<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 21, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
COMMISSION FILE NUMBER 0-22802
BOSTON CHICKEN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3904053
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
14103 Denver West Parkway
P. O. Box 4086
Golden, CO 80401-4086
(Address of principal executive offices, including zip code)
(303) 278-9500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares of Common Stock, $.01 par value per share, outstanding as of
May 21, 1996: 63,601,898.
<PAGE>
BOSTON CHICKEN, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1995
and April 21, 1996................................. 2
Consolidated Income Statements for the quarters
ended April 16, 1995 and April 21, 1996............ 3
Consolidated Statements of Cash Flows for the
quarters ended April 16, 1995 and April 21, 1996... 4
Notes to Consolidated Financial Statements......... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities......................... 12
Item 6. Exhibits and Reports on Form 8-K.............. 12
Signature Page......................................... 13
Exhibit Index.......................................... Exhibit-1
</TABLE>
1
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, April 21,
1995 1996
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents............ $ 310,436 $ 155,483
Accounts receivable, net............. 13,445 14,002
Due from affiliates.................. 9,614 9,741
Notes receivable..................... 5,462 38,497
Prepaid expenses and other current 1,536 2,717
assets..............................
Deferred income taxes................ 3,322 3,841
---------- ----------
Total current assets............. 343,815 224,281
Property and Equipment, net............. 258,550 265,521
Notes Receivable........................ 450,572 671,504
Deferred Financing Costs, net........... 15,745 17,985
Other Assets, net....................... 5,195 8,266
---------- ----------
Total assets..................... $1,073,877 $1,187,557
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable..................... $ 12,292 $ 7,388
Accrued expenses..................... 9,095 8,911
Deferred franchise revenue........... 8,945 9,229
---------- ----------
Total current liabilities........ 30,332 25,528
Deferred Franchise Revenue.............. 2,072 3,940
Liquid Yield Option Notes............... 177,306 173,024
Convertible Subordinated Debt........... 129,872 129,862
Deferred Income Taxes................... 16,631 18,685
Other Noncurrent Liabilities............ 833 726
Commitments and Contingencies
Stockholders' Equity:
Preferred stock--$.01 par value;
authorized 20,000,000 shares;
no shares issued and outstanding.... -- --
Common stock--$.01 par value;
authorized 100,000,000 shares;
issued and outstanding: 59,129,301
in 1995 and 62,624,702 in 1996...... 591 626
Additional paid-in capital........... 675,611 778,888
Retained earnings.................... 40,629 56,278
---------- ----------
716,831 835,792
---------- ----------
Total liabilities and
stockholders' equity............ $1,073,877 $1,187,557
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
2
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
---------------------
April 16, April 21,
1995 1996
--------- ---------
<S> <C> <C>
Revenue:
Royalties and franchise-related
fees.............................. $24,789 $46,033
Company-operated stores............ 15,318 1,314
--------- ---------
Total revenue.................. 40,107 47,347
Costs and Expenses:
Cost of products sold.............. 5,790 480
Salaries and benefits.............. 8,548 7,509
General and administrative......... 12,242 10,811
--------- ---------
Total costs and expenses....... 26,580 18,800
--------- ---------
Income from Operations.................. 13,527 28,547
Other Expense:
Interest expense, net.............. (2,057) (2,900)
Other income, net.................. 28 109
--------- ---------
Total other expense............ (2,029) (2,791)
--------- ---------
Income Before Income Taxes.............. 11,498 25,756
Income Taxes............................ 4,382 10,107
--------- ---------
Net Income.............................. $ 7,116 $15,649
========= =========
Net Income Per Common and
Equivalent Share................... $0.15 $0.24
========= =========
Weighted Average Number of Common
and Equivalent Shares Outstanding.. 48,566 64,317
========= =========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
3
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
---------------------
April 16, April 21,
1995 1996
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income............................... $ 7,116 $ 15,649
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 2,735 4,214
Interest on Liquid Yield Option Notes.. - 4,193
Deferred income taxes.................. 3,304 1,535
Gain on disposal of assets............. - (157)
Changes in assets and liabilities:
Accounts receivable and due from
affiliates.......................... (795) (684)
Accounts payable and accrued
expenses............................ (3,399) 2,383
Deferred franchise revenue........... 1,010 2,152
Other assets and liabilities......... (1,058) (1,368)
-------- ---------
Net cash provided by operating
activities........................ 8,913 27,917
-------- ---------
Cash Flows from Investing Activities:
Purchase of property and equipment..... (42,731) (27,060)
Proceeds from the sale of assets....... 16,381 16,683
Decrease (increase) in other assets.... 23 (5,882)
Issuance of notes receivable........... (87,844) (508,163)
Repayments of notes receivable......... 47,353 254,196
-------- ---------
Net cash used in investing
activities........................ (66,818) (270,226)
-------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock. 19,660 87,356
Proceeds from revolving credit
facility.............................. 79,355 -
Repayment of revolving credit facility. (62,280) -
-------- ---------
Net cash provided by financing
activities........................ 36,735 87,356
-------- ---------
Net Decrease in Cash and Cash
Equivalents............................. (21,170) (154,953)
Cash and Cash Equivalents, beginning of
period.................................. 25,304 310,436
-------- ---------
Cash and Cash Equivalents, end of period. $ 4,134 $ 155,483
======== =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared by Boston Chicken,
Inc. (the "Company") and are unaudited except for the consolidated balance sheet
at December 31, 1995. The financial statements have been prepared in accordance
with the instructions for Form 10-Q and, therefore, do not necessarily include
all information and footnotes required by generally accepted accounting
principles. In the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the Company's
consolidated financial position, results of operations and cash flows as of
April 21, 1996 and for all periods presented have been made. The statements are
subject to year-end audit adjustment. A description of the Company's accounting
policies and other financial information is included in the audited consolidated
financial statements as filed with the Securities and Exchange Commission in the
Company's Form 10-K for the year ended December 31, 1995. The consolidated
results of operations for the quarter ended April 21, 1996 are not necessarily
indicative of the results expected for the full year.
2. AREA DEVELOPER FINANCING
The Company currently offers secured debt financing to certain area
developers to partially finance store development and working capital needs.
Only developers which are developing a significant portion of an area of
dominant influence ("ADI") or metropolitan area of a major city and which meet
all of the Company's requirements are eligible for such financing. These
financing arrangements permit the Company to obtain an equity interest in the
developer at a predetermined price after a moratorium (generally two years from
execution or subsequent amendment of the loan) on conversion of the loan into
equity. The maximum loan amount is established to give the Company majority
ownership of the developer upon conversion (or option exercise, as described
further below) provided the Company exercises its right to participate in any
intervening financing of the developer.
Area developer financing generally requires the developer to expend at least
75% of its contributed capital prior to drawing on its revolving loan, with
advances permitted during a two- or three-year draw period (or additional draw
period in the event of a loan amendment) in a pre-determined maximum amount,
generally equal to two to four times the amount of the area developer's
contributed capital. Upon expiration of the draw period, the loan converts to an
amortizing term loan payable over four to five years in periodic installments,
sometimes with a final balloon payment. The Company may extend the draw and
repayment periods, subject to the area developer purchasing additional
development rights, contributing additional capital, or in connection with other
amendments to the loan agreement. Interest is set at 1% over the applicable
"reference rate" of Bank of America Illinois as established from time to time
and is payable each period. The loan is secured by a pledge of substantially all
of the assets of the area developer and any franchisee under its area
development agreement and generally by a pledge of the equity interests of the
owners of the developer.
(A) LOAN CONVERSION OPTION
The Company may convert all or any portion of the loan amount after a
moratorium period (generally two years from execution or subsequent amendment of
the loan) or at any time after default of the loan and generally up to the later
of full repayment of the loan or a specified date in the agreement, into equity
in the area developer at the conversion price set forth in the loan agreement,
generally at a 12% to 15% premium over the per unit price paid by the investors
in the area developer for their equity investment made concurrently with the
execution of the loan agreement or subsequent amendments thereto. To the extent
such loan is not fully drawn or has been drawn and repaid, the Company has a
corresponding option to acquire, at the loan conversion price, the amount of
additional equity it could have acquired by conversion of the loan, had the loan
been fully drawn.
5
<PAGE>
There can be no assurance that the Company will exercise its future rights to
acquire an equity interest in any area developer to which it provides financing
or that such exercise will result in a majority interest in the area developer.
(B) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING
The following table summarizes credit commitments for area developer
financing (in thousands of dollars except number of area developers):
<TABLE>
<CAPTION>
Dec. 31, April 21,
1995 1996
--------- ---------
<S> <C> <C>
(Unaudited)
Number of area developers receiving
financing 17 16
Loan commitments $ 614,094 $ 754,983
Unused revolving loan (202,676) (204,819)
--------- ---------
Loans outstanding (included in Notes
Receivable) $ 411,418 $ 550,164
========= =========
</TABLE>
3. OTHER FINANCINGS
The Company has entered into a secured loan agreement with Einstein Bros.
Bagels, Inc. ("Einstein Bros."), providing $134.0 million of debt financing to
Einstein Bros. of which $120.0 million is convertible into Einstein Bros. common
stock. As of April 21, 1996, $120.0 million of convertible debt was outstanding,
which, upon conversion, would result in the Company having a majority ownership
interest in Einstein Bros. The Company has also extended to Einstein Bros. a
$40.0 million bridge loan, of which $38.5 million was outstanding as of April
21, 1996. In May 1996, Einstein Bros. obtained a $45.0 million revolving credit
facility from a syndicate of banks, the proceeds of which were used to repay the
Company the outstanding balance under the bridge loan. In connection with the
bank financing, the Company agreed to subordinate its loan to Einstein Bros. to
the bank loan and to release its security interest in the assets of Einstein
Bros. On May 30, 1996, the Company announced it intends to convert its $120.0
million convertible loan. Such conversion, which is expected to occur on or
about June 16, 1996, subject to certain conditions, will result in the Company
having a 68% ownership interest in Einstein Bros. The $14.0 million non-
convertible portion of the facility will remain available subsequent to such
conversion. The Company may satisfy its funding obligations under the loan
agreement in cash or registered shares of the Company's common stock. The loan
agreement provides for a three-year draw period, subsequent to which the loan
converts to an amortizing term loan payable over five years in periodic
installments with a final balloon payment. Interest is at 1% over the applicable
"reference rate" of Bank of America Illinois as established from time to time
and is payable currently.
4. CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that in management's
judgment is adequate to provide for estimated possible loan losses. The amount
of the allowance is based on management's review of use of loan proceeds,
adherence to store development schedules, store performance trends, type and
amount of collateral securing the loan, prevailing economic conditions, and
other factors which management deems relevant at the time. Based upon this
review and analysis, no allowance was required as of December 31, 1995 and April
21, 1996.
6
<PAGE>
5. STOCK OPTIONS
The Company accounts for its employee stock options in accordance with APB No.
25.
6. ROYALTIES AND FRANCHISE-RELATED FEES
Royalties and franchise-related fees are comprised of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
Quarter Ended
----------------------
April 16, April 21,
1995 1996
----------- ---------
<S> <C> <C>
Royalties................................ $ 7,935 $14,776
Franchise and area developer fees........ 3,380 2,692
Interest income.......................... 6,920 17,987
Real estate and related services income.. 4,297 7,968
Software fees............................ 2,257 2,610
--------- ---------
$24,789 $46,033
========= =========
</TABLE>
7. COMMITMENTS
Through April 21, 1996, ten Boston Market area developers sold to BC Equity
Funding, L.L.C. an aggregate of $54.0 million of 10% cumulative preferred
equity, redeemable at any time by the area developers at a premium initially
equal to 10% of the initial issue price, to be increased 2% each year up to a
maximum of 20% of the initial issue price plus accrued dividends (the
"Redemption Price"). The Company has agreed that in the event its conversion and
option rights under its secured loan agreement with the area developers expire
unexercised (see Note 2) and the Company does not consent to an initial public
offering of the area developer, the Company will purchase the preferred equity
from the holders at the Redemption Price.
8. CONTINGENCIES
The Company is subject to various lawsuits, claims, and other legal matters in
the course of conducting its business, including its business as a franchisor.
The Company believes that the outcome of such lawsuits, claims, and other legal
matters will not have a material impact on the Company's consolidated financial
position or results of operations.
7
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-Q UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONSTITUTE "FORWARD-
LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE, OR ACHIEVEMENTS OF BOSTON CHICKEN, INC. (THE "COMPANY"), ITS AREA
DEVELOPERS AND FRANCHISEES, BOSTON MARKET(R) STORES, AND EINSTEIN BROS. BAGELS,
INC. ("EINSTEIN BROS.") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: COMPETITION;
SUCCESS OF OPERATING INITIATIVES; AREA DEVELOPERS' ADHERENCE TO DEVELOPMENT
SCHEDULES; ADVERTISING AND PROMOTIONAL EFFORTS; ADVERSE PUBLICITY; ACCEPTANCE OF
NEW PRODUCT OFFERINGS; EXPANSION OF THE HOLIDAY HOME MEAL REPLACEMENT BUSINESS;
AVAILABILITY, LOCATIONS, AND TERMS OF SITES FOR STORE DEVELOPMENT; CHANGES IN
BUSINESS STRATEGY OR DEVELOPMENT PLANS; AVAILABILITY AND TERMS OF CAPITAL; FOOD,
LABOR, AND EMPLOYEE BENEFIT COSTS; CHANGES IN GOVERNMENT REGULATIONS; REGIONAL
WEATHER CONDITIONS; AND OTHER FACTORS REFERENCED IN THIS FORM 10-Q OR IN THE
COMPANY'S FORM 10-K FOR ITS 1995 FISCAL YEAR. THE SUCCESS OF THE COMPANY IS
DEPENDENT ON ITS AREA DEVELOPERS AND FRANCHISEES AND THE MANNER IN WHICH THEY
OPERATE AND DEVELOP BOSTON MARKET STORES.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
- -------
The total number of stores in the Boston Market system increased from 611 at
the quarter ended April 16, 1995 to 894 at the quarter ended April 21, 1996.
Gross systemwide store revenue for the Boston Market system was $311.8 million
for the quarter ended April 21, 1996 compared with $187.4 million for the
quarter ended April 16, 1995.
In connection with the introduction of new entrees into the Boston Market
system in 1995, the Company began actively monitoring weekly per store average
revenue ("WPSA"). WPSA represents the average gross revenue for all stores in
the Boston Market system based upon the actual number of days the stores are
open in the reporting period. WPSA for the quarter ended April 21, 1996 was
$22,762 compared with $20,695 in the comparable period in 1995. WPSA increased
10% despite the severe weather that affected many markets during the quarter.
A majority of the Boston Market stores operated by the Company and its area
developers have been open for less than two years. Consequently, operating
results achieved to date may not be indicative of the results that may be
achieved in the future by any new or existing store.
Based upon current trends and operating initiatives, the Company has
established a goal to achieve WPSA of $24,000 to $26,000 by the end of fiscal
1996. The ability of the Boston Market system to achieve such goal is dependent
upon a variety of factors, including acceptance of new product offerings,
expansion of the holiday home meal replacement business, the impact of
advertising and promotional efforts, competition, weather, the absence of
adverse publicity, general economic conditions, and other factors affecting
consumer trial and frequency. There can be no assurance such goal will be
achieved. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ABOVE FOR
ADDITIONAL FACTORS RELATING TO THE FOREGOING FORWARD-LOOKING STATEMENTS.
8
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
REVENUE
Total revenue increased $7.2 million (18%), to $47.3 million for the quarter
ended April 21, 1996 from $40.1 million for the quarter ended April 16, 1995.
Royalty and franchise-related fees increased $21.2 million (85%) to $46.0
million for the quarter ended April 21, 1996 from $24.8 million for the
comparable quarter of last year. This increase is primarily due to an increase
in royalties attributable to the larger base of franchise stores operating
systemwide, from 493 stores at December 26, 1994 to 891 at April 21, 1996,
higher interest income generated on loans made to area developers, and an
increase in real estate and related services income.
Revenue from Company-operated stores decreased $14.0 million (92%), to $1.3
million for the first quarter of 1996 from $15.3 million for the first quarter
of 1995. This decrease was due to a lower average number of Company-operated
stores open during the first quarter of 1996. The Company had an average of
three Company-operated stores for the quarter ended April 21, 1996 compared to
an average of 46 for the quarter ended April 16, 1995. The lower average number
of Company-operated stores during the current quarter reflects the conclusion of
the Company's practice of opening stores in new markets to seed development and
then transfering those stores to area developers.
COST OF PRODUCTS SOLD
Cost of products sold decreased $5.3 million (91%), to $.5 million for the
quarter ended April 21, 1996 compared with $5.8 million for the comparable
quarter last year. This decrease was primarily due to fewer Company-operated
stores open during the first quarter of 1996 compared to the first quarter of
1995.
SALARIES AND BENEFITS
Salaries and benefits decreased $1.0 million (12%), to $7.5 million for the
first quarter of 1996 from $8.5 million for the first quarter of 1995. The
decrease was primarily due to fewer Company-operated stores open during the
first quarter of 1996 compared to the first quarter of 1995.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased $1.4 million (11%), to $10.8
million for the current quarter from $12.2 million for the first quarter of
1995. The decrease was primarily due to fewer Company-operated stores open
during the first quarter of 1996 compared to the first quarter of 1995,
partially offset by an increase in depreciation and amortization charges to $4.2
million in the 1996 quarter, compared with $2.7 million in the 1995 quarter. The
increase in depreciation and amortization expense is primarily attributable to a
higher fixed asset base reflecting the Company's investment in its support
center infrastructure.
OTHER EXPENSE
The Company incurred other expense of $2.8 million in the first quarter of
1996 compared with other expense of $2.0 million in the comparable quarter of
1995. This increase reflects higher net interest expense, primarily attributable
to the Liquid Yield Option Notes which were not outstanding during the first
quarter of 1995.
INCOME TAXES
The provision for income taxes for 1996 is based upon the Company's
anticipated tax rate.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's primary capital requirements relate to providing
partial financing to its Boston Market area developers for their use in store
development and to finance their working capital needs. The remainder of the
Company's capital requirements relate primarily to advances to Einstein Bros.
under its loan agreement and investments in corporate infrastructure necessary
to support the increase in the number of stores in operation systemwide. During
the quarter ended April 21, 1996, the Company expended approximately $153.3
million related to the development of Boston Market stores, advanced $118.5
million under the Einstein Bros. loan agreement, and expended $9.2 million on
corporate infrastructure.
As of April 21, 1996, the Company had made secured loan commitments to its
Boston Market area developers aggregating approximately $755.0 million, of which
approximately $550.2 million had been advanced. At such date, these area
developers had contributed capital aggregating $254.8 million. The Company
anticipates fully funding its commitments pursuant to its loan agreements with
these area developers and anticipates increasing such loan commitments. Even
though the majority of Boston Market stores are cash flow positive at the store
operating level reasonably quickly after opening, the Company's area developers
have incurred, and the Company anticipates that its area developers will
continue to incur, substantial net losses during their expansion phase which is
anticipated to result, and in the majority of cases has resulted, in negative
net worth. The Company believes that such losses can be recovered as the rate of
expansion moderates by reduction or elimination of development overhead and
related costs, increased operational effeciencies, greater economies of scale,
increased advertising effeciencies, increased store revenue, and reduced effects
of cannibalization. However, there can be no assurance that such losses will be
recovered. The failure of an area developer to achieve a sufficient level of
profitability subsequent to the completion of its expansion phase could have a
material adverse impact on the Company's financial position and results of
operations. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 8.
The Company has secured loan commitments to Einstein Bros. providing $134.0
million of financing of which $120.0 million is convertible into Einstein Bros.
common stock. As of April 21, 1996, $120.0 million of such convertible debt
financing was outstanding. On May 30, 1996, the Company announced its intention
to convert the convertible portion of such loan into a 68% equity interest in
Einstein Bros. The Company has also extended to Einstein Bros. a $40.0 million
bridge loan, of which $38.5 million was outstanding as of April 21, 1996. In May
1996, Einstein Bros. obtained a $45.0 million revolving credit facility from a
syndicate of banks, the proceeds of which were utilized to repay the Company the
outstanding balance under the bridge loan. SEE "SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS" ON PAGE 8.
On April 22, 1996, the Company paid $21.6 million in common stock and notes
to acquire the equity interests of certain investors in Mid-Atlantic Restaurant
Systems L.P. ("Mid-Atlantic"). The Company also assumed $27.0 million in Mid-
Atlantic debt owed to a third party. Subsequent to the transaction, the Company
repaid the debt owed to the third party. The transaction resulted in the Company
obtaining a 93% equity interest in Mid-Atlantic.
Capital Resources. For the quarter ended April 21, 1996, the Company
generated approximately $27.9 million of cash from operating activities and
$87.4 million from the issuance of shares of its common stock. As of April 21,
1996, the Company had $155.5 million available in cash and cash equivalents and
$74.5 million available under its unsecured revolving credit facility.
The Company has entered into two master lease facilities aggregating $175.0
million for store equipment which is subleased to area developers. The subleases
to the area developers contain substantially the same terms as the master lease.
As of April 21, 1996, the Company had utilized $170.6 million of the available
funds.
10
<PAGE>
The Company anticipates that it, its area developers, and Einstein Bros.
will have need for additional financing dependent primarily on the number of
stores opened, the cost of such stores, and store operating results. The
Company's capital requirements depend primarily on the amount and timing of
borrowings under the loan agreements between the Company and its area developers
and between the Company and Einstein Bros. The Company, its area developers, and
Einstein Bros. may seek additional funds from public or private offerings of
debt or equity securities. There can be no assurance that the Company, its area
developers, or Einstein Bros. will be able to raise such funds on satisfactory
terms when needed. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON
PAGE 8.
11
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On May 14, 1996, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of the Company's common stock, $.01 par value, from 100,000,000 to
480,000,000.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits: See Exhibit Index appearing elsewhere herein, which is
incorporated herein by reference.
B. Reports on Form 8-K: The Company filed one report on Form 8-K during
the quarter ended April 21, 1996. Such Form 8-K reported item 5, and
was dated and filed on April 10, 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSTON CHICKEN, INC.
Date: May 31, 1996 /s/ Scott A. Beck
---------------------------
Scott A. Beck
Co-Chairman of the Board and
Chief Executive Officer
Date: May 31, 1996 /s/ Mark W. Stephens
----------------------------
Mark W. Stephens
Vice Chairman and Chief
Financial Officer
(Principal Financial Officer)
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Exhibits Number*
- ------- -------- ----------
<S> <C> <C>
3 Certificate of Amendment to Certificate of Incorporation dated May 14, 1996.
4.1 Certificate of Amendment to Certificate of Incorporation dated May 14, 1996
(included in Exhibit 3).
4.2 Twelfth Amendment dated April 19, 1996 to Amended and Restated Credit
Agreement dated as of May 18, 1994 (the "Credit Agreement"), among the
Company, the Lenders named therein, and Bank of America Illinois, as Agent
("Twelfth Amendment to Credit Agreement").
4.3 Thirteenth Amendment dated May 17, 1996 to Credit Agreement, including form
of Subordination Agreement by the Company in favor of the Lenders named
therein, and Bank of America Illinois, as agent ("Thirteenth Amendment").
10.1 Twelfth and Thirteenth Amendments to Credit Agreement (included in
Exhibits 4.1 and 4.2).
10.2 Purchase and Supply Agreement (Amended and Restated as of April 1, 1996)
between the Company and Hudson Foods, Inc. (incorporated by reference to
Exhibit 10 to Form 10-Q for the quarter ended March 30, 1996 filed by Hudson
Foods, Inc., Commission File No. 1-9050).
10.3 Amended and Restated Loan Agreement dated May 17, 1996, by and between the
Company and Einstein Bros. Bagels, Inc. (incorporated by reference to
Exhibit 10.1 to Registration Statement on Form S-1 filed by Einstein Bros.
Bagels, Inc. on May 30, 1996 (Registration No. 333-04725)).
10.4 Form of Option Agreement between the Company and Mark W. Stephens dated
as of April 23, 1996.
10.5 Form of Option Agreement between the Company and Laurence M. Zwain dated
as of April 23, 1996.
11 Statement re Computation of Earnings Per Share.
99.1 Form of Amended and Restated Agreements between the Company and BC Equity
Funding, L.L.C.
99.2 Press release issued by the Company on May 30, 1996.
- --------------
</TABLE>
* This information appears only in the manually signed original of this
Form 10-Q.
14
<PAGE>
Exhibit 3
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
BOSTON CHICKEN, INC.
PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
Boston Chicken, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify as follows:
1. The Certificate of Incorporation of the Company is hereby amended
by changing Article FOURTH thereof so that, as amended, Article FOURTH of
the Certificate of Incorporation of the Corporation shall read in its
entirety as follows:
"FOURTH: The total number of shares of stock which the Company
shall have authority to issue is 500,000,000, 480,000,000 shares of
which shall be Common Stock, $.01 par value per share (the "Common
Stock"), and 20,000,000 shares of which shall be Preferred Stock, $.01
par value per share ("Preferred Stock")."
2. That such amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation having adopted
resolutions setting forth such amendment and declaring its advisability,
and the holders of a majority of the outstanding stock of the Corporation
having approved and adopted resolutions providing for such amendment.
IN WITNESS WHEREOF, Boston Chicken, Inc. has caused this Certificate to be
signed by its Vice President and attested to by its Secretary, on this 14th day
of May, 1996.
BOSTON CHICKEN, INC.
By: /s/ J. Randal Miller
Name: J. Randal Miller
Title: Vice President
ATTEST:
/s/ Donald J. Bingle
Name: Donald J. Bingle
Title: Vice President and Secretary
<PAGE>
Exhibit 4.2
TWELFTH AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT dated as of April 19, 1996 is entered into by and among
Boston Chicken, Inc., a Delaware corporation (the "Borrower"), the lenders who
are party to the Credit Agreement referred to below (the "Lenders") and Bank of
America Illinois, an Illinois banking corporation (as successor to Continental
Bank), as Agent for the Lenders (herein, in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent are parties to a
certain Amended and Restated Credit Agreement dated as of May 18, 1994 (herein,
as heretofore amended, called the "Credit Agreement");
WHEREAS, the Borrower wishes to increase the maximum amount of Debt
permitted to be outstanding under the GE Equipment Master Lease from $75,000,000
to $100,000,000; and
WHEREAS, subject to the terms and conditions set forth herein the
Agent and the Lenders are willing to amend certain provisions of the Credit
Agreement in order to permit such an increase.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Borrower, the Agent and the Lenders hereby agree as
follows:
SECTION 1. AMENDMENTS.
Upon receipt of the documents to be delivered by the Borrower pursuant
to Section 2 below, and in reliance on the Borrower's warranties set forth in
Section 3 below, as of the date hereof the Credit Agreement shall be hereby
amended as follows:
(a) Clause (11) of Section 6.1 to the Credit Agreement is amended to
read in its entirety as follows:
"(11) Liens arising pursuant to (a) the Equipment Master Leases and
the documents from time to time delivered in connection therewith, provided
that at no time shall such Liens securing Financial Lease Debt arising
from (i) the BA Equipment Master Lease exceed in principal amount Seventy-
Five Million ($75,000,000)
1
<PAGE>
or (ii) the GE Equipment Master Lease exceed in principal amount One
Hundred Million ($100,000,000) and (b) the Reimbursement Agreement and the
documents from time to time delivered in connection therewith; and"
(b) Section 7.6 of the Credit Agreement is amended to read in its
entirety as follows:
"SECTION 7.6. Senior Debt. Maintain at all times the sum of (1) the
aggregate principal amount of Revolving Loans plus (2) the aggregate amount
of all Financial Lease Debt of not greater than $275,000,000."
SECTION 2. CERTAIN DOCUMENTS.
Concurrently herewith the Borrower has delivered the following to the
Agent, each duly executed and appropriately dated and in form and substance
satisfactory to the Agent:
(a) Certificate of the Borrower. A certificate of the Secretary or
Assistant Secretary of the Borrower certifying a copy of all equipment
schedules heretofore or concurrently herewith added to the GE Equipment
Master Lease since the GE Equipment Master Lease was originally executed
evidencing any increase in the Debt thereunder;
(b) Schedules. Copies of all updated schedules to the Credit
Agreement, as necessary; and
(c) Miscellaneous. Such other approvals, opinions or documents as
the Agent may reasonably request.
SECTION 3. WARRANTIES.
To induce the Agent and the Lenders to enter into this Amendment, the
Borrower warrants to the Agent and the Lenders as of the date hereof that:
(a) The representations and warranties contained in Article IV of the
Credit Agreement are true and correct as of the date hereof; and
(b) No Default or Event of Default has occurred and is continuing.
-2-
<PAGE>
SECTION 4. GENERAL.
(a) Terms used but not otherwise defined herein are used herein as
defined in the Credit Agreement.
(b) As hereby modified, the Credit Agreement shall remain in full
force and effect and is hereby ratified, approved and confirmed in all respects.
(c) This Amendment shall be binding upon and shall inure to the
benefit of the Borrower, the Lenders and the Agent and respective successors and
assigns of the Lenders and the Agent.
(d) This Amendment may be executed in any number of counterparts and
by the different parties on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Amendment.
-3-
<PAGE>
Delivered at Chicago, Illinois, as of the date and year first above written.
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
-----------------------------------------
Title: Vice President
-----------------------------------
BANK OF AMERICA ILLINOIS, in its
individual corporate capacity and as
agent
By: /s/ Marcia Clausen /s/ David A. Johanson
-----------------------------------------
Title: Vice President Vice President
----------------------------------
LASALLE NATIONAL BANK
By: /s/ Bruce Hague
-----------------------------------------
Title: Senior Vice President
-----------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ John M. Dillon
-----------------------------------------
Title: Vice President
-----------------------------------
SEATTLE-FIRST NATIONAL BANK
By: /s/ Michael J. Collum
-----------------------------------------
Title: Vice President
-----------------------------------
<PAGE>
Exhibit 4.3
THIRTEENTH AMENDMENT AND CONSENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRTEENTH AMENDMENT AND CONSENT dated as of May 17, 1996 (this
"Amendment") is entered into by and among Boston Chicken, Inc., a Delaware
corporation (the "Borrower"), the lenders who are party to the Credit Agreement
referred to below (the "Lenders") and Bank of America Illinois, an Illinois
banking corporation (formerly known as to Continental Bank), as Agent for the
Lenders (herein, in such capacity, the "Agent").
W I T N E S E T H:
-----------------
WHEREAS, the Borrower, the Lenders and the Agent are parties to a
certain Amended and Restated Credit Agreement dated as of May 18, 1994 (herein,
as heretofore amended, called the "Credit Agreement");
WHEREAS, the Borrower wishes to make certain amendments to the Credit
Agreement relating to Einstein Bros. Bagels, Inc., a Delaware corporation; and
WHEREAS, subject to the terms and conditions set forth herein the
Agent and the Lenders are willing to so amend certain provisions of the Credit
Agreement.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Borrower, the Agent and the Lenders hereby agree as
follows:
SECTION 1. AMENDMENTS.
Upon receipt of the documents to be delivered by the Borrower pursuant
to Section 3 below, and in reliance on the Borrower's warranties set forth in
Section 4 below, as of the date hereof the Credit Agreement shall be hereby
amended as follows:
(a) The definition of "Subsidiary" set forth in Section 1.1 of the
Credit Agreement is amended by adding the following at the end of the first
sentence of such definition:
"; provided, that solely for purposes of Article VI, so long as any
Einstein Credit Agreement shall remain in effect, following a conversion,
if any, of the indebtedness owed by Einstein to the Borrower pursuant to
the respective Financed Franchisee Loan Documents into a majority of the
voting stock of Einstein, Einstein shall not be deemed a "Subsidiary" of
the Borrower but shall be a "Financed Subsidiary."
<PAGE>
(b) The following definitions set forth in Section 1.1 of the Credit
Agreement are amended to read in their entirety as follows:
"'Commitment Amount' means $74,500,000 plus any Additional Amount,
provided, that in no event shall such sum exceed $100,000,000. For
purposes of this definition, the term "Additional Amount" means the
aggregate amount of Commitments from those Lenders (a) who become Lenders
pursuant to Section 10.5 after the Effective Date and (b) whose Commitment
was acquired by joint assignment from each of the Lenders party to this
Agreement as of the Effective Date (the "Original Lenders") in an amount
from each Original Lender proportionate to such Original Lender's
respective Percentage in effect on the Effective Date, provided, that in no
event shall "Additional Amount" include the Commitment of Seattle First
National Bank (k/n/a Bank of America NW, N.A.)."
"'Einstein Credit Agreement' means that certain Secured Credit
Agreement dated as of May 17, 1996 among Einstein, the lenders from time to
time party thereto and Bank of America Illinois, as agent for such lenders,
as the same may be amended, modified or restated from time to time."
(c) Clause (1)(b) of Section 2.4 of the Credit Agreement is amended to
read in its entirety as follows:
"(b) At all times while such Revolving Loan is a Eurodollar Rate
Loan, for each Interest Period, at a rate per annum equal to the Eurodollar
Rate (Reserve Adjusted) applicable to such Interest Period, plus the
applicable margin, based on the sum of the aggregate principal amount of
all Revolving Loans outstanding on the first day of such Interest Period,
as set forth below:
Aggregate Outstandings Margin
---------------------- ------
less than $25,000,000 1.75%
greater than or equal
to $25,000,000 but
less than or equal to
$75,000,000 2.00%
greater than $75,000,000 2.75%"
(d) Clause (1)(a)(iii) of Section 6.8 of the Credit Agreement is
amended to read in its entirety as follows:
-2-
<PAGE>
"(iii) all such loans and advances to Financed Franchisees (other than
Einstein) shall be secured in the manner described in paragraph (3) of
Schedule VI,"
(e) Clause (1)(b) of Section 6.8 of the Credit Agreement is amended to
read in its entirety as follows:
"(b) Financed Subsidiaries (other than Einstein); provided, that (i) such
loans and advances are made pursuant to Financed Subsidiary Loan Documents,
(ii) such loans or advances are evidenced by promissory notes and (iii) all
Liens in favor of the Borrower securing such loans and advances are duly
perfected prior to the initial loan or advance thereunder;"
(f) Clause (1) of Section 6.8 of the Credit Agreement is amended by
adding at the end of such clause the following:
"(e) following a conversion, if any, of the indebtedness owed by
Einstein to the Borrower pursuant to the respective Financed Franchisee
Loan Documents into a majority of the voting stock of Einstein, loans and
advances to Einstein which may be subordinated to indebtedness under the
Einstein Credit Agreement in an aggregate outstanding principal amount not
to exceed the sum of (i) $50,000,000 plus (ii) an aggregate amount equal to
two hundred percent (200%) of the net income of Einstein (but, in each
case, only if a positive number) for each fiscal year of Einstein ending
after May 17, 1996; provided, that at the time such loan or advance is made
no Default or Event of Default (as such terms are defined in the Einstein
Credit Agreement) shall have occurred and be continuing under the Einstein
Credit Agreement."
(g) Clause (5) of Section 6.9 of the Credit Agreement is deleted in
its entirety.
(h) Clause (14) of Section 8.1 of the Credit Agreement is deleted in
its entirety.
(i) Schedule IV to the Credit Agreement is amended to read in its
entirety as set forth on Annex A hereto.
(j) Schedule VII to the Credit Agreement is amended to read in its
entirety as set forth on Annex B hereto.
SECTION 2. CONSENT.
Upon receipt of the documents to be delivered by the Borrower pursuant
to Section 3 below, and in reliance on the Borrower's warranties set forth in
Section 4 below, as of the date hereof, any provisions of the Credit Agreement
to the contrary notwithstanding, the Lenders hereby consent to the
-3-
<PAGE>
execution and delivery by the Borrower of a Subordination Agreement in
substantially the form attached hereto as Annex C.
SECTION 3. CERTAIN DOCUMENTS.
Concurrently herewith the Borrower has delivered the following to the
Agent, each duly executed and appropriately dated and in form and substance
satisfactory to the Agent:
(a) Certificate of the Borrower. A certificate of the Secretary or
Assistant Secretary of the Borrower certifying (i) a copy of the Financed
Franchisee Loan Documents in effect as of the date hereof with Einstein,
(ii) a copy of the Certificate of Incorporation and bylaws of the Borrower
(or a statement that no change has been made to such documents since the
date of the Credit Agreement), (iii) resolutions of the board of directors
or executive committee of the Borrower authorizing the execution, delivery
and performance by the Borrower of this Amendment, and (iv) the names and
true signatures of the officers of the Borrower authorized to sign this
Amendment and the other documents to be delivered by the Borrower
hereunder.
(b) Guaranty. A reaffirmation of Guaranty duly executed by BC Real
Estate Investments, Inc.
(c) Certificate of the Guarantor. A certificate or certificates of
the Secretary or Assistant Secretary of BCRE certifying: (a) a copy of the
organizational documents of BCRE, as heretofore amended (or a statement
that no change has been made to such documents since the date of the
respective Guaranty); (b) copies of all corporate action taken by BCRE,
authorizing the execution, delivery and performance by BCRE of the
reaffirmation of Guaranty; and (c) the names and true signatures of the
officers of BCRE authorized to sign the reaffirmation of Guaranty;
(d) Schedules. Copies of all updated schedules to the Credit
Agreement, as necessary; and
(e) Miscellaneous. Such other approvals, opinions or documents as the
Agent may reasonably request.
SECTION 4. WARRANTIES.
To induce the Agent and the Lenders to enter into this Amendment, the
Borrower warrants to the Agent and the Lenders as of the date hereof that:
-4-
<PAGE>
(a) The representations and warranties contained in Article IV of the
Credit Agreement (as amended hereby) are true and correct as of the date
hereof; and
(b) No Default or Event of Default under the Credit Agreement (as
amended hereby) has occurred and is continuing.
SECTION 5. GENERAL.
(a) Terms used but not otherwise defined herein are used herein as
defined in the Credit Agreement.
(b) As hereby amended or modified, the Credit Agreement shall remain
in full force and effect and is hereby ratified, approved and confirmed in all
respects.
(c) After the date hereof, all references in the Credit Agreement and
the Loan Documents to "Credit Agreement," "Agreement," "hereof" or the like
shall refer to the Credit Agreement as hereby amended or modified.
(d) This Amendment shall be binding upon the Borrower and the Lenders
and shall inure to the benefit of the Borrower, the Lenders and the Agent and
the respective successors and assigns of the Lenders and the Agent.
(e) This Amendment may be executed in any number of counterparts and
by the different parties on separate counterparts, and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Amendment.
-5-
<PAGE>
Delivered at Chicago, Illinois, as of the date and year first above written.
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
--------------------------------
Title: Vice President
--------------------------
BANK OF AMERICA ILLINOIS,
as agent
By: /s/ David A. Johanson
--------------------------------
Title: Vice President
--------------------------
BANK OF AMERICA ILLINOIS, as lender
By: /s/ Marcia Clausen
--------------------------------
Title: Vice President
--------------------------
LASALLE NATIONAL BANK
By: /s/ John C. Thurston
--------------------------------
Title: Loan Officer
--------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ John M. Dillon
--------------------------------
Title: Vice President
--------------------------
BANK OF AMERICA NW, N.A. (f/k/a
Seattle-First National Bank)
By: /s/ Michael J. Collum
--------------------------------
Title: Vice President
--------------------------
<PAGE>
ANNEX A
SCHEDULE IV
TO
CREDIT AGREEMENT
Debt*
1. Secured Loan Agreements (includes Boston Chicken, Inc.'s agreement to
subordinate its loans and liens in certain instances), between Boston
Chicken, Inc. ("Boston Chicken"), as lender and each of the following as
borrower: BC Boston, L.P., BC GoldenGate, L.L.C., BC Great Lakes, L.L.C., BC
New York, L.L.C., BC Northwest, L.P., BC Superior, L.L.C., BC Texas, Inc.,
BCE West, L.P., Boston West, L.L.C. Mayfair Partners, L.P., Mid-Atlantic
Restaurant Systems L.P., New Jersey Rose, L.L.C., Finest Foodservice,
L.L.C., P&L Food Services, L.L.C., Platinum Rotisserie, L.L.C. and R&A Food
Services, Inc. No liens secure Boston Chicken's obligations under such
Secured Loan Agreements, Amended and Restated Loan Agreement between Boston
Chicken, as lender, and Einstein Bros. Bagels, Inc., as borrower
2. Guaranties of the obligations of the tenant under the following leases (as
of December 22, 1994):
a) Lease Agreement by and between WR Palm Harbor, L.P., as Landlord, and
R&A Food Services, Inc. as Tenant, Store #196, Palm Harbor, FL
b) Lease Agreement by and between Preston Town Crossing, Ltd., as Landlord,
an BC Texas, Inc., as Tenant, Store #328, 2104 Preston Road, Plano, TX
c) Lease Agreement by and between O'Brien Management, as Landlord, and BC
Chicago, Inc., as Tenant, Store #300, 1562 N. Wells, Chicago IL
3. Primary liability for leases transferred to Franchisees and Financed
Franchisees, as follows (as of December 22, 1994): Lease at Route 30 Mall,
Framingham, Massachusetts from Dorian Plaza Associates transferred tom CM
Ventures, Inc.; Lease at 725/727 Centre Street, Jamaica Plain, Massachusetts
from John & Mary Coney Trust transferred to David L. Rice and Gary I.
Harper; Lease at Hyde Park Avenue, Hyde Park, Massachusetts from
Metropolitan Avenue Realty Trust transferred to Messrs. Bailey, Twohig and
Chase; Lease at Plainview Shopping Center, Plainview New York from
TREECO/Plainview Limited Partnership transferred to Atlantic Foods Limited
Partnership (CT); and Lease at 10E. Palmetto Park Road, Boca Raton, Florida
from Commercial Funding Corp. transferred to R&A Food Services, Inc.; the
following leases assigned to BC Texas, Inc.; Lease at 1220 Town East
Boulevard, Mesquite, Texas; Lease at 5941 Forest Lane, Dallas, Texas; Lease
at 4200-80 Oak Lawn Avenue, Highland Park, Texas; Lease at 730 West
Centerville Road, Garland, Texas; and Lease at 789 Wheatland Road,
Duncanville, Texas; the following Leases assigned to BC Chicago, Inc.; Lease
at 1840 West Army Trail Road, Hanover Park, IL; Lease at 260 Danada Square
West, Wheaton, IL; Lease at 525 W. Roosevelt Road, Glen Ellyn, IL; Lease at
10059 Skokie Boulevard, Skokie, IL; Lease at 73 Linden Ave., Glencoe, IL;
Lease at 2619 N. Clark Street, Chicago, IL; Lease at 4870 N. Harlem Avenue,
Harwood Heights, IL; Lease at 2201 N. Halstead Avenue, Chicago, IL; Lease at
1007 E. Ogden Avenue, Naperville, IL; Lease at 160C South Waukegan Road,
Deerfield, IL; Lease at 7130 Dempster Avenue, Morton Grove, IL; and Lease at
800 Devon Avenue, Park Ridge, IL; the following Leases assigned to Mayfair
Partners, L.P.: Lease at Burke Centre Shopping Center, Burke, VA; Lease at
Olney Village Shopping Center, Olney, MD; Lease at 4870 Bethesda Avenue,
Bethesda, MD; Lease at North Point Village Center, Reston, VA; Lease at
Franklin Farm, Herndon, VA; Lease at 8366 Sudley Road, Manassas, VA; and
Lease at 5762-5764 Union Mill Road, Clifton, VA; the following Leases
assigned to BC Detroit, L.P.: Lease at 5160 Highland Road, Waterford, MI;
Lease at 3808 Secor Road, Toledo, OH; Lease at 3325 Washtenaw Avenue, Ann
Arbor, MI; Lease
<PAGE>
at 26269 Novi Road; Novi, MI; Lease at 136 North Telegraph Road, Dearborn, MI;
Lease at 560 West Ann Arbor Road, Plymouth Township, MI; Lease at 20195 Mack
Avenue, Grosse Pointe Woods, MI; Lease at 37104 Six Mile Road, Livonia, MI;
Lease at 221 Twelve Mile Road, Royal Oak, MI; Lease at 26021-23 Hoover Road,
Warren, MI; Lease at 2502 Woodward Avenue, Bloomfield Hills, MI; Lease at 1577
South Woodward, Birmingham, MI; Lease at Southfield Plaza Shopping Center, 29940
Southfield Road, Southfield, MI; Lease at 31230 Harper Avenue, St. Clair Shores,
MI; and Lease of Parking Spaces located at the Southeast Corner of Telegraph and
Chevvy Hill in Dearborn, MI; Lease at 5812 Alexis Road, Slyvania, OH; the
following Leases assigned to Mid-Atlantic Restaurant Systems L.P.; Lease at 100
Oxford Valley Road, Langhorne, PA; Lease at Kirkwood Plaza Shopping Center,
located on Route 2, New Castle County, DE; Lease at 9113 Roosevelt Blvd.,
Philadelphia, PA; Lease at 1750 Allentown Road, Langdale, PA; Lease at Abbots
Square, 530 South 2nd Street, Philadelphia, PA; Lease at Concord Gallery, 3636
Concord Pike, Wilmington, DE; Lease at 6 Berlin Road, Voorhees, NJ; Lease at
2201 Cottman Avenue, Philadelphia, PA; and Lease at 759C Huntington Pike,
Abington, PA; the following Leases assigned to BC Boston, Inc.: Lease at 822
Somerville, Cambridge, MA; Lease at 95 Sharon Street, Stoughton, MA; Lease at
341 Conchituata, Framingham, MA; Lease at 725 Centre Street, Jamaica Plain, MA;
Lease at 345 Broadway, Somerville, MA; Lease at 232 Tremont Street, Boston, MA;
Lease at 239 Washington, Wellesly Hills, MA; the following leases assigned to
BCE West, L.P.: Lease at 7515 S. University, Littleton, CO; Lease at 1100 S.
Colorado Blvd., Denver, CO; Lease at 8607 E. Arapahoe, Greenwood Village, CO;
Lease at 7400 E. Hampden, Denver, Co; Lease at 6964 N. Academy, Colorado
Springs, CO; Lease at 7630 W. 80th Street, Arvada, CO; Lease at 1015 N. Academy,
Colorado Springs, CO; Lease at 3435 S. McClintock, Tempe, AZ; Lease at 1011
Highway 528, Albuquerque, NM; Lease at 4002 E. Thunderbird, Phoenix, AZ; Lease
at 1903 E. Speedway, Tucson, AZ; Lease at 955 S. Hoover Road, Longmont, CO;
Lease at 540 Highway 105, Monument, CO; Lease at 700 Colorado Blvd., Denver, CO;
Lease at 243 E. 29th Street, Loveland, CO; and the following leases assigned to
New Jersey Rose, L.L.C.: Lease at 226 Highway 34 South, Aberdeen, NJ; Lease at
4159 Route 9 South, Howell, NJ.
4. Primary liability for leases pursuant to which Boston Chicken, as tenant,
subleases the premises to a franchisee, as subtenant, as follows (as of
December 22, 1994):
a) Sublease of Store #0003 (111 Lenox Street, Norwood, MA) to BC Boston,
Inc.
b) Sublease of Store #0004 (Twin City Plaza, Fitchburg, MA) to BC Boston,
Inc.
c) Sublease of Store #0008 (1940 Beacon Street, Brookline, MA) to BC
Boston, Inc.
d) Sublease of Store #0009 (1201 Highland, Needham, MA) to BC Boston, Inc.
e) Sublease of Store #0010 (1293 Massachusetts, Arlington, MA) to BC
Boston, Inc.
f) Sublease of Store #0013 (1099 Lexington, Waltham, MA) to BC Boston, Inc.
g) Sublease of Store #0014 (756 Belmont St., Brockton, MA) to BC Boston,
Inc.
h) Sublease of Store #0016 (194 Park Avenue, Worcester, MA) to BC Boston,
Inc.
i) Sublease of Store #0017 (207 Cambridge St., Boston, MA) to BC Boston,
Inc.
j) Sublease of Store #0023 (14 Maple, East Longmeadow, MA) to BC Boston,
Inc.
k) Sublease of Store #0026 (645 VFW Parkway, W. Roxbury, MA) to BC Boston,
Inc.
<PAGE>
l) Sublease of Store #0039 (168 Broadway, Saugus, MA) to BC Boston, Inc.
m) Sublease of Store #0030 (256 Bellevue, Newport, MA) to BC Boston, Inc.
n) Sublease of Store #0034 (1223 Commonwealth, Alliston, MA) to BC
Boston, Inc.
o) Sublease of Store #0048 (Arsenal Mall, Watertown, MA) to BC Boston,
Inc.
p) Sublease of Store #0062 (1606 Memorial, Chicopee, MA) to BC Boston,
Inc.
q) Sublease of Store #0064 (Route 1 and Washington, Dedham, MA) to BC
Boston, Inc.
r) Sublease of Store #0069 (14 Austin Street, Newtonville, MA) to BC
Boston, Inc.
s) Sublease of Store #0070 (1351 Whalley Avenue, New Haven, CT) to TJV
Video
t) Sublease of Store #0081 (31 Boston Turnpike Road, Shrewbury, MA) to BC
Boston, Inc.
u) Sublease of Store #0089 (836 Washington, Weymouth, MA) to BC Boston,
Inc.
v) Sublease of Store #0096 (185 Sockanoset Cross Road, Cranston, RI) to
BC Boston, Inc.
w) Sublease of Store #0162 (5002 Cortez West, Bradenton, FL) to R&A Food
Services, Inc.
x) Sublease of Store #0186 (12142 Collegiate Way, Orlando, FL) to R&A
Food Services, Inc.
y) Sublease of Store #0253 (5815 University Blvd., Tamarac, FL) to R&A
Food Services, Inc.
z) Sublease of Store #0329 (1329 Boston Road, Springfield, MA) to BC
Boston, Inc.
aa) Sublease of Store #0341 (2720-A N. Roosevelt Blvd., Key West, FL) to
R&A Food Services, Inc.
bb) Sublease of Store #0456 (31960 Gratlot, Roseville, MI) to BC Detroit,
L.P.
cc) Sublease of Store #0469 (911 Conant Street, Maunee, OH) to BC Detroit,
L.P.
dd) Sublease of Store #0524 (930 W. Alexis, Toledo, OH) to BC Detroit,
L.P.
ee) Sublease of Store #0540 (22318 Ford Road, Dearborn Heights, MI) to BC
Detroit, L.P.
ff) Sublease of Store #0543 (5651 Mercury, Dearborn, MI) to BC Detroit,
L.P.
gg) Sublease of Store #0553 (5170 Stone Mountain Highway, Stone Mountain,
GA) to A Fare of the Hearth, Inc.
hh) Sublease of 6301 Rosewell Road, NE, Atlanta, GA 30328 to Diaz
Enterprises
5. Consents to subordinate interests or defer royalties with SBA or similar
loans for the following franchisees:
EFT, Inc. (deferral of royalties)
<PAGE>
Fowl Players, Inc. (deferral of royalties)
Harper-Rice Partnership (deferral of royalties and consent to pledge)
William J. Hufnagel and Eleanor Hufnagel, James Hufnagel and Joann Hufnagel,
and Gregory Isola and Diann Isola (consent to pledge)
Boston Chicken may be obligated to take similar action for any additional
stores developed under certain of its older forms of agreements (no longer
utilized for new developers and franchisees)
6. $130,000,000 principal amount of 4-1/2% Convertible Subordinated Debentures
Due 2004
7. Guaranty of obligations of Mid-Atlantic Restaurant Systems L.P.
8. Obligations of Boston Chicken under a note issued to CMS/Mid-Atlantic
Business Opportunity Partners, L.P. in the principal amount of $6,847,856.26
- -------------------
* Inclusion in this Schedule IV shall not constitute an admission that
included items or items similar thereto constitute "Debt" as defined in the
Credit Agreement
<PAGE>
ANNEX B
SCHEDULE VII
Requirements for Einstein Bros. Bagels Inc.
Secured Loan Agreement
The Borrower shall have the right, but not the obligation, to convert
the indebtedness evidenced by such loan documents into a majority of the voting
stock of the Franchisee or to obtain such position through the exercise of an
equity option at the conversion price, or both, which right shall become
exercisable not later than the earlier to occur of a registered public offering
with the Securities and Exchange Commission of the common stock of the
Franchisee or April 1, 1997.
<PAGE>
ANNEX C
SUBORDINATION AGREEMENT
WHEREAS, Einstein Bros. Bagels, Inc. (hereinafter, together with its
successors and assigns, called "Borrower"), may from time to time hereafter
become indebted to the undersigned and Borrower has requested, and may from time
to time hereafter request, the banks party to that certain Secured Credit
Agreement dated as of May 17, 1996 (as amended, modified, restated, refinanced
or otherwise replaced from time to time, the "Credit Agreement") among the
Borrower, the lenders from time to time party thereto (the "Lenders") and Bank
of America Illinois, as agent for such Lenders (in such capacity, the "Agent")
to make or agree to make loans, advances or other financial accommodations to
Borrower.
NOW, THEREFORE, to induce the Lenders, from time to time, to make or agree
to make loans, advances or other financial accommodations (including, without
limitation, renewals or extensions of any loans or advances heretofore or
hereafter made) to Borrower, and for other valuable consideration, receipt
whereof is hereby acknowledged, the undersigned agrees as follows:
1. All obligations of Borrower, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent or now or hereafter existing,
or due or to become due, are hereinafter called "Liabilities." All Liabilities
arising under the Credit Agreement are hereinafter called "Senior Liabilities";
and all Liabilities to the undersigned with respect to indebtedness or
liabilities for borrowed money are hereinafter called "Junior Liabilities"; it
being expressly understood and agreed that the term "Senior Liabilities," as
used herein, shall include, without limitation, any and all interest accruing on
any of the Senior Liabilities after the commencement of any proceedings referred
to in paragraph 5 hereof, notwithstanding any provision or rule of law which
might restrict the rights of the Lenders, as against Borrower or anyone else, to
collect such interest. The terms "Default" and "Event of Default" shall have
the respective meanings assigned thereto in the Credit Agreement.
2. The undersigned will, from time to time, (a) promptly notify the Agent
of the creation of any Junior Liabilities and of the issuance of any promissory
note or other instrument to evidence any Junior Liabilities, (b) upon request by
the Agent, cause any Junior Liabilities which are not evidenced by a promissory
note or other instrument of Borrower to be so evidenced, and (c) type, write or
otherwise conspicuously
-1-
<PAGE>
imprint on each promissory note or other instrument evidencing the junior
liabilities the following legend: "RIGHTS OF THE HOLDER TO RECEIVE PAYMENT
HEREUNDER ARE SUBJECT TO A SUBORDINATION AGREEMENT DATED May 17, 1996 EXECUTED
BY BOSTON CHICKEN, INC. IN FAVOR OF BANK OF AMERICA ILLINOIS, AS AGENT FOR
CERTAIN LENDERS DESCRIBED THEREIN."
3. The payment of all Junior Liabilities (other than with respect the
Secured Demand Note in the principal amount of $25,000,000, dated January 30,
1996, made by the Borrower and payable to Boston Chicken, Inc., a Delaware
corporation, as amended to increase the principal amount to $40,000,000 pursuant
to an amendment dated as of March 7, 1996) shall be postponed and subordinated
to the payment in full of all Senior Liabilities, and no payments or other
distributions whatsoever in respect of any Junior Liabilities shall be made, nor
shall any property or assets of Borrower be applied to the purchase or other
acquisition or retirement of any Junior Liabilities. Notwithstanding the
foregoing, unless prohibited by Section 4 below, the Borrower may (i) make
scheduled interest payments with respect to the Junior Liabilities, and (ii)
make the payments expressly permitted by Section 6.14(ii) of the Credit
Agreement.
4. (a) Upon the happening and continuing of any Default in respect of
the payment of the Senior Liabilities (a "Payment Default"), no direct or
indirect payment or distribution shall be made by the Borrower on account of the
principal of or interest on or other amounts constituting Junior Liabilities,
unless and until (i) such Payment Default shall have been cured or waived by the
Required Lenders (as such term is defined in the Credit Agreement) or shall have
ceased to exist or (ii) the Required Lenders shall have waived in writing the
application of this paragraph 4(a).
(b) Without limiting the effect of paragraph 4(a), upon the happening and
continuing of any Event of Default (other than a Payment Default) with respect
to the Senior Liabilities (a "Non-Payment Default"), then upon written notice
thereof given to the Borrower by the Required Lenders ("Payment Blockage
Notice"), no direct or indirect payment or distribution shall be made by the
Borrower on account of the principal of or interest on or other amounts
consisting Junior Liabilities unless and until (i) such Non-Payment Default
shall have been cured or waived by the Required Lenders or shall have ceased to
exist or (ii) the Required Lenders shall have waived in writing the application
of this paragraph 4(b) to such Non-Payment Default; provided, however, that (A)
this paragraph 4(b) shall not prevent the making of any payment for more than
179 days after a Payment Blockage Notice shall have been given or deemed to have
been given ("Payment Blockage Period") unless the Senior Liabilities
-2-
<PAGE>
in respect of which such Default or Event of Default exists has been declared
due and payable in their entirety, in which case no payment or distribution may
be made until such acceleration has been rescinded or annulled and (B) not more
than one effective Payment Blockage Notice shall be given within a period of 360
consecutive days; provided, that if a Payment Blockage Period is terminated
pursuant to subsection (i) above, then one additional Payment Blockage Notice
may be given within such 360-day period; provided, further, that in the event
such additional Payment Blockage Notice is given, the Payment Blockage Period
with respect thereto shall not be longer than a period equal to 179 days minus
the number of days elapsed during which the original Payment Blockage Period
(which was terminated pursuant to subsection (i) above) was in effect, so that
there shall be a period of at least 181 consecutive days in each 360-day period
when no Payment Blockage Period is in effect.
(c) Notwithstanding the foregoing, the undersigned agrees that any waiver
of any Default or Event of Default by the Lenders under the Credit Agreement
shall also be deemed a waiver by the undersigned with respect to any such
similar default in connection with the Junior Liabilities.
5. In the event of any dissolution winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to Borrower or to its
creditors, as such, or to its property (whether voluntary or involuntary partial
or complete, and whether in bankruptcy, insolvency or receivership, or upon an
assignment for the benefit of creditors, or any other marshalling of the assets
and liabilities of Borrower, or any sale of all or substantially all of the
assets of Borrower, or otherwise), the Senior Liabilities shall first be paid in
full before the undersigned shall be entitled to receive and to retain any
payment or distribution in respect of the Junior Liabilities, and, in order to
implement the foregoing, (a) all payments and distributions of any kind or
character in respect of the Junior Liabilities to which the undersigned would be
entitled if the Junior Liabilities were not subordinated, or subordinated and
pledged or assigned, pursuant to this Agreement shall be made directly to the
Agent for the benefit of the Lenders, and (b) the undersigned shall promptly
file a claim or claims, in the form required in such proceedings, for the full
outstanding amount of the Junior Liabilities and shall cause said claim or
claims to be approved and all payments and other distributions in respect
thereof to be made directly to the Agent for the benefit of the Lenders.
6. In the event that the undersigned receives any payment or other
distribution of any kind or character from Borrower or from any other source
whatsoever in respect of any of
-3-
<PAGE>
the Junior Liabilities, other than as expressly permitted by the terms of this
Agreement, such payment or other distribution shall be received in trust for the
Lenders and promptly turned over by the undersigned to the Agent for the benefit
of the Lenders. The undersigned will mark its books and records, and cause
Borrower to mark its books and records, so as to clearly indicate that the
Junior Liabilities are subordinated in accordance with the terms of this
Agreement, and will cause to be clearly inserted in any promissory note or other
instrument which at any time evidences any of the Junior Liabilities a statement
to the effect that the payment thereof is subordinated in accordance with the
terms of this Agreement. The undersigned will execute such further documents or
instruments and take such further action as the Agent may reasonably from time
to time request to carry out the intent of this Agreement.
7. The undersigned hereby waives (a) notice of acceptance by the Agent and
the Lenders of this Agreement; (b) notice of the existence or creation or non-
payment of all or any of the Senior Liabilities; and (c) all diligence in
collection or protection of or realization upon the Senior Liabilities or any
thereof or any security therefor.
8. The undersigned will not without the prior written consent of the Agent
(a) cancel, waive, forgive, transfer or assign, or subordinate to any
Liabilities other than the Senior Liabilities, any Junior Liabilities or any
rights in respect thereof; (b) take any collateral security for any Junior
Liabilities; or (c) commence, or join with any other creditor in commencing, any
bankruptcy, reorganization or insolvency proceedings with respect to Borrower.
Notwithstanding the foregoing, the undersigned may exercise conversion rights
with respect to the Liabilities.
9. This Agreement shall in all respects be a continuing agreement and
shall remain in full force and effect (notwithstanding, without limitation, the
dissolution of the undersigned or that at any time or from time to time all
Senior Liabilities may have been paid in full), subject to discontinuance only
upon receipt by the Agent of written notice from the undersigned, or any person
duly authorized and acting on behalf of the undersigned, of the discontinuance
hereof provided, however, that no such notice of discontinuance shall affect or
impair any of the agreements and obligations of the undersigned hereunder with
respect to any and all Senior Liabilities existing prior to the time of receipt
of such notice by the Agent, any and all Senior Liabilities created or acquired
thereafter pursuant to any previous commitments made by the Lenders, any and all
extensions or renewals of any of the foregoing, any and all interest accruing on
any of the foregoing and any and all
-4-
<PAGE>
expenses paid or incurred by the Agent or any Lender in endeavoring to collect
or realize upon any of the foregoing or any security thereof, and all of the
agreements and obligations of the undersigned under this Agreement shall,
notwithstanding any such notice of discontinuance, remain fully in effect until
all such Senior Liabilities (including any extensions or renewals of any thereof
and all such interest and expenses) shall have been paid in full.
10. The Agent and the Lenders may, from time to time, subject to the terms
of the Credit Agreement, whether before or after any discontinuance of this
Agreement, without notice to the undersigned, assign or transfer any or all of
the Senior Liabilities or any interest thereon, and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Senior Liabilities shall be and remain Senior Liabilities for the purposes of
this Agreement, and every immediate and successive assignee or transferee of any
of the Senior Liabilities or of any interest therein shall, to the extent of the
interest of such assignee or transferee in the Senior Liabilities, be entitled
to the benefits of this Agreement to the same extent as if such assignee or
transferee were the Agent or a Lender.
11. The Agent and the Lenders shall not be prejudiced in their rights
under this Agreement by any act or failure to act of Borrower or the
undersigned, or any noncompliance of Borrower or the undersigned with any
agreement or obligation, regardless of any knowledge thereof which the Agent or
a Lender may have or with which the Agent or a Lender may be charged, and no
action of the Agent or a Lender permitted hereunder shall in any way affect or
impair the rights of the Agent and the Lenders and the obligations of the
undersigned under this Agreement.
12. No delay on the part of the Agent or the Lenders in the exercise of
any right or remedy shall operate as a waiver thereof and no single or partial
exercise by the Agent or the Lenders of any right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy nor
shall any modification or waiver of any of the provisions of this Agreement be
binding upon the Agent or the Lenders except as expressly set forth in a writing
duly signed and delivered on behalf of the Agent and the Lenders.
13. This Agreement shall be binding upon the undersigned and upon the
successors and assigns of the undersigned. If more than one party shall execute
this Agreement, the term "undersigned" as used herein shall mean all parties
executing this Agreement and each of them, and all such parties shall be jointly
and severally obligated hereunder.
-5-
<PAGE>
14. This Agreement shall be construed in accordance with and governed by
the laws of the State of Illinois. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been made and delivered at Chicago,
Illinois this ___ day of May, 1996.
BOSTON CHICKEN, INC.
By:___________________________
Title:________________________
The undersigned Borrower hereby acknowledges receipt of a copy of the
foregoing Subordination Agreement, waives notice of acceptance thereof by the
Agent and the Lenders, and agrees to be bound by the terms and provisions
thereof, to make no payments or distributions contrary to the terms and
provisions thereof, and to do every other act and thing necessary or appropriate
to carry out such terms and provisions.
Dated: May 17, 1996 EINSTEIN BROS. BAGELS, INC.
By:___________________________
Title:________________________
<PAGE>
Exhibit 10.4
FORM OF OPTION AGREEMENT
This Option Agreement (this "Agreement") is made as of this 23rd day of
April, 1996, between Boston Chicken, Inc., a Delaware corporation ("BCI") and
Mark W. Stephens ("Grantee").
1. GRANT OF OPTION. Subject to the terms and conditions of this
Agreement, BCI hereby grants to Grantee the right and option (the "Option") to
purchase from BCI 348.16 shares of common stock, $.01 par value per share, of
Einstein Bros. Bagels, Inc. ("EBBI") (the "Option Shares"), which number of
Option Shares may be adjusted pursuant to Section 9 below.
2. EXERCISE PRICE. The purchase price for each Option Share shall be
$1,436.14 per share (the "Exercise Price").
3. VESTING. Subject to termination of the Option as provided herein, the
Option may be exercised, at any time and from time to time on or after April 23,
1997 but such Option shall not be exercisable for more than a percentage of the
aggregate number of Option Shares in accordance with the following schedule:
Cumulative
Date Percentage
---- ----------
On or after April 23, 1997 to April 22, 1998 up to 10%
April 23, 1998 to April 22, 1999 up to 30%
April 23, 1999 to April 22, 2000 up to 60%
April 23, 2000 to April 22, 2001 up to 100%
4. PROCEDURE FOR EXERCISE. If Grantee elects to exercise the Option,
Grantee shall deliver to BCI: (i) a notice of exercise (the "Exercise Notice")
in the form set forth on Exhibit A attached hereto, and (ii) full payment of the
Exercise Price for the Option Shares to be purchased. The date on which the
Exercise Notice and the Exercise Price for the Option Shares to be purchased are
received by BCI is referred to herein as the "Exercise Date." As soon as
practicable after the Exercise Date, BCI will deliver to Grantee one or more
properly executed EBBI stock certificates, in the name of Grantee, evidencing
the Option Shares so purchased, subject to appropriate restrictive legends.
5. PAYMENT OF EXERCISE PRICE. The Exercise Price shall be paid by
Grantee by delivery of a certified check drawn on any state or national bank or
savings and loan association.
<PAGE>
6. PARTIAL EXERCISE. One or more partial exercises of the Option shall
be permitted from time to time.
7. EXPIRATION. The Option and this Agreement shall expire and become
void upon the earlier of five (5) years from the date hereof or upon the
termination of Grantee's employment with BCI (including without limit due to
Grantee's death or disability), regardless of the cause for such termination.
8. RESTRICTIONS ON OPTION AND OPTION SHARES. The Option shall be
exercisable only by Grantee. The Option may not be sold, pledged, assigned or
otherwise transferred without the prior written consent of BCI in its sole
discretion. Any purported transfer or transaction in violation of this Section
8. shall be null and void ab initio.
9. ADJUSTMENTS. In the event of any change in the number of shares of
common stock of EBBI outstanding by reason of any stock split, stock dividend,
split-up, split-off, spin-off, recapitalization, merger, consolidation,
reorganization, combination or exchange of shares, sale by EBBI of all or part
of its assets, distribution to shareholders of EBBI other than a normal cash
dividend, or other extraordinary or unusual event occurring after the date
hereof and prior to exercise of the Option in full, the number and kind of
shares of common stock of EBBI or other property for which the Option may then
be exercised and the Exercise Price per Option Share shall be adjusted so as to
reflect such change.
10. NO RIGHTS AS A STOCKHOLDER. Unless and until a certificate or
certificates representing such Option Shares of common stock of EBBI shall have
been issued to Grantee, Grantee shall not be or have any of the rights or
privileges of a stockholder of EBBI with respect to shares of common stock of
EBBI acquirable upon exercise of the Option.
11. TAX WITHHOLDING. As a condition to any exercise of the Option, BCI
shall require Grantee to deposit with BCI such federal and state income,
employment and other taxes, if any, as may be required to be withheld under
applicable law. Such withholding shall be paid in cash.
12. TAX CONSEQUENCES. Grantee is solely responsible for learning,
understanding, and accepting the tax consequences to him of the receipt and
exercise of the Option and the disposition of the Option Shares.
13. INVESTMENT REPRESENTATIONS. Grantee, as a condition to this Agreement
and the exercise of the Option, represents and warrants that the Option and the
Option Shares have been and will be acquired for its own account and not with a
view to the resale or other distribution thereof. Grantee further represents
that he is an accredited investor within the meaning of Regulation D under the
Securities Act of 1933, as amended, that he has made all inquires concerning the
Option and the Option Shares, he deems appropriate, and has received
satisfactory responses to such inquires. Grantee understands that the Option
and the Option Shares have not been and will not be registered under the
Securities Act of 1933 and, therefore, cannot be sold or transferred unless
either they are subsequently registered under such Act (as
2
<PAGE>
well as under any applicable state securities laws) or an exemption from such
registration is available.
14. GOVERNING LAW. THE PARTIES INTEND THIS AGREEMENT TO BE GOVERNED BY
THE LAWS OF THE STATE OF COLORADO. If the scope of any provision contained
herein is too broad to permit enforcement of such provision to its full extent,
then such provision shall be enforced to the maximum extent permitted by law.
If any provision of this Agreement shall be construed to be illegal or invalid,
the legality or validity of any other provision hereof shall not be affected
thereby, and any illegal or invalid provision of this Agreement shall be
severable, and all other provisions shall remain in full force and effect.
15. AMENDMENT. This Agreement, and each section hereof, may be amended
only in writing, signed by the party against whom enforcement of any such
amended provision is sought.
16. HEADINGS. Any headings of sections of this Agreement are solely for
the convenience of the parties and are not a part of this Agreement nor are they
to be used in its interpretation.
17. COUNTERPARTS. This Agreement may be executed in several counterparts;
each such counterpart shall be considered as an original agreement and all such
executed counterparts shall constitute an Agreement.
18. NOTICES. Any notice, request, instruction, or other document required
to be given under this Agreement by either party to the other shall be in
writing and delivered in person or by courier, or by facsimile transmission or
mailed by certified mail, postage prepaid, return receipt requested (such mailed
notice to be effective on the date such receipt is acknowledged) as follows:
To BCI:
General Counsel
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Facsimile: (303) 384-5339
To Grantee:
Mark W. Stephens
14103 Denver West Parkway
Golden, Colorado 80401
Facsimile: (303) 384-5335
3
<PAGE>
Notices sent for next day delivery by Federal Express or other reliable courier
shall be deemed given the next business day after sending, notices transmitted
by fax or personally delivered shall be deemed given when so transmitted or
delivered, respectively, and notices sent by certified or registered mail shall
be deemed given on the fifth business day after sending.
19. SUCCESSORS. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors.
20. ENTIRE AGREEMENT. This Agreement and exhibits hereto contain the
entire agreement of the parties hereto with respect to the transactions and
relationships contemplated herein, and supersedes all prior understandings and
agreements of the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BOSTON CHICKEN, INC.
BY:
----------------------------- ---------------------------
TITLE: VICE PRESIDENT MARK W. STEPHENS
--------------------------
4
<PAGE>
EXHIBIT A
---------
EXERCISE NOTICE
-------------------------
Date
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Dear Sir:
I wish to exercise the option granted on ______________________, 1996 and
evidenced by that Option Agreement dated _________________, 1996 to the extent
of _____________ shares of the common stock of Einstein Bros. Bagels, Inc., at
the option price of $1,436.14 per share. My check in the amount of $__________
in payment of the entire purchase price and tax withholding for these shares
accompanies this letter.
Please issue a certificate for these shares in the following name:
-----------------------------
Name
-----------------------------
Street Address
-----------------------------
City/State/Zip
Very truly yours,
------------------------------
Signature
------------------------------
Typed or Printed Name
------------------------------
Social Security Number
<PAGE>
Exhibit 10.5
FORM OF OPTION AGREEMENT
This Option Agreement (this "Agreement") is made as of this 23rd day of
April, 1996, between Boston Chicken, Inc., a Delaware corporation ("BCI") and
Laurence Zwain ("Grantee").
1. GRANT OF OPTION. Subject to the terms and conditions of this Agreement,
BCI hereby grants to Grantee the right and option (the "Option") to purchase
from BCI 278.52 shares of common stock, $.01 par value per share, of Einstein
Bros. Bagels, Inc. ("EBBI") (the "Option Shares"), which number of Option Shares
may be adjusted pursuant to Section 9 below.
2. EXERCISE PRICE. The purchase price for each Option Share shall be
$1,436.14 per share (the "Exercise Price").
3. VESTING. Subject to termination of the Option as provided herein, the
Option may be exercised, at any time and from time to time on or after April 23,
1997 but such Option shall not be exercisable for more than a percentage of the
aggregate number of Option Shares in accordance with the following schedule:
Cumulative
Date Percentage
---- ----------
On or after April 23, 1997 to April 22, 1998 up to 10%
April 23, 1998 to April 22, 1999 up to 30%
April 23, 1999 to April 22, 2000 up to 60%
April 23, 2000 to April 22, 2001 up to 100%
4. PROCEDURE FOR EXERCISE. If Grantee elects to exercise the Option,
Grantee shall deliver to BCI: (i) a notice of exercise (the "Exercise Notice")
in the form set forth on Exhibit A attached hereto, and (ii) full payment of the
Exercise Price for the Option Shares to be purchased. The date on which the
Exercise Notice and the Exercise Price for the Option Shares to be purchased are
received by BCI is referred to herein as the "Exercise Date." As soon as
practicable after the Exercise Date, BCI will deliver to Grantee one or more
properly executed EBBI stock certificates, in the name of Grantee, evidencing
the Option Shares so purchased, subject to appropriate restrictive legends.
5. PAYMENT OF EXERCISE PRICE. The Exercise Price shall be paid by Grantee
by delivery of a certified check drawn on any state or national bank or savings
and loan association.
6. PARTIAL EXERCISE. One or more partial exercises of the Option shall be
permitted from time to time.
<PAGE>
7. EXPIRATION. The Option and this Agreement shall expire and become void
upon the earlier of five (5) years from the date hereof or upon the termination
of Grantee's employment with BCI (including without limit due to Grantee's death
or disability), regardless of the cause for such termination.
8. RESTRICTIONS ON OPTION AND OPTION SHARES. The Option shall be
exercisable only by Grantee. The Option may not be sold, pledged, assigned or
otherwise transferred without the prior written consent of BCI in its sole
discretion. Any purported transfer or transaction in violation of this Section
8. shall be null and void ab initio.
9. ADJUSTMENTS. In the event of any change in the number of shares of
common stock of EBBI outstanding by reason of any stock split, stock dividend,
split-up, split-off, spin-off, recapitalization, merger, consolidation,
reorganization, combination or exchange of shares, sale by EBBI of all or part
of its assets, distribution to shareholders of EBBI other than a normal cash
dividend, or other extraordinary or unusual event occurring after the date
hereof and prior to exercise of the Option in full, the number and kind of
shares of common stock of EBBI or other property for which the Option may then
be exercised and the Exercise Price per Option Share shall be adjusted so as to
reflect such change.
10. NO RIGHTS AS A STOCKHOLDER. Unless and until a certificate or
certificates representing such Option Shares of common stock of EBBI shall have
been issued to Grantee, Grantee shall not be or have any of the rights or
privileges of a stockholder of EBBI with respect to shares of common stock of
EBBI acquirable upon exercise of the Option.
11. TAX WITHHOLDING. As a condition to any exercise of the Option, BCI
shall require Grantee to deposit with BCI such federal and state income,
employment and other taxes, if any, as may be required to be withheld under
applicable law. Such withholding shall be paid in cash.
12. TAX CONSEQUENCES. Grantee is solely responsible for learning,
understanding, and accepting the tax consequences to him of the receipt and
exercise of the Option and the disposition of the Option Shares.
13. INVESTMENT REPRESENTATIONS. Grantee, as a condition to this Agreement
and the exercise of the Option, represents and warrants that the Option and the
Option Shares have been and will be acquired for its own account and not with a
view to the resale or other distribution thereof. Grantee further represents
that he is an accredited investor within the meaning of Regulation D under the
Securities Act of 1933, as amended, that he has made all inquires concerning the
Option and the Option Shares, he deems appropriate, and has received
satisfactory responses to such inquires. Grantee understands that the Option and
the Option Shares have not been and will not be registered under the Securities
Act of 1933 and, therefore, cannot be sold or transferred unless either they are
subsequently registered under such Act (as well as under any applicable state
securities laws) or an exemption from such registration is available.
2
<PAGE>
14. GOVERNING LAW. THE PARTIES INTEND THIS AGREEMENT TO BE GOVERNED BY THE
LAWS OF THE STATE OF COLORADO. If the scope of any provision contained herein is
too broad to permit enforcement of such provision to its full extent, then such
provision shall be enforced to the maximum extent permitted by law. If any
provision of this Agreement shall be construed to be illegal or invalid, the
legality or validity of any other provision hereof shall not be affected
thereby, and any illegal or invalid provision of this Agreement shall be
severable, and all other provisions shall remain in full force and effect.
15. AMENDMENT. This Agreement, and each section hereof, may be amended only
in writing, signed by the party against whom enforcement of any such amended
provision is sought.
16. HEADINGS. Any headings of sections of this Agreement are solely for the
convenience of the parties and are not a part of this Agreement nor are they to
be used in its interpretation.
17. COUNTERPARTS. This Agreement may be executed in several counterparts;
each such counterpart shall be considered as an original agreement and all such
executed counterparts shall constitute an Agreement.
18. NOTICES. Any notice, request, instruction, or other document required
to be given under this Agreement by either party to the other shall be in
writing and delivered in person or by courier, or by facsimile transmission or
mailed by certified mail, postage prepaid, return receipt requested (such mailed
notice to be effective on the date such receipt is acknowledged) as follows:
To BCI:
General Counsel
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Facsimile: (303) 384-5339
To Grantee:
Laurence Zwain
14103 Denver West Parkway
Golden, Colorado 80401
Facsimile: (303) 384-5335
Notices sent for next day delivery by Federal Express or other reliable courier
shall be deemed given the next business day after sending, notices transmitted
by fax or personally delivered shall
3
<PAGE>
be deemed given when so transmitted or delivered, respectively, and notices sent
by certified or registered mail shall be deemed given on the fifth business day
after sending.
19. SUCCESSORS. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors.
20. ENTIRE AGREEMENT. This Agreement and exhibits hereto contain the entire
agreement of the parties hereto with respect to the transactions and
relationships contemplated herein, and supersedes all prior understandings and
agreements of the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BOSTON CHICKEN, INC.
BY:
-------------------------- ------------------------------
TITLE: VICE PRESIDENT LAURENCE ZWAIN
-----------------------
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<PAGE>
EXHIBIT A
---------
EXERCISE NOTICE
_________________
Date
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Dear Sir:
I wish to exercise the option granted on ________________, 1996 and
evidenced by that Option Agreement dated ___________________, 1996 to the extent
of ______________ shares of the common stock of Einstein Bros. Bagels, Inc., at
the option price of $1,436.14 per share. My check in the amount of
$________________ in payment of the entire purchase price and tax withholding
for these shares accompanies this letter.
Please issue a certificate for these shares in the following name:
_____________________________
Name
_____________________________
Street Address
_____________________________
City/State/Zip
Very truly yours,
______________________________
Signature
______________________________
Typed or Printed Name
______________________________
Social Security Number
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Ended
----------------------
April 16, April 21,
1995 1996
---------- ----------
<S> <C> <C>
Primary earnings per share:
Weighted average number of shares outstanding....... 45,196 60,499
Dilutive effect of common stock
options and warrants............................... 3,370 3,818
---------- ----------
Adjusted primary weighted average
number of common and equivalent shares
outstanding........................................ 48,566 64,317
========== ==========
Fully diluted earnings per share:
Weighted average number of shares outstanding....... 45,196 60,499
Dilutive effect of common stock
options and warrants............................... 3,436 3,818
---------- ----------
Adjusted fully diluted weighted
average number of common and equivalent
shares outstanding................................. 48,632 64,317
========== ==========
</TABLE>
<PAGE>
EXHIBIT 99.1
FORM OF AMENDED AND RESTATED AGREEMENT BETWEEN
BOSTON CHICKEN, INC. AND BC EQUITY FUNDING, L.L.C.
This agreement (the "Agreement") is made as of ___, 199__ by and between
BC Equity Funding, L.L.C., a Delaware limited liability company ("BC Funding"),
and Boston Chicken, Inc., a Delaware corporation ("BCI").
RECITALS
BC Funding desires to make an investment in a preferred equity interest in
__________, Inc., a Delaware corporation, which desires to simultaneously make
an investment in a preferred membership interest of ____________, a Delaware
[limited liability company] and a Boston Chicken/Boston Market Store area
developer (the "Developer"). To induce BC Funding to make such investment BCI
is willing to enter into this agreement pursuant to which BCI will be obligated
to purchase such preferred equity interest in certain cases, all on the terms
and subject to the conditions set forth herein.
COVENANTS
In consideration of the foregoing and the mutual covenants and agreements
contained herein, BCI and BC Funding hereby agree as follows:
1. DEFINED TERMS. As used herein, the following terms shall have the
meanings given them below:
"BCI" shall mean Boston Chicken, Inc., a Delaware corporation.
"BC Funding" shall mean BC Equity Funding, L.L.C., a Delaware limited
liability company.
"Business Day" shall mean a day on which Federal and state chartered
banks in Denver, Colorado are open for commercial banking business.
"Common Shares" shall mean the common stock, par value $.01 per share,
of Holdings that may be owned by BC Funding.
"Developer" shall mean ____________, a Delaware [limited liability
company].
"Governing Document" shall mean Holdings' certificate of
incorporation.
"Holdings" shall mean _____________, Inc., a Delaware corporation.
<PAGE>
"Membership Interest Purchase Agreement" shall mean the Unit Purchase
Agreement dated the same date as this Agreement pursuant to which Holdings is
purchasing units of preferred membership interest in the Developer.
"Preferred Shares" shall mean the shares of Series A preferred stock,
par value $.01 per share, of Holdings owned by BC Funding.
"Redemption Amount" shall have the meaning given it in the Governing
Document.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
between Holdings and BC Funding dated the same date as this Agreement pursuant
to which BC Funding is purchasing the Preferred Shares.
2. PURCHASE OF PREFERRED SHARES BY BCI IN EVENT OF BCI'S FAILURE TO
CONSENT TO AN IPO. In the event BCI does not consent to an initial public
offering of equity of the Developer requested by Holdings pursuant to the
Membership Interest Purchase Agreement, then, subject to the provisions of
Section 3 hereof, BCI shall purchase from BC Funding, and BC Funding shall sell
to BCI (i) all of the Preferred Shares for a purchase price equal to the
Redemption Amount in effect at the closing of such purchase and (ii) all of the
Common Shares at a per share purchase price equal to the price paid by BC
Funding to acquire those Common Shares. Subject to the provisions of Section 3
hereof, the closing date for the purchase of the Preferred Shares and Common
Shares pursuant to this Section 2 shall be the 45th calendar day after the date
of the notice from Holdings pursuant to the Membership Interest Purchase
Agreement requesting a public offering, or if such date is not a Business Day,
the first Business Day thereafter. The closing shall be held at the principal
offices of BCI. At the closing, (i) BCI shall pay the purchase price for the
Preferred Shares and Common Shares in cash by wire transfer of immediately
available funds to an account designated by BC Funding or, at BCI's option by
delivery of registered shares of common stock of BCI having a fair market value
equal to the Redemption Amount, or a combination of cash and such shares of
common stock of BCI equal in the aggregate to the Redemption Amount, as
determined by BCI, and (ii) BC Funding shall deliver to BCI stock certificates
evidencing the Preferred Shares and Common Shares accompanied by duly executed
stock powers.
3. GOVERNMENTAL CONSENTS OR APPROVALS. In the event any sale of the
Preferred Shares or Common Shares by BC Funding to BCI hereunder is subject to
any requirement that BCI or BC Funding shall have obtained any consent to or
approval of such transaction from any governmental authority, then (i) it shall
be a condition to the respective obligations of BCI and BC Funding to consummate
such transaction that such consent or approval shall have been given, and (ii)
if such consent or approval has not been given prior to the closing date
otherwise specified herein, the closing date shall be changed to the second
Business Day following the date on which such consent or approval is given.
4. REPRESENTATIONS AND WARRANTIES OF BCI. BCI represents and
warrants to BC Funding that:
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<PAGE>
(a) BCI is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, with full power
and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of BCI. This Agreement has
been duly executed and delivered by and constitutes a valid and binding
obligation of BCI, enforceable in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) conflict
with or violate any provision of the certificate or incorporation or bylaws
of BCI or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or
enforceable against BCI; (ii) result in any breach of or default under any
mortgage, contract, agreement, indenture, trust or other instrument which
is either binding upon or enforceable against BCI; or (iii) breach or
violate any provision of any law or regulation applicable to BCI.
5. REPRESENTATIONS AND WARRANTIES OF BC FUNDING. BC Funding represents
and warrants to BCI that:
(a) BC Funding is a limited liability company duly organized and
validly existing in good standing under the laws of the State of
Delaware, with full power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action of members and managers of BC Funding.
This Agreement has been duly executed and delivered by BC Funding and
constitutes a valid and binding obligation of BC Funding enforceable in
accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) conflict
with or violate any provision of the certificate of formation or limited
liability company agreement of BC Funding or any decree or order of any
court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against BC Funding; (ii) result
in any breach of or default under any mortgage, contract, agreement,
indenture, trust or other instrument which is either binding upon or
enforceable against BC Funding; or (iii) breach or violate any provision
of any law or regulation applicable to BC Funding.
(d) BC Funding is the sole record and beneficial owner of the
Preferred Shares, free and clear of all liens, pledges, encumbrances, and
claims of
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<PAGE>
every kind. There are no outstanding warrants, options or rights of any
kind to acquire from BC Funding any of the Preferred Shares, there are no
restrictions (other than those arising from federal and state securities
laws and pursuant to that certain Shareholder's Agreement dated as of the
date hereof by and among Holdings and all of the holders of the capital
stock of Holdings) on, and there are no agreements relating to, the
transfer of any of the Preferred Shares other than this Agreement. The
assignment of the Preferred Shares to BCI in accordance with this Agreement
will vest title to the Preferred Shares in BCI, free and clear of all
liens, pledges, encumbrances, and claims of every kind except those arising
by virtue of any agreement or arrangement entered into by BCI.
(e) With respect to any Common Shares to be sold hereunder, at the
time of such sale BC Funding will be the sole record and beneficial owner
of the Common Shares, free and clear of all liens, pledges, encumbrances,
and claims of every kind. The assignment of the Common Shares to BCI in
accordance with this Agreement will vest title to the Common Shares in BCI,
free and clear of all liens, pledges, encumbrances, and claims of every
kind except those arising by virtue of any agreement or arrangement entered
into by BCI.
6. CHANGE OF TERMS OF PREFERRED SHARES. BC Funding agrees that it will
not vote in favor of, or otherwise consent or agree to, any amendment of the
Governing Document that would change in any manner whatsoever the voting powers,
designations, preferences, rights, qualifications, restrictions, limitations or
other terms or provisions of the Preferred Shares or Common Shares without the
prior written consent of BCI, and BC Funding further agrees that it will not
transfer the Preferred Shares or the Common Shares unless it has first obtained
the written agreement of the proposed transferee to be bound by the provisions
of this Section 6.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The respective
representations, warranties, covenants and agreements of the parties shall
survive the consummation of the transactions contemplated hereby.
8. AMENDMENT AND MODIFICATION. The parties hereto may amend, modify and
supplement this Agreement only by an instrument in writing executed by each
party to this Agreement.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
10. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior understandings and agreements of the parties with respect thereto.
11. HEADINGS. The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
4
<PAGE>
12. EXECUTION IN COUNTERPART. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
13. EXPENSES. Each of the parties to this Agreement shall pay all of the
expenses incurred by it in connection with this Agreement, including without
limitation its legal and accounting fees. BC Funding shall pay any transfer
taxes arising out of the sale of Preferred Shares to BCI pursuant to this
Agreement.
14. BROKERS' COMMISSIONS. Each party to this Agreement shall indemnify
and hold harmless the other party from the commission, fee or claim of any
person, firm or corporation employed or retained or claiming to be employed or
retained by it to bring about, or to represent it in, the transactions
contemplated thereby.
15. NOTICES. Any notice, request, information or other document to be
given thereunder to any of the parties by any other party shall be in writing
and delivered personally or sent by Federal Express or other carrier,
transmitted by fax, or sent registered or certified mail, postage prepaid, as
follows:
If to BC Funding, addressed to:
BC Equity Funding, L.L.C.
c/o Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401-4086
Attention: General Counsel
If to BCI, addressed to:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401-4086
Attention: General Counsel
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given on the day it is so delivered, and any notice delivered by the other means
referred to above shall be deemed to have been given on the date it is received.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed therein.
5
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
BC EQUITY FUNDING, L.L.C.
By: BOSTON CHICKEN, INC.
Its Manager
By:
------------------------------
Title:
----------------------------
BOSTON CHICKEN, INC.
By:
------------------------------
Title:
----------------------------
6
<PAGE>
EXHIBIT 99.2
[LOGO]
NEWS
Analyst contact: Melissa Marsden
303-384-5652
Media contract: Karen Rugen
303-384-5076
BOSTON CHICKEN TO CONVERT LOAN IN EINSTEIN BROS. BAGELS
GOLDEN, COLO., May 30, 1996 -- Boston Chicken, Inc. (Nasdaq NMS: BOST) said
today that it intends to convert its $120 million loan to Einstein Bros. Bagels,
Inc. (EBBI) into a majority equity interest. Earlier today, EBBI announced it
has filed a Registration Statement for an initial public offering of 2.2 million
shares of common stock.
In connection with the initial public offering, Boston Chicken plans to purchase
two million additional EBBI shares in a concurrent private placement. Mark
Stephens, vice chairman and chief financial officer of Boston Chicken, Inc.,
said, "Our confidence in the potential for EBBI is reflected in our planned
purchase of additional equity at the same net price to EBBI as the public will
pay in the proposed offering."
After the initial public offering and concurrent private placement, which are
expected to be completed later this summer, Boston Chicken's interest in EBBI is
anticipated to be approximately 60%. In connection with these transactions, it
is expected that Scott Beck, co-chairman of Boston Chicken, Inc., will assume
the additional role of chairman of EBBI.
EBBI was formed in March 1995, funded in part by an $80 million convertible loan
from Boston Chicken, Inc. In January 1996, the loan was increased to $120
million to support EBBI's acquisition of Noah's New York Bagels, Inc., the pre-
eminent West Coast bagel retailer. To reflect its dual-brand strategy of
developing both Einstein Bros. and Noah's New York Bagel stores, EBBI intends to
change its name to Einstein/Noah Bagel Corp.
Boston Chicken, Inc. franchises and operates Boston Market(R) retail food
service stores that specialize in homestyle meals featuring rotisserie-roasted
Boston Chicken(R) and turkey breast, Hearth Honey(TM) hams, double-sauced meat
loaf, hot, hand-carved Boston Carver(TM) sandwiches and fresh vegetables, salads
and other side dishes, including mashed potatoes made from scratch. Boston
Market meals combine the freshness and quality of traditional home cooking with
convenience and value. As of May 29, 1996, there were 905 Boston Market stores
in 37 states and the District of Columbia.
