<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 19, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-21097
EINSTEIN/NOAH BAGEL CORP.
(Exact name of registrant as specified in its charter)
Delaware 84-1294908
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
14103 Denver West Parkway
Golden, CO 80401
(Address of principal executive offices, including zip code)
(303) 215-9300
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock, $.01 par value per share, outstanding as of
May 29, 1998: 34,083,681.
<PAGE>
EINSTEIN/NOAH BAGEL CORP.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 28, 1997 and
April 19, 1998.............................................. 3
Consolidated Statements of Operations for the quarters ended
April 20, 1997 and April 19, 1998........................... 4
Consolidated Statements of Cash Flows for the quarters ended
April 20, 1997 and April 19, 1998........................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
Signature Page.............................................. 12
Exhibit Index............................................... 13
</TABLE>
2
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 28, April 19,
1997 1998
---------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents.................................. $ 34,148 $ 7,218
Accounts receivable........................................ 1,593 1,126
Inventories................................................ 9,823 9,013
Prepaid expenses and other current assets.................. 502 213
---------- ----------
Total current assets...................................... 46,066 17,570
Property and Equipment, net................................. 194,152 200,152
Goodwill, net............................................... 360,155 357,051
Trademarks, net............................................. 22,075 21,916
Recipes, net................................................ 7,202 6,961
Other Assets, net........................................... 13,478 13,093
---------- ----------
Total assets.............................................. $643,128 $616,743
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable........................................... $ 16,140 $ 7,009
Accrued expenses........................................... 38,369 38,544
Current portion of senior term loan........................ 6,000 6,000
---------- ----------
Total current liabilities................................. 60,509 51,553
Long Term Portion of Senior Term Loan....................... 24,000 22,500
Convertible Subordinated Debentures......................... 125,000 125,000
Other Noncurrent Liabilities................................ 23,225 23,326
Minority Interest........................................... 80,048 77,459
Commitments and Contingencies
Stockholders' Equity:
Preferred stock --$.01 par value; 20,000,000 shares
authorized; no shares issued and outstanding.............. -- --
Common stock --$.01 par value; 200,000,000 shares
authorized; issued: 33,332,594 shares in
December and 33,333,681 shares in April................... 333 333
Additional paid-in capital................................. 374,685 374,661
Treasury stock, at cost (813,146 shares in
December and April)....................................... (5,261) (5,2610)
Accumulated deficit........................................ (39,411) (52,828)
---------- ----------
Total stockholders' equity................................ 330,346 316,905
---------- ----------
Total liabilities and stockholders' equity............... $643,128 $616,743
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
---------------------
April 20, April 19,
1997 1998
--------- ---------
<S> <C> <C>
Revenue:
Store revenue .......................................... $ 2,103 $110,475
Royalties and franchise-related fees ................... 14,625 --
------- --------
Total revenue ...................................... 16,728 110,475
Costs and Expenses:
Store:
Cost of products sold .............................. 704 38,572
Salaries and benefits .............................. 609 35,380
Other controllable costs............................ 122 9,269
Rent, occupancy and related costs................... 150 10,589
Marketing expenses ................................. 126 3,968
Depreciation and amortization ...................... 66 6,178
------- --------
Total store costs and expenses ................. 1,777 103,956
Non-Store:
General and administrative ......................... 6,023 14,888
Depreciation and amortization (excluding goodwill
amortization) .................................... 1,071 1,045
Goodwill amortization .............................. 625 3,247
------- --------
Total non-store costs and expenses ............. 7,719 19,180
------- --------
Total costs and expenses ....................... 9,496 123,136
------- --------
Income (Loss) from Operations .............................. 7,232 (12,661)
Other Income (Expense):
Interest income ........................................ 391 246
Interest expense ....................................... (170) (3,591)
------- --------
Total other income (expense) ....................... 221 (3,345)
------- --------
Income (Loss) before Income Taxes and Minority Interest .... 7,453 (16,006)
Income Taxes ............................................... 2,275 --
Minority Interest in Loss of Subsidiary .................... -- (2,589)
------- --------
Net Income (Loss) .......................................... $ 5,178 $(13,417)
======= ========
Basic Earnings (Loss) per Share ............................ $ 0.16 $ (0.41)
======= ========
Diluted Earnings (Loss) per Share .......................... $ 0.15 $ (0.41)
======= ========
Weighted Average Number of Common Shares Outstanding:
Basic .............................................. 32,559 32,520
======= ========
Diluted ............................................ 34,962 32,520
======= ========
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
4
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
---------------------
April 20, April 19,
1997 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) ................................................ $ 5,178 $(13,417)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization ................................ 1,762 10,470
Minority interest ............................................ -- (2,589)
Warrant and option expense ................................... 26 --
Deferred income taxes ........................................ (1,926) --
Changes in assets and liabilities:
Accounts receivable ...................................... (3,873) 467
Accounts payable and accrued expenses .................... 5,363 (9,101)
Deferred franchise revenue ............................... 595 --
Other assets and liabilities ............................. (89) (150)
--------- --------
Net cash provided by (used in) operating activities .. 7,036 (14,320)
--------- --------
Cash Flows from Investing Activities:
Purchase of property and equipment ............................... (3,872) (10,684)
Proceeds from sale of assets ..................................... 3,600 --
Purchase of other assets ......................................... (2,362) (426)
Issuance of notes receivable ..................................... (124,298) --
Repayment of notes receivable .................................... 53,386 --
--------- --------
Net cash used in investing activities ........................ (73,546) (11,110)
--------- --------
Cash Flows Provided by (Used in) Financing Activities:
Proceeds from issuance of common stock ........................... 8,206 --
Repayments under credit facility ................................. -- (1,500)
Proceeds from convertible debt ................................... 29,500 --
Repayment of convertible debt .................................... (21,700) --
--------- --------
Net cash provided by (used in) financing activities .......... 16,006 (1,500)
--------- --------
Net Decrease in Cash and Cash Equivalents ............................ (50,504) (26,930)
Cash and Cash Equivalents, beginning of period ....................... 50,741 34,148
--------- --------
Cash and Cash Equivalents, end of period ............................. $ 237 $ 7,218
========= ========
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
5
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements have been prepared by Einstein/Noah
Bagel Corp. (the "Company") and are unaudited except for the consolidated
balance sheet at December 28, 1997. The financial statements have been prepared
in accordance with the instructions for Form 10-Q and, therefore, do not
necessarily include all information and footnotes required by generally accepted
accounting principles. In the opinion of the Company, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's consolidated financial position, results of operations and cash
flows as of April 19, 1998 and for all periods presented have been made. The
statements are subject to year-end audit adjustment. A description of the
Company's accounting policies and other financial information are included in
the audited consolidated financial statements as filed with the Securities and
Exchange Commission in the Company's Form 10-K for the year ended December 28,
1997. The consolidated results of operations for the quarter ended April 19,
1998 are not necessarily indicative of the results expected for the full year.
2. Commitments and Contingencies
The Company has entered into agreements with certain vendors which provide
for minimum purchases over specified terms. Such agreements call for retroactive
rate adjustments or cash settlement in the event of purchase shortfalls.
Management believes that the ultimate settlement of such commitments will not
have a material impact on the consolidated financial position or results of
operations of the Company.
Bagel Store Development Funding, L.L.C. ("Bagel Funding") has invested a
total of approximately $89.5 million, representing an approximately 21% equity
interest, in Einstein/Noah Bagel Partners, L.P., a majority-owned subsidiary of
the Company ("Bagel Partners"). The Company is the manager of Bagel Funding.
Bagel Funding has the right to require Bagel Partners or the Company to redeem
Bagel Funding's equity interest in Bagel Partners at a pre-determined formula
price based on store level cash flow of Bagel Partners in the event that, at any
time after December 5, 1999 and prior to June 5, 2001, the Company does not
consent to a public offering of such equity interests or the termination of
certain rights and obligations under franchise and license agreements between
the Company and Bagel Partners. Such right becomes exercisable prior to December
5, 1999 if there is a Change in Control (as defined in the Bagel Partners
partnership agreement) of the Company. The Company or Bagel Partners may pay the
purchase price for such equity interests in cash, shares of the Company's common
stock or any combination thereof.
The Company has become subject to various lawsuits, claims and other legal
matters in the course of conducting its business. 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.
The Company and certain of its current and former executive officers and
directors are defendants in a class action lawsuit filed in the United States
District Court for the District of Colorado. In addition, an action was filed in
state court in Jefferson County, Colorado, although such action has been stayed
pending resolution of the federal case. The complaints in such actions allege,
among other things, that the Company and the other defendants violated Sections
11, 12(2) and 15 of the Securities Act of 1933, as amended, and Section 10(b) of
the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, as
well as certain similar provisions of Colorado state law. The plaintiffs are
seeking, among other things, an award of unspecified compensatory damages,
interest and costs. Although the Company cannot predict the outcome of these
lawsuits, the Company believes the complaints are without merit and intends to
vigorously defend against the allegations made in the complaints. On February
10, 1998 the Company filed a motion to dismiss the complaint in the federal
case.
3. Reclassifications
Certain reclassifications have been made to the 1997 financial statements
to conform to the 1998 presentation.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-Q under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of Einstein/Noah Bagel Corp. (the "Company"), its
area developers, and Einstein Bros./(R)/Bagels 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; advertising and promotional
efforts; brand awareness; availability and terms of capital; adverse publicity;
acceptance of new product offerings; the Company's relationship with, and
business of, Boston Chicken, Inc. ("Boston Chicken"), the Company's majority
stockholder; changes in business strategy or development plans; achievement of
development schedules; availability, locations and terms of sites for store
development; food, labor and employee benefit costs; changes in government
regulation; regional weather conditions; and other factors referenced in this
Form 10-Q. The Company cannot predict which factors would cause actual results
to differ materially from those indicated by the forward-looking statements. In
addition to considering statements that explicitly describe such risks and
uncertainties, readers are urged to consider statements that include the terms
"believes", "belief", "expects", "plans", "anticipates", "intends" or the like
to be uncertain and forward-looking.
General
On December 5, 1997, the Company converted its loans to its area developers
into a majority equity interest in the area developers and purchased additional
area developer equity interests, and the area developers merged into a surviving
entity, Einstein/Noah Bagel Partners, L.P. ("Bagel Partners"). As a result of
the loan conversions and the area developer merger (together with certain
related transactions, the "Transactions"), the Company owns approximately 78% of
Bagel Partners with the remaining equity interest owned by Bagel Store
Development Funding, L.L.C. and management of the former area developers.
As a result of the Transactions, the revenue generated by the Company as a
lender, franchisor and service provider to the area developers prior to the date
of the Transactions is eliminated in consolidation and replaced with store
revenue and operating expenses from and after the date of the Transactions. The
foregoing results are adjusted in the "minority interest" line item to reflect
the minority interests not owned by the Company. As a result of the
Transactions, the operating results for the quarter ended April 19, 1998 are not
readily comparable to those for the quarter ended April 20, 1997.
As of April 19, 1998, Boston Chicken held approximately 51.9% 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. On May 27, 1998,
Boston Chicken announced that it had retained Morgan Stanley & Co. Incorporated
to advise and assist it in evaluating the sale of all or a portion of the shares
of common stock of the Company owned by it to one or more third parties. 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. The Company also has a
non-convertible unsecured credit facility from Boston Chicken providing for
borrowings of up to $50.0 million. Although the Company has not requested
funding under such facility, there can be no assurance that, if requested,
Boston Chicken would have the resources available, or would use its available
resources, to fund the credit facility.
The Company's future financial condition and results of operations are
subject to uncertainties related to stockholder class action lawsuits filed
against the Company and certain other defendants. See Note 2 of Notes to the
Company's Consolidated Financial Statements. Because such litigation is at a
preliminary stage, the Company is unable to make a meaningful estimate of any
loss that could result from an unfavorable outcome of the litigation.
7
<PAGE>
Results of Operations
The Company's results of operations for the quarter ended April 20, 1997
reflect the Company's operations primarily as a franchisor. As a result of the
Transactions, the Company's results of operations for the quarter ended April
19, 1998 reflect the results of the Company as the majority owner and operator
of stores systemwide.
Revenue. Total systemwide net store revenue increased 45% to $110.5
million for the quarter ended April 19, 1998 compared to $76.5 million in the
prior comparable quarter. The increase in systemwide net store revenue was due
to an increase in the number of stores in operation systemwide to 557 stores at
the quarter ended April 19, 1998 from 420 stores at the quarter ended April 20,
1997. This increase was offset by a decrease in the average weekly per store
sales ("WPSA") to $12,360 for the quarter ended April 19, 1998 as compared to
$13,179 for the prior comparable quarter. The lower net WPSA was due to a
smaller proportion of mature stores in the system during the quarter ended April
19, 1998 compared to the prior comparable quarter.
Company net store revenue increased to $110.5 million for the quarter ended
April 19, 1998, compared to $2.1 million in the prior comparable quarter. The
increase was due to an increase in the average number of Company stores in
operation to 560 for the quarter ended April 19, 1998 from 12 Company stores for
the prior comparable period.
The Company did not have any royalties, franchise-related fees or interest
income from area developer loans for the quarter ended April 19, 1998 compared
to royalties, franchise-related fees and interest income from area developer
loans of $14.6 million for the prior comparable quarter. As a result of the
Transactions, revenue previously recognized by the Company as lender, franchisor
and service provider to its area developers is eliminated in consolidation.
Store Costs and Expenses. Store costs and expenses increased to $104
million for the quarter ended April 19, 1998, compared to $1.8 million in the
prior comparable quarter.
Store costs and expenses as a percentage of store revenue for the quarter
ended April 19, 1998 were 94.1% compared to 84.5 % for the prior comparable
quarter. The cost of products sold, including food and paper, was 34.9% of store
revenue for the quarter ended April 19, 1998, compared to 33.5% for the prior
comparable quarter. The increase was due in part to higher food costs in menu
offerings and in part to inefficiencies of a bagel production plant that was
closed in the quarter ended April 19, 1998. Salaries and benefits were 32.0% of
store revenue for the quarter ended April 19, 1998 as compared to 28.9% for the
prior comparable quarter. The increase was due to smaller staffs in the prior
comparable quarter. Other controllable costs (including telephone, utilities,
security, repairs and maintenance, supplies, uniforms and laundry), together
with rent, occupancy and related costs, were 18.0% of store revenue for the
quarter ended April 19, 1998 as compared to 12.9% for the prior comparable
quarter. The increase was due to larger stores and more complex store
configuration in the quarter ended April 19, 1998 compared to the prior
comparable quarter. Marketing expense was 3.6% of store revenue for the quarter
ended April 19, 1998 as compared to 6.0% for the prior comparable quarter. The
decrease was due to a change in marketing strategy. Store depreciation and
amortization was 5.6% of store revenue for the quarter ended April 19, 1998 as
compared to 3.1% for the prior comparable quarter. The increase was due to
larger stores and higher equipment costs for the current store base as compared
to the Company store base in the prior comparable quarter.
General and Administrative. General and administrative expenses increased
to $14.9 million for the quarter ended April 19, 1998 from $6.0 million for the
prior comparable quarter. The increase was due to the transition to a Company-
controlled system under which expenses previously incurred by the Company's area
developers are now reflected on the Company's consolidated financial statements
and a severance charge of $1.5 million for terminated employees.
8
<PAGE>
Depreciation and Amortization. For the quarter ended April 19, 1998, non-
store depreciation and amortization was consistent with the prior comparable
quarter. Goodwill amortization increased to $3.2 million for the quarter ended
April 19, 1998 as compared to $0.6 million for the prior comparable quarter. The
increase was due to goodwill recorded as a result of the Transactions.
Other Income (Expense). The Company incurred other expense of $3.3 million
compared to other income of $0.2 in the prior comparable quarter. The increase
was due to the interest on the Company's convertible subordinated debentures
issued in the second quarter of 1997.
Minority Interest. The minority interest in losses of Bagel Partners was
$2.6 million for the quarter ended April 19, 1998.
Income Taxes. Because of the uncertainty of utilizing the loss incurred
for the quarter ended April 19, 1998, no income tax benefit was established.
Liquidity and Capital Resources
Cash used in operations for the quarter ended April 19, 1998 was $14.3
million, a decrease of $21.3 million from cash provided from operations of $7.0
million for the quarter ended April 20, 1997. The decrease was due primarily to
paydown of accounts payable and accrued expense balances and other changes in
working capital for the quarter ended April 19, 1998 of $8.8 million, compared
to cash provided of $2.0 million in the prior comparable quarter. Also, general
and administrative costs increased by $8.9 million in the quarter ended April
19, 1998 as compared to the prior comparable quarter. The increase was due to
the transition to a Company-controlled system and a severance charge of $1.5
million for terminated employees.
Cash used in financing activities was $1.5 million for the quarter ended
April 19, 1998 compared to $16.0 million provided from financing activities for
the prior comparable quarter. As of April 19, 1998, the Company had $7.2 million
available in cash and cash equivalents. In the quarter ended April 14, 1998, the
Company made a $1.5 million payment under the Credit Facility (defined below)
and in the prior comparable quarter received cash from bank borrowings and the
issuance of common stock. The Company is party to a secured credit agreement
with Bank of America National Trust and Savings Association and the lenders
named therein (the "Credit Facility"), that consists of a secured term loan
facility, under which $28.5 million was outstanding at April 19, 1998, and a
$25.0 million secured revolving credit facility. The $25.0 million revolving
credit facility becomes available in increments through September 1998, when the
entire amount of the facility becomes available, subject to the Company's
compliance with certain financial covenants, including a minimum operating cash
flow test. There was $12.0 million available to the Company under the Credit
Facility as of June 1, 1998. The Credit Facility also contains financial
covenants that require maintaining certain minimum average weekly net sales
levels and system and store cash flow ratios, and that limit overhead levels. If
the Company is unable to comply with any of the Credit Facility's financial
covenants, the Company would be unable to draw on the revolving credit facility
and, upon action of the lenders under the Credit Facility, all outstanding
principal and interest under the Credit Facility could be accelerated and become
immediately due and payable. To the extent the Company did not have borrowing
availability under the Credit Facility, the Company could be required to seek
additional sources of capital and, if unable to obtain such capital, could be
unable to satisfy its obligations when due.
The Company also had a $50.0 million non-convertible credit facility with
Boston Chicken. Although the Company has not requested funding under the credit
facility, there can be no assurance that, if requested, Boston Chicken would
have the resources available, or would use its available resources, to fund the
credit facility.
The Company's primary use of capital reflects its effort to establish brand
awareness and market leadership, which historically was done by providing
partial financing to its area developers for use in rapid store development and
working capital needs. Net loan advances to area developers were $70.9 million
in the first quarter of 1997 (consisting of $124.3 million of loan advances, net
of $53.4 million of loan repayments). The majority of the loan advance and
repayment activity reflects the revolving nature of the loans; that is, amounts
were drawn and repaid on a regular basis to optimize cash management.
In addition to providing funding to its area developers, the Company's
capital requirements have consisted of store development, development of its
corporate infrastructure, which supports systemwide expansion, and investments
in food production facilities. For the quarter ended April 19, 1998, the Company
expended $10.7
9
<PAGE>
million on construction of new stores, a majority of which were opened during
the fourth quarter of 1997, and on investments in food production facilities. In
the prior comparable quarter, the Company expended $3.9 million related to
corporate infrastructure and investments in food production facilities. The
Company generated $3.6 million in the first quarter of 1997 from the sale of
stores to a newly-formed area developer.
The Company's primary uses of capital for the remainder of 1998, other than
providing working capital for normal operating expenses, are expected to consist
primarily of satisfaction of current liabilities, expenditures related to
building and opening new stores and retrofitting existing stores, and payment of
principal and interest on outstanding indebtedness. In the event the Company
requires additional capital for working capital needs, there can be no assurance
that the Company will be able to raise such capital on satisfactory terms, if at
all. See "Special Note Regarding Forward-Looking Statements" on page 7.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth under Note 2 of the Company's Notes to
Consolidated Financial Statements contained in Part I of this Form 10-Q is
incorporated herein by reference thereto.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits: See Exhibit Index appearing elsewhere herein, which is
incorporated herein by reference.
B. Reports on Form 8-K: During the first quarter ended April 19, 1998,
the Company filed an amendment on Form 8-K/A to its Form 8-K dated
November 21, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
EINSTEIN/NOAH BAGEL CORP.
Date: June 2, 1998 /s/ Robert M. Hartnett
---------------------------------
Robert M. Hartnett
Chairman of the Board,
Chief Executive Officer and
President
Date: June 2, 1998 /s/ W. Eric Carlborg
---------------------------------
W. Eric Carlborg
Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibits*
------- --------
10.1 First Amendment and Waiver dated March 27, 1998 to the Amended and
Restated Secured Credit Agreement dated as of November 21, 1997
among the Company, Bank of America National Trust and Savings
Association ("Bank of America"), as Agent and Issuing Lender,
General Electric Capital Corporation, as Co-Agent and the Lenders
named therein (incorporated by reference to Exhibit 10.4(b) to the
Company's 1997 Annual Report on Form 10-K).
10.2 First Amendment dated March 25, 1998 to Limited Partnership
Agreement of Einstein/Noah Bagel Partners, L.P. (incorporated by
reference to Exhibit 10.18(b) to the Company 1997 Annual Report on
Form 10-K).
10.3 Letter agreement dated April 29, 1998 by and between the Company and
Robert M. Hartnett
10.4 Letter agreement dated March 25, 1998 by and between the Company and
David G. Stanchak
10.5 Termination Agreement dated May 1, 1998 by and between the Company
and Jeffrey L. Butler
27 Financial Data Schedule.
* In the case of incorporation by reference to documents filed by Boston
Chicken, Inc. under the Securities Exchange Act of 1934, as amended, Boston
Chicken Inc.'s file number under that Act is 0-22802.
13
<PAGE>
[LOGO OF EINSTEIN/NOAH BAGEL CORP.]
EXHIBIT 10.3
April 29, 1998
Mr. Robert Hartnett
100 MacFarlane Road
Delray Beach, FL 33483
Dear Bob:
I am pleased to confirm our offer of the position of Chief Executive
Officer of ENBC, reporting to the Board of Directors. Your bi-weekly base salary
will be $11,538.46 ($300,000 annualized) subject to annual performance review.
Additionally, you will participate in an annual bonus plan with a target payout
equal to 50% of base pay ($150,000), which will be paid coincident with other
bonuses following the close of the fiscal year. One-third of your bonus will be
based on the Company's revenue performance, one-third of your bonus will be
based on Company profitability and one-third of your bonus will be based on
Company overhead, in each case measured against targets to be mutually agreed
upon by you and the Company within two weeks of the date hereof. No other terms
and conditions of your employment are otherwise affected.
As an executive officer of the Company, you will continue to be entitled to
participate in the Company's Amended & Restated 1997 Stock Option Plan. At the
Stock Option Committee meeting on March 26, 1998, you were given a stock option
grant under the 1997 plan of 210,000 shares at an exercise price of $4.5625 per
share. Such options will vest over a four- year period at the rate of 25% per
year, as further detailed in the Amended & Restated 1997 Stock Option Plan.
Further, these options will be subject to all the provisions of that Plan as it
may be amended from time to time.
Additionally, the Company will reimburse you for all reasonable costs
(closing costs, movement of household goods, househunting and temporary living)
for your relocation to the Denver area. All reimbursed amounts will be tax
protected at 35% to help compensate for the taxes you may incur as a result of
the allowance. The actual incremental taxes you pay will depend upon the
deductibility of the relocation expenses you incur. You will also be advanced
$30,000 as a miscellaneous relocation allowance payable after your start date.
Should you voluntarily terminate your employment with the Company on or before
one year from your start date in this position, or should your employment be
terminated for cause during such period, you hereby agree to repay all monies
paid you by the Company for relocation, including the $30,000 miscellaneous
relocation allowance.
As a condition of employment, you will be required to enter into the
Company's standard form of confidentiality and non-compete agreement.
<PAGE>
[LOGO OF EINSTEIN/NOAH BAGEL CORP.]
Mr. Robert Hartnett
April 29, 1998
Page 2
The Company will continue your base salary for one year in the event your
employment is terminated, other than for "cause" (as hereinafter defined),
within four years of the date of this letter. In addition, in such event you
will be entitled to receive a pro rata portion of your bonus for the year in
which your employment is terminated in such amount as may be reasonably
determined by the Board of Directors based on performance relative to
performance targets for such partial year and the Company will pay for the
continuation of your health insurance coverage for eighteen months (or such
shorter period ending when you are covered under an employer-paid health
insurance plan of a successor employer). Finally, in such event all Company
stock options held by you at the time of such termination shall also continue to
vest during the one-year period following termination and be exercisable for one
additional year after the end of such one-year period of continued vesting.
The Company will continue your base salary for two years in the event your
employment is terminated, other than for "cause" (as hereinafter defined), or in
the event of your voluntary termination of employment for "good reason" (as
hereinafter defined), in either case within four years of the date of this
letter but following a "change in control" (as hereinafter defined) of the
Company. In addition, in such event you will be entitled to receive a pro rata
portion of your bonus for the year in which your employment is terminated in
such amount as may be reasonably determined by the Board of Directors based on
performance relative to performance targets for such partial year and the
Company will pay for the continuation of your health insurance coverage for
eighteen months (or such shorter period ending when you are covered under an
employer-paid health insurance plan of a successor employer). Finally, in such
event all Company stock options held by you at the time of such termination
shall also continue to vest, and be exercisable, during the two-year period
following termination.
For purposes of this letter agreement, a "change in control" of the Company
shall mean any of the following: (a) the acquisition by any person (including
any syndicate or group deemed to be a "person" under Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision, but excluding Boston Chicken, Inc.) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
stock (or other voting securities) of the Company entitling such person to
exercise (i) more than 30% of the total voting power of all shares of capital
stock or other voting securities of the Company entitling the holders thereof to
vote generally in elections of directors ("Voting Power"), with "beneficial
ownership" being determined for this purpose in accordance with Rule 13d-3 under
the Exchange Act as in effect on the date hereof, and (ii) a percentage of
Voting Power in excess of the percentage of Voting Power which Boston Chicken,
Inc. is entitled to exercise by reason of its ownership of capital stock or
other voting securities of the Company, (b) a sale of all or substantially all
of the assets of the Company to any purchaser (the "Purchaser") if any person
other than Boston Chicken, Inc. is the beneficial owner of shares of capital
stock of the Purchaser entitling such person to exercise (i) more than 30% of
the Voting Power of such Purchaser and (ii) a percentage of Voting Power of the
Purchaser in excess of the percentage of Voting Power of the Purchaser which
Boston Chicken, Inc. is entitled to exercise by reason of its ownership of
equity interests
<PAGE>
[LOGO OF EINSTEIN/NOAH BAGEL CORP.]
Mr. Robert Hartnett
April 29, 1998
Page 3
or other voting securities in the Purchaser, or (c) the individuals who, as of
the date of any "change in control" of Boston Chicken, Inc., are members of the
board of directors of the Company ceasing for any reason to constitute a
majority of the board of directors of the Company. For purposes of this letter
agreement a "change in control" of Boston Chicken, Inc. shall mean (i) the
acquisition by any person (including any syndicate or group deemed to be a
"person" under Section 13(d)(3) or 14(d)(2) of the Exchange Act, or any
successor provision, but excluding Scott Beck or Saad Nadhir) of beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of capital stock or
other voting securities of Boston Chicken, Inc. entitling such person to
exercise more than 30% of the Voting Power of Boston Chicken, Inc., (ii) a sale
of all or substantially all of the assets of Boston Chicken, Inc. to any
purchaser (a "BCI Purchaser") if any person other than Scott Beck or Saad Nadhir
is the beneficial owner of shares of capital stock or other voting securities of
the BCI Purchaser entitling such person to exercise more than 30% of the Voting
Power of such Purchaser, or (iii) the individuals who, as of the date of this
letter agreement, are members of the board of directors of Boston Chicken, Inc.
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the board of directors of Boston Chicken, Inc., provided, however, that if
either the election of any new director or the nomination for election of any
new director by Boston Chicken, Inc.'s stockholders was approved by a vote of at
least a majority of the Incumbent Board, such new director shall be considered a
member of the Incumbent Board.
For purposes of this letter agreement, (a) termination for "cause" shall
mean termination of your employment by reason of any misappropriation of funds
or other property of the Company, commission of any felony or any crime
involving moral turpitude, fraud or theft, or any breach of your confidentiality
or noncompete agreement with the Company, and (b) voluntary termination for
"good reason" shall mean your voluntary termination of employment following any
material reduction of your compensation or benefits or any relocation of your
position to a location more than 60 miles from Golden, Colorado.
The amounts payable under this letter agreement will be paid without
reduction (except as expressly provided herein with respect to payment of health
insurance premiums), regardless of any compensation paid or payable to you from
any source or which you could have obtained upon seeking other employment,
provided that the Company shall be permitted to make all payments net of any
legally required tax withholding.
This letter agreement shall be governed by Colorado law.
You represent and warrant that you are not a party to any non-compete,
confidentiality or similar agreement, whether written or oral, with any person
or entity that would restrict or otherwise affect your employment with the
Company.
<PAGE>
[LOGO OF EINSTEIN/NOAH BAGEL CORP.]
Mr. Robert Hartnett
April 29, 1998
Page 4
We are delighted that you have decided to move to Colorado and assume this
important position. We look forward to what we believe will be an enormous
contribution by you to ENBC and we will do all that we can to ensure your
success.
Again, congratulations!
Sincerely,
/s/ Scott A. Beck
------------------------------
Scott A. Beck
Chairman
I hereby accept the offer as stated above:
Signature: /s/ Robert M. Hartnett Date: 4/29/98
---------------------- -------
<PAGE>
EXHIBIT 10.4
March 25, 1998
Dear David Stanchak:
As you have been informed, your employment with Einstein/Noah Bagel Corp.
("ENBC"), will end on April 12, 1998, in connection with a reorganization of the
company. This letter provides certain information about your separation from the
company, and outlines the terms and conditions of the Separation Benefit
available to you.
Because of your separation, you are entitled to payment of your salary through
the date of termination, and to compensation for all accrued, unused vacation
time. You will receive a paycheck reflecting salary earned through April 12,
1998 and accrued unused vacation time, less customary withholdings. If you have
any questions about that paycheck, you should contact Denise Thomas at 216-3704.
Until April 12, 1998, you are expected to assist in the transition of work, and,
as necessary, to perform the functions and duties of your position as would any
employee of ENBC. Your supervisor will let you know what you are expected to
do. Failure to meet these expectations may result in immediate termination and
may, in the sole discretion of ENBC, disqualify you from receiving the
Separation Benefit discussed below. This letter is not and shall not be
construed as a contract of continuing employment.
If you choose not to sign the enclosed Release, and presently participate in the
medical and/or dental plans, your coverage will end on April 30, 1998. If you
participate in long term disability, short term disability, life insurance
and/or voluntary life insurance, your coverage will end on your last day of
employment. If you participate in the flex spending accounts, expenses must be
incurred by your last day of employment, and submitted thereafter for
reimbursement within three (3) months.
If you are a participant in the medical, dental or flex spending account plans,
under COBRA you are eligible to continue these coverages beyond your last day of
employment, at your own expense. If you are a participant in the life or
voluntary life insurance program(s) you are eligible to convert these coverages
into an individual policy. More information about COBRA and conversion is
included in this packet. Questions about these plans can be directed to the
Employee Service Center at 1-888-220-9032.
<PAGE>
If you are a participant in the Employee Savings Plan, you will be given the
option to cash out or roll over your 401(k) account. You should consult your
financial advisor
before making that election. Please call Putnam Investments at 1 (800)-864-3966
for information and forms.
You may obtain information concerning job references from Denise Thomas.
A summary of your stock option vesting schedule is enclosed. If you choose not
to accept the Separation Benefit described below, vesting will terminate as of
April 12, 1998. All vested options granted before May 28, 1996, must be
exercised within five (5) days of your termination date. Vested options granted
on or after May 28, 1996, must be exercised within fifteen (15) days of your
termination date. If you have stock options in Boston Chicken, Inc. ("BCI"),
you will receive a separate letter from BCI describing your rights with respect
to those options. You are not eligible for any further stock option grants made
on or after the date of this letter. Please see the exercise form, broker's
list and explanation of the exercise process enclosed for additional information
concerning stock options. Further information about your options is available
from Nicole Bonsness at 216-5777.
ENBC has established a program to provide you with a separation benefit in
exchange for certain consideration on your part and in the interest of a final
resolution of all claims you have or might have against the company. The
"Separation Benefit" consists of paying you a salary of $150,000, extending from
your termination date to August 29, 1999 (the "Extended Termination Date").
Accordingly, if you choose to accept the Separation Benefit by signing the
attached release, you will remain employed by ENBC until the Extended
Termination Date and will, until that date, continue to receive the above-
mentioned salary, less required withholdings, as well as company-paid health
insurance benefits. You will, however, lose your company-paid life insurance and
disability insurance and employee-paid voluntary life insurance coverage as of
April 12, 1998, and you will accrue no vacation time after that date. In
addition, vesting of ENBC stock options will continue until January 31, 2000,
and you will have the right to exercise vested options, as described above,
until that date.
You have up to forty-five (45) days to consider whether to accept the company's
offer of a separation benefit by signing the attached Release. If you agree to
the terms and conditions set out above and decide to accept separation pay, you
may do so by executing the Release and returning it to Paul Strasen in ENBC's
Legal Department (phone 216-3463) on or before April 20, 1998. The Release will
not be effective or enforceable for seven days after you sign it and you may
revoke it during that time.
<PAGE>
If you choose to revoke the release, you must deliver written notice of your
decision to ENBC's Legal Department, Attn: Paul Strasen within seven days after
you sign the release. The Release will then be of no legal effect. You will,
however, forfeit any separation benefit referred to in the preceding paragraph.
If we do not receive your notice of revocation during that seven day period, the
Release will become final and binding. Because the Release may affect
important legal rights, ENBC advises you to consult with an attorney before
signing it.
As required by law, enclosed is a summary of the positions and ages of all
company employees selected for termination in connection with this reduction in
force, as well as a summary of the positions and ages of all employees within
the organizational units affected by the reduction in force who were not
selected for termination.
You are free to reapply for employment with the company at any time. Given
ENBC's reorganization, however, you should concentrate your job search efforts
on other employers. Whether or not you choose to execute the enclosed Release,
ENBC cannot provide you with recall rights, or otherwise assure you that you
will be given any preference or priority with respect to any future job openings
that may arise. Rather, your application will be considered according to the
same criteria by which the company generally evaluates employment applications.
In addition, if you accept the Separation Benefit and later are rehired by ENBC,
you may be required to return to ENBC a portion of your Separation Benefit as a
condition of your rehiring.
We understand that this is a difficult and unsettling time for you. We thank
you for your work for the company, and wish you well in your personal and
professional future.
Very truly yours,
Einstein/Noah Bagel Corp.
By: /s/ John Puterbaugh
------------------------------------------
John Puterbaugh
Senior Vice President, Human Resources
<PAGE>
EXHIBIT 10.5
TERMINATION AGREEMENT
This Agreement (the "Agreement") is made as of this 1st day of May 1998, by
and between Einstein/Noah Bagel Corp., a Delaware corporation (hereinafter
referred to as the "Company"), and Jeffrey L. Butler (hereinafter referred to as
"Butler").
RECITALS
--------
Butler has served as President, and a director, of, the Company. Butler
resigned as President and as a director of the Company effective May 1, 1998.
In consideration of the mutual covenants hereinafter set forth and in full
satisfaction of any claim Butler may have or assert arising from or in any way
relating to his employment or engagement with, and separation from, the Company,
the parties hereto agree as follows:
COVENANTS
---------
In consideration of the mutual promises contained herein, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. TERMINATION PAYMENTS. In full satisfaction of any obligations the
--------------------
Company may have to Butler relating in any way to his employment or engagement
with, and separation from, the Company, the Company agrees to pay to Butler (a)
the sum of $350,000, $50,000 of which shall be payable upon execution and
delivery of this Agreement and $300,000 of which shall be payable in twenty-six
(26) substantially equal installments over the one-year period commencing upon
the date hereof. The Company shall be entitled to deduct from all such payments
all applicable FICA contributions, federal and state income taxes and any other
payroll taxes. The Company will also reimburse Butler's cost of continuing his
health insurance under COBRA until the earlier of twelve months from the date
hereof or the date he is covered under another employer-paid health insurance
plan.
2. CONFIDENTIALITY. Butler acknowledges that he is a party to the
----------------
Confidentiality and Non-Compete Agreement dated as of the date hereof, a copy
of which is attached hereto as Schedule A (the "Confidentiality Agreement") and
agrees to comply therewith.
3. INVENTIONS, DESIGNS AND PRODUCT DEVELOPMENTS. All inventions,
---------------------------------------------
innovations, designs, ideas and product developments developed or conceived by
Butler, solely or jointly with others, whether or not patentable or
copyrightable, at any time during the employment or engagement of Butler by the
Company and that relate to the actual or then-currently planned business
activities of the Company or its subsidiaries (collectively, the "Developments")
and all of Butler's right, title and interest therein, shall be the exclusive
property of the Company. Butler hereby assigns, transfers and conveys
<PAGE>
to the Company all of his right, title and interest in and to any and all such
Developments. At any time and from time to time, upon the request of the
Company, Butler shall execute and deliver to the Company any and all
instruments, documents and papers, give evidence and do any and all other acts
that, in the opinion of counsel for the Company, are or may be necessary or
desirable to document such transfer or to enable the Company to file and
prosecute applications for and to acquire, maintain and enforce any and all
patents, trademark registrations or copyrights under United States or foreign
law with respect to any Developments or to obtain any extension, validation,
reissue, continuance or renewal of any such patent, trademark or copyright. The
Company will be responsible for the preparation of any such instruments,
documents and papers and for the prosecution of any such proceedings and will
reimburse Butler for all reasonable expenses incurred by him in compliance with
the provisions of this Section. Butler shall not be required to devote more than
ten hours of his time in any calendar year to perform his obligations under this
Section 3.
4. COVENANT RESTRICTING SOLICITATION. For a period of two years from the
----------------------------------
date hereof Butler shall not, directly or indirectly, solicit or attempt to
solicit for employment any person who is an employee of the Company on the date
of Butler's date of termination.
5. DISPARAGEMENT. Butler agrees not to disparage, or otherwise speak
--------------
negatively of, the Company or any of the Company Released Parties (as
hereinafter defined) and the Company agrees not to disparage, or otherwise speak
negatively, of Butler. The Company further agrees to use reasonable best
efforts to cause its directors not to disparage, or otherwise speak negatively,
of Butler.
6. EQUITABLE RELIEF. Each of the parties acknowledges that the
----------------
restrictions contained in the Confidentiality Agreement and Sections 3, 4 and 5
are reasonable and necessary to protect the legitimate interests of the Company
and Butler, and that any violation of any provisions of those Sections by a
party will result in irreparable injury to the other party. Each party also
acknowledges that the other party shall be entitled in enforcing the provisions
of those Sections to obtain temporary and permanent injunctive relief, without
the necessity of proving actual damages, and to an equitable accounting of all
earnings, profits and other benefits arising from any such violation, which
rights shall be cumulative of and in addition to any other rights or remedies to
which such party may be entitled.
7. STOCK OPTIONS. (a) Butler has been granted stock options on shares of
--------------
the Company, as set forth on Schedule B attached hereto (collectively, the
"Options"). The Options shall continue to vest for a period of one year from
the date hereof (except that the options to purchase 6,797 shares granted on
July 25, 1995, which vest on July 25, 1999 shall continue to vest for a period
of two years) and shall continue to be exercisable for a period of two years
from the date hereof, in each case pursuant to and in accordance with the terms
thereof. Notwithstanding the foregoing, such options shall terminate
immediately and be of no further force and effect upon any material breach by
Butler of
2
<PAGE>
the Confidentiality Agreement or Sections 3, 4 or 5 hereof. In the event that
the Company intends to terminate Butler's options pursuant to this Section 7(a),
the Company shall first provide Butler written notice thereof, which notice
shall set forth in reasonable detail Butler's breach of covenants hereunder.
Upon receipt of such notice Butler shall have ten (10) days in which to cure any
such alleged breach which is capable of being cured, but the Options shall not
be exercisable during such ten (10) day period unless the alleged breach is
capable of being cured during such period.
(b) Butler shall not be eligible for any additional stock option
grants after the date hereof.
8. BUTLER REPRESENTATIONS. Butler represents and warrants to the
-----------------------
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Butler is a party or
by which he is bound.
9. WAIVER. Failure by either party to insist upon strict compliance
-------
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or remedy hereunder at any one or more times be
deemed a waiver or relinquishment of such right or remedy at any other time or
times.
10. SEVERABILITY. Each section, paragraph, term and provision of this
-------------
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Butler agrees that
if any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be enforceable by limitations
thereon, the parties hereto agree that the same shall be enforceable to the
fullest extent permissible under the laws and pubic policies applied in such
jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
11. RELEASES. (a) In partial consideration for the termination payments
---------
provided for in Section 1 hereof, Butler acknowledges and agrees that he, for
himself and his successors, assigns and legal representatives, fully and forever
releases and discharges the Company, its subsidiaries and area developers and
their respective officers, directors, employees, agents, representatives and
insurers (collectively, the
3
<PAGE>
"Company Released Parties") from and against any and all claims, liabilities,
demands, obligations, damages, actions, or causes of action of any nature or
type whatsoever, whether or not presently known, including future claims,
liabilities, demands, obligations, damages, actions or causes of action if based
in whole or part on acts or omissions occurring before he delivers this release
to the Company, in any way relating to his employment or engagement with, his
separation from, or his investment in the Company, except, in each case, for his
rights described in this Agreement, rights under the Company's Director and
Officer Insurance Policy, under the indemnification provisions of the Company's
Certificate of Incorporation and under the provisions of Section 145 of the
Delaware General Corporation Law ("DGCL"), in each case as they relate to his
duties and service as an officer and director of the Company, if any. Butler
acknowledges and agrees that the legal rights and claims that he is giving up
include, but are not limited to, his rights, if any, under all state and federal
statutes that protect him from discrimination in employment on the basis of sex,
race, national origin, religion, disability and age, such as Title VII of the
Civil Rights Act of 1964, as amended, the Rehabilitation Act of 1973, the
Americans With Disabilities Act, the Family and Medical Leave Act, the Equal Pay
Act, and the Colorado Civil Rights Act, as well as all common law rights and
claims, such as breach of contract, express or implied, tort, whether negligent
or intentional, wrongful discharge and any claim for fraud, omission or
misrepresentation against the Company Released Parties.
(b) The Company acknowledges and agrees that it, for itself and its
successors and assigns fully and forever releases and discharges Butler, his
heirs and legal representatives from and against any and all claims,
liabilities, demands, obligations, damages, actions, or causes of action of any
nature or type whatsoever, whether or not presently known, including future
claims, liabilities, demands, obligations, damages, actions or causes of action
if based in whole or in part on acts or omissions occurring before it delivers
this release to Butler, except, in each case, for the Company's rights described
in this Agreement, the Company's rights under the Company's Director and Officer
Insurance policy and the Company's right under Section 145 of the DGCL to be
reimbursed by Butler, if required by law, for expenses of any litigation
advanced to him in defense of such litigation.
12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
-----------------------
and be binding upon the Company, its successors and assigns. This Agreement
shall inure to the benefit of and be enforceable by the personal or legal
representatives, executors, administrators, successors, assigns, heirs,
distributees and/or legatees of Butler, except that duties and responsibilities
of Butler under this Agreement are personal to him, and are not subject to
assignment or transfer by him.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
-----------------
the parties concerning the termination of Butler's employment with the Company.
This Agreement may not be modified or rescinded except by a written agreement to
such effect signed by both parties.
4
<PAGE>
14. ARBITRATION. Any controversy, claim or dispute between the parties
------------
relating to or arising out of this Agreement will be finally settled by
arbitration governed by the then current Commercial Arbitration Rules of the
American Arbitration Association in accordance with the terms of this Agreement,
provided, however, that the Company shall not be prevented from seeking or
obtaining in any court of competent jurisdiction appropriate injunctive relief
in the event of a breach of the Confidentiality Agreement or any of the
provisions of Sections 3, 4 or 5 of this Agreement. Any arbitration will be
conducted in Denver, Colorado by a panel of three neutral arbitrators.
15. CONFIDENTIALITY AND PUBLICITY. (a) The parties agree to maintain the
------------------------------
confidentiality of this Agreement and the terms hereof (the "Confidential
Information"), except that (i) either party may make disclosures of Confidential
Information that has become publicly known other than by an action of the
disclosing party, or a person acting on their behalf, in violation of the terms
of this Agreement, (ii) the Company may make such disclosure of Confidential
Information as it may determine to be required under applicable securities laws
or the rules of any applicable securities exchange or quotation system, or in
connection with the preparation of any disclosure document to be distributed to
investors, lenders or similar persons, (iii) either party may disclose
Confidential Information that it may be legally compelled to disclose (after
using reasonable best efforts to notify the other party hereto in advance of
such disclosure, and reasonably cooperating in efforts of the other party to
resist such disclosure), (iv) either party may disclose such Confidential
Information as may be required to permit it to enforce the provisions of this
Agreement, and (v) either party may disclose Confidential Information to its
attorneys, accountants or other professional advisors.
(b) The Company agrees to provide Butler to the extent he is
available, the opportunity to review prior to its issuance any press release to
be issued by the Company that mentions his name, provided, however, that this
section shall not be interpreted to limit Company's ability to issue any press
release that mentions Butler's name that the Company deems necessary, based on
the advice of its counsel, with or without his review.
(c) Butler agrees to provide the Company an opportunity to review any
press release or other public communication or statement he may make regarding
the Company prior to the issuance of such press release or, to the extent
practicable, making of such communication or statement.
16. FUTURE COOPERATION. Butler agrees to cooperate in good faith with the
------------------
Company in any third-party litigation instituted by or against the Company with
respect to matters which occurred during the period in which Butler was employed
by or served as a director or officer of the Company. The Company agrees to
reimburse Butler or reasonable expenses incurred by him in connection with such
cooperation with respect to such matters. Butler shall not be required to devote
more than ten hours of his time in any calendar year commencing after 1998 to
perform his obligations under this Section 16, provided, however, that nothing
herein shall limit the right of the Company to compel
5
<PAGE>
Butler to testify or provide documents or information in any matter pursuant to
subpoena or other legal means, regardless of the amount of time required to be
expended by him in connection therewith.
17. NOTICES. All notices, request, demands, and other communications
--------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such notices,
requests, demands, and other communications shall be deemed delivered three
business days after being so duly posted:
to the Company: Einstein/Noah Bagel Corp.
14123 Denver West Parkway
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 216-3490
to Employee: Jeffrey L. Butler
c/o Kevin Shepherd
Triune, Inc.
4770 Baseline Road, Suite 380
Boulder, CO 80303
Facsimile: (303) 499-6259
18. GOVERNING LAW. This Agreement and the rights and obligations of the
--------------
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
19. SURVIVAL. The parties acknowledge and agree that the covenants
---------
contained in this Agreement and the Confidentiality Agreement shall survive the
termination of Butler's employment with the Company.
20. ATTORNEYS' FEES. In the event any violation of any term of this
----------------
Agreement or the Confidentiality Agreement is asserted by any party hereto, the
prevailing party shall be entitled to recover from the other party its
reasonable costs and attorneys' fees, and if the Company is the prevailing
party, the Company will be entitled to recover such amounts by setoff against
amounts otherwise due Butler to recover such amounts.
21. WAIVER OF LOCKUP AGREEMENT. The Company hereby waives the restriction
---------------------------
on the sale of 95,385 shares of common stock of ENBC owned by Butler set forth
in the letter agreement attached hereto as Schedule C and agrees that no further
consent of the Company shall be required thereunder.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE: EINSTEIN/NOAH BAGEL CORP.
By: /s/ Paul A. Strasen
---------------------
/s/ Jeffrey L. Butler Its: Senior Vice President
- --------------------- ---------------------
Jeffrey L. Butler
5-1-98
7
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