<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Einstein/Noah Bagel Corp.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
LOGO
14123 DENVER WEST PARKWAY, GOLDEN, COLORADO 80401-4086
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
You are cordially invited to attend the annual meeting of stockholders of
Einstein/Noah Bagel Corp. (the "Company"), which will be held at the Denver
Marriott West, 1717 Denver West Boulevard, Golden, Colorado on Tuesday, May
13, 1997, at 12:00 noon, Mountain Time, for the following purposes:
1. To elect directors.
2. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 17, 1997 are
entitled to vote at the meeting. A list of such stockholders will be available
for examination by any stockholder for any purpose germane to the meeting,
during normal business hours, at the offices of the Company, for a period of
10 days prior to the meeting.
It is important that your shares be represented at the meeting regardless of
the size of your holdings. Whether or not you intend to be present at the
meeting in person, we urge you to mark, date and sign the enclosed proxy and
return it in the envelope provided for that purpose, which does not require
postage if mailed in the United States.
/s/ Joel M. Alam
Joel M. Alam
SECRETARY
Golden, Colorado
April 1, 1997
YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.
<PAGE>
EINSTEIN/NOAH BAGEL CORP.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Einstein/Noah Bagel Corp. (the "Company") of proxies for
use at the annual meeting of stockholders of the Company to be held at the
Denver Marriott West, 1717 Denver West Boulevard, Golden, Colorado at 12:00
noon, Mountain Time, on May 13, 1997, and at any postponements or adjournments
thereof. Proxies properly executed and returned in a timely manner will be
voted at the meeting in accordance with the directions noted thereon. If no
direction is indicated, proxies will be voted (i) for the election of the
nominees named herein as directors and (ii) on other matters presented for a
vote, in accordance with the judgment of the persons acting under the proxies.
Any stockholder giving a proxy has the power to revoke it at any time before
it is voted, either in person at the meeting, by written notice to the
Secretary of the Company, or by delivery of a later-dated proxy.
Nominees for director receiving the affirmative vote of the holders of a
plurality of the shares of the Company's common stock, par value $0.01 per
share ("Common Stock"), present in person or represented by proxy and entitled
to vote at the meeting will be elected as directors. Approval of any other
matter submitted to the stockholders for their consideration requires, in each
case, the affirmative vote of the holders of a majority of the shares of the
Common Stock present in person or by proxy and entitled to vote at the
meeting. Representatives from the Company's transfer agent will serve as
inspectors of election. Abstentions, directions to withhold authority and
broker non-votes are counted as shares present and entitled to vote in the
determination of whether the shares of Common Stock represented at the meeting
constitute a quorum. Pursuant to the Company's bylaws, abstentions are not
counted in tabulations of the votes cast on proposals presented to
stockholders. Broker non-votes are deemed not entitled to vote on proposals
for which brokers do not have discretionary authority and, therefore, have no
effect with respect to such proposals.
The Company's principal executive offices are located at 14123 Denver West
Parkway, Golden, Colorado 80401-4086 (telephone 303/215-9300). It is expected
that proxy materials will be mailed to stockholders beginning on or about
April 1, 1997.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on March 17, 1997 are
entitled to vote at the annual meeting of stockholders. The Common Stock is
the only voting stock of the Company outstanding, of which 32,689,678 shares
were outstanding as of the close of business on March 17, 1997. Each share of
Common Stock is entitled to one vote.
ELECTION OF DIRECTORS
Nine directors are to be elected at the meeting. The persons named below
have been designated by the Board of Directors as nominees for election as
directors for a term expiring at the annual meeting of stockholders in 1998.
All of the nominees are serving as directors of the Company as of the date of
this Proxy Statement. In February 1997, Noah C. Alper resigned as a member of
the Board of Directors. As a result, the Board of Directors was reduced from
ten to nine members as permitted under the Company's bylaws.
<PAGE>
The nine nominees for director receiving the vote of the holders of a
plurality of the shares of Common Stock present in person or represented by
proxy and entitled to vote at the meeting will be elected. Unless otherwise
instructed, properly executed proxies that are returned in a timely manner
will be voted for election of the Board's nine nominees. If, however, any of
such nominees should be unable or should fail to act as a nominee, the proxies
will be voted for such other person as will be determined by the holders of
the proxies in their discretion, or the Board of Directors may make an
appropriate reduction in the number of directors to be elected.
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, Inc.
("Boston Chicken") since June 1992 and 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") from
September 1989 until his retirement in January 1992, and Chief Operating
Officer 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 has served
as President of Pace Affiliates, Inc., an investment banking firm which he
founded.
Mark R. Goldston, age 42, became President and Chief Executive Officer and a
director of the Company in April 1996. Since January, 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.
David G. Stanchak, age 38, became a director and Vice President and Chief
Development Officer of the Company in March 1995. From June 1992 until March
1995, he served as a Senior Vice President of Boston Chicken, and from August
1989 until June 1992, Mr. Stanchak was the National Director of Real Estate
and Real Estate Legal Counsel for Blockbuster.
Kyle T. Craig, age 49, has been a director of the Company since February
1995. Mr. Craig was Chairman of the Board of the Company from June 1995 until
he resigned in July 1996. From February 1995 until being appointed as Chairman
in June 1995, Mr. Craig served as Vice President of the Company. Mr. Craig
also served as the Chief Concept Officer of Boston Chicken from April 1994
through June 1995. From November 1993 until April 1994, he was President of
KFC-Brand Development, a unit of KFC Corp., from April 1990 until November
1993, he was President of KFC-USA, also a unit of KFC Corp. KFC Corp. is a
wholly owned subsidiary of PepsiCo, Inc.
M. Laird Koldyke, age 35, became a director of the Company in March 1995.
Mr. Koldyke has served as a general partner of the Frontenac Company, a
venture capital company, in Chicago, Illinois since 1989.
Gail A. Lozoff, age 46, became a director and a Vice President of the
Company in April 1995, after working with Bagel & Bagel, Inc., which she
founded in June 1988. From April 1995 until September 1996, Ms. Lozoff served
as Vice President--Design and Merchandising of the Company. Ms. Lozoff also
served as President and Chief Executive Officer of Bagel & Bagel from May 1992
until April 1995.
John H. Muehlstein, Jr., age 41, became a director of the Company in March
1995. Since 1986, he has been a partner at the Chicago law firm of Pedersen &
Houpt.
John A. Offerdahl, age 32, became a director in March 1995 and served as
Vice President--Operations, Southeast Zone of the Company from March 1995
through August 1996. Mr. Offerdahl served as the Chairman and Chief Executive
Officer of Offerdahl's Bagel Gourmet, Inc., which he founded in 1989, from
December 1989 until March 1995. From May 1986 until September 1994, Mr.
Offerdahl played professional football for the Miami Dolphins in the National
Football League.
2
<PAGE>
Lloyd D. Ruth, age 50, became a director of the Company in March 1995. Since
January 1987, he has been a general partner at Marquette Management Partners,
a venture capital company, in Deerfield, Illinois.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
FOREGOING NOMINEES FOR DIRECTOR.
PRINCIPAL STOCKHOLDERS AND SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 17, 1997 by: (i) each stockholder known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock; (ii) each director and nominee for director; (iii)
each executive officer named in the Summary Compensation Table below; and (iv)
all directors and executive officers as a group. The beneficial ownership
reflected in the following table is calculated in accordance with Rule 13d-3
of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Unless
otherwise indicated, ownership includes sole voting and investment power.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)(2)
------------------
NAME NUMBER PERCENT
---- ---------- -------
<S> <C> <C>
Boston Chicken, Inc.(3).............................. 18,135,997 54.1%
Scott A. Beck(4)...................................... 131,652 *
Mark R. Goldston(5)................................... 274,592 *
David G. Stanchak..................................... 65,102 *
Michael J. Beaudoin(6)................................ 42,923 *
Paul A. Strasen(7).................................... 27,789 *
Joel M. Alam(8)....................................... 25,164 *
Kyle T. Craig......................................... 63,603 *
M. Laird Koldyke(9)................................... 488,608 1.5%
Gail A. Lozoff(10).................................... 563,568 1.7%
John H. Muehlstein, Jr................................ 16,757 *
John A. Offerdahl(11)................................. 1,017,770 3.1%
Lloyd D. Ruth(12)..................................... 70,867 *
Daniel V. Colangelo(13)............................... 188,147 *
All directors and executive officers as a group
(excluding Messrs. Beaudoin and Colangelo)(13
persons)............................................. 2,921,728 9.0%
</TABLE>
- --------
*Less than 1%.
(1) Includes shares subject to options granted by the Company which are
exercisable within 60 days of March 17, 1997 as follows: Mr. Goldston--
11,403; Mr. Stanchak--13,046; Mr. Beaudoin--17,295; Mr. Strasen--16,537;
Mr. Alam--16,537; Mr. Craig--19,844; Ms. Lozoff--12,289; Mr. Offerdahl--
42,447; Mr. Colangelo--3,793; and all executive officers and directors as
a group (including such individuals, except Messrs. Beaudoin and
Colangelo)--181,470. Excludes the aggregate number of shares of Common
Stock shown above as owned by Boston Chicken that may be deemed to be
beneficially owned by Messrs. Beck and Goldston because such individuals
may be deemed to be affiliates of Boston Chicken. Messrs. Beck and
Goldston disclaim any beneficial ownership of such shares (except for,
with respect to Mr. Goldston, that number of shares of Common Stock
subject to options granted by Boston Chicken to Mr. Goldston that were
exercisable as of March 17, 1997). See Footnotes 3 and 5 below.
(2) Includes shares subject to outstanding warrants of the Company as
follows: Mr. Beck--55,432; Mr. Stanchak--7,313; Mr. Muehlstein--2,391;
Mr. Ruth--1,913; and all executive officers and directors as a group
(including such individuals)--72,730.
(3) Includes 701,177 shares of Common Stock on which Boston Chicken has
granted options to purchase to certain individuals (including Mr.
Goldston), of which options to purchase 248,949 shares of Common Stock
are exercisable within 60 days of March 17, 1997. Includes 838,822 shares
subject to options granted by the Company which are exercisable within 60
days of March 17, 1997. The address of Boston Chicken is 14103 Denver
West Parkway, Golden, Colorado 80401-4086. See "Relationship with Boston
Chicken."
3
<PAGE>
(4) Includes 17,948 shares held by a limited partnership, of which Mr. Beck
is the general partner.
(5) Includes 230,931 shares of Common Stock subject to options from Boston
Chicken which are currently exercisable within 60 days of March 17, 1997.
(6) Mr. Beaudoin resigned as Senior Vice President--Supply Chain of the
Company in February 1997.
(7) Includes 3,653 shares held by a trust, of which Mr. Strasen is a trustee
and beneficiary, and 5,099 shares held by a limited liability company,
which Mr. Strasen and his spouse control.
(8) Includes 2,039 shares beneficially owned by Mr. Alam's spouse, which are
subject to options from the Company exercisable within 60 days of March
17, 1997. Mr. Alam disclaims beneficial ownership of such shares.
(9) Represents 488,608 shares of Common Stock held by a limited partnership,
the general partner of which is an entity of which Mr. Koldyke is a
general partner. Mr. Koldyke disclaims beneficial ownership of all such
shares which exceed his pecuniary interest.
(10) Includes 546,850 shares of Common Stock held by a corporation, of which
Ms. Lozoff's spouse is the sole stockholder. Ms. Lozoff disclaims
beneficial ownership of such shares.
(11) Includes 932,876 shares of Common Stock held by a limited partnership, of
which corporations controlled by Mr. Offerdahl and his spouse are the
sole limited partner and the general partner. Also includes 42,447 shares
beneficially owned by Mr. Offerdahl's spouse, which are subject to
options from the Company exercisable within 60 days of March 17, 1997, of
which shares Mr. Offerdahl disclaims beneficial ownership.
(12) Includes 65,203 shares of Common Stock held by two limited partnerships,
the general partner of which is a limited partnership of which Mr. Ruth
is a general partner. Mr. Ruth disclaims beneficial ownership of all such
shares which exceed his pecuniary interest.
(13) Mr. Colangelo resigned as President and Chief Executive Officer of the
Company in January 1996.
OWNERSHIP OF BOSTON CHICKEN COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Boston Chicken common stock as of March 17, 1997 by (i) each
director and nominee for director; (ii) each executive officer named in the
Summary Compensation Table below; and (iii) all directors and executive
officers as a group. The beneficial ownership reflected in the following table
is calculated in accordance with Rule 13d-3 under the Exchange Act. Unless
otherwise indicated, ownership includes sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OWNED
--------------------
NAME NUMBER(1)(2) PERCENT
---- ------------ -------
<S> <C> <C>
Scott A. Beck(3)..................................... 6,303,175 9.7%
Mark R. Goldston..................................... 109,999 *
David G. Stanchak.................................... 461,357 *
Michael J. Beaudoin.................................. 2,735 *
Paul A. Strasen...................................... 29 *
Joel M. Alam(4)...................................... 27,471 *
Kyle T. Craig........................................ 126,223 *
M. Laird Koldyke..................................... 0 *
Gail A. Lozoff(5).................................... 291,177 *
John H. Muehlstein, Jr............................... 5,000 *
John A. Offerdahl(6)................................. 77,589 *
Lloyd D. Ruth........................................ 0 *
Daniel V. Colangelo.................................. 0 *
All directors and executive officers as a group
(excluding Messrs. Beaudoin and Colangelo) (13
persons)............................................ 7,412,630 11.3%
</TABLE>
- --------
* Less than 1%.
4
<PAGE>
(1) Includes shares subject to options which are exercisable within 60 days of
March 17, 1997 as follows: Mr. Beck--603,510; Mr. Goldston--109,999; Mr.
Stanchak--142,050; Mr. Beaudoin--2,735; Mr. Alam--22,740; Mr. Craig--
99,075; and all executive officers and directors as a group (including
such individuals, except Mr. Beaudoin)--898,325.
(2) Excludes an aggregate of 3,019,123 of the 5,261,430 shares of common stock
of Boston Chicken beneficially owned by BC Midwest Trust, 207,702 of the
312,333 shares of common stock of Boston Chicken beneficially owned by
certain partnerships, and 3,723 of the 7,447 shares of common stock of
Boston Chicken beneficially owned by BC Midwest, Inc., which shares may be
deemed to be beneficially owned by Scott Beck by virtue of his ownership
of shares of BC Midwest, Inc., the trustee of BC Midwest Trust and the
general partner of such partnerships. Mr. Beck disclaims beneficial
ownership with respect to such excluded shares because they exceed his
pecuniary interest as a beneficiary of BC Midwest Trust, as a limited
partner of such partnerships and as a stockholder of BC Midwest, Inc. Also
excludes 10,610 shares of common stock of Boston Chicken held by Mr.
Beck's spouse, of which shares he disclaims beneficial ownership.
(3) Excludes 311,110 shares gifted by Mr. Beck to a charitable foundation in
October 1996.
(4) Includes 1,300 shares held jointly by Mr. Alam and his spouse, 25 shares
held by his spouse, 300 shares held by Mr. Alam's minor children, and
3,106 shares beneficially owned by Mr. Alam's spouse which are subject to
options from the Company exercisable within 60 days of March 17, 1997. Mr.
Alam disclaims beneficial ownership of the shares held by his minor
children and by his spouse individually.
(5) Represents shares owned by a corporation, of which Ms. Lozoff's spouse is
the sole stockholder. Ms. Lozoff disclaims beneficial ownership of such
shares.
(6) Represents shares owned by a limited partnership, of which corporations
controlled by Mr. Offerdahl and his spouse are the sole limited partner
and the general partner.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The four standing committees of the Board of Directors of the Company are
the Audit Committee, the Compensation Committee, the Reporting Person Stock
Option Committee and the Stock Option Committee, the functions and membership
of which are described below. The Board of Directors does not have a standing
nominating committee. The Board of Directors held an aggregate of eleven
regular and special meetings in 1996 and also acted by unanimous written
consent five times.
Audit Committee. The Audit Committee consists of three non-employee
directors: Messrs. Koldyke, Offerdahl and Ruth. The Audit Committee met once
during fiscal 1996. The Audit Committee's functions include making
recommendations to the Board of Directors on the selection of the Company's
auditors, reviewing the arrangements for, and scope of, the independent
auditors' examination, meeting with the independent auditors, the Board of
Directors and certain officers of the Company to review the adequacy of
internal controls and reporting, and performing any other duties or functions
deemed appropriate by the Board of Directors.
Compensation Committee. The Compensation Committee consists of four
directors: Messrs. Beck, Koldyke, Muehlstein and Ruth. The Compensation
Committee met once during fiscal 1996. The Compensation Committee is
responsible for establishing policies for, and making recommendations to, the
Board of Directors regarding salaries and certain other compensation to be
paid to officers of the Company.
Reporting Person Stock Option Committee. The Reporting Person Stock Option
Committee consists of two non-employee directors: Messrs. Koldyke and Ruth.
The Reporting Person Stock Option Committee met once during fiscal 1996 and
also acted by unanimous written consent two times. The Reporting Person Stock
Option Committee is responsible for the administration of, and the granting of
all options under, the Company's Amended and Restated 1995 Employee Stock
Option Plan (the "Employee Plan") to persons subject to Section 16 of the
Exchange Act and the rules promulgated thereunder ("Reporting Persons").
Stock Option Committee. The Stock Option Committee consists of four
directors: Messrs. Beck, Koldyke, Muehlstein and Ruth. The Stock Option
Committee met two times during fiscal 1996 and also acted by
5
<PAGE>
unanimous written consent thirteen times. The Stock Option Committee is
responsible for the administration of, and the granting of all options under,
the Employee Plan to persons other than Reporting Persons.
In fiscal 1996, during the time each director served in such capacity, no
director attended less than 75% of the aggregate of all meetings of the Board
and all meetings held by committees of the Board on which such director
served.
Nominations for election of directors are made by the Board of Directors
and, pursuant to the Company's bylaws, may be made by a committee appointed by
the Board or by any stockholder entitled to vote in the election of directors.
See "Submission of Stockholder Proposals for the 1998 Annual Meeting" for
procedures with respect to nominations by stockholders.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for each of the fiscal years
ended December 29, 1996 and December 31, 1995 received by the Company's Chief
Executive Officer and the Company's four other most highly compensated
executive officers (the "named executive officers"). The Company was
incorporated in February 1995 and did not conduct business prior to that time.
The Company does not have a restricted stock award program or a long-term
incentive plan.
<TABLE>
<CAPTION>
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL COMPEN- OPTIONS COMPEN-
POSITION(1) YEAR SALARY BONUS SATION (#) SATION(2)
----------- ---- -------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mark R. Goldston........... 1996 $256,154 $400,000 0 139,030 $ 0
President and Chief
Executive Officer 1995 -- -- -- -- --
David G. Stanchak.......... 1996 149,038 0 0 45,518 0
Chief Development Officer 1995 90,865 0 0 42,483 4,629
Michael J. Beaudoin(3)..... 1996 149,038 0 0 70,518 0
Senior Vice President--
Supply Chain 1995 60,096 0 0 42,483 0
Paul A. Strasen............ 1996 125,000 0 0 37,931 0
Senior Vice President and
General Counsel 1995 81,731 0 0 42,483 58,693
Joel M. Alam............... 1996 125,000 0 0 37,931 0
Senior Vice President and
Secretary 1995 79,327 0 0 42,483 0
</TABLE>
- --------
(1) Daniel V. Colangelo served as President and Chief Executive Officer of the
Company until January 1996. During fiscal year 1995, the Company paid Mr.
Colangelo total cash compensation of $103,462 in salary and $47,375 in
bonus, and during fiscal year 1996, the Company paid Mr. Colangelo total
cash compensation of $67,308 in salary. During 1995 and 1996, the Company
granted Mr. Colangelo options to purchase an aggregate of 50,979 and
37,931 shares of Common Stock, respectively. The Company paid Mr.
Colangelo no other compensation during such fiscal years.
(2) Amounts represent relocation reimbursements.
(3) Mr. Beaudoin resigned as Senior Vice President--Supply Chain in February
1997.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made by
the Company to the named executive officers during the fiscal year ended
December 29, 1996.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
TOTAL PRICE APPRECIATION
OPTIONS GRANTED EXERCISE FOR OPTION TERM(3)
DATE OF OPTIONS TO EMPLOYEES IN OR BASE EXPIRATION -------------------
NAME(1) GRANT(2) GRANTED(3) FISCAL YEAR PRICE DATE 5% 10%
- ------- ------- ---------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark R. Goldston(4)..... 4/8/96 114,030 5.86% $10.5236 4/8/2006 $754,677 $1,912,501
7/19/96 25,000 1.28 12.0000 7/19/2006 188,688 478,123
David G. Stanchak....... 1/16/96 45,518 2.34 6.5909 1/16/2006 188,671 478,130
Michael J. Beaudoin..... 1/16/96 45,518 2.34 6.5909 1/16/2006 188,671 478,130
7/19/96 25,000 1.28 12.0000 7/19/2006 188,688 478,123
Paul A. Strasen......... 1/16/96 37,931 1.95 6.5909 1/16/2006 157,223 398,435
Joel M. Alam............ 1/16/96 37,931 1.95 6.5909 1/16/2006 157,223 398,435
</TABLE>
- --------
(1) On January 16, 1996, the Company granted Mr. Colangelo options to purchase
an aggregate of 37,931 shares of Common Stock at an exercise price of
$6.5909 per share. Such options represent 1.95% of the total number of
options granted to employees during fiscal year 1996 and expire January
16, 2006. See "Certain Transactions--Employment and Consulting
Agreements." The potential realizable values of such options at assumed
annual rates of stock price appreciation of 5% and 10% during the term of
the options are $157,223 and $398,435, respectively. See Footnote 3.
(2) Options granted become exercisable with respect to 10% of the total number
of shares on the first anniversary of the date of grant, an additional 20%
on the second anniversary of the date of grant, an additional 30% on the
third anniversary of the date of grant, and the balance on the fourth
anniversary of the date of grant.
(3) These amounts represent certain assumed annual rates of appreciation
calculated from the exercise price, as required by the rules of the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future
performance of the Common Stock. There can be no assurance that the
amounts reflected in this table will be achieved.
(4) Excludes 344,673 shares of Common Stock subject to options granted to Mr.
Goldston in April 1996 by Boston Chicken on shares of Common Stock owned
by Boston Chicken with an exercise price of $6.38 per share.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for the named executive officers' aggregated
information concerning each exercise of stock options during the fiscal year
ended December 29, 1996 and the fiscal year-end value of unexercised options.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT FISCAL YEAR-
SHARES FISCAL YEAR-END (#) END ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME(1) EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Mark R. Goldston........ 0 $ 0 0/139,030 $ 0/$2,653,515
David G. Stanchak....... 4,249 24,193 0/ 83,749 0/ 1,977,015
Michael J. Beaudoin..... 0 0 4,248/108,753 101,910/ 2,423,985
Paul A. Strasen......... 0 0 4,248/ 76,166 101,910/ 1,800,454
Joel M. Alam............ 0 0 4,248/ 76,166 101,910/ 1,800,454
</TABLE>
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(1) During fiscal year 1996, Mr. Colangelo exercised options to purchase an
aggregate of 50,979 shares of Common Stock and realized an aggregate of
$35,996 upon such exercise. At December 29, 1996, Mr. Colangelo retained
options to purchase 37,931 shares of Common Stock, all of which were
exercisable as of such date, having an aggregate value of $883,189 as of
such date.
7
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STOCK OPTION PLANS
The purpose of the Employee Plan is to benefit the Company by offering
certain present and future employees, officers and consultants of the Company
and its subsidiaries an opportunity to become holders of Common Stock over a
period of years, thereby giving them a stake in the growth and prosperity of
the Company and to encourage them to continue their involvement with the
Company. Under the Employee Plan, eligible persons may be granted options to
purchase an aggregate of not more than 5,500,000 shares of Common Stock. Such
options are not intended to be treated as incentive stock options as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Each director who is not an officer or employee of the Company is eligible
to participate in the Company's 1996 Stock Option Plan for Non-Employee
Directors (the "Directors Plan"). The purpose of the Directors Plan is to
benefit the Company by offering certain present and future directors who are
not employees or officers of the Company and its subsidiaries an opportunity
to become holders of Common Stock over a period of years, thereby giving them
a stake in the growth and prosperity of the Company in order to enable them to
represent the viewpoint of other stockholders of the Company more effectively
and to encourage them to continue serving as directors of the Company.
Under the Directors Plan, options for shares having a fair market value of
$50,000 at the date of grant are granted at the time of each election or re-
election of eligible directors to the Board, except that the initial grants of
options under the Directors Plan were made on the date of adoption of the
Directors Plan. An aggregate of 100,000 shares is available for option grants
under the Directors Plan. Such options are not intended to be treated as
incentive stock options as defined in Section 422 of the Code. As of March 17,
1997, each of Messrs. Koldyke, Muehlstein and Ruth had received options to
purchase 4,318 shares of Common Stock under the Directors Plan, at an exercise
price of $11.58 per share.
DIRECTOR COMPENSATION
In addition to annual grants under the Directors Plan, each director who is
not an officer or employee of, or consultant to, the Company receives $500
cash compensation for each board of directors meeting at which they are
present and for each committee meeting at which they are present not held in
conjunction with a meeting of the board of directors. Outside directors are
also reimbursed for their expenses for each board and committee meeting
attended.
The Company has also entered into employment and consulting agreements with
certain of its directors who are or were executive or other officers of the
Company. See "Certain Transactions--Employment and Consulting Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Compensation Committee of the
Board of Directors during the year ended December 29, 1996: Scott A. Beck, M.
Laird Koldyke, John H. Muehlstein, Jr., and Lloyd D. Ruth.
Currently, no executive officer of the Company, except for Scott Beck, who
is Chairman of the Board of the Company and a member of the Compensation
Committee of the Board of Directors, and Mark R. Goldston, who is President
and Chief Executive Officer of the Company, serves as a member of the
compensation committee or as a director of any other entity, one of whose
executive officers serves on the compensation committee or is a director of
the Company. Mr. Beck is Chairman of the Board, President and Chief Executive
Officer of Boston Chicken and Mr. Goldston is Vice Chairman of the Board and a
director of Boston Chicken. Neither Mr. Beck nor Mr. Goldston serves on the
compensation committee of Boston Chicken's board of directors.
8
<PAGE>
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Report of the
Compensation Committee" and "Performance Graph" will not be deemed to be filed
or to be proxy soliciting material or incorporated by reference in any prior
or future filings by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
The Board of Directors has two standing committees responsible for executive
compensation matters. The Compensation Committee has overall responsibility
for cash compensation and the Reporting Person Stock Option Committee has
overall responsibility for stock option grants to executive officers,
including grant approval and plan administration. The following report on
executive compensation is furnished by the members of such committees.
Prior to the Company's initial public offering in August 1996, the Company's
Board of Directors was responsible for establishing executive compensation for
the Company's executive officers, based principally on the recommendations of
management. In connection with the Company's initial public offering, the
Company established the Compensation Committee to determine executive
compensation. The Compensation Committee subsequently ratified the Board's
actions with respect to executive compensation for fiscal 1996.
GENERAL POLICIES
The Company's compensation program is intended to enable the Company to
attract, motivate, reward and retain the management talent required to achieve
corporate objectives in a dynamic environment operating in a highly
competitive industry, and thereby increase stockholder value. It is the
Company's policy to provide incentives to its senior management to achieve
both short-term and long-term objectives. For 1996, the Company's executive
compensation consisted primarily of salary and stock options, with a structure
heavily weighted to stock-based compensation. The Committee believes that
stock-based compensation, in the form of stock options, directly aligns the
interests of management and the Company's stockholders to increase stockholder
value over a period of years.
CASH COMPENSATION
Cash compensation for executive officers consists of salary and, in the case
of Mr. Goldston, a cash bonus for 1996 pursuant to his employment arrangement
with the Company. In 1996 and 1995, bonuses generally have not been part of
the Company's general executive compensation structure.
The Compensation Committee is aware that most of the Company's executive
officers experienced a significant reduction in annual cash compensation upon
joining the Company. In addition, the Committee believes, based on the general
knowledge and experience of the Committee members, that base salaries for the
Company's executive officers are generally low relative to (i) cash salaries
of similarly sized or otherwise comparable companies, (ii) the contributions
of the executive officers to the development of the Company's business, and
(iii) their experience, responsibilities and achievements.
Base salaries for executive officers are determined by a subjective
assessment of responsibilities and position within the Company, individual
performance and the Company's overall performance. No specific corporate
performance measures are considered. Salaries for 1996 were increased from
1995 levels based on a subjective assessment of the factors described above.
STOCK OPTIONS
The Reporting Person Stock Option Committee and Compensation Committee
consider incentive compensation in the form of stock options to be an
integral, important and relatively large part of executive compensation in
particular and employee compensation generally. All options granted have an
exercise price equal to the fair market value of the Common Stock on the grant
date.
9
<PAGE>
Options are granted to executive officers upon commencement of employment
and annually near the beginning of each year at the discretion of the
Reporting Person Stock Option Committee. In exercising such discretion, the
Reporting Person Stock Option Committee uses a formula that considers factors
such as salary, position and responsibilities, the date of commencement of
employment in relation to the next annual option grant, factors relating to
recruiting and employment offers, significant salary changes and promotions
and other factors relating to special performance. Option grants relating to
recruiting and employment offers and special circumstances are recommended by
management.
In 1996, the Reporting Person Stock Option Committee generally granted
options to executive officers based on a multiple of two to three times such
executive officer's salary divided by the fair market value of the Common
Stock on the grant date. The number of options previously granted to executive
officers was not a factor considered by the Reporting Person Stock Option
Committee in determining the number of options granted in fiscal 1996.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mark R. Goldston joined the Company as President, Chief Executive Officer
and a director in April 1996. Mr. Goldston's 1996 compensation consisted of
base salary, bonus and stock options. Mr. Goldston's compensation was the
result of arms' length negotiations with the Company in connection with his
employment as President and Chief Executive Officer. Factors considered by the
Board of Directors in determining and approving Mr. Goldston's compensation
included his entrepreneurial drive, extensive retail experience, knowledge and
leadership abilities. The Compensation Committee subsequently ratified Mr.
Goldston's compensation after consideration of such factors. With respect to
Mr. Goldston's stock option grant on July 19, 1996, the Reporting Person Stock
Option Committee considered the same factors that were used to determine stock
option grants to other executive officers on that date.
POLICY REGARDING RULE 162(M)
In general, Section 162(m) of the Code limits the tax deductibility of
annual compensation paid to certain executive officers to $1 million, subject
to an exception for "performance-based" compensation plans as defined under
that Section. The Company believes that its Employee Plan and Directors Plan
qualify as "performance-based" plans that are not subject to the $1 million
cap. The other compensation currently paid to the Company's executive officers
is not expected to exceed the $1 million cap. The Committee's current policy
is to maintain a compensation structure that permits all executive
compensation to be tax deductible to the Company. However, circumstances may
arise in the future that might result in the Committee authorizing
compensation that is not entirely deductible.
CONCLUSION
The Compensation Committee and Reporting Person Stock Option Committee
intend to continue the policy of providing a significant portion of executive
compensation in the form of at-risk, incentive-based compensation, such as
stock options. The Committees believe that such a policy, which directly
aligns the financial interests of management with the financial interests of
stockholders, provides the proper incentives to attract, reward and retain
high quality management. The Committees intend to review the executive
compensation structure at least annually, increase salaries and option grants,
and provide additional forms of incentive-based or fixed compensation, all as
the Committees believe appropriate to continue attracting and retaining
management with the necessary experience and expertise to further the
Company's growth.
COMPENSATION COMMITTEE MEMBERS REPORTING PERSON STOCK OPTION
SCOTT A. BECK COMMITTEE MEMBERS
M. LAIRD KOLDYKE M. LAIRD KOLDYKE
JOHN H. MUEHLSTEIN, JR. LLOYD D. RUTH
LLOYD D. RUTH
10
<PAGE>
PERFORMANCE GRAPH
The Company has determined that a peer group that is representative of its
line of business and its stage of commercial development is appropriate for
performance comparison purposes. The members of the peer group are Au Bon Pain
Co. Inc., BAB Holdings, Inc., Boston Chicken, Inc., Brinker International
Inc., Manhattan Bagel Co., Inc., McDonald's Corp., New York Bagel Enterprises,
Papa John's International Inc., Quality Dining, Inc., Sbarro Inc., and
Starbucks Corp. (the "Peer Group Index"). The following graph compares the
percentage change in the cumulative total returns on the Common Stock, the
Peer Group Index, and the Standard & Poor's 500 Index (assuming reinvestment
of any dividends) for the period beginning on August 1, 1996, the effective
date of the registration of the Common Stock under Section 12 of the Exchange
Act, and ending on December 27, 1996, the last day on which shares of Common
Stock traded on the Nasdaq National Market prior to December 29, 1996, the
last day of the Company's 1995 fiscal year.
COMPARISON OF CUMULATIVE RETURN
VS. PEER GROUP AND S&P 500 INDICES (1)
GRAPH
<TABLE>
<CAPTION>
8/2/96 12/27/96
------ --------
<S> <C> <C>
Einstein/Noah Bagel Corp.................................. $100 $145.73
Peer Group................................................ $100 $ 98.92
S&P 500................................................... $100 $116.85
</TABLE>
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(1) Assumes $100 invested on August 1, 1996 in Common Stock, the Peer Group
Index, and the S&P 500 Index. Historical results are not necessarily
indicative of future performance.
11
<PAGE>
CERTAIN TRANSACTIONS
ACQUISITION OF NOAH'S NEW YORK BAGELS, INC.
In February 1996, the Company acquired all of the outstanding capital stock
of Noah's New York Bagels, Inc. ("Noah's") for an aggregate purchase price of
$100.9 million in cash. Noah Alper, formerly a Vice Chairman of the Board,
received an aggregate of $10,274,268 from the Company in such acquisition.
Also in connection with such acquisition, a trust, of which Mr. Alper is the
beneficiary and trustee, purchased 93,600 shares of Common Stock for an
aggregate purchase price of $984,672.
CONCURRENT PUBLIC OFFERING
In connection with the Company's initial public offering in August 1996, the
Company sold to certain persons or entities, consisting primarily of officers,
directors and employees of each of the Company and Boston Chicken, an
aggregate of 425,000 shares of Common Stock in a concurrent non-underwritten
public offering at the initial public offering price net of underwriting
discount (the "Concurrent Public Offering"). In the Concurrent Public
Offering, executive officers and directors of the Company (none of whom were
members of the committee of the Board of Directors who negotiated the offering
price) purchased an aggregate of 45,360 of such shares of Common Stock as
follows: Mr. Beck--8,612; Mr. Alper--3,498; Mr. Goldston--3,750; Mr. W. Eric
Carlborg, Senior Vice President--Finance--3,750; Mr. Stanchak--3,750; Mr.
Beaudoin--3,750; Mr. Jeffrey L. Butler, President, Einstein Bros. Bagels--
3,750; Mr. Alam--4,500; Mr. Strasen--2,500; Mr. Muehlstein--3,750; and Mr.
Ruth--3,750. Certain executive officers and directors of Boston Chicken (other
than Messrs. Beck and Goldston) also purchased an aggregate of 39,500 shares
of Common Stock.
REGISTRATION RIGHTS
The Company is a party to an amended and restated registration rights
agreement dated as of February 1, 1996 (the "Stockholder Registration
Agreement") with certain stockholders of the Company, including Messrs.
Goldston, Craig, Alper, Stanchak, Beaudoin, Butler, Beck and Colangelo, as
well as Mr. Alam and his spouse, and with certain stockholders of the Company,
which are entities controlled by certain executive officers and directors of
the Company or their spouses, including Mr. Strasen and his spouse, Mr.
Offerdahl and his spouse, Mr. Koldyke, Mr. Ruth, Mr. Muehlstein and Ms.
Lozoff's spouse. Pursuant to such agreement, the Company granted certain
piggyback and resale registration rights under the Securities Act with respect
to shares of Common Stock owned by such stockholders (the "Registrable
Securities"). The Company has registered under the Securities Act the
Registrable Securities held by such stockholders (except for shares owned by
Messrs. Beck and Goldston), which permit them to make public resales of the
Registrable Securities in accordance with the requirements of the Securities
Act.
TRANSACTIONS WITH AREA DEVELOPERS
BCE West Bagels, L.L.C. Lawrence Beck, Scott Beck's father, is a minority
investor in BCE West Bagels, L.L.C. ("BCE West"), the Company's area developer
for the Phoenix, Tucson, Albuquerque/Santa Fe, Denver, Colorado Springs, Las
Vegas, El Paso and Salt Lake City designated market areas ("DMAs"). In fiscal
1996, BCE West paid to the Company an aggregate of $3,960,832 in development,
franchise, royalty, real estate, software maintenance and miscellaneous fees,
interest and deposits. The Company believes that the terms of the area
development agreement and each franchise agreement entered into with BCE West
are as favorable to the Company as those with other area developers of the
Company. The Company also believes that the terms of the secured loan
agreement with BCE West are as favorable to the Company as those with other
area developers of the Company to whom the Company has loaned money.
COLONIAL BAGELS, L.P. Lawrence Beck is a minority investor in the general
partner of Colonial Bagels, L.P. ("Colonial"), the Company's area developer
for the Boston, Burlington/Plattsburgh, Cleveland, Pittsburgh,
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<PAGE>
Providence/New Bedford, and Springfield DMAs. Effective June 17, 1996, the
Company entered into a convertible secured loan agreement and an area
development agreement with Colonial. In connection with the execution of such
agreements, the Company sold to Colonial certain assets located in certain of
those DMAs at net book value for an aggregate purchase price of $486,917,
pursuant to an asset sale agreement. The Company realized no significant gain
or loss on such sale. In fiscal 1996, Colonial paid to the Company an
aggregate of $1,877,466 in development, franchise, royalty, real estate,
software maintenance and miscellaneous fees, interest and deposits. The
Company believes that the terms of the area development agreement and each
franchise agreement entered into with Colonial are as favorable to the Company
as those with other area developers of the Company. The Company also believes
that the terms of the secured loan agreement and asset sale agreement with
Colonial are as favorable to the Company as those with other area developers
of the Company to whom the Company has loaned money and sold assets.
NOAH'S PACIFIC, L.L.C. Noah Alper owns a minority equity interest in Noah's
Pacific, L.L.C. ("Noah's Pacific"), the Company's area developer for the Los
Angeles, Portland, Seattle/Tacoma and Las Vegas DMAs. Effective June 17, 1996,
the Company entered into a convertible secured loan agreement and an area
development agreement with Noah's Pacific. In connection with the execution of
such agreements, the Company sold to Noah's Pacific the Company stores and
certain assets located in certain of those DMAs at net book value for an
aggregate purchase price of $10,482,762, pursuant to an asset sale agreement,
and entered into a franchise agreement with Noah's Pacific for each such
store. The Company realized no significant gain or loss on such sale. In
fiscal 1996, Noah's Pacific paid to the Company an aggregate of $3,713,608 in
development, franchise, royalty, real estate, software maintenance and
miscellaneous fees, interest and deposits. The Company believes that the terms
of the area development agreement and each franchise agreement entered into
with Noah's Pacific are as favorable to the Company as those with other area
developers of the Company. The Company also believes that the terms of the
secured loan agreement and asset sale agreement with Noah's Pacific are as
favorable to the Company as those with other area developers of the Company to
whom the Company has loaned money and sold assets.
NOAH'S BAY AREA BAGELS, L.L.C. Noah Alper owns a minority equity interest in
Noah's Bay Area, L.L.C. ("Noah's Bay Area"), the Company's area developer for
the San Francisco/Oakland/San Jose and Sacramento/Stockton/Modesto DMAs.
Effective July 15, 1996, the Company entered into a convertible secured loan
agreement and an area development agreement with Noah's Bay Area Bagels. In
connection with the execution of such agreements, the Company sold to Noah's
Bay Area the Company stores and certain assets located in those DMAs at net
book value for an aggregate purchase price of $9,542,001, pursuant to an asset
sale agreement, and entered into a franchise agreement with Noah's Bay Area
for each such store. The Company realized no significant gain or loss on such
sale. In fiscal 1996, Noah's Bay Area paid to the Company an aggregate of
$3,761,002 in development, franchise, royalty, real estate, software
maintenance and miscellaneous fees, interest and deposits. The Company
believes that the terms of the area development agreement and each franchise
agreement entered into with Noah's Bay Area are as favorable to the Company as
those with other area developers of the Company. The Company also believes
that the terms of the secured loan agreement and asset sale agreement with
Noah's Bay Area are as favorable to the Company as those with other area
developers of the Company to whom the Company has loaned money and sold
assets.
OTHER AREA DEVELOPERS. Bagel Store Development Funding L.L.C., a Delaware
limited liability company ("Bagel Funding"), owns a majority equity interest
in all of the Company's area developers and certain officers and directors of
the Company own equity interests in Bagel Funding. See "--Bagel Store
Development Funding L.L.C." In addition to the transactions between the
Company and each of BCE West, Colonial, Noah's Pacific and Noah's Bay Area
described above, in fiscal 1996, the Company entered into convertible secured
loan agreements and area development agreements with its other area
developers. In connection with the execution of such agreements, the Company
sold to such area developers the Company stores and related assets located in
the area developers' respective DMAs at net book value for an aggregate
purchase price of $29,430,721, pursuant to asset sale agreements, and entered
into franchise agreements for each such store. The Company realized no
significant gain or loss on any of such sales. In fiscal 1996, such area
developers paid to the Company an
13
<PAGE>
aggregate of $19,637,563 in development, franchise, royalty, real estate,
software maintenance and miscellaneous fees, interest and deposits. The
Company believes that the terms of the area development agreements and
franchise agreements entered into with such area developers are as favorable
to the Company as those with its other area developers. The Company also
believes that the terms of the secured loan agreements and asset sale
agreements with such area developers are as favorable to the Company as those
with its other area developers of the Company to whom the Company has loaned
money.
AREA DEVELOPER WARRANTS. On January 15, 1996, in connection with the
formation of the Company's area developers, the Company issued to such
entities warrants to acquire an aggregate of 1,012,500 shares of Common Stock,
each at an exercise price per share of $6.47, the fair market value of the
shares of Common Stock on the date the warrants were sold. As of March 31,
1997, all of such warrants had been exercised.
BAGEL STORE DEVELOPMENT FUNDING, L.L.C.
Bagel Funding was formed in December 1995 to invest in the Company's area
developers. Through December 29, 1996, Bagel Funding had raised $90.0 million
(including an aggregate of $15.0 million in subscriptions receivable) and had
invested a total of $70.2 million in the Company's area developers. 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 price based
on the 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 does not consent to the area
developer's request to undertake a firm commitment underwritten public
offering of such area developer's equity 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. The Company is currently the manager of Bagel Funding,
but has no equity interest in Bagel Funding. The Company received fees of
$500,000 during 1996 for serving as manager of Bagel Funding. Messrs. Scott
Beck, Butler, Carlborg, Muehlstein, Ruth and Stanchak each own a direct equity
interest in Bagel Funding. Such interests aggregate approximately 8.1% of the
outstanding equity interest in Bagel Funding. Certain executive officers and
directors of Boston Chicken own direct or indirect equity interests in Bagel
Funding. Such interests, excluding interests owned by Scott Beck, aggregate
approximately 10.8% of the outstanding equity interest in Bagel Funding.
EMPLOYMENT AND CONSULTING AGREEMENTS
On March 6, 1996, the Company entered into a consulting agreement with Mr.
Colangelo in connection with his resignation as President and Chief Executive
Officer of the Company. Pursuant to the consulting agreement, Mr. Colangelo
agreed to, upon the Company's request, provide information, advice and
assistance to the Company concerning matters that were within the scope of his
knowledge and expertise during the course of his employment by the Company.
The consulting agreement has a term of one year and is automatically renewed
for successive one-year periods unless terminated by either party upon 30
days' prior written notice. Under the consulting agreement, Mr. Colangelo
receives $100,000 per year and is entitled to reimbursement for his related
reasonable business expenses. In addition, in January 1996, Mr. Colangelo
exercised options granted during 1995 under the Employee Plan. Mr. Colangelo
also retained options to purchase an aggregate of 37,931 shares of Common
Stock at an exercise price of $6.5909 per share, which options were granted in
January 1996 and vest in accordance with the Employee Plan's vesting schedule
during the term of the consulting agreement.
On March 24, 1995, in connection with the Company's acquisition of the
assets of Bagel & Bagel, Inc., the Company entered into an employment
agreement with Ms. Lozoff, pursuant to which Ms. Lozoff became a Vice
14
<PAGE>
President and a director of the Company. The employment agreement terminates
August 1, 1998. Ms. Lozoff receives an annual salary of $125,000 and
reimbursement of reasonable business expenses. In addition, at the time she
entered into the employment agreement, Ms. Lozoff was granted options to
purchase 42,483 shares of Common Stock under the Employee Plan with an
exercise price of $5.88 per share.
On September 23, 1996, the Company entered into a letter agreement with Mr.
Offerdahl in connection with his resignation as an officer of the Company and
termination of his employment agreement with the Company effective July 26,
1996. Pursuant to such letter agreement, the vesting of options to purchase
42,483 shares of Common Stock at an exercise price of $5.88 per share was
accelerated in accordance with the terms of Mr. Offerdahl's employment
agreement.
On September 23, 1996, the Company entered into a letter agreement with
Lynnora Offerdahl, Mr. Offerdahl's spouse, in connection with her resignation
as a consultant to the Company and termination of her consulting agreement
with the Company effective August 11, 1996. Pursuant to such letter agreement,
the vesting of options to purchase 42,483 shares of Common Stock at an
exercise price of $5.88 per share was accelerated in accordance with the terms
of Ms. Offerdahl's consulting agreement.
On April 5, 1996, Mr. Goldston was elected President and Chief Executive
Officer and a director of the Company. The Company has agreed to pay to Mr.
Goldston a base salary of $360,000 per year, with a guaranteed bonus of
$400,000 for fiscal year 1996. For fiscal year 1997, Mr. Goldston will be
eligible for a $400,000 bonus, the receipt of which will be based upon the
achievement of mutually agreed upon reasonable performance goals. In addition,
the Company granted to Mr. Goldston options under the Employee Plan to
purchase 114,030 shares of Common Stock at an exercise price of $10.52 per
share. Beginning in fiscal year 1997, and for each year thereafter as long as
he remains an employee of the Company, Mr. Goldston will be eligible for an
annual stock option grant under the Employee Plan to purchase, at a minimum,
that number of shares of Common Stock that have an aggregate exercise price of
$800,000. In connection with his employment, Mr. Goldston also purchased
28,508 shares of Common Stock at a price of $10.52 per share, the fair market
value of the shares of Common Stock on the date of purchase.
Effective January 17, 1996, Boston Chicken employed Mr. Goldston to
undertake various special projects for Boston Chicken. In August 1996, Mr.
Goldston became Vice Chairman of the Board and a director of Boston Chicken.
Boston Chicken has agreed to structure Mr. Goldston's future projects so that
his employment with Boston Chicken will not interfere with his duties with the
Company. As an employee of Boston Chicken, Mr. Goldston receives an annual
salary of $40,000 and is eligible to participate in Boston Chicken's employee
stock option plan. Mr. Goldston has been granted options under that plan to
purchase 100,000 shares of Boston Chicken common stock at an exercise price of
$27.9375 per share. In addition, Boston Chicken granted to Mr. Goldston
options (outside of Boston Chicken's employee option plans) to purchase an
additional 100,000 shares of Boston Chicken common stock at an exercise price
of $16.00 per share, the fair market value of the Boston Chicken common stock
on the date of grant. Such options are currently exercisable. In consideration
for certain consulting services rendered to Boston Chicken by Mr. Goldston and
a consulting firm of which Mr. Goldston was a principal, Boston Chicken has
paid an aggregate of $1,818,086 to such firm for consulting services rendered
during fiscal years 1995 and 1996. Boston Chicken has also granted to Mr.
Goldston an option to purchase from Boston Chicken 344,673 shares of the
Company's Common Stock at an exercise price of $6.38 per share.
On July 1, 1996, the Company entered into a transition and consulting
agreement with Mr. Craig in connection with his resignation as Chairman of the
Board of the Company, pursuant to which Mr. Craig will continue as a full-time
employee of the Company until June 30, 1997 and will provide consulting
services to the Company for a period of one year thereafter. As an employee of
the Company, Mr. Craig was paid approximately $3,600 bi-weekly through the end
of fiscal 1996 and will be paid approximately $7,900 bi-weekly during the
first six months of fiscal 1997. During the term of his employment, Mr. Craig
will continue to participate in the
15
<PAGE>
Company's employee benefit plans, except that he will not be eligible to
receive options under any of the Company's stock option plans.
BOWANA AVIATION, INC.
During the fiscal 1996, the Company made payments in an aggregate amount of
$98,000 to Bowana Aviation, Inc. ("Bowana") pursuant to lease agreements
between Bowana and the Company for the use of Bowana's aircraft. Such lease
agreements were terminated in July 1996. Mr. Beck and Lawrence Beck own
Bowana. The Company believes that the terms of its use of Bowana's aircraft
were at least as favorable to the Company as those it could have obtained from
an unaffiliated party.
LOANS TO EXECUTIVE OFFICERS
On August 9, 1995, the Company made a loan to Mr. Craig in the principal
amount of $400,000, the proceeds of which were used by Mr. Craig to pay off a
loan from Boston Chicken. Interest on the principal amount of the Company's
loan to Mr. Craig accrued at the reference rate announced by Bank of America
Illinois from time to time plus 1%. Mr. Craig repaid the loan and all interest
accrued thereon in full on September 10, 1996.
On March 31, 1995, in connection with the Company's acquisition of the
assets of OBG, of which Mr. Offerdahl and his spouse were majority
stockholders, the Company made a non-recourse loan to OBG in the principal
amount of $437,497, the proceeds of which were used to purchase an aggregate
of 74,345 shares of Common Stock, which shares secure the payment of principal
and interest under such loan. Also on March 31, 1995, the Company made a non-
recourse loan to OBG in the principal amount of $1,312,500, the proceeds of
which were used to purchase an equity interest in BC Equity Funding, L.L.C., a
Delaware limited liability company that invests in Boston Chicken area
developers ("BCEF"), which equity interest secures the payment of principal
and interest under such loan. Each loan described above accrues interest on
the principal amount at the reference rate announced by Bank of America
Illinois from time to time plus 1%. The principal balance of each loan and all
accrued but unpaid interest thereon are due and payable on April 15, 2001, but
may be required to be repaid earlier under certain circumstances. As of March
17, 1997, an aggregate of $2,085,887 in principal and accrued interest was
outstanding under such loans.
Also in connection with the Company's acquisition of the assets of OBG, on
each of April 15, 1995, June 15, 1995, September 15, 1995 and January 15,
1996, the Company made an interest-free loan to OBG in the principal amount of
$46,100, and on April 15, 1996, the Company made an additional interest-free
loan to OBG in the principal amount of $1,502,276. The proceeds of each such
loan were used to satisfy income tax obligations arising from the acquisition.
Each such loan is secured by units of membership interest in BCEF owned by
OBG. The principal balance of each loan and all accrued but unpaid interest
thereon are due and payable on April 15, 2001, but may be required to be
repaid prior to such date in whole or in part under certain circumstances.
OTHER RELATIONSHIPS
Blind Faith, Inc., of which Ms. Lozoff and her spouse are the sole
stockholders, leases to the Company the land and building on which a store is
located. The Company subleases such land and building to one of its area
developers. The annual rental payments under the lease and sublease, each of
which terminates in May 2009, aggregate $72,000.
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RELATIONSHIP WITH BOSTON CHICKEN
During 1994 and 1995 Boston Chicken spent substantial amounts of time and
resources investigating the potential of the bagel business. In March 1995,
Boston Chicken made an investment in the Company in the form of a convertible
secured loan and sold to the Company at net book value certain assets and
certain know-how and agreements. On June 17, 1996, Boston Chicken converted
its loan to the Company into shares of Common Stock, as more fully described
below. Also in March 1995, Boston Chicken and the Company entered into fee
service agreements pursuant to which Boston Chicken has provided the Company
with certain multi-unit retail infrastructure support, including accounting
and administration services, financial services, real estate services and
computer and communications services.
LOAN AGREEMENT
On March 24, 1995, Boston Chicken made a senior secured convertible loan to
the Company, secured by substantially all of the Company's and its
subsidiaries' assets, in order to provide partial funding for store
development and working capital. In February 1996, in connection with the
Noah's acquisition, Boston Chicken increased the amount available under the
loan from $80.0 million to $120.0 million. Also in February 1996, Boston
Chicken provided a $25.0 million bridge loan to the Company (later increased
to $40.0 million), which was repaid by the Company upon the closing of the
Company's secured revolving credit facility. On May 9, 1996, Boston Chicken
and the Company amended the convertible loan agreement to include a $14.0
million non-convertible facility, which was subsequently increased to $50.0
million. On June 17, 1996, pursuant to the terms of the convertible loan
agreement, Boston Chicken converted $80.0 million outstanding under the loan
into Common Stock at a conversion price of $6.38 per share, and converted the
remaining $40.0 million outstanding under the loan into Common Stock at a
conversion price of $14.42 per share. The Company issued an aggregate of
15,307,421 shares of Common Stock in the loan conversion. As of March 17,
1997, there was no balance outstanding under the non-convertible loan
facility. Interest on the non-convertible loan is based on the reference rate
of Bank of America Illinois plus an applicable margin. In fiscal 1996, the
Company paid to Boston Chicken $6,084,893 in interest under its loans with
Boston Chicken. Any borrowings outstanding under the Company's non-convertible
loan facility from Boston Chicken are payable on June 15, 2003.
Boston Chicken may satisfy a portion of its funding obligations under the
non-convertible loan agreement in cash or in shares of Boston Chicken common
stock. Boston Chicken has agreed to guarantee the price of any shares of
Boston Chicken common stock delivered to the Company in satisfaction of Boston
Chicken's obligations under the loan agreement and thereafter sold by the
Company. Boston Chicken's obligation to guarantee the selling price of the
shares is contingent upon the Company selling all of the shares of Boston
Chicken common stock received by it with respect to a particular advance
within the first seven trading days after the advance date in one or more bona
fide broker's or market maker transactions through or to Merrill Lynch to one
or more persons not affiliated with, related to, or associated with the
Company. During fiscal 1996, Boston Chicken issued to the Company, and the
Company had sold on the Nasdaq National Market, through Merrill Lynch, Pierce,
Fenner & Smith Incorporated acting as broker, 2,701,615 shares of registered
Boston Chicken common stock for aggregate proceeds of approximately $88.0
million.
In connection with the Company's secured revolving credit facility with Bank
of America Illinois, Boston Chicken agreed to subordinate all of its loans to
the Company to all indebtedness under the Company's secured revolving credit
facility, and further agreed to release its security interest in the assets of
the Company.
CONCURRENT PRIVATE PLACEMENT AGREEMENT, REGISTRATION AGREEMENT AND CONCURRENT
OFFERING PURCHASE AGREEMENT
In connection with the Company's initial public offering and the Concurrent
Public Offering in August 1996, the Company entered into a concurrent private
placement agreement (the "Concurrent Private Placement Agreement") with Boston
Chicken, pursuant to which Boston Chicken purchased 2,000,000 shares of Common
Stock for $15.81 per share, the initial public offering price per share, net
of underwriting discount. The Concurrent Private Placement Agreement includes
customary terms and provisions, representations and warranties and
indemnification obligations. In addition, the Concurrent Private Placement
Agreement permits Boston Chicken to maintain ownership of shares of Common
Stock having up to 52% of the voting power of all
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of the outstanding shares of capital stock of the Company having the power
generally to vote in the election of directors pursuant to an option (the "BCI
Option") to purchase newly issued shares of Common Stock for cash or
registered shares of Boston Chicken common stock at a per share exercise price
equal to the (i) the weighted average price per share at which the Common
Stock was issued or sold in a transaction pursuant to which the BCI Option
becomes exercisable, in the case of a transaction in which such price per
share is readily ascertainable, or (ii) in all other cases, the average of the
closing sale prices for the Common Stock on the Nasdaq National Market (or
such other principal exchange or market on which the Common Stock may then be
trading) for the five trading days ending on the fifth trading day prior to
the date of the transaction pursuant to which the BCI Option becomes
exercisable, but subject in each case to adjustments for issuances of shares
of Common Stock in connection with recapitalizations, dividends, stock splits,
consolidations of shares and other diluting events. In the event payment is
made in registered shares of Boston Chicken common stock, Boston Chicken will
guarantee the price at which those shares can be sold at the market within a
limited time period. The BCI Option will terminate if (i) Boston Chicken sells
or transfers shares of Common Stock and as a result owns less than a majority
of the then outstanding shares of the Company's voting stock or (ii) the
percentage of outstanding shares of voting stock of the Company owned by
Boston Chicken is reduced below 50% other than as a result of Boston Chicken's
voluntary sale or transfer of shares of Common Stock and Boston Chicken fails
to acquire a sufficient number of shares of Common Stock so that it owns at
least a majority of the then outstanding shares of voting stock of the Company
by July 31 of the calendar year next following the calendar year in which such
reduction occurs. In addition, the percentage ownership level of 52% is
subject to reduction to the extent voluntary sales or transfers by Boston
Chicken reduce its ownership of the outstanding shares of voting stock of the
Company to less than 52% but do not otherwise result in termination of the BCI
Option. In determining the percentage ownership of voting stock of the Company
owned by Boston Chicken for purposes of the BCI Option, the Concurrent Private
Placement Agreement excludes (i) 701,177 shares of 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
reporting purposes. As so calculated, Boston Chicken held approximately 50.8%
of the voting stock of the Company as of March 17, 1997, and, accordingly, had
the right to purchase 838,822 additional shares of Common Stock under the BCI
Option at prices ranging from $25.29 to $30.75. The Concurrent Private
Placement Agreement prohibits the Company from taking certain actions without
the consent of Boston Chicken as long as the BCI Option has not terminated,
including altering any rights attaching to the Common Stock, offering or
issuing any equity securities or debt securities convertible into equity
securities, in either case other than Common Stock, distributing assets or
securities of the Company having a fair market value in excess of 10% of the
Company's consolidated gross assets or consolidated gross revenues measured as
of the immediately preceding fiscal year end, and filing a petition in
bankruptcy.
In connection with the Concurrent Private Placement Agreement, the Company
also entered into a registration agreement with Boston Chicken (the "Boston
Chicken Registration Agreement"), pursuant to which the Company granted to
Boston Chicken five demand and unlimited piggyback registration rights under
the Securities Act with respect to the shares of Common Stock purchased by
Boston Chicken in the Concurrent Private Placement or otherwise owned by it,
including shares of Common Stock subject to the BCI Option, for which the
Company will bear substantially all of the expenses in connection with such
registrations (other than underwriting discounts or commissions). Boston
Chicken's demand registration rights under the Boston Chicken Registration
Agreement became exercisable on September 27, 1996.
In connection with a public offering of shares by the Company in November
1996, the Company entered into a concurrent offering purchase agreement (the
"Concurrent Offering Purchase Agreement") with Boston Chicken, pursuant to
which Boston Chicken purchased an aggregate of 500,000 shares of Common Stock
at $28.575 per share. The Concurrent Offering Purchase Agreement includes
customary terms, representations, warranties and other provisions. The
Concurrent Offering Purchase Agreement also provides that the shares of Common
Stock purchased thereby by Boston Chicken constitute Registrable Securities
under the Boston Chicken Registration Agreement.
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ACCOUNTING AND ADMINISTRATION SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into an accounting
and administration services agreement, subsequently amended and restated in
May 1996 and June 1996 to incorporate minor changes to such agreement (the
"Accounting and Administration Services Agreement"), pursuant to which Boston
Chicken has agreed to assist the Company, its subsidiaries and area developers
in performing certain services, including maintaining accounting records,
performing accounting activities, preparing financial reports, administering
options, establishing and administering employee benefits, human resources,
insurance and recordkeeping services, assisting with lease negotiations,
maintaining lease files and complying with reporting obligations thereunder,
and providing certain other administrative support services. During fiscal
1996, the Company paid to Boston Chicken fees aggregating $720,800 under such
agreement.
The Accounting and Administration Services Agreement has a term of three
years and may be terminated by the Company or Boston Chicken upon 180 days'
prior written notice. In addition, Boston Chicken may terminate the agreement
without notice 15 days after giving notice of non-payment of the fees provided
for in the agreement, unless such non-payment is cured within such 15-day
period.
FINANCIAL SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into a financial
services agreement (as amended, the "Financial Services Agreement"), pursuant
to which Boston Chicken agreed to provide certain financial services to the
Company and its area developers, including identification and analysis of
possible transactions and related financial and strategic advice, assistance
in budget and forecast preparation, consultations and advice as to
presentations, discussions and disclosures to financial analysts and the
financial press, and advice concerning crisis management and control. In
consideration for such financial services, the Company paid to Boston Chicken
fees aggregating approximately $125,000 for fiscal year 1996. The Financial
Services Agreement was terminated effective as of May 20, 1996.
REAL ESTATE SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into a real estate
services agreement, subsequently amended and restated in May 1996 to make
minor changes to such agreement (the "Real Estate Services Agreement"),
pursuant to which Boston Chicken agreed to assist the Company, its
subsidiaries and area developers in conducting certain real estate-related
activities, including site analysis, advisory services regarding customer
trade area studies and other real estate matters. Pursuant to the Real Estate
Services Agreement, the Company paid to Boston Chicken in fiscal 1996 fees
aggregating $315,000. The Real Estate Services Agreement was terminated
effective as of June 17, 1996.
COMPUTER AND COMMUNICATIONS SYSTEMS SERVICES AGREEMENTS
On March 24, 1995, Boston Chicken and the Company entered into a computer
and communications systems services agreement, subsequently amended and
restated in May 1996 and June 1996 to make certain changes to such agreement
(the "Computer Services Agreement"), pursuant to which (i) the Company has
agreed to acquire communications and computer systems or hardware specified or
required from time to time by Boston Chicken for use by the Company and its
subsidiaries and area developers (except for Noah's Pacific and Noah's Bay
Area, area developers of the Company operating Noah's New York Bagels stores,
each of which is subject to a separate agreement with Boston Chicken for
computer systems conversion and services), (ii) Boston Chicken has licensed
the Company to use retail store-level computer software programs and certain
other computer software programs in connection with various support and
control functions (which the Company has agreed to use exclusively, along with
other software specified by Boston Chicken), and (iii) Boston Chicken has
agreed to provide certain computer and communications support services. In
consideration for such license and provision of services, in addition to other
miscellaneous fees, the Company has agreed to pay to Boston Chicken, for data
center and network service operations and support of certain infrastructure
programs, $750,000 for each of the 1996, 1997 and 1998 fiscal years and 0.25%
of net systemwide revenue of the Company, its subsidiaries and area developers
(excluding the revenue derived from Noah's New York Bagels stores) for each of
the 1999 and 2000 fiscal years. Pursuant to the Computer Services Agreement,
the Company and its subsidiaries paid to Boston Chicken in fiscal 1996 fees
aggregating $2,943,251.
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The Computer Services Agreement has a term of five years and may be
terminated by the Company or Boston Chicken upon one year prior written
notice. In addition, Boston Chicken may terminate the agreement without notice
15 days after giving notice of non-payment of the fees provided for in the
agreement, unless such non-payment is cured within such 15-day period.
OTHER RELATIONSHIPS BETWEEN BOSTON CHICKEN AND THE COMPANY
In July 1996, the Company, as tenant, entered into a lease with Boston
Chicken, as landlord, for the Company's support center facility, consisting of
approximately 38,000 square feet of office space (and certain common areas,
including parking areas) located in Golden, Colorado. The lease commenced on
September 1, 1996 and has a 15-year term, renewable for two consecutive five-
year terms. The lease provides for initial rent of approximately $38,000 per
month to be increased by 15% every five years during the initial term and any
renewal term of the lease. Under the lease, the Company has agreed that, in
the event Boston Chicken enters into a sale/leaseback transaction with any
third party, the Company will, at Boston Chicken's option, amend the amount of
rental payments under the lease to equal 40% of the rental amounts agreed to
be paid by Boston Chicken pursuant to such a transaction. The lease is a
"triple net" lease which requires the Company to pay its proportionate share
of costs associated with the property, building and common areas related to
the leased premises, including, without limitation, real estate taxes,
maintenance costs and insurance premiums. In addition, the Company is required
to pay to Boston Chicken an administrative and management fee not to exceed
15% of such costs. Under the terms of the lease, the Company is required to
procure and maintain comprehensive commercial liability and property damage
insurance for the leased premises. The lease contains other provisions typical
of commercial leases generally, including indemnification provisions, a
prohibition against subleasing without landlord consent and standard
provisions relating to defaults under the lease and remedies available upon
default. The Company believes the terms and provisions of the lease, including
the rent payable thereunder, are at least as favorable to the Company as those
it could have obtained from an unaffiliated third party.
The Company is a party to two subleases with Boston Chicken, pursuant to
which the Company is entitled to the non-exclusive use of aircraft leased by
Boston Chicken from unaffiliated leasing companies. Under the subleases, the
Company is obligated to pay to Boston Chicken between $1,900 and $2,800
(depending on the type of aircraft) for each hour of flight time such aircraft
is used by the Company. There is no minimum monthly use requirement or lease
payment under either of the subleases, and both subleases may be terminated by
either party upon 30 days' written notice. The Company believes that costs
incurred by it under the subleases are lower than the costs it would incur to
lease and maintain its own aircraft from an unaffiliated third party lessor
and slightly higher than the costs it would incur to charter individual
aircraft on a spot-basis from unaffiliated third party lessors. However, the
Company believes that such higher costs are reasonably related to the benefits
to the Company from the subleases, including aircraft availability and higher
maintenance standards, that it would not realize from charter arrangements
with unaffiliated third party lessors. During fiscal 1996, the Company paid to
Boston Chicken an aggregate of $469,128 under the two subleases.
APPOINTMENT OF AUDITORS
The Board of Directors has selected the accounting firm of Arthur Andersen
LLP to serve as the independent auditors of the Company for its current fiscal
year ending December 28, 1997, pursuant to the recommendation of the Audit
Committee. Arthur Andersen LLP has served as the Company's independent
auditors since 1995. Representatives of Arthur Andersen LLP are expected to be
present at the annual meeting and they will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions from stockholders.
SOLICITATION OF PROXIES
Proxies will be solicited by the Board of Directors through the use of the
mail. Proxies may also be solicited by directors, officers, and a small number
of other employees of the Company personally or by mail, telephone, facsimile,
or otherwise, but such persons will not be compensated for such services.
Brokerage firms, banks, fiduciaries, voting trustees, or other nominees will
be requested to forward the soliciting material to the beneficial owners of
stock held of record by them. The entire cost of the Board of Directors'
solicitation will be borne by the Company.
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SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
In accordance with rules promulgated by the Securities and Exchange
Commission, any stockholder who wishes to submit a proposal for inclusion in
the proxy material to be distributed by the Company in connection with the
1998 Annual Meeting must do so no later than December 2, 1997. Any such
proposal should be submitted in writing to the Secretary of the Company at its
principal executive offices. In addition, the Company's bylaws require that in
order for any business to be properly brought before any meeting of
stockholders, including nominations for the election of directors, a
stockholder must provide written notice delivered to the Secretary of the
Company at the principal executive offices of the Company not less than 30 nor
more than 60 days prior to the meeting date; provided, however, that in the
event that less than 40 days notice or prior public disclosure of the date of
the meeting is given or made to stockholders, the stockholder notice, in order
to be timely, must be received prior to the date of the meeting and not later
than the close of business on the tenth day following the day on which notice
or disclosure of the meeting date has been given or made. The stockholder
notice must include the stockholder's name and address as it appears on the
Company's records and the class and number of shares of the Company's capital
stock beneficially owned by such stockholder on the record date for the
meeting. In addition, (i) for proposals other than nominations for the
election of directors, such notice must include a description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting, and any material interest of the stockholder in such
business, and (ii) for proposals relating to stockholder nominations for the
election of directors, such notice must also include, with respect to each
person nominated, the information required by Regulation 14A under the
Exchange Act.
OTHER MATTERS
Management knows of no other matters to be brought before the annual meeting
other than those described above. If any other business should come before the
meeting, it is intended that the persons named in the enclosed proxy will vote
the shares in accordance with their best judgment on any such matter.
GENERAL
It is important that proxies be returned promptly. If you are unable to
attend the meeting, you are urged, regardless of the number of shares owned,
to date, sign, and return without delay your proxy card in the enclosed
addressed envelope.
By Order of the Board of Directors
/s/ Joel M. Alam
Joel M. Alam
SECRETARY
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EINSTEIN/NOAH BAGEL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 13, 1997--12:00 NOON, MOUNTAIN
TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Scott A. Beck and Mark R. Goldston, or either
of them, each with full power of substitution, to act as proxies for the
undersigned, and to vote all shares of Common Stock of Einstein/Noah Bagel
Corp. (the "Company"), which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held on May 13, 1997, at 12:00 noon, Mountain Time, at the Denver Marriott
West, 1717 Denver West Boulevard, Golden, Colorado, and at any and all
postponements and adjournments thereof, as follows:
[_]Check here if you plan to attend the Annual Meeting.
PLEASE MARK VOTE IN SQUARE USING DARK INK ONLY.
1. Election of Directors: Nominees: Scott A. Beck, Kyle T. Craig, Mark R.
Goldston, M. Laird Koldyke, Gail A. Lozoff, John H. Muehlstein, John A.
Offerdahl, Lloyd D. Ruth and David G. Stanchak.
[_]FOR all of the nominees listed above (except as marked to the contrary above)
[_]WITHHOLD AUTHORITY to vote for all of the nominees listed above.
To withhold your vote for any nominee(s), mark the "FOR" box and strike a line
through the nominee(s) name in the above list.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
2. In their discretion, on such other business as may properly come before the
meeting.
(Continued and to be signed on reverse side)
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED. IF ANY
OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL
MEETING.
The undersigned acknowledges receipt from the Company prior to the execution
of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy Statement
dated April 1, 1997, and the Annual Report to Stockholders.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
---------------------------------
Signature
---------------------------------
Signature (if held jointly)
Dated ____________________ , 1997
Please sign exactly as name ap-
pears on this card. When signing
as attorney, executor, adminis-
trator, trustee, guardian, cor-
porate officer, or general part-
ner, please give your full ti-
tle. If shares are held jointly,
each holder may sign but only
one signature is required.
