenant's/Option Holder's Right of First Refusal becomes operative,
Tenant/Option Holder does not exercise such right and the offer triggering
Tenant's/Option Holder's Right of First Refusal closes.
(b) In the event Tenant/Option Holder exercises its option to
purchase during the sixth, seventh, or eighth Lease Years, the option to
purchase price shall be an amount equal to the total Annual Rent payable
for the Lease Year subsequent to the lease year in which the option is
exercised, divided by ten (10%) percent. In the event Tenant/Option Holder
exercises its option to purchase at the end of the primary Lease Term, the
purchase price shall be an amount equal to the Annual Rent that would have
been payable for the first Lease Year of the first option to extend divided
by ten (10%) percent. In the event Tenant/Option Holder exercises its
option to purchase at the end of the third option to extend or the end of
the fifth option to extend, the purchase price shall be equal to the Annual
Rent that would have been payable for the Lease Year subsequent to the
third option to extend or with respect to the fifth option to extend the
Annual Rent that would have been payable for the last Lease Year of the
fifth option to extend and increased by ten (10%) percent, as the case may
be, divided by ten (10%) percent or the fair market value of the Premises,
as defined herein, whichever is the lesser. For purposes of determining the
fair market value of the Premises above, Landlord shall select an appraiser
(at its expense) to determine the fair market value of the Premises and
Tenant/Option Holder
2
<PAGE>
shall also select an appraiser (at its expense) to determine the fair
market value of the Premises. If such appraisers cannot agree on the fair
market value of the Premises as of the option exercise date, then the two
(2) appraisers shall select a third appraiser (the expense of which shall
be shared equally by Tenant/Option Holder and Landlord) to determine such
fair market value and the average of the three appraisals shall be
conclusively considered to be the fair market value of the Premises. If one
party fails to select an appraiser within thirty (30) days after
Tenant/Option Holder exercises its option to purchase, and the other party
(the "Second Party") does select an appraiser then the Second Party may
notify the First Party that unless First Party has selected an appraiser
within ten (10) days following delivery of said notice to the First Party,
the Second Party's appraisal shall be deemed to represent the fair market
value of the Premises.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
Except as modified above, the terms and provisions of the Option remain
unmodified and in full force and effect.
WITNESSES: CAPTEC NET LEASE REALTY, INC.
_____________________________ By:_____________________________________
Print Name: Gary A. Bruder
Its Vice President
_____________________________
Print Name:
[TENANT NAME OR BCI NAME]
_____________________________ By:_____________________________________
Print Name:
Its:______________________________
_____________________________
Print Name:
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of _____________, 199___, by
Gary A. Bruder, as Vice President of Captec Net Lease Realty, Inc., a Michigan
corporation, on behalf of the corporation.
________________________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires:__________________
STATE OF )
)ss
COUNTY OF )
Subscribed and sworn to before me this ___ day of _______________, 199___,
by ___________________, as ____________________ of [TENANT NAME OR BCI NAME], a
[TENANT OR BCI ENTITY], on behalf of the ______________________________.
________________________________________
Notary Public
_____________County_____________________
My Commission Expires:
4
<PAGE>
Lease No. _______
[Street Address]
[City, State]
ENVIRONMENTAL INDEMNIFICATION AND
HOLD HARMLESS AGREEMENT
-----------------------
THIS ENVIRONMENTAL INDEMNIFICATION AND HOLD HARMLESS AGREEMENT (the
"Agreement") is made as of the ____ day of _______, 1996, by [TENANT NAME],
[TENANT ENTITY], whose address is ____________________________________ (the
"Tenant"), in favor of CAPTEC NET LEASE REALTY, INC., a Michigan corporation,
whose address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544,
Ann Arbor, Michigan 48104-0544 (the "Landlord").
RECITALS
[OPTION 1 - The Tenant has entered into a [Purchase Agreement], dated
____________ (the "Purchase Agreement"), pursuant to which the Tenant will
acquire certain assets from [SELLER NAME], [SELLER ENTITY] (the "Seller"),
including without limitation certain real property and improvements located at
________________________, commonly known as Boston Market Restaurant No. ___
(the "Premises"). The Tenant has assigned its rights under the Purchase
Agreement to the Landlord.] [OPTION 2 - The Tenant owns certain real property
and improvements located at ________________________, commonly known as Boston
Market Restaurant No. ___ (the "Premises").] [OPTION 3 - The Tenant owns certain
real property located at ________________________, and is constructing
improvements on such real property to be known as Boston Market Restaurant No.
___ (the "Premises").]
The Landlord has agreed to purchase the Premises from [the Seller] [the
Tenant] in connection with a net lease real estate transaction pursuant to the
terms and conditions of the commitment letter dated April ____, 1996 from Captec
Financial Group, Inc., a Michigan corporation (acting on behalf of Landlord) to
Boston Chicken, Inc., a Delaware corporation (acting on behalf of Tenant).
[DESCRIBE THE NATURE OF THE ENVIRONMENTAL PROBLEMS AT THE PREMISES AND
REMEDIATION STEPS BEING TAKEN, IF ANY.] In order to facilitate the net lease
real estate transaction described above, the Tenant has agreed to provide the
indemnification set forth in this Agreement.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms have the definitions set
forth below:
a. "Hazardous Materials" means any regulated asbestos (whether friable or
non-friable), PCBs, ureaformaldehyde, oil or other petroleum products or
fractions thereof, flammable explosives, radioactive materials, or
materials
<PAGE>
defined under federal, state and local laws and regulations, statutes,
ordinances or court decisions as "hazardous substances", "hazardous
materials", "hazardous waste", "waste", "toxic substances", "pollution" or
"contamination". Without limiting the generality of the foregoing, the
definition of those terms shall include those definitions found in
Applicable Environmental Law.
b. "Applicable Environmental Law" shall mean all present and future
statutes, laws, ordinances, acts, rules, regulations, decrees, and rulings
of all governmental authorities with competent jurisdiction which relate or
pertain to human health, the environment or hazardous materials, including
without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, codified principally at 42 U.S.C.A. 9601 et seq.
(1983 and Supp. 1987), as amended ("CERCLA"), the Resource Conservation and
Recovery Act of 1976, the Hazardous and Solid Waste Amendments of 1984,
codified at 42 U.S.C.A. 6901 et seq. (Supp. 1987), as amended, the National
Environmental Policy Act, 42 U.S.C. 4321, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. 1801, et seq., the Toxic Substances Control
Act, 15 U.S.C. 2601, et seq., the Clean Water Act, 33 U.S.C. 1251, et seq.,
the Clean Air Act, 42 U.S.C. 7401, et seq., the Occupational Safety and
Health Act, 29 U.S.C. 651, et seq., and all environmental control laws of
the State where the Premises are located.
c. "Environmental Activity" means any actual or threatened disposal,
release, emission, discharge, existence, use, migration, generation,
storage, handling, transportation, abatement, disposal, or removal of
Hazardous Materials (other than those Hazardous Materials which are
necessary for the conduct of Tenant's business operated on the Premises and
which are generated, stored, handled, transported, disposed and/or removed
by Tenant during the term or any extension of the term exercised by Tenant
in accordance with Applicable Environmental Law) or any other activity or
occurrence that causes any such event to exist; provided, however, that
Environmental Activity shall not encompass any acts or omissions by owners
or occupants of the Premises after termination or expiration of the lease
between Landlord and Tenant.
2. Indemnity. The Tenant agrees unconditionally and absolutely to defend,
indemnify and hold harmless the Landlord and its assignees, and their respective
directors, officers, shareholders, employees, agents, representatives and the
successors and assigns of all of the foregoing (collectively, the "Indemnified
Parties") from and against any and all damages, diminution in value of the
Premises, penalties, fines (both civil and criminal), losses, liabilities,
judgments, causes of actions, suits, claims, demands, costs and expenses made or
brought against or incurred or suffered by an Indemnified Party (including all
out-of-pocket litigation costs incurred by an Indemnified Party and the
reasonable fees and expenses of the Landlord's counsel and consultants and all
costs incurred by an Indemnified Party of investigating, cleaning up, removing,
remediating, implementing corrective action with respect to, abating or
otherwise
-2-
<PAGE>
responding to the contamination associated with the former presence of [a
gasoline service station] on the Premises) of any nature, directly or indirectly
arising out of or in connection with any or all of the following:
a. any Environmental Activity on the Premises, including, without
limitation, the existence, use, generation, migration, storage, release,
threatened release, or disposal of Hazardous Materials on, onto, from or
under the Premises;
b. any mechanics' or other material liens on the Premises arising from any
remediation work performed by Tenant or Tenant's chosen consultants or
contractors;
c. any environmental liens, other deed restrictions or deed notices
required by any governmental authority with competent jurisdiction which
are imposed on the Premises as a result of the presence of Hazardous
Materials on the Premises on or prior to the date hereof;
d. any failure by the Tenant to comply in its operations at the Premises
with the terms of any order of any federal, state or local authority having
competent jurisdiction and regulatory authority over environmental matters
or with any Applicable Environmental Law;
e. any personal injury or property damage arising out of or related to
performance by [the Tenant] [the Seller] (or its agents, employees,
contractors and consultants) of any of the remediation work with respect to
the Premises; and
f. any cleanup, containment, damages, fines paid to third parties on
account of tort, nuisance or other liability arising from an Environmental
Activity and all legal and consultant fees associated therewith.
The Tenant's liability under this Paragraph 2 specifically includes the
occurrence of any Environmental Activity on the Premises occurring after the
date hereof which is a result of unlawful actions or inactions of the Tenant in
its operations at the Premises prior to the date hereof.
Nothing in this Agreement shall limit in any way Tenant's right to counsel
or appeal an order or decision or penalty or other enforcement action issued or
pursued by a governmental authority. The rights, if any exist, of any
Indemnified Party to assume responsibility for and undertake any investigation,
remediation or monitoring at the Premises or to resolve or otherwise affect any
dispute between Tenant and such governmental authority do not accrue until after
Tenant's contest and/or appeal are exhausted; provided that Tenant shall proceed
with due diligence to contest and/or appeal such matter.
-3-
<PAGE>
Landlord agrees unconditionally and absolutely to defend, indemnify and
hold harmless the Tenant and its assignees, and their respective directors,
officers, shareholders, employees, agents, representatives and the successors
and assigns of all of the foregoing (collectively, "Tenant Parties") from and
against any and all damages, diminution in value of the Premises, penalties,
fines (both civil and criminal), losses, liabilities, judgments, causes of
actions, suits, claims, demands, costs and expenses made or brought against or
incurred or suffered by Tenant Parties (including all out-of-pocket litigation
costs incurred by Tenant Parties and the reasonable fees and expenses of Tenant
Parties' counsel and consultants and all costs incurred by Tenant Parties of
investigating, cleaning up, removing, remediating, implementing corrective
action with respect to, abating or otherwise responding to the contamination
associated with the former presence of [a gasoline service station] on the
Premises) directly arising out of Landlord's negligence or willful misconduct
with respect to the Premises.
3. Survival of Obligations. The Landlord's and Tenant's obligations under
this Agreement shall survive for a period of five (5) years after the expiration
of the term (or any renewal terms exercised by Tenant) of the lease between
Landlord and Tenant.
4. Claims. If any claim is made or brought against any Indemnified Party
which is subject to the indemnification set forth in this Agreement ("Covered
Claim"), the Tenant shall defend the same in the name of such Indemnified Party,
by attorneys approved by the Landlord. If a Covered Claim occurs and Tenant
refuses to provide a defense or attorneys satisfactory to Landlord, the Landlord
may, in its sole discretion, upon the occurrence of any claim, engage its own
attorneys to defend or assist therein, and at the Landlord's option, the
Landlord's attorneys may control the litigation or resolution of such Covered
Claim. If Tenant refuses to defend a Covered Claim or refuses to provide
attorneys satisfactory to Landlord, the Tenant shall pay or, on demand, shall
reimburse the Landlord for the payment of the reasonable fees and disbursements
of the Landlord's attorneys.
If any Covered Claim is made or brought against any Tenant Party, the
Landlord shall defend the same in the name of such Tenant Party, by attorneys
approved by the Tenant Party. If a Covered Claim occurs and Landlord refuses to
provide a defense or refuses to provide attorneys satisfactory to Tenant, the
Tenant Party may, in its sole discretion, engage its own attorneys to defend or
assist therein, and at the Tenant Party's option, the Tenant Party's attorneys
may control the litigation or resolution of such Covered Claim. If Landlord
refuses to defend a Covered Claim or refuses to provide attorneys satisfactory
Tenant, the Landlord shall pay or, on demand, shall reimburse the Tenant Party
for the payment of the reasonable fees and disbursements of the Tenant Party's
attorneys.
5. Notices. In the event any party becomes aware of the existence of a
Covered Claim, such party shall immediately notify the other parties in writing,
and notice shall be deemed received (a) upon receipted delivery if sent by
personal messenger, (b) three (3) business days after being deposited in the
U.S. Mail, registered or certified, return receipt requested, or (c) one (1)
business day after being deposited with a nationally recognized overnight
courier service,
-4-
<PAGE>
in each case with postage/delivery prepaid or billed to the sender and addressed
to the address indicated in the preamble above.
6. Entire Agreement. This Agreement shall constitute the entire agreement and
understanding of the parties, and there are no other prior or contemporaneous
written or oral agreements, undertakings, promises, warranties or covenants not
contained herein with respect to the subject matter of this Agreement.
7. Waivers. No waiver of any condition or provision of this Agreement by any
party shall be valid unless in writing signed by such party. No such waiver
shall be deemed or construed as a waiver of any other or similar provision or of
any future event, act, or default.
8. Severability. If any provision of this Agreement is deemed unenforceable
in whole or part, such provision shall be limited to the extent necessary to
render the same valid or shall be excised from this Agreement, as circumstances
require, and this Agreement shall be construed as if said provision had been
incorporated herein as so limited or as if such provision had not been included
herein, as the case may be.
9. Headings. Headings of paragraphs are for convenience of reference only and
shall not be construed as part of this Agreement.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State where the Premises are located.
11. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which, taken together,
shall constitute a single instrument.
12. Litigation. In the event any dispute arises hereunder and litigation or
arbitration proceedings are commenced, the prevailing party shall be entitled to
recover from the other parties all costs and expenses incurred in connection
with such proceedings, including but not limited to attorneys' fees and costs.
13. Successors and Assigns. The obligations under this Agreement shall be
binding upon successors and assigns of Tenant and Landlord, and the rights and
privileges of the Indemnified Parties and Tenant Parties under this Agreement
shall inure to the benefit of their respective successors and assigns.
[SIGNATURE PAGE FOLLOWS]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
WITNESSES: [TENANT ENTITY]
_____________________________________ By __________________________________
Print Name:
_____________________________________ Its ____________________________
Print Name:
CAPTEC NET LEASE REALTY, INC.
_____________________________________ By __________________________________
Print Name: Gary A. Bruder
Its Vice President
_____________________________________
Print Name:
STATE OF ________________ )
)ss:
COUNTY OF _______________ )
Subscribed and sworn to before me this ___ day of _______________, 199___,
by ________________________, as ________________________, of [TENANT NAME],
[TENANT ENTITY], on behalf of the ________________________________.
_____________________________________
Notary Public
_____________ County, _______________
My Commission Expires: ______________
STATE OF MICHIGAN )
)ss:
COUNTY OF WASHTENAW )
Subscribed and sworn to before me this ___ day of ___________________,
199__, by Gary A. Bruder, as Vice President of Captec Net Lease Realty, Inc., a
Michigan corporation, on behalf of the corporation.
_____________________________________
Notary Public
Washtenaw County, Michigan
My Commission Expires: ______________
Lease No.________
-6-
<PAGE>
Lease No. ______
[STREET ADDRESS]
[CITY, STATE]
CERTIFICATE OF TENANT
---------------------
In connection with that certain Lease Agreement, Rent Addendum and Addendum
to Lease Agreement, each dated as of the date hereof (collectively "Lease"),
[TENANT], [TENANT ENTITY] ("Tenant"), for the benefit of CAPTEC NET LEASE
REALTY, INC., a Michigan corporation ("Landlord"), warrants, represents,
covenants and agrees, to the best of its knowledge, that the following are true
and correct as of the date hereof:
1. Tenant is in possession and occupancy of the Premises (as defined in
the Lease). The Premises are legally occupied, and all required certificates of
occupancy, approvals, permits and licenses required by any governmental
authority and necessary or advisable to operate, occupy or use the Premises for
the purposes permitted under the Lease have been issued and remain in full force
and effect.
2. Tenant accepts the Premises in "AS IS" condition.
3. Tenant's franchise agreement with Boston Chicken, Inc. relating to the
Premises is in full force and effect, there are no defaults under any of the
provisions thereof, all conditions to the effectiveness or continuing
effectiveness thereof required to be satisfied as of the date hereof have been
satisfied, and Tenant will take all actions necessary or required to keep the
franchise agreement in full force and effect throughout the term of the Lease.
4. Except as necessary for the operation of a restaurant and as allowed by
law, the Premises will not be used for the purpose of storing hazardous wastes
or materials, and no such storage or use will otherwise be allowed on the
Premises which will cause or increase the likelihood of causing the release of
hazardous wastes or materials onto the Premises.
Dated as of ______________, 199__.
[TENANT]
By __________________________________
Its _____________________________
STATE OF ________________ )
) ss.
COUNTY OF _______________ )
The foregoing instrument was acknowledged before me this ___ day of
___________, 199__, by ___________________, as ____________________ of [TENANT],
[TENANT ENTITY], on behalf of the [ENTITY].
_____________________________________
Notary Public
_______________ County, _____________
My Commission Expires: ______________
[Notary Public's Seal]
<PAGE>
EXHIBIT N
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
-----------------
COMPUTER AND COMMUNICATIONS SYSTEMS AGREEMENT
---------------------------------------------
N-1
<PAGE>
COMPUTER AND
COMMUNICATIONS SYSTEMS AGREEMENT
________________________
FRANCHISE OWNER
<PAGE>
BOSTON CHICKEN, INC.
COMPUTER AND COMMUNICATIONS SYSTEMS AGREEMENT
---------------------------------------------
THIS AGREEMENT is made and entered into this _____ day of
___________________________, 199____ (the "Effective Date"), by and between
BOSTON CHICKEN, INC., a Delaware corporation (hereinafter referred to as
"COMPANY") and FRANCHISE OWNER (as defined below).
"FRANCHISE OWNER":______________________________________________________________
________________________________________________________________________________
a ______________________________________________________________________________
Principal Address:______________________________________________________________
_____________________________________________________________
_____________________________________________________________
R E C I T A L S
---------------
WHEREAS, COMPANY and FRANCHISE OWNER have entered into a Franchise
Agreement granting FRANCHISE OWNER the right to operate a BOSTON MARKET Unit
(the "UNIT") at ___________________________________________________________ (the
"Franchise Agreement");
WHEREAS, under the Franchise Agreement, FRANCHISE OWNER is required to
operate the UNIT in compliance with the specifications and standards which
COMPANY prescribes from time to time for BOSTON MARKET Units, including without
limitation, COMPANY's specifications and standards for computer hardware and
software and communications systems; and
WHEREAS, COMPANY has developed specifications and standards for computer
hardware and software and communications systems to be used in the operation of
BOSTON MARKET Units.
<PAGE>
C O V E N A N T S
-----------------
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" - Any person or legal entity that directly or indirectly owns
or controls COMPANY, that is directly or indirectly owned or controlled by
COMPANY, or that is under common control with COMPANY. For purposes of this
definition, "control" means the power to direct or cause the direction of the
management and policies of an entity.
"Computer System" - Those brands, types, makes, and/or models of
communications and computer systems or hardware specified or required by COMPANY
for use by, between, or among BOSTON MARKET 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 the UNIT,
between or among BOSTON MARKET Units, and between and among UNIT and
COMPANY and/or FRANCHISE OWNER;
(2) security systems;
(3) printers; and
(4) archival and back-up systems.
"Licensed Program" - The computer software programs developed by or for
COMPANY and designated by COMPANY from time to time as specified or required in
connection with utilization of the Computer System, which may include, without
limitation, COMPANY's required point-of-sale, bookkeeping, inventory, training,
marketing, employee selection, operations and financial information, collection
and retrieval systems (including COMPANY's required general ledger system
utilizing the standard chart of accounts prescribed by COMPANY from time to
time) for use in connection with the operation of BOSTON MARKET Units or
franchise owners' and developers' businesses, 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 COMPANY or its
2
<PAGE>
Affiliates for use with the Licensed Program or otherwise or any data generated
by the use of the Licensed Program.
"Specified Software" - Such software (other than the Licensed Program),
programming, and services which COMPANY from time to time specifies or requires
for use by franchise owners of BOSTON MARKET Units in connection with
utilization of the Computer System and the Licensed Program.
2. COMPUTER SYSTEM AND SPECIFIED SOFTWARE.
2.A. ACQUISITION OF COMPUTER SYSTEM AND SPECIFIED SOFTWARE.
Within one hundred twenty (120) days after the Effective Date, FRANCHISE
OWNER shall (i) acquire the Computer System for the UNIT and acquire the right
to use, for the remainder of the term of the Franchise Agreement applicable to
the UNIT, the Specified Software in the manner specified by COMPANY; (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, and the Specified Software to operate as specified by COMPANY,
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 UNIT to enable the Computer System, the Licensed
Program, and the Specified Software to operate as specified by COMPANY; and (iv)
commence using the Computer System, the Licensed Program, and the Specified
Software in the operation of the UNIT in the manner specified by COMPANY.
FRANCHISE OWNER 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 COMPANY shall have no
liability to FRANCHISE OWNER or to any other party in connection with any of the
foregoing.
2.B. COVENANT TO USE ONLY SPECIFIED SOFTWARE AND LICENSED PROGRAM.
FRANCHISE OWNER acknowledges that operating non-Specified Software on the
Computer System with the Specified Software and/or the License Program may cause
errors or other interruptions to or problems with the Specified Software and/or
Licensed Program. Therefore, FRANCHISE OWNER hereby agrees to operate only
Specified Software and the Licensed Program on the Computer System.
2.C. MODIFICATION, ENHANCEMENT, AND REPLACEMENT OF COMPUTER SYSTEM AND
SPECIFIED SOFTWARE.
FRANCHISE OWNER acknowledges that COMPANY may, during the term of this
Agreement, require FRANCHISE OWNER to modify, enhance and/or replace all or any
part
3
<PAGE>
of the Computer System and/or the Specified Software at FRANCHISEE OWNER's
expense, and agrees, within one hundred twenty (120) days of receipt of notice
from COMPANY, 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
Computer System and/or Specified Software specified by COMPANY 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, to operate as specified by COMPANY. Any such modifications,
enhancements, and replacements may require FRANCHISE OWNER 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. FRANCHISE OWNER acknowledges that
COMPANY cannot estimate the costs of future enhancements, modifications, and
replacements to the Computer System or the Specified Software and that the cost
to FRANCHISE OWNER of obtaining the enhancements, modifications, and
replacements to the Computer System, Licensed Program, or Specified Software may
not be fully amortizable over the remaining term of the Franchise Agreement.
Nonetheless, FRANCHISE OWNER agrees to incur such costs in connection with the
Computer System, the Licensed Program and the Specified Software and any
enhancements or modifications thereto and any replacements therefor, provided
that the COMPANY is then currently specifying the same enhancements,
modifications, and replacements for use in COMPANY-owned BOSTON MARKET Units.
Within one hundred twenty (120) days after FRANCHISE OWNER receives notice from
COMPANY, FRANCHISE OWNER shall obtain and implement any such modifications,
enhancements, or replacements which COMPANY designates and requires.
3. LICENSED PROGRAM.
3.A. GRANT OF LICENSE.
COMPANY hereby grants to FRANCHISE OWNER a nonexclusive, nontransferable,
nonassignable license to use the Licensed Program, subject to the following
terms and conditions:
(1) The Licensed Program shall be installed and tested on the Computer
System by COMPANY or its designee. If FRANCHISE OWNER does not
purchase the Computer System from COMPANY, FRANCHISE OWNER must pay
COMPANY a reasonable installation and testing fee upon completion of
COMPANY's installation and testing of the operation of the Licensed
Program with the Computer System. FRANCHISE OWNER acknowledges and
agrees the current installation and testing fee of $3,500.00 is
reasonable.
(2) Except with the prior written consent of COMPANY, the Licensed Program
shall not be operated by persons other than FRANCHISE OWNER and
employees of
4
<PAGE>
FRANCHISE OWNER, 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 the UNIT and the FRANCHISE OWNER's principal office;
provided, however, that with prior notice to COMPANY, FRANCHISE OWNER
may operate the Licensed Program on equipment other than the Computer
System and at a location other than the UNIT and the FRANCHISE OWNER's
principal office to the extent required due to malfunction of the
Computer System or other cause beyond the reasonable control of
FRANCHISE OWNER, but not for any period longer than seven (7)
consecutive days unless otherwise agreed in writing by COMPANY.
(3) The Licensed Program shall be used in FRANCHISE OWNER's operation of
the UNIT and shall not be used for any other purpose.
(4) Without limiting the foregoing, FRANCHISE OWNER shall not, and shall
not allow its 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 any
component thereof, or any data generated by the use of the Licensed
Program or any component of the Licensed Program; (b) disclose or
grant access to the Licensed Program, or any data generated by the use
of the Licensed Program or any component of the Licensed Program, to
any third party other than one to whom COMPANY has consented in
writing and who has agreed in writing with COMPANY to keep the
Licensed Program confidential; (c) copy or reproduce the Licensed
Program, or any data generated by the use of the Licensed Program or
any component of the Licensed Program, in any manner, except to the
extent necessary for normal back-up and operating thereof; or (d)
alter, modify or adapt the Licensed Program, any documentation
relating thereto or any component of the Licensed Program, including,
but not limited to, translating, decompiling, reverse engineering or
disassembling the Licensed Program.
(5) FRANCHISE OWNER acknowledges and agrees that the Licensed Program and
any data generated by the use of the Licensed Program is the valuable,
proprietary property and trade secret of COMPANY and/or its
Affiliates, and FRANCHISE OWNER agrees to use the utmost care to
safeguard the Licensed Program and any data generated by the use of
the Licensed Program and to maintain the copyright protection and the
secrecy and confidentiality thereof. FRANCHISE OWNER shall not
undertake to patent, copyright or otherwise assert proprietary rights
to the Licensed Program and any data generated by the use of the
Licensed Program or any portion thereof. FRANCHISE OWNER recognizes
that all or part of the Licensed Program and any data generated by the
use of the Licensed Program may be copyrighted and agrees that this
shall not be
5
<PAGE>
construed as causing the copyrighted material to be public
information. FRANCHISE OWNER will ensure that all copies of the
Licensed Program and any data generated by the use of the Licensed
Program or any components of the Licensed Program in its possession
contain an appropriate copyright notice under the Universal Copyright
Convention or other notice of proprietary rights specified by COMPANY.
(6) FRANCHISE OWNER shall promptly disclose to COMPANY all ideas and
suggestions for modifications or enhancements of the Licensed Program
conceived or developed by or for FRANCHISE OWNER, and COMPANY and its
Affiliates shall have the right to use and license such ideas and
suggestions. All modifications and enhancements made to the Licensed
Program together with the copyright therein shall be the property of
COMPANY, without regard to the source of the modification or
enhancement, and FRANCHISE OWNER hereby assigns all of its right,
title, and interest in any ideas, modifications, and enhancements to
COMPANY. FRANCHISE OWNER agrees to execute any document, in
recordable form, which COMPANY determines is necessary to reflect such
ownership.
(7) COMPANY shall have the right at all times to access the Licensed
Program and to retrieve, analyze and use all data in the files of
FRANCHISE OWNER for the Licensed Program.
(8) COMPANY shall provide to FRANCHISE OWNER all upgrades, modifications,
improvements, enhancements, extensions and other changes to the
Licensed Program approved by COMPANY for use in connection with the
operation of BOSTON MARKET Units, and FRANCHISE OWNER shall promptly
implement their use.
(9) Upon expiration or termination of this Agreement, FRANCHISE OWNER
shall allow COMPANY's employees or agents to remove the Licensed
Program from the Computer System, shall immediately return the
Licensed Program, each component thereof, and any data generated by
the use of the Licensed Program to COMPANY, and shall immediately
destroy any and all back-up or other copies of the Licensed Program or
parts thereof, documentation for the Licensed Program and any data
generated by the use of the Licensed Program, and other materials or
information which relate to or reveal the Licensed Program and its
operation and any data generated by the use of the Licensed Program.
6
<PAGE>
3.B. SOFTWARE LICENSE FEE.
FRANCHISE OWNER agrees to pay to COMPANY upon installation of the Licensed
Program on FRANCHISE OWNER's Computer System, a software license fee (the
"Software License Fee") in the amount of Fifteen Thousand Dollars ($15,000.00).
The Software License Fee shall be fully earned by COMPANY upon installation of
the Licensed Program on the Computer System and is non-refundable in whole or in
part.
3.C. SOFTWARE SUPPORT SERVICE.
During the term of this Agreement and, provided that FRANCHISE OWNER is in
compliance with the terms of this Agreement, COMPANY shall provide to FRANCHISE
OWNER such support services as COMPANY deems reasonably necessary to cause the
Licensed Program to perform on the Computer System in accordance with the
standards for the Licensed Program as specified from time to time by COMPANY,
provided, however, that in no event will such support services be less than
COMPANY provides to COMPANY-operated BOSTON MARKET Units. Such support services
shall not extend to error corrections, operational support and assistance
resulting from FRANCHISE OWNER impermissibly operating non-Specified Software on
the Computer System in breach of this Agreement.
3.D. SOFTWARE SUPPORT SERVICE FEE.
For the software support service provided by COMPANY to FRANCHISE OWNER,
FRANCHISE OWNER agrees to pay to COMPANY a periodic software support service fee
("Software Support Fee") in the amount of Three Hundred and Twenty Three Dollars
($323.00). Such fee 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 on the Computer System. The Software
Support Fee may be increased by COMPANY from time to time, at its sole option,
upon written notice to FRANCHISE OWNER, subject to any limitation set forth in
the Franchise Agreement.
3.E. MODIFICATION, ENHANCEMENT, AND REPLACEMENT OF LICENSED PROGRAM.
FRANCHISE OWNER acknowledges that COMPANY may, during the term of this
Agreement, require FRANCHISE OWNER to modify, enhance and/or replace all or any
part of the Licensed Program at FRANCHISE OWNER's expense, and agrees, within
one hundred twenty (120) days of receipt of notice from COMPANY, 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 specified by
COMPANY and to take any and all other actions as may be necessary to enable the
modified, enhanced or replacement Licensed Program to operate as specified by
COMPANY. Any such modifications, enhancements, and replacements may
7
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require FRANCHISE OWNER 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. FRANCHISE OWNER acknowledges that COMPANY cannot estimate the costs
of future enhancements, modifications, and replacements to the Licensed Program,
and that the cost to FRANCHISE OWNER of obtaining the enhancements,
modifications, and replacements to the Licensed Program, may not be fully
amortizable over the remaining term of the Franchise Agreement. Nonetheless,
FRANCHISE OWNER agrees to incur such costs in connection with the Licensed
Program and any enhancements or modifications thereto and any replacements
therefor, provided that the COMPANY is then currently specifying the same
enhancements, modifications, and replacements for use in COMPANY-operated BOSTON
MARKET Units, subject to any limitation in the Franchise Agreement. Within one
hundred twenty (120) days after FRANCHISE OWNER receives notice from COMPANY,
FRANCHISE OWNER shall obtain and implement any such modifications, enhancements,
or replacements which COMPANY designates and requires.
3.F. WARRANTIES AND LIMITATION OF LIABILITY.
COMPANY represents and warrants to FRANCHISE OWNER that: (1) COMPANY has
all rights, titles, licenses and authorizations to license the Licensed Program
to FRANCHISE OWNER, subject only to nonexclusive licenses granted to others; and
(2) the Licensed Program does not, and as a result of any enhancements,
improvements or modifications provided by COMPANY will not, to the best of
COMPANY's knowledge, infringe upon any United States patent, copyright or other
proprietary right of any third party. In the event FRANCHISE OWNER's use of the
Licensed Program as provided by COMPANY is enjoined as a result of a claim by a
third party of patent or copyright infringement or violation of proprietary
rights, COMPANY shall, in its sole discretion, either (i) procure for FRANCHISE
OWNER the right to continue use of the Licensed Program as contemplated
hereunder, or (ii) replace the Licensed Program or modify it such that there is
no infringement of the third party's rights; and such action by COMPANY shall be
FRANCHISE OWNER's sole and exclusive remedy against COMPANY in such event.
COMPANY does not represent or warrant to FRANCHISE OWNER, and expressly
disclaims any warranty that the Licensed Program is error-free or that the
operation and use of the Licensed Program by FRANCHISE OWNER will be
uninterrupted or error-free. COMPANY shall have no obligation or liability for
any expense or loss incurred by FRANCHISE OWNER arising from use of the Licensed
Program in conjunction with any other computer program.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, COMPANY MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE LICENSED
PROGRAM, PROGRAM DOCUMENTATION, OR ANY
8
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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.
FRANCHISE OWNER acknowledges that the Licensed Program contains third-party
sub-components which COMPANY has the authority to license to FRANCHISE OWNER as
part of the Licensed Program pursuant to and in accordance with software license
agreements with such third-party vendors (collectively, the "Subcomponent
Licenses"). In addition, FRANCHISE OWNER acknowledges that acquisitions by
FRANCHISE OWNER of all or portions of the Computer System and the Specified
Software from or through the COMPANY are governed by license or other agreements
by and between third-party vendors and COMPANY, which agreements specifically
permit COMPANY to sell and/or sublicense all or portions of the Computer System
and the Specified Software to FRANCHISE OWNER or specifically require FRANCHISE
OWNER to agree to be bound by the terms thereof (either type of license
hereinafter referred to as the "Third Party Licenses"). FRANCHISE OWNER
therefore hereby agrees to be bound by the terms of each Subcomponent License
and, to the extent FRANCHISE OWNER purchases all or portions of the Specified
Software or the Computer System from or through COMPANY, each relevant Third
Party License, in each case as if FRANCHISE OWNER 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 (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. FRANCHISE OWNER further agrees to
indemnify and hold harmless COMPANY 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
FRANCHISE OWNER, its directors, officers, employees, agents and owners.
5. COPYRIGHTS.
5.A. OWNERSHIP OF COPYRIGHTS.
FRANCHISE OWNER and COMPANY acknowledge and agree that (1) COMPANY may
hereby authorize FRANCHISE OWNER to use certain copyrighted or copyrightable
works (the "Copyrighted Works"), including the Licensed Program, (2) the
Copyrighted Works are the valuable property of COMPANY or its Affiliates, and
(3) the FRANCHISE OWNER's rights to use the Copyrighted Works are granted to
FRANCHISE OWNER solely on the condition that FRANCHISE OWNER complies with the
terms of this Section 5. FRANCHISE OWNER
9
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acknowledges and agrees that COMPANY 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, 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 to FRANCHISE OWNER by COMPANY for use in the
operation of the Licensed Program. COMPANY intends that all works of authorship
related to the BOSTON MARKET System which are created in the future will be
owned by it or its Affiliates.
5.B. LIMITATION ON FRANCHISE OWNER'S USE OF COPYRIGHTS.
FRANCHISE OWNER acknowledges that FRANCHISE OWNER's 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 COMPANY from time to time during the term of
this Agreement, and is derived solely from this Agreement. FRANCHISE OWNER
shall 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 COMPANY specifying that COMPANY or an Affiliate of
COMPANY 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 COMPANY in and to the Copyrighted Works.
FRANCHISE OWNER acknowledges that this Agreement does not confer any interest in
the Copyrighted Works upon FRANCHISE OWNER, other than the right to use the
Copyrighted Works in connection with the operation of the UNIT in compliance
with this Agreement. If COMPANY authorizes FRANCHISE OWNER to prepare any
adaptation, translation or work derived from the Copyrighted Works, or if
FRANCHISE OWNER prepares any Copyrighted Work such as menus, advertisements,
posters or promotional material, FRANCHISE OWNER hereby agrees that such
adaptation, translation, derivative work or Copyrighted Work shall be the
property of COMPANY and FRANCHISE OWNER hereby assigns all its right, title and
interest therein to COMPANY. FRANCHISE OWNER agrees to execute any documents,
in recordable form, which COMPANY determines are necessary to reflect such
ownership. FRANCHISE OWNER shall submit all such adaptations, translations,
derivative works and Copyrighted Works to COMPANY for approval prior to use.
10
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5.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
FRANCHISE OWNER shall immediately notify COMPANY 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. FRANCHISE OWNER shall not
communicate with any person other than COMPANY and its counsel in connection
with any such infringement, challenge or claims. COMPANY 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.
FRANCHISE OWNER agrees to execute any and all instruments and documents, render
such assistance, and do such acts and things as may, in the opinion of COMPANY's
counsel, be necessary or advisable to protect and maintain the interests of
COMPANY in any litigation or other proceeding or to otherwise protect and
maintain the interests of COMPANY in the Copyrighted Works. COMPANY will
reimburse FRANCHISE OWNER for the reasonable out-of-pocket expenses incurred and
paid by FRANCHISE OWNER in complying with the requirements imposed by this
Section 5.C.
5.D. DISCONTINUANCE OF USE.
If it becomes advisable at any time in COMPANY's sole judgment for
FRANCHISE OWNER to modify or discontinue use of any of the Copyrighted Works
and/or for FRANCHISE OWNER to use one or more additional or substitute
copyrighted or copyrightable items, FRANCHISE OWNER agrees to immediately comply
with COMPANY's directions to modify or otherwise discontinue the use of the
copyrighted materials and/or to use any substitute materials specified by
COMPANY. Neither COMPANY nor its Affiliates shall have any obligation to
reimburse FRANCHISE OWNER for any expenditures made by FRANCHISE OWNER to modify
or discontinue the use of any Copyrighted Work or to adopt additional or
substitute copyrighted or copyrightable items.
6. CONFIDENTIALITY.
FRANCHISE OWNER acknowledges and agrees that the Licensed Program 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 Franchise Agreement and is
therefore governed by and subject to all of the terms, conditions, and
restrictions of the Franchise Agreement relating to Confidential Information.
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7. TERM
The term of this Agreement shall begin on the Effective Date and terminate
concurrently with the earlier to occur of the expiration of the Franchise
Agreement or the termination of this Agreement as provided in Section 8 hereof.
Notwithstanding the foregoing, Sections 4 and 6 hereof shall survive the
expiration or earlier termination of this Agreement forever.
8. TERMINATION; BREACH
In addition to termination of this Agreement as provided in Section 10
hereof, COMPANY may terminate this Agreement, effective upon delivery of notice
of termination to FRANCHISE OWNER, if (1) FRANCHISE OWNER breaches any provision
of this Agreement; or (2) COMPANY has the right to terminate the Franchise
Agreement pursuant to the terms of the Franchise Agreement.
Upon FRANCHISE OWNER's breach of this Agreement, COMPANY may, in addition
to termination of this Agreement, exercise all rights and remedies available to
it under the Franchise Agreement for any breach of the Franchise Agreement as if
this Agreement were a part of the Franchise Agreement.
In addition, in the event that COMPANY terminates this Agreement, COMPANY
will also have the right to terminate the Franchise Agreement, in accordance
with the terms and provisions thereof.
9. ASSIGNMENT.
This Agreement and the rights and obligations arising hereunder may not be
assigned by FRANCHISE OWNER except in conjunction with an assignment of the
Franchise Agreement made in compliance with the terms of the Franchise
Agreement. This Agreement is fully assignable by COMPANY and shall inure to the
benefit of any assignee or other successor to the interests of COMPANY therein.
10. SEVERABILITY.
If any provision of this Agreement is declared or made invalid or
unenforceable by judicial action, legislation or other government action,
COMPANY 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 FRANCHISE OWNER. If COMPANY 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
12
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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 COMPANY 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 COMPANY 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.
FRANCHISE OWNER acknowledges that COMPANY will be irreparably harmed by any
breach hereof, that monetary damages would be inadequate and that COMPANY shall
have the right to have an injunction or other equitable remedies imposed in
relief of, or to prevent or restrain, such breach. FRANCHISE OWNER agrees that
COMPANY will not be required to post a bond to obtain any injunctive relief and
that FRANCHISE OWNER's only remedy if an injunction is entered against FRANCHISE
OWNER 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). FRANCHISE OWNER agrees that COMPANY 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 COMPANY and FRANCHISE OWNER hereunder are cumulative and no
exercise or enforcement by COMPANY or FRANCHISE OWNER of any right or remedy
hereunder shall preclude the exercise or enforcement by COMPANY or FRANCHISE
OWNER of any other right or remedy hereunder or to which COMPANY or FRANCHISE
OWNER is entitled by law.
14. COSTS AND LEGAL FEES.
Allocation of and the determination of responsibility for costs and legal
fees incurred by the parties hereto in connection with this Agreement shall be
governed by and subject to the
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terms, conditions, and restrictions of the Franchise Agreement as if this
Agreement were incorporated therein.
15. RELATIONSHIP OF PARTIES.
This Agreement does not create a fiduciary relationship between the parties
hereto. COMPANY and FRANCHISE OWNER 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.
17. JURISDICTION.
FRANCHISE OWNER SHALL, AND COMPANY 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 COMPANY'S
EXECUTIVE OFFICE AT THE TIME SUCH ACTION IS FILED. FRANCHISE OWNER IRREVOCABLY
SUBMITS 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 COMPANY BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES EVEN IF COMPANY HAS BEEN ADVISED OF THE POSSIBILITY
THEREOF, OR FOR ANY LOST PROFITS OR ANY CLAIM AGAINST FRANCHISE OWNER BY ANY
OTHER PARTY. COMPANY'S LIABILITY HEREUNDER FOR DAMAGES SHALL IN NO EVENT EXCEED
THE TOTAL AMOUNT PAID BY FRANCHISE OWNER FOR SOFTWARE SUPPORT FEES DURING THE
THREE MONTH PERIOD PRECEDING THE EVENT GIVING RISE TO THE CLAIM FOR DAMAGES.
COMPANY SHALL NOT BE LIABLE FOR ANY
14
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FAILURE TO PROVIDE ANY SERVICES REQUIRED HEREUNDER IF SUCH FAILURE IS DUE TO ANY
CAUSE BEYOND ITS REASONABLE CONTROL.
19. WAIVER OF JURY TRIAL.
COMPANY AND FRANCHISE OWNER 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 FRANCHISE OWNER and
COMPANY.
21. CONSTRUCTION.
This Agreement constitutes a separate license to use the Licensed Program
and all obligations hereunder are in addition to and cumulative with the
obligations of FRANCHISE OWNER under the Franchise Agreement. 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. The term "FRANCHISE OWNER" as used in this Agreement is
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 FRANCHISE
OWNER hereunder, whether or not as partners or joint venturers, their
obligations and liabilities to COMPANY 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 COMPANY 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 FRANCHISE OWNER has been notified,
or to FRANCHISE OWNER at FRANCHISE OWNER's most current principal business
address of which COMPANY has been notified, as applicable. All payments
required by this Agreement shall be directed to COMPANY at the above address, or
to such other persons and places as
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COMPANY may direct from time to time. Any required payment not actually
received by COMPANY during regular business hours on the date due shall be
deemed delinquent.
BOSTON CHICKEN, INC. _________________________________________
FRANCHISE OWNER
By:_____________________________ By:______________________________________
Name:__________________________ Name:___________________________________
Title:_________________________ Title:__________________________________
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EXHIBIT O
TO THE
BOSTON CHICKEN, INC.
OFFERING CIRCULAR
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OPERATIONS MANUAL TABLE OF CONTENTS
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Operations Manual
Table of Contents
<TABLE>
<S> <C> <C>
CHAPTER 1: CASH AND FINANCIAL RELATED ..................................................1.1
Section 1: Transaction Processing......................................................1.3
Payment by Cash......................................................................1.5
Announcing Amount Tendered to a Customer...........................................1.5
Counting Change Back to a Customer.................................................1.5
Putting Bills in the Till..........................................................1.6
Payment by Traveler's Check..........................................................1.6
Payment by Check.....................................................................1.6
Recording Customer Information.....................................................1.7
Payment by Credit Card...............................................................1.7
Credit Card Acceptance Guidelines..................................................1.8
Processing a Credit Card Sale......................................................1.8
Processing a Credit Card When the Credit Card Terminal is Not Working.............1.12
Entering Manual Changes into Credit Card Terminal.................................1.15
Important Telephone Numbers.......................................................1.15
Payment by Gift Certificate.........................................................1.16
Selling Gift Certificates...........................................................1.17
Payment by Coupon...................................................................1.18
Refunds.............................................................................1.19
Processing a Refund...............................................................1.19
Issuing a Receipt...................................................................1.19
Section 2: Manual Transaction Processing..............................................1.21
Processing Transactions Manually...................................................1.23
Recovering from a Manual Operation.................................................1.23
Section 3: Cash Administration....................................................... 1.25
Cash Till Management................................................................1.27
Cash Till Policies................................................................1.27
Starting a Cashier's Shift: Beginning of the Day..................................1.28
Changing a Cashier's Shift: Middle of the Day.....................................1.28
Skimming the Cash Tills...........................................................1.29
Paid-outs.........................................................................1.31
Counting and Reconciling Cash Tills...............................................1.31
Completing the Till Balancing Smart Form..........................................1.32
What to Do with Cashier Reconciliation Paperwork..................................1.35
Researching Cash Over/Shorts......................................................1.36
Unannounced Cash Audits...........................................................1.37
Gift Certificates...................................................................1.37
Background........................................................................1.37
Holiday Gift Certificate Program..................................................1.37
Ordering Gift Certificates........................................................1.38
Receiving Gift Certificates.......................................................1.39
The Store Safe and Safe Fund........................................................1.42
What Gets Locked in the Safe?.....................................................1.42
What Is a Safe Fund?..............................................................1.42
Maintaining Safe Fund Accountability..............................................1.44
The Change Order..................................................................1.45
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Increases to the Store Safe Fund..................................................................1.45
Bad Checks (NSF)................................................................................... 1.45
Section 4: End-of-Day Cash, Credit Card, and Paperwork Activities.................................. 1.47
Preparing for the Close of Business................................................................ 1.49
Counting and Declaring All Monies for the Day...................................................... 1.49
Counting Currency and Coin........................................................................1.49
Counting Checks and Gift Certificates.............................................................1.50
Counting Manual Credit Card Receipts..............................................................1.50
End-of-Day Credit Card Procedures.................................................................1.50
Declaring End-of-Day Cash and End-of-Day Credit Cards.............................................1.52
Making Out a Bank Deposit Slip..................................................................... 1.55
Ordering Credit Card Supplies...................................................................... 1.56
Securing the Day's Money........................................................................... 1.56
Maintaining Bank Deposit Accountability............................................................ 1.57
Paperwork to be Sent to the Boston Market Support Center........................................... 1.59
Section 5: Financial and Statistical Reporting...................................................... 1.67
General Ledger Report.............................................................................. 1.69
Section 6: Financial and Statistical Projections.................................................... 1.71
Sales and Forecasting smart form................................................................... 1.73
Elements of the Sales and Forecasting smart form................................................... 1.75
CHAPTER 2: INVENTORY RELATED......................................................................... 2.1
Section 1: Ordering Inventory...................................................................... 2.3
Order Cycles....................................................................................... 2.5
Cycle Examples....................................................................................2.5
Establish Order Cycle.............................................................................2.5
PAR Levels......................................................................................... 2.6
Paper PAR Table...................................................................................2.9
PAR Level Guidelines..............................................................................2.9
Five-Step Ordering Process......................................................................... 2.13
Create Suggested Order............................................................................2.13
Validate Suggested Order..........................................................................2.13
Modify/Accept Order...............................................................................2.14
View/Print Order Summary..........................................................................2.14
Create/Print Purchase Orders......................................................................2.14
Guidelines for Ordering Products................................................................... 2.14
Food and Paper Items..............................................................................2.14
Smallwares........................................................................................2.16
Services..........................................................................................2.16
Repairs...........................................................................................2.16
Office Supplies...................................................................................2.17
Section 2: Receiving Inventory...................................................................... 2.19
Preparing for the Shipment......................................................................... 2.21
Arrival of the Shipment............................................................................ 2.21
Attended Deliveries...............................................................................2.21
Unattended Deliveries.............................................................................2.21
Inspecting the Shipment: Non-meat.................................................................. 2.21
Identity..........................................................................................2.22
Quantity..........................................................................................2.22
Expiration Date...................................................................................2.22
Frozen Inventory Items............................................................................2.23
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Refrigerated Inventory Items....................................... 2.24
Room Temperature Inventory Items................................... 2.25
Produce Procedures and Specifications - Fully-Producing Stores....... 2.25
Key Tips: Shelf Life.............................................. 2.25
Ethylene Gas....................................................... 2.26
Ice on Produce..................................................... 2.26
Cooler Air Drafts.................................................. 2.26
Cooler Temperatures................................................ 2.27
Recrisping Or Saving Vegetables.................................... 2.27
Storage............................................................ 2.27
Produce Procedures and Specifications - Market Fresh Stores.......... 2.34
Market Fresh Produce Receiving Guidelines.......................... 2.34
Use-by Date........................................................ 2.35
Vacuum-Packed Produce.............................................. 2.35
Reasons for Rejecting Produce...................................... 2.35
Dry Storage........................................................ 2.36
Walk-In Cooler Storage Recommendations............................. 2.36
Example of Walk-in Cooler Storage - Market Fresh Stores............ 2.37
Criteria for Receiving Market Fresh Produce........................ 2.38
Characteristics of Abuse........................................... 2.38
Inspecting the Shipment: Chicken, Turkey, Ham, and Meat Loaf......... 2.39
Quantity and Weight................................................ 2.39
Verify Invoice..................................................... 2.40
Temperature........................................................ 2.41
Expiration Date - Unmarinated Chicken.............................. 2.42
Expiration Date - Pre-marinated Chicken/Cryovac-Packed Chicken..... 2.43
"Use-by Date" - Turkey, Ham........................................ 2.43
Shelf Lives - Meat Loaf............................................ 2.43
Condition.......................................................... 2.43
Refusing Chicken, Turkey, Ham, or Meat Loaf........................ 2.45
Receiving Administration............................................. 2.46
General............................................................ 2.46
Special Deliveries (Off Schedule).................................. 2.48
Quality Standards.................................................... 2.53
Quality Identifier................................................. 2.53
Notification....................................................... 2.53
Remember........................................................... 2.53
Credits, Invoice Adjustments, and Returns............................ 2.54
Creating Credit Invoices and Making Adjustments.................... 2.54
Pick-ups (Returns)................................................... 2.57
General............................................................ 2.57
Invoice Adjustment Description..................................... 2.59
Miscellaneous Issues................................................. 2.60
Providing Keys for Unattended Delivery............................. 2.60
Handling Vendor Inquiry on Status of Invoice Payment................. 2.61
Period-End Invoice Reconciliation.................................... 2.62
Reconciling the Purchase Summary................................... 2.62
Amount appears on General Ledger, but not on Purchase Summary...... 2.62
Amounts for same invoice appear on both Purchase Summary and on
General Ledger, but do not agree................................. 2.63
Account Code 4325 - Other.......................................... 2.64
Section 3: Storing Inventory........................................... 2.65
Physical Placement of Food Inventory Items........................... 2.67
Frozen Inventory Items............................................. 2.67
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Sourced Products................................................... 2.67
Refrigerated Inventory Items....................................... 2.68
Room Temperature Inventory Items................................... 2.69
Checking and Maintaining Proper Temperature of Inventory Items....... 2.69
Frozen Inventory Items............................................. 2.69
Refrigerated Inventory Items....................................... 2.69
Room Temperature Inventory Items................................... 2.70
Thawing Sourced Product............................................ 2.70
Determining the Shelf Life and Expiration Date of Inventory Items.... 2.70
Inventory Items Labeled with Their Expiration Date or Use-by Date.. 2.71
Inventory Items Labeled with Their Delivery Date................... 2.71
Frozen Inventory Items............................................. 2.72
Sourced Inventory Items............................................ 2.72
Pot Pie Crusts Inventory........................................... 2.72
Refrigerated Inventory Items....................................... 2.73
Room Temperature Inventory Items................................... 2.73
Storing Paper Goods.................................................. 2.73
Section 4: Performing a Physical Inventory............................. 2.75
Preparing for a Physical Inventory................................... 2.77
Conducting a Physical Inventory...................................... 2.77
More Helpful Hints for Conducting a Physical Inventory............. 2.79
Inventory - IFC...................................................... 2.79
Count Inventory.................................................... 2.79
Enter Inventory Counts............................................. 2.79
Confirm Entered Counts............................................. 2.80
End-of-Week Processing............................................... 2.80
Run End-of-Week Processing......................................... 2.80
Confirm Sales...................................................... 2.80
Print and Analyze Weekly Performance Reports....................... 2.80
Weekly Reports and Worksheets........................................ 2.81
Section 5: Wasting Product............................................. 2.83
To Waste or Not to Waste............................................. 2.85
Market Fresh Stores Only - Holding Unopened Product for Serving
Next Day......................................................... 2.86
Weighing Waste....................................................... 2.86
Waste.............................................................. 2.87
Print and Complete Waste Worksheet................................. 2.87
Enter Waste........................................................ 2.87
Review Waste Report................................................ 2.87
The Waste Worksheet.................................................. 2.88
CHAPTER 3: PRODUCTION RELATED............................................ 3.1
Section 1: Cooking Schedule Smart Form................................. 3.3
The Gross Sales and Spits Sold Report (Chicken)...................... 3.5
Calculating Spits Sold............................................. 3.5
Determining How Much Chicken to Cook to Meet Sales................... 3.7
Calculating a Usage Factor for Chicken............................. 3.7
Using the Usage Factor to Determine the Number of Spits to Cook
to Meet Sales Volume............................................. 3.8
The Gross Sales and Breasts Sold Report (Turkey)..................... 3.10
Calculating Turkey Breasts Sold.................................... 3 10
Calculating a Usage Factor for Turkey.............................. 3.10
Scheduling Turkey Cooking.......................................... 3.10
Elements of the Cooking Schedule Smart Form.......................... 3.12
Adjusting and Maintaining the Cooking Schedule Smart Form............ 3.17
When Actual Sales are Less Than Sales Projection................... 3.18
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When Actual Sales are Greater Than Sales Projection...................................................3.18
Section 2: Chicken and Turkey Handling....................................................................3.19
Marination #1 Procedure.................................................................................3.21
Wearing Gloves and Vinyl Apron........................................................................3.21
Preparing Marinade #1.................................................................................3.21
Marinating the Chicken................................................................................3.22
Storing and Dating the Chicken........................................................................3.23
Cleaning the Chicken Handling Area and Equipment......................................................3.25
Marination #2 Procedure.................................................................................3.25
Determining the Day's Chicken Cooking Needs...........................................................3.25
Wearing Gloves and Vinyl Apron........................................................................3.26
Mixing Marinade #2....................................................................................3.26
Marinating the Chicken................................................................................3.26
Pre-Marinated Chicken Procedure - Marination #3.........................................................3.27
Determining the Day's Chicken Cooking Needs...........................................................3.27
Mixing the Marinade (M3) for Pre-Marinated Chicken....................................................3.28
Marinating the Pre-Marinated Chicken..................................................................3.29
Shelf Life............................................................................................3.29
Marination #4 Procedure.................................................................................3.30
Shelf Life............................................................................................3.30
Chicken Spitting Procedure Using Traditional Spits......................................................3.31
Preparing the Spit for the Chicken....................................................................3.31
Placing the Chicken on the Spit.......................................................................3.32
Storing and Dating the Chicken........................................................................3.34
Chicken Spitting Procedure Using V-Spits................................................................3.34
Chicken to be Spit....................................................................................3.34
Wearing Gloves and Vinyl Apron........................................................................3.34
Trussing Procedure......................................................................................3.35
Marinating the Chicken Using V-Spits....................................................................3.37
Placing the Chicken on the V-Spit.......................................................................3.37
V-Spitting............................................................................................3.39
Spitting Fewer Than 4 Chickens on a Spit................................................................3.40
Turkey Basketing Procedures.............................................................................3.40
Preparing for Turkey Basketing........................................................................3.40
Placing the Turkey in the Basket......................................................................3.41
Cleaning the Handling Area and Equipment..............................................................3.44
Section 3: Chicken and Turkey Cooking.....................................................................3.45
Old Hickory Ovens.......................................................................................3.47
Preparing to Load.....................................................................................3.47
Gas Controls..........................................................................................3.48
Oven Settings.........................................................................................3.49
Loading the Rotisserie................................................................................3.50
Rotating the Spits and Baskets........................................................................3.54
Speed-Cooking Chicken.................................................................................3.57
Finished Product Standards............................................................................3.59
Unloading an Oven.....................................................................................3.61
Holding Cooked Chicken and Turkey.....................................................................3.61
Planetary Ovens.........................................................................................3.64
Glossary of Terms.....................................................................................3.64
Preparing to Load.....................................................................................3.66
Finished Product Standards............................................................................3.68
Oven Unloading Procedure..............................................................................3.69
Combined Chicken and Turkey Cooking Procedure.........................................................3.70
Holding Cooked Chicken and Turkey.....................................................................3.71
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Section 4: Chicken Cutting.............................................................................. 3.73
How Much Chicken to Cut............................................................................... 3.75
Removing Chickens from the Spit....................................................................... 3.76
Removing the End Skewer from the Spit............................................................... 3.76
Sliding the Chickens from the Spit.................................................................. 3.77
Separating the Skewers from the Chicken............................................................. 3.77
Removing Chickens from a V-Spit....................................................................... 3.77
Removing the Trussing String........................................................................ 3.78
Cutting the Chicken................................................................................... 3.78
Cutting the Chicken in Half......................................................................... 3.78
Cutting the Chicken into Quarters................................................................... 3.79
Maintaining Product Standards....................................................................... 3.79
Section 5: Turkey Carving............................................................................... 3.81
How Much Turkey to Carve.............................................................................. 3.83
Removing Turkeys from the Basket...................................................................... 3.83
Carving the Turkey.................................................................................... 3.84
Turkey Re-use......................................................................................... 3.84
Storing Turkey for Sandwiches....................................................................... 3.84
Recording of Waste.................................................................................. 3.85
Troubleshooting..................................................................................... 3.85
Section 6: Chicken - Other Sources...................................................................... 3.87
Picking Hot Chicken (for Chicken Soup and Pot Pies)................................................... 3.89
Setting Up for Picking Hot Chicken.................................................................. 3.89
Picking the Chicken................................................................................. 3.89
Storing Picked Chicken.............................................................................. 3.90
Cleaning Up......................................................................................... 3.91
Picking Cold Chicken.................................................................................. 3.91
Picking Oven Roasted Breast Meat...................................................................... 3.92
Setting Up to Pick Oven Roasted Breasts............................................................. 3.92
Picking the Oven Roasted Breasts.................................................................... 3.93
Storing Picked Oven Roasted Breasts................................................................. 3.93
Cleaning Up......................................................................................... 3.93
Preparing Products.................................................................................. 3.94
Blending Oven Roasted Breast Meat and In-House Picked Chicken....................................... 3.95
Picking Heated Oven Roasted Breast Meat............................................................. 3.96
Section 7: Turkey Picking............................................................................... 3.97
Picking Cold Turkey................................................................................... 3.99
Setting Up to Pick Cold Turkey...................................................................... 3.99
Picking Cold Turkey Breasts......................................................................... 3.99
Storing Picked Turkey Breasts.........................................................................3.100
Cleaning up...........................................................................................3.100
Section 8: Ham Holding and Carving......................................................................3.101
Ham Holding Procedures................................................................................3.103
Ham Carving Information...............................................................................3.103
Recording of Waste....................................................................................3.105
End-of-Night Procedures...............................................................................3.105
Section 9: Production Scheduling........................................................................3.107
Understanding the Usage Factor Calculation Smart Form.................................................3.109
Elements of the Usage Factor Calculation Smart Form...................................................3.109
Completing the Usage Factor Calculation Smart Form..................................................3.109
Understanding the Production Scheduling Smart Form....................................................3 111
Elements of the Production Scheduling Smart Form......................................................3.112
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Completing the Production Scheduling Smart Form.......................................................3.114
Usage Factor for Side Items.........................................................................3.116
Build-To Level......................................................................................3.117
Beginning Inventory.................................................................................3.118
Need to Prepare.....................................................................................3.118
Number of Recipes to Prepare........................................................................3.119
Initials of Preparer................................................................................3.120
Actual Yield........................................................................................3.120
Ending Inventory: Counting Finished Product...........................................................3.120
Today's Usage: Calculating Daily Usage..............................................................3.121
Setting Up Production Schedule Priorities - Fully-Producing Stores....................................3.121
Completing the Market Fresh Assembly Worksheet........................................................3.123
Product Assembly Tasks................................................................................3.123
Section 10: Vegetable Production Chart Smart Form.......................................................3.127
Elements of the Vegetable Production Chart Smart Form.................................................3.129
Completing the Vegetable Production Chart Smart Form..................................................3.129
Section 11: Managing Backup Production..................................................................3.133
Introduction to the Backup Position...................................................................3.135
General Backup Procedures.............................................................................3.135
Determining Product Usage by Hour.....................................................................3.136
Product Usage by Hour Smart Form......................................................................3.137
Elements of the Product Usage by Hour Smart Form......................................................3.139
Container Factor....................................................................................3.139
Completing the Product Usage by Hour Smart Form.......................................................3.140
Build-To: Maintaining Backup Product Levels...........................................................3.141
High Volume/Long Cook Time..........................................................................3.141
High Volume/Short Cook Time.........................................................................3.141
Low Volume/Long Cook Time...........................................................................3.142
Low Volume/Short Cook Time..........................................................................3.142
Section 12: Product Merchandising.......................................................................3.143
Guidelines............................................................................................3.145
Cold Side Items.......................................................................................3.146
Hot Side Items........................................................................................3.147
Section 13: Carver Sandwiches...........................................................................3.149
Sandwich Mix Report...................................................................................3.151
Station Setup and Planning............................................................................3.153
Assembly Line Production............................................................................3.153
Sandwich Station Top and Cooler Layout..............................................................3.153
Station Guides......................................................................................3.153
Staffing..............................................................................................3.154
Station Flow..........................................................................................3.154
Retail..............................................................................................3.154
Drive-thru..........................................................................................3.155
Communication.........................................................................................3.156
Server to Sandwich Maker............................................................................3.156
Sandwich Maker to Carver and Sandwich Maker.........................................................3.156
Sandwich Station Responsibilities.....................................................................3.157
2-Person Station....................................................................................3.157
3-Person Station....................................................................................3.158
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CHAPTER 4: EMPLOYEE RELATED.............................................................................. 4.1
Section 1: Sourcing..................................................................................... 4.3
You Are the Employer.................................................................................. 4.5
Determining Needs..................................................................................... 4.5
Store Staffing........................................................................................ 4.5
Recruiting Philosophy................................................................................. 4.6
Recruiting Process.................................................................................... 4.6
Sourcing Strategies and Tools (Also Refer to the Hourly Selection Administration Binder).............. 4.7
Internal Referrals.................................................................................. 4.7
Newspaper Ads....................................................................................... 4.7
Alternative Publications............................................................................ 4.8
Public Signs and Ads................................................................................ 4.8
Media Ads........................................................................................... 4.8
Malls............................................................................................... 4.8
Mailing Inserts..................................................................................... 4.8
New Residents....................................................................................... 4.9
High Schools and Jr. High Schools................................................................... 4.9
Colleges and Universities........................................................................... 4.9
Technical, Vocational, and Trade Schools............................................................4.10
State and Federal Programs..........................................................................4.10
Community Organizations and Locations...............................................................4.10
Career Fairs and Open Houses........................................................................4.10
Competition.........................................................................................4.10
Direct Mail.........................................................................................4.11
Media on the Move...................................................................................4.11
Point of Sale.......................................................................................4.11
Boston Market Logo Materials........................................................................4.11
Section 2: Selection Process............................................................................4.15
Store Interview Times.................................................................................4.17
Interview Tips........................................................................................4.17
Acceptable Interview Questions........................................................................4.18
Employee Selection....................................................................................4.22
Employment Application................................................................................4.22
Information Sheet...................................................................................4.25
Screen..............................................................................................4.25
Written Tests.......................................................................................4.25
Patterned Interview.................................................................................4.25
Telephone Reference Check Categories................................................................4.25
Employment Verification Guidelines..................................................................4.26
Reasons for Rejecting Candidates....................................................................4.28
Suggested Verbal Turnoffs...........................................................................4.28
Section 3: Extending an Offer and Making the Hire.......................................................4.29
Compensation..........................................................................................4.31
Wage Surveys........................................................................................4.31
Employment Categories.................................................................................4.33
Making the Offer......................................................................................4.33
Confidentiality.....................................................................................4.34
Orientation...........................................................................................4.40
New Employee Paperwork..............................................................................4.41
Dress and Grooming Standards........................................................................4.53
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Section 4: Performance Management........................................................................4.57
Hourly Employee Job Descriptions.......................................................................4.59
Back-of-House (regular store)........................................................................4.59
Front-of-House (regular store).......................................................................4.61
F.A.S.T. Track/TM/...................................................................................4.62
Flagship Positions...................................................................................4.65
Flagship Customer Service Representative.............................................................4.67
Hourly Employee Performance Appraisal..................................................................4.69
Talk-to-Me - Managing for Optimal Performance..........................................................4.71
Introduction.........................................................................................4.71
"Positioning"........................................................................................4.71
The Positioning Card.................................................................................4.72
Elements of the Positioning Card: Front Side.........................................................4.73
Shift Focus..........................................................................................4.74
Elements of the Positioning Card: Back Side..........................................................4.75
How to Position an Employee Using Talk-to-Me...........................................................4.75
Talking into Position................................................................................4.75
Talking Through Position.............................................................................4.76
Talking Out of Position..............................................................................4.76
Other Ideas for Positioning..........................................................................4.76
Termination............................................................................................4.77
Section 5: Legal Issues..................................................................................4.79
Americans with Disabilities Act (ADA) Compliance.......................................................4.81
What ADA Means to the Manager........................................................................4.81
Equal Employment Opportunity (EEO).....................................................................4.82
I-9 Reporting..........................................................................................4.82
Employees Who Are Rehired............................................................................4.83
Acceptable Documents for Employment Eligibility......................................................4.83
Application Holding Times..............................................................................4.85
Worker's Compensation..................................................................................4.85
Employee Leave.........................................................................................4.85
Family and Medical Leave.............................................................................4.86
Employment of Minors...................................................................................4.86
Harassment.............................................................................................4.86
State and Federal Labor Law Posters....................................................................4.87
Section 6: Payroll Processing............................................................................4.89
Employee Files.........................................................................................4.91
Active/Inactive Employee Files.......................................................................4.91
New Store Pre-Opening..................................................................................4.92
Processing Employee Personal Data (PSAs)...............................................................4.92
New Hire/Rehire/Transfer from Another C0.............................................................4.93
Personal Change......................................................................................4.93
Job and/or Rate Change...............................................................................4.93
Termination..........................................................................................4.93
Transfer to Another Store............................................................................4.93
Leave of Absence.....................................................................................4.94
Exceptions...........................................................................................4.94
Processing Employee Pay Data (Payroll Hours to be Paid)................................................4.95
Automated Payroll Hours (ReMACS).....................................................................4.95
Payroll Call.........................................................................................4.95
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Valid ADP Hours/Earnings Codes....................................................................... 4.96
Processing Borrowed Employees.......................................................................... 4.97
Validating Your Payroll.............................................................................. 4.97
Validating New Hires, Rate Changes, and File Numbers................................................... 4.99
Processing Miscellaneous Paperwork..................................................................... 4.99
Direct Deposit....................................................................................... 4.99
Wage Attachments/Garnishments........................................................................4.100
Group Insurance Election Forms (Medical, Dental, Flexmed, Flexcare, and Voluntary Life)..............4.100
Stop Payments........................................................................................4.100
W-2s.................................................................................................4.100
Troubleshooting........................................................................................4.100
Sample Forms...........................................................................................4.102
CHAPTER 5: CUSTOMER RELATED............................................................................... 5.1
Section 1: Philosophies.................................................................................. 5.3
Exceeding Customer Expectations........................................................................ 5.5
Lifetime Value of a Customer........................................................................... 5.5
Moments of Truth....................................................................................... 5.6
The Internal Customer.................................................................................. 5.7
Bending the Rules...................................................................................... 5.8
Section 2: Personal Customer Service..................................................................... 5.9
Greet.................................................................................................. 5.11
A Boston Market Welcome.............................................................................. 5.11
Shoppers............................................................................................. 5.12
Roles of the Greeter................................................................................. 5.12
Recognizing Regular Customers........................................................................ 5.14
Selecting the Greeter................................................................................ 5.15
Serve.................................................................................................. 5.15
Menu Knowledge: If You Don't Know It, You Can't Sell It!............................................. 5.15
Extras and Substitutions............................................................................. 5.16
Giving Customers the Best Value...................................................................... 5.16
Suggestive Selling................................................................................... 5.17
Descriptive Adjectives............................................................................... 5.22
Ensuring Food Quality................................................................................ 5.23
Portioning to Be Proud Of............................................................................ 5.23
Sandwiches........................................................................................... 5.23
Speed/Efficiency..................................................................................... 5.29
Special Requests..................................................................................... 5.30
Thank.................................................................................................. 5.30
Be Sincere........................................................................................... 5.30
Be Warm and Friendly................................................................................. 5.30
Section 3: Customer Contact by Phone..................................................................... 5.31
Phone Etiquette........................................................................................ 5.33
Answering the Phone.................................................................................. 5.33
Phone Orders........................................................................................... 5.34
Using the Phone Order Pad............................................................................ 5.34
Suggestive Selling................................................................................... 5.35
Verifying the Order and Thanking the Customer........................................................ 5.35
Filling the Order.................................................................................... 5.36
Section 4: Service Systems............................................................................... 5.37
Server to Cashier...................................................................................... 5.39
Server Responsibilities.............................................................................. 5.39
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Cashier Responsibilities..............................................................................5.39
Dine-in or Carry-out?.................................................................................5.40
One on One..............................................................................................5.40
Section 5: Packaging......................................................................................5.41
Types of Containers.....................................................................................5.41
3-Compartment Plate and Lid...........................................................................5.43
Salad Platter and Lid.................................................................................5.43
Logo Containers.......................................................................................5.43
Foil Containers.......................................................................................5.43
Plastic Containers....................................................................................5.44
Logo Paper Cups.......................................................................................5.44
Bulk Cutlery..........................................................................................5.44
Carry-out Bags........................................................................................5.45
Carry-out Plates......................................................................................5.45
Transporting a Quality Product..........................................................................5.46
Often-Asked Questions about Packaging...................................................................5.47
Section 6: Evaluating the Customer Experience.............................................................5.49
Walk the Customer Pathway...............................................................................5.51
Clock Service Times.....................................................................................5.52
Poll Mystery Shoppers...................................................................................5.52
Section 7: Handling Customer Feedback.....................................................................5.55
Handling a Compliment and a Request for Information.....................................................5.57
Handling Customer Complaints............................................................................5.57
Act Immediately.......................................................................................5.58
Listen Attentively....................................................................................5.58
Apologize and Empathize...............................................................................5.58
Solve.................................................................................................5.59
Follow Up.............................................................................................5.59
Handling Exception Situations...........................................................................5.59
Expired Coupons.......................................................................................5.59
Food-Related Illness..................................................................................5.60
Customers with Disabilities...........................................................................5.60
Entree Stress.........................................................................................5.60
The Boston Market Customer Service Number (1-800-365-7000)..............................................5.61
Purpose to Market Partners/Store Managers.............................................................5.61
Purpose to the Boston Market Support Center...........................................................5.62
Customer Call Process.................................................................................5.62
Quality Hotline Service Number........................................................................5.63
CHAPTER 6: EQUIPMENT AND FACILITIES RELATED................................................................ 6.1
Section 1: Cleaning and Sanitation Overview............................................................... 6.3
Cleaning Versus Sanitizing.............................................................................. 6.5
Cleaning.............................................................................................. 6.5
Sanitizing............................................................................................ 6.5
Principles of Washing, Rinsing, and Sanitizing.......................................................... 6.6
Daily Sanitation Requirements........................................................................... 6.7
Calibrating Biotherm Thermometers..................................................................... 6.8
Calibrating Digital Thermometers...................................................................... 6.8
Sanitizing Thermometers............................................................................... 6.9
Biological Hazards...................................................................................... 6.9
Cross-Contamination................................................................................... 6.9
Danger Zone...........................................................................................6.11
Foodborne Illness.....................................................................................6.12
Jefco's Recommended Cleaning Chemicals..................................................................6.13
Optional Cleaning Chemicals.............................................................................6.14
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Chemical Hazards.......................................................................................6.14
Definition............................................................................................6.14
Avoidance.............................................................................................6.14
Physical Hazards.......................................................................................6.15
Definition............................................................................................6.15
Avoidance.............................................................................................6.16
Jefco's Recommended Cleaning Tools.....................................................................6.16
Brooms................................................................................................6.16
Buckets, Mops, and Signs..............................................................................6.17
Brushes...............................................................................................6.17
Spray Bottles.........................................................................................6.17
Scrub Pads and Towels.................................................................................6.17
Miscellaneous.........................................................................................6.18
Section 2: Repair and Maintenance Overview...............................................................6.l9
Repair Overview........................................................................................6.21
Troubleshooting Prior to Making a Repair Call.........................................................6.21
Types of Repair Calls.................................................................................6.21
Inspecting Quality of Work Completed..................................................................6.22
Maintenance Overview...................................................................................6.22
Fire Up/Fire Down Schedule.............................................................................6.23
Section 3: How to Operate, Clean, Maintain, and Troubleshoot Food-Related Equipment......................6.25
Can Opener Edlund......................................................................................6.29
Operation.............................................................................................6.29
Daily Cleaning........................................................................................6.29
Troubleshooting.......................................................................................6.29
Coffee Maker Bloomfield 8780-BC........................................................................6.30
Startup...............................................................................................6.30
Operation for Coffee..................................................................................6.30
Operating of Hot Water Dispenser......................................................................6.31
Cleaning..............................................................................................6.31
Maintenance...........................................................................................6.31
Troubleshooting.......................................................................................6.32
Warranty..............................................................................................6.32
Coffee Dispensers Bloomfield - 7750BC..................................................................6.33
Startup...............................................................................................6.33
Operation.............................................................................................6.33
Cleaning..............................................................................................6.33
Maintenance...........................................................................................6.34
Troubleshooting.......................................................................................6.34
Cold Food Case Nax # 1.5 VRM 950RP.....................................................................6.35
Parts Identification..................................................................................6.35
Setup.................................................................................................6.36
Operation.............................................................................................6.36
Cleaning..............................................................................................6.36
Closing...............................................................................................6.37
Maintenance...........................................................................................6.37
Troubleshooting.......................................................................................6.38
Warranty..............................................................................................6.38
Convection Oven Blodgett Model - #DFG-100 DBL-BM.......................................................6.39
Parts Identification..................................................................................6.39
Startup...............................................................................................6.40
Operation.............................................................................................6.41
Cleaning..............................................................................................6.41
Planned Maintenance...................................................................................6.42
Troubleshooting.......................................................................................6.42
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Warranty..............................................................................................6.42
Cook & Hold Unit Winston C-VAP CA7509..................................................................6.43
Startup...............................................................................................6.44
Delay Cycle...........................................................................................6.45
Operation.............................................................................................6.45
Cleaning - Daily......................................................................................6.46
Cleaning - Weekly.....................................................................................6.47
Planned Maintenance...................................................................................6.47
Warranty..............................................................................................6.48
Troubleshooting.......................................................................................6.48
Cook & Hold Unit with Preset Buttons...................................................................6.49
Winston C-VAP CA7507..................................................................................6.49
Cutting Board - Boos Maple Wood and Poly Slice.........................................................6.51
Cleaning..............................................................................................6.51
Treating Maple Wood...................................................................................6.51
New Cut/Carve Sandwich Station - Custom................................................................6.52
Startup Temperature Settings..........................................................................6.52
Plan View (Right-Hand Station) and Front Elevation....................................................6.52
Opening Procedure.....................................................................................6.54
Stocking of Tins/Bags.................................................................................6.55
Closing Procedure.....................................................................................6.55
Maintenance...........................................................................................6.56
Troubleshooting.......................................................................................6.56
Cutting Station - Craft Mfg. Custom....................................................................6.57
Setup.................................................................................................6.57
Cutting Station Cleaning..............................................................................6.58
Cutting Board Cleaning................................................................................6.58
Heating Lamp Cleaning.................................................................................6.59
Skewers Cleaning......................................................................................6.59
Spits and Baskets Cleaning............................................................................6.59
Trash Barrel Cleaning.................................................................................6.60
Maintenance...........................................................................................6.60
Troubleshooting.......................................................................................6.60
Warranty..............................................................................................6.61
Dining Room Tables and Chairs..........................................................................6.62
Cleaning..............................................................................................6.62
Dining Room Trays......................................................................................6.63
Cleaning..............................................................................................6.63
Alternate Cleaning during Peak Periods................................................................6.63
Electric Timer: NCC (National Controls Corp.)..........................................................6.64
Startup...............................................................................................6.64
Operation.............................................................................................6.64
Check Operating Mode..................................................................................6.65
Entering the Programming Mode.........................................................................6.65
Entering the Reprogramming Mode.......................................................................6.66
Reprogramming the Cooking Time........................................................................6.66
Switching Program Assignments.........................................................................6.67
Using the Self-Test Mode..............................................................................6.68
Exiting the Program Mode..............................................................................6.68
Warranty..............................................................................................6.68
Exhaust Hoods Captive-Aire.............................................................................6.69
Startup...............................................................................................6.69
Cleaning..............................................................................................6.69
Maintenance...........................................................................................6.69
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Troubleshooting.......................................................................................6.70
Warranty..............................................................................................6.70
Food Processor - Hobart #FP-100-BM.....................................................................6.71
Startup...............................................................................................6.71
Operation.............................................................................................6.72
Safety................................................................................................6.72
Cleaning..............................................................................................6.73
Food Processor Maintenance............................................................................6.74
Plate Maintenance.....................................................................................6.74
Troubleshooting.......................................................................................6.75
Warranty..............................................................................................6.75
Food Warmer - A.P.W. #W3...............................................................................6.76
Startup...............................................................................................6.76
Operation.............................................................................................6.76
Cleaning..............................................................................................6.77
Troubleshooting.......................................................................................6.77
Warranty..............................................................................................6.77
Wells Warmer - Model #SS206ULTD........................................................................6.78
Startup...............................................................................................6.78
Operation.............................................................................................6.78
Cleaning..............................................................................................6.79
Troubleshooting.......................................................................................6.79
Warranty..............................................................................................6.79
Gas Hoses..............................................................................................6.80
Disconnecting the Gas Line............................................................................6.80
Reconnecting the Gas Line.............................................................................6.80
Weekly................................................................................................6.80
Heat Lamp Over Cut Station - Hatco #GRAIHL-54D.........................................................6.81
Startup...............................................................................................6.81
Cleaning..............................................................................................6.81
Troubleshooting.......................................................................................6.82
Warranty..............................................................................................6.82
Holding Cabinets - Alto-Shaam # 500-S/STD & # 1000 UP/P................................................6.83
Parts Identification..................................................................................6.83
Startup...............................................................................................6.83
Operation.............................................................................................6.84
Cleaning..............................................................................................6.84
Maintenance...........................................................................................6.85
Troubleshooting.......................................................................................6.85
Warranty..............................................................................................6.86
Holding Cabinet - Cleveland Model BMW-334..............................................................6.87
Description...........................................................................................6.87
Controls..............................................................................................6.87
Startup...............................................................................................6.87
Operations............................................................................................6.88
Cleaning - General....................................................................................6.88
Cleaning - Daily......................................................................................6.89
Cleaning - Weekly.....................................................................................6.89
Maintenance...........................................................................................6.90
Troubleshooting.......................................................................................6.90
Warranty..............................................................................................6.91
Holding Cabinets - Seco Model #711-4144................................................................6.92
Startup...............................................................................................6.92
Operation.............................................................................................6.92
</TABLE>
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Cleaning - Daily.........................................................6.93
Cleaning - Weekly........................................................6.93
Maintenance..............................................................6.94
Holding Cabinets - Winston C-VAP HA4507...................................6.95
Startup..................................................................6.95
Operation................................................................6.96
Cleaning - Daily.........................................................6.96
Cleaning - Weekly........................................................6.97
Maintenance..............................................................6.97
Troubleshooting..........................................................6.98
Warranty.................................................................6.98
Holding Drawer - Winston HB 3503..........................................6.99
Startup..................................................................6.99
Operation...............................................................6.100
Cleaning................................................................6.100
Maintenance.............................................................6.101
Troubleshooting.........................................................6.102
Warranty................................................................6.102
Hot Food Case - Nax # 2.5 RNW 950RP......................................6.103
Startup.................................................................6.103
Operation...............................................................6.103
Cleaning................................................................6.104
Maintenance.............................................................6.104
Troubleshooting.........................................................6.105
Warranty................................................................6.106
Hussmann Hot and Cold Food Display Cases - Boston Market Model ESC/ESH...6.107
Startup.................................................................6.107
Operation Tips..........................................................6.107
Shutdown................................................................6.108
Cleaning................................................................6.109
Maintenance.............................................................6.109
Ice Machine - Hoshizaki #KM800MRE/URCIZE.................................6.112
Startup.................................................................6.112
Operation...............................................................6.112
Cleaning................................................................6.112
Maintenance.............................................................6.112
Troubleshooting.........................................................6.113
Warranty................................................................6.113
Ice Machine - Beverage Station..........................................6.113
Kettles-Cleveland - #24GM-200-K6 Boiler-based............................6.114
Startup.................................................................6.114
Operation...............................................................6.115
Pasta Basket for Kettle.................................................6.115
Cleaning................................................................6.116
Maintenance.............................................................6.117
Troubleshooting.........................................................6.117
Warranty................................................................6.117
Kettles-Cleveland #SD-650-K12-BC - Direct Steam..........................6.118
Startup.................................................................6.118
Operation...............................................................6.118
Cleaning................................................................6.119
Maintenance.............................................................6.120
Troubleshooting.........................................................6.120
Warranty................................................................6.120
Kettles-Groen TDH/40-SP..................................................6.121
Startup.................................................................6.121
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Operation...............................................................6.121
Cleaning................................................................6.122
Maintenance.............................................................6.123
Troubleshooting.........................................................6.123
Warranty................................................................6.124
Lemonade Dispenser-Jet Spray Model # EJ1.................................6.125
Startup.................................................................6.125
Maintenance.............................................................6.126
Troubleshooting.........................................................6.127
Warranty................................................................6.127
Mixer 80-Qt-Hobart #L-800-2A-BC..........................................6.128
Startup.................................................................6.128
Operation...............................................................6.128
Cleaning................................................................6.129
Maintenance.............................................................6.129
Troubleshooting.........................................................6.130
Warranty................................................................6.130
Planetary Ovens - BMR-32.................................................6.131
Startup.................................................................6.131
Control Panel Operation.................................................6.131
Cleaning - Daily........................................................6.133
BMR32 Vent Cleaning Procedure...........................................6.134
Cleaning - Monthly......................................................6.135
Maintenance.............................................................6.136
Troubleshooting Guide...................................................6.137
Warranty................................................................6.138
Post Mix System 41407....................................................6.139
Operations..............................................................6.139
Cleaning - Daily........................................................6.139
Cleaning - Weekly.......................................................6.140
Cleaning - Monthly......................................................6.140
Changing a Bag in a Box.................................................6.140
Cleaning Syrup Line Connectors..........................................6.141
Maintenance.............................................................6.141
Troubleshooting.........................................................6.142
Warranty................................................................6.145
Potato Wedger-Nemco Model #N55450-8......................................6.146
Startup.................................................................6.146
Operation...............................................................6.146
Cleaning................................................................6.147
Maintenance.............................................................6.147
Warranty................................................................6.147
Power Soak Dish Sink System Metcraft Model BM - 1400/ 1401...............6.148
Introduction............................................................6.148
Startup.................................................................6.148
Changing Tank Water.....................................................6.149
Operation...............................................................6.149
Cleaning................................................................6.151
Maintenance.............................................................6.151
Troubleshooting.........................................................6.152
Authorized Service Information..........................................6.152
Warranty................................................................6.153
Reach-in Refrigerators and Freezers-McCall...............................6.154
Startup.................................................................6.154
Cleaning................................................................6.154
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Maintenance.............................................................6.154
Troubleshooting.........................................................6.155
Warranty................................................................6.155
Refrigerator-Undercounter-Beverage-Air #UCR27-25.........................6.156
Startup.................................................................6.156
Operation...............................................................6.156
Cleaning................................................................6.156
Maintenance.............................................................6.157
Troubleshooting.........................................................6.157
Warranty................................................................6.158
Rotisserie Ovens-Old Hickory Model - # N7G-R (right) or # N7G-L (left)...6.159
Startup.................................................................6.159
Operation...............................................................6.160
Cleaning................................................................6.160
Maintenance.............................................................6.163
Troubleshooting.........................................................6.163
Warranty................................................................6.163
Sandwich Station-Beverage-Air Model - # SUR-48-8C and # SUR-60-8C........6.164
Startup.................................................................6.164
Operation...............................................................6.164
Cleaning................................................................6.165
Maintenance.............................................................6.165
Troubleshooting.........................................................6.165
Warranty................................................................6.166
Sinks/Grease Traps.......................................................6.167
Troubleshooting.........................................................6.167
Maintenance.............................................................6.167
Slotted Steam Riser - Model #VSP-1.......................................6.168
Setup...................................................................6.168
Startup.................................................................6.168
Operation...............................................................6.169
Cleaning................................................................6.169
Troubleshooting.........................................................6.170
Warranty................................................................6.170
Soup Kettles-Tomlinson Model #28-600-76..................................6.171
Startup.................................................................6.171
Operation...............................................................6.171
Cleaning................................................................6.171
Troubleshooting.........................................................6.172
Warranty................................................................6.172
Spit Table-Craft Mfg. Custom.............................................6.173
Setup...................................................................6.173
Cleaning................................................................6.173
Spits, Baskets, and V-spits..............................................6.174
Cleaning................................................................6.174
Steamer-Cleveland #24-CGP- 10-BC.........................................6.175
Startup.................................................................6.175
Operation...............................................................6.175
Cleaning................................................................6.177
Maintenance.............................................................6.178
Troubleshooting.........................................................6.179
Warranty................................................................6.180
Steamer-Cleveland #24-CGM-200............................................6.181
Startup.................................................................6.181
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Operation...............................................................6.181
Cleaning................................................................6.183
Maintenance.............................................................6.184
Troubleshooting.........................................................6.185
Warranty................................................................6.186
Tea Brewer-Bloomfield - 878lBC...........................................6.187
Setup...................................................................6.187
Operation...............................................................6.188
Cleaning................................................................6.189
Maintenance.............................................................6.189
Troubleshooting.........................................................6.192
Warranty................................................................6.192
Tea Urns-Bloomfield 8699BC...............................................6.193
Urn Cleaning............................................................6.193
Faucet Cleaning - Daily.................................................6.193
Faucet Cleaning - Weekly................................................6.194
Tea Urns - NuCo..........................................................6.196
Cleaning................................................................6.196
Thermometer-Bi-therm.....................................................6.197
Setup...................................................................6.197
Cleaning................................................................6.197
Digital Thermometer Atkins #33032-F......................................6.199
Operation...............................................................6.199
Probe Removal...........................................................6.199
Probe Storage...........................................................6.199
Recalibration...........................................................6.200
Walk-In Cooler/Freezer-Kolpak Custom.....................................6.201
Setup...................................................................6.201
Cleaning - Daily........................................................6.201
Cleaning - Weekly.......................................................6.201
Maintenance.............................................................6.202
Troubleshooting.........................................................6.202
Warranty................................................................6.202
Warmer Lamps -Merco # BD-775-CT..........................................6.203
Startup.................................................................6.203
Shutdown................................................................6.203
Cleaning................................................................6.203
Maintenance.............................................................6.203
Troubleshooting.........................................................6.203
Warranty................................................................6.203
Section 4: How to Clean the Physical Plant.................................6.205
Building.................................................................6.207
Cleaning................................................................6.207
Entrance Area............................................................6.207
Sidewalks, Parking, and Dumpster Area....................................6.208
Cleaning................................................................6.208
Landscaping..............................................................6.209
Floors...................................................................6.209
Cleaning................................................................6.209
Mopping During Peak Periods.............................................6.210
Cleaning the Floor Tools................................................6.211
Restrooms................................................................6.212
Cleaning................................................................6.212
Service Line.............................................................6.213
Tables and Seating.......................................................6.214
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Cleaning................................................................6.214
Trash Receptacles........................................................6.214
Cleaning................................................................6.214
Windows..................................................................6.215
Spot Cleaning...........................................................6.215
CHAPTER 7: SAFETY AND SECURITY RELATED.......................................7.1
Section 1: General Safety Measures..........................................7.3
Maintaining a Safe Work Area...............................................7.5
Employee Safety Training...................................................7.6
Emergency Procedures......................................................7.6
Operating and Maintaining Equipment Safely................................7.6
Avoiding Burns............................................................7.6
Using Knives Safely.......................................................7.7
Proper Lifting Techniques.................................................7.8
Safety Incentive Programs..................................................7.8
Personal Automobile - Guidelines for Store Business or
Catering Deliveries......................................................7.10
Delivery Truck Driver - Guidelines for Truck Delivery Insurance...........7.11
Emergency Preparedness....................................................7.13
Emergency Equipment and Supplies.........................................7.13
Facility Preparedness....................................................7.13
Outside Agencies..........................................................7.14
Fire Department..........................................................7.14
Police Department........................................................7.14
Utility Companies........................................................7.14
Local Building Department................................................7.14
Evacuation Plans..........................................................7.14
Section 2: General Security Measures.......................................7.17
Physical Security Issues..................................................7.19
Keys and Codes...........................................................7.19
Alarm Systems............................................................7.19
Safes....................................................................7.20
Lighting.................................................................7.22
Landscaping..............................................................7.22
Blinds and Signs.........................................................7.22
CCTV (Video Cameras).....................................................7.23
Security Officers........................................................7.24
Operations Security Issues................................................7.27
Trash Handling...........................................................7.27
Door Safety..............................................................7.28
Cash Handling............................................................7.28
Store Opening Procedures.................................................7.30
Store Closing Procedures.................................................7.30
Crime Prevention and Detection Issues.....................................7.31
Internal Theft...........................................................7.31
External Theft - Short-Change Artist.....................................7.33
External Theft - Counterfeit Money.......................................7.34
External Theft - Robbery.................................................7.35
External Theft - Burglary................................................7.37
Section 3: Employee Accident Investigation Guidelines......................7.39
Who Should Investigate Incidents?.........................................7.41
Customer Incident Investigation...........................................7.44
The Collection of Data...................................................7.44
Report Review............................................................7.45
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Section 4: Insurance Claims Reporting Procedures............................7.47
Worker's Compensation Claims..............................................7.49
General Liability Claims..................................................7.49
Store Property Damage and Crime Claims....................................7.50
Reporting Auto Liability Claims...........................................7.50
Reporting Auto Liability Incidents.......................................7.50
Section 5: Crisis Situations................................................7.53
Defining a Crisis.........................................................7.55
Store Emergency Call List.................................................7.56
Potential Emergencies....................................................7.57
Handling a Crisis.........................................................7.58
Gathering Information....................................................7.59
Working with Authorities/Outside Agencies................................7.59
What to Tell Employees...................................................7.60
Post-Traumatic Stress Disorder (PTSD)....................................7.61
Dealing with Customers...................................................7.62
Dealing with Victims' Families...........................................7.63
Dealing with the Media....................................................7.63
When a Reporter Phones...................................................7.64
When a Reporter Comes to the Store.......................................7.66
Power Outages.............................................................7.67
Daytime Power Outages....................................................7.68
Nighttime Power Outages..................................................7.68
Notification.............................................................7.69
Fire......................................................................7.69
Fires in Rotisserie Ovens................................................7.70
Common-Sense Rules.......................................................7.70
Notification.............................................................7.70
Dealing with the Media...................................................7.71
Recovery and Reentry.....................................................7.71
Foodborne Illness/Infectious Disease......................................7.72
Foodborne Illness: What to Do............................................7.72
Dealing with the Media...................................................7.74
Infectious Disease: What to Do...........................................7.74
Foodborne Illness Script.................................................7.76
Robbery...................................................................7.78
Action Steps.............................................................7.78
Burglary..................................................................7.80
Action Steps.............................................................7.80
Dealing with the Media...................................................7.81
Medical Emergencies.......................................................7.81
Dealing with the Media...................................................7.82
Natural Disasters.........................................................7.82
Hurricanes...............................................................7.82
Tornadoes................................................................7.84
Floods...................................................................7.84
Earthquakes..............................................................7.86
Dealing with the Media...................................................7.87
Food Tampering............................................................7.87
Dealing with the Media...................................................7.88
Bomb Threats/Extortion....................................................7.88
Dealing with the Media...................................................7.89
Bomb Threat Checklist....................................................7.90
Random Acts of Violence...................................................7.91
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Picketing.................................................................7.92
Guide to Gathering Crisis Information.....................................7.93
The Event................................................................7.93
Notifying the Authorities................................................7.94
Dealing with Victims.....................................................7.94
Dealing with the Media...................................................7.94
Section 6: OSHA Compliance Guidelines......................................7.97
The Occupational Safety and Health Act (OSHA).............................7.99
Duties and Authority of OSHA Officers/Inspectors........................7.100
Store Manager Responsibilities..........................................7.100
OSHA Requirements........................................................7.101
OSHA Poster.............................................................7.101
OSHA Recordkeeping......................................................7.101
Hazardous Chemical Communication (Right to Know).........................7.102
Bloodborne Pathogens Standard............................................7.103
Sample Chemical Label....................................................7.104
Material Safety Data Sheet...............................................7.105
OSHA Compliance Self-Inspection Checklist................................7.106
CHAPTER 8: DRIVE-THRU RELATED................................................8.1
Section 1: Philosophies.....................................................8.3
Drive-Thru Standards.......................................................8.5
Quality, Convenient Fresh Meals to Go.....................................8.5
Personable, Creative, and Unique Customer Service Experience..............8.5
Accurate and Fast Service.................................................8.5
Optimal Employee Environment..............................................8.5
Providing Customers with the Basics........................................8.6
Section 2: Staffing.........................................................8.7
Drive-Thru Crew Positions..................................................8.9
Drive-Thru Position Descriptions..........................................8.10
Order Taker..............................................................8.10
Assembler................................................................8.10
Cashier/Presenter........................................................8.10
Section 3: Service.........................................................8.13
Steps of Service..........................................................8.15
Order Taker..............................................................8.15
Assembler................................................................8.18
Cashier/Presenter........................................................8.20
The Rest of the Crew: Teamwork...........................................8.22
Cutting Station..........................................................8.23
Section 4: Managing the Drive-Thru.........................................8.25
Manager Duties in Drive-Thru..............................................8.27
Service Bottlenecks.......................................................8.27
Production Management.....................................................8.28
Ongoing Training..........................................................8.29
Incentives for Drive-Thru Employees......................................8.30
Labor Chart...............................................................8.31
Scheduling Guidelines: Projecting Drive-Thru Volume.......................8.33
Section 5: Equipment.......................................................8.35
Drive-Thru Hot Case.......................................................8.37
Startup..................................................................8.37
Hot Case Operation.......................................................8.37
Cleaning/Close...........................................................8.38
Drink Tower/Post Mix System...............................................8.39
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Startup..................................................................8.39
Operation................................................................8.39
Cleaning/close...........................................................8.39
Window (Electric Only)....................................................8.39
Startup..................................................................8.39
Operation................................................................8.39
Cleaning/close...........................................................8.40
Section 6: Safety and Security.............................................8.41
Safety Procedures.........................................................8.43
Managing Safety and Security..............................................8.43
CHAPTER 9: F.A.S.T. TRACK(TM) RELATED........................................9.1
Section 1: F.A.S.T. Track Overview..........................................9.3
F.A.S.T. Track Goal and Focus..............................................9.5
Why are Faster Service Times Important?...................................9.5
F.A.S.T. Track Model......................................................9.5
Customer Experience........................................................9.6
Employee Experience........................................................9.7
Front of House (FOH)......................................................9.7
Back of House (BOH).......................................................9.8
Drive-Thru................................................................9.9
F.A.S.T. Track Hourly Employee Positions..................................9.10
Front of House (FOH).....................................................9.10
Back of House (BOH)......................................................9.11
Drive-Thru...............................................................9.12
Section 2: F.A.S.T. Track Management.......................................9.15
F.A.S.T. Track Management Tools...........................................9.17
QPrint! Resources........................................................9.17
F.A.S.T. Track Video(s)..................................................9.17
F.A.S.T. Track Management Modules........................................9.17
F.A.S.T. Track Labor Scheduling Workshop.................................9.18
F.A.S.T. Track Simulation................................................9.18
Management Principles and Priorities......................................9.18
Identify and Attack Bottlenecks First!...................................9.18
Systematize and Simplify Routine Tasks...................................9.19
Training is Crucial!.....................................................9.19
Ready...Set...Go!........................................................9.19
Have the Right People at the Right Place Doing the Right Thing...........9.20
Work Smarter and Easier - Not Faster and Harder..........................9.20
Saving Seconds and Minutes Means Saving Dollars and Customers............9.20
Don't Trade Efficiency for Quality!......................................9.21
Great Food Isn't Enough; Customers Want Convenience and
Outstanding Service.....................................................9.21
Good Management is the Key...............................................9.22
Employee Sliding Technique................................................9.22
Importance of Cross-Training.............................................9.23
Labor Deployment (Peak and Non-Peak)......................................9.23
Main Food Line Labor Deployment..........................................9.25
Eliminating Bottlenecks...................................................9.26
Target Assembly/Service Times............................................9.26
Bottleneck Indicators....................................................9.26
Attacking and Eliminating Bottlenecks....................................9.27
Section 3: F.A.S.T. Track Systems..........................................9.29
F.A.S.T. Track Phone Order Procedures.....................................9.31
Primary Responsibility...................................................9.31
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Procedures...............................................................9.31
Use of Order Monitors and Bump Bars.......................................9.32
Assembling Orders Off of Monitors........................................9.32
Tips for Reading and Using Order Monitors................................9.33
"Bumping" Orders Off the Monitor.........................................9.34
Manual Transaction Processing.............................................9.36
If POS/Cash Registers Work but Monitors Don't............................9.36
If Both POS and Monitors are Inoperable..................................9.36
Section 4: F.A.S.T. Track Equipment.........................................9.39
Backup Holding Cabinet- Henny Penny.......................................9.41
Description..............................................................9.41
Controls.................................................................9.41
Startup..................................................................9.41
Operation................................................................9.43
Cleaning.................................................................9.43
Maintenance..............................................................9.44
Troubleshooting..........................................................9.44
Warranty Information.....................................................9.45
Bump Bar..................................................................9.46
Description..............................................................9.46
Controls and Operation...................................................9.46
Safety Precautions.......................................................9.46
Troubleshooting..........................................................9.47
Cutting Board Scale - Doran(R)............................................9.47
Description..............................................................9.47
Calibration..............................................................9.47
Operation................................................................9.47
Cleaning.................................................................9.48
Warranty.................................................................9.48
Delfield(R) Hot/Cold Food Case and Carver/Sandwich Station................9.49
Description..............................................................9.49
Controls.................................................................9.49
Operation................................................................9.50
Shutdown.................................................................9.54
Cleaning.................................................................9.54
Maintenance..............................................................9.56
Troubleshooting..........................................................9.57
Warranty Information.....................................................9.58
Order Monitor - NCR(R)....................................................9.59
Description..............................................................9.59
Controls.................................................................9.59
Operations...............................................................9.59
Interface with Bump Bar..................................................9.59
Interface with POS.......................................................9.59
Troubleshooting..........................................................9.59
Section 5: Training F.A.S.T. Track.........................................9.61
Basic Training Plan.......................................................9.63
Training Individual Employees............................................9.63
Team Training (FOH, BOH, DT).............................................9.64
Training Materials........................................................9.65
Materials Needed by Managers/Trainers....................................9.65
QPrint! Resources........................................................9.66
Materials Needed by Trainees (Employees/Crew)............................9.66
F.A.S.T. Track Hourly Employee Position Descriptions......................9.68
Sides Assembler Position..................................................9.69
Position Description.....................................................9.69
Performance Expectations.................................................9.69
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Position Prerequisites...................................................9.70
Suggested Cross-training.................................................9.70
Sandwich Maker Position...................................................9.70
Position Description.....................................................9.70
Performance Expectations.................................................9.70
Position Prerequisites...................................................9.71
Suggested Cross-training.................................................9.71
Carver Position...........................................................9.72
Position Description.....................................................9.72
Performance Expectations.................................................9.72
Position Prerequisites...................................................9.73
Suggested Cross-training.................................................9.73
Quality Coordinator Position..............................................9.74
Position Description.....................................................9.74
Performance Expectations.................................................9.74
Position Prerequisites...................................................9.75
Suggested Cross-training.................................................9.75
Greeter/Cashier Position..................................................9.76
Position Description.....................................................9.76
Performance Expectations.................................................9.76
Position Prerequisites...................................................9.77
Suggested Cross-training.................................................9.77
Dining Room Host Position.................................................9.78
Position Description.....................................................9.78
Performance Expectations.................................................9.78
Position Prerequisites...................................................9.79
Suggested Cross-training.................................................9.79
Handler/Utility Position..................................................9.80
Position Description.....................................................9.80
Performance Expectations.................................................9.80
Position Prerequisites...................................................9.81
Suggested Cross-training.................................................9.81
Cooker/Runner Position....................................................9.82
Position Description.....................................................9.82
Performance Expectations.................................................9.82
Position Prerequisites...................................................9.83
Suggested Cross-training.................................................9.83
Backup/Prep Position......................................................9.84
Position Description.....................................................9.84
Performance Expectations.................................................9.84
Position Prerequisites...................................................9.85
Suggested Cross-training.................................................9.85
DT Sides Assembler Position...............................................9.86
Position Description.....................................................9.86
Performance Expectations.................................................9.86
Position Prerequisites...................................................9.87
Suggested Cross-training.................................................9.87
DT Carver/Sandwich Maker Position.........................................9.88
Position Description.....................................................9.88
Performance Expectations.................................................9.88
Position Prerequisites...................................................9.89
Suggested Cross-training.................................................9.89
DT Cashier Position.......................................................9.90
Position Description.....................................................9.90
Performance Expectations.................................................9.90
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<PAGE>
Position Prerequisites...................................................9.91
Suggested Cross-training.................................................9.91
DT Greeter Position.......................................................9.92
Position Description.....................................................9.92
Performance Expectations.................................................9.92
Position Prerequisites...................................................9.93
Suggested Cross-training.................................................9.93
Employee Development......................................................9.94
Complete and Effective Position Training.................................9.94
Adequate Cross-training..................................................9.94
Employee Incentives and Rewards..........................................9.95
- --------------------------------------------------------------------------------
Operations Manual 2/97 Table of Contents
(C) 1997 Boston Chicken, Inc. Confidential 25
<PAGE>
RECEIPT
THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND
OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL
AGREEMENTS CAREFULLY.
IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY
THE EARLIEST OF:
A. THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR
B. TEN BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR
C. TEN BUSINESS DAYS BEFORE ANY PAYMENT TO US.
YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT
LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT.
IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR
MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE
LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION,
WASHINGTON, D.C. 20580 AND THE APPROPRIATE STATE AGENCY IDENTIFIED ON EXHIBIT 1.
We authorize the respective state agencies identified on Exhibit 1 to receive
service of process for Boston Chicken, Inc. in the particular state. I have
received a Uniform Franchise Offering Circular dated ____________________, 1997.
This circular included the following Exhibits:
1. List of State Agencies/Agents for Service of Process
2. Development Agreement
3. Franchise Agreement
4. Delivery Rider
5. Catering Rider
6. Addendum to Lease
7. Addendum to In-Line Shopping Center Lease
8. Addendum to Purchase and Sale Agreement
9. List of Franchisees
10. Franchisees Who Have Left the System
11. Financial Statements
12. Secured Loan Agreement
13. Inducement Agreement
14. Form of GECC Sublease
<PAGE>
15. Franchise Sublease
16. Franchise Lease
17. Special Purposes Addendum to Franchise Lease
18. Third Party Lease
19. Computer and Communications Systems Agreement
20. Operations Manual Table of Contents
21. Receipt of Offering Circular
Date:______________________________
________________________________________
_______________, individually and/or
as an officer, shareholder, member or
partner of _____________________________
(__________________________ corporation)
(__________________________ partnership)
(____________ limited liability company)
<PAGE>
RECEIPT
THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND
OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL
AGREEMENTS CAREFULLY.
IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY
THE EARLIEST OF:
A. THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR
B. TEN BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR
C. TEN BUSINESS DAYS BEFORE ANY PAYMENT TO US.
YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT
LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT.
IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR
MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE
LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION,
WASHINGTON, D.C. 20580 AND THE APPROPRIATE STATE AGENCY IDENTIFIED ON EXHIBIT 1.
We authorize the respective state agencies identified on Exhibit 1 to receive
service of process for Boston Chicken, Inc. in the particular state. I have
received a Uniform Franchise Offering Circular dated _______________, 1997. This
offering circular included the following Exhibits:
1. List of State Agencies/Agents for Service of Process
2. Development Agreement
3. Franchise Agreement
4. Delivery Rider
5. Catering Rider
6. Addendum to Lease
7. Addendum to In-Line Shopping Center Lease
8. Addendum to Purchase and Sale Agreement
9. List of Franchisees
10. Franchisees Who Have Left the System
11. Financial Statements
12. Secured Loan Agreement
13. Inducement Agreement
14. Form of GECC Sublease
<PAGE>
15. Franchise Sublease
16. Franchise Lease
17. Special Purpose Addendum to Franchise Lease
18. Third Party Lease
19. Computer and Communications Systems Agreement
20. Operations Manual Table of Contents
21. Receipt of Offering Circular
Date:_______________________________
_____________________________________
______________, individually and/or
as an officer, shareholder, member or
partner of __________________________
(_______________________ corporation)
(_______________________ partnership)
(_________ limited liability company)
