<PAGE> 1
As filed with the Securities and Exchange Commission on April 8, 1998
Registration No. 333-44339
================================================================================
AMENDMENT No. 1
TO
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EINSTEIN/NOAH BAGEL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1294908
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14123 DENVER WEST PARKWAY
GOLDEN, COLORADO 80401
(303) 215-9300
(Name, address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------------
AMY S. POWERS
VICE PRESIDENT AND SECRETARY
EINSTEIN/NOAH BAGEL CORP.
14123 DENVER WEST PARKWAY, P.O. BOX 4086
GOLDEN, COLORADO 80401-4086
(303) 215-9300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
KEVIN J. MCCARTHY
BELL, BOYD & LLOYD
70 WEST MADISON STREET
CHICAGO, ILLINOIS 60602
(312) 372-1121
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered Per Share (1) Offering Price (1) Registration Fee (2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,320,094 shares $ 6.16 $ 14,291,780 $ 4,216.08
========================================================================================================================
</TABLE>
(1) Calculated in accordance with Rule 457(c) based on the average of the high
and low sales prices of the Common Stock reported on the Nasdaq National
Market on January 12, 1998, as reported in The Wall Street Journal
(Western Edition).
(2) Previously paid.
---------------------------
PURSUANT TO RULE 429 OF THE GENERAL RULES AND REGULATIONS UNDER THE
SECURITIES ACT OF 1933, THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT
ALSO RELATES TO 2,249,447 SHARES OF COMMON STOCK REGISTERED UNDER REGISTRATION
STATEMENT NO. 333-12395, WHICH BECAME EFFECTIVE ON SEPTEMBER 27, 1996, AS
AMENDED BY POST-EFFECTIVE AMENDMENT NO. 1 THERETO, WHICH BECAME EFFECTIVE ON
JUNE 18, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
---------------------------
AMENDING THE PROSPECTUS AND FILING CERTAIN EXHIBITS
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation, or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED APRIL 8, 1998
PROSPECTUS
4,569,541 SHARES
[ENBC LOGO]
COMMON STOCK
This Prospectus covers 4,569,541 shares (the "Shares") of common
stock, par value $.01 (the "Common Stock"), of Einstein/Noah Bagel Corp. (the
"Company") which may be offered and sold from time to time for the account of
the persons who are identified herein under the heading "Registering
Stockholders" and any other person who obtains the right to sell the Shares
hereunder (the "Registering Stockholders"). THE COMPANY WILL RECEIVE NO PART
OF THE PROCEEDS OF ANY SALES OF THE SHARES.
The distribution of the Shares by the Registering Stockholders may be
effected from time to time in one or more transactions on the Nasdaq National
Market (which may involve block transactions), in negotiated transactions, or
otherwise, and at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, or at negotiated prices. See "Plan of
Distribution." The Registering Stockholders may engage one or more brokers to
act as principal or agent in making sales, who may receive discounts or
commissions from the Registering Stockholders in amounts to be negotiated. The
Registering Stockholders and any such brokers may be deemed "underwriters" under
the Securities Act of 1933, as amended (the "Securities Act"), of the Shares
sold.
The Common Stock is traded on the Nasdaq National Market under the
symbol "ENBX." On April 2, 1998, the closing sale price of the Common Stock,
as reported in The Wall Street Journal (Western Edition), was $4 1/8 per share.
SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information................................................................... 2
Incorporation of Certain Documents by Reference......................................... 3
Special Note Regarding Forward-Looking Statements....................................... 4
Risk Factors............................................................................ 4
Selected Consolidated Financial and Store Data.......................................... 9
Registering Stockholders................................................................ 11
Plan of Distribution.................................................................... 14
Experts................................................................................. 14
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
registration statements, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices, 500
West Madison Street, Chicago, Illinois 60661, and 7 World Trade Center, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, such as the Company, that file
electronically with the Commission.
The Company has filed a registration statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act in
respect of the Common Stock offered hereby. For purposes hereof, the term
"Registration Statement" means the initial Registration Statement and any and
all amendments thereto. This Prospectus omits certain information contained in
the Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Statements herein concerning the contents of
any contract or other document are not necessarily complete, and in each
instance reference is made to such contract or other document filed with the
Commission as an exhibit to the Registration Statement, or otherwise, each such
statement being qualified by, and subject to, such reference in all respects.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and information heretofore filed by the
Company with the Commission (File No. 0-21097) are incorporated herein by
reference:
(i) The Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1997, and
(ii) The description of the Company's Common Stock set forth under
the caption "Description of Capital Stock" in the Company's prospectus included
in the Company's registration statement on Form S-1, Registration No.
333-04725, which is incorporated by reference in the Company's registration
statement on Form 8-A filed July 29, 1996, as amended, for the registration of
the Common Stock under Section 12(g) of the Exchange Act.
Each document filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock pursuant hereto
shall be deemed to be incorporated by reference in this Prospectus and to be a
part of this Prospectus from the date of filing of such document. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained in this Prospectus or in any subsequently
filed document that also is or is deemed to be incorporated by reference in
this Prospectus modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents that are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to Investor Relations, Einstein/Noah Bagel Corp., 14123 Denver West
Parkway, Golden, Colorado 80401, telephone (303) 215-9300.
3
<PAGE> 5
The following is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
incorporated by reference in this Prospectus. References in this Prospectus to
the "Company" mean the Company, its predecessors and its and their
subsidiaries, unless the context otherwise requires. Einstein Bros.(R) Bagels
and Noah's New York Bagels(R) are trademarks owned by the Company.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS SET FORTH UNDER THE CAPTION "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS 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 THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE
COMPANY, EINSTEIN/NOAH BAGEL PARTNERS, L.P., A MAJORITY-OWNED SUBSIDIARY OF THE
COMPANY, EINSTEIN BROS. BAGELS STORES AND NOAH'S NEW YORK BAGELS 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 THE BUSINESS OF,
BOSTON CHICKEN, INC., THE COMPANY'S MAJORITY STOCKHOLDER ("BOSTON CHICKEN");
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 THE COMPANY'S
FILINGS WITH THE COMMISSION. 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.
RISK FACTORS
In evaluating an investment in the securities offered hereby,
prospective investors should carefully consider the following factors in
addition to the other information contained in this Prospectus.
ANTICIPATED OPERATING LOSSES OF THE COMPANY
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 1997 fiscal year are not, and for
the 1998 fiscal year will not be, readily comparable to those for the 1996 and
1995 fiscal years.
The Company expects to report positive earnings before interest, income
taxes, depreciation and amortization expenses ("EBITDA") in 1998; however, due
primarily to significant depreciation charges associated with the acquisition of
a Company store base and significant goodwill amortization resulting from the
Transactions, the Company expects to report a net loss in 1998. SEE "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS" ABOVE. The Company's area developers
incurred aggregate net losses of $40.6 million in 1996 and $93.5 million in 1997
(until consummation of the Transactions).
EBITDA is dependent upon a number of factors, including the number of
stores in operation systemwide, the net weekly per store average ("WPSA")
revenue and cash flow of such stores and systemwide overhead expenses. Net WPSA
represents the weekly per store average for all stores after customer and
employee discounts, based upon the actual number of days the stores are open in
the reporting period. The Company considers EBITDA an important indicator of
operational performance. However, EBITDA should not be considered an alternative
to operating or net income as an indicator of the Company's operational
performance, nor as an alternative to cash flows from operating activities as a
measure of liquidity, in each case, determined in accordance with generally
accepted accounting principles.
4
<PAGE> 6
INTEGRATION OF BUSINESS OPERATIONS
The Company's success is dependent to a significant extent upon the
successful integration of the business operations of the Company's former area
developers and the Company's ability to develop and operate existing and future
stores and manage its organizational and financial resources. There can be no
assurance that the Company will be able to successfully integrate the
administrative, management and service operations of a combined system or that
such integration will occur in a timely and efficient manner. The failure to
achieve such integration could have a material adverse effect on the business,
operating results and financial condition of the Company. The consolidation of
the operations of the Company's former area developers requires the
dedication of management resources and may temporarily distract attention from
the day-to-day business of the Company, which could adversely affect the
Company's business and operating results. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGE 4.
EXPANSION
The opening and success of stores are dependent on a number of
factors, including the availability of suitable sites, the negotiation of
acceptable lease or purchase terms for such sites, permitting and regulatory
compliance, the ability to meet construction schedules, the ability to hire and
train qualified personnel, the financial and other capabilities of the Company
and general economic and business conditions. Not all of the foregoing factors
are within the control of the Company. The financial resources required by the
Company to achieve systemwide plans will be dependent upon, among other things,
the number and cost of stores developed and store operating results. The cost
to develop a prototype store ranges from between $350,000 and $450,000. There
can be no assurance that the Company will have access to the financial resources
necessary to achieve systemwide plans or that stores will be successfully
developed and operated.
TERMS OF CREDIT FACILITY AND AVAILABILITY OF CAPITAL
In November 1997, the Company entered into a secured credit agreement
with Bank of America National Trust and Savings Association and the lenders
named therein (the "Credit Facility") that consisted of a $30.0 million secured
term loan facility and a $40.0 million secured revolving credit facility. As of
December 28, 1997, $30.0 million was outstanding under the term loan of the
Credit Facility. The terms and conditions of the Credit Facility impose
restrictions that affect, among other things, the ability of the Company to
incur debt, make acquisitions, sell assets, merge, grant or incur liens, make
investments or loans, engage in sale leaseback transactions, pay dividends or
make distributions (other than tax distributions), repurchase equity interests
and make capital expenditures. In March 1998, the Credit Facility was amended to
reduce the amount of the revolving credit facility to $25.0 million, which will
become available in increments through September 1998, subject to the Company's
compliance with certain financial covenants, including a minimum operating cash
flow test. 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.
Any such acceleration would also permit holders of other debt of the Company to
exercise their remedies, including acceleration of their debt which in the
aggregate totaled $125.0 million as of December 28, 1997. 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's primary uses of capital in 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 4.
5
<PAGE> 7
LIMITED OPERATING HISTORY
The Company commenced operations in March 1995, and has a limited
operating history upon which investors may evaluate the Company's performance.
As of December 28, 1997, there were 574 stores in operation systemwide. A
majority of such stores have been in operation for less than two years. In
February 1998, the Company announced that, in order to permit increased
organizational focus on the existing store base, it intended to modify its 1998
development plans and to develop 25 to 50 stores in 1998. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 4.
DEPENDENCE ON PRODUCTION CAPACITY
The Company's development plans require that it continue to maintain
and develop significant bagel dough production capacity from internal or
external sources. To date, the Company has met bagel dough production
requirements through a combination of a frozen dough production facility owned
and operated by a third-party baking company which has committed certain
capacity to the Company pursuant to a long-term supply agreement and two frozen
dough production facilities in California operated by the Company. The Company
has determined that the frozen dough requirements previously satisfied by the
two facilities in California can be met from one facility's production capacity
and the Company expects to close one of the facilities in April 1998. Any
interruption of production capacity could have a material adverse effect on the
ability of the Company to supply bagels to its stores. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 4.
LABOR MATTERS
Certain operations of the Company conducted in northern California
under the Noah's New York Bagels brand have from time to time been the subject
of union organizing activities. One store in the San Francisco Bay area is
currently in union contract negotiations and a union has recently prevailed in
an election in another Bay area store (although such election has not yet been
certified by the National Labor Relations Board). Union affiliation may have a
negative impact upon employee relations and labor costs.
COMPETITION; EASE OF ENTRY INTO BUSINESS
The food service industry is intensely competitive with respect to
food quality, concept, convenience, location, customer service and value. In
addition, there are many well-established food service competitors with
substantially greater financial and other resources, and with substantially
longer operating histories, than the Company. Many of such competitors are less
dependent than the Company on a single primary product. The Company believes
that it competes with other bagel retailers and bakeries, specialty coffee
retailers, doughnut shops, fast-food restaurants, delicatessens, take-out food
service companies, supermarkets and convenience stores. In addition, the
Company believes that the start-up costs associated with retail bagel and
similar food service establishments are not a significant impediment to entry
into the retail bagel business.
RISKS ASSOCIATED WITH THE FOOD SERVICE INDUSTRY
Food service businesses are often affected by changes in consumer
tastes, national, regional and local economic conditions, demographic trends,
traffic patterns, the cost and availability of labor, purchasing power,
availability of product and the type, number and location of competing
restaurants. Multi-unit food service businesses such as the Company can also be
substantially adversely affected by publicity resulting from food quality,
illness, injury, or other health concerns (including food-borne illness claims)
or operating issues stemming from one store or a limited number of stores,
whether or not the Company is liable. Claims relating to foreign objects,
food-borne illness or operating issues are common in the food service industry
and a number of such claims may exist at any given time. Dependence on frequent
deliveries of produce and supplies also subjects food service businesses such as
the Company to the risk that
6
<PAGE> 8
shortages or interruptions in supply caused by adverse weather or other
conditions could adversely affect the availability, quality and cost of
ingredients. In addition, material changes in, or the Company's failure to
comply with, applicable federal, state and local government regulations, and
factors such as inflation, increased food, labor and employee benefits costs,
regional weather conditions and unavailability of an adequate number of
experienced managers and hourly employees may also adversely affect the food
service industry in general and the Company's results of operations and
financial condition in particular.
GOVERNMENT REGULATION
The restaurant industry is subject to numerous federal, state and
local government regulations, including those relating to the preparation and
sale of food and building and zoning requirements. The Company is subject to
laws governing its relationship with employees, including minimum wage
requirements, overtime, working and safety conditions and citizenship
requirements. The failure to obtain or retain food licenses, or increases in
employee benefit costs or other costs associated with employees, could adversely
affect the Company.
RELATIONSHIP WITH BOSTON CHICKEN
The Company and Boston Chicken, the Company's majority stockholder, are
parties to fee service agreements, pursuant to which Boston Chicken provides to
the Company certain accounting and administration, and computer and
communications services. The interruption of these services or a material
adverse change in Boston Chicken's business or financial condition could have a
material adverse effect on the Company. In addition, the Company has an
unsecured, subordinated non-convertible credit facility with Boston Chicken
providing for borrowings of up to $50.0 million, none of which was outstanding
as of April 2, 1998. Although the Company has not requested funding under the
Boston Chicken 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.
CONTROL BY AND CONFLICTS OF INTEREST WITH BOSTON CHICKEN
Boston Chicken owns approximately 51.9% of the outstanding shares of
the Company's Common Stock. The Company has granted to Boston Chicken an option
that permits it to maintain ownership of shares of the Company's 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. As of December 28, 1997, Boston Chicken had the right to purchase
1,467,949 additional shares of the Company's Common Stock at prices ranging from
$10.30 to $30.75 per share. By reason of its holdings and such option, Boston
Chicken is able to control the affairs and policies of the Company. In addition,
Boston Chicken is able to elect the Company's board of directors and approve or
disapprove any matter submitted to a vote of the stockholders of the Company,
including certain fundamental business transactions requiring approval by the
stockholders of the Company.
Pursuant to agreements with Boston Chicken, the Company is prohibited
from taking certain actions without the consent of Boston Chicken as long as
Boston Chicken's option to purchase the Company's Common Stock discussed above
has not terminated, including altering any rights attaching to the Company's
Common Stock, offering or issuing any equity securities or debt securities
convertible into equity securities, in either case other than the Company's
Common Stock, distributing assets or securities of the Company having a fair
market value in excess of 10% of the Company's consolidated gross revenues
measured as of the immediately preceding fiscal year end and filing a petition
in bankruptcy.
In addition to existing agreements between the Company and Boston
Chicken, the Company may enter into additional or modified agreements,
arrangements and transactions with Boston Chicken. While the Company expects
that any such future arrangements and transactions will be determined through
negotiation between the Company and Boston Chicken, there can be no assurance
that conflicts of interest will not occur with respect to such future business
dealings and similar corporate matters. Conflicts may arise in connection with
product
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<PAGE> 9
offerings, consumer and market positioning, recruiting, site selection and
issuances of additional securities by the Company. There can be no assurance
that any such conflicts will be resolved in a manner favorable to the Company
or its minority stockholders.
VOLATILITY OF STOCK PRICE
The market price for the Company's Common Stock has been highly
volatile. During the period from August 1, 1996 (the date on which the Common
Stock began trading on the Nasdaq National Market) through April 2, 1998, the
per share closing price of the Common Stock has fluctuated from a high of $36
1/2 to a low of $4 1/16. Such volatility does not necessarily relate to the
Company's financial performance. In the future, the market price for the Common
Stock may be significantly affected by the Company's operating results and other
factors that may or may not be within the Company's control. Volatility in the
market price of the Common Stock, changes in prevailing interest rates, changes
in perception of the Company's creditworthiness, fluctuations in the stock
market generally, as well as general economic conditions, may adversely affect
the market price of the Common Stock.
RECOVERABILITY OF INTANGIBLE ASSETS
The Company has recorded significant intangible assets in connection
with certain acquisitions of other bagel retailers and in connection with the
Transactions. Applicable accounting standards require the Company to review
long-lived assets (such as goodwill and other identifiable intangible assets)
to be held and used by the Company for impairment whenever events or changes in
circumstances indicate that the carrying values of those assets may not be
recoverable. In the event that the Company determines that the carrying value
of such intangible assets is impaired, it would write down such carrying value,
which would result in a charge to earnings. Any such charge could have a
material adverse effect on the Company's financial results.
ANTI-TAKEOVER EFFECT OF CHARTER, STATUTORY AND OTHER PROVISIONS
Boston Chicken's ownership interest in the Company and terms of
certain provisions in the Company's Restated Certificate of Incorporation and
Amended and Restated Bylaws may have the effect of discouraging a change in
control of the Company. Such provisions include the requirement that all
stockholder action must be effected at a duly-called annual or special meeting
of stockholders and the requirement that stockholders follow an advance
notification procedure for stockholder nominations of candidates for the board
of directors and to present other stockholder business to be considered at any
meeting of stockholders. In addition, the board of directors has the
authority, without further action by the stockholders, to issue up to 20
million shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, and to issue authorized but
unissued shares of Common Stock up to a maximum of 200 million shares. The
issuance of preferred stock or additional shares of Common Stock could have the
effect of delaying, deferring or preventing a change in control of the Company,
even if such change in control would be beneficial to the Company's
stockholders.
The terms of the Company's 7 1/4% Convertible Subordinated Debentures
due 2004 (the "Debentures") provide that the Company will be required, as of 40
business days after the occurrence of a change in control of the Company (as
defined in the indenture with respect to the Debentures), to purchase for cash
any Debenture, at the option of the holder, for an amount equal to 100% of the
principal amount thereof, plus accrued but unpaid interest up to but not
including the date of the change in control. The terms of the Bagel Partners
partnership agreement provide that upon a change in control of the Company (as
defined in the partnership agreement), Bagel Funding's right to require Bagel
Partners to redeem Bagel Funding's interest in Bagel Partners in certain cases
will be accelerated so it is exercisable for the period commencing on the date
of the change in control and ending 42 months after December 5, 1997, the date
of the Transactions. In addition, the Credit Facility also provides that in the
event of a change in control of the Company (as defined in the Credit
Agreement), the commitment of each of the lenders shall immediately terminate
and the outstanding principal amount of the Credit Facility, all interest
thereon and all other amounts payable under the Credit Facility shall become
immediately due and payable. The change in control purchase provisions of the
Debentures and the above-described provisions of the Bagel Partners partnership
agreement and the Credit Facility may in certain circumstances have an
anti-takeover effect.
8
<PAGE> 10
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial and
store data for the Company. This data should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto included
in the Company's Annual Report on Form 10-K for fiscal year ended December 28,
1997, which report is incorporated herein by reference.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 24, 1995
(INCEPTION) FISCAL YEAR ENDED
THROUGH -----------------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28,
1995 1996 (1) 1997 (1)
------------ ------------ ------------
(In thousands, except per share data and number of stores)
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Company stores .................................... $ 25,685 $ 35,803 $ 28,436
Royalties and franchise-related fees .............. 671 19,918 28,286
Interest income ................................... 67 5,986 21,566
--------- --------- ---------
Total revenue ................................. 26,423 61,707 78,288
Income (loss) from operations ....................... (43,152)(2) 10,039 3,664 (3)
Net income (loss) ................................... (43,716) 5,707 (1,402)
Basic earnings (loss) per share ..................... (7.87) 0.29 (0.04)
Diluted earnings (loss) per share ................... (7.87) 0.27 (0.04)
Weighted average number of common and equivalent
shares outstanding:
Basic earnings (loss) per share ............... 5,570 19,286 32,956
Diluted earnings (loss) per share ............. 5,570 21,023 32,956
STORE DATA (UNAUDITED):
Systemwide net revenue .............................. $ 26,410 $ 138,251 $ 302,995
Company stores ...................................... 47 14 574
Area developer stores ............................... 13 301 0
--------- --------- ---------
Number of stores at end of year ..................... 60 315 574
========= ========= =========
CONSOLIDATED BALANCE SHEET DATA:
Total assets ........................................ $ 50,299 $ 332,418 $ 643,128
Long-term debt (4) .................................. 58,875 -- 149,000
Stockholders' equity (deficit) ...................... (20,994) 315,517 330,346
</TABLE>
(1) The Company's fiscal year is the 52/53-week period ending on the last Sunday
in December and normally consists of 13 four-week periods.
(2) Includes a $26.6 million write-off of intangible assets.
(3) Includes an $18.2 million charge associated primarily with the Transactions.
(4) Includes at December 31, 1995, $11.1 million attributable to repurchase
common stock shares and $7.8 million attributable to Series A preferred
stock. See Note 11 of Notes to the Company's Consolidated Financial
Statements incorporated by reference herein. Includes at December 28, 1997,
$24.0 million of the Company's $30.0 million senior term loan ($6.0 million
payable in 1998) and $125.0 million of 7 1/4% convertible subordinated
debentures due 2004. See Note 6 of Notes to the Company's Consolidated
Financial Statements incorporated by reference herein.
PREDECESSOR COMPANIES
The summary historical combined financial data shown below represent
the financial data of the Company's predecessors: Brackman Brothers, Inc.
("Brackman"), Bagel & Bagel, Inc. ("Bagel & Bagel") and Offerdahl's Bagel
Gourmet, Inc. ("Offerdahl's"). The financial data for the period ended March 31,
1995 include the results of operations of the predecessors through their
respective dates of acquisition,
9
<PAGE> 11
which were March 24, 1995 for Brackman and Bagel & Bagel and March 31, 1995 for
Offerdahl's. The financial information is presented on the historic cost basis
of each of the predecessors. The basic and fully diluted earnings (loss) per
share and the weighted average number of common and equivalent shares
outstanding during the period have not been presented for these periods because
the Company believes this information is not meaningful. Subsequent to the
acquisition of these predecessors, the Company sold substantially all of their
assets. Accordingly, the Company does not believe that such operating results
are meaningful or are indicative of future operating results of the Company.
<TABLE>
<CAPTION>
Year ended Period from
------------------------------- January 1, 1995
December 31, December 31, through
1993 1994 March 31, 1995
----------- ------------ ---------------
(in thousands)
<S> <C> <C> <C>
COMBINED STATEMENTS OF OPERATIONS DATA:
Total revenue.......................... $12,048 $19,158 $5,882
Income from operations................. 449 1,452 39
Net income (loss)...................... 389 696 (158)
COMBINED BALANCE SHEET DATA:
Total assets........................... $4,770 $9,511
Long-term debt......................... 1,011 2,822
</TABLE>
10
<PAGE> 12
REGISTERING STOCKHOLDERS
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of April 2, 1998 by each of the
Registering Stockholders.
<TABLE>
<CAPTION>
TOTAL SHARES NOT
SHARES OWNED REGISTERED HEREUNDER
------------ SHARES REGISTERED --------------------
NAME NUMBER PERCENT HEREUNDER NUMBER PERCENT
---- ------ ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Sangwoo Ahn ...................................... 18,040 * 2,869 15,171 *
Sangwoo Ahn Family Partnership II ................ 4,500 * 4,500 0 *
Altgeld Management Corporation ................... 46,932 * 22,500 24,432 *
Arnold Amster .................................... 5,625 * 5,625 0 *
Avalon Corp. ..................................... 16,100 * 3,514 12,586 *
Chris Bancroft ................................... 8,440 * 8,440 0 *
Bank of America National Trust and
Savings Association ............................ 35,375 * 35,375 0 *
Bank America Investment Corp. .................... 28,688 * 28,688 0 *
B&B Holdings, Inc. ............................... 489,475 1.5% 489,475 0 *
Lawrence Beck .................................... 63,587 * 19,125 44,462 *
Belushi Partners II .............................. 13,272 * 4,781 8,491 *
Morris Belzberg .................................. 4,218 * 4,218 0 *
Steven Berrard ................................... 14,421 * 5,625 8,796 *
Donald J. Bingle ................................. 3,520 * 1,020 2,500 *
Theodore A. Bosler Trust ......................... 4,123 * 2,391 1,732 *
Dean L. Buntrock ................................. 44,462 * 44,462 0 *
Dean and Rosemarie Buntrock Foundation ........... 175,000 * 175,000 0 *
Vincent Buonnano ................................. 3,869 * 2,869 1,000 *
Jeffrey L. Butler ................................ 504,254 1.5% 504,254 0 *
W. Eric Carlborg ................................. 24,990 * 2,869 22,121 *
Caruthers Family, LLC ............................ 13,522 * 4,218 9,304 *
Joseph Cusimano IRA Rollover ..................... 3,825 * 3,825 0 *
D&R, L.L.C ....................................... 56,250 * 56,250 0 *
Peter Desnoes .................................... 18,622 * 4,781 13,841 *
EBB Investors, Inc. .............................. 23,906 * 23,906 0 *
Jim Edgemon ...................................... 478 * 478 0 *
EE, L.P. ......................................... 17,948 * 17,948 0 *
Andrew J. Filipowski ............................. 24,438 * 11,250 13,188 *
Jimmy Filler ..................................... 6,975 * 5,975 1,000 *
Brian J. Flynn June, 1992 Non-Exempt Trust........ 24,457 * 11,250 13,207 *
Donald F. Flynn, 1993 Trust ...................... 13,250 * 11,250 2,000 *
Kevin F. Flynn June 1992 Non-Exempt Trust......... 23,457 * 11,250 12,207 *
Robert Flynn 1995 Revocable Trust ................ 2,188 * 1,688 500 *
Richard A. Forsythe Revocable Trust .............. 4,781 * 4,781 0 *
Frontenac VI Limited Partnership ................. 488,608 1.5% 488,608 0 *
Stuart Fullinwider ............................... 3,125 * 1,530 1,595 *
Robert D. Furst, Jr .............................. 595 * 195 400 *
Furst Rudman Investors, L.L.P .................... 2,390 * 2,390 0 *
Hollis Geiger, Jr ................................ 598 * 598 0 *
GECFS, Inc........................................ 80,000 * 80,000 0 *
Thomas F. Githens Family Partnership ............. 6,647 * 2,250 4,397 *
Mark R. Goldston ................................. 376,931 1.1% 344,673 32,258 *
J. Douglas Gray .................................. 3,391 * 2,391 1,000 *
Arnold C. Greenberg .............................. 20,000 * 12,500 7,500 *
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
TOTAL SHARES NOT
SHARES OWNED REGISTERED HEREUNDER
------------ SHARES REGISTERED --------------------
NAME NUMBER PERCENT HEREUNDER NUMBER PERCENT
---- ------ ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Grosvenor Fund, L.P. ............................. 2,812 * 2,812 0 *
Hal P. Harlan .................................... 3,825 * 3,825 0 *
Harlan Bagel Supply Company ...................... 23,173 * 23,173 0 *
J. Bruce Harreld ................................. 2,500 * 2,500 0 *
Mark Hayden ...................................... 14,185 * 9,030 5,155 *
J. Michael Hester ................................ 5,738 * 5,738 0 *
A. Barry Hirschfeld .............................. 3,391 * 2,391 1,000 *
Joe Hoog ......................................... 956 * 956 0 *
William P. Hulligan .............................. 11,325 * 4,782 6,543 *
M Howard Jacobson ................................ 500 * 500 0 *
JHR Enterprises, Inc. ............................ 1,056 * 1,056 0 *
JMH Associates, Inc. Profit Sharing Fund ......... 9,825 * 3,825 6,000 *
JWC Trust ........................................ 31,587 * 3,825 27,762 *
Jeffrey A. Klein ................................. 37,094 * 6,216 30,878 *
KMK & Associates ................................. 10,563 * 9,563 1,000 *
Perry J. Lewis ................................... 5,974 * 3,994 1,980 *
Gail A. Lozoff ................................... 4,249 * 4,249 0 *
Don Manuel ....................................... 478 * 478 0 *
Marquette Venture Partners II, L.P. .............. 47,519 * 47,519 0 *
W. McDowell, Jr .................................. 2,250 * 2,250 0 *
John and Janet Melk, Joint Tenants ............... 49,813 * 47,813 2,000 *
David B. Meltzer ................................. 2,869 * 2,869 0 *
D. Michael Meyer ................................. 4,218 * 4,218 0 *
James Fox Miller ................................. 9,563 * 9,563 0 *
Lewis Miller ..................................... 1,596 * 983 613 *
John A. Morgan ................................... 8,225 * 6,244 1,981 *
Morgan, Lewis, Githens & Ahn, L.P. ............... 14,344 * 14,344 0 *
John B. Morlock .................................. 15,150 * 11,250 3,900 *
John H. Muehlstein, Jr ........................... 16,757 * 16,757 0 *
Dennis B. Mullen ................................. 3,600 * 1,100 2,500 *
Andrew P. Murphy ................................. 1,125 * 1,125 0 *
MVP II Affiliates Fund, L.P. ..................... 886 * 886 0 *
Saad J. Nadhir ................................... 164,126 * 164,126 0 *
Jeffrey C. Neal .................................. 93,831 * 16,875 76,956 *
Alain O'Hayon .................................... 478 * 478 0 *
Peer Pedersen .................................... 138,820 * 138,820 0 *
Steven J. Quamme ................................. 5,625 * 5,625 0 *
A.G. Rappaport ................................... 12,677 * 4,781 7,896 *
Charles Reeder ................................... 3,390 * 2,390 1,000 *
J. Christopher Reyes ............................. 17,012 * 4,781 12,231 *
M. Jude Reyes .................................... 23,241 * 4,781 18,460 *
Harry T. Rose .................................... 6,141 * 2,391 3,750 *
Keith M. Rudman .................................. 196 * 196 0 *
Lloyd D. Ruth..................................... 2,536 * 2,536 0 *
Martin S. Schwartz ............................... 11,453 * 11,453 0 *
Martin S. Schwartz Trust
FBO Stacy Schwartz .............................. 500 * 500 0 *
Penny Bender Sebring ............................. 52,496 * 50,934 1,562 *
Jeffry J. Shearer ................................ 83,191 * 56,250 26,941 *
John A. Shields .................................. 22,231 * 2,869 19,362 *
Geoff Soper ...................................... 2,344 * 1,056 1,288 *
David Stanchak ................................... 56,437 * 56,437 0 *
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
TOTAL SHARES NOT
SHARES OWNED REGISTERED HEREUNDER
------------ SHARES REGISTERED --------------------
NAME NUMBER PERCENT HEREUNDER NUMBER PERCENT
---- ------ ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Mark W. Stephens ................................. 182,266 * 182,266 0 *
Storie Partners, L.P.............................. 4,218 * 4,218 0 *
Emanuel B. Tarrson ............................... 10,355 * 4,218 6,137 *
Ronald E. Tarrson ................................ 12,083 * 4,218 7,865 *
Steven Tarrson ................................... 4,218 * 4,218 0 *
Rick Tasman ...................................... 772 * 772 0 *
Daniel Taylor .................................... 981,023 2.9% 981,023 0 *
Mark Thomas ...................................... 459 * 459 0 *
John Todd ........................................ 5,000 * 1,959 3,041 *
Triune, Inc. ..................................... 3,516 * 3,516 0 *
Triune Venture Holdings, L.P. .................... 10,837 * 9,142 1,695 *
Howard C. Warren ................................. 92,275 * 47,813 44,462 *
Anthony Wedo ..................................... 14,251 * 11,751 2,500 *
Blanch Weiss or Howard Weiss...................... 300 * 300 0 *
M. David White ................................... 2,860 * 2,860 0 *
Wijler Guernsey, Ltd. ............................ 14,344 * 14,344 0 *
Youngstown Partners .............................. 39,375 * 39,375 0 *
Laurence M. Zwain ................................ 2,391 * 2,391 0 *
</TABLE>
* Less than one percent.
Bank of America National Trust and Savings Association is the agent for
the lenders and a participating bank under the Credit Facility. GECFS, Inc. is
an affiliate of General Electric Capital Corporation, which is a participating
bank under the Credit Facility. B&B Holdings, Inc., formerly known as Bagel &
Bagel, Inc., which was acquired by the Company in March 1995, is owned by the
spouse of Gail Lozoff, the Chief Marketing Officer of the Company since March
1998. Ms. Lozoff was the Chief Concept Officer of the Company from October 1997
until March 1998 and was a Vice President of the Company from April 1995 until
October 1997. Ms. Lozoff has also served as a director of the Company since
April 1995. Donald J. Bingle served as Vice President, General Counsel and
Secretary of Boston Chicken from May 1992 until December 1996. Dean L. Buntrock
served as a director of Boston Chicken from October 1993 until March 1998.
Jeffrey L. Butler has served as a director of the Company since December 1997
and as President of the Company since September 1997. From May 1996 until
September 1997, Mr. Butler served as President of the Einstein Bros. Bagels
Concept and from January 1996 until May 1996, he served as Chief Operating
Officer of the Company. Prior thereto, Mr. Butler served in a number of
executive capacities at area developers of Boston Chicken. W. Eric Carlborg has
served as Chief Financial Officer of the Company since April 1997. Mr. Carlborg
also served as Senior Vice President-Finance of the Company from July 1996 until
April 1997 and as Vice President of Alignment and Planning of Boston Chicken
from October 1995 through June 1996. Frontenac VI Limited Partnership is a
limited partnership, the general partner of which is an entity of which M. Laird
Koldyke, a director of the Company, is a general partner. Stuart Fullinwider
served as Senior Vice President-Business and Information Services of Boston
Chicken from November 1996 until November 1997. Prior thereto, Mr. Fullinwider
served in a number of capacities as an officer of Boston Chicken. Mark R.
Goldston is a consultant to Boston Chicken. Until his resignation from the
Company in December 1997, Mr. Goldston was Chief Executive Officer of the
Company since September 1997 and a director of the Company since April 1996.
From April 1996 until September 1997, Mr. Goldston also served as President of
the Company. Until his resignation from Boston Chicken in December 1997, Mr.
Goldston was also employed by Boston Chicken since January 1996 and served as a
Vice Chairman of the Board and a director of Boston Chicken since August 1996.
Arnold C. Greenberg has been a director of Boston Chicken since February 1991.
Hal P. Harlan is an equity owner of Harlan Bagel Supply Company ("Harlan"),
with whom the Company has entered into a project and approved supplier agreement
pursuant to which Harlan provides the Company's area developers and their food
service distributors with frozen bagel dough. J. Bruce Harreld has been a
director of Boston Chicken since June 1993. Mark Hayden was an employee of
Boston Chicken from 1992 until June 1997. M Howard Jacobson has served as a
director of Boston Chicken since February 1991. Marquette Venture Partners II,
L.P. and MVP II Affiliates Fund, L.P. are partnerships, the general partner of
each of which is an entity of which Mr. Ruth, a director of the Company, is a
general partner. Lewis Miller was an employee of the Company from May 1995 until
May 1996. Morgan, Lewis, Githens & Ahn, L.P. serves as a consultant to Boston
Chicken. John H. Muehlstein, Jr. has served as a director of the Company since
March 1995. Dennis Mullen has been Executive Vice President-Business Partner
Group of Boston Chicken since March 1998 and served as Chief Financial
Officer-Boston Market Concept of Boston Chicken from June 1997 until January
1998. Prior thereto, Mr. Mullen served in a number of executive capacities at
area developers of Boston
13
<PAGE> 15
Chicken. Saad J. Nadhir has served as Co-Chairman of the Board and Chief
Executive Officer of Boston Chicken since October 1997. Mr. Nadhir previously
served as Co-Chairman of the Board and President of Boston Chicken from 1994
until January 1997. Peer Pedersen has served as a director of Boston Chicken
since January 1993. Steven J. Quamme has served as a consultant to Boston
Chicken since November 1997 and prior thereto was as an executive and equity
owner of an area developer of each of the Company and Boston Chicken. A.G.
Rappaport was an employee and equity owner of an area developer of the Company.
Lloyd D. Ruth has been a director of the Company since March 1995. Jeffry
J.Shearer served as Vice-Chairman of the Board of Boston Chicken from September
1993 until August 1996 and served as a director of Boston Chicken from January
1992 until August 1996. David G. Stanchak has served as Vice President and
Chief Development Officer of the Company and has been a director of the Company
since March 1995. Mark W. Stephens has been a Vice Chairman and a director of
Boston Chicken since December 1995 and Chief Financial Officer of Boston Chicken
since 1993. Daniel Taylor was the majority equity owner of several entities from
which an area developer of the Company purchased 14 stores in Texas. John Todd
served as Chief Financial Officer-Boston Market from November 1996 until August
1997. Anthony Wedo served as Chief Concept Officer of Boston Chicken from June
1997 until November 1997. Prior thereto, Mr. Wedo served in a number of
executive capacities at area developers of Boston Chicken. M. David White
served as Vice President-Finance of Boston Chicken from January 1995 until June
1997. Laurence M. Zwain served as a Vice-Chairman of the Board and a director of
Boston Chicken from May 1997 until August 1997. Mr. Zwain also served as
President and Chief Executive Officer of Boston Chicken from January 1996 until
May 1997.
PLAN OF DISTRIBUTION
An aggregate of up to 4,569,541 Shares may be offered and sold
pursuant to this Prospectus. The distribution of such Shares by the Registering
Stockholders may be effected from time to time in one or more transactions on
the Nasdaq National Market (which may involve block transactions), in
negotiated transactions, or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, or at negotiated
prices. The Registering Stockholders may engage one or more brokers to act as
principal or agent in making sales, who may receive discounts or commissions
from the Registering Stockholders in amounts to be negotiated. The Registering
Stockholders and any such brokers may be deemed "underwriters" under the
Securities Act of the Shares sold. Daniel Taylor, one of the Registering
Stockholders, is prohibited, pursuant to an agreement with the Company, from
selling more than 15,000 Shares during any one trading day without the prior
consent of the Company.
This Prospectus also may be used, with the Company's consent, by
transferees, pledgees or donees of the Registering Stockholders, or by other
persons acquiring Shares and who wish to offer and sell such Shares under
circumstances requiring or making desirable its use. To the extent required, the
Company will file, during any period during which offers or sales are being
made, one or more supplements to this Prospectus to set forth the names of the
transferees, pledgees or donees of Registering Stockholders and any other
material information with respect to the plan of distribution not previously
disclosed.
The Company will pay all expenses of filing the Registration Statement
and preparing and reproducing this Prospectus. The Registering Stockholders will
pay any selling expenses, including brokerage commissions, incurred in
connection with their sale of any Shares covered by this Prospectus, except
that the Company has agreed to pay such expenses with respect to up to 750,000
Shares which may be issued to Daniel Taylor.
EXPERTS
The financial statements of the Company and subsidiaries at December
29, 1996 and at December 28, 1997, and for the period from March 24, 1995
(inception) through December 31, 1995 and for the fiscal years ended December
29, 1996 and December 28, 1997, and the related financial statement schedule
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their reports
thereon also incorporated by reference in this Prospectus, and are incorporated
herein by such reference in reliance upon the authority of said firm as experts
in accounting and auditing.
The financial statements of Bagel & Bagel, Inc. for the period from
December 28, 1994 to March 23, 1995 incorporated by reference in this
Prospectus have been audited by Mayer Hoffman McCann L.C., independent
14
<PAGE> 16
auditors, as set forth in their report thereon also incorporated by reference
in this Prospectus, and are incorporated herein by such reference in reliance
upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of Offerdahl's Bagel Gourmet, Inc.
and Affiliates for the period from January 1, 1995 to April 2, 1995
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their report
thereon also incorporated by reference in this Prospectus, and are incorporated
herein by such reference in reliance upon the authority of said firm as experts
in accounting and auditing.
15
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, all of which
will be paid by the Company, in connection with the registration, issuance and
distribution of the securities being registered hereby. All amounts are
estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . $ 4,216
Legal Fees and Expenses . . . . . . . . . . . . . . . . . 15,000
Accountants' Fees and Expenses . . . . . . . . . . . . . . 5,000
Printing and Engraving Expenses . . . . . . . . . . . . . 15,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 784
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 40,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors, officers, employees and agents of the Company;
allows the advancement of costs of defending against litigation; and permits
companies incorporated in Delaware to purchase insurance on behalf of
directors, officers, employees and agents against liabilities whether or not in
the circumstances such companies would have the power to indemnify against such
liabilities under the provisions of the statute.
The Company's Restated Certificate of Incorporation (Exhibit 3.1
hereto), provides for indemnification of the Company's officers and directors
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law. The Company maintains directors and officers insurance
covering its executive officers and directors.
The Company's Restated Certificate of Incorporation eliminates, to the
fullest extent permitted by Delaware law, liability of a director to the
Company or its stockholders for monetary damages for a breach of such
director's fiduciary duty of care except for liability where a director (a)
breaches his or her duty of loyalty to the Company or its stockholders, (b)
fails to act in good faith or engages in intentional misconduct or knowing
violation of law, (c) authorizes payment of an illegal dividend or stock
repurchase, or (d) obtains an improper personal benefit. While liability for
monetary damages has been eliminated, equitable remedies such as injunctive
relief or rescission remain available. In addition, a director is not relieved
of his or her responsibilities under any other law, including the federal
securities laws.
ITEM 16. EXHIBITS.
A list of the exhibits included or incorporated by reference as part
of this Registration Statement is set forth in the Exhibit Index which
immediately precedes such exhibits and is hereby incorporated by reference
herein.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended
(the "Securities Act");
II-1
<PAGE> 18
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the Registration Statement is on Form S-3,
Form S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-2
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement, or amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, in Golden, Colorado on April 6, 1998.
EINSTEIN/NOAH BAGEL CORP.
By: /s/ Scott A. Beck
----------------------------
Scott A. Beck
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, or amendment thereto, has been signed by the following
persons in the capacities indicated on April 6, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Scott A. Beck Chairman of the Board and Director
- --------------------------------------------------- (Principal Executive Officer)
Scott A. Beck
/s/ W. Eric Carlborg Chief Financial Officer
- --------------------------------------------------- (Principal Financial Officer)
W. Eric Carlborg
/s/ Susan Daggett Vice President--Controller
- --------------------------------------------------- (Principal Accounting Officer)
Susan Daggett
Chief Executive Officer and
- --------------------------------------------------- Director
Robert M. Hartnett
/s/ M. Laird Koldyke Director
- ---------------------------------------------------
M. Laird Koldyke
/s/ Gail A. Lozoff Director
- ---------------------------------------------------
Gail A. Lozoff
/s/ John H. Muehlstein, Jr. Director
- ---------------------------------------------------
John H. Muehlstein, Jr.
/s/ Lloyd D. Ruth Director
- ---------------------------------------------------
Lloyd D. Ruth
/s/ David G. Stanchak Director
- ---------------------------------------------------
David G. Stanchak
/s/ Jeffrey L. Butler President and Director
- ---------------------------------------------------
Jeffrey L. Butler
</TABLE>
II-3
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE*
<S> <C>
3.1 Restated Certificate of Incorporation of the Company ("Certificate of Incorporation") (incorporated by
reference to Exhibit 3 to the Company's quarterly report on Form 10-Q for the quarter ended October 6, 1996).
3.2 Amended and Restated Bylaws of the Company ("Bylaws") (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-3 (Reg. No. 333-28941).
4.1 Certificate of Incorporation (included in Exhibit 3.1).
4.2 Bylaws (included in Exhibit 3.2).
4.3 Certificate representing Common Stock (incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-3 (Reg. No. 333-04725)).
4.4 Amended and Restated Registration Rights Agreement dated as of February 1, 1996 by and among the Company and
certain stockholders of the Company (incorporated by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-3 (Reg. No. 333-04725)).
4.5 Concurrent Private Placement Agreement dated August 1, 1996 between Boston Chicken, Inc. ("Boston Chicken") and
the Company (incorporated by reference to Exhibit 10.3 to Boston Chicken's Quarterly Report on Form 10-Q for
the quarter ended July 14, 1996).
4.6 Registration Agreement dated August 1, 1996 between Boston Chicken and the Company (incorporated by reference
to Exhibit 10.3 to Boston Chicken's Quarterly Report on Form 10-Q for the quarter ended July 14, 1996).
4.7 Concurrent Offering Purchase Agreement dated November 26, 1996 between Boston Chicken and the Company
(incorporated by reference to Exhibit 10.41 to Boston Chicken's 1996 Annual Report on Form 10-K).
4.8 Registration Rights Agreement dated as of February 24, 1997 by and between the Company and Alamo Bagels, L.P.
(incorporated by reference to the Company's 1996 Annual Report on Form 10-K).
4.9 Indenture dated as of May 29, 1997 by and between the Company and Bankers Trust Company, as Trustee, which
includes as Exhibits the forms of Debenture for the Company's 7 1/4% Convertible Subordinated Debentures due
2004 (the ''Debenture Indenture'') (incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated as of May 22, 1997).
4.10 Registration Rights Agreement dated as of May 22, 1997 by and between the Company and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated and Morgan Stanley & Co.
Incorporated (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated as of
May 22, 1997).
4.11(a) Warrant Certificate to Purchase Shares of Common Stock issued on November 21, 1997 to GECFS, Inc. (incorporated by
reference to Exhibit 10.5(a) to the Company's 1997 Annual Report on Form 10-K).
4.11(b) Registration Rights Agreement dated November 21, 1997 between the Company and GECFS, Inc. (incorporated by reference
to Exhibit 10.5(b) to the Company's 1997 Annual Report on Form 10-K).
4.12(a) Warrant Certificate to Purchase Shares of Common Stock issued on November 21, 1997 to Bank of America National Trust
and Savings Association ("Bank of America") (incorporated by reference to Exhibit 10.6(a) to the Company's 1997 Annual
Report on Form 10-K).
4.12(b) Registration Rights Agreement dated November 21, 1997 between the Company and Bank of America (incorporated by
reference to Exhibit 10.6(b) to the Company's 1997 Annual Report on Form 10-K).
5 Opinion of Bell, Boyd & Lloyd (including consent)(previously filed).
23.1 Consent of Arthur Andersen LLP with respect to the Audited Consolidated Financial Statements of the Company and
subsidiaries and Related Supplemental Schedule.
23.2 Consent of Mayer Hoffman McCann L.C. with respect to the Audited Financial Statements of Bagel and Bagel, Inc.
23.3 Consent of Arthur Andersen LLP with respect to the Audited Combined Financial Statements of Offerdahl's Bagel Gourmet,
Inc. and Affiliates.
</TABLE>
- -------------------------
* In the case of incorporation by reference to documents filed by Boston
Chicken under the Securities Exchange Act of 1934, as amended, Boston
Chicken's file number under that Act is 0-22802.
Exhibit-1
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT TITLE
NO.
<S> <C>
23.4 Consent of Bell, Boyd & Lloyd (included in Exhibit 5).
</TABLE>
Exhibit-2
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 16, 1998
(except Note 6 as to which the date is March 27, 1998) on our audits of the
consolidated financial statements of Einstein/Noah Bagel Corp. and subsidiaries,
and to all references to our firm included in or made a part of this
registration statement on Form S-3.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado
April 6, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this registration statement of
our report dated April 26, 1996 on our audit of the financial statements of
Bagel & Bagel, Inc. and to all references to our firm included in or made a part
of this registration statement on Form S-3.
/s/ MAYER HOFFMAN MCCANN L.C.
MAYER HOFFMAN MCCANN L.C.
Kansas City, Missouri
April 6, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated April 24, 1996 on
our audit of the combined financial statements of Offerdahl's Bagel Gourmet,
Inc. and Affiliates, and to all references to our firm included in or made a
part of this registration statement on Form S-3.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado
April 6, 1998
