<PAGE> 1
As filed with the Securities and Exchange Commission on April 8, 1998
Registration No. 333-28941
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1
TO
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-1
ON
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
------------------------------
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
[EINSTEIN/NOAH LOGO]
$65,015,000 AGGREGATE PRINCIPAL AMOUNT OF
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
AND
3,059,519 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
This Prospectus relates to the 7 1/4% Convertible Subordinated
Debentures due 2004 (the "Debentures") of Einstein/Noah Bagel Corp. (the
"Company") and the shares of the Company's common stock, par value $.01 per
share ("Common Stock"), issuable upon the conversion of the Debentures. The
Debentures were issued and sold on May 29, 1997 (the "Original Offering") in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), to persons reasonably believed by
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex.
Brown & Sons Incorporated and Morgan Stanley & Co. Incorporated, as the initial
purchasers ("Initial Purchasers") of the Debentures, to be "qualified
institutional buyers" (as defined by Rule 144A under the Securities Act), other
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) or in transactions complying with the provisions
of Regulation S under the Securities Act. The Debentures and the Common Stock
issuable upon the conversion of the Debentures may be offered and sold from
time to time by holders named herein or by their transferees, pledgees, donees
or their successors (collectively, the "Registering Holders") pursuant to this
Prospectus. The Registration Statement of which this Prospectus is a part has
been filed with the Securities and Exchange Commission (the "Commission")
pursuant to a registration rights agreement dated as of May 22, 1997 (the
"Registration Agreement") between the Company and the Initial Purchasers
entered into in connection with the Original Offering. The Debentures are
convertible at any time prior to maturity, unless previously redeemed, into
shares of Common Stock at a conversion price of $21.25 per share, subject to
adjustment under certain conditions. The Common Stock is traded on the Nasdaq
National Market under the symbol "ENBX". On April 2, 1998, the last sale
price of the Common Stock as reported on the Nasdaq National Market was $4 1/8
per share. Interest on the Debentures will be payable semi-annually on June 1
and December 1 of each year, commencing December 1, 1997.
The Debentures are not redeemable prior to June 1, 2000. Thereafter,
the Debentures are redeemable at the option of the Company, in whole or in
part, at any time and from time to time, at the redemption prices set forth
herein, plus accrued interest. Upon a Change in Control, holders of Debentures
will have the right, subject to certain conditions and restrictions, to require
the Company to purchase all or any part of their Debentures at the principal
amount thereof plus accrued and unpaid interest. See "Description of
Debentures."
The Debentures will be subordinate in right of payment to all existing
and future Senior Indebtedness of the Company. As of December 28, 1997, the
Company had outstanding $30.0 million of indebtedness that constituted Senior
Indebtedness. See "Description of Debentures -- Subordination of Debentures."
The Debentures and the Common Stock issuable upon the conversion of
the Debentures may be sold by the Registering Holders from time to time
directly to purchasers or through agents, underwriters or dealers. See "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Debentures and the Common Stock issuable upon the
conversion of the Debentures in respect of which this Prospectus is being
delivered and the applicable agent's commission, dealer's purchase price or
underwriter's discount, if any, will be set forth in the accompanying
supplement to this Prospectus.
The Registering Holders will receive all of the net proceeds of the
sale of the Debentures and the Common Stock issuable upon the conversion of the
Debentures and will pay all underwriting discounts and selling commissions, if
any, applicable to the sale of the Debentures and the Common Stock issuable
upon the conversion of the Debentures.
The Registering Holders and any broker-dealers, agents or underwriters
which participate in the distribution of the Debentures and the Common Stock
issuable upon the conversion of the Debentures may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Debentures and the Common
Stock issuable upon the conversion of the Debentures purchased by them may be
deemed to be underwriting commissions and discounts under the Securities Act.
See "Plan of Distribution" for a description of indemnification arrangements.
SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
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
Description of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Registering Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</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.
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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.
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<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 SITE 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.
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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. At
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.
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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
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<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, 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
9
<PAGE> 11
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
DESCRIPTION OF DEBENTURES
The Debentures were issued pursuant to an indenture dated as of May 29,
1997 (the "Indenture") between the Company, as issuer, and Bankers Trust
Company, as trustee (the "Trustee"). The terms of the Debentures include those
stated in the Indenture and those provisions required by, or made a part of the
Indenture by reference to, the Trust Indenture Act of 1939, as in effect on the
date of the Indenture (the "Trust Indenture Act"). The Debentures are subject to
all such terms, and prospective investors are referred to the Indenture for a
statement thereof. A copy of the Indenture is an exhibit to the Registration
Statement of which this Prospectus forms a part.
The following summary of the Debentures is qualified in its entirety
by express reference to the Debentures and the Indenture, which are
incorporated by reference as a part of such summary. Capitalized terms not
defined herein shall have the meanings ascribed to such terms in the Indenture.
GENERAL
The Debentures are subordinated unsecured obligations of the Company,
are limited to an aggregate principal amount of $125,000,000 and will mature on
June 1, 2004.
The Debentures bear interest from the date of issuance at the rate per
annum shown on the cover page of this Prospectus. Interest will be payable
semi-annually on June 1 and December 1 of each year, commencing December 1,
1997, to Holders of record at the close of business on May 15 or November 15
preceding each such interest payment date. Principal of and interest on the
Debentures will be payable at the office of the Paying Agent. Interest on the
Debentures will be mailed to each Holder's registered address. The Trustee
acts as the Paying Agent.
Debentures may be presented for conversion at the office of the
Conversion Agent and for exchange or registration of transfer at the office of
the Registrar. The Trustee acts as the Conversion Agent and Registrar.
FORM, DENOMINATION AND REGISTRATION
The Debentures will be issued in denominations of $1,000 and integral
multiples thereof. Debentures currently held by qualified institutional buyers
(as defined under Rule 144A under the Securities Act) ("QIBs") and by persons
who are not U.S. persons who acquired such Debentures in "offshore
transactions" in reliance on Regulation S under the Securities Act ("Non-U.S.
Persons") are currently evidenced by restricted global Debentures (the
"Restricted Global Debentures") which were deposited with, or on behalf of, The
Depository Trust Company ("DTC"), and registered in the name of Cede & Co.
("Cede") as DTC's nominee. Debentures sold to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) were issued in definitive form.
A purchaser (a "Public Holder") of Debentures pursuant to this
Prospectus will receive a beneficial interest in an unrestricted global
Debenture (the "Public Global Debenture") which will be deposited with, or on
behalf of, DTC and registered in the name of Cede, as DTC's nominee. Except as
set forth below, the record ownership of the Public Global Debenture may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
A Public Holder may hold its interest in the Public Global Debenture
directly through DTC if such Public Holder is a participant in DTC, or
indirectly through organizations which are participants in DTC (the
"Participants"). Transfers between Participants are effected in the ordinary
way in accordance with DTC rules and will be settled in same day funds.
Public Holders who are not Participants may beneficially own interests
in the Public Global Debenture held by DTC only through Participants or certain
banks, brokers, dealers, trust companies and other parties that clear
11
<PAGE> 13
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants"). So long as Cede, as the
nominee of DTC, is the registered owner of the Public Global Debenture, Cede
for all purposes is considered the sole holder of the Public Global Debenture.
Owners of beneficial interests in the Public Global Debenture are entitled to
have certificates registered in their names and to receive physical delivery of
certificates in definitive form. The laws of some states may require that
certain persons take physical delivery of securities in definitive form.
Payment of interest on and the redemption and repurchase price of the
Public Global Debenture will be made to Cede, the nominee for DTC, as
registered owner of the Public Global Debenture, by wire transfer of
immediately available funds on each interest payment date, each redemption date
and each repurchase date, as applicable. None of the Company, the Trustee or
any paying agent will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the Public Global Debenture or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company has been informed by DTC, that, with respect to any
payment of interest on or the redemption or repurchase price of the Public
Global Debenture, DTC's practice is to credit Participants' accounts on the
payment date, redemption date or repurchase date, as applicable, therefor with
payments in amounts proportionate to their respective beneficial interests in
the principal amount represented by the Public Global Debenture as shown on the
records of DTC, unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants to owners of beneficial
interests in the principal amount represented by the Public Global Debenture
held through such Participants are the responsibility of such Participants, as
is now the case with securities held for the accounts of customers registered
in street name.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the Public
Global Debenture to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate evidencing such
interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance of DTC, or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a Public Holder of Debentures (including, without limitation,
the presentation of Debentures for exchange as described below) only at the
direction of one or more Participants to whose account with DTC interests in
the Public Global Debenture are credited and only in respect of the principal
amount of the Debentures represented by the Public Global Debenture as to which
such Participant or Participants has or have given such direction.
The Company has been advised as follows: DTC is a limited purpose
trust company organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Public Global Debenture among
Participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. If DTC is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
cause the Debentures to be issued in definitive form in exchange for the Public
Global Debenture.
12
<PAGE> 14
CONVERSION RIGHTS
A Holder may, at any time prior to maturity, convert the principal
amount of a Debenture (or any portion thereof equal to $1,000 or an integral
multiple of $1,000) into shares of Common Stock at the conversion price set
forth on the cover page of this Prospectus, subject to adjustment as described
below (the "Conversion Price"). The right to convert a Debenture called for
redemption will terminate at the close of business on the Redemption Date for
such Debenture or such earlier date as the Holder presents the Debenture for
redemption (unless the Company shall default in making the redemption payment
when due, in which case the conversion right shall terminate at the close of
business on the date such default is cured and such Debenture is redeemed). A
Debenture for which a Holder has delivered a Change in Control Purchase Notice
exercising the option of such Holder to require the Company to purchase such
Debenture may be converted only if such notice is withdrawn by a written notice
of withdrawal delivered by the Holder to the Paying Agent prior to the close of
business on the Change in Control Purchase Date in accordance with the
Indenture.
No payment or adjustment will be made for dividends or distributions
with respect to shares of Common Stock issued upon conversion of a Debenture.
Except as otherwise provided in the Indenture, interest accrued shall not be
paid on Debentures converted. If any Holder surrenders a Debenture for
conversion between the record date for the payment of an installment of
interest and the related interest payment date, then, notwithstanding such
conversion, the interest payable on such interest payment date will be paid to
the Holder on such record date. However, in such event, such Debenture, when
surrendered for conversion, must be accompanied by delivery by such Holder of a
check or draft payable in an amount equal to the interest payable on such
interest payment date on the portion so converted. Notwithstanding the
foregoing, if any Debenture is called for redemption on June 1, 2000 and such
Debenture is surrendered for conversion at any time during the ten business
days immediately preceding the date fixed for redemption, interest shall accrue
on such Debenture through, but not including, the date fixed for redemption and
shall be payable on such redemption date to the person who surrenders such
Debenture for conversion and the conversion date of such Debenture will be
deemed to be the redemption date. No fractional shares will be issued upon
conversion, but a cash payment will be made for any fractional interest based
upon the current market price of the Common Stock.
The Conversion Price is subject to adjustment upon the occurrence of
certain events, including (i) the issuance of shares of Common Stock as a
dividend or distribution on the Common Stock, (ii) the subdivision or
combination of the outstanding Common Stock, (iii) the issuance to all or
substantially all holders of Common Stock of rights or warrants to subscribe
for or purchase Common Stock (or securities convertible into Common Stock) at a
price per share less than the then current market price per share, as defined,
(iv) the distribution to all or substantially all holders of Common Stock of
shares of capital stock of the Company (other than Common Stock), evidences of
indebtedness, or other non-cash assets (including securities of any company
other than the Company), (v) the distribution to all or substantially all
holders of Common Stock of rights or warrants to subscribe for its securities
(other than those referred to in (iii) above), and (vi) the distribution to all
or substantially all holders of Common Stock of cash in an aggregate amount
that (together with all other cash distributions to all or substantially all
holders of Common Stock made within the preceding 12 months not triggering a
Conversion Price adjustment) exceeds an amount equal to 20% of the Company's
market capitalization on the Business Day immediately preceding the day on
which the Company declares such distribution. In the event of a distribution
pro rata to holders of Common Stock of rights to subscribe for additional
shares of the Company's capital stock (other than those referred to in (iii)
above), the Company may, instead of making any adjustment in the Conversion
Price, make proper provisions so that each Holder who converts a Debenture (or
any portion thereof) after the record date for such distribution and prior to
the expiration or redemption of such rights shall be entitled to receive upon
such conversion, in addition to the shares of Common Stock issuable upon
conversion, an appropriate number of such rights. No adjustment of the
Conversion Price will be required to be made until the cumulative adjustments
require an increase or decrease of at least 1% in the Conversion Price as last
adjusted.
Subject to any applicable right of the Holders upon a Change in
Control, if the Company reclassifies or changes its outstanding Common Stock,
or consolidates with or merges into or sells or conveys all or substantially
all of the assets of the Company as an entirety to any person, or is a party to
a merger that reclassifies or changes its outstanding Common Stock, the
Debentures will become convertible into the kind and amount of shares of stock
13
<PAGE> 15
and other securities and property (including cash) that the Holders would have
owned immediately after the transaction if the Holders had converted the
Debentures immediately before the effective date of the transaction.
The term "all or substantially all" as used in the previous two
paragraphs has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the Holders of the Debentures were to assert that an
adjustment to the conversion privilege of the Debentures was required under the
Indenture and the Company were to contest such assertion, there could be no
assurance as to how a court would interpret the phrase under New York law,
which may have the effect of preventing the Trustee or the Holders of the
Debentures from successfully asserting that the Conversion Price is subject to
adjustment or that the Debentures are convertible into other shares of stock
and other securities and property that the Holders would have owned immediately
after the transaction if the Holders had converted the Debentures immediately
before the effective date of the transaction.
Certain adjustments to the Conversion Price to reflect the Company's
issuance of certain rights, warrants, evidences of indebtedness, securities, or
other property (including cash) to holders of the Common Stock may result in
constructive distributions taxable as dividends to Holders of the Debentures.
Similarly, if instead of adjusting the Conversion Price upon a pro rata
distribution of rights to subscribe for additional shares of the Company's
capital stock, as described above, the Company elects at such time to alter the
consideration receivable by the holders of the Debentures upon conversion to
include the rights such holders would have been entitled to if conversion had
occurred prior to the record date for such distribution of rights, the
alteration may result in constructive distributions taxable as dividends to
Holders of the Debentures.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures may not be redeemed at the option of the Company prior
to June 1, 2000. Thereafter, the Debentures may be redeemed at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice by mail.
The redemption prices (expressed as a percentage of principal amount)
are as follows for the 12-month period beginning on June 1 of the following
years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- -----
<S> <C>
2000 .......................................... 104.14%
2001 .......................................... 103.11
2002 .......................................... 102.07
2003 .......................................... 101.04
</TABLE>
in each case together with accrued interest up to but not including the
date of redemption.
PURCHASE OF DEBENTURES AT THE OPTION OF HOLDERS UPON A CHANGE IN CONTROL
In the event of a Change in Control (as defined below), each Holder
will have the option, subject to the terms and conditions of the Indenture, to
require the Company to purchase all or any part (provided that the principal
amount must be $1,000 or an integral multiple thereof) of the Holder's
Debentures as of the date that is 40 Business Days after the occurrence of such
Change in Control (the "Change in Control Purchase Date") for a purchase price
equal to 100% of the principal amount thereof, plus accrued interest up to but
not including the Change in Control Purchase Date.
Within ten Business Days after the occurrence of a Change in Control,
the Company shall mail to the Trustee and to each Holder and cause to be
published a written notice of the Change in Control, setting forth, among other
things, the terms and conditions of, and the procedures required for exercise
of, the Holder's right to require the purchase of such Holder's Debentures.
14
<PAGE> 16
To exercise the purchase right upon a Change in Control, a Holder must
deliver written notice of such exercise to the Paying Agent at any time prior
to the close of business on the Change in Control Purchase Date, specifying the
Debentures with respect to which the purchase right is being exercised. Such
notice of exercise may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent at any time prior to the close of
business on the Change in Control Purchase Date.
A Change in Control shall be deemed to have occurred if any of the
following occurs after the original issuance of the Debentures:
(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 Boston Chicken and its
successors, or any person or group controlled by such persons) of beneficial
ownership, directly or indirectly, through a purchase, merger, or other
acquisition transaction or series of transactions, of shares of capital stock
of the Company entitling such Person to exercise more than 50% of the total
voting power of all shares of capital stock of the Company entitling the
holders thereof to vote generally in elections of directors; or
(ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company,
or any sale, lease, or exchange of all or substantially all of the property and
assets of the Company to another Person (other than (i) sales or leases of
property to franchisees of the Company in the ordinary course of business or
(ii) a merger which (x) does not result in any reclassification, conversion,
exchange, or cancellation of outstanding shares of capital stock of the Company
or (y) is effected primarily to change the jurisdiction of incorporation of the
Company and results in reclassification, conversion, or exchange of outstanding
shares of Common Stock solely into shares of Common Stock of the surviving
entity).
A "beneficial owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture, except that the Indenture requires that the
number of shares of capital stock of the Company entitling the holders thereof
to vote generally in the election of directors shall be deemed to include, in
addition to all outstanding shares of capital stock of the Company entitling
the holders thereof to vote generally in the election of directors and Unissued
Shares deemed to be held by the Person with respect to which the Change in
Control determination is being made, all Unissued Shares deemed to be held by
all other Persons. As defined in the Indenture, "Unissued Shares" means shares
of capital stock of the Company not outstanding that are subject to options,
warrants, rights to purchase, or conversion privileges exercisable within 60
days of the date of determination of a Change in Control and that, upon
issuance, will entitle the holders thereof to vote generally in the election of
directors.
The term "all or substantially all" as used in clause (ii) of the
definition of Change in Control has not been interpreted under New York law
(which is the governing law of the Indenture) to represent a specific
quantitative test. As a consequence, in the event the Holders of the
Debentures elected to exercise their rights under the Indenture and the Company
elected to contest such election, there could be no assurance as to how a court
would interpret the phrase under New York law, which may have the effect of
preventing the Trustee or the Holders of the Debentures from successfully
asserting that a Change in Control has occurred.
The Company will comply with the provisions of Rule 13e-4 and Rule
14e-1 under the Exchange Act, will file Schedule 13E-4 or any successor or
similar schedule required thereunder, and will otherwise comply with all
federal and state securities laws in connection with any offer by the Company
to purchase Debentures at the option of the Holders upon a Change in Control.
The Change in Control purchase feature of the Debentures may in
certain circumstances make more difficult or discourage a takeover of the
Company and the removal of incumbent management. The Company is not aware of
any specific effort to accumulate shares of Common Stock or to obtain control
of the Company by means of a merger, tender offer, solicitation, or otherwise,
nor is the Change of Control purchase feature part of a plan by management to
adopt a series of anti-takeover provisions. Instead, the Change in Control
purchase feature is a result of negotiations between the Company and the
Initial Purchasers.
15
<PAGE> 17
Depending upon the terms of the transaction, a future highly leveraged
transaction, reorganization, restructuring, merger, or similar transaction
involving the Company's present management or directors could constitute a
Change in Control. Neither the Company nor its current management has any
current intention to engage in a transaction involving a Change in Control,
although it is possible that the Company or its management may decide to do so
in the future.
Subject to the limitation on mergers and consolidations discussed
below, the Company could, in the future, enter into certain transactions,
including certain recapitalizations, the sale of all or substantially all of
its assets, or the liquidation of the Company, that would not constitute a
Change in Control under the Indenture, but that would increase the amount of
Senior Indebtedness (or any other indebtedness) outstanding at such time,
substantially reduce or eliminate the Company's assets, or otherwise adversely
affect the Holders of the Debentures. There are no restrictions in the
Indenture on the creation of additional Senior Indebtedness (or any other
indebtedness), and, under certain circumstances, the incurrence of significant
amounts of additional indebtedness could have an adverse effect on the
Company's ability to service its indebtedness, including the Debentures.
If a Change in Control were to occur, there can be no assurance that
the Company would have sufficient funds to pay the Change in Control Purchase
Price for all Debentures tendered by the Holders thereof. In addition, the
Credit Facility, which constitutes Senior Indebtedness, provides that a change
in control (as defined therein) will constitute an event of default thereunder,
the occurrence of which would cause any repurchase of the Debentures, absent a
waiver, to be blocked by the subordination provisions of the Debentures. Even if
such event of default did not occur or was waived, the exercise by any Holder of
Debentures of the right to require the Company to repurchase Debentures as a
result of the occurrence of a Change in Control could create an event of default
under Senior Indebtedness of the Company, as a result of which any repurchase
could, absent a waiver, be blocked by the subordination provisions of the
Debentures. See "Subordination of Debentures". Further, the terms of future
Senior Indebtedness or other future indebtedness ranking pari passu in right of
payment with the Debentures could require that such indebtedness be repaid upon
the occurrence of a Change in Control. Failure by the Company to repurchase the
Debentures when required will result in an Event of Default with respect to the
Debentures whether or not such repurchase is permitted by the subordination
provisions thereof.
SUBORDINATION OF DEBENTURES
To the extent set forth in the Indenture, the Debentures will be
subordinated and subject in right of payment to the prior payment in full of
all Senior Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, assumed, or guaranteed. Upon any payment or
distribution of assets of the Company in any dissolution, winding-up,
liquidation, or reorganization of the Company (whether in an insolvency or
bankruptcy proceeding or otherwise), all Senior Indebtedness must be paid in
full (including the principal thereof, interest thereon, and fees and expenses
relating thereto) before any payment is made on or in respect of the
Debentures. In the event of a default in payment (whether at maturity or at a
date fixed for prepayment or by acceleration or otherwise) of principal of or
interest on Senior Indebtedness, no payment may be made by the Company on or in
respect of the Debentures until payment in full of the Senior Indebtedness then
due or cure of the default. Upon a default with respect to any Senior
Indebtedness (other than a default in the payment of principal of or interest
on Senior Indebtedness) permitting a holder thereof to accelerate its maturity,
and upon written notice of such default to the Trustee and the Company by any
holder of such Senior Indebtedness or its representative, then, unless and
until such default has been cured, waived in writing, or has ceased to exist,
no payment may be made by the Company in respect of the Debentures; provided
that nothing in the above-described provision will prevent the making of any
payment in respect of the Debentures for a period of more than 90 days after
the date such written notice of default is given unless the maturity of the
Senior Indebtedness has been accelerated, in which case no payment on the
Debentures may be made until such acceleration has been waived or such Senior
Indebtedness has been paid in full. No such subordination will prevent the
occurrence of any Event of Default (as defined in the Indenture) with respect
to the Debentures, but, as a result of these subordination provisions, in the
event of insolvency, Holders may recover less ratably than other creditors of
the Company.
"Senior Indebtedness" means the following, whether outstanding upon
issuance of the Debentures or thereafter incurred or created: (a) the principal
and premium, if any, and interest on and fees, costs, enforcement
16
<PAGE> 18
expenses, collateral protection expenses, and other reimbursement or indemnity
obligations in respect of all indebtedness or obligations of the Company to any
Person, including but not limited to banks and other lending institutions, for
money borrowed (other than that evidenced by the Debentures) or in respect of
credit or other banking facilities evidenced by a note, bond, debenture, loan
agreement, a lease intended as security or similar instrument or agreement
(including purchase money obligations with original maturities in excess of one
year and noncontingent reimbursement obligations in respect of the amounts paid
under letters of credit); (b) commitment or standby fees due and payable to
lending institutions with respect to credit facilities available to the
Company; (c) all noncontingent obligations of the Company (i) for the
reimbursement of any obligor on any letter of credit, banker's acceptance, or
similar credit transaction, (ii) under interest rate swaps, caps, collars,
options, and similar arrangements and (iii) under any foreign exchange
contract, currency swap agreement, futures contract, currency option contract,
or other foreign currency hedge; (d) all obligations of the Company for the
payment of money relating to a Capitalized Lease Obligation; (e) any
liabilities of others described in the preceding clauses that the Company has
guaranteed or which are otherwise its legal liability; and (f) renewals,
extensions, refundings, refinancings, restructurings, amendments, and
modifications of any such indebtedness or guarantee. Notwithstanding anything
to the contrary in the Indenture or the Debentures, "Senior Indebtedness" does
not include (i) any indebtedness of the Company to any person under any
employee benefit plan or to any employee or affiliates of the Company, (ii) any
indebtedness of the Company to Boston Chicken, or (iii) any indebtedness or
other obligation of the Company that by its terms or the terms of the
instrument creating or evidencing it is stated to be not superior in right of
payment to the Debentures.
The Indenture does not limit the amount of future or additional
indebtedness, including Senior Indebtedness, that the Company can create, incur,
assume, or guarantee, nor does the Indenture limit the amount of indebtedness
that any subsidiary can incur. All indebtedness of the Company incurred from
time to time under the Credit Facility will constitute Senior Indebtedness. As
of December 28, 1997, the Company had outstanding $30.0 million of indebtedness
that constituted Senior Indebtedness.
EVENTS OF DEFAULT; NOTICE AND WAIVER
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, or reorganization) occurs and is continuing, the
Trustee may, by notice to the Company, declare all unpaid principal of and
accrued interest to the date of acceleration on the Debentures then outstanding
to be due and payable immediately. Also, in such event, the Holders of at least
25% in principal amount of the Debentures then outstanding may notify the
Company and the Trustee with respect thereto, and upon the request of such
Holders, the Trustee shall declare all unpaid principal of and accrued interest
to the date of acceleration on the Debentures then outstanding to be due and
payable immediately. If an Event of Default resulting from certain events of
bankruptcy, insolvency, or reorganization shall occur, all unpaid principal of
and accrued interest on the Debentures then outstanding shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders.
The Indenture provides that the Holders of a majority in principal
amount of the Debentures may on behalf of all Holders waive any existing
default or Event of Default and its consequences except a default in the
payment of principal of or accrued interest on the Debentures or any default in
respect of any provision of the Indenture that cannot be modified or amended
without the consent of the Holder of each Debenture affected.
Other than granting Holders the option to require the Company to
purchase all or part of their Debentures upon the occurrence of a Change in
Control as described in "Purchase of Debentures at the Option of Holders Upon a
Change in Control," the Indenture does not contain any covenants or other
provisions designed to afford Holders protection in the event of takeovers,
recapitalizations, highly leveraged transactions, or similar restructurings
involving the Company.
The following are Events of Default under the Indenture: (i) failure
of the Company to pay interest for 30 days after the same is due or failure to
pay principal when due; (ii) failure of the Company to comply with any of its
other agreements contained in the Debentures or the Indenture for 30 days after
receipt of notice of such failure; (iii) default under any bond, debenture,
note, or other evidence of indebtedness for money borrowed of the Company
17
<PAGE> 19
having an aggregate outstanding principal amount of in excess of $10 million,
which default shall have resulted in such indebtedness being accelerated,
without such indebtedness being discharged, or such acceleration having been
rescinded or annulled, within ten days from the date of such acceleration; and
(iv) certain events of bankruptcy or insolvency, including without limitation
appointment of a Custodian of the Company's property, or liquidation of the
Company.
The Trustee shall, within 90 days after the occurrence of any default
known to it, give to the Holders notice of such default; provided that, except
in the case of a default in the payment of principal of or interest on any of
the Debentures, the Trustee may withhold such notice if it in good faith
determines that the withholding of such notice is in the interests of the
Holders.
No Holder may pursue any remedy under the Indenture or the Debentures
against the Company (except actions for payment of overdue principal or
interest or for the conversion of the Debentures), unless (i) the Holder gives
to the Trustee written notice of a continuing Event of Default, (ii) the
Holders of at least 25% in principal amount of the outstanding Debentures make
a written request to the Trustee to pursue the remedy, (iii) such Holder or
Holders offer satisfactory indemnity to the Trustee against any loss,
liability, or expense, (iv) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of indemnity, and (v) the
Trustee shall not have received during such 60-day period a contrary direction
from the Holders of at least a majority in principal amount of the outstanding
Debentures.
The Company must deliver an Officer's Certificate to the Trustee
within 90 days after the end of each fiscal year of the Company as to the
signer's knowledge of the Company's compliance with all conditions and
covenants on its part contained in the Indenture, and stating whether or not
the signer knows of any default or Event of Default. If such signer knows of
such a default or Event of Default, the Officer's Certificate shall describe
the default or Event of Default and the efforts to remedy the same.
AMENDMENT
The Company and the Trustee may amend or supplement the Indenture or
the Debentures without notice to any Holder but with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Debentures. The Holders of a majority in principal amount of the Debentures
then outstanding may waive compliance in a particular instance by the Company
with any provision of the Indenture or the Debentures without notice to any
Holder. Without the consent of the Holder of each Debenture affected thereby,
however, an amendment, supplement, or waiver may not (i) reduce the principal
amount of Debentures whose Holders must consent to an amendment, supplement, or
waiver, (ii) reduce the rate of or change the time for payment of interest on
any Debenture, (iii) reduce the principal of or premium on or change the fixed
maturity of any Debenture or alter the redemption provisions with respect
thereto in a manner adverse to the Holder thereof, (iv) alter the conversion
provisions with respect to any Debenture in a manner adverse to the Holder
thereof, (v) waive a default in the payment of the principal of or premium or
interest on any Debenture, (vi) make any changes that could alter the rights of
Holders to waive defaults or Events of Default, or to receive payment of the
Debentures, (vii) modify the subordination provisions of the Indenture in a
manner adverse to the Holders, or (viii) make any Debenture payable in money
other than that stated in the Debenture.
The Company and the Trustee may amend or supplement the Indenture or
the Debentures without notice to or consent of any Holder in certain events,
such as to comply with the certain conversion adjustment, liquidation, and
merger provisions described in the Indenture, to provide for uncertificated
Debentures in addition to or in place of certificated Debentures, to cure any
ambiguity, defect, or inconsistency, or to make any other change that does not
adversely affect the rights of the Holders, to comply with the provisions of
the Trust Indenture Act, or to appoint a successor Trustee.
18
<PAGE> 20
REGISTRATION RIGHTS
The Company has filed a Registration Statement, of which this
Prospectus forms a part, with respect to the securities offered hereby pursuant
to a registration rights agreement (the "Registration Agreement") dated as of
May 22, 1997 between the Company and the Initial Purchasers, to register
resales of the Debentures and the shares of Common Stock into which the
Debentures are convertible. The Company will use its reasonable efforts to keep
such registration statement effective until two years after the latest date of
original issuance of the Debentures or such earlier date as all securities
registrable thereunder (the "Registrable Securities") shall have been disposed
of (the "Effectiveness Period"). The Company will provide to each holder of
Registrable Securities copies of the prospectus which is a part of the
registration statement, notify each holder when the registration statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Registrable Securities. A holder of Registrable
Securities that sells such Registrable Securities pursuant to the registration
statement will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Agreement, including certain indemnification obligations. At least
three business days prior to any intended resale of Registrable Securities, the
holder thereof must notify the Company of such intention and provide the
Company with such information with respect to such holder and the intended
distribution as may be reasonably required to amend the Registration Statement
or supplement this Prospectus. The Company will be permitted to suspend the use
of this Prospectus for a period not to exceed an aggregate of 60 days in any
12-month period, under certain circumstances relating to pending corporate
developments, public filings with the Commission and similar events. If this
Prospectus is unavailable for an aggregate period in excess of 60 days in any
12-month period (in each case, a "Registration Event"), the Company has agreed
to pay liquidated damages to the holders of the Debentures and the holders of
the Common Stock issued upon conversion of the Debentures. The liquidated
damages will accrue upon the occurrence of any Registration Event and until
such time as there are no Registration Events which have occurred and are
continuing at a rate equal to one-half of one percent (0.5%) per annum of the
principal amount of the Debentures and will be payable on the interest payment
dates for the Debentures.
This summary of certain provisions of the Registration Agreement is
subject to, and qualified in its entirety by reference to, all the provisions of
the Registration Agreement, a copy of which is an exhibit to the Registration
Statement of which this Prospectus forms a part.
SATISFACTION AND DISCHARGE
The Company may terminate all of its obligations under the Indenture,
other than its obligation to pay the principal of and interest on the
Debentures and certain other obligations (including its obligation to deliver
shares of Common Stock upon conversion of the Debentures), at any time, by
depositing with the Trustee or a paying agent other than the Company, money or
non-callable U.S. Government Obligations sufficient to pay the principal of and
interest on the Debentures then outstanding to maturity.
MERGERS AND CONSOLIDATIONS
Subject to the right of the Holders to require the Company to purchase
the Debentures in the event of a Change in Control, the Company may consolidate
or merge with or into any other corporation, and the Company may transfer its
property and assets substantially as an entirety to any other person, provided
(i) either the Company is the resulting or surviving corporation, or the
successor corporation is a domestic corporation and the successor expressly
assumes, by supplemental indenture executed and delivered to the Trustee,
payment of the principal of and interest on the Debentures and performance and
observance of every covenant of the Indenture, and (ii) immediately before and
immediately after giving effect to such transaction, no default or Event of
Default shall have occurred and be continuing. Thereafter, all obligations of
the Company under the Indenture and the Debentures will terminate.
19
<PAGE> 21
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture.
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; provided, however, if it acquires any conflicting
interest (as defined) and there exists a default with respect to the
Debentures, it must eliminate such conflict or resign.
The Holders of a majority in principal amount of all outstanding
Debentures will have the right to direct the time, method, and place of
conducting any proceeding for exercising any remedy or power available to the
Trustee, provided that such direction does not conflict with any rule of law or
with the Indenture, is not unduly prejudicial to the rights of another Holder
or the Trustee, and does not involve the Trustee in personal liability.
20
<PAGE> 22
PLAN OF DISTRIBUTION
The Debentures and Common Stock offered hereby may be sold from time
to time to purchasers directly by the Registering Holders. Alternatively, the
Registering Holders may from time to time offer the Debentures and Common Stock
to or through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Registering Holders or the purchasers of Debentures and Common Stock
for whom they may act as agents. The Registering Holders and any underwriters,
broker/dealers or agents that participate in the distribution of Debentures and
Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of Debentures and Common Stock by
them and any discounts, commissions, concessions or other compensation received
by any such underwriter, broker/dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Debentures and Common Stock issuable upon conversion thereof may
be sold from time to time in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The sale of the Debentures and the
Common Stock issuable upon conversion thereof may be effected in transactions
(which may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Debentures or the Common
Stock may be listed or quoted at the time of sale, (ii) in the over-the-counter
market, (iii) in transactions otherwise than on such exchanges or in the
over-the-counter market or (iv) through the writing of options. At the time a
particular offering of the Debentures or the Common Stock is made, a Prospectus
Supplement, if required, will be distributed which will set forth the aggregate
amount and type of Debentures and Common Stock being offered and the terms of
the offering, including the name or names of any underwriters, broker/dealers
or agents, any discounts, commissions and other terms constituting compensation
from the Registering Holders and any discounts, commissions or concessions
allowed or resolved or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Debentures and Common Stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions, the Debentures and Common Stock may not be
offered or sold unless they have been registered or qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Debentures or the Common Stock may not
simultaneously engage in market-making activities with respect to such
securities for a two or nine business day period prior to the commencement of
such distribution. In addition to and without limiting the foregoing, each
Registering Holder and any other person participating in a distribution will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Regulation M, which
provisions may limit the timing of purchases and sales of any of the securities
by the Registering Holders or any such other person. All of the foregoing may
affect the marketability of the Debentures and the Common Stock and the
brokers' and dealers' ability to engage in market-making activities with
respect to these securities.
Pursuant to the Registration Agreement, all expenses of the
registration of the Debentures and Common Stock will be paid by the Company,
including, without limitation, Commission filing fees and expenses of
compliance with state securities laws; provided, however, that the Registering
Holders will pay all underwriting discounts and selling commissions, if any.
The Registering Holders will be indemnified by the Company against certain
civil liabilities, including certain liabilities under the Securities Act. The
Company will be indemnified by the Registering Holders against certain civil
liabilities, including certain liabilities under the Securities Act.
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated have provided services to the
Company and to entities related to the Company and may in the future provide
services to the Company or such other entities, for which they have received or
expect to receive customary fees.
21
<PAGE> 23
REGISTERING HOLDERS
The Debentures were originally issued by the Company and sold by the
Initial Purchasers in a transaction exempt from the registration requirements
of the Securities Act, to persons reasonably believed by such Initial
Purchasers to be "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act), other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or in
transactions complying with the provisions of Regulation S under the Securities
Act. The Registering Holders (which term includes their transferees, pledgees,
donees or their successors) may from time to time offer and sell pursuant to
this Prospectus any or all of the Debentures and Common Stock issued upon
conversion of the Debentures.
The following table sets forth information with respect to the
following Registering Holders and the respective principal amounts of
Debentures and shares of Common Stock beneficially owned by each Registering
Holder as of April 2, 1998. Such information has been obtained from the
Registering Holders or such other sources as of the date hereof as the Company
deems reliable. The Company will supplement this Prospectus from time to time
to reflect information regarding ownership of Debentures or Common Stock
received from Registering Holders desiring to sell such securities pursuant to
the Registration Statement. Except as otherwise disclosed herein, none of the
Registering Holders has, or within the past three years has had, any position,
office or other material relationship with the Company or any of its
predecessors or affiliates. Because the Registering Holders may offer all or
some portion of the Debentures or the Common Stock issuable upon conversion
thereof pursuant to this Prospectus, no estimate can be given as to the amount
of the Debentures or the Common Stock issuable upon conversion thereof that
will be held by the Registering Holders upon termination of any such sales. In
addition, the Registering Holders identified below may have sold, transferred
or otherwise disposed of all or a portion of their Debentures, since the date
on which they provided the information regarding their Debentures, in
transactions exempt from the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF NUMBER OF PERCENTAGE OF
DEBENTURES SHARES OF COMMON STOCK
BENEFICIALLY PERCENTAGE OF COMMON STOCK AFTER
OWNED THAT DEBENTURES THAT MAY BE CONVERSION OF
NAME MAY BE SOLD OUTSTANDING SOLD (1) DEBENTURES (2)
---- ----------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Bank of New York . . . . . . . . . . . . . $ 415,000 * 19,529 *
Bank Boston, N.A. . . . . . . . . . . . . . 115,000 * 5,411 *
Bankers Trust Company . . . . . . . . . . . 2,855,000 2.3% 134,352 *
Bear Stearns Securities Corp.. . . . . . . 9,835,000 7.9% 462,823 1.4%
Boston Safe Deposit & Trust Co. . . . . . . 13,215,000 10.6% 621,882 1.9%
Bankers Trust Company . . . . . . . . . . . 1,930,000 1.5% 90,823 *
Chase Manhattan Bank . . . . . . . . . . . 500,000 * 23,529 *
CIBC Oppenheimer Corp. . . . . . . . . . . 2,500,000 2.0% 117,647 *
Credit Suisse First Boston Corporation . . 8,895,000 7.1% 418,588 1.2%
Fleet Bank of Massachusetts, N.A. . . . . . 140,000 * 6,589 *
First National Bank Maryland (The) . . . . 190,000 * 8,941 *
Investors Bank & Trust/M.F. Custody . . . . 265,000 * 12,470 *
Key Bank National Association . . . . . . . 100,000 * 4,705 *
Lehman Brothers Inc. . . . . . . . . . . . 2,550,000 2.0% 120,000 *
Mercantile, Safe Deposit and Trust
Company . . . . . . . . . . . . . . . . . 2,015,000 1.6% 94,823 *
Merrill Lynch Professional Clearing Corp. . 2,300,000 1.8% 108,235 *
Merrill Lynch, Pierce Fenner & Smith . . . 9,745,000 7.8% 458,588 1.4%
Morgan Stanley & Co., Incorporated . . . . 2,150,000 1.7% 101,176 *
Northern Trust Company . . . . . . . . . . 600,000 * 28,235 *
Piper Jaffray, Inc. . . . . . . . . . . . . 50,000 * 2,352 *
PNC Bank Corporation . . . . . . . . . . . 95,000 * 4,470 *
SBC Warburg Dillon Read Inc. . . . . . . . 1,000,000 * 47,058 *
Spear, Leeds & Kellogg . . . . . . . . . . 250,000 * 11,764 *
SSB Custodian . . . . . . . . . . . . . . . 3,305,000 2.6% 155,529 *
- -------------------
</TABLE>
* Less than one percent.
22
<PAGE> 24
(1) Assumes conversion of the full amount of Debentures held by such
Registering Holder at the initial conversion price of $21.25 per
share; such conversion price is subject to adjustment as described
under "Description of Debentures -- Conversion Rights." Accordingly,
the number of shares of Common Stock issuable upon conversion of the
Debentures may increase or decrease from time to time. Under the terms
of the Indenture, fractional shares will not be issued upon conversion
of the Debentures; cash will be paid in lieu of fractional shares, if
any.
(2) The percentage of outstanding shares of Common Stock after conversion
represents the percentage of the Common Stock each Registering Holder
will have after treating as outstanding the number of shares of Common
Stock shown as being issuable upon the assumed conversion by the named
Registering Holder of the full amount of such Registering Holder's
Debentures but not assuming the conversion of the Debentures of any
other Registering Holder.
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
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.
23
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
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) 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;
II-1
<PAGE> 26
(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> 27
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> 28
EXHIBIT NO.
TITLE *
<TABLE>
<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")(previously filed).
4.1 Certificate of Incorporation (included in Exhibit 3.1).
4.2 Bylaws (included in Exhibit 3.2).
4.3 Certificate representing Common Stock (incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-1 (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).
23.1 Consent of Arthur Andersen LLP with respect to the Audited Consolidated Financial Statements of the Company and
Subsidiaries and Related Supplemental Schedules.
23.2 Consent of Mayer Hoffman McCann L.C. with respect to the Audited Financial Statements of Bagel & 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> 29
<TABLE>
EXHIBIT NO. TITLE
<S> <C>
25.1 Statement of Eligibility and Qualification Trustee on Form T-1 (incorporated by reference to Exhibit 25.1 to
the Company's Registration Statement on Form S-1 (Registration No. 333-28941)).
</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 audits 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
