<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 JULY 14, 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
August 20, 1996: 63,950,292.
<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
July 14, 1996................................................................. 2
Consolidated Income Statements for the quarter and two quarters ended
July 9, 1995 and July 14, 1996................................................ 3
Consolidated Statements of Cash Flows for the two
quarters ended July 9, 1995 and July 14, 1996................................. 4
Notes to Consolidated Financial Statements.................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................................... 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities..................................................... 15
Item 6. Exhibits and Reports on Form 8-K.......................................... 16
Signature Page..................................................................... 17
Exhibit Index............................................................... Exhibit-1
</TABLE>
1
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, July 14,
1995 1996
------------ -----------
<S> <C> <C>
(Unaudited)
ASSETS
- ------
Current Assets:
Cash and cash equivalents............ $ 310,436 $ 110,932
Accounts receivable, net............. 13,445 18,002
Due from affiliates.................. 9,614 13,741
Notes receivable..................... 5,462 -
Prepaid expenses and other current
assets.............................. 1,536 4,088
Deferred income taxes................ 3,322 3,720
---------- ----------
Total current assets................ 343,815 150,483
Property and Equipment, net............ 258,550 354,429
Notes Receivable....................... 450,572 622,868
Deferred Financing Costs, net.......... 15,745 19,027
Excess of Purchase Price Over Fair
Value of Net Assets Acquired, net..... - 171,605
Other Assets, net...................... 5,195 53,002
---------- ----------
Total assets........................ $1,073,877 $1,371,414
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable..................... $ 12,292 $ 16,472
Accrued expenses..................... 9,095 18,892
Deferred franchise revenue........... 8,945 9,842
---------- ----------
Total current liabilities.......... 30,332 45,206
Deferred Franchise Revenue............. 2,072 8,456
Revolving Credit Facility.............. - 42,650
Liquid Yield Option Notes.............. 177,306 176,169
Convertible Subordinated Debt.......... 129,872 129,862
Deferred Income Taxes.................. 16,631 20,358
Other Noncurrent Liabilities........... 833 9,807
Minority Interest...................... - 33,185
Repurchase ENBC Common Stock and
Series A Preferred Stock............. - 20,360
Commitments and Contingencies
Stockholders' Equity:
Preferred stock --$.01 par value;
20,000,000 shares authorized;
no shares issued and outstanding... - -
Common stock --$.01 par value;
100,000,000 shares authorized;
issued and outstanding:
59,129,301 in 1995 and 63,902,895
in 1996............................ 591 639
Additional paid-in capital........... 675,611 812,528
Retained earnings.................... 40,629 72,194
---------- ----------
716,831 885,361
---------- ----------
Total liabilities and
stockholders' equity............... $1,073,877 $1,371,414
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Two
Quarter Ended Quarters Ended
--------------------- --------------------
July 9, July 14, July 9, July 14,
1995 1996 1995 1996
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenue:
Royalties and franchise-related fees................... $21,808 $39,137 $46,597 $ 85,170
Company-operated stores................................ 12,992 25,424 28,310 26,738
--------- --------- -------- ---------
Total revenue......................................... 34,800 64,561 74,907 111,908
Cost and Expenses:
Cost of products sold.................................. 4,811 9,468 10,601 9,948
Salaries and benefits.................................. 7,480 9,328 16,028 16,837
General and administrative............................. 8,097 15,905 20,339 26,716
--------- --------- -------- ---------
Total cost and expenses............................... 20,388 34,701 46,968 53,501
--------- --------- -------- ---------
Income from Operations.................................. 14,412 29,860 27,939 58,407
Other Expense:
Interest expense, net.................................. (2,440) (3,435) (4,497) (6,335)
Other income, net...................................... 6 203 34 312
--------- --------- -------- ---------
Total other expense................................... (2,434) (3,232) (4,463) (6,023)
--------- --------- -------- ---------
Income Before Income Taxes and Minority Interest........ 11,978 26,628 23,476 52,384
Income Taxes............................................ 4,558 9,691 8,940 19,798
Minority Interest in Earnings of Subsidiary............. - (1,021) - (1,021)
--------- --------- -------- ---------
Net Income.............................................. $ 7,420 $15,916 $14,536 $ 31,565
========= ========= ======== =========
Net Income Per Common and
Equivalent Share....................................... $0.15 $0.24 $0.30 $0.48
========= ========= ======== =========
Weighted Average Number of Common
and Equivalent Shares Outstanding...................... 50,033 67,131 49,189 65,523
========= ========= ======== =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Two Quarters Ended
-----------------------
July 9, July 14,
1995 1996
----------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income............................................................................. $ 14,536 $ 31,565
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................................................ 5,441 9,234
Interest on liquid yield option notes................................................ 1,470 7,338
Deferred income taxes................................................................ 7,198 3,329
Minority interest.................................................................... - 1,021
Loss (gain) on disposal of assets.................................................... 106 (160)
Changes in assets and liabilities, excluding effects
from acquisitions:
Accounts receivable and due from affiliates....................................... (845) (6,291)
Accounts payable and accrued expenses............................................. (3,049) 2,482
Deferred franchise revenue........................................................ (482) 3,076
Other assets and liabilities...................................................... (1,133) (2,795)
----------- ---------
Net cash provided by operating activities........................................ 23,242 48,799
----------- ---------
Cash Flows from Investing Activities:
Purchase of property and equipment................................................... (71,747) (68,468)
Proceeds from the sale of assets..................................................... 25,368 44,099
Increase in deferred financing costs and other assets................................ (6,669) (7,886)
Issuance of notes receivable......................................................... (212,942) (722,097)
Repayments of notes receivable....................................................... 100,033 433,334
----------- ---------
Net cash used in investing activities............................................ (165,957) (321,018)
----------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock............................................... 19,472 102,494
Proceeds from issuance of subsidiary's common stock.................................. - 1,577
Proceeds from issuance of liquid yield option notes.................................. 172,464 -
Repayment of long-term debt.......................................................... - (29,006)
Proceeds from revolving credit facility.............................................. 140,015 -
Repayments of revolving credit facilities........................................... (140,015) (2,350)
----------- ---------
Net cash provided by financing activities........................................ 191,936 72,715
----------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents................................... 49,221 (199,504)
Cash and Cash Equivalents, beginning of period......................................... 25,304 310,436
----------- ---------
Cash and Cash Equivalents, end of period............................................... $ 74,525 $ 110,932
=========== =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
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 July
14, 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 and two quarters ended July 14, 1996 are
not necessarily indicative of the results expected for the full year.
2. ACQUISITIONS
During the quarter ended July 14, 1996, the Company converted its $120.0
million loan into common stock in Einstein/Noah Bagel Corp. ("ENBC") and
currently owns approximately a 60% interest in ENBC. The Company also 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"), its Boston
Market area developer in Philadelphia. As part of this transaction, the Company
assumed $38.5 million in liabilities owed to third parties, including funded
debt of $27.0 million. The transaction resulted in the Company obtaining a 93%
equity interest in Mid-Atlantic. The ENBC and Mid-Atlantic transactions have
been accounted for as purchases, and, accordingly, the purchase prices were
allocated to assets and liabilities based upon an evaluation of their fair
values at the date of the transactions, resulting in goodwill of $177.8 million
which is being amortized over a 35-year life. The Company will evaluate possible
revisions to the goodwill balance or useful life based upon future events and
circumstances. Such events and circumstances could include, but are not limited
to, a change in business strategy or change in current and long-term projected
operating performance. If factors indicate that the assets should be evaluated
for possible impairment, the Company will use an estimate of such assets'
undiscounted projected cash flows in measuring whether the assets are impaired.
In such circumstances, the excess of the net carrying value of the assets over
their fair value would be deemed impaired, and consequently, charged to
earnings.
The following represents the unaudited pro forma results of operations
through July 14, 1996, as if the ENBC and Mid-Atlantic transactions had occurred
at the beginning of the Company's fiscal year (in thousands of dollars, except
per share data):
<TABLE>
<CAPTION>
<S> <C> <C>
Revenue.................. $163,964
Net income............... 19,733
Net income per share..... $ 0.30
</TABLE>
This pro forma information is not indicative of the results of operations
that actually would have been obtained if the transactions had occurred at the
beginning of the Company's fiscal year. The pro forma information is not
intended to be a projection of future results.
5
<PAGE>
3. AREA DEVELOPER FINANCING
The Company currently offers secured debt financing to certain Boston
Market 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 or metropolitan area of a major city and which meet
all of the Company's requirements are eligible for such financing. 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, 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 generally by a pledge of the equity interests of the owners of the
developer.
ENBC offers secured debt financing to its area developers to partially
finance store development and working capital needs on terms which are similar
to those offered by the Company to Boston Market area developers.
(A) LOAN CONVERSION OPTION
The Company may convert all or any convertible portion of the loan amount
after a moratorium period (generally two years from execution or subsequent
amendment of the loan) and generally after the area developer has completed not
less than 80% of its area development commitment (or in the event of certain
defaults) 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. The maximum loan amount is
established to give the Company majority ownership of the developer upon
conversion provided the Company exercises its right to participate in any
intervening financing of the developer. In some instances, a portion of the loan
may be non-convertible. 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.
ENBC's loan agreements with its area developers contain conversion and
option features similar to those provided by the Company to Boston Market
area developers.
There can be no assurance that the Company or ENBC will exercise future
rights to convert into or acquire an equity interest in any area developer to
which they provide financing or that such exercise or acquisition would result
in a majority interest in the area developer.
(B) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING
The following table summarizes credit commitments and outstanding balances
set forth on the Company's balance sheets for area developer financing of Boston
Market area developers as of both December 31, 1995 and July 14, 1996 and ENBC
area developers as of July 14, 1996 (in thousands of dollars, except number of
area developers):
<TABLE>
<CAPTION>
Dec. 31, July 14,
1995 1996
--------- -----------
<S> <C> <C>
(Unaudited)
Number of area developers receiving financing....... 17 23
Loan commitments................................... $ 614,094 $ 872,523
Unused revolving loan............................... (202,676) (258,190)
--------- ---------
Loans outstanding (included in Notes Receivable).... $ 411,418 $ 614,333
========= =========
</TABLE>
6
<PAGE>
(C) CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
The allowance for Boston Market and ENBC 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 for loan losses was required
as of December 31, 1995 and July 14, 1996.
The following table sets forth certain aggregate financial information as of
the dates indicated provided by Boston Market and ENBC financed area developers
(excluding Mid-Atlantic, which is now consolidated in the Company's financial
statements) to which the Company and ENBC currently have outstanding loans, even
though such loans made by ENBC predate its consolidation in the Company's
financial statements (in thousands, except number of financed area developers
and store data):
<TABLE>
<CAPTION>
December 26, December 25, December 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Total number of financed area developers...................... 5 12 18
Total number of financed area developer stores open........... 78 274 649
Total gross assets............................................ $71,880 $237,833 $531,153
Total debt:
To the Company or ENBC..................................... 43,794 163,971 379,556
To third parties (including capital lease obligations)..... - 3,068 14,606
Total stockholder/partner/member equity (deficit)............. 10,006 7,448 (6,083)
</TABLE>
4. DEBT
The Company and ENBC each have a revolving bank credit facility. The
Company's facility provides for borrowings of up to $74.5 million through June
30, 1997 and ENBC's facility provides for borrowings up to $45.0 million through
April 30, 1998. Borrowings under the Company's facility may be either floating
rate loans with interest at the bank's reference rate or eurodollar rate loans
plus an applicable margin. Borrowings under ENBC's facility may be either
floating rate loans with interest at the bank's reference rate plus 1.0%
(subsequently reduced to .5% in August 1996) or eurodollar rate loans plus an
applicable margin. In addition, a commitment fee applicable to each facility
equal to .25% of the average daily unused portion of the loan is required. The
agreements contain covenants, among others, restricting other borrowings,
prohibiting cash dividends, and requiring the maintenance of interest coverage
and cash flow ratios, minimum capital levels, and specified levels of store
sales. ENBC's facility is collateralized by substantially all of its assets.
As of July 14, 1996, no amount was outstanding under the Company's facility and
$42.7 million was outstanding under ENBC's facility.
5. STOCK OPTIONS
The Company accounts for its employee stock options in accordance with APB No.
25.
7
<PAGE>
6. STOCKHOLDERS' EQUITY
In connection with certain acquisitions in 1995, ENBC issued 1,721,250 shares
of its common stock and 6,250 shares of Series A preferred stock and granted the
holders of these shares the right to require ENBC to repurchase the shares under
certain circumstances, including the failure to complete an initial public
offering of its common stock. In August 1996, ENBC completed an initial public
offering and other financings which in the aggregate raised net proceeds of
$86.0 million, including an investment by the Company of $31.6 million.
Subsequent to the completion of these financings, the holder of the Series A
preferred stock converted its interest into 459,559 shares of ENBC common stock
and all of ENBC's repurchase obligations with respect to the Series A preferred
stock and the common stock expired.
7. ROYALTIES AND FRANCHISE-RELATED FEES
Royalties and franchise-related fees for the Company and ENBC (from the date
of conversion of its loan into ENBC common stock) are comprised of the following
(in thousands of dollars):
<TABLE>
<CAPTION>
Quarter Ended Two Quarters Ended
--------------------------------------------------------
July 9, 1995 July 14, 1996 July 9, 1995 July 14, 1996
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Royalties.......................... $ 7,474 $11,584 $15,409 $26,360
Initial franchise and area
developer fees................... 2,686 4,585 6,066 7,277
Interest income.................... 6,446 13,910 13,366 31,897
Real estate and related
services income.................. 3,689 5,333 7,986 13,301
Software fees...................... 1,484 3,725 3,741 6,335
Other.............................. 29 - 29 -
------- ------- ------- -------
$21,808 $39,137 $46,597 $85,170
======= ======= ======= =======
</TABLE>
8. COMMITMENTS
Through July 14, 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 have
expired unexercised (see Note 3) 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.
In December 1995, Bagel Store Development Funding, L.L.C. ("Bagel Funding")
was formed to invest in existing and proposed area developers of ENBC. Through
July 14, 1996, Bagel Funding had raised $90.0 million (including an aggregate of
$45.0 million in subscriptions receivable) and had invested a total of $40.4
million in such area developers. ENBC is obligated to purchase Bagel Funding's
equity interest in an area developer at a formula price in the event that the
area developer fails to fulfill its obligation to redeem such interests at such
price in any one of the following circumstances: (i) ENBC converts into or
otherwise acquires a majority interest in the area developer; (ii) ENBC does not
consent to the area developer undertaking an initial public offering after
ENBC's conversion and/or option rights under its loan agreement with the area
developer have expired unexercised; or (iii) ENBC does not consent to the
termination of the area developer's area development and franchise agreements
with ENBC after ENBC's conversion and/or option rights under its loan agreement
with the area developer have expired unexercised.
8
<PAGE>
9. 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.
9
<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"),
EINSTEIN/NOAH BAGEL CORP. ("ENBC"), THEIR AREA DEVELOPERS AND FRANCHISEES,
BOSTON MARKET(R) STORES, EINSTEIN BROS. BAGEL STORES AND NOAH'S NEW YORK BAGEL
STORES TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: COMPETITION; SUCCESS OF OPERATING
INITIATIVES; 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 AND ENBC IS
DEPENDENT ON THEIR RESPECTIVE AREA DEVELOPERS AND FRANCHISEES AND THE MANNER IN
WHICH THEY OPERATE AND DEVELOP BOSTON MARKET STORES AND EINSTEIN BROS. BAGELS
AND NOAH'S NEW YORK BAGEL STORES.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
- -------
During the quarter ended July 14, 1996, the Company converted its loan to
Einstein/Noah Bagel Corp. ("ENBC") into common stock (and currently owns
approximately a 60% equity interest) and acquired a 93% interest in Mid-Atlantic
Restaurant Systems L.P. ("Mid-Atlantic"), its Boston Market area developer in
the Philadelphia area. As a result of such conversion of ENBC, the revenue
previously generated from ENBC by the Company as a lender and service provider
has been eliminated in consolidation and replaced with revenue (and operating
expenses) from ENBC franchise operations as well as from ENBC company-operated
stores. As a result of such acquisition of Mid-Atlantic, the revenue previously
generated from Mid-Atlantic by the Company as a franchisor, lender and service
provider has been eliminated in consolidation and replaced with revenue (and
operating expenses) from owning Company-operated stores. The foregoing results
are adjusted in the "minority interest" line item to reflect the minority
interest not owned by the Company. As a result of these transactions, the
operating results for the period are not readily comparable to those for the
quarter ended July 9, 1995.
As a result of the Mid-Atlantic transaction, the Company owns 78 Boston Market
stores in the Philadelphia market. The following table sets forth store
performance data for these 78 stores:
<TABLE>
<CAPTION>
Quarter Ended
July 14, 1996
----------------------
(dollars in thousands)
<S> <C> <C>
Net sales........................ $21,370.3 100.0%
Food and paper costs............. 8,027.5 37.6%
Salaries and benefits............ 5,560.8 26.0%
Operating expenses............... 1,507.3 7.1%
Occupancy and advertising costs.. 2,282.7 10.6%
--------- -----
Store cash flow.................. $ 3,992.0 18.7%
========= =====
</TABLE>
10
<PAGE>
RESULTS OF OPERATIONS
- ----------------------
STORE ACTIVITY
The results of operations are significantly impacted by the number of stores
opened during the quarter. The following table sets forth store activity for
the Company and ENBC for the period indicated.
<TABLE>
<CAPTION>
Quarter Ended July 14, 1996
----------------------------------
Beginning Stores Stores Ending
Stores Opened Closed Stores
--------- ------ ------ ------
<S> <C> <C> <C> <C>
Boston Market 894 65 (2) 957
ENBC 138 51 (1) 188
</TABLE>
REVENUE
Total revenue increased 86% for the quarter ended July 14, 1996 over the prior
comparable quarter. For the two quarters ended July 14, 1996, total revenue
increased 49% over the prior comparable quarters. Royalties and franchise-
related fees increased 79% for the quarter ended July 14, 1996 and increased 83%
for the two quarters ended July 14, 1996. The increases in royalties and
franchise-related fees were primarily attributable to higher interest income
from loans to Boston Market area developers, higher royalties due to higher
systemwide store revenue in the Boston Market system and the inclusion of ENBC'S
royalties and franchise-related fees from the date of conversion of the
Company's loan into ENBC common stock. The increases in interest income were due
to higher outstanding loan balances associated primarily with the increases in
stores opened by Boston Market area developers. Higher royalties were driven by
an increase in systemwide store revenue which increased to $260.5 million in the
quarter ended July 14, 1996, up 52% from $171.4 million for the prior
comparable quarter, and increased to $572.3 million in the two quarters ended
July 14, 1996, up 60%, from $358.8 million for the prior comparable period. The
increase in systemwide store revenue was due primarily to an increase in the
number of Boston Market stores open and higher WPSAs for the Boston Market
system, which increased 7.2% to $23,826 for the quarter ended July 14, 1996,
from $22,227 in the prior comparable quarter. WPSA increased 8.1% to $23,179 for
the two quarters ended July 14, 1996, from $21,433 in the prior comparable
period. WPSA represents the weekly per store 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.
Revenue from Company-operated stores is significantly affected by the average
number of Company stores in the periods being compared. The average number of
Boston Market Company stores for the second quarter of 1996 was 79 compared to
39 for the second quarter of 1995. The average number of Boston Market Company
stores for the two quarters ended July 14, 1996 was 36 compared to 43 in the
comparable 1995 period. This change in average number is attributable to the
timing of store sales to area developers in 1995 and the acquisition of 78 Mid-
Atlantic stores in 1996. Revenue from Company-operated stores increased 96% for
the second quarter of 1996 compared with the comparable quarter last year and
decreased 6% for the two quarters ended July 14, 1996 compared with the prior
comparable period. The increase for the quarter was due to a combination of a
higher average number of Company-operated Boston Market stores and the inclusion
of ENBC stores from the date of conversion of the Company's loan into ENBC
common stock. The decrease for the two quarters ended July 14, 1996 was due to
a lower average number of Company-operated Boston Market stores partially offset
by the inclusion of ENBC-operated stores from the date of the conversion of the
Company's loan into ENBC common stock.
COST OF PRODUCTS SOLD
As a result of the higher average number of Company-operated stores operating
in the quarter ended July 14, 1996, cost of products sold increased 97% compared
with the prior comparable quarter. Cost of products sold decreased 6% for the
two quarters ended July 14, 1996, compared with the comparable period last year.
The decrease in cost of products sold over the prior two quarters was
attributable to a lower average number of stores operating in the two quarters
ended July 14, 1996 compared to the prior comparable period.
11
<PAGE>
SALARIES AND BENEFITS
As a result of the higher average number of Company-operated stores
operating in the quarter ended July 14, 1996, salaries and benefits increased
25% compared with the prior comparable quarter. The increase for the second
quarter of 1996 was also due to an increased number of employees at the
Company's support center and the inclusion of ENBC employees from the date of
conversion. Salaries and benefits increased 5% for the two quarters ended July
14, 1996 compared with the comparable period last year. The increase in salaries
and benefits for the two quarters ended July 14, 1996 was due to an increased
number of employees at the Company's support center and the inclusion of ENBC
employees for a portion of the second quarter.
GENERAL AND ADMINISTRATIVE
As a result of the higher average number of Company-operated stores
operating in the quarter ended July 14, 1996, general and administrative
expenses increased 96% compared with the prior comparable quarter. The increase
for the second quarter was also due to an increased number of employees at the
Company's support center and the inclusion of ENBC general and administrative
expenses from the date of conversion. General and administrative expenses
increased 31% for the two quarters ended July 14, 1996 compared with the
comparable period last year. The increase in general and administrative expenses
for the two quarters ended July 14, 1996 was due to an increase in the number of
employees at the Company's support center and the inclusion of ENBC general and
administrative expenses for a portion of the second quarter. Included in general
and administrative expenses were depreciation and amortization charges of $5.1
million for the second quarter of 1996 compared with $2.7 million in the second
quarter of 1995. Depreciation and amortization charges were $9.3 million for the
two quarters ended July 14, 1996, compared with $5.4 million for the comparable
period last year. The increases in depreciation and amortization expense were
primarily attributable to the goodwill associated with the acquisition of the
interest in Mid-Atlantic and the conversion of the ENBC loan and a higher fixed
asset base reflecting the Company's and ENBC's investment in support center
infrastructure.
OTHER EXPENSE
The Company incurred other expense of $3.2 million in the second quarter of
1996 compared with other expense of $2.4 million in the comparable quarter of
1995. The Company incurred other expense of $6.0 million for the two quarters
ended July 14, 1996 compared with other expense of $4.5 million for the
comparable period last year. These increases 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 and
ENBC's anticipated tax rates.
MINORITY INTEREST
The minority interest in the earnings of subsidiary of $1.0 million for the
quarter and two quarters ended July 14, 1996, represents the minority ownership
interest in the earnings of ENBC.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's and ENBC's primary capital requirements relate to
establishing brand awareness and leadership by providing partial financing to
area developers for their use in rapid store development and to finance their
working capital needs. As of July 14, 1996, the Company had secured loan
commitments to its current Boston Market financed area developers (excluding
Mid-Atlantic, which is now consolidated in the Company's financial statements)
aggregating approximately $710.0 million, of which approximately $555.0 million
had been advanced. As of July 14, 1996, ENBC had secured loan commitments to its
current area developers aggregating approximately $162.5 million of which
approximately $59.3 million had been advanced.
12
<PAGE>
As a result of executing the rapid expansion strategy required by the
Company, Boston Market area developers have incurred net losses in each of the
last three years. The losses incurred over this three year period, aggregating
$149.1 million in 1995, $47.0 million in 1994, and $9.8 million in 1993, include
(a) depreciation and amortization charges of approximately $49 million, (b)
approximately $86 million attributable to development overhead, scale
inefficiencies in operating overhead, and other start-up costs which the Company
believes are necessary to establish the Boston Market brand in new territories
and open stores at a rate sufficient to gain a competitive advantage over
similar concepts, and (c) royalties, interest, and other franchise-related fees
that would no longer be incurred in the event the Company were to acquire, or
convert its convertible secured loans, to such financed area developers. As a
result of the foregoing factors, as well as ongoing improvements to store
operating performance, the Company does not consider these start-up losses to be
a meaningful financial measure during this rapid expansion phase (i.e. that
period during which new stores constitute a significant percentage of stores
open in an area of dominant influence). The Company believes the rapid expansion
phase for most of its developers should last approximately four to five years
from the time significant development commences in such area developer's area of
dominant influence. As the rapid expansion phase ends, the size of the area
developer's store base should enable the developer to gradually reduce and
eventually recover such start-up losses. The reduction in and recovery of losses
is expected to be driven primarily by lower development overhead, increased
operational and advertising efficiencies, greater economies of scale, and
further increases in store revenue through continued product and service
enhancements. The point at which losses may be recovered will vary by area
developer depending primarily upon the size and timing of the area developer's
store development schedule, the achievement of advertising efficiency, the level
of interest charges, the intensity of regional competition, and the quality of
management, however, there can be no assurance that such losses will be
recovered. Because the financed area developers are generally two to three years
into significant store development in their respective areas of dominant
influence, the Company believes substantially all of its financed area
developers will remain in the rapid expansion phase during 1996 in most of their
areas of dominant influence and the Company, accordingly, anticipates that such
financed area developers will continue to incur start-up losses in 1996.
Subsequent to the completion of the rapid expansion phase, the Company expects
area developer profitability to be a more meaningful factor in assessing loan
recoverability and any future loan commitments. Although the Company believes
its current financed area developers will achieve such profitability, in the
event the foregoing strategy does not come to fruition or an area developer
otherwise fails to achieve a sufficient level of profitability subsequent to its
rapid expansion phase, such event 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 10.
As a result of ENBC's area developers pursuing a similar rapid expansion
strategy, the Company believes such area developers will also incur net losses
during their rapid expansion phase. The Company also believes however, that the
foregoing factors applicable to start-up losses and recovery will also apply to
these area developers. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS"
ON PAGE 10.
Pursuant to the terms of the loan agreement with its area developers, the
Company may convert all or any portion of the convertible loan amount into
equity of the area developer after a moratorium period, provided generally the
area developer has completed not less than 80% of its area development
commitment or in the event of certain defaults. Any determination to convert any
area developer loan or otherwise acquire an equity interest would involve a
variety of economic and operational considerations, including the projected
financial impact of converting the loan, the status of the area developer's
market penetration, the performance of the area developer's stores, the
Company's desire to own such stores and the willingness of the Company to incur
the risk of owning stores versus receiving income as a franchisor, lender and
service provider, the Company's ability to manage such stores if necessary, the
future capital requirements of the area developer and its ability to raise such
capital, and the demand on Company resources. In addition, any loan conversion
or other acquisition of an equity interest in an area developer by the Company
would not be indicative of whether the Company intended to, or would, convert or
otherwise acquire an equity interest in any other area developer. Upon
conversion, the Company would typically become majority equity owner of the area
developer, resulting in the Company consolidating the area developer's
operations in its financial statements. Consequently, the franchise and related
fees earned by the Company (including interest, royalties, real estate related,
software, and other fees) from such an area developer would be eliminated in
consolidation. The operating results of the area developer (primarily store
revenue, less expenses) would be included in the Company's financial results.
Such results would be adjusted for any remaining minority interest in such area
developer not acquired by the Company.
13
<PAGE>
Capital Resources. For the two quarters ended July 14, 1996, the Company
generated approximately $48.8 million of cash from operating activities and
$104.1 million from the issuance of shares of common stock. As of July 14,
1996, the Company had $110.9 million available in cash and cash equivalents and
$76.8 million available under its revolving credit facilities. In August 1996,
ENBC completed an initial public offering and other financings which in the
aggregate raised net proceeds of $86.0 million, including an investment by the
Company of $31.6 million. Of such net proceeds, approximately $45.0 million was
used to repay the balance outstanding under its bank revolving credit facility.
The Company anticipates that it, ENBC, and their respective area developers
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 the Company and ENBC. The Company, ENBC, and its area developers, may seek
additional funds from public or private offerings of debt or equity securities.
There can be no assurance that the Company, ENBC, or their area developers will
be able to raise such funds on satisfactory terms when needed. SEE "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 10.
14
<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 ("Common Stock") from
100,000,000 to 480,000,000.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting was held on May 14, 1996. Each of the Company's
current directors was re-elected. The votes cast for and withheld from each
such director were as follows:
<TABLE>
<CAPTION>
Director For Withheld
-------- --- --------
<S> <C> <C>
Scott A. Beck 55,195,499 207,114
Dean L. Buntrock 55,195,238 207,375
Arnold C. Greenberg 55,198,881 203,732
J. Bruce Harreld 55,196,398 206,215
M Howard Jacobsen 55,199,789 202,824
Saad J. Nadhir 55,195,270 207,343
Peer Pedersen 55,194,803 207,810
Jeffry J. Shearer 55,195,930 206,683
Mark W. Stephens 55,196,242 206,371
</TABLE>
Also at the annual meeting, proposals to (i) amend the Company's Certificate
of Incorporation to increase the number of shares of Common Stock that the
Company is authorized to issue from 100,000,000 to 480,000,000 (ii) approve the
Company's 1995 Employee Stock Option Plan and (iii) approve an amendment to the
Company's Amended and Restated 1991 Stock Option Plan for Non-Employee
Directors, were each approved. The votes cast for and against these proposals,
and the number of abstentions and broker non-votes with respect to each of these
proposals, were as follows:
Amendment of Certificate of Incorporation
-----------------------------------------
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
49,796,737 5,403,569 57,334 144,973
Approval of 1995 Employee Stock Option Plan
-------------------------------------------
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
44,991,295 8,462,152 115,827 1,833,339
Amendment of 1991 Stock Option Plan for Non-Employee Directors
--------------------------------------------------------------
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
46,607,532 6,806,797 154,945 1,833,339
15
<PAGE>
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 July 14, 1996, which report was dated June 17, 1996.
Such report on Form 8-K reported under Item 2 (Acquisition or
Disposition of Assets) the conversion by the Company of its convertible
secured loan to Einstein/Noah Bagel Corp. ("ENBC") into 15,307,421
shares of common stock of ENBC, constituting a majority equity interest
in ENBC, and included under Item 7 (Exhibits) excerpts from ENBC's
Registration Statement on Form S-1 (Registration No. 333-04725) and the
Amended Restated Loan Agreement between the Company and ENBC.
16
<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: August 28, 1996 /s/ Scott A. Beck
--------------------------------------------
Scott A. Beck
Co-Chairman of the Board and Chief Executive
Officer
Date: August 28, 1996 /s/ Mark W. Stephens
--------------------------------------------
Mark W. Stephens
Vice Chairman and Chief Financial
Officer (Principal Financial Officer)
17
<PAGE>
EXHIBIT INDEX
EXHIBIT
- -------
NUMBER EXHIBITS
- ------ --------
10.1 First Amendment to the Amended and Restated Loan
Agreement between the Company and Einstein/Noah
Bagel Corp. ("ENBC") dated July 19, 1996 (Incorporated
by reference to Exhibit 10.1(b) to the Registration
Statement on Form S-1 of ENBC (Registration No.
333-04725)).
10.2 First Amendment to Secured Demand Note of ENBC payable
to Boston Chicken (Incorporated by reference to Exhibit
10.3(b) to the Registration Statement on Form S-1 of ENBC
(Registration No. 333-04725)).
10.3 Concurrent Private Placement Agreement and Registration
Agreement dated August 1, 1996 between the Company and
ENBC.
10.4 Option Agreement between the Company and Mark W.
Stephens dated as of April 23, 1996.
10.5 Option Agreement between the Company and Laurence M.
Zwain dated as of April 23, 1996.
10.6 Option Agreement between the Company and Mark R.
Goldston dated as of April 23, 1996.
10.7 Credit Agreement dated as of May 17, 1996 among ENBC,
the Lenders named therein, and Bank of America Illinois,
as Agent (Incorporated by reference to Exhibit 10.9 to
the Registration Statement on Form S-1 of ENBC
(Registration No. 333-04725)).
10.8(a) Amended and Restated Accounting and Administration
Services Agreement dated as of May 28, 1996 between
the Company and ENBC (Incorporated by reference to
Exhibit 10.12(a) to the Registration Statement on Form
S-1 of ENBC (Registration No. 333-04725)).
10.8(b) First Amendment to Amended and Restated Accounting and
Administration Services Agreement dated as of June 17,
1996 between the Company and ENBC (Incorporated by
reference to Exhibit 10.12(b) to the Registration
Statement on Form S-1 of ENBC (Registration No.
333-04725)).
10.9(a) First Amendment to Financial Services Agreement dated
as of March 7, 1996 between the Company and ENBC
(Incorporated by reference to Exhibit 10.13(b) to the
Registration Statement on Form S-1 of ENBC
(Registration No. 333-04725)).
<PAGE>
EXHIBIT
-------
NUMBER EXHIBITS
------ --------
10.9(b) Financial Services Termination Agreement dated as of
May 28, 1996 between the Company and ENBC (Incorporated
by reference to Exhibit 10.13(c) to the Registration
Statement on Form S-1 of ENBC (Registration No.
333-04725)).
10.10(a) Amended and Restated Real Estate Services Agreement
dated as of May 28, 1996 between the Company and ENBC
(Incorporated by reference to Exhibit 10.14(a) to the
Registration Statement on Form S-1 of ENBC
(Registration No. 333-04725)).
10.10(b) Amended and Restated Real Estate Service Termination
Agreement dated as of June 17, 1996 between the
Company and ENBC (Incorporated by reference to Exhibit
10.14(b) to the Registration Statement on Form S-1 of
ENBC (Registration No. 333-04725)).
10.11(a) Amended and Restated Computer and Communications Systems
Services Agreement dated as of June 17, 1996 between
the Company and ENBC (Incorporated by reference to
Exhibit 10.15(a) to the Registration Statement on Form
S-1 of ENBC (Registration No. 333-04725)).
10.11(b) First Amendment to the Amended and Restated Computer
Communications Systems Services Agreement dated as of
June 17, 1996 between the Company and ENBC (Incorporated
by reference to Exhibit 10.15(b) to the Registration
Statement on Form S-1 of ENBC (Registration No.
333-04725)).
10.12 Project and Approved Supplier Agreement among Harlan Bagel Supply
Company, Harlan Bakeries, Inc. and ENBC (Incorporated by reference
to Exhibit 10.24 to the Registration Statement on Form S-1 of ENBC
(Registration No. 333-04725)).
11 Statement re Computation of Earnings Per Share.
27 Financial Data Schedule.
99.1 Form of Agreement between ENBC and Bagel Funding, L.L.C.
relating to ENBC's purchase of Bagel Funding's
interest in area developers (Incorporated by
reference to Exhibit 10.30 to the Registration
Statement on Form S-1 of ENBC (Registration No.
333-04725)).
In the case of incorporation by reference to documents filed by ENBC, ENBC's
file number under that Act is 0-21097.
<PAGE>
Exhibit 10.3
2,000,000 SHARES OF COMMON STOCK
OF
EINSTEIN/NOAH BAGEL CORP.
CONCURRENT PRIVATE PLACEMENT
AGREEMENT
DATED August 1, 1996
<PAGE>
CONCURRENT PRIVATE PLACEMENT AGREEMENT
THIS AGREEMENT is made as of August 1, 1996, between Einstein/ Noah Bagel
Corp., a Delaware corporation (the "Company"), and Boston Chicken, Inc., a
Delaware corporation (the "Purchaser"). Except as otherwise indicated herein,
capitalized terms used herein are defined in Section 6 hereof.
R E C I T A L S :
-----------------
WHEREAS, the Company is concurrently offering (i) shares of its common
stock, $.01 par value per share ("Common Stock") in an underwritten initial
public offering ("Initial Public Offering") and (ii) shares of Common Stock in a
non-underwritten public offering ("Concurrent Public Offering") (the Initial
Public Offering and Concurrent Public Offering sometimes hereinafter referred to
together as the "Public Offerings"); and
WHEREAS, the Company desires to sell to the Purchaser and the Purchaser
desires to purchase, concurrently with, and subject to, the closings of the
Public Offerings, an aggregate of 2,000,000 shares of Common Stock (the
"Shares"), for a purchase price per Share equal to $15.81, the price to public
per share in the Initial Public Offering, net of underwriting discount (the
"Price Per Share"), and grant the Purchaser an option to purchase additional
shares of Common Stock in certain circumstances, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase and Sale of Shares. Subject to the terms and conditions set
forth herein, the Company hereby agrees to issue and sell to the Purchaser, and
the Purchaser hereby agrees to purchase from the Company at the Closing (as
hereinafter defined), the Shares for an aggregate purchase price equal to the
Price Per Share multiplied by the number of Shares.
2. The Closing of the Purchase and Sale of Shares.
A. Authorization. On or before the Closing, the Company will have
authorized the issuance and sale to the Purchaser of the Shares.
B. Time and Place of Closing. The closing of the purchase and sale
of the Shares (the "Closing") will take place at the offices of Bell, Boyd &
Lloyd, 70 W. Madison Street, Chicago, Illinois, subject to the concurrent
closing of the sale of shares of Common Stock in the Public Offerings (the
"Closing Date"). At the Closing, the Company will deliver to the Purchaser a
stock certificate or stock certificates (in such denominations requested by
Purchaser at least three business days prior to the Closing) evidencing the
Shares to be purchased by the Purchaser, registered in the Purchaser's or its
nominee's name, upon payment of the purchase price thereof by wire transfer of
immediately available funds to the Company's account at Bank of America
Illinois, Chicago, Illinois.
2
<PAGE>
3. Conditions of the Purchaser's Obligation at the Closing. The
obligation of the Purchaser to purchase and pay for the Shares at the Closing is
subject to the satisfaction as of the Closing of the following conditions:
A. Closing of Initial Public Offering and Concurrent Public Offering.
The Initial Public Offering and the Concurrent Public Offering shall close
concurrently herewith, and such closings shall have occurred on or before the
end of the fifteenth business day after the date hereof.
B. Representations and Warranties; Officer's Certificate. The
representations and warranties contained in Section 5 hereof shall be accurate
at and as of the Closing as though then made. At the Closing Date there shall
not have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus (as defined in Section 6 hereof), any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and the Purchaser shall have received a certificate
of the President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company, dated as of the Closing Date to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 5 hereof are true and correct with the
same force and effect as though expressly made at and as of Closing Date, (iii)
the Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to Closing Date, and
(iv) no stop order suspending the effectiveness of the Registration Statement
(as defined in Section 6 hereof) has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
C. Registration Agreement. The Company and the Purchaser shall have
entered into a Registration Agreement in form and substance substantially
similar to Exhibit A attached hereto (the "Registration Agreement") and the
Registration Agreement shall be in full force and effect as of the Closing.
D. Blue Sky Clearances. The Company shall have timely made all
filings under applicable state securities laws, and will have taken all other
action necessary to consummate the issuance of the Shares pursuant to this
Agreement as a private placement to an accredited investor or pursuant to other
available securities registration exemptions in compliance with such laws.
E. Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Sections 3A, 3B and 3C, inclusive,
have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors and, if required, by the Company's
stockholders authorizing the
3
<PAGE>
execution, delivery, and performance of this Agreement, the Registration
Agreement, and each of the other agreements contemplated hereby, and the
issuance and sale of the Shares;
(iii) certified copies of the Company's restated certificate of
incorporation and amended and restated bylaws, each as in effect at the
Closing;
(iv) copies of all third party and governmental consents,
approvals, and filings obtained in connection with the transactions
hereunder (including, without limitation, all blue sky law filings and
waivers of all preemptive rights and rights of first refusal), if any; and
(v) copies of the Prospectus and Registration Statement filed by
the Company with the Securities and Exchange Commission in connection with
the Public Offering.
F. Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing shall have been taken and all
documents incident thereto shall be satisfactory in form and substance to
counsel to the Purchaser.
G. Opinion of Company's Counsel. The Purchaser shall have received
from Bell, Boyd & Lloyd, counsel for the Company, an executed copy of its
opinion to the Purchaser, dated the date of the Closing, in form and substance
reasonably satisfactory to the Purchaser.
H. Receipt of Consents. The Purchaser shall have received the
written consent of any persons or entities whose consent is contractually
required to consummate the transactions contemplated hereby or by the
Registration Agreement.
I. Termination of Agreement.
(i) If any condition specified in this Section 3 shall not have
been fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Purchaser by notice to the Company at any time at or
prior to the Closing.
(ii) Notwithstanding anything herein to the contrary, the
Purchaser may terminate this Agreement, by written notice to the Company,
at any time at or prior to Closing Date (a) if there has been, since the
time of execution of this Agreement or since the respective dates as of
which information is given in the Prospectus, any material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business, or (b) the underwriters in the Initial Public Offering or the
representatives of such underwriters have terminated the
4
<PAGE>
Purchase Agreement relating to the Initial Public Offering pursuant to
Section 9 of such Agreement or otherwise.
(iii) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other
party; provided that Section 10 shall survive such termination and remain
in full force and effect.
4. Current Public Information. The Company shall at all times file all
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action to provide
current public information to the extent required to enable the Purchaser to
sell Restricted Securities pursuant to Rule 144 adopted by the Securities and
Exchange Commission under the Securities Act (as such rule may be amended from
time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission.
5. Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as of the date hereof, and agrees with the
Purchaser, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the date hereof, the Registration Statement, the
Rule 462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any such
amendment or supplement was issued and at the Closing Date, included or
will include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Purchaser expressly for use in
the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to
5
<PAGE>
Rule 424 under the 1933 Act, complied when so filed in all material
respects with the 1933 Act Regulations and, if applicable, each preliminary
prospectus and the Prospectus was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement (as defined in Section 6 hereof) and the Prospectus
(as defined in Section 6 hereof), together with the related schedules and
notes, present fairly, where applicable, the financial position of the
respective entity to which such financial statements relate (including,
where applicable, the consolidated subsidiaries of such entity) at the
dates indicated and, where applicable, the statement of operations,
stockholders' equity and cash flows of such entity (including, where
applicable, the consolidated subsidiaries of such entity) for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The pro forma financial
statements and the related notes thereto included in the Registration
Statement and the Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and have been properly
compiled on the bases described therein.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock, except for cash dividends paid on the Company's Series A Preferred
Stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in
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which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, other than
the pledge of such stock pursuant to the Company's secured revolving bank
credit agreement dated May 17, 1996 with Bank of America Illinois, as agent
for the lenders named therein (the "Credit Agreement"). The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21.1 to
the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus and except for the Repurchase Shares (as defined in the
Prospectus)). The shares of issued and outstanding capital stock have been
duly authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any security
holder of the Company.
(viii) Authorization of Agreement. This Agreement has been duly
executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Shares have
been duly authorized for issuance and sale to the Company pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable; the Common Stock conforms
to all statements relating thereto contained in the Prospectus; and the
issuance of the Shares is not subject to preemptive or other similar rights
of any security holder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in default
in the performance or
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observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any subsidiary is
subject (collectively, "Agreements and Instruments") except for such
defaults that would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated herein and compliance by the Company with
its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any subsidiary pursuant to,
the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any subsidiary or any of
their assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. Except as disclosed in the
Prospectus, no labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, has been threatened.
(xii) Absence of Proceedings. Except as disclosed in the Prospectus,
there is no action, suit, proceeding, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or foreign,
now pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any subsidiary, which is required to be disclosed
in the Registration Statement, or which the Company reasonably believes is
likely to result in a Material Adverse Effect, or which the Company
reasonably believes is likely to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, are, considered in the aggregate,
not likely to result in a Material Adverse Effect.
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<PAGE>
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or reasonably believe that they can acquire on
reasonable terms, the patents, patent rights, licenses, invention,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") currently employed by them
in connection with the business now operated by them, and, except as
disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has received any notice or, to the best of their respective
knowledge, is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to carry on the business of the Company or any of its
subsidiaries, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Shares hereunder or the consummation of the transactions contemplated
by this Agreement, except such as have been already obtained or as may be
required under state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such certificates, permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them,
except where the failure to so possess such Government Licenses would not,
singly or in the aggregate, have a Material Adverse Effect; the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure
9
<PAGE>
of doing business with Cuba, codified as Section
517,075 of the Florida statutes, and the rules and regulations thereunder
or is exempt therefrom.
(xviii) Registration Rights. There are no persons with registration
or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act, except as described in the Registration Statement.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
6. Definitions. For the purpose of this Agreement, the following terms
have the meanings set forth below:
"Affiliate" of any particular person or entity means any other person
or entity controlling, controlled by or under common control with such
particular person or entity.
"Fair Market Value" as of a particular date (the "valuation date"),
shall mean an amount equal to (i) the average of the closing sale price of the
shares of Common Stock on the Nasdaq National Market or, if the Common Stock is
not then listed on the Nasdaq National Market, on the principal securities
exchange, if any, on which the Common Stock is then listed for trading, on the
five consecutive trading days ending with (and inclusive of) the fifth trading
day prior to the valuation date, as reported in the Wall Street Journal (Western
Edition), or, (ii) if no sales take place on any one or more of such days on the
Nasdaq National Market or (as the case may be) such principal securities
exchange, the average of the closing bid and asked prices on such day or days as
officially reported or listed on the Nasdaq National Market or such other
principal securities exchange, or, (iii) if the Common Stock is not then listed
or admitted to trading on the Nasdaq National Market or other principal
securities exchange, the last sale price on such days if reported by a reputable
entity or system engaged in the regular reporting of securities prices. If
there is no such entity or system or the Common Stock is not publicly traded,
"Fair Market Value" shall be determined as of the valuation date by a nationally
recognized investment banking or accounting firm mutually acceptable to the
Company and the Purchaser.
"Officer's Certificate" means a certificate signed by the Company's
chairman, vice chairman, president, chief executive officer, chief financial
officer, or chief operating officer, stating that (i) the officer signing such
certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate, taken as a whole with the other documents delivered in connection
with this Agreement, does not misstate any material fact and does not omit to
state any material fact necessary to make the certificate not misleading.
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"Prospectus" means the final prospectus in the form first furnished to
the underwriters for use in connection with the Public Offerings.
"Registration Statement" means the registration statement on Form S-1
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") relating to the Public Offering, including the
exhibits thereto and schedules, if any, at the time it became effective and
including any information deemed part of such registration statement at the time
it became effective pursuant to paragraph (b) of Rule 430A under the 1933 Act,
including any Rule 462(b) Registration Statement.
"Rule 462(b) Registration Statement" means any registration statement
filed pursuant to Rule 462(b) under the 1933 Act.
"Subsidiary" means, with respect to any person, any corporation,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total Voting Stock is at the time owned or
controlled, directly or indirectly, by that person or one or more of the other
Subsidiaries of that person or a combination thereof, or (ii) if a partnership,
limited liability company, association or other business entity, a majority of
the partnership, limited liability company, or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by any
person or one or more subsidiaries of that person or a combination thereof. For
purposes hereof, a person or persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association, or
other business entity if such person or persons shall be allocated a majority of
partnership, association, or other business entity gains or losses or shall be
or control the managing director, general partner or manager of such
partnership, limited liability company, association, or other business entity.
"Voting Stock" means the Common Stock and any other securities of the
Company having the power generally (and not merely upon the occurrence of a
contingency) pursuant to the Company's charter and bylaws, to vote in the
election of the Company's directors; provided, however, that the percentage of
Voting Stock held by the Purchaser for purposes relating to the Option shall not
include (i) any shares of Common Stock subject to options granted by the
Purchaser prior to the date hereof, (ii) any shares of Common Stock held by
officers, directors or employees of the Purchaser, and (iii) any shares of
Common Stock held by any person or entity that would not be counted under
generally accepted accounting principles for determining whether the Purchaser
holds a majority of the Voting Stock for consolidated financial statement
reporting purposes.
7. Consolidation Option.
A. Grant of Option; Termination.
(a) On the terms and subject to the conditions set forth herein,
the Company hereby grants to the Purchaser the cumulative, continuing option
(the "Option") to purchase (directly or through a nominee, subsidiary or
Affiliate of the Purchasaer, whose ownership, sales or transfers of Voting Stock
the Purchaser has agreed will be attributed to the
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<PAGE>
Purchaser) such number of shares of Common Stock as may be necessary, when added
to all other shares of Voting Stock owned by the Purchaser, to enable the
Purchaser to have ownership of shares of Common Stock equal to the Applicable
Percentage (as hereinafter defined) of the Company's then outstanding shares of
Voting Stock. For this purpose, the "Applicable Percentage" shall be equal to
52%, provided that if Purchaser voluntarily sells or transfers, and thereby
reduces its percentage ownership of the Company's then outstanding shares of
Voting Stock to less than 52%, then the "Applicable Percentage" shall be equal
to such lesser percentage. The Option shall be exercisable, at the price and on
the terms provided below, in whole or in part from time to time, from and after
any time when the Purchaser owns less than the Applicable Percentage of the
Company's then outstanding Voting Stock.
(b) The Option shall terminate:
i. if the Purchaser sells or transfers shares of Common
Stock and as a result owns less than a majority of the then outstanding shares
of Voting Stock (based on the most recent information given in writing by the
Company to Purchaser regarding the number of such shares outstanding prior to
such sale); or
ii. if the percentage of the outstanding shares of Voting
Stock owned by the Purchaser is reduced below 50% other than as a result of the
Purchaser's voluntary sale or transfer of shares of Common Stock and the
Purchaser fails to acquire a sufficient number of shares of Common Stock so that
the Purchaser owns at least a majority of the then outstanding shares of Voting
Stock by July 31 of the calendar year next following the calendar year in which
such reduction occurs; provided, however, that if the process of determining the
Fair Market Value of the shares of Common Stock to be purchased hereunder is
pending as of such July 31, the Option shall not terminate if such shares of
Common Stock are paid for by the Purchaser within five (5) business days after
the completion of such determination.
(c) For purposes of determining the Applicable Percentage under
Section 7A(a) and the amount of Voting Stock held by the Purchaser pursuant to
Section 7A(b) in connection with a transaction where the Purchaser effects a
voluntary sale or transfer of Common Stock simultaneously with an issuance of
Voting Stock by the Company, the Purchaser shall be deemed to have sold or
transferred such shares of Common Stock prior to the Company's issuance.
B. Purchase Price. Subject to Section 8 hereof, the purchase price
payable upon each exercise of an Option shall be an amount equal to (i) the
weighted-average price per share at which the Common Stock was issued or sold in
a transaction pursuant to which the Option becomes exercisable (as
proportionately adjusted for any stock split, dividend, combination or other
event of or similar to the type described in Section 8A occurring after such
transaction) multiplied by the number of shares of Common Stock to be purchased
upon such exercise in the case of a transaction in which such price per share is
readily ascertainable by the amount of cash paid or the value of marketable
securities or other readily tradable property exchanged for such Common Stock,
or (ii) the Fair Market Value of the Common Stock to be issued pursuant to such
Option, in all other cases. The valuation date for purposes of
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<PAGE>
determining such Fair Market Value shall be the date of the transaction pursuant
to which the Option becomes exercisable, provided that if the determination of
Fair Market Value is to be made by an investment banking or accounting firm,
such determination shall be made as of a date as near as possible, in the
judgment of such firm, to the date upon which such firm delivers its
determination to the Purchaser and the Company. Any fees and expenses payable in
connection with such determination or in connection with referring a pricing
adjustment to the auditors of the Company pursuant to Section 8A hereof shall be
paid by the Company.
C. Manner of Exercise. The Purchaser shall exercise its Option by
delivery of a written exercise notice to the Company designating a date (the
"Issue Date"), which date shall be not less than five nor more than 25 business
days from the date of such exercise notice. On the Issue Date, provided that
all applicable regulatory approvals shall have been obtained, and there are no
injunctions outstanding prohibiting such transfer or any other regulatory or
governmental impediments to such transfer (collectively, "Governmental
Impediments"), the Company shall issue to the Purchaser (or any Affiliate or
nominee designated by the Purchaser) the number of shares of Common Stock as to
which the Option has been exercised against payment of the purchase price
therefor as set forth in Section 7B hereof. If there is any Governmental
Impediment, the Issue Date shall be postponed until the tenth business day after
the first day on which no Governmental Impediment remains outstanding (and
references herein to the Issue Date shall be construed accordingly), unless the
Purchaser and the Company agree on some other date. The Purchaser's obligation
to purchase the shares of Common Stock on an Issue Date pursuant to the exercise
of its Option is conditioned, in its discretion, on (i) no Material Adverse
Effect, or (ii) any event or facts that will, with the passage of time, result
in a Material Adverse Effect, having occurred between the time Purchaser gives
notice of the exercise of its Option and the Issue Date; provided, however, that
if the Purchaser determines not purchase shares of Common Stock as a result of
the occurrence of the foregoing, the Purchaser's right to exercise its Option to
purchase the shares of Common Stock it would have purchased pursuant to such
Option exercise or otherwise shall not be adversely affected.
D. Payment of Purchase Price.
(a) The purchase price payable upon any exercise of the Option
(the "Option Exercise Price") shall be payable by, at the option of the
Purchaser, (i) in check or wire transfer in immediately available funds to an
account designated by the Company, or (ii) in that number of registered shares
of common stock, $.01 par value per share, of the Purchaser ("Purchaser Shares")
equal to the fair market value of the Common Stock to be issued pursuant to the
Option divided by the average closing sales price per share of the Purchaser
Shares quoted on the Nasdaq National Market, as reported in the Wall Street
Journal (Western Edition), for the five business days ending two business days
before the Issue Date, rounded up to the nearest whole share. Notwithstanding
the foregoing, the Purchaser's right to pay the Option Exercise Price in
Purchaser Shares is subject to any restriction on the Company contained in the
documents then governing any loan the Company has with a bank or banks;
provided, however, that such restrictions may be no more restrictive than those
contained in the Company's Secured Loan Agreement dated as of May 17, 1996 with
Bank of America Illinois, as agent, as in effect on the date hereof; and
provided, further, that the Company agrees to use its reasonable best
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<PAGE>
efforts to obtain any necessary waivers or consents requested by the Purchaser
to allow the Option Exercise Price to be paid in Purchaser Shares.
(b) If the Option Exercise Price with respect to a particular
Option exercise is paid in Purchaser Shares and (i) the Company sells all of the
Purchaser Shares received by it with respect to such exercise within that number
of trading days commencing on the first trading day on which the Nasdaq National
Market is open for business following the Issue Date and ending on the day that
is that number of days thereafter determined by dividing the number of such
Purchaser Shares so received by 100,000 (rounding up to the next whole day),
plus two additional days (the "Guarantee Period") for cash in one or more bona
fide broker's or market maker transactions through or to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") or as otherwise provided in any
prospectus pursuant to which the sale and the Company's resale of the Shares is
registered (the "Purchaser Prospectus") to one or more persons not affiliated
with, related to, or associated with the Company, (ii) the aggregate proceeds
from the sale of such Purchaser Shares received by the Company, net of broker's
commissions, is less than the dollar amount of the Option Exercise Price (the
"Shortfall"), and (iii) the Purchaser receives notice from the Company within 14
days of the expiration of the Guarantee Period of the amount of the Shortfall
with copies of applicable confirmation slips or other evidence reasonably
satisfactory to the Purchaser attached thereto, the Purchaser shall, within
three business days of the receipt of such notice, in it sole discretion, either
(x) pay to the Company an amount in cash equal to the Shortfall, or (y) deliver
that number of Shares determined in the manner provided in Section 7D(d) below.
(c) Notwithstanding anything herein to the contrary, the
Purchaser may not exercise its right to pay the Option Exercise Price through
the issuance of Purchaser Shares at any time that the distribution of Purchaser
Shares by the Purchaser or the resale of Purchaser Shares by the Company during
the Guarantee Period would be prohibited by law, including pursuant to Rule
10b-6 under the Securities Exchange Act of 1934, as amended (the "1934 Act").
(d) In the event the Purchaser elects to pay the Shortfall in
Purchaser Shares, the number of Purchaser Shares to be delivered to the Company
shall be determined by dividing the Shortfall by the average closing per share
sales price of the Purchaser Shares quoted on the Nasdaq National Market, as
reported in the Wall Street Journal (Western Edition), for the five (5) trading
days immediately prior to the last business day before the date on which the
Purchaser delivers the Purchaser Shares to the Company in payment of the
Shortfall. In the event the Purchaser elects to pay the Shortfall in Purchaser
Shares, the provisions of this Section 7D, as applicable, shall apply for
purposes of determining the length of a new Guarantee Period, which shall
commence on the trading day immediately following the date on which the Company
(or its representative) receives such Purchaser Shares, and other terms relating
to the sale of such Purchaser Shares, including, without limitation, any
additional Shortfall.
(e) In the event the Purchaser pays the Option Exercise Price
hereunder with Purchaser Shares, the Company agrees that (i) during any trading
day during the Guarantee Period the Company will not sell more than 100,000
Purchaser Shares; provided, that, notwithstanding the limitations on sales set
forth in this paragraph, on any day during the
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Guarantee Period, the Purchaser may permit the Company to sell all, or more than
100,000, Purchaser Shares received in payment of the Option Exercise Price
subject to the volume limitations contained from time to time in the Purchaser
Prospectus, and (ii) it will not sell any Purchaser Shares during any period
when Boston Chicken has notified the Company that the resale of the Advance may
be prohibited by Rule 10b-6 under the 1934 Act or that such resale may violate
other applicable securities laws, rules or regulations; provided, that if such
prohibition occurs during the Guarantee Period the Guarantee Period shall be
extended one full day for each day that the Company is prohibited from selling
as a result of the limitations in this Section 7D(e).
(f) The Purchaser agrees that in the event the Company is unable
to trade all or part of the Purchaser Shares permitted to be traded by the
Company on any trading day during the Guarantee Period through no fault of the
Company, the Guarantee Period shall be extended by one trading day for each such
trading day on which the Company is so unable to trade. The Company will notify
the Purchaser of such extension of the Guarantee Period by the close of business
on the third trading day following the date on which the Company is so unable to
trade.
E. New Shares Pari Passu. The shares of Common Stock to be issued
on each exercise of an Option shall rank pari passu in all respects with the
shares of Common Stock outstanding on the Issue Date applicable thereto, save
only as to any dividend, rights or distribution the record date for which shall
have occurred before the Issue Date. All shares of Common Stock issued upon an
exercise of an Option shall be subject to such limitations, and shall have such
rights and privileges, under the Company's charter and bylaws, as are applicable
generally to the Common Stock. Each share of Common Stock issued pursuant to an
exercise of an Option shall be duly authorized, validly issued and fully paid
and nonassessable, and will not be subject to any restriction under the
Company's charter or bylaws, as such may be amended from time to time, that is
not applicable to shares of Common Stock generally.
F. Share Certificates and Listing. The Company shall, promptly
after the Issue Date applicable to an exercise of an Option, cause a certificate
for the shares of Common Stock issued on such exercise to be delivered to the
Purchaser or as it may direct. The Company shall, as soon as reasonably
practicable after such issue, cause the shares so issued to be listed on the
Nasdaq National Market or principal securities exchange on which the Common
Stock is then listed for trading.
G. Reservation of Shares. The Company shall maintain reserved for
issuance at all times during the period the Option is exercisable that number of
authorized but unissued shares of Common Stock issuable upon exercise of the
Option from time to time.
H. General Indemnification Relating to Purchaser Shares.
(a) The Purchaser agrees to reimburse, to the extent permitted by
law, the Company, its directors, officers, employees and agents, and each
person, if any, who controls the Company within the meaning of the 1933 Act, for
any and all losses, claims, damages, expenses and liabilities to which they or
any of them may become subject under the 1933 Act or any other statute or common
law or otherwise by reason of its offer and sale of Purchaser Shares pursuant to
Section 7D, and to reimburse the Company for any reasonable legal or other
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<PAGE>
expenses actually and reasonably incurred in connection with investigating any
claims and defending any actions, insofar as such losses, claims, damages,
expenses, liabilities, or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or
any alleged untrue statement of a material fact contained in or incorporated by
reference in the registration statement which contains the Purchaser Prospectus
(the "Purchaser Registration Statement") or any post-effective amendment
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; or
(ii) any untrue statement of a material fact or
any alleged untrue statement of a material fact contained or incorporated by
reference in the Purchaser Prospectus (as amended or supplemented if the
Purchaser shall have filed with the Securities and Exchange Commission any
amendment or supplement thereto), if used within the period during which the
Purchaser is required to keep the Purchaser Registration Statement in which such
Purchaser Prospectus is contained current, or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading;
provided, however, that the Purchaser's obligations contained herein shall not
apply to losses, claims, damages, expenses, liabilities, or actions arising out
of, or based upon any such untrue statement or any such omission or alleged
omission, if such statement or omission was made in reliance upon, and in
conformity with, information relating to the Company furnished to the Purchaser
by the Company expressly for use in connection with the preparation of the
Purchaser Registration Statement or any prospectus contained in the Purchaser
Registration Statement or any such amendment or supplement thereto.
(b) The Company shall (in the same manner and to the same
extent as set forth in subsection (a) above), reimburse, to the extent permitted
by law, the Purchaser, its directors, officers, employees and agents, and each
person, if any, who controls the Purchaser within the meaning of the 1933 Act,
if such statement or omission was made in reliance upon and in conformity with
information relating to the Company furnished to the Purchaser by the Company
expressly for use in connection with the preparation of the Purchaser
Registration Statement or the Purchaser Prospectus or any amendment or
supplement thereto.
(c) Any person entitled to reimbursement hereunder will (i)
give written notice to the reimbursing party of any claim with respect to which
it seeks reimbursement within 14 days of the person entitled to reimbursement
paying the Reimbursable Expenses (provided, however, that any failure by a
person entitled to reimbursement hereunder to give such prompt written notice
shall not adversely affect such person's rights hereunder unless and then only
to the extent that such failure prejudices the rights of the reimbursing party
hereunder) and (ii) unless in such party's reasonable judgment a conflict or
interest between such party and the reimbursing parties may exist with respect
to such claim, permit such reimbursing party to assume the defense of such claim
with counsel reasonably satisfactory to the party being
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reimbursed. If such defense is assumed, the reimbursing party will not be
subject to any liability for any settlement made by the party being reimbursed
without its consent (but such consent will not be unreasonably withheld). A
reimbursing party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties being reimbursed by such reimbursing party with respect
to such claim, unless in the reasonable judgment of such counsel a conflict of
interest may exist between such party being reimbursed and any other of such
reimbursed parties with respect to such claim.
(d) (i) If the reimbursement provided for in Sections 7H(a)
and (b) is unavailable to or insufficient to hold harmless the party being
reimbursed under paragraphs (a) or (b) hereof in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then each applicable
reimbursing party, in lieu of reimbursing such party, shall contribute to the
amount paid or payable by such party being reimbursed as a result of such
losses, claims, damages, expenses, or liabilities in such proportion as is
appropriate to reflect the relative fault of the Purchaser and the Company in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses, or liabilities. The relative fault of the Purchaser
and the Company shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Purchaser or by the
Company, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, expenses, and
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any action or claim.
(ii) The Purchaser and the Company agree that it would
not be just and equitable if contribution pursuant to this Section 7H were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The Purchaser agrees to reimburse the Company, within 14
days after receipt of written evidence of payment thereof, for the reasonable
legal fees and expenses incurred by the Company in connection with the sale of
any Purchaser Shares received pursuant to Section 7D.
8. Certain Corporate Actions.
A. Capitalization Issues, Distributions, Sub-division and
Consolidation. If, at any time on or after the first trading day by reference to
which the Fair Market Value of the Common Stock is determined for the purposes
of any exercise of an Option and before the Issue Date relating to such
exercise, the Company shall announce that it proposes to issue of shares of
Common Stock by way of recapitalization or to declare, pay or make any dividend
or other distribution (whether in cash or other property), to make any sub-
division of the outstanding shares of Common Stock into a larger number of
shares or to consolidate the outstanding shares
17
<PAGE>
of Common Stock into a smaller number of shares, then the Company and the
Purchaser shall consult to determine whether, and to what extent, any adjustment
should be made to the number of shares of Common Stock to be issued on the
exercise of its Option and/or to the purchase price payable therefor, in the
light of all the facts and circumstances relating to such proposed
recapitalization, dividend or other distribution, sub-division or consolidation
(including, without limitation, the impact thereof on the sales prices of the
Common Stock on the trading days relevant to the determination of Fair Market
Value and the relationship of "ex" recapitalization, dividend, sub-division or
consolidation dates and/or the record or effective date thereof with such
trading days and/or with the Issue Date relating to such exercise). If the
parties disagree on the question of adjustment, either or both of them may refer
the matter to the Company's independent auditors to determine the same. In
making such determination, such auditors shall act as experts and not as
arbitrators and their determination shall, in the absence of manifest error, be
conclusive and binding. In arriving at their determination, they shall be
empowered to take, pay for and rely upon such independent advice or opinion
(including, without limitation, as to the impact of the proposed
recapitalization, dividend or other distribution, sub-division or consolidation
on the said sales prices of the Common Stock) as they consider appropriate.
B. Certain Diluting Events. If the Company shall (i) issue or sell any
shares of Common Stock for a consideration per share less than the Fair Market
Value thereof as of the date of issuance, or (ii) issue any share of Common
Stock pursuant to warrants, options, rights or convertible securities at a price
or a conversion, exercise, exchange or subscription rate less than the Fair
Market Value thereof as of the date of issuance (each a "Diluting Event"), and
as a result thereof the Option becomes exercisable, the purchase price payable
upon the exercise of the Option shall be reduced to a price equivalent to the
lesser of the Fair Market Value of the shares of Common Stock acquired upon the
exercise of such Option (as determined pursuant to Section 7B hereof) and the
weighted average price at which such shares were issued in Diluting Events. For
purposes hereof, "Diluting Event" shall not include (i) any issuance of shares
of Common Stock pursuant to employee benefit plans, stock option plans or stock
options approved by the Company's Board of Directors, (ii) any issuance of
shares of Common Stock to officers or employees of the Company in an aggregate
amount not to exceed $1 million in any calendar year, (iii) any issuance of
shares of Common Stock pursuant to warrants, options, rights or convertible
securities at a price greater than or equal to the Fair Market Value of the
Common Stock on the date the Company sold or issued, or agreed to sell or issue,
such warrants, options, rights or convertible securities, or (iv) any offer of
shares of Common Stock pro rata to all holders of Common Stock on equal terms
and conditions.
C. Restrictions on the Company. As long as the Option has not
terminated, the Company shall not, without the prior consent of the Purchaser:
(i) alter any rights attaching to the Common Stock;
(ii) make any offer or issue or sell any equity securities, or any
debt securities convertible into equity securities, in either case other
than Common Stock;
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<PAGE>
(iii) make any distribution of assets or securities if the fair market
value of the assets so distributed or represented by such securities as of
the year-end next preceding the distribution date, or the annual revenues
of the business represented by such assets or securities for such year
exceed 10% of the consolidated gross assets of the Company as of such date
or, as the case may be, of the consolidated gross revenues of the Company
for such year, as disclosed by its then most recently audited consolidated
financial statements;
(iv) make or permit any Subsidiary to make an assignment for the
benefit of creditors or admit in writing its inability to pay its debts
generally as they become due; or
(v) petition or apply, or permit any Subsidiary to petition or apply,
to any tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Company or any Subsidiary or of any substantial part of
the assets of the Company or any Subsidiary, or commence any proceeding
(other than a proceeding for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction; or, if any such petition or
application is filed, or any such proceeding is commenced, against the
Company or any Subsidiary, by any act of the Company or Subsidiary indicate
its approval thereof, consent thereto or acquiescence therein.
9. Purchasers' Investment Representations.
--------------------------------------
The Purchaser hereby represents to the Company that:
(i) the Purchaser is acquiring the Shares solely for investment
for its own account and not with a view to, or for sale in connection with,
a public distribution in violation of the federal securities laws, and
acknowledges that each certificate for Shares purchased hereunder will be
imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally
issued on August 1, 1996, and have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be
sold, transferred, or assigned unless registered under the Act or
an opinion of counsel or other documentation reasonably
satisfactory to the Company is obtained to the effect that such
sale, transfer, or assignment is exempt from the registration
requirements of the Act."
(ii) the Purchaser has the financial ability to bear the economic
risk of an investment in the Shares, has adequate means of providing for
its current needs and contingencies, has no need for liquidity in such
investment and could afford a complete loss of such investment; and
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<PAGE>
(iii) the Purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D of the Securities Act; and
(iv) the Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of its investment in the Shares; and
(v) the Purchaser expressly acknowledges receipt of the
Prospectus and acknowledges and agrees that the Purchaser has read and
understood the information contained therein; and
(vi) the Purchaser has been given full opportunity to ask
questions of and to receive answers from representatives of the Company
concerning the terms and conditions of the investment and the business of
the Company and such other information as it desires in order to evaluate
an investment in the Shares, and all such questions have been answered to
the full satisfaction of the Purchaser; and
(vii) the Purchaser understands that the Shares have not been
registered under the Act or the securities laws of any state, and are being
issued in reliance upon specific exemptions from registration thereunder,
and the Purchaser agrees that the Shares may not be sold, offered for sale,
transferred, pledged, hypothecated, or otherwise disposed of except
pursuant to (a) a registration statement with respect to such securities
which is effective under the Act and under the securities act of any
relevant state, (b) Rule 144 under the Act, or (c) any other exemption
from registration under the Act and under the securities act of any
relevant state relating to the disposition of securities, provided an
opinion of counsel is furnished, reasonably satisfactory in form and
substance to the Company, that an exemption from the registration
requirements of the Act and such state act is available. The Purchaser
understands the legal consequences of the foregoing to mean that it may be
required to bear the economic risk of its investment in the Shares for an
indefinite period of time. The Purchaser understands that any instruments
initially representing the Shares shall bear legends restricting the
transfer thereof. The Purchaser agrees not to resell or otherwise dispose
of all or any of the Shares, except as permitted by law, including, without
limitation, any and all applicable regulations under the Act and any state
law or regulations; and
(viii) the Purchaser understands that no federal or state agency
has made any finding or determination as to the fairness of an investment
in, or any recommendation or endorsement of, the Shares.
10. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Purchaser or on its behalf, until 30 days after
audited financial statements for the Company's fiscal year 1997 are delivered to
the
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<PAGE>
Purchaser. Nothing herein shall imply any duty of the Company after the
execution and delivery of this Agreement to update any representations or
warranties made herein.
11. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind the respective successors and assigns of
the parties hereto whether so expressed or not. References herein to Purchaser
shall be deemed to include such assignees. A sale or other transfer of Shares
shall not, however, of itself without express assignment of rights or
obligations hereunder, be deemed an assignment of any such rights or
obligations.
12. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by, or
invalid under, applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
13. Counterparts. This Agreement may be executed simultaneously in
counterparts, any one of which need not contain the signature of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.
14. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
15. GOVERNING LAW. THE DELAWARE GENERAL CORPORATION LAW WILL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL
OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF COLORADO.
16. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
express courier service (charges prepaid) or by facsimile transmission, or three
business days after being mailed to the recipient by certified or registered
mail, return receipt requested and postage prepared. Such notices, demands and
other communications will be sent to the Purchaser as follows:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 384-5339
and to the Company as follows:
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<PAGE>
Einstein/Noah Bagel Corp.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written
EINSTEIN/NOAH BAGEL CORP.
/s/ Paul A. Strasen
-----------------------------
Name: Paul A. Strasen
-----------------------
Title: Vice President
----------------------
BOSTON CHICKEN, INC.
/s/ Donald J. Bingle
-----------------------------
Name: Donald J. Bingle
-----------------------
Title: Vice President
----------------------
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<PAGE>
REGISTRATION AGREEMENT
----------------------
THIS AGREEMENT is made as of August 1, 1996 between Einstein/Noah
Bagel Corp., a Delaware corporation (the "Company"), and Boston Chicken, Inc., a
Delaware corporation (the "Investor").
The parties to this Agreement are parties to a Concurrent Private
Placement Agreement of August 1, 1996 (the "Private Placement Agreement"). In
order to induce the Investor to enter into the Private Placement Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
Closing under the Private Placement Agreement. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time after the earlier of (i)
the date on which the Company requests that the Securities and Exchange
Commission (the "SEC") declare effective the Resale Registration (as defined in
and as required by that certain Amended and Restated Registration Rights
Agreement dated as of February 1, 1996 (the "Other Registration Rights
Agreement") by and among the Company and the Stockholders named therein (such
Stockholders other than the Investor being herein sometimes referred to as the
"Other Stockholders"), and (ii) the date thirteen months after the Closing of
the Private Placement Agreement, the holders of at least 30% of the Registrable
Securities may request registration under the Securities Act of 1933, as amended
(the "Securities Act"), of all or part of their Registrable Securities on Form
S-1 or any similar long-form registration ("Long-Form Registrations"), and the
holders of at least 20% of the Registrable Securities may request registration
under the Securities Act of all or any portion of their Registrable Securities
on Form S-2 or S-3 or any similar short-form registration ("Short-Form
Registrations") if available. All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations." In connection
with the first Demand Registration requested hereunder, the Company agrees, for
the express benefit of the Other Stockholders, to waive any holdback imposed by
the Company pursuant to Section 3.4 of the Other Registration Rights Agreement
on the Other Stockholders whose securities are registered in the Resale
Registration, and the Investor agrees, for the express benefit of such Other
Stockholders, to consent to any such waiver, if applicable. Each request for a
Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered and the anticipated per share price range
for such offering. Within ten days after receipt of any such request, the
Company shall give written notice of such requested registration to all
<PAGE>
other holders of Registrable Securities and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of the
Company's notice.
(b) Registrations. The holders of Registrable Securities shall be
entitled to request five Demand Registrations in which the Company shall pay all
Registration Expenses; provided that the aggregate offering value of the
Registrable Securities requested to be registered in any Long-Form Registration
must equal at least $5,000,000 and in any Short-Form Registration must equal at
least $3,000,000. Unless a Long-Form Registration is requested by the holders
initially requesting registration, Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any applicable short
form; provided that that such holders shall not be entitled to more than two
Long-Form Registrations hereunder. After the Company has become subject to the
reporting requirements of the Securities Exchange Act, the Company shall use its
reasonable best efforts to make Short-Form Registrations on Form S-3 available
for the sale of Registrable Securities. A registration shall not count as one
of the permitted Demand Registrations until it has become effective (unless such
Demand Registration has not become effective due solely to the fault of the
holders requesting such registration), and neither the last nor any subsequent
Demand Registration shall count as one of the permitted Demand Registrations
unless the holders of Registrable Securities are able to register and sell at
least 90% of the Registrable Securities requested to be included in such
registration; provided, that in any event the Company shall pay all Registration
Expenses in connection with any registration initiated as a Demand Registration
whether or not it has become effective, and whether or not such registration has
counted as one of the permitted Demand Registrations (unless such Demand
Registration does not become effective due solely to the fault of the holders
requesting such registration).
(c) Priority on Demand Registrations. The Company shall not include
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of at least a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering,
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in such registration prior to
the inclusion of any securities which are not Registrable Securities the number
of Registrable Securities requested to be included which in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering, pro rata among the respective holders thereof on the basis of the
amount of Registrable Securities owned by each such holder.
(d) Restrictions on Long-Form Registrations. The Company shall not be
obligated to effect any Long-Form Registration within 120 days after the
effective date of a previous Long-Form Registration or a registration in which
the holders of Registrable Securities were given piggyback rights pursuant to
paragraph 2 and in which there was no reduction in the number of Registrable
Securities requested to be included. The Company may postpone for up to
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<PAGE>
120 days the filing or the effectiveness of a registration statement for a
Demand Registration if the Company's board of directors determines in its
reasonable good faith judgment that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer, reorganization or similar transaction; provided that in such event, the
holders of Registrable Securities initially requesting such Demand Registration
shall be entitled to withdraw such request and, if such request is withdrawn,
such Demand Registration shall not count as one of the permitted Demand
Registrations hereunder and the Company shall pay all Registration Expenses in
connection with such registration. The Company may delay a Demand Registration
hereunder only once in any twelve-month period.
(e) Selection of Underwriters. The holders of a majority of the
Registrable Securities initially requesting registration hereunder shall have
the right to select the investment banker(s) and manager(s) to administer the
offering, if any, subject to the Company's approval which shall not be
unreasonably withheld.
(f) Other Registration Rights. Except as provided in this Agreement,
the Company shall not hereafter grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of the holders of a majority of the Registrable
Securities; provided that the Company may grant rights to other Persons to (i)
participate in Piggyback Registrations so long as such rights are subordinate
to the rights of the holders of Registrable Securities with respect to
such Piggyback Registrations and (ii) request registrations so long as the
holders of Registrable Securities are entitled to participate in any such
registrations with such Persons pro rata on the basis of the number of shares
owned by each such holder.
2. Piggyback Registrations.
(a) Right to Piggyback. Commencing on the date on which the holders
of Registrable Securities are first entitled to request a Demand Registration
pursuant to paragraph 1(a) above, whenever the Company proposes to register any
of its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice (in any event within three business days after
its receipt of notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities of its intention
to effect such a registration and shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within such 15-day period. Notwithstanding the
foregoing, the Company shall not be required to effect any registration of
Registrable Securities under this paragraph 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
employee benefit plans, or incidental to the filing of a registration statement
for an offering to be made on a delayed or continuous basis pursuant to Rule
415(a)(1)(viii) under the Securities Act or any similar rule that may be adopted
by the SEC.
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<PAGE>
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (iii) third, other securities requested to be
included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially requesting
such registration, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be included
in such registration, pro rata among the holders of such Registrable Securities
on the basis of the number of shares owned by each such holder, and (iii) third,
other securities requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
underwritten secondary registration on behalf of the holders of the Company's
securities, the selection of investment banker(s) and manager(s) for the
offering must be reasonably acceptable to the holders of a majority of the
Registrable Securities included in such Piggyback Registration. Such approval
will be assumed unless notice to the contrary is given by the holders of a
majority of the Registrable Securities included in such Piggyback Registration
to the Company within ten days of such holders' receipt of notice of selection
by the Company.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not, without the prior
written consent of the holders of a majority of the Registrable Securities
(which consent shall not be unreasonably withheld), file or cause to be effected
any other registration for the underwritten offering, issue or sale of any of
its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except on Form
S-8 or any successor form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least 90 days has
elapsed from the effective date of such previous registration.
4
<PAGE>
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period (or such shorter period as the underwriters managing the registered
public offering may permit) beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) In connection with any underwritten registration, the Company (i)
shall not effect any public sale or distribution of its equity securities, or
any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the 90-day period (or such
longer period as may be requested by the underwriters managing the registered
public offering) beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) shall use its reasonable best efforts to cause each
holder of at least 2% (on a fully-diluted basis) of its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock,
purchased from the Company at any time after the date of this Agreement (other
than in a registered public offering or pursuant to stock options granted under
a stock option plan primarily for employees, officers or directors) to agree not
to effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than nine months and comply with the provisions of the Securities Act with
5
<PAGE>
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided, however, that the Company shall not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the Nasdaq Stock Market National
Market System automated quotation system and, if so listed, use its reasonable
best efforts to secure designation of all such Registrable Securities covered by
such registration statement as a Nasdaq "national market system security" within
the meaning of Rule 11Aa2-1 of the Securities Exchange Act of 1934, as amended,
or, failing that, to secure Nasdaq authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such Registrable
Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other reasonable actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite
6
<PAGE>
or facilitate the disposition of such Registrable Securities (including
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to request the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included; and
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its reasonable best efforts promptly to
obtain the withdrawal of such order; and
(m) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Registrable
Securities; and
(n) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
7
<PAGE>
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
initially requesting such registration and for the reasonable fees and
disbursements of each additional counsel retained by any holder of Registrable
Securites for the purpose of rendering a legal opinion on behalf of such holder
in connection with any underwritten Demand Registration or Piggyback
Registration.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers, directors, employees,
agents, and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
8
<PAGE>
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
officers, directors, employees, agents, and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the obligation
to indemnify shall be individual to each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities.
7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification
9
<PAGE>
obligations to the Company or the underwriters with respect thereto, except as
otherwise provided in paragraph 6 hereof.
8. Definitions.
(a) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, sole proprietorship, or other entity,
business association or organization.
(b) "Registrable Securities" means (i) any shares of common stock,
$0.01 par value per share ("Common Stock"), of the Company issued pursuant to
the Private Placement Agreement, (ii) any shares of Common Stock issued or
issuable with respect to the shares of Common Stock referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of Common Stock held by Persons
holding securities described in clauses (i) and (ii) above (including, without
limitation, any shares of Common Stock acquired pursuant to the Private
Placement Agreement or conversion of convertible debt). Notwithstanding the
foregoing, the Company shall not be required to include in any Demand
Registration or any Piggyback Registration any Registrable Securities that are
then eligible to be sold pursuant to Rule 144(k) under the Securities Act. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been distributed to the public pursuant to
a offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force). For purposes of this Agreement, a
Person shall be deemed to be a holder of Registrable Securities, and the
Registrable Securities shall be deemed to be in existence, whenever such Person
has the right to acquire directly or indirectly such Registrable Securities
(upon conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected, and
such person shall be entitled to exercise the rights of a holder of Registrable
Securities hereunder.
(c) Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Private Placement Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. Except as permitted in paragraph 1(g)
hereof, the Company shall not hereafter enter into any agreement with respect to
its securities which is inconsistent with or violates the rights granted to the
holders of Registrable Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
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<PAGE>
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, Investor (as long as the Investor holds any
Registrable Securities) and holders of at least a majority of any other
outstanding Registrable Securities.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) Severability. Whenever 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 is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. The Delaware General Corporation Law shall govern
all issues and questions concerning the relative rights of the Company and its
stockholders. All other issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Colorado, without giving effect to any choice of law or
conflict of law rules or provisions that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
11
<PAGE>
(j) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
courier service (charges prepaid) or sent via facsimile transmission, and three
days after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to the Investor at the address indicated below and
to the Company at the address indicated below:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 384-5339
Einstein/Noah Bagel Corp.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) Effect on Prior Rights. This Agreement supersedes and replaces
in all respects the Investor's and the Company's rights and obligations with
respect to each other (and only with respect to each other) contained in the
Other Registration Rights Agreement.
(l) Notice of Transfer. The Investor and any other holder of
Registrable Securities agrees to notify the Company of any transfers of
Registrable Securities; provided, however, that any failure to give such notice
shall not adversely affect the rights to which any holder or transferee of
Registrable Securities would otherwise be entitled hereunder.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EINSTEIN/NOAH BAGEL CORP.
By /s/ Paul A. Strasen
-------------------------
Name: Paul A. Strasen
Title: Vice President
BOSTON CHICKEN, INC.
By /s/ Donald J. Bingle
-------------------------
Name: Donald J. Bingle
Title: Vice President
13
<PAGE>
Exhibit 10.4
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, regardless of the cause for such
termination; provided, however, that the Option and this Agreement shall not
terminate and the Option shall accelerate and immediately become 100% vested in
the event of Grantee's death or permanent disability during his employment with
BCI.
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
2
<PAGE>
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.
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: /s/ Donald J. Bingle /s/ Mark W. Stephens
------------------------------- --------------------------------
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
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, regardless of the cause for such
termination; provided, however, that the Option and this Agreement shall not
terminate and the Option shall accelerate and immediately become 100% vested in
the event of Grantee's death or permanent disability during his employment with
BCI.
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:
Laurence Zwain
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: /s/ Donald J. Bingle /s/ Laurence Zwain
----------------------------- ------------------------------
TITLE: VICE PRESIDENT LAURENCE ZWAIN
----------------------------
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 10.6
OPTION AGREEMENT
This Option Agreement (this "Agreement") is made as of this 8th day of
April, 1996, between Boston Chicken, Inc., a Delaware corporation ("BCI"), and
Mark Goldston ("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 1,531.88 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 or acceleration of the Option as
provided herein, the Option may be exercised, at any time and from time to time
after the date of grant, 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 before April 7, 1997 up to 34%
April 8, 1997 to April 7, 1998 up to 67%
On or after April 8, 1998 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, regardless of the cause for such
termination; provided, however, that the Option and this Agreement shall not
terminate and the Option shall accelerate and immediately become 100% vested in
the event of Grantee's death or permanent disability during his employment with
BCI.
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 that 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 Goldston
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: /s/ Donald J. Bingle /s/ Mark Goldston
------------------------------ -------------------------------
TITLE: VICE PRESIDENT MARK GOLDSTON
-----------------------------
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 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Ended Two Quarters Ended
------------------------- ---------------------------
July 9, July 14, July 9, July 14,
1995 1996 1995 1996
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average number of shares outstanding 46,381 63,648 45,706 61,848
Dilutive effect of common stock options
and warrants 3,652 3,483 3,483 3,675
---------- ----------- ----------- ------------
Adjusted primary weighted average number of
common and equivalent shares outstanding 50,033 67,131 49,189 65,523
========== ============ =========== ============
Fully diluted earnings per share:
Weighted average number of shares outstanding 46,381 63,648 45,706 61,848
Dilutive effect of common stock options
and warrants 3,895 3,483 3,601 3,675
---------- ----------- ----------- ------------
Adjusted fully diluted weighted average number
of common and equivalent shares outstanding 50,276 67,131 49,307 65,523
========== =========== =========== ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-14-1996
<CASH> 110,932
<SECURITIES> 0
<RECEIVABLES> 31,743
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 150,483
<PP&E> 354,429
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,371,414
<CURRENT-LIABILITIES> 45,206
<BONDS> 306,031
0
0
<COMMON> 639
<OTHER-SE> 884,722
<TOTAL-LIABILITY-AND-EQUITY> 1,371,414
<SALES> 26,738
<TOTAL-REVENUES> 111,908
<CGS> 9,948
<TOTAL-COSTS> 53,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,335
<INCOME-PRETAX> 52,384
<INCOME-TAX> 19,798
<INCOME-CONTINUING> 31,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,565
<EPS-PRIMARY> .48
<EPS-DILUTED> 0
</TABLE>
