SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-K
(Mark one)
X Annual report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934 (Fee required)
For the fiscal year ended December 27, 1997, or
Transition report pursuant to Section 13 or l5(d) of the Securities
----- Exchange Act of 1934 (No fee required)
For the transition period from ______ to ______
Commission file number 0-19253
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Au Bon Pain Co., Inc.
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(Exact name of registrant as specified in its charter)
Delaware 04-2723701
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
19 Fid Kennedy Avenue, Boston, MA 02210
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(Address of principal executive offices) (Zip code)
(617) 423-2100
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.0001 par value
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(Title of class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 and 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form. / /
Aggregate market value of the registrant's voting stock held by
non-affiliates as of March 17, 1998: Class A Common Stock, $.0001 par value:
$85,224,214.
Number of shares outstanding of each of the registrant's classes of
common stock, as of March 17, 1998: Class A Common Stock, $.0001 par value:
10,252,537 shares, Class B Common Stock, $.0001 par value: 1,605,741 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
The registrant's definitive proxy statement for its Annual Meeting of
Stockholders, which will be filed with the Commission on or before April 27,
1998, is incorporated by reference in response to Part III, Items 10, 11, 12 and
13; and certain exhibits to the registrant's Form S-1 Registration Statement
(File No. 33-453219), Form S-l Registration Statement (File No. 33-40153),
annual reports on Form 10-K for the fiscal years ended December 30, 1995 and
December 28, 1996 and Form 8-K filed December 22, 1993, are incorporated by
reference in response to Part IV, Item 14.
TABLE OF CONTENTS
Securities and Exchange Commission
Item Numbers and Description Page
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Part I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of
Security Holders
Part II
Item 5 Market For Registrant's Common Equity and Related
Stockholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures
About Market Risk
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Part III
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Related Transactions
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Signatures
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PART I
ITEM 1. BUSINESS
GENERAL
Au Bon Pain Co., Inc. ("the Company") was formed in March 1981 with
three Boston area bakeries and one cookie store serving croissants, breads and
cookies. As of December 27, 1997, the Company had grown to 220 Company-operated
and 115 franchised bakery cafes operating under two concepts: Au Bon Pain, with
160 Company-operated and 96 franchise-operated bakery cafes, and Saint Louis
Bread Company ("Saint Louis Bread"), which also does business as "Panera Bread"
outside of the Saint Louis area, with 60 Company-operated and 19
franchise-operated bakery cafes. Both concepts specialize in high quality food
for breakfast and lunch, including fresh baked goods, made-to-order sandwiches
on freshly baked breads, soups, salads, custom roasted coffees, and other cafe
beverages.
The Au Bon Pain bakery cafes are principally located in Boston, other
New England cities, New York City, Connecticut, Washington, D.C., Chicago,
Maryland, New Hampshire, New Jersey, California, Philadelphia, Pittsburgh, Rhode
Island, Texas, Santiago, Chile, The Philippines, Indonesia, Sao Paulo, Brazil,
Bangkok, Thailand and London, England (see "Properties"). System wide sales for
Au Bon Pain, which include Company-operated and franchised restaurant sales,
were approximately $199 million for the fiscal year ended December 27, 1997.
The Saint Louis Bread bakery cafes are principally located in St.
Louis, Atlanta, Kansas, Detroit and Chicago (see "Properties"). System wide
sales for Saint Louis Bread, were approximately $82 million for the fiscal year
ended December 27, 1997. The Company believes that the acquisition of Saint
Louis Bread has created a number of opportunities. The Saint Louis Bread
suburban bakery cafe concept has proved to be well suited for suburban locations
and offers the Company greater access to these markets, thereby enhancing the
Company's long-term growth prospects.
CONCEPT AND STRATEGY
Target customers of Au Bon Pain and Saint Louis Bread include urban
office employees, suburban dwellers, shoppers, travelers, students and other
adults who are time sensitive, yet desire a higher quality breakfast and lunch
experience than is typically found at quick service restaurants. The Company's
strategy is to create distinctive food offerings at reasonable prices which are
fresher, of higher quality and of greater variety than those offered by its
competitors. In addition, the Company believes its operational excellence, speed
of service and convenient locations further differentiate the Company from its
competitors. Average
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revenue per Company-operated bakery cafe open for the full fiscal year ended
December 27, 1997 was approximately $1,014,211 for the Au Bon Pain concept and
approximately $1,200,257 for the Saint Louis Bread concept.
The Company believes that excellence in execution is a key to success
in the restaurant industry. The distinctive nature of the Company's menu
offerings, the quality of its restaurant operations, the Company's high quality
cafe design and the prime locations of its cafes are integral to the Company's
success. The Company's operating strategy is to increase overall sales by
offering new products that will expand the current business and increase
afternoon sales, and by continuing to open new bakery cafes in existing and new
markets on both Company-operated and franchise bases and to increase sales in
existing bakery cafes through the continued introduction and promotion of
distinctive, high quality menu items.
MENU
The menus of both concepts provide customers with popular food items
which the Company believes are fresher, of higher quality and in greater variety
than those offered by its competitors. The key menu groups are fresh baked
goods, made-to-order sandwiches, soups and cafe beverages. Included within these
menu groups are: a variety of freshly baked bagels, breads, croissants, muffins,
scones, rolls and sweet goods; sandwiches made-to-order with specialty cheeses,
smoked meats, roast beef, hot grilled chicken, albacore tuna and white meat
chicken salads; hearty, unique soups; custom roasted coffees and cafe beverages
such as espresso and cappuccino. A primary difference in menu between the two
concepts is the significant emphasis within the Saint Louis Bread concept on
sophisticated European and sourdough breads.
The Company regularly reviews and revises its menu offerings to satisfy
changing customer preferences and to maintain customer interest. New menu items
are developed in corporate test kitchens and then introduced in a limited number
of the Company's bakery cafes to determine customer response and verify that
preparation and operating procedures maintain consistency, high quality
standards and profitability. If successful, they are introduced in all Au Bon
Pain and/or Saint Louis Bread bakery cafes.
MARKETING
The Company believes it competes on the basis of quality food and
service rather than price. Pricing is structured so that customers perceive good
value at both Au Bon Pain and Saint Louis Bread (high quality food at reasonable
prices). The average customer purchase is approximately $3.09 at Au Bon Pain and
$4.92 at
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Saint Louis Bread. Breakfast and lunch checks typically average $2.12 and $4.23,
respectively, at Au Bon Pain and $3.51 and $5.84, respectively, at Saint Louis
Bread. The Company attempts to increase its per location sales through menu
development, promotions and by sponsorship of local community charitable events.
To date, the Company has not advertised extensively; rather, it relies
on word of mouth, customer satisfaction and promotional programs to encourage
trial by new customers and to make existing customers aware of new menu
offerings.
CATERING
Au Bon Pain operates a catering program which offers a select group of
delivered breakfast and luncheon food items appropriate for on-site consumption
at corporate functions. Customers place orders by toll-free telephone with
trained customer service representatives at the Company's Boston headquarters.
Orders are immediately routed utilizing a computerized delivery support system
to the most appropriate bakery cafe for preparation and delivery. In 1997,
catering sales represented approximately 5.5% of the Au Bon Pain
Company-operated restaurant sales. At present, Saint Louis Bread does not offer
catering services. With the predominance of Saint Louis Bread cafes in suburban
locations, the Company believes that the potential to develop significant
catering business at Saint Louis Bread is lower than at Au Bon Pain.
SITE SELECTION
For both concepts, the Company seeks convenient locations in
high-visibility, high-traffic, densely populated areas which are easily
accessible to their respective target customers. The Company also operates in
regional shopping malls, transportation centers, universities and hospitals. The
Company believes that its concepts, menus, history of quality retail operations
and bakery cafe designs enable the Company to access locations which may not be
available to traditional quick service restaurants. Examples of Au Bon Pain
bakery cafe locations include Copley Place, Brigham and Women's Hospital, South
Station and Harvard Business School in Boston; the Empire State Building and
World Financial Center in New York City; the Pittsburgh Airport in Pittsburgh;
2000 Pennsylvania Avenue in Washington, D.C.; and the Santiago Airport in
Santiago, Chile. Examples of Saint Louis Bread bakery cafe locations include the
Galleria Mall in St. Louis and the Lenox Square Mall in Atlanta. However, the
Saint Louis Bread locations are predominantly sited in strip center suburban
retail locations in the markets in which they operate.
In 1997 the Company opened one Au Bon Pain bakery cafe in an existing
market, and franchised 11 of its existing Au Bon Pain bakery
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cafes in the Philadelphia market. The Company's Au Bon Pain franchisees also
opened 38 new bakery cafes domestically and in Chile, the Philippines,
Indonesia, Thailand, Brazil and England.
During 1997, the Company expanded the number of Company-operated Saint
Louis Bread bakery cafes by six to 60 locations in existing markets and in the
new Saint Louis Bread markets of Boston and Detroit. The Saint Louis Bread
franchise-operated locations expanded from 10 locations to 19 locations
including new market openings in Tulsa, Oklahoma, Columbus, OH, Louisville, KY
and Davenport, IA.
Both bakery cafe concepts rely on a substantial volume of repeat
business. In evaluating a potential location, the Company studies the
surrounding trade area, obtaining information and/or demographics within that
area on quick service breakfast or lunch competitors. Management evaluates the
Company's ability to establish a dominant presence within that area, in order to
create entry barriers to other bakery cafe competitors. Based on this
information, sales and return on investment are projected.
The Company uses sophisticated fixtures and materials in the bakery
cafe design for both concepts. The design visually reinforces the distinctive
difference between the Company's bakery cafes and other quick service
restaurants serving breakfast and lunch. Many of the Company's cafes also
feature outdoor cafe seating. The current estimated construction and equipment
costs for a typical Au Bon Pain bakery cafe outside of New York City are
approximately $475,000 before any landlord construction allowance. The estimated
construction and equipment cost for a typical Au Bon Pain bakery cafe in New
York City is approximately $830,000 before any landlord construction allowance.
The current estimated construction and equipment cost for a typical Saint Louis
Bread bakery cafe is approximately $590,000 before any landlord allowance.
The average bakery cafe size ranges between 2,500 and 4,000 square
feet. Currently, all bakery cafes, including franchises, are in leased premises.
Lease terms are typically ten years with one or two five-year renewal options
periods thereafter. Leases typically have a minimum base occupancy charge,
charges for a proportionate share of building operating expenses and real estate
taxes, and contingent percentage rent based on sales above a stipulated sales
level.
PRODUCTION
Frozen dough products are produced at two frozen dough facilities and
are then distributed to Company operated bakery cafes and franchise for baking.
Baked goods prepared from frozen dough products represent approximately 30% of
the Au Bon Pain business unit's total bakery cafe sales and approximately 20% of
the Saint
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Louis Bread business unit's total bakery cafe sales. During 1996, the Company
completed construction of the state of the art frozen dough production facility
in Mexico, MO. The facility is 80,000 square feet and increased capacity
three-fold over the level at the production facility in South Boston. Start-up
costs incurred at the Mexico, MO plant significantly reduced 1996 results of
operations. In addition, during 1997 the operating efficiencies of the new
facility were not sufficient to fully offset the additional overhead costs
associated with the facility.
On March 23, 1998 the Company sold the Mexico, MO production facility
and its wholesale frozen dough business to Bunge Foods Corporation ("Bunge") for
approximately $13 million in cash. In conjunction with the sale, Au Bon Pain and
Saint Louis Bread entered into five year supply agreements with Bunge for the
supply of substantially all their frozen dough needs, excluding bagels, in their
domestic bakery cafes. The Company expects the supply agreements will result in
an improved operating margin of approximately .5% of total revenues, along with
reduced interest expense. The net proceeds of the sale were used to reduce debt.
In addition, approximately $2 million of related receivables at December 27,
1997 will be used to further reduce debt. The Company expects to recognize a
pre-tax loss on the sale of the facility of approximately $700,000 in the
Company's results of operations for the first quarter of 1998.
The sale of the frozen dough production facility provides economies of
scale in plant production which are reflected in the economics of the five-year
supply agreements and allows the Company to take advantage of Bunge's
significant purchasing power. The five year supply agreements allow the bakery
cafes to continue to offer consistently high quality fresh baked goods as the
frozen dough products purchased from Bunge will be made on the same equipment,
by the same management team, using the same proprietary processes and
specifications as prior to the sale to Bunge.
The Company also operates a central commissary used for baking and for
preparing certain other menu items, which are then delivered to a portion of the
Company's Boston-area bakery cafes. During 1998, the Company expects to close
the commissary located in Chelsea, Massachusetts and to consolidate certain of
the functions currently performed there into the South Boston production
facility, while also integrating certain other functions into the Boston-area
bakery cafes. The Company does not expect to incur significant costs to close
the commissary. Each of the Saint Louis Bread bakery cafes is supported by a
regional commissary which daily provides principally unbaked sourdough products
for baking and sale within the Saint Louis Bread bakery cafes.
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MANAGEMENT INFORMATION SYSTEMS
Each Company-operated bakery cafe has computerized cash registers to
collect point-of-sale transaction data, which are used to generate pertinent
marketing information, including product mix and average check. All product
prices are programmed into the system from the Company's corporate office.
The Company's in-store personal computer-based management support
system is designed to assist in labor scheduling and food cost management, to
provide corporate and retail operations management quick access to retail data
and to reduce managers' administrative time. The system supplies sales, bank
deposit and variance data to the Company's accounting department in Boston on a
daily basis. The Company uses this data to generate weekly consolidated reports
regarding sales and other key elements, as well as detailed profit and loss
statements for each bakery cafe every four weeks. Additionally, the Company
monitors the average check, customer count, product mix and other sales trends.
The Company has not completed its assessment of the impact of the Year
2000 issue. It is management's belief that the primary financial systems are
Year 2000 compatible. Testing of those systems for compliance is expected to
occur during 1998. Many secondary systems associated with the Company's retail
operations will require modifications. It is the Company's belief that existing
internal Company resources will be adequate to reprogram these Year 2000
modifications. It is expected that the most significant Year 2000 system issue
for the Company is with POS systems used by the Au Bon Pain concept. The Company
is in negotiations with several vendors to replace the existing POS systems with
new state-of-the-art systems. The new systems are expected to be leased at a net
incremental cost of approximately $400,000 annually. The incremental cost of the
new system is expected to be substantially offset by labor efficiency savings
associated with the new POS system.
DISTRIBUTION
The Company currently utilizes an independent distributor to distribute
frozen dough products and other materials to Company-operated Au Bon Pain and
Saint Louis Bread bakery cafes. By contracting with an independent distributor,
the Company has been able to eliminate investment in distribution systems and to
focus its managerial and financial resources on its retail operations. The
distributor picks up frozen dough products throughout the week from the plants
and delivers to the cafes. Virtually all other supplies for retail operations,
including paper goods, coffee and small-wares, are contracted for by the Company
and delivered by the vendors to the distributor for delivery to the bakery
cafes. The
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individual bakery cafes order directly from the distributor two to three
times per week.
Franchised bakery cafes operate under individual contracts with either
the Company's distributor or other regional distributors.
JOINT VENTURES
The Company currently operates 15 Au Bon Pain bakery cafes in New York
City, which are owned under a joint venture agreement between the Company and an
independent investor group. Under the terms of this agreement, the Company has
an obligation to offer the group up to 49% of the equity in each bakery cafe
opened in the metropolitan tri-state area of New York City (New York City, Long
Island, Westchester County (NY), Bergen County (NJ), and Fairfield County (CT)).
The equity participation percentage is based on the cost of the initial
construction upon opening of the bakery cafe. This equity percentage is fixed
prior to the date of the respective bakery cafe openings. The group has no
obligation to participate in any bakery cafe, and the percentage participation
must be elected by the group prior to the opening of the bakery cafe. Each joint
venture bakery cafe must purchase all of its frozen dough products from the
Company and is operated by the Company under a management agreement under which
the Company receives a management fee of 6% of sales of each joint venture
bakery cafe. The Company has agreed to provide a guaranty to one or more
institutional lenders acceptable to the Company to assist the group in financing
its acquisition of up to 5% of the equity in new bakery cafes opened after
January 1, 1993. As of December 27, 1997, approximately $83,062 is outstanding
under this arrangement.
The Company also has a 75% interest in Pain Francais, Inc., which owns
the bakery cafe located in the GE Building at Rockefeller Center, New York. The
other 25% is held by the same joint venture partner. This bakery cafe operates
under a management agreement similar to the agreement under which the joint
venture bakery cafes are operated.
FRANCHISES
Au Bon Pain
Domestic
The Company currently has domestic franchising agreements with thirteen
organizations: Northern Bakers, Inc., CA One, ABP Southern California, Wayne
ABP, Inc., R.C. Menzer, Romallso, Inc., The Lauren Group, Inc., FGR Food Group,
Host Marriott Corp., Boston Concessions Group, Inc., Crowne Plaza Ravinia, ABP
Delaware Valley, LLC and DoubleTree Hotels. In general, the Company has two
sources of revenue from its domestic Au Bon Pain franchisees: fees for new
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locations and royalties on sales by franchisees. New domestic locations, other
than airport locations, to be developed by franchisees typically require a
$25,000 initial franchise fee per location and a 5% royalty. Airport franchise
fees range between $10,000 and $50,000, depending upon passenger traffic and the
Company's assistance in obtaining the concession. All domestic franchisees are
obligated to use Company-approved ingredients, including Au Bon Pain-approved
frozen dough products.
In 1997, the Company sold 11 bakery cafes to ABP Delaware Valley for
$2.6 million, in connection with the execution of a franchise area development
agreement covering certain portions of Pennsylvania, New Jersey and Delaware.
The purchase price was funded via a ten-year note with the Company which accrues
interest at 8.25% per annum. Under terms of the area development agreement, the
franchisee must open 17 new bakery cafes according to a minimum opening schedule
in order to maintain development exclusivity in the territory and has the right
to open either Au Bon Pain or Saint Louis Bread bakery cafes within the
specified territory.
International
The Company currently has international franchise development
agreements with developers in Chile, Argentina, Brazil and certain other South
American countries, Thailand, Indonesia, the Philippines, Malaysia, Singapore,
England, the Caribbean and the Canary Islands. Bakery cafes have been opened to
date in Chile, Indonesia, the Philippines, Thailand, Brazil and England. Under
these agreements, the Company has granted exclusive development rights to
franchise and operate Au Bon Pain bakery cafes in the respective country or
countries. The agreements generally require the payment of up front development
fees, which have ranged from $250,000 to $750,000, a franchise fee, typically
from $10,000 to $30,000 for each Au Bon Pain bakery cafe opened, depending upon
the size of the location, and royalties from the sale of products from each
bakery cafe of 5% of sales. The developer is, in most instances, required to
open bakery cafes according to a specific minimum schedule. The Company may also
agree to provide advice, consultation and training for the development of a
frozen dough plant. Currently, the Company considers international franchising
and licensing arrangements as a means of business expansion for its Au Bon Pain
concept and is actively pursuing additional international franchising
relationships.
Saint Louis Bread Company
In connection with the Saint Louis Bread acquisition in 1993, the
Company assumed two area development agreements pursuant to which Saint Louis
Bread granted exclusive development rights to two franchisees. One area
development agreement covers the cities of Kansas City, St. Joseph and Topeka,
Kansas and Kansas City,
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Missouri. The second area development agreement covers various counties in
Missouri and includes the City of Springfield.
In 1996, the Company began a broad-based franchising program. The
Company is actively seeking to extend its Saint Louis Bread franchise
relationships beyond its current franchisees. The Saint Louis Bread unit
franchise agreements typically require the payment of an up-front franchise fee
of $35,000 and continuing royalties of 4% to 5% on sales from each bakery cafe.
The franchisees are required to purchase all of their dough products from
sources approved by Saint Louis Bread.
As of December 27, 1997 the Company has entered into franchise
development agreements for a total of 356 bakery cafes to be located in specific
sections of the Tulsa, Oklahoma, Columbus, Ohio, Cincinnati, Ohio, Cleveland,
Ohio, Iowa, Louisville, Kentucky, Orlando, Florida, Jacksonville, Florida,
Massachusetts, Dallas, Texas, Pittsburgh, PA, Tampa, Florida, Illinois,
Minnesota, Colorado, Wisconsin and Tennessee markets.
EMPLOYEES
The Company has approximately 1,378 full-time employees, of whom
approximately 170 are employed in general or administrative functions
principally at or from the Company's executive offices in Boston, Massachusetts;
approximately 84 are employed at the Boston frozen dough plant and the
commissary; approximately 61 are employed in the Saint Louis Bread corporate
office in St. Louis, MO; approximately 91 are employed in the Saint Louis Bread
production facilities in St. Louis, MO, Chicago, IL, Detroit, MI, and Atlanta,
GA; and approximately 684 and 288 are employed in the Au Bon Pain and Saint
Louis Bread retail operations, respectively. The Company also has approximately
4,141 part-time employees, of whom 2,665 and 1,476 are employed in the Au Bon
Pain and Saint Louis Bread bakery cafes, respectively. These totals include
employees of Pain Francais, Inc. and at the joint venture locations in New York
City. There are no collective bargaining agreements. The Company considers its
employee relations to be excellent.
TRADEMARKS
The "Au Bon Pain" and "Au Bon Pain The Bakery Cafe" names are of
material importance to the Company and are trademarks registered with the United
States Patent and Trademark Office and in certain foreign countries. In
addition, the name "Saint Louis Bread Company" and "Panera Bread" are of
material importance to the Company. "Saint Louis Bread Company" is registered
with the United States Patent and Trademark Office. In addition, "Saint Louis
Bread Company and design" and "Panera Bread" and "Panera Bread and design"
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and various other marks of lesser importance have been filed with the United
States Patent and Trademark Office.
GOVERNMENT REGULATION
Each Company-operated and franchised bakery cafe is subject to
regulation by federal agencies and to licensing and regulation by state and
local health, sanitation, safety, fire, alcoholic beverage control and other
departments. Difficulties or failures in obtaining the required licensing or
approval could result in delays or cancellations in the opening of restaurants.
The Company is also subject to federal and a substantial number of
state laws regulating the offer and sale of franchises. Such laws impose
registration and disclosure requirements on franchisors in the offer and sale of
franchises and may also apply substantive standards to the relationship between
franchisor and franchisee. The Company does not believe that current or
potential future regulations of franchises have or will have any material impact
on the Company's operations. The Company is subject to the Fair Labor Standards
Act and various state laws governing such matters as minimum wages, overtime and
other working conditions.
The Company's Boston frozen dough plant, commissary and Saint Louis
Bread dough plants are subject to various federal, state and local environmental
regulations. Compliance with applicable environmental regulations is not
believed to have any material effect on capital expenditures, earnings or
competitive position of the Company. Estimated capital expenditures for
environmental compliance matters are not material.
The Americans With Disabilities Act prohibits discrimination in
employment and public accommodations on the basis of disability. Under the
Americans With Disabilities Act, the Company could be required to expend funds
to modify its bakery cafes to provide service to, or make reasonable
accommodations for the employment of, disabled persons. The Company believes
that compliance with the requirements of the Americans With Disabilities Act
will not have a material adverse effect on its financial condition, business or
operations.
ITEM 2. PROPERTIES
All Company-operated bakery cafes are located in leased premises with
lease terms typically for ten years with one or two five-year renewal option
periods thereafter. Leases typically have a minimum base occupancy charge,
charges for a proportionate share of building operating expenses and real estate
taxes and contingent percentage rent based on sales above a stipulated sales
level. The
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joint venture bakery cafes operate in leased premises under similar lease
arrangements.
In 1983, Au Bon Pain built its plant and headquarters in South Boston,
Massachusetts. The executive offices occupy approximately 24,000 square feet.
The Company owns the original building plus additions and leases the land on
which these improvements are located from the City of Boston under a long term
ground lease. The annual rent is approximately $150,000. The lease expires,
assuming exercise of renewal options, in 2017.
In 1997, the Company leased short-term office space in Waltham, MA to
house its Accounting and Development functions.
In 1996, the Company completed construction of a central production
facility on a 20 acre tract of land in Mexico, MO to increase the Company's
production capacity. The new facility cost approximately $9 million and began
operation in mid-1996. The cost of the facility was financed primarily by an
$8.6 million industrial development bond issued by the City of Mexico, Missouri
in July 1995, secured by an $8.7 million letter of credit with a commercial bank
through July, 2000, and by equipment lease financing. On March 23, 1998 the
Company sold the Mexico, MO production facility to Bunge Foods Corp. See
"Production".
Au Bon Pain operates its commissary in leased premises in Chelsea,
Massachusetts under a ten year lease expiring in 1998, with an option to extend
for an additional five years. Management intends to close this facility in 1998
upon lease expiration. See "Production".
In 1997, Saint Louis Bread leased new office space in Webster Grove, Mo
for its corporate offices. The space occupies approximately 10,300 square feet.
The annual rent is approximately $69,500. The lease expires, assuming exercise
of renewal options, in 2007.
The Company considers its physical properties to be in good operating
condition and suitable for the purposes for which they are used.
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BAKERY CAFE LOCATIONS
Au Bon Pain Bakery Cafes:
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Company-Operated: 160 total as of December 27, 1997
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Boston Market Area: 46
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101 Merrimac Street Filene's
1100 Massachusetts Avenue Fleet Bank
15 Harvard Street Harvard Business School
176 Federal Street Harvard Square
431 Boylston Street Hynes Auditorium
53 State Street International Place
684 Massachusetts Avenue Kendall Square
745 Boylston Street Longwood Galleria
75-101 Federal Street Milk Street
Arlington Center MIT
Beacon Hill Natick Mall
Bowdoin Square New England Medical Center
Brattle Street North Shore Shopping Center
Brigham & Women's Hospital Northeastern University
Burlington Mall One Newton Place
Cambridgeside Galleria Park Plaza
Children's Hospital South Shore Plaza
Church Park South Station
Coolidge Corner Square One Mall
Copley Place Tower Records
Davis Square Wellesley Center
Design Center South Boston Winter Street
Fanueil Hall Market Place Woburn Business Center
Other New England: 14
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Avon Marketplace, Avon, CT Rockingham Mall, Salem, NH
City Place, Hartford, CT Rhode Island Hospital,
Providence, RI
Fleet Center, Providence, RI St. Francis Hospital,
Hartford, CT
Hartford Civic Center, Hartford, CT Thayer Street, Providence, RI
Mall of New Hampshire, Warwick Mall, Warwick, RI
Manchester, NH
One Broadway, New Haven, CT West Farms Malls,
West Hartford, CT
Pheasant Lane Mall, Nashua, NH Worcester Commons,
Worcester, MA
California Market Area: 1
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353 Sacramento Street, San Francisco
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Pittsburgh Market Area: 8
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Fifth Avenue Place Pittsburgh Airport-Landside
Oliver Building Ross Park Mall
Oxford Center Two PPG Place
Pittsburgh Airport-Airside USX Tower
Washington, D.C. - Baltimore Market Area: 24
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10 North Calvert 800 North Capitol Street
1001 Pennsylvania Avenue, NW Commerce Place
1101 Vermont Avenue, NW Crystal City
1401 Eye Street Gallery at Harbor Place
1615 L Street, NW International Square
1701 Pennsylvania Avenue, NW L'Enfant Plaza
1724 L Street, NW National Place
1801 L Street Pentagon City
1850 M Street Springfield Mall
2000 Pennsylvania Avenue, NW Towson Town Center
601 Indiana Avenue Union Station
700 13th Street, NW Warner Building
Greater New York Area: 41
- --------------------------
101 Hudson Street Empire State Building
16 East 44th Street Exxon Building
222 Broadway JFK Airport-Cart
300 Madison Avenue JFK Airport-American Airlines
420 Fifth Avenue Laguardia Airport
425 Lexington Avenue Long Island Jewish Medical Center
444 Madison Avenue Manhattan Mall
54 East 8th Street Nanuet Mall
6 Union Square East One Metrotech Center
60 Broad Street Port Authority
600 Lexington Avenue Riverside Square
600 Third Avenue Rockefeller Center/GE Building
684 Broadway Rockefeller Center/Time Warner
73 Fifth Avenue Rutgers University
80 Pine Street Short Hills Mall
875 Third Avenue-Down State Street Plaza
875 Third Avenue-Up Westchester Mall
95 Wall Street World Financial-Down
Celanese Building World Financial-Up
Chanin Building World Trade Center
Daily News Building
15
<PAGE>
Midwest Market Area: 26
- ------------------------
122 South Michigan Avenue, Chicago Amoco Building, Chicago
123 North Wacker Drive, Chicago BP Building, Cleveland
125 South Wacker Drive, Chicago Carew Tower, Cincinnati
161 North Clark Street, Chicago Columbus City Center, Columbus
180 North Michigan Avenue, Chicago Federal Reserve, Chicago
181 West Madison, Chicago Grand Avenue, Milwaukee
200 West Adams, Chicago IBM Building, Minneapolis
222 North LaSalle Street, Chicago IDS Center, Minneapolis
30 North LaSalle Street, Chicago Illinois Center, Chicago
33 North Dearborn, Chicago Merchandise Mart, Chicago
3rd & Broad, Columbus St. Paul Center, Minneapolis
500 West Monroe, Chicago Tower City, Cleveland
600 Superior Avenue, Cleveland Woodfield Mall, Schaumburg, IL
Franchise-Operated/Domestic: 59 total as of December 27, 1997
Northern Bakers, Inc.: 8
- -------------------------
Big D Supermarket, Shrewsbury, MA Dartmouth-Hitchcock Medical
Center, Lebanon, NH
Cape Cod Mall, Hyannis, MA Fox Run Mall, Newington, NH
Carousel Mall, Syracuse, NY Maine Mall, South Portland, ME
Crossgates Mall, Albany, NY Silver City Galleria,
Taunton, MA
Host Marriott: 2
- -----------------
Hartsfield Airport, Concourse B, Hartsfield Airport, Concourse D,
Atlanta, GA Atlanta, GA
Fortunoff (Wayne ABP, Inc.): 1
Wayne Town Center, Wayne, NJ
R.C. Menzer: 2
- ---------------
South Hills Village, Westmoreland Mall,
Pittsburgh, PA Greensburg, PA
Romallso, Inc.: 1
- ------------------
Roosevelt Field Mall, Garden City, NY
The Lauren Group, Inc.: 2
- --------------------------
Choices, Tannersville, PA Crossing Factory Store,
Tannersville, PA
16
<PAGE>
DoubleTree Hotels: 14
- ---------------------
Austin, TX Louisville, KY III
Boise, ID Miami Lakes, FL
Hartsfield International Airport, Norwalk, CT
Atlanta, GA
Jacksonville, FL O'Hare, Chicago, IL
Largo, MD Philadelphia, PA
Louisville, KY I San Antonio, TX
Louisville, KY II Tyson's Corner, VA
ABP Southern California, LLC: 5
- --------------------------------
Brea Mall, Brea, North County Fair, Escondido
Laguna Hills Mall, Laguna Hills South Lake Avenue, Pasadena
Montclair Plaza, Montclair
Boston Concessions Group: 1
- ---------------------------
Logan International Airport, Terminal C, Boston
CA One Services, Inc.: 7
- -------------------------
Ft. Lauderdale Airport, Newark International Airport,
Ft Lauderdale, FL Newark, NJ
Greater Cincinnati Airport, San Jose International Airport,
Hebron, KY San Jose, CA
Hancock International Airport, West Palm Beach International
Syracuse, NY Airport, West Palm Beach, FL
Logan International Airport,
Boston, MA
Crowne Plaza Ravinia: 1
- -----------------------
Crowne Plaza, Atlanta
ABP Delaware Valley: 11
- ------------------------
30th Street Station, Philadelphia Mellon Building, Philadelphia
Commerce Square Montgomery Mall, Philadelphia
Exton Square Mall, Exton, PA Ten Penn Center, Philadelphia
Graham Building, Philadelphia Two Logan Square, Philadelphia
King of Prussia, PA Two Penn Center, Philadelphia
Liberty Place, Philadelphia
FGR Food Corp.: 4
- ------------------
Dallas-Fort Worth Airport I Dallas-Fort Worth Airport III
Dallas-Fort Worth Airport II Dallas-Fort Worth Airport IV
17
<PAGE>
Franchise-Operated/International: 37 total as of December 27, 1997
ABP Alimentos y Servicios, Chile: 17
- -------------------------------------
Apoquindo/Hendaya Museum of Pre-Columbian Art
Bandera New Providencia
El Bosque Norte Providencia
El Bosque Sud Ripley
Food Garden Santiago Airport-Cart
Gimnasio Santiago Airport-Counter
Homecenter Las Condes Santiago Airport-Duty Free
La Dehasa World Trade Center
Miraflores
GS&P Foods, Inc., The Philippines: 6
- -------------------------------------
EDSA/Shangri-La Mall, Ortegas Taipan Building, Ortegas
Megamall, Ortegas Tektite Building, Manila
PCI Tower, Makati Zeta Building, Manila
PT Ayodhia Pina Pangan, Indonesia: 7
- -------------------------------------
BNI Building, Jakarta Plaza Senayan, Jakarta
BRI Building, Jakarta Setia-Budi Atrium, Jakarta
Kunigan Plaza, Jakarta Stock Exchange (BEJ), Jakarta
Landmark Building, Jakarta
Royal ABP Co., Ltd, Thailand: 3
- --------------------------------
Lake Rajarda Sindhorn
SCB Plaza
BV Hospitality UK Ltd, United Kingdom: 2
- -----------------------------------------
225 The Strand, London Cheapside, London
ABP Brasil Ltda, Brazil: 2
- ---------------------------
Alameda Santos/Citibank, Sao Paulo Birmman Building, Sao Paulo
18
<PAGE>
Saint Louis Bread Company Bakery Cafes:
- ---------------------------------------
Company-Operated Bakery Cafes: 60 total as of December 27, 1997
Greater St. Louis Market Area: 32
- ----------------------------------
Ballas, Creve Coeur, MO Gateway One, St. Louis, MO
Baxter, Ballwin, MO Grand, St. Louis, MO
Bogey Hills, St. Charles, MO Kirkwood, MO
Brentwood, St. Louis, MO Main, St. Charles, MO
Capriccio, Richmond Heights, MO Market, St. Louis, MO
Cape Girardeau, MO Pine, St. Louis, MO
Carondelot, Clayton, MO Rendezvous Cafe,
Richmond Heights, MO
Central West End, St. Louis, MO Soulard, St. Louis, MO
Chesterfield Mall, Chesterfield, MO South 9th Street, Columbia, MO
City Museum, St. Louis South Central, Clayton, MO
Columbia Mall, Columbia, MO Surrey Plaza, Florissant, MO
Crestwood Plaza, St. Louis, MO Telegraph Road, St. Louis, MO
Delmar, University City, MO Tesson, St. Louis, MO
Esquire, Clayton, MO West County, Des Peres, MO
Four Seasons, Chesterfield, MO Westport Plaza,
Maryland Heights., MO
Galleria, Richmond Heights, MO Winchester, MO
Atlanta Market Area: 9
- -----------------------
Briarcliff, Atlanta, GA Lenox Square, Atlanta, GA
Dunwoody, GA Peachtree, Atlanta, GA
Emory Village, Atlanta, GA Sandy Springs, Atlanta, GA
Gwinnett Place, Deluth, GA Town Center, Kennesaw, GA
Haywood Mall, Greenville, SC
Chicago Market Area: 15
- ------------------------
Belleville, IL Park Ridge, IL
Diversey, Chicago, IL St. Clair Square,
Fairview Heights, IL
Evanston, IL Stratford Square Mall, IL
Fox Valley, Aurora, IL Vernon Hills, IL
Golf & Meachum, Schaumberg, IL Wheaton, IL
Halsted, Chicago, IL Wilmette, IL
LaGrange Park, IL Winnetka, IL
Orland Square Mall,
Orland Park, IL
Massachusetts Market Area: 1
- -----------------------------
Vinnin Square, Swampscott, MA
Michigan Market Area: 3
- ------------------------
City Center, Novi, MI Orchard Mall, West Bloomfield, MI
Lathrope Village, Bloomfield, MI
19
<PAGE>
Franchise-Operated Bakery Cafes: 19 total as of December 27, 1997
Traditional Bakery, Inc.: 6
- ----------------------------
1570 East Battlefield, 2401 East 32nd Street,
Springfield, MO Joplin, MO
500 South National, East Sunshine, Springfield, MO
Springfield, MO
3265 Falls Parkway, 3800 East 51st Street, Tulsa, OK
Branson, MO
Original Bread, Inc.: 6
- ------------------------
11022 Metcalf, Overland Park, KS 520 West 23rd Street,
Lawrence, KS
11319 West 95th St., 1605 North Rock Road, Wichita, KS
Overland Park, KS
8300 Mission Road, Westport, Kansas City, KS
Prairie Village, KS
SLB of Iowa: 1
- ---------------
Elmore Crossing, Davenport, IA
Breads of the World: 2
- -----------------------
Festival at Sawmill, Dublin, OH Olentangy Plaza, Columbus, OH
Breads Unlimited: 1
- --------------------
Tuttle Crossing Mall, Columbus, OH
SLB of Central Illinois: 1
- ---------------------------
510 East John Street, Champaign, IL
St.LB Inc.: 1
- --------------
Mall of St. Matthews, Louisville, KY
Ozark Breads, Inc.: 1
- ----------------------
2510 Missouri, Jefferson City, MO
20
<PAGE>
The following table sets forth Company-operated and franchise operated bakery
cafes open at the dates indicated:
Dec. 25 Dec. 31, Dec. 30, Dec. 28, Dec. 27,
1993 1994 1995 1996 1997
------- -------- -------- -------- --------
Company-operated
Au Bon Pain 137 182 192 177 160
Saint Louis Bread 19 31 52 54 60
--- --- --- --- ---
156 213 244 231 220
Franchise-operated
Au Bon Pain 39 25 29 48 96
Saint Louis Bread 1 6 8 10 19
--- --- --- --- ---
40 31 37 58 115
Total
Au Bon Pain 176 207 221 225 256
Saint Louis Bread 20 37 60 64 79
--- --- --- --- ---
196 244 281 289 335
21
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company submitted no matters to a vote of security holders during
the fourth quarter of the fiscal year ended December 27, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
(a) Market Information.
-------------------
The Company's Class A Common Stock is traded on the NASDAQ National
Market tier of the NASDAQ Stock Market under the symbol ABPCA. The following
table sets forth the high and low sale prices as reported by NASDAQ for the
fiscal periods indicated.
1996 High Low
- ---- ------ -----
First quarter .............................. 9-5/16 6-3/4
Second quarter ............................. 9 6-7/8
Third quarter .............................. 7-1/4 6-1/8
Fourth quarter ............................. 8-1/4 5-1/2
1997
- ----
First quarter .............................. 8-7/16 5-7/8
Second quarter ............................. 7-3/8 6
Third quarter .............................. 10-1/4 7
Fourth quarter ............................. 9-13/16 7-1/4
On March 17, 1998, the last sale price for the Class A Common Stock, as
reported on the NASDAQ National Market System, was $8 5/16.
(b) Holders.
--------
On March 17, 1998, the Company had approximately 1,455 holders of
record of its Class A Common Stock and approximately 91 holders of its Class B
Common Stock.
(c) Dividends.
----------
The Company has never paid cash dividends on its capital stock and has
no intention of paying cash dividends in the foreseeable future.
22
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
<TABLE>
<CAPTION>
For the fiscal years ended
-------------------------------------------------------------
Dec. 25, Dec. 31, Dec. 30, Dec. 28, Dec. 27,
1993 1994 1995 1996 1997
------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Restaurant sales $113,980 $173,436 $216,411 $225,625 $233,212
Franchise sales and
other revenues 8,935 9,450 10,055 11,309 17,678
-------- -------- -------- -------- --------
122,915 182,886 226,466 236,934 250,890
Costs and expenses:
Cost of food and
paper products 39,695 60,535 77,250 85,631 90,385
Restaurant
operating expenses 56,697 85,139 112,161 115,364 119,537
Depreciation and
amortization 7,967 11,891 14,879 16,195 16,862
General and
administrative 6,757 10,098 12,818 14,979 16,417
Non-recurring
charge - - 8,500 4,435 -
-------- -------- -------- -------- --------
111,116 167,663 225,608 236,604 243,201
-------- -------- -------- -------- --------
Operating income 11,799 15,223 858 330 7,689
Interest expense, net 57 1,727 3,363 5,140 7,204
Other (income)
expense, net (28) 80 2,016 2,513 212
Minority interest 105 78 (94) (40) (42)
Income(loss) before
provision (benefit)
for income taxes 11,665 13,338 (4,427) (7,283) 315
Provision(benefit)
for income taxes 4,844 5,497 (2,813) (2,918) (1,492)
-------- -------- -------- -------- --------
Net income(loss) $ 6,821 $ 7,841 $ (1,614) $ (4,365) $ 1,807
======== ======== ======== ======== ========
Net income(loss)
per common share - basic $ .71 $ .60 $ (.14) $ (.37) $ .15
======== ======== ======== ======== ========
Net income(loss)
per common share
- diluted $ .69 $ .59 $ (.14) $ (.37) $ .15
======== ======== ======== ======== ========
Weighted average
number of shares
outstanding - basic 11,042 11,429 11,621 11,705 11,766
Weighted average
number of shares
outstanding - diluted 11,353 11,624 11,621 11,705 11,913
Comparable restaurant
sales percentage
increase for
Company-operated
bakery cafes 6.7% 5.8%(1) 0.5% 0.7% 3.6%
</TABLE>
1 Fiscal 1994 included 53 weeks. The 1994 restaurant sales used in this
computation have been adjusted downward to be comparable to fiscal 1993 and
fiscal 1995.
23
<PAGE>
<TABLE>
<CAPTION>
For the fiscal years ended
-------------------------------------------------------------
Dec. 25, Dec. 31, Dec. 30, Dec. 28, Dec. 27,
1993 1994 1995 1996 1997
------- -------- -------- -------- --------
(in thousands, except Company-operated bakery cafes open)
<S> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Working capital $ 5,817 $ (3,439) $ 846 $ (1,748) $ (58)
Total assets 120,474 165,586 193,018 196,428 186,516
Long-term debt, less
current maturities 274 19,095 42,502 49,736 42,527
Convertible
subordinated notes 30,000 30,000 30,000 30,000 30,000
Stockholders' equity 76,098 94,164 93,238 90,056 92,274
Company-operated
bakery cafes open 156 213 244 231 220
</TABLE>
24
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total
revenues of certain items included in the Company's consolidated statements of
operations for the periods indicated:
For the fiscal years ended
---------------------------------------
Dec. 30, Dec. 28, Dec. 27,
1995 1996 1997
-------- -------- --------
Revenues:
Restaurant sales 95.6% 95.2% 93.0%
Franchise sales and
other revenues 4.4 4.8 7.0
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
Costs and expenses:
Cost of food and paper
products 34.1% 36.1% 36.0%
Restaurant operating
expenses 49.5 48.7 47.7
Depreciation and
amortization 6.6 6.8 6.7
General and
administrative 5.7 6.3 6.5
Non-recurring charge 3.7 1.9 -
----- ----- -----
99.6 99.8 96.9
----- ----- -----
Operating margin 0.4 0.2 3.1
Interest expense, net 1.5 2.2 2.9
Other expense, net 0.9 1.0 0.1
Minority interest -- -- --
----- ----- -----
Income(loss) before
(benefit) from
income taxes (2.0) (3.0) 0.1
Benefit from
income taxes (1.3) (1.2) (0.6)
----- ----- -----
Net income(loss) (0.7)% (1.8)% 0.7%
===== ===== =====
General
The Company's revenues are derived from restaurant sales and franchise
sales and other revenues. Franchise sales and other revenues include sales of
frozen dough products to franchisees and others, royalty income and franchise
fees. Certain expenses (cost of food and paper products, restaurant operating
expenses and depreciation and amortization) relate primarily to restaurant
sales, while general and administrative expenses relate to all areas of revenue
generation.
25
<PAGE>
The Company's fiscal year ends on the last Saturday in December. The
fiscal years from 1995 through 1997 ended on December 30, 1995, December 28,
1996 and December 27, 1997 and included 52, 52 and 52 weeks, respectively. The
Company's fiscal year normally consists of 13 four-week periods, with the first,
second and third quarters ending 16 weeks, 28 weeks and 40 weeks, respectively,
into the fiscal year.
Results of Operations
1997 Compared to 1996
---------------------
Total restaurant sales from Company-operated bakery cafes increased
3.1% to $233 million in 1997 from $226 million in 1996 due to several factors.
Incremental sales were generated from the opening of 6 new Saint Louis Bread
Company-operated bakery cafes opened throughout 1997 and 3 Au Bon Pain and 2
Saint Louis Bread Company-operated bakery cafes opened throughout 1996. In
addition, comparable restaurant sales increases in Saint Louis Bread and Au Bon
Pain contributed to the sales growth. Restaurant sales increased 18.3% in the
Saint Louis Bread business due to the store openings and strong comparable
restaurant sales of 9.3%, which were slightly offset by the sale of one Saint
Louis Bread Company-operated restaurant in connection with the execution of a
franchise area development agreement. Sales from Company-owned restaurants in
the Au Bon Pain business unit declined 1.7% as the sales from new
Company-operated restaurants and an increase in comparable restaurant of 1.6%
sales were more than offset by the effect of the disposition throughout 1997 of
a number of underperforming bakery cafes.
Other revenues increased to $17.7 million in 1997 from $11.3 million in
1996, principally from growth in wholesale sales to $8.0 million in 1997, from
$5.7 million in 1996 and an increase in franchise revenue to $9.4 million in
1997, from $5.5 million in 1996. The wholesale sales increase was due to
additional customers and distribution. The franchise revenue increase was driven
by the execution of new franchise area development agreements, fees from opening
new franchise locations and higher royalty income.
Operating income increased to $7.7 million in 1997 from $330,000 in
1996. Operating income in 1996 included a non-recurring charge recorded by the
Company of $4.4 million ($3.8 million after-tax), related principally to the
write-down of certain assets under FAS #121. Before the non-recurring charge,
operating income increased 61% in 1997 to $2.9 million above 1996, driven by
increased sales and contribution, especially in the Saint Louis Bread division,
where a significant increase in franchise contribution combined with sales
growth and operational efficiencies drove Saint Louis Bread's operating income
to nearly double versus 1996. In addition, manufacturing contribution
26
<PAGE>
improved versus 1996, as the new production facility opened in 1996 in Mexico,
MO stabilized its operating performance.
Operating margin in the Au Bon Pain business unit declined by .5 points
in 1997 versus 1996, due to higher food and paper costs of 1.2 points caused by
higher commodity costs for butter and less than full capacity in the
manufacturing facility in Mexico, Missouri. Restaurant operating expenses
decreased by .7 points as sales growth and the closing of unprofitable
restaurants provided leverage against occupancy and store overhead costs.
Depreciation and amortization and general and administrative expenses as a
percentage of revenue remained flat with the prior year.
Operating margin in the Saint Louis Bread business unit increased by
4.3 points versus the prior year, as higher sales leveraged the fixed costs
within the operational expenses and significantly higher franchise contribution
increased operating margin. Food and paper costs were .4 points lower in 1997
versus 1996, as operational efficiencies offset commodity cost increases.
Restaurant operating expenses as a percentage of revenue declined by 1.3 points
with the sales improvement providing leverage against occupancy costs, which
declined by .5 points, overhead costs, which declined by .1 points and labor,
which declined by .6 points. Franchise contribution grew by over 700%,
increasing margin by 1.5 points in 1997 versus 1996, as the broad-based
franchise program initiated in 1996 for Saint Louis Bread successfully expanded
the number of committed stores to 356 total stores.
1996 Compared to 1995
---------------------
Restaurant sales from Company-operated bakery cafes increased 4.2% to
$226 million in 1996 from $216 million in 1995, due principally to several
factors: incremental sales in 1996 over 1995 from the 15 Au Bon Pain and 20
Saint Louis Bread Company-operated bakery cafes opened throughout 1995, strong
comparable restaurant sales in the Saint Louis Bread business unit and sales
from the 3 Au Bon Pain and 2 Saint Louis Bread Company-operated bakery cafes
opened throughout 1996. Company-operated restaurant sales decreased 2.9% in the
Au Bon Pain business unit, as additional sales stemming from the new
Company-operated bakery cafes opened in 1995 and 1996 were more than offset by
the effect on sales of the disposition throughout 1996 of a series of
underperforming bakery cafes under an initiative begun in late 1995.
Company-operated restaurant sales increased 33.6% in the Saint Louis Bread
business unit in 1996 over 1995, due to sales stemming from the new
Company-operated bakery cafes opened in 1995 and 1996 and from strong comparable
restaurant sales. Comparable restaurant sales in 1996 decreased 1.3%, or $1.96
million, in the Au Bon Pain business unit. In the Saint Louis Bread business
unit comparable restaurant sales increased 10.2%, or $3.32 million, in 1996 over
the previous year driven by a highly successful bagel product line introduction.
27
<PAGE>
Operating income declined to $330,000 in 1996 from $858,000 in 1995.
Operating income was significantly affected by separate non-recurring charges
recorded by the Company of $4.4 million ($3.7 million after-tax) in 1996 and of
$8.5 million ($5.3 million after-tax) in 1995. The non-recurring charge recorded
in 1996 related principally to the write-down of certain assets in accordance
with FAS #121. The non-recurring charge recorded in 1995 related principally to
the closure of certain under-performing bakery cafes. Before the non-recurring
charges, operating margin decreased in 1996 to 2.0% from 4.1% in 1995, as
operating margin improvements at the Saint Louis Bread business unit were more
than offset by lower operating margins in the Au Bon Pain business unit, driven
primarily by costs associated with the start-up of a new frozen dough
manufacturing facility opened during 1996 in Mexico, Missouri.
Operating margin in the Au Bon Pain business unit declined by 4.3
points in 1996 versus 1995, due principally to start-up costs and inefficiencies
related to the opening of the new manufacturing facility and significantly
higher commodity costs for butter and flour in 1996 versus the previous year. In
total, these manufacturing related costs constituted the majority of the 2.6
point increase to cost of food and paper costs as a percentage of revenues in
the Au Bon Pain business unit compared to the prior year. Restaurant operating
expenses increased by .4 points in 1996 versus 1995, as percentage increases in
occupancy costs due to negative leverage stemming from the slight comparable
restaurant sales decline more than offset percentage improvements in both labor
costs and controllable expenses at the retail store level. Depreciation and
amortization expense as a percentage of revenues increased by .4 points in 1996
due to incremental depreciation related to the new Missouri manufacturing
facility and the negative leverage associated with the comparable restaurant
sales decline. General and administrative expenses as a percentage of revenues
increased by .9 points in 1996 versus 1995 due primarily to greater investment
in infrastructure in the international franchise area, information systems and
other overhead areas.
At Saint Louis Bread, operating margin improved by 4.8 points in 1996
versus 1995, as the new management team established at the end of 1995 improved
operational focus and control throughout 1996 and the significantly positive
comparable restaurant sales increase in 1996 leveraged many of the largely fixed
costs within the operations. Percentage food and paper costs decreased by .4
points in 1996 compared to 1995, despite higher allocated costs associated with
frozen dough provided by the new manufacturing facility opened during the year.
Percentage restaurant operating expenses decreased by 4.2 points driven by
improved management controls surrounding labor costs and store-level
controllable expenses. Depreciation and amortization expense and general and
administrative expenses each decreased by .2 points versus the previous year due
to leverage from the significantly higher sales in 1996.
28
<PAGE>
Benefit from Income Taxes
The Company had a benefit from income taxes of $2.8 million, $2.9
million and $1.5 million for the years ended December 30, 1995, December 28,
1996 and December 27, 1997, respectively, due to federal and state net operating
loss carryforwards, tax credit carryforwards and the fact that the Company has
incurred net losses. As of December 27, 1997, the Company had federal and state
net operating loss carryforwards of approximately $40.0 million, as well as
approximately $3.1 million of tax credit carryforwards available for income tax
purposes. Approximately $13.1 million of these carryforwards expire in the years
2000-2002, while the remaining $26.9 million expires in the years 2010-2012. For
the year ended December 31, 1997, the Company provided a valuation allowance of
$1.3 million to reduce its deferred tax asset to a level which, more likely than
not, will be realized. The valuation allowance is primarily attributable to the
potential expiration of charitable contribution deduction carryforwards and
certain state net operating loss carryforwards. The Company reevaluates the
positive and negative evidence impacting the realizability of its deferred tax
assets on an annual basis.
Net income (loss)
Higher operating income in 1997 versus 1996 and deferred tax assets
generated during 1997 from federal net operating loss carryforwards and tax
credit carryforwards (see "Benefit from Income Taxes"), partially offset by
higher interest costs incurred in 1997, produced a significant increase in net
income for the year ended December 27, 1997 versus a net loss of $4.3 million
for the year ended December 28, 1996, which included a non-recurring charge of
$3.8 million.
The lower operating income in 1996 versus 1995, combined with higher
interest expense and other expense, net resulted in a net loss of $4.4 million
in 1996, as compared with a net loss of $1.6 million in 1995. The higher
interest expense was due primarily to higher average long-term debt outstanding,
as higher average interest rate due to the issuance of $15 million senior
subordinated debentures in July, 1996 which carry a significantly higher coupon
rate than the other outstanding long-term debt.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $853,000 at December 27, 1997
from $2.6 million at December 28, 1996. The Company's principal requirements for
cash are capital expenditures for constructing and equipping new bakery cafes
and maintaining or remodeling existing bakery cafes and working capital. To
date, the
29
<PAGE>
Company has met its requirements for capital with cash from operations, proceeds
from the sale of equity and debt securities and bank borrowings.
Net cash provided by net income plus depreciation was $17.3 million in
1997 versus $10.3 million in 1996. A total of $13.5 million was provided by
operating activities in 1997 compared to $14.8 million in 1996. In 1997, funds
provided by operating activities were primarily the result of an increase in
accrued expenses, offset by growth in accounts receivable and a decrease in
accounts payable. In 1996, funds provided by operating activities were primarily
the result of an increase in accounts payable and accrued expenses, offset by
growth in accounts receivable and inventories.
The Company utilized $7.7 million and $21.8 million for investing
activities in 1997 and 1996, respectively. The investing activities in 1997
resulted primarily from three transactions. In the third quarter of 1997, the
Company sold its interest in Peet's Coffee and Teas, Incorporated back to Peet's
for $2 million in cash, resulting in a pre-tax gain of $930,000. Also in the
third quarter of 1997, the Company sold a Saint Louis Bread cafe for $1.1
million in cash in conjunction with the execution of a franchise area
development agreement, resulting in a pre-tax gain of $325,000. In the fourth
quarter of 1997 the Company sold its Woburn, MA office building for $4.9 million
in cash, resulting in a gain of $660,000. The pre-tax gains on these
transactions were recognized as a component of other expense, net in the
Company's consolidated financial statements for the year ended December 27,
1997. The Company used the proceeds of $3.3 million from these transactions to
reduce debt during 1997.
Total capital expenditures in 1997 of $14.7 million were related
primarily to the opening of one Au Bon Pain and six Saint Louis Bread new
Company-operated bakery cafes and to the construction of four new local Saint
Louis Bread commissaries. The expenditures were mainly funded by net cash from
operating activities of $13.5 million and cash proceeds from the non-operating
transaction described above.
The Company utilized $7.5 million and generated $3.2 million from
financing activities in 1997 and 1996, respectively. The financing activities in
1997 and 1996 resulted primarily from proceeds from and principal payments on
long-term debt, and the issuance of common stock under the Company's employee
stock option and employee stock purchase plans.
In 1998, the Company expects to spend approximately $22.0 million for
capital expenditures, principally for the opening of new
30
<PAGE>
bakery cafes. The Company expects to fund these expenditures substantially
through internally generated cash flow.
On July 24, 1996, the Company issued $15 million senior subordinated
debentures maturing in July, 2000. The debentures accrue interest at increasing
fixed rates over the four year term, ranging between 11.25% and 14.0%. In
connection with the private placement, warrants with an exercise price of $5.62
per share were issued to purchase between 400,000 and 580,000 shares of the
Company's Class A common stock, depending on the term which the debentures
remain outstanding and certain future events. The net proceeds of the financing
were used to reduce the amount outstanding under the Company's bank revolving
line of credit. With the Company's existing revolving line of credit, management
believes it has the capital resources necessary to meet its growth goals through
1999.
The Company has a $28.0 million unsecured revolving line of credit
which bears interest at either the commercial bank's prime rate or LIBOR plus
3.0%, at the Company's option. At December 27, 1997, $18.3 million was
outstanding under the line of credit and an additional $1,200,000 of the
remaining availability was utilized by outstanding letters of credit issued by
the bank on behalf of the Company. The revolving line of credit matures on
September 30, 1999.
On March 23, 1998 the Company sold the Mexico, MO production facility
and its wholesale frozen dough business to Bunge Foods Corporation ("Bunge") for
approximately $13 million in cash. In conjunction with the sale, Au Bon Pain and
Saint Louis Bread entered into five year supply agreements with Bunge for the
supply of substantially all their frozen dough needs, excluding bagels, in their
domestic bakery cafes. The Company expects the supply agreements will result in
an improved operating margin of approximately .5% of total revenues, along with
reduced interest expense. The net proceeds of the sale were used to reduce the
$7.9 million outstanding for the Industrial Revenue Bond and $4.9 million for a
permanent reduction to the revolving credit line. This reduction of the
revolving credit line reduced the total commitment of the Banks in the Credit
Agreement so that the amount available under the revolving credit line decreased
to $23.1 million from $28 million (see Note 8). In addition, approximately $2
million of related receivables at December 27, 1997 will be used to further
reduce debt. The Company expects to recognize a pre-tax loss on the sale of the
facility of approximately $700,000 in the Company's results of operations for
the first quarter of 1998. There were no gains or losses associated with the
early retirement of the Industrial Revenue Bond or the partial repayment of the
revolving credit line.
31
<PAGE>
Assuming there is no significant change in the Company's business, the
Company believes that the existing cash and cash equivalents as well as cash
flows from operations will be sufficient to meet its working capital
requirements for at least the next twelve months.
Certain Factors Affecting Future Operating Results
Statements made or incorporated in this Form 10-K include a number of
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words "estimates," "projects," "anticipates," "believes," "expects,"
"intends," "future," and words of similar import which express management's
belief, expectations or intentions regarding the Company's future performance.
The forward-looking statements involve known and unknown risks and
uncertainties. The Company's actual results could differ materially from those
set forth in the forward-looking statements. The amount of cost to the Company
under the new Supply Agreements is dependent upon market fluctuations in
commodities prices, particularly flour and butter. Additionally, the Company's
operating results may be affected by many factors, including but not limited to,
variations in the number and timing of bakery cafe openings and public
acceptance of new bakery cafes, competition and other factors that may affect
retailers in general.
The Company has not completed its assessment of the impact of the Year
2000 issue. It is management's belief that the primary financial systems are
Year 2000 compatible. Testing of those systems for compliance is expected to
occur during 1998. Many secondary systems associated with the Company's retail
operations will require modifications. It is the Company's belief that existing
internal Company resources will be adequate to reprogram these Year 2000
modifications. It is expected that the most significant Year 2000 system issue
for the Company is with POS systems used by the Au Bon Pain concept. The Company
is in negotiations with several vendors to replace the existing POS systems with
new state-of-the-art systems. The new systems are expected to be leased at a net
incremental cost of approximately $400,000 annually. The incremental cost of the
new system is expected to be substantially offset by labor efficiency savings
associated with the new POS system.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". This statement requires that changes in comprehensive
income be shown in a financial statement that is displayed with the same
prominence as other financial statements. The statement is effective for annual
periods beginning after December 15, 1997 and the Company will adopt its
provisions in fiscal 1998. Reclassifications for earlier periods is required for
comprehensive purposes. Management does not expect the statement to have an
impact on its financial position or results of operations.
32
<PAGE>
In June 1997, the Financial Accounting Standards Board issued Statement
of Accounting standards ("SFAS") No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which changes the manner in which public
companies report information about their operating segments. SFAS No 131 which
is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers, and the
geographic locations in which the entity holds assets and reports revenues.
Management is currently evaluating the effects of this change on its reporting
of segment information. The company will adopt SFAS No. 131 for its fiscal year
ending December 26, 1998.
33
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following described consolidated financial statements of the
Company are included in response to this item:
Report of Independent Accountants.
Consolidated Balance Sheets as of December 28, 1996 and December 27,
1997.
Consolidated Statements of Operations for the fiscal years ended
December 30, 1995, December 28, 1996 and December 27, 1997.
Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 1995, December 28, 1996 and December 27, 1997.
Consolidated Statements of Stockholders' Equity for the fiscal years
ended December 30, 1995, December 28, 1996 and December 27, 1997.
Notes to Consolidated Financial Statements.
34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Au Bon Pain Co., Inc.:
We have audited the accompanying consolidated financial statements and
the financial statement schedules of Au Bon Pain Co., Inc. as of December 27,
1997 and December 28, 1996, and for each of the three fiscal years in the period
ended December 27, 1997. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance as to whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Au Bon Pain Co., Inc. as of December 27, 1997 and December 28, 1996, and the
consolidated results of its operations and cash flows for each of the three
fiscal years in the period ended December 27, 1997 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included herein.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 13, 1998, except for Note 17,
as to which the date is March 23, 1998.
35
<PAGE>
AU BON PAIN CO., INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Dec. 28, Dec. 27,
1996 1997
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 2,579 $ 853
Accounts receivable, less allowance of $104 and
$134 in 1996 and 1997, respectively................ 7,730 9,427
Inventories (Note 3)................................ 8,997 9,117
Prepaid expenses.................................... 2,353 775
Refundable income taxes............................. 2,117 596
Deferred income taxes (Note 11)..................... 488 600
-------- --------
Total current assets........................... 24,264 21,368
-------- --------
Property and equipment, net (Note 4)................. 121,733 112,232
-------- --------
Other assets:
Notes receivable (Note 5)........................... 2,291 4,743
Intangible assets, net of accumulated amortization
of $4,702 and $6,121 in 1996 and 1997, respectively 32,657 31,361
Deferred financing costs............................ 1,382 953
Deposits and other (Note 12)........................ 9,110 9,097
Deferred income taxes (Note 11)..................... 4,991 6,762
-------- --------
Total other assets............................. 50,431 52,916
-------- --------
Total assets................................... $196,428 $186,516
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 11,141 $ 7,071
Accrued expenses (Note 7)........................... 14,169 13,917
Current maturities of long-term debt (Note 8)....... 702 438
-------- --------
Total current liabilities...................... 26,012 21,426
Long-term debt (Note 8) ............................. 49,736 42,527
Convertible subordinated notes (Note 9).............. 30,000 30,000
-------- --------
Total liabilities.............................. 105,748 93,953
Commitments and contingencies (Notes 8 and 10)....... - -
Minority interest.................................... 624 289
Stockholders' equity (Note 13):
Preferred stock, $.0001 par value:
Class B, shares authorized 2,000,000; issued and
outstanding 20,000 and 0 in 1996 and 1997,
respectively...................................... - -
Common stock, $.0001 par value:
Class A, shares authorized 50,000,000; issued
and outstanding 10,066,671 and 10,187,042 in 1996
and 1997, respectively............................ 1 1
Class B, shares authorized 2,000,000; issued and
outstanding 1,647,354 and 1,610,038 convertible
to Class A, in 1996 and 1997, respectively........ - -
Additional paid-in capital.......................... 68,075 68,486
Retained earnings................................... 21,980 23,787
-------- --------
Total stockholders' equity..................... 90,056 92,274
-------- --------
Total liabilities and stockholders' equity..... $196,428 $186,516
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
36
<PAGE>
AU BON PAIN CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
for the fiscal years ended
----------------------------------
Dec. 30, Dec. 28, Dec. 27,
1995 1996 1997
-------- -------- --------
Revenues:
Restaurant sales................ $216,411 $225,625 $233,212
Franchise sales and other
revenues...................... 10,055 11,309 17,678
-------- -------- --------
226,466 236,934 250,890
Costs and expenses:
Cost of food and paper products. 77,250 85,631 90,385
Restaurant operating expenses:
Labor......................... 57,860 60,266 63,593
Occupancy..................... 26,709 28,529 28,514
Other......................... 27,592 26,569 27,430
-------- -------- --------
112,161 115,364 119,537
Depreciation and amortization... 14,879 16,195 16,861
General and administrative...... 12,818 14,979 16,418
Non-recurring charge (Note 6)... 8,500 4,435 -
-------- -------- --------
225,608 236,604 243,201
-------- -------- --------
Operating income.................. 858 330 7,689
Interest expense, net............. 3,363 5,140 7,204
Other expense, net (Notes 4, 12
and 15)......................... 2,016 2,513 212
Minority interest (income)........ (94) (40) (42)
-------- -------- --------
Income (loss) before benefit
from income taxes............... (4,427) (7,283) 315
Benefit from income
taxes (Note 11)................. (2,813) (2,918) (1,492)
-------- -------- --------
Net income (loss) ................ $ (1,614) $ (4,365) $ 1,807
======== ======== ========
Net income (loss) per common share
- basic $ (.14) $ (.37) $ .15
======== ======== ========
Net income (loss) per common share
- diluted $ (.14) $ (.37) $ .15
======== ======== ========
Weighted average number of shares
outstanding - basic.............. 11,621 11,705 11,766
======== ======== ========
Weighted average number of shares
outstanding - diluted............ 11,621 11,705 11,913
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
37
<PAGE>
AU BON PAIN CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
for the fiscal years ended
----------------------------------
Dec. 30, Dec. 28, Dec. 27,
1995 1996 1997
-------- -------- --------
Cash flows from operations:
Net income (loss)................... $ (1,614) $ (4,365) $ 1,807
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization..... 14,879 16,195 16,861
Amortization of deferred
financing costs................. 77 308 619
Provision for losses on
accounts receivable............. 73 44 49
Minority interest................. (94) (40) (42)
Deferred income taxes............. (4,234) (430) (1,883)
Non-recurring charge.............. 7,770 4,435 -
Gain on sale of investment........ - - (930)
Gain on sale of property and
equipment....................... - - (986)
Loss on disposal of property and
equipment....................... 31 - 308
Changes in operating assets and
liabilities:
Accounts receivable............... 119 (1,178) (1,747)
Inventories....................... (1,779) (1,221) (294)
Prepaid expenses.................. (355) 343 1,514
Refundable income taxes........... 289 (1,423) 1,521
Accounts payable.................. (154) 820 (4,070)
Accrued expenses.................. 771 1,287 769
-------- -------- --------
Net cash provided by operating
activities.................... 15,779 14,775 13,496
-------- -------- --------
Cash flows from investing activities:
Additions to property and
equipment....................... (38,650) (17,062) (14,681)
Proceeds from sale of property
and equipment................... - - 6,044
Proceeds from sale of investment.. - - 2,000
Payments received on notes
receivable...................... 59 82 139
Increase in intangible assets..... (50) (73) (122)
Decrease (increase) in deposits
and other....................... 1,450 (4,321) (1,058)
Increase in notes receivable...... (951) (475) -
-------- -------- --------
Net cash used in investing
activities.................... (38,142) (21,849) (7,678)
-------- -------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
38
<PAGE>
for the fiscal years ended
---------------------------------
Dec. 30, Dec. 28, Dec. 27,
1995 1996 1997
-------- -------- --------
Cash flows from financing activities:
Exercise of employee stock
options......................... 241 184 168
Issuance of warrants.............. - 679 -
Proceeds from long-term debt
issuance........................ 115,418 87,561 57,530
Principal payments on
long-term debt.................. (87,713) (83,958) (65,003)
Proceeds from issuance of
common stock.................... 346 320 243
Increase in deferred
financing costs................. (152) (1,211) (189)
Decrease in minority interest..... (349) (342) (293)
-------- -------- --------
Net cash provided by (used
in) financing activities...... 27,791 3,233 (7,544)
Net increase (decrease) in cash
and cash equivalents................ 5,428 (3,841) (1,726)
Cash and cash equivalents, at
beginning of period................. 992 6,420 2,579
-------- -------- --------
Cash and cash equivalents, at
end of period....................... $ 6,420 $ 2,579 $ 853
======== ======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest..................... $ 4,097 $ 4,637 $ 6,602
Income taxes................. $ 1,543 $ 370 $ 700
Satisfaction of Notes Receivable
in exchange for PP&E......... $ - $ 356 $ -
Note received from sale of
property and equipment.......... $ - $ - $ 2,591
The accompanying notes are an integral part of the consolidated financial
statements.
39
<PAGE>
AU BON PAIN CO., INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the fiscal years ended
December 30, 1995, December 28, 1996 and December 27, 1997
(in thousands)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
$.0001 Par Value $.0001 Par Value
Class A Class B Class B Additional Total
------- ------- ------- Paid-In Retained Stockholders'
Shares Amount Shares Amount Shares Amount Capital Earnings Equity
------ ------ ------ ------ ------ ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Dec.
26, 1994 9,828 $1 1,732 $- 20 $- $66,204 $27,959 $94,164
Exercise of
employee
stock options 45 241 241
Income tax
benefit related
to stock option
plan 101 101
Issuance of
common stock 31 346 346
Conversions of
Class B to
Class A 25 (25)
Net loss (1,614) (1,614)
----- -- ----- -- -- -- ------- ------- -------
Balance, Dec.
30, 1995 9,929 $1 1,707 $- 20 $- $66,892 $26,345 $93,293
----- -- ----- -- -- -- ------- ------- -------
Exercise of
employee
stock options 30 147 147
Income tax
benefit related
to stock option
plan 37 37
Issuance of
common stock 48 320 320
Warrants issued
for debt
financing 679 679
Conversions of
Class B to
Class A 60 (60)
Net loss (4,365) (4,365)
------ -- ----- -- -- -- ------- ------- -------
Balance, Dec.
28, 1996 10,067 $1 1,647 $- 20 $- $68,075 $21,980 $90,056
------ -- ----- -- -- -- ------- ------- -------
Exercise of
employee
stock options 23 152 152
Income tax
benefit related
to stock option
plan 16 16
Issuance of
common stock 40 243 243
Conversions of
Class B to
Class A 37 (37)
Conversions of
preferred stock
to Class A
common stock 20 (20)
Net income 1,807 1,807
------ -- ----- -- -- -- ------- ------- -------
Balance, Dec.
27, 1997 10,187 $1 1,610 $- 0 $- $68,486 $23,787 $92,274
====== == ===== == == == ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
40
<PAGE>
AU BON PAIN CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Au Bon Pain Co., Inc. and its subsidiaries operate two retail bakery
cafe businesses and two franchising businesses under the concept names "Au Bon
Pain" and "Saint Louis Bread Company". Certain Saint Louis Bread Company stores
began operating under the name "Panera Bread" during 1997. Included in franchise
sales and other revenues are sales of product to franchisees and others of $7.4
million, $8.3 million and $11.7 million for the fiscal years ended December 30,
1995, December 28, 1996 and December 27,1997, respectively. Included in costs
and expenses are charges related to franchise sales of approximately $1.3
million, $1.9 million and $2.6 million for the fiscal years ended December 30,
1995, December 28, 1996 and December 27, 1997, respectively.
2. Summary of Accounting Policies
Principles of Consolidation
The consolidated statements include the accounts of Au Bon Pain Co.,
Inc., ABP Holdings, Inc., a wholly owned subsidiary, Saint Louis Bread Company,
Inc. ("Saint Louis Bread"), a wholly owned subsidiary, ABP Midwest
Manufacturing, a wholly owned subsidiary, and investments in joint ventures in
which a majority interest is held (the "Company"). All intercompany balances and
transactions have been eliminated.
Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain items in the prior year financial statements have been
reclassified to conform to current year presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity at
the time of purchase of three months or less to be cash equivalents.
41
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Upon retirement or sale, the
cost of assets disposed of and their related accumulated depreciation are
removed from the accounts. Any resulting gain or loss is credited or charged to
operations. Maintenance and repairs are charged to expense when incurred, while
betterments are capitalized. Depreciation is computed over the estimated useful
lives of the assets using the straight-line method. Leasehold improvements are
amortized over the terms of the leases (including available option periods) or
over their useful lives, whichever is shorter. The estimated useful lives used
for financial statement purposes are:
Machinery and equipment................. 3-10 years
Furniture and fixtures.................. 3-10 years
Leasehold improvements.................. 10-23 years
Signs................................... 10 years
Interest is capitalized in connection with the construction of new
locations or facilities. The capitalized interest is recorded as part of the
asset to which it relates and is amortized over the asset's estimated useful
life. Capitalized interest amounted to $792,000, $581,000 and $70,780 in 1995,
1996 and 1997 respectively.
Intangible Assets
Intangible assets consist of goodwill arising from the excess cost over
the value of net assets of joint ventures, businesses and stores acquired, as
well as the original acquisition of the Company. Goodwill is amortized on a
straight-line basis over periods ranging from twenty-five to forty years.
Periodically management assesses, based on undiscounted cash flows, if there has
been a permanent impairment in the carrying value of its intangible assets and,
if so, the amount of any such impairment, by comparing anticipated discounted
future operating income from acquired businesses with the carrying value of the
related intangibles. In performing this analysis, management considers such
factors as current results, trends, future prospects and other economic factors.
Income Taxes
The provision for income taxes is determined in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under this method, deferred taxes are determined based on the
difference between the financial statements and the tax bases of assets and
liabilities using enacted income tax rates in effect in the years in which the
differences are expected to reverse.
42
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's temporary differences consist primarily of depreciation and
amortization and reserves.
Deferred Financing Costs
Costs incurred in connection with obtaining debt financing are
amortized over the terms of the related debt.
Franchise and Development Fees
Franchise fees are the result of sales of area development rights and
the sale of individual franchise locations to third parties, both domestically
and internationally. Fees from the sale of area development rights are 100%
recognized as revenue upon completion of all commitments related to the
agreements. Fees from the sale of individual franchise locations are 100%
recognized as revenue upon the commencement of franchise operations.
Capitalization of Certain Development Costs
The Company capitalizes certain expenses associated with the
development and construction of new store locations. Capitalized costs of $2.4
million and $2.7 million as of December 28, 1996 and December 27, 1997,
respectively, are recorded as part of the asset to which they relate and are
amortized over the asset's useful life.
Advertising Costs
Advertising costs are expensed when incurred.
Pre-Opening Costs
All pre-opening costs associated with the opening of new retail
locations are expensed when incurred.
Fiscal Year
The Company's fiscal year ends on the last Saturday in December. Fiscal
years for the consolidated financial statements included herein include 52 weeks
for the fiscal years ended December 30, 1995, December 28, 1996 and December 27,
1997.
Income Per Share Data
Earnings per share is based on the weighted average number of shares
outstanding during the period after consideration of the dilutive effect, if
any, for common stock equivalents, including stock options, warrants and
preferred stock. Statement of Financial Accounting Standards No. 128, "Earnings
Per Share," requires dual presentation of basic and diluted EPS. SFAS 128 has
been adopted in the Company's 1997 financial statements with comparable
disclosures for the prior year.
43
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fair Value of Financial Instruments
The carrying amount of the Company's long term debt, including current
maturities, approximates fair value because the interest rates on these
instruments change with market interest rates. The carrying amounts for accounts
receivable and accounts payable approximate their fair values due to the short
maturity of these instruments.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". This statement requires that changes in comprehensive
income be shown in a financial statement that is displayed with the same
prominence as other financial statements. The statement is effective for annual
periods beginning after December 15, 1997 and the Company will adopt its
provisions in fiscal 1998. Reclassifications for earlier periods is required for
comprehensive purposes. Management does not expect the statement to have a
material impact on its financial position or results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information," which changes the manner in which
public companies report information about their operating segments. SFAS No. 131
which is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers, and the
geographic locations in which the entity holds assets and reports revenues.
Management is currently evaluating the effects of this change on its reporting
of segment information. The company will adopt SFAS No. 131 for its fiscal year
ending December 26, 1998.
3. Inventories
Inventories consist of the following (in thousands):
December 28, December 27,
1996 1997
------------ ------------
Production....................... $ 3,071 $ 3,389
Retail stores.................... 1,762 1,680
Paper goods...................... 456 392
Smallwares....................... 3,161 3,008
Other............................ 547 648
-------- --------
$ 8,997 $ 9,117
======== ========
44
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Property and Equipment
Major classes of property and equipment consist of the following (in
thousands):
December 28, December 27,
1996 1997
------------ ------------
Leasehold improvements........... $ 91,161 $101,619
Machinery and equipment.......... 59,414 63,319
Furniture and fixtures........... 19,063 18,603
Construction in progress......... 19,585 1,083
Signage.......................... 3,634 3,515
-------- --------
192,857 188,139
Less accumulated depreciation
and amortization............... 71,124 75,907
-------- --------
Property and equipment, net...... $121,733 $112,232
======== ========
In the fourth quarter of 1997 the Company sold its Woburn, MA office
building for $4.9 million in cash, resulting in a gain of $660,000. The gain was
recognized as a component of other expense, net.
In the third quarter of 1997, the Company sold a Saint Louis Bread cafe
for $1.1 million in cash in conjunction with the execution of a franchise area
development agreement, resulting in a pre-tax gain of $325,000. The gain was
recognized as a component of other expense, net.
The Company recorded depreciation expense related to these assets of
$13.4 million, $14.7 million and $15.4 million in 1995, 1996 and 1997,
respectively.
5. Notes Receivable
Notes receivable relate to the sale of certain retail locations and to
the funding for the opening of new locations of a franchisee. In the third
quarter of fiscal 1997 the Company franchised 11 of its existing ABP stores in
the Philadelphia market to ABP Delaware Valley LLC. As part of the sale the
Company received a note receivable in the amount of $2.6 million which bears
interest at the rate of 8.25% per annum. There was no gain or loss recognized on
the transaction. The note requires monthly principal and interest payments of
$28,765 commencing in November 1997 which reflect an interest rate of 6.00%. The
difference of 2.25% interest shall accrue with respect to the outstanding
principal amount of this note. Commencing November 4, 1999, ABP Delaware Valley
LLC will make the scheduled payment plus any accrued interest until it is paid
in full. The note matures August 11, 2007.
In addition, the Company holds five additional notes receivable with
two other franchisees with an outstanding principal balance of $2.2 million at
December 27, 1997. These notes bear interest at between 8.00% and 9.25%. Two of
these notes require monthly payments while the remaining three notes require
payments of interest with a balloon payment of $1.4 million due in 2004. The
notes mature between 2003 and 2004.
45
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Non-recurring Charges
During the third quarter of fiscal 1996, the Company recorded a
non-recurring charge of $4.4 million principally to reflect a write-down under
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for the Long-Lived Assets to be Disposed
of". SFAS 121, adopted at the beginning of fiscal year 1996, establishes
accounting standards for recognizing and measuring the impairment of long-lived
assets and requires reducing the carrying amount of any impaired asset to fair
value. The charge was taken as a result of continued less than expected
performance results at certain Au Bon Pain restaurants. The $4.4 million
non-cash charge included a $1.4 million goodwill write-down, a $0.6 million
fixed asset write-down and a $1.4 million write-down of an office building held
for resale. The charge represented a reduction of the carrying amounts of the
assets to their estimated fair values as determined by using discounted
estimated future cash flows. In addition, the $4.4 million charge included a
$1.0 million charge to write-down the book value of six restaurants whose leases
expired in 1997 and which were not renewed. For the fifty-two weeks ended
December 28, 1996 and December 27, 1997 the restaurants included in the reserve
had sales of $3,096,000 and $1,559,000, respectively and a pre-tax loss of
$578,000 and $313,000, respectively.
During the third quarter of fiscal 1995, the Company recorded a
non-recurring pre-tax charge of $8.5 million principally to cover the expected
costs of closing certain under-performing restaurants. The components of the
non-recurring charge included cash costs of approximately $2.1 million for lease
obligations, professional and consulting services, employee relocation and
termination costs and non-cash charges of approximately $6.4 million related to
fixed asset disposals. The store closures were completed in fiscal 1996 for a
total cost of approximately $221,000. For the fifty-two weeks ended December 28,
1996 and December 27, 1997 the stores included in the reserve had sales of
$4,247,000 and $0, respectively and a pre-tax loss of $946,000 and $209,000,
respectively.
7. Accrued Expenses
Accrued expenses consist of the following (in thousands):
December 28, December 27,
1996 1997
------------ ------------
Accrued insurance.................... $ 1,310 $ 1,384
Rent................................. 3,503 3,799
Payroll and related taxes............ 2,554 2,182
Interest............................. 1,319 1,390
Other................................ 4,649 $ 5,162
------- -------
$13,335 $13,917
======= =======
46
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Long-term Debt
Long-term debt consists of the following (in thousands):
December 28, December 27,
1996 1997
------------ ------------
Revolving credit line at prime + .5%
(9.00% at December 27, 1997)......... $22,000 $18,326
Term loan - variable rate................ 3,533 -
Industrial development bond for
Mexico, Missouri plant at weekly
floating rate (4.25% at
December 27, 1997)................... 8,300 7,900
Loan with Cigna Insurance at prime less
.75% (7.75% at December 27, 1997)..... 2,000 2,000
Term loan at 7.0% payable in
annual installments of $50,000
including interest, due January
2001................................. 205 169
Senior Subordinated Debenture (13.00%
at December 27, 1997)................ 14,400 14,570
------- -------
Total debt............................. 50,438 42,965
Less current maturities................ 702 438
------- -------
Total long-term debt................... $49,736 $42,527
======= =======
As of both December 28, 1996 and December 27, 1997, the Company had a
$28 million unsecured revolving line of credit. The revolving credit agreement
contains restrictions relating to future indebtedness, liens, investments,
distributions, the merger, acquisition or sale of assets and certain leasing
transactions. The agreement also requires the maintenance of certain financial
ratios and covenants, the most restrictive being a debt to net worth ratio.
There is a fee of 3/8% of the unused portion of the revolving line of credit.
Available unused borrowings totaled approximately $5.1 million at December 28,
1996 and $8.5 million at December 27, 1997. At December 28, 1996 and December
27, 1997 the Company had outstanding letters of credit against the revolving
line of credit aggregating $0.9 million and $1.2 million, respectively. Interest
is calculated on the $3.5 million term loan at the lower of prime plus .5% or
LIBOR plus an amount ranging from 1.25% to 3.0% depending on certain financial
tests. Interest-only payments are due under the revolving credit line monthly,
in arrears, with principal balance payable at maturity September 30, 1999.
In March 1995, the Company signed a note for the purpose of purchasing
a building in Woburn, MA. The Company had originally planned to move their
corporate offices to this location. Principal and interest on the note were paid
quarterly, with interest being calculated based on the applicable Eurodollar
rate plus .75%. Under the term loan, the Company had the right, at its election,
to repay the outstanding amount as a whole or in part, at any time without
penalty or premium. The Company sold the building in December of 1997 and
retired the note which had a balance of $3.2 million.
47
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In July, 1995 the Company obtained an industrial development bond
issued by the City of Mexico, Missouri, secured by a $8.7 million letter of
credit with a commercial bank. The bond matures in July, 2000 and interest is
payable monthly at a weekly floating rate, which was 4.25% on December 27, 1997.
On July 24, 1996, the Company issued $15 million senior subordinated
debentures maturing in July, 2000. The debentures accrue interest at varying
fixed rates over the four year term, ranging from 11.25% to 14.0%. In connection
with the private placement, warrants with an exercise price of $5.62 per share
were issued to purchase between 400,000 and 580,000 shares of the Company's
Class A Common Stock, depending on the term which the debentures remain
outstanding and certain future events. At December 27, 1997, 400,000 warrants
were issued and outstanding, all of which were vested.
The Company has recognized interest expense of $3.4 million, $5.1
million and $7.2 million as of December 30, 1995, December 28, 1996, and
December 27, 1997, respectively.
Maturities of debt outstanding at December 27, 1997 are as follows (in
thousands):
1998........................... $ 438
1999........................... 20,867
2000........................... 15,013
2001........................... 447
2002........................... 500
Thereafter..................... 5,700
-------
$42,965
=======
9. Convertible Subordinated Notes
In December 1993, the Company issued $30.0 million of its unsecured
4.75% Convertible Subordinated Notes due 2001 ("1993 Notes"). The 1993 Notes are
convertible at the holders' option into shares of the Company's Class A Common
Stock at $25.50 per share. In December 1997, the Company could have, at its
option, redeemed all or a part of the outstanding 1993 Notes upon payment of a
premium. The Company did not redeem all or part of the outstanding notes. The
note agreement requires the Company to maintain minimum permanent capital, as
therein defined.
10. Commitments
The Company is obligated under noncancelable operating leases for a
production facility, a commissary and retail stores. Lease terms are generally
for ten years with renewal options at certain locations and generally require
the Company to pay a proportionate share of real estate taxes, insurance, common
area and other operating costs. Substantially all store leases provide for
contingent rental payments based on sales in excess of specified amounts.
48
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Aggregate minimum requirements under these leases are, as of December
27, 1997, approximately as follows (in thousands):
1998........................... $ 20,047
1999........................... 18,473
2000........................... 17,217
2001........................... 15,010
2002........................... 12,914
Thereafter..................... 40,907
--------
$124,568
========
Rental expense under long-term leases was approximately $22.3 million,
$29.3 million and $24.5 million in 1995, 1996 and 1997, respectively, which
included contingent rentals of approximately $2.9 million, $3.0 million and $3.0
million, respectively.
11. Income Taxes Payable
The benefit from income taxes in the consolidated statements of
operations is comprised of the following (in thousands):
December 30, December 28, December 27,
1995 1996 1997
------------ ------------ ------------
Current:
Federal............... $ 1,202 $(1,650) $ 259
State................. 219 (838) 132
------- ------- -------
1,421 (2,488) 391
------- ------- -------
Deferred:
Federal............... (3,597) (365) (1,433)
State................. (637) (65) (450)
------- ------- -------
(4,234) (430) (1,883)
------- ------- -------
Total benefit from
income taxes.......... $(2,813) $(2,918) $(1,492)
======= ======= =======
A reconciliation of the statutory federal income tax rate and the
effective tax rate as a percentage of pretax income is as follows:
1995 1996 1997
------ ------ ------
Statutory rate (benefit)........... (34.0)% (34.0)% 34.0%
State income taxes, net of
federal tax benefit.............. (4.0) 2.2 (432.8)
Utilization of tax credits......... (2.8) - -
Charitable contributions........... (4.0) (3.7) (89.9)
Company-owned Life Insurance
(See Note 12)...................... (28.8) (15.4) (451.0)
Non-deductible goodwill and meals
and entertainment................ 5.7 9.1 51.0
Other, net......................... 4.3 1.8 (.4)
Change in valuation allowance...... - - 415.4
----- ----- ------
(63.6)% (40.0)% (473.7)%
===== ===== ======
49
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The tax effects of the significant temporary differences which comprise
the deferred tax assets are as follows (in thousands):
1996 1997
-------- ------
Current assets:
Receivables Reserve............. $ 42 $ 56
Accrued Expenses................ 368 544
Other reserves................... 78 -
----- ------
488 600
Non-current assets/liabilities:
Property, plant and equipment.... 799 443
Accrued expenses................. 1,073 1,135
Goodwill......................... (1,325) (1,648)
Tax credit carried forward....... 2,862 3,368
Net operating loss carried
forward........................ 1,363 4,484
Charitable contribution carried
forward ....................... 219 296
Other reserves................... - (8)
------ ------
4,991 8,070
Total Deferred Tax Asset....... 5,479 8,670
Valuation Allowance............ - (1,308)
------ ------
Total net deferred tax asset....... $5,479 $7,362
====== ======
A valuation allowance is provided to reduce the deferred tax assets to
a level which, more likely than not, will be realized. The valuation allowance
is primarily attributable to the potential expiration of charitable contribution
deduction carryforwards and certain state net operating loss carryforwards. The
Company estimates that after filing its federal income tax returns for the year
ended December 27, 1997, it will have net operating losses of $5,844,000 which
can be carried forward from thirteen to fifteen years to offset Federal taxable
income. The Company also estimates that after filing its state income tax
returns for the year ended December 27, 1997 it will have state net operating
losses of $13,142,000 which can be carried forward from three to five years and
$20,693,000 which can be carried forward from thirteen to fifteen years to
offset state taxable income. The Company has Federal jobs tax credit
carryforwards of approximately $594,000 which expire in twelve to thirteen
years. In addition, the Company has Federal alternative minimum tax credit
carryforwards of approximately $2,499,000 which are available to reduce future
regular Federal income taxes over an indefinite period. The Company reevaluates
the positive and negative evidence impacting the realizability of its deferred
income tax assets on an annual basis.
50
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Deposits and Other
During fiscal 1997, the Company established a $4.3 million deposit with
its distributor. This financial arrangement allows the Company to receive lower
distribution costs. The savings exceed the carrying value of the deposit. The
deposit is flexible and the Company may at times decrease the amount on deposit,
at its discretion.
In the third quarter of 1997, the Company sold its interest in Peet's
Coffee and Teas, Incorporated back to Peet's for $2 million in cash, resulting
in a pre-tax gain of $930,000. The gain was recognized as a component of other
expense, net.
During fiscal year 1994, the Company established a company-owned life
insurance program ("COLI") covering a substantial portion of its employees. At
December 27, 1997, the cash surrender value and prepaid premiums of $75.9
million and the insurance policy loans of $74.8 million were netted and included
in other assets on the consolidated balance sheet. The loans are collateralized
by the cash values of the underlying life insurance policies and require
interest payments at a rate of 10.3%. Tax law changes adopted as part of the
Health Insurance Portability and Accountability Act significantly reduced the
level of tax benefits recognized under the Company's COLI program in the third
quarter of 1996. The Company included $.5 million of expenses in other (income)
expense, net, relating to COLI in 1997.
13. Stockholders' Equity
Class B Preferred Stock
In April 1994, the Company issued 20,000 shares of Class B Preferred
Stock (Series 1) as part of the ABP Midwest acquisition. In 1997 these shares
were converted to Class A Common Stock.
Common Stock
Each share of Class B Common Stock has the same dividend and
liquidation rights as each share of Class A Common Stock. The holders of Class B
Common Stock are entitled to three votes for each share owned. The holders of
Class A Common Stock are entitled to one vote for each share owned. Each share
of Class B Common Stock is convertible, at the shareholder's option, into Class
A Common Stock on a one-for-one basis. The Company had reserved at December 27,
1997, 7,589,719 shares of its Class A Common Stock for issuance upon conversion
of Class B Common Stock and exercise of awards granted under the Company's 1992
Equity Incentive Plan, Formula Stock Option Plan for Independent Directors and
conversion of the 1993 Notes (see Note 9).
51
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Registration Rights
Certain holders of Class A and Class B Common Stock, pursuant to stock
subscription agreements, can require the Company, under certain circumstances,
to register their shares under the Securities Act of 1933 or have included in
certain registrations all or part of such shares, at the Company's expense.
1992 Equity Incentive Plan
In May 1992, the Company adopted its Equity Incentive Plan ("Equity
Plan") to replace its Non-Qualified Incentive Stock Option Plan. Under the
Equity Plan, a total of 950,000 shares of Class A Common Stock was initially
reserved for awards under the Equity Plan. The Equity Plan was amended by the
Board of Directors and the stockholders in May 1994 and June 1997 to increase
the number of shares available thereunder from 950,000 to 2,500,000, and from
2,500,000 to 4,300,000 respectively. Awards under the Equity Plan can be in the
form of stock options (both qualified and non-qualified), stock appreciation
rights, performance shares, restricted stock or stock units.
Activity under the Equity Plan and its predecessor is summarized below:
Weighted Average
Shares Exercise Price
---------- ----------------
Outstanding at December 31, 1994 1,407,313 $18.50
Granted....................... 1,543,052 $ 7.47
Exercised..................... (45,425) $ 5.30
Canceled...................... (1,473,503) $17.88
---------- ------
Outstanding at December 30, 1995 1,431,437 $ 7.32
Granted....................... 742,345 $ 7.67
Exercised..................... (30,200) $ 4.87
Canceled...................... (211,548) $ 7.92
---------- ------
Outstanding at December 28, 1996 1,932,034 $ 7.42
Granted....................... 1,226,169 $ 7.49
Exercised..................... (23,148) $ 6.56
Canceled...................... (143,537) $ 8.05
---------- ------
Outstanding at December 27, 1997 2,991,518 $ 7.44
========== ======
Options vest over a five year period and must be exercised within ten
years from the date of the grant. Of the options at December 27, 1997, 1,168,134
were vested and exercisable.
Formula Stock Option Plan for Independent Directors
On January 27, 1994, the Company's Board of Directors authorized the
Formula Stock Option Plan for Independent Directors, as defined in the
agreement. This plan authorized a one-time grant of an option to purchase 10,000
shares of the Company's Class A Common Stock at its closing price on January 26,
1994. The plan also allows for independent
52
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
directors elected after that time to receive a similar option at the closing
price for the day immediately preceding the individual's election to the board.
Each independent director who is first elected as such after the
effective date of the Directors' Plan shall receive, as of the date he or she is
so elected, a one-time grant of an option to purchase 5,000 shares of Class A
Common Stock at a price per share equal to the closing price of the Class A
Common Stock as reported by the NASDAQ/National Market System for the trading
day immediately preceding the date of the person's election to the board.
In addition, all independent directors serving in such capacity as of
the last day of each fiscal year commencing with the fiscal year ending December
31, 1994 receive an option to purchase 5,000 shares of Class A Common Stock at
the closing price for the prior day.
Each option granted is fully vested at the grant date, and is
exercisable, either in whole or in part, for 10 years following the grant date.
The Company has granted 113,248 options under this plan as of December 27, 1997.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation", which is effective for the Company's financial
statements for fiscal years beginning after December 15, 1995. SFAS 123 allows
companies to either account for stock-based compensation under the new
provisions of SFAS 123 or under the provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", but
requires pro-forma disclosure in the footnotes to the financial statements as if
the measurement provisions of SFAS 123 had been adopted. The Company has elected
the disclosure-only alternative and, accordingly, no compensation costs have
been recognized for the stock option plans. Had compensation costs for the
Company's stock option plans been determined based on the fair value at the
grant date for awards in 1995 and 1996 consistent with the provisions of SFAS
123, the Company's net income (loss) for the years ended December 28, 1996 and
December 27, 1997 would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1995 1996 1997
------------------------- ------------------------- -------------------------
Net Loss Net Loss Net Loss Net Loss Net Income Net Income
(in thousands) Per Share (in thousands) Per Share (in thousands) Per Share
<S> <C> <C> <C> <C> <C> <C>
As
Reported $(1,614) $(.14) $(4,365) $(.37) $1,807 $.15
Pro
Forma $(1,819) $(.16) $(4,965) $(.42) $ 953 $.08
</TABLE>
53
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The effects of applying SFAS 123 in this pro-forma disclosure are not
likely to be representative of the effects on reported net income for future
years. SFAS 123 does not apply to awards prior to 1995 and additional awards in
future years are anticipated.
The fair value of the options granted during 1995, 1996 and 1997 is
$3.20 per share, $3.46 per share and $3.69 per share, respectively, on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions: dividend yield 0%, volatility of 35% in 1995 and 1996 and 40% in
1997, risk-free interest rate of 6.14% in 1995, 5.99% in 1996 and 6.38% in 1997,
and an expected life of 6 years.
The following table summarizes information concerning currently
outstanding and exercisable options:
Options Options
Outstanding Exercisable
-------------------------------- ----------------------
Weighted
Average
Range of Remaining Weighted Weighted
Exercise Number Contractual Average Number Average
Price Outstanding Life Price Exercisable Price
- ------------ ----------- ----------- -------- ----------- --------
$ 4.50- 6.75 259,013 6.13 $ 6.16 141,780 $ 6.04
$ 6.75-10.13 2,711,240 8.20 $ 7.51 1,020,003 $ 7.32
$10.13-15.19 20,089 8.36 $13.07 5,812 $12.91
$15.19-21.25 1,176 6.92 $21.25 539 $23.16
--------- ---- ------ --------- ------
2,991,518 7.93 $ 7.44 1,168,134 $ 7.20
1992 Employee Stock Purchase Plan
In May 1992, the Company adopted its 1992 Employee Stock Purchase Plan
("1992 Purchase Plan") to replace its Employee Stock Purchase Plan. The 1992
Purchase Plan was amended in June 1997 by the Board of Directors and
Stockholders to increase the number of shares of Class A Common Stock reserved
for issuance from 150,000 to 350,000. The 1992 Purchase Plan gives eligible
employees the option to purchase Class A Common Stock (total purchases in a year
may not exceed 10% of an employee's prior year compensation) at 85% of the fair
market value of the Class A Common Stock at the date of purchase.
14. Employee Benefit Plans
Employee Savings Plan
The Au Bon Pain Employee 401(k) Plan ("Savings Plan") was adopted by
the Company in 1991 under Section 401(k) of the Internal Revenue Code of 1986,
as amended. All employees of the Company, including executive officers, are
eligible to participate in the Savings Plan. A participating employee may elect
to defer on a pre-tax basis up to 15% of his or her salary. This amount is
contributed to the Savings Plan. All amounts vest immediately and are invested
in various funds as directed by the participant. The full amount in a
participant's account will be distributed to a participant upon termination of
employment, retirement,
54
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
disability or death. The Company does not currently contribute to the Savings
Plan.
The Saint Louis Bread Company Employee 401(k) Plan ("Saint Louis Bread
Savings Plan") adopted by the former Saint Louis Bread Company in 1993 under
Section 401(k) of the Internal Revenue Code of 1986, as amended. In 1997 the
"Saint Louis Bread Savings Plan" was merged into the Au Bon Pain "Savings Plan".
Plan participants of the "Saint Louis Bread Savings Plan" retained the matching
contributions made through 1996 with a vesting schedule of seven years. There
has been no further matching as of December 27, 1997.
15. Litigation Settlement
During the third quarter of 1997, the Company entered into a definitive
agreement to settle a lawsuit filed by a former vendor of the Company. The
Company recognized a charge of $675,000 in the third quarter of 1997 as a
component of other expense(income), net, to cover the settlement and other
expenses incurred in connection therewith.
16. Net Income (Loss) Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
For the fiscal years ended
---------------------------------------
Dec. 30, Dec. 28, Dec. 27,
1995 1996 1997
-------- -------- --------
Net income (loss) used in net
income (loss) per common share
- basic $ (1,614) $ (4,365) $ 1,807
Net income (loss) used in net
income (loss) per common share
- diluted $ (1,614) $ (4,365) $ 1,807
Weighted average number of
shares outstanding - basic 11,621 11,705 11,766
Effect of dilutive securities:
Employee stock options -- -- 42
Stock warrants -- -- 105
-------- -------- --------
Weighted average number of shares
outstanding - diluted 11,621 11,705 11,913
Net income (loss) per common
share - basic $ (0.14) $ (0.37) $ 0.15
Net income (loss) per common
share - diluted $ (0.14) $ (0.37) $ 0.15
During 1995, 1996 and 1997, options to purchase 1,176,000 shares of
common stock at $25.50 per share were outstanding in conjunction with the
55
<PAGE>
AU BON PAIN CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
issuance of $30 million of convertible subordinated notes (see Note 9). These
shares were not included in the computation of diluted earnings per share for
the fiscal years ended December 30, 1995, December 28, 1996 or December 27, 1997
because the addition of interest expense, after the effect of income taxes, of
$855,000 to net income (loss) would have been antidilutive.
During 1995 and 1996, options to purchase 422,080 and 248,450 shares of
common stock at an average price of $6.69 and $5.77 per share, respectively, and
warrants to purchase 0 and 96,000 shares of common stock at $5.62 per share were
outstanding but were not included in the computation of diluted earnings per
share for the fiscal years ended December 30, 1995 or December 28, 1996 because
the effect would have been antidilutive.
17. Subsequent Event
On March 23, 1998 the Company sold the Mexico, MO production facility
and its wholesale frozen dough business to Bunge Foods Corporation ("Bunge") for
approximately $13 million in cash. In conjunction with the sale, Au Bon Pain and
Saint Louis Bread entered into five year supply agreements with Bunge for the
supply of substantially all their frozen dough needs, excluding bagels, in their
domestic bakery cafes. The Company expects the supply agreements will result in
an improved operating margin of approximately .5% of total revenues, along with
reduced interest expense. The net proceeds of the sale were used to reduce the
$7.9 million outstanding for the Industrial Revenue Bond and $4.9 million for a
permanent reduction to the revolving credit line. This reduction of the
revolving credit line reduced the total commitment of the Banks in the Credit
Agreement so that the amount available under the revolving credit line decreased
to $23.1 million from $28 million (see Note 8). In addition, approximately $2
million of related receivables at December 27, 1997 will be used to further
reduce debt. The Company expects to recognize a pre-tax loss on the sale of the
facility of approximately $700,000 in the Company's results of operations for
the first quarter of 1998. There were no gains or losses associated with the
early retirement of the Industrial Revenue Bond or the partial repayment of the
revolving credit line.
56
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Information required by Part III (Items 10 through 13) is incorporated by
reference to the Company's definitive proxy statement for its 1998 annual
meeting of stockholders which will be filed with the Securities and Exchange
Commission on or before April 27, 1998. If for any reason such a statement is
not filed within such period, this Report will be appropriately amended.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS.
The following described consolidated financial statements of the
Company are included in this report:
Report of Independent Accountants.
Consolidated Balance Sheets at December 28, 1996 and December 27,
1997.
Consolidated Statements of Operations for the years ended December
30, 1995, December 28, 1996 and December 27, 1997.
Consolidated Statements of Cash Flows for the years ended December
30, 1995, December 28, 1996 and December 27, 1997.
Consolidated Statements of Stockholders' Equity for the years ended
December 30, 1995, December 28, 1996 and December 27, 1997.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENTS SCHEDULE.
-----------------------------
The following financial statement schedule for the Company is filed
herewith:
Schedule II - Valuations and Qualifying Accounts.
Schedule II
AU BON PAIN CO., INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
================================================================================
Balance at Balance
beginning at end
Description: of period Additions Deductions of period
- --------------------------------------------------------------------------------
Allowance for Doubtful Accounts
Fiscal Year ended Dec. 30, 1995 $ 76 $ 73 $89 $ 60
Fiscal Year ended Dec. 28, 1996 $ 60 $ 69 $25 $ 104
Fiscal Year ended Dec. 27, 1997 $104 $ 49 $19 $ 134
Valuation Allowance
Fiscal Year ended Dec. 27, 1997 $ 0 $1,308 $ 0 $1,308
57
<PAGE>
All other schedules are omitted because not applicable or not required
by Regulation S-X.
3. EXHIBITS.
--------
Exhibit
NUMBER DESCRIPTION
- ------- -----------
2.1 Asset Purchase Agreement by and among Au Bon Pain Co., Inc., ABP
Midwest Manufacturing Co., Inc. and Bunge Foods Corporation dated
as of February 11, 1998; Amendment to Asset Purchase Agreement,
dated as of March 23, 1998.*
3.1 Certificate of Incorporation of Registrant, as amended to June 2,
1991. Incorporated by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994.
3.1.1 Certificate of Amendment to Certificate of Incorporation, dated and
filed June 3, 1991. Incorporated by reference to Exhibit 3.1.1 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.
3.1.2 Certificate of Amendment to the Certificate of Incorporation filed
on June 2, 1994. Incorporated by reference to Exhibit 3.1.2 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994.
3.1.3 Certificate of Designations, Preferences and Rights of the Class B
Preferred Stock (Series 1), filed November 30, 1994. Incorporated
by reference to Exhibit 3.1.3 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994.
3.2 Bylaws of Registrant, as amended to date. Incorporated by reference
to Registrant's registration statement on Form S-1 (File No.
33-40153), Exhibit 3.2.
4.1.1 Amended and Restated Revolving Credit Agreement dated as of
February 13, 1998 among the Issuer, Saint Louis Bread Company,
Inc., ABP Midwest Manufacturing Co., Inc., BankBoston, N.A.,
USTrust and BankBoston N.A. as Agent.*
4.1.2 Amended and Restated Revolving Credit Note dated as of February 13,
1998 of the Issuer, Saint Louis Bread Company, Inc. and ABP Midwest
Manufacturing Co., Inc. in favor of BankBoston, N.A.*
4.1.3 Amended and Restated Revolving Credit Note dated as of February 13,
1998 of the Issuer, Saint Louis Bread Company, Inc. and ABP Midwest
Manufacturing Co., Inc. in favor of USTrust.*
4.2 Form of 4.75% Convertible Subordinated Note due 2001. Incorporated
by reference to Registrant's Form 8-K filed December 22, 1993,
Exhibit 4.
58
<PAGE>
4.3.1 Investment Agreement dated as of July 24, 1996 by and between Au
Bon Pain Co., Inc., Saint Louis Bread Company, Inc., ABP Midwest
Manufacturing Co., Inc., Allied Capital Corporation, Allied Capital
Corporation II, Capital Trust Investments, Ltd. Incorporated by
reference to Exhibit 4.3.1 of Registrant's Annual Report on Form
10-K for the year ended December 28, 1996.
4.3.2 Senior Subordinated Debenture dated as of July 24, 1996 in the
amount of $3,600,000 from Au Bon Pain Co., Inc., Saint Louis Bread
Company, Inc., and ABP Midwest Manufacturing Co., Inc. payable to
Allied Capital Corporation. Incorporated by reference to Exhibit
4.3.2 of Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.
4.3.3 Senior Subordinated Debenture dated as of July 24, 1996 in the
amount of $7,500,000 to Au Bon Pain Co., Inc., Saint Louis Bread
Company, Inc., and ABP Midwest Manufacturing Co., Inc. payable to
Capital Trust Investments, Ltd. Incorporated by reference to
Exhibit 4.3.3 of Registrant's Annual Report on Form 10-K for the
year ended December 28, 1996.
4.3.4 Senior Subordinated Debenture dated as of July 24, 1996 in the
amount of $3,900,000 from Au Bon Pain Co., Inc., Saint Louis Bread
Company, Inc., and ABP Midwest Manufacturing Co., Inc. payable to
Allied Capital Corporation II. Incorporated by reference to Exhibit
4.3.4 of Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.
10.1 Distribution Service Agreement between the Registrant and the SYGMA
Network, Inc., dated December 2, 1994. Incorporated by reference to
Exhibit 10.1.1 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.2 Lease from Economic Development and Industrial Corporation to the
Registrant, dated December 14, 1982, as amended August 1, 1984 and
July 1, 1985. Incorporated by reference to Registrant's
registration statement on Form S-1 (File No. 33-40153), Exhibit
10.8.
10.3.1 Registrant's Non-Qualified Stock Option Plan For Employees and
forms of option agreements thereunder. Incorporated by reference to
Registrant's registration statement on Form S-1 (File No.
33-40153), Exhibit 10.10.
10.3.2 Registrant's 1992 Equity Incentive Plan and form of non-qualified
option agreement thereunder. Incorporated by reference to
Registrant's registration statement on Form S-1 (File No.
33-40153), Exhibit 10.13.
59
<PAGE>
10.3.3 Registrant's 1992 Employee Stock Purchase Plan. Incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
year ended December 30, 1995.
10.3.4 Registrant's Formula Stock Option Plan for Independent Directors
and form of option agreement thereunder, as amended. Incorporated
by reference to the Registrant's Annual Report on Form 10-K for the
year ended December 30, 1995.
10.4 Amended and Restated Coffee Supply Agreement by and among
Registrant and Peet's Companies, Inc., Peet's Coffee and Tea, Inc.,
and Peet's Trademark Company, dated as of the 26th day of October,
1994. Incorporated by reference to Exhibit 10.8 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994.
10.5 Indenture of Trust dated as of July 1, 1995 by and between the
Industrial Development Authority of the City of Mexico, Missouri
and Mark Twain Bank, as Trustee. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December
30, 1995.
10.5.1 Loan Agreement dated as of July 1, 1995 by and between the
Industrial Development Authority of the City of Mexico, Missouri
and ABP Midwest Manufacturing Co., Inc. Incorporated by reference
to the Registrant's Annual Report on Form 10-K for the year ended
December 30, 1995.
10.5.2 Promissory Note issued by ABP Midwest Manufacturing Co., Inc. in
the face amount of $8,741,370. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December
30, 1995.
10.6.1 Employment Agreement between the Registrant and Richard Postle.
Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 30, 1995.+
10.6.2 Employment Agreement between the Registrant and Robert Taft.
Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 28, 1996.+
10.6.3 Employment Agreement between the Registrant and Maxwell Abbott.
Incorporated by reference to Exhibit 10.6.3 of the Registrant's
Annual Report on Form 10-K for the year ended December 28, 1996.+
10.6.4 Employment Letter between the Registrant and Samuel Yong.
Incorporated by reference to Exhibit 10.6.4 of the Registrant's
Annual Report on Form 10-K for the year ended December 28, 1996.+
60
<PAGE>
10.7.1 Form of Stock Purchase Warrant from Au Bon Pain Co., Inc. to Allied
Capital Corporation, Allied Capital Corporation II, and Capital
Trust Investments, Ltd. Incorporated by reference to Exhibit 10.7.1
of the Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.
10.7.2 Form of Contingent Stock Purchase Warrant from Au Bon Pain Co.,
Inc. to Allied Capital Corporation, Allied Capital Corporation II
and Capital Trust Investments, Ltd. Incorporated by reference to
Exhibit 10.7.2 of the Registrant's Annual Report on Form 10-K for
the year ended December 28, 1996.
10.7.3 Form of Stock Purchase Warrant from Au Bon Pain Co, Inc. to Princes
Gate Investors, L.P., Acorn Partnership I L.P., PG Investments
Limited, PGI Sweden AB and Gregor Von Open. Incorporated by
reference to Exhibit 10.7.3 of the Registrant's Annual Report on
Form 10-K for the year ended December 28, 1996.
10.7.4 Registration Rights Agreement dated as of July 24, 1996 among
Allied Capital Corporation, Allied Capital Corporation II, Capital
Trust Investments, Ltd., Princes Gate Investors, L.P., Acorn
Partnership I, L.P., PGI Investments Limited, PGI Sweden AB, Gregor
Von Open and Au Bon Pain Co., Inc., Incorporated by reference to
Exhibit 10.7.4 of the Registrant's Annual Report on Form 10-K for
the year ended December 28, 1996.
10.8.4 Form of Rights Agreement, dated as of October 21, 1996 between the
Registrant and State Street Bank and Trust Company. Incorporated by
reference to the Registrant's Registration Statement on Form 8-A
(File No. 000-19253).
10.9 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Saint Louis Bread Company, Inc. dated as of March
23, 1998.*
10.10 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Au Bon Pain Co., Inc. dated as of March 23, 1998.*
21 Registrant's Subsidiaries. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December
28, 1996.
61
<PAGE>
23.1 Consent of Coopers & Lybrand L.L.P.*
27 Financial Data Schedule.*
- --------------------------
* Filed herewith.
+ Management contract or compensatory plan required to be filed as an exhibit to
this Form 10-K pursuant to Item 14(c).
(b) Reports on Form 8-K.
During the last quarter of the fiscal year covered by this report, the
Company filed no report on Form 8-K.
62
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AU BON PAIN CO., INC.
By: /S/ LOUIS I. KANE
---------------------------------------------
Louis I. Kane
Co-Chairman
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons in
the capacities and on the date indicated:
Signature Title Date
- --------- ----- ----
/S/ LOUIS I. KANE Co-Chairman March 25, 1998
- --------------------------
Louis I. Kane
/S/ RONALD M. SHAICH Co-Chairman and March 25, 1998
- -------------------------- Principal Executive
Ronald M. Shaich Officer
/S/ FRANCIS W. HATCH Director March 25, 1998
- --------------------------
Francis W. Hatch
/s/ GEORGE E. KANE Director March 27, 1998
- --------------------------
George E. Kane
Director _________________
- --------------------------
James R. McManus
/S/ HENRY J. NASELLA Director March 25, 1998
- --------------------------
Henry J. Nasella
/S/ JOSEPH P. SHAICH Director March 25, 1998
- --------------------------
Joseph P. Shaich
/S/ ANTHONY J. CARROLL Senior Vice President, March 25, 1998
- --------------------------- Treasurer and Principal
Anthony J. Carroll Accounting Officer
63
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Item Page
- ------- ---- ----
<S> <C> <C>
2.1 Asset Purchase Agreement by and among Au Bon Pain Co., Inc., ABP
Midwest Manufacturing Co., Inc. and Bunge Foods Corporation dated
as of February 11, 1998; Amendment to Asset Purchase Agreement,
dated as of March 23, 1998.*
4.1.1 Amended and Restated Revolving Credit Agreement dated as of
February 13, 1998 among the Issuer, Saint Louis Bread Company,
Inc., ABP Midwest Manufacturing Co., Inc., BankBoston, N.A.,
USTrust and BankBoston N.A. as Agent.*
4.1.2 Amended and Restated Revolving Credit Note dated as of February 13,
1998 of the Issuer, Saint Louis Bread Company, Inc. and ABP Midwest
Manufacturing Co., Inc. in favor of BankBoston, N.A.*
4.1.3 Amended and Restated Revolving Credit Note dated as of February 13,
1998 of the Issuer, Saint Louis Bread Company, Inc. and ABP Midwest
Manufacturing Co., Inc. in favor of USTrust.*
10.9 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Saint Louis Bread Company, Inc. dated as of March
23, 1998.*
10.10 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Au Bon Pain Co., Inc. dated as of March 23, 1998.*
23.1 Consent of Coopers & Lybrand L.L.P.*
27 Financial Data Schedule.*
</TABLE>
Execution Copy
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the 11th day of February, 1998, by and between BUNGE FOODS CORPORATION, a
Delaware corporation with its executive offices at 3701 Algonquin Road, Suite
360, Rolling Meadows, Illinois 60008 ("Buyer"), AU BON PAIN CO., INC., a
Delaware Corporation with its executive offices at 19 Fid Kennedy Avenue,
Boston, Massachusetts 02210 ("Au Bon Pain"); and ABP MIDWEST MANUFACTURING CO.,
INC., a Delaware corporation with its executive offices at 19 Fid Kennedy
Avenue, Boston, Massachusetts 02210 ("Seller").
W I T N E S S E T H:
WHEREAS, Seller and its affiliate, Saint Louis Bread Company, Inc., a
Delaware corporation ("Saint Louis Bread"), are wholly-owned subsidiaries of Au
Bon Pain; and
WHEREAS, Seller is the owner and operator of a bakery products
manufacturing facility (as more specifically defined herein, the "Plant")
located in Mexico, Missouri, where it manufactures bakery products for
distribution to the bakery/cafe retail outlets owned and franchised by Au Bon
Pain and Saint Louis Bread, and for wholesale distribution into certain markets;
and
WHEREAS, Seller desires to sell, transfer, assign and convey to Buyer,
and Buyer desires to purchase from Seller, the Plant and certain of Seller's
assets associated with the Plant and the operation of Seller's wholesale
business at the Plant, for a cash payment, all upon and subject to the terms,
conditions, and covenants herein set forth; and
WHEREAS, as a material inducement to Seller and Au Bon Pain, and as a
condition (among others) for Seller's and Au Bon Pain's agreement to enter into
this Agreement and to sell the Plant and other assets related to the Plant and
the operation of Seller's wholesale business at the Plant upon such terms,
conditions and covenants, Buyer has agreed to enter into separate supply
agreements with each of Au Bon Pain and Saint Louis Bread providing for the
manufacture and sale of bakery products to Au Bon Pain, Saint Louis Bread, and
their respective franchise systems through their distributors (each a "Supply
Agreement"); and
WHEREAS, as a material inducement to Buyer, and as a condition (among
others) for Buyer's agreement to enter into this Agreement and to purchase the
Plant and other assets related to the Plant and the operation of Seller's
wholesale business at the Plant upon such terms, conditions and covenants, Au
Bon Pain and Saint Louis Bread have each agreed to enter into their respective
Supply Agreements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto, each of
them intending to be legally bound, hereby agree as follows:
<PAGE>
ARTICLE 1
TERMS OF SALE
1.1 Purchase and Sale of Assets. Subject to the terms and conditions
hereof, at the Closing (as defined in Section 8.1), Seller or Au Bon Pain, as
applicable, shall sell to Buyer, and Buyer shall purchase and accept delivery
and conveyance from Seller or Au Bon Pain, as applicable of, all of the
following assets of Seller or Au Bon Pain, as applicable (collectively, the
"Assets"):
(a) The real property and improvements located in the City of Mexico,
County of Audrain, Missouri, as more particularly described in Schedule 1.1(a),
together with all rights, privileges, rights of way and easements appurtenant to
such premises, whether recorded or unrecorded, whether currently open or used,
including, without limitation, rights to all minerals, oil or gas on or under
such premises, development rights, air rights, water rights and any easements,
rights of way or other interests in, on, or under any land, highway, alley,
street, passage or right of way abutting or adjoining such premises and all
fixtures, machinery, equipment and conduits providing fire protection, security,
heat, exhaust, ventilation, air conditioning, electricity, lighting, plumbing,
gas, sewer and water at the location of such premises and all use permits and
zoning variances (collectively, the "Real Property");
(b) All items of tangible personal property owned by Seller and located
at the Plant and used or usable in connection with the ownership or operation of
the Plant and the operation of Seller's wholesale business at the Plant,
including, without limitation, all improvements, furniture, furnishings,
fixtures, computer hardware and software, equipment, machinery, apparatus,
appliances, storage containers, tools, dies, jigs and related spare parts and
all supplies, together with all manuals, written warranties, licenses and other
similar documents relating thereto (collectively, the "Personal Property") (the
Personal Property and the Real Property are referred to herein collectively as
the "Plant");
(c) All inventory of raw materials, work-in-process, packaging,
shipping materials, finished goods and supplies related to the operation of the
Plant and the operation of Seller's business at the Plant (collectively,
"Inventories");
(d) All notes receivable and trade accounts receivable arising out of
the operation of Seller's wholesale business at the Plant, except as provided in
Section 1.2(a) (collectively, the "Receivables");
(e) The prepaid expenses, deposits and rights to credits or refunds
described on Schedule 1.1(e) (collectively, the "Prepaid Expenses");
(f) All right, title and interest in and to the leases related to the
operation of the Plant and the operation of Seller's wholesale business at the
Plant which are described on Schedule 1.1(f) (collectively, the "Leases");
(g) All right, title and interest in and to the contracts related to
the operation of the Plant and the operation of Seller's wholesale business at
the Plant which are described on Schedule 1.1(g) (collectively, the "Contracts",
together with the Leases, the "Assumed Contracts");
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<PAGE>
(h) The recipes, formulas, product specifications, operating standards,
and preparation procedures for those products marketed and sold by Seller in
connection with its wholesale business which are described on Schedule 1.1(h)
(collectively, the "Wholesale Products");
(i) All designs, models, prototypes, plans, specifications, engineering
and other drawings and everything related thereto; all sales materials,
catalogs, advertising, marketing and promotional materials; all customer and
supplier lists, mailing lists; and copies of sales records, account histories,
correspondence with customers, and records of purchases from correspondence with
suppliers (collectively, the "Intangibles");
(j) The Missouri Enterprise Zone Tax Incentives listed on Schedule
1.1(j) attached hereto, to the extent transferable by Buyer; and
(k) The wholesale business as a going concern, including all
transferable government permits, including the goodwill thereof.
1.2 Excluded Assets. Any provision of this Agreement to the contrary
notwithstanding, Buyer shall not purchase, and Seller shall not sell, any right,
title or interest of Seller in and to the following (collectively, the "Excluded
Assets"):
(a) Any accounts receivable due from any affiliate of Seller or from
any Distributor (as such term is defined in the Supply Agreement), or any
receivable that is in dispute or is more than 90 days past its due date at the
time of the closing;
(b) Any item of tangible personal property which consists of
copyrighted material, or bears any trademark or service mark, of Au Bon Pain or
Saint Louis Bread, including without limitation, any sales and marketing
material or packaging, unless such material is used as permitted in the Supply
Agreements or the Manufacturing Licenses entered into pursuant to (and as
defined in) Section 7.1;
(c) The assets which are specifically identified on Schedule 1.2(c);
and
(d) Any prepaid expense associated with any Assumed Contract which
Assumed Contract is not assigned to Buyer.
1.3 Purchase Price; Payment.
(a) The aggregate consideration for the sale of the Assets, and the
performance and fulfillment of the other terms, conditions and covenants of this
Agreement shall be the sum of the net book value of the Assets as reflected on
Seller's books and records on the Closing Date (as defined in Section 8.1) plus
One Million Dollars ($1,000,000) (the "Purchase Price"), and the assumption by
Buyer of the Assumed Liabilities (as defined in Section 1.5). The net book value
of the Assets shall be determined in accordance with generally accepted
accounting principles consistently applied ("GAAP"); provided, however, that (1)
notwithstanding Seller's practice of recording Inventories on its books, the net
book value of the Inventories shall be determined in
-3-
<PAGE>
accordance with GAAP with all costs fully absorbed; and (2) no reserve for
doubtful accounts shall be included in determining the net book value of the
Assets.
(b) Three (3) business days prior to the Closing Date, Seller shall
deliver to Buyer a statement of the estimated net book value of the Assets as of
the Closing Date (the "Estimated Net Book Value"). The Purchase Price shall be
paid in full by Buyer at the Closing based on the Estimated Net Book Value in
lawful currency of the United States of America by wire transfer of immediately
available funds to an account designated by a written notice from Seller to
Buyer which notice shall be delivered to Buyer not less than three (3) days
prior to the Closing.
(c) Within thirty (30) days after the Closing Date, Seller shall
prepare and deliver to Buyer a proposed final statement of the net book value of
the Assets as of the Closing Date (the "Final Net Book Value"). Buyer shall have
thirty (30) calendar days to review Seller's proposed statement of the Final Net
Book Value. If Buyer disputes any item included in such statement, it shall,
within such thirty (30) day period, provide Seller with a written notice
specifying in reasonable detail such item(s) of dispute. Buyer and Seller shall
attempt in good faith to resolve by mutual agreement the item(s) in dispute
within thirty (30) calendar days (the "Resolution Period") immediately following
the delivery of such written notice. If any of the item(s) in dispute are not
resolved within the Resolution Period, the parties shall submit the dispute(s)
for resolution to Arthur Andersen, LLP, or such other so-called "Big Six"
accounting firm mutually agreed upon by Buyer and Seller (the "Arbitrator"),
whose decision shall be final and binding on the parties, and when made, shall
be deemed to be an agreement between the parties on the issues so determined.
The expense of the Arbitrator shall be borne equally by the parties.
(d) If the Final Net Book Value, as finally determined pursuant to
Section 1.3(c), exceeds the Estimated Net Book Value, then Buyer shall pay
Seller the amount of such excess within five (5) business days after the date of
final determination. If the Final Net Book Value, as finally determined pursuant
to Section 1.3(c), is less than the Estimated Net Book Value, then Seller shall
pay, and Au Bon Pain shall cause Seller to pay, Buyer the amount of such
difference within five (5) business days after the date of final determination.
1.4 Apportionment of Taxes and Other Charges.
All normal and customarily apportioned items including without
limitation, real estate and personal property taxes and assessments, and utility
bills, shall be prorated between the parties as of the Closing Date.
1.5 Assumption of Certain Liabilities.
At the Closing and subject to the terms and conditions of this
Agreement, Buyer shall assume, pay or discharge the liabilities and obligations
of Seller under the Assumed Contracts and those specified on Schedule 1.5 (such
liabilities and obligations are referred to herein, collectively, as the
"Assumed Liabilities"). Except for the Assumed Liabilities, Buyer shall not
assume or be deemed to assume or become liable for, and Seller shall remain
liable for and hold Buyer harmless against, any other liabilities, debts,
contracts, commitments or obligations of Seller, whether the same are known or
unknown, liquidated or unliquidated, insured or uninsured, existing, contingent
upon future events or circumstances, accrued, funded, unfunded or otherwise.
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<PAGE>
1.6 Form of Conveyance.
(a) The Real Property shall be conveyed at the Closing in fee simple
absolute, by a good and sufficient general warranty deed (the "Deed"), to Buyer
and shall convey a good and clear record and marketable title to the Real
Property, free from all Liens, tenants and occupants from or on the Real
Property except for those matters listed on Schedule 1.6(a). The Deed shall be
in proper form for recording and shall be duly executed, acknowledged and
delivered by Seller, together with all necessary or applicable conveyance and
transfer tax forms and checks in payment of all conveyance and transfer taxes.
Acceptance and recording of the Deed at the Closing by Buyer shall constitute
satisfaction of the terms and conditions of this Section 1.6(a).
(b) All Assets not described in Section 1.6(a) shall be conveyed at the
Closing free of all Liens by a bill of sale and assignment (the "Bill of Sale")
in substantially the form attached hereto as Exhibit 1.6(b) to be delivered by
Seller to Buyer at Closing.
1.7 Tax Allocation.
For all federal, state and local tax purposes, the Purchase
Price shall be allocated among the various items in the manner indicated in
Schedule 1.7. Neither Seller nor Buyer shall file any Return (as defined in
Section 2.11) or report or take any position with any taxing agency or authority
that is inconsistent with the such allocation, except to the extent required by
a court of law or an appropriate taxing agency or authority in a determination
binding upon either such party; provided, however, that such party provides
reasonable written notice and opportunity to the other party, at such other
party's sole cost and expense, to contest and appeal such determination on
behalf of both parties, and such determination nevertheless becomes final.
1.8 Collection of Receivables.
(a) At the Closing, Seller shall deliver to Buyer a listing of all
Receivables (including debtor and aging information) reflected on the books and
records of Seller as of the Closing Date certified as true and accurate by an
authorized officer of Seller. From and after the Closing, Buyer shall have the
right and authority to collect for its own account all Receivables and to
endorse, until such Receivables may be reassigned to Seller pursuant to Section
1.8(b), the name of Seller on any checks or drafts received with respect to any
such Receivables, and Seller and Au Bon Pain each agrees to deliver promptly to
Buyer any payments received by Seller and Au Bon Pain, as the case may be, with
respect to the Receivables, and to instruct account debtors to forward payments
to Buyer. Buyer shall deliver promptly to Seller any payments received by Buyer
with respect to the receivables not purchased by Buyer. If any Receivable is to
be collected through a draw on a letter of credit or similar instrument issued
for the account of any customer, Seller shall cooperate with Buyer to assign all
of Seller's rights under such letter of credit or other instrument, where
permitted, or otherwise to ensure that Buyer obtains the benefit of the proceeds
of such letter of credit or other instrument.
(b) If Buyer has not received payment of any such Receivable within
ninety (90) calendar days of its due date, Seller will pay, and Au Bon Pain will
cause Seller to pay, to Buyer such uncollected amount on demand, but in no case
shall such demand be made later than one hundred ten (110) business days after
the Closing Date. Upon receipt of payment of any such Receivable from Seller,
Buyer shall assign to Seller any such Receivable for collection without
recourse.
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<PAGE>
Payments received by Buyer which are not designated as applicable to a
specific invoice shall be applied to unpaid invoices chronologically beginning
with payment of the oldest invoice first. Buyer shall use reasonable collection
efforts with respect to the Receivables after the Closing Date, consistent with
its collection practice for its accounts receivable generally, until the
uncollected Receivables are reassigned to Seller. Buyer shall deliver promptly
to Seller any payments received by Buyer with respect to any reassigned
Receivables.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Au Bon Pain represent and warrant jointly and severally to
Buyer that:
2.1 Organization and Good Standing.
(a) Seller is duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware with full corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. Seller is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, require such
qualification. Seller has all requisite power and authority to own, lease and
operate the Assets and to carry on the business at the Plant as currently
conducted.
(b) Au Bon Pain is duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware with full
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. ABP Midwest is a wholly-owned subsidiary of Au
Bon Pain. Au Bon Pain is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, require such qualification.
2.2 Execution and Delivery; No Conflicts.
(a) All consents, approvals, authorizations and orders necessary for
the execution, delivery and performance by Seller and Au Bon Pain of their
respective obligations hereunder, other than as described in Schedule 2.2(a),
have been obtained. This Agreement and each other agreement, instrument or other
document to which either or both of them are a party and which is required to be
executed by either or both of them hereunder (collectively, the "Other
Agreements") has been duly authorized by all necessary corporate action on the
part of Seller and Au Bon Pain and has been duly executed and delivered by
Seller and Au Bon Pain and constitutes the legal, valid and binding obligation
of Seller and Au Bon Pain enforceable against each of them in accordance with
its terms, except to the extent that (i) such enforcement is subject to or
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally; and (ii) the remedy of specific performance and
injunctive and other forms of equitable remedies is subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
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<PAGE>
(b) Upon receipt of the consents, approvals, authorizations and orders
referred to in Schedule 2.2(a), the execution, delivery and performance of this
Agreement and the Other Agreements by Seller and Au Bon Pain and the
consummation of the transactions contemplated hereby by Seller and Au Bon Pain
will not: (i) conflict with or result in a breach or violation of any term or
provision of, or (with or without notice or passage of time, or both) constitute
a default under, or otherwise give any person a basis for nonperformance under,
any indenture, mortgage, deed of trust, loan or credit agreement, lease, license
or other agreement or instrument to which Seller or Au Bon Pain is a party or by
which Seller or Au Bon Pain is bound or to which any of the Assets or Assumed
Contracts is subject; (ii) result in the violation of the provisions of the
Certificate of Incorporation or Bylaws of Seller or Au Bon Pain, in each case as
amended, or any judgment, order, writ, injunction or decree of any court or any
arbitrator having jurisdiction over Seller or Au Bon Pain or any of the Assets
or any applicable law or regulation; or (iii) result in the creation or
imposition of any Lien upon any of the Assets.
2.3 Title to Assets; Encumbrances.
(a) Seller or Au Bon Pain, as applicable, has good title to the
Personal Property, Inventories, Receivables, Prepaid Expenses, Wholesale
Products and Intangibles, and has valid leasehold interests and contract rights
as to any leased personal property covered by the Assumed Contracts, in each
case free and clear of all Liens (as hereinafter defined) except (i) as set
forth on Schedule 2.3(a); and (ii) for Permitted Liens (as hereinafter defined).
None of the Assets, whether owned or leased, is subject to any pending, or to
the knowledge of Seller or Au Bon Pain, threatened condemnation proceedings,
special assessments, charges, developer rights or tax deferred financing
districts. The term "Liens," as used in this Agreement, shall mean any and all
liens, mortgages, claims, options, conditional sales agreements, rights of first
refusal, security interests, pledges, deeds of trust, or other charges and
encumbrances. The term "Permitted Liens" as used in this Agreement, shall mean:
(i) liens for ad valorem real or personal property taxes, or assessments, the
payment for which are not yet due or are being contested in good faith by
appropriate proceedings which are disclosed on Schedule 2.3(a); (ii) liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carriers', laborers' and materialmen's and similar liens if the
obligations secured by such liens are not then delinquent or are being contested
in good faith by appropriate proceedings which are disclosed on Schedule 2.3(a).
(b) Schedule 2.3(b) sets forth a Property and Equipment Report of
Seller dated as of December 27, 1997. Except as disclosed on Schedule 2.3(b),
the items of Personal Property listed on Schedule 2.3(b) and the equipment
covered by the Leases are in normal operating condition, subject only to
reasonable wear and tear, and, to the best of Seller's and Au Bon Pain's
knowledge, are not in need of maintenance and repairs, except for ordinary and
routine maintenance and repairs.
(c) With respect to each of the Assumed Contracts: (i) each such
Assumed Contract is valid, existing and effective in accordance with its terms;
(ii) no act or event has occurred which, with notice or lapse of time, or both,
would constitute a default under such Assumed Contract by Seller or Au Bon Pain,
or, to the knowledge of Seller or Au Bon Pain, any other party; (iii) neither
Seller nor Au Bon Pain has given or received any notice of cancellation or
termination in connection with such Assumed Contract; (iv) except as set forth
on Schedule 2.3(c), each such Assumed Contract will not require consents of the
other parties thereto in order to be assigned to
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Buyer hereunder. True and complete copies of all Assumed Contracts shall be
provided to Buyer prior to the closing.
(d) Neither Seller nor Au Bon Pain has received notice of violation of,
and to the knowledge of Seller and Au Bon Pain, Seller or Au Bon Pain, as
applicable, is in compliance with all applicable material building, zoning, land
use or other similar statutes, laws, ordinances, regulations, permits, health
and safety codes or other requirements in respect of the Plant. There are no
outstanding requirements or recommendations by fire underwriters or rating
boards, any insurance companies or holders of mortgages or other security
interests that have been communicated to Seller or Au Bon Pain within the
current year or the last three (3) full calendar years requiring or recommending
any repairs or work to be performed with reference to the Plant.
(e) The Receivables are valid, existing and represent monies due Seller
as a result of transactions in the ordinary course of business and are for goods
sold or services rendered by Seller.
(f) The Inventories were acquired or produced and have been maintained
in the ordinary course of the business.
(g) Except as disclosed in Schedule 2.3(g): (i) Seller owns, or has the
sole and exclusive right to manufacture and sell, the Wholesale Products; (ii)
the consummation of the sale of the Assets and the other transactions
contemplated by this Agreement will not alter or impair any such rights; and
(iii) none of the Wholesale Products is the subject of a lawsuit or any other
proceeding, nor, within the current year or last three (3) full calendar years
of Seller, has any party challenged or, to the knowledge of Seller and Au Bon
Pain, threatened to challenge Seller's right to manufacture and sell the
Wholesale Products; and, to the knowledge of Seller and Au Bon Pain, there is no
basis for any such challenge.
(h) The Assets constitute all of the assets which Seller requires to
conduct the operation of the business at the Plant as currently conducted.
2.4 Litigation.
Except as set forth on Schedule 2.4: (i) there is no legal
action, suit, arbitration, claim, proceeding or governmental investigation
(whether federal, state, local or foreign) pending for which Seller has received
service of process or, to the best knowledge of Seller and Au Bon Pain,
threatened against Seller relating to the Assets, the operation of the wholesale
business or the products manufactured and sold by Seller; and (ii) there are no
decrees, injunctions or orders of any court, administrative or regulatory body,
arbitration panel or governmental agency outstanding or, to best of Seller's and
Au Bon Pain's knowledge threatened, against Seller relating to any aspect of its
business or any part of the Assets. With respect to any matter required to be
disclosed pursuant to this Section 2.4, there has been no reservation of rights
by any insurance carrier, and no such reservation is, to the knowledge of Seller
or Au Bon Pain, threatened, concerning the coverage of Seller.
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2.5 Permits, Licenses and Certificates.
Seller possesses, and is operating in material compliance
with, the licenses, permits and certificates described on Schedule 2.5 which are
necessary to conduct its business as currently conducted at the Plant (the
"Permits"). Each Permit has been lawfully and validly issued, and no proceeding
is pending or threatened, nor, to the best of Seller's and Au Bon Pain's
knowledge, does any basis therefor exist, looking toward the revocation,
suspension or limitation of any Permit. Neither Seller nor Au Bon Pain has
knowledge of any other material licenses, permits and certificates that are
necessary to conduct its business at the Plant and which Seller does not possess
and with which Seller is not operating in compliance. Except as set forth in
Schedule 2.5, the consummation of the transactions contemplated by this
Agreement will not result in the revocation, suspension or limitation of any
Permit and no Permit will require the consent of its issuing authority to or as
a result of the consummation of the transactions contemplated hereby.
2.6 Employees and Labor Matters.
Except as described in Schedule 2.6: (a) Seller is in
compliance with all federal, state, local and other applicable law respecting
employment and employment practices, terms and conditions of employment and
wages and hours; (b) there is no unfair labor practice, complaint, charge or
other matter against or involving Seller pending or, to the knowledge of Seller
and Au Bon Pain, threatened before any governmental authority; (c) there is no
labor strike, dispute, organizing effort, slow down, stoppage or other labor
difficulty pending, or, to the knowledge of Seller and Au Bon Pain, threatened,
against or affecting Seller; (d) no representation question exists respecting
employees at the Plant; (e) no grievance nor any arbitration proceeding arising
out of or under any collective bargaining agreement is pending, and no claim
therefor exists; and (f) there is no collective bargaining agreement with
respect to any employee at the Plant which is binding on Seller.
2.7 Environmental Matters.
Except as disclosed in Schedule 2.7:
(a) No Hazardous Materials (as defined below) are present on,
in or under any of the Assets other than in compliance with Environmental and
Safety Requirements (as defined below), and no threatened or actual release,
spill or discharge of any Hazardous Materials has occurred on, in or under any
of the Assets which would require reporting or remediation under any
Environmental and Safety Requirements;
(b) To Seller's and Au Bon Pain's knowledge, Seller is in
compliance with all applicable Environmental and Safety Requirements, and Seller
possesses all required permits, licenses, certifications and approvals relating
to the Assets under Environmental and Safety Requirements;
(c) Seller has not received notice of, any private,
administrative or judicial action, proceeding or inquiry, investigation or order
relating to compliance with, or obligations under, Environmental and Safety
Requirements;
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(d) To Seller's and Au Bon Pain's knowledge, there are no conditions
that would preclude the transfer from Seller to Buyer, or reissuance to Buyer,
of each permit required by Environmental and Safety Requirements to own and
operate the Assets or conduct business at the Plant after the Closing Date;
(e) To Seller's and Au Bon Pain's knowledge, there are no underground
or aboveground storage tanks which contain Hazardous Materials located on or at
any of the Assets. All tanks, storage vessels, storm systems or pipes which are
included in the Assets are in compliance with all applicable Environmental and
Safety Requirements;
(f) None of the Assets are listed in the National Priorities List of
the Comprehensive Environmental Response Compensation and Liability Information
System promulgated pursuant to CERCLA (as defined below), or similar state lists
and laws;
(g) To Seller's and Au Bon Pain's knowledge, none of the Assets have
been used to treat, store for more than ninety (90) days, or dispose of
materials which are or were regulated under RCRA (as defined below), nor been
subject to RCRA interim status, a RCRA permit, or a RCRA Part A or Part B permit
application, whether or not such application was subsequently withdrawn;
(h) To Seller's and Au Bon Pain's knowledge, there is no friable
asbestos or friable asbestos containing material at, on, in or under any of the
Assets;
(i) To Seller's and Au Bon Pain's knowledge, there are no
polychlorinated biphenyls ("PCBs") at, on, in, used, stored or disposed of on,
at, in or under any of the Assets;
(j) To Seller's and Au Bon Pain's knowledge, there are no nuclear
radiation devices at, used, stored or disposed of, at, on, in or under any of
the Assets; and
(k) Seller has notified Buyer of the location of, and has made
available to Buyer, all known material documents, records and information
relating to the environmental representations and warranties contained herein,
Environmental and Safety Requirements affecting any of the Assets and permits
required for any of the Assets by Environmental and Safety Requirements.
The term "Hazardous Materials" shall include: (A) hazardous
substances or hazardous wastes, as defined by the Environmental and Safety
Requirements; (B) petroleum, including without limitation, crude oil, or any
fraction thereof, which is liquid at standard conditions of temperature and
pressure; (C) any radioactive material, including, without limitation, any
source, special nuclear, or by-product material as defined in the Atomic Energy
Act; (D) asbestos in any form or condition; (E) PCBs; and (F) any other
material, substance or waste to which liability or standards of conduct may be
imposed under any Environmental and Safety Requirements.
The term "Environmental and Safety Requirements" shall mean,
individually and collectively, the requirements imposed by the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984 ("RCRA"), the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act ("CERCLA"), the Toxic Substances Control Act, the Safe
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Drinking Water Act, the Federal Water Pollution Control Act (the "Clean Water
Act"), the Clean Air Act, the Emergency Planning and Community Right-to-Know
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Noise Control
Act, the Radon Indoor Air Quality Research Act, and the National Environmental
Policy Act (Environmental Impact Statement), and any similar comparable Missouri
statutes and regulations, in each case, as amended; any state lien and superlien
and environmental clean-up statutes, with implementing rules and regulations,
and the Occupational Safety and Health Act of 1970, as amended.
2.8 Intentionally Omitted.
2.9 Fees, Expenses and Commissions.
Neither Seller nor Au Bon Pain has taken any action or has
entered into any agreement, understanding or other arrangement that would
obligate Seller or Buyer to pay any broker's or finder's fee or any other
similar fee or commission to any agent, broker, investment banker or other firm
or person in connection with any of the transactions contemplated by this
Agreement, except for Brent Baxter Enterprises, LLC and Peter J. Solomon Company
Limited, whose fees shall be the exclusive responsibility of Seller. Seller and
Au Bon Pain shall, jointly and severally, indemnify and hold Buyer harmless with
respect to any claim of any third party for such fee or commission claiming by,
through or under Seller.
2.10 Absence of Certain Changes or Events.
Since December 1, 1997 and except as disclosed on Schedule 2.10, there
has not been:
(a) Any material adverse change in or damage or loss to the Assets, or
the operations of Seller's wholesale business;
(b) Any increase in the compensation payable by Seller to any employee
of Seller other than routine increases made in the ordinary course of business
consistent with past practice, or any bonus, incentive compensation, or service
award, or other like benefit, granted, made or accrued, contingently or
otherwise, to or to the credit of any of such employee, or any adoption or
modification by Seller of any employee welfare, pension, retirement or similar
payment or arrangement;
(c) Any sale, assignment or transfer (including, without limitation,
the granting or permitting of any Lien) of any of the Assets other than in the
ordinary course of business or consistent with past practices;
(d) Any capital expenditure or commitment to make a capital
expenditure, in either case, in excess of Ten Thousand Dollars ($10,000)
(exclusive of expenditures for repair or maintenance of equipment in the
ordinary course of the business);
(e) Any cancellation, termination or amendment by Seller of any right
under the Assumed Contracts except for terminations in the ordinary course of
business;
(f) Any merger or consolidation of Seller into or with any corporation
or enterprise, or any action by Seller toward or effecting such a merger or
consolidation or a complete or partial
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liquidation or dissolution of Seller or any material portion of the Assets
(other than as contemplated by this Agreement);
(g) Any failure on the part of Seller to operate its wholesale business
in the ordinary course so as to preserve such business in all material respects,
including the services of its key employees and the goodwill of its suppliers,
customers and others having business relations with Seller; or
(h) Any agreement by or commitment of Seller to do or permit any of the
foregoing.
2.11 Taxes.
Notwithstanding anything in this Agreement to the contrary,
this Section 2.11 shall not apply with regard to any Tax or Taxes (as such terms
are defined below) to the extent that from and after the Closing, the Assets are
not subject to a lien for such Tax or Taxes, and Buyer or its affiliates are not
liable for such Tax or Taxes.
(a) Definitions. For purposes of this Agreement:
(i) The term "Code" shall mean the Internal Revenue Code
of 1986, as amended. All citations to the Code or to the regulations promulgated
thereunder shall include any amendments or any substitute or successor
provisions thereto.
(ii) The term "Returns" shall mean, collectively, all
reports, declarations, estimates, returns, information statements and similar
documents relating to, or required to be filed in respect of, any Taxes; and any
statements, returns, reports or similar documents required to be filed pursuant
to any similar income, excise or other tax provision of federal, state, local or
foreign law; and the term "Return" means any one of the foregoing Returns.
(iii) The term "Taxes" shall mean: (A) all net income,
gross income, gross receipts, sales, use, ad valorem, franchise, profits,
license, lease, service, service use, withholding, employment, payroll, excise,
severance, transfer, documentary, mortgage, registration, stamp, occupation,
environmental, premium, property, windfall, profits, customs, duties and other
taxes, fees, assessments or charges of any kind whatever, together with any
interest, penalties and other additions with respect thereto, imposed by any
federal, state, local or foreign government; and (B) any penalties, interest or
other additions to a Tax for the failure to collect, withhold or pay over any of
the foregoing, or to accurately file any Return; and the term "Tax" shall mean
any one of the foregoing Taxes. Notwithstanding the foregoing, however, when
used with reference to a specified person (for example and without limitation,
"Taxes of Seller"), the terms "Taxes" and "Tax" shall include only those amounts
for which such person is, or could become, liable in whole or part (including,
without limitation, any obligation in connection with a duty to collect,
withhold or pay over any Tax, any obligation to contribute to the payment of any
Taxes determined on a consolidated, combined or unitary basis, any liability as
a transferee, or any liability as a result of any express or implied obligation
to indemnify or pay the Tax obligations of another person).
(b) Returns Filed and Taxes Paid. (i) Seller has duly filed or
caused to be filed, on or before the due date thereof (including any valid
extensions), with the appropriate
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taxing authorities, all Returns that it is required to file; (ii) each such
Return (including any amendment thereto) is true, correct, and complete in all
material respects; (iii) all Taxes of Seller due with respect to, or shown to be
due on, each such Return (or amendment thereto) or subsequent assessment with
regard thereto, have been timely paid; (iv) there is no valid basis for the
assessment of any deficiency with regard to any such Return; and (v) there are
no extensions of time to file which are pending. No other Taxes of Seller are
due with respect to any taxable periods or portions of periods ending on or
before the Closing Date. There are no liens, attachments, or similar
encumbrances on any of the Assets with respect to any Taxes, other than liens
for Taxes of Seller that are not yet due and payable.
(c) Miscellaneous. Seller has collected or withheld all Taxes
that it is required to collect or withhold. None of the Assets (i) is property
which is required to be treated as being owned by any other person pursuant to
the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code; or (ii) directly or indirectly secures any debt, the interest on which is
tax exempt under Section 103(a) of the Code. The transactions contemplated by
this Agreement are not subject to the tax withholding provisions of Section 3406
of the Code, or of subchapter A of Chapter 3 of the Code, or of any other
comparable provision of law.
2.12. Insurance.
Seller's business and the Assets are insured under various
policies of general liability and other forms of insurance which, to the best of
Seller's and Au Bon Pain's knowledge, are in adequate amounts in relation to
Seller's business and the Assets. Each of such insurance policies is current and
in full force and effect and Seller has not received notice of default under or
intended cancellation or nonrenewal of any such policies. Seller and Au Bon Pain
will keep all such insurance policies in effect through the Possession Time.
Seller has not been refused any insurance by an insurance carrier to which it
has applied for insurance.
2.13 Employment Relationships.
At any time after the date of this Agreement, Seller will make
available to Buyer upon demand a true and correct roster of Seller's employees
at the Plant as of the date of this Agreement, setting forth each such
employee's compensation, date of hire and whether or not contributions are made
for such employee and/or whether such employee is otherwise entitled to benefits
under health or medical benefit, welfare or other employee benefit or fringe
benefit plans.
2.14 Status of Assets; Assumed Contracts.
Except as disclosed on Schedule 2.14, with respect to any of
the following constituting an Asset or an Assumed Liability, within the current
year or the last full calendar year: (i) Seller or Au Bon Pain, as the case may
be, has not assigned any material rights or obligations under (and is not
otherwise restricted for any reason from enjoying the full benefits under) any
Assumed Contract; (ii) neither Seller nor Au Bon Pain, as the case may be, nor,
to the knowledge of Seller or Au Bon Pain, any other party is in material
default in connection with any Assumed Contract; (iii) no act or event has
occurred which, with notice or lapse of time or both, would constitute a
material default by Seller or Au Bon Pain, as the case may be, or, to the
knowledge of Seller or Au Bon Pain, by another party under any Assumed Contract;
(iv) there is no basis for any claim of material default by Seller or by Au Bon
Pain (as the case may be), or, to
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the knowledge of Seller or Au Bon Pain, by another party under any Assumed
Contract; (v) neither Seller nor Au Bon Pain has received or given any notice of
cancellation or termination in connection with any Assumed Contract; (vi) each
Assumed Contract is the valid and binding agreement of Seller or Au Bon Pain, as
the case may be, which is in full force and effect and is enforceable in
accordance with its terms except, with regard to the other party or parties to
such instrument, as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws and general principles of
equity; (vii) no Assumed Contract will be affected by, or require the consent of
or payment to any other party to avoid an event of default, an event of
termination or other adverse effect with respect to such Assumed Contract
(assuming that any required notice of default or termination has been given and
any periods for cure have expired) by reason of the transactions contemplated by
this Agreement, except that the consent of the other parties thereto to the
assignment to Buyer will be required for Assumed Contracts identified in
Schedule 2.14; and (viii) there is no existing, pending, or, to the knowledge of
Seller or Au Bon Pain, threatened termination, cancellation, limitation,
amendment or change to any Assumed Contract or in the business relations
underlying the same.
2.15 Transactions with Affiliates.
Except as disclosed in Schedule 2.15, no officer or director
of Seller, or, to the knowledge of Seller or Au Bon Pain, any "affiliate" or
"associate" (as such terms are defined in the rules and regulations of the
Securities and Exchange Commission under the Securities Act of 1933, as amended)
of any of the foregoing is a party to any of the Assumed Contracts.
2.16 Accuracy of Statements.
No representation or warranty by Seller or Au Bon Pain in this
Agreement or in any Exhibit or Schedule to this Agreement or the Other
Agreements contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact, necessary to make the statements
herein or therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
3.1 Organization and Good Standing.
Buyer is duly organized and is existing as a corporation in
good standing under the laws of the State of Delaware with full corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Buyer is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or jurisdiction
in which either the ownership or use of the properties owned or used by it, or
the nature of the activities conducted by it, require such qualification.
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3.2 Execution and Delivery.
This Agreement, and each other agreement, instrument or other
document required to be executed by Buyer hereunder, has been duly authorized by
all necessary corporate action on the part of Buyer, has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms, except to the
extent that: (i) such enforcement is subject to or limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally; and
(ii) the remedy of specific performance and injunctive and other forms of
equitable remedies is subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
3.3 Consents, Violations and Authorizations.
(a) Buyer is not a party to or bound by any mortgage, indenture, lien,
deed of trust, lease, agreement, permit, concession, franchise, license,
instrument, order, judgment or decree which would require the consent of another
to the execution of this Agreement or the transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, by Buyer will not: (i)
conflict with or result in a breach or violation of any term or provision of, or
(with or without notice or passage of time, or both) constitute a default under,
or otherwise give any person a basis for nonperformance under, any material
indenture, mortgage, deed of trust, loan or credit agreement, lease, license or
other agreement or instrument to which Buyer is a party or by which Buyer is
bound or to which any of its properties or assets is subject; or (ii) result in
the violation of the provisions of the Certificate of Incorporation or Bylaws of
Buyer, or any order, writ, injunction or decree of any court or any arbitrator
having jurisdiction over the Buyer, or any applicable law or regulation.
3.4 Fees and Commissions.
Buyer has taken no action and has entered into no agreement,
understanding or other arrangement that would obligate Buyer or Seller to pay
any broker or finder's fee or other similar fee or commission to any agent,
broker, investment banker or other firm or person in connection with any of the
transactions contemplated by this Agreement, except for Chapman Partners, whose
fees shall be the exclusive responsibility of Buyer. Buyer shall indemnify and
hold Seller harmless with respect to any claim of any third party for such fee
or commission claiming by, through or under Buyer.
3.5 Sufficient Funds.
On the Closing Date, Buyer will have sufficient funds to
consummate the transactions contemplated hereby.
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3.6 Accuracy of Statements.
No representation or warranty by Buyer in this Agreement or in
any Exhibit or Schedule to this Agreement, or in each other agreement,
instrument or other document required to be executed by it hereunder, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact, necessary to make the statements herein or therein not
misleading.
ARTICLE 4
CONDUCT OF THE BUSINESS AND
OTHER MATTERS PENDING CLOSING
4.1 Conduct of Business. During the period commencing on the date
hereof and continuing through the Closing Date, Seller shall (except as
expressly contemplated by this Agreement or to the extent that Buyer shall
otherwise consent in writing):
(a) Use all reasonable efforts to keep available the services of the
Plant Employees (as defined in Section 7.2);
(b) Not sell, lease or otherwise dispose of any of the Assets, except
in the ordinary course of business or sell, sublease, assign, surrender its
interests in or otherwise dispose of any of the Assumed Contracts;
(c) Not create, assume or incur the creation of any Lien which cannot
be discharged at or prior to Closing, other than Permitted Liens, in respect of
any of the Assets or the wholesale business;
(d) Not modify, amend, alter or terminate (whether by written or oral
agreement) any right of Seller which would have a material adverse effect on the
Assets or the Assumed Contracts;
(e) Maintain property and liability insurance covering the Assets and
its wholesale business in the amounts and with coverage at least as great as the
amounts and coverage in effect as of December 1, 1997;
(f) Maintain the Assets in the same condition as the condition that
they existed as of December 1, 1997, ordinary wear and tear excepted, and use
reasonable efforts to preserve Seller's possession and control of all of the
Assets;
(g) Maintain the books, accounts and records related to its wholesale
business in a manner consistent with past practice and sound business practices;
(h) Comply with all applicable law relating to Seller or to the conduct
of its business, and conduct its business so that on the Closing Date the
representations and warranties contained in this Agreement shall be true as
though such representations and warranties were made on and as of such date,
except for changes permitted or contemplated by the terms of this Agreement and
except for any representations or warranties that by their terms are limited to
a specific date;
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(i) Provide Buyer with prompt written notice of any material adverse
change in the Assets or Seller's wholesale business operations;
(j) Consistent with its prior practices, (Seller shall) maintain in
inventory at the plant quantities of goods, supplies and materials that are
sufficient to allow Buyer to continue to operate the Plant immediately after the
Closing Date free of any unusual shortage of such items, and (Seller shall)
maintain in inventory at The SYGMA Network, Inc. ("SYGMA") quantities of Product
(as such term is defined in the Supply Agreements) in compliance with the
relevant agreements between Seller and SYGMA and in compliance with Sygma
inventory levels required under the Supply Agreements;
(k) Operate its wholesale business only in the ordinary course so as to
preserve the goodwill of its suppliers, customers and others having business
relations with Seller;
(l) Not enter into any transaction which is outside the ordinary course
of business or enter into any supply contract either as a buyer or seller which
contracts individually or in the aggregate require payments in excess of Fifty
Thousand Dollars ($50,000) and which are for a term in excess of six (6) months
or which cannot be terminated by Seller or its successors or assigns upon thirty
(30) days prior written notice; and
(m) Not take or permit any action that, if taken or permitted
immediately prior to the execution of this Agreement would constitute a breach
of the representations and warranties in this Article 4.
4.2 Access.
(a) Seller shall provide Buyer and its accountants, counsel and other
representatives reasonable access during operating hours during the period prior
to and on the Closing Date to the Plant, Plant Employees and, during such
period, and to the extent material, shall furnish promptly to Buyer, without
request, a copy of each report, notice and other document (other than tax
returns) filed or received by, or on behalf of, Seller to the extent that it
relates to the Assets during such period pursuant to the requirements of
applicable regulatory law and, upon reasonable request, all other material
information (other than financial data or information), pertaining to the Assets
or the Plant Employees.
(b) Except as may be required by law, Buyer will hold any information
acquired pursuant to this Section 4.2 in strict confidence until after the
Closing or until such time as such information otherwise becomes publicly
available through no action of Buyer, and shall not disclose any of it except to
Buyer's directors, officers, employees, agents, accountants, counsel and other
representatives in connection with the negotiation and consummation of the
transactions contemplated by this Agreement. If this Agreement is terminated in
accordance with Article 9 hereof, Buyer will return to Seller all documents,
work papers and other materials obtained from Seller and all copies thereof,
whether so obtained before or after the execution hereof, and will otherwise
keep confidential such information.
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4.3 Obtaining Approvals.
Seller and Buyer shall use their respective best efforts (but
without being obligated to pay any financial or other consideration) to obtain
prior to the Closing Date, any necessary consent, authorization, amendment or
approval of, or exemption by: (a) any governmental body or agency or
instrumentality thereof; and (b) any other person whose consent or approval is
required as a condition precedent to the consummation of the transactions
contemplated by this Agreement.
4.4 Obligations Concerning Employees.
From the date of this Agreement through the Closing Date,
Buyer shall have the right upon reasonable notice to Seller during normal
business hours and without unreasonable disruption of the operation of the
Business, to interview the Plant Employees and otherwise conduct hiring
procedures with regard to its possible hiring of Plant Employees, but, except as
contemplated in Section 7.2, shall have no obligation to offer employment to any
Plant Employee.
4.5 Payment of Certain Transactional Costs and Taxes.
(a) Seller shall pay, and Au Bon Pain shall cause Seller to pay, all
sales taxes, other property transfer taxes, all documentary or other stamp taxes
and all similar taxes, including without limitation income taxes, if any,
arising out of or related to the transactions contemplated by this Agreement.
Buyer shall pay all filing, recording, notarial and similar fees with respect to
the transfer of any of the Assets.
(b) If Seller or Buyer intends to treat the transfer of any Asset to
Buyer as exempt from any Tax imposed on transfers of similar property, such
party shall furnish the other with a certificate or other evidence reasonably
satisfactory to the other party that such exemption is applicable.
(c) Any periodic real or personal property tax imposed by any state or
local governmental unit on a Asset with respect to a taxable period that
includes the Closing Date shall be apportioned on a per diem basis with Seller
being responsible for payment of such Tax apportioned to the part of such
taxable period that occurs prior to the Closing Date.
4.6 The Real Property.
(a) Condition of the Real Property. Subject to Article 10, Seller shall
use reasonable efforts to maintain the Real Property in the same condition in
which it existed as of December 1, 1997, ordinary wear and tear excepted, to the
Closing Date and, on such date, Seller shall tender possession of the Real
Property to Buyer. Immediately prior to Closing, Buyer shall conduct a
"walk-through" inspection of the Real Property to verify that it is in the
condition required herein.
(b) Seller's Deliveries. As soon as practicable, but no later than the
Closing Date, Seller shall make available to Buyer correct and complete copies
of the following (to the extent in Seller's or Au Bon Pain's possession or
otherwise available to Seller or Au Bon Pain without undue
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effort or expense): (i) all documentation relative to the zoning classification,
special use permits and zoning or other land use restrictions imposed upon or in
respect to the Real Property; (ii) certificates of occupancy and other
governmental licenses and permits issued in respect to or required for the
present use and occupancy of the Real Property; (iii) all as-built plans and
specifications for the improvements to the Real Property, soil tests,
engineering studies, environmental audits or reports, reports of insurance
carriers, agreements, plats, plans, drawings, surveys, specifications, title
insurance policies, and other like documents, instruments and items relating to
the Real Property; (iv) all notifications received by Seller or Au Bon Pain
asserting that the Real Property, or any portion thereof, do not comply with any
law, rule, regulation, order, code, permit or other legal requirement; and (v)
all real estate tax bills and all utility and, to the extent available, other
operating expense bills relating to the operation of the Real Property for the
current year or the last two (2) calendar years immediately preceding the date
hereof.
4.7 Bulk Transfer Compliance.
Buyer and Seller hereby waive compliance by Buyer and Seller
with the bulk sales law and any other similar laws in any applicable
jurisdiction with respect to the transactions contemplated by this Agreement.
Seller and Au Bon Pain shall, jointly and severally, indemnify Buyer from, and
hold it harmless against, any liabilities, damages, costs and expenses directly
resulting from or arising out of the parties' decision to waive compliance with
any of such laws with respect to the transactions contemplated by this
Agreement.
4.8 Release of Affiliate Encumbrances.
All encumbrances of any kind or nature whatsoever in favor of
any affiliate of Seller on the Assets will be removed by Seller on or prior to
the Closing Date.
4.9 Supplements to Schedules and Exhibits.
Seller and Au Bon Pain shall deliver to Buyer prior to the
Closing a written statement disclosing any untrue statement of a material fact
in this Agreement or any Exhibit or Schedule hereto (or supplement thereto) or
document furnished pursuant hereto promptly upon the discovery of such untrue
statement, accompanied by a written supplement to any Exhibit or Schedule to
this Agreement that may be affected thereby. No such disclosure by Seller or Au
Bon Pain shall be deemed to modify, amend or supplement the representations or
warranties of Seller or Au Bon Pain, as the case may be, or the Schedules and
Exhibits hereto for the purposes of Article 5, unless Buyer shall have consented
thereto in writing.
4.10 Non-Competition.
(a) For and in consideration of Buyer's payment of the Purchase Price,
Seller covenants and agrees that it will not for a period of five (5) calendar
years from the Closing Date for itself, or as an agent of or on behalf of, or in
conjunction with, any person, firm, corporation, partnership or other entity or
otherwise in any manner or capacity, engage in or have any interest in, or in
any way assist in the manufacture and sale of bakery goods in the United States,
Mexico or Canada (the "Territory").
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(b) Although the parties consider the restrictions contained in Section
4.10(a) to be reasonable, if a final nonappealable determination is made by a
court of competent jurisdiction that the time or Territory or any other
restriction contained in Section 4.10(a) is an unreasonable or otherwise
unenforceable restriction against Seller, neither this Agreement nor the
provisions of Section 4.10(a) shall be rendered void, but shall be deemed
amended to apply as to such maximum time, territory and scope and to such other
extent as permitted by law and as determined by such court under the
circumstances involved.
4.11 Non-Solicitation.
Seller shall not, directly or indirectly, for five (5) years
after the Closing Date, solicit or hire any employee of Buyer, unless the
employment of such employee has been terminated by Buyer, or Buyer consents
thereto.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 Conditions of Buyer.
The obligation of Buyer to purchase the Assets, to assume the
Assumed Liabilities, and to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, at or prior to the Closing Date,
of each of the following conditions:
(a) No preliminary or permanent injunction or other order by any United
States or state court or by any governmental body or agency or instrumentality
thereof that prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect;
(b) There shall not be pending or threatened any action or proceeding
before or by any governmental body or agency or instrumentality thereof or
court, domestic or foreign: (i) challenging the acquisition by Buyer of the
Assets or otherwise seeking to restrain or prohibit the consummation of the
transactions contemplated by this Agreement or seeking material damages in
connection therewith; or (ii) seeking to restrain or prohibit Buyer's direct or
indirect ownership of the Assets or rights under the Assumed Contracts or
operation of the Plant as contemplated by this Agreement and the Supply
Agreements;
(c) There shall not be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable by Buyer
to the consummation of the transactions contemplated by this Agreement by any
United States or state governmental body or agency or instrumentality thereof or
court that (i) would prohibit Buyer's direct or indirect ownership of any
material portion of the Assets, (ii) would render Buyer or Seller unable to
consummate the transactions contemplated by this Agreement or (iii) would make
such consummation illegal;
(d) The parties hereto shall have secured all appropriate orders,
consents, approvals and clearances, in form and substance reasonably
satisfactory to Buyer, by and from all third parties, including but not limited
to governmental or regulatory authorities, whose order,
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consent, approval or clearance is required by contract or applicable law for the
consummation of the sale of the Assets and the other transactions herein
contemplated;
(e) All waiting periods, if any, under the HSR Act (as defined in
Section 7.3) shall have expired or been terminated;
(f) The representations and warranties of Seller and Au Bon Pain in
this Agreement shall be true and correct on and as of the Closing Date with the
same effect as if made on the Closing Date and Seller and Au Bon Pain shall have
complied with all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied on or prior to the Closing Date;
(g) Seller shall have delivered to Buyer the Deed, Bill of Sale and
such other documentation as contemplated by this Agreement in each case in form
and substance reasonably satisfactory to Buyer;
(h) Buyer and Seller shall each have executed and delivered to the
other a closing statement setting forth the Purchase Price, the closing
adjustments and apportionments and the application thereof at the Closing as
contemplated by Section 1.3 (the "Closing Statement");
(i) Each of Au Bon Pain and Saint Louis Bread shall have entered into a
Supply Agreement for the purchase of bakery products from Buyer's operation of
the Plant pursuant to Section 7.1;
(j) Each of Au Bon Pain and Saint Louis Bread shall have executed and
delivered to Buyer a non-exclusive Manufacturing License to manufacture the
Wholesale Products pursuant to Section 7.1;
(k) Seller shall have executed and delivered a certification of
non-foreign status in the form attached as Exhibit 5.1(k);
(l) [Intentionally omitted];
(m) Buyer shall have received all appropriate assurances regarding the
delivery by holders of Liens of all termination statements and instruments of
release, which are sufficient in form and substance satisfactory to Buyer and
its counsel, to release and discharge all Liens on the Assets, except for
Permitted Liens, and all necessary consents to assignment of the Assumed
Contracts to Buyer shall have been received by Buyer;
(n) Buyer shall have received a certificate of the Secretary or
Assistant Secretary of Seller to the effect set forth on Exhibit 5.1(n);
(o) Buyer shall have received a certificate of the Seller signed by a
Vice President or more senior officer of the Seller to the effect set forth on
Exhibit 5.1(o);
(p) Seller shall have delivered to Buyer one or more certificates as to
the legal existence and corporate good standing of Seller, dated not more than
ten (10) days prior to the Closing Date, from the Secretary of State of Delaware
and the Secretary of State of Missouri;
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(q) Buyer shall have received the legal opinion of Gadsby & Hannah LLP
substantially in the form attached as Exhibit 5.1(q);
(r) There shall have been no material adverse change to the Assets or
wholesale business of Seller, since December 1, 1997;
(s) Buyer shall have received a title insurance policy from Chicago
Title Insurance Company consistent with the commitment for title insurance
attached hereto as Exhibit 5.1(s)(1) (except that Items No. 10, 11 and 12 shall
be discharged at the Closing and deleted from such title policy and such policy
may take exception for Item No. 8 on Schedule 1.6(a)), which policy shall also
confirm by an updated survey of the Real Property that: (i) the location of the
easements shown on the survey prepared by Engineering Survey & Services dated
July 13 and 19, 1995, a copy of which is attached hereto as Exhibit 5.1(s)(2);
(ii) the location of a certain easement to Missouri-American Water Company as
shown on the plan recorded with said easement at Book 285, Page 803, and (iii)
the lagoons owned and/or operated by the City of Mexico, Missouri located to the
south of the Real Property do not encroach onto the Real Property, or if an
encroachment does exist, that affirmative coverage can be secured that the
location of the lagoons do not prohibit the use of the improvements on the Real
Property as currently constructed;
(t) Seller shall have taken, or caused to be taken, such further
actions, and executed and delivered such other agreements, instruments and
documents as are provided for in this Agreement or as may reasonably be
requested by Buyer consistent with the terms of this Agreement or as may be
necessary or convenient to consummate the transactions contemplated hereby or in
connection herewith;
(u) Buyer shall have received assignment and assumption agreements with
respect to the Assumed Contracts, in a form reasonably satisfactory to Buyer,
Seller and any third party whose consent is required to effectively assign the
Assumed Contracts to Buyer;
(v) Buyer shall have received assignment and assumption agreements with
respect to the Assumed Liabilities;
(w) Buyer shall have received all keys to the Assets; and
(x) Buyer shall have received a clearance certificate or other similar
document(s) which may be required by any state or foreign taxing authority in
order to relieve Buyer of any obligations with respect to Seller's Taxes.
5.2 Conditions of Seller.
The obligation of Seller to sell, assign and transfer the
Assets, transfer the Assumed Liabilities to Buyer, and to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
(a) no preliminary or permanent injunction or other order by any United
States or state court or by any governmental body or agency or instrumentality
thereof that prevents the
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consummation of the transactions contemplated by this Agreement shall have been
issued and remain in effect;
(b) there shall not be pending or threatened any action or proceeding
before or by any governmental body or agency or instrumentality thereof or
court, domestic or foreign (i) challenging the sale by Seller of the Assets or
otherwise seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or seeking material damages in connection
therewith; or (ii) seeking to restrain or prohibit Buyer's direct or indirect
ownership of the Assets or operation of the Plant as contemplated by this
Agreement and the Supply Agreement;
(c) there shall not be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable by
Seller to the consummation of the transactions contemplated by this Agreement by
any United States or state governmental body or agency or instrumentality
thereof or court that (i) would prohibit Buyer's direct or indirect ownership of
the Assets, (ii) would render Buyer or Seller unable to consummate the
transactions contemplated by this Agreement, or (iii) would make such
consummation illegal;
(d) the parties hereto shall have secured all appropriate orders,
consents, approvals and clearances, in form and substance reasonably
satisfactory to Seller, by and from all third parties, including but not limited
to governmental or regulatory authorities, whose order, consent, approval or
clearance is required by contract or applicable law for the consummation of the
sale of the Assets and the other transactions herein contemplated;
(e) all applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated;
(f) the representations and warranties of Buyer in this Agreement shall
be true and correct in all respects on and as of the Closing Date with the same
effect as if made on the Closing Date and Buyer shall have complied in all
material respects with all covenants and agreements and satisfied all conditions
on its part to be performed or satisfied on or prior to the Closing Date;
(g) Buyer and Seller shall each have executed and delivered the Closing
Statement contemplated by Section 1.3;
(h) Buyer shall have entered into with each of Au Bon Pain and Saint
Louis Bread a Supply Agreement for the purchase of bakery products from Buyer's
operation of the Plant pursuant to Section 7.1;
(i) Buyer shall have executed and delivered to each of Au Bon Pain and
Saint Louis Bread a counterpart copy of the non-exclusive Manufacturing License
for the manufacture of the Wholesale Products pursuant to Section 7.1;
(j) Seller shall have been paid the Purchase Price in lawful currency
of the United States of America by wire transfer of immediately available funds
pursuant to Section 1.2;
(k) All necessary consents to assignment of the Assumed Contracts to
Buyer shall have been received by Seller;
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(l) Seller shall have received a certificate of the Secretary or an
Assistant Secretary of the Buyer to the effect set forth in Exhibit 5.2(l);
(m) Seller shall have received a certificate of the Buyer signed by a
Vice President or more senior officer of the Buyer to the effect set forth in
Exhibit 5.2(m);
(n) Buyer shall have delivered to Seller one or more certificates as to
the legal existence and corporate good standing of Buyer from the Secretary of
State of Delaware and the Secretary of State of Missouri;
(o) Seller shall have received the legal opinion of Murray H.
Warschauer substantially in the form attached as Exhibit 5.2(o); and
(p) Buyer shall have taken, or caused to be taken, such further
actions, and executed and delivered such other agreements, instruments and
documents as are provided for in this Agreement or as may reasonably be
requested by Seller consistent with the terms of this Agreement or as may be
necessary or convenient to consummate the transactions contemplated hereby or in
connection herewith.
ARTICLE 6
SURVIVAL; INDEMNIFICATION
6.1 Survival of Representations, Warranties and Covenants.
Except as may expressly be provided in this Agreement, the
covenants contained in this Agreement shall survive the Closing Date
indefinitely. The representations and warranties shall survive for a period of
twenty-four (24) months following the Closing Date, except that any
representation and warranty contained in Sections 2.1, 2.2 and 2.3 shall survive
indefinitely, and except that any representation or warranty contained in
Section 2.7 shall survive until the expiration of the applicable statute of
limitations and any representation or warranty contained in Section 2.11 shall
survive for six (6) months after the expiration of the applicable statute of
limitations. Any claim for indemnification hereunder for a breach of any
representation or warranty shall be made on or prior to the date, if any, on
which the survival period for such representation or warranty expires, it being
understood that claims made on or prior to such expiration date shall survive
such expiration date.
6.2 Indemnification.
(a) Seller shall indemnify, defend and hold Buyer, and each of its
officers, directors, employees, and agents, harmless from and against any and
all loss, cost, damage, expense, or liability (including, without limitation,
judgments, settlements and reasonable attorneys' fees) (collectively, "Damages")
arising out of or resulting from (i) any inaccuracy in or breach of any
representation, warranty, covenant or agreement made by Seller in this Agreement
or in any writing delivered pursuant to this Agreement or at the Closing; and
(ii) any failure of Seller to perform or fully observe any covenant, agreement,
condition or provision to be performed or observed by it pursuant to this
Agreement.
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(b) Buyer shall indemnify, defend and hold Seller, and each of its
officers, directors, employees, and agents, harmless from and against any and
all Damages arising out of or resulting from: (i) any inaccuracy in or breach of
any representation, warranty, covenant or agreement made by Buyer in this
Agreement or in any writing delivered pursuant to this Agreement or at the
Closing; and (ii) any failure by Buyer to perform or fully observe any covenant,
agreement, condition or provision to be performed or observed by it pursuant to
this Agreement.
(c) Any provision hereof to the contrary notwithstanding (except with
respect to the Supply Agreements): (i) the indemnification provided for
hereunder shall constitute the exclusive remedy for any Damages arising out of,
resulting from, or related to this Agreement, regardless of whether the legal
theory for such claim for Damages is based in tort, contract or otherwise; and
(ii) such Damages shall in no event exceed the Purchase Price plus the aggregate
amount due under the Assumed Liabilities, including without limitation, the
Assumed Contracts. No party shall be entitled to seek indemnification pursuant
to Sections 6.2(a) or 6.2(b) until the aggregate amount of the Damages actually
incurred exceeds Two Hundred Fifty Thousand Dollars ($250,000) (the "Deductible
Amount"). In the event that the Deductible Amount is exceeded, the indemnified
parties shall be entitled to seek indemnification only to the extent of Damages
incurred in excess of the Deductible Amount.
(d) Any claim for indemnity under this Section 6.2 shall be delivered
in writing in accordance with Section 11.2 hereof within thirty (30) days of a
discovery by the indemnified party of such claim to the indemnifying party and
such claim shall set forth with reasonable specificity the amount claimed and
the underlying facts supporting such claim; provided, however, that the failure
of an indemnified party to so notify an indemnifying party within such thirty
(30) day period shall not relieve the indemnifying party of its obligation to
indemnify under this Agreement unless the rights of the indemnifying party are
thereby materially prejudiced. The indemnifying party shall have thirty (30)
days to accept or dispute such claim. Any undisputed claims shall be satisfied
as set forth above. With respect to any disputes that the parties are not
mutually able to resolve, each of the parties hereby consents to the
nonexclusive jurisdiction of the courts of the State of Missouri, and of the
United States District Courts located in the State of Missouri, and to any court
to which an appeal from any of the foregoing courts may be taken.
(e) If a third party asserts a claim against any indemnified party for
which indemnification would be available under this Section 6.2 (a "Third Party
Claim"), the indemnified party shall promptly give notice of the Third Party
Claim, describing the Third Party Claim with reasonable specificity, to the
indemnifying party; provided, however, that the failure to give such notice
shall not affect the right of the indemnified party to indemnification hereunder
unless such failure materially prejudices the ability of the indemnifying party
to defend any Third Party Claim or take any other remedial action. The
indemnifying party shall be entitled to assume the defense of the Third Party
Claim, including the employment of counsel reasonably satisfactory to the
indemnified party. The indemnified party may participate in any such proceeding
at its own expense. In addition, in the event that such indemnifying party,
within a reasonable time after notice of any Third Party Claim, fails to defend
any indemnified party, such indemnified party shall (upon further notice to such
indemnifying party) have the right to undertake its defense of the Third Party
Claim for the account of such indemnifying party and to have its expenses
reimbursed promptly by the indemnifying party with respect to the Third Party
Claim. Regardless of which party is controlling the defense of any Third Party
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Claim, (i) both the indemnifying party and the indemnified party shall act in
good faith and (ii) no settlement of such Third Party Claim may be agreed to
without the written consent of the indemnifying party. The controlling party
shall promptly deliver, or cause to be delivered, to the other party copies of
all correspondence, pleadings, motions, briefs, appeals, orders or other written
statements relating to the matter, whether received or submitted in connection
with the defense of the Third Party Claim, and timely notices of any hearing or
other court proceeding relating to the Third Party Claim.
ARTICLE 7
ADDITIONAL COVENANTS OF THE PARTIES
7.1 Manufacturing.
(a) At the Closing, Buyer shall enter into Supply Agreements with each
of Au Bon Pain and Saint Louis Bread in the forms attached as Exhibit
7.1(a)(1)-(2).
(b) At the Closing, each of Au Bon Pain and Saint Louis Bread Seller
shall grant to Buyer a license to manufacture certain wholesale products
pursuant to Manufacturing Licenses in the forms attached as Exhibit
7.1(b)(1)-(2) (the "Manufacturing Licenses"). Except to the extent expressly
provided for in each Manufacturing License, Buyer shall not use in any manner
any of the trade names, brands, trademarks or trade dress of Seller, Au Bon Pain
or Saint Louis Bread except in the manufacture and sale of products to Au Bon
Pain, Saint Louis Bread and their respective franchise systems pursuant to the
Supply Agreements. Subject to the rights granted in the Manufacturing Licenses,
all product recipes, formulas, specifications, manufacturing processes or
preparation procedures and any other trade secrets and information used to
manufacture product for Au Bon Pain or Saint Louis Bread (including, without
limitation, information related to the cost of products) shall remain solely the
property of Seller, regardless of whether developed or modified by Buyer or
Seller. All such information shall be kept strictly confidential by Buyer.
(c) As used in this Agreement, the term "Proprietary Information" shall
mean any knowledge or information, written or oral, which relates in any manner
to the respective businesses of Buyer and Seller which is confidential and
proprietary information of the Disclosing Party (as defined below), including,
without limitation, with respect to the Wholesale Products, whether disclosed
prior to, on or after the date of this Agreement, including, without limitation,
the recipes, formulas, specifications, manufacturing processes, preparation
procedures, financial information, equipment, marketing methods, demographic and
trade information, customer profiles and preferences, costs, development plans,
products and production techniques and all related trade secrets and proprietary
information treated as such by the Disclosing Party, whether by course of
conduct, by letter or report, or by the use of an appropriate stamp or legend
designating such information to be confidential or proprietary. As used herein,
the term "Disclosing Party" shall mean the party to this Agreement which
discloses or makes available Proprietary Information to the Receiving Party, and
the term "Receiving Party" shall mean the party to this Agreement to whom
Proprietary Information is disclosed or made available by the Disclosing Party,
provided however that with respect to the Wholesale Products, Buyer shall be
deemed the Disclosing Party and Seller shall be deemed the Receiving Party.
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(d) The Receiving Party shall hold all Proprietary Information in
confidence, shall use such Proprietary Information only for the benefit of the
Disclosing Party and disclose such Proprietary Information only to the Receiving
Party's officers, directors, employees and agents in order to assist the
Receiving Party in performing its obligations under this Agreement. The
Receiving Party shall not disclose Proprietary Information to any other Person,
provided, however, the Receiving Party may disclose Proprietary Information to a
corporate Affiliate of the Receiving Party if such Affiliate first agrees in
writing to be bound by the covenants contained in this Agreement with respect to
the use and nondisclosure of Proprietary Information.
(e) The obligations and prohibitions set forth in this Section 7.1
shall not apply to any Proprietary Information that is required to be disclosed
by applicable law or that is shown, by preexisting documentary evidence or other
reliable evidence, to be information: (i) that was known by the Receiving Party
prior to the exchange of information in contemplation of this Agreement; (ii)
entered into the public domain other than through the act of the Receiving
Party; (iii) is independently developed by the Receiving Party; or (iv) is
rightfully received by the Receiving Party from a third party who is not
obligated to the Disclosing Party to keep such information confidential.
7.2 Employment of Seller's Employees.
Effective as of the Closing Date, Seller shall terminate the
employment of all employees, supervisors, agents and other persons hired or
retained by Seller in connection with its ownership and operation of the Plant
("Plant Employees"). Buyer shall have no obligation to hire any Plant Employees,
although Buyer may interview and make offers to hire any such Plant Employees if
Buyer so elects in its sole and absolute discretion. Buyer shall disclose to
Seller the identity of any Plant Employees it chooses not to hire not less than
two (2) weeks prior to the Closing Date. Regardless of whether Buyer offers to
employ any Plant Employees, with respect solely to events occurring prior to (or
on) the Closing Date, Seller shall be liable for all termination and severance
costs, if any, to which any Plant Employees are entitled; provided, however,
that Buyer shall offer employment to a sufficient number of Plant Employees so
that Seller shall have no duties or obligations under the federal WARN Act.
7.3 Hart-Scott-Rodino.
Buyer and Seller shall each use their best efforts to prepare
and submit within ten (10) business days after the date of this Agreement to the
U.S. Department of Justice and the Federal Trade Commission such pre-merger
notifications, if any, as are required by the Hart-Scott-Rodino Act (the "HSR
Act") and, in connection with such notifications, to request early termination
of all applicable waiting periods.
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7.4 Payment of Taxes.
Seller shall timely pay, and Au Bon Pain shall cause Seller to
pay, before the same shall become delinquent and before penalties accrue
thereon, all Taxes (including any Taxes incurred in connection with the
transactions contemplated by this Agreement), (a) shown (or required to be
shown) on any Return (or amendment thereto) filed (or required to be filed) by
Seller before, on or after the Closing Date, or (b) that become due from or
payable by Seller before, on or after the Closing Date. This Section 7.4 shall
not apply with regard to any Tax to the extent that the Assets cannot be made
subject to a lien for such Tax and Buyer cannot be made liable for such Tax.
Each party shall be responsible for filing Forms W-2 with respect to the 1998
taxable year in accordance with the "Standard Procedure" described in Rev. Proc.
84-77, 1984-2 C.B. 753. The responsibility for all other information returns
shall be allocated similarly.
7.5 Cooperation and Records Retention.
From time to time, Seller and Buyer shall provide, and shall
cause their respective accountants and other representatives to provide, to each
other on a timely basis, the information (including but not limited to work
papers) that they or their accountants or other representatives have within
their control and that may be reasonably necessary in connection with the
preparation of any Return or the examination by any taxing authority or other
administrative or judicial proceeding relating to any Return. Seller and Buyer
shall retain or cause to be retained, until the applicable statutes of
limitations (including any extensions and carryovers) have expired, copies of
all Returns for all tax periods beginning before the Closing Date, together with
supporting work schedules and other records or information that may be relevant
to such Returns.
7.6 Tax Elections.
No new elections with respect to Taxes, or any changes in
current elections with respect to Taxes, affecting the Assets shall be made by
Seller after the date of this Agreement without the prior written consent of
Buyer.
ARTICLE 8
CLOSING
8.1 Closing Date.
Unless this Agreement shall have been terminated and the
transactions contemplated hereby shall have been abandoned pursuant to Article
9, the sale of the Assets to Buyer by Seller and the consummation of the other
transactions contemplated by this Agreement (the "Closing") shall occur at 11:00
a.m. onMarch 20, 1998, at the offices of Gadsby & Hannah LLP, 225 Franklin
Street, Boston, Massachusetts 02110, or at such other hour or place or on such
other date as may be agreed upon by Seller and Buyer upon the fulfillment of all
conditions precedent to the Closing (such date being referred to herein as the
"Closing Date"). Actual possession of the Assets shall be delivered to Buyer at
12:01 a.m. on the day following the Closing Date (the "Possession Time").
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<PAGE>
8.2 Deliveries at Closing by Seller.
At Closing, Seller shall:
(a) execute and deliver to Buyer any and all instruments of
sale, assignment and other documents reasonably requested by Buyer to effect the
transfer of the Assets to Buyer, to effect the assumption of the Assumed
Liabilities by Buyer, or otherwise to consummate the transactions contemplated
hereby, including without limitation:
(i) the Deed;
(ii) other documents and certificates relating to the
transfer of Plant which are customary in transactions similar to the
transactions contemplated by this Agreement, such as certificates of
value, affidavits of non-foreign status, affidavits as to mechanics
liens, and the like, including items reasonably requested by Buyer's
title insurer;
(iii) one or more assignment and assumption
agreements with respect to the Assumed Contracts to be acquired by
Buyer hereunder, in a form reasonably satisfactory to Buyer, Seller and
any third party whose consent is required to effectively assign the
Assumed Contracts to Buyer;
(iv) an assignment and assumption agreement with
respect to the Assumed Liabilities in the form attached as Exhibit
8.2(a)(iv);
(v) a blanket bill of sale and assignment covering
all Assets in the form attached as Exhibit 1.6(b);
(vi) such other documents, including instruments of
sale, transfer and assignment, transferring, assigning and conveying
the Assets as shall be reasonably requested by Buyer to evidence the
transfer of any of the Assets in accordance with this Agreement; and
(vii) possession of the Assets and all keys thereto.
(b) Execute and deliver the closing certificates in the forms
attached hereto as Exhibit 5.1(n) and Exhibit 5.1(o), each duly executed as
provided herein;
(c) Deliver certificates of good standing or the equivalent,
dated not more than ten (10) calendar days prior to the Closing Date, attesting
to the good standing of Seller and Au Bon Pain as corporations under the laws of
the State of Delaware;
(d) Deliver all consents, amendments, assignments, estoppel
letters, authorizations and approvals required pursuant to Article 5 as a
condition to Closing;
(e) Deliver all clearance certificates or other similar
documents that may be required by any state or foreign taxing authority in order
to relieve Buyer of any obligation to withhold any portion of the Purchase
Price;
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<PAGE>
(f) Deliver to Buyer an opinion of Gadsby & Hannah LLP,
counsel for Seller, in the form attached as Exhibit 5.1(q);
(g) Execute and deliver a receipt for the Purchase Price and
all other consideration to be paid pursuant to Section 1.2;
(h) Deliver to Buyer duly executed Supply Agreements; and
(i) Deliver all other previously undelivered documents and
material required to be delivered by Seller to Buyer at or prior to the Closing.
8.3 Deliveries at Closing by Buyer.
At Closing, Buyer shall deliver to Seller:
(a) The Purchase Price and other consideration as provided in
Section 1.2 hereof;
(b) An assumption and assignment agreement with respect to the
Assumed Liabilities in the form attached as Exhibit 8.2(a)(iv);
(c) The closing certificates in the form attached as Exhibit
5.2(l) and Exhibit 5.2(m), each duly executed as provided herein;
(d) A resale tax exemption certificate, if applicable;
(e) An executed opinion of Murray H. Warschauer, counsel for
Buyer, in the form attached as Exhibit 5.2(o); and
(f) Execute and deliver to Seller the Supply Agreements.
(g) All other previously undelivered documents and material
required to be delivered by Buyer to Seller at or prior to the Closing.
8.4 Simultaneous Closing.
All actions taken at the Closing shall be deemed to be
performed simultaneously and the Closing shall not be deemed to have occurred
until all required actions of the parties pursuant to this Agreement have been
performed or waived. The parties shall deliver such additional documents and
take such additional actions as may reasonably be deemed necessary to complete
the transactions contemplated by this Agreement.
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<PAGE>
ARTICLE 9
TERMINATION
9.1 Termination.
This Agreement may be terminated and the transactions
contemplated herein may be abandoned prior to the Closing Date:
(a) by the mutual consent of Seller and Buyer;
(b) by Seller or Buyer, if the Closing has not occurred on or
before June 30, 1998;
(c) by Buyer if there has been a misrepresentation, breach of
warranty or breach of covenant by Seller hereunder, provided Buyer is not then
in material default of its obligations hereunder;
(d) by Seller if there has been a misrepresentation, breach of
warranty or breach of covenant by Buyer hereunder, provided Seller is not then
in material default of its obligations hereunder;
(e) by Seller if any of the conditions precedent to Seller's
obligations hereunder shall have become incapable of fulfillment through no
fault of Seller; and
(f) by Buyer if any of the conditions precedent to Buyer's
obligations hereunder shall have become incapable of fulfillment through no
fault of Buyer.
9.2 Procedure Upon Termination.
In the event of the termination of this Agreement by either
party pursuant to Section 9.1(b)-(f), written notice thereof shall be given
forthwith to the other party to this Agreement, and this Agreement shall
terminate and be abandoned without further action by Seller or Buyer. Upon
termination of this Agreement pursuant to Section 9.1(a),(b), (e) or (f), there
shall be no liability or obligation on the part of either Seller or Buyer to the
other under this Agreement or in connection with the transactions contemplated
hereby; provided that, no such termination of this Agreement will relieve any
party of liability for any breach of this Agreement prior to such termination;
provided, further that the obligations of Buyer set forth in Section 7.1(d)
shall survive the termination of this Agreement. In the event of a termination
pursuant to Section 9.1(c)-(d) hereof, such termination shall be without
prejudice to any rights that the terminating party may have against the other
party or any other party under the terms of this Agreement or otherwise.
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<PAGE>
ARTICLE 10
CASUALTY AND CONDEMNATION
10.1 Casualty.
(a) Until the Possession Time, the risk of loss of or damage
to the Assets shall be and remain with Seller. If prior to the Possession Time,
there shall occur destruction, loss or damage to any of the Assets due to fire,
flood, accident, explosion, seismic vibration, riot, mud slide, act of God,
public enemy or other casualty (an "Event of Casualty"), Seller shall give Buyer
prompt written notice of such destruction, loss or damage and shall apply all
insurance proceeds to restore the Assets to substantially the same condition as
they were in prior to the destruction, loss or damage.
(b) If the insurance proceeds payable by reason of an Event of
Casualty (plus the amount of any deductible) are not sufficient to pay all costs
of repair of such destruction, loss or damage, and if Seller does not undertake
to repair such destruction, loss or damage to substantially the same condition
as they were in prior to the destruction, loss or damage, Buyer may, at Buyer's
option, terminate this Agreement and the transactions contemplated thereby.
10.2 Condemnation
If prior to the Possession Time, all or any part of the Assets
shall be taken, or threatened to be taken in the exercise of the power of
eminent domain by any sovereign, municipality or other public or private
authority or otherwise impaired by any governmental agency or authority, Seller
shall give Buyer prompt written notice of such taking or threatened taking or
impairment within five (5) business days after it becomes aware thereof. In the
event such taking or impairment would materially interfere with the use and
operation of the Business as conducted prior to the Closing Date, Buyer may, at
its option, terminate this Agreement and the transactions contemplated thereby.
ARTICLE 11
GENERAL PROVISIONS
11.1 Complete Agreement; No Third Party Rights; Choice of Law;
Counterparts.
This Agreement: (a) constitutes the entire agreement and
supersedes all other prior agreements and undertakings (both written and oral),
among the parties hereto with respect to the subject matter hereof; (b) is not
intended to confer upon any person any rights or remedies hereunder or with
respect to the subject matter hereof except as specifically provided in this
Agreement; (c) shall be governed by, and construed in accordance with, the
internal laws (and not the law of conflicts) of the State of Missouri; and (d)
may be executed in two or more counterparts, each of which shall be deemed to be
an original, but all such counterparts together shall constitute a single
agreement.
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<PAGE>
11.2 Notices.
Except as may otherwise expressly be provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
upon the earlier of (a) personal delivery to the addresses set forth below, (b)
in the case of facsimile transmission, immediately upon confirmation of
completion of transmission, (c); in the case of mailed notice, five (5) business
days after deposit in the mail, with proper postage for registered or certified
mail, return receipt requested, prepaid, or (d) in the case of notice by Federal
Express or other reputable overnight courier service, two (2) business days
after delivery to such courier service, addressed to the party to be notified as
follows:
If to Seller: c/o Au Bon Pain Co., Inc.
19 Fid Kennedy Avenue
Boston, Massachusetts 02210-2497
Attention: Mr. Ronald M. Shaich
Co-Chairman and
Chief Executive Officer
and
Mr. Louis I. Kane
Co-Chairman
telecopier (617) 423-7879
with a copy to: Gadsby & Hannah LLP
225 Franklin Street
Boston, Massachusetts 02110
Attention: Walter D. Wekstein, Esq.
Lawrence R. Katz, Esq.
telecopier (617) 345-7050
If to Seller: Bunge Foods Corporation
3701 Algonquin Road, Suite 360
Rolling Meadows, Illinois 60008
Attention: General Manager
telecopier (847) 342-0029
with a copy to: Bunge Corporation
11720 Borman Drive
St. Louis, Missouri 63146
Attention: Legal Department
telecopier (314) 994-6521
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<PAGE>
11.3 Further Assurances.
Subject to the terms and conditions provided in this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date any further action is necessary to carry
out the purposes of this Agreement, Seller or Buyer, as the case may be, shall
take, or cause to be taken all such necessary actions.
11.4 Expenses.
All costs and expenses incurred in connection with
consummation of the transactions provided for in this Agreement shall be paid by
the party or parties incurring the same.
11.5 Amendment/Waiver.
This Agreement may be amended or modified only by a written
instrument executed by both Buyer and Seller. Compliance with or performance
under any term or provision of this Agreement may be waived only in writing
signed by the party to be charged with such waiver.
11.6 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. This
Agreement may not be assigned by either party without the prior written consent
of the other party.
11.7 Captions.
Captions and headings to Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
11.8 Sales Taxes.
Buyer shall solely be responsible for(a) any sales, transfer
and similar taxes and all recording and similar fees applicable to the
transactions contemplated by this Agreement; and (b) the costs and expenses
incurred in connection with obtaining all permits and licenses required by Buyer
to operate the Plant after the Closing.
11.9 Public Announcements.
Neither Buyer nor Seller, without the prior consent of the
other shall, disclose to any person or entity prior to the Closing the existence
of this Agreement or the transactions contemplated hereby, except to the extent
required by applicable law (including without
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<PAGE>
limitation any securities law or regulation of the Securities and Exchange
Commission or the National Association of Securities Dealers).
11.10 Severability.
If any term or provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or incapable of being
enforced by any law or public policy, all other terms or provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party.
11.11 Exhibits and Schedules.
Each of the Exhibits and Schedules to this Agreement is hereby
incorporated herein by this reference and expressly made a part hereof.
11.12 Equitable Remedies.
Since damages, in the event of breach of any term or condition
of this Agreement, would be difficult, if not impossible, to ascertain, the
parties hereto may obtain in addition to any other remedy available to it, an
injunction restraining such breach and specific performance of any such breached
term or condition. No bonds or other securities shall be required in connection
therewith.
11.13 Joint Preparation.
This Agreement has been prepared jointly by the parties with
assistance from their respective legal counsel.
11.14 Investigations.
Buyer may rely upon the representations and warranties made by
Seller and Au Bon Pain in this Agreement regardless of any investigation made,
or which may be made, by or on behalf of Buyer except and to the extent of
Buyer's actual knowledge at or prior to the Closing of the inaccuracy of any
such representations and warranties.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
entered into as an instrument under seal as of the day and year first above
written.
BUNGE FOODS CORPORATION
By: /s/ Dexter M. Frye
---------------------
Dexter M. Frye
Senior Vice President
ABP MIDWEST MANUFACTURING CO., INC.
By: /s/ Ronald M. Shaich
-----------------------
Ronald M. Shaich,
Executive Vice President
AU BON PAIN CO., INC.
By: /s/ Ronald M. Shaich
------------------------
Ronald M. Shaich
Co-Chairman and Chief Executive Officer
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<PAGE>
AMENDMENT TO ASSET PURCHASE AGREEMENT
This amendment ("Amendment"), dated as of March 23, 1998, is to that
certain Asset Purchase Agreement dated February 11, 1998 (the "Agreement") by
and among ABP Midwest Manufacturing Co., Inc., a Delaware corporation
("Seller"), Au Bon Pain Co., Inc., a Delaware corporation ("Au Bon Pain"), and
Bunge Foods Corporation, a Delaware corporation ("Buyer"), for, among other
things, the sale of Seller's manufacturing plant in Mexico, Missouri (the
"Plant") to Buyer. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement.
WHEREAS, the parties desire that the Agreement be amended to reflect
changes that have occurred, and to correct inaccuracies discovered, since the
parties entered into the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree that,
anything to the contrary in the Agreement notwithstanding:
1. Schedule 1.1(f) to the Agreement, item 1, Delivery Order Number 6,
incorrectly indicates that the following piece of equipment leased from
Mercantile Leasing Corporation will be transferred to Buyer: Adamatic
Double Bank Knife Divider/Former Model RK4200. This piece of equipment is
not located at the Plant, is not used in the operation of the Assets being
sold to Buyer, and, therefore, the lease obligations for this piece of
equipment, as well as this piece of equipment, is to remain with Seller.
2. Section 1.1(i) to the Agreement is hereby deleted and restated in its
entirety as follows:
(i) All Seller's designs, models, prototypes, plans, specifications,
engineering and other drawings and everything related thereto; all Seller's
sales materials, catalogs, advertising, marketing and promotional
materials; all Seller's customer and supplier lists, mailing lists; and
copies of Seller's sales records, account histories, correspondence with
customers, and records of purchases from correspondence with suppliers
(collectively, the "Intangibles");
3. Schedule 1.7 to Exhibit 7.1(a)1 to the Agreement (which is Schedule 1.7 to
the Au Bon Pain Supply Agreement) shall be deleted and replaced with the
attached revised Schedule 1.7.
4. Schedule 1.7 to Exhibit 7.1(a)2 to the Agreement (which is Schedule 1.7 to
the Saint Louis Bread Supply Agreement) shall be deleted and replaced with
the attached revised Schedule 1.7.
5. Due to a change in product codes, Exhibit A to Exhibit 7.1(b)1 to the
Agreement (which is Exhibit A to the Au Bon Pain Wholesale Manufacturing
License) shall be deleted and replaced with the attached revised Exhibit A.
<PAGE>
6. Due to a change in product codes, Exhibit A to Exhibit 7.1(b)2 to the
Agreement (which is Exhibit A to the Saint Louis Bread Wholesale
Manufacturing License) shall be deleted and replaced with the attached
revised Exhibit A.
7. The following additional lease, which was inadvertently omitted from the
Agreement at the time of its execution, is hereby included with the Leases
listed on Schedule 1.1(f) to the Agreement and is to be assumed by Buyer:
First United Leasing lease for Skyjack Scissorlift
8. The following additional contracts, which were inadvertently omitted from
the Agreement at the time of its execution, are hereby included with the
Contracts listed on Schedule 1.1(g) to the Agreement and are to be assumed
by Buyer:
Rabbinical Counsel of New England Agreement
Mitel Financial Services Agreement
Diamond Walnut Growers, Inc. Agreement
9. The following additional contracts, which have been entered into since the
execution of the Agreement, are hereby included with the Contracts listed
on Schedule 1.1(g) to the Agreement and are to be assumed by Buyer:
South Georgia Pecan Co. Agreement
Con Agra Flour Milling Company Agreement
Slane International, Inc. Agreement (the "Slane Agreement")
Container Systems Agreement (the "Container Systems Agreement")
In addition, Seller has paid a deposit of $6,975 to Container Systems in
connection with the Container Systems Agreement and a deposit of $10,000 to
Slane International, Inc. in connection with the Slane Agreement. The Final
Net Book Value and Purchase Price shall reflect that these payments are to
be refunded to Seller.
10. Pursuant to Section 1.1(g) of the Agreement, Buyer agreed to assume the
obligation to pay the balance due to Trademark Equipment, Inc. for two
ovens shipped to the Plant in January 1998. Seller has since paid for said
ovens. The Final Net Book Value and Purchase Price shall reflect that this
payment is to be refunded to Seller.
11. Seller shall pay to Buyer the amounts due from Seller to Seller's employees
for vacation pay (the "Vacation Pay"). Upon receipt, Buyer shall be
responsible for and assume liability to such employees for the vacation pay
in the amounts paid and for the account of the employees designated by
Seller. The Vacation Pay shall be paid by Seller to Buyer at the time that
the Final Net Book Value is determined.
12. The insurance coverage required to be obtained and maintained by Au Bon
Pain pursuant to the Au Bon Pain Supply Agreement and by Saint Louis Bread
pursuant to the Saint Louis Bread Supply Agreement shall be satisfied if,
in the aggregate, such policy or policies equal the required amounts set
forth on Schedule 12 to either Supply
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<PAGE>
Agreement, so long as Au Bon Pain and Saint Louis Bread are under common
ownership. In the event that Au Bon Pain and Saint Louis Bread cease to be
under common ownership, each shall obtain and maintain its own policy with
the minimum coverage required pursuant to each Supply Agreement.
13. Any provision contained in the Agreement to the contrary notwithstanding,
the Closing shall occur on Monday, March 23, 1998; provided, however, that
all items of expense and income associated with operating the Plant from
and after 12:01 a.m. on Sunday, March 22, 1998 shall be for the account and
benefit of Buyer. The foregoing shall not be deemed to modify the
Possession Time.
14. Section 1.7 of the Agreement to the contrary notwithstanding, Seller and
Buyer shall mutually determine the allocation of the Purchase Price for tax
purposes within sixty (60) days after the Closing Date.
15. This Amendment may be executed in two or more counterparts. Each
counterpart, including a signature page executed by each of the parties
hereto shall be an original counterpart of this Amendment, but all of such
counterparts together shall constitute one instrument.
16. With the exception of the Amendment hereby incorporated into the Agreement,
unless specifically modified by the foregoing, the remaining terms and
conditions of the Agreement are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
entered into as an instrument under seal as of the day and year first above
written.
BUNGE FOODS CORPORATION
By /s/ Michael M. Scharf
--------------------------------
Michael M. Scharf
Senior Vice President
ABP MIDWEST MANUFACTURING CO., INC.
By /s/ Anthony J. Carroll
--------------------------------
Anthony J. Carroll
Vice President and Treasurer
AU BON PAIN CO., INC.
By /s/ Anthony J. Carroll
--------------------------------
Anthony J. Carroll
Vice President and Treasurer
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<PAGE>
INDEX OF EXHIBITS
TO ASSET PURCHASE AGREEMENT
Exhibit No.* Item
- ----------- ----
Exhibit 1.6(b) Bill of Sale
Exhibit 5.1(k) Non-foreign Status Certification to Seller
Exhibit 5.1(n) (Assistant) Secretary Certificate to Seller
Exhibit 5.1(o) Vice President (or Senior Officer) Certificate
of Seller and Au Bon Pain
Exhibit 5.1(q) Gadsby & Hannah LLP Opinion to Buyer
Exhibit 5.1(s) Title Insurance
Exhibit 5.1(s)(2) Survey
Exhibit 5.2(m) Vice President (or Senior Officer) Certificate
of Buyer
Exhibit 5.2(o) Murray H. Warschauer Opinion to Seller
Exhibit 7.1(a)(1) Au Bon Pain Supply Agreement
Exhibit 7.1(a)(2) Saint Louis Bread Supply Agreement
Exhibit 7.1(b)(1) Au Bon Pain Manufacturing License
Exhibit 7.1(b)(2) Saint Louis Bread Manufacturing License
Exhibit 8.2(a)(iv) Assumed Liabilities Assignment and Assumption
Agreement
* All Exhibits have been omitted. Copies will be provided supplementally to
the Commission upon request, provided that the Company reserves the right
to request confidential treatment for same.
Exhibit 4.1.1
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
-----------------------------------------------
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of the
13th day of February, 1998, by and among (i) AU BON PAIN CO., INC., a Delaware
corporation having its principal place of business at 19 Fid Kennedy Avenue,
Boston, Massachusetts 02210 ("ABP"), (ii) SAINT LOUIS BREAD COMPANY, INC., a
Delaware corporation having its principal place of business at 19 Fid Kennedy
Avenue, Boston, Massachusetts 02210 ("Saint Louis Bread"), (iii) ABP MIDWEST
MANUFACTURING CO., INC., a Delaware corporation having its principal place of
business at 19 Fid Kennedy Avenue, Boston, Massachusetts 02210 ("ABP Midwest",
and, together with ABP and Saint Louis Bread, the "Borrowers"), (iv) BANKBOSTON,
N.A., a national banking association, having its principal place of business at
100 Federal Street, Boston, Massachusetts 02110 ("BankBoston"), and (v) USTRUST,
a Massachusetts trust company, having its principal place of business at 30
Court Street, Boston, Massachusetts 02108, ("USTrust" and collectively with
BankBoston, the "Banks"), and BANKBOSTON, N.A. as agent for the Banks (in such
capacity, the "Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, pursuant to the Amended and Restated Revolving Credit and Term
Loan Agreement dated as of March 17, 1995 (as amended from time to time, the
"Existing Credit Agreement") by and among the Borrowers, the Banks and USTrust
as agent for the Banks, the Banks have made available certain financing to the
Borrower upon the terms and conditions contained therein;
WHEREAS, immediately prior to the effectiveness of this Amended and
Restated Revolving Credit Agreement, BankBoston has accepted an assignment of
the entire interest of Citizens Bank of Massachusetts under the Existing Credit
Agreement pursuant to that certain Assignment and Acceptance of even date
herewith, by and among the Borrowers, the Banks and USTrust, as agent for the
Banks;
WHEREAS, the Banks and the Borrowers desire that BankBoston act as
agent for the Banks and replace USTrust, the agent for the Banks under the
Existing Credit Agreement;
WHEREAS, the Borrowers desire to amend and restate the Existing Credit
Agreement, and the Banks have agreed to make such amendments on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree to amend and restate the Existing
Credit Agreement in its entirety as set forth herein:
<PAGE>
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[section] 1. DEFINITIONS AND RULES OF INTERPRETATION.
[section] 1.1. Definitions. The following terms shall have the meanings
set forth in this [section]1 or elsewhere in the provisions of this Credit
Agreement referred to below:
4.75% Convertible Subordinated Notes. Those certain 4.75% Convertible
Subordinated Notes due January 2, 2001 issued by Au Bon Pain Co., Inc. in the
aggregate principal amount of $30,000,000 pursuant to the terms of that certain
Securities Purchase Agreement dated as of December 17, 1993 among Au Bon Pain
Co., Inc. and certain purchasers named therein (as such notes are amended,
modified and restated and in effect from time to time).
ABP. Au Bon Pain Co., Inc., a Delaware corporation.
ABP Midwest. ABP Midwest Manufacturing Co., Inc., a Delaware
corporation.
Affiliate. Any Person that would be considered to be an affiliate of
any one of the Borrowers under Rule 144(a) of the Rules and Regulations of the
Securities and Exchange Commission, as in effect on the date hereof, if such
Borrower were issuing securities.
Agent. BankBoston acting as agent for the Banks.
Agent's Special Counsel. Bingham Dana LLP of Boston, Massachusetts, or
such other counsel as may be approved by the Agent.
Balance Sheet Date. December 28, 1996.
BankBoston. BankBoston, N.A., a national banking association.
Banks. BankBoston, USTrust, and any of their permitted successors and
assigns.
Base Rate. The higher of (i) the annual rate of interest announced from
time to time by the Agent at its head office in Boston, Massachusetts as its
"base rate" and (ii) one-half of one percent (1/2%) above the Federal Funds
Effective Rate. For purposes of this definition, "Federal Funds Effective Rate"
shall mean for any day, the rate per annum equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans which bear interest calculated
by reference to the Base Rate.
<PAGE>
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Borrowers. Au Bon Pain Co., Inc., a Delaware corporation, Saint Louis
Bread Company, Inc., a Delaware corporation, and ABP Midwest Manufacturing Co.,
Inc., a Delaware corporation, collectively, and if the context requires,
individually.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking busine[section]
Capitalized Leases. Leases under which any of the Borrowers or any of
their Subsidiaries is the lessee or obligor, the discounted future rental
payment obligations under which are required to be capitalized on the balance
sheet of the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Closing Date. February 13, 1998.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Commitment. With respect to each Bank, the amount set forth in the
column labeled Commitment opposite such Bank's name on Schedule 1.1(a) hereto,
as the same may be reduced, by the Borrowers or in accordance with [section]11,
from time to time.
Commitment Fee. See [section]2.2.
Commitment Percentage. With respect to each Bank, the percentage set
forth opposite such Bank's name on Schedule 1.1(a) thereto.
Compliance Certificate. See [section]6.4.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrowers, and
their Subsidiaries, consolidated in accordance with generally accepted
accounting principles.
Consolidated Capital Expenditures. For any specified period, amounts
added or required to be added to the fixed asset account on the Borrowers'
consolidated balance sheet in accordance with generally accepted accounting
principles, in respect of (i) the acquisition, construction, improvement or
replacement of land, buildings, machinery, equipment, leaseholds and any other
real or personal property, and (ii) to the extent not included in clause (i)
above, expenditures on account of materials, contract labor and direct labor
relating thereto (excluding expenditures properly expensed as repairs and
maintenance in accordance with generally accepted accounting principles).
<PAGE>
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Consolidated Growth Capital Expenditures. With respect to any relevant
period, the aggregate amount of Consolidated Capital Expenditures of the
Borrowers and their Subsidiaries which are incurred by the Borrowers and their
Subsidiaries during such relevant period and which, in accordance with generally
accepted accounting principles, are properly attributable to (i) the
acquisition, construction, or equipping of bakery cafes and stores acquired or
constructed during or after the Borrowers' fiscal year ending in 1997 or (ii)
the remodeling and improvement of any of ABP's bakery cafes and stores, which
were owned by ABP at the beginning of the Borrowers' fiscal year ending in 1997,
as part of ABP's "ABP 2000" project; which Consolidated Growth Capital
Expenditures shall in any event include, without limitation, those of the type
set forth on Schedule 1.1(b) under the heading "Growth/Discretionary Capital
Expenditures."
Consolidated Maintenance Capital Expenditures. The aggregate amount of
Consolidated Capital Expenditures of the Borrowers and their Subsidiaries which
are not Consolidated Growth Capital Expenditures
Consolidated Net Income (or Deficit). For any specified period, the net
income (or deficit) (after taxes) of the Borrowers and their Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles after eliminating all extraordinary nonrecurring non-cash
items of income, all extraordinary nonrecurring non-cash items of expense up to
an annual maximum of $2,500,000 and all inter-company items.
Consolidated Operating Cash Flow. With respect to the Borrowers and
their Subsidiaries and for any period, the sum of (a) Consolidated Net Income
for such period plus (b) to the extent deducted in the calculation of
Consolidated Net Income for such period, the aggregate amount of depreciation,
amortization and other non-cash charges for such period, plus (c) to the extent
deducted in the calculation of Consolidated Net Income for such period,
Consolidated Total Interest Expense for such period, less (d) twenty-five
percent (25%) of all Consolidated Growth Capital Expenditures and one hundred
percent (100%) of all Consolidated Maintenance Capital Expenditures made during
such period to the extent such Consolidated Capital Expenditures are permitted
by [section]8.2, in each case determined on a consolidated basis for the
Borrowers and their Subsidiaries in accordance with generally accepted
accounting principles.
Consolidated Senior Liabilities. Consolidated Total Liabilities less
Subordinated Debt.
Consolidated Tangible Net Worth. The excess of the Consolidated Total
Assets of the Borrowers and their Subsidiaries over the Consolidated Total
Liabilities, both determined on a consolidated basis after eliminating all
inter-company items, as the same properly appear on a consolidated balance sheet
of the Borrowers and their Subsidiaries prepared in accordance with generally
accepted accounting principles, less the sum of:
(a) the total book value of all assets of the Borrowers and their
Subsidiaries which would be treated as intangibles under generally accepted
accounting principles, including
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without limitation, such items as deferred financing costs, good will,
trademarks, trade names, service marks, brand names, copyrights, patents and
licenses, and rights with respect to the foregoing; and
(b) all amounts representing any write-up in the book value of any
assets of the Borrowers and their Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date.
Consolidated Total Assets. All assets of the Borrowers and their
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Total Debt Service. For any specific period, the sum of
(a) Consolidated Total Interest Expense for such period, plus (b) all scheduled
maturities or installments of long-term Indebtedness (including, without
limitation, scheduled Capitalized Lease installments payable during such period
other than the interest component of such payments, and also including without
limitation, final maturities of Indebtedness previously classified as long-term
Indebtedness) of the Borrowers and their Subsidiaries due and payable during
such period, calculated on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Total Interest Expense. For any specific period, the
aggregate amount of interest required to be paid or accrued during such period
by the Borrowers and their Subsidiaries on all Indebtedness, whether such
interest was or is required to be reflected as an item of expense or capitalized
and including, without limitation, the interest component of all payments under
Capitalized Leases, calculated on a consolidated basis in accordance with
generally accepted accounting principles.
Consolidated Total Liabilities. All liabilities of the Borrowers and
their Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles (including all Indebtedness of the
Borrowers and their Subsidiaries) less those Revolving Credit Loans equal to
that portion of the deposit posted by ABP with The SYGMA Network, Inc. and/or
The SYGMA Network of Ohio, Inc. at the relevant time of reference thereto
pursuant to the SYGMA Distribution Service Agreement made as of December 13,
1994 among ABP, The SYGMA Network, Inc. and The SYGMA Network of Ohio, Inc.
which ABP can withdraw from The SYGMA Network, Inc. and/or The SYGMA Network of
Ohio, Inc., as applicable, at any time at the sole option of ABP pursuant to
such agreement.
Conversion Request. A notice given by the Borrowers to the Agent in
accordance with [section]4.2 pursuant to which the Borrowers notify the Agent of
their election to convert one Type of Revolving Credit Loan to another Type of
Revolving Credit Loan or to continue a Type of a Revolving Credit Loan.
Credit Agreement. This Amended and Restated Revolving Credit Agreement,
including the Schedules and Exhibits hereto.
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Default. See [section]11.
Distribution. Any of the following: (a) the declaration or payment of
any dividend on or in respect of any shares of any class of capital stock of the
Borrowers, other than dividends payable solely in shares of common stock of any
Borrower; (b) the purchase, redemption, or other retirement of any shares of any
class of capital stock of any Borrower, directly or indirectly through a
Subsidiary of the Borrowers, an employee stock ownership or other employee
benefit plan or otherwise; (c) any other return of capital by any Borrower to
its shareholders as such and any other distribution on or in respect of any
shares of any class of capital stock of any Borrower; and (d) any other
distribution on or in respect of any shares of any class of capital stock of any
Borrower.
Dollars. Dollars in lawful currency of the United States of America.
Domestic Lending Office. Initially, the office of each Bank set forth
on Schedule 1.1(a) hereto, and, thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Base
Rate Loans.
Drawdown Date. The date on which any Revolving Credit Loan is made or
is to be made in accordance with [section]2.1.
Employee Benefit Plan. Any employee benefit plan within the meaning of
[section]3(2) of ERISA maintained or contributed to by the Borrowers or any
ERISA Affiliate, other than a Multiemployer Plan.
Environmental Laws. See [section]5.17.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate. Any Person which is treated as a single employer with
any one of the Borrowers under [section]414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of [section]4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Requirement. For any day with respect to a
Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any
lender subject thereto would be required to maintain reserves under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Requirement shall be adjusted
automatically on and as of the effective date of any change in the Eurocurrency
Reserve Requirement.
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Eurodollar Business Day. Any Business Day on which commercial banks are
open for international business (including dealings in Dollar deposits) in
London or such other eurodollar interbank market as may be selected by the Agent
in its sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank
designated as such on Schedule 1.1(c) hereto and, thereafter, such other office
of such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, a rate per annum determined by dividing (a) the rate at which the
Agent's Eurodollar Lending Office is offered Dollar deposits two Eurodollar
Business Days prior to the beginning of such Interest Period in the eurodollar
interbank market where the eurodollar and foreign currency and exchange
operations of such Eurodollar Lending Office are customarily conducted at or
about 10:00 A.M., Boston time, for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount substantially
comparable to the amount of the Agent's Eurodollar Rate Loan to which such
Interest Period applies by (b) a number equal to one (1) minus the Eurodollar
Reserve Requirement, if any.
Eurodollar Rate Loans. Revolving Credit Loans which bear interest
calculated by reference to the Eurodollar Rate.
Event of Default. See [section]11.
Existing Credit Agreement. The Amended and Restated Revolving Credit
and Term Loan Agreement, dated as of March 17, 1995, as amended, by and among
the Borrowers, USTrust, BankBoston, Citizens Bank of Massachusetts and USTrust
as Agent.
generally accepted accounting principles. (a) When used in [section]8,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrowers reflected in their financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time and (ii) consistently applied with past financial
statements of the Borrowers adopting the same principles; provided that, in each
case referred to in this definition of "generally accepted accounting
principles", a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
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Guaranteed Pension Plan. Any pension plan maintained by the Borrowers
or any of their Subsidiaries, or to which the Borrowers or any of their
Subsidiaries contributes, that is required to pay plan termination insurance
premiums to the Pension Benefit Guaranty Corporation.
Guaranties. (a) All guaranties, sales with recourse, endorsements
(other than for collection or deposit in the ordinary course of business) and
other obligations (contingent or otherwise) to pay, purchase, repurchase or
otherwise acquire or become liable upon or in respect of any Indebtedness of
others, and (b) without limiting the generality of the foregoing, all
obligations (contingent or otherwise) to purchase products, supplies or other
property or services from others under agreements requiring payment therefor
regardless of the non-delivery or non-furnishing thereof, or to make Investments
in others, or to maintain the capital, working capital, solvency or general
financial conditions of others, or to indemnify others against and hold them
harmless from damages, losses and liabilities, all under circumstances intended
to enable such others or any others to discharge any of their Indebtedness or to
comply with agreements relating to their Indebtedness or otherwise to assure or
protect their creditors against loss in respect of such Indebtedne[section]
Hazardous Substances. See [section]5.17.
Head Office. The head office of BankBoston located at 100 Federal
Street, Boston, Massachusetts 02110 or such other address as BankBoston shall
have last furnished in writing to the Borrowers and the Banks.
Imperio Term Loan Agreement. A Term Loan Agreement dated as of December
30, 1994, entered into by and between USTrust and Old Westbury Expressions, as
the same may be amended, extended or renewed from time to time; provided that
the principal amount outstanding thereunder shall not exceed $77,000 at any one
time outstanding.
Imperio Term Loans. The loans made or to be made by USTrust to Old
Westbury Expressions under the Imperio Term Loan Agreement.
Indebtedness. With respect to any Person to which such term is applied,
all obligations and reserves, contingent and otherwise, that in accordance with
generally accepted accounting principles should be reflected on such Person's
balance sheet as liabilities or to which reference should be made by footnotes
thereto and shall in any event include (a) all debt and other similar monetary
obligations, whether direct or indirect, (b) all Capitalized Leases, (c) all
obligations secured by any mortgage, pledge, security interest or lien existing
on property owned or acquired by such Person subject to such mortgage, pledge,
security interest or lien, whether or not the obligations secured thereby shall
have been assumed, and (d) all Guaranties by such Person.
Interest Payment Date. (a) As to any Base Rate Loan, monthly in arrears
on the last day of each calendar month, and (b) as to any Eurodollar Rate Loan
in respect of which the Interest Period is (i) 3 months or less, the last day of
such Interest Period and (ii) more than 3
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months, the date that is 3 months from the Drawdown Date thereof and the last
day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan which is a
Eurodollar Rate Loan, (i) initially, the period commencing on the date such
Revolving Credit Loan is made and ending on the last day of a period of either
1, 2, 3, or 6 months as selected by the Borrowers in a Loan Request for any such
Eurodollar Rate Loan, and (ii) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such Revolving Credit
Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrowers in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(ii) if with respect to any Revolving Credit Loan which is a
Eurodollar Rate Loan, the Borrowers shall fail to give a Conversion Request as
provided in [section]4.2, the Borrowers shall be deemed to have requested a
conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on the last
day of the then current Interest Period with respect thereto;
(iii) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month; and
(iv) the Borrowers may not select an Interest Period for any
Revolving Credit Loan that is a Eurodollar Rate Loan that would extend beyond
the scheduled Maturity Date.
Investment Agreement. The Investment Agreement dated as of July 24,
1996 by and among the Borrowers, Allied Capital Corporation, Allied Capital
Corporation II, and Capital Trust Investments, Ltd.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock (other than stock
issued by a wholly-owned Subsidiary of the relevant Person) or Indebtedness of,
or for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time, (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c)
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there shall be deducted in respect of each such Investment any amount received
as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); and (d) there
shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment, whether as dividends, interest or otherwise, except
that accrued interest included as provided in the foregoing clause (b) may be
deducted when paid.
Letter of Credit. See [section]3.1(a).
Letter of Credit Application. See [section]3.1(a).
Letter of Credit Participation. See [section]3.1(d).
Letter of Credit Reimbursement Agreement. See [section]9.9.
Leverage Ratio. With respect to the applicable time of reference, the
ratio of (a) the sum of Consolidated Senior Liabilities plus the net present
value (calculated using a discount rate of 12%) of future minimum commitments
under all operating leases (as such term is applied in accordance with generally
accepted accounting principles) of the Borrowers and their Subsidiaries at such
time to (b) the sum of the Consolidated Tangible Net Worth of the Borrowers and
their Subsidiaries plus all Subordinated Debt of the Borrowers and their
Subsidiaries outstanding at such time.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, and any other instruments or agreements
executed and delivered by the Borrowers to the Banks in connection with the
transactions contemplated by this Credit Agreement.
Loan Request. See [section]2.5.
Majority Banks. As of any date, the Banks holding at least two-thirds
of the outstanding principal amount of the Notes on such date, and if no such
principal is outstanding, the Banks whose aggregate Commitment constitutes at
least two-thirds of the Total Commitment; provided that if the number of Banks
is two or less, the term "Majority Banks" shall mean both Banks.
Maturity Date. September 30, 1999, or such earlier date on which the
outstanding Revolving Credit Loans hereunder are declared due and payable
pursuant to the terms of this Credit Agreement or on which the Total Commitment
is terminated.
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
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Multiemployer Plan. Any multiemployer plan within the meaning of
[section]3(37) of ERISA maintained or contributed to by any of the Borrowers or
any ERISA Affiliate.
Note Record. The grid attached to a Note, or the continuation of such
grid, or any other similar record maintained by the Bank holding such Note with
respect to any Revolving Credit Loan.
Notes. See [section]2.4.
Obligations. All indebtedness, obligations and liabilities of the
Borrowers and their Subsidiaries to the Banks, individually or collectively,
existing on the date of this Credit Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Credit Agreement, the Notes
or the other Loan Documents or in respect of the Revolving Credit Loans or
Letters of Credit or under other instruments at any time evidencing or securing
any thereof.
Old Westbury Expressions. Old Westbury Expressions, Inc., a New York
corporation.
Outstanding or outstanding. With respect to the Revolving Credit Loans,
the aggregate unpaid principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by [section]4002
of ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. Liens, security interests and other encumbrances of
the type permitted by [section]7.3.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Proprietary Rights. See [section]5.6.
Real Estate. All real property at any time owned or leased by the
Borrowers or any of their Subsidiaries.
Reimbursement Obligation. The Borrowers' obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in [section]3.2.
Revolving Credit Loans. Collectively, the revolving credit loans made
or to be made by the Banks to the Borrowers pursuant to [section]2 of this
Credit Agreement.
Saint Louis Bread. Saint Louis Bread Company, Inc., a Delaware
corporation.
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Scheduled Letters of Credit. See [section]3.1.
Senior Indebtedne[section] See [section]4.12(f).
Settlement. The making of, or receiving of, payments in immediately
available funds, by the Banks to or from the Agent in accordance with
[section]2.6 to the extent necessary to cause each Bank's actual share of the
outstanding amount of the Revolving Credit Loans to be equal to each Bank's
Commitment Percentage of the outstanding amount of such Revolving Credit Loans,
in any case where, prior to such event or action, the actual share is not so
equal.
Settlement Amount. That amount which each Bank is required to pay in
order to effect a Settlement.
Settlement Date. See [section]2.6(b).
Subordinated Debt. All Indebtedness permitted hereunder that is
subordinated in right of payment to the Obligations on terms satisfactory to the
Banks.
Subordination Agreement. The Subordination Agreement dated as of July
24, 1996 among the Banks, the Agent, the Borrowers, Allied Capital Corporation,
Allied Capital Corporation II, and Capital Trust Investments, Ltd., as amended
previously, and in effect on the date hereof.
Subsidiary. Any corporation, partnership, association, trust, or other
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan
or a Eurodollar Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
Unlimited Imperio Guaranty. The unlimited guaranty dated as of December
30, 1994, executed by the Borrowers in favor of USTrust in connection with the
Imperio Term Loan Agreement, guaranteeing all obligations of Old Westbury
Expressions, Leonard Imperio and Rosemarie Imperio owing to USTrust under or in
connection with the Imperio Term Loan Agreement.
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Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
the Borrowers do not reimburse the Agent and the Banks on the date specified in,
and in accordance with, [section]3.2.
USTrust. USTrust, a Massachusetts trust company, in its individual
capacity.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
[section]1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in Massachusetts, have the meanings assigned to them therein.
(h) Reference to a particular "[section]" refers to that section of the
agreement in which such reference appears unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to the agreement in which they appear as a whole and not to any
particular section or subdivision of that agreement unless otherwise
specifically indicated.
[section]2. THE REVOLVING CREDIT FACILITY.
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[section]2.1. Commitment to Lend. Subject to the terms and conditions
set forth in this Credit Agreement, each of the Banks severally agrees to lend
to the Borrowers and the Borrowers may borrow, repay, and reborrow from time to
time between the date of this Credit Agreement and the Maturity Date upon notice
by the Borrowers to the Agent given in accordance with [section]2.5, such sums
as requested by the Borrowers up to a maximum aggregate principal amount
outstanding (after giving effect to all amounts then being requested) at any one
time equal to such Bank's Commitment provided that the aggregate outstanding
principal balance of the Revolving Credit Loans shall at no time exceed (a) the
Total Commitment as then in effect less (b) an amount equal to the sum of (i)
the aggregate outstanding principal amount of the Imperio Term Loans and the
commitments to make new loans under the Imperio Term Loan Agreement, plus (ii)
the Maximum Drawing Amount with respect to outstanding Letters of Credit, plus
(iii) the aggregate amount of Unpaid Reimbursement Obligations owing with
respect to Letters of Credit issued hereunder. The Revolving Credit Loans shall
be made pro rata in accordance with each Bank's Commitment Percentage. Each
request for a Revolving Credit Loan shall constitute a representation by the
Borrowers that the conditions set forth in [section]9 and [section]10, in the
case of the initial Revolving Credit Loans to be made on the Closing Date, and
[section]10, in the case of all other Revolving Credit Loans, have been
satisfied on the date of such request.
[section]2.2. Commitment Fee. The Borrowers agree to pay to the Agent
for the accounts of the Banks in accordance with their respective Commitment
Percentages a commitment fee calculated daily at the per annum rate of 0.375% on
the difference on each such day between (a) the Total Commitment in effect on
such date and (b) an amount equal to the sum on such day of (i) the aggregate
outstanding principal amount of the Revolving Credit Loans, plus (ii) the
Maximum Drawing Amount with respect to outstanding Letters of Credit, plus (iii)
the aggregate amount of Unpaid Reimbursement Obligations owing with respect to
Letters of Credit issued hereunder (the "Commitment Fee"); provided that for
purposes of calculating the Commitment Fee, the Total Commitment shall be
reduced by the aggregate then outstanding principal amount of the Imperio Term
Loans. The amount of such Commitment Fee shall be payable quarterly in arrears
on the last day of each March, June, September and December for the calendar
quarter, or portion thereof, then ended.
[section]2.3. Reduction of Commitment.
(a) The Borrowers shall have the right at any time and from time to
time upon three (3) Business Days' written notice to the Agent to reduce by
$100,000 or an integral multiple thereof or terminate entirely the unborrowed
portion of the Total Commitment, whereupon the Commitments of the Banks shall be
reduced pro rata in accordance with their respective Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated. Promptly
after receiving any notice of the Borrowers delivered pursuant to this
[section]2.3, the Agent will notify the Banks of the substance thereof. No
reduction of the Commitments of the Banks may be reinstated.
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(b) Upon the effective date of any such termination, the Borrowers
shall pay to the Agent for the respective accounts of the Banks the full amount
of any Commitment Fee then accrued.
[section]2.4. The Notes. The Revolving Credit Loans shall be evidenced
by separate promissory notes of the Borrowers in substantially the form of
Exhibit A hereto (each a "Note"), dated the Closing Date and completed with
appropriate insertions. One Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Commitment or, if less, the outstanding
amount of all Revolving Credit Loans made by such Bank, plus interest accrued
thereon, as set forth below. The Borrowers irrevocably authorize each Bank to
make or cause to be made, at or about the time of receipt of any payment of
principal on such Bank's Note, an appropriate notation reflecting such payment
on the Note Record attached to such Bank's Note. The outstanding amount of the
Revolving Credit Loans set forth on such Note Record shall be prima facie
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Note
Record shall not limit or otherwise affect the obligations of the Borrowers
hereunder or under any Note to make payments of principal of or interest on any
Note when due.
[section]2.5. Requests for Revolving Credit Loans. The Borrowers shall
give to the Agent written notice in the form of Exhibit B hereto (or telephonic
notice confirmed in a writing in the form of Exhibit B hereto) of each Revolving
Credit Loan requested hereunder (a "Loan Request") no later than 11:00 a.m.
(Boston time) at least (a) one (1) Business Day prior to the proposed Drawdown
Date of any Base Rate Loan and (b) three (3) Eurodollar Business Days prior to
the proposed Drawdown Date of any Eurodollar Rate Loan; provided that in the
event that an overdraft occurs with respect to any account any Borrower
maintains with either of the Banks, the Borrowers may request a Base Rate Loan
in an amount necessary to cover such overdraft by notice to the Agent not later
than 10:00 a.m. (Boston time) on the proposed Drawdown Date. Each such notice
shall specify (i) the principal amount of the Revolving Credit Loan requested,
(ii) the proposed Drawdown Date of such Revolving Credit Loan, (iii) if a
Eurodollar Rate Loan, the Interest Period for such Revolving Credit Loan and
(iv) the Type of such Revolving Credit Loan. By delivery of such Loan Request,
the Borrowers shall be deemed to have represented and warranted to the Banks
that the conditions precedent set forth in [section]10.1 are satisfied as of the
date of such Loan Request and the then requested Drawdown Date. Any Loan Request
delivered by any Borrower shall be deemed to have been delivered by, and shall
bind, all the Borrowers. Each Loan Request shall be irrevocable and binding on
the Borrowers and shall obligate the Borrowers to accept the Revolving Credit
Loan requested from the Banks on the proposed Drawdown Date; provided that (x)
if the Revolving Credit Loan requested is a Base Rate Loan and (y) the Borrowers
specify in such Loan Request that the Borrowers will not accept the Revolving
Credit Loan then requested on the proposed Drawdown Date unless the Agent
receives the amount of each Bank's Commitment Percentage of the requested
Revolving Credit Loan from each such Bank, severally, prior to the time on which
such Revolving Credit Loan is to be advanced, then the Borrowers shall have no
obligation to accept such Revolving Credit Loan on the proposed Drawdown Date,
and the Agent shall have no obligation to make such Revolving Credit Loan
<PAGE>
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available to the Borrowers on the proposed Drawdown Date, unless prior to the
time on which such Revolving Credit Loan is to be advanced the Agent shall have
received from each such Bank, severally, the amount of such Bank's Commitment
Percentage of the then requested Revolving Credit Loan. Each Loan Request in
respect of (A) any Base Rate Loan shall be in a minimum borrowing amount of
$50,000 and (B) any Eurodollar Rate Loan shall be in a minimum amount of
$500,000 or an integral multiple of $100,000 in excess thereof; provided,
however, the number of Eurodollar Rate Loans outstanding at any one time shall
not exceed five (5).
[section]2.6. Funds for Revolving Credit Loans; Settlements.
(a) Promptly upon receipt of any Loan Request, the Agent shall notify
each of the Banks of the substance thereof. Upon receipt of the documents
required by [section][section]9 and 10 and the satisfaction of the other
conditions set forth herein to the extent applicable, the Agent will make the
aggregate amount of the Revolving Credit Loans requested by the Borrowers
pursuant to [section]2.5 available to the Borrowers.
(b) Each Bank severally agrees that it shall be absolutely liable, to
the extent of such Bank's Commitment Percentage, to effect Settlements on the
last Business Day of each week, on the Maturity Date and within one Business Day
after each other date on which the aggregate Settlement Amount payable exceeds
$1,000,000 (or more frequently at the Agent's discretion) (the "Settlement
Date"), without regard to the occurrence on such Settlement Date of any Default
or Event of Default or any other condition precedent whatsoever. On the Business
Day prior to each such Settlement Date, the Agent shall give telephonic notice
to the Banks of (i) the respective outstanding amount of Revolving Credit Loans
made by each Bank as at the close of business on the prior day, (ii) the
Settlement Amount that any Bank, as applicable (the "Settling Bank"), shall pay
to effect a Settlement and (iii) the portion (if any) of the aggregate
Settlement Amount to be paid to each Bank. A statement of the Agent submitted to
the Banks with respect to any amounts owing under this [section]2.6(b) shall be
prima facie evidence of the amount due and owing. Each Settling Bank shall, as
promptly as practical during normal business hours on each Settlement Date,
effect a wire transfer of immediately available funds to the Agent in the amount
of its Settlement Amount. The Agent shall, as promptly as practical during
normal business hours on each Settlement Date, effect a wire transfer of
immediately available funds to each Bank of the Settlement Amount to be paid to
such Bank. All funds advanced by any Bank as a Settling Bank pursuant to this
[section]2.6(b) shall for all purposes be treated as a Revolving Credit Loan
made by such Settling Bank to the Borrowers and all funds received by any Bank
pursuant to this [section]2.6(b) shall for all purposes be treated as repayment
of amounts owed by the Borrowers with respect to Revolving Credit Loans made by
such Bank.
(c) If the Settlement Amount is made available to the Agent (or,
conversely, if the Agent makes the Settlement Amount available to a Bank
entitled thereto) on a date after the relevant Settlement Date, such Settling
Bank shall pay to the Agent (or, conversely, the Agent shall pay to such Bank
entitled to such Settlement Amount) on demand an amount equal to the product of
(i) the average computed for the period referred to in clause (iii) below, of
the
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weighted average interest rate paid by the Agent (or such Bank) for federal
funds acquired by the Agent (or such Bank) during each day included in such
period, times (ii) the Settlement Amount, times (iii) a fraction, the numerator
of which is the number of days that elapse from and including such Settlement
Date to the date on which the Settlement Amount shall become immediately
available to the Agent (or such Bank), and the denominator of which is 365. Upon
payment of such amount the Settling Bank shall be deemed to have delivered the
Settlement Amount of such Settling Bank on the Settlement Date and shall become
entitled to interest payable by the Borrowers with respect to such Bank's
Settlement Amount as if such share were delivered on the Settlement Date. If the
Settlement Amount is not in fact made available to the Agent by the Settling
Bank within three (3) Business Days of such Settlement Date, the Agent shall be
entitled to debit the Borrowers' accounts to recover such amount from the
Borrowers, with interest thereon at the rate per annum applicable to any
Revolving Credit Loans made on such Settlement Date. A statement of the Agent
submitted to any Bank with respect to any amounts owing under this paragraph
shall be prima facie evidence of the amount due and owing to the Agent by such
Bank.
(d) The failure or refusal of any of the Banks to make available to the
Agent at the aforesaid time on any date the amount of the Revolving Credit Loans
to be made by such Bank shall not relieve any other Bank from its obligations
hereunder to make Settlements and Revolving Credit Loans, but in no event shall
any Bank or the Agent be responsible for funding or otherwise be liable for the
failure of any other Bank to make the Revolving Credit Loans to be made by such
other Bank.
[section]2.7. Mandatory Repayments of Revolving Credit Loans. The
Borrowers promise to pay the outstanding amount of all Revolving Credit Loans on
the Maturity Date. In addition, if at any time the sum of the outstanding amount
of the Revolving Credit Loans exceeds the Total Commitment of the Banks, the
Borrowers shall immediately pay the amount of such excess to the Agent for
application to the Revolving Credit Loans, and the Agent shall distribute such
amount to the Banks in accordance with [section]2.6(b).
[section]2.8. Optional Repayments of Revolving Credit Loans. The
Borrowers shall have the right, at their election, to repay the outstanding
amount of any Revolving Credit Loans, as a whole or in part, at any time without
penalty or premium; provided that in the case of any full or partial prepayment
of the outstanding amount of any Eurodollar Rate Loans, the Borrowers shall be
obligated to reimburse the Banks in respect thereof pursuant to [section]4.3.
The Borrowers shall give the Agent, no later than 10:00 a.m. (Boston time) (a)
at least one (1) Business Day's notice of any proposed repayment of Base Rate
Loans and (b) at least three (3) Eurodollar Business Days' notice of any
proposed repayment of Revolving Credit Loans, in each case specifying the
proposed date of repayment and the principal amount to be paid, which notice, if
not in writing, shall be promptly confirmed in writing. Each such partial
payment of (i) Base Rate Loans shall be in a minimum amount of $50,000 and (ii)
Eurodollar Rate Loans shall be in a minimum amount of $500,000 or an integral
multiple of $100,000 in excess thereof. Each repayment pursuant to this
[section]2.8 shall be accompanied by the payment of accrued interest on the
principal repaid to the date of payment. Each such partial repayment shall be
allocated among the Banks, in proportion, as nearly as practicable, to the
respective
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unpaid principal amount of each Bank's Note, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion, and
shall be distributed to each Bank in accordance with [section]2.6(b).
[section]2.9. Fees. The Borrowers shall pay to the Agent for the pro
rata account of each Bank, in accordance with each Bank's Commitment Percentage,
the following fees: (i) on the Closing Date, a closing fee in the amount of
$70,002.00; (ii) on March 31, 1998, a fee in the amount of $70,000.00; (iii) on
June 30, 1998, a fee in an amount equal to three-fourths percent (3/4%) of the
Total Commitment as then in effect; and (iv) on September 30, 1998, and on the
last Business Day of each calendar quarter thereafter, a fee in an amount equal
to one percent (1%) of the Total Commitment as then in effect.
[section]3 LETTER OF CREDIT FACILITY
[section]3.1. Letter of Credit Commitments.
(a) Subject to the terms and conditions hereof and the execution and
delivery by any Borrower of a letter of credit application on the Agent's
customary form (a "Letter of Credit Application"), the Agent on behalf of the
Banks and in reliance upon the agreement of the Banks set forth in
[section]3.1(d) and upon the representations and warranties of the Borrowers
contained herein, agrees, in its individual capacity, to issue, extend and renew
for the account of the Borrowers one or more standby or documentary letters of
credit (individually, a "Letter of Credit"), in such form as may be requested
from time to time by the Borrowers and agreed to by the Agent; provided,
however, that, after giving effect to such request, (x) the sum of the aggregate
Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed
$2,000,000 at any one time and (y) the sum of (i) the Maximum Drawing Amount on
all Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and (iii) the
amount of all Revolving Credit Loans outstanding shall at no time exceed (A) the
Total Commitment as then in effect less (B) the aggregate outstanding principal
amount of the Imperio Term Loans and the commitments to make new loans under the
Imperio Term Loan Agreement.
(b) Each Letter of Credit Application shall be completed to the
satisfaction of the Agent. Promptly upon receipt of any Letter of Credit
Application, the Agent shall notify each of the Banks of the substance thereof.
In the event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the provisions of
this Credit Agreement shall, to the extent of any such inconsistency, govern.
(c) Each Letter of Credit issued, extended or renewed hereunder shall,
among other things, (i) provide for the payment of sight drafts for honor
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein, and (ii) have an expiry date no
later than the date which is fourteen (14) days prior to the Maturity Date. Each
Letter of Credit so issued, extended or renewed shall be subject to the Uniform
Customs.
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(d) Each Bank severally agrees that it shall be absolutely liable,
without regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft paid
by the Agent under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrowers pursuant to [section]3.2 (such agreement for a Bank
being called herein the "Letter of Credit Participation" of such Bank).
(e) Each such payment made by a Bank shall be treated as the purchase
by such Bank of a participating interest in the Borrowers' Reimbursement
Obligation under [section]3.2 in an amount equal to such payment. Each Bank
shall share in accordance with its participating interest in any interest which
accrues pursuant to [section]3.2.
(f) The parties hereto acknowledge and agree that the letters of credit
described on Schedule 3.1 hereto (the "Scheduled Letters of Credit") shall be
deemed to be Letters of Credit issued under this [section]3 subject to the terms
and provisions set forth in this Credit Agreement and the rights and obligations
of the Borrowers, the Banks and the Agent with respect to such Scheduled Letters
of Credit shall be as set forth in this Credit Agreement as though such Letters
of Credit had been issued hereunder. With respect to those Scheduled Letters of
Credit issued by USTrust, and in each such case, to the extent applicable to
such Letters of Credit, USTrust shall be deemed to be the "Agent" under this
[section]3 with all of the rights of the Agent under this [section]3 and
references to the Agent in its capacity as an issuing Bank of Letters of Credit
shall be deemed to be references to USTrust as such issuing Bank with respect to
those Letters of Credit and the obligations of the Borrowers and the other Banks
in connection with such Letters of Credit as set forth in this [section]3 shall
apply to such Letters of Credit and USTrust as the issuing Bank thereof.
[section]3.2. Reimbursement Obligation of the Borrowers. In order to
induce the Agent to issue, extend and renew each Letter of Credit and the Banks
to participate therein, the Borrowers hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in [section]3.2(b) and (c),
on each date that any draft presented under such Letter of Credit is honored by
the Agent, or the Agent otherwise makes a payment with respect thereto, (i) the
amount paid by the Agent under or with respect to such Letter of Credit, and
(ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Agent or any Bank in connection with any payment made
by the Agent or any Bank under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total Commitment to
an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the Banks
and the Agent as cash collateral for all Reimbursement Obligations, and
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(c) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with [section]11, an amount equal to the then Maximum Drawing Amount
on all Letters of Credit, which amount shall be held by the Agent for the
benefit of the Banks and the Agent as cash collateral for all Reimbursement
Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office
in immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrowers under this [section]3.2 at any time from the date such amounts
become due and payable (whether as stated in this [section]3.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in [section]4.11 for
overdue principal on the Revolving Credit Loans.
[section]3.3. Letter of Credit Payments. If any draft shall be
presented or other demand for payment shall be made under any Letter of Credit,
the Agent shall notify the Borrowers of the date and amount of the draft
presented or demand for payment and of the date and time when it expects to pay
such draft or honor such demand for payment. If the Borrowers fail to reimburse
the Agent as provided in [section]3.2 on or before the date that such draft is
paid or other payment is made by the Agent, the Agent may at any time thereafter
notify the Banks of the amount of any such Unpaid Reimbursement Obligation. No
later than 3:00 p.m. (Boston time) on the Business Day next following the
receipt of such notice, each Bank shall make available to the Agent, at its Head
Office, in immediately available funds, such Bank's Commitment Percentage of
such Unpaid Reimbursement Obligation, together with an amount equal to the
product of (i) the average, computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times (ii) the
amount equal to such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, times (iii) a fraction, the numerator of which is the number of days
that elapse from and including the date the Agent paid the draft presented for
honor or otherwise made payment to the date on which such Bank's Commitment
Percentage of such Unpaid Reimbursement Obligation shall become immediately
available to the Agent, and the denominator of which is 360. The responsibility
of the Agent to the Borrowers and the Banks shall be only to determine that the
documents (including each draft) delivered under each Letter of Credit in
connection with such presentment shall be in conformity in all material respects
with such Letter of Credit.
[section]3.4. Obligations Absolute. The Borrowers' obligations under
this [section]3 shall be absolute and unconditional under any and all
circumstances and irrespective of the occurrence of any Default or Event of
Default or any condition precedent whatsoever or any setoff, counterclaim or
defense to payment which the Borrowers may have or have had against the Agent,
any Bank or any beneficiary of a Letter of Credit. The Borrowers further agree
with the Agent and the Banks that the Agent and the Banks shall not be
responsible for, and the Borrowers' Reimbursement Obligations under [section]3.2
shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, fraudulent or forged, or any dispute
between or among the Borrowers, the beneficiary of any Letter of Credit or any
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financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of the Borrowers against the
beneficiary of any Letter of Credit or any such transferee. The Agent and the
Banks shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrowers agree that
any action taken or omitted by the Agent or any Bank under or in connection with
each Letter of Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Borrowers and shall not result in any liability
on the part of the Agent or any Bank to the Borrowers.
[section]3.5. Reliance by Issuer. To the extent not inconsistent with
[section]3.4, the Agent shall be entitled to rely, and shall be fully protected
in relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have received such advice or concurrence of the Majority Banks as
it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of the
Majority Banks, and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Banks and all future holders of the Notes or
of a Letter of Credit Participation.
[section]3.6. Letter of Credit Fee. The Borrowers shall pay in advance,
on the date of the issuance or any extension or renewal of any Letter of Credit
or, if earlier, on each annual anniversary date of the issuance of such Letter
of Credit, a standby letter of credit fee equal to the greater of (i) 2% per
annum of the Maximum Drawing Amount of each Letter of Credit, or (ii) the
Agent's minimum standard flat fee charged for each standby Letter of Credit (in
each case, a "Letter of Credit Fee"), to be for the accounts of the Banks in
accordance with their respective Commitment Percentages. In respect of each
Letter of Credit, the Borrowers shall also pay to the Agent for the Agent's own
account, at such other time or times as such charges are customarily made by the
Agent, the Agent's customary issuance, amendment, negotiation or document
examination and other administrative fees as in effect from time to time.
[section]4. INTEREST; INTEREST RATE CONVERSION OPTIONS;
CERTAIN GENERAL PROVISIONS.
[section]4.1. Interest on Revolving Credit Loans.
(a) Except as otherwise increased pursuant to [section]4.11 hereof, the
outstanding amount of each Type of Revolving Credit Loan shall bear interest
calculated as follows:
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(i) the outstanding amount of each Revolving Credit Loan which
is a Base Rate Loan shall bear interest at a rate per annum equal to
the Base Rate plus one-half of one percent (0.50%); and
(ii) the outstanding amount of each Revolving Credit Loan
which is a Eurodollar Rate Loan shall bear interest during each
Interest Period relating thereto at a rate per annum equal to the
Eurodollar Rate determined for each such Interest Period plus three
percent (3.0%).
(b) The Borrowers absolutely and unconditionally promise to pay
interest on each Type of Revolving Credit Loan in arrears on each Interest
Payment Date with respect thereto.
[section]4.2. Interest Rate Conversion Options.
(a) The Borrowers may elect from time to time to convert any
outstanding Type of Revolving Credit Loan to another Type of Revolving Credit
Loan; provided that (i) with respect to any such conversion of a Base Rate Loan
to a Eurodollar Rate Loan, the Borrowers shall give the Agent at least three (3)
Eurodollar Business Days' prior irrevocable notice of such election; and (ii)
with respect to any such conversion of a Eurodollar Rate Loan to a Base Rate
Loan, such conversion shall only be made on the last day of the Interest Period
with respect thereto or upon the date of payment in full of any amounts owing
pursuant to [section]4.3 as a result of such conversion. On the date on which
such conversion is being made, each Bank shall take such action as is necessary
to transfer its Commitment Percentage of such Revolving Credit Loans to its
Domestic Lending Office or its Eurodollar Lending Office, as the case may be.
All or any part of the outstanding Revolving Credit Loans of any Type may be
converted as provided herein; provided, that partial conversions of Eurodollar
Rate Loans shall be in an aggregate principal amount of $500,000 or an integral
multiple of $100,000 in excess thereof and, provided further, the number of
Eurodollar Rate Loans outstanding at any one time shall not exceed five (5).
(b) Any Revolving Credit Loan which is a Eurodollar Rate Loan may be
continued as such upon the expiration of an Interest Period with respect thereto
by compliance by the Borrowers with the notice provisions for conversions
contained in subsection (a) above; provided that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the last
day of the last Interest Period for which a Eurodollar Rate was determined by
the Agent on or prior to the Agent's obtaining knowledge of such Default or
Event of Default. The Agent shall notify the Banks promptly that such automatic
conversion contemplated by this [section]4.2(b) will occur.
(c) Any conversion of Revolving Credit Loans to or from Eurodollar Rate
Loans shall be in such amounts and be made pursuant to such elections so that,
after giving effect thereto, the outstanding amount of all Eurodollar Rate
Loans, if any remain outstanding after giving effect to such conversion, having
the same Interest Period shall not be less than, in each such case, $500,000 or
an integral multiple of $100,000 in excess thereof.
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(d) Any conversion of Revolving Credit Loans to or from Base Rate Loans
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the outstanding amount of all Base Rate Loans, if any
remain outstanding after giving effect to such conversion, shall not be less
than $100,000 or an integral multiple of $100,000 in excess thereof.
(e) Each conversion of a Type of Revolving Credit Loan or continuation
of any Base Rate Loan or Eurodollar Rate Loan hereunder shall be allocated
between the Banks in proportion, as nearly as practicable, to such Bank's
Commitment Percentage, with adjustments to the extent practicable to equalize
any prior conversions or continuations not exactly in proportion.
[section]4.3. Indemnity. The Borrowers agree to indemnify each Bank and
to hold each Bank harmless from any loss or expense that such Bank may sustain
or incur as a consequence of (a) default by the Borrowers in payment of the
principal amount of or interest on any Eurodollar Rate Loans, including any such
loss or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (b) default
by the Borrowers in making a borrowing after the Borrowers have given (or are
deemed to have given) a Loan Request or a Conversion Request in accordance with
[section][section]2.5 or 4.2 other than as a result of a default by any Bank,
(c) the making of any payment of a Eurodollar Rate Loan or the making of any
conversion of any such Eurodollar Rate Loan on a day that is not the last day of
the applicable Interest Period with respect thereto, including interest or fees
payable by any Bank to lenders of funds obtained by it in order to maintain any
such Eurodollar Rate Loan, or (d) default by the Borrowers in making any
repayment of a Eurodollar Rate Loan after the Borrowers have given a notice of
repayment in accordance with [section]2.8. This covenant shall survive the
termination of this Credit Agreement and payment of the Notes.
[section]4.4. Funds for Payments. All payments of principal, interest,
and the Commitment Fee and any other amounts due hereunder or under any of the
other Loan Documents shall be made by the Borrowers to the Agent at the Agent's
head office at 100 Federal Street, Boston, Massachusetts 02110 or at such other
location in the Boston, Massachusetts area that the Agent may from time to time
designate, in each case in immediately available funds.
[section]4.5. Computations. All computations of interest on the
Revolving Credit Loans and the Commitment Fee shall be based on a 360 day year
and paid for the actual number of days elapsed. Except as otherwise specifically
provided herein, whenever a payment hereunder or under any of the other Loan
Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Revolving
Credit Loans as reflected on the Note Records from time to time shall be
considered conclusive and binding absent manifest mathematical error on the
Borrowers unless within five (5) Business Days after receipt of any notice by
the Agent or any of the Banks of such outstanding amount, the Borrowers shall
notify the Agent or such Bank to the contrary. Each change in the rate of
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interest applicable to the Base Rate Loans resulting from a change in the Base
Rate shall be effective on the date of each change in the Base Rate.
[section]4.6. Inability to Determine Eurodollar Rate. In the event the
Agent shall determine in good faith that adequate and reasonable methods do not
exist for ascertaining the Eurodollar Rate that would otherwise determine the
rate of interest to be applicable during any Interest Period, the Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrowers) to the Borrowers at least one (1) Business Day before
the first day of such Interest Period. In such event, (a) any Loan Request or
Conversion Request with respect to Eurodollar Rate Loans shall be automatically
withdrawn or, at the Borrowers' option, shall be deemed a request for Base Rate
Loans, (b) each Eurodollar Rate Loan will automatically, on the last day of the
then current Interest Period thereof, become a Base Rate Loan, and (c) the
obligations of the Banks to make additional Eurodollar Rate Loans shall be
suspended until the Agent determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Agent shall so notify the Borrowers
and the Banks.
[section]4.7. Illegality. Notwithstanding any other provisions herein,
if any introduction of or change in any law, regulation, treaty or directive or
in the interpretation or application thereof shall make it unlawful, or any
central bank or other governmental authority having jurisdiction over any Bank
or its Eurodollar Lending Office shall assert that it is unlawful, for such Bank
or its Eurodollar Lending Office to make or maintain Eurodollar Rate Loans, (a)
such Bank shall forthwith give notice of such circumstances, confirmed in a
writing delivered to the Borrowers by courier or postal service (which notice
shall be withdrawn by such Bank when such Bank shall reasonably determine that
it shall no longer be illegal for such Bank or its Eurodollar Lending Office to
make or maintain Eurodollar Rate Loans or to convert Base Rate Loans to
Eurodollar Rate Loans), (b) the commitment of such Bank to make or maintain
Eurodollar Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall
forthwith be canceled and (c) such Bank's Eurodollar Rate Loans then
outstanding, if any, shall be converted automatically to Base Rate Loans on the
next succeeding last day of each Interest Period applicable to such Eurodollar
Rate Loans or within such earlier period as may be required by law. The
Borrowers agree promptly to pay the Agent for the account of each Bank, upon
demand by the Agent, any additional amounts necessary to compensate the Banks
for any costs incurred by the Banks in making any conversion in accordance with
this [section]4.7, including any interest or fees payable by the Banks to
lenders of funds obtained by them in order to make or maintain their Eurodollar
Rate Loans (the Agent's written notice of such costs, as certified to the
Borrowers, to be conclusive absent manifest error).
[section]4.8. Additional Costs, Etc. If any present or future, or any
change in any present or future, applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
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(a) subject any Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Credit Agreement,
the other Loan Documents, such Bank's Commitment or the Revolving Credit Loans
advanced by such Bank (other than taxes based upon or measured by the income or
profits of such Bank), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or the
interest on any Revolving Credit Loans or any other amounts payable to such Bank
under this Credit Agreement or the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, or other similar requirements against
assets held by, or deposits in or for the account of, or loans by, or
commitments of, or letters of credit issued by, an office of any Bank, or
(d) impose on any Bank any other conditions or requirements with
respect to this Credit Agreement, the other Loan Documents, the Revolving Credit
Loans, such Bank's Commitment, or any class of loans or commitments of which any
of the Revolving Credit Loans or such Bank's Commitment forms a part;
and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining the Revolving Credit Loans
or Letters of Credit or such Bank's Commitment, or
(ii) to reduce the amount of principal, interest or other
amounts payable to such Bank hereunder on account of such Bank's
Commitment, the Revolving Credit Loans or any Letters of Credit, or
(iii) to require such Bank to make any payment or to forego
any interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon written demand made by
such Bank at any time and from time to time and as often as the occasion
therefor may arise, pay to such Bank such additional amounts as will be
sufficient to compensate such Bank for such additional cost, reduction, payment
or foregone interest or other sum (after such Bank shall have allocated the same
fairly and equitably among all customers of any class generally affected
thereby); provided that in the event that such additional cost, reduction,
payment, or foregone interest or other sum which was incurred by such Bank is
subsequently returned or reimbursed to such Bank, such Bank shall return or
reimburse to the Borrowers any additional amount paid pursuant to this
[section]4.8 by the Borrowers to such Bank with respect thereto. Such
<PAGE>
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Bank shall give the Borrowers prompt written notice of any event causing such
additional cost, reduction, payment or foregone interest or other sum.
[section]4.9. Certificate. A certificate setting forth any additional
amounts payable pursuant to [section]4.8 and the changes as a result of which
such amounts are due and the computations in reasonable detail pursuant to which
such amounts were calculated, submitted by any Bank to the Borrowers, shall be
conclusive absent manifest error.
[section]4.10. Capital Adequacy. If any present or future, or any
change in any present or future, law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) or the
interpretation thereof by a court or governmental authority with appropriate
jurisdiction affects the amount of capital required or expected to be maintained
by any Bank or any corporation controlling such Bank and such Bank determines
that the amount of capital required to be maintained by it or such corporation
is increased by or based upon the existence of its Commitment or the Revolving
Credit Loans made pursuant hereto, then such Bank may notify the Borrowers of
such fact. To the extent that the costs of such increased capital requirements
are not reflected in the rates of interest payable hereunder, the Borrowers and
such Bank shall thereafter attempt to negotiate in good faith, within thirty
(30) days of the day on which the Borrowers receive such notice, an adjustment
payable hereunder that will adequately compensate such Bank in light of these
circumstances. If the Borrowers and such Bank are unable to agree to such
adjustment within thirty (30) days of the date on which the Borrowers receive
such notice, then commencing on the date of such notice (but not earlier than
the effective date of any such increased capital requirement), the fees payable
hereunder shall increase by an amount that will, in such Bank's reasonable
determination, provide adequate compensation to such Bank, such amount to be
conclusive and binding on the Borrowers, absent manifest error. Each Bank shall
allocate such cost increases among its customers in good faith and on an
equitable basis.
[section]4.11. Interest on Overdue Amounts. Overdue principal and (to
the extent permitted by applicable law) interest on the Revolving Credit Loans
and all other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest compounded daily and payable on demand at a rate
per annum equal to three and one-fourth percent (3-1/4%) above the Base Rate
until such amount shall be paid in full (after as well as before judgment).
[section]4.12. Joint and Several Liability of the Borrowers. This
section shall be controlling with respect to all of the provisions of this
Credit Agreement and the other Loan Documents, including those provisions which
do not specifically reference this [section]4.12. In the event of a conflict
between this [section]4.12 and any other provision of this Credit Agreement or
any other provision of the Loan Documents, this [section]4.12 shall be
controlling.
(a) Joint and Several Liability. Each of the Borrowers is accepting
joint and several liability with each of the other Borrowers hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided to the Borrowers by the Banks under this Credit Agreement, for the
mutual benefit, directly and indirectly, of
<PAGE>
-27-
each of the Borrowers and in consideration of the undertakings of each other
Borrower to accept joint and several liability for the Obligations. Each of the
Borrowers, jointly and severally with each of the other Borrowers, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with each of the other Borrowers, with
respect to the payment and performance of all of the Obligations (including,
without limitation, any Obligation arising under this [section]4.12), it being
the intention of the parties hereto that all the Obligations shall be the joint
and several obligations of each of the Borrowers without preferences or
distinction among them.
(b) Failure to Make Payment. If and to the extent that any of the
Borrowers shall fail to make any payment with respect to any of the Obligations
as and when due or to perform any of the Obligations in accordance with the
terms thereof, then in each such event the other Borrowers will make such
payment with respect to, or perform, such Obligation.
(c) Full Recourse. The Obligations specific to each of the Borrowers
under the provisions of this [section]4.12 constitute the full recourse
Obligations of each of the Borrowers enforceable against each such corporation
to the full extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Credit Agreement or any other circumstance
whatsoever.
(d) Waivers; Consents; etc. Except as otherwise expressly provided in
this Credit Agreement, each of the Borrowers hereby waives notice of acceptance
of its applicable joint and several liability, notice of any Revolving Credit
Loans made or Letters of Credit issued under this Credit Agreement, notice of
the occurrence of any default, or of any demand for any payment under this
Credit Agreement or other Loan Documents, notice of any action at any time taken
or omitted by the Agent or any Bank under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Credit Agreement. Each of the
Borrowers hereby assents to, and waives notice of, any extension or postponement
of the time for the payment of any of the Obligations, the acceptance of any
payment of any of the Obligations, the acceptance of any partial payment
thereon, any waiver, consent or other action or acquiescence by the Agent or any
Bank at any time or times in respect of any default by any of the Borrowers in
the performance or satisfaction of any term, covenant, condition or provision of
this Credit Agreement, any and all other indulgences whatsoever by the Agent or
any Bank in respect of any of the Obligations, and the taking, addition,
substitution or release, in whole or in part, at any time or times, of any
security for any of the Obligations or the addition, substitution or release, in
whole or in part, of any of the Borrowers. Without limiting the generality of
the foregoing, each of the Borrowers assents to any other action or delay in
acting or failure to act on the part of the Agent or any Bank with respect to
the failure by any of the Borrowers to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this
[section]4.12, afford grounds for terminating, discharging or relieving any of
the Borrowers, in whole or in part, from any of its Obligations under this
[section]4.12, it being the intention of each of the
<PAGE>
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Borrowers that, so long as any of the Obligations hereunder remain unsatisfied,
the Obligations of such Borrowers under this [section]4.12 shall not be
discharged except by performance and then only to the extent of such
performance. The Obligations of each of the Borrowers under this [section]4.12
shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding
with respect to any of the Borrowers or the Banks. The applicable joint and
several liability of the Borrowers hereunder shall continue in full force and
effect notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any of
the Borrowers or the Agent or any Bank.
(e) Obligations Absolute; No Marshalling. The provisions of this
[section]4.12 are made for the benefit of the Agent and the Banks and their
respective successors and assigns, and may be enforced by it or them from time
to time against any or all of the Borrowers as often as occasion therefor may
arise and without requirement on the part of the Agent or the Banks first to
marshall any of its or their claims or to exercise any of its or their rights
against any of the other Borrowers or to exhaust any remedies available to it or
them against any of the other Borrowers or to resort to any other source or
means of obtaining payment of any of the Obligations hereunder or to elect any
other remedy. The provisions of this [section]4.12 shall remain in effect until
all of the Obligations shall have been paid in full or otherwise fully satisfied
and the Commitment of each Bank hereunder has been terminated. If at any time,
any payment, or any part thereof, made in respect of any of the Obligations, is
rescinded or must otherwise be restored or returned by the Banks upon the
insolvency, bankruptcy or reorganization of any of the Borrowers, or otherwise,
the provisions of this [section]4.12 will forthwith be reinstated in effect, as
though such payment had not been made.
(f) Subordination of Subrogation Rights, etc. Each of the Borrowers
hereby agrees that it will not enforce any of its rights of contribution or
subrogation against the other Borrowers or any Affiliate of the Borrowers with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to the Agent or the Banks with respect to any
of the Obligations or any collateral security therefor until such time as all
Indebtedness of the Borrowers owing to the Banks or the Agent under the Loan
Documents (the "Senior Indebtedness") has been paid in full in immediately
available funds denominated in Dollars. Any claim which any Borrower may have
against any other Borrower with respect to any payments to the Banks hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full of the
Senior Indebtedness and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Borrower, its debts or its assets,
whether voluntary or involuntary, all such Senior Indebtedness shall be paid in
full in immediately available funds denominated in Dollars before any payment or
distribution of any character, whether in cash, securities or other property,
shall be made to any other Borrower therefor.
(g) Subordination. Each of the Borrowers hereby agrees that the payment
of any amounts due with respect to the indebtedness owing by any Borrower
<PAGE>
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to any other Borrower or any Affiliate of any Borrower is hereby subordinated to
the prior payment in full in immediately available funds denominated in Dollars
of the Senior Indebtedne[section] Each Borrower hereby agrees that after the
occurrence and during the continuance of any Event of Default, such Borrower
will not demand, sue for or otherwise attempt to collect any indebtedness of any
other Borrower owing to such Borrower until the Senior Indebtedness shall have
been paid in full in immediately available funds denominated in Dollars. If,
notwithstanding the foregoing sentence, such Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Borrower as trustee for the Agent and
be paid over to the Agent for the pro rata account of the Banks to be applied to
repay the Senior Indebtedne[section]
(h) Revolving Credit Loans. Any of the Borrowers may be a Borrower
under this facility and any Borrower may request a Revolving Credit Loan or a
Letter of Credit thereunder and any such request by a Borrower shall be deemed
to have been made by and shall bind all of the Borrowers.
[section]5. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and
severally represent and warrant to the Banks and the Agent as follows:
[section]5.1. Corporate Authority.
(a) Incorporation; Good Standing. Each of the Borrowers and their
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, (ii) has all requisite
corporate power and authority and legal right to own and operate its property,
to lease the property it operates as lessee and to conduct its business as now
conducted and as presently contemplated, and (iii) is in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where a failure to be so qualified
would not have a materially adverse effect on the business, assets or financial
condition of such Borrower or such Subsidiaries or such Borrower's ability to
perform the Obligations.
(b) Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which any Borrower or any of
its Subsidiaries is or is to become a party and the transactions contemplated
hereby and thereby (i) are within the corporate authority and legal right of
such Person, (ii) have been duly authorized by all necessary corporate
proceedings, (iii) do not conflict with or result in any breach or contravention
of any provision of law, statute, rule or regulation to which such Borrower or
any of its Subsidiaries is subject or any judgment, order, writ, injunction,
license or permit applicable to such Borrower or any of its Subsidiaries which
would have a materially adverse effect on the business, assets or financial
condition of such Borrower or any of its Subsidiaries, (iv) do not conflict
with, or result in any breach or contravention of, any provision of the
corporate charter or bylaws of, or any agreement or other instrument binding
upon, such Borrower or any of its Subsidiaries and (v) do not result in the
creation of any lien under any agreement, indenture, instrument, lease or
undertaking to which such Borrower or any of its Subsidiaries is a party or by
which it or any of its properties are bound.
<PAGE>
-30-
(c) Enforceability. The execution and delivery of this Credit Agreement
and the other Loan Documents to which any Borrower or any of its Subsidiaries is
or is to become a party will result in valid and legally binding obligations of
such Borrower or any of its Subsidiaries enforceable against it in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights and except to the extent that availability of the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
[section]5.2. Governmental Approvals. Except as indicated on Schedule
5.2 hereto, the execution, delivery and performance by each Borrower or any of
its Subsidiaries of this Credit Agreement and the other Loan Documents to which
any Borrower or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby do not require such Borrower or any
of its Subsidiaries to obtain the approval or consent of, to make a filing with,
or to perform or obtain the performance of any other act by or in respect of any
governmental agency or authority other than those already obtained or performed.
[section]5.3. Title to Properties; Leases. Except as indicated on
Schedule 5.3 hereto, the Borrowers and their Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Borrowers and their
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date and except for defects of title to certain real
property which do not materially impair the value or usefulness thereof),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances,
except for Permitted Liens. The Borrowers and their Subsidiaries enjoy peaceful
and undisturbed possession under all material leases under which they are
operating, and all said leases are valid and subsisting and in full force and
effect and there exists with respect thereto no default or circumstance which,
with notice or lapse of time or both, would constitute a default thereunder.
[section]5.4. Financial Statements. There has been furnished to each of
the Banks the consolidated balance sheet of the Borrowers and their Subsidiaries
as at the Balance Sheet Date, and related consolidated statements of income,
retained earnings and cash flow for the fiscal year then ended, certified by
Coopers & Lybrand L.L.P., the Borrowers' independent certified public
accountants. The Borrowers have also furnished to the Banks an interim,
unaudited consolidated balance sheet of the Borrowers and their Subsidiaries as
at October 4, 1997, and a consolidated statement of operations for the portion
then ended of the current fiscal year, in each case certified by the Borrowers'
chief financial or accounting officer. Such financial statements have been
prepared in accordance with generally accepted accounting principles and fairly
present the financial condition and the results of operations of the Borrowers
as at the close of business on the dates thereof. There are no liabilities,
contingent or otherwise, of any of the Borrowers involving material amounts
known to any officer of a Borrower and not disclosed or reflected in said
financial statements and the related
<PAGE>
-31-
notes thereto. Such balance sheets and statements of income, retained earnings
and cash flow have been prepared in accordance with generally accepted
accounting principles consistently applied and are correct and complete and
fairly present the financial condition of the Borrowers and their Subsidiaries
as at the close of business on the date thereof and the consolidated results of
operations for the fiscal period then ended. There are no contingent liabilities
of the Borrowers or any of their Subsidiaries as of such date involving material
amounts, known to the officers of the Borrowers and not disclosed in said
balance sheet and the related notes thereto.
[section]5.5. No Material Changes, Etc. Except as indicated on Schedule
5.5 hereto, since the Balance Sheet Date there has occurred no materially
adverse change in the financial condition or business of any of the Borrowers or
their Subsidiaries as shown on or reflected in the consolidated balance sheet of
the Borrowers and their Subsidiaries as at the Balance Sheet Date, or the
related consolidated statements of income, retained earnings or cash flow for
the fiscal year then ended, other than changes in the ordinary course of
business that have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition of the Borrowers and
their Subsidiaries. Since the Balance Sheet Date, no Borrower has made any
Distribution.
[section]5.6. Franchises, Patents, Copyrights, Etc. Each of the
Borrowers and their Subsidiaries, respectively, possesses or has a valid right
to use all material franchises, patents, copyrights, inventions, technology,
trademark registrations, trademarks, trade names, trade secrets, service marks,
licenses and permits, and rights in respect of the foregoing and, to the best of
its knowledge, patent and trademark applications and rights in respect thereto
(collectively, the "Proprietary Rights"), adequate for the conduct of its
business substantially as now conducted without known conflict with any rights
of others which could affect or impair in a material manner the business or
assets of any of the Borrowers and their Subsidiaries. The Borrowers are not
aware of any existing or threatened infringement or misappropriation of (a) any
Proprietary Rights of others by any of the Borrowers or any of their
Subsidiaries or (b) any Proprietary Rights of any of the Borrowers or any of
their Subsidiaries by others, in any way which might materially adversely affect
the business, assets or condition, financial or otherwise, of any of the
Borrowers and their Subsidiaries.
[section]5.7. No Litigation. Except as set forth on Schedule 5.7
hereto, there are no actions, suits, proceedings or investigations of any kind
pending or, to the Borrowers' knowledge, threatened against any of the Borrowers
or any of their Subsidiaries before any court, tribunal or administrative agency
or board that, if adversely determined, might, either in any case or in the
aggregate, materially adversely affect the properties, assets, financial
condition or business of the Borrowers and their Subsidiaries or materially
impair the right of the Borrowers and their Subsidiaries, considered as a whole,
to carry on business substantially as now conducted by them, or result in any
substantial liability not adequately covered by insurance, or for which adequate
reserves are not maintained on the consolidated balance sheet of the Borrowers,
or which question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto. There
are no final judgments against any of the Borrowers or any of their Subsidiaries
that, with other
<PAGE>
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outstanding final judgments against any Borrower or any Subsidiary, undischarged
and not covered by insurance, exceed in the aggregate $50,000.
[section]5.8. No Materially Adverse Contracts, Etc. None of the
Borrowers nor any of their Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or, to the Borrowers' knowledge, is expected in the future to have a
materially adverse effect on the business, assets or financial condition of any
of the Borrowers or their Subsidiaries. None of the Borrowers nor any of its
Subsidiaries is a party to any contract or agreement that has or, to the best of
the Borrowers' knowledge, is expected, in the judgment of the Borrowers'
officers, to have any materially adverse effect on the business of (i) any of
the Borrowers or (ii) the Borrowers and their Subsidiaries taken as a whole.
[section]5.9. Compliance With Other Instruments, Laws, Etc. None of the
Borrowers nor any of their Subsidiaries is in violation of any provision of its
charter documents, bylaws, or any agreement or instrument to which it is subject
or by which it or any of its properties are bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of (i) any of the Borrowers, or (ii) the Borrowers and their Subsidiaries taken
as a whole or (iii) any of the Borrowers' ability to perform the Obligations.
[section]5.10. Tax Status. The Borrowers and, to the best of the
Borrowers' knowledge, their Subsidiaries have (a) made or filed all federal and
state income and all other material tax returns, reports and declarations
required by any jurisdiction to which any of them is subject or properly filed
for and received extensions with respect thereto which are still in full force
and effect and which have been fully complied with in all material respects, (b)
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith by appropriate proceedings and for which adequate
reserves, to the extent required by generally accepted accounting principles,
have been established and (c) set aside on their books provisions reasonably
adequate for the payment of all estimated taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Borrowers know of no basis for any
such claim.
[section]5.11. No Event of Default. No Default or Event of Default has
occurred and is continuing.
[section]5.12. Holding Company and Investment Company Acts. None of the
Borrowers nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it a "registered investment company", or an "affiliated company" or a "principal
underwriter" of a "registered investment company", as such terms are defined in
the Investment Company Act of 1940.
<PAGE>
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[section]5.13. Absence of Financing Statements, Etc. Except with
respect to Permitted Liens, there is no financing statement, security agreement,
chattel mortgage, real estate mortgage or, to the best of the Borrowers'
knowledge with respect to documents which do not require the signature of a
representative of any of the Borrowers or their Subsidiaries, any other document
filed or recorded with any filing records, registry, or other public office,
that purports to cover, affect or give notice of any present or possible future
lien on, or security interest in, any material assets or property of any of the
Borrowers or any of their Subsidiaries or rights thereunder.
[section]5.14. Certain Transactions. Except as would be permitted under
[section]7.9, none of the officers, directors or other key employees of any of
the Borrowers or any of their Subsidiaries is presently a party to any
transaction with any of the Borrowers or any of their Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services or
supplies to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such key
employee or, to the knowledge of the Borrowers, any corporation, partnership,
trust or other entity in which any officer, director, or any such key employee
has a substantial interest or is an officer, director, trustee or partner.
[section]5.15. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions. The Borrowers have
heretofore delivered to the Agent the most recently completed annual report,
Form 5500, with all required attachments, and actuarial statement required to be
submitted under [section]103(d) of ERISA, with respect to each Guaranteed
Pension Plan.
(b) Terminability of Welfare Plans. Under each Employee Benefit Plan
which is an employee welfare benefit plan within the meaning of [section]3(1) or
[section]3(2)(B) of ERISA, no benefits are due unless the event giving rise to
the benefit entitlement occurs prior to plan termination (except as required by
Title I, Part 6 of ERISA). The Borrowers or an ERISA Affiliate, as appropriate,
may terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of the
Borrowers or such ERISA Affiliate without liability to any Person.
(c) Guaranteed Pension Plans. Each contribution required to be made to
a Guaranteed Pension Plan, whether required to be made to avoid the incurrence
of an accumulated funding deficiency, the notice or lien provisions of
[section]302(f) of ERISA, or otherwise, has been timely made. No waiver of an
accumulated funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan. No liability to the PBGC
(other than required insurance premiums, all of which have been paid) has been
incurred by any of the Borrowers or any ERISA Affiliate with respect to
<PAGE>
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any Guaranteed Pension Plan and there has not been any ERISA Reportable Event,
or any other event or condition which presents a material risk of termination of
any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each
Guaranteed Pension Plan (which in each case occurred within twelve months of the
date of this representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of [section]4001 of ERISA did not
exceed the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
(d) Multiemployer Plans. None of the Borrowers nor any ERISA Affiliate
has incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under [section]4201 of ERISA or as a result of a sale of
assets described in [section]4204 of ERISA. None of the Borrowers nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of [section]4241 or [section]4245 of
ERISA or that any Multiemployer Plan intends to terminate or has been terminated
under [section]4041A of ERISA.
[section]5.16. Purpose Credit.
(a) The Borrowers have not engaged principally or as one of their
important activities in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System.
(b) The Borrowers shall not, directly or indirectly, apply any part of
the proceeds of the Notes for the purpose of or in connection with the
Borrowers' broker-dealer activities, if any, within the meaning of Regulation T
of the Federal Reserve Board (Title 12, Part 220, Code of Federal Regulations,
as amended) or any published regulations, interpretations or rulings thereunder.
(c) The issuance of the Notes and the application of the proceeds
thereof by the Borrowers will not contravene Regulation X of the Federal Reserve
Board (Title 12, Part 224, Code of Federal Regulations, as amended) or any
published regulations, interpretations or rulings thereunder.
[section]5.17. Environmental Compliance.
(a) None of the Borrowers nor their Subsidiaries, and the Borrowers
have no actual knowledge that any operator of the Real Estate, has violated, or
is alleged to have violated, any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters (hereinafter "Environmental
Laws"), which violation would have a material adverse effect on the environment
or the business, assets or financial condition of (i) any of the Borrowers or
(ii) the Borrowers and their Subsidiaries taken as a whole.
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(b) None of the Borrowers nor any of their Subsidiaries has received
notice from any third party including, without limitation: any federal, state or
local governmental authority, (i) that any one of them has been identified by
the United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste,
as defined by 42 U.S.C. [section]6903(5), any hazardous substances as defined by
42 U.S.C. [section]9601(14), any pollutant or contaminant as defined by 42
U.S.C. [section]9601(33) and any toxic substances, oil or hazardous materials or
other chemicals or substances regulated by any Environmental Laws (hereinafter
"Hazardous Substances") which any one of them has generated, transported or
disposed of has been found at any site at which a federal, state or local agency
or other third party has conducted or has ordered that any of the Borrowers or
any of their Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that any one of them
is or shall be a named party to any claim, action, cause of action, complaint,
or legal or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances.
(c) None of the Borrowers nor any of their Subsidiaries is subject to
any applicable environmental law requiring the performance of Hazardous
Substances site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency or the recording
or delivery to other Persons of an environmental disclosure document or
statement by virtue of the transactions set forth herein and contemplated hereby
or to the effectiveness of any other transactions contemplated hereby.
[section]5.18. Compliance With Fair Labor Standards Act. The Borrowers
have at all times operated their businesses in compliance with all applicable
provisions of the Fair Labor Standards Act of 1938 (29 U.S.C. [section]106 and
207) except to the extent that the Borrowers' failure to comply therewith would
not have a material adverse affect on the business, assets or condition,
financial or otherwise, of any of the Borrowers. None of the Borrowers'
inventory has been produced by employees who are or were employed in violation
of the minimum wage or maximum hour provisions of such Act or any regulations
thereunder.
[section]5.19. Subsidiaries. Attached hereto as Schedule 5.19 is a
schedule listing all Subsidiaries of the Borrowers as of the date hereof and
showing with respect to each Subsidiary the jurisdiction in which it is
organized and the approximate percentage of the outstanding Voting Stock of that
Subsidiary held either by the Borrowers or another Subsidiary. All of the
outstanding capital stock of each Subsidiary has been duly authorized and issued
and is fully-paid and non-assessable and is free and clear of any pledge,
charge, lien, security interest or other encumbrance or restriction on transfer.
[section]5.20. Disclosure. No representation or warranty made by any of
the Borrowers in any of the Loan Documents or in any other document furnished
from time to time in connection herewith or therewith, contains any
misrepresentation of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading.
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There is no fact known to the Borrowers that materially adversely affects, or
that might reasonably be expected to materially adversely affect, the business,
property or financial condition of any of the Borrowers or the Borrowers and
their Subsidiaries on a consolidated basis.
[section]6. AFFIRMATIVE COVENANTS OF THE BORROWERS. The Borrowers
covenant and agree that, so long as any Revolving Credit Loan or Note is
outstanding or any Bank has any obligation to make any Revolving Credit Loans or
the Agent or any Bank has any obligation to issue any Letter of Credit
hereunder:
[section]6.1. Punctual Payment. The Borrowers will duly and punctually
pay or cause to be paid the principal and interest on the Revolving Credit
Loans, all Reimbursement Obligations, the Letter of Credit Fees, and the
Commitment Fee, all in accordance with the terms of this Credit Agreement and
the Notes.
[section]6.2. Maintenance of Office. The Borrowers will maintain their
chief executive office at 19 Fid Kennedy Avenue, Boston, Massachusetts 02210, or
at such other place in the United States of America as the Borrowers shall
designate upon written notice to the Banks, where notices, presentations and
demands to or upon the Borrowers in respect of the Loan Documents may be given
or made.
[section]6.3. Records and Accounts. The Borrowers will (a) keep, and
cause each of their Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of their
Subsidiaries, contingencies, and other reserves.
[section]6.4. Financial Statements, Certificates and Information. The
Borrowers will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than ninety (90)
days after the end of each fiscal year of the Borrowers, the consolidated
balance sheet of the Borrowers and their Subsidiaries as at the end of such
year, and the related consolidated statements of income, retained earnings and
cash flows for such year, each setting forth in comparative form the figures for
the previous fiscal year and all such consolidated statements to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles, and certified, in the case of such consolidated statements, without
qualification by Coopers & Lybrand L.L.P. or such other independent public
accountants of nationally recognized standing selected by the Borrowers,
together with a written statement from such accountants to the effect that they
have read a copy of this Credit Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any Default
or Event of Default, or, if such accountants shall have obtained knowledge of
any then existing Default or Event of Default they shall disclose in such
statement any such Default or Event of Default; provided
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that such accountants shall not be liable to the Banks for failure to obtain
knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three fiscal quarters in each of
the Borrowers' fiscal years, copies of the unaudited consolidated balance sheet
of the Borrowers' and their Subsidiaries as at the end of such quarter, and the
related consolidated statements of income and cash flows for such quarter and
the portion of the Borrowers' fiscal year then elapsed, together with
comparative consolidated figures for the same periods of the preceding year, all
in reasonable detail and prepared in accordance with generally accepted
accounting principles and accompanied by a certificate of the principal
financial officer of the Borrowers stating that the information contained in
such financial statements is correct and complete and fairly presents the
financial position of the Borrowers and their Subsidiaries on the date thereof
and the results of their operations for the periods covered thereby (subject to
year-end adjustments);
(c) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial officer of the Borrowers in substantially the form of
Exhibit C hereto and setting forth in reasonable detail computations evidencing
compliance with the covenants contained in [section]8 hereof and certifying no
default has occurred under any of the Indebtedness of the Borrowers and their
Subsidiaries as at the end of the period covered by such statements or during
such period as may be required, and (if applicable) reconciliations to reflect
changes in generally accepted accounting principles since the Balance Sheet Date
(each a "Compliance Certificate");
(d) contemporaneously with the filing or mailing thereof, copies of all
material of a financial nature filed with the Securities and Exchange
Commission, or any other similar or corresponding governmental commission,
department or agency or sent to the stockholders of the Borrowers or any holder
of the Borrowers' Indebtedness for borrowed monies;
(e) promptly upon receipt thereof, copies of all detailed audits or
reports submitted to any of the Borrowers by independent public accountants in
connection with any annual or interim audits of the books of any of the
Borrowers or their Subsidiaries;
(f) from time to time upon request by the Agent or any Bank, such other
financial data and information (including, without limitation, information
regarding the business and affairs and condition, financial and other, of, and
periodic financial projections with respect to, any of the Borrowers, their
Subsidiaries and their respective properties) as the Agent or any Bank may
reasonably request; and
(g) simultaneously with the delivery of the financial statements
referred to in subsection (a) above, a report containing the statement of income
and cash flows for each bakery cafe and store of the Borrowers and their
Subsidiaries for the fiscal year most recently ended, together with comparative
figures for the same cafe or store during the preceding fiscal year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles and accompanied by a certificate of the
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principal financial officer of the Borrowers stating that the information
contained in such financial statements is correct and complete and fairly
presents the financial position of each bakery cafe and store, individually, of
the Borrowers and their Subsidiaries on the date thereof and the results of
their operations for the periods covered thereby.
[section]6.5. Corporate Existence; Maintenance of Properties. Except as
otherwise permitted by [section]7.6 hereof, the Borrowers will do or cause to be
done all things necessary to preserve and keep in full force and effect their
corporate existence, material rights and franchises and those of their
Subsidiaries. The Borrowers (a) will cause all of their material properties and
those of their Subsidiaries used or useful in the conduct of their business or
the business of their Subsidiaries to be maintained and kept in good condition,
repair and working order and supplied with all reasonably necessary equipment,
(b) will cause to be made all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrowers may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of their Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided that
nothing in this [section]6.5 shall prevent the Borrowers from discontinuing the
operation and maintenance of any of its properties or those of their
Subsidiaries if such discontinuance is, in the sole judgment of the Borrowers,
desirable in the conduct of their own or their Subsidiaries' business and that
does not in the aggregate materially adversely affect the business of the
Borrowers and their Subsidiaries on a consolidated basis.
[section]6.6. Insurance. The Borrowers will, and will cause each of
their Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its insurable properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such periods
as may be reasonably satisfactory to the Agent. The Banks shall be named an
additional insured as their interests may appear under all such policies.
[section]6.7. Taxes; Etc. The Borrowers will, and will cause each of
their Subsidiaries to duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue all taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of their property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrowers or such Subsidiary shall have set aside on their books
adequate reserves with respect thereto; and provided further that the Borrowers
and each Subsidiary of the Borrowers will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
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[section]6.8. Inspection of Properties and Books. The Borrowers shall
permit the Banks, through the Agent or any of the Banks' other designated
representatives, during normal business hours and in a manner which will not
unreasonably interfere with the conduct of the Borrowers' business, to visit and
inspect any of the properties of the Borrowers or any of their Subsidiaries, to
examine the books of account of the Borrowers and their Subsidiaries (and to
make copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Borrowers and their Subsidiaries with, and to be
advised as to the same by, the Borrowers' chief financial officer, all at the
Borrowers' expense and at such reasonable intervals as the Agent or any Bank may
reasonably request.
[section]6.9. Compliance with Laws, Contracts, Licenses, and Permits.
The Borrowers will, and will cause each of their Subsidiaries to, comply with
(a) the applicable laws and regulations wherever its business is conducted,
including all Environmental Laws which may be in effect from time to time, (b)
the provisions of its charter documents and by-laws, (c) all agreements and
instruments by which it or any of its properties may be bound and (d) all
applicable decrees, orders, and judgments; if in each such case failure to
comply would have a materially adverse effect on the Borrowers. If at any time
any authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in order
that the Borrowers may fulfill any of the Obligations, the Borrowers will
promptly take or cause to be taken all reasonable steps within the power of the
Borrowers to obtain such authorization, consent, approval, permit or license and
furnish the Banks with evidence thereof.
[section]6.10. Employee Benefit Plans.
(a) The Borrowers will (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service furnish to the Agent a copy of
the most recent actuarial statement required to be submitted under
[section]103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Banks any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under [section][section]302,
4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under [section][section]4041A, 4202, 4219, 4242, or 4245 of
ERISA; and
(b) The Borrowers and each Subsidiary will fund any Guaranteed Pension
Plan as required by the provisions of [section]302 of ERISA and [section]412 of
the Code. The Borrowers and each Subsidiary will deliver to the Banks copies of
any request for waiver from the funding standards or extension of the
amortization periods required by [section][section]303 and 304 of ERISA or
[section]412 of the Code, promptly following the date on which the request is
submitted to the Department of Labor or the Internal Revenue Service, as the
case may be.
[section]6.11. Further Assurances. The Borrowers will cooperate with
the Banks and the Agent and execute such further instruments and documents as
the Banks or the Agent shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Credit Agreement and the
other Loan Documents.
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[section]6.12. Notices. The Borrowers will promptly notify the Agent
and each of the Banks in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice or take any other action in respect
of a claimed default (whether or not constituting an Event of Default) under
this Credit Agreement or any other note, evidence of indebtedness, indenture or
other obligation to which or with respect to which any of the Borrowers or any
of their Subsidiaries is a party or obligor, whether as principal or surety, the
Borrowers shall forthwith give written notice thereof to each of the Banks,
describing the notice or action and the nature of the claimed default.
[section]6.13. Fair Labor Standards Act. The Borrowers will, and will
cause each of their Subsidiaries to, at all times operate their business in
compliance with all applicable provisions of the Fair Labor Standards Act of
1938 (29 U.S.C. [section][section] 206 and 207) if the failure to comply with
such provisions might reasonably be expected to have a materially adverse affect
on the Borrowers and their Subsidiaries.
[section]6.14. Environmental Events. The Borrowers will promptly give
notice to the Banks (a) of any violation of any Environmental Law that any of
the Borrowers or any of their Subsidiaries report in writing or are reportable
by such Persons in writing (or for which any written report supplemental to any
oral report is made) to any federal, state or local environmental agency and (b)
upon becoming aware thereof, of any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
or any federal, state or local environmental agency or board, that has the
potential to materially adversely affect the assets, liabilities, financial
conditions or operations of any of the Borrowers individually or the Borrowers
and their Subsidiaries on a consolidated basis.
[section]6.15. Notification of Claims. The Borrowers will, immediately
upon becoming aware thereof, notify the Banks in writing of any uninsured
set-off, claims (including, with respect to the Real Estate, environmental
claims), withholdings or other defenses which may have a materially adverse
affect on the assets, liabilities, financial conditions or operations of any of
the Borrowers individually or the Borrowers and their Subsidiaries on a
consolidated basis.
[section]6.16. Use of Proceeds. The Borrowers will use the proceeds of
the Revolving Credit Loans for general corporate and working capital purposes,
including without limitation the financing of capital expenditures subject to
the limitations set forth in [section]8.2.
[section]6.17. Notice of Litigation, Judgment and Material Events. The
Borrowers will give notice to the Banks in writing within fifteen (15) days of
becoming aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting any of the Borrowers or any of
their Subsidiaries or to which any of the Borrowers or any of their Subsidiaries
are or become a party involving an uninsured claim against the Borrowers
individually or the Borrowers and their Subsidiaries on a consolidated basis
that could reasonably be expected to have a materially adverse effect on any of
the Borrowers or on the Borrowers and their Subsidiaries on a consolidated basis
and stating the nature and status of
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such litigation or proceedings. The Borrowers will, and will cause each of their
Subsidiaries to, give notice to the Banks, in writing, in form and detail
satisfactory to the Banks, (a) within ten (10) days of any judgment not covered
by insurance or reserves, final or otherwise, against any of the Borrowers or
any of their Subsidiaries in an amount which in aggregate with other such
judgments against any of the Borrowers or any of their Subsidiaries exceeds
$50,000 and (b) promptly after becoming aware thereof, of the occurrence of any
event that it is reasonable to expect will be required to be reported to the
Securities and Exchange Commission.
[section]6.18. SYGMA Request. On the occurrence of any Default or Event
of Default, the Borrowers will make prompt written request to The SYGMA Network,
Inc. and/or The SYGMA Network of Ohio, Inc. (collectively, "SYGMA") for the
return, no later than three (3) Business Days following such request, of any and
all deposits posted by the Borrowers and held by SYGMA pursuant to the SYGMA
Distribution Service Agreement made as of December 13, 1994 by and among ABP and
SYGMA. The failure by the Borrowers to make such request as required under this
[section]6.18 or to receive the return of such deposits by SYGMA within the
three (3) Business Days of such request shall result in an Event of Default
under [section]11 of the Credit Agreement. Such deposits shall immediately upon
receipt be applied to repay any outstanding Revolving Credit Loans.
[section]7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. The Borrowers
covenant and agree that, so long as any Revolving Credit Loan or Note is
outstanding or any Bank has any obligation to make any Revolving Credit Loans or
the Agent or any Bank has any obligation to issue any Letter of Credit
hereunder:
[section]7.1. Restrictions on Indebtedne[section] The Borrowers will
not, and will not permit any of their Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any of the
Loan Documents;
(b) liabilities which should, in accordance with generally accepted
accounting principles, be classified as current liabilities and which are
incurred in the ordinary course of business other than through (i) the borrowing
of money or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with normal
purchases of goods and services;
(c) Indebtedness (including without limitation, Guaranties) which
exists on the date hereof and is listed on Schedule 7.1 attached hereto;
(d) the Unlimited Imperio Guaranty;
(e) Indebtedness in respect of taxes, assessments, governmental charges
or levies and claims for labor, materials and supplies to the extent that
payment therefor shall not at the time be required to be made in accordance with
the provisions of [section]6.7;
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(f) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrowers or any
of their Subsidiaries shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution shall have
been obtained pending such appeal or review;
(g) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(h) purchase money Indebtedness not exceeding $2,000,000 in aggregate
principal amount at any one time outstanding incurred in the ordinary course of
business in connection with the acquisition, by lease or purchase, of any real
or personal property constituting fixed assets of any of the Borrowers or any of
their Subsidiaries, provided that any purchase money Indebtedness incurred in
connection with any such acquisition shall not exceed the cost of the real or
personal property so acquired;
(i) Indebtedness of the Borrowers to each other, or of a Subsidiary of
any Borrower owing to such Borrower;
(j) unsecured subordinated Indebtedness in an aggregate principal
amount not to exceed $15,000,000 evidenced by Senior Subordinated Debentures
dated July 24, 1996 issued pursuant to the Investment Agreement and subordinated
to the Obligations pursuant to the terms of the Subordination Agreement; and
(k) unsecured Indebtedness owing to INAC Corp. in an aggregate amount
not to exceed $2,000,000 at any one time outstanding under that certain
Revolving Credit Agreement dated as of January 12, 1996 by and between ABP and
INAC Corp.
[section]7.2. Restrictions on Sale and Leaseback. The Borrowers will
not, and will not permit any of their Subsidiaries to, enter into any
arrangement, directly or indirectly, whereby any of the Borrowers or any of
their Subsidiaries shall sell or transfer any property owned by any of them in
order then or thereafter to lease such property or lease other property that any
of the Borrowers or any of their Subsidiaries intend to use for substantially
the same purpose as the property being sold or transferred nor will the
Borrowers or any of their Subsidiaries rent or lease any assets which either
were owned by any of them as of the Balance Sheet Date and were thereafter sold
or transferred by any of the Borrowers or any such Subsidiaries or are to be
used for substantially the same purposes as any assets so owned and sold or
transferred.
[section]7.3. Restrictions on Liens. None of the Borrowers will, nor
will any Borrower permit any of its Subsidiaries to, (a) create or incur or
suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any of
its property or assets of any character whether now owned or hereafter acquired,
or upon the income or profits therefrom; (b) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of
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Indebtedness or performance of any other obligation in priority to payment of
its general creditors; (c) acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; (d) suffer to exist for a
period of more than thirty (30) days (or, in the event that the Borrowers
promptly undertake and diligently pursue a clean-up action in the case of any
lien imposed by or pursuant to any Environmental Laws, such longer period as is
reasonable for such clean-up action) after the same shall have been incurred any
Indebtedness or claim or demand against it (except for Indebtedness, claims or
demands which arise as a result of or are imposed by any Environmental Laws, and
which do not exceed $100,000 individually or $250,000 in the aggregate) that if
unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or (e) sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; provided that the Borrowers and
any of their Subsidiaries may create or incur or suffer to be created or
incurred or to exist:
(i) liens in favor of the Borrowers on all or part of the
assets of Subsidiaries of the Borrowers securing Indebtedness owing by
Subsidiaries of the Borrowers to the Borrowers;
(ii) liens to secure taxes, assessments and other government
charges or claims for labor, material or supplies in respect of
obligations not overdue or if payment shall not at the time be required
to be made in accordance with [section]6.7;
(iii) liens in respect of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment
of, worker's compensation, unemployment insurance, old age pensions or
other social security obligations or to secure performance in
connection with bids or contracts (other than for the payment of
borrowed money) or to secure surety, stay, appeal or customs bonds or
other similar liens, pledges or deposits;
(iv) liens in respect of judgments or awards, the Indebtedness
with respect to which is permitted by [section]7.1(g);
(v) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens, in existence less than 60 days (or
in the case of any lien with respect to which the underlying claim
shall currently be contested by the Borrowers or such Subsidiaries in
good faith by appropriate proceedings, the period of time during which
such lien is being contested) from the date of creation thereof in
respect of obligations not overdue or deposits to obtain the release of
such liens;
(vi) encumbrances consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which any of the Borrowers or any of their
Subsidiaries are a party, and other minor liens or encumbrances none of
which in the opinion of the Borrowers interferes materially with the
use of the property affected in
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the ordinary conduct of the business of the Borrowers and their
Subsidiaries, which defects do not individually or in the aggregate
have a materially adverse effect on the business of any of the
Borrowers or the on the business of the Borrowers and their
Subsidiaries on a consolidated basis;
(vii) presently outstanding liens listed on Schedule 7.3
hereto so long as, with respect to those liens securing Indebtedness,
such liens secure Indebtedness outstanding on the date hereof and not
any renewals, refundings or extensions thereof;
(viii) liens on ABP's facility in Mexico, Missouri securing
Indebtedness permitted under [section]7.1(e) incurred in connection
with the construction and equipping of the ABP's facility in Mexico,
Missouri;
(ix) liens in respect of purchase money indebtedness permitted
under [section]7.1(i); and
(x) liens, if any, in favor of the Agent for the benefit of
the Banks and the Agent under the Loan Documents.
[section]7.4. Restrictions on Investments. The Borrowers will not, and
will not permit any of their Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase by the
Borrowers;
(b) demand deposits, certificates of deposit having a maturity of not
more than 366 days from the date of acquisition, bankers acceptances and time
deposits of (i) either of the Banks or (ii) any United States bank with which
the Borrowers, now or in the future, maintain operating accounts;
(c) Securities commonly known as "commercial paper" issued by any
entity organized and existing under the laws of the United States of America or
any state thereof which at the time of purchase have been rated and the ratings
for which are not less than "P-1" if rated by Moody's Investors Service, and not
less than "A-1" if rated by Standard and Poor's Corporation;
(d) Investments with respect to Indebtedness permitted by
[section]7.1(j) so long as such entities remain Subsidiaries of the Borrowers;
and
(e) existing Investments listed and described on Schedule 7.4 hereto
and the Unlimited Imperio Guaranty.
[section]7.5. Distributions. The Borrowers will not make any
Distributions.
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[section]7.6. Consolidation, Merger and Sale of All Assets. None of the
Borrowers will, nor will they permit any of their material Subsidiaries to, (a)
merge or consolidate into or with any other Person or convey, sell, lease or
otherwise dispose of all or substantially all of their assets to another Person,
or permit any Person to merge or consolidate into or with any of the Borrowers
or any such Subsidiaries or convey, sell, lease or otherwise dispose of all or
substantially all of their assets to any of the Borrowers or any such
Subsidiaries; provided that (i) any such Subsidiaries may merge into, or convey,
sell, lease or dispose of their assets to, any of the Borrowers or any
wholly-owned Subsidiaries of the Borrowers, (ii) a Person other than any of such
Subsidiaries may merge into, or convey, sell, lease or dispose of its assets to,
any of the Borrowers if such Borrower is the surviving or acquiring corporation,
and (iii) a Person other than the Borrowers or another one of their Subsidiaries
may merge into, or convey, sell, lease or dispose of its assets to, such
Subsidiary if (A) such Subsidiary is the surviving or acquiring corporation or
(B) the surviving or acquiring entity, if not such Subsidiary, becomes a
Subsidiary of the Borrowers; provided further that in any such transaction the
rights and powers of the Banks will not, in their sole reasonable discretion, be
materially adversely affected thereby and immediately after such transaction no
Default or Event of Default shall exist hereunder; and provided, further that,
in no event shall any of the Borrowers become a Subsidiary of any other Person
without the prior consent of the Banks, (b) take any action which results in a
"Repurchase Event" (as defined in [section]3.5 of the 4.75% Subordinated
Convertible Notes), or (c) take any action which results in a "Transfer of
Borrowers' Business" (as defined in the Investment Agreement).
[section]7.7. Sale of Assets; Liquidation; Change in Term of
Indebtedness, etc.
(a) The Borrowers will not, nor will they permit any of their
Subsidiaries to, convey, sell, lease, transfer any assets to another Person
subject to a franchise agreement or otherwise dispose of any assets, directly or
indirectly, in a single transaction or in a series of transactions occurring
during any one fiscal year of the Borrowers, except as permitted under
[section]7.6 hereof, except for sales of inventory, obsolete equipment and
similar sales or other dispositions of property in the ordinary course of
busine[section] To the extent that any sale of assets prohibited under
[section]7.6 or [section]7.7 of this Credit Agreement is thereafter permitted to
occur by written approval of the Banks, the proceeds of such a sale of assets
(net of any costs and expenses payable by the Borrowers in connection with such
sale and the principal amounts of any indebtedness secured by such assets and
required to be repaid in connection with such sale) shall be applied by the
Borrowers to repay any outstanding Revolving Credit Loans and the Total
Commitment of the Banks under the Credit Agreement shall be reduced by the
amount of the proceeds from such sale.
(b) None of the Borrowers will, nor will they permit any of their
Subsidiaries to, liquidate, dissolve or wind up their affairs nor institute,
consent to or fail promptly to contest proceedings for any such purpose,
provided, however, that any such Subsidiaries may be liquidated into any of the
Borrowers or into any wholly-owned Subsidiaries of any of the Borrowers in
transactions permitted by [section]7.6 hereof or by this [section]7.7 and any
inactive or immaterial Subsidiaries of the Borrowers may be dissolved by the
Borrowers.
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(c) The Borrowers will not amend or modify in any respect the terms and
provisions of the Subordinated Debt.
[section]7.8. Federal Regulations. The Borrowers will not, and will not
permit any of their Subsidiaries to, engage, principally or as one of their
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System. The Borrowers will not, directly or indirectly, use any
part of the proceeds of any Revolving Credit Loans or Letters of Credit for
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System or for any purpose that violates, or that would be
inconsistent with, the provisions of the Regulations of such Board of Governors.
[section]7.9. Arms Length Transactions. Except as disclosed on Schedule
7.9 hereto, none of the Borrowers or their Subsidiaries will enter into with any
Affiliate any transaction or series of similar transactions occurring between
the Closing Date and the Maturity Date in which the aggregate amount involved
with respect to all such transactions exceeds $50,000 if such transaction or
transactions would be less favorable to the Borrowers and their Subsidiaries
than would be the case if such transaction or transactions had been entered into
with a non-Affiliate.
[section]7.10. Restriction on Subsidiaries. The Borrowers will not
permit any of their Subsidiaries to enter into any agreement which would
directly limit such Subsidiaries' rights to declare or pay dividends to the
Borrowers.
[section]7.11. Prepayment of Subordinated Debt. The Borrowers will not,
and will not permit any of their Subsidiaries to, (a) amend, supplement or
otherwise modify the terms of any of the Subordinated Debt (including, without
limitation, the Subordinated Debt evidenced by the 4.75% Convertible
Subordinated Notes and the Subordinated Debentures issued pursuant to the terms
of the Investment Agreement) to increase the principal amount of the
Indebtedness evidenced thereby or the rate of interest applicable to such
Indebtedness, or to alter the schedule of payments of principal or interest with
respect to such Indebtedness, or to alter the maturity date thereof, or (b)
prepay, redeem, or repurchase any of the principal of, or interest on, such
Subordinated Debt; provided that so long as no Default or Event of Default
exists or would result therefrom, the Borrowers may prepay such Subordinated
Debt from the proceeds of the issuance of additional shares of capital stock or
other equity securities.
[section]8. FINANCIAL COVENANTS OF THE BORROWERS.
[section]8.1 Maximum Allowable Leverage Ratio. The Borrowers will not,
at any time, permit the Leverage Ratio to exceed 1.65:1.00.
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[section]8.2 Consolidated Capital Expenditures. The Borrowers will not
permit Consolidated Capital Expenditures incurred during each period consisting
of four (4) consecutive fiscal quarters and ending on a date set forth below, to
exceed the amount set forth opposite such date in the table below:
@@
----------------------- --------- ------------------------
Fiscal Quarter Ending Maximum Consolidated
Capital Expenditures
------------------------ -------- ------------------------
------------------------ -------- ------------------------
12/27/97 $16,000,000
------------------------ -------- ------------------------
4/18/98 $18,000,000
------------------------ -------- ------------------------
7/11/98 $18,000,000
------------------------ -------- ------------------------
10/3/98 $20,000,000
------------------------ -------- ------------------------
12/26/98 $20,000,000
------------------------ -------- ------------------------
4/17/99 $18,000,000
------------------------ -------- ------------------------
7/10/99 $18,000,000
------------------------ -------- ------------------------
@@
[section]8.3. Consolidated Operating Cash Flow. The Borrowers will not
permit the ratio of Consolidated Operating Cash Flow, determined at the end of
each fiscal quarter of the Borrowers for the period consisting of the four (4)
consecutive fiscal quarters then ending, to Consolidated Total Debt Service
incurred during such four (4) quarter period, to be less than (a) 1.50 to 1.00
for the four quarter period ending December 27, 1997 and April 18, 1998 and (b)
1.60 to 1.00 for any such four quarter period ending after April 18, 1998.
[section]8.4. Profitable Operations. The Borrowers will not permit
Consolidated Net Income for any period consisting of two consecutive fiscal
quarters of the Borrowers to be less than $1.00.
[section]9. CLOSING CONDITIONS. The effectiveness of this Agreement and
the obligation of any Bank to make the initial Revolving Credit Loan or the
Agent or any Bank to issue any Letter of Credit on the Closing Date shall be
subject to the satisfaction of the following conditions precedent:
[section]9.1. Corporate Action. All corporate action necessary for the
valid execution, delivery and performance by the Borrowers of this Credit
Agreement and the other Loan Documents to which any Borrower is or is to become
a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
[section]9.2. Loan Documents. Each of the Loan Documents shall have
been duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in
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form and substance satisfactory to each of the Banks. Each Bank shall have
received a fully executed copy of each such document.
[section]9.3 Opinion of Borrowers' Legal Counsel. Each of the Banks and
the Agent shall have received from legal counsel to the Borrowers, a favorable
opinion addressed to the Banks and the Agent dated the Closing Date, in
substantially the form of Exhibit D hereto.
[section]9.4. Certified Copies of Charter Documents. Each of the Banks
shall have received from each of the Borrowers and each of their Subsidiaries,
copies of each of (a) such entities charter or other incorporation documents
certified by the Secretary of State of such entities' state of incorporation to
be true and complete as of the date of certification, which date shall be no
more than five (5) days prior to the Closing Date, and (b) its by-laws as in
effect on such date, certified by a duly authorized officer of such Borrower, or
such Subsidiary, to be true and complete on the Closing Date.
[section]9.5. Incumbency Certificates. Each of the Banks shall have
received from each of the Borrowers and each of their Subsidiaries an incumbency
certificate, dated the Closing Date, signed by a duly authorized officer of such
Borrower or such Subsidiary, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (a) to sign, in the name
and on behalf of such Borrower or such Subsidiary, each of the Loan Documents to
which it is or is to become a party; (b) to make application for the Revolving
Credit Loans and Letters of Credit; and (c) to give notices and to take other
action on its behalf under the Loan Documents.
[section]9.6. Good Standing Certificates. The Agent shall have
received, with a copy for each Bank, a certificate from the Secretary of State,
or other appropriate authority of such jurisdiction, evidencing the good
standing of each of the Borrowers and their Subsidiaries in the jurisdiction of
their incorporation and each jurisdiction in which a failure to so qualify could
have a materially adverse effect on the business, operations, property or
financial or other condition of the Borrowers and their Subsidiaries.
[section]9.7. Payment of Fees. The Borrowers shall have paid to the
Banks or the Agent, as appropriate, any and all fees payable in connection with
the transactions contemplated by the Loan Documents.
[section]9.8. Letter of Credit Reimbursement Agreement. The Agent shall
have received evidence satisfactory to the Agent that (i) Citizens Bank of
Massachusetts and Citizens Bank of Rhode Island (as successor by merger to
Citizens Trust Company) have amended that certain Letter of Credit Reimbursement
Agreement dated as of July 1, 1995, by and among ABP Midwest, ABP and Citizens
Trust Company (as such agreement was initially executed and delivered and
thereafter amended with the approval of each of the Banks, the "Letter of Credit
Reimbursement Agreement"), in connection with the construction and equipping of
ABP's facility in Mexico, Missouri to require, on or before July 15, 1998, (y)
deposit with the "Trustee" of funds sufficient to effect an immediate defeasance
of the outstanding "Bonds" (as such terms are defined in that certain Indenture
of Trust dated as of July 1, 1995, as amended
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and in effect, (the "Trust Indenture")) in accordance with the provisions of
Section 6.01(a)(ii)(A) or (B) of the Trust Indenture, or (z) the arrangement by
the Borrowers of a substitute credit facility for the "Letter of Credit" (as
such term is defined in the Letter of Credit Reimbursement Agreement) pursuant
to such terms and documentation acceptable to the "Confirming Bank" (as such
term is defined in the Trust Indenture), and (ii) the Royal Bank of Scotland,
plc, New York Branch, defined as the "Confirming Bank" in the Trust Indenture,
has committed in writing to remain the "Confirming Bank" under any "Alternate
Credit Facility" (as such terms are defined in the Trust Indenture) issued by
BankBoston, N.A., Mercantile Bank National Association (f/k/a Mercantile Bank of
St. Louis, N.A.) or another financial institution acceptable to the "Confirming
Bank" (as such term is defined in the Trust Indenture).
[section]10. CONDITIONS TO ALL BORROWINGS. The obligation of any Bank
to make any Revolving Credit Loan or the Agent or any Bank to issue any Letter
of Credit, including any initial Revolving Credit Loan to be made on the Closing
Date, shall be subject to the satisfaction of the following conditions
precedent:
[section]10.1. Representations True; No Event of Default. Each of the
representations and warranties of the Borrowers contained in this Credit
Agreement or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which
they were made and shall also be true at and as of the time of the making of the
Revolving Credit Loan or at the time of the issuance of a Letter of Credit, with
the same effect as if made at and as of that time (except to the extent of
changes resulting from transactions contemplated or permitted by this Credit
Agreement and changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. The Agent
shall have received a certificate of the Borrowers signed by an authorized
officer of each of the Borrowers to such effect.
[section]10.2. No Legal Impediment. No change shall have occurred in
any law or regulations thereunder or interpretations thereof that in the
reasonable opinion of any Bank would make it illegal for such Bank to make the
Revolving Credit Loans or issue Letters of Credit.
[section]10.3. Governmental Regulation. Each Bank shall have received
such statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
[section]10.4. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Credit Agreement and all documents
incident thereto shall be satisfactory in substance and in form to the Banks and
to the Agent's Special Counsel, and the Banks and such counsel shall have
received all information and such counterpart originals or certified or other
copies of such documents as the Banks may reasonably request.
<PAGE>
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[section]11. EVENTS OF DEFAULT; ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrowers shall fail to pay any principal of the Revolving
Credit Loans when the same shall become due and payable, whether at the stated
date of maturity or any accelerated date of maturity or at any other date fixed
for payment;
(b) the Borrowers shall fail to pay any interest on the Revolving
Credit Loans, the Commitment Fee, any Letter of Credit Fee, or other sums due
hereunder or under any of the other Loan Documents when the same shall become
due and payable, whether at the stated date for payment or any accelerated date
for payment or at any other date fixed for payment or, if prior to such date the
Agent delivers to the Borrowers an invoice relating to such interest and fees,
on or prior to the due date set forth on such invoice relating thereto;
(c) any of the Borrowers or any of their Subsidiaries shall fail to
comply with any of their covenants contained in [section][section]6.4, 6.8,
6.16, [section]7 or [section]8;
(d) any of the Borrowers or any of their Subsidiaries shall fail to
perform any term, covenant or agreement contained herein or in any of the other
Loan Documents (other than those specified elsewhere in this [section]11) and
such failure shall not have been remedied within ten (10) days thereof;
(e) any representation or warranty of the Borrowers or any of their
Subsidiaries in this Credit Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection with
this Credit Agreement shall prove to have been false in any material respect
upon the date when made;
(f) the Borrowers or any of their Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligation for borrowed
money, or fail to observe or perform any material term, covenant or agreement
contained in any agreement by which any of them are bound, evidencing or
securing borrowed money for such period of time as would permit (assuming the
giving of appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof or take any
action with respect to collateral security therefor;
(g) any of the Borrowers or any of their Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of any of the Borrowers or any of their Subsidiaries or
of any substantial part of the assets of any of the Borrowers or any of their
Subsidiaries or shall commence any case or other proceeding relating to any of
the Borrowers or any of their Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or
<PAGE>
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shall take any action to authorize or in furtherance of any of the foregoing, or
if any such petition or application shall be filed or any such case or other
proceeding shall be commenced against any of the Borrowers or any of their
Subsidiaries and any of the Borrowers or any of their Subsidiaries shall
indicate its approval thereof, consent thereto or acquiescence therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any of the Borrowers or any of
their Subsidiaries bankrupt or insolvent, or approving a petition in any such
case or other proceeding, or a decree or order for relief is entered in respect
of any of the Borrowers or any of their Subsidiaries in an involuntary case
under federal bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any final
judgment against any of the Borrowers or any of their Subsidiaries that, with
other outstanding final judgments, undischarged and not covered by insurance,
against such Person(s) exceeds in the aggregate $250,000;
(j) if ABP shall default in the payment or performance of any of its
obligations under the Unlimited Imperio Guaranty;
(k) the occurrence of a (i) "Repurchase Event" (as defined in
[section]3.5 of the 4.75% Subordinated Convertible Notes), or (ii) "Transfer of
Borrowers' Business" (as defined in the Investment Agreement);
(l) the Borrowers or any of their Subsidiaries shall fail to observe or
perform any material term, covenant or agreement contained in the Letter of
Credit Reimbursement Agreement causing the occurrence of an "Event of Default"
(as such term is defined in the Letter of Credit Reimbursement Agreement);
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrowers declare all amounts owing with respect to this Credit Agreement
and the Notes to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrowers; provided that in the
event of any Event of Default specified in [section]11(g) or [section]11(h), all
such amounts shall become immediately due and payable automatically and without
any requirement of notice from the Agent or any Bank; provided, further, that in
the event that within ninety (90) days following an Event of Default the
Majority Banks do not request the Agent to declare all amounts owing with
respect to this Credit Agreement and the Notes immediately due and payable and
such Event of Default is then continuing, any Bank may declare all amounts owing
with respect to such Bank's Note to be immediately due and payable and proceed
to protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding. No remedy herein conferred upon any Bank or the holder
or any Note is intended to be exclusive of any other remedy and each and every
remedy shall be
<PAGE>
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cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
If any one or more of the Events of Default specified in [section]11(g)
or [section]11(h) shall occur, any unused portion of the credit hereunder shall
forthwith terminate and each of the Banks shall be relieved of all obligations
to make Revolving Credit Loans or issue Letters of Credit hereunder. If any
other Event of Default shall have occurred and be continuing, the Agent, upon
the request of the Majority Banks, shall, by notice to the Borrowers, terminate
the unused portion of the credit hereunder, and upon such notice being given
such unused portion of the credit hereunder shall terminate immediately and each
of the Banks shall be relieved of all further obligations to make Revolving
Credit Loans or issue Letters of Credit. If any such notice is given to the
Borrowers, the Agent will forthwith furnish a copy thereof to each of the Banks.
No termination of the credit hereunder shall relieve the Borrowers of any of the
Obligations or any of their existing obligations to the Banks arising under
other agreements or instruments.
[section]12. SET-OFF. Regardless of the adequacy of any collateral,
during the continuance of an Event of Default, any deposits or other sums
credited by or due from any of the Banks to any of the Borrowers and any
securities or other property of any of the Borrowers in the possession of such
Bank may be applied to or set-off against the payment of Obligations and any and
all other liabilities, direct, or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, of the Borrowers to such Bank.
Each of the Banks agrees with each other Bank that (a) if an amount to be
set-off is to be applied to Indebtedness of any of the Borrowers to such Bank,
other than Indebtedness evidenced by the then outstanding Notes, such amount
shall be applied ratably to such other Indebtedness and to the Indebtedness
evidenced by all such Notes, and (b) if a Bank shall receive from the Borrowers,
whether by voluntary payment, exercise of the right of set-off, counterclaim,
cross action, enforcement of the claim evidenced by the Notes held by a Bank, by
proceedings against the Borrowers at law or in equity or by proof thereof in
bankruptcy, reorganization, liquidation, receivership or similar proceedings, or
otherwise, and shall retain and apply to the payment of the Note or Notes held
by a Bank any amount in excess of its ratable portion of the payments received
by each of the Banks, such Bank will make such disposition and arrangements with
the other Banks with respect to such excess, either by way of distribution, pro
tanto assignment of claims, subrogation or otherwise as shall result in each
Bank receiving in respect of the Notes held by it, its proportionate payment as
contemplated by this Credit Agreement; provided that if all or any part of such
excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
[section]13. THE AGENT.
[section]13.1. Authorization. The Agent is authorized to take such
action on behalf of each of the Banks and to exercise all such powers as are
hereunder and in related documents delegated to the Agent, together with such
powers as are reasonably incident thereto.
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[section]13.2. Employees and Agents. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Credit Agreement and the other Loan Documents.
The Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrowers.
[section]13.3. No Liability. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
[section]13.4. No Representations. The Agent shall not be responsible
for the execution or validity or enforceability of this Credit Agreement or the
Notes or any instrument at any time constituting, or intended to constitute,
collateral security for the Notes, or for the value of any such collateral
security or for the validity, enforceability or collectability of any such
amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrowers, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Borrowers or any
holder of any of the Notes shall have been duly authorized or is true, accurate
and complete. The Agent has not made nor does it now make any representations or
warranties, express or implied, nor does it assume any liability to the Banks,
with respect to the credit worthiness or financial conditions of the Borrowers
or any of their Subsidiaries. Each Bank acknowledges that it has, independently
and without reliance upon the Agent or the other Banks, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement.
[section]13.5. Payments. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder or under
the Notes might involve it in liability, it may refrain from making distribution
until its right to make distribution shall have been adjudicated by a court of
competent jurisdiction. If a court of competent jurisdiction shall adjudge that
any amount received and distributed by the Agent is to be repaid, each Person to
whom any such distribution shall have been made shall either repay to the Agent
its proportionate share of the amount so adjudged to be repaid or shall pay over
the same in such manner and to such Persons as shall be determined by such
court. With respect to Obligations, a payment to the Agent shall be deemed to be
a payment to each Bank of its pro rata share of such payment.
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[section]13.6. Holders of Notes. The Agent may deem and treat the payee
of any Note, or the purchaser of any Letter of Credit Participation, as the
absolute owner or purchaser thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee or purchaser or by
a subsequent holder, assignee or transferee.
[section]13.7. Indemnity. The Banks, pro rata in accordance with their
relative Commitments, jointly and severally agree hereby to indemnify, and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrowers as
required by [section]14 or [section]15), and liabilities of every nature and
character arising out of or related to this Credit Agreement or the Notes or the
transactions contemplated or evidenced hereby or thereby, or the Agent's actions
taken hereunder or thereunder, except to the extent that any of the same shall
be directly caused by the Agent's willful misconduct or gross negligence.
[section]13.8. Agent as Bank. In its individual capacity, BankBoston
shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment, the Revolving Credit Loans made by it, the issuance
of Letters of Credit, and as the holder of any of the Notes, as it would have
were it not also the Agent.
[section]13.9. Resignation. The Agent may resign at any time by giving
ninety (90) days prior written notice thereof to the Banks and the Borrowers.
Upon any such resignation, the Majority Banks shall have the right to appoint
another Bank or any other financial institution as the successor Agent. Unless a
Default or Event of Default shall have occurred and be continuing, such
successor, if other than a Bank, shall be reasonably acceptable to the
Borrowers. If no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent, which shall be a financial
institution having a rating of not less than "A" or its equivalent by Standard &
Poor's Corporation. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
[section]13.10. Notification of Defaults and Events of Default. Each
Bank hereby agrees that, upon learning of the existence of a Default or an Event
of Default, it shall promptly notify the Agent thereof. The Agent hereby agrees
that upon receipt of any notice under this [section]13.10 it shall promptly
notify the other Banks of the existence of such Default or Event of Default.
[section]14. EXPENSES. The Borrowers agree to pay (a) the reasonable
cost of producing and reproducing this Credit Agreement, the other Loan
Documents and the other agreements
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and instruments mentioned herein, (b) any taxes (including any interest and
penalties in respect thereto) payable by the Agent or the Banks (other than
taxes based upon the Agent's or any Bank's net income) on or with respect to the
transactions contemplated by this Credit Agreement (the Borrowers hereby
agreeing to indemnify the Banks with respect thereto), (c) the reasonable fees,
expenses and disbursements of the Agent's Special Counsel or any local counsel
to the Agent incurred in connection with the preparation, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals, consents or
waivers hereto or hereunder regardless of whether any such transaction is
consummated, (d) the fees, expenses and disbursements of the Agent incurred by
the Agent in connection with the preparation, administration or interpretation
of the Loan Documents and other instruments mentioned herein, each closing
hereunder and amendments, modifications, approvals, consents or waivers hereto
or hereunder regardless of whether any such transaction is consummated, and (e)
all reasonable out-of-pocket expenses (including reasonable attorneys' (which
attorneys may be employees of any Bank or the Agent) fees and costs) incurred by
any Bank or the Agent in connection with (i) the enforcement of any of the Loan
Documents against the Borrowers or any of their Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default,
(ii) any so-called "work-out" of the Obligations and (iii) any litigation,
proceeding or dispute whether arising hereunder or otherwise, in any way related
to any Bank's or the Agent's relationship with the Borrowers or any of their
Subsidiaries. The covenants of this [section]14 shall survive payment or
satisfaction of payment of amounts owing under or with respect to the Loan
Documents.
[section]15. INDEMNIFICATION. The Borrowers agree to indemnify and hold
harmless the Agent and the Banks from and against any and all claims, actions
and suits whether groundless or otherwise, and from and against any and all
liabilities, losses, damages and expenses of every nature and character arising
out of this Credit Agreement or any of the other Loan Documents or the
transactions evidenced hereby unless any such claims, actions or suits arise out
of the Agent's or the Banks' intentional misconduct or gross negligence. In
litigation, or the preparation therefor, the Banks and the Agent shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrowers agree to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrowers
under this [section]15 are unenforceable for any reason, the Borrowers hereby
agree to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law.
[section]16. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in any of the other Loan Documents
or in any documents or other papers delivered by or on behalf of any of the
Borrowers pursuant hereto shall be deemed to have been relied upon by the Banks
and the Agent, notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Banks of the Revolving Credit
Loans or the issuance of Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any Obligation remains outstanding
or any Bank has any obligation to make any Revolving Credit Loans or issue
Letters of Credit. All statements contained in any certificate or other paper
delivered to any
<PAGE>
-56-
Bank or the Agent at any time by or on behalf of any of the Borrowers pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrowers hereunder.
[section]17. PARTIES IN INTEREST; ASSIGNMENT. All the terms of this
Credit Agreement and the other Loan Documents shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto and thereto. None of the Borrowers may assign or transfer its
rights or obligations hereunder or thereunder without the prior written consent
of each of the Banks. Each Bank shall have the right to assign or transfer at
any time its rights and benefits and obligations or any portion thereof under
this Credit Agreement or any other Loan Document with the prior written consent
of the Borrowers (unless a Default or Event of Default shall occur and be then
continuing in which case the prior written consent of the Borrowers will not be
required) and the Agent.
[section]18. NOTICES, ETC. Except as otherwise expressly provided in
this Credit Agreement, all notices and other communications made or required to
be given pursuant to this Credit Agreement or the Notes shall be in writing and
shall be delivered in hand, mailed by United States certified first class mail,
postage prepaid, or sent by telegraph, telecopy, telefax or telex and confirmed
by delivery via courier or postal service, addressed as follows:
(a) if to the Borrowers, at 19 Fid Kennedy Avenue, Boston,
Massachusetts 02210, Attention: Mr. Anthony J. Carroll, Chief Financial Officer,
(with a copy to Walter D. Wekstein, Esq., Gadsby & Hannah LLP, 225 Franklin
Street, Boston, MA 02110), or at such other address for notice as the Borrowers
shall last have furnished in writing to the Person giving the notice;
(b) if to the Agent or BankBoston, at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Sharon A. Stone, Director, Mail Stop 01-07-07,
(with a copy to Sula R. Fiszman, Esq., Bingham Dana LLP, 150 Federal Street,
Boston, MA 02110) or such other address for notice as BankBoston shall last have
furnished in writing to the Person giving the notice;
(c) if to USTrust, at 30 Court Street, Boston, Massachusetts 02108,
Attention: Jeffrey Huth, Vice President, or such other address for notice as
such Bank shall have last furnished in writing to the Person giving the notice;
and
(d) if to any other entity which may hereafter become a party hereto as
a Bank, at their address as in Schedule 1.1(a) hereof.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if telecopied, or delivered by hand to a
responsible officer of the party to which it is directed, at the time of the
receipt thereof by such officer and (ii) if sent by certified first-class mail,
postage prepaid, when mailed. Any such notice or demand deemed to have been duly
given or made hereunder by any of the Borrowers shall constitute notice from all
of the Borrowers.
<PAGE>
-57-
[section]19. GOVERNING LAW. THIS CREDIT AGREEMENT AND EACH OF THE OTHER
LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF SAID COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE
OF LAW). THE BORROWERS CONSENT TO THE JURISDICTION IN ANY OF THE FEDERAL OR
STATE COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN CONNECTION WITH ANY
SUIT TO ENFORCE THE RIGHTS OF THE BANKS AND THE AGENT UNDER THIS CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
[section]20. HEADINGS. The captions in this Credit Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
[section]21. COUNTERPARTS. This Credit Agreement and any amendment
hereof may be executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an original,
and all of which together shall constitute one instrument. In proving this
Credit Agreement it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is sought.
[section]22. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Credit Agreement nor any term hereof may be changed,
waived, discharged or terminated, except as provided in [section]24.
[section]23. WAIVER OF JURY TRIAL. The Borrowers hereby waive their
right to a jury trial with respect to any action or claim arising out of any
dispute in connection with this Credit Agreement or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the performance
of such rights and obligations. The Borrowers (a) certify that no
representative, agent or attorney of any Bank or the Agent has represented,
expressly or otherwise, that such Bank or the Agent would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledge that it
has been induced to enter into this Credit Agreement and the other Loan
Documents by, among other things, the mutual waivers and certifications
contained herein.
[section]24. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise
expressly provided in this Credit Agreement, any consent or approval required or
permitted by this Credit Agreement to be given by the Banks may be given, and
any term of this Credit Agreement or of any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by the
Borrowers of any terms of this Credit Agreement or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with, but
<PAGE>
-58-
only with, the written consent of the Borrowers and the written consent of the
Majority Banks. Notwithstanding the foregoing, the rate of interest, and the
required dates for payment of interest, on the Notes, the maturity and
amortization of the Notes, the amount of the Commitments of the Banks, the
amount of the Commitment Fee hereunder and the terms of this [section]24 may not
be changed without the written consent of the Borrowers and the written consent
of each of the Banks; the definition of Majority Banks may not be amended
without the written consent of each of the Banks; and [section]13 may not be
amended without the written consent of the Agent. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of any Bank or
the Agent in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrowers shall entitle
the Borrowers to other or further notice or demand in similar or other
circumstances.
[section]25. SEVERABILITY. The provisions of this Credit Agreement are
severable and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
[section]26. TRANSITIONAL ARRANGEMENTS.
[section]26.1. Existing Credit Agreement Superseded. On the Closing
Date, this Credit Agreement shall amend, restate and supersede in its entirety
the Existing Credit Agreement; provided that (i) all revolving credit loans
outstanding under the Existing Credit Agreement shall be deemed to be Revolving
Credit Loans outstanding hereunder and (ii) all Letters of Credit outstanding
under the Existing Credit Agreement shall be deemed to be outstanding hereunder.
All commitment and other fees which accrued prior to the Closing Date under the
Existing Credit Agreement but which remain unpaid on the Closing Date shall be
calculated as of the Closing Date (pro rated in the case of any fractional
periods) and paid by the Borrowers hereunder in accordance with the method and
on the dates specified in the Existing Credit Agreement and shall be allocated
pro rata between USTrust, BankBoston, and Citizens Bank of Massachusetts in
accordance with their respective "Commitment Percentages", as defined in the
Existing Credit Agreement. All interest on Revolving Credit Loans which accrued
prior to the Closing Date under the Existing Credit Agreement will be calculated
and paid on the Closing Date and shall be allocated pro rata between USTrust,
BankBoston, and Citizens Bank of Massachusetts in accordance with their
respective "Commitment Percentages", as defined in the Existing Credit
Agreement.
[section]26.2. Return and Cancellation of Notes. As soon as reasonably
practicable after the receipt by the Banks of their Notes hereunder on the
Closing Date, the Banks will return to the Borrowers, marked "canceled", the
"Notes" held by the Banks pursuant to the Existing Credit Agreement.
<PAGE>
-59-
[section]26.3. Adjustments Among Banks. On the Closing Date, the Banks
shall make such adjustments among themselves as are necessary to ensure that
each Bank has funded its Commitment Percentage of all Revolving Credit Loans
outstanding on the Closing Date.
[remainder of page intentionally left blank]
<PAGE>
-60-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement under seal as of the date first set forth above.
AU BON PAIN CO., INC.
By: /s/ LOUIS I. KANE
___________________________________
Name: Louis I. Kane
Title: Co-Chairman
SAINT LOUIS BREAD COMPANY, INC.
By: /s/ ANTHONY J. CARROLL
____________________________________
Name: Anthony J. Carroll
Title: Treasurer
ABP MIDWEST MANUFACTURING CO., INC.
By: /s/ ANTHONY J. CARROLL
____________________________________
Name: Anthony J. Carroll
Title: Treasurer
BANKBOSTON, N.A.,
individually and
as Agent
By: /s/ SHARON A. STONE
____________________________________
Name: Sharon A. Stone
Title: Director
USTRUST
By: /s/ P. JEFFREY HUTH
____________________________________
Name: P. Jeffrey Huth
Title: Vice President
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Exhibit* Item
- ------- ----
Exhibit A Amended and Restated Revolving Credit Note
Exhibit B Loan Request
Exhibit C Compliance Certificate
Exhibit D Opinion of Borrowers' Counsel
Schedule* Item
- -------- ----
Schedule 1.1(a) Revolving Credit Commitments
Schedule 1.1(b) Consolidated Growth Capital Expenditures
Schedule 1.1(c) Eurodollar Lending Offices
Schedule 3.1 Letters of Credit
Schedule 5.2 Governmental Approvals
Schedule 5.3 Non-owned Assets
Schedule 5.5 Material Changes
Schedule 5.7 Outstanding Litigation
Schedule 5.19 Subsidiaries
Schedule 7.1 Existing Indebtedness
Schedule 7.3 Existing Liens
Schedule 7.4 Investments
Schedule 7.9 Affiliate Transactions
* All Exhibits and Schedules (other than Schedule 1.1(a)) have been omitted.
Copies will be provided supplementally to the Commission upon request, provided
that the Company reserves the right to request confidential treatment for same.
<PAGE>
Schedule 1.1(a)
REVOLVING CREDIT COMMITMENTS
Commitment
Lender Commitment Percentage
BankBoston, N.A. $18,666,666.67 66-2/3%
100 Federal Street
Boston, Massachusetts 02110
Telefax Number: (617) 434-4426
Telex: 940581
Answerback: BOSTONBK BSN
Attention: Jeffrey D. Gilbreath, 01-07-07
Sharon A. Stone, 01-07-07
Barbara D. Searle, 01-07-07
USTrust $9,333,333.33 33-1/3%
30 Court Street
Boston, Massachusetts 02108
Telefax Number: (617) 695-4185
Telex: 681752
Answerback: UST BSN
Attention: Anthony G. Wilson, V.P.
Jeffrey Huth, V.P.
Exhibit 4.1.2
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$18,666,666.67 as of February 13, 1998
FOR VALUE RECEIVED, the undersigned, AU BON PAIN CO., INC., a Delaware
corporation, SAINT LOUIS BREAD COMPANY, INC., a Delaware corporation, and ABP
MIDWEST MANUFACTURING CO., INC., a Delaware corporation (collectively, the
"Borrowers"), hereby jointly and severally promise to pay to the order of
BANKBOSTON, N.A. (the "Bank"), at the head office of the Agent, as such term is
defined in the Amended and Restated Revolving Credit Agreement among the
Borrowers, USTrust and BankBoston, N.A., individually and as Agent, dated the
date hereof (as amended and in effect from time to time, the "Credit
Agreement"), at 100 Federal Street, Boston, Massachusetts, on or before the
Maturity Date, Eighteen Million Six Hundred Sixty-Six Thousand Six Hundred
Sixty-Six Dollars and Sixty-Seven Cents ($18,666,666.67), or, if less, the
aggregate unpaid principal amount of the Revolving Credit Loans made by the Bank
to the Borrowers pursuant to the Credit Agreement. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to them in the
Credit Agreement. Unless otherwise provided herein, the rules of interpretation
set forth in [section].1.2 of the Credit Agreement shall be applicable to this
Amended and Restated Revolving Credit Note (this "Note").
The Borrowers further jointly and severally promise to pay (a)
principal from time to time at the times provided in the Credit Agreement and
(b) interest from the date hereof on the principal amount from time to time
unpaid to and including the maturity hereof at the rates and times and in all
cases in accordance with the terms of the Credit Agreement. The Bank may, but
shall not be required to, endorse the Note Record relating to this Note with
appropriate notations evidencing advances and payments of principal hereunder as
contemplated by the Credit Agreement.
This Note evidences borrowings under and has been issued pursuant to,
is entitled to the benefits of, and is subject to, the provisions of the Credit
Agreement. This Note is executed and delivered in substitution for, and as an
amendment and replacement of, that certain Amended and Restated Revolving Credit
Note dated as of September 6, 1995 (the "Original Note") issued by the Borrowers
to the Bank under the Credit Agreement as previously in effect. Nothing herein
or in any other document shall be construed to constitute payment of such
Original Note or to release or terminate any security interest granted to secure
the obligations evidenced thereby. The principal of this Note is subject to
prepayment in whole or in part in the manner and to the extent specified in the
Credit Agreement.
<PAGE>
In case an Event of Default shall occur, the entire unpaid principal
amount of this Note and all of the unpaid interest accrued thereon may become or
be declared due and payable in the manner and with the effect provided in the
Credit Agreement.
The parties hereto, including the undersigned maker, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note and assent to the extensions of the time of payment or forbearance or other
indulgence without notice.
Each of the Borrowers hereby waives its right to a jury trial with
respect to any action or claim arising out of any dispute in connection with
this Note, any rights or obligations hereunder or the performance of such rights
and obligations. Each of the Borrowers (a) certifies that no representative,
agent or attorney of any Bank or the Agent has represented, expressly or
otherwise, that such Bank or the Agent would not, in the event of litigation,
seek to enforce the foregoing waivers and (b) acknowledges that it has been
induced to enter into this Note by, among other things, the mutual waivers and
certifications contained herein.
THIS NOTE AND THE OBLIGATIONS OF EACH OF THE BORROWERS HEREUNDER SHALL
BE GOVERNED BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).
IN WITNESS WHEREOF, each of the Borrowers has caused this Note to be
signed in its corporate name as an instrument under seal by its duly authorized
officer on the date and in the year first above written.
AU BON PAIN CO., INC.
By: /s/ LOUIS I. KANE
____________________________________
Name: Louis I. Kane
Title: Co-Chairman
SAINT LOUIS BREAD COMPANY, INC.
By: /s/ ANTHONY J. CARROLL
____________________________________
Name: Anthony J. Carroll
Title: Treasurer
<PAGE>
ABP MIDWEST MANUFACTURING CO., INC.
By: /s/ ANTHONY J. CARROLL
____________________________________
Name: Anthony J. Carroll
Title: Treasurer
<PAGE>
ADVANCES AND
REPAYMENTS OF PRINCIPAL
Advances and payments of principal of this Note were made on the dates
and in the amounts specified below:
_______________________________________________________________________________
Amount Amount of Balance of
of Revolving Principal Principal Notation
Date Credit Loan Prepaid or Repaid Unpaid Made By
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Exhibit 4.1.3
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$9,333,333.33 as of February 13, 1998
FOR VALUE RECEIVED, the undersigned, AU BON PAIN CO., INC., a Delaware
corporation, SAINT LOUIS BREAD COMPANY, INC., a Delaware corporation, and ABP
MIDWEST MANUFACTURING CO., INC., a Delaware corporation (collectively, the
"Borrowers"), hereby jointly and severally promise to pay to the order of
USTRUST (the "Bank"), at the head office of the Agent, as such term is defined
in the Amended and Restated Revolving Credit Agreement among the Borrowers,
USTrust and BankBoston, N.A., individually and as Agent, dated the date hereof
(as amended and in effect from time to time, the "Credit Agreement"), at 100
Federal Street, Boston, Massachusetts, on or before the Maturity Date, Nine
Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three Dollars
and Thirty-Three Cents ($9,333,333.33), or, if less, the aggregate unpaid
principal amount of the Revolving Credit Loans made by the Bank to the Borrowers
pursuant to the Credit Agreement. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement. Unless otherwise provided herein, the rules of interpretation set
forth in [section] 1.2 of the Credit Agreement shall be applicable to this
Amended and Restated Revolving Credit Note (this "Note").
The Borrowers further jointly and severally promise to pay (a)
principal from time to time at the times provided in the Credit Agreement and
(b) interest from the date hereof on the principal amount from time to time
unpaid to and including the maturity hereof at the rates and times and in all
cases in accordance with the terms of the Credit Agreement. The Bank may, but
shall not be required to, endorse the Note Record relating to this Note with
appropriate notations evidencing advances and payments of principal hereunder as
contemplated by the Credit Agreement.
This Note evidences borrowings under and has been issued pursuant to,
is entitled to the benefits of, and is subject to, the provisions of the Credit
Agreement. This Note is executed and delivered in substitution for, and as an
amendment and replacement of, that certain Amended and Restated Revolving Credit
Note dated as of September 6, 1995 (the "Original Note") issued by the Borrowers
to the Bank under the Credit Agreement as previously in effect. Nothing herein
or in any other document shall be construed to constitute payment of such
Original Note or to release or terminate any security interest granted to secure
the obligations evidenced thereby. The principal of this Note is subject to
prepayment in whole or in part in the manner and to the extent specified in the
Credit Agreement.
<PAGE>
In case an Event of Default shall occur, the entire unpaid principal
amount of this Note and all of the unpaid interest accrued thereon may become or
be declared due and payable in the manner and with the effect provided in the
Credit Agreement.
The parties hereto, including the undersigned maker, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note and assent to the extensions of the time of payment or forbearance or other
indulgence without notice.
Each of the Borrowers hereby waives its right to a jury trial with
respect to any action or claim arising out of any dispute in connection with
this Note, any rights or obligations hereunder or the performance of such rights
and obligations. Each of the Borrowers (a) certifies that no representative,
agent or attorney of any Bank or the Agent has represented, expressly or
otherwise, that such Bank or the Agent would not, in the event of litigation,
seek to enforce the foregoing waivers and (b) acknowledges that it has been
induced to enter into this Note by, among other things, the mutual waivers and
certifications contained herein.
THIS NOTE AND THE OBLIGATIONS OF EACH OF THE BORROWERS HEREUNDER SHALL
BE GOVERNED BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).
IN WITNESS WHEREOF, each of the Borrowers has caused this Note to be
signed in its corporate name as an instrument under seal by its duly authorized
officer on the date and in the year first above written.
AU BON PAIN CO., INC.
By: /s/ LOUIS I. KANE
_____________________________________
Name: Louis I. Kane
Title: Co-Chairman
SAINT LOUIS BREAD COMPANY, INC.
By: /s/ ANTHONY J. CARROLL
_____________________________________
Name: Anthony J. Carroll
Title: Treasurer
<PAGE>
ABP MIDWEST MANUFACTURING CO., INC.
By: /s/ ANTHONY J. CARROLL
_____________________________________
Name: Anthony J. Carroll
Title: Treasurer
<PAGE>
ADVANCES AND
REPAYMENTS OF PRINCIPAL
Advances and payments of principal of this Note were made on the dates
and in the amounts specified below:
_______________________________________________________________________________
Amount Amount of Balance of
of Revolving Principal Principal Notation
Date Credit Loan Prepaid or Repaid Unpaid Made By
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Execution Copy
BAKERY PRODUCT SUPPLY AGREEMENT
This Bakery Product Supply Agreement ("Agreement"), dated as of
March 23, 1998, is by and between BUNGE FOODS CORPORATION, a Delaware
corporation ("Supplier") and SAINT LOUIS BREAD COMPANY, INC., a Delaware
corporation ("Buyer").
WHEREAS, contemporaneously herewith, Supplier has acquired from ABP
Midwest Manufacturing Co., Inc., a Delaware corporation and an Affiliate (as
defined below) of Buyer ("ABP Midwest"), ABP Midwest's bakery products
manufacturing plant in Mexico, Missouri (the "Plant") pursuant to the terms of
an Asset Purchase Agreement by and among Supplier, ABP Midwest and Au Bon Pain
Co., Inc., a Delaware corporation ("Au Bon Pain") (the "Purchase Agreement");
and
WHEREAS, in partial consideration of Buyer's entry into the Purchase
Agreement, Supplier agreed to enter into this Agreement; and
WHEREAS, to induce Buyer to enter into this Agreement, Bunge
Corporation, a New York corporation ("Bunge Corporation"), has agreed to
guaranty the obligations of Supplier under this Agreement as provided
immediately following this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Definitions: In addition to other terms defined herein, capitalized
terms used in this Agreement shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any
Person directly or indirectly controlling,
controlled by, or under common control with
such other Person. For purposes of
determining whether a Person is an
Affiliate, the term "control" shall mean
possession, directly or indirectly, of the
power to direct or cause the direction of
the management and policies of a Person,
whether through ownership of securities, by
virtue of the office held by such Person, by
contract or otherwise.
"Base Standard Costs" shall mean, for each Product Code during any
period of time, the sum of: (a) the per unit
standard costs, including delivered raw
materials and delivered packaging (in each
case at the stipulated delivered price per
unit of material multiplied by the standard
usage in the Bill of Materials) and Direct
Labor Costs, as set forth in the Bill of
Materials, excluding the cost of flour and
butter; plus (b) the Billing Price for Flour
and Butter; plus (c) an allowance for
Employee Benefits on a cost per unit basis
determined according to the methodology set
forth on Schedule 1.1. Such sum shall be
calculated using the operating standards and
process specifications included in the Bill
of Materials.
"Bill of Materials" shall mean Buyer's bill of materials for
each Product Code, including any process
specifications, yield and usage information,
and the standard usage of electricity (as
described in Schedule 3.1). A copy of the
Bill of
<PAGE>
Materials in effect as of the date
hereof for each Product Code is attached as
Exhibit 1.1. Such bills of materials, which
set forth the cost structure for each
Product Code, are subject to modification by
Buyer as provided in Section 4.1.
"Billing Freight Allowance" shall mean the estimated per Case freight
allowance used for the purpose of
establishing the Invoice Price for a Product
Code to a Distributor, determined by
agreement of the parties as of the date
hereof (or at the time of introduction in
the case of a New Product or additional or
modified Product) and at the times and in
the manner specified in Section 3.3.
"Billing Price for Electricity" shall mean, for each Product Code during any
month, the weighted average price of
electricity per kilowatt hour estimated for
the purpose of establishing the Invoice
Price determined by agreement of the parties
as of the date hereof (or at the time of
introduction in the case of a New Product or
additional or modified Product) and at the
times and in the manner specified in Section
3.3 and consistent with the methodology
described on Schedule 3.1 multiplied by the
per unit standard kilowatt hour usage set
forth in the Bill of Materials as described
on Schedule 3.1.
"Billing Price for Flour shall mean, for each Product Code, the
and Butter estimated cost per unit of Product of flour
and butter used for the purpose of
establishing the Invoice Price, determined
by agreement of the parties as of the date
hereof (or at the time of introduction in
the case of a New Product or additional or
modified Product) and at the times and in
the manner specified in Section 3.3.
"Buyer's System" shall mean the bakery/cafe retail outlets in
the continental United States owned,
franchised or licensed by Buyer and the
bakery/cafe retail outlets in the
continental United States operated by other
Persons pursuant to a joint venture or other
arrangement with Buyer in which Buyer holds
not less than a fifty-one percent (51%)
interest.
"Case" shall mean, for each Product Code, the
number of units that are packaged in each
standard case as set forth in the Bill of
Materials.
"CPI Allowance" shall mean, at any time for each job
classification, the actual regular,
non-overtime wage rates and Employee
Benefits (determined in accordance with
Schedule 1.2) as of the date of this
Agreement, plus a percentage increase equal
to the percentage increase in the Consumer
Price Index from the date of this Agreement
plus [ ].* As used
herein, the term "Consumer Price Index"
shall mean the "Consumer Price Index for
Urban Wage Earners and Clerical Workers,
U.S. City Average, All Items (1982-84=100)"
published by the Bureau of Labor Statistics
of the United States Department of Labor
(or, if such index is not available, any
comparable successor or substitute index,
appropriately adjusted, which is designated
by Buyer and approved by Supplier). As of
the last day of the month ending
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
immediately prior to the date hereof, the
Consumer Price Index was 161.9.
"Direct Labor Costs" shall mean, the direct hourly labor costs
per unit of Product Code, as calculated in
accordance with the structure and
methodology in the Bill of Materials based
upon the non-overtime wage rates per
position as set forth in Schedule 1.2 (such
non-overtime wage rates plus Employee
Benefits not to exceed the CPI Allowance).
"Distributors" shall mean the distributors designated by
Buyer or members of Buyer's System (whether
independently owned and operated, or part of
Buyer's System), who are authorized pursuant
to Section 7.1 to order and/or receive
Product from Supplier, to perform
preliminary quality checks on Product, to
make payments to Supplier for Product as
invoiced by Supplier pursuant to the terms
of this Agreement, and to distribute Product
to Buyer's System. A current list of
approved Distributors is set forth on
Schedule 1.3.
"Employee Benefits" shall mean, for each Product Code during any
period of time, the total employee benefit
expense incurred by Supplier to or for the
benefit of the direct labor used to
manufacture such Product, which benefits
shall consist of the benefits described on
Schedule 1.4 for hourly employees.
"New Product" shall mean all items of bakery products that
are not capable of being manufactured on one
or more of the following existing production
lines at the Plant, as such production lines
may exist from time-to-time during the Term
or as they may be modified pursuant to
Section 3.5: (1) the Laminated Line
(including extruded Products); (2) the
Bread/Roll Line; (3) the Muffin Line; (4)
the Cookie Line; and (5) the Icing/Mix Line.
"Period" shall mean a period of time agreed-to
between Supplier and Buyer from time to time
during the Term, but in no event shall any
such period be longer than one (1) month.
"Person" shall mean an individual, a corporation, a
general partnership, a limited partnership,
a limited liability company, an association,
a trust or any other entity or organization,
including a government or political
subdivision or an agency or instrumentality
thereof.
"Product" shall mean all bakery goods that are
currently or hereafter manufactured at the
Plant (or manufactured at a facility other
than the Plant with the approval of Buyer in
accordance with the terms of this
Agreement), and then supplied directly or
indirectly for resale to Buyer's System,
provided that such bakery goods are capable
of being manufactured on one or more of the
following existing production lines at the
Plant, as such production lines may exist
from time-to-time during the Term or as they
may be modified pursuant to Section 3.5: (1)
the Laminated Line (including extruded
Products); (2) the Bread/Roll Line; (3) the
Muffin Line; (4) the Cookie Line; and (5)
the Icing/Mix Line (including, without
limitation, bakery goods in the categories
listed on Schedule 1.5). The
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<PAGE>
foregoing notwithstanding, the term
"Product" shall not include bagels or PM
Sweets (brownies and bars).
"Product Code" shall mean an item of Product which is a
specific combination of formulation, unit
size, package size (including number of
units), package type and label, all in
accordance with the Bill of Materials, and
to which a specific product code has been
assigned for identification purposes.
"Purchase Target" shall mean the minimum amount of total
Upcharge to be earned by Supplier as a
result of the purchase of Product from
Supplier in each of the first four (4) years
of the Term, as set forth on Schedule 1.6.
"Quarter" shall mean the three (3) consecutive months
ending on the last day of the calendar month
occurring every May, August, November and
February during the Term.
"Stipulated Flour
and Butter Costs" shall mean, for each Product Code, the
delivered per unit cost of flour and butter
for a period of time, based on either: (1)
the purchase price for flour and/or butter
as selected by Buyer from time to time after
consultation with and advice from Supplier
from available contracts for flour and
butter for such period of time; or (2) the
methodology selected by Buyer for purchasing
flour and/or butter for a period of time
determined by Buyer (for example, but
without limitation, through purchases on the
spot markets), in each case multiplied by
the standard usage per unit of Product Code
in the Bill of Materials.
"Stock-out Shortage" shall mean the inability of a Distributor to
fill an order for Product placed by a member
of Buyer's System due solely to a failure by
Supplier to supply Product to such
Distributor. The amount of a Stock-Out
Shortage, for a Product Code, shall equal
the aggregate number of Cases of such
Product Code ordered from the affected
Distributor by Buyer's System less the
number of Cases of such Product Code in the
affected Distributor's inventory.
"Term" shall mean, unless earlier terminated due to
a Supplier Default or a Buyer Default or
pursuant to Section 3.7.3, the period during
which Supplier shall be required to
manufacture and supply Product and Buyer
shall be required to purchase, or cause to
be purchased, Product in accordance with the
terms of this Agreement, which shall be for
a period of five (5) years commencing on the
date of this Agreement, and shall be
automatically renewed on a year-to-year
basis thereafter unless notice of
termination by either party is given to the
other party not less than twelve (12) months
prior to termination.
"Upcharge" shall mean, for each Product Code existing
as of the date hereof, the dollar amount per
unit of Product as set forth on Schedule
1.7, and for each Product Code for a New
Product the dollar amount per unit of
Product as shall be agreed upon in writing
by Buyer and Supplier. With respect to each
additional Product Code introduced by Buyer
pursuant to Section 3.5.1, the Upcharge
shall equal [ ]* (during each of the
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
first four (4) years of the Term) and
[ ]* (during the fifth (5th) year of
the Term) of the sum of the Base Standard
Costs initially established for each such
additional Product Code plus a variance
equal to [ ]* of such Base
Standard Costs. Upcharge on any unit of
Product or New Product shall be deemed
earned at the time when title and risk of
loss pass pursuant to Section 6 of this
Agreement.
"Updated Electricity Costs" shall mean, for each Product Code during any
month, the weighted average price of
electricity per kilowatt hour determined in
the manner described on Schedule 3.1
multiplied by the per unit standard kilowatt
hour usage set forth in the Bill of
Materials as described on Schedule 3.1.
"Updated Freight Allowance" shall mean, for each Product Code during any
period, the per Case stipulated cost of
freight, equal to: (a) the freight cost per
truck from the Plant to each Distributor's
warehouse (or such other designated
destination) from available quotes for such
freight services as selected by Buyer (or by
Supplier in the absence of such a selection
by Buyer); divided by (b) the agreed-to
number of Cases shipped per truck.
"Updated Standard Costs" shall mean, for each Product Code during any
period of time, the sum of: (a) the per unit
standard costs, including delivered raw
materials and delivered packaging (in each
case at the actual delivered price per unit
of material multiplied by the standard usage
in the Bill of Materials) and Direct Labor
Costs, excluding the cost of flour and
butter; plus (b) the Stipulated Flour and
Butter Costs; plus (c) an allowance for
Employee Benefits allocated on a cost per
unit basis determined according to the
methodology set forth on Schedule 1.1. Such
sum shall be calculated using the operating
standards and process specifications
included in the Bill of Materials. The
foregoing notwithstanding, the Direct Labor
Costs and Employee Benefits (determined in
accordance with the methodology set forth in
Schedule 1.1) shall not exceed the CPI
Allowance.
2. Manufacture and Supply of Product:
2.1 Supply Requirements. Subject to the terms and conditions of this
Agreement, during the Term, Supplier shall: (a) manufacture and supply Product
in such quantities as may be required by each Distributor and/or member of
Buyer's System to enable them to meet the Product requirements and inventory
needs of Buyer's System; and (b) manufacture and supply Product in such
quantities as may be required by each Distributor to maintain an adequate level
of Product inventory as provided in this Agreement.
2.2 Exclusivity. So long as Supplier timely supplies Product in
accordance with the required recipes, formulas, processes and Product
specifications, and in the quantities required by each Distributor and Buyer,
Buyer shall purchase from Supplier (through its Distributors) one hundred
percent (100%) of its Product requirements for Buyer's bakery/cafe outlets in
the continental United States, and Buyer shall use its reasonable best efforts,
subject to applicable law, to direct the bakery/cafe outlets that are a part of
Buyer's System to purchase from Supplier (through its Distributors) one hundred
percent (100%) of their Product requirements. In the case of The SYGMA Network,
Inc. and its Affiliates (collectively, "SYGMA"), a Distributor, Supplier shall
supply each SYGMA distribution
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
facility so that at any time each has no more than eight (8) days of inventory
of Product on hand, measured according to the following formula: The dollar
balance (at SYGMA's sales price) of SYGMA's Product inventory at such time
divided by SYGMA's average daily dollar sales of Product during the twelve-weeks
immediately preceding such time. Buyer shall not sell, directly or indirectly,
bakery products at wholesale to third-parties, except to Buyer's System pursuant
to this Agreement; provided, however, that nothing contained herein shall
prevent Buyer from manufacturing and selling fresh baked or refrigerated dough
products or frozen bagels from any of its commissaries to any third party.
2.3 Specifications and Packaging. Supplier shall manufacture Product in
accordance with Buyer's recipes, formulas, and Product specifications as set
forth in the current Bills of Materials, operating standards and other documents
listed on Schedule 2.3, as such requirements may be modified by Buyer upon
reasonable prior notice from time to time during the Term in accordance with
Section 4.1. Product shall be packaged in the manner prescribed by the
Distributors and Buyer. Notwithstanding anything to the contrary contained
herein, Supplier shall be entitled to alter any process or operating standard if
such an alteration is required to comply with good manufacturing practices as
set forth in the regulations promulgated by the U.S. Food and Drug
Administration (Current Good Manufacturing Practices in Manufacturing, Packing,
or Holding Human Food, 21 C.F.R 110 (1997)), as such regulations may be amended
from time to time, including, without limitation, alterations to prevent
microbial contamination. Supplier shall provide Buyer prompt notice of any
alteration, which shall be prior notice to the extent practicable.
2.4 Payment. Supplier shall invoice each Distributor for Product on
payment terms that Supplier and such Distributor may agree upon which do not
affect the determination and adjustment of the Invoice Price (as defined below).
Supplier shall provide Buyer with a copy of each invoice at the time it provides
such invoice to a Distributor.
3. Pricing and Adjustments:
3.1 General Pricing Structure.
(a) Supplier will charge each Distributor an Invoice Price per
Case of Product as set forth in Section 3.2. Supplier shall invoice freight
separately from Product. During the thirty (30) days prior to the adjustment of
each Invoice Price, the Invoice Price for the next succeeding year shall be
established as set forth in Section 3.3.
(b) Within ten (10) business days after the end of each
Period, during each Quarter as provided in Section 3.4, Supplier shall update
and report to Buyer the difference between the sum of the four (4) components of
the Invoice Price as set forth in Section 3.2(a) and the sum of the actual costs
for such components, in each case, as applied to the volume of Product shipped
during the Period. At the end of each Quarter, the net difference between the
sum of the four (4) components of the Invoice Price as set forth in Section
3.2(a) and the sum of the actual costs for such components during the Quarter
shall be determined and adjusted by a payment to or from Buyer, after taking
into account any Project Expenses and Structural Savings due to Supplier
pursuant to Section 3.5.
(c) The Invoice Price and updates each Period and adjustments
each Quarter shall be determined in the manner as set forth in this Article 3
consistent with the pricing diagram set forth in Schedule 3.1; provided,
however, that in the event of any inconsistency between the Schedule 3.1 and any
Section of this Agreement, the text in such Section shall at all times control.
All requests for credit from Buyer's System for failure to meet Product
specifications shall be processed directly through
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<PAGE>
Supplier. Buyer and Supplier shall mutually agree upon reasonable administrative
procedures for processing of any credit requests.
3.2 Invoice Price Per Case. The Invoice Price for Product shipped
pursuant to this Agreement shall be invoiced by Product Code, and shall be
expressed in dollars per Case. The "Invoice Price" for each Case of Product
shipped to each Distributor shall equal, for each Product Code, the sum of the
FOB Mexico Billing Price Per Case plus the Billing Freight Allowance. As used
herein, the "FOB Mexico Billing Price Per Case" for each Product Code, shall
equal the product obtained by multiplying
(a) the sum obtained by adding:
(1) the Base Standard Costs established pursuant to
Section 3.3; plus
(2) a variance equal to [ ]* of such Base
Standard Costs; plus
(3) the Billing Price for Electricity established
pursuant to Section 3.3; plus
(4) the Upcharge;
by
(b) the number of standard units of Product in a Case.
The Invoice Price shall be adjusted on May 1, 1999 and each May 1st thereafter,
and at other times, in the manner described in Section 3.3.
3.3 Changes to Invoice Price. During the thirty (30) days prior to May
1, 1999 and each May 1st thereafter, Supplier and Buyer shall mutually make a
reasonable estimate of the Base Standard Costs, and shall mutually agree on the
Billing Price for Electricity and the Billing Freight Allowance that will be in
effect for the upcoming year commencing as of each such May 1st. If the parties
are unable agree upon an estimate for the Base Standard Costs, the Billing Price
for Electricity and/or the Billing Freight Allowance, the Invoice Price shall
remain unchanged. The foregoing notwithstanding, if the accumulated net
adjustments from each Period due to or from Buyer computed pursuant to Section
3.4 exceed [ ]* during the course of
any year, Buyer and Seller shall discuss, within thirty (30) days after notice
from either party, the implementation of a reasonable adjustment to the Invoice
Price based upon changes in Base Standard Costs, Billing Price for Electricity
and/or Billing Freight Allowance since the immediately preceding adjustment to
the Invoice Price.
3.4 Periodic Updates and Adjustments. Within ten (10) business days
after the end of each Period during each Quarter, as required to ensure
accuracy, Supplier shall deliver to Buyer a summary report (the "Quarterly
Adjustment/True-Up Summary Report") in the form attached hereto as Exhibit 3.4.
Supplier shall post to the Quarterly Adjustment/True-Up Summary Report each such
Period the Total Dollar Adjustment (Direct Cost) determined in accordance with
Section 3.4.1 and the Total Dollar Adjustment (Freight) determined in accordance
with Section 3.4.2.
3.4.1 Direct Cost Update. Within ten (10) business days after
the end of each Period during each Quarter, Supplier shall deliver to Buyer a
summary report (the "Interim Update (Direct Costs") in the form attached hereto
as Exhibit 3.4.1. Supplier shall also provide to Buyer each Period, for each
Product Code, the Bill of Materials and such other supporting documentation as
may reasonably be requested by Buyer to verify the computation of the net
adjustment due to or from Supplier. Each
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
Interim Update (Direct Costs)), for each such Period, shall set forth the Total
Dollar Adjustment (Direct Cost). As used herein the term "Total Dollar
Adjustment (Direct Cost)" shall equal the total, for all Product Codes, of the
positive or negative difference between the FOB Mexico Billing Price Per Case
minus the Updated FOB Mexico Price Per Case multiplied by the number of Cases of
Product shipped during such Period. The "Updated FOB Mexico Price Per Case"
shall equal the product obtained by multiplying:
(a) the sum obtained by adding:
(1) the Updated Standard Costs; plus
(2) a variance equal to [ ]* of such
Updated Standard Costs; plus
(3) the Updated Electricity Costs; plus
(4) the Upcharge;
by
(b) the number of standard units of Product in a Case.
3.4.2 Freight Allowance Update. Together with the Interim
Update (Direct Costs), Supplier shall deliver to Buyer a summary report (the
"Interim Update (Freight)") in the form attached hereto as Exhibit 3.4.2. Each
Interim Update (Freight) shall set forth the Total Dollar Adjustment (Freight).
As used herein the "Total Dollar Adjustment (Freight)" shall equal the total,
for all Product Codes, of the net positive or negative difference for all
Distributors (expressed in dollars per Case) between the Billing Freight
Allowance for each such Distributor minus the Updated Freight Allowance,
multiplied by the total number of Cases shipped to each such Distributor during
such Period.
3.4.3 Within fifteen (15) business days after the end of each
Quarter, Supplier shall provide to Buyer a final proposed Quarterly
Adjustment/True-Up Summary Report for the Quarter. The final proposed Quarterly
Adjustment/True-Up Summary Report shall also set forth all Non-Capital Project
Expenses, Capital Project Expenses and Structural Savings due to Supplier for
the Quarter pursuant to Section 3.5. The aggregate, for all Product Codes, of
the amounts determined pursuant to Section 3.4.1 and Section 3.4.2 during each
Period of the Quarter, after taking into account any amounts due to Supplier for
Non-Capital Project Expenses, Capital Project Expenses and Structural Savings,
shall constitute Supplier's proposed net adjustment due to or from Supplier for
the Quarter.
3.4.4 Buyer shall have ten (10) business days to review the
final proposed Quarterly Adjustment/True-Up Summary Report for each Quarter
after its receipt. If Buyer is unable to reconcile or disputes any item included
in the final Adjustment Summary, or the computation of the net adjustment due to
or from Supplier, it shall notify Supplier within such ten (10) business days of
any such items it is unable to reconcile or which it disputes. The foregoing
notwithstanding, the failure by Buyer to dispute or question any item within
such ten (10) business days shall not constitute a waiver by Buyer or Supplier
of the right to subsequently dispute or question such item; provided, however,
that any such dispute or question by Buyer or Supplier shall be asserted not
later than ten (10) business days after the end of the immediately next
succeeding Quarter or shall be thereafter be deemed irrevocably waived. Supplier
and Buyer shall attempt diligently in good faith to reconcile any differences
and to resolve by mutual agreement any items in dispute within ten (10) business
days (the "Resolution Period") following such notification by Buyer. If any of
the items in dispute are not resolved within the Resolution Period, the parties
shall submit the disputed items for resolution to an arbitrator mutually agreed
upon by the
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
parties (the "Arbitrator"), whose decision shall be final and binding on the
parties, and when made, shall be deemed to be an agreement between Supplier and
Buyer on the issues so determined. The expense of the Arbitrator shall be borne
equally by Buyer and Supplier.
3.4.5 Any net adjustment due to or from Supplier for any
Quarter shall be paid by or to Buyer within the later of: ten (10) business days
after the ten (10) business day review provided for in Section 3.4.4, or its
final determination if a dispute or question is raised within such ten (10)
business day review, provided, however, that any amounts not in dispute shall be
paid by the earlier of such dates.
3.5 Modifications to Products and Introduction of Additional
Products; Structural Savings.
3.5.1 Modifications and Additional Products. From time to time
during the Term, Buyer shall have the right, on a project-by-project basis, to
introduce additional Product items or make modifications to existing Product
recipes, formulas, specifications and preparation procedures which, in either
case, require expenditures by Supplier in order to manufacture such additional
Product or to implement such modifications. Such additional or modified Product
either may be in addition to or may replace one or more then-existing Product
Codes. Prior to implementing any such project, Buyer and Supplier shall develop
a mutually agreeable budget for the project. The actual direct, incremental
expenses associated with any one project to introduce additional or modified
Product, consisting of material, packaging, direct hourly labor (collectively,
"Non-Capital Project Expenses") and expenses with any one project which are
capital expenditures under generally accepted accounting principles
(collectively, "Capital Project Expenses"), shall be allocated as follows:
(a) If the total Non-Capital Project Expenses do not exceed
[ ]*, Supplier shall pay the total amount of such
expenses; provided, however, that Supplier shall not be obligated to incur more
than [ ]* of such expenses, in the aggregate,
during any one year of the Term.
(b) If the total Non-Capital Project Expenses (exclusive of any
expenses constituting capital expenses under generally accepted accounting
principles) exceed [ ]* per project or if the
annual [ ]* limit in Section 3.5.1(a) has been
exceeded, Buyer shall pay the total amount of such excess.
(c) If the total Capital Project Expenses do not exceed
[ ]*, Supplier shall pay the total amount of such
expenses.
(d) If the total Capital Project Expenses exceed
[ ]*, Buyer shall pay to Supplier an annual amount equal to
Buyer's "Pro Rata Share" (as hereinafter defined) of the total Capital Project
Expenses multiplied by a percentage amount, on a per annum basis, equal to
[ ]* over and above the yield on Ten-year Treasury Bills issued by the
United States Government as reported, from time to time, by the Wall Street
Journal. As used herein, the term "Pro Rata Share" shall mean, for any Quarter,
the amount of Product manufactured by Supplier for Buyer's System utilizing
capital equipment purchased by Supplier in connection with any project, divided
by the total amount of product (including Product) manufactured on such
equipment, multiplied by the Capital Project Expenses. For purposes of this
Section 3.5.1 and Section 3.5.3, the standard for measuring the amount of
Product manufactured shall be determined by agreement of the parties before
implementation of the project and shall be based upon one of the following
criteria: (i) units of Product manufactured; (ii) weight of Product
manufactured; or (iii) equipment utilization time.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
3.5.2 Limitations on Capital Project Expenses. The provisions
of Section 3.5.1(c) notwithstanding, Supplier shall not be obligated to incur
Capital Project Expenses under Section 3.5.1(c) during any year which exceed
Fifty Thousand Dollars ($50,000). Upon the termination of this Agreement for any
reason other than a Supplier Default, Supplier shall have the option of selling
the equipment acquired pursuant to Section 3.5.1(d) to Buyer for its net book
value, and Buyer shall be obligated to purchase such equipment from Supplier
within thirty (30) days of receiving notice thereof. This option shall expire,
if not sooner exercised, thirty (30) days prior to the termination date of this
Agreement, except in the case of a Buyer Default, in which case, this option
shall expire thirty (30) days after the termination date. For purposes of this
Section 3.5.2, all capital expenditures shall be deemed to have a seven (7) year
depreciable life and to be depreciated on a straight-line basis unless otherwise
agreed.
3.5.3 Structural Savings.
(a) From time to time during the Term, Supplier shall provide
Buyer with recommendations for improving the efficiency of the manufacturing and
supply processes and for reducing costs. Buyer and Supplier shall mutually
determine which, if any, of such recommendations are to be implemented on a
project-by-project basis, and shall work together to implement such agreed-upon
projects. Buyer and Supplier shall mutually determine the amount of cost savings
to be included in Updated Standard Costs and the time during which such cost
savings shall be realized. All agreed-upon savings shall be applied to reduce
the Updated Standard Costs by amending the applicable Bills of Materials upon
the agreed-upon implementation date of the project. Any provision hereof to the
contrary notwithstanding, any program implemented for the purpose of managing
flour and butter costs shall not be governed by this Section 3.5.3.
(b) If the implementation of any such project involves a
capital expenditure by Supplier under generally accepted accounting principles,
Buyer shall pay to Supplier an annual amount equal to Buyer's Pro Rata Share
multiplied by the amount of the project's capital expenditure multiplied by a
percentage amount, on a per annum basis, equal to [ ]* over and above the
yield on Ten-year Treasury Bills issued by the United States Government as
reported, from time to time, in the Wall Street Journal.
(c) If the implementation of any such project involves a
change in delivered raw materials, delivered packaging or Direct Labor Costs
which do not involve capital expenditures pursuant to Section 3.5.3(b) and which
are reflected in agreed-upon changes in the Bill of Materials, Buyer shall pay
to Supplier an amount equal to [ ]* of the agreed-upon
savings resulting from such changes during the agreed-upon time.
(d) The foregoing notwithstanding, if Supplier undertakes any
project which is not otherwise a part of any structural savings program
agreed-to by Buyer pursuant to this Section 3.5.3 (including, by way of
illustration and without limitation, the installation of a spiral blast
freezer), the cost structure for the appropriate Bills of Materials for the
Updated Standard Costs shall be modified to reflect any changes in the operating
standards resulting from the implementation of such project, without any
allocation of expense to Buyer.
3.5.4 Accounting for Project Expenses and Structural Savings.
All amounts to be paid by Buyer to Supplier pursuant to this Section 3.5 shall
be accounted for by Supplier separately from the Pricing and Adjustment
provisions of Sections 3.1 through 3.4, and shall be included on the Quarterly
Adjustment/True-Up Summary Report delivered by Supplier to Buyer (itemized
according to project) at the end of each Quarter pursuant to Section 3.4.3.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
3.6 Supplier's Purchasing Duties; Vendors. Supplier shall use its best
efforts to assist Buyer in obtaining the most favorable available prices for raw
materials and packaging, including without limitation, flour and butter. To the
extent that raw materials and packaging are purchased by Supplier from vendors
designated by Buyer, the cost of such raw materials and packaging shall not
constitute a failure to satisfy Supplier's obligations under this Section 3.6.
Anything to the contrary herein notwithstanding, Supplier shall not change any
vendors without the prior consent of Buyer, which consent shall not be
unreasonably withheld. Grounds for Supplier to propose terminating a vendor
shall include, but not be limited to, the failure of such vendor to supply
sufficient quantities of any item purchased by Supplier from the vendor on a
timely basis and/or according to required specifications. Neither Supplier nor
Buyer shall enter into any formal or informal arrangement or understanding with
any vendor (regardless of whether such vendor is an Affiliate of either Supplier
or Buyer) by which either Supplier or Buyer receives, directly or indirectly,
any rebate, discount or other consideration, unless such arrangement or
understanding is fully disclosed to the other and the value of such rebate,
discount or other consideration is applied to reduce Base Standard Costs and
Updated Standard Costs pursuant to this Agreement.
3.7. Purchase Target Minimums; Purchase Target Deficiency Payments.
3.7.1 Purchase Target Minimums. In each of the first four (4)
years of the Term (each a "Year"), Buyer shall purchase, or cause to be
purchased, from Supplier an amount of Product that results in Supplier earning a
total Upcharge for that Year that is greater than or equal to the applicable
Purchase Target. In addition, pursuant to the Purchase Agreement, Supplier has
also entered into a bakery product supply agreement with Au Bon Pain, an
Affiliate of Buyer, upon terms and conditions similar to those contained in this
Agreement, pursuant to which Au Bon Pain is required to purchase a certain
amount of bakery products from Supplier during each year of the term of the
agreement. To the extent Au Bon Pain exceeds its purchase target during any Year
in which Buyer has failed to achieve its Purchase Target, such excess amount of
Upcharge earned by Supplier shall be deemed, solely for the purpose of
determining whether Buyer has achieved its Purchase Target, to have been earned
by Supplier hereunder during such Year.
3.7.2 Purchase Target Deficiency Payments. If, during any
Year, Supplier has not earned total Upcharges as part of the Invoice Price for
Product in an amount equal to or greater than the Purchase Target for such Year,
then Buyer shall pay Supplier, within thirty (30) calendar days of the end of
such Year, an amount equal to the Purchase Target less the amount of Upcharge
earned by Supplier on Product purchased during such Year as part of the Invoice
Price for Product (a "Purchase Target Deficiency Payment"). If the Upcharge
earned by Supplier in any Year is less than the Purchase Target for such Year
and such deficiency is a result of a Supplier Default or a Force Majeure Event
(as defined in Section 19), then the Purchase Target Deficiency Payment shall be
reduced to the extent such deficiency was attributable to such Supplier Default
or Force Majeure Event.
3.7.3 Maximum Upcharge. Any provision of this Agreement to the
contrary notwithstanding, after Supplier has earned a total Upcharge (excluding
any Upcharge attributable to New Product) of
[ ]*, the Upcharge for each Product Code shall equal
[ ]* of the sum of the Base Standard Costs plus a variance equal to
[ ]* of such Base Standard Costs, and Buyer and Supplier shall each
have the right to terminate this Agreement on not less than twelve (12) months
prior notice; provided, however, that Buyer shall have the right to terminate
this Agreement on not less than four (4) months prior notice during the first
twelve (12) months after such total Upcharge has been earned.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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4. Modifications to Product or Bill of Materials; New Product.
4.1 Modifications to Product.
(a) Buyer may, from time to time and with reasonable prior
notice, direct Supplier to manufacture additional Product, which is not New
Product, or to modify existing Product specifications, recipes, formulas and
processes. Supplier shall be responsible for implementing manufacturing and
supply changes required to accommodate such Product proposals.
(b) Subject to Section 2.3, Supplier shall not change any
specifications, recipes, formulas, or processes related to Product without
Buyer's prior approval.
(c) Buyer shall have the right to audit and approve all
changes to standard costs reflected in the Bills of Materials, including but not
limited to, changes in formulae, processes, ingredients, manning per line, line
speeds and yields, structural waste, and units per Case (including any change to
a Bill of Materials whereby an operating variance is reclassified into ongoing
direct cost). In addition, Buyer shall have the right to audit the transition to
any new information system implemented by Supplier to assure the consistent
treatment of Base Standard Costs and Updated Standard Costs and other concepts
set forth herein. Subject to Section 3.5, Supplier shall be responsible for
scaling up and implementing any manufacturing and supply changes required to
accommodate any changes to Product.
(d) Any provision of this Section 4.1 to the contrary
notwithstanding, if Buyer modifies existing Product specifications, recipes,
formulas or process, Buyer shall purchase, or cause to be purchased, Supplier's
entire inventory of a discontinued Product Code and any ingredients and
packaging made obsolete by the discontinuation of such a Product Code; provided,
however, that Buyer shall not be obligated to purchase such obsolete inventories
or ingredients or packaging in excess of twenty-five percent (25%) of the volume
of such ingredients or packaging which has been consumed or used by Supplier in
manufacturing such discontinued Product Code during the twelve (12) months
immediately preceding its discontinuance.
4.2 New Product. In the event that Buyer develops a New Product, Buyer
may solicit bids for the manufacture and supply of New Product from third
parties, provided, however, prior to entering into a commitment with a third
party to manufacture or supply such New Product, Buyer shall negotiate in good
faith with Supplier for Supplier to act as the manufacturer and supplier of such
New Product on terms consistent with this Agreement, but with an Upcharge to be
mutually agreed upon by Buyer and Supplier. Supplier may, but shall not be
obligated to, submit a bid to Buyer to manufacture or supply any New Product.
Although Buyer shall offer Supplier an opportunity to bid to be the supplier of
such New Product, such opportunity is not, and shall not be deemed to be, a
right of first negotiation, a right of first refusal, nor a right of last
refusal. If a New Product is manufactured and supplied by Supplier, such New
Product shall become Product and, then to the extent purchased, an agreed-to
upcharge shall be credited toward Buyer's Purchase Target obligation.
Notwithstanding anything contained herein to the contrary, Supplier shall not be
required to develop or fund the development of any New Product.
5. Duty to Supply:
5.1 Reliability. Supplier recognizes the importance of a reliable
source of supply of Product to Buyer's System. Subject to the terms of this
Agreement, Supplier shall use its best efforts to manufacture and supply one
hundred percent (100%) of the Product requirements of Buyer's System by
maintaining adequate inventory levels of Product with each Distributor. Buyer
shall provide Supplier
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with reasonable advance notice of any special promotions or other events that
would reasonably be expected to materially affect the demand for and the need
for additional Product.
5.2 Failure to Supply. In the event that:
(a) Supplier fails to supply the members of Buyer's System
with their respective Product requirements and such failure is not
attributable to an act or failure to act by Buyer, a Distributor or a
member of Buyer's System, then Buyer shall have the right to purchase
Product from sources other than Supplier to the extent Supplier is
unable to supply such Product, provided that Buyer gives Supplier prior
or contemporaneous notice thereof; and
(b) Supplier fails to supply Product (other than New Product
or additional or modified Product as contemplated by Section 4.1 and
Section 4.2 in its first ninety (90) days of supply by Supplier) and
such failure results in a Stock-out Shortage, then Supplier shall pay
to Buyer an amount equal to the then-current full retail price of each
Case of such undelivered Product less the Invoice Price of each Case of
such undelivered Product (the "Shortage Fee"); provided, however, that
no Shortage Fee shall be payable to Buyer if: (i) the Stock-out
Shortage is due to a failure by a Distributor to order timely such
Product in sufficient quantities or to take timely delivery of such
Product or provide Supplier with accurate information regarding
inventory management; (ii) the Stock-out Shortage is due to a failure
to provide notice to Supplier required by Section 2.3, Section 4.1 or
Section 5.1; (iii) the cumulative amount of Stock-out Shortages in any
calendar quarter is less than one-half of one percent (0.5%) of the
total number of Cases of all Product Codes shipped by such Distributor
to Buyer's System in such quarter; (iv) the Stock-out Shortage is due
to an increase in the number of Cases of any Product Code ordered by
members of Buyer's System during any fourteen (14) consecutive days
which is more than ten percent (10%) above the rolling two (2) week
average number of Cases ordered during the twelve (12) weeks
immediately preceding such fourteen (14) days; (v) the Stock-out
Shortage is due to a failure to receive one or more ingredients from a
vendor through no fault of Supplier and Supplier promptly notifies
Buyer of any such failure to receive an ingredient from the vendor; or
(vi) the Stock-out Shortage is due to a Force Majeure Event. The
Shortage Fee payable hereunder shall constitute liquidated damages and
Supplier shall not be liable to Buyer, the Distributors or members of
Buyer's System for any other damages, so long as the events described
in this Section 5.2 do not otherwise constitute a Supplier Default
pursuant to Section 15.1.
6. Place of Manufacture: Supplier shall manufacture all Product at the Plant and
supply all Product from the Plant, provided, however, that Supplier may
manufacture Product at facilities other than the Plant and supply Product from
facilities other than the Plant if: (i) Supplier obtains Buyer's prior written
approval; and (ii) Buyer is provided the same access to such other facilities
and such other facilities' employees and books and records as Buyer has with
respect to the Plant. Buyer's approval or disapproval shall be based upon the
impact the new facility is expected to have upon Product, including, among other
things, its quality and consistency, and the Invoice Price and adjustments
thereto. Title to Product and risk of loss shall pass to a Distributor or
Independent Operator (as defined in Section 7.5), as the case may be, when
Product is physically received by such Distributor or Independent Operator.
7. Distributors:
7.1 Supplier's Rights. Each Distributor and Independent Operator (as
defined in Section 7.5) shall be, at all times, creditworthy and reasonably
satisfactory to Supplier. Supplier shall be entitled to suspend supply of
Product to any Distributor or Independent Operator upon as much prior
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notice as is reasonably practical to Buyer if Supplier, in its sole discretion,
determines such Distributor or Independent Operator is not creditworthy or has
failed to perform in a commercially reasonable manner. If the sole reason for
such suspension is the creditworthiness of a Distributor or Independent
Operator, Buyer may avoid the suspension by providing to Supplier a guarantee of
the performance of such Distributor or Independent Operator in substantially the
form provided in Exhibit 7.1.
7.2 Appointment. If Buyer desires to appoint a new or alternate
Distributor, Buyer shall submit the name and business address of such proposed
Distributor to Supplier along with such other information as Supplier may
reasonably request. Supplier shall thereafter have thirty (30) calendar days in
which to approve or disapprove the appointment of such Person as a Distributor.
If Supplier disapproves the appointment, Supplier shall provide Buyer with
notice of the reason or reasons for such disapproval within such thirty-days,
and if the sole reason for disapproval is the creditworthiness of such
Distributor then Buyer may, at Buyer's sole discretion, obtain immediate
approval of such Distributor by providing to Supplier a guarantee of the
performance of such Distributor in substantially the form provided in Exhibit
7.1. If Supplier fails to provide Buyer with notice of disapproval within such
thirty-days, then Supplier shall be deemed to have approved the appointment of
such Person as a Distributor.
7.3 Default. If a Distributor or an Independent Operator materially
defaults in its obligations to Supplier, including without limitation, by
failing to pay Supplier for Product in accordance with the terms agreed upon by
Supplier and such Distributor or Independent Operator, Supplier shall have the
right to suspend supply of Product to such Distributor or Independent Operator
upon as much prior notice to Buyer as is reasonably practical, provided,
however, such Distributor, Independent Operator or Buyer or a member of Buyer's
System shall have the right to cure such default. Subject to Section 7.2, Buyer
shall have the right to replace a defaulting Distributor with an alternate
Distributor. In case of suspension or pending suspension of supply of Product to
a Distributor or an Independent Operator under Section 7.1 or Section 7.3,
Supplier shall cooperate with Buyer and Buyer's System to avoid any disruption
of supply to Buyer's System.
7.4 Alternative Pricing for Certain Distributors. Any provision of this
Agreement to the contrary notwithstanding, from time to time during the Term,
Buyer may direct Supplier to invoice certain Distributors at a price higher than
the Invoice Price (an "Additional Amount"). In such case, Supplier shall remit
to Buyer within ten (10) business days after the end of each Period the
Additional Amounts invoiced and received by Supplier. Except for the remittance
by Supplier of the Additional Amounts, all other terms and conditions of this
Agreement with respect to the manufacture and supply of Product to such
Distributors shall remain in effect, including, without limitation, the
adjustments contemplated in Section 3.4.
7.5 Direct Distribution. Certain members of Buyer's System
("Independent Operators") may, with Buyer's approval, purchase Product through
Buyer without using a Distributor. Supplier shall supply Product to such
Independent Operators designated by Buyer on terms and conditions to be
negotiated and agreed upon between such Independent Operators and Buyer, and on
payment terms to be determined in accordance with Supplier's credit policy.
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8. Quality Assurance:
8.1 Inspection. Upon demand, Buyer shall have the right, without prior
notice and during operating hours, to inspect the Plant (and all other
facilities where Product is manufactured) and to observe the Product
manufacturing process. Buyer shall also have the right, upon reasonable notice,
to escort its franchisees (and such other Persons as are approved by Supplier)
through the Plant during operating hours to observe the Product manufacturing
process.
8.2 Quality Assurance Program. Buyer shall establish with Supplier a
mutually acceptable quality assurance program, which program shall, among other
things, provide Buyer's management with reasonable and meaningful access to
Supplier and its employees in charge of Product. Buyer shall have the right, at
its sole option and expense, to station a full-time quality assurance
representative at the Plant who shall have the authority to accept or reject
Product prior to its shipment. Product may only be rejected if it fails to
comply with the Product specifications provided to Supplier. Any quality
assurance representative shall, at all times, be reasonably acceptable to
Supplier. Neither the presence of a quality assurance representative at the
Plant on behalf of Buyer, nor the failure of such representative to reject
Product prior to shipment, shall in any way modify Supplier's obligations to
manufacture and ship Product according to Product specifications pursuant to
Section 2.3.
9. Representations and Warranties of Supplier: Supplier represents and
warrants to Buyer that:
9.1 Organization and Good Standing. Supplier has been duly organized
and is existing as a corporation in good standing under the laws of the State of
Delaware, and is qualified and in good standing as a foreign corporation in the
State of Missouri, with full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
9.2 Supplier Organization. Supplier is a wholly owned subsidiary of
Bunge Corporation. Supplier has provided to Buyer a copy of the Dun & Bradstreet
report on Bunge Corporation, certified by the Treasurer of Bunge Corporation to
be materially true and correct with respect to financial information contained
therein, a copy of which is attached hereto as Exhibit 9.2.
9.3 Execution and Delivery. All consents, approvals, authorizations and
orders necessary for the execution, delivery and performance by Supplier of its
obligations hereunder have been obtained. This Agreement has been duly
authorized by all necessary corporate action on the part of Supplier, has been
duly executed and delivered by Supplier, and constitutes the legal, valid and
binding obligation of Supplier enforceable against Supplier in accordance with
its terms, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
9.4 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of the corporate charter or bylaws of Supplier or (ii) conflict
with, or result (immediately or upon the giving of notice or the passage of time
or both) in a breach or any violation of or any default under, or give rise to a
right of modification, termination, cancellation or acceleration of any
obligation or to a loss of a benefit under, any agreement, mortgage, indenture,
lease, instrument, permit, concession, franchise, license or other agreement, or
any statute, or any order, writ, injunction or decree of any court, governmental
body or agency or instrumentality thereof, or any arbitrator having jurisdiction
over Supplier or any of its assets, to which Supplier is a party or to which its
properties or assets may be bound, other than such conflicts, violations or
defaults or possible modifications, terminations, cancellations or accelerations
which
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individually or in the aggregate do not and will not have a material
adverse effect on Supplier or its ability to consummate the transactions
contemplated hereby.
9.5 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or governmental investigation, inquiry or proceeding
(whether local or foreign) pending or, to the knowledge of Supplier, threatened
against or affecting Supplier or its respective properties, assets or
businesses, nor, to the knowledge of Supplier, does any basis therefor exist and
Supplier is not in default with respect to any order, writ, judgment,
injunction, decree, determination or award of any court or of any governmental
agency or instrumentality (whether domestic or foreign) which, in each case,
would materially impact upon Supplier's obligations hereunder or Supplier's
ability to perform its obligations hereunder.
9.6 Disclosure. No representation or warranty of the Supplier in this
Agreement and no information contained in any Schedule or other writing
delivered by Supplier pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to make the statements herein or therein not misleading. To the
knowledge of Supplier after due inquiry, there is no fact that Supplier has not
disclosed to Buyer in writing that materially adversely affects, nor insofar as
Supplier can now foresee, will materially adversely affect Supplier's ability to
perform fully this Agreement.
9.7 Fees, Expenses and Commissions. Except for a fee payable solely by
Supplier to Chapman Partners, Inc., in connection with the Purchase Agreement,
Supplier has taken no action and has entered into no agreement, understanding or
other arrangement that would obligate Supplier or Buyer to pay any broker's or
finder's fee or any other similar fee or commission to any agent, broker,
investment banker or other firm or person in connection with any of the
transactions contemplated by this Agreement.
10. Representations and Warranties of Buyer: Buyer hereby represents and
warrants to Supplier that:
10.1 Organization and Good Standing. Buyer has been duly organized and
is existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
10.2 Execution and Delivery. All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by Buyer of its
obligations hereunder have been obtained. This Agreement has been duly
authorized by all necessary corporate action on the part of Buyer, has been duly
executed and delivered by Buyer and constitutes the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally, and by
general equitable principles.
10.3 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of the Certificate of Incorporation or bylaws of Buyer, in each
case as amended, or (ii) conflict with, or result (immediately or upon the
giving of notice or the passage of time or both) in a breach or any violation of
or any default under, or give rise to a right of modification, termination,
cancellation or acceleration of any obligation or to a loss of a benefit under,
any agreement, mortgage, indenture, lease, instrument, permit, concession,
franchise, license or other agreement, or any statute, or any order, writ,
injunction or decree of any court, governmental body or agency or
instrumentality thereof, or any arbitrator having
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jurisdiction over Buyer or any of its assets, to which Buyer is a party or by
which its properties or assets may be bound, other than such conflicts,
violations or defaults or possible modifications, terminations, cancellations or
accelerations which individually or in the aggregate do not and will not have a
material adverse effect on Buyer or its ability to consummate the transactions
contemplated hereby.
10.4 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or governmental investigation, inquiry or proceeding
(whether local or foreign) pending or, to the knowledge of Buyer, threatened
against or affecting Buyer or its properties, assets or businesses, nor, to the
knowledge of Buyer, does any basis therefor exist and Buyer is not in default
with respect to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality (whether
domestic or foreign) which, in each case, would materially impact upon Buyer's
obligations hereunder or Buyer's ability to perform its obligations hereunder.
10.5 Disclosure. No representation or warranty of the Buyer in this
Agreement and no information contained in any Schedule or other writing
delivered by Buyer pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to make the statements herein or therein not misleading. To the
knowledge of Buyer after due inquiry, there is no fact that Buyer has not
disclosed to Supplier in writing that materially adversely affects, nor insofar
as Buyer can now foresee, will materially adversely affect Buyer's ability to
perform fully this Agreement.
10.6 Fees, Expenses and Commissions. Except for fees payable solely by
Buyer to Brent Baxter Enterprises, LLC and Peter J. Solomon Company Limited in
connection with the Purchase Agreement, Buyer has taken no action and has
entered into no agreement, understanding or other arrangement that would
obligate Buyer or Supplier to pay any broker's or finder's fee or other similar
fee or commission to any agent, broker, investment banker or other firm or
person in connection with any of the transactions contemplated by this
Agreement.
11. Additional Covenants of Supplier: In addition to the other obligations
of Supplier under this Agreement, Supplier covenants that during the Term
(including any extensions or renewals thereof, unless expressly provided
otherwise):
11.1 Product. Except as provided herein, during the Term and for one
(1) year thereafter, Supplier shall not, either directly or indirectly, supply
any Product or any substitute for Product to any bakery/cafe included in Buyer's
System.
11.2 Operations; Compliance with Standards and Law. Subject to the
provisions of this Agreement, Supplier shall operate the Plant (and all other
facilities that manufacture Product which are approved by Buyer) and manufacture
Product in accordance with good manufacturing practices and manufacture and
supply Product in accordance with the recipes, formulas, processes, and Product
specifications (including as to vendors) established by Buyer and in accordance
with all applicable laws, rules and regulations, statutes, ordinances,
regulations, orders and bylaws.
11.3 Distributor Obligations. Subject to Section 7, Supplier shall not
terminate its obligation to supply Buyer's System nor shall Supplier withhold
delivery of Product from any non-defaulting member of Buyer's System or any
non-defaulting Distributor due to nonpayment or other default by a Distributor
or a member of Buyer's System.
11.4 Ownership of the Plant. Without limiting Buyer's rights pursuant
to Section 15, during the Term (but excluding any extensions or renewals
thereof), if Supplier shall sell, transfer or license any
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part of the Plant or enter into any agreement or arrangement that would have the
effect of transferring operational control of the Plant to a third party,
Supplier shall cause such third party to assume, for the benefit of Buyer, all
obligations of Supplier hereunder.
11.5 Efficiency of Operation. Subject to Buyer's right to designate
vendors and processes, Supplier shall use its best efforts to operate the Plant
at optimal efficiency and to perform its other responsibilities hereunder,
including, without limitation, purchasing raw materials, contracting for labor
and arranging for freight in an efficient, cost effective and professional
manner.
11.6 Cooperation with Inspections. Supplier shall cooperate with Buyer
in any investigation or inspection by any governmental agency or by Buyer
relating to the Plant or Product which involves health, safety or product
liability issues.
11.7. Non-Solicitation. Supplier shall not, directly or indirectly,
during the Term and, so long as this Agreement is not terminated by Supplier as
a result of a Buyer Default, for one year thereafter, solicit or hire any
employee of Buyer, unless the employment of such employee has been terminated by
Buyer, or Buyer consents thereto.
11A. Additional Covenants of Buyer: In addition to the other obligations of
Buyer under this Agreement, Buyer covenants that during the Term (including any
extensions or renewals thereof, unless expressly provided otherwise):
11A.1 Compliance with Standards and Law. Buyer shall comply with all
applicable laws, rules and regulations, statutes, ordinances, regulations,
orders and bylaws, including, without limitation, antitrust and franchise laws.
11A.2 Distributor Obligations. Buyer shall not terminate its obligation
to purchase, or cause to be purchased, Product from Supplier due to nonpayment
or other default by a Distributor.
11A.3 Transfer of Interest. If Buyer shall enter into any agreement or
arrangement that would have the effect of transferring operational control of
Buyer or Buyer's System to a third party, Buyer shall cause such third party to
assume, for the benefit of Supplier, all obligations of Buyer or Buyer's System,
as the case may be, hereunder.
11A.4 Product Usage: Buyer shall use its best efforts to provide
Supplier with timely information with respect to Product usage.
11A.5 Cooperation with Inspections. Buyer shall cooperate with Supplier
in any investigation or inspection by any governmental agency or by Supplier
relating to the Plant or Product which involves health, safety or product
liability issues.
11A.6 Non-Solicitation. Buyer shall not, directly or indirectly, during
the Term, so long as this Agreement is not terminated by Buyer as a result of a
Supplier Default, and for one year thereafter, solicit or hire any employee of
Supplier or Bunge Corporation, unless the employment of such employee has been
terminated by Supplier or Bunge Corporation, as the case may be, or Supplier or
Bunge Corporation, as the case may be, consents thereto.
12. Insurance: During the Term (and any extension thereof), Supplier shall be
required to obtain and maintain insurance policies, in the amounts set forth on
Schedule 12. With respect to the Commercial General Liability and Umbrella
policies, Buyer shall be named as an additional insured.
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During the Term and (any extension thereof), Buyer shall obtain and maintain
insurance policies, in the amounts set forth on Schedule 12. With respect to the
Commercial General Liability and Umbrella policies, Supplier and Bunge
Corporation shall be named as additional insureds. All insurance policies
required by this Section 12 shall be obtained from recognized insurance carriers
with an A.M. Best rating of "A-" or better.
13. Confidentiality/Ownership:
13.1 Proprietary Information. As used in this Agreement, the term
"Proprietary Information" shall mean any knowledge or information, written or
oral, which relates in any manner to the respective businesses of Buyer and
Supplier which is confidential and proprietary information of the Disclosing
Party (as defined below), whether disclosed prior to, on or after the date of
this Agreement, including, without limitation, the recipes, formulas,
specifications, manufacturing processes, preparation procedures, financial
information, equipment, marketing methods, demographic and trade information,
customer profiles and preferences, costs, development plans, products and
production techniques and all related trade secrets and proprietary information
treated as such by the Disclosing Party, whether by course of conduct, by letter
or report, or by the use of an appropriate stamp or legend designating such
information to be confidential or proprietary. As used herein, the term
"Disclosing Party" shall mean the party to this Agreement which discloses or
makes available Proprietary Information to the Receiving Party, and the term
"Receiving Party" shall mean the party to this Agreement to whom Proprietary
Information is disclosed or made available by the Disclosing Party.
13.2 Restrictions on Use. The Receiving Party shall hold all
Proprietary Information in confidence, shall use such Proprietary Information
only for the benefit of the Disclosing Party and disclose such Proprietary
Information only to the Receiving Party's officers, directors, employees and
agents in order to assist the Receiving Party in performing its obligations
under this Agreement. The Receiving Party shall not disclose Proprietary
Information to any other Person, provided, however, the Receiving Party may
disclose Proprietary Information to a corporate Affiliate of the Receiving Party
if such Affiliate first agrees in writing to be bound by the covenants contained
in this Agreement with respect to the use and nondisclosure of Proprietary
Information.
13.3 Ownership. Subject to the terms and conditions of the Purchase
Agreement, ownership of all Proprietary Information relating to all recipes,
formulas, specifications, manufacturing processes or preparation procedures,
demographic and trade information, customer profiles and preferences, costs,
development plans, products and production techniques and any other trade
secrets and information used to make Product (including, without limitation,
information related to the cost of Product) shall remain solely the property of
Buyer, regardless of whether developed or modified by Buyer or Supplier. In
manufacturing bakery products other than pursuant to this Agreement, Supplier
shall use product codes and product names for product which are separate and
distinct from those used for Product manufactured for Buyer.
13.4 Exceptions. The obligations and prohibitions set forth in this
Section 13 shall not apply to any Proprietary Information that is required to be
disclosed by applicable law or that is shown, by preexisting documentary
evidence or other reliable evidence, to be information: (i) that was known by
the Receiving Party prior to the exchange of information in contemplation of
this Agreement; (ii) entered into the public domain other than through the act
of the Receiving Party; (iii) is independently developed by the Receiving Party;
or (iv) is rightfully received by the Receiving Party from a third party who is
not obligated to the Disclosing Party to keep such information confidential.
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13.5 Protected Signature Product; Competitors. If Buyer licenses to
Supplier the right to manufacture and sell any Product to any Person other than
to a Distributor or to Buyer's System, then Supplier shall, in any event, be
prohibited from: (i) using Buyer's trademarks, trade names, trade secrets and
trade dress; and (ii) selling to any third-party any "Protected Signature
Product," which is set forth on Schedule 13.5(a). In addition, Supplier shall
not manufacture or sell any dough product manufactured on any of the production
lines identified in the definition of Product in Section 1 to any Competitor.
For the purpose of this Section 13.5, the term "Competitor" shall mean any of
the retail operations listed on Schedule 13.5(b) and any retail operation with
at least one hundred (100) stores that sell baked goods and coffee, where such
sales of baked goods and coffee represent thirty percent (30%) or more of such
retail operation's total annual sales revenue. Nothing contained herein shall
prevent Supplier from selling any baked, par-baked or pre-proofed bakery
products to any Competitor or other customer of Supplier, so long as: (1) such
bakery products are materially different in formulation from any Product
manufactured by Supplier for Buyer hereunder, and (2) Supplier agrees to
manufacture Buyer's own baked, par-baked or pre-proofed bakery products which
are within the product categories listed on Schedule 1.5 and introduced by Buyer
as additional Product with an Upcharge as provided in the definition of
"Upcharge" in Section 1.
14. Opportunities/Conflicts of Interest: Except as otherwise set forth in this
Agreement: (i) neither party shall have any rights in or to the business
activities of the other party, nor to the income or profits derived therefrom;
(ii) neither party shall be obligated to offer any investment or other business
opportunity to the other party; and (iii) neither party shall have any duty,
fiduciary or otherwise, to afford the other party any opportunity to participate
in such activities.
15. Termination:
15.1 Supplier Default. The obligations to purchase Product under this
Agreement may be terminated by Buyer if any one or more of the following events
occur (each a "Supplier Default"):
(a) If Supplier files a petition for adjudication as a
bankrupt, for reorganization or for an arrangement under any bankruptcy or
insolvency law, or if any involuntary petition under such law is filed against
Supplier and is not dismissed within thirty (30) days thereafter; then, so long
as any such event is continuing, Buyer may by notice in writing to Supplier
terminate its obligations to purchase all or a portion of Product forthwith;
(b) If Supplier makes an assignment of all or substantially
all of its assets for the benefit of creditors, or if Supplier's interest under
this Agreement shall be taken upon execution;
(c) If Supplier fails to perform any material covenant or
material obligation including, but not limited to, the payment of any amounts
due to Buyer; provided, however, that no termination shall be made hereunder
unless and until Buyer gives Supplier notice of such failure to perform and
Supplier has not cured such failure within thirty (30) days after its receipt of
such notice, or ten (10) days in the case of failure to make payment of any
amounts due to Buyer; or
(d) There is a change of ownership or control of Supplier or
Supplier transfers its interest in the Plant to a third party (in either case,
other than to an Affiliate of Supplier), or if Bunge Corporation terminates its
guaranty provided below; provided, however, that Buyer's exclusive remedy upon
the occurrence of such an event in the absence of Buyer's prior written consent
to any such event (and without limiting Buyer's remedies in the event of any
other Supplier Default) shall be limited to the right to terminate this
Agreement.
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<PAGE>
15.2 Cancellation Fee. In the event of a Supplier Default, which, if
subject to cure, is not timely cured, then no rights or remedies otherwise
available to the parties upon such termination shall be deemed surrendered,
except in the case of a Supplier Default under Section 15.1(d) in the case of
which Buyer's sole remedy shall be to terminate this Agreement. In addition to
all other rights and remedies granted herein to either party, and in addition to
all other rights and remedies each party may have at law, in equity or
otherwise, in the event that if this Agreement is terminated due to Supplier
Default (excluding a Supplier Default under Section 15.1(d)), Supplier shall pay
to Buyer a cancellation fee (the "Supplier's Cancellation Fee") in an amount
equal to [ ]* per year for each year
remaining in the first four (4) years of the Term, pro rated for any partial
such year remaining in the Term upon the effective date of termination. If Buyer
elects to terminate due to a Supplier Default, then Supplier's Cancellation Fee
shall be payable to Buyer in full within thirty (30) days following the
effective date of termination.
15.3 Buyer Default. The obligations to manufacture and supply Product
under this Agreement may be terminated by Supplier if any one or more of the
following events occur (each a "Buyer Default"):
(a) Buyer files a petition for adjudication as a bankrupt, for
reorganization or for an arrangement under any bankruptcy or
insolvency law, or if any involuntary petition under such law
is filed against Buyer and is not dismissed within thirty (30)
days thereafter; then, so long as any such event is
continuing, Supplier may by notice in writing to Buyer
terminate its obligations to manufacture or supply all or a
portion of Product forthwith;
(b) Buyer makes an assignment of all or substantially all of
its assets for the benefit of creditors, or if Buyer's
interest under this Agreement shall be taken upon execution;
(c) Buyer fails to perform any material covenant or material
obligation including, but not limited to, the payment of any
amounts due to Supplier from Buyer; provided, however, that no
termination may be made hereunder unless and until Supplier
gives Buyer written notice of such failure to perform and
Buyer has not cured such failure within thirty (30) days after
its receipt of such notice, or ten (10) days in the case of
failure to make payment of any amounts due to Supplier; or
(d) There is a change of ownership or control of Buyer and the
entity assuming ownership or control fails to assume Buyer's
obligations under this Agreement as contemplated by Section
11A.3.
15.4 Cancellation Fee. In the event of a Buyer Default (excluding a
Buyer Default under Section 15.3(d)), which, if subject to cure, is not timely
cured, then no rights or remedies otherwise available to the parties upon such
termination shall be deemed surrendered. In addition to all other rights and
remedies granted herein to either party, and in addition to all other rights and
remedies each party may have at law, in equity or otherwise, in the event that
this Agreement is terminated due to a Buyer Default, Buyer shall pay to Supplier
a cancellation fee (the "Buyer's Cancellation Fee") in an amount equal to
[ ]* per year for each year remaining in the
first four (4) years of the Term, pro rated for any partial such year remaining
in the Term upon the effective date of termination. If Buyer elects to terminate
due to a Buyer Default, then Buyer's Cancellation Fee shall be payable to
Supplier in full within thirty (30) days following the effective date of
termination.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
15.5 Effect of Termination
(a) Termination of this Agreement, whether by lapse of time,
mutual consent, operation of law, exercise of right of
termination or otherwise shall not affect the ownership
interests in the respective proprietary rights and other
rights of the parties, but shall only affect any obligations
of the parties to continue to cooperate in the manufacturing,
supply and purchase of Product.
(b) Upon termination of this Agreement by lapse of time or
mutual consent, Supplier shall complete the manufacture and
supply of Product to fill any outstanding orders that are
deliverable within thirty (30) days of such termination and
Buyer shall purchase, or cause to be purchased, such Product.
(c) Notwithstanding any termination of this Agreement, all
provisions regarding: (i) the sharing of costs between the
parties; (ii) the ownership, non-use, or protection of
Proprietary Information; (iii) indemnification, (iv)
representations of the parties being true as of the time made;
and (v) any obligations of either party to the other contained
herein which, by their nature, should reasonably extend beyond
the termination of any regular ongoing business relationship
between the parties as contemplated by this Agreement, shall
survive such termination.
16. Information and Audit Rights of Buyer:
16.1 Books and Records. Supplier shall maintain, in accordance with
generally accepted accounting principles consistently applied, accurate and
complete books and records with respect to all Base Standard Costs and Updated
Standard Costs and freight costs relating to Product.
16.2 Rights to Audit; Rights to Inspect. Upon reasonable prior notice,
Buyer shall have the right, during normal business hours, to inspect and audit
the books and records of Supplier relating solely to the calculation of Invoice
Price and adjustments thereto.
16.3 Certain Information. Upon Buyer's written request, Supplier shall
provide information in its control concerning the manufacturing and supply of
Product, including, without limitation, sources of raw materials used in Product
and information on Supplier's maintenance of confidential information relating
to Buyer.
17. Remedies: The relationship between Supplier and Buyer, which is reflected in
this Agreement, is special and unique and has a value which cannot be readily
measured in monetary terms. Therefore, in the event of any breach or threatened
breach by either party, the other party shall be entitled to seek both legal and
equitable relief, including, without limitation, temporary, preliminary and
permanent injunctive relief, to restrain such breach or threatened breach and to
mandate compliance with the terms set forth herein.
18. Indemnification: Supplier will at all times indemnify, defend and hold
harmless Buyer from and against any and all claims, damages, liabilities, costs
and expenses, including reasonable counsel fees, arising out of (i) any failure
by Supplier to perform its obligations hereunder; and (ii) the supply of Product
by Supplier that is not in compliance with the Product specifications. Buyer
will at all times indemnify, defend and hold harmless Supplier from and against
any and all claims, damages, liabilities, costs and expenses, including
reasonable counsel fees, arising out of (i) any failure by Buyer to perform its
obligations hereunder; (ii) any claim for infringement or violation with any
patent or trade secret of
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<PAGE>
any third party, to the extent such claim is attributable to use by Supplier of
the recipes, formulae, processes and specifications provided to Supplier by
Buyer; and (iii) any claim or action by any third-party alleging infringement or
violation of, or conflict with, any trademarks, tradenames or trade dress, to
the extent such claim or action is attributable to the use of such trademarks,
tradenames or trade dress used in accordance with Buyer's specifications. Prompt
written notice of any claim or litigation hereunder shall be given to either
party, as the case may be, by the other party. The indemnifying party shall have
the right to control the defense of the claim at its expense. The indemnified
party shall have the right, but not the obligation, to participate in the
defense of any claim. There shall be no settlement of any claim to which an
indemnity relates without the prior written consent of the indemnitor, which
consent shall not be unreasonably withheld or delayed. If a third party brings
an action against either party and there is a dispute between Buyer and Supplier
as to who is responsible for defending such action, then, until such dispute is
resolved, Buyer and Supplier shall cooperate so as not to jeopardize the defense
of such action.
19. Force Majeure: Neither party shall be responsible for any resulting loss to
the other party if the fulfillment of any of the terms or provisions of this
Agreement is delayed or prevented by strikes, work stoppages and labor unrest
(other than with respect to strikes, work stoppages and labor unrest that occurs
at the Plant at any time after six (6) months after the date hereof),
transportation stoppages, ingredient shortages not the fault of Supplier, riots,
wars, acts of enemies, national emergency, floods, fires, acts of God, or by any
other cause not within the control of the party whose performance is interfered
with or which, by the exercise of reasonable diligence, such party is unable to
prevent (individually and collectively, a "Force Majeure Event"). Upon the
occurrence of a Force Majeure Event, the party claiming force majeure shall
notify the other party forthwith and both parties shall use their reasonable
best efforts to mitigate or eliminate any adverse effects of such event.
20. Relationship of Parties: Supplier and Buyer are each independent
contractors. Nothing herein contained shall be construed to place Supplier and
Buyer in the relationship of principal and agent, master and servant, partners,
joint venturers, and, except as otherwise set forth in this Agreement, neither
party shall have, expressly or by implication, the power to represent itself as
having any authority to make contracts in the name of or binding upon the other,
or to obligate or bind the other in any manner whatsoever.
21. Consents; Notices: Unless otherwise specifically set forth herein, any
notice, consent or approval of a party shall be in writing and given by
telecopier and original posted first class mail, postage prepaid, within two (2)
business days thereafter; or by certified or registered mail with an
acknowledgment of receipt, postage prepaid, return receipt requested; or by a
reputable private courier, such as Federal Express, which provides evidence of
receipt as a part of its delivery service, and addressed as follows:
If to Buyer: Saint Louis Bread Company, Inc.
19 Fid Kennedy Avenue
Marine Industrial Park
Boston, MA 02210-2497
Attn: Chief Executive Officer
telecopier (617) 423-7879
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<PAGE>
with copy to: Walter D. Wekstein, Esq.
Lawrence R. Katz, Esq.
Gadsby & Hannah LLP
225 Franklin Street
Boston, MA 02110
telecopier (617) 345-7050
If to Supplier: Bunge Foods Corporation
3701 Algonquin Road, Suite 360
Rolling Meadows, IL 60008
Attn: General Manager
telecopier (847) 342-0029
with a copy to: Bunge Corporation
11720 Borman Drive
St. Louis, MO 63146
Attn: Legal Department
telecopier (314) 994-6521
or to such other address as may be designated in writing by either party from
time to time in accordance herewith, and shall be deemed delivered two (2)
business days following delivery by hand, by private courier or when so
telecopied and five (5) business days following proper dispatch by certified or
registered mail. A business day is any Monday through Friday on which first
class mail is delivered.
22. Arbitration: If a dispute arises under this Agreement, the parties shall
submit their dispute to arbitration under the jurisdiction and in accordance
with the rules of the American Arbitration Association (the "Association")
located in Boston, Massachusetts or at any other mutually agreeable location.
The parties shall be bound by the decision of the arbitrator(s). Notwithstanding
the foregoing, the arbitrator(s) shall not have the authority to modify any
express provision of this Agreement. Moreover, and notwithstanding the
provisions of this Section 22 or anything else to the contrary contained in this
Agreement, each party shall have the right to seek injunctive or equitable
relief in a court of competent jurisdiction in addition to or in lieu of its
rights pursuant to this section.
23. Assignees and Third Parties: Subject to Buyer's rights in Article 15, this
Agreement may be assigned by Supplier to a third party which acquires all or
substantially all of the assets of Supplier or the Plant which agrees to be
assume and be bound by this Agreement. This Agreement may be assigned by Buyer
to an entity which acquires all or substantially all of Buyer's retail
bakery/cafe outlets and which agrees to assume and be bound by this Agreement as
provided in Section 11A.3.
24. Choice of Law: This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Missouri, as applicable to
agreements executed and entirely performed in said State.
25. Attorneys' Fees: If any action or proceeding is brought to enforce or
interpret any provision of this Agreement then, in addition to any other relief
to which the prevailing party may be entitled, the prevailing party shall be
entitled to recover its reasonable costs and attorneys' fees.
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<PAGE>
26. Severability: If any term or provision of this Agreement is determined by a
court of competent jurisdiction to be invalid illegal or incapable of being
enforced by any law or public policy, all other terms or provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to the other parties.
27. Modification; Waivers: This Agreement (including the Schedules and Exhibits
hereto) may be modified or amended only with the written consent of each party
hereto. No party hereto shall be released from its obligations hereunder without
the written consent of all of the other parties. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party against whom such waiver is to be asserted. Except as otherwise
specifically provided herein, no delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
28. Headings: The headings of the articles, sections and other subdivisions of
this Agreement are for convenient reference only. They shall not be used in any
way to govern, limit, modify, construe this Agreement or any part or provision
thereof nor otherwise be given any legal effect.
29. Succession: This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and other legal
representatives and, to the extent that any assignment hereof is permitted
hereunder, their assignees.
30. Counterparts: This Agreement may be executed in counterparts. Each
counterpart, including a signature page executed by each of the parties hereto,
shall be an original counterpart of this Agreement, but all of such counterparts
together shall constitute one (1) instrument.
31. Additional Documents: Each party agrees to provide any additional documents
reasonably requested by the other party in order to carry out the purpose and
intent of this Agreement.
32. Approvals; Consents: Unless otherwise specifically set forth herein, the
approvals and consents that are required or permitted herein shall not be
unreasonably withheld or delayed.
33. Entire Agreement: This Agreement (including the Schedules and Exhibits
hereto) contains the full and complete undertaking and agreement between Buyer
and Supplier with respect to the within subject matter, and supersedes all other
agreements between Buyer and Supplier, whether written or oral,
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<PAGE>
except any confidentiality agreements between the parties, which shall, to the
extent such agreements do not contradict the terms of this Agreement, continue
in effect.
IN WITNESS WHEREOF, the parties hereto have set their hands to this
Agreement as a sealed instrument and have delivered this Agreement as of the day
and year first above written.
BUNGE FOODS CORPORATION,
a Delaware corporation
By: /s/ Michael M. Scharf
---------------------
Its: Senior Vice President
SAINT LOUIS BREAD COMPANY, INC.,
a Delaware corporation
By: /s/ Anthony J. Carroll
----------------------
Its: Vice President and Treasurer
Bunge Corporation Guaranty:
In order to induce Buyer to execute and deliver the foregoing
Agreement, Bunge Corporation, a New York corporation, hereby unconditionally
guarantees to Buyer that it shall cause Supplier, a wholly-owned subsidiary of
Bunge Corporation, to fulfill each and every obligation of Supplier under this
Agreement, and in connection therewith and not in limitation of the foregoing,
Bunge Corporation hereby unconditionally guarantees to Buyer, the prompt payment
by Supplier of all amounts at any time due by Supplier to Buyer pursuant to this
Agreement, whether in the ordinary course of operations, arising as a result of
a Supplier Default or otherwise. This guaranty shall terminate if Supplier shall
cease to be an Affiliate of Bunge Corporation or if the Plant is sold or the
ownership of the Plant is otherwise transferred to a third-party who is not an
Affiliate of Bunge Corporation.
BUNGE CORPORATION,
a New York corporation
By: /s/ Michael M. Scharf
---------------------
Its: Senior Vice President
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<PAGE>
Index of Schedules and Exhibits to
Bakery Product Supply Agreement
by and between
Bunge Foods Corporation and
Saint Louis Bread Company, Inc.
dated as of March 23, 1998
Schedule* Title
- --------- -----
1.1 Methodology for Calculating Employee Benefits Allowance
1.2 Schedule of Wage Rates and Employee Benefits
1.4 Description of Employee Benefits
1.5 Product Categories
1.6 Purchase Targets
2.3 Product Specifications
3.1 Pricing Diagram
7.1 Form of Distributor Guaranty
12 Insurance
13.5(a) Au Bon Pain Protected Signature Product
13.5(b) Competitors
Exhibit* Title
- -------- -----
1.1 Bill of Materials for each Product Code as of Closing
3.4.1 Form of Adjustment Summary
9.2 Dun and Bradstreet Report
* All Schedules and Exhibits to this Bakery Product Supply Agreement have been
omitted. Copies will be provided supplementally to the Commission at no expense
upon request, provided that the Company reserves the right to request
confidential treatment for same.
Execution Copy
BAKERY PRODUCT SUPPLY AGREEMENT
This Bakery Product Supply Agreement ("Agreement"), dated as of
March 23, 1998, is by and between BUNGE FOODS CORPORATION, a Delaware
corporation ("Supplier") and AU BON PAIN CO., INC., a Delaware corporation
("Buyer").
WHEREAS, contemporaneously herewith, Supplier has acquired from ABP
Midwest Manufacturing Co., Inc., a Delaware corporation and an Affiliate (as
defined below) of Buyer ("ABP Midwest"), ABP Midwest's bakery products
manufacturing plant in Mexico, Missouri (the "Plant") pursuant to the terms of
an Asset Purchase Agreement by and among Supplier, ABP Midwest and Buyer (the
"Purchase Agreement"); and
WHEREAS, in partial consideration of Buyer's entry into the Purchase
Agreement, Supplier agreed to enter into this Agreement; and
WHEREAS, to induce Buyer to enter into this Agreement, Bunge
Corporation, a New York corporation ("Bunge Corporation"), has agreed to
guaranty the obligations of Supplier under this Agreement as provided
immediately following this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Definitions: In addition to other terms defined herein, capitalized terms
used in this Agreement shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any
Person directly or indirectly controlling,
controlled by, or under common control with
such other Person. For purposes of
determining whether a Person is an
Affiliate, the term "control" shall mean
possession, directly or indirectly, of the
power to direct or cause the direction of
the management and policies of a Person,
whether through ownership of securities, by
virtue of the office held by such Person, by
contract or otherwise.
"Base Standard Costs" shall mean, for each Product Code during any
period of time, the sum of: (a) the per unit
standard costs, including delivered raw
materials and delivered packaging (in each
case at the stipulated delivered price per
unit of material multiplied by the standard
usage in the Bill of Materials) and Direct
Labor Costs, as set forth in the Bill of
Materials, excluding the cost of flour and
butter; plus (b) the Billing Price for Flour
and Butter; plus (c) an allowance for
Employee Benefits on a cost per unit basis
determined according to the methodology set
forth on Schedule 1.1. Such sum shall be
calculated using the operating standards and
process specifications included in the Bill
of Materials.
"Bill of Materials" shall mean Buyer's bill of materials for
each Product Code, including any process
specifications, yield and usage information,
and the standard usage of electricity (as
described in Schedule 3.1). A copy of the
Bill of
<PAGE>
Materials in effect as of the date hereof
for each Product Code is attached as Exhibit
1.1. Such bills of materials, which set
forth the cost structure for each Product
Code, are subject to modification by Buyer
as provided in Section 4.1.
"Billing Freight Allowance" shall mean the estimated per Case freight
allowance used for the purpose of
establishing the Invoice Price for a Product
Code to a Distributor, determined by
agreement of the parties as of the date
hereof (or at the time of introduction in
the case of a New Product or additional or
modified Product) and at the times and in
the manner specified in Section 3.3.
"Billing Price for Electricity" shall mean, for each Product Code during any
month, the weighted average price of
electricity per kilowatt hour estimated for
the purpose of establishing the Invoice
Price determined by agreement of the parties
as of the date hereof (or at the time of
introduction in the case of a New Product or
additional or modified Product) and at the
times and in the manner specified in Section
3.3 and consistent with the methodology
described on Schedule 3.1 multiplied by the
per unit standard kilowatt hour usage set
forth in the Bill of Materials as described
on Schedule 3.1.
"Billing Price for Flour shall mean, for each Product Code, the
and Butter" estimated cost per unit of Product of flour
and butter used for the purpose of
establishing the Invoice Price, determined
by agreement of the parties as of the date
hereof (or at the time of introduction in
the case of a New Product or additional or
modified Product) and at the times and in
the manner specified in Section 3.3.
"Buyer's System" shall mean the bakery/cafe retail outlets in
the continental United States owned,
franchised or licensed by Buyer and the
bakery/cafe retail outlets in the
continental United States operated by other
Persons pursuant to a joint venture or other
arrangement with Buyer in which Buyer holds
not less than a fifty-one percent (51%)
interest.
"Case" shall mean, for each Product Code, the
number of units that are packaged in each
standard case as set forth in the Bill of
Materials.
"CPI Allowance" shall mean, at any time for each job
classification, the actual regular,
non-overtime wage rates and Employee
Benefits (determined in accordance with
Schedule 1.2) as of the date of this
Agreement, plus a percentage increase equal
to the percentage increase in the Consumer
Price Index from the date of this Agreement
plus [ ].* As used
herein, the term "Consumer Price Index"
shall mean the "Consumer Price Index for
Urban Wage Earners and Clerical Workers,
U.S. City Average, All Items (1982-84=100)"
published by the Bureau of Labor Statistics
of the United States Department of Labor
(or, if such index is not available, any
comparable successor or substitute index,
appropriately adjusted, which is designated
by Buyer and approved by Supplier). As of
the last day of the month ending
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
immediately prior to the date hereof, the
Consumer Price Index was 161.9.
"Direct Labor Costs" shall mean, the direct hourly labor costs
per unit of Product Code, as calculated in
accordance with the structure and
methodology in the Bill of Materials based
upon the non-overtime wage rates per
position as set forth in Schedule 1.2 (such
non-overtime wage rates plus Employee
Benefits not to exceed the CPI Allowance).
"Distributors" shall mean the distributors designated by
Buyer or members of Buyer's System (whether
independently owned and operated, or part of
Buyer's System), who are authorized pursuant
to Section 7.1 to order and/or receive
Product from Supplier, to perform
preliminary quality checks on Product, to
make payments to Supplier for Product as
invoiced by Supplier pursuant to the terms
of this Agreement, and to distribute Product
to Buyer's System. A current list of
approved Distributors is set forth on
Schedule 1.3.
"Employee Benefits" shall mean, for each Product Code during any
period of time, the total employee benefit
expense incurred by Supplier to or for the
benefit of the direct labor used to
manufacture such Product, which benefits
shall consist of the benefits described on
Schedule 1.4 for hourly employees.
"New Product" shall mean all items of bakery products that
are not capable of being manufactured on one
or more of the following existing production
lines at the Plant, as such production lines
may exist from time-to-time during the Term
or as they may be modified pursuant to
Section 3.5: (1) the Laminated Line
(including extruded Products); (2) the
Bread/Roll Line; (3) the Muffin Line; (4)
the Cookie Line; and (5) the Icing/Mix Line.
"Period" shall mean a period of time agreed-to
between Supplier and Buyer from time to time
during the Term, but in no event shall any
such period be longer than one (1) month.
"Person" shall mean an individual, a corporation, a
general partnership, a limited partnership,
a limited liability company, an association,
a trust or any other entity or organization,
including a government or political
subdivision or an agency or instrumentality
thereof.
"Product" shall mean all bakery goods that are
currently or hereafter manufactured at the
Plant (or manufactured at a facility other
than the Plant with the approval of Buyer in
accordance with the terms of this
Agreement), and then supplied directly or
indirectly for resale to Buyer's System,
provided that such bakery goods are capable
of being manufactured on one or more of the
following existing production lines at the
Plant, as such production lines may exist
from time-to-time during the Term or as they
may be modified pursuant to Section 3.5: (1)
the Laminated Line (including extruded
Products); (2) the Bread/Roll Line; (3) the
Muffin Line; (4) the Cookie Line; and (5)
the Icing/Mix Line (including, without
limitation, bakery goods in the categories
listed on Schedule 1.5). The
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<PAGE>
foregoing notwithstanding, the term
"Product" shall not include bagels or PM
Sweets (brownies and bars).
"Product Code" shall mean an item of Product which is a
specific combination of formulation, unit
size, package size (including number of
units), package type and label, all in
accordance with the Bill of Materials, and
to which a specific product code has been
assigned for identification purposes.
"Purchase Target" shall mean the minimum amount of total
Upcharge to be earned by Supplier as a
result of the purchase of Product from
Supplier in each of the first four (4) years
of the Term, as set forth on Schedule 1.6.
"Quarter" shall mean the three (3) consecutive months
ending on the last day of the calendar month
occurring every May, August, November and
February during the Term.
"Stipulated Flour
and Butter Costs" shall mean, for each Product Code, the
delivered per unit cost of flour and butter
for a period of time, based on either: (1)
the purchase price for flour and/or butter
as selected by Buyer from time to time after
consultation with and advice from Supplier
from available contracts for flour and
butter for such period of time; or (2) the
methodology selected by Buyer for purchasing
flour and/or butter for a period of time
determined by Buyer (for example, but
without limitation, through purchases on the
spot markets), in each case multiplied by
the standard usage per unit of Product Code
in the Bill of Materials.
"Stock-out Shortage" shall mean the inability of a Distributor to
fill an order for Product placed by a member
of Buyer's System due solely to a failure by
Supplier to supply Product to such
Distributor. The amount of a Stock-Out
Shortage, for a Product Code, shall equal
the aggregate number of Cases of such
Product Code ordered from the affected
Distributor by Buyer's System less the
number of Cases of such Product Code in the
affected Distributor's inventory.
"Term" shall mean, unless earlier terminated due to
a Supplier Default or a Buyer Default or
pursuant to Section 3.7.3, the period during
which Supplier shall be required to
manufacture and supply Product and Buyer
shall be required to purchase, or cause to
be purchased, Product in accordance with the
terms of this Agreement, which shall be for
a period of five (5) years commencing on the
date of this Agreement, and shall be
automatically renewed on a year-to-year
basis thereafter unless notice of
termination by either party is given to the
other party not less than twelve (12) months
prior to termination.
"Upcharge" shall mean, for each Product Code existing
as of the date hereof, the dollar amount per
unit of Product as set forth on Schedule
1.7, and for each Product Code for a New
Product the dollar amount per unit of
Product as shall be agreed upon in writing
by Buyer and Supplier. With respect to each
additional Product Code introduced by Buyer
pursuant to Section 3.5.1, the Upcharge
shall equal [ ]* (during each of the
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
first four (4) years of the Term) and
[ ]* (during the fifth (5th) year of
the Term) of the sum of the Base Standard
Costs initially established for each such
additional Product Code plus a variance
equal to [ ]* of such Base
Standard Costs. Upcharge on any unit of
Product or New Product shall be deemed
earned at the time when title and risk of
loss pass pursuant to Section 6 of this
Agreement.
"Updated Electricity Costs" shall mean, for each Product Code during any
month, the weighted average price of
electricity per kilowatt hour determined in
the manner described on Schedule 3.1
multiplied by the per unit standard kilowatt
hour usage set forth in the Bill of
Materials as described on Schedule 3.1.
"Updated Freight Allowance" shall mean, for each Product Code during any
period, the per Case stipulated cost of
freight, equal to: (a) the freight cost per
truck from the Plant to each Distributor's
warehouse (or such other designated
destination) from available quotes for such
freight services as selected by Buyer (or by
Supplier in the absence of such a selection
by Buyer); divided by (b) the agreed-to
number of Cases shipped per truck.
"Updated Standard Costs" shall mean, for each Product Code during any
period of time, the sum of: (a) the per unit
standard costs, including delivered raw
materials and delivered packaging (in each
case at the actual delivered price per unit
of material multiplied by the standard usage
in the Bill of Materials) and Direct Labor
Costs, excluding the cost of flour and
butter; plus (b) the Stipulated Flour and
Butter Costs; plus (c) an allowance for
Employee Benefits allocated on a cost per
unit basis determined according to the
methodology set forth on Schedule 1.1. Such
sum shall be calculated using the operating
standards and process specifications
included in the Bill of Materials. The
foregoing notwithstanding, the Direct Labor
Costs and Employee Benefits (determined in
accordance with the methodology set forth in
Schedule 1.1) shall not exceed the CPI
Allowance.
2. Manufacture and Supply of Product:
2.1 Supply Requirements. Subject to the terms and conditions of this
Agreement, during the Term, Supplier shall: (a) manufacture and supply Product
in such quantities as may be required by each Distributor and/or member of
Buyer's System to enable them to meet the Product requirements and inventory
needs of Buyer's System; and (b) manufacture and supply Product in such
quantities as may be required by each Distributor to maintain an adequate level
of Product inventory as provided in this Agreement.
2.2 Exclusivity. So long as Supplier timely supplies Product in
accordance with the required recipes, formulas, processes and Product
specifications, and in the quantities required by each Distributor and Buyer,
Buyer shall purchase from Supplier (through its Distributors) one hundred
percent (100%) of its Product requirements for Buyer's bakery/cafe outlets in
the continental United States, and Buyer shall use its reasonable best efforts,
subject to applicable law, to direct the bakery/cafe outlets that are a part of
Buyer's System to purchase from Supplier (through its Distributors) one hundred
percent (100%) of their Product requirements. In the case of The SYGMA Network,
Inc. and its Affiliates (collectively, "SYGMA"), a Distributor, Supplier shall
supply each SYGMA distribution
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
facility so that at any time each has no more than eight (8) days of inventory
of Product on hand, measured according to the following formula: The dollar
balance (at SYGMA's sales price) of SYGMA's Product inventory at such time
divided by SYGMA's average daily dollar sales of Product during the twelve-weeks
immediately preceding such time. Buyer shall not sell, directly or indirectly,
bakery products at wholesale to third-parties, except to Buyer's System pursuant
to this Agreement; provided, however, that nothing contained herein shall
prevent Buyer from manufacturing and selling fresh baked or refrigerated dough
products or frozen bagels from any of its commissaries to any third party.
2.3 Specifications and Packaging. Supplier shall manufacture Product in
accordance with Buyer's recipes, formulas, and Product specifications as set
forth in the current Bills of Materials, operating standards and other documents
listed on Schedule 2.3, as such requirements may be modified by Buyer upon
reasonable prior notice from time to time during the Term in accordance with
Section 4.1. Product shall be packaged in the manner prescribed by the
Distributors and Buyer. Notwithstanding anything to the contrary contained
herein, Supplier shall be entitled to alter any process or operating standard if
such an alteration is required to comply with good manufacturing practices as
set forth in the regulations promulgated by the U.S. Food and Drug
Administration (Current Good Manufacturing Practices in Manufacturing, Packing,
or Holding Human Food, 21 C.F.R 110 (1997)), as such regulations may be amended
from time to time, including, without limitation, alterations to prevent
microbial contamination. Supplier shall provide Buyer prompt notice of any
alteration, which shall be prior notice to the extent practicable.
2.4 Payment. Supplier shall invoice each Distributor for Product on
payment terms that Supplier and such Distributor may agree upon which do not
affect the determination and adjustment of the Invoice Price (as defined below).
Supplier shall provide Buyer with a copy of each invoice at the time it provides
such invoice to a Distributor.
3. Pricing and Adjustments:
3.1 General Pricing Structure.
(a) Supplier will charge each Distributor an Invoice Price per
Case of Product as set forth in Section 3.2. Supplier shall invoice freight
separately from Product. During the thirty (30) days prior to the adjustment of
each Invoice Price, the Invoice Price for the next succeeding year shall be
established as set forth in Section 3.3.
(b) Within ten (10) business days after the end of each
Period, during each Quarter as provided in Section 3.4, Supplier shall update
and report to Buyer the difference between the sum of the four (4) components of
the Invoice Price as set forth in Section 3.2(a) and the sum of the actual costs
for such components, in each case, as applied to the volume of Product shipped
during the Period. At the end of each Quarter, the net difference between the
sum of the four (4) components of the Invoice Price as set forth in Section
3.2(a) and the sum of the actual costs for such components during the Quarter
shall be determined and adjusted by a payment to or from Buyer, after taking
into account any Project Expenses and Structural Savings due to Supplier
pursuant to Section 3.5.
(c) The Invoice Price and updates each Period and adjustments
each Quarter shall be determined in the manner as set forth in this Article 3
consistent with the pricing diagram set forth in Schedule 3.1; provided,
however, that in the event of any inconsistency between the Schedule 3.1 and any
Section of this Agreement, the text in such Section shall at all times control.
All requests for credit from Buyer's System for failure to meet Product
specifications shall be processed directly through
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<PAGE>
Supplier. Buyer and Supplier shall mutually agree upon reasonable administrative
procedures for processing of any credit requests.
3.2 Invoice Price Per Case. The Invoice Price for Product shipped
pursuant to this Agreement shall be invoiced by Product Code, and shall be
expressed in dollars per Case. The "Invoice Price" for each Case of Product
shipped to each Distributor shall equal, for each Product Code, the sum of the
FOB Mexico Billing Price Per Case plus the Billing Freight Allowance. As used
herein, the "FOB Mexico Billing Price Per Case" for each Product Code, shall
equal the product obtained by multiplying
(a) the sum obtained by adding:
(1) the Base Standard Costs established pursuant to Section
3.3; plus
(2) a variance equal to [ ]* of such Base
Standard Costs; plus
(3) the Billing Price for Electricity established pursuant to
Section 3.3; plus
(4) the Upcharge;
by
(b) the number of standard units of Product in a Case.
The Invoice Price shall be adjusted on May 1, 1999 and each May 1st thereafter,
and at other times, in the manner described in Section 3.3.
3.3 Changes to Invoice Price. During the thirty (30) days prior to May
1, 1999 and each May 1st thereafter, Supplier and Buyer shall mutually make a
reasonable estimate of the Base Standard Costs, and shall mutually agree on the
Billing Price for Electricity and the Billing Freight Allowance that will be in
effect for the upcoming year commencing as of each such May 1st. If the parties
are unable agree upon an estimate for the Base Standard Costs, the Billing Price
for Electricity and/or the Billing Freight Allowance, the Invoice Price shall
remain unchanged. The foregoing notwithstanding, if the accumulated net
adjustments from each Period due to or from Buyer computed pursuant to Section
3.4 exceed [ ]* during the course of
any year, Buyer and Seller shall discuss, within thirty (30) days after notice
from either party, the implementation of a reasonable adjustment to the Invoice
Price based upon changes in Base Standard Costs, Billing Price for Electricity
and/or Billing Freight Allowance since the immediately preceding adjustment to
the Invoice Price.
3.4 Periodic Updates and Adjustments. Within ten (10) business days
after the end of each Period during each Quarter, as required to ensure
accuracy, Supplier shall deliver to Buyer a summary report (the "Quarterly
Adjustment/True-Up Summary Report") in the form attached hereto as Exhibit 3.4.
Supplier shall post to the Quarterly Adjustment/True-Up Summary Report each such
Period the Total Dollar Adjustment (Direct Cost) determined in accordance with
Section 3.4.1 and the Total Dollar Adjustment (Freight) determined in accordance
with Section 3.4.2.
3.4.1 Direct Cost Update. Within ten (10) business days after
the end of each Period during each Quarter, Supplier shall deliver to Buyer a
summary report (the "Interim Update (Direct Costs") in the form attached hereto
as Exhibit 3.4.1. Supplier shall also provide to Buyer each Period, for each
Product Code, the Bill of Materials and such other supporting documentation as
may reasonably be requested by Buyer to verify the computation of the net
adjustment due to or from Supplier. Each
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
Interim Update (Direct Costs)), for each such Period, shall set forth the Total
Dollar Adjustment (Direct Cost). As used herein the term "Total Dollar
Adjustment (Direct Cost)" shall equal the total, for all Product Codes, of the
positive or negative difference between the FOB Mexico Billing Price Per Case
minus the Updated FOB Mexico Price Per Case multiplied by the number of Cases of
Product shipped during such Period. The "Updated FOB Mexico Price Per Case"
shall equal the product obtained by multiplying:
(a) the sum obtained by adding:
(1) the Updated Standard Costs; plus
(2) a variance equal to [ ]* of such Updated
Standard Costs; plus
(3) the Updated Electricity Costs; plus
(4) the Upcharge;
by
(b) the number of standard units of Product in a Case.
3.4.2 Freight Allowance Update. Together with the Interim
Update (Direct Costs), Supplier shall deliver to Buyer a summary report (the
"Interim Update (Freight)") in the form attached hereto as Exhibit 3.4.2. Each
Interim Update (Freight) shall set forth the Total Dollar Adjustment (Freight).
As used herein the "Total Dollar Adjustment (Freight)" shall equal the total,
for all Product Codes, of the net positive or negative difference for all
Distributors (expressed in dollars per Case) between the Billing Freight
Allowance for each such Distributor minus the Updated Freight Allowance,
multiplied by the total number of Cases shipped to each such Distributor during
such Period.
3.4.3 Within fifteen (15) business days after the end of each
Quarter, Supplier shall provide to Buyer a final proposed Quarterly
Adjustment/True-Up Summary Report for the Quarter. The final proposed Quarterly
Adjustment/True-Up Summary Report shall also set forth all Non-Capital Project
Expenses, Capital Project Expenses and Structural Savings due to Supplier for
the Quarter pursuant to Section 3.5. The aggregate, for all Product Codes, of
the amounts determined pursuant to Section 3.4.1 and Section 3.4.2 during each
Period of the Quarter, after taking into account any amounts due to Supplier for
Non-Capital Project Expenses, Capital Project Expenses and Structural Savings,
shall constitute Supplier's proposed net adjustment due to or from Supplier for
the Quarter.
3.4.4 Buyer shall have ten (10) business days to review the
final proposed Quarterly Adjustment/True-Up Summary Report for each Quarter
after its receipt. If Buyer is unable to reconcile or disputes any item included
in the final Adjustment Summary, or the computation of the net adjustment due to
or from Supplier, it shall notify Supplier within such ten (10) business days of
any such items it is unable to reconcile or which it disputes. The foregoing
notwithstanding, the failure by Buyer to dispute or question any item within
such ten (10) business days shall not constitute a waiver by Buyer or Supplier
of the right to subsequently dispute or question such item; provided, however,
that any such dispute or question by Buyer or Supplier shall be asserted not
later than ten (10) business days after the end of the immediately next
succeeding Quarter or shall be thereafter be deemed irrevocably waived. Supplier
and Buyer shall attempt diligently in good faith to reconcile any differences
and to resolve by mutual agreement any items in dispute within ten (10) business
days (the "Resolution Period") following such notification by Buyer. If any of
the items in dispute are not resolved within the Resolution Period, the parties
shall submit the disputed items for resolution to an arbitrator mutually agreed
upon by the
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
parties (the "Arbitrator"), whose decision shall be final and binding on the
parties, and when made, shall be deemed to be an agreement between Supplier and
Buyer on the issues so determined. The expense of the Arbitrator shall be borne
equally by Buyer and Supplier.
3.4.5 Any net adjustment due to or from Supplier for any
Quarter shall be paid by or to Buyer within the later of: ten (10) business days
after the ten (10) business day review provided for in Section 3.4.4, or its
final determination if a dispute or question is raised within such ten (10)
business day review, provided, however, that any amounts not in dispute shall be
paid by the earlier of such dates.
3.5 Modifications to Products and Introduction of Additional
Products; Structural Savings.
3.5.1 Modifications and Additional Products. From time to time
during the Term, Buyer shall have the right, on a project-by-project basis, to
introduce additional Product items or make modifications to existing Product
recipes, formulas, specifications and preparation procedures which, in either
case, require expenditures by Supplier in order to manufacture such additional
Product or to implement such modifications. Such additional or modified Product
either may be in addition to or may replace one or more then-existing Product
Codes. Prior to implementing any such project, Buyer and Supplier shall develop
a mutually agreeable budget for the project. The actual direct, incremental
expenses associated with any one project to introduce additional or modified
Product, consisting of material, packaging, direct hourly labor (collectively,
"Non-Capital Project Expenses") and expenses with any one project which are
capital expenditures under generally accepted accounting principles
(collectively, "Capital Project Expenses"), shall be allocated as follows:
(a) If the total Non-Capital Project Expenses do not exceed
[ ]*, Supplier shall pay the total amount of such
expenses; provided, however, that Supplier shall not be obligated to incur more
than [ ]* of such expenses, in the aggregate,
during any one year of the Term.
(b) If the total Non-Capital Project Expenses (exclusive of any
expenses constituting capital expenses under generally accepted accounting
principles) exceed [ ]* per project or if the
annual [ ]* limit in Section 3.5.1(a) has been
exceeded, Buyer shall pay the total amount of such excess.
(c) If the total Capital Project Expenses do not exceed
[ ]*, Supplier shall pay the total amount of such
expenses.
(d) If the total Capital Project Expenses exceed
[ ]*, Buyer shall pay to Supplier an annual amount equal to
Buyer's "Pro Rata Share" (as hereinafter defined) of the total Capital Project
Expenses multiplied by a percentage amount, on a per annum basis, equal to
[ ]* over and above the yield on Ten-year Treasury Bills issued by the
United States Government as reported, from time to time, by the Wall Street
Journal. As used herein, the term "Pro Rata Share" shall mean, for any Quarter,
the amount of Product manufactured by Supplier for Buyer's System utilizing
capital equipment purchased by Supplier in connection with any project, divided
by the total amount of product (including Product) manufactured on such
equipment, multiplied by the Capital Project Expenses. For purposes of this
Section 3.5.1 and Section 3.5.3, the standard for measuring the amount of
Product manufactured shall be determined by agreement of the parties before
implementation of the project and shall be based upon one of the following
criteria: (i) units of Product manufactured; (ii) weight of Product
manufactured; or (iii) equipment utilization time.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
3.5.2 Limitations on Capital Project Expenses. The provisions
of Section 3.5.1(c) notwithstanding, Supplier shall not be obligated to incur
Capital Project Expenses under Section 3.5.1(c) during any year which exceed
[ ]*. Upon the termination of this Agreement for
any reason other than a Supplier Default, Supplier shall have the option of
selling the equipment acquired pursuant to Section 3.5.1(d) to Buyer for its net
book value, and Buyer shall be obligated to purchase such equipment from
Supplier within thirty (30) days of receiving notice thereof. This option shall
expire, if not sooner exercised, thirty (30) days prior to the termination date
of this Agreement, except in the case of a Buyer Default, in which case, this
option shall expire thirty (30) days after the termination date. For purposes of
this Section 3.5.2, all capital expenditures shall be deemed to have a seven (7)
year depreciable life and to be depreciated on a straight-line basis unless
otherwise agreed.
3.5.3 Structural Savings.
(a) From time to time during the Term, Supplier shall provide
Buyer with recommendations for improving the efficiency of the manufacturing and
supply processes and for reducing costs. Buyer and Supplier shall mutually
determine which, if any, of such recommendations are to be implemented on a
project-by-project basis, and shall work together to implement such agreed-upon
projects. Buyer and Supplier shall mutually determine the amount of cost savings
to be included in Updated Standard Costs and the time during which such cost
savings shall be realized. All agreed-upon savings shall be applied to reduce
the Updated Standard Costs by amending the applicable Bills of Materials upon
the agreed-upon implementation date of the project. Any provision hereof to the
contrary notwithstanding, any program implemented for the purpose of managing
flour and butter costs shall not be governed by this Section 3.5.3.
(b) If the implementation of any such project involves a
capital expenditure by Supplier under generally accepted accounting principles,
Buyer shall pay to Supplier an annual amount equal to Buyer's Pro Rata Share
multiplied by the amount of the project's capital expenditure multiplied by a
percentage amount, on a per annum basis, equal to [ ]* over and above the
yield on Ten-year Treasury Bills issued by the United States Government as
reported, from time to time, in the Wall Street Journal.
(c) If the implementation of any such project involves a
change in delivered raw materials, delivered packaging or Direct Labor Costs
which do not involve capital expenditures pursuant to Section 3.5.3(b) and which
are reflected in agreed-upon changes in the Bill of Materials, Buyer shall pay
to Supplier an amount equal to [ ]* of the agreed-upon
savings resulting from such changes during the agreed-upon time.
(d) The foregoing notwithstanding, if Supplier undertakes any
project which is not otherwise a part of any structural savings program
agreed-to by Buyer pursuant to this Section 3.5.3 (including, by way of
illustration and without limitation, the installation of a spiral blast
freezer), the cost structure for the appropriate Bills of Materials for the
Updated Standard Costs shall be modified to reflect any changes in the operating
standards resulting from the implementation of such project, without any
allocation of expense to Buyer.
3.5.4 Accounting for Project Expenses and Structural Savings.
All amounts to be paid by Buyer to Supplier pursuant to this Section 3.5 shall
be accounted for by Supplier separately from the Pricing and Adjustment
provisions of Sections 3.1 through 3.4, and shall be included on the Quarterly
Adjustment/True-Up Summary Report delivered by Supplier to Buyer (itemized
according to project) at the end of each Quarter pursuant to Section 3.4.3.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
3.6 Supplier's Purchasing Duties; Vendors. Supplier shall use its best
efforts to assist Buyer in obtaining the most favorable available prices for raw
materials and packaging, including without limitation, flour and butter. To the
extent that raw materials and packaging are purchased by Supplier from vendors
designated by Buyer, the cost of such raw materials and packaging shall not
constitute a failure to satisfy Supplier's obligations under this Section 3.6.
Anything to the contrary herein notwithstanding, Supplier shall not change any
vendors without the prior consent of Buyer, which consent shall not be
unreasonably withheld. Grounds for Supplier to propose terminating a vendor
shall include, but not be limited to, the failure of such vendor to supply
sufficient quantities of any item purchased by Supplier from the vendor on a
timely basis and/or according to required specifications. Neither Supplier nor
Buyer shall enter into any formal or informal arrangement or understanding with
any vendor (regardless of whether such vendor is an Affiliate of either Supplier
or Buyer) by which either Supplier or Buyer receives, directly or indirectly,
any rebate, discount or other consideration, unless such arrangement or
understanding is fully disclosed to the other and the value of such rebate,
discount or other consideration is applied to reduce Base Standard Costs and
Updated Standard Costs pursuant to this Agreement.
3.7. Purchase Target Minimums; Purchase Target Deficiency Payments.
3.7.1 Purchase Target Minimums. In each of the first four (4)
years of the Term (each a "Year"), Buyer shall purchase, or cause to be
purchased, from Supplier an amount of Product that results in Supplier earning a
total Upcharge for that Year that is greater than or equal to the applicable
Purchase Target. In addition, pursuant to the Purchase Agreement, Supplier has
also entered into a bakery product supply agreement with Saint Louis Bread
Company, Inc. ("Saint Louis Bread"), a Delaware corporation and an Affiliate of
Buyer, upon terms and conditions similar to those contained in this Agreement,
pursuant to which Saint Louis Bread is required to purchase a certain amount of
bakery products from Supplier during each year of the term of the agreement. To
the extent Saint Louis Bread exceeds its purchase target during any Year in
which Buyer has failed to achieve its Purchase Target, such excess amount of
Upcharge earned by Supplier shall be deemed, solely for the purpose of
determining whether Buyer has achieved its Purchase Target, to have been earned
by Supplier hereunder during such Year.
3.7.2 Purchase Target Deficiency Payments. If, during any
Year, Supplier has not earned total Upcharges as part of the Invoice Price for
Product in an amount equal to or greater than the Purchase Target for such Year,
then Buyer shall pay Supplier, within thirty (30) calendar days of the end of
such Year, an amount equal to the Purchase Target less the amount of Upcharge
earned by Supplier on Product purchased during such Year as part of the Invoice
Price for Product (a "Purchase Target Deficiency Payment"). If the Upcharge
earned by Supplier in any Year is less than the Purchase Target for such Year
and such deficiency is a result of a Supplier Default or a Force Majeure Event
(as defined in Section 19), then the Purchase Target Deficiency Payment shall be
reduced to the extent such deficiency was attributable to such Supplier Default
or Force Majeure Event.
3.7.3 Maximum Upcharge. Any provision of this Agreement to the
contrary notwithstanding, after Supplier has earned a total Upcharge (excluding
any Upcharge attributable to New Product) of
[ ]*, the Upcharge for each Product Code
shall equal 36.14% of the sum of the Base Standard Costs plus a variance equal
to [ ]* of such Base Standard Costs, and Buyer and Supplier
shall each have the right to terminate this Agreement on not less than twelve
(12) months prior notice; provided, however, that Buyer shall have the right to
terminate this Agreement on not less than four (4) months prior notice during
the first twelve (12) months after such total Upcharge has been earned.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
4. Modifications to Product or Bill of Materials; New Product.
4.1 Modifications to Product.
(a) Buyer may, from time to time and with reasonable prior
notice, direct Supplier to manufacture additional Product, which is not New
Product, or to modify existing Product specifications, recipes, formulas and
processes. Supplier shall be responsible for implementing manufacturing and
supply changes required to accommodate such Product proposals.
(b) Subject to Section 2.3, Supplier shall not change any
specifications, recipes, formulas, or processes related to Product without
Buyer's prior approval.
(c) Buyer shall have the right to audit and approve all
changes to standard costs reflected in the Bills of Materials, including but not
limited to, changes in formulae, processes, ingredients, manning per line, line
speeds and yields, structural waste, and units per Case (including any change to
a Bill of Materials whereby an operating variance is reclassified into ongoing
direct cost). In addition, Buyer shall have the right to audit the transition to
any new information system implemented by Supplier to assure the consistent
treatment of Base Standard Costs and Updated Standard Costs and other concepts
set forth herein. Subject to Section 3.5, Supplier shall be responsible for
scaling up and implementing any manufacturing and supply changes required to
accommodate any changes to Product.
(d) Any provision of this Section 4.1 to the contrary
notwithstanding, if Buyer modifies existing Product specifications, recipes,
formulas or process, Buyer shall purchase, or cause to be purchased, Supplier's
entire inventory of a discontinued Product Code and any ingredients and
packaging made obsolete by the discontinuation of such a Product Code; provided,
however, that Buyer shall not be obligated to purchase such obsolete inventories
or ingredients or packaging in excess of twenty-five percent (25%) of the volume
of such ingredients or packaging which has been consumed or used by Supplier in
manufacturing such discontinued Product Code during the twelve (12) months
immediately preceding its discontinuance.
4.2 New Product. In the event that Buyer develops a New Product, Buyer
may solicit bids for the manufacture and supply of New Product from third
parties, provided, however, prior to entering into a commitment with a third
party to manufacture or supply such New Product, Buyer shall negotiate in good
faith with Supplier for Supplier to act as the manufacturer and supplier of such
New Product on terms consistent with this Agreement, but with an Upcharge to be
mutually agreed upon by Buyer and Supplier. Supplier may, but shall not be
obligated to, submit a bid to Buyer to manufacture or supply any New Product.
Although Buyer shall offer Supplier an opportunity to bid to be the supplier of
such New Product, such opportunity is not, and shall not be deemed to be, a
right of first negotiation, a right of first refusal, nor a right of last
refusal. If a New Product is manufactured and supplied by Supplier, such New
Product shall become Product and, then to the extent purchased, an agreed-to
upcharge shall be credited toward Buyer's Purchase Target obligation.
Notwithstanding anything contained herein to the contrary, Supplier shall not be
required to develop or fund the development of any New Product.
5. Duty to Supply:
5.1 Reliability. Supplier recognizes the importance of a reliable
source of supply of Product to Buyer's System. Subject to the terms of this
Agreement, Supplier shall use its best efforts to manufacture and supply one
hundred percent (100%) of the Product requirements of Buyer's System by
maintaining adequate inventory levels of Product with each Distributor. Buyer
shall provide Supplier
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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<PAGE>
with reasonable advance notice of any special promotions or other events that
would reasonably be expected to materially affect the demand for and the need
for additional Product.
5.2 Failure to Supply. In the event that:
(a) Supplier fails to supply the members of Buyer's System
with their respective Product requirements and such failure is not
attributable to an act or failure to act by Buyer, a Distributor or a
member of Buyer's System, then Buyer shall have the right to purchase
Product from sources other than Supplier to the extent Supplier is
unable to supply such Product, provided that Buyer gives Supplier prior
or contemporaneous notice thereof; and
(b) Supplier fails to supply Product (other than New Product
or additional or modified Product as contemplated by Section 4.1 and
Section 4.2 in its first ninety (90) days of supply by Supplier) and
such failure results in a Stock-out Shortage, then Supplier shall pay
to Buyer an amount equal to the then-current full retail price of each
Case of such undelivered Product less the Invoice Price of each Case of
such undelivered Product (the "Shortage Fee"); provided, however, that
no Shortage Fee shall be payable to Buyer if: (i) the Stock-out
Shortage is due to a failure by a Distributor to order timely such
Product in sufficient quantities or to take timely delivery of such
Product or provide Supplier with accurate information regarding
inventory management; (ii) the Stock-out Shortage is due to a failure
to provide notice to Supplier required by Section 2.3, Section 4.1 or
Section 5.1; (iii) the cumulative amount of Stock-out Shortages in any
calendar quarter is less than one-half of one percent (0.5%) of the
total number of Cases of all Product Codes shipped by such Distributor
to Buyer's System in such quarter; (iv) the Stock-out Shortage is due
to an increase in the number of Cases of any Product Code ordered by
members of Buyer's System during any fourteen (14) consecutive days
which is more than ten percent (10%) above the rolling two (2) week
average number of Cases ordered during the twelve (12) weeks
immediately preceding such fourteen (14) days; (v) the Stock-out
Shortage is due to a failure to receive one or more ingredients from a
vendor through no fault of Supplier and Supplier promptly notifies
Buyer of any such failure to receive an ingredient from the vendor; or
(vi) the Stock-out Shortage is due to a Force Majeure Event. The
Shortage Fee payable hereunder shall constitute liquidated damages and
Supplier shall not be liable to Buyer, the Distributors or members of
Buyer's System for any other damages, so long as the events described
in this Section 5.2 do not otherwise constitute a Supplier Default
pursuant to Section 15.1.
6. Place of Manufacture: Supplier shall manufacture all Product at the Plant and
supply all Product from the Plant, provided, however, that Supplier may
manufacture Product at facilities other than the Plant and supply Product from
facilities other than the Plant if: (i) Supplier obtains Buyer's prior written
approval; and (ii) Buyer is provided the same access to such other facilities
and such other facilities' employees and books and records as Buyer has with
respect to the Plant. Buyer's approval or disapproval shall be based upon the
impact the new facility is expected to have upon Product, including, among other
things, its quality and consistency, and the Invoice Price and adjustments
thereto. Title to Product and risk of loss shall pass to a Distributor or
Independent Operator (as defined in Section 7.5), as the case may be, when
Product is physically received by such Distributor or Independent Operator.
7. Distributors:
7.1 Supplier's Rights. Each Distributor and Independent Operator (as
defined in Section 7.5) shall be, at all times, creditworthy and reasonably
satisfactory to Supplier. Supplier shall be entitled to suspend supply of
Product to any Distributor or Independent Operator upon as much prior
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notice as is reasonably practical to Buyer if Supplier, in its sole discretion,
determines such Distributor or Independent Operator is not creditworthy or has
failed to perform in a commercially reasonable manner. If the sole reason for
such suspension is the creditworthiness of a Distributor or Independent
Operator, Buyer may avoid the suspension by providing to Supplier a guarantee of
the performance of such Distributor or Independent Operator in substantially the
form provided in Exhibit 7.1.
7.2 Appointment. If Buyer desires to appoint a new or alternate
Distributor, Buyer shall submit the name and business address of such proposed
Distributor to Supplier along with such other information as Supplier may
reasonably request. Supplier shall thereafter have thirty (30) calendar days in
which to approve or disapprove the appointment of such Person as a Distributor.
If Supplier disapproves the appointment, Supplier shall provide Buyer with
notice of the reason or reasons for such disapproval within such thirty-days,
and if the sole reason for disapproval is the creditworthiness of such
Distributor then Buyer may, at Buyer's sole discretion, obtain immediate
approval of such Distributor by providing to Supplier a guarantee of the
performance of such Distributor in substantially the form provided in Exhibit
7.1. If Supplier fails to provide Buyer with notice of disapproval within such
thirty-days, then Supplier shall be deemed to have approved the appointment of
such Person as a Distributor.
7.3 Default. If a Distributor or an Independent Operator materially
defaults in its obligations to Supplier, including without limitation, by
failing to pay Supplier for Product in accordance with the terms agreed upon by
Supplier and such Distributor or Independent Operator, Supplier shall have the
right to suspend supply of Product to such Distributor or Independent Operator
upon as much prior notice to Buyer as is reasonably practical, provided,
however, such Distributor, Independent Operator or Buyer or a member of Buyer's
System shall have the right to cure such default. Subject to Section 7.2, Buyer
shall have the right to replace a defaulting Distributor with an alternate
Distributor. In case of suspension or pending suspension of supply of Product to
a Distributor or an Independent Operator under Section 7.1 or Section 7.3,
Supplier shall cooperate with Buyer and Buyer's System to avoid any disruption
of supply to Buyer's System.
7.4 Alternative Pricing for Certain Distributors. Any provision of this
Agreement to the contrary notwithstanding, from time to time during the Term,
Buyer may direct Supplier to invoice certain Distributors at a price higher than
the Invoice Price (an "Additional Amount"). In such case, Supplier shall remit
to Buyer within ten (10) business days after the end of each Period the
Additional Amounts invoiced and received by Supplier. Except for the remittance
by Supplier of the Additional Amounts, all other terms and conditions of this
Agreement with respect to the manufacture and supply of Product to such
Distributors shall remain in effect, including, without limitation, the
adjustments contemplated in Section 3.4.
7.5 Direct Distribution. Certain members of Buyer's System
("Independent Operators") may, with Buyer's approval, purchase Product through
Buyer without using a Distributor. Supplier shall supply Product to such
Independent Operators designated by Buyer on terms and conditions to be
negotiated and agreed upon between such Independent Operators and Buyer, and on
payment terms to be determined in accordance with Supplier's credit policy.
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8. Quality Assurance:
8.1 Inspection. Upon demand, Buyer shall have the right, without prior
notice and during operating hours, to inspect the Plant (and all other
facilities where Product is manufactured) and to observe the Product
manufacturing process. Buyer shall also have the right, upon reasonable notice,
to escort its franchisees (and such other Persons as are approved by Supplier)
through the Plant during operating hours to observe the Product manufacturing
process.
8.2 Quality Assurance Program. Buyer shall establish with Supplier a
mutually acceptable quality assurance program, which program shall, among other
things, provide Buyer's management with reasonable and meaningful access to
Supplier and its employees in charge of Product. Buyer shall have the right, at
its sole option and expense, to station a full-time quality assurance
representative at the Plant who shall have the authority to accept or reject
Product prior to its shipment. Product may only be rejected if it fails to
comply with the Product specifications provided to Supplier. Any quality
assurance representative shall, at all times, be reasonably acceptable to
Supplier. Neither the presence of a quality assurance representative at the
Plant on behalf of Buyer, nor the failure of such representative to reject
Product prior to shipment, shall in any way modify Supplier's obligations to
manufacture and ship Product according to Product specifications pursuant to
Section 2.3.
9. Representations and Warranties of Supplier: Supplier represents and
warrants to Buyer that:
9.1 Organization and Good Standing. Supplier has been duly organized
and is existing as a corporation in good standing under the laws of the State of
Delaware, and is qualified and in good standing as a foreign corporation in the
State of Missouri, with full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
9.2 Supplier Organization. Supplier is a wholly owned subsidiary of
Bunge Corporation. Supplier has provided to Buyer a copy of the Dun & Bradstreet
report on Bunge Corporation, certified by the Treasurer of Bunge Corporation to
be materially true and correct with respect to financial information contained
therein, a copy of which is attached hereto as Exhibit 9.2.
9.3 Execution and Delivery. All consents, approvals, authorizations and
orders necessary for the execution, delivery and performance by Supplier of its
obligations hereunder have been obtained. This Agreement has been duly
authorized by all necessary corporate action on the part of Supplier, has been
duly executed and delivered by Supplier, and constitutes the legal, valid and
binding obligation of Supplier enforceable against Supplier in accordance with
its terms, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
9.4 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of the corporate charter or bylaws of Supplier or (ii) conflict
with, or result (immediately or upon the giving of notice or the passage of time
or both) in a breach or any violation of or any default under, or give rise to a
right of modification, termination, cancellation or acceleration of any
obligation or to a loss of a benefit under, any agreement, mortgage, indenture,
lease, instrument, permit, concession, franchise, license or other agreement, or
any statute, or any order, writ, injunction or decree of any court, governmental
body or agency or instrumentality thereof, or any arbitrator having jurisdiction
over Supplier or any of its assets, to which Supplier is a party or to which its
properties or assets may be bound, other than such conflicts, violations or
defaults or possible modifications, terminations, cancellations or accelerations
which
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individually or in the aggregate do not and will not have a material adverse
effect on Supplier or its ability to consummate the transactions contemplated
hereby.
9.5 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or governmental investigation, inquiry or proceeding
(whether local or foreign) pending or, to the knowledge of Supplier, threatened
against or affecting Supplier or its respective properties, assets or
businesses, nor, to the knowledge of Supplier, does any basis therefor exist and
Supplier is not in default with respect to any order, writ, judgment,
injunction, decree, determination or award of any court or of any governmental
agency or instrumentality (whether domestic or foreign) which, in each case,
would materially impact upon Supplier's obligations hereunder or Supplier's
ability to perform its obligations hereunder.
9.6 Disclosure. No representation or warranty of the Supplier in this
Agreement and no information contained in any Schedule or other writing
delivered by Supplier pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to make the statements herein or therein not misleading. To the
knowledge of Supplier after due inquiry, there is no fact that Supplier has not
disclosed to Buyer in writing that materially adversely affects, nor insofar as
Supplier can now foresee, will materially adversely affect Supplier's ability to
perform fully this Agreement.
9.7 Fees, Expenses and Commissions. Except for a fee payable solely by
Supplier to Chapman Partners, Inc., in connection with the Purchase Agreement,
Supplier has taken no action and has entered into no agreement, understanding or
other arrangement that would obligate Supplier or Buyer to pay any broker's or
finder's fee or any other similar fee or commission to any agent, broker,
investment banker or other firm or person in connection with any of the
transactions contemplated by this Agreement.
10. Representations and Warranties of Buyer: Buyer hereby represents and
warrants to Supplier that:
10.1 Organization and Good Standing. Buyer has been duly organized and
is existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
10.2 Execution and Delivery. All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by Buyer of its
obligations hereunder have been obtained. This Agreement has been duly
authorized by all necessary corporate action on the part of Buyer, has been duly
executed and delivered by Buyer and constitutes the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally, and by
general equitable principles.
10.3 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of the Certificate of Incorporation or bylaws of Buyer, in each
case as amended, or (ii) conflict with, or result (immediately or upon the
giving of notice or the passage of time or both) in a breach or any violation of
or any default under, or give rise to a right of modification, termination,
cancellation or acceleration of any obligation or to a loss of a benefit under,
any agreement, mortgage, indenture, lease, instrument, permit, concession,
franchise, license or other agreement, or any statute, or any order, writ,
injunction or decree of any court, governmental body or agency or
instrumentality thereof, or any arbitrator having
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jurisdiction over Buyer or any of its assets, to which Buyer is a party or by
which its properties or assets may be bound, other than such conflicts,
violations or defaults or possible modifications, terminations, cancellations or
accelerations which individually or in the aggregate do not and will not have a
material adverse effect on Buyer or its ability to consummate the transactions
contemplated hereby.
10.4 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or governmental investigation, inquiry or proceeding
(whether local or foreign) pending or, to the knowledge of Buyer, threatened
against or affecting Buyer or its properties, assets or businesses, nor, to the
knowledge of Buyer, does any basis therefor exist and Buyer is not in default
with respect to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality (whether
domestic or foreign) which, in each case, would materially impact upon Buyer's
obligations hereunder or Buyer's ability to perform its obligations hereunder.
10.5 Disclosure. No representation or warranty of the Buyer in this
Agreement and no information contained in any Schedule or other writing
delivered by Buyer pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to make the statements herein or therein not misleading. To the
knowledge of Buyer after due inquiry, there is no fact that Buyer has not
disclosed to Supplier in writing that materially adversely affects, nor insofar
as Buyer can now foresee, will materially adversely affect Buyer's ability to
perform fully this Agreement.
10.6 Fees, Expenses and Commissions. Except for fees payable solely by
Buyer to Brent Baxter Enterprises, LLC and Peter J. Solomon Company Limited in
connection with the Purchase Agreement, Buyer has taken no action and has
entered into no agreement, understanding or other arrangement that would
obligate Buyer or Supplier to pay any broker's or finder's fee or other similar
fee or commission to any agent, broker, investment banker or other firm or
person in connection with any of the transactions contemplated by this
Agreement.
11. Additional Covenants of Supplier: In addition to the other obligations
of Supplier under this Agreement, Supplier covenants that during the Term
(including any extensions or renewals thereof, unless expressly provided
otherwise):
11.1 Product. Except as provided herein, during the Term and for one
(1) year thereafter, Supplier shall not, either directly or indirectly, supply
any Product or any substitute for Product to any bakery/cafe included in Buyer's
System.
11.2 Operations; Compliance with Standards and Law. Subject to the
provisions of this Agreement, Supplier shall operate the Plant (and all other
facilities that manufacture Product which are approved by Buyer) and manufacture
Product in accordance with good manufacturing practices and manufacture and
supply Product in accordance with the recipes, formulas, processes, and Product
specifications (including as to vendors) established by Buyer and in accordance
with all applicable laws, rules and regulations, statutes, ordinances,
regulations, orders and bylaws.
11.3 Distributor Obligations. Subject to Section 7, Supplier shall not
terminate its obligation to supply Buyer's System nor shall Supplier withhold
delivery of Product from any non-defaulting member of Buyer's System or any
non-defaulting Distributor due to nonpayment or other default by a Distributor
or a member of Buyer's System.
11.4 Ownership of the Plant. Without limiting Buyer's rights pursuant
to Section 15, during the Term (but excluding any extensions or renewals
thereof), if Supplier shall sell, transfer or license any
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part of the Plant or enter into any agreement or arrangement that would have the
effect of transferring operational control of the Plant to a third party,
Supplier shall cause such third party to assume, for the benefit of Buyer, all
obligations of Supplier hereunder.
11.5 Efficiency of Operation. Subject to Buyer's right to designate
vendors and processes, Supplier shall use its best efforts to operate the Plant
at optimal efficiency and to perform its other responsibilities hereunder,
including, without limitation, purchasing raw materials, contracting for labor
and arranging for freight in an efficient, cost effective and professional
manner.
11.6 Cooperation with Inspections. Supplier shall cooperate with Buyer
in any investigation or inspection by any governmental agency or by Buyer
relating to the Plant or Product which involves health, safety or product
liability issues.
11.7. Non-Solicitation. Supplier shall not, directly or indirectly,
during the Term and, so long as this Agreement is not terminated by Supplier as
a result of a Buyer Default, for one year thereafter, solicit or hire any
employee of Buyer, unless the employment of such employee has been terminated by
Buyer, or Buyer consents thereto.
11A. Additional Covenants of Buyer: In addition to the other obligations of
Buyer under this Agreement, Buyer covenants that during the Term (including any
extensions or renewals thereof, unless expressly provided otherwise):
11A.1 Compliance with Standards and Law. Buyer shall comply with all
applicable laws, rules and regulations, statutes, ordinances, regulations,
orders and bylaws, including, without limitation, antitrust and franchise laws.
11A.2 Distributor Obligations. Buyer shall not terminate its obligation
to purchase, or cause to be purchased, Product from Supplier due to nonpayment
or other default by a Distributor.
11A.3 Transfer of Interest. If Buyer shall enter into any agreement or
arrangement that would have the effect of transferring operational control of
Buyer or Buyer's System to a third party, Buyer shall cause such third party to
assume, for the benefit of Supplier, all obligations of Buyer or Buyer's System,
as the case may be, hereunder.
11A.4 Product Usage: Buyer shall use its best efforts to provide
Supplier with timely information with respect to Product usage.
11A.5 Cooperation with Inspections. Buyer shall cooperate with Supplier
in any investigation or inspection by any governmental agency or by Supplier
relating to the Plant or Product which involves health, safety or product
liability issues.
11A.6 Non-Solicitation. Buyer shall not, directly or indirectly, during
the Term, so long as this Agreement is not terminated by Buyer as a result of a
Supplier Default, and for one year thereafter, solicit or hire any employee of
Supplier or Bunge Corporation, unless the employment of such employee has been
terminated by Supplier or Bunge Corporation, as the case may be, or Supplier or
Bunge Corporation, as the case may be, consents thereto.
12. Insurance: During the Term (and any extension thereof), Supplier shall be
required to obtain and maintain insurance policies, in the amounts set forth on
Schedule 12. With respect to the Commercial General Liability and Umbrella
policies, Buyer shall be named as an additional insured.
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During the Term and (any extension thereof), Buyer shall obtain and maintain
insurance policies, in the amounts set forth on Schedule 12. With respect to the
Commercial General Liability and Umbrella policies, Supplier and Bunge
Corporation shall be named as additional insureds. All insurance policies
required by this Section 12 shall be obtained from recognized insurance carriers
with an A.M. Best rating of "A-" or better.
13. Confidentiality/Ownership:
13.1 Proprietary Information. As used in this Agreement, the term
"Proprietary Information" shall mean any knowledge or information, written or
oral, which relates in any manner to the respective businesses of Buyer and
Supplier which is confidential and proprietary information of the Disclosing
Party (as defined below), whether disclosed prior to, on or after the date of
this Agreement, including, without limitation, the recipes, formulas,
specifications, manufacturing processes, preparation procedures, financial
information, equipment, marketing methods, demographic and trade information,
customer profiles and preferences, costs, development plans, products and
production techniques and all related trade secrets and proprietary information
treated as such by the Disclosing Party, whether by course of conduct, by letter
or report, or by the use of an appropriate stamp or legend designating such
information to be confidential or proprietary. As used herein, the term
"Disclosing Party" shall mean the party to this Agreement which discloses or
makes available Proprietary Information to the Receiving Party, and the term
"Receiving Party" shall mean the party to this Agreement to whom Proprietary
Information is disclosed or made available by the Disclosing Party.
13.2 Restrictions on Use. The Receiving Party shall hold all
Proprietary Information in confidence, shall use such Proprietary Information
only for the benefit of the Disclosing Party and disclose such Proprietary
Information only to the Receiving Party's officers, directors, employees and
agents in order to assist the Receiving Party in performing its obligations
under this Agreement. The Receiving Party shall not disclose Proprietary
Information to any other Person, provided, however, the Receiving Party may
disclose Proprietary Information to a corporate Affiliate of the Receiving Party
if such Affiliate first agrees in writing to be bound by the covenants contained
in this Agreement with respect to the use and nondisclosure of Proprietary
Information.
13.3 Ownership. Subject to the terms and conditions of the Purchase
Agreement, ownership of all Proprietary Information relating to all recipes,
formulas, specifications, manufacturing processes or preparation procedures,
demographic and trade information, customer profiles and preferences, costs,
development plans, products and production techniques and any other trade
secrets and information used to make Product (including, without limitation,
information related to the cost of Product) shall remain solely the property of
Buyer, regardless of whether developed or modified by Buyer or Supplier. In
manufacturing bakery products other than pursuant to this Agreement, Supplier
shall use product codes and product names for product which are separate and
distinct from those used for Product manufactured for Buyer.
13.4 Exceptions. The obligations and prohibitions set forth in this
Section 13 shall not apply to any Proprietary Information that is required to be
disclosed by applicable law or that is shown, by preexisting documentary
evidence or other reliable evidence, to be information: (i) that was known by
the Receiving Party prior to the exchange of information in contemplation of
this Agreement; (ii) entered into the public domain other than through the act
of the Receiving Party; (iii) is independently developed by the Receiving Party;
or (iv) is rightfully received by the Receiving Party from a third party who is
not obligated to the Disclosing Party to keep such information confidential.
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13.5 Protected Signature Product; Competitors. If Buyer licenses to
Supplier the right to manufacture and sell any Product to any Person other than
to a Distributor or to Buyer's System, then Supplier shall, in any event, be
prohibited from: (i) using Buyer's trademarks, trade names, trade secrets and
trade dress; and (ii) selling to any third-party any "Protected Signature
Product," which is set forth on Schedule 13.5(a). In addition, Supplier shall
not manufacture or sell any dough product manufactured on any of the production
lines identified in the definition of Product in Section 1 to any Competitor.
For the purpose of this Section 13.5, the term "Competitor" shall mean any of
the retail operations listed on Schedule 13.5(b) and any retail operation with
at least one hundred (100) stores that sell baked goods and coffee, where such
sales of baked goods and coffee represent thirty percent (30%) or more of such
retail operation's total annual sales revenue. Nothing contained herein shall
prevent Supplier from selling any baked, par-baked or pre-proofed bakery
products to any Competitor or other customer of Supplier, so long as: (1) such
bakery products are materially different in formulation from any Product
manufactured by Supplier for Buyer hereunder, and (2) Supplier agrees to
manufacture Buyer's own baked, par-baked or pre-proofed bakery products which
are within the product categories listed on Schedule 1.5 and introduced by Buyer
as additional Product with an Upcharge as provided in the definition of
"Upcharge" in Section 1.
14. Opportunities/Conflicts of Interest: Except as otherwise set forth in this
Agreement: (i) neither party shall have any rights in or to the business
activities of the other party, nor to the income or profits derived therefrom;
(ii) neither party shall be obligated to offer any investment or other business
opportunity to the other party; and (iii) neither party shall have any duty,
fiduciary or otherwise, to afford the other party any opportunity to participate
in such activities.
15. Termination:
15.1 Supplier Default. The obligations to purchase Product under this
Agreement may be terminated by Buyer if any one or more of the following events
occur (each a "Supplier Default"):
(a) If Supplier files a petition for adjudication as a
bankrupt, for reorganization or for an arrangement under any bankruptcy or
insolvency law, or if any involuntary petition under such law is filed against
Supplier and is not dismissed within thirty (30) days thereafter; then, so long
as any such event is continuing, Buyer may by notice in writing to Supplier
terminate its obligations to purchase all or a portion of Product forthwith;
(b) If Supplier makes an assignment of all or substantially
all of its assets for the benefit of creditors, or if Supplier's interest under
this Agreement shall be taken upon execution;
(c) If Supplier fails to perform any material covenant or
material obligation including, but not limited to, the payment of any amounts
due to Buyer; provided, however, that no termination shall be made hereunder
unless and until Buyer gives Supplier notice of such failure to perform and
Supplier has not cured such failure within thirty (30) days after its receipt of
such notice, or ten (10) days in the case of failure to make payment of any
amounts due to Buyer; or
(d) There is a change of ownership or control of Supplier or
Supplier transfers its interest in the Plant to a third party (in either case,
other than to an Affiliate of Supplier), or if Bunge Corporation terminates its
guaranty provided below; provided, however, that Buyer's exclusive remedy upon
the occurrence of such an event in the absence of Buyer's prior written consent
to any such event (and without limiting Buyer's remedies in the event of any
other Supplier Default) shall be limited to the right to terminate this
Agreement.
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15.2 Cancellation Fee. In the event of a Supplier Default, which, if
subject to cure, is not timely cured, then no rights or remedies otherwise
available to the parties upon such termination shall be deemed surrendered,
except in the case of a Supplier Default under Section 15.1(d) in the case of
which Buyer's sole remedy shall be to terminate this Agreement. In addition to
all other rights and remedies granted herein to either party, and in addition to
all other rights and remedies each party may have at law, in equity or
otherwise, in the event that if this Agreement is terminated due to Supplier
Default (excluding a Supplier Default under Section 15.1(d)), Supplier shall pay
to Buyer a cancellation fee (the "Supplier's Cancellation Fee") in an amount
equal to [ ]* per year for each year
remaining in the first four (4) years of the Term, pro rated for any partial
such year remaining in the Term upon the effective date of termination. If Buyer
elects to terminate due to a Supplier Default, then Supplier's Cancellation Fee
shall be payable to Buyer in full within thirty (30) days following the
effective date of termination.
15.3 Buyer Default. The obligations to manufacture and supply Product
under this Agreement may be terminated by Supplier if any one or more of the
following events occur (each a "Buyer Default"):
(a) Buyer files a petition for adjudication as a bankrupt, for
reorganization or for an arrangement under any bankruptcy or
insolvency law, or if any involuntary petition under such law
is filed against Buyer and is not dismissed within thirty (30)
days thereafter; then, so long as any such event is
continuing, Supplier may by notice in writing to Buyer
terminate its obligations to manufacture or supply all or a
portion of Product forthwith;
(b) Buyer makes an assignment of all or substantially all of
its assets for the benefit of creditors, or if Buyer's
interest under this Agreement shall be taken upon execution;
(c) Buyer fails to perform any material covenant or material
obligation including, but not limited to, the payment of any
amounts due to Supplier from Buyer; provided, however, that no
termination may be made hereunder unless and until Supplier
gives Buyer written notice of such failure to perform and
Buyer has not cured such failure within thirty (30) days after
its receipt of such notice, or ten (10) days in the case of
failure to make payment of any amounts due to Supplier; or
(d) There is a change of ownership or control of Buyer and the
entity assuming ownership or control fails to assume Buyer's
obligations under this Agreement as contemplated by Section
11A.3.
15.4 Cancellation Fee. In the event of a Buyer Default (excluding a
Buyer Default under Section 15.3(d)), which, if subject to cure, is not timely
cured, then no rights or remedies otherwise available to the parties upon such
termination shall be deemed surrendered. In addition to all other rights and
remedies granted herein to either party, and in addition to all other rights and
remedies each party may have at law, in equity or otherwise, in the event that
this Agreement is terminated due to a Buyer Default, Buyer shall pay to Supplier
a cancellation fee (the "Buyer's Cancellation Fee") in an amount equal to
[ ]* per year for each year remaining in the
first four (4) years of the Term, pro rated for any partial such year remaining
in the Term upon the effective date of termination. If Buyer elects to terminate
due to a Buyer Default, then Buyer's Cancellation Fee shall be payable to
Supplier in full within thirty (30) days following the effective date of
termination.
*The information contained within these brackets has been omitted and filed
separately with the Commission pursuant to a request for Confidential Treatment
under Rule 24b-2.
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15.5 Effect of Termination
(a) Termination of this Agreement, whether by lapse of time,
mutual consent, operation of law, exercise of right of
termination or otherwise shall not affect the ownership
interests in the respective proprietary rights and other
rights of the parties, but shall only affect any obligations
of the parties to continue to cooperate in the manufacturing,
supply and purchase of Product.
(b) Upon termination of this Agreement by lapse of time or
mutual consent, Supplier shall complete the manufacture and
supply of Product to fill any outstanding orders that are
deliverable within thirty (30) days of such termination and
Buyer shall purchase, or cause to be purchased, such Product.
(c) Notwithstanding any termination of this Agreement, all
provisions regarding: (i) the sharing of costs between the
parties; (ii) the ownership, non-use, or protection of
Proprietary Information; (iii) indemnification, (iv)
representations of the parties being true as of the time made;
and (v) any obligations of either party to the other contained
herein which, by their nature, should reasonably extend beyond
the termination of any regular ongoing business relationship
between the parties as contemplated by this Agreement, shall
survive such termination.
16. Information and Audit Rights of Buyer:
16.1 Books and Records. Supplier shall maintain, in accordance with
generally accepted accounting principles consistently applied, accurate and
complete books and records with respect to all Base Standard Costs and Updated
Standard Costs and freight costs relating to Product.
16.2 Rights to Audit; Rights to Inspect. Upon reasonable prior notice,
Buyer shall have the right, during normal business hours, to inspect and audit
the books and records of Supplier relating solely to the calculation of Invoice
Price and adjustments thereto.
16.3 Certain Information. Upon Buyer's written request, Supplier shall
provide information in its control concerning the manufacturing and supply of
Product, including, without limitation, sources of raw materials used in Product
and information on Supplier's maintenance of confidential information relating
to Buyer.
17. Remedies: The relationship between Supplier and Buyer, which is reflected in
this Agreement, is special and unique and has a value which cannot be readily
measured in monetary terms. Therefore, in the event of any breach or threatened
breach by either party, the other party shall be entitled to seek both legal and
equitable relief, including, without limitation, temporary, preliminary and
permanent injunctive relief, to restrain such breach or threatened breach and to
mandate compliance with the terms set forth herein.
18. Indemnification: Supplier will at all times indemnify, defend and hold
harmless Buyer from and against any and all claims, damages, liabilities, costs
and expenses, including reasonable counsel fees, arising out of (i) any failure
by Supplier to perform its obligations hereunder; and (ii) the supply of Product
by Supplier that is not in compliance with the Product specifications. Buyer
will at all times indemnify, defend and hold harmless Supplier from and against
any and all claims, damages, liabilities, costs and expenses, including
reasonable counsel fees, arising out of (i) any failure by Buyer to perform its
obligations hereunder; (ii) any claim for infringement or violation with any
patent or trade secret of
-22-
<PAGE>
any third party, to the extent such claim is attributable to use by Supplier of
the recipes, formulae, processes and specifications provided to Supplier by
Buyer; and (iii) any claim or action by any third-party alleging infringement or
violation of, or conflict with, any trademarks, tradenames or trade dress, to
the extent such claim or action is attributable to the use of such trademarks,
tradenames or trade dress used in accordance with Buyer's specifications. Prompt
written notice of any claim or litigation hereunder shall be given to either
party, as the case may be, by the other party. The indemnifying party shall have
the right to control the defense of the claim at its expense. The indemnified
party shall have the right, but not the obligation, to participate in the
defense of any claim. There shall be no settlement of any claim to which an
indemnity relates without the prior written consent of the indemnitor, which
consent shall not be unreasonably withheld or delayed. If a third party brings
an action against either party and there is a dispute between Buyer and Supplier
as to who is responsible for defending such action, then, until such dispute is
resolved, Buyer and Supplier shall cooperate so as not to jeopardize the defense
of such action.
19. Force Majeure: Neither party shall be responsible for any resulting loss to
the other party if the fulfillment of any of the terms or provisions of this
Agreement is delayed or prevented by strikes, work stoppages and labor unrest
(other than with respect to strikes, work stoppages and labor unrest that occurs
at the Plant at any time after six (6) months after the date hereof),
transportation stoppages, ingredient shortages not the fault of Supplier, riots,
wars, acts of enemies, national emergency, floods, fires, acts of God, or by any
other cause not within the control of the party whose performance is interfered
with or which, by the exercise of reasonable diligence, such party is unable to
prevent (individually and collectively, a "Force Majeure Event"). Upon the
occurrence of a Force Majeure Event, the party claiming force majeure shall
notify the other party forthwith and both parties shall use their reasonable
best efforts to mitigate or eliminate any adverse effects of such event.
20. Relationship of Parties: Supplier and Buyer are each independent
contractors. Nothing herein contained shall be construed to place Supplier and
Buyer in the relationship of principal and agent, master and servant, partners,
joint venturers, and, except as otherwise set forth in this Agreement, neither
party shall have, expressly or by implication, the power to represent itself as
having any authority to make contracts in the name of or binding upon the other,
or to obligate or bind the other in any manner whatsoever.
21. Consents; Notices: Unless otherwise specifically set forth herein, any
notice, consent or approval of a party shall be in writing and given by
telecopier and original posted first class mail, postage prepaid, within two (2)
business days thereafter; or by certified or registered mail with an
acknowledgment of receipt, postage prepaid, return receipt requested; or by a
reputable private courier, such as Federal Express, which provides evidence of
receipt as a part of its delivery service, and addressed as follows:
If to Buyer: Au Bon Pain Co., Inc., Inc.
19 Fid Kennedy Avenue
Marine Industrial Park
Boston, MA 02210-2497
Attn: Chief Executive Officer
telecopier (617) 423-7879
-23-
<PAGE>
with copy to: Walter D. Wekstein, Esq.
Lawrence R. Katz, Esq.
Gadsby & Hannah LLP
225 Franklin Street
Boston, MA 02110
telecopier (617) 345-7050
If to Supplier: Bunge Foods Corporation
3701 Algonquin Road, Suite 360
Rolling Meadows, IL 60008
Attn: General Manager
telecopier (847) 342-0029
with a copy to: Bunge Corporation
11720 Borman Drive
St. Louis, MO 63146
Attn: Legal Department
telecopier (314) 994-6521
or to such other address as may be designated in writing by either party from
time to time in accordance herewith, and shall be deemed delivered two (2)
business days following delivery by hand, by private courier or when so
telecopied and five (5) business days following proper dispatch by certified or
registered mail. A business day is any Monday through Friday on which first
class mail is delivered.
22. Arbitration: If a dispute arises under this Agreement, the parties shall
submit their dispute to arbitration under the jurisdiction and in accordance
with the rules of the American Arbitration Association (the "Association")
located in Boston, Massachusetts or at any other mutually agreeable location.
The parties shall be bound by the decision of the arbitrator(s). Notwithstanding
the foregoing, the arbitrator(s) shall not have the authority to modify any
express provision of this Agreement. Moreover, and notwithstanding the
provisions of this Section 22 or anything else to the contrary contained in this
Agreement, each party shall have the right to seek injunctive or equitable
relief in a court of competent jurisdiction in addition to or in lieu of its
rights pursuant to this section.
23. Assignees and Third Parties: Subject to Buyer's rights in Article 15, this
Agreement may be assigned by Supplier to a third party which acquires all or
substantially all of the assets of Supplier or the Plant which agrees to be
assume and be bound by this Agreement. This Agreement may be assigned by Buyer
to an entity which acquires all or substantially all of Buyer's retail
bakery/cafe outlets and which agrees to assume and be bound by this Agreement as
provided in Section 11A.3.
24. Choice of Law: This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Missouri, as applicable to
agreements executed and entirely performed in said State.
25. Attorneys' Fees: If any action or proceeding is brought to enforce or
interpret any provision of this Agreement then, in addition to any other relief
to which the prevailing party may be entitled, the prevailing party shall be
entitled to recover its reasonable costs and attorneys' fees.
-24-
<PAGE>
26. Severability: If any term or provision of this Agreement is determined by a
court of competent jurisdiction to be invalid illegal or incapable of being
enforced by any law or public policy, all other terms or provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to the other parties.
27. Modification; Waivers: This Agreement (including the Schedules and Exhibits
hereto) may be modified or amended only with the written consent of each party
hereto. No party hereto shall be released from its obligations hereunder without
the written consent of all of the other parties. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party against whom such waiver is to be asserted. Except as otherwise
specifically provided herein, no delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
28. Headings: The headings of the articles, sections and other subdivisions of
this Agreement are for convenient reference only. They shall not be used in any
way to govern, limit, modify, construe this Agreement or any part or provision
thereof nor otherwise be given any legal effect.
29. Succession: This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and other legal
representatives and, to the extent that any assignment hereof is permitted
hereunder, their assignees.
30. Counterparts: This Agreement may be executed in counterparts. Each
counterpart, including a signature page executed by each of the parties hereto,
shall be an original counterpart of this Agreement, but all of such counterparts
together shall constitute one (1) instrument.
31. Additional Documents: Each party agrees to provide any additional documents
reasonably requested by the other party in order to carry out the purpose and
intent of this Agreement.
32. Approvals; Consents: Unless otherwise specifically set forth herein, the
approvals and consents that are required or permitted herein shall not be
unreasonably withheld or delayed.
33. Entire Agreement: This Agreement (including the Schedules and Exhibits
hereto) contains the full and complete undertaking and agreement between Buyer
and Supplier with respect to the within subject matter, and supersedes all other
agreements between Buyer and Supplier, whether written or oral,
-25-
<PAGE>
except any confidentiality agreements between the parties, which shall, to the
extent such agreements do not contradict the terms of this Agreement, continue
in effect.
IN WITNESS WHEREOF, the parties hereto have set their hands to this
Agreement as a sealed instrument and have delivered this Agreement as of the day
and year first above written.
BUNGE FOODS CORPORATION,
a Delaware corporation
By: /s/ Michael M. Scharf
---------------------
Its: Senior Vice President
AU BON PAIN CO., INC.,
a Delaware corporation
By: /s/ Anthony J. Carroll
----------------------
Its: Vice President and Treasurer
Bunge Corporation Guaranty:
In order to induce Buyer to execute and deliver the foregoing
Agreement, Bunge Corporation, a New York corporation, hereby unconditionally
guarantees to Buyer that it shall cause Supplier, a wholly-owned subsidiary of
Bunge Corporation, to fulfill each and every obligation of Supplier under this
Agreement, and in connection therewith and not in limitation of the foregoing,
Bunge Corporation hereby unconditionally guarantees to Buyer, the prompt payment
by Supplier of all amounts at any time due by Supplier to Buyer pursuant to this
Agreement, whether in the ordinary course of operations, arising as a result of
a Supplier Default or otherwise. This guaranty shall terminate if Supplier shall
cease to be an Affiliate of Bunge Corporation or if the Plant is sold or the
ownership of the Plant is otherwise transferred to a third-party who is not an
Affiliate of Bunge Corporation.
BUNGE CORPORATION,
a New York corporation
By: /s/ Michael M. Scharf
---------------------
Its: Senior Vice President
-26-
<PAGE>
Index of Schedules and Exhibits to
Bakery Product Supply Agreement
by and between
Bunge Foods Corporation and
Au Bon Pain Co., Inc.
dated as of March 23, 1998
Schedule* Title
- --------- -----
1.1 Methodology for Calculating Employee Benefits Allowance
1.2 Schedule of Wage Rates and Employee Benefits
1.4 Description of Employee Benefits
1.5 Product Categories
1.6 Purchase Targets
2.3 Product Specifications
3.1 Pricing Diagram
7.1 Form of Distributor Guaranty
12 Insurance
13.5(a) Au Bon Pain Protected Signature Product
13.5(b) Competitors
Exhibit* Title
- -------- -----
1.1 Bill of Materials for each Product Code as of Closing
3.4.1 Form of Adjustment Summary
9.2 Dun and Bradstreet Report
* All Schedules and Exhibits to this Bakery Product Supply Agreement have been
omitted. Copies will be provided supplementally to the Commission upon request,
provided that the Company reserves the right to request confidential treatment
for same.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Au Bon Pain Co., Inc. on Form S-8 (File Nos. 33-46682, 33-46683, and 33-96510)
and Form S-3 (File No. 33-82292) of our report dated February 13, 1998, except
for Note 17 as to which the date is March 23, 1998, on our audits of the
consolidated financial statements and financial statement schedules of Au Bon
Pain Co., Inc. as of December 27, 1997 and December 28, 1996, and for each of
the three years in the period ended December 27, 1997, which report is included
in this Annual report on Form 10-K.
/s/ COOPERS & LYBRAND, L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RECALCULATION OF PRIOR QUARTERS EARNINGS PER SHARE FROM PRIMARY TO BASIC
EARNINGS PER SHARE RESULTS IN NO CHANGE TO EARNINGS PER SHARE. DILUTED
EARNINGS PER SHARE IS ANTIDILUTIVE IN EACH QUARTER OF FISCAL YEARS 1995,
1996 AND 1997.
</LEGEND>
<CIK> 0000724606
<NAME> AU BON PAIN CO., INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> DEC-27-1997
<EXCHANGE-RATE> 1
<CASH> 853
<SECURITIES> 0
<RECEIVABLES> 9,427
<ALLOWANCES> 134
<INVENTORY> 9,117
<CURRENT-ASSETS> 21,368
<PP&E> 112,232
<DEPRECIATION> 75,907
<TOTAL-ASSETS> 186,516
<CURRENT-LIABILITIES> 21,426
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 92,273
<TOTAL-LIABILITY-AND-EQUITY> 186,516
<SALES> 233,212
<TOTAL-REVENUES> 250,890
<CGS> 90,385
<TOTAL-COSTS> 119,537
<OTHER-EXPENSES> 33,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,204
<INCOME-PRETAX> 315
<INCOME-TAX> (1,492)
<INCOME-CONTINUING> 1,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,807
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
