<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 7, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOSTON CHICKEN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3904053
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
14103 DENVER WEST PARKWAY
GOLDEN, COLORADO 80401-4086
(303) 278-9500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
MARK W. STEPHENS
VICE CHAIRMAN OF THE BOARD AND CHIEF FINANCIAL OFFICER
BOSTON CHICKEN, INC.
14103 DENVER WEST PARKWAY
GOLDEN, COLORADO 80401-4086
(303) 278-9500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
PATRICK J. MALONEY DAVID A. SCHUETTE
BELL, BOYD & LLOYD MAYER, BROWN & PLATT
70 WEST MADISON STREET 190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60602 CHICAGO, ILLINOIS 60603
(312) 372-1121 (312) 782-0600
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Convertible Subordinated
Debentures due 2004.... $287,500,000(1) 100%(2) $287,500,000(2) $87,122
- -------------------------------------------------------------------------------------
Common Stock, $.01 par (3) -- -- --
value..................
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</TABLE>
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(1) Includes $37,500,000 principal amount of Convertible Subordinated
Debentures due 2004 (the "Debentures") which may be purchased pursuant to
an over-allotment option granted by the Registrant to the Underwriters.
(2) Estimated solely for purpose of calculating the registration fee.
(3) Includes such indeterminate number of shares of Common Stock as may be
issuable upon conversion of the Debentures registered hereby.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 7, 1997
PROSPECTUS
$250,000,000
BOSTON CHICKEN, INC.
[LOGO OF BOSTON MARKET]
% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
-----------
The % Convertible Subordinated Debentures due 2004 (the "Debentures") of
Boston Chicken, Inc., a Delaware corporation (the "Company"), offered hereby
will be convertible at any time prior to maturity, unless previously redeemed,
into shares of common stock, $.01 par value per share, of the Company ("Common
Stock") at a conversion price of $ per share, subject to adjustment under
certain conditions. The Common Stock is traded on the Nasdaq National Market
under the symbol "BOST". On March 5, 1997, the last sale price of the Common
Stock as reported on the Nasdaq National Market was $32 1/4 per share. Interest
on the Debentures will be payable semi-annually on and of each year,
commencing , 1997.
The Debentures are not redeemable prior to , 2000. Thereafter, the
Debentures are redeemable at the option of the Company, in whole or in part, at
any time and from time to time, at the redemption prices set forth herein, plus
accrued interest. Upon a Change in Control, holders of Debentures will have the
right, subject to certain conditions and restrictions, to require the Company
to purchase all or any part of their Debentures at the principal amount thereof
plus accrued and unpaid interest. See "Description of Debentures".
The Debentures will be subordinate in right of payment to all existing and
future Senior Indebtedness of the Company. As of March 3, 1997, the Company had
approximately $282.0 million of indebtedness outstanding (excluding accrued
interest thereon) that would have constituted Senior Indebtedness. The
Debentures will rank pari passu with the Company's Liquid Yield Option Notes
due 2015 (the "LYONs") and 4 1/2% Debentures due 2004 (the "4 1/2%
Debentures"). Following completion of this offering, the Company anticipates it
will call for the redemption of its 4 1/2% Debentures in accordance with the
terms of the indenture related thereto. See "Use of Proceeds," "Capitalization"
and "Description of Debentures--Subordination of Debentures". Application will
be made for the quotation of the Debentures on the Nasdaq SmallCap Market.
SEE "RISK FACTORS" ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE DEBENTURES OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
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<S> <C> <C> <C>
Per Debenture.......... 100% % %
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Total(4)............... $250,000,000 $ $
</TABLE>
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(1) Plus accrued interest, if any, from the date of initial issuance.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting".
(3) Before deducting expenses payable by the Company estimated at $625,000.
(4) The Company has granted the several Underwriters an option to purchase up
to an additional $37,500,000 aggregate principal amount of Debentures,
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discount, and Proceeds to
Company will be $ , $ and, $ , respectively. See
"Underwriting".
-----------
The Debentures are being offered by the several Underwriters, subject to
prior sale, when, as, and if issued to and accepted by them, subject to the
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel, or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Debentures will be made in New York, New York on or about
, 1997.
-----------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
MORGAN STANLEY & CO.
INCORPORATED
-----------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports, registration
statements, proxy statements, and other information filed by the Company with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's Regional Offices, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, 7 World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, such as the Company, that file
electronically with the Commission.
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), in respect of the Debentures offered
hereby. For purposes hereof, the term "Registration Statement" means the
initial Registration Statement and any and all amendments thereto. This
Prospectus omits certain information contained in the Registration Statement
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Debentures offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto. Statements herein concerning the contents of any contract or other
document are not necessarily complete, and in each instance reference is made
to such contract or other document filed with the Commission as an exhibit to
the Registration Statement, or otherwise, each such statement being qualified
by, and subject to, such reference in all respects.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES OR
THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE
OF DEBENTURES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING".
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements of the Company and Notes
thereto included or incorporated by reference in this Prospectus. Except as
otherwise specified, the information in this Prospectus assumes no exercise of
the Underwriters' over-allotment option. See "Underwriting". References in this
Prospectus to the "Company" mean the Company, its predecessors, and its and
their subsidiaries from time to time, unless the context otherwise requires.
Boston Chicken(R) and Boston Market(R) are trademarks owned by the Company, and
Einstein Bros.(TM) and Noah's New York Bagels(R) are trademarks owned by
Einstein/Noah Bagel Corp.
THE COMPANY
The Company franchises and operates retail food service stores under the
Boston Market brand name that specialize in fresh, convenient meal solutions
featuring home style entrees of chicken, turkey, ham, and meat loaf, as well as
sandwiches and a variety of freshly prepared vegetables, salads, and other side
dishes. As of December 29, 1996, the Boston Market system included 1,087 stores
located in 38 states and the District of Columbia, 964 of which are operated by
area developers partially financed by the Company with convertible secured
revolving loans, 105 of which are Company-operated, and 18 of which are
operated by other franchisees. See "The Company--Area Development Strategy". As
of December 29, 1996, the Company had entered into area development agreements
that provide for the development of 2,494 additional stores. The Company
estimates that there will be approximately 1,400 stores in operation systemwide
by the end of 1997. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON
PAGE 8.
The Boston Market concept combines the fresh, flavorful, and appealing meals
associated with traditional home cooking with the convenience associated with
fast food. Boston Market stores feature a clean, bright, and inviting
environment to purchase a meal for take-out or in-store dining. The Company's
primary entrees include rotisserie roasted chicken and turkey breast, double-
glazed baked ham, and double-sauced meat loaf. Side dishes designed to
complement these entrees include mashed potatoes made from scratch, corn,
stuffing, creamed spinach, butternut squash, garlic and dill potatoes, baked
beans, macaroni and cheese, cranberry walnut relish, cinnamon apples, and a
variety of chilled salads. Stores also offer a variety of freshly carved
chicken, turkey, ham and meat loaf sandwiches under the Boston Carver(TM) and
Extreme Carver(TM) brand names; fresh-baked chicken pot pies; chicken and other
soups; beverages; desserts; and other items.
The Company also currently owns approximately 17.3 million shares
(representing approximately 53.1% at February 28, 1997) of the outstanding
common stock of Einstein/Noah Bagel Corp. ("ENBC"). ENBC franchises and
operates specialty retail stores that feature fresh-baked bagels, cream
cheeses, coffee, and other related products, primarily under the Einstein Bros.
Bagels and Noah's New York Bagels brand names. The common stock of ENBC is
quoted on the Nasdaq National Market under the symbol "ENBX". On March 5, 1997,
the last sale price of the common stock of ENBC as reported on the Nasdaq
National Market was $26 1/8 per share. See "The Company--Einstein/Noah Bagel
Corp."
The Company was incorporated as a Massachusetts corporation in March 1988 and
was reincorporated in the State of Delaware in September 1993. The Company's
principal executive offices are located at 14103 Denver West Parkway, P.O. Box
4086, Golden, Colorado 80401-4086, and its telephone number is (303) 278-9500.
3
<PAGE>
RECENT DEVELOPMENTS
BC New York, L.L.C. Loan Conversion. On March 4, 1997, the Company announced
plans to convert its loan to BC New York, L.L.C., a Boston Market area
developer of the Company ("BCNY"), into a majority equity interest in BCNY.
Upon completion of such conversion, expected to occur before the end of March
1997, the Company will have added 118 Boston Market stores operating in the
metropolitan New York area, northern New Jersey and Connecticut to its Company
store base, bringing the total of Company-operated stores to 223. Additionally,
the Company has agreed to acquire 40% of the current equity holders' interest
in BCNY, which would result in the Company having an equity interest in BCNY of
approximately 84%.
As part of the transaction, the management of, and current equity investors
in, BCNY formed a new Boston Market area developer which acquired from BCNY the
right to develop approximately 260 additional Boston Market stores in the New
York metropolitan area. The Company expects that such area developer will also
operate the 118 Boston Market stores for the Company on terms to be negotiated.
Progressive Food Concepts, Inc. On January 31, 1997, Progressive Food
Concepts, Inc. ("PFCI"), a new company partially financed by the Company,
entered into a series of agreements with Harry's Farmers Market, Inc.
("Harry's"), an operator of retail food stores in the Atlanta area, to
capitalize on emerging trends in the food buying habits of today's consumers.
The transaction permits PFCI to develop a business model based on Harry's
existing businesses and acquire an approximately 43% equity interest in
Harry's. Harry's owns and operates five stores in the Atlanta area, including:
three Harry's Farmers Markets, mega-markets specializing in high quality
fruits, vegetables, meats and seafood, fresh bakery goods, fresh ready-to-
heat/cook and ready-to-eat prepared foods, and deli, cheese and dairy products;
and two smaller Harry's In A Hurry stores, which emphasize high quality, fresh
ready-to-heat/cook prepared foods and specialty perishables. Pursuant to the
agreements with Harry's, PFCI has acquired beneficial ownership of, and a
royalty-free license to use, all of Harry's intellectual property and trademark
rights outside the states of Georgia and Alabama (including all rights to the
Harry's Farmers Market and Harry's In A Hurry retail concepts) and access to
Harry's personnel, information, and facilities for purposes of developing a
business model based on Harry's businesses. The Company has provided PFCI with
a $17.0 million secured loan that is convertible, after a moratorium period and
subject to PFCI meeting certain financial performance criteria, into a majority
equity interest in PFCI. See "Recent Developments".
Fourth Quarter Results. On January 28, 1997, the Company announced earnings
for the fourth quarter ended December 29, 1996 of $18.1 million, or $0.27 per
share, compared to net income of $10.2 million, or $0.19 per share, for the
comparable 1995 period. The Company's revenue for the fourth quarter of 1996
increased 71% to $78.3 million from $45.9 million generated in the fourth
quarter of 1995. Systemwide Boston Market store revenue, which includes
Company-operated and franchise stores, increased to $305.5 million for the
fourth quarter of 1996 from $236.6 million generated for the comparable 1995
period.
For the year ended December 29, 1996, the Company earned $67.0 million, or
$1.01 per share, compared to fiscal year 1995 net income of $33.6 million, or
$0.66 per share. The Company's revenue for the 1996 fiscal year increased 66%
to $264.5 million from $159.5 million reported for the 1995 fiscal year.
Systemwide Boston Market store revenue increased to $1.2 billion for the 1996
fiscal year from $792.9 million generated for the 1995 fiscal year. See "Recent
Developments".
Boston Market International, Inc. The Company is in the preliminary stage of
expanding the Boston Market brand into foreign markets, which may occur through
license, franchise, area development, joint venture or other arrangements. In
connection therewith, the Company intends to license to a new company, Boston
Market International, Inc. ("BMI"), the rights to develop Boston Market stores
in Taiwan and the People's Republic of China. On January 8, 1997, BMI entered
into a letter of intent with a restaurant developer in Southeast Asia that
contemplates the formation of a new entity that would sublicense such
development rights
4
<PAGE>
and develop up to 600 Boston Market stores in such countries over the next ten
years. BMI is expected to be funded initially with third party private equity
capital and a loan from the Company which could be convertible into a majority
equity interest in BMI. To the extent practicable in the jurisdictions in which
it will operate, BMI expects to follow the Company's business model of
providing partial funding to its area developers, franchisees, licensees,
and/or joint venture partners with loans convertible into majority equity
interests in such entities. See "Recent Developments". IN ADDITION TO FACTORS
DISCUSSED IN "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 8, THE
FOLLOWING FACTORS MAY CAUSE THE ACTUAL TERMS OF THE TRANSACTIONS DESCRIBED
ABOVE AND THE PERFORMANCE OR ACHIEVEMENTS OF BMI AND ITS AREA DEVELOPERS,
FRANCHISEES, LICENSEES, AND/OR JOINT VENTURE PARTNERS TO BE MATERIALLY
DIFFERENT FROM THOSE EXPRESSED OR IMPLIED HEREIN: NEGOTIATION AND EXECUTION OF
DEFINITIVE AGREEMENTS; AVAILABILITY AND TERMS OF CAPITAL; RECEIPT OF FOREIGN
GOVERNMENT APPROVALS; COMPLIANCE WITH FOREIGN GOVERNMENT REGULATIONS; AND
ACCEPTANCE BY FOREIGN CONSUMERS OF THE BOSTON MARKET BRAND AND CONCEPT.
RISK FACTORS
AN INVESTMENT IN THE DEBENTURES OFFERED HEREBY INVOLVES CERTAIN RISKS. SEE
"RISK FACTORS".
THE OFFERING
<TABLE>
<S> <C>
Debentures $250,000,000 principal amount of %
offered Convertible Subordinated Debentures due
hereby....... 2004.
Interest and , commencing , 1997.
Payment
Dates........
Maturity...... , 2004.
Conversion The Debentures are convertible into shares
Rights....... of Common Stock at any time prior to
maturity or redemption at a conversion
price of $ per share, subject to
adjustment under certain conditions.
Optional The Debentures are not redeemable prior to
Redemption by , 2000. Thereafter, the Debentures
the Company.. are redeemable at any time and from time to
time at the option of the Company, in whole
or in part, at the redemption prices set
forth herein, plus accrued interest.
Change in Upon a Change in Control, holders of the
Control...... Debentures will have the right, subject to
certain restrictions and conditions, to
require the Company to purchase all or any
part of their Debentures at the principal
amount thereof, plus accrued interest.
Subordination. The Debentures are subordinated to all
existing and future Senior Indebtedness of
the Company. As of March 3, 1997, the
Company had approximately $282.0 million of
indebtedness outstanding (excluding accrued
interest thereon) that would have
constituted Senior Indebtedness. The
Debentures will rank pari passu with the
Company's LYONs and the 4 1/2% Debentures.
The Indenture governing the Debentures will
not restrict the incurrence of Senior
Indebtedness or other indebtedness by the
Company.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds.................... The Company intends to use the net proceeds
from this offering primarily for
development of the Boston Market system,
including providing partial financing for
certain of its area developers and BMI. Net
proceeds will also be used to fund the
Company's obligations under its convertible
loan to PFCI and may be used to pursue
related opportunities in the emerging
ready-to-heat/cook and specialty
perishables market segments. In addition,
net proceeds will be used for the repayment
of borrowings under the Company's revolving
credit facility and for general corporate
purposes, which may include the purchase of
stores from area developers and funding
obligations under the Company's credit
facility with ENBC. Net proceeds may also
be used in connection with the redemption
of the 4 1/2% Debentures, if any. See "Use
of Proceeds".
Proposed Nasdaq SmallCap Market
Symbol............................ Application will be made for the quotation
of the Debentures on the Nasdaq SmallCap
Market under the symbol "BOSTH". The Common
Stock is quoted on the Nasdaq National
Market under the symbol "BOST".
</TABLE>
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND STORE DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES)
<TABLE>
<CAPTION>
THREE QUARTERS
FISCAL YEARS ENDED(1) ENDED(1)
-------------------------- -----------------
DEC. 26, DEC. 25, DEC. 31, OCT. 1, OCT. 6,
1993 1994 1995(2) 1995 1996(3)
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Total revenue................... $ 42,530 $ 96,151 $159,479 $113,578 $186,218
Income from operations.......... 1,927 24,611 67,238 46,820 77,920
Net income...................... 1,647 16,173 33,559 23,350 48,865
Net income per common and
equivalent share.............. $ 0.06 $ 0.38 $ 0.66 $ 0.47 $ 0.74
Weighted average number of com-
mon and equivalent shares out-
standing...................... 32,667 42,861 50,972 49,695 66,091
Ratio of earnings to fixed
charges (4).................... 2.38 3.97 4.23 4.32 5.77
STORE DATA (UNAUDITED):
Systemwide Boston Market store
revenue (5).................... $152,056 $383,691 $792,948 $556,318 $861,120
Number of Boston Market stores
in operation
at period end:
Company-operated.............. 38 41 3 48 96
Financed area developers...... 78 314 712 578 897
-------- -------- -------- -------- --------
Subtotal..................... 116 355 715 626 993
Other franchisees............. 101 179 114 128 30
-------- -------- -------- -------- --------
Total........................ 217 534 829 754 1,023
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT OCT. 6, 1996
--------------------------
ACTUAL AS ADJUSTED (6)
---------- ---------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................... $ 49,849 $
Notes receivable................................... 710,111 710,111
Total assets....................................... 1,422,770
Long-term debt..................................... 310,435
Stockholders' equity............................... $ 912,329 $912,329
</TABLE>
- --------
(1) The Company's fiscal year is the 52/53-week period ending on the last
Sunday in December and normally consists of 13 four-week periods. The first
quarter consists of four periods and each of the remaining quarters
consists of three periods.
(2) On June 17, 1996, the Company began consolidating ENBC's results of
operations as a result of the Company's conversion of its loan to ENBC into
a majority equity interest in ENBC's common stock. Giving pro forma effect
to the Company's loan conversion as of the beginning of the Company's 1995
fiscal year, revenue, net income, and net income per common and equivalent
share were $183,985,000, $338,000, and $0.00, respectively. See the
Company's unaudited pro forma consolidated financial statements and notes
thereto included in the Company's Current Report on Form 8-K/A filed with
the Commission on September 3, 1996 which is incorporated herein by
reference.
(3) On June 17, 1996, the Company began consolidating ENBC's results of
operations as a result of the Company's conversion of its loan to ENBC into
a majority equity interest in ENBC's common stock. Giving pro forma effect
to the Company's loan conversion as of the beginning of the Company's 1995
fiscal year, revenue, net income, and net income per common and equivalent
share were $213,740,000, $41,431,000, and $0.63, respectively.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and fixed charges. Fixed charges
include interest expense and a percentage of rents which management deems
representative of an interest factor.
(5) Includes gross revenue for all stores in the Boston Market system.
(6) Adjusted to reflect the consummation of this offering and the application
of the net proceeds therefrom as set forth under "Use of Proceeds". See
also "Capitalization".
7
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS SET FORTH UNDER THE CAPTION "RISK FACTORS" AND ELSEWHERE
IN THIS PROSPECTUS OR WHICH ARE INCORPORATED HEREIN BY REFERENCE 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 THE COMPANY, ENBC, BMI, THEIR AREA
DEVELOPERS, FRANCHISEES, AND LICENSEES, BOSTON MARKET STORES, EINSTEIN BROS.
BAGELS STORES AND NOAH'S NEW YORK BAGELS STORES AND PFCI 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,
INCLUDING ROLL-OUT OF THE F.A.S.T. TRACK(TM)(TM) SYSTEM AT BOSTON MARKET
STORES; DEVELOPMENT AND OPERATING COSTS; AREA DEVELOPERS' ADHERENCE TO
DEVELOPMENT SCHEDULES; ADVERTISING AND PROMOTIONAL EFFORTS; BRAND AWARENESS;
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 PROSPECTUS OR IN THE COMPANY'S FORM 10-K FOR
ITS 1995 FISCAL YEAR OR ANY OF THE OTHER DOCUMENTS AND INFORMATION
INCORPORATED HEREIN BY REFERENCE. SEE "DOCUMENTS INCORPORATED BY REFERENCE".
THE SUCCESS OF THE COMPANY, ENBC, AND BMI 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 STORES AND NOAH'S NEW
YORK BAGELS STORES. SEE "RISK FACTORS".
RISK FACTORS
In evaluating an investment in the Debentures, prospective investors should
carefully consider the following factors in addition to the other information
contained in this Prospectus.
COMPETITION
The food service industry is intensely competitive with respect to food
quality, concept, location, service, and price. In addition, there are many
well-established food service competitors with substantially greater financial
and other resources than the Company and with substantially longer operating
histories. The Company believes that it competes with other take-out food
service companies, fast-food restaurants, casual full-service dine-in
restaurants, delicatessens, cafeteria-style buffets, and prepared food stores,
as well as with supermarkets and convenience stores.
FOOD SERVICE INDUSTRY
Food service businesses are often affected by changes in consumer tastes,
national, regional, and local economic conditions, demographic trends, traffic
patterns, and the type, number, and location of competing restaurants. Multi-
unit food service chains such as the Company can also be substantially
adversely affected by publicity resulting from food quality, illness, injury,
or other health concerns (including food-borne illness claims) or operating
issues stemming from one store or a limited number of stores, whether or not
the Company is liable. Claims relating to foreign objects, food-borne illness
or operating issues are common in the food service industry and a number of
such claims may exist at any given time. Dependence on frequent deliveries of
produce and supplies also subjects food service businesses such as the Company
to the risk that shortages or interruptions in supply caused by adverse
weather or other conditions could adversely affect the availability, quality,
and cost of ingredients. In addition, material changes in, or the Company's
failure to comply with, applicable federal, state, and local government
regulations, and factors such as inflation, increased food, labor, and
employee benefits costs, regional weather conditions, and unavailability of an
adequate number of experienced managers and hourly employees may also
adversely affect the food service industry in general and the Company's
results of operations and financial condition in particular.
8
<PAGE>
EXPANSION/DEPENDENCE ON AREA DEVELOPERS
As of December 29, 1996, there were 1,087 Boston Market stores in operation
systemwide. The Company has entered into area development agreements and
franchise agreements that provide for the opening of 2,494 additional stores.
There can be no assurance that the Company and its area developers will be
able to achieve these goals, manage expanding operations effectively, or
maintain or accelerate growth.
The Company's success is dependent upon its area developers and franchisees
and the manner in which they develop and operate their Boston Market stores
and manage their organizational and financial resources. The opening and
success of stores are dependent on numerous factors, including the
availability of suitable sites, the negotiation of acceptable lease or
purchase terms for such sites, permitting and regulatory compliance, the
ability to meet construction schedules, the ability to hire and train
qualified personnel, the financial and other capabilities of the Company and
its area developers and general economic and business conditions. Not all of
the foregoing factors are within the control of the Company or its area
developers. There can be no assurance that area developers and franchisees
will have the business abilities or access to financial resources necessary to
open the Boston Market stores required by their development schedules or will
successfully develop or operate Boston Market stores in their development
areas in a manner consistent with the Company's concepts and standards. The
Company has extended secured debt financing to certain qualifying Boston
Market area developers pursuant to which the Company has agreed to lend an
aggregate of approximately $838.0 million, of which approximately $647.3
million had been advanced as of December 29, 1996. These loans subject the
Company to the risks of being a secured lender. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".
EINSTEIN/NOAH BAGEL CORP.
The Company currently owns approximately 17.3 million shares (representing
approximately 53.1% at February 28, 1997) of the outstanding common stock of
ENBC. The nature of ENBC's business and operations expose it to risks
substantially similar to those set forth herein with respect to the Company.
In addition, ENBC is at a significantly earlier stage in its development
program than is the Company. ENBC's anticipated expansion will require the
addition of management, facilities, systems, and personnel. The failure by
ENBC and its area developers to acquire necessary resources on a cost-
effective basis could have a material adverse effect on the value of the
Company's investment in ENBC and the contribution by ENBC to the earnings of
the Company. There can be no assurance that ENBC and its area developers will
be able to achieve their development and operating goals, manage expanding
operations effectively, or maintain or accelerate growth. In addition, there
can be no assurance of the viability of any of ENBC's brands in a particular
geographic region or locale. The Company has also made available to ENBC a
$50.0 million unsecured, subordinated, non-convertible loan facility, which
subjects the Company to the risks of being an unsecured, subordinated lender.
As of March 3, 1997, there was no outstanding balance under the loan facility.
See "The Company--Einstein/Noah Bagel Corp."
BOSTON MARKET INTERNATIONAL, INC.
The Company intends to license to BMI the rights to use the Boston Market
brand in Taiwan and the People's Republic of China and to make a convertible
loan to BMI which could be convertible into a majority equity interest in BMI.
BMI has entered into a letter of intent with a restaurant developer in
Southeast Asia, providing for the development of 600 Boston Market stores in
Taiwan and the People's Republic of China over the next ten years. See "Recent
Developments". The success of BMI and its area developers, franchisees,
licensees, and/or joint venture partners in the development of the Boston
Market brand and concept in foreign markets are subject to risks similar to
those set forth above for the Company and its area developers. In addition,
there can be no assurance that the contemplated transactions between the
Company and BMI will be consummated, foreign consumers will accept the Boston
Market brand and concept, BMI will be able to successfully identify and
recruit qualified area developers, franchisees, licensees, joint venture
partners and suppliers in foreign markets, BMI will be able to obtain
necessary foreign government approvals, or that compliance with foreign
government regulations will not significantly adversely affect BMI's business
plan.
9
<PAGE>
PROGRESSIVE FOOD CONCEPTS, INC.
The Company has provided a $17.0 million convertible loan to PFCI. PFCI is a
newly formed entity, which is only beginning to develop its business plan. The
success of PFCI is subject to the finalization and implementation of a
business plan, adaptability of the Harry's business concepts to new markets
and acceptance of such concepts by consumers in such markets, raising
sufficient capital, obtaining the management and infrastructure necessary to
implement such business plan, financial condition and results of operations of
Harry's, and competition in the perishable fresh food, prepared foods, and
specialty food businesses, as well as the grocery business generally. There
can be no assurance that PFCI will successfully achieve these goals. "See
Recent Developments".
CAPITAL REQUIREMENTS
The Company anticipates that it will have a continuing need for additional
capital to accomplish its and its area developers' expansion goals. There can
be no assurance that the Company will be able to raise such capital when
needed on satisfactory terms. In addition, the Company currently offers loans
to its area developers, ENBC, and PFCI, and is expected to offer loans to BMI,
under loan agreements pursuant to which the Company is, and will be, subject
to the risks of being a secured lender. See "The Company--Area Development
Strategy" and "The Company--Einstein/Noah Bagel Corp." The Company's
management of its capital resources may be affected by the amount and timing
of advances under such loan agreements and additional loan agreements. The
Company's obligations under the loan agreements could affect the amount and
timing of the Company's future capital financing requirements.
EFFECT OF CERTAIN CHARTER, BYLAW, AND OTHER PROVISIONS
The Company's Certificate of Incorporation and Bylaws include certain
provisions that may have the effect of discouraging a change in control of the
Company. Such provisions include the requirement that all stockholder action
must be effected at a duly-called annual or special meeting of stockholders
and the requirement that stockholders follow an advance notification procedure
for stockholder nominations of candidates for the Board of Directors and to
present other stockholder business to be considered at any meeting of
stockholders. In addition, the Board of Directors has the authority, without
further action by the stockholders, to issue up to 20,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges, and restrictions thereof, and to issue authorized but unissued
shares of Common Stock up to the maximum of 480,000,000 shares. The issuance
of preferred stock or additional shares of Common Stock could have the effect
of delaying, deferring, or preventing a change in control of the Company, even
if such change in control would be beneficial to the Company's stockholders.
The terms of the Company's LYONs and 4 1/2% Debentures provide that the
Company will be required, as of 40 business days after the occurrence of a
Change in Control (as defined) of the Company (occurring on or prior to June
1, 2000, in the case of the LYONs), to purchase for cash any LYON or 4 1/2%
Debenture, at the option of the holder, for a Change in Control Purchase Price
equal to the Issue Price plus accrued Original Issue Discount (in the case of
a LYON), or 100% of the principal amount thereof, plus accrued but unpaid
interest (in the case of a 4 1/2% Debenture), through the Change in Control
Purchase Date. The Change in Control purchase features of the LYONs and the 4
1/2% Debentures may in certain circumstances have an anti-takeover effect. The
definition of "Change in Control" for purposes of the LYONs and the 4 1/2%
Debentures is set forth in the indenture related to the LYONs and the
indenture related to the 4 1/2% Debentures, respectively, which are exhibits
to the Registration Statement of which this Prospectus is a part. The
Debentures offered hereby contain provisions substantially identical to those
discussed above with respect to the 4 1/2% Debentures in the event of a Change
in Control. See "Description of Debentures--Purchase of Debentures at the
Option of Holders upon a Change in Control". If a Change in Control was to
occur, there can be no assurance that the Company would have sufficient funds
to pay the Change in Control Purchase Price for all Debentures, LYONs, and 4
1/2% Debentures tendered by the holders thereof.
10
<PAGE>
RECENT DEVELOPMENTS
BC New York, L.L.C. Loan Conversion. On March 4, 1997, the Company announced
plans to convert its loan to BCNY into a majority equity interest in BCNY.
Upon completion of such conversion, expected to occur before the end of March
1997, the Company will have added 118 Boston Market stores operating in the
metropolitan New York area, northern New Jersey and Connecticut to its Company
store base, bringing the total of Company-operated stores to 223.
Additionally, the Company has agreed to acquire 40% of the current equity
holders' interest in BCNY, which would result in the Company having an equity
interest in BCNY of approximately 84%.
As part of the transaction, the management of, and current equity investors
in, BCNY formed a new Boston Market area developer which acquired from BCNY
the right to develop approximately 260 additional Boston Market stores in the
New York metropolitan area. The Company expects that such area developer will
also operate the 118 Boston Market stores for the Company on terms to be
negotiated.
Progressive Food Concepts, Inc. On January 31, 1997, PFCI entered into a
series of agreements with Harry's to capitalize on emerging trends in the food
buying habits of today's consumers. The transaction permits PFCI to develop a
business model based on Harry's existing businesses and acquire a substantial
equity investment in Harry's. The Company has provided PFCI with a $17.0
million secured loan that is convertible, after a moratorium period and
subject to PFCI meeting certain financial performance criteria, into a
majority equity interest in PFCI.
Harry's owns and operates five stores in the Atlanta area, including: three
Harry's Farmers Markets, mega- markets specializing in high quality fruits,
vegetables, meats and seafood, fresh bakery goods, fresh ready-to-heat/cook
and ready-to-eat prepared foods, and deli, cheese and dairy products; and two
smaller Harry's In A Hurry stores, which emphasize high quality, fresh ready-
to-heat/cook prepared foods and specialty perishables. Harry's line of over
300 prepared food products and meals are made in its 28,000 square foot USDA-
approved manufacturing facility, and over 200 proprietary bakery items are
baked fresh daily in its 55,000 square foot bakery.
Pursuant to the agreements with Harry's, PFCI has acquired beneficial
ownership of, and a royalty-free license to use, all of Harry's intellectual
property and trademark rights outside the states of Georgia and Alabama
(including all rights to the Harry's Farmers Market and Harry's In A Hurry
retail concepts) and access to Harry's personnel, information, and facilities
for purposes of developing a business model based on Harry's businesses. PFCI
has also obtained the right to acquire, subject to certain conditions, up to
seven million shares of Harry's Class A common stock (representing
approximately 43% of Harry's currently outstanding common stock and
approximately 20% of the voting power of such outstanding common stock), and a
right of first refusal with respect to additional financings and business
combination transactions into which Harry's may propose to enter.
Fourth Quarter Results. On January 28, 1997, the Company announced earnings
for the fourth quarter and year ended December 29, 1996. The selected
consolidated financial data for the quarters ended December 29, 1996 and
December 31, 1995 are unaudited, but in the opinion of management, include all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the Company's consolidated financial position and results of
operations. Interim results are not necessarily indicative of the full fiscal
year.
11
<PAGE>
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES)
<TABLE>
<CAPTION>
QUARTER ENDED(1) YEAR ENDED(1)
------------------ -------------------------
DEC. 31, DEC. 29, DEC. 31, DEC. 29,
1995 1996 1995 1996
-------- -------- -------- ---------------
(13 (53
WEEKS) WEEKS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue:
Royalties and franchise
related fees.............. $ 34,750 $ 49,742 $107,913 $ 180,558
Company-operated stores.... 11,151 28,548 51,566 83,950
-------- -------- -------- ----------
Total revenue............ 45,901 78,290 159,479 264,508
Costs and expenses:
Cost of products sold...... 4,626 10,645 19,737 31,160
Salaries and benefits...... 8,179 12,473 31,137 42,172
General and
administrative (2)........ 12,678 41,763 41,367 99,847
-------- -------- -------- ----------
Total cost and expenses.. 25,483 64,881 92,241 173,179
-------- -------- -------- ----------
Income from operations....... 20,418 13,409 67,238 91,329
Other income (expense),
net (3) (3,753) 18,898 (12,865) 23,854
-------- -------- -------- ----------
Income before income taxes
and minority interest....... 16,665 32,307 54,373 115,183
Income taxes................. 6,456 11,998 20,814 42,990
Minority interest in
(earnings) of subsidiary.... -- (2,216) -- (5,235)
-------- -------- -------- ----------
Net income................... $ 10,209 $ 18,093 $ 33,559 $ 66,958
======== ======== ======== ==========
Net income per common and
equivalent share............ $ 0.19 $ 0.27 $ 0.66 $ 1.01
======== ======== ======== ==========
Weighted average number of
common and equivalent shares
outstanding................. 54,849 67,867 50,972 66,501
======== ======== ======== ==========
STORE DATA (UNAUDITED):
Systemwide Boston Market
store revenue (4)......... $236,630 $305,471 $792,948 $1,166,591
Number of Boston Market
stores in operation at
period end:
Company-operated........................... 3 105
Financed area developers................... 712 964
-------- ----------
Subtotal................................. 715 1,069
Other franchisees.......................... 114 18
-------- ----------
Total.................................... 829 1,087
======== ==========
<CAPTION>
AT DECEMBER 29,
1996
---------------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................................... $ 58,829
Notes receivable........................................ 800,519
Total assets............................................ 1,543,616
Long-term debt ......................................... 312,454
Stockholders' equity.................................... $ 935,840
</TABLE>
- --------
(1) The Company's fiscal year is the 52/53-week period ending on the last
Sunday in December and normally consists of 13 four-week periods. The
first quarter consists of four periods and each of the remaining quarters
consists of three periods. Fiscal 1995 consisted of 53 weeks with its
fourth quarter consisting of 13 weeks.
(2) Includes non-recurring charges of approximately $23.0 million for the
quarter ended December 29, 1996 and $38.0 million for the year ended
December 29, 1996.
(3) Includes non-recurring gains of approximately $23.4 million for the
quarter ended December 29, 1996 and $38.2 million for the year ended
December 29, 1996.
(4) Includes gross revenue for all stores in the Boston Market system.
12
<PAGE>
Boston Market International, Inc. The Company is in the preliminary stage of
expanding the Boston Market brand into foreign markets, which may occur
through license, franchise, area development, joint venture or other
arrangements. In connection therewith, the Company intends to license to BMI,
the rights to develop Boston Market stores in Taiwan and the People's Republic
of China. On January 8, 1997, BMI entered into a letter of intent with a
restaurant developer in Southeast Asia that contemplates the formation of a
new entity that would sublicense such development rights and develop up to 600
Boston Market stores in such countries over the next ten years. BMI is
expected to be funded initially with third party private equity capital and a
loan from the Company which could be convertible into a majority equity
interest in BMI. To the extent practicable in the jurisdictions in which it
will operate, BMI expects to follow the Company's business model of providing
partial funding to its area developers, franchisees, licensees, and/or joint
venture partners with loans convertible into majority equity interests in such
entities. IN ADDITION TO FACTORS DISCUSSED IN "SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS" ON PAGE 8, THE FOLLOWING FACTORS MAY CAUSE THE ACTUAL
TERMS OF THE TRANSACTIONS DESCRIBED ABOVE AND THE PERFORMANCE OR ACHIEVEMENTS
OF BMI AND ITS AREA DEVELOPERS, FRANCHISEES, LICENSEES, AND/OR JOINT VENTURE
PARTNERS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED HEREIN:
NEGOTIATION AND EXECUTION OF DEFINITIVE AGREEMENTS; AVAILABILITY AND TERMS OF
CAPITAL; RECEIPT OF FOREIGN GOVERNMENT APPROVALS; COMPLIANCE WITH FOREIGN
GOVERNMENT REGULATIONS; AND ACCEPTANCE BY FOREIGN CONSUMERS OF THE BOSTON
MARKET BRAND AND CONCEPT.
13
<PAGE>
THE COMPANY
The Company franchises and operates retail food service stores under the
Boston Market brand name that specialize in fresh, convenient meal solutions
featuring home style entrees of chicken, turkey, ham, and meat loaf, as well
as sandwiches and a variety of freshly prepared vegetables, salads, and other
side dishes. As of December 29, 1996, the Boston Market system included 1,087
stores located in 38 states and the District of Columbia, 964 of which are
operated by area developers partially financed by the Company with convertible
secured revolving loans, 105 of which are Company-operated, and 18 of which
are operated by other franchisees. See "--Area Development Strategy". As of
December 29, 1996, the Company had entered into area development agreements
that provide for the development of 2,494 additional stores. The Company
estimates that there will be approximately 1,400 stores in operation
systemwide by the end of 1997. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 8.
The Boston Market concept combines the fresh, flavorful, and appealing meals
associated with traditional home cooking with the convenience associated with
fast food. Boston Market stores feature a clean, bright, and inviting
environment to purchase a meal for take-out or in-store dining. The Company's
primary entrees include rotisserie roasted chicken and turkey breast, double-
glazed baked ham, and double-sauced meat loaf. Side dishes designed to
complement these entrees include mashed potatoes made from scratch, corn,
stuffing, creamed spinach, butternut squash, garlic and dill potatoes, baked
beans, macaroni and cheese, cranberry walnut relish, cinnamon apples, and a
variety of chilled salads. Stores also offer a variety of freshly carved
chicken, turkey, ham, and meat loaf sandwiches under the Boston Carver and
Extreme Carver brand names; fresh-baked chicken pot pies; chicken and other
soups; beverages; desserts; and other items.
Certain members of the Company's current management made their initial
investment in the Company in December 1991, at which time there were
approximately 33 stores operating under the Boston Chicken name. After an
extensive review of the Boston Chicken concept, members of the Company's
management invested additional capital and acquired control of the Company in
the spring of 1992. Subsequently, the Company substantially refined the Boston
Chicken concept, developed an attractive prototype store, created a network of
area developers, installed systemwide voice and data communications systems,
and achieved significant development momentum in most major markets in the
United States. With these formation and development phases completed, the
Company shifted its focus to evolving the Boston Chicken concept and
increasing operational efficiency. Further evolution of the concept was
initiated in early 1995 with the addition of turkey, ham, and meat loaf dinner
entrees, expansion of the Company's line of sandwiches, salads, and soups, and
entry into the holiday home meal replacement business. To reflect the variety
of complete meals offered and to establish a broad platform for future growth,
the Company changed the name of Boston Chicken stores to Boston Market.
AREA DEVELOPMENT STRATEGY
The Company relies on area developers to achieve rapid penetration of
targeted markets. The Company believes that having a relatively small group of
area developers, each led by an experienced retail food service veteran with
substantial equity invested in the area developer, is a superior means to
achieve market leadership than more traditional franchising approaches which
utilize a large number of franchisees. By concentrating its expansion efforts
through these focused area development organizations, the Company believes it
is able to achieve focused systemwide expansion and create operating and
advertising efficiencies. The Company is currently evaluating further
operating efficiencies that it believes may be achieved through continued
consolidation of its domestic area developer network. See "--Current Operating
Initiatives--Organizational Strategy Initiatives". The Company is currently in
the preliminary stages of expansion into foreign markets, which could occur
through license, franchise, area development, joint venture, or other
arrangements. See "Recent Developments".
The Company believes that the development and operation of stores in a
targeted market is enhanced when an area developer is permitted to focus on
development and operations, rather than on raising capital. Accordingly, the
Company has made convertible secured loans to its area developers to partially
finance store
14
<PAGE>
development and working capital needs. The loans are typically convertible
into a majority equity interest in the area developer upon the completion of a
moratorium period, provided generally that 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 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. There can be
no assurance that the Company will exercise its future rights to acquire an
equity interest in any area developer to which it provides financing or that
such exercise will result in control of the area developer. As of December 29,
1996, the Company had entered into area development agreements that provide
for the development of 2,494 additional stores. The Company estimates that
there will be approximately 1,400 stores in operation systemwide by the end of
1997. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 8.
CURRENT OPERATING INITIATIVES
The Company's current efforts in concept evolution and operations include
the following:
MENU
The Company believes that variety is a primary factor influencing customer
trial and frequency. As a result, the Company has significantly expanded its
menu offerings to include additional dinner entrees and a line of salads,
soups, and Boston Carver sandwiches. The Company is currently expanding its
Boston Carver sandwich line to include Extreme Carver sandwiches, such as its
new Chicken Cheese Steak(TM) sandwich. In addition, the Company has expanded
its Boston Hearth(TM) specialty foods line. Boston Market stores now offer
Boston Hearth breasts of turkey, marinated in natural juices and slow-roasted
in Boston Market rotisserie ovens, and three holiday meal packages which serve
from 10 to 24 people, in addition to whole and half boneless, sliced, glazed
Hearth Honey(TM) Hams and banquet size side dishes.
F.A.S.T. TRACK(TM)(TM)
The Company and its area developers are currently in the process of
implementing a new customer service approach, known as the F.A.S.T. (Faster
Average Service Times) Track system that is designed to enable Boston Market
stores to serve more customers faster, especially during peak hours. The
F.A.S.T. Track system is being implemented in all new and certain existing
Boston Market stores. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS"
ON PAGE 8. The F.A.S.T. Track system modifies the way orders are taken and
processed by allowing customers to make menu selections and pay for their
meals first, before the server has prepared their order. Using this new
system, servers at various stations assemble the individual items in the
customer's order (hot and cold sides, sandwiches, entrees, and desserts) at
the same time.
ORGANIZATIONAL STRATEGY INITIATIVES
The Company and its area developers are exploring alternative organizational
strategies in an effort to maximize store-level performance and minimize area
developer overhead expenses. These initiatives include possible area developer
combinations and store operator incentive programs. Such programs include
store level bonus compensation based upon store performance and may include
significant store level ownership opportunities. The Company believes that the
implementation of such initiatives could reduce overhead expenses and enhance
the ability of the Company and its area developers to attract and retain
highly motivated store managers who would deliver superior performance at the
store-level. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE
8.
15
<PAGE>
VENDOR CONSOLIDATION
The Company is working to consolidate the number of vendors who provide
products and services to the Boston Market system. The Company believes that,
based upon the number of stores in the Boston Market system and the volume
purchases associated therewith, it is capable of negotiating purchase
agreements that will provide savings to it and its area developers.
EINSTEIN/NOAH BAGEL CORP.
In March 1995, the Company made an investment in ENBC, which was created
through the combination of a number of leading regional bagel retailers. The
Company currently owns approximately 17.3 million shares (representing
approximately 53.1% at February 28, 1997) of the outstanding common stock of
ENBC. The common stock of ENBC is quoted on the Nasdaq National Market under
the symbol "ENBX". On February 28, 1997, the last sale price of the common
stock of ENBC as reported on the Nasdaq National Market was $26 1/8 per share.
The Company has also entered into agreements pursuant to which the Company
provides ENBC certain accounting and administration and computer and
communications services. ENBC's principal business objective is to become the
leading specialty retailer of fresh-baked bagels and related products in the
United States and to ultimately support and extend its consumer brands through
alternate distribution channels, such as wholesale and contract food service.
ENBC operates and franchises specialty retail stores that feature fresh-baked
bagels, cream cheeses, coffee, and other related products, primarily under the
Einstein Bros. Bagels and Noah's New York Bagels brand names.
As of December 29, 1996, ENBC had 315 stores in operation systemwide, of
which 301 were operated by area developers financed in part by ENBC and 14
were operated by ENBC. Such financing generally permits ENBC in certain
circumstances to convert its loan into a majority equity interest in the area
developer. As of December 29, 1996, ENBC had entered into area development
agreements that provide for the development of 1,012 additional stores, the
majority of which are scheduled to open over the next three years. ENBC
estimates that there will be between 615 and 665 stores in operation
systemwide by the end of 1997. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 8.
ENBC has granted to the Company an option to purchase newly issued shares of
ENBC common stock for cash or registered shares of the Company's Common Stock
that permits the Company to maintain ownership of up to 52% of the outstanding
shares of ENBC common stock (the "ENBC Option"). In the event payment is made
in registered shares of the Company's Common Stock, the Company has agreed to
guarantee the price at which those shares can be sold at the market within a
limited time period. The ENBC Option will terminate if (i) the Company sells
or transfers shares of ENBC common stock and as a result owns less than a
majority of the then outstanding shares of ENBC's voting stock or (ii) the
percentage of outstanding shares of voting stock of ENBC owned by the Company
is reduced below 50% other than as a result of the Company's voluntary sale or
transfer of shares of ENBC common stock and the Company fails to acquire a
sufficient number of shares of ENBC common stock so that it owns at least a
majority of the then outstanding shares of voting stock of ENBC by July 31 of
the calendar year next following the calendar year in which such reduction
occurs. In calculating the percentage ownership of voting stock of ENBC owned
by the Company for purposes of the ENBC Option, such calculation excludes from
ownership by the Company (i) 701,177 shares of ENBC common stock subject to
options granted by the Company, (ii) any shares of ENBC common stock held by
officers, directors or employees of the Company, and (iii) any shares of ENBC
common stock held by any person or entity that would not be counted under
generally accepted accounting principles in determining whether the Company
owns a majority of the voting stock for consolidated financial statement
reporting purposes. Pursuant to such calculation, as of February 28, 1997, the
Company owned approximately 50.9% of the outstanding common stock of ENBC and
has the right to purchase 746,785 shares of common stock of ENBC at prices
ranging from $25.58 to $30.75 per share. ENBC also granted to the Company
pursuant to a registration rights agreement five demand and unlimited
piggyback registration rights under the Securities Act with respect to shares
of ENBC common stock owned by the Company.
16
<PAGE>
The Company and ENBC are also parties to a $50.0 million unsecured,
subordinated, non-convertible loan agreement. As of December 29, 1996, there
was no balance outstanding under the facility. Interest on the loan is based
on the reference rate of Bank of America Illinois plus 0.5%. Any borrowings
outstanding under ENBC's loan facility from the Company are payable on June
15, 2003. The Company may satisfy a portion of its funding obligations under
the loan agreement in cash or shares of Common Stock. The Company has agreed
to guarantee the price of any shares of Common Stock delivered to ENBC in
satisfaction of the Company's obligations under the loan agreement and
thereafter sold by ENBC.
USE OF PROCEEDS
The net proceeds to the Company from this offering are estimated to be
approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full). The Company intends to use the net proceeds from
this offering primarily for development of the Boston Market system, including
providing partial financing for certain of its area developers and BMI. Net
proceeds will also be used to fund the Company's obligations under its
convertible loan to PFCI and may be used to pursue related opportunities in
the emerging ready-to-heat/cook and specialty perishables market segments. In
addition, net proceeds will be used for the repayment of borrowings under the
Company's revolving credit facility and for general corporate purposes, which
may include the purchase of stores from area developers and funding
obligations under the Company's credit facility with ENBC.
The Company anticipates repaying its revolving bank debt ($11.5 million at
March 3, 1997) incurred to provide funds for loans made by the Company to area
developers to finance the development of stores and for general corporate
purposes. These borrowings bear interest at either the agent's reference rate
plus an applicable margin or, at the Company's option, the eurodollar rate
plus an applicable margin. Borrowings outstanding under the Company's
revolving bank debt as of March 3, 1997 bear interest at a rate of 9.5% per
annum. Any borrowings outstanding under the Company's revolving credit
agreement are payable on December 1, 1999.
In addition, following consummation of this offering, the Company
anticipates it will call for the redemption of its 4 1/2% Debentures in
accordance with the terms of the indenture related thereto. The 4 1/2%
Debentures are convertible by the holders thereof at any time at a conversion
price of $27.969 per share of Common Stock and, based on the current market
price of the Common Stock, the Company expects that any such call for
redemption would result in the conversion of substantially all of such 4 1/2%
Debentures. To the extent any holders do not exercise their rights to convert
the 4 1/2% Debentures into shares of Common Stock prior to any redemption
thereof, the Company may use a portion of the proceeds from this offering in
payment of the applicable redemption price for any such 4 1/2% Debentures not
so converted. However, there can be no assurance that the Company will call
for such redemption.
Pending such use, net proceeds will be invested in short-term interest-
bearing instruments. To the extent that the net proceeds, revolving credit
facility, and funds from operations are insufficient to finance the Company's
expansion plans, the Company intends to seek additional capital from future
equity and/or debt financings, although there can be no assurance of the
availability or terms of such funds in the future.
17
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The following table sets forth, for each of the Company's fiscal quarters
indicated below, the high and low sale prices of the Common Stock as quoted on
the Nasdaq National Market as reported by The Wall Street Journal (Western
Edition).
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995:
First Quarter (ended April 16, 1995)................... 19 7/8 14 1/2
Second Quarter (ended July 9, 1995).................... 26 5/8 16 7/8
Third Quarter (ended October 1, 1995).................. 27 1/2 23
Fourth Quarter (ended December 31, 1995)............... 35 7/8 25 7/8
1996:
First Quarter (ended April 21, 1996)................... 37 5/8 27 3/8
Second Quarter (ended July 14, 1996)................... 37 27 1/4
Third Quarter (ended October 6, 1996).................. 36 3/8 24 1/8
Fourth Quarter (ended December 29, 1996)............... 41 1/2 31 3/8
1997:
First Quarter (from December 30, 1996 through February
28, 1997)............................................. 38 1/4 30 7/8
</TABLE>
On March 5, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $32 1/4 per share. At March 5, 1997, there were
approximately 2,900 record holders of the Common Stock.
The Company has never paid cash dividends on its Common Stock and the Board
of Directors intends to continue a policy of retaining any earnings for use in
the Company's operations. The Company does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Company's current senior
credit facilities prohibit the payment of any cash dividends.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
29, 1996 and as adjusted to give effect to this offering and application of
the net proceeds therefrom. See "Use of Proceeds". This table should be read
in conjunction with the Consolidated Financial Statements of the Company and
the Notes thereto included or incorporated in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 29, 1996
-----------------------------------
ACTUAL AS ADJUSTED
----------------- -----------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
SHORT-TERM DEBT.............................. $ -- $ --
================= ===============
LONG-TERM DEBT:
Senior credit facilities(1)................ $ -- $ --
4 1/2% Convertible Subordinated Debentures
due 2004(2)............................... 129,841 129,841
% Convertible Subordinated Debentures due
2004..................................... --
Liquid Yield Option Notes due 2015......... 182,613 182,613
----------------- ---------------
Total long-term debt..................... 312,454
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 20,000,000
shares authorized; no shares
issued and outstanding.................... -- --
Common Stock, $.01 par value; 480,000,000
shares authorized; 64,245,868 shares is-
sued and outstanding...................... 642 642
Additional paid-in capital................. 827,611 827,611
Retained earnings.......................... 107,587 107,587
----------------- ---------------
Total stockholders' equity............... 935,840 935,840
----------------- ---------------
Total capitalization..................... $1,248,294 $
================= ===============
</TABLE>
- --------
(1) As of March 3, 1997, the Company had $11.5 million outstanding under its
revolving credit facility. See "Use of Proceeds". In addition, as of March
3, 1997, the Company had $254.3 million outstanding under its senior
secured master lease facilities. The master lease facilities are accounted
for as operating leases. ENBC also has a $45.0 million senior secured
revolving bank credit facility, no borrowings under which were outstanding
as of March 3, 1997.
(2) Following completion of this offering, the Company anticipates it will
call for the redemption of its outstanding 4 1/2% Debentures in accordance
with the terms of the indenture related thereto.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND STORE DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES)
The following table sets forth selected consolidated financial and store data
for the Company. This data should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto included or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
THREE QUARTERS
FISCAL YEARS ENDED (1) ENDED(1)
------------------------------------------------ ------------------
DEC. 29, DEC. 27, DEC. 26, DEC. 25, DEC. 31, OCT. 1, OCT. 6,
1991 1992 1993 1994 1995(2) 1995 1996(3)
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenue:
Royalties and fran-
chise related fees.... $ 1,374 $ 2,627 $ 12,681 $ 55,235 $107,913 $ 73,163 $130,816
Company-operated
stores................ 3,865 5,656 29,849 40,916 51,566 40,415 55,402
------- ------- -------- -------- -------- -------- --------
Total revenue........ 5,239 8,283 42,530 96,151 159,479 113,578 186,218
Costs and expenses:
Cost of products sold.. 1,429 2,241 11,287 15,876 19,737 15,111 20,515
Salaries and benefits.. 2,872 7,110 15,437 22,637 31,137 22,958 29,699
General and adminis-
trative............... 3,529 5,241 13,879 27,930 41,367 28,689 58,084(4)
Provision for reloca-
tion.................. -- -- -- 5,097 -- -- --
------- ------- -------- -------- -------- -------- --------
Total costs and ex-
penses.............. 7,830 14,592 40,603 71,540 92,241 66,758 108,298
------- ------- -------- -------- -------- -------- --------
Income (loss) from
operation.............. (2,591) (6,309) 1,927 24,611 67,238 46,820 77,920
Other income (expense).. 23 459 (280) (4,161) (12,865) (9,112) 4,956(5)
------- ------- -------- -------- -------- -------- --------
Income (loss) before
income taxes........... (2,568) (5,850) 1,647 20,450 54,373 37,708 82,876
Income taxes............ -- -- -- 4,277 20,814 14,358 30,992
Minority interest in
(earnings) of
subsidiary............. -- -- -- -- -- -- (3,019)
------- ------- -------- -------- -------- -------- --------
Net income (loss)....... $(2,568) $(5,850) $ 1,647 $ 16,173 $ 33,559 $ 23,350 $ 48,865
======= ======= ======== ======== ======== ======== ========
Net income (loss) per
common and equivalent
share................. (0.14) $ (0.21) $ 0.06 $ 0.38 $ 0.66 $ 0.47 $ 0.74
======= ======= ======== ======== ======== ======== ========
Weighted average num-
ber of common and
equivalent shares
outstanding........... 18,776 28,495 32,667 42,861 50,972 49,695 66,091
======= ======= ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(6)....... -- -- 2.38 3.97 4.23 4.32 5.77
STORE DATA (UNAUDITED):
Systemwide Boston Mar-
ket store revenue(7).. $20,752 $42,654 $152,056 $383,691 $792,948 $556,318 $861,120
Number of Boston Mar-
ket stores in opera-
tion at period end:
Company-operated..... 5 19 38 41 3 48 96
Financed area devel-
opers............... -- 3 78 314 712 578 909
------- ------- -------- -------- -------- -------- --------
Subtotal........... 5 22 116 355 715 626 1,005
Other franchisees.... 29 61 101 179 114 128 18
------- ------- -------- -------- -------- -------- --------
Total.............. 34 83 217 534 829 754 1,023
======= ======= ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT OCTOBER 6, 1996
----------------------
AS
ACTUAL ADJUSTED(8)
---------- -----------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................ $ 49,849 $
Notes receivable....................................... 710,111 710,111
Total assets........................................... 1,422,770
Long-term debt......................................... 310,435
Stockholders' equity................................... $ 912,329 $912,329
</TABLE>
- -------
(1) The Company's fiscal year is the 52/53-week period ending on the last
Sunday in December and normally consists of 13 four-week periods. The first
quarter consists of four periods and each of the remaining quarters
consists of three periods.
(2) On June 17, 1996, the Company began consolidating ENBC's results of
operations as a result of the Company's conversion of its loan to ENBC into
a majority equity interest in ENBC's common stock. Giving pro forma effect
to the Company's loan conversion as of the beginning of the Company's 1995
fiscal year, revenue, net income, and net income per common and equivalent
share were $183,985,000, $338,000, and $0.00, respectively. See the
Company's unaudited pro forma consolidated financial statements and notes
thereto included in the Company's Current Report on Form 8-K/A filed with
the Commission on September 3, 1996 which is incorporated by reference.
(3) On June 17, 1996, the Company began consolidating ENBC's results of
operations as a result of the Company's conversion of its loan to ENBC into
a majority equity interest in ENBC's common stock. Giving pro forma effect
to the Company's loan conversion as of the beginning of the Company's 1995
fiscal year, revenue, net income, and net income per common and equivalent
share were $213,740,000, $41,431,000, and $0.63, respectively.
(4) Includes a non-recurring charge of approximately $15.0 million.
(5) Includes a non-recurring gain of approximately $14.8 million.
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes and fixed charges. Fixed
charges include interest expense and a percentage of rents which management
deems representative of an interest factor. For the years ended December
29, 1991 and December 27, 1992, earnings before fixed charges were
insufficient to cover fixed charges by $2,568,000 and $5,850,000,
respectively.
(7) Includes gross revenue for all stores in the Boston Market system.
(8) Adjusted to reflect the consummation of this offering and the application
of the net proceeds therefrom as set forth under "Use of Proceeds". See
also "Capitalization".
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS
QUARTER AND THREE QUARTERS ENDED OCTOBER 6, 1996 COMPARED TO QUARTER AND THREE
QUARTERS ENDED OCTOBER 1, 1995
General
On June 17, 1996, the Company converted its loan to ENBC into ENBC common
stock. On April 22, 1996, the Company acquired a 93% interest in Mid-Atlantic
Restaurant Systems L.P. ("Mid-Atlantic"), its Boston Market area developer in
the Philadelphia area. During the quarter ended October 6, 1996, Mid-Atlantic
acquired additional Boston Market stores. As a result of the conversion of the
ENBC loan, 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-operated stores. As a result of the acquisition of Mid-Atlantic
and its subsequent acquisition of stores, the revenue previously generated by
the Company as a franchisor, lender and service provider has been eliminated
in consolidation and replaced with revenue (and operating expenses) from
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 October 1, 1995.
As of October 6, 1996, the Company owned 95 Boston Market stores in the
Philadelphia market. The following table sets forth store performance data for
these stores:
<TABLE>
<CAPTION>
QUARTER ENDED
OCTOBER 6, 1996
---------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net sales................................................ $25,964.5 100.0%
Food and paper costs..................................... 9,606.2 37.0%
Salaries and benefits.................................... 6,614.0 25.5%
Operating expenses....................................... 2,033.8 7.8%
Occupancy and advertising costs.......................... 2,813.5 10.8%
--------- -----
Store cash flow.......................................... $ 4,897.0 18.9%
========= =====
</TABLE>
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
systemwide store activity for the Company and ENBC for the period indicated.
<TABLE>
<CAPTION>
QUARTER ENDED OCTOBER 6, 1996
------------------------------
BEGINNING STORES STORES ENDING
STORES OPENED CLOSED STORES
--------- ------ ------ ------
<S> <C> <C> <C> <C>
Boston Market.............................. 957 67 (1) 1,023
ENBC....................................... 188 53 0 241
</TABLE>
Revenue. Total revenue increased 92% for the quarter ended October 6, 1996
over the prior comparable quarter. For the three quarters ended October 6,
1996, total revenue increased 64% over the prior comparable period. Royalties
and franchise related fees increased 72% for the quarter ended October 6, 1996
and increased 79% for the three quarters ended October 6, 1996. The increases
in royalties and franchise related fees were primarily attributable to higher
interest income from loans made 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 to ENBC into ENBC common stock. The
increases in interest income were due to higher outstanding loan balances
associated primarily with increases in stores opened by area developers.
Higher royalties were the result of an increase in
21
<PAGE>
Boston Market systemwide store revenue which increased to $288.9 million in the
quarter ended October 6, 1996, up 46% from $197.5 million for the prior
comparable quarter. Systemwide store revenue increased to $861.1 million in the
three quarters ended October 6, 1996, up 55% from $556.3 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 weekly per
store averages ("WPSAs") for the Boston Market system, which increased 5.7% to
$24,716 for the quarter ended October 6, 1996, from $23,388 in the prior
comparable quarter. WPSAs increased 7.1% to $23,673 for the three quarters
ended October 6, 1996, from $22,098 in the comparable 1995 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. The inclusion of ENBC's royalties and franchise
related fees from the date of conversion accounted for 42% of the increase in
royalty and franchise related fees for the third quarter and 19% of the
increase for the three quarters ended October 6, 1996.
Revenue from Boston Market Company-operated stores is significantly affected
by the average number of such stores in the periods being compared. The average
number of Boston Market Company-operated stores for the third quarter of 1996
was 94 compared to 32 for the third quarter of 1995. The average number of
Boston Market Company-operated stores for the three quarters ended October 6,
1996 was 53 compared to 39 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 stores in 1996. Revenue from Company-operated
stores increased 137% for the third quarter of 1996 compared with the
comparable 1995 quarter and increased 37% for the three quarters ended October
6, 1996 compared with the comparable 1995 period. The increase for these
periods was due to a combination of a higher average number of Boston Market
Company-operated stores and the inclusion of ENBC-operated stores from the date
of conversion. The inclusion of revenue from ENBC-operated stores from the date
of conversion accounted for 14% of the increase in store revenue for the third
quarter and 39% of the increase for the three quarters ended October 6, 1996.
Cost of Products Sold. As a result of the higher average number of Boston
Market Company-operated stores operating in the quarter ended October 6, 1996,
cost of products sold increased 134% compared with the prior comparable
quarter. Cost of products sold increased 36% for the three quarters ended
October 6, 1996, compared with the comparable 1995 period also as a result of
the higher average numbers of Boston Market Company-operated stores operating
in the three quarters ended October 6, 1996, compared with the prior comparable
period. ENBC-operated stores included from the date of conversion accounted for
13% of the increase in cost of products sold for the third quarter and 37% of
the increase for the three quarters ended October 6, 1996.
Salaries and Benefits. Primarily as a result of the higher average number of
Boston Market Company-operated stores operating in the quarter ended October 6,
1996, salaries and benefits increased 86% compared with the comparable 1995
quarter. The increase for the third quarter of 1996 was also due to the
inclusion of ENBC employees from the date of conversion and an increased number
of employees at the Company's support center. ENBC accounted for 31% of the
increase in salaries and benefits for the third quarter. Salaries and benefits
increased 29% for the three quarters ended October 6, 1996 compared with the
comparable 1995 period. The increase in salaries and benefits for the three
quarters ended October 6, 1996 was due to an increased number of employees at
the Company's support center and the inclusion of ENBC employees from the date
of conversion. ENBC accounted for 34% of the increase in salaries and benefits
for the three quarters ended October 6, 1996.
General and Administrative. Included in general and administrative expenses
for the quarter and three quarters ended October 6, 1996, was a non-recurring
provision of approximately $15.0 million to purchase store equipment from
Boston Market area developers which will be made obsolete due to the
introduction of a new service system designed to provide faster customer
service. Absent this provision, general and administrative expenses increased
96% for the quarter ended October 6, 1996 over the comparable 1995 quarter and
increased 50% for the three quarters ended October 6, 1996 over the comparable
1995 period. The increase for the quarter was attributable to inclusion of
ENBC's general and administrative expenses from the date of conversion, greater
depreciation and amortization expense, and a higher average number of Company-
operated Boston Market stores.
22
<PAGE>
ENBC accounted for 13% of the increase in general and administrative expenses
for the third quarter. The increase for the three quarters ended October 6,
1996 was primarily attributable to greater depreciation and amortization
expense, an increase in the general and administrative expenses at the support
center necessary to support systemwide expansion, and inclusion of ENBC's
general and administrative expenses from the date of conversion. ENBC
accounted for 14% of the increase. Included in general and administrative
expenses were depreciation and amortization charges of $6.3 million for the
third quarter of 1996 compared with $2.9 million in the third quarter of 1995.
Depreciation and amortization charges were $15.6 million for the three
quarters ended October 6, 1996, compared with $8.4 million for the comparable
1995 period. The increases in depreciation and amortization expense were
primarily attributable to the goodwill associated with the acquisition of Mid-
Atlantic and the conversion of the ENBC loan, as well as a higher fixed asset
base reflecting the Company's and ENBC's investment in support center
infrastructure.
Other Income (Expense). Included in other income (expense) for the quarter
and three quarters ended October 6, 1996, was approximately a $14.8 million
gain recognized as a result of ENBC issuing 4.4 million shares of common stock
to third parties in the third quarter. Absent this gain, the Company had a net
expense of $3.8 million in the third quarter of 1996 compared to a net expense
of $4.6 million in the comparable quarter of 1995 and a net expense of $9.8
million for the three quarters ended October 6, 1996 compared to a net expense
of $9.1 million in the comparable 1995 period. The decrease in the expense in
the 1996 quarter was attributable to additional interest income earned in the
third quarter of 1996. The increase in the expense for the three quarters
ended October 6, 1996 was due to additional interest expense incurred in 1996
resulting from the LYONs being outstanding for the entire period in 1996
versus only a portion of the year in 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
$2.0 million for the quarter and $3.0 million for the three quarters ended
October 6, 1996, represents the minority ownership interest in the earnings of
ENBC.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994 AND FISCAL YEAR 1994 COMPARED TO
FISCAL YEAR 1993.
General
The total number of stores in the Boston Market system increased from 217 at
the year ended December 26, 1993 to 829 at the year ended December 31, 1995.
Gross systemwide store revenue for the Boston Market system was $792.9 million
for the year ended December 31, 1995, compared to $152.1 million for the year
ended December 26, 1993.
During fiscal year 1995, a majority of the Boston Market stores operated by
the Company and its area developers had been open for less than two years.
Consequently, operating results achieved through fiscal year 1995 may not be
indicative of the results that may be achieved in the future by the Company or
its area developers.
Results of Operations
Fiscal Year 1995 Compared to Fiscal Year 1994
Revenue. Total revenue increased 66% for 1995 from 1994. Royalty and
franchise related fees increased 95% primarily due to an increase in royalties
attributable to the larger base of franchise stores operating systemwide, from
493 stores at December 25, 1994 to 826 stores at December 31, 1995, higher
interest income generated on increased loans made to certain area developers,
and an increase in lease and real estate services income.
23
<PAGE>
Revenue from Company-operated stores increased 26% for 1995 from 1994 due to
a combination of a higher average number of Company-operated stores open and
higher average store revenue during 1995. The Company had three Company-
operated stores at December 31, 1995 compared to 41 at December 25, 1994.
During 1995, the Company sold 91 Company-operated stores which it had opened to
seed development in certain new markets prior to executing area development
agreements for such markets.
Cost of Products Sold. Cost of products sold increased 24% for 1995 from 1994
primarily due to an increase in the number of Company-operated stores open and
higher average store revenue during the year. Management does not believe that
the cost of products sold as a percentage of store revenue at Company-operated
stores is indicative of cost of products sold as a percentage of store revenue
at franchise stores due to the Company's practice of opening new stores
primarily to seed new markets. These newer stores tend to have higher food and
paper costs as a result of increased food usage for free tasting,
inefficiencies resulting from employee inexperience, and a lack of store-
specific operating history to assist in forecasting daily food production
needs.
Salaries and Benefits. Salaries and benefits increased 38% for 1995 from
1994. The increase resulted from an increase in the number of employees at the
Company's support center necessary to support systemwide expansion and an
increase in the number of employees at Company-operated stores due to a higher
average number of Company-operated stores open during the year.
General and Administrative. General and administrative expenses increased 48%
for 1995 from 1994. The increase is attributable to the continued development
of the Company's support center infrastructure necessary to support systemwide
expansion and higher general and administrative expenses at Company-operated
stores resulting from a higher average number of Company-operated stores open
during the year. Included in general and administrative expenses were
depreciation and amortization charges of $11.4 million in 1995 and $6.1 million
in 1994. The increase in depreciation and amortization expense is primarily
attributable to a substantially higher fixed asset base reflecting the
Company's investment in its infrastructure.
Other Expense. The Company incurred other expense of $12.9 million in 1995,
compared with other expense of $4.2 million in 1994. This increase reflects
higher net interest expense, primarily attributable to the Company's 4 1/2%
Debentures, which were outstanding during all of 1995, interest expense on the
Company's LYONs commencing in June 1995, and short-term borrowings under its
unsecured credit facility, partially offset by higher interest income.
Income Taxes. The provision for income taxes for 1995 reflects the Company's
expected effective tax rate.
Fiscal Year 1994 Compared to Fiscal Year 1993
Revenue. Total revenue increased 126% for 1994 from 1993. Royalty and
franchise related fees increased 335% primarily due to an increase in royalties
attributable to the larger base of franchise stores operating systemwide, from
179 stores at December 26, 1993 to 493 stores at December 25, 1994, an increase
in franchise fees related to the increase in the number of stores that
commenced operation as franchised stores during the year, and higher interest
income generated on increased loans made to certain area developers. Additional
factors contributing to the increase in revenue from royalty and franchise
related fees include an increase in lease income due to a higher number of
store sites which the Company owns and leases to area developers and
recognition of software license and maintenance fees for store-level computer
software systems developed by the Company for use by franchisees. No software-
related fees were earned in 1993.
Revenue from Company-operated stores increased 37% for 1994 from 1993. This
increase was due to a higher average number of Company-operated stores open
during the year. The Company had 38 Company-operated stores at December 26,
1993, compared to 41 at December 25, 1994. During 1994, the Company sold 54
Company-operated stores which it had opened to seed new markets.
Cost of Products Sold. Cost of products sold increased 41% for 1994 from
1993. This increase was primarily due to an increase in the number of Company-
operated stores open during 1994. Management does not believe
24
<PAGE>
that the cost of products sold as a percentage of store revenue at Company-
operated stores is indicative of cost of products sold as a percentage of store
revenue at franchise stores due to the Company's practice of opening new stores
primarily to seed new markets. These newer stores, which constituted the
majority of the Company-operated store base, tend to have higher food and paper
costs as a result of increased food usage for free tasting, inefficiencies
resulting from employee inexperience, and a lack of store-specific operating
history to assist in forecasting daily food production needs.
Salaries and Benefits. Salaries and benefits increased 47% for 1994 from
1993. The increase resulted from an increase in the number of employees at the
Company's support center necessary to support systemwide expansion and an
increase in the number of employees at Company-operated stores due to a higher
average number of Company-operated stores open during the year.
General and Administrative. General and administrative expenses increased
101% for 1994 from 1993. The increase is attributable to the development of the
Company's support center infrastructure necessary to support systemwide
expansion and higher general and administrative expenses at Company-operated
stores resulting from a higher average number of Company-operated stores open
during the year. Included in general and administrative expenses were
depreciation and amortization charges of $6.1 million in 1994 and $2.0 million
in 1993. The increase in depreciation and amortization expense is primarily
attributable to a substantially higher fixed asset base reflecting the
Company's investment in its infrastructure.
Provision for Relocation. In September 1994, the Company consolidated its
four Chicago-based support center facilities into a single facility and
relocated to Golden, Colorado. The total cost of the relocation was $5.1
million.
Other Expense. The Company incurred other expense of $4.2 million in 1994,
compared with other expense of $0.3 million in 1993. This increase reflects
higher interest expense, primarily attributable to the 4 1/2% Debentures and
short-term borrowings under its unsecured credit facility, partially offset by
higher interest income.
Income Taxes. Included in income taxes in 1994 is a $3.5 million benefit
reflecting an adjustment to the valuation allowance previously provided against
deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company's and ENBC's principal 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 December 31, 1995, the Company had secured loan
commitments to its Boston Market financed area developers aggregating
approximately $614.1 million, of which approximately $411.4 million had been
advanced. As of October 6, 1996, the Company had secured loan commitments to
its Boston Market financed area developers aggregating approximately $761.4
million, of which approximately $590.7 million had been advanced. As of October
6, 1996, ENBC had secured loan commitments to its area developers aggregating
approximately $210.8 million, of which approximately $100.7 million had been
advanced.
As a result of executing the rapid expansion strategy required by the
Company, Boston Market financed area developers have incurred aggregate net
losses in each of fiscal years 1995, 1994, and 1993 as follows: $149.1 million
in 1995, $47.0 million in 1994, and $9.8 million in 1993. These losses 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
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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's financed area developers continued their
rapid expansion phase in 1996 in most of their areas of dominant influence and
the Company believes such area developers will remain in such rapid expansion
phase during 1997. Accordingly, the Company expects that fiscal 1996 financed
area developer financial results (excluding results from financed area
developers whose loans have been converted or whose loans the Company has
agreed to convert) will show aggregate net losses comparable to net losses
incurred by the Company's financed area developers in fiscal 1995; however,
the Company believes that area developer aggregate net losses will begin to
decline in fiscal 1997. 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 the completion of
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 8.
ENBC's area developers are pursuing a similar rapid expansion strategy and
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 apply to
ENBC area developers as well. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 8.
Pursuant to the terms of the loan agreements 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. Any such
conversion could occur in conjunction with combinations of existing area
developers with one another or otherwise. 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 a
conversion pursuant to which the Company becomes the majority equity owner of
the area developer, the Company would consolidate 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.
In 1995, the Company sold 91 Boston Market stores to its area developers in
the Minneapolis/St. Paul, Omaha, Kansas City, Des Moines, St. Louis, New York,
New Jersey, San Francisco, San Jose, and Detroit
26
<PAGE>
metropolitan areas. In addition to opening stores to seed development in new
markets and subsequently selling such stores to the new area developer for
such market, the Company purchases and resells Boston Market stores in markets
with multiple area developers or franchisees, primarily to facilitate
consolidation of such markets. In connection with these consolidation
activities, in 1995, the Company acquired 58 Boston Market stores, 55 of which
have been sold to the Company's area developers. The aggregate proceeds from
the sale of Company-operated stores developed to seed new markets and from the
sale of stores which were acquired to consolidate markets were approximately
$61.2 million in 1995. There were no material gains or losses recognized as a
result of these sales. The Company issued a total of 686,781 shares of its
Common Stock in 1995 pursuant to its "shelf" registration statement for the
acquisition of 56 of the aforementioned Boston Market stores. In addition, in
1995 and 1996, the Company issued to ENBC a total of 750,000 shares and
1,951,615 shares, respectively, of registered Common Stock in partial
satisfaction of the Company's funding obligations under its convertible
secured loan agreement with ENBC. The Company believes that substantially all
of the shares issued in connection with these transactions have been sold by
the recipients.
Capital Resources. For the year ended December 31, 1995, the Company's
primary sources of capital included $55.5 million generated from operating
activities, $172.5 million from the sale of the LYONs, and $385.4 million from
the sale of shares of Common Stock. For the three quarters ended October 6,
1996, the Company generated approximately $49.0 million of cash from operating
activities and $170.7 million from the issuance of shares of the Company's
Common Stock and ENBC 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. Of such net proceeds, approximately $45.0 million was used to repay
the balance outstanding under ENBC's bank revolving credit facility.
As of October 6, 1996, the Company had $59.4 million available in cash and
cash equivalents and $108.3 million available under its revolving credit
facilities.
In December 1996, the Company terminated its existing revolving credit
facility and entered into a new $110.0 million senior revolving credit
facility. Borrowings under the revolving credit facility bear interest at
either the agent's reference rate plus an applicable margin, or at the
Company's option, the eurodollar rate plus an applicable margin. The revolving
credit agreement is secured by certain assets of the Company and expires in
December 1999. The Company also entered into a new $190.0 million senior
secured credit facility, structured as a master lease (the "1996 master lease
facility"), which provides financing for equipment, real estate, and leasehold
improvements for stores operated by the Company and its area developers. The
1996 master lease facility is accounted for as an operating lease, bears
interest at LIBOR plus an applicable margin, and has terms, including renewal
options, of between three and five years. As of December 29, 1996, the Company
had utilized approximately $149.0 million of the facility. Availability of
borrowings under the Company's revolving credit facility and the 1996 master
lease facility is formula-based. In connection with the revolving credit
facility and the 1996 master lease facility, the Company also entered into a
facilities agreement, which contains affirmative, negative, and financial
covenants governing both such facilities. The revolving credit facility and
the 1996 master lease facility are also cross-collateralized and cross-
defaulted.
The Company anticipates that it and 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.
In addition, the Company expects that BMI, its area developers, franchisees,
licensees, and/or joint venture partners, and PFCI will have need for
additional financing. 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, BMI, and PFCI. The
Company, ENBC, and the other aforementioned entities may seek additional funds
from offerings of debt or equity securities. There can be no assurance that
the Company, ENBC, or such entities will be able to raise such funds on
satisfactory terms when needed. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 8.
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<PAGE>
SEASONALITY
Historically, the Company has experienced lower average store revenue in the
months of January and February as a result of inclement weather.
IMPACT OF INFLATION
The Company believes that inflation has not had a material impact on its
operations to date. Substantial increases in labor, employee benefits, food,
and other operating expenses could adversely affect the operations of Boston
Market, Einstein Bros. Bagels and Noah's New York Bagels stores.
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DESCRIPTION OF DEBENTURES
The Debentures will be issued pursuant to an indenture to be dated as of
, 1997 (the "Indenture") between the Company, as issuer, and Bankers
Trust Company, as trustee (the "Trustee"). A copy of the Indenture is filed as
an exhibit to the Registration Statement of which this Prospectus forms a
part. The terms of the Debentures will include those stated in the Indenture
and those provisions required by, or made a part of the Indenture by reference
to, the Trust Indenture Act of 1939, as in effect on the date of the Indenture
(the "Trust Indenture Act"). The Debentures will be subject to all such terms,
and prospective investors are referred to the Indenture for a statement
thereof.
The following summary of the Debentures does not purport to be complete and
is qualified in its entirety by express reference to the Debentures and the
Indenture, which are incorporated by reference as a part of such summary.
Capitalized terms defined in the Indenture shall have the same meanings
herein.
GENERAL
The Debentures will be subordinated unsecured obligations of the Company,
will be limited to an aggregate principal amount of $250,000,000 ($287,500,000
if the Underwriters' over-allotment option is exercised in full), and will
mature on , 2004.
The Debentures will bear interest from the date of issuance at the rate per
annum shown on the cover page of this Prospectus. Interest will be payable
semi-annually on and of each year, commencing , 1997, to Holders of record at
the close of business on or preceding each such interest payment date.
Principal of and interest on the Debentures will be payable at the office of
the Paying Agent. Interest on the Debentures will be mailed to each Holder's
registered address. The Trustee will initially act as the Paying Agent.
The Debentures will be issued only in registered form, without coupons, and
only in denominations of $1,000 and integral multiples thereof. Debentures may
be presented for conversion at the office of the Conversion Agent and for
exchange or registration of transfer at the office of the Registrar. The
Trustee will initially act as the Conversion Agent and Registrar. Any exchange
or transfer will be without charge, except that the Company or the Registrar
may, subject to certain exceptions, require payment of a sum sufficient to
cover any tax, assessment, or other governmental charge that may be imposed in
relation thereto.
CONVERSION RIGHTS
A Holder may, at any time prior to maturity, convert the principal amount of
a Debenture (or any portion thereof equal to $1,000 or an integral multiple of
$1,000) into shares of Common Stock at the conversion price set forth on the
cover page of this Prospectus, subject to adjustment as described below (the
"Conversion Price"). The right to convert a Debenture called for redemption
will terminate at the close of business on the Redemption Date for such
Debenture or such earlier date as the Holder presents the Debenture for
redemption (unless the Company shall default in making the redemption payment
when due, in which case the conversion right shall terminate at the close of
business on the date such default is cured and such Debenture is redeemed). A
Debenture for which a Holder has delivered a Change in Control Purchase Notice
exercising the option of such Holder to require the Company to purchase such
Debenture may be converted only if such notice is withdrawn by a written
notice of withdrawal delivered by the Holder to the Paying Agent prior to the
close of business on the Change in Control Purchase Date in accordance with
the Indenture.
No payment or adjustment will be made for dividends or distributions with
respect to shares of Common Stock issued upon conversion of a Debenture.
Except as otherwise provided in the Indenture, interest accrued shall not be
paid on Debentures converted. If any Holder surrenders a Debenture for
conversion between the record date for the payment of an installment of
interest and the related interest payment date, then, notwithstanding such
conversion, the interest payable on such interest payment date will be paid to
the Holder on such record date. However, in such event, such Debenture, when
surrendered for conversion, must be
29
<PAGE>
accompanied by delivery by such Holder of a check or draft payable in an
amount equal to the interest payable on such interest payment date on the
portion so converted. Notwithstanding the foregoing, if any Debenture is
called for redemption on , 2000 and such Debenture is surrendered for
conversion at any time during the ten business days immediately preceding the
date fixed for redemption, interest shall accrue on such Debenture through,
but not including, the date fixed for redemption and shall be payable on such
redemption date to the person who surrenders such Debenture for conversion and
the conversion date of such Debenture will be deemed to be the redemption
date. No fractional shares will be issued upon conversion, but a cash payment
will be made for any fractional interest based upon the current market price
of the Common Stock.
The Conversion Price is subject to adjustment upon the occurrence of certain
events, including (i) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock, (ii) the subdivision or combination of the
outstanding Common Stock, (iii) the issuance to all or substantially all
holders of Common Stock of rights or warrants to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) at a price per
share less than the then current market price per share, as defined, (iv) the
distribution to all or substantially all holders of Common Stock of shares of
capital stock of the Company (other than Common Stock), evidences of
indebtedness, or other non-cash assets (including securities of any company
other than the Company), (v) the distribution to all or substantially all
holders of Common Stock of rights or warrants to subscribe for its securities
(other than those referred to in (iii) above), and (vi) the distribution to
all or substantially all holders of Common Stock of cash in an aggregate
amount that (together with all other cash distributions to all or
substantially all holders of Common Stock made within the preceding 12 months
not triggering a Conversion Price adjustment) exceeds an amount equal to 20%
of the Company's market capitalization on the Business Day immediately
preceding the day on which the Company declares such distribution. In the
event of a distribution pro rata to holders of Common Stock of rights to
subscribe for additional shares of the Company's capital stock (other than
those referred to in (iii) above), the Company may, instead of making any
adjustment in the Conversion Price, make proper provisions so that each Holder
who converts a Debenture (or any portion thereof) after the record date for
such distribution and prior to the expiration or redemption of such rights
shall be entitled to receive upon such conversion, in addition to the shares
of Common Stock issuable upon conversion, an appropriate number of such
rights. No adjustment of the Conversion Price will be required to be made
until the cumulative adjustments require an increase or decrease of at least
1% in the Conversion Price as last adjusted.
Subject to any applicable right of the Holders upon a Change in Control, if
the Company reclassifies or changes its outstanding Common Stock, or
consolidates with or merges into or sells or conveys all or substantially all
of the assets of the Company as an entirety to any person, or is a party to a
merger that reclassifies or changes its outstanding Common Stock, the
Debentures will become convertible into the kind and amount of shares of stock
and other securities and property (including cash) that the Holders would have
owned immediately after the transaction if the Holders had converted the
Debentures immediately before the effective date of the transaction.
Certain adjustments to the Conversion Price to reflect the Company's
issuance of certain rights, warrants, evidences of indebtedness, securities,
or other property (including cash) to holders of the Common Stock may result
in constructive distributions taxable as dividends to Holders of the
Debentures. Similarly, if instead of adjusting the Conversion Price upon a pro
rata distribution of rights to subscribe for additional shares of the
Company's capital stock, as described above, the Company elects at such time
to alter the consideration receivable by the holders of the Debentures upon
conversion to include the rights such holders would have been entitled to if
conversion had occurred prior to the record date for such distribution of
rights, the alteration may result in constructive distributions taxable as
dividends to Holders of the Debentures.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures may not be redeemed at the option of the Company prior to
, 2000. Thereafter, the Debentures may be redeemed at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice by mail.
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<PAGE>
The redemption prices (expressed as a percentage of principal amount) are as
follows for the 12-month period beginning on of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000................. %
2001.................
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002................. %
2003.................
</TABLE>
in each case together with accrued interest up to but not including the date
of redemption.
PURCHASE OF DEBENTURES AT THE OPTION OF HOLDERS UPON A CHANGE IN CONTROL
In the event of a Change in Control (as defined below), each Holder will
have the option, subject to the terms and conditions of the Indenture, to
require the Company to purchase all or any part (provided that the principal
amount must be $1,000 or an integral multiple thereof) of the Holder's
Debentures as of the date that is 40 Business Days after the occurrence of
such Change in Control (the "Change in Control Purchase Date") for a purchase
price equal to 100% of the principal amount thereof, plus accrued interest up
to but not including the Change in Control Purchase Date.
Within ten Business Days after the occurrence of a Change in Control, the
Company shall mail to the Trustee and to each Holder and cause to be published
a written notice of the Change in Control, setting forth, among other things,
the terms and conditions of, and the procedures required for exercise of, the
Holder's right to require the purchase of such Holder's Debentures.
To exercise the purchase right upon a Change in Control, a Holder must
deliver written notice of such exercise to the Paying Agent at any time prior
to the close of business on the Change in Control Purchase Date, specifying
the Debentures with respect to which the purchase right is being exercised.
Such notice of exercise may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent at any time prior to the close of
business on the Change in Control Purchase Date.
A Change in Control shall be deemed to have occurred if any of the following
occurs after the original issuance of the Debentures:
(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the Exchange
Act or any successor provision, but excluding Scott A. Beck, Saad J.
Nadhir, or a person or group controlled by them or either of them (or their
heirs or legatees)) of beneficial ownership, directly or indirectly,
through a purchase, merger, or other acquisition transaction or series of
transactions, of shares of capital stock of the Company entitling such
Person to exercise more than 50% of the total voting power of all shares of
capital stock of the Company entitling the holders thereof to vote
generally in elections of directors; or
(ii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company, or
any sale, lease, or exchange of all or substantially all of the property
and assets of the Company to another Person (other than (i) sales or leases
of property to franchisees of the Company in the ordinary course of
business or (ii) a merger which (x) does not result in any
reclassification, conversion, exchange, or cancellation of outstanding
shares of capital stock of the Company or (y) is effected primarily to
change the jurisdiction of incorporation of the Company and results in
reclassification, conversion, or exchange of outstanding shares of Common
Stock solely into shares of Common Stock of the surviving entity).
A "beneficial owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture, except that the Indenture requires that the
number of shares of capital stock of the Company entitling the holders thereof
to vote generally in the election of directors shall be deemed to include, in
addition to all outstanding shares of capital stock of the Company entitling
the holders thereof to vote generally in the election of directors and
Unissued Shares deemed
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<PAGE>
to be held by the Person with respect to which the Change in Control
determination is being made, all Unissued Shares deemed to be held by all
other Persons. As defined in the Indenture, "Unissued Shares" means shares of
capital stock of the Company not outstanding that are subject to options,
warrants, rights to purchase, or conversion privileges exercisable within 60
days of the date of determination of a Change in Control and that, upon
issuance, will entitle the holders thereof to vote generally in the election
of directors.
The term "all or substantially all" as used in clause (ii) of the definition
of Change in Control has not been interpreted under New York law (which is the
governing law of the Indenture) to represent a specific quantitative test. As
a consequence, in the event the Holders of the Debentures elected to exercise
their rights under the Indenture and the Company elected to contest such
election, there could be no assurance as to how a court would interpret the
phrase under New York law, which may have the effect of preventing the Trustee
or the Holders of the Debentures from successfully asserting that a Change in
Control has occurred.
The Company will comply with the provisions of Rule 13e-4 and Rule 14e-1
under the Exchange Act, will file Schedule 13E-4 or any successor or similar
schedule required thereunder, and will otherwise comply with all federal and
state securities laws in connection with any offer by the Company to purchase
Debentures at the option of the Holders upon a Change in Control.
The Change in Control purchase feature of the Debentures may in certain
circumstances make more difficult or discourage a takeover of the Company and
the removal of incumbent management. The Company is not aware of any specific
effort to accumulate shares of Common Stock or to obtain control of the
Company by means of a merger, tender offer, solicitation, or otherwise, nor is
the Change of Control purchase feature part of a plan by management to adopt a
series of anti-takeover provisions. Instead, the Change in Control purchase
feature is a result of negotiations between the Company and the Underwriters.
Depending upon the terms of the transaction, a future highly leveraged
transaction, reorganization, restructuring, merger, or similar transaction
involving the Company's present management or directors could constitute a
Change in Control. Neither the Company nor its current management has any
current intention to engage in a transaction involving a Change in Control,
although it is possible that the Company or its management may decide to do so
in the future.
Subject to the limitation on mergers and consolidations discussed below, the
Company could, in the future, enter into certain transactions, including
certain recapitalizations, the sale of all or substantially all of its assets,
or the liquidation of the Company, that would not constitute a Change in
Control under the Indenture, but that would increase the amount of Senior
Indebtedness (or any other indebtedness) outstanding at such time,
substantially reduce or eliminate the Company's assets, or otherwise adversely
affect the Holders of the Debentures. There are no restrictions in the
Indenture on the creation of additional Senior Indebtedness (or any other
indebtedness), and, under certain circumstances, the incurrence of significant
amounts of additional indebtedness could have an adverse effect on the
Company's ability to service its indebtedness, including the Debentures.
If a Change in Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the Change in Control Purchase
Price for all Debentures tendered by the Holders thereof. Because the LYONs
and the 4 1/2% Debentures contain provisions substantially identical to the
Change in Control purchase feature of the Debentures, upon the occurrence of a
Change in Control, holders of the LYONs and the 4 1/2% Debentures will also
have the right to require the Company to repurchase the LYONs and the 4 1/2%
Debentures. In addition, the Company's revolving credit facility and 1996
master lease facility, each of which constitutes Senior Indebtedness, provide
that a change in control (as defined therein) will constitute an event of
default thereunder, the occurrence of which would cause any repurchase of the
Debentures, absent a waiver, to be blocked by the subordination provisions of
the Debentures. Even if such event of default did not occur or was waived, the
exercise by any Holder of Debentures of the right to require the Company to
repurchase Debentures as a result of the occurrence of a Change in Control
could create an event of default under Senior Indebtedness
32
<PAGE>
of the Company, as a result of which any repurchase could, absent a waiver, be
blocked by the subordination provisions of the Debentures. See "Subordination
of Debentures". Further, the terms of future Senior Indebtedness or other
future indebtedness ranking pari passu in right of payment with the Debentures
could require that such indebtedness be repaid upon the occurrence of a Change
in Control. Failure by the Company to repurchase the Debentures when required
will result in an Event of Default with respect to the Debentures whether or
not such repurchase is permitted by the subordination provisions thereof.
SUBORDINATION OF DEBENTURES
To the extent set forth in the Indenture, the Debentures will be
subordinated and subject in right of payment to the prior payment in full of
all Senior Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, assumed, or guaranteed. Upon any payment or
distribution of assets of the Company in any dissolution, winding-up,
liquidation, or reorganization of the Company (whether in an insolvency or
bankruptcy proceeding or otherwise), all Senior Indebtedness must be paid in
full (including the principal thereof, interest thereon, and fees and expenses
relating thereto) before any payment is made on or in respect of the
Debentures. In the event of a default in payment (whether at maturity or at a
date fixed for prepayment or by acceleration or otherwise) of principal of or
interest on Senior Indebtedness, no payment may be made by the Company on or
in respect of the Debentures until payment in full of the Senior Indebtedness
then due or cure of the default. Upon a default with respect to any Senior
Indebtedness (other than a default in the payment of principal of or interest
on Senior Indebtedness) permitting a holder thereof to accelerate its
maturity, and upon written notice of such default to the Trustee and the
Company by any holder of such Senior Indebtedness or its representative, then,
unless and until such default has been cured, waived in writing, or has ceased
to exist, no payment may be made by the Company in respect of the Debentures;
provided that nothing in the above-described provision will prevent the making
of any payment in respect of the Debentures for a period of more than 89 days
after the date such written notice of default is given unless the maturity of
the Senior Indebtedness has been accelerated, in which case no payment on the
Debentures may be made until such acceleration has been waived or such Senior
Indebtedness has been paid in full. No such subordination will prevent the
occurrence of any Event of Default (as defined in the Indenture) with respect
to the Debentures, but, as a result of these subordination provisions, in the
event of insolvency, Holders may recover less ratably than other creditors of
the Company.
"Senior Indebtedness" means the following, whether outstanding upon issuance
of the Debentures or thereafter incurred or created: (a) the principal and
premium, if any, and interest on and fees, costs, enforcement expenses,
collateral protection expenses, and other reimbursement or indemnity
obligations in respect of all indebtedness or obligations of the Company to
any Person, including but not limited to banks and other lending institutions,
for money borrowed (other than that evidenced by the Debentures) or in respect
of credit or other banking facilities evidenced by a note, bond, debenture,
loan agreement, a lease intended as security or similar instrument or
agreement (including purchase money obligations with original maturities in
excess of one year and noncontingent reimbursement obligations in respect of
the amounts paid under letters of credit); (b) commitment or standby fees due
and payable to lending institutions with respect to credit facilities
available to the Company; (c) all noncontingent obligations of the Company (i)
for the reimbursement of any obligor on any letter of credit, banker's
acceptance, or similar credit transaction, (ii) under interest rate swaps,
caps, collars, options, and similar arrangements and (iii) under any foreign
exchange contract, currency swap agreement, futures contract, currency option
contract, or other foreign currency hedge; (d) all obligations of the Company
for the payment of money relating to a Capitalized Lease Obligation; (e) any
liabilities of others described in the preceding clauses that the Company has
guaranteed or which are otherwise its legal liability; and (f) renewals,
extensions, refundings, refinancings, restructurings, amendments, and
modifications of any such indebtedness or guarantee. Notwithstanding anything
to the contrary in the Indenture or the Debentures, "Senior Indebtedness" does
not include any indebtedness of the Company (i) to any person under any
employee benefit plan or to any employee or affiliates of the Company, (ii)
any indebtedness or other obligation of the Company that by its terms or the
terms of the instrument creating or evidencing it is stated to be not superior
in right of payment to the Debentures, or (iii) indebtedness represented by
the LYONs or the 4 1/2% Debentures.
33
<PAGE>
The Indenture does not limit the amount of future or additional
indebtedness, including Senior Indebtedness, that the Company can create,
incur, assume, or guarantee, nor does the Indenture limit the amount of
indebtedness that any subsidiary can incur. All indebtedness of the Company
incurred from time to time under the Company's revolving credit facility and
master lease facilities will constitute Senior Indebtedness. See
"Capitalization". As of March 3, 1997, the Company had approximately $282.0
million of indebtedness outstanding (excluding accrued interest thereon) that
would have constituted Senior Indebtedness. The Debentures will rank pari
passu with the Company's outstanding LYONs and 4 1/2% Debentures. Following
completion of this offering, the Company anticipates it will call for the
redemption of its outstanding 4 1/2% Debentures in accordance with the terms
of the indenture related thereto.
In addition, the Debentures will be effectively subordinated to all
liabilities, including trade payables, of the Company's subsidiaries. Any
right of the Company to receive assets of any of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the Holders of the
Debentures to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
EVENTS OF DEFAULT; NOTICE AND WAIVER
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, or reorganization) occurs and is continuing, the
Trustee may, by notice to the Company, declare all unpaid principal of and
accrued interest to the date of acceleration on the Debentures then
outstanding to be due and payable immediately. Also, in such event, the
Holders of at least 25% in principal amount of the Debentures then outstanding
may notify the Company and the Trustee with respect thereto, and upon the
request of such Holders, the Trustee shall declare all unpaid principal of and
accrued interest to the date of acceleration on the Debentures then
outstanding to be due and payable immediately. If an Event of Default
resulting from certain events of bankruptcy, insolvency, or reorganization
shall occur, all unpaid principal of and accrued interest on the Debentures
then outstanding shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders.
The Indenture provides that the Holders of a majority in principal amount of
the Debentures may on behalf of all Holders waive any existing default or
Event of Default and its consequences except a default in the payment of
principal of or accrued interest on the Debentures or any default in respect
of any provision of the Indenture that cannot be modified or amended without
the consent of the Holder of each Debenture affected.
Other than granting Holders the option to require the Company to purchase
all or part of their Debentures upon the occurrence of a Change in Control as
described in "Purchase of Debentures at the Option of Holders Upon a Change in
Control," the Indenture does not contain any covenants or other provisions
designed to afford Holders protection in the event of takeovers,
recapitalizations, highly leveraged transactions, or similar restructurings
involving the Company.
The following are Events of Default under the Indenture: (i) failure of the
Company to pay interest for 30 days after the same is due or failure to pay
principal when due; (ii) failure of the Company to comply with any of its
other agreements contained in the Debentures or the Indenture for 30 days
after receipt of notice of such failure; (iii) default under any bond,
debenture, note, or other evidence of indebtedness for money borrowed of the
Company having an aggregate outstanding principal amount of in excess of $10
million, which default shall have resulted in such indebtedness being
accelerated, without such indebtedness being discharged, or such acceleration
having been rescinded or annulled, within ten days from the date of such
acceleration; and (iv) certain events of bankruptcy or insolvency, including
without limitation appointment of a Custodian of the Company's property, or
liquidation of the Company.
34
<PAGE>
The Trustee shall, within 90 days after the occurrence of any default known
to it, give to the Holders notice of such default; provided that, except in the
case of a default in the payment of principal of or interest on any of the
Debentures, the Trustee may withhold such notice if it in good faith determines
that the withholding of such notice is in the interests of the Holders.
No Holder may pursue any remedy under the Indenture or the Debentures against
the Company (except actions for payment of overdue principal or interest or for
the conversion of the Debentures), unless (i) the Holder gives to the Trustee
written notice of a continuing Event of Default, (ii) the Holders of at least
25% in principal amount of the outstanding Debentures make a written request to
the Trustee to pursue the remedy, (iii) such Holder or Holders offer
satisfactory indemnity to the Trustee against any loss, liability, or expense,
(iv) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity, and (v) the Trustee shall not have
received during such 60-day period a contrary direction from the Holders of at
least a majority in principal amount of the outstanding Debentures.
The Company must deliver an Officer's Certificate to the Trustee within 90
days after the end of each fiscal year of the Company as to the signer's
knowledge of the Company's compliance with all conditions and covenants on its
part contained in the Indenture, and stating whether or not the signer knows of
any default or Event of Default. If such signer knows of such a default or
Event of Default, the Officer's Certificate shall describe the default or Event
of Default and the efforts to remedy the same.
AMENDMENT
The Company and the Trustee may amend or supplement the Indenture or the
Debentures without notice to any Holder but with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Debentures. The Holders of a majority in principal amount of the Debentures
then outstanding may waive compliance in a particular instance by the Company
with any provision of the Indenture or the Debentures without notice to any
Holder. Without the consent of the Holder of each Debenture affected thereby,
however, an amendment, supplement, or waiver may not (i) reduce the principal
amount of Debentures whose Holders must consent to an amendment, supplement, or
waiver, (ii) reduce the rate of or change the time for payment of interest on
any Debenture, (iii) reduce the principal of or premium on or change the fixed
maturity of any Debenture or alter the redemption provisions with respect
thereto in a manner adverse to the Holder thereof, (iv) alter the conversion
provisions with respect to any Debenture in a manner adverse to the Holder
thereof, (v) waive a default in the payment of the principal of or premium or
interest on any Debenture, (vi) make any changes that could alter the rights of
Holders to waive defaults or Events of Default, or to receive payment of the
Debentures, (vii) modify the subordination provisions of the Indenture in a
manner adverse to the Holders, or (viii) make any Debenture payable in money
other than that stated in the Debenture.
The Company and the Trustee may amend or supplement the Indenture or the
Debentures without notice to or consent of any Holder in certain events, such
as to comply with the certain conversion adjustment, liquidation, and merger
provisions described in the Indenture, to provide for uncertificated Debentures
in addition to or in place of certificated Debentures, to cure any ambiguity,
defect, or inconsistency, or to make any other change that does not adversely
affect the rights of the Holders, to comply with the provisions of the Trust
Indenture Act, or to appoint a successor Trustee.
SATISFACTION AND DISCHARGE
The Company may terminate all of its obligations under the Indenture, other
than its obligation to pay the principal of and interest on the Debentures and
certain other obligations (including its obligation to deliver shares of Common
Stock upon conversion of the Debentures), at any time, by depositing with the
Trustee or a paying agent other than the Company, money or non-callable U.S.
Government Obligations sufficient to pay the principal of and interest on the
Debentures then outstanding to maturity.
35
<PAGE>
MERGERS AND CONSOLIDATIONS
Subject to the right of the Holders to require the Company to purchase the
Debentures in the event of a Change in Control, the Company may consolidate or
merge with or into any other corporation, and the Company may transfer its
property and assets substantially as an entirety to any other person, provided
(i) either the Company is the resulting or surviving corporation, or the
successor corporation is a domestic corporation and the successor expressly
assumes, by supplemental indenture executed and delivered to the Trustee,
payment of the principal of and interest on the Debentures and performance and
observance of every covenant of the Indenture, and (ii) immediately before and
immediately after giving effect to such transaction, no default or Event of
Default shall have occurred and be continuing. Thereafter, all obligations of
the Company under the Indenture and the Debentures will terminate.
CONCERNING THE TRUSTEE
Bankers Trust Company will be the Trustee under the Indenture.
The Indenture will contain certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; provided, however, if it acquires any conflicting
interest (as defined) and there exists a default with respect to the
Debentures, it must eliminate such conflict or resign.
The Holders of a majority in principal amount of all outstanding Debentures
will have the right to direct the time, method, and place of conducting any
proceeding for exercising any remedy or power available to the Trustee,
provided that such direction does not conflict with any rule of law or with
the Indenture, is not unduly prejudicial to the rights of another Holder or
the Trustee, and does not involve the Trustee in personal liability.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Alex. Brown & Sons Incorporated and Morgan Stanley & Co.
Incorporated (the "Underwriters"), the Company has agreed to sell to each of
the Underwriters named below, and each of the Underwriters has severally
agreed to purchase from the Company, the respective principal amounts of
Debentures set forth opposite its name below. In the Purchase Agreement, the
Underwriters have agreed, subject to the terms and conditions set forth
therein, to purchase all of the Debentures offered hereby if any of such
Debentures are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER DEBENTURES
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
Alex. Brown & Sons Incorporated.............................
Morgan Stanley & Co. Incorporated...........................
------------
Total.................................................. $250,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Debentures to the public at the offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of % of the principal amount thereof. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of % of the
principal amount thereof to certain other dealers. After the offering
contemplated hereby, the offering price and other selling terms may be changed
by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
$37.5 million principal amount of the Debentures at the public
36
<PAGE>
offering price set forth on the cover page hereof, less the underwriting
discount. The Underwriters may exercise such option only to cover over-
allotments, if any, made in connection with the sale of the Debentures offered
hereby. To the extent that the Underwriters exercise this option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof which the principal amount
of Debentures to be purchased by it shown in the above table is of the $250
million principal amount of Debentures initially offered hereby. If purchased,
the Underwriters will offer such additional Debentures on the same terms as
those on which the $250 million principal amount of Debentures are being
offered.
Until the distribution of the Debentures is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members (if any) to bid for and purchase the
Debentures and the Common Stock. As an exception to these rules, the
Representatives are permitted to engage in certain transactions that stabilize
the price of the Debentures or the Common Stock. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Debentures or the Common Stock.
If the Underwriters create a short position in the Debentures in connection
with the offering, i.e., if they sell a greater principal amount of Debentures
than is set forth on the cover page of this Prospectus, the Underwriters may
reduce that short position by purchasing Debentures in the open market. The
Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Debentures. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
In connection with this offering, the Underwriters or their respective
affiliates and selling group members (if any) who are qualified market makers
on Nasdaq may engage in "passive market making" in the Common Stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Exchange Act. Rule 103 permits, upon the satisfaction of certain conditions,
underwriters and selling group members participating in a distribution that
are also Nasdaq market makers in the security being distributed (or a related
security) to engage in limited market making transactions during the period
when Regulation M under the Exchange Act would otherwise prohibit such
activity. Rule 103 prohibits underwriters and selling group members engaged in
passive market making generally from entering a bid or effecting a purchase at
a price that exceeds the highest bid for those securities displayed on the
Nasdaq National Market by a market maker that is not participating in the
distribution. Under Rule 103, each underwriter or selling group member engaged
in passive market making is subject to a daily net purchase limitation equal
to 30% of such entity's average daily trading volume during the two full
consecutive calendar months immediately preceding the date of the filing of
the registration statement under the Securities Act pertaining to the security
to be distributed (or such related security).
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act.
The Company has agreed that it will not sell or otherwise dispose of any
Common Stock without the prior written consent of the Underwriters for a
period of 120 days from the date of this Prospectus, except that the Company
may, without such consent, (i) issue shares upon the exercise of options
granted pursuant to the Company's stock option plans, or upon exercise or
conversion of other outstanding options, warrants, or convertible debt, and
(ii) issue up to an aggregate of one million shares pursuant to potential
acquisitions and shelf registration statements.
37
<PAGE>
Charles A. Lewis, Vice Chairman--Investment Banking of Merrill Lynch & Co.,
Penny A. Sebring, and their family beneficially own 961,467 shares of Common
Stock, and have an economic interest in an additional 112,106 shares of Common
Stock pursuant to their ownership of a beneficial interest in BC Midwest Trust.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Debentures offered
hereby are being passed upon for the Company by Bell, Boyd & Lloyd, Chicago,
Illinois. Attorneys in that firm own an aggregate of approximately 2,700 shares
of Common Stock. Mayer, Brown & Platt, Chicago, Illinois, is acting as counsel
for the Underwriters in connection with certain legal matters relating to the
sale of the Debentures offered hereby.
EXPERTS
The financial statements of the Company at December 25, 1994, at December 31,
1995 and for the fiscal years ended December 26, 1993, December 25, 1994, and
December 31, 1995 and the related financial statement schedule included in or
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their reports
thereon also included in or incorporated by reference in this Prospectus, and
are included in or incorporated by reference herein in reliance upon such
reports given upon the authority of said firm as experts in accounting and
auditing.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents and information heretofore filed by the Company with
the Commission are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1995, which was filed with the Commission on March 4, 1996.
(2) The Company's Current Report on Form 8-K dated April 10, 1996, which
was filed with the Commission on April 11, 1996.
(3) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended April 21, 1996, which was filed with the Commission on June 1, 1996.
(4) The Company's Current Report on Form 8-K dated June 17, 1996, which
was filed with the Commission on July 2, 1996, as amended by the Company's
Current Report on Form 8-K/A, which was filed with the Commission on
September 3, 1996.
(5) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended July 14, 1996, which was filed with the Commission on August 26, 1996.
(6) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended October 6, 1996, which was filed with the Commission on November 20,
1996.
(7) The Company's Current Report on Form 8-K dated January 31, 1997, which
was filed with the Commission on February 5, 1997.
(8) The description of the Company's capital stock set forth under the
caption "Description of Capital Stock" in the Company's prospectus
constituting a part of the Company's registration statement on Form S-1
(Reg. No. 33-69256), which description is incorporated by reference in the
Company's registration statement on Form 8-A dated November 4, 1993 for the
registration of the Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debentures offered hereby (except to the
extent specified therein or in rules or regulations of the Commission) shall be
deemed to be
38
<PAGE>
incorporated in this Prospectus by reference and to be part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, at the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference other than exhibits to such
documents. Requests for such copies should be directed to Boston Chicken, Inc.,
14103 Denver West Parkway, P.O. Box 4086, Golden, Colorado, 80401-4086,
Attention: Investor Relations Department (telephone: 303-278-9500).
39
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 25, 1994 and December 31, 1995.. F-3
Consolidated Income Statements for the fiscal years ended December 26,
1993, December 25, 1994, and December 31, 1995......................... F-4
Consolidated Statement of Stockholders' Equity for the fiscal years
ended December 26, 1993, December 25, 1994, and December 31, 1995...... F-5
Consolidated Statement of Cash Flows for the fiscal years ended December
26, 1993,
December 25, 1994, and December 31, 1995............................... F-6
Notes to Audited Consolidated Financial Statements...................... F-7
Consolidated Balance Sheets at December 31, 1995 and October 6, 1996
(unaudited)............................................................ F-19
Consolidated Income Statements for the quarter and three quarters ended
October 1, 1995 and October 6, 1996 (unaudited)........................ F-20
Consolidated Statements of Cash Flows for the three quarters ended
October 1, 1995 and for the three quarters ended October 6, 1996
(unaudited)............................................................ F-21
Notes to Unaudited Consolidated Financial Statements.................... F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Boston Chicken, Inc.:
We have audited the accompanying consolidated balance sheets of Boston
Chicken, Inc. (a Delaware corporation) and subsidiary as of December 25, 1994
and December 31, 1995, and the related consolidated income statements,
statements of stockholders' equity and cash flows for the fiscal years ended
December 26, 1993, December 25, 1994, and December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Boston Chicken, Inc. and
subsidiary as of December 25, 1994 and December 31, 1995, and the results of
their operations and their cash flows for the fiscal years ended December 26,
1993, December 25, 1994, and December 31, 1995 in conformity with generally
accepted accounting principles.
Denver, Colorado
February 28, 1996
F-2
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 25,304 $ 310,436
Accounts receivable, net........................... 6,540 13,445
Due from affiliates................................ 6,462 9,614
Notes receivable................................... 16,906 5,462
Prepaid expenses and other current assets.......... 2,282 1,536
Deferred income taxes.............................. 1,835 3,322
-------- ----------
Total current assets............................. 59,329 343,815
Property and Equipment, net.......................... 163,314 258,550
Notes Receivable..................................... 185,594 450,572
Deferred Financing Costs, net........................ 8,346 15,745
Other Assets, net.................................... 10,399 5,195
-------- ----------
Total assets..................................... $426,982 $1,073,877
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................... $ 15,188 $ 12,292
Accrued expenses................................... 6,587 9,095
Deferred franchise revenue......................... 5,505 8,945
-------- ----------
Total current liabilities........................ 27,280 30,332
Deferred Franchise Revenue........................... 5,815 2,072
Convertible Subordinated Debt........................ 130,000 129,872
Liquid Yield Option Notes............................ -- 177,306
Other Noncurrent Liabilities......................... 1,061 833
Deferred Income Taxes................................ 3,011 16,631
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock--$.01 par value; authorized
20,000,000 shares; no shares issued and
outstanding....................................... -- --
Common Stock--$.01 par value; authorized
100,000,000 shares; issued and outstanding:
44,700,010 shares in 1994 and 59,129,301 in 1995.. 447 591
Additional paid-in capital......................... 252,298 675,611
Retained earnings.................................. 7,070 40,629
-------- ----------
259,815 716,831
-------- ----------
Total liabilities and stockholders' equity....... $426,982 $1,073,877
======== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-3
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
(53 WEEKS)
<S> <C> <C> <C>
Revenue:
Royalties and franchise related fees.. $12,681 $55,235 $107,913
Company-operated stores............... 29,849 40,916 51,566
------- ------- --------
Total revenue....................... 42,530 96,151 159,479
Costs and Expenses:
Cost of products sold................. 11,287 15,876 19,737
Salaries and benefits................. 15,437 22,637 31,137
General and administrative............ 13,879 27,930 41,367
Provision for relocation.............. -- 5,097 --
------- ------- --------
Total costs and expenses............ 40,603 71,540 92,241
------- ------- --------
Income from Operations.................. 1,927 24,611 67,238
Other Expense:
Interest expense, net................. (440) (4,235) (13,179)
Other income, net..................... 160 74 314
------- ------- --------
Total other expense................. (280) (4,161) (12,865)
------- ------- --------
Income Before Income Taxes.............. 1,647 20,450 54,373
Income Taxes............................ -- 4,277 20,814
------- ------- --------
Net Income.............................. $ 1,647 $16,173 $ 33,559
======= ======= ========
Net Income Per Common and Equivalent
Share.................................. $ 0.06 $ 0.38 $ 0.66
======= ======= ========
Weighted Average Number of Common and
Equivalent Shares Outstanding.......... 32,667 42,861 50,972
======= ======= ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year.......... $ 224 $ 347 $ 447
Issuance of common stock.............. 113 85 125
Conversion of convertible debt into
common stock......................... 10 -- 1
Conversion of liquid yield option
notes into common stock.............. -- -- 1
Issuance of common stock in connection
with acquisitions.................... -- 11 12
Exercise of stock options............. -- 4 5
-------- -------- --------
Balance at end of year................ $ 347 $ 447 $ 591
======== ======== ========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year.......... $ 27,563 $103,662 $252,298
Issuance of common stock, net of
offering cost of $1,108 in 1993,
$1,475 in 1994, and $13,851 in 1995.. 65,931 124,905 383,784
Conversion of convertible debt into
common stock......................... 10,062 -- 127
Conversion of liquid yield option
notes into common stock.............. -- -- 3,232
Issuance of common stock in connection
with acquisitions.................... -- 19,920 30,675
Exercise of stock options, including
income tax benefit of $3,102 in 1994
and $4,049 in 1995................... 106 3,811 5,495
-------- -------- --------
Balance at end of year................ $103,662 $252,298 $675,611
======== ======== ========
RETAINED EARNINGS (DEFICIT)
Balance at beginning of year.......... $(10,750) $ (9,103) $ 7,070
Net income............................ 1,647 16,173 33,559
-------- -------- --------
Balance at end of year................ $ (9,103) $ 7,070 $ 40,629
======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................. $ 1,647 $ 16,173 $ 33,559
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 1,970 6,074 11,442
Interest on liquid yield option notes.. -- -- 8,075
Deferred income taxes.................. -- 4,277 12,133
Loss (gain) on disposal of assets...... (150) (368) 231
Changes in assets and liabilities:
Accounts receivable and due from
affiliates............................ (4,343) (7,800) (10,057)
Accounts payable and accrued expenses.. 6,247 13,724 3,661
Deferred franchise revenue............. 3,236 5,926 (303)
Other assets and liabilities........... (561) (2,088) (3,265)
-------- --------- ---------
Net cash provided by operating
activities............................ 8,046 35,918 55,476
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment...... (49,151) (163,622) (145,756)
Proceeds from the sale of assets........ 6,161 62,342 80,910
Acquisition of other assets............. (1,093) (12,790) (9,788)
Issuance of notes receivable............ (45,690) (225,282) (661,033)
Repayment of notes receivable........... 747 68,498 407,499
-------- --------- ---------
Net cash used in investing activities.. (89,026) (270,854) (328,168)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.. 66,150 125,703 385,360
Proceeds from issuance of convertible
subordinated debt...................... 9,658 130,000 --
Proceeds from issuance of liquid yield
option notes........................... -- -- 172,464
Borrowings under credit facility........ 32,275 96,130 229,240
Repayments under credit facility........ (32,275) (96,130) (229,240)
-------- --------- ---------
Net cash provided by financing
activities............................ 75,808 255,703 557,824
-------- --------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents............................ (5,172) 20,767 285,132
Cash and Cash Equivalents, beginning of
year.................................. 9,709 4,537 25,304
-------- --------- ---------
Cash and Cash Equivalents, end of year. $ 4,537 $ 25,304 $ 310,436
======== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid........................... $ 226 $ 3,395 $ 7,195
======== ========= =========
Income taxes paid....................... $ -- $ -- $ 3,299
======== ========= =========
NON CASH TRANSACTIONS:
Tax benefit of stock option exercise.... $ -- $ 3,102 $ 4,049
======== ========= =========
Conversion of convertible subordinated
notes, liquid yield option notes and
accrued interest into common stock..... $ 10,072 $ -- $ 3,361
======== ========= =========
Issuance of common stock for assets..... $ -- $ 19,931 $ 30,687
======== ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Boston Chicken, Inc. and subsidiary (the "Company") franchise and operate
food service stores under the name "Boston Market" that specialize in fresh,
convenient meals featuring home style entrees, freshly prepared vegetables,
salads, and other side dishes. At December 31, 1995, there were 829 stores
systemwide in the United States, consisting of 826 franchise stores and three
Company-operated stores. In 1993, 1994, and 1995, in connection with its
practice of opening new stores to seed development in targeted markets, the
Company sold 13, 54 and 91 Company-operated stores, respectively, to area
developers or franchisees of the Company. Pursuant to the provisions of its
franchise agreements, the Company is obligated to allow franchisees to utilize
the Company's trademarks, copyrights, recipes, operating procedures, and other
elements of the Boston Market system in the operation of franchised Boston
Market stores.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiary. All material intercompany accounts and
transactions have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year is the 52/53-week period ending on the last Sunday
in December. The first quarter consists of four periods and each of the
remaining three quarters consists of three periods, with the first, second,
and third quarters ending 16 weeks, 28 weeks, and 40 weeks, respectively, into
the fiscal year. Fiscal years 1993 and 1994 each contained 52 weeks, or
thirteen four-week periods. Fiscal year 1995 contained 53 weeks.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and on deposit, and highly
liquid instruments purchased with maturities of three months or less.
Inventories
Inventories, which are classified in prepaid expenses and other current
assets, are stated at the lower of cost (first-in, first-out) or market and
consist of food, paper products, and supplies.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization has been
calculated using the straight-line method. The following represent the useful
lives over which the assets are depreciated and amortized:
<TABLE>
<S> <C>
Buildings and improvements................................... 15-30 years
Leasehold improvements....................................... 15 years
Furniture, fixtures, equipment, and computer software........ 6-8 years
Pre-opening costs............................................ 1 year
</TABLE>
Property and equipment additions include acquisitions of property and
equipment, costs incurred in the development and construction of new stores,
major improvements to existing stores, and costs incurred in the development
and purchase of computer software. Pre-opening costs consist primarily of
salaries and other direct
F-7
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expenses relating to the set-up, initial stocking, training, and general
management activities incurred prior to the opening of new stores.
Expenditures for maintenance and repairs are charged to expense as incurred.
Development costs for franchised stores are expensed when the store opens.
Deferred Financing Costs
Deferred financing costs are amortized over the period of the related
financing, which ranges from two to twenty years.
Revenue Recognition
Revenue from Company-operated stores is recognized in the period for which
related food and beverage products are sold. Royalties are recognized in the
same period related franchise store revenue is generated. Revenue derived from
initial franchise fees and area development fees is recognized when the
franchise store opens. Interest, real estate services, and software
maintenance fees are recognized as earned. Lease income is recognized over the
life of the lease on a straight-line basis. Software license income is
recognized as the software is placed in service. The components of royalties
and franchise-related fees are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
DEC. 26, DEC. 25, DEC. 31,
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Royalties........................................ $ 5,464 $17,421 $ 34,841
Initial franchise and area development fees...... 5,230 13,057 13,712
Interest income from area developer financing
(See Note 9).................................... 1,130 11,632 33,251
Lease and real estate services income............ 253 5,361 17,939
Software fees.................................... -- 6,480 7,723
Other............................................ 604 1,284 447
------- ------- --------
Total royalties and franchise-related fees... $12,681 $55,235 $107,913
======= ======= ========
</TABLE>
Per Share Data
Net income per common share is computed by dividing net income, adjusted in
1993 for interest related to the conversion of 7% convertible subordinated
notes, by the weighted average number of common shares and dilutive common
stock equivalent shares outstanding during the year.
Common and equivalent shares include any common stock, options, and warrants
issued within one year prior to the effective date of the Company's initial
public offering at a price or exercise price less than the initial public
offering price. These have been included as common stock equivalents
outstanding, reduced by the number of shares of common stock which could be
purchased with the proceeds from the assumed exercise of the options and
warrants, including tax benefits assumed to be realized.
Employee Benefit Plan
The Company has a 401(k) plan to which the Company makes no contribution.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
F-8
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to 1994 amounts to conform with the
1995 presentation.
3. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT DATA
Accounts receivable are net of an allowance for doubtful accounts of
$246,000 at December 25, 1994 and $486,000 at December 31, 1995.
<TABLE>
<CAPTION>
DEC. 25, 1994 DEC. 31, 1995
------------- -------------
<S> <C> <C>
Property and equipment consists of (in
thousands of dollars):
Land...................................... $ 64,123 $106,244
Buildings................................. 36,365 73,487
Leasehold improvements.................... 10,670 19,448
Furniture, fixtures, equipment, and
computer software........................ 45,579 64,338
Development in progress................... 9,543 5,170
Pre-opening costs......................... 1,450 163
-------- --------
167,730 268,850
Less: Accumulated depreciation and
amortization............................. (4,416) (10,300)
-------- --------
Total property and equipment, net....... $163,314 $258,550
======== ========
</TABLE>
Included in land, building, and leasehold improvements are $78.9 million and
$174.8 million of assets leased to others at December 25, 1994 and December
31, 1995, respectively.
<TABLE>
<CAPTION>
DEC. 25, 1994 DEC. 31, 1995
------------- -------------
<S> <C> <C>
Accrued expenses consist of (in thousands of
dollars):
Accrued payroll and fringe benefits....... $1,661 $1,556
Accrued interest.......................... 2,549 2,538
Accrued other............................. 2,377 5,001
------ ------
Total accrued expenses.................. $6,587 $9,095
====== ======
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------
DEC. 26, 1993 DEC. 25, 1994 DEC. 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Interest expense, net consists of
(in thousands of dollars):
Interest income................... $ 200 $ 1,592 $ 2,173
Interest expense.................. (640) (5,827) (15,352)
----- ------- --------
Interest expense, net........... $(440) $(4,235) $(13,179)
===== ======= ========
</TABLE>
Included in General and Administrative Expense is a provision for loss on
store closings and dispositions of $832,841 in 1993.
F-9
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
Cash and Cash Equivalents
The carrying value approximates fair value due to the length of maturity of
the investments.
Notes Receivable
The estimated fair value of the Company's notes receivable, including the
conversion option (See Note 9), are based on the discounted value of the
future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings.
Debt
The fair value of the Company's debt instruments are based on prices as
quoted on the Nasdaq SmallCap Market as reported by the Wall Street Journal
(Western Edition).
The estimated fair values of the Company's financial instruments at December
31, 1995 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
Cash and Cash Equivalents..................... $310,436 $310,436
Notes Receivable.............................. 456,034 456,034
Convertible Subordinated Debt................. 129,872 154,872
Liquid Yield Option Notes..................... 177,306 228,148
</TABLE>
5. DEBT
The Company has entered into an unsecured revolving credit agreement
providing for borrowings of up to $94.0 million through June 30, 1997.
Borrowings under the agreement may be either floating rate loans with interest
at the bank's reference rate or eurodollar loans with interest at the
eurodollar rate, plus an applicable margin. In addition, a commitment fee of
.25% of the average daily unused portion of the loan is required. The
agreement contains covenants, among others, restricting other borrowings,
prohibiting cash dividends, and requiring the Company to maintain interest
coverage and cash flow ratios and a minimum net worth. As of December 31,
1995, no borrowings were outstanding under the credit agreement.
In February 1994, the Company issued $130.0 million of 4 1/2% convertible
subordinated debentures due February 1, 2004. Interest is payable semi-
annually on February 1 and August 1 of each year. The debentures are
convertible at any time prior to maturity into shares of common stock at a
conversion rate of $27.969 per share, subject to adjustment under certain
conditions. Beginning February 1, 1996, the debentures may be redeemed at the
option of the Company, provided that through February 1, 1997, the debentures
cannot be redeemed unless the closing price of the common stock equals or
exceeds $39.16 per share for at least 20 out of 30 consecutive trading days.
The debentures are redeemable initially at 103.6% of their principal amount
and at declining prices thereafter, plus accrued interest. In 1995, $128,000
of convertible subordinated debentures were converted into 4,576 shares of
common stock.
In June 1995, the Company completed the sale of $828.0 million aggregate
principal amount at maturity of Liquid Yield Option Notes due June 1, 2015
("LYONs") for which the Company received gross proceeds of
F-10
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
approximately $172.5 million. The LYONs are zero-coupon subordinated notes
which were sold at an issue price of $208.29 per $1,000 principal amount due
at maturity, representing an 8% yield. Each LYON is convertible at the option
of the holder at any time on or prior to maturity into 8.532 shares of common
stock of the Company. In the event the holder exercises the option to convert,
the holder will not receive any payment for the accrued original issue
discount. The Company will purchase the LYONs at the option of the holder as
of June 1, 2000, June 1, 2005 and June 1, 2010, for a purchase price per LYON
of $308.32, $456.39, and $675.57, respectively. The Company may elect to pay
the purchase price in cash or common stock or a combination thereof.
Commencing on June 1, 2000, the LYONs are redeemable at the option of the
Company for cash, at a price equal to the original issue price plus accrued
original issue discount through the redemption date. In 1995, $3.2 million of
LYONs were converted into 127,980 shares of common stock.
6. INCOME TAXES
The primary components that comprise the deferred tax assets and liabilities
at December 25, 1994 and December 31, 1995 are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
DEC. 25, 1994 DEC. 31, 1995
------------- -------------
<S> <C> <C>
Deferred tax assets:
Accounts payable and accrued expenses.......... $ 794 $ 841
Deferred franchise revenue..................... 3,469 3,495
Other noncurrent liabilities................... 262 181
Net operating losses........................... 11,639 --
Alternative minimum tax credit................. -- 827
Other.......................................... 173 651
------- --------
Total deferred tax assets.................... 16,337 5,995
Deferred tax liabilities:
Property and equipment......................... (17,047) (18,340)
Other assets................................... (466) (964)
------- --------
Total deferred tax liabilities............... (17,513) (19,304)
------- --------
Net deferred tax liability................... $(1,176) $(13,309)
======= ========
</TABLE>
Income taxes consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------
DEC. 26, DEC. 25, DEC. 31,
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal............................................ $-- $ -- $ 7,784
State.............................................. -- -- 897
---- ------ -------
-- -- 8,681
Deferred:
Federal............................................ -- 3,614 10,743
State.............................................. -- 663 1,390
---- ------ -------
-- 4,277 12,133
---- ------ -------
$-- $4,277 $20,814
==== ====== =======
</TABLE>
F-11
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For the years ended December 25, 1994 and December 31, 1995, the Company
recognized income tax benefits of $3,102,000 and $4,049,000, respectively,
pertaining to the exercise of stock options, which are reflected in additional
paid-in capital.
The difference between the Company's actual tax provision and the tax
provision by applying the statutory Federal income tax rate is attributable to
the following (in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------
DEC. 26, DEC. 25, DEC. 31,
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at statutory rate............. $ 560 $ 6,953 $19,031
State taxes, net of Federal benefit.............. 66 818 1,740
Other............................................ -- 26 43
Change in valuation allowance.................... (626) (3,520) --
----- ------- -------
Provision for income taxes....................... $ -- $ 4,277 $20,814
===== ======= =======
</TABLE>
7. NATIONAL AND LOCAL ADVERTISING FUNDS
The Company administers a National Advertising Fund to which Company-
operated stores and franchisees make contributions based on individual
franchise agreements (2% of base revenue). Collected amounts are spent
primarily on developing marketing and advertising materials for use
systemwide. Such amounts are not segregated from the cash resources of the
Company, but the National Advertising Fund is accounted for separately and not
included in the financial statements of the Company.
The Company maintains Local Advertising Funds that provide comprehensive
advertising and sales promotion support (primarily television and radio media
time) for the Boston Market stores in particular markets. Periodic
contributions are made by both Company-operated and franchise stores
(currently generally 4% of base revenue). The Company disburses funds and
accounts for all transactions related to such Local Advertising Funds. Such
amounts are not segregated from the cash resources of the Company, but are
accounted for separately and are not included in the financial statements of
the Company.
The National Advertising Fund had an accumulated deficit at December 25,
1994 and December 31, 1995, which was funded by an advance from the Company.
Such advances are reflected in Due from Affiliates.
8. COMMITMENTS AND CONTINGENCIES
In 1994, the Company entered into a $75.0 million master lease facility for
store equipment, the majority of which is subleased to area developers. The
master lease is accounted for as an operating lease, bears interest at LIBOR
plus an applicable margin, expires in 1996, and contains two one-year renewal
options, a purchase option, and a sale option. The sublease to area developers
contains substantially the same terms as the master lease. If the Company
elects to sell the equipment to a third party, it will be obligated for no
more than $43.9 million of the lease balance at the end of the base term,
which amount will be reduced by a portion of the proceeds received on the sale
of the equipment. The Company has provided a $12.1 million letter of credit to
add to the collateral available under the master lease facility. The letter of
credit is secured by certain property of the Company. As of December 31, 1995,
the Company had utilized the entire amount available under the facility.
F-12
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1995, the Company entered into a second $75.0 million master lease
agreement for store equipment which is also subleased to area developers. Each
lease under this master lease is also accounted for as an operating lease,
bears interest at LIBOR plus an applicable margin, expires at various dates
through 1997, and contains a one-year renewal option, purchase option and a
sale option. The 1995 master lease agreement contains a cross default
provision with the Company's revolving credit agreement (See Note 5). The
subleases to area developers contain substantially the same terms as the
lease. If the Company elects to sell the equipment to a third party, it will
be obligated for no more than $39.2 million of the lease balance at the end of
the base term, which amount will be reduced by a portion of the proceeds
received on the sale of the equipment. As of December 31, 1995, the Company
had utilized approximately $73.8 million of the facility.
Through December 31, 1995, certain area developers sold to BC Equity
Funding, L.L.C. ("BCEF") an aggregate of $55.0 million of 10% cumulative
preferred equity, redeemable by the area developers at a premium initially
equal to 10% of the initial issue price, to be increased by 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 upon the occurrence of
certain events and subject to limitations, it will purchase the preferred
equity from the holders at the Redemption Price, for cash or common stock, at
the option of the Company.
The Company leases sites for Company-operated stores. Lease terms are
generally five years, with two or three five-year renewal options. Most of the
leases contain escalation clauses and common area maintenance charges.
The Company also purchases or leases sites, improvements, and equipment
which it then leases, subleases, or assigns to an area developer or
franchisee. The leases, subleases, and assignment terms to area developers and
franchisees are negotiated at arms length on commercially reasonable terms.
The Company is contingently liable for all lease costs, including common area
maintenance charges. In addition, the Company has guaranteed the lease
payments of certain area developers and franchisees. In connection with
certain of these lease guarantees, the Company has provided a $2 million
letter of credit.
The following is a schedule of future minimum rental payments which are
required under operating leases that have initial or remaining noncancellable
lease terms in excess of one year, sublease proceeds, rental payment
guarantees and assignments, and rental receipts due under leases on property
and equipment owned by the Company as of December 31, 1995 (in thousands of
dollars):
<TABLE>
<CAPTION>
RENTAL MINIMUM
NET PAYMENT RENTAL RECEIPTS
MINIMUM MINIMUM GUARANTEES ON PROPERTY AND
RENTAL SUBLEASE RENTAL AND EQUIPMENT OWNED
PAYMENTS PROCEEDS PAYMENTS ASSIGNMENTS BY THE COMPANY
-------- -------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1996................. $ 36,098 $ 36,328 $-- $ 9,952 $ 17,174
1997................. 50,352 58,155 -- 9,530 17,253
1998................. 5,839 5,823 16 8,350 17,263
1999................. 5,544 5,566 -- 7,283 17,573
2000................. 4,975 5,002 -- 6,797 18,283
Later Years.......... 18,903 18,293 610 35,990 113,028
-------- -------- ---- ------- --------
$121,711 $129,167 $626 $77,902 $200,574
======== ======== ==== ======= ========
</TABLE>
The net rental expense under operating leases was $1,681,000, $3,242,000,
and $4,495,000 for fiscal years 1993, 1994, and 1995, respectively.
F-13
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has entered into an agreement with a poultry supplier relating
to the production of two chicken processing facilities. The agreement expires
in 2001, and contains two two-year and one one-year renewal options. The
Company has also agreed to purchase a minimum of $34.3 million of turkeys from
this supplier in 1996.
The Company has become 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. AREA DEVELOPER AND OTHER FINANCING
Area Developer Financing
The Company currently offers secured debt financing to certain area
developers to partially finance store development and working capital needs.
Only developers which are developing a significant portion of an area of
dominant influence ("ADI") or metropolitan area of a major city and which meet
all of the Company's requirements are eligible for such financing. Certain of
these financing arrangements permit the Company to obtain an equity interest
in the developer at a predetermined price after a moratorium (generally two
years from execution or subsequent amendment of the loan) on conversion of the
loan into equity. The maximum loan amount is generally established to give the
Company majority ownership of the developer upon conversion (or option
exercise, as described further below) provided the Company exercises its right
to participate in any intervening financing of the developer.
Area developer financing generally requires the developer to expend at least
75% of its contributed capital toward developing stores prior to drawing on
its revolving loan, with advances permitted during a two- or three-year draw
period (or additional draw period in the event of a loan amendment) in a pre-
determined maximum amount, generally equal to two to four times the amount of
the area developer's contributed capital. Upon expiration of the draw period,
the loan converts to an amortizing term loan payable over four to five years
in periodic installments, sometimes with a final balloon payment. The Company
may extend the draw and repayment periods, subject to the area developer
purchasing additional development rights, investing additional contributed
capital, or in connection with other amendments to the loan agreement.
Interest is set at 1% over the applicable "reference rate" of Bank of America
Illinois as established from time to time and is payable each period. The loan
is secured by a pledge of substantially all of the assets of the area
developer and any franchisee under its area development agreement and
generally by a pledge of the equity interests of the owners of the developer.
(A) LOAN CONVERSION OPTION
For loans with a conversion option, the Company may convert all or any
portion of the loan amount after a moratorium period (generally two years from
execution or subsequent amendment of the loan) or at any time after default of
the loan and generally up to the later of full repayment of the loan or a
specified date in the agreement, into equity in the area developer at the
conversion price set forth in the loan agreement, generally at a 12% to 15%
premium over the per unit equity price paid by the investors in the area
developer for their equity investment made concurrently with the execution of
the loan agreement or subsequent amendments thereto. To the extent such loan
is not fully drawn or has been drawn and repaid, the Company has a
corresponding option to acquire, at the loan conversion price, the amount of
additional equity it could have acquired by conversion of the loan, had the
loan been fully drawn.
F-14
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
There can be no assurance that the Company will exercise its future rights
to acquire an equity interest in any area developer to which it provides
financing or that such exercise will result in a majority interest in the area
developer.
(B) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING
The following table summarizes credit commitments for area developer
financing (in thousands of dollars, except number of area developers):
<TABLE>
<CAPTION>
DEC. 25, DEC. 31,
1994 1995
-------- --------
<S> <C> <C>
Number of area developers receiving financing........... 13 17
Loan commitments........................................ $332,531 $614,094
Unused loans............................................ 131,265 202,676
-------- --------
Loans outstanding (included in Notes Receivable)........ $201,266 $411,418
======== ========
Allowance for loan losses............................... $ -- $ --
======== ========
</TABLE>
(C) CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that in management's
judgment is adequate to provide for estimated possible loan losses. The amount
of the allowance is based on management's review of each area developer's use
of loan proceeds, adherence to its store development schedule, store
performance trends, type and amount of collateral securing the loan,
prevailing economic conditions, and other factors which management deems
relevant at the time. Based upon this review and analysis, no allowance was
required as of December 25, 1994 and December 31, 1995.
Other Financings
In 1995, the Company entered into a secured loan agreement with Einstein
Bros. Bagels, Inc. ("Einstein Bros."), providing $80.0 million of convertible
debt financing to Einstein Bros. The maximum loan amount is established to
give the Company majority ownership of Einstein Bros. upon conversion (or
option exercise, as described further below) provided the Company exercises
its rights to participate in any intervening financing of Einstein Bros. The
Company may satisfy its funding obligations under the loan agreement in cash
or registered shares of common stock. The loan agreement provides for a three-
year draw period, subsequent to which the loan converts to an amortizing term
loan payable over five years in periodic installments with a final balloon
payment. Interest is at 1% over the applicable "reference rate" of Bank of
America Illinois as established from time to time and is payable currently.
The loan is secured by a pledge of substantially all of the assets of Einstein
Bros. The Company may convert all or any portion of the loan amount at its
election (at any time after the earlier of April 1, 1996 or default of the
loan and up to the later of full repayment of the loan or October 2003) into
equity in Einstein Bros. at a conversion price that is set at an 8.5% premium
over the per unit equity price paid by the initial investors in Einstein Bros.
for their equity investment made concurrently with the execution of the loan
agreement. To the extent the 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. There can be no
assurance that the Company will exercise its future right to acquire an equity
interest in Einstein Bros. or that such exercise will result in a majority
interest in Einstein Bros. As of December 31, 1995, $40.0 million was
outstanding. In February 1996, the Company increased the amount available
under the secured loan to $120.0 million and extended to Einstein Bros. a
$25.0 million bridge loan. The Company has determined that no allowance for a
loan loss is required for this loan based on its review of factors similar to
those reviewed in connection with area developer loans.
F-15
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The principal maturities on the aforementioned receivables are as follows
(in thousands of dollars):
<TABLE>
<S> <C>
1996............................................................ $ 5,400
1997............................................................ 7,495
1998............................................................ 29,208
1999............................................................ 41,147
2000............................................................ 44,602
Thereafter...................................................... 323,566
--------
$451,418
========
</TABLE>
10. STOCKHOLDERS' EQUITY
In 1993, the Company sold to BC Midwest L.P. 4,476,660 shares of common
stock receiving net proceeds of approximately $9.6 million (See Note 11).
In November 1993, the Company completed an initial public offering of
4,120,000 shares of its common stock and a private placement of 1,800,000
shares of common stock to executive officers of the Company receiving net
proceeds of approximately $54.0 million.
In August 1994, the Company completed the public sale of 6,900,000 shares of
its common stock receiving net proceeds of approximately $120.0 million.
In November 1994, the Company sold to BC Midwest L.P. 1,542,852 shares of
common stock receiving net proceeds of approximately $4.5 million.
In December 1995, the Company completed the public sale of 10,350,000 shares
of its common stock receiving net proceeds of approximately $342.0 million.
As of December 31, 1995, the Company has 24,179,943 shares of common stock
reserved for issuance upon exercise of stock options and conversion of
convertible subordinated debentures and LYONs.
Stock Option Plans
The Company has two employee stock option plans (the "Employee Plans") under
which options to purchase up to 12,240,000 shares of common stock may be
granted. Under the terms of the Employee Plans, the Company may annually grant
options to certain employees and officers of, and consultants to, the Company.
The option price is equal to the fair market value of the stock on the date of
the grant and each option has a term of ten years. The options generally vest
at a rate of 10% at the end of the first year, an additional 20% at the end of
the second year, an additional 30% at the end of the third year, with the
balance vesting at the end of the fourth year from the date of the grant.
The Company also maintains a stock option plan for non-employee directors
(the "Directors Plan") under which options to purchase up to 360,000 shares of
common stock may be granted. Under the terms of the Directors Plan, the
Company automatically grants to directors who are not officers or employees of
the Company options to purchase shares having a fair market value of $200,000
(previously $50,000) at the date of grant, each time they are elected or re-
elected as a director of the Company. The option price is equal to the fair
market value of the stock on the date of grant and each option generally has a
term of ten years. The options are exercisable at the end of one year of
service from the date of grant.
F-16
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Activity under the option plans is as follows:
<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE
--------- -------------
<S> <C> <C>
Outstanding as of December 27, 1992.................... 4,392,140 $ 1.46-$ 2.08
Granted.............................................. 2,981,184 3.34- 6.00
Exercised............................................ (72,622) 1.46- 1.67
Canceled............................................. (602,678) 1.46- 5.50
--------- -------------
Outstanding as of December 26, 1993.................... 6,698,024 1.46- 6.00
Granted.............................................. 2,362,133 14.88- 21.25
Exercised............................................ (384,905) 1.46- 5.50
Canceled............................................. (534,831) 1.46- 20.63
--------- -------------
Outstanding as of December 25, 1994.................... 8,140,421 1.46- 21.25
Granted.............................................. 1,141,955 15.06- 35.00
Exercised............................................ (539,899) 1.46- 20.63
Canceled............................................. (74,212) 4.17- 24.75
--------- -------------
Outstanding as of December 31, 1995.................... 8,668,265 $ 1.46-$35.00
========= =============
Exercisable as of December 31, 1995.................... 2,693,143 $ 1.46-$21.00
========= =============
</TABLE>
11. RELATED-PARTY TRANSACTIONS
The Company has entered into secured loan and area development agreements
with certain area developers in which certain directors and certain current
and former officers of the Company and members of their families have a direct
or indirect equity interest. The Company has received from these entitites in
1993, 1994, and 1995, approximately $6.6 million, $30.9 million, and $46.0
million, respectively, in development, franchise, royalty, software license,
software maintenance, accounting, and other miscellaneous fees, rent, and
interest on their loans with the Company. In addition, these entities have
paid approximately $3.5 million, $11.3 million, and $20.0 million in national
and local advertising contributions during the same periods. The Company has
also sold to certain of these entities Boston Market stores, inventory,
equipment and other miscellaneous assets, including reimbursement of the
Company's general and administrative costs and expenses of operating the
stores, for which it received approximately $5.0 million, $47.1 million, and
$14.6 million in 1993, 1994, and 1995, respectively. The Company believes that
the terms of these agreements are as favorable to the Company as those with
other area developers of the Company.
The Company has paid to one of these area developers $146,000 in 1994 and
$100,000 in 1995 for various services.
Certain officers and directors of the Company have an equity interest in
Einstein Bros. For the Company's 1995 fiscal year, Einstein Bros. paid to the
Company approximately $1.2 million for the purchase of furniture, equipment,
and other miscellaneous assets and approximately $3.0 million in software
license, software maintenance, real estate, financial advisory, accounting
fees, and interest on its loan with the Company.
The Company maintains an employment agreement with a former officer and
director of the Company which provides for annual payments of approximately
$200,000 through 1996, the total amount of which has been provided for in
these financial statements.
Two directors/officers of the Company control BC Midwest Trust, successor to
the interests previously held by BC Midwest L.P.
F-17
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARY
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Certain officers and directors of the Company are officers and minority
investors in BCEF having invested $6.7 million of an aggregate of $60.0
million. The Company has been engaged by BCEF to be its manager for which it
received a fee of $375,000 in 1995. The Company has no equity interest in
BCEF.
During 1993, the Company's chief executive officer received from the Company
$107,066 as reimbursement for payments he made to Bowana Aviation, Inc.
("Bowana") for the Company's use of an aircraft owned by Bowana. During 1994
and 1995, the Company paid $527,744 and $661,960, respectively, to Bowana for
the use of aircrafts. The Company's chief executive officer and a relative own
Bowana. The Company believes that the amounts charged are at rates comparable
to those charged by third parties.
12. RELOCATION
In September 1994, the Company consolidated its four Chicago-based support
center facilities into a single facility and relocated to Golden, Colorado.
The cost of the relocation, including moving personnel and facilities,
severance payments and the write-off of vacated leasehold improvements was
$5.1 million.
F-18
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 6,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 310,436 $ 59,358
Accounts receivable, net............................ 13,445 18,907
Due from affiliates................................. 9,614 10,462
Notes receivable.................................... 5,462 --
Prepaid expenses and other current assets........... 1,536 2,680
Deferred income taxes............................... 3,322 8,534
---------- ----------
Total current assets.............................. 343,815 99,941
Property and Equipment, net......................... 258,550 358,567
Notes Receivable.................................... 450,572 710,111
Deferred Financing Costs, net....................... 15,745 20,504
Excess of Purchase Price Over Fair Value of Net As-
sets Acquired, net................................. -- 180,468
Other Assets, net................................... 5,195 53,179
---------- ----------
Total assets...................................... $1,073,877 $1,422,770
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................... $ 12,292 $ 10,218
Accrued expenses.................................... 9,095 28,584
Deferred franchise revenue.......................... 8,945 11,290
---------- ----------
Total current liabilities......................... 30,332 50,092
Deferred Franchise Revenue............................ 2,072 7,608
Revolving Credit Facility............................. -- 1,200
Liquid Yield Option Notes............................. 177,306 179,373
Convertible Subordinated Debt......................... 129,872 129,862
Deferred Income Taxes................................. 16,631 35,958
Other Noncurrent Liabilities.......................... 833 7,258
Minority Interest..................................... -- 99,090
Commitments and Contingencies
Stockholders' Equity:
Preferred stock--$.01 par value; authorized
20,000,000 shares; no shares issued and
outstanding........................................ -- --
Common stock--$.01 par value; authorized 100,000,000
shares; issued and outstanding: 59,129,301 in 1995
and 63,902,895 in 1996............................. 591 640
Additional paid-in capital.......................... 675,611 822,195
Retained earnings................................... 40,629 89,494
---------- ----------
716,831 912,329
---------- ----------
Total liabilities and stockholders' equity........ $1,073,877 $1,422,770
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-19
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
--------------------- ---------------------
OCTOBER 1, OCTOBER 6, OCTOBER 1, OCTOBER 6,
1995 1996 1995 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Royalties and franchise-related
fees............................ $26,566 $45,646 $73,163 $130,816
Company-operated stores.......... 12,105 28,664 40,415 55,402
------- ------- ------- --------
Total revenue.................. 38,671 74,310 113,578 186,218
Cost and Expenses:
Cost of products sold............ 4,510 10,567 15,111 20,515
Salaries and benefits............ 6,930 12,862 22,958 29,699
General and administrative....... 8,350 31,368 28,689 58,084
------- ------- ------- --------
Total cost and expenses........ 19,790 54,797 66,758 108,298
------- ------- ------- --------
Income from Operations............. 18,881 19,513 46,820 77,920
Other Income (Expense):
Interest expense, net............ (4,593) (3,803) (9,090) (10,138)
Gain on sale of subsidiary's
stock........................... -- 14,778 -- 14,778
Other income (expense), net...... (56) 4 (22) 316
------- ------- ------- --------
Total other income (expense)... (4,649) 10,979 (9,112) 4,956
------- ------- ------- --------
Income Before Income Taxes and
Minority Interest................. 14,232 30,492 37,708 82,876
Income Taxes....................... 5,418 11,194 14,358 30,992
Minority Interest in (Earnings) of
Subsidiary........................ -- (1,998) -- (3,019)
------- ------- ------- --------
Net Income......................... $ 8,814 $17,300 $23,350 $ 48,865
======= ======= ======= ========
Net Income Per Common and
Equivalent Share.................. $ 0.17 $ 0.26 $ 0.47 $ 0.74
======= ======= ======= ========
Weighted Average Number of Common
and Equivalent Shares Outstanding. 50,863 67,416 49,695 66,091
======= ======= ======= ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-20
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE QUARTERS ENDED
-----------------------
OCTOBER 1, OCTOBER 6,
1995 1996
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 23,350 $ 48,865
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 8,380 15,559
Interest on liquid yield option notes.............. 4,637 10,542
(Gain) loss on sale of subsidiary's stock.......... -- (14,778)
Deferred income taxes.............................. 11,094 (21,843)
Minority interest.................................. -- 3,019
Loss (gain) on disposal of assets.................. 306 (160)
Changes in assets and liabilities, excluding
effects from acquisitions:
Accounts receivable and due from affiliates...... (5,120) (3,877)
Accounts payable and accrued expenses............ (3,837) 7,776
Deferred franchise revenue....................... (411) 2,713
Other assets and liabilities..................... (982) 1,175
--------- -----------
Net cash provided by operating activities...... 37,417 48,991
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................... (99,519) (92,351)
Proceeds from the sale of assets..................... 47,171 58,996
Increase in deferred financing costs and other
assets.............................................. (9,454) (10,247)
Issuance of notes receivable......................... (376,008) (1,013,570)
Repayments of notes receivable....................... 207,175 630,064
--------- -----------
Net cash used in investing activities.......... (230,635) (427,108)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock............... 36,610 110,833
Proceeds from issuance of subsidiary's common stock.. -- 59,902
Proceeds from issuance of liquid yield option notes.. 172,464 --
Proceeds from revolving credit facilities............ 165,815 32,660
Repayments of revolving credit facilities............ (165,815) (76,356)
--------- -----------
Net cash provided by financing activities...... 209,074 127,039
--------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents. 15,856 (251,078)
Cash and Cash Equivalents, beginning of period....... 25,304 310,436
--------- -----------
Cash and Cash Equivalents, end of period............. $ 41,160 $ 59,358
========= ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-21
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED 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 October 6, 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 three
quarters ended October 6, 1996 are not necessarily indicative of the results
expected for the full year.
2. ACQUISITIONS
During the three quarters ended October 6, 1996, the Company converted its
$120.0 million loan into common stock of Einstein/Noah Bagel Corp. ("ENBC")
and subsequently invested an additional $31.6 million in ENBC common stock,
resulting in a current ownership interest of approximately 58% of the
outstanding shares of common stock of 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. Subsequent to the Company's
acquisition of Mid-Atlantic, Mid-Atlantic acquired Boston Market stores for a
purchase price of $16.9 million, including the assumption of $1.1 million in
liabilities owed to third parties. These 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 $182.2 million which is being
amortized over a 35-year life. The Company will evaluate adjustments to the
goodwill balance or useful life based upon future events and circumstances,
which 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 October 6, 1996, as if the aforementioned transactions had occurred at
the beginning of the Company's fiscal year (in thousands of dollars, except
per share data):
<TABLE>
<S> <C>
Revenue......................................................... $247,485
Net income...................................................... $ 35,633
Net income per share............................................ $ 0.54
</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.
3. AREA DEVELOPER FINANCING
The Company currently offers convertible and non-convertible secured debt
financing to certain Boston Market area developers to partially finance store
development and working capital needs. Only developers which
F-22
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 similar to those
offered by the Company to Boston Market area developers.
(A) LOAN CONVERSION OPTION
The Company may convert all or any portion of the convertible 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. 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 the Company's loan agreements with its Boston
Market area developers.
There can be no assurance that the Company or ENBC will exercise future
rights to convert their loans to area developers 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.
F-23
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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 October 6, 1996
and ENBC area developers as of October 6, 1996 (in thousands of dollars,
except number of area developers):
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 6,
1995 1996
------------ ----------
<S> <C> <C>
Boston Market:
Number of area developers receiving financing........ 15 14
Loan commitments..................................... $ 614,094 $ 761,415
Unused revolving loans............................... (202,676) (170,692)
--------- ---------
Loans outstanding (included in Notes Receivable)..... $ 411,418 $ 590,723
========= =========
ENBC:
Number of area developers receiving financing........ -- 10
Loan commitments..................................... $ -- $ 210,800
Unused revolving loans............................... -- (110,070)
--------- ---------
Loans outstanding (included in Notes Receivable)..... $ -- $ 100,730
========= =========
</TABLE>
(C) CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
The allowance for Boston Market and ENBC financed area developers' 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 managements 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 October 6,
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), even though such loans made by ENBC pre-date 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 which
together aggregate $109.5 million. The Company's facility provides for
borrowings of up to $64.5 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
F-24
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 base rate plus .5% 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 credit facility
agreements contain covenants, among others, restricting other borrowings,
prohibiting cash dividends, and requiring the respective borrowers maintenance
of interest coverage and cash flow ratios, minimum capital levels, and
specified store level sales. ENBC's facility is collateralized by
substantially all of its assets. As of October 6, 1996, no amount was
outstanding under the Company's facility and $1.2 million was outstanding
under ENBC's facility.
5. STOCK OPTIONS
The Company accounts for its employee stock options in accordance with APB
No. 25.
6. STOCKHOLDERS' EQUITY
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. Prior to these
transactions, the Company held approximately a 70% interest in ENBC and
subsequent to these transactions, the Company held approximately a 58%
interest in ENBC. The transactions resulted in a pretax gain of approximately
$14.8 million. Deferred income taxes have been provided for on the gain.
7. ROYALTIES AND FRANCHISE-RELATED FEES
Royalties and franchise-related fees for the Company and ENBC (from the date
of the Company's conversion of its loan into ENBC common stock) are comprised
of the following (in thousands of dollars):
<TABLE>
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
------------------------------- -------------------------------
OCTOBER 1, 1995 OCTOBER 6, 1996 OCTOBER 1, 1995 OCTOBER 6, 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Royalties............... $ 8,756 $14,159 $24,165 $ 40,519
Initial franchise and
area developer fees.... 3,013 5,978 9,079 13,255
Interest income......... 8,678 15,522 22,044 47,421
Real estate, lease, and
related services in-
come................... 4,352 7,000 12,338 20,255
Software fees........... 1,713 2,858 5,454 9,238
Other................... 54 129 83 128
------- ------- ------- --------
$26,566 $45,646 $73,163 $130,816
======= ======= ======= ========
</TABLE>
8. COMMITMENTS
Through October 6, 1996, twelve Boston Market area developers sold to BC
Equity Funding, L.L.C. an aggregate of $56.7 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.
F-25
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
October 6, 1996, Bagel Funding had raised $90.0 million (including an
aggregate of $20.7 million in subscriptions receivable) and had invested a
total of $51.9 million in ENBC 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.
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.
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CON-
NECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE DEBENTURES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Prospectus Summary........................................................ 3
Special Note Regarding Forward-Looking Statements......................... 8
Risk Factors.............................................................. 8
Recent Developments....................................................... 11
The Company............................................................... 14
Use of Proceeds........................................................... 17
Price Range of Common Stock and Dividend Policy........................... 18
Capitalization............................................................ 19
Selected Consolidated Financial and Store Data............................ 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Description of Debentures................................................. 29
Underwriting.............................................................. 36
Legal Matters............................................................. 38
Experts................................................................... 38
Documents Incorporated by Reference....................................... 38
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$250,000,000
[BOSTON MARKET LOGO]
% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2004
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
MORGAN STANLEY & CO.
INCORPORATED
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by the
Company in connection with the registration, issuance, and distribution of the
securities being registered hereby. All amounts are estimates except the SEC
registration fee, the NASD filing fee, and the Nasdaq fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $87,122
NASD Filing Fee................................................. 29,250
Nasdaq Fee...................................................... 1,000
Trustee's Fees and Expenses..................................... 5,000
Legal Fees and Expenses......................................... 125,000
Rating Agency Fees.............................................. 50,000
Accountants' Fees and Expenses.................................. 50,000
Printing and Engraving Expenses................................. 250,000
Miscellaneous................................................... 27,628
--------
Total....................................................... $625,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors, officers, employees, and agents of the Company;
allows the advancement of costs of defending against litigation; and permits
companies incorporated in Delaware to purchase insurance on behalf of
directors, officers, employees, and agents against liabilities whether or not
in the circumstances such companies would have the power to indemnify against
such liabilities under the provisions of the statute.
The Company's Certificate of Incorporation, a copy of which is Exhibit
4.1(a) hereto, provides for indemnification of the Company's officers and
directors to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law. The Company maintains directors and officers
insurance covering its executive officers and directors.
The Company's Certificate of Incorporation eliminates, to the fullest extent
permitted by Delaware law, liability of a director to the Company or its
stockholders for monetary damages for a breach of such director's fiduciary
duty of care except for liability where a director (a) breaches his or her
duty of loyalty to the Company or its stockholders, (b) fails to act in good
faith or engages in intentional misconduct or knowing violation of law, (c)
authorizes payment of an illegal dividend or stock repurchase, or (d) obtains
an improper personal benefit. While liability for monetary damages has been
eliminated, equitable remedies such as injunctive relief or rescission remain
available. In addition, a director is not relieved of his or her
responsibilities under any other law, including the federal securities laws.
Insofar as indemnification by the Company for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, the Company has
been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
ITEM 16. EXHIBITS.
A list of the exhibits included or incorporated by reference as part of this
Registration Statement is set forth in the Exhibit Index which immediately
precedes such exhibits, and is hereby incorporated by reference herein.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Not applicable.
(b) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c)-(g) Not applicable.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(i)(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of the prospectus filed by the Registrant pursuant to 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(j) Not applicable.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT, OR AMENDMENT THERETO, TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN GOLDEN, COLORADO ON MARCH 3, 1997.
BOSTON CHICKEN, INC.
/s/ Scott A. Beck
By: _________________________________
Scott A. Beck
Chairman of the Board, President
and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Scott A. Beck and
Mark W. Stephens, and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with authority to execute in the
name of each such person and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including post-effective amendments) to this
registration statement necessary or advisable to enable the registrant to
comply with the Securities Act of 1933, as amended, and any rules,
regulations, and requirements of the Securities and Exchange Commission in
respect thereof, which amendments may make such other changes in the
registration statement as the aforesaid attorney-in-fact executing the same
deems appropriate, and any filings pursuant to Rule 462(b) under the
Securities Act of 1933, as amended.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT, OR AMENDMENT THERETO, HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON MARCH 3, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Scott A. Beck Chairman of the Board, President, Chief
___________________________________________ Executive Officer and Director (Principal
Scott A. Beck Executive Officer)
/s/ Mark W. Stephens Vice Chairman of the Board, Chief Financial
___________________________________________ Officer and Director (Principal Financial
Mark W. Stephens Officer)
Vice Chairman of the Board, President and
___________________________________________ Chief Executive Officer of Boston Market
Laurence M. Zwain and Director
/s/ Mark R. Goldston Vice Chairman of the Board and Director
___________________________________________
Mark R. Goldston
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Mark A. Link Vice President-Financial Reporting
___________________________________________ (Principal Accounting Officer)
Mark A. Link
Director
___________________________________________
Dean L. Buntrock
/s/ Arnold C. Greenberg Director
___________________________________________
Arnold C. Greenberg
/s/ J. Bruce Harreld Director
___________________________________________
J. Bruce Harreld
/s/ M Howard Jacobson Director
___________________________________________
M Howard Jacobson
/s/ Peer Pedersen Director
___________________________________________
Peer Pedersen
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER EXHIBITS* PAGE NUMBER**
------- --------- -------------
<C> <S> <C>
1.1 Form of Purchase Agreement with respect to the
Debentures.
4.1(a) Certificate of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 4.1 to
the Registrant's Registration Statement on Form S-8
(Reg. No. 33-71930)).
4.1(b) Certificate of Amendment to Certificate of
Incorporation of the Registrant (incorporated by
reference to Exhibit 3 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 21,
1996).
4.2 Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement of Form S-1 (Reg.
No. 33-81001)).
4.3 Indenture dated as of February 1, 1994 by and between
the Registrant and Harris Trust and Savings Bank, as
Trustee, which includes as Exhibit A the form of
Debenture for the Registrant's 4 1/2% Convertible
Subordinated Debentures Due 2004 (incorporated by
reference to Exhibit 4.1 to the Registrant's 1993
annual report on Form 10-K).
4.4 Secured Revolving Credit Agreement dated as of
December 9, 1996 among the Registrant, Bankers Trust
Company, as Documentation Agent, Bank of America
Illinois, as Agent, and the Lenders Named Therein.
4.5 Facilities Agreement dated as of December 9, 1996
among the Registrant, Bank of America Illinois, as
Agent for Certain Lenders, and General Electric
Capital Corporation.
4.6 Concurrent Private Placement Agreement dated November
8, 1993 (incorporated by reference to Exhibit 4.7 to
the Registrant's Registration Statement on Form S-1
(Reg. No. 33-73870)).
4.7 Second Amended and Restated Piggyback Registration
Agreement dated November 8, 1993 (incorporated by
reference to Exhibit 4.8 to the Registrant's
Registration Statement on Form S-1 (Reg. No. 33-73870)).
4.8 Form of Certificate for Common Stock (incorporated by
reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1 (Reg. No. 33-69256)).
4.9 Stock Purchase Agreements dated as of March 24, 1995
by and between the Registrant and Einstein/Noah Bagel
Corp. ("ENBC"), formerly known as Einstein Bros.
Bagels, Inc., formerly known as Progressive Bagel
Concepts, Inc. (incorporated by reference to Exhibit
4.10 to the Registrant's 1994 annual report on Form
10-K).
4.10 Stock Purchase Agreement dated March 31, 1995 by and
between the Registrant and ENBC (incorporated by
reference to Exhibit 4.11 to the Registrant's
Registration Statement on Form S-1 (Reg. No. 33-79280)).
4.11 Registration Rights Agreements dated as of March 24,
1995 between the Registrant and ENBC (incorporated by
reference to Exhibit 4.11 to the Registrant's 1994
annual report on Form 10-K).
4.12 Registration Rights Agreement dated as of March 31,
1995 by and between the Registrant and ENBC
(incorporated by reference to Exhibit 4.13 to the
Registrant's Registration Statement on Form S-1 (Reg.
No. 33-79280)).
4.13 Indenture dated as of June 1, 1995 by and between the
Registrant and Chemical Bank, as Trustee, which
includes as an Exhibit the form of LYON for the
Registrant's Liquid Yield Option Notes due 2015
(incorporated by reference to Exhibit 4.14 to the
Registrant's Registration Statement on Form S-3 (Reg.
No. 33-93872)).
</TABLE>
- --------
* In the case of incorporation by reference to documents filed by the Company
under the Securities Exchange Act of 1934, as amended, the Company's file
number under that Act is 0-22802.
** Appears in manually signed copy only.
Exh-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER EXHIBITS* PAGE NUMBER**
------- --------- -------------
<C> <S> <C>
4.14 Stock Purchase Agreement dated August 10, 1995 by and
between the Registrant and ENBC (incorporated by
reference to Exhibit 4.15 to the Registrant's
Registration Statement on Form S-1 (Reg. No. 33-96230)).
4.15 Registration Rights Agreement dated August 10, 1995 by
and between the Registrant and ENBC (incorporated by
reference to Exhibit 4.16 to the Registrant's
Registration Statement on Form S-1 (Reg. No. 33-96230)).
4.16 Warrant Purchase Agreement dated as of July 18, 1996
by and between the Registrant and Market Partners,
L.L.C. ("Market Partners"), including the form of
Warrant (incorporated by reference to Exhibit 4.17 to
the Registrant's Registration Statement on Form S-8
(Reg. No. 333-15389)).
4.17 Registration Rights Agreement dated as of September
27, 1996 by and between the Registrant and Market
Partners (incorporated by reference to Exhibit 4.18
to the Registrant's Registration Statement on Form S-
8 (Reg. No. 333-15389)).
4.18 Warrant Certificate of the Registrant dated December
12, 1996 issued to General Electric Capital
Corporation.
4.19 Registration Rights Agreement entered into as of
December 12, 1996 by and between the Registrant and
General Electric Capital Corporation.
4.20 Form of Indenture, including the Form of the
Debentures.
5 Opinion of Bell, Boyd & Lloyd.
12.1 Statement regarding Computation of Ratio of Earnings
to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Bell, Boyd & Lloyd (included in Exhibit 5).
25.1 Statement of Eligibility and Qualification of Trustee
on Form T-1.
27 Financial Data Schedule (incorporated by reference to
Exhibit 27 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended October 6, 1996).
</TABLE>
- --------
* In the case of incorporation by reference to documents filed by the
Company under the Securities Exchange Act of 1934, as amended, the
Company's file number under that Act is 0-22802.
** Appears in manually signed copy only.
Exh-2
<PAGE>
Exhibit 1.1
MBP DRAFT 1/20/97
-----------------
BOSTON CHICKEN, INC.
(a Delaware corporation)
$250,000,000
_____% Convertible Subordinated Debentures due 2004
PURCHASE AGREEMENT
------------------
___________, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
ALEX. BROWN & SONS INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Boston Chicken, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Alex. Brown & Sons Incorporated and Morgan
Stanley & Co. Incorporated (collectively, the "Underwriters", which term shall
also include any underwriter substituted as hereinafter provided in Section 9
hereof), with respect to the issue and sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective principal
amounts set forth in Schedule A hereto of the $250,000,000 aggregate principal
amount of the Company's ____% Convertible Subordinated Debentures due 2004 (the
"Debentures"), and with respect to the grant by the Company to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of an additional $37,500,000 principal amount of
Debentures to cover over-allotments, if any. The aforesaid $250,000,000
principal amount of Debentures (the "Initial Securities") to be purchased by the
Underwriters and all or any
1
<PAGE>
part of the $37,500,000 principal amount of Debentures subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities". The Securities are to be issued
pursuant to an Indenture dated as of ___________, 1997 (the "Indenture") between
the Company and Bankers Trust Company, as trustee (the "Trustee").
The Securities are convertible into shares of common stock $.01 par value
per share, of the Company (the "Common Stock") in accordance with the terms of
the Securities and the Indenture, at the initial conversion price specified in
Schedule B hereto.
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-_____) covering the
registration of the Securities, and the shares of Common Stock issuable upon
conversion of the Securities, under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A Information that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus, including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the
form first furnished to
2
<PAGE>
the Underwriters for use in connection with the offering of the Securities is
herein called the "Prospectus." For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (and all
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement, any preliminary
prospectus or the Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934 (the "1934
Act") which is or is deemed to be incorporated by reference in the Registration
Statement, such preliminary prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to each Underwriter as of the date
hereof, and agrees with each Underwriter, as follows:
(i) The Company meets the requirements for use of Form S-3 under the
1933 Act. 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 or any Rule 462(b)
Registration Statement became effective, the Registration Statement and the
Rule 462(b) Registration Statement complied in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and the Trust
Indenture Act of 1939, as amended (the "1939 Act") and the rules and
regulations of the Commission under the 1939 Act (the "1939 Act
Regulations") and did not contain an untrue statement of a material fact or
omit to
3
<PAGE>
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and at the time any post-effective
amendments to the Registration Statement or any Rule 462(b) Registration
Statement become effective any such post-effective amendments will comply
in all material respects with the requirements of the 1933 Act and the 1933
Act Regulations and the 1939 Act and the 1939 Act Regulations 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, included an untrue statement of a material fact or
omitted 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, and the Prospectus, as amended or supplemented, at the Closing
Time (and, if any Option Securities are purchased, at the Date of Delivery)
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in 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 any Underwriter through Merrill Lynch expressly for
use in the Registration Statement or Prospectus or to that part of the
Registration Statement which shall constitute the Statement of Eligibility
and Qualification under the 1939 Act (Form T-1) of the Trustee.
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 Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with this offering 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) 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) The consolidated financial statements included in the
Registration Statement and the Prospectus present
4
<PAGE>
fairly the financial position of the Company and its consolidated
subsidiaries as at the dates indicated and the results of their operations
for the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may otherwise be indicated therein); and the
supporting schedules included in the Registration Statement present fairly
the information required to be stated therein.
(iv) 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, (B) there have
been no transactions entered into by the Company or 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.
(v) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus; and the Company is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases property or
conducts a significant amount of business, except where the failure to so
qualify would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiary considered as one enterprise.
(vi) Each "significant subsidiary" of the Company (as such term is
defined in Rule 1-02 of Regulation S-X) (each a "Subsidiary and
collectively, the Subsidiaries"), has been duly incorporated 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 and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases property or
conducts a significant amount of business, except where the failure to so
qualify
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<PAGE>
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise; except as
otherwise disclosed in the Registration Statement, 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. The only
subsidiaries of the Company are the subsidiaries listed on Schedule C
hereto.
(vii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column "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, options or warrants referred to in the Prospectus).
The shares of issued and outstanding Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable; the Common Stock
conforms to all statements relating thereto contained in the Prospectus;
and the issuance of the Securities is not subject to preemptive or other
similar rights which have not been waived.
(viii) The Securities to be issued and sold pursuant to this
Agreement have been duly authorized, and when issued, authenticated and
delivered pursuant to this Agreement, against payment of the consideration
set forth herein, will have been duly executed, authenticated, issued and
delivered and will constitute legal, valid and binding obligations of the
Company, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other similar laws of general applicability now or
hereafter in effect relating to or affecting creditors' rights and to
general equity principles, entitled to the benefits provided by the
Indenture under which they are to be issued, which will be substantially in
the form included as an exhibit to the Registration Statement; the
Indenture has been duly authorized and duly qualified under the 1939 Act,
and when executed and delivered by the Company and the Trustee (assuming
due authorization, execution and delivery by the Trustee), will constitute
a legal, valid and binding instrument enforceable in accordance with its
terms subject, as to enforcement, to bankruptcy, insolvency, reorganization
or other similar laws of general applicability now or hereafter in effect
relating to or affecting creditors' rights and to general equity
principles; and the Securities
6
<PAGE>
and the Indenture conform in all material respects to the descriptions
thereof in the Prospectus.
(ix) Upon issuance and delivery of the Securities in accordance with
this Agreement and the Indenture, the Securities shall be convertible at
the option of the holder thereof for shares of Common Stock in accordance
with the terms of the Securities and the Indenture; and the shares of
Common Stock initially issuable upon conversion of Securities have been
duly authorized and reserved for issuance, and when issued and delivered,
pursuant to the terms of the Indenture, will be validly issued, fully paid
and non-assessable.
(x) Neither the Company nor any of its subsidiaries is in violation
of its charter or by-laws or in material default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any material contract, indenture, mortgage, loan agreement, note, lease or
other 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 material
property or assets of the Company or any subsidiary is subject; and the
execution, delivery and performance of this Agreement and the Indenture and
the consummation of the transactions contemplated herein and therein and
compliance by the Company with its obligations hereunder and thereunder
have been duly authorized by all necessary corporate action and will not
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any material
property or assets of the Company or any of its subsidiaries pursuant to,
any material contract, indenture, mortgage, loan agreement, note, lease or
other 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 material
property or assets of the Company or any subsidiary is subject, nor will
such action result in any violation of the provisions of the charter or by-
laws of the Company or any applicable law, rule, regulation, judgment,
order or administrative or court decree.
(xi) There is no action, suit or proceeding before or 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 of its subsidiaries, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which the
Company reasonably believes is likely to result in any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business
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<PAGE>
prospects of the Company and its subsidiaries considered as one enterprise,
or which the Company reasonably believes is likely to materially and
adversely affect the properties or assets thereof or might materially and
adversely affect the consummation of this Agreement; all pending legal or
governmental proceedings to which the Company or any of its subsidiaries 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 material to the Company and its subsidiaries considered
as one enterprise; and there are no contracts or documents of the Company
or any of its subsidiaries which are required to be filed as exhibits to
the Registration Statement by the 1933 Act or by the 1933 Act Regulations
which have not been so filed.
(xii) The Company and its subsidiaries own, possess, have the right
to use, or reasonably believe they can acquire on reasonable terms, the
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "patent and
proprietary rights") currently employed by them in connection with the
business now operated by them, and 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 such patent or proprietary
rights which the Company reasonably believes to be likely to result in an
unfavorable decision, ruling or finding, or of any facts which the Company
reasonably believes would render any such patent and proprietary rights
invalid or inadequate to protect the interest of the Company or its
subsidiaries therein, and which infringement or conflict or invalidity or
inadequacy, singly or in the aggregate, would result in 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.
(xiii) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the
offering, issuance or sale of the Securities hereunder or the issuance of
shares of Common Stock upon conversion of the Securities, except such as
may be required under the 1933 Act or the 1933 Act Regulations, the 1939
Act or the 1939 Act Regulations or state securities laws.
8
<PAGE>
(xiv) This Agreement has been duly authorized, executed and delivered
by the Company.
(xv) 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 stated in
the Prospectus.
(xvi) All taxes and fees required to be paid within respect to the
execution of the Indenture and the issuance of the Securities have been
paid.
(xvii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply as to form in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934 Act (the "1934 Act
Regulations").
(b) Any certificate identified as a certificate under this Agreement and
signed by any officer of the Company and delivered to the Underwriters or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company agrees to
sell to each Underwriter, severally and not jointly, and each Underwriter,
severally and not jointly, agrees to purchase from the Company, at the price set
forth in Schedule B, the aggregate principal amount of Initial Securities set
forth in Schedule A opposite the name of such Underwriter, plus any additional
principal amount of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the Underwriters, severally and not jointly, to
purchase up to an additional $37,500,000 principal amount of Securities at the
same price set forth in Schedule B for the Initial Securities, plus accrued
interest, if any, from the Closing Date to the Date of Delivery (as defined
below). The option hereby granted will expire 30 days after the date hereof and
may be exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the
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<PAGE>
offering and distribution of the Initial Securities upon notice by the
Underwriters to the Company setting forth the number of Option Securities as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for such Option Securities. Any such time and date
of delivery (a "Date of Delivery") shall be determined by the Underwriters, but
shall not be earlier than two full business days nor later than five full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined, unless otherwise agreed by the
Underwriters and the Company. If the option is exercised as to all or any
portion of the Option Securities, each of the Underwriters, acting severally and
not jointly, will purchase that proportion of the total principal amount of
Option Securities then being purchased which the principal amount of Initial
Securities set forth in Schedule A opposite the name of such Underwriter bears
to the total principal amount of Initial Securities, subject in each case to
such adjustments as the Underwriters in their discretion shall make to eliminate
any sales or purchases of Securities having a principal amount less than $1,000.
(c) Payment of the purchase price for the Initial Securities shall be made
at the office of Bell, Boyd & Lloyd, Three First National Plaza, Chicago,
Illinois, and delivery of certificates for the Initial Securities shall be made
against payment therefor at the office of Merrill Lynch, Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New York 10281-
1305, or (in either case) at such other place as shall be agreed upon by the
Underwriters and the Company, at 10:00 A.M. on the fourth business day after the
date hereof (unless postponed in accordance with the provisions of Section 9),
or such other time not later than ten business days after such date as shall be
agreed upon by the Underwriters and the Company (such time and date of payment
and delivery being herein called "Closing Time"). In addition, in the event
that any or all of the Option Securities are purchased by the Underwriters,
payment of the purchase price for such Option Securities shall be made at the
above-mentioned office of Bell, Boyd & Lloyd, and delivery of certificates for
the Option Securities shall be made against payment therefor at the above-
mentioned office of Merrill Lynch, or (in either case) at such other place as
shall be agreed upon by the Underwriters and the Company, on each Date of
Delivery as specified in the notice from the Underwriters to the Company.
Payment shall be made to the Company by a wire transfer of immediately available
funds to a bank account designated by the Company, against delivery to the
Underwriters of certificates for the Securities to be purchased by them.
Certificates for the Initial Securities and the Option Securities, if any, shall
be in such denominations and registered in such names as the Underwriters may
request in writing at least one business day before the Closing Time or the
relevant Date of
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<PAGE>
Delivery, as the case may be. The certificates for the Initial Securities and
the Option Securities, if any, will be made available for examination and
packaging by the Underwriters not later than 3:00 P.M. on the last business day
prior to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) The Company will comply with the requirements of Rule 430A and
will notify the Underwriters immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration
Statement shall become effective, or any supplement to the Prospectus or
any amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission on the Registration Statement, (iii) of any
request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional
information, (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, and (v) of the suspension
of the qualification of the Securities for offering or sale in any
jurisdiction, or the initiation or threatening of any proceedings for any
such purpose. The Company will promptly effect the filings necessary
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing
under Rule 424(b) was received by the Commission and, in the event that it
was not, it will promptly file such prospectus. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) The Company will give the Underwriters notice of its intention to
file or prepare any amendment to the Registration Statement (including any
filing under Rule 462(b)) or any amendment or supplement to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Underwriters or counsel
for the Underwriters shall reasonably object, provided that such objection
shall not prevent the filing of any such amendment
11
<PAGE>
or supplement which, in the opinion of counsel for the Company, is required
to be filed by the requirements of the 1933 Act or the 1933 Act
Regulations.
(c) The Company will deliver to each Underwriters a signed copy of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference
therein) and will also deliver to the Underwriters as many conformed copies
of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) as the Underwriters may reasonably request. The
copies of the Registration Statement and each amendment thereto furnished
to the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(d) The Company will furnish to each Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the Prospectus (as
amended or supplemented) as such Underwriter may reasonably request for the
purposes contemplated by the 1933 Act or the 1934 Act or the respective
applicable rules and regulations of the Commission thereunder; provided
that in the event that an Underwriter is required to deliver a Prospectus
in connection with sales of any of the Securities at any time nine months
or more after the time of issuance of the Prospectus, upon the request of
such Underwriter but at its expense, the Company will prepare and deliver
to such Underwriter as many copies as it may request of a Prospectus (as
amended or supplemented) complying with Section 10(a)(3) of the 1933 Act.
The Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) The Company will comply with the 1933 Act and the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations and the 1939 Act and
the 1939 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement and in the Prospectus.
If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall occur
or condition shall exist as a result of which it is necessary, to amend the
Registration Statement or amend or supplement the Prospectus in order that
the Prospectus will not include any untrue
12
<PAGE>
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements
of the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the Prospectus comply
with such requirements, and the Company will furnish to the Underwriters
such number of copies of such amendment or supplement as the Underwriters
may reasonably request.
(f) The Company will endeavor, in cooperation with the Underwriters,
to qualify the Securities and the Shares of Common Stock issuable upon
conversion of the Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States
as the Underwriters may designate; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to execute a general
consent to service of process in any jurisdiction. In each jurisdiction in
which the Securities or such Shares of Common Stock have been so qualified,
the Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for so
long as it may be required to complete the distribution of such Securities.
(g) The Company will timely file such reports pursuant to the 1934 Act
as are necessary to make generally available to its security holders as
soon as practicable an earnings statement for the purposes of, and to
provide the benefits contemplated by, the last paragraph of Section 11(a)
of the 1933 Act.
(h) The Company will use the net proceeds received by it from the sale
of the Securities in the manner specified in the Prospectus under "Use of
Proceeds".
(i) The Company will file with the National Association of Securities
Dealers ("NASD") all documents and notices required by the NASD of
companies that have issued securities that are traded in the over-the-
counter market and quotations for which are reported by the National
Association of Securities Dealers Automated Quotation System-National
Market System.
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(j) The Company will not, without the prior written consent of Merrill
Lynch, contract to sell or announce or make any offering, sale or other
disposition of any debt securities of the Company having a maturity greater
than one year during the period beginning from the date of this Agreement
and continuing through the earlier of the termination of trading
restrictions with respect to the Securities, as notified to the Company by
you, or the Closing Time.
(k) During a period of 120 days from the date of the Prospectus, the
Company will not, without the prior written consent of Merrill Lynch, (i)
directly or indirectly, sell, offer to sell, grant any option for the sale
of, or otherwise dispose of, any Common Stock or any security convertible
or exchangeable into or exercisable for Common Stock (except for Debentures
issued pursuant to this Agreement or Common Stock issued pursuant to the
Company's employee or director stock option plans, upon exercise or
conversion of outstanding options or warrants or convertible debt described
in the Prospectus or in connection with acquisitions or currently effective
shelf registration statements (provided that the number of shares of Common
Stock issued in connection with such acquisitions or such registration
statements does not exceed 1,000,000)) or (ii) file any registration
statement under the 1933 Act to register the offer or sale of any shares of
Common Stock or any security convertible or exchangeable into or
exercisable for Common Stock.
(l) The Company will use its best efforts to have the Securities
quoted on the Nasdaq Small Cap Market and the shares of Common Stock
issuable upon conversion of Securities quoted on the Nasdaq National Market
(or listed on a national securities exchange) and to cause the Securities
to be registered under the 1934 Act.
(m) The Company will reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligations to issue Common Stock upon conversion of
Securities.
(n) The Company, during the period when the Prospectus is required to
be delivered under the 1933 Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15
of the 1934 Act within the time periods required by the 1934 Act and the
1934 Act Regulations.
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<PAGE>
SECTION 4. Payment of Expenses. The Company will pay all expenses incident
to the performance of its obligations under this Agreement, except as otherwise
expressly provided in Section 3(d) hereof, including (i) the printing and filing
of the Registration Statement as originally filed and of each amendment thereto,
(ii) the reproduction of this Agreement and the Indenture, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel and
accountants, (v) the qualification of the Securities and the shares of Common
Stock issuable upon conversion of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the fees and disbursements of counsel in connection therewith and in connection
with the preparation of the Blue Sky Survey, (vi) the printing and delivery to
the Underwriters of copies of the Registration Statement as originally filed and
of each amendment thereto, of each preliminary prospectus, and of the Prospectus
and any amendments or supplements thereto, (vii) the printing and delivery to
the Underwriters of copies of the Blue Sky Survey, (viii) the fees and expenses
of the Trustee, including the fees and disbursements of counsel for the Trustee
in connection with the Indenture, (ix) any fees payable in connection with the
rating of the Securities, (x) the fee of the National Association of Securities
Dealers, Inc. and (xi) the fees and expenses incurred in connection with the
quotation of the Securities, and the shares of Common Stock into which the
Securities are convertible, in accordance with the provisions of Section 3(l).
It is understood, however, that except as provided in Section 6 hereof, you will
pay the fees of your counsel, transfer taxes on resale of any of the Securities
by you and any advertising expenses incurred in connection with any offers you
may make.
If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section 5 or Section 8(a)(i) hereof, the Company shall reimburse
the Underwriters for all of their reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of the
Underwriters hereunder are subject to the accuracy of the representations and
warranties of the Company herein contained, to the performance by the Company of
its obligations hereunder, and to the following further conditions:
(a) The Registration Statement, including any Rule 462(b) Registration
Statement, has become effective and at Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefor initiated or threatened
by the Commission. A prospectus containing the Rule 430A
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<PAGE>
Information shall have been filed with the Commission in accordance with
Rule 424(b) of the 1933 Act Regulations within the prescribed time period
and prior to Closing Time the Company shall have provided evidence
satisfactory to the Underwriters of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and
declared effective in accordance with the requirements of Rule 430A of the
1933 Act Regulations.
(b) At Closing Time the Underwriters shall have received:
(1) The favorable opinion, dated as of Closing Time, of Bell,
Boyd & Lloyd, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Registration Statement.
(iii) To the best of their knowledge and information, the
Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which a
failure to so qualify would have a material adverse effect on the
business of the Company and its subsidiaries considered as one
enterprise.
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus in the column
"Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement or
pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of
convertible securities, options or warrants referred to in the
Prospectus) and the shares of issued and outstanding Common Stock
have been duly authorized and validly issued and are fully paid
and non-assessable.
(v) Each Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the
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[State of Delaware], has corporate power and authority under such
laws to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and, to the
best of their knowledge and information, is duly qualified as a
foreign corporation to transact business and is in good standing
in each jurisdiction in which a failure to so qualify would have
a material adverse effect on the business of the Company and its
subsidiaries considered as one enterprise; except as otherwise
disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable
and, to the best of their knowledge and information, is owned by
the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim
or equity.
(vi) The issuance of the Securities is not subject to
preemptive or other similar rights arising by operation of law,
under the charter or by-laws of the Company or, to the best of
their knowledge and information, otherwise, which have not been
waived.
(vii) The Initial Securities or Option Securities, as the
case may be, to be issued and sold by the Company pursuant to
this Agreement have been duly authorized by requisite corporate
action on the part of the Company, and the Securities, when
executed and authenticated in accordance with the terms of the
Indenture and delivered to and paid for by you, will be valid and
binding obligations of the Company entitled to the benefits of
the Indenture and enforceable against the Company in accordance
with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and by general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); and the
Securities and the Indenture conform as to legal matters in all
material respects to the descriptions thereof in the Prospectus.
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(viii) The Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement,
enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, and by general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or
in equity); the Indenture has been duly qualified under the 1939
Act.
(ix) Upon issuance and delivery of the Securities in
accordance with this Agreement and the Indenture, the Securities
shall be convertible at the option of the holder thereof for
shares of Common Stock in accordance with the terms of the
Securities and the Indenture; and the shares of Common Stock
initially issuable upon conversion of Securities have been duly
authorized and reserved for issuance and, when issued and
delivered pursuant to the terms of the Indenture, will be validly
issued, fully paid and non-assessable.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the
1933 Act; any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period
required by Rule 424(b); and, to the best of their knowledge and
information, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement
has been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission.
(xii) The Registration Statement, including any Rule 462(b)
Registration Statement and the Rule 430A Information, as
applicable, the Prospectus and each amendment or supplement to
the Registration Statement and Prospectus (excluding the
documents incorporated by reference therein) as of their
respective effective or issue dates
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(other than the financial statements and schedules and other
financial data included therein, and the Trustee's Statement of
Eligibility on Form T-1 (the "Form T-1") as to which no opinion
need be rendered) complied as to form in all material respects
with the requirements of the 1933 Act and the 1933 Act
Regulations.
(xiii) The Common Stock conforms to the description thereof
contained in the Prospectus, and the form of certificate used to
evidence the Common Stock is in due and proper form and complies
with all applicable statutory requirements and with any
applicable requirements of the charter and by-laws of the
Company.
(xiv) To the best of their knowledge and information, (a)
there are no legal or governmental proceedings pending or
threatened against the Company or any of its subsidiaries which
are required to be disclosed in the Registration Statement, other
than those disclosed therein, and (b) all pending legal or
governmental proceedings to which the Company or any of its
subsidiaries is a party or to which any of their property is
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business,
are, considered in the aggregate, not material.
(xv) To the best of their knowledge and information, there
are no contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described in the
Registration Statement or to be filed as exhibits thereto other
than those described therein or filed as exhibits thereto, and
the descriptions thereof in the Registration Statement are
correct in all material respects.
(xvi) No authorization, approval, consent or order of any
court or governmental authority or agency is required in
connection with the offering, issuance or sale of the Securities
to the Underwriters or the issuance of shares of Common Stock
upon conversion of the Securities, except (A) the registration
under the 1933 Act of the Securities and the shares of Common
Stock issuable upon conversion of Securities, (B) registration
under the 1934 Act of the Securities, (C) the qualification of
the Indenture under the
19
<PAGE>
1939 Act and (D) such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by you, and the issuance of shares
of Common Stock upon conversion of Securities.
(xvii) To the best of their knowledge and information, the
execution, delivery and performance of this Agreement and the
Indenture and the consummation of the transactions contemplated
herein and therein and compliance by the Company with its
obligations hereunder and thereunder will not conflict with or
constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon
any material property or assets of the Company or any of its
subsidiaries pursuant to, any material contract, indenture,
mortgage, loan agreement, note, lease or other 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 material
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company, or any
applicable law, rule, regulation, judgment, order or
administrative or court decree.
(xviii) Each document filed pursuant to the 1934 Act (other
than the financial statements and supporting schedules included
therein, as to which no opinion need be rendered) and
incorporated or deemed to be incorporated by reference in the
Prospectus complied when so filed as to form in all material
respects with the 1934 Act and the 1934 Act Regulations.
(2) The favorable opinion, dated as of Closing Time, of Mayer,
Brown & Platt, counsel for the Underwriters, with respect to the
matters set forth in (i), (ii), (vi), (solely as to preemptive or
other similar rights arising by operation of law or under the charter
or by-laws of the Company) and (vii) to (xiii), inclusive, of
subsection (b)(1) of this Section.
(3) In giving their opinions required by subsections (b)(1) and
(b)(2), respectively, of this Section, Bell, Boyd & Lloyd and Mayer,
Brown & Platt shall each additionally state that nothing has come to
20
<PAGE>
their attention that would lead them to believe that the Registration
Statement or any amendment thereto, including the Rule 430A
Information (except for the financial statements and schedules and
other financial data included or incorporated by reference therein or
omitted therefrom and the Form T-1, as to which counsel need make no
statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement
thereto (except for the financial statements and schedules and other
financial data included or incorporated by reference therein or
omitted therefrom and the Form T-1, as to which counsel need make no
statement), at the time the Prospectus was issued, at the time any
such amended or supplemented prospectus was issued or at Closing Time,
included or includes an untrue statement of a material fact or omitted
or omits 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.
In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(c) At Closing Time there shall not have been, since the date hereof
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, and the Underwriters shall
have received a certificate of the Chairman, a Vice Chairman, the President
or a Vice President of the Company and of the chief financial or chief
accounting officer of the Company or the Vice President -SEC and Financial
Reporting, dated as of Closing Time, to the effect that, to the best of
their knowledge based on reasonable investigation, (i) there has been no
such material adverse change, (ii) the representations and warranties in
Section 1 hereof are true and correct with the
21
<PAGE>
same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all
conditions required on its part to be performed or satisfied at or prior to
Closing Time pursuant to this Agreement, and (iv) no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or threatened by the
Commission.
(d) At the time of the execution of this Agreement, the Underwriters
shall have received from Arthur Andersen LLP a letter dated such date, in
form and substance satisfactory to the Underwriters, to the effect that (i)
they are independent public accountants with respect to the Company and its
subsidiary within the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) it is their opinion that the consolidated financial statements and
supporting schedules included in the Registration Statement and covered by
their opinions therein comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations; (iii) based upon limited procedures set forth in detail in
such letter, nothing has come to their attention which causes them to
believe that (A) the interim unaudited financial statements of the Company
and its subsidiaries included in the Registration Statement do not comply
as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations or are not
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements included in the Registration Statement
(except as may otherwise be indicated therein), (B) the unaudited amounts
of revenue, earnings and earnings per common and equivalent share set forth
under "Selected Consolidated Financial and Store Data" in the Prospectus
were not determined on a basis substantially consistent with that used in
determining the corresponding amounts in the audited financial statements
included in the Registration Statement, or (C) at a specified date not more
than three days prior to the date of this Agreement, there has been any
change in the capital stock of the Company or any increase in the
consolidated long-term debt of the Company and its subsidiary or any
decrease in consolidated net current assets or net assets as compared with
the amounts shown in the October 6, 1996 balance sheet incorporated by
reference in the Registration Statement or, during the period from October
6, 1996 to a specified date not more than three days prior to the date of
this Agreement, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated revenues, net
income or net
22
<PAGE>
income per share of the Company and its subsidiaries, except in all
instances for changes, increases or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur and except
as otherwise set forth in such letter; and (iv) in addition to the
examination referred to in their opinions and the limited procedures
referred to in clause (iii) above, they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and financial information which are included in the
Registration Statement and Prospectus and which are specified by the
Underwriters, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company and its subsidiary identified in such letter.
(e) At Closing Time the Underwriters shall have received from Arthur
Andersen LLP a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to subsection
(d) of this Section, except that the specified date referred to shall be a
date not more than five days prior to Closing Time and to the further
effect that they have carried out procedures as specified in clause (iv) of
subsection (d) of this Section with respect to certain amounts, percentages
and financial information specified by the Underwriters and deemed to be a
part of the Registration Statement pursuant to Rule 430(A)(b) and have
found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iv).
(f) [Intentionally left blank]
(g) At Closing Time and at each Date of Delivery, if any, counsel for
the Underwriters shall have been furnished with such documents and opinions
as they may reasonably require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated and
related proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated and
with respect to the shares of Common Stock issuable upon conversion of the
Securities shall be reasonably satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
23
<PAGE>
(h) In the event that the Underwriters exercise their option provided
in Section 2(b) hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Company contained
herein and the statements in any certificates furnished by the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Underwriters shall have received:
(1) A certificate, dated such Date of Delivery, of the Chairman,
a Vice Chairman, the President or a Vice President of the Company and
of the chief financial or chief accounting officer of the Company or
the Vice President - SEC and Financial Reporting confirming that the
certificate delivered at the Closing Time pursuant to Section 5(c)
hereof remains true and correct as of such Date of Delivery.
(2) The favorable opinion of Bell, Boyd & Lloyd, counsel for the
Company, in form and substance reasonably satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Sections 5(b)(1) and
5(b)(3) hereof.
(3) The favorable opinion of Mayer, Brown & Platt, counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Sections 5(b)(2) and
5(b)(3) hereof.
(4) A letter from Arthur Andersen LLP, in form and substance
satisfactory to the Underwriters and dated such Date of Delivery,
substantially the same in form and substance as the letter furnished
to the Underwriters pursuant to Section 5(e) hereof, except that the
"specified date" in the letter furnished pursuant to this Section
5(h)(4) shall be a date not more than five days prior to such Date of
Delivery.
If any material condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement, or, in the case
of any condition to the purchase of Option Securities, on a Date of Delivery
which is after the Closing Time, the obligations of the several Underwriters to
purchase the relevant Option Securities, may be terminated by the Underwriters
by notice to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and
24
<PAGE>
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof.
SECTION 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever, promptly after submission for payment, arising out of any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment thereto), including the
Rule 430A Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage or expense
whatsoever, promptly after submission for payment, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or such alleged untrue statement or omission; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense whatsoever, promptly after
submission for payment (including, subject to Section 6(c) hereof, the
reasonable fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent
25
<PAGE>
arising out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Merrill Lynch expressly for
use in the Registration Statement (or any amendment thereto), including the Rule
430A Information, or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) and provided further, that, insofar as this
indemnity agreement relates to any untrue statement or omission, or any alleged
untrue statement or omission, made in a preliminary prospectus, but eliminated
or remedied in the Prospectus, it shall not inure to the benefit of an
Underwriter (or to the benefit of any person who controls such Underwriter) if a
copy of the Prospectus was not delivered by such Underwriter to the person
asserting the claim arising from such untrue statement or omission, or such
alleged untrue statement or omission at or prior to the time required by the
1933 Act, if the delivery thereof would have constituted a defense to the claim
asserted by such person.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage or expense described in the indemnity contained
in subsection (a) of this Section, promptly after submission for payment, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, or any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action, with counsel chosen by it
and approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses
26
<PAGE>
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel retained for
local procedural and practice matters) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification could be sought under
this Section 6 (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim, (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party, (iii) does not impugn the reputation of any
indemnified party and (iv) does not restrict any indemnified party from engaging
in any activity.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 6(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
SECTION 7. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement, or
contained in certificates of officers of the Company submitted pursuant hereto
and identified as such, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the Underwriters.
27
<PAGE>
SECTION 8. Termination of Agreement.
(a) The Underwriters may terminate this Agreement, by written notice to
the Company, at any time at or prior to Closing Time (i) if there has been,
since the date 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 (ii)
if there has occurred any material adverse change in the financial markets in
the United States or any outbreak of hostilities or escalation thereof involving
the United States or other calamity or crisis the effect of which is such as to
make it, in the judgment of the Underwriters, impracticable to market the
Securities or to enforce contracts for the sale of the Securities, or (iii) if
trading in the Common Stock has been suspended by the Commission or the Nasdaq
National Market, or (iv) any downgrading in the rating accorded the Company's
debt securities by any "nationally recognized statistical rating organization,"
as that term is defined by the Commission for purposes of Rule 436(g)(2) under
the 1933 Act, or any such organization shall have announced publicly that it has
placed any of such debt securities on what is commonly termed a "watch list" for
possible downgrading, or (v) if trading generally on the New York Stock Exchange
or the Nasdaq National Market has been suspended, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices for securities have
been required, by said Exchange or by such system or by order of the Commission
or any other governmental authority, or if a banking moratorium has been
declared by either Federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof.
SECTION 9. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the non-defaulting Underwriters shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the non-defaulting
Underwriters shall not have completed such arrangements within such 24-hour
period, then:
28
<PAGE>
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of Securities to be purchased on such date, each
of the non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after the
Closing Time, the obligation of the Underwriters to purchase and of the
Company to sell the Option Securities to be purchased and sold on such Date
of Delivery shall terminate without liability on the part of any non-
defaulting Underwriter or the Company.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the non-defaulting Underwriters or the Company shall
have the right to postpone Closing Time or the relevant Date of Delivery, as the
case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 9.
SECTION 10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered
personally to the recipient, one day after being sent to the recipient by
reputable overnight express courier service (charges prepaid), five days after
being mailed to the recipient (postage prepaid) or upon confirmation if
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to Merrill Lynch, at 5500 Sears Tower, Chicago,
Illinois 60606, Attention: Charles A. Lewis, Vice Chairman - Investment
Banking; notices to the Company shall be directed to it at 14103 Denver West
Parkway, Golden, Colorado 80401-4086, Attention:
___________________________________.
SECTION 11. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the
29
<PAGE>
Company and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters and the Company and their respective
successors and the controlling persons and officers and directors referred to in
Section 6 and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 12. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. SPECIFIED TIMES OF DAY REFER
TO NEW YORK CITY TIME.
* * *
30
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
BOSTON CHICKEN, INC.
By:______________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
ALEX. BROWN & SONS INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:______________________________
Authorized Signatory
31
<PAGE>
SCHEDULE A
Principal Amount of
Name of Underwriter Initial Securities
------------------- -------------------
Merrill Lynch, Pierce, Fenner & Smith..................
Incorporated...............................
Alex. Brown & Sons Incorporated........................
Morgan Stanley & Co. Incorporated......................
---------
Total...................................
=========
Sch A-1
<PAGE>
SCHEDULE B
BOSTON CHICKEN, INC.
$250,000,000
____% Convertible Subordinated Debentures due 2004
1. The initial public offering price of the Securities shall be ___% of
the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Underwriters for the Initial
Securities shall be ___% of the principal amount thereof.
3. The interest rate on the Securities shall be ___% per annum.
4. The Securities shall be convertible into shares of common stock, par
value $.01 per share, of the Company at an initial conversion price of $_____
per share.
Sch B-1
<PAGE>
SCHEDULE C
List of Subsidiaries
Sch C-1
<PAGE>
Exhibit 4.4
================================================================================
SECURED REVOLVING CREDIT AGREEMENT
dated as of December 9, 1996
among
BOSTON CHICKEN, INC.,
THE LENDERS NAMED HEREIN,
BANKERS TRUST COMPANY,
as Documentation Agent,
and
BANK OF AMERICA ILLINOIS,
as Agent
================================================================================
<PAGE>
The following Table of Contents has been inserted for convenience only and does
not constitute a part of this Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<S> <C>
DEFINITIONS AND ACCOUNTING TERMS................. 2
1.1. Defined Terms................................................ 2
1.2. Accounting Terms............................................. 16
ARTICLE II
AMOUNT AND TERMS OF THE REVOLVING LOAN.............. 16
2.1. Revolving Loan Commitment.................................... 16
2.2. Borrowing Procedure.......................................... 17
2.3. Funding Reliance............................................. 19
2.4. Interest..................................................... 20
2.5. Commitment Fee............................................... 21
2.6. Revolving Notes.............................................. 21
2.7. Prepayments; Voluntary Reduction of Commitment............... 22
2.8. Method of Payment............................................ 23
2.9. Use of Proceeds.............................................. 23
2.10. Sharing of Payments.......................................... 24
2.11. Computation of Fees and Interest............................. 24
2.12. Additional Lenders........................................... 25
ARTICLE III
THE LETTERS OF CREDIT...................... 26
3.1. LC Commitment................................................ 26
3.2. Request for Issuance of Letters of Credit.................... 26
3.3. Expiration................................................... 27
3.4. Participation................................................ 27
3.5. Notification of Demand for Payment........................... 27
3.6. Funding by Issuing Lender.................................... 27
3.7. Non-Conforming Demand For Payment............................ 27
3.8. Return of Letter of Credit................................... 28
3.9. Reimbursement Agreement of the Borrower...................... 28
3.10. Funding By Lenders........................................... 28
3.11. Return of Funds Related to Non-Conforming Demand............. 29
3.12. Obligation to Reimburse for or Participate in
Letter of Credit Payments................................ 29
3.13. Mandatory Payment to Agent of LC Obligations................. 30
3.14. Fees......................................................... 30
3.15. Voluntary Reduction of the LC Commitments.................... 31
3.16. Cash Collateral.............................................. 31
3.17. Making of Payments........................................... 31
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY.......... 32
4.1. Taxes............................................. 32
4.2. Increased Costs................................... 33
4.3. Change in Rate of Return.......................... 34
4.4. Basis for Determining Interest Rate Inadequate
or Unfair..................................... 35
4.5. Changes in Law Rendering Certain Revolving
Loans Unlawful................................ 35
4.6. Funding Losses.................................... 36
4.7. Right of Lenders to Fund Through Other Offices.... 36
4.8. Discretion of Lenders as to Manner of Funding..... 36
4.9. Mitigation of Circumstances; Replacement of
Affected Lender............................... 37
4.10. Conclusiveness of Statements; Survival of
Provisions.................................... 37
ARTICLE V
CONDITIONS.................. 37
5.1. Condition Precedent to Effectiveness of
Agreement..................................... 37
5.2. Conditions Precedent to All Revolving Loans
and Letters of Credit......................... 42
ARTICLE VI
REPRESENTATIONS............... 43
6.1. Real Property..................................... 43
6.2. Mortgages......................................... 43
6.3. Solvency.......................................... 43
ARTICLE VII
COVENANTS................. 43
7.1. Maintenance of Bank Accounts...................... 43
7.2. Annual Clean-Up................................. 44
7.3. Notes, Certificates and Other Collateral........ 44
7.4. Further Assurances................................ 44
ARTICLE VIII
EVENTS OF DEFAULT............. 45
8.1. Events of Default................................. 45
8.2. Effect of Event of Default........................ 46
ARTICLE IX
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE AGENT....................... 47
9.1. Appointment and Authorization; "Agent"; Issuing
Lender....................................... 47
9.2. Delegation of Duties............................. 48
9.3. Liability of Agent............................... 48
9.4. Reliance by Agent................................ 49
9.5. Notice of Default................................ 50
9.6. Credit Decision.................................. 50
9.7. Indemnification of Agent......................... 51
9.8. Agent in Individual Capacity..................... 51
9.10. Withholding Tax.................................. 52
9.11. Collateral Matters............................... 54
9.12. Duties of the Documentation Agent................ 54
</TABLE>
ARTICLE X
<TABLE>
<CAPTION>
<S> <C>
MISCELLANEOUS............. 54
10.1. Waivers and Amendments.......................... 54
10.2. Notices, Etc.................................... 55
10.3. No Waiver; Remedies............................. 56
10.4. Successors and Assigns.......................... 56
10.5. Assignments and Participations, etc............. 56
10.6. Costs, Expenses, and Taxes...................... 58
10.7. Right of Setoff................................. 58
10.8. Governing Law................................... 59
10.9. Severability of Provisions...................... 59
10.10. Headings........................................ 59
10.11. SUBMISSION TO JURISDICTION; WAIVER OF VENUE..... 59
10.12. Borrower Indemnification........................ 60
10.13. WAIVER OF JURY TRIAL............................ 62
10.14. SERVICE OF PROCESS.............................. 62
10.15. Facilities Agreement and Intercreditor
Agreement.................................... 62
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
---------
<S> <C>
SCHEDULE I Commitments ((S) 1.1)
SCHEDULE II Percentages ((S) 1.1)
SCHEDULE III Existing BAI Letters of Credit ((S)1.1)
SCHEDULE IV Real Property ((S) 6.1)
EXHIBITS
--------
EXHIBIT A-1 Form of Revolving A Note ((S) 2.6)
EXHIBIT A-2 Form of Revolving B Note ((S) 2.6)
EXHIBIT A-3 Form of Revolving C Note ((S) 2.6)
EXHIBIT B Form of Borrowing Request ((S)2.2(1))
EXHIBIT C Form of Continuation/Conversion Notice ((S) 2.2(2))
EXHIBIT D-1 Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison,
Special Counsel for the Borrower and the Guarantor ((S) 5.1)
EXHIBIT D-2 Form of Opinion of Donald J. Bingle, General Counsel for Borrower
and the Guarantor ((S)5.1)
EXHIBIT E Form of Mortgage/Deed of Trust ((S) 5.1)
EXHIBIT F Form of Pledge Agreement ((S) 5.1)
EXHIBIT G Form of Assignment and Acceptance ((S) 10.5)
EXHIBIT H Form of Supplemental Signature Page ((S) 2.12)
EXHIBIT I Form of Facilities Agreement
EXHIBIT J Form of Intercreditor Agreement
</TABLE>
-iv-
<PAGE>
SECURED REVOLVING CREDIT AGREEMENT
THIS SECURED REVOLVING CREDIT AGREEMENT dated as of December 9, 1996,
among BOSTON CHICKEN, INC., a Delaware corporation (the "Borrower"), the
lenders, whether as original signatories or pursuant to Sections 2.12 or 10.5,
party hereto (herein, together with any assignees thereof, collectively called
the "Lenders" and each individually called a "Lender"), BANKERS TRUST COMPANY,
having its principal place of business at 130 Liberty Street, One Bankers Trust
Plaza, New York, New York 10006, as documentation agent for the Lenders (herein
in such capacity, together with any successors thereto in such capacity, called
the "Documentation Agent"), and BANK OF AMERICA ILLINOIS, an Illinois banking
association having its principal place of business at 231 South LaSalle Street,
Chicago, Illinois 60697 (together with any successor thereto, "BAI"), as agent
for the Lenders (herein in such capacity, together with any successors thereto
in such capacity, called the "Agent") and as letter of credit issuing bank
(herein in such capacity, together with any successors thereto in such capacity,
called the "Issuing Lender").
WHEREAS, concurrently herewith the Borrower is entering into that
certain Facilities Agreement dated as of even date herewith (as amended,
supplemented, modified, restated, refinanced, refunded or renewed from time to
time in accordance with the terms of the Intercreditor Agreement referred to
below, the "Facilities Agreement" in the form attached hereto as Exhibit I)
among the Borrower, the Agent and General Electric Capital Corporation, for
itself and as agent for the Lease Participants referred to below (in its
individual capacity, "GECC"; and in such dual capacity, the "Lease Agent");
WHEREAS, concurrently herewith the Borrower is entering into that
certain Master Lease Agreement No. 2, dated as of even date herewith (as
amended, supplemented, modified, restated, refinanced, refunded or renewed from
time to time in accordance with the terms of the Intercreditor Agreement
referred to below, the "1996 Master Lease Agreement") between the Borrower and
the Lease Agent;
WHEREAS, subject to the terms and conditions of the 1996 Master Lease
Agreement, on the date hereof and/or from time to time hereafter GECC may convey
to certain financial institutions (collectively with GECC, the "Lease
Participants") participating interests in its rights, duties and obligations
under the 1996 Master Lease Agreement; and
<PAGE>
WHEREAS, concurrently herewith the Agent and the Lease Agent are
entering into that certain Intercreditor Agreement dated as of even date
herewith (the "Intercreditor Agreement" in the form attached hereto as Exhibit
J) which sets forth certain agreements among the Lenders, the Issuing Bank, the
Agent, the Lease Agent and the Lease Participants with respect to, among other
things, voting rights and collateral issues;
WHEREAS, the Lenders have agreed to make available to the Borrower a
secured revolving credit facility upon the terms and conditions set forth in
this Agreement, the Facilities Agreement and the Intercreditor Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.1. Defined Terms. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Affected Lender" - see Section 4.5.
"Actionable Default" has the meaning specified in the Intercreditor
Agreement.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Agent" - see Preamble.
"Agent-Related Persons" means BAI and any successor agent arising
under Section 9.9 and any successor letter of credit issuing bank hereunder,
together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
-2-
<PAGE>
"Agreement" means this Secured Revolving Credit Agreement, as amended,
supplemented, modified, restated, refinanced, refunded or renewed from time to
time.
"Applicable Margin" or "Applicable Commitment Fee," as the case may
be, means, at any time, a margin or fee as follows:
(1) in the case of the Applicable Margin,
(a) on any day on which the Outstanding Percentage is less than or
equal to 33%, a margin based on the Implied Debt Rating Level then in
effect as follows:
<TABLE>
<CAPTION>
Implied Applicable Margin
Debt Rating
Level Eurodollar Floating Rate
----------- ---------- -------------
<S> <C> <C>
I 0.75% 0.00%
II 1.00% 0.00%
III 1.50% 0.25%
IV 2.00% 0.75%
V 2.50% 1.25%
</TABLE>
(b) on any day on which the Outstanding Percentage is greater than 33%
but less than or equal to 66%, a margin based on the Implied Debt Rating
Level then in effect as follows:
<TABLE>
<CAPTION>
Implied Applicable Margin
Debt Rating
Level Eurodollar Floating Rate
----------- ---------- -------------
<S> <C> <C>
I 1.00% 0.00%
II 1.25% 0.00%
III 1.75% 0.50%
IV 2.25% 1.00%
V 2.75% 1.50%
</TABLE>
(c) on any day on which the Outstanding Percentage is greater than
66%, a margin based on the Implied Debt Rating Level then in effect as
follows:
-3-
<PAGE>
<TABLE>
<CAPTION>
Implied Applicable Margin
Debt Rating
Level Eurodollar Floating Rate
----------- ---------- -------------
<S> <C> <C>
I 1.25% 0.00%
II 1.50% 0.25%
III 2.00% 0.75%
IV 2.50% 1.25%
V 3.00% 1.75%
</TABLE>
(2) in the case of the Applicable Commitment Fee, a per annum fee
based on the Implied Debt Rating Level then in effect as follows:
<TABLE>
<CAPTION>
Implied Debt Applicable
Rating Level Commitment Fee
----------- --------------
<S> <C>
I 0.200%
II 0.250%
III 0.300%
IV 0.375%
V 0.500%
</TABLE>
It is acknowledged that as of the Effective Date, the Implied Debt
Rating Level is V.
"Assignee" - see Section 10.5.
"Assignment and Acceptance" - see Section 10.5.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursements of
internal counsel.
"Authorized Officer" means any one of the following officers of the
Borrower: Chairman, Vice Chairman, President, Vice President - Finance, Chief
Financial Officer, Chief Accounting Officer, Treasurer and any Senior Vice
President.
"BAI" - see Preamble.
"BCRE" means BC Real Estate Investments, Inc., a Delaware corporation.
-4-
<PAGE>
"Beneficiary" means any beneficiary under any Letter of Credit.
"Borrowing" shall mean a borrowing hereunder consisting of Revolving
Loans made to the Borrower at the same time by the Lenders pursuant to Article
II. A Borrowing may be a floating Rate Borrowing or a Eurodollar Rate Borrowing.
"Borrowing Request" - see Section 2.2.
"Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required to close under the laws
of the States of Colorado, Illinois or New York, as the case may be, and if the
applicable Business Day relates to any Eurodollar Loan, means such day on which
dealings are carried on in the applicable Eurodollar interbank market.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Borrower or any Guarantor and
their respective Subsidiaries in or upon which a Lien now or hereafter exists in
favor of the Lenders, the Collateral Agent (as such term is defined in the
Intercreditor Agreement) or the Agent on behalf of the Lenders, whether under
this Agreement, any other Loan Document or under any other documents relating to
this Agreement executed by any such Person and delivered to the Agent or the
Lenders.
"Commitment" means, at any time as to any Lender, collectively such
Lender's Commitment A, Commitment B, Commitment C and LC Commitment then in
effect.
"Commitment A" means, at any time, the commitments of the Lenders to
make Revolving A Loans pursuant to Section 2.1(1)(a), in the aggregate amount
set forth on Schedule I, as the same may be amended pursuant to Section 2.12.
"Commitment B" means, at any time, the commitments of the Lenders to
make Revolving B Loans pursuant to Section 2.1(1)(b), in the aggregate amount
set forth on Schedule I, as the same may be amended pursuant to Section 2.12.
"Commitment C" means, at any time, the commitments of the Lenders to
make Revolving C Loans pursuant to Section 2.1(1)(c), in the aggregate amount
set forth on Schedule I, as the same may be amended pursuant to Section 2.12.
-5-
<PAGE>
"Continuation/Conversion Notice" see Section 2.2
"Creditors" has the meaning specified in the Facilities Agreement.
"Debt" has the meaning specified in the Facilities Agreement.
"Default" means any of the events specified in Section 8.1, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Documentation Agent" - see Preamble.
"Dollar" and the sign "$" mean lawful money of the United States of
America.
"Effective Date" - see Section 5.1.
"Eligible Assignee" means (a) a commercial bank or financial
institution organized under the laws of the United States, or any state thereof,
and having a combined capital and surplus of at least $100,000,000; (b) a
commercial bank or financial institution organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States; or
(c) a Person that is primarily engaged in the business of commercial banking and
that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a
Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary;
provided, that in any of (a), (b) or (c), such commercial bank or such financial
institution or Person engaged in the business of commercial banking shall not
be, and no Affiliate thereof shall be, a direct competitor of the Borrower or
any of its Subsidiaries or otherwise engaged in the same or similar business as
the Borrower or any of its Subsidiaries.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon the
-6-
<PAGE>
presence, placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental, placement, spills, leaks, discharges, emissions or releases) of
any Hazardous Substance at, in, or from property, whether or not owned by the
Borrower or any of its subsidiaries.
"Environmental Laws" has the meaning specified in the Facilities
Agreement.
"Environmental Liabilities" - see Section 10.12(2)(a).
"Eurocurrency Reserve Percentage" shall mean, with respect to any
Eurodollar Loan for any Interest Period, a percentage (expressed as a decimal)
equal to the daily average during such Interest Period, as prescribed by the
FRB, for determining the aggregate maximum reserve requirements (including all
basic, supplemental, marginal and other reserves) applicable to "Eurocurrency
liabilities" pursuant to Regulation D or any other then-applicable regulation of
the FRB which prescribes reserve requirements applicable to "Eurocurrency
liabilities," as defined in Regulation D, as applicable to the class of banks of
which the Agent is a member. Without limiting the effect of the foregoing, the
Eurocurrency Reserve Percentage shall reflect any other reserves required to be
maintained by the Agent against (i) any category of liabilities that includes
deposits by reference to which the Eurodollar Rate (Reserve Adjusted) is to be
determined, or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loan. For purposes of this Agreement, any Eurodollar Loan
hereunder shall be deemed to be "Eurocurrency liabilities," as defined in
Regulation D, and, as such, shall be deemed to be subject to such reserve
requirements without the benefit of, or credit for, proration, exceptions or
offsets which may be available to the Agent from time to time under Regulation
D.
"Eurodollar Loan" shall mean any Revolving Loan which bears interest
at a rate determined by reference to the Eurodollar Rate (Reserve Adjusted).
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for
any Interest Period, the rate per annum equal to the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) rate per annum at which Dollar
deposits in immediately available funds are offered to the Lending Office of the
Agent two Business Days prior to the beginning of such Interest Period by prime
banks in the interbank eurodollar market as at or about 12:00 noon, Chicago
time, for delivery on the first day of such Interest Period, for the number of
days comprised therein and in an amount equal or comparable to the
-7-
<PAGE>
amount of the Eurodollar Loan of the Agent for such Interest Period.
"Eurodollar Rate (Reserve Adjusted)" shall mean, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upward, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) ---------------
1-Eurocurrency
Reserve Percentage
"Event of Default" means any of the events specified in Section 8.1;
provided, that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Existing BAI Credit Agreement" means that certain Amended and
Restated Credit Agreement dated as of May 18, 1994, as amended, among the
Borrower, certain financial institutions party thereto and BAI, as agent.
"Existing BAI Letters of Credit" means the letters of credit described
in Schedule III.
"Facilities Agreement" - see Recitals.
"Federal Funds Rate" shall mean at any time an interest rate per annum
equal to the weighted average of the rates for overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day for such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it, it
being understood that the Federal Funds Rate for any day which is not a Business
Day shall be the Federal Funds Rate for the next preceding Business Day.
"Financed Franchisee" has the meaning specified in the Facilities
Agreement.
"Financed Subsidiary" has the meaning specified in the Facilities
Agreement.
"Financial LC Commitment Fee"- see Section 3.14(1)(b).
"Financial Letter of Credit" means any Letter of Credit determined by
the Issuing Lender to be a "financial guaranty-type standby letter of credit" as
defined in footnote 13 to Appendix A
-8-
<PAGE>
to the Risk Based Capital Guidelines issued by the Comptroller of the Currency.
"Floating Rate" means, for any day, the higher of: (1) 0.50% per
annum above the latest Federal Funds Rate; and (2) the rate of interest in
effect for such day as publicly announced from time to time by BAI in Chicago,
Illinois, as its "reference rate." (The "reference rate" is a rate set by BAI
based upon various factors including BAI's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate.)
Any change in the reference rate announced by BAI shall take effect at
the opening of business on the day specified in the public announcement of such
change.
"Floating Rate Loan" shall mean any Revolving Loan which bears
interest at a rate determined by reference to the Floating Rate.
"FRB" shall mean the Board of Governors of the Federal Reserve System,
and any Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, imposed by any jurisdiction on account
of amounts payable or paid pursuant to Section 4.1.
"GAAP" means generally accepted accounting principles in the United
States applied by the Borrower consistent with past practice (subject to changes
in accounting policies permitted by such generally accepted accounting
principles which have been or are contemporaneously disclosed in writing to the
Agent).
"GECC" - see Recitals.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantor" means any Subsidiary which from time to time executes a
Guaranty.
-9-
<PAGE>
"Guaranty" has the meaning specified in the Facilities Agreement.
"Hazardous Substance" means (a) petroleum or chemical products,
whether in liquid, solid, or gaseous form, or any fraction or by-product
thereof, (b) asbestos or asbestos-containing materials, (c) polychlorinated
biphenyls (pcbs), (d) radon gas, (e) underground storage tanks, (f) any
explosive or radioactive substances, (g) lead or lead-based paint, or (h) any
other substance, material, waste or mixture which is or shall be listed,
defined, or otherwise determined by any governmental authority to be hazardous,
toxic, dangerous or otherwise regulated, controlled or giving rise to liability
under any Environmental Laws.
"Head Office" means the principal office of BAI at 231 South LaSalle
Street, Chicago, IL 60697.
"Implied Debt Rating" means the implied senior unsecured debt rating
issued for the Borrower by S&P or Moody's, as the case may be.
"Implied Debt Rating Level" means (1) in the event the Implied Debt
Rating by both S&P and Moody's is in the same Rating Category Level (as defined
below), such Rating Category Level, (2) in the event the Implied Debt Rating by
S&P and by Moody's falls into different Rating Category Levels, (a) in the event
such two Rating Category Levels are consecutive, then the higher of such Rating
Category Level, (b) in the event such two Rating Category Levels are not
consecutive but have one Rating Category Level between them, then such middle
Rating Category Level and (c) in the event such two Rating Category Levels are
not consecutive but have more than one Rating Category Level between them, then
the Rating Category Level which is one lower than the higher of such Rating
Category Levels; provided, that if either the S&P or Moody's Implied Debt Rating
Level falls within Rating Category Level V, then the Implied Debt Rating Level
shall be V. For purposes of this definition, "Rating Category Levels" shall be
as follows:
<TABLE>
<CAPTION>
Rating Category Implied Debt Implied Debt
Levels Rating Rating
------ S & P Moody's
----- -------
<S> <C> <C>
I BBB- and higher Baa3 and higher
II BB+ Ba1
III BB Ba2
IV BB- Ba3
</TABLE>
-10-
<PAGE>
V B+ and below B1 and below
For purposes of relativity between Rating Category Levels, Rating Category Level
I will be considered the "highest" and Rating Category Level V will be
considered the "lowest."
"Indemnified Liabilities" - see Section 10.12.
"Indemnitee" - see Section 10.12.
"Intercreditor Agreement" - see Recitals.
"Interest Period" see Section 2.4(3).
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuing Lender" means BAI, in its capacity as the issuer of Letters
of Credit for the Borrower's account pursuant to the terms of this Agreement.
"LC Application" means a letter of credit application in the form then
used by the Issuing Lender for the type of letter of credit requested (with
appropriate adjustments to indicate that any letter of credit issued thereunder
is to be issued pursuant to, and subject to the terms and conditions of, this
Agreement).
"LC Commitment" - see Section 3.1.
"LC Commitment Fees" means collectively, the Financial LC Commitment
Fee and the Non-Financial LC Commitment Fee.
"LC Obligations" means any and all obligations of every description of
the Borrower in connection with the Letters of Credit issued pursuant to this
Agreement, including without limitation all reimbursement obligations (whether
absolute or contingent) under this Agreement, and all obligations in respect of
related fees or expenses.
"Lease Agent" - see Recitals.
"Lease Participant" - see Recitals.
"Lenders" or "Lender" shall have the meaning assigned to such term in
the Preamble and shall include BAI acting in the capacity of Issuing Lender; for
purposes of clarification only, to the extent that BAI may have any rights or
obligations in
-11-
<PAGE>
addition to those of the Lenders due to its status as Issuing Lender, its status
as such will be specifically referenced.
"Lending Office" shall mean, with respect to any Lender, any office
designated (whether or not notice is given to the Borrower) by such Lender in
its sole discretion as a Lending Office for purposes hereunder. A Lender may
designate separate Lending Offices for the purposes of making, maintaining or
continuing Floating Rate Loans, or Eurodollar Loans and, with respect to
Eurodollar Loans, such Lending Office may be a foreign branch or an Affiliate of
such Lender or such Lender's holding company.
"Letters of Credit" - see Section 3.1.
-----------
"Lien" has the meaning specified in the Facilities Agreement.
"Loan Documents" means this Agreement, the Revolving Notes, the
Facilities Agreement, the Mortgages, the Pledge Agreement, each Guaranty, each
LC Application and all other agreements, instruments and documents delivered
from time to time to the Agent or the Issuing Lender with respect to this
Agreement or with respect to any liabilities arising in connection herewith, as
the same may be amended, supplemented, modified, restated or renewed from time
to time.
"Material Adverse Change" has the meaning specified in the Facilities
Agreement.
"MidAtlantic Inc." means Mid-Atlantic Restaurant Systems, Inc., a
Delaware corporation.
"MidAtlantic L.P." means Mid-Atlantic Restaurant Systems L.P., a
Delaware limited partnership.
"Moody's" means Moody's Investors Services, Inc.
"Mortgage" means a mortgage or deed of trust substantially in the form
of Exhibit E attached hereto executed by BCRE in favor of the Agent (i) in the
case of a Mortgage covering either Tranche A Collateral or Tranche C Collateral,
for the benefit of itself and the Lenders, and (ii) in the case of a Mortgage
covering Tranche B Collateral, for the benefit of itself and the Creditors
generally.
"1996 Master Lease Agreement" - see Recitals.
"Non-Financial Letter of Credit" means any standby Letter of Credit
other than a Financial Letter of Credit.
-12-
<PAGE>
"Non-Financial LC Commitment Fee"- see Section 3.14(1)(a).
"Obligations" means all advances, debts, liabilities and obligations
arising under any Loan Document owing by the Borrower to any Lender, the Agent
or any Indemnitee, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising.
"Other Taxes" means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Outstanding Percentage" means, at any time, the quotient (expressed
as a percentage) obtained by dividing (1) the aggregate principal amount of all
Revolving Loans then outstanding plus the aggregate face amount of Letters of
Credit then issued and outstanding pursuant to Section 3.1 or then drawn and not
reimbursed pursuant to Section 3.9 by (2) the Total Commitment Amount then in
effect.
"Participant" has the meaning specified in Section 10.5(4).
"Percentage" shall mean, at any time as to any Lender, the percentage
set forth opposite such Lender's name on Schedule II, as the same may be amended
pursuant to Section 2.12.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Pledge Agreement" - means a pledge agreement substantially in the
form of Exhibit F attached hereto executed by the Borrower and MidAtlantic Inc.
in favor of the Agent.
"Pledged Collateral" means "Collateral" as such term is defined in the
Pledge Agreement.
"Regulation A" shall mean Regulation A (or any successor regulation)
promulgated by the FRB as from time to time in effect.
"Regulation D" shall mean Regulation D (or any successor regulation)
promulgated by the FRB as from time to time in effect.
-13-
<PAGE>
"Regulation U" shall mean Regulation U (or any successor regulation)
promulgated by the FRB as from time to time in effect.
"Required Lenders" means (i) at any time prior to the occurrence of an
Actionable Default, Lenders then holding at least 66-2/3% of the Total
Commitment Amount, and (ii) at any time after the occurrence of an Actionable
Default, Lenders then holding at least 66-2/3% of (A) the then aggregate unpaid
principal amount of the Revolving Loans, plus (B) the aggregate face amount of
Letters of Credit issued and outstanding pursuant to Section 3.1 or drawn and
not reimbursed pursuant to Section 3.9 (to the extent such unreimbursed draws do
not constitute Revolving Loans).
"Retail Period" has the meaning specified in the Facilities Agreement.
"Revolving Loans" means, collectively, the Revolving A Loan, the
Revolving B Loan and the Revolving C Loan; and "Revolving Loan" means any of the
Revolving A Loan, the Revolving B Loan and the Revolving C Loan.
"Revolving A Loan" shall have the meaning assigned to such term in
Section 2.1(1)(a).
"Revolving B Loan" shall have the meaning assigned to such term in
Section 2.1(1)(b).
"Revolving C Loan" shall have the meaning assigned to such term in
Section 2.1(1)(c).
"Revolving Notes" means, collectively, the Revolving Note A, the
Revolving Note B and the Revolving Note C.
"Revolving A Note" shall have the meaning assigned to such term in
Section 2.6.
"Revolving B Note" shall have the meaning assigned to such term in
Section 2.6.
"Revolving C Note" shall have the meaning assigned to such term in
Section 2.6.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Federal Bankruptcy Reform Act of 1978 and, in the alternative,
for purposes of the New York Uniform Fraudulent
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Transfer Act; (b) the present fair saleable value of the property of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured; (c) such Person
is able to realize upon its property and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they mature in
the normal course of business; (d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital.
"S&P" means Standard & Poor's Rating Group, a division of The McGraw-
Hill Companies, Inc.
"Store" has the meaning specified in the Facilities Agreement.
"Subsidiary" has the meaning specified in the Facilities Agreement.
"Supplemental Signature Page" - see Section 2.12.
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of each Lender
and the Agent, respectively, taxes imposed on or measured by its net income, net
worth or capital and franchise taxes and doing business taxes imposed by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Lender or the Agent, as the case may be, is organized or maintains a lending
office.
"Termination Date" means December 1, 1999.
"Total Commitment Amount" means the sum of all Lenders' Commitments,
it being understood that on the date hereof, the Total Commitment Amount is
$110,000,000; provided, that in no event shall the "Total Commitment Amount"
exceed $150,000,000.
"Tranche A Collateral" means all Collateral located in any state other
than the State of California.
"Tranche B Collateral" means all Collateral located in any state other
than the States of California and Florida.
"Tranche C Collateral" means all Collateral located in the State of
California.
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"Type of Revolving Loan or Borrowing" - see Section 2.1(5). The Types
of Revolving Loans or Borrowings under this Agreement are: Floating Rate Loans
or Floating Rate Borrowings and Eurodollar Loans or Eurodollar Rate Borrowings.
SECTION 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with that
applied in the preparation of the financial statements referred to in Section
2.4 of the Facilities Agreement (or any successor section therein), and all
financial data prepared by the Borrower and submitted pursuant to this Agreement
shall be prepared in accordance with such principles except for such financial
data which the Borrower expressly states has not been prepared in accordance
with such principles.
ARTICLE II
AMOUNT AND TERMS OF THE REVOLVING LOAN
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SECTION 2.1. Revolving Loan Commitment.
(1) Subject to the terms and conditions set forth in this Agreement
and the other Loan Documents, each of the Lenders, severally and for itself
alone, from time to time from the Effective Date to but not including the
Termination Date agrees to make:
(a) loans to the Borrower on a revolving basis, at such times and in
an amount equal to such Lender's Percentage of such aggregate amounts as
the Borrower may request from all of the Lenders under the Commitment A
(the "Revolving A Loan");
(b) loans to the Borrower on a revolving basis, at such times and in
an amount equal to such Lender's Percentage of such aggregate amounts as
the Borrower may request from all of the Lenders under the Commitment B
(the "Revolving B Loan"); and
(c) loans to the Borrower on a revolving basis, at such times and in
an amount equal to such Lender's Percentage of such aggregate amounts as
the Borrower may request from all of the Lenders under the Commitment C
(the "Revolving C Loan");
provided, that in no event shall: (x) the aggregate principal amount of
Revolving Loans then outstanding or which any Lender shall be committed to have
outstanding to the Borrower, when added to the amount of such Lender's
participation in the Letters of Credit issued and outstanding pursuant to
Section 3.1 or drawn
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and not reimbursed pursuant to Section 3.9, exceed at any time such Lender's
Percentage of the Total Commitment Amount; and (y) the aggregate principal
amount of all Revolving Loans then in effect which all the Lenders shall be
committed to have outstanding to the Borrower, when added to the aggregate face
amount of Letters of Credit issued and outstanding pursuant to Section 3.1 or
drawn and not reimbursed pursuant to Section 3.9, exceed at any one time the
Total Commitment Amount then in effect.
(2) Revolving Loans as made by the Lenders shall be, applied, first,
against the Commitment A until such Commitment is exhausted, thereby
constituting Revolving A Loans, second, against the Commitment B until such
Commitment is exhausted, thereby constituting Revolving B Loans and, third,
against the Commitment C until such Commitment is exhausted, thereby
constituting Revolving C Loans.
(3) In the event the aggregate outstanding principal balance of all
Revolving Loans plus the aggregate face amount of Letters of Credit issued and
outstanding or drawn and not reimbursed at any one time exceeds the Total
Commitment Amount, the Borrower shall, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans or pledge cash
collateral to the Agent (pursuant to documentation reasonably satisfactory to
the Required Lenders, the Issuing Lender and the Agent) in an amount equal to
such excess or take such other actions as shall be necessary to eliminate such
excess. Any such repayments shall be applied, first, to reduce outstanding
Revolving C Loans, second, to reduce outstanding Revolving B Loans, and third,
to reduce outstanding Revolving A Loans.
(4) All Revolving Loans shall be repaid by the Borrower on the
Termination Date, unless paid or payable sooner pursuant to the provisions of
this Agreement.
(5) Each Revolving Loan shall be either a Floating Rate Loan or a
Eurodollar Loan (each being herein called a "Type" of Revolving Loan), as the
Borrower shall specify in the related Borrowing Request or Continuation/
Conversion Notice pursuant to Section 2.2. Floating Rate Loans and Eurodollar
Loans may be outstanding at the same time, provided, that (a) in the case of
Eurodollar Loans, not more than ten (10) different Interest Periods shall be
outstanding at any one time for all such Eurodollar Loans, and (b) the Borrower
shall specify Revolving Loans and Interest Periods such that no payment or
prepayment of any principal on any Revolving Loan shall result in a breakage of
any Interest Period.
SECTION 2.2. Borrowing Procedure.
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(1) Any Authorized Officer of the Borrower may request a Revolving
Loan on behalf of the Borrower after the Effective Date and prior to the
Termination Date in Dollars on any Business Day by giving the Agent telephonic,
telex or facsimile notice (which notice shall be irrevocable once given and
shall be promptly confirmed in writing if given telephonically) in the form of
Exhibit B attached hereto ("Borrowing Request") or such other form as shall be
acceptable to the Agent. Each Borrowing Request must be received by the Agent
prior to 10:00 A.M., Chicago time, on the proposed date of such Borrowing (which
must be a Business Day) in the case of Floating Rate Loans and prior to 10:00
A.M., Chicago time, three (3) Business Days prior to the proposed date of such
Borrowing (which must be a Business Day) in the case of Eurodollar Loans and in
each case shall specify (a) the principal amount of such Borrowing, (b) the
proposed date of Borrowing (which must be a Business Day), (c) the Type of
Borrowing and (d) in the case of a Eurodollar Rate Borrowing, the initial
Interest Period for such Borrowing. Promptly upon receipt of such Borrowing
Request, the Agent shall advise each Lender thereof. Not later than 11:00 A.M.,
Chicago time, on the date of a proposed Borrowing, each Lender shall provide the
Agent at its principal office in Chicago with immediately available funds in an
amount equal to such Lender's Percentage of the principal amount of the proposed
Borrowing specified in the Borrowing Request. Each Floating Rate Loan shall be
in a principal amount of $500,000 or an integral multiple thereof; each
Eurodollar Loan shall be in a principal amount of $1,000,000 or an integral
multiple thereof. All Borrowings shall be pro rata among the Lenders in
accordance with their respective Percentages. Not later than 1:00 P.M., Chicago
time, on the proposed date of Borrowing specified in the Borrowing Request,
subject to the satisfaction of the applicable conditions precedent set forth in
Article V hereof, the Agent shall make the proceeds of each Revolving Loan
available to the Borrower by causing an amount of immediately available funds
equal to the principal amount of such Revolving Loan to be credited to the
account of the Borrower at BAI unless otherwise required pursuant to the terms
of this Agreement.
(2) Conversion and Continuation of Revolving Loans. The Borrower
may, by delivery to the Agent of a notice in the form of Exhibit C attached
hereto ("Continuation/Conversion Notice") with appropriate insertions, before
10:00 A.M., Chicago time, three (3) Business Days prior to conversion or
continuation, convert or continue Revolving Loans as follows: (a) convert
Eurodollar Loans into Floating Rate Loans, (b) convert Floating Rate Loans into
Eurodollar Loans and (c) continue a Eurodollar Loan into a subsequent Interest
Period of the same duration or of any other duration permitted hereunder,
subject to the following:
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(a) the Interest Period applicable to any Eurodollar Loan resulting
from a conversion shall be specified by the Borrower in the Continuation/
Conversion Notice delivered pursuant to this Section; provided, however,
that if no such Interest Period shall be specified, the Borrower shall be
deemed to have selected an Interest Period of one month's duration. If the
Borrower shall not have given timely notice to continue any Eurodollar Loan
into a subsequent Interest Period and shall not otherwise have given notice
to convert such Eurodollar Loan, such Eurodollar Loan unless repaid
pursuant to the terms hereof shall automatically be converted into a
Floating Rate Loan;
(b) if less than all Revolving Loans at the time outstanding shall be
converted or continued, such conversion or continuation shall be made pro
rata among the Lenders, as applicable, in accordance with the respective
principal amounts of Revolving Loans of such Type (and having the same
Interest Period) held by such Lenders immediately prior to such conversion
or continuation;
(c) in the case of a conversion or continuation of less than the full
amount of any Revolving Loan, the aggregate principal amount of the
converted or continued Eurodollar Loan, if any, shall be not less than
$1,000,000 or any larger integral multiple of $500,000;
(d) if any Eurodollar Loan is converted at a time other than the last
day of an Interest Period applicable thereto, the Borrower shall at the
time of conversion pay any loss or expense (including, without limitation,
breakage losses and expenses) associated therewith pursuant to Section 4.6;
(e) any portion of a Eurodollar Loan required to be paid on any
principal payment date occurring in less than one month after the end of
the then-current Interest Period applicable to such Eurodollar Loan shall
be automatically converted at the end of such Interest Period into a
Floating Rate Loan.
Notwithstanding the foregoing, so long as any Default or Event of Default shall
exist, no Revolving Loans shall be converted to or continued as Eurodollar
Loans.
SECTION 2.3. Funding Reliance. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any
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Lender by 9:00 A.M., Chicago time, on the day of a Borrowing that such Lender
will not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Agent may assume, subject to the
satisfactory fulfillment by the Borrower of the conditions precedent set forth
in Article V, that such Lender has made such amount available to the Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Agent, such Lender and the Borrower severally agree to repay
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Agent made such amount available to the
Borrower to the date such amount is repaid to the Agent, at the Federal Funds
Rate from time to time in effect, based on a year of 360 days.
SECTION 2.4. Interest.
(1) Interest Rates. With respect to each Revolving Loan, the
Borrower hereby promises to pay interest on the unpaid principal amount thereof
for the period commencing on the date of such Revolving Loan until such
Revolving Loan is paid in full, as follows:
(a) At all times while such Revolving Loan is a Floating Rate Loan,
at a rate per annum equal to the Floating Rate from time to time in effect
plus the Applicable Margin for Floating Rate Loans in effect from time to
time; and
(b) At all times while such Revolving Loan is a Eurodollar Loan, for
each Interest Period, at a rate per annum equal to the Eurodollar Rate
(Reserve Adjusted) applicable to such Interest Period, plus the Applicable
Margin for Eurodollar Loans in effect on the first day of such Interest
Period.
(2) Interest Payment Dates. Accrued interest on each Floating Rate
Loan shall be due and payable quarterly in arrears on the first Business Day of
each of March, June, September and December of each year and at maturity.
Accrued interest on each Eurodollar Loan shall be payable on the last day of
each Interest Period relating to such Eurodollar Loan (and if such Interest
Period exceeds 3 months, also payable on the date occurring 3 months after the
beginning of such Interest Period), and at maturity. After maturity, accrued
interest on all Revolving Loans shall be payable on demand.
(3) Interest Periods. Each "Interest Period" for a Eurodollar Loan
shall commence on the date such Eurodollar Loan was made or converted from a
Revolving Loan of a different Type,
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or on the expiration of the immediately preceding Interest Period for such
Eurodollar Loan, and shall end on the date which is 1, 2, 3 or 6 months
thereafter, as the Borrower may specify pursuant to Section 2.2(1) or (2)
hereof. Each "Interest Period" for a Eurodollar Loan which would otherwise end
on a day which is not a Business Day shall end on the next succeeding Business
Day (unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the next
preceding Business Day).
(4) Setting and Notice of Rates. The applicable Eurodollar Rate for
each Interest Period shall be determined by the Agent, and notice thereof shall
be given by the Agent promptly to the Borrower and each Lender. Each
determination of the applicable Eurodollar Rate by the Agent shall be conclusive
and binding upon the parties hereto, in the absence of demonstrable error. If
the Agent is unable to determine such a rate, the provisions of Sections 4.4 and
4.9 shall apply. The Agent shall, upon written request of the Borrower or any
Lender, deliver to the Borrower or such Lender a statement showing the
computations used by the Agent in determining any applicable Eurodollar Rate
hereunder.
(5) Default Interest. Any principal payments on the Revolving Loans
not paid when due, whether at stated maturity, by notice of repayment, by
acceleration or otherwise, shall, to the extent permitted by applicable law,
thereafter bear interest (compounded monthly and payable upon demand) at a rate
which is 2% per annum in excess of the rate of interest otherwise payable under
this Agreement in respect of such principal amount until such unpaid amount has
been paid in full (whether before or after judgment).
SECTION 2.5. Commitment Fee. The Borrower agrees to pay a non-
refundable unused commitment fee on the average daily amount by which the Total
Commitment Amount exceeds the aggregate outstanding Revolving Loans plus the sum
of the aggregate undrawn face amount of the Letters of Credit and the amount of
Letters of Credit drawn but not reimbursed, at a rate per annum equal to the
Applicable Commitment Fee from time to time in effect, for the period commencing
on the date hereof and continuing to but not including the Termination Date,
payable quarterly in arrears on the first Business Day of March, June, September
and December of each year and at maturity, payable to the Agent for the account
of each Lender in accordance with such Lender's Percentage.
SECTION 2.6. Revolving Notes. All Revolving A Loans made by each
Lender under this Agreement shall be evidenced by, and repaid with interest in
accordance with, a single promissory note of the Borrower in substantially the
form of Exhibit A-1 attached hereto duly completed, in a principal amount equal
to
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the Commitment A, payable to the Agent for the benefit of the Lenders (the
"Revolving A Note"); all Revolving B Loans made by each Lender under this
Agreement shall be evidenced by, and repaid with interest in accordance with, a
single promissory note of the Borrower in substantially the form of Exhibit A-2
attached hereto duly completed, in a principal amount equal to the Commitment B,
payable to the Agent for the benefit of the Lenders (the "Revolving B Note");
and all Revolving C Loans made by each Lender under this Agreement shall be
evidenced by, and repaid with interest in accordance with, a single promissory
note of the Borrower in substantially the form of Exhibit A-3 attached hereto
duly completed, in a principal amount equal to the Commitment C, payable to the
Agent for the benefit of the Lenders (the "Revolving C Note"). The Agent is
hereby authorized by the Borrower and each Lender to endorse on the schedule
attached to the respective Revolving Note the amount of each respective
Revolving Loan and of each payment of principal received by the Agent on account
of such Revolving Loan, which endorsement shall, in the absence of demonstrable
error, be conclusive as to the outstanding balance of such Revolving Loan made
by the Lenders; provided, that the failure to make such notation with respect to
any Revolving Loan or payment shall not limit or otherwise affect the
obligations of the Borrower or the Lender under this Agreement or the respective
Revolving Note.
SECTION 2.7. Prepayments; Voluntary Reduction of Commitment. (1)
The Borrower may prepay at any time the Revolving Notes in whole or in part
(provided, with respect to any partial prepayment of a Eurodollar Loan, the
remaining principal amount of such Eurodollar Loan shall not be less than
$1,000,000 or any larger integral multiple of $500,000) with accrued interest to
the date of such prepayment on the amount prepaid in which event such prepaid
amount may be reborrowed hereunder in a Revolving Loan to the extent outstanding
amounts hereunder shall not exceed the Total Commitment Amount at such time;
provided, that (a) any prepayment of a Eurodollar Loan shall be made subject to
the Borrower's payment obligations set forth in Section 4.6, (b) each partial
prepayment shall be in a principal amount not less than $1,000,000 or such
greater amount which shall be an integral multiple thereof, and (c) any such
prepayments shall be applied, first, to prepay Revolving C Loans, if any,
second, to prepay Revolving B Loans, if any, and, third, to prepay Revolving A
Loans, if any. The right of the Borrower to voluntarily prepay the Revolving
Loans shall be exercisable by delivery of written notice (including by
facsimile) or telephonic notice (thereafter promptly confirmed in writing) to
the Agent prior to 12:00 noon, Chicago time, at least two Business Days prior to
the proposed prepayment, which notice shall specify the amount by which the
Borrower proposes to prepay the Revolving Loans and the proposed date of such
prepayment.
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(2) The Borrower shall have the right, at any time from time to time,
without premium or penalty, to permanently reduce the Total Commitment Amount
hereunder with such reduction to be applied, first, to reduce in full the
Commitment C, second, to reduce in full the Commitment B, and third, to reduce
the Commitment A; provided, that any such reduction in the Total Commitment
Amount shall reduce the Commitment of each Lender pro rata based on its
Percentage; and provided, further, that no such reduction shall reduce the Total
Commitment Amount to an amount less than the sum of the then outstanding
Revolving Loans and the aggregate face amount of Letters of Credit issued and
outstanding pursuant to Section 3.1 (other than Letters of Credit with respect
to which the Borrower has pledged cash collateral to the Agent) or drawn and not
reimbursed pursuant to Section 3.9. The right of the Borrower to voluntarily
reduce the Total Commitment Amount shall be exercisable by delivery of written
notice (including by facsimile) or telephonic notice (thereafter promptly
confirmed in writing) to the Agent prior to 12:00 noon, Chicago time, at least
two Business Days prior to the proposed reduction in the Total Commitment
Amount, which notice shall specify the amount by which the Borrower proposes to
reduce the Total Commitment Amount and the proposed date of such reduction.
SECTION 2.8. Method of Payment. The Borrower shall make each payment
under this Agreement and under the Revolving Notes not later than 12:00 noon,
Chicago time, on the date when due in lawful money of the United States to the
Agent for the account of the Lenders pro rata according to their respective
Percentages. The Agent shall promptly remit to each Lender its pro rata share
(based on its Percentage) of all such payments received in collected funds by
the Agent for the benefit of such Lender. The Borrower hereby authorizes the
Agent, if and to the extent payment is not made when due under this Agreement or
under the Revolving Notes, to charge from time to time against any account of
the Borrower with the Agent any amount so due. Whenever any payment to be made
under this Agreement or under the Revolving Notes shall be stated to be due on a
Saturday, Sunday, or a public holiday, or the equivalent for banks generally
under the laws of the State of Illinois, such payment shall be made on the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of the payment of interest. All payments under
Sections 4.2 and 4.3 shall be made by the Borrower directly to the Lender or
Lenders entitled thereto.
SECTION 2.9. Use of Proceeds. The proceeds of the Revolving Loans
shall be used by the Borrower (i) to replace the Existing BAI Credit Agreement;
(ii) to issue Financial Letters of Credit and Non-Financial Letters of Credit;
and (iii) for general corporate purposes. The Borrower will not, directly or
indirectly, use any part of such proceeds for the purpose of
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purchasing or carrying any margin stock within the meaning of Regulation U or to
extend credit to any Person for the purpose of purchasing or carrying any such
margin stock.
SECTION 2.10. Sharing of Payments.
(1) If any Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise) on account
of any Revolving Loan in excess of its pro rata share (based on its
Percentage) of payments and other recoveries obtained by all Lenders of
Revolving Loans on account of principal of and interest on Revolving Loans,
such Lender shall purchase from the other Lenders such participations in
the Revolving Loans as shall be necessary to cause such purchasing Lender
to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Lender, the
purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase
price to the ratable extent of such recovery together with an amount equal
to such selling Lender's ratable share (according to the proportion of (a)
the amount of such selling Lender's required repayment to the purchasing
Lender to (b) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered.
(2) The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to Section 2.10(1) may, to the fullest extent
permitted by law, exercise all of its rights of payment with respect to
such participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff pursuant to Section 10.7, such Lender shall, to
the extent practicable, exercise its rights in respect to such secured
claim in a manner consistent with the rights of the Lenders entitled under
this Section to share in the benefits of any recovery of such secured
claim.
2.11. Computation of Fees and Interest. (1) All computations of interest
for Floating Rate Loans when the Floating Rate is determined by BAI's "reference
rate" shall be made on the basis of a year of 365 or 366 days, as the case may
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be, and actual days elapsed. All other computations of fees and interest shall
be made on the basis of a 360-day year and actual days elapsed (which results in
more interest being paid than if computed on the basis of a 365-day year).
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(2) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error.
2.12. Additional Lenders.
(1) The Agent may, prior to the Termination Date, invite other
lenders (that are Eligible Assignees and have been previously approved in
writing by the Borrower, which approval shall not be unreasonably withheld), and
the Borrower, prior to the Termination Date, may invite other lenders (that are
Eligible Assignees and have been previously approved in writing by the Agent,
which approval shall not be unreasonably withheld), to become a Lender under
this Agreement and to increase the aggregate amount of the Commitment B and
Total Commitment Amount by the amount of such lender's proposed additional
Commitment (which such additional Commitment shall not be less than $5,000,000
or an integral multiple of $1,000,000 in excess thereof); provided, however,
that in no event shall such actions cause (i) the Total Commitment Account to
increase above $150,000,000, or (ii) any Lender's Percentage to exceed 25%.
(2) The party extending an invitation pursuant to clause (1) above
shall notify the other parties to this Agreement of each other lender (that has
been previously approved in writing by the Borrower or the Agent, as the case
may be, which approval shall not be unreasonably withheld) that has accepted
such an invitation to become a party to this Agreement pursuant to Section
2.12(1). The Borrower, the Agent and each such lender shall execute and deliver
to the Agent (for the account of the Agent, the Borrower, and such lender)
supplemental signature pages, in the form of Exhibit H attached hereto (each, a
"Supplemental Signature Page"). Upon the execution and delivery of each such
Supplemental Signature Page and despite any contrary provision of this Agreement
(including Section 10.1), (a) each such lender shall become a Lender hereunder,
(b) each such lender shall simultaneously make a Revolving A Loan, a Revolving B
Loan and a Revolving C Loan to the Borrower in an amount equal to its Percentage
of the then outstanding, as the case may be, Revolving A Loans, if any,
Revolving B Loans, if any, and Revolving C Loans, if any, the proceeds of which
shall be simultaneously paid to the Agent for distribution to the Lenders to the
extent that any Lender's Percentage of the then outstanding Revolving Loans
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is decreased as a result of the new commitment of such lender, and (c) each such
lender shall thereafter be obligated to make Revolving Loans to the Borrower up
to and including the amount of such Lender's Percentage of the Total Commitment
Amount on the terms and conditions contained herein.
(3) Upon any increase in the Total Commitment Amount pursuant to
Section 2.12(2), the Agent shall amend (a) Schedule I hereto to include the
Commitment of the additional lender, and (b) Schedule II hereto to include the
Percentage of the additional lender and to adjust the Percentages of the
existing Lenders so that after giving effect to the increase in the Commitment B
and the Total Commitment Amount, the respective Percentage of the existing
Lenders and the additional lender shall equal (i) such Lender's Commitment, over
(ii) the Total Commitment Amount. The Agent shall deliver a copy of such amended
Schedules I and II to the Borrower and each Lender. Such amended Schedules I and
II shall supersede any previous Schedules I and II and shall be conclusive and
binding absent manifest error.
(4) The Agent shall pay to each Lender its pro rata portion of any
fee, charge or other payment made by the Borrower and to which the Lenders are
entitled pursuant to this Agreement payable in arrears on the basis of each
Lender's average daily Percentage during the applicable computation period.
ARTICLE III
THE LETTERS OF CREDIT
SECTION 3.1. LC Commitment. The Issuing Lender agrees for itself and
the Lenders to issue from time to time before the Termination Date such standby
letters of credit (such letters of credit, together with the Existing BAI
Letters of Credit being herein collectively called "Letters of Credit," and
individually a "Letter of Credit") as the Borrower may request, subject to the
terms and conditions of Sections 3.4 and 5.2. The aggregate face amount of all
Letters of Credit issued and outstanding pursuant to this Section 3.1 and all
Letters of Credit drawn and not reimbursed pursuant to Section 3.9 shall not at
any one time exceed $10,000,000 (or such reduced amount as may be fixed by the
Borrower pursuant to Section 3.15). The foregoing commitment of each Lender is
herein called its "LC Commitment" and collectively the "LC Commitments."
SECTION 3.2. Request for Issuance of Letters of Credit. The Borrower
shall give the Agent and the Issuing Lender at least five (5) Business Days'
prior written notice of a request for issuance of each Letter of Credit, each
such request
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to be accompanied by an LC Application duly executed by the Borrower and in all
respects in form and substance satisfactory to the Agent and the Issuing Lender,
together with such other documentation as the Agent or the Issuing Lender may
reasonably request in support thereof. The Agent shall promptly notify each
Lender of the Borrower's request that such Letter of Credit be issued.
SECTION 3.3. Expiration. Each Letter of Credit shall expire on or
before the Termination Date unless the Borrower shall have pledged cash
collateral to the Agent therefor in an amount, and pursuant to documentation,
reasonably satisfactory to the Issuing Lender and the Agent.
SECTION 3.4. Participation. Concurrently with the issuance of each
Letter of Credit (or, in the case of the Existing BAI Letters of Credit, on the
Effective Date), the Issuing Lender shall be deemed to have sold and transferred
to each other Lender, and each Lender shall be deemed irrevocably and
unconditionally to have automatically purchased and received from the Issuing
Lender, without recourse or warranty, an undivided interest and participation,
to the extent of such other Lender's Percentage, in such Letter of Credit and
the Borrower's related LC Obligations.
SECTION 3.5. Notification of Demand for Payment. The Issuing Lender
shall promptly notify the Agent, who shall in turn promptly notify the Borrower
and each Lender, of the amount of each demand for payment under a Letter of
Credit and of the date on which such payment is to be made.
SECTION 3.6. Funding by Issuing Lender. With respect to each demand
for payment pursuant to a Letter of Credit, the Issuing Lender shall, promptly
following its receipt thereof, examine all documents purporting to represent
such demand to ascertain that the same appear on their face to be in conformity
with the terms and conditions of such Letter of Credit. If the Issuing Lender
determines that a demand for payment under a Letter of Credit conforms to the
terms and conditions of such Letter of Credit, then the Issuing Lender shall
make payment to the Beneficiary in accordance with the terms of such Letter of
Credit.
SECTION 3.7. Non-Conforming Demand For Payment. If, after
examination of a demand for payment under a Letter of Credit, the Issuing Lender
shall have determined that such demand does not conform to the terms and
conditions of such Letter of Credit, then the Issuing Lender shall, as soon as
reasonably practicable, give notice to the related Beneficiary and to the
Borrower to the effect that demand was not in accordance with the terms and
conditions of such Letter of Credit, stating the
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reasons therefor and that the relevant document is being held at the disposal of
the Beneficiary or is being returned to the Beneficiary, as the Issuing Lender
may elect. The Beneficiary may attempt to correct any such non-conforming demand
for payment under such Letter of Credit if, and to the extent that, the
Beneficiary is entitled (without regard to the provisions of this sentence) and
able to do so.
SECTION 3.8. Return of Letter of Credit. With respect to each Letter
of Credit, the Issuing Lender shall have the right, provided the Issuing Lender
is not then in default under such Letter of Credit by reason of its having
wrongfully failed to honor a demand for payment previously made by a Beneficiary
under such Letter of Credit, to require such Beneficiary to surrender such
Letter of Credit to the Issuing Lender on the stated expiration date. The
Borrower agrees, if necessary, to use its best efforts to cause the Beneficiary
to surrender such Letter of Credit.
SECTION 3.9. Reimbursement Agreement of the Borrower. The Borrower
hereby unconditionally and irrevocably agrees to reimburse the Issuing Lender
for each payment or disbursement made by the Issuing Lender under a Letter of
Credit honoring a demand for payment made by the Beneficiary thereunder, in each
case on the date that such payment or disbursement is made. Subject to
Borrower's ability to satisfy the conditions precedent set forth in Section 5.2,
if any amount shall not be reimbursed by the Borrower on the date of such
payment or disbursement, the Borrower automatically shall be deemed to have
requested as of the immediately preceding Business Day a Floating Rate Loan
pursuant to Section 2.2 in the amount of such payment or disbursement (which
need not be in the principal amount of $500,000 or an integral multiple
thereof); provided, that if at the time of such request Revolving Loans are not
then available to the Borrower, such request shall not be granted and the
Borrower's reimbursement obligations set forth above shall remain in place.
SECTION 3.10. Funding By Lenders. If the Issuing Lender makes any
payment or disbursement under any Letter of Credit and the Borrower has not
reimbursed the Issuing Lender in full for such payment or disbursement or a
Revolving Loan in the amount of such payment or disbursement has not been made
pursuant to Section 3.9, on the date on which payment is made under a Letter of
Credit, or if any reimbursement received by the Issuing Lender from the Borrower
is or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Borrower or otherwise, each other Lender shall provide the
Agent, for the account of the Issuing Lender, at its principal office in Chicago
with immediately available funds in an amount equal to such Lender's Percentage
of the amount of such payment or
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disbursement. If and to the extent any Lender shall not have made such amount
available to the Agent on any such date, such Lender agrees to pay interest on
such amount to the Agent, for the account of the Issuing Lender, forthwith on
demand for each day from and including the date on which such payment was made
to but excluding the date such amount is made available to the Agent for the
account of the Issuing Lender. Such interest shall be determined at a rate per
annum equal to the Federal Funds Rate from time to time in effect, based upon a
year of 360 days.
SECTION 3.11. Return of Funds Related to Non-Conforming Demand. If
the Issuing Lender does not disburse funds to the Beneficiary for any reason
after the Agent has received such funds from any Lender pursuant to Section
3.10, the Issuing Lender shall promptly return such funds to the Agent, which
shall promptly return such funds to such other Lenders, together with interest
on such funds from and including the date on which the Agent received such funds
to but excluding the day on which the Agent so returns such funds to the other
Lenders at the Federal Funds Rate for each such day, based upon a year of 360
days.
SECTION 3.12. Obligation to Reimburse for or Participate in Letter of
Credit Payments. The Borrower's obligation to reimburse the Issuing Lender for
payments made by the Issuing Lender under any Letter of Credit honoring a demand
for payment by the Beneficiary thereunder, and each Lender's obligation to
participate in and make available to the Agent its Percentage of such payments
in accordance with this Agreement, shall be irrevocable, absolute and
unconditional under any and all circumstances including, without limitation, any
of the following circumstances:
(1) any lack of legality, validity, regularity or enforceability of
this Agreement, any Letter of Credit or any other Loan Document;
(2) the existence of any claim, setoff, defense or other right which
the Borrower may have or have had at any time against any Beneficiary, the
Agent, the Issuing Lender any other Lender, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting) or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
Beneficiary of any Letter of Credit);
(3) any draft, certificate or any other document presented under any
Letter of Credit proving to be
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forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(4) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
(5) payment by the Issuing Lender under any Letter of Credit against
presentation of a draft or certificate or other document that does not
comply with the terms of such Letter of Credit unless such payment by the
Issuing Lender constituted gross negligence or willful misconduct of the
Issuing Lender; or
(6) the occurrence of any Default or Event of Default;
provided, however, that the Borrower shall not be obligated to reimburse the
Issuing Lender for, and no Lender shall be obligated to participate in, any
wrongful payment made by the Issuing Lender under any Letter of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of the Issuing Lender or any of its officers, employees or agents.
SECTION 3.13. Mandatory Payment to Agent of LC Obligations. The
Borrower agrees that, on any termination of the LC Commitments pursuant to
Section 3.15 or Section 8.2, it will pay to the Agent for the account of the
Issuing Lender and the other Lenders in Dollars and in same day funds an amount
equal to the amount of all LC Obligations, whether or not the related Letter of
Credit has been drawn (which amount shall be retained by the Agent in a separate
collateral account as security for the LC Obligations and the outstanding
principal amount of the Revolving Notes, all interest thereon, and all other
amounts payable under this Agreement and the other Loan Documents) plus the then
aggregate accrued amount of unpaid fees arising under Section 3.14.
SECTION 3.14. Fees. The Borrower agrees to pay the following fees
(all such fees being non-refundable):
(1) The Borrower agrees to pay to the Agent for the account of each
Lender a fee for each (a) Non-Financial Letter of Credit (the "Non-
Financial LC Commitment Fee"), from the date of issuance thereof to the
earlier to occur of the expiration or termination thereof or the date of
final and complete payment by the Agent thereunder, at a rate per annum
equal to one half of the Applicable Margin for Eurodollar Loans in
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effect from time to time multiplied by the aggregate outstanding face
amount of each such Non-Financial Letter of Credit, and (b) Financial
Letter of Credit (the "Financial LC Commitment Fee"), from the date of
issuance thereof to the earlier to occur of the expiration or termination
thereof or the date of final and complete payment by the Agent thereunder,
at a rate per annum equal to the Applicable Margin for Eurodollar Loans in
effect from time to time multiplied by the aggregate outstanding face
amount of each such Financial Letter of Credit, such fees, in any case, to
be payable in arrears on the last day of each calendar quarter (or at such
other times as the Agent shall request, for any period prior to such date
or time for which such LC Commitment Fees shall not have been theretofore
paid).
(2) The Borrower agrees to pay to the Issuing Lender (a) an issuance
fee equal to 1/4% of the face amount of each Letter of Credit payable upon
issuance and (b) such other standard fees and amounts as the Issuing Lender
shall customarily require in connection with the negotiation, processing
and/or administration of Letters of Credit in similar situations, in each
case, such fees to be in addition to the fees payable under Section
3.14(1), with respect to the issuance and/or negotiation of each Letter of
Credit.
SECTION 3.15. Voluntary Reduction of the LC Commitments. The
Borrower may from time to time on at least two (2) Business Days' prior written
notice to the Agent permanently reduce the amount of the LC Commitments to an
amount not less than the maximum amount of the Letters of Credit then
outstanding or drawn and not reimbursed. The Borrower may at any time on like
notice terminate the LC Commitments upon payment to the Agent in accordance with
Section 3.13 of all LC Obligations (whether absolute or contingent) in
connection with the Letters of Credit.
SECTION 3.16. Cash Collateral. If, on any date, the aggregate face
amount of Letters of Credit issued and outstanding or drawn and not reimbursed
shall exceed the LC Commitments, the Borrower shall pledge cash collateral to
the Agent (pursuant to documentation reasonably satisfactory to the Required
Lenders, the Issuing Lender and the Agent) in an amount equal to such excess.
SECTION 3.17. Making of Payments. Except as otherwise provided, all
payments (including those made pursuant to Section 3.14 or Section 3.16) in
respect of the Letters of Credit shall be made by the Borrower to the Agent for
the account of the
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Lenders pro rata according to their respective Percentages of the LC Obligations
held by them. The Agent shall promptly remit to each Lender its pro rata share
(based on its Percentage) of all such payments received in collected funds by
the Agent for the benefit of such Lender. The Borrower hereby authorizes the
Agent, if and to the extent payment is not made when due under this Agreement to
charge from time to time against any account of the Borrower with the Agent any
amount so due. All such payments shall be made to the Agent at its office in
Chicago, not later than 12:00 noon, Chicago time, on the date due; and funds
received after that hour shall be deemed to have been received by the Agent on
the next following Business Day. The Agent shall promptly remit to each Lender
its pro rata share (based on its Percentage) of all such payments received in
collected funds by the Agent for the account of such Lender.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
SECTION 4.1. Taxes. (1) Any and all payments by the Borrower to
each Lender or the Agent under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for, any Taxes.
In addition, the Borrower shall pay all Other Taxes.
(2) If the Borrower shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(a) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section),
such Lender or the Agent, as the case may be, receives an amount equal to
the sum it would have received had no such deductions or withholdings been
made;
(b) the Borrower shall make such deductions and withholdings; and
(c) the Borrower shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law.
(3) The Borrower agrees to indemnify and hold harmless each Lender and
the Agent for the full amount of Taxes, Other Taxes, and Further Taxes in the
amount that the respective Lender specifies as necessary to preserve the after-
tax yield the Lender
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would have received if such Taxes, Other Taxes or Further Taxes had not been
imposed, and any liability (including penalties, interest, additions to tax and
reasonable expenses) arising therefrom or with respect thereto, whether or not
such Taxes, Other Taxes or Further Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days after the date
the Lender or the Agent makes written demand therefor.
(4) Within 30 days after the date of any payment by the Borrower of
Taxes, Other Taxes or Further Taxes, the Borrower shall furnish to the Agent,
for the account of the Lenders, the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment satisfactory to such
Lender or the Agent.
(5) If the Borrower is required to pay any amount to any Lender or the
Agent pursuant to subsection (2) or (3) of this Section 4.1, then such Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Borrower which may thereafter accrue, if such change
in the sole judgment of such Lender is not otherwise disadvantageous to such
Lender.
SECTION 4.2. Increased Costs. If after the date hereof, (1)
Regulation D, or (2) the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or any Lending Office of such Lender) with any request or directive (whether or
not having the force of law) or any such authority, central bank or comparable
agency,
(a) shall subject any Lender (or any Lending Office of such Lender) to
any tax, duty or other charge with respect to its Eurodollar Loans or its
obligation to make Eurodollar Loans, its LC Obligations or its obligation
to issue Letters of Credit, or shall change the basis of taxation of
payments to any Lender of the principal of or interest on its Eurodollar
Loans or any other amounts due under this Agreement in respect of its
Eurodollar Loans or its obligation to make Eurodollar Loans or its LC
Obligations (except for changes in the rate of tax on the overall gross or
net income of such Lender or its Lending Office); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the FRB, but excluding any
reserve included in
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the determination of interest rates pursuant to Section 1.1), special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (or any Lending Office of
such Lender); or
(c) shall impose on any Lender (or its Lending Office) any other
condition affecting its Eurodollar Loans or the LC Obligations;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D, to impose a cost on) such Lender (or any Lending Office of
such Lender) of making or maintaining any Eurodollar Loan, any Letter of Credit
or the LC Commitment or to reduce the amount of any sum received or receivable
by such Lender (or the Lending Office or such Lender) under this Agreement or
under its Revolving Loans with respect thereto, then upon demand by such Lender
(which demand shall be made within 45 days after such Lender has actual
knowledge of such additional cost or reduced sum receivable and shall be
accompanied by a statement setting forth the basis of such demand), the Borrower
shall pay directly to such Lender such additional amount or amounts as will
reimburse such Lender for such increased cost or such reduction.
SECTION 4.3. Change in Rate of Return. If, after the date hereof, any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority affects or would affect
the amount of capital required or expected to be maintained by any Lender or any
person controlling such Lender, and such Lender reasonably determines that the
rate of return on its or such controlling person's capital as a consequence of
its Commitments or the Revolving Loans or the Letters of Credit made by such
Lender is reduced to a level below that which such Lender or such controlling
person could have achieved but for the occurrence of any such circumstance,
then, in any such case the Borrower shall, upon demand by such Lender (which
demand shall be made within 45 days after such Lender has actual knowledge of
such increase in capital or reduction in rate of return) pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts shall be prepared in good
faith (including calculations thereof in reasonable detail) and shall, in the
absence of manifest error, be conclusive and binding on the Borrower. In
determining such amount, such Lender may use any method of averaging and
attribution that it shall deem reasonably applicable. Each Lender shall notify
the
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Borrower of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this Section
4.3.
SECTION 4.4. Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period:
(1) the Agent is advised by any Lender that deposits in Dollars (in
the applicable amounts) are not being offered to such Lender in the
relevant market for such Interest Period, or the Agent otherwise determines
(which determination shall be binding and conclusive on all parties) that
by reason of circumstances affecting the interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the applicable
Eurodollar Rate; or
(2) any Lender advises the Agent that the Eurodollar Rate (Reserve
Adjusted), as determined by the Agent, will not adequately and fairly
reflect the cost to such Lender of maintaining or funding such Eurodollar
Loans for such Interest Period, or that the making or funding of Eurodollar
Loans has become impracticable as a result of an event occurring after the
date of this Agreement which in the opinion of such Lender materially
changes such Eurodollar Loans,
then, so long as such circumstances shall continue: (a) the Agent shall promptly
notify the other parties thereof, (b) no Lender shall be under any obligation to
make or convert into Eurodollar Loans, and (c) on the last day of the then
current Interest Period for Eurodollar Loans, such Eurodollar Loans shall,
unless then repaid in full, automatically convert to Floating Rate Loans. If
conditions subsequently change so that the foregoing conditions no longer exist,
the Agent in the case of clause (1) or such Lender in the case of clause (2)
will promptly notify the Borrower and the Lenders thereof, and upon the receipt
of such notice, the obligations of all Lenders to make or continue Eurodollar
Loan shall be reinstated.
SECTION 4.5. Changes in Law Rendering Certain Revolving Loans
Unlawful. In the event, after the date hereof, that any change in (including the
adoption of any new) applicable laws or regulations, or any change in the
interpretation of applicable laws or regulations by any governmental or other
regulatory body charged with the administration thereof, should make it unlawful
for a Lender or the Lending Office of such Lender (an "Affected Lender") to
make, maintain or fund Eurodollar Loans, then (a) the Affected Lender shall
promptly notify each of the other parties hereto, (b) the obligation of all
Lenders to make or convert into Eurodollar Loans shall, upon the effectiveness
of such event, be
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suspended for the duration of such unlawfulness, and (c) on the last day of the
current Interest Period for each Eurodollar Loan (or, in any event, if the
Affected Lender so requests, on such earlier date as may be required by the
relevant law, regulation or interpretation), such Eurodollar Loan shall, unless
then repaid in full, automatically convert to Floating Rate Loans. If conditions
subsequently change so that the foregoing conditions no longer exist, such
Lender will promptly notify the Borrower and the other Lenders thereof, and upon
the receipt of such notice, the obligations of all Lenders to make or continue
Eurodollar Loans shall be reinstated.
SECTION 4.6. Funding Losses. The Borrower hereby agrees that upon
demand by any Lender (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) the Borrower
will indemnify such Lender against any net loss or expense which such Lender may
sustain or incur (including, without limitation, any net loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund or maintain Eurodollar Loans), as reasonably
determined by such Lender, as a result of (a) any payment, prepayment or
conversion of any Eurodollar Loan of such Lender on a date other than the last
day of an Interest Period for such Eurodollar Loan, or (b) any failure of the
Borrower to borrow or convert any Revolving Loans on a date specified therefor
in a Borrowing Request or Continuation/Conversion Notice pursuant to this
Agreement. For this purpose, all notices to the Agent pursuant to this Agreement
shall be deemed to be irrevocable.
SECTION 4.7. Right of Lenders to Fund Through Other Offices. Each
Lender may, if it so elects, fulfill its Commitment as to any Eurodollar Loan by
causing its Lending Office to make such Eurodollar Loan, provided that in such
event for the purposes of this Agreement, such Eurodollar Loan shall be deemed
to have been made by such Lender and the obligation of the Borrower to repay
such Eurodollar Loan shall nevertheless be to such Lender and shall be deemed
held by it, to the extent of such Eurodollar Loan, for the account of such
branch or affiliate.
SECTION 4.8. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Revolving Loans in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder shall be made as
if such Lender had actually funded and maintained each Eurodollar Loan during
each Interest Period for such Revolving Loan through the purchase of deposits
having a maturity corresponding to such Interest Period and bearing an interest
rate equal to the Eurodollar Rate, for such Interest Period.
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SECTION 4.9. Mitigation of Circumstances; Replacement of Affected
Lender. (1) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge which will result in, and will promptly
thereafter use all reasonable commercial efforts available to it (and not, in
such Lender's good faith judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation by the Borrower to pay any amount pursuant
to Section 4.2 or 4.3 or (ii) the occurrence of any circumstances of the nature
described in Section 4.4 or 4.5 (and, if any Lender has given notice of any such
event described in clause (i) or (ii) above and thereafter such event ceases to
exist, such Lender shall promptly so notify the Borrower and the Agent). Without
limiting the foregoing, each Lender will designate a different Lending Office if
such designation will avoid (or reduce the cost to the Borrower of) any event
described in clause (i) or (ii) of the preceding sentence and such designation
will not, in such Lender's reasonable judgment, be otherwise materially
disadvantageous to such Lender.
(2) At any time any Lender is an Affected Lender, the Borrower may replace
such Affected Lender as a party to this Agreement with one or more other
Eligible Assignee(s) reasonably satisfactory to the Agent, such Eligible
Assignee(s) to have a Commitment in such amounts as shall be reasonably
satisfactory to the Agent (and upon notice from the Borrower such Affected
Lender shall assign (pursuant to an Assignment and Acceptance), without recourse
or warranty, its Commitment, its Revolving Loans, and all of its other rights
and obligations hereunder to such Eligible Assignee(s) for a purchase price
equal to the sum of the principal amount of the Revolving Loans so assigned, all
accrued and unpaid interest thereon, its ratable share of all accrued and unpaid
non-use fees, any amounts payable under Section 4.6 as a result of such Lender
receiving payment of any Eurodollar Loan prior to the end of an Interest Period
therefor and all other obligations owed to such Affected Lender hereunder).
SECTION 4.10. Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of any Lender pursuant to Sections 4.1 through 4.6
shall be conclusive absent demonstrable error. The provisions of Sections 4.1
through 4.4 shall survive termination of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
--------------------
SECTION 5.1. Condition Precedent to Effectiveness of Agreement. The
terms and provisions of this Agreement (including, without limitation, the
Commitment of each Lender
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hereunder) shall become effective (the "Effective Date"), on such date upon
which the Agent shall have received each of the following, each dated the
Effective Date and in form and substance reasonably satisfactory to the Agent
and its counsel and each in sufficient number of signed counterparts (other than
in the case of the Revolving Notes) to provide one for each Lender:
(1) This Agreement. This Agreement duly executed by the Borrower,
the Lenders, the Agent, the Documentation Agent and the Issuing Lender;
(2) Revolving Notes. The Revolving Notes duly executed by the
Borrower;
(3) Facilities Agreement. The Facilities Agreement duly executed by
the Borrower, the Agent and the Lease Agent;
(4) Intercreditor Agreement. The Intercreditor Agreement duly
executed by the Borrower, the Agent and the Lease Agent.
(5) 1996 Master Lease Agreement. Evidence that the 1996 Master Lease
Agreement is in full force and effect and that all of the conditions
thereto have been satisfied or waived.
(6) Certificate of the Borrower. A certificate or certificates of
the Secretary or Assistant Secretary of the Borrower certifying: (a) a copy
of the Certificate of Incorporation of the Borrower, as theretofore
amended; (b) a copy of the bylaws of the Borrower, as theretofore amended;
(c) copies of all corporate action taken by the Borrower, including
resolutions of its board of directors, authorizing the execution, delivery,
and performance of the Loan Documents by the Borrower and each other
document to be delivered pursuant to this Agreement and authorizing
borrowings by each of the Authorized Officers; and (d) the names and true
signatures of the officers of the Borrower authorized to sign the Loan
Documents to which it is a party and the other documents to be delivered by
the Borrower under this Agreement;
(7) Certified Charter and Good Standing. A certificate of the due
incorporation, legal existence and good standing of the Borrower in its
state of incorporation, issued by the appropriate authorities of such
jurisdiction, and certificates of Borrower's good standing and due
qualification to do business, issued by
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appropriate officials in any states in which the failure to so qualify
would result in a Material Adverse Change;
(8) Opinion of counsel for the Borrower. Opinions of (i) Paul,
Weiss, Rifkind, Wharton & Garrison, special counsel for the Borrower and
each Guarantor, (ii) Donald J. Bingle, general counsel to the Borrower and
each Guarantor, in substantially the form of Exhibits D-1 and D-2 attached
hereto, respectively, and as to such other matters as the Agent and its
counsel may reasonably request;
(9) Mortgages. Mortgages duly executed by BCRE covering certain
parcels of real property referenced on Schedule IV and designated with an
"*", together with:
(i) where required by applicable state law, a separate
environmental indemnity agreement;
(ii) an ALTA loan title insurance policy (or marked-up title
insurance commitment) issued by First American Title Insurance Company
with respect to such parcel and any easements appurtenant thereto
specified by Agent, which policy or commitment shall (a) insure the
priority of the Mortgage as a valid and enforceable first lien,
subject only to Liens permitted by Section 4.1 of the Facilities
Agreement and such matters that are acceptable to Agent in its
reasonable judgment, (b) contain such endorsements and affirmative
coverages as Agent shall reasonably require, including without
limitation, comprehensive, doing business, usury, tie-in, last dollar,
contiguity and revolving credit endorsements where available, and (c)
delete, where possible, any general survey exception and/or provide
affirmative coverage over any matter that a current ALTA survey of
such parcel would disclose;
(iii) where available, a Phase I environmental audit with respect
to such parcel (and such further environmental audits or evidence of
the absence of hazardous wastes as Agent reasonably shall deem
necessary), which audit must be satisfactory in Agent's sole
discretion as to form and substance, together with a reliance letter
for the benefit of Agent from the environmental consultant performing
such audit;
(iv) such Uniform Commercial Code financing statements or
statements of termination, release or partial release with respect to
the fixtures encumbered by the Mortgages as Agent may reasonably
require;
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(v) such environmental disclosure documents, mortgage tax
affidavits or allocation statements, or such other documents as Agent
may reasonably request; and
(vi) evidence of insurance to the extent required by the
Mortgages.
(10) Pledge Agreement. The Pledge Agreement, duly executed by the
Borrower and MidAtlantic Inc., together with (a) the promissory notes and
certificates (including blank undated stock powers covering such
certificates) subject thereto, (b) if any interests pledged pursuant to the
Pledge Agreement are uncertificated securities, confirmation and evidence
satisfactory to the Agent that the security interest in such uncertificated
securities has been transferred to and perfected by the Agent for the
benefit of the Lenders in accordance with Section 8-313 and Section 8-321
(or any successor sections) of the Uniform Commercial Code, as in effect in
the relevant jurisdiction, and (c) duly completed, and in proper form for
filing, Uniform Commercial Code financing statements (Form UCC-1), or such
other evidence of filing as may be reasonably acceptable to the Agent,
naming the Borrower and MidAtlantic Inc. as the debtors and the Agent as
the secured party, or other similar instruments or documents, filed under
the Uniform Commercial Code of all jurisdictions as may be necessary or, in
the opinion of the Agent, desirable to perfect the security interest of the
Agent for the benefit of the Lenders in the Pledged Collateral;
(11) Certificate. A certificate or certificates of the Secretary or
Assistant Secretary of MidAtlantic Inc. certifying: (a) a copy of the
organizational documents of MidAtlantic Inc., as theretofore amended; (b)
copies of all corporate action taken by MidAtlantic Inc., authorizing the
execution, delivery and performance by MidAtlantic Inc. of the Pledge
Agreement and each other document to be delivered pursuant to this
Agreement; and (c) the names and true signatures of the officers of
MidAtlantic Inc. authorized to sign the Pledge Agreement and the other
documents to be delivered by MidAtlantic under this Agreement;
(12) Certified Charter and Good Standing. A certificate of the due
organization, legal existence and good standing of MidAtlantic Inc. in its
state of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of MidAtlantic Inc.'s good standing and due
qualification to do business,
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issued by appropriate officials in any states in which the failure to so
qualify would result in a Material Adverse Change;
(13) Guaranty. A Guaranty duly executed by each Subsidiary of the
Borrower which is required pursuant to Section 4.11(1) of the Facilities
Agreement to execute a Guaranty;
(14) Certificate. A certificate or certificates of the Secretary or
Assistant Secretary of each Guarantor certifying: (a) a copy of the
organizational documents of such Guarantor, as theretofore amended; (b)
copies of all corporate or partnership action taken by such Guarantor,
authorizing the execution, delivery and performance by the Guarantor of the
Loan Documents to which it is a party and each other document to be
delivered pursuant to this Agreement; and (c) the names and true signatures
of the officers of such Guarantor authorized to sign the Loan Documents to
which it is a party and the other documents to be delivered by the Borrower
under this Agreement;
(15) Certified Charter and Good Standing. A certificate of the due
organization, legal existence and good standing of each Guarantor in its
state of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of such Guarantor's good standing and due
qualification to do business, issued by appropriate officials in any states
in which the failure to so qualify would result in a Material Adverse
Change;
(16) Existing BAI Credit Agreement. Evidence satisfactory to the
Agent that (a) all loans outstanding under the Existing BAI Credit
Agreement have been repaid and (b) such agreement has been terminated;
(17) Reimbursement Agreement. Evidence satisfactory to the Agent that
(a) that certain Reimbursement Agreement, dated as of December 22, 1994,
among the Borrower, the financial institutions party thereto and BAI, as
letter of credit issuer and as agent, has been duly terminated (b) all
letters of credit in connection therewith have been cancelled and (c) all
Liens arising in connection therewith have been released;
(18) BA Equipment Master Lease. Evidence satisfactory to the Agent
that (a) that certain Participation Agreement dated as of December 22, 1994
among the Borrower, Norwest Bank Minnesota, National Association, as
Certificate Trustee,
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certain financial institutions from time to time party thereto, BAI, as
administrative agent, and Harris Trust and Savings Bank, as collateral
agent, has been duly terminated, (b) title to all equipment subject thereto
has been transferred to the Borrower and, if appropriate, the respective
franchisees, and (c) all Liens arising in connection therewith have been
released; and
(19) Miscellaneous. Such other approvals, opinions or documents as
the Agent may reasonably request.
SECTION 5.2. Conditions Precedent to All Revolving Loans and Letters
of Credit. The obligation of the Lenders to make each Revolving Loan (including
the initial Revolving Loan) and of the Issuing Lender to issue Letters of Credit
shall be subject to the further conditions precedent that on the date of such
Revolving Loan or Letter of Credit:
(1) The following statements shall be true and the Agent shall have
received a certificate signed by a duly Authorized Officer of the Borrower
(in his or her capacity as such, and without any personal liability
therefor) dated the date of such Revolving Loan or Letter of Credit,
stating that:
(a) The representations and warranties contained in Article VI of
this Agreement, in Section II of the Facilities Agreement (or any
successor section therein) and in each other Loan Document are correct
in all material respects on and as of the date of such Revolving Loan
or Letter of Credit as though made on and as of such date, except to
the extent that such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties
shall be true and correct in all material respects on and as of such
earlier date);
(b) No Default or Event of Default has occurred and is
continuing, or would result from the borrowing of such Revolving Loan
or the issuance of such Letter of Credit; and
(c) The Borrower is in compliance with Section 3.10 of the
Facilities Agreement (or any successor section therein).
(2) The Agent or the Issuing Lender shall have received such other
approvals, opinions, or documents as the Agent or the Issuing Lender may
reasonably request.
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ARTICLE VI
REPRESENTATIONS
---------------
The Borrower represents and warrants to the Lenders that:
SECTION 6.1. Real Property. Schedule IV hereto sets forth, as of the
date hereof, a complete and accurate listing of the common address of each
parcel of real property owned by BCRE.
SECTION 6.2. Mortgages. Each Mortgage when delivered will be
effective to grant to the Agent for the benefit of, in the case of a Mortgage
constituting either Tranche A Collateral or Tranche C Collateral, itself and the
Lenders, and, in the case of a Mortgage constituting Tranche B Collateral, all
Creditors, a legal, valid and enforceable Lien on all the right, title and
interest of the mortgagor under such Mortgage in the mortgaged property
described therein. When each such Mortgage is duly recorded in the offices
listed on the schedule to such Mortgage and the mortgage recording fees and
taxes in respect thereof are paid and compliance is otherwise had with the
formal requirements of state law applicable to the recording of real estate
mortgages generally, each such mortgaged property, subject to the encumbrances
and exceptions to title set forth therein and except as noted in the title
policies delivered to the Agent pursuant to Section 5.1(9), will be subject to a
legal, valid, enforceable and perfected first priority Lien.
SECTION 6.3. Solvency. As of the Effective Date, the Company and
each Guarantor is Solvent.
ARTICLE VII
COVENANTS
---------
Unless otherwise consented to in writing by the Required Lenders, so
long as the Revolving Notes shall remain unpaid or the Lenders shall have any
Commitment under this Agreement or any Letter of Credit remains outstanding or
any LC Obligations remain unpaid, the Borrower will:
SECTION 7.1. Maintenance of Bank Accounts. Maintain with one or more
Lenders all bank accounts of the Borrower and any Guarantor, which accounts
shall be subject to the customary fees of the respective Lender; provided, that
the Borrower may maintain: (1) bank accounts with parties other than the Lenders
which accounts are used by the Borrower to receive deposits of daily receipts
from individual Stores, provided, that all such
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daily receipts are deposited once per week into one of the bank accounts of the
Borrower with a Lender; and (2) such other bank accounts with parties other than
the Lenders, provided, that the aggregate cash balance of all such accounts does
not exceed ten percent (10%) of the total aggregate cash balances of all bank
accounts of the Borrower and the Guarantors.
SECTION 7.2. Annual Clean-Up. For a period of not less than thirty
(30) consecutive days during each consecutive period of thirteen (13) Retail
Periods, reduce the aggregate outstanding principal amount of Revolving Loans
plus accrued interest thereon to zero.
SECTION 7.3. Notes, Certificates and Other Collateral. Commencing
on the Effective Date, deliver to the Agent promptly and in no event more than
ten (10) Business Days after receipt (a) all promissory notes and other
instruments evidencing any Debt owed by any Financed Franchisee to the Borrower
or any Subsidiary, and (b) all certificates (together with duly executed undated
blank stock powers; or in the case of uncertificated certificates, registration
of pledges) evidencing partnership units or other equity interests of
MidAtlantic L.P. or any Financed Subsidiary, which are owned or otherwise held
(including capital stock, partnership units or other equity interests held as
collateral) by the Borrower or any Subsidiary; and, simultaneously with the
delivery of such promissory notes, instruments or certificates, an updated
Attachment 1 to the Pledge Agreement indicating, as appropriate, such Person as
a "Pledged Note Issuer" and/or a "Pledged Unit Issuer" (as such terms are
defined in the Pledge Agreement). All such promissory notes, instruments and
certificates shall be held by the Agent in accordance with, and subject to, the
Pledge Agreement; provided, that the Agent's interest therein shall not exceed
the interest of the Borrower or such Subsidiary, as the case may be, therein and
shall terminate and be promptly released in accordance with the documentation by
which the Borrower or such Subsidiary holds such interest; and provided further
that the Agent shall take such action with respect to the foregoing promissory
notes, instruments and certificates as the Borrower or such Subsidiary may
reasonably instruct (so long as such action is either mandatory pursuant to the
documentation by which the Borrower or such Subsidiary holds such promissory
notes, instruments or certificates, if held as Pledged Collateral, or is
consistent with the terms of this Agreement and the other Loan Documents) in
order to comply with the terms of the documentation by which the Borrower or
such Subsidiary holds such interest.
SECTION 7.4. Further Assurances. Promptly upon request by the Agent
or the Required Lenders, the Borrower shall (and shall cause any of its
Subsidiaries to) do, execute, acknowledge where necessary, deliver, record,
re-record, file, re-file,
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register and re-register, any and all such further acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as the
Agent or such Required Lenders, as the case may be, may reasonably require from
time to time in order (i) to carry out more effectively the intent and purposes
of this Agreement or any other Loan Document, (ii) to subject to the Liens
created by any of the Mortgages any of the properties, rights or interests
covered by any of the Mortgages, (iii) to perfect and maintain the validity,
effectiveness and priority of any of the Mortgages and the Liens intended to be
created thereby, and (iv) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to the Agent and Lenders the rights granted or now
or hereafter intended to be granted to the Lenders under any Loan Document or
under any other document executed in connection therewith.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
SECTION 8.1. Events of Default. If any of the following events
("Events of Default") shall occur:
(1) The Borrower should fail to pay (a) the principal of, or interest
or fees on any Obligation owing hereunder, including the Revolving Notes,
as and when due and payable and in the case of interest or fees such
failure shall continue for two (2) Business Days or (b) any reimbursement
obligation, interest or fee with respect to any LC Obligation which is not
satisfied by a deemed disbursement of a Floating Rate Loan or otherwise as
provided under Section 3.9 and such failure shall continue for seven (7)
Business Days;
(2) Any representation or warranty made or deemed made (pursuant to
Section 2.2) by the Borrower in this Agreement or any other Loan Document
other than the Facilities Agreement or which is contained in any
certificate, document, opinion, or financial or other statement furnished
at any time under or in connection with any Loan Document other than the
Facilities Agreement shall prove, in light of the circumstances under which
it was made, to have been incorrect in any material respect on or as of the
date made or deemed made;
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(3) The Borrower or any Subsidiary shall fail to perform or observe
any term, covenant or agreement contained in Section 2.9 applicable
thereto;
(4) The Borrower or any Subsidiary shall fail to perform or observe
any other term, covenant, or agreement contained in any Loan Document
applicable thereto (other than the Revolving Notes and the Section
referenced in the foregoing clause (3) or the Facilities Agreement) on its
part to be performed or observed and such failure shall continue for
fifteen (15) Business Days following notice thereof from the Agent or the
Required Lenders;
(5) The occurrence of a Default (as such term is defined in the
Facilities Agreement) under the Facilities Agreement and any requirement
set forth therein for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied;
(6) Any Mortgage shall for any reason (other than pursuant to the
terms thereof or as a result of the Agent's action) cease to create a valid
security interest in the Collateral purported to be covered thereby or such
security interest shall for any reason cease to be a perfected and first
priority security interest subject only to Liens permitted by Section 4.1
of Facilities Agreement (or any successor section therein) and such
Mortgage; or
(7) The Pledge Agreement shall, at any time after its execution and
delivery and for any reason (other than due to the action or inaction of
the Agent or its attorneys or agents) cease (a) to create a valid security
interest in and to the Pledged Collateral subject to the Liens permitted by
Section 4.1 of the Facilities Agreement (or any successor section therein)
or (b) to be in full force and effect or shall be declared null and void,
or the validity or enforceability thereof shall be contested by the
Borrower, MidAtlantic Inc. or any Subsidiary, or the Borrower or
MidAtlantic Inc. shall deny it has any further liability or obligation
under or shall fail to perform its material obligations under the Pledge
Agreement (subject to any applicable grace periods set forth therein).
SECTION 8.2. Effect of Event of Default. If any Event of Default
described in Section 6.1(6) of (and as defined in) the Facilities Agreement (or
any successor section therein) shall occur, automatically the Commitment of each
of the Lenders and the agreement of the Issuing Lender to issue Letters of
Credit hereunder shall immediately terminate and the outstanding principal
amount of the Revolving Notes, all interest thereon and
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all other amounts payable under this Agreement and the other Loan Documents
shall become immediately due and payable; and, in the case of any Event of
Default set forth herein, the Agent may (or shall, upon the written request of
the Required Lenders), by notice to the Borrower, subject to the Intercreditor
Agreement, (1) declare the Commitments of each of the Lenders and the agreement
of the Issuing Lender to issue Letters of Credit to be terminated, (2) declare
the outstanding principal amount of the Revolving Notes, all interest thereon,
and all other amounts payable under this Agreement and the other Loan Documents
to be forthwith due and payable, whereupon the Revolving Notes, all such
interest, and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by the Borrower. Following such declaration,
the Agent may exercise, in the case of the Tranche A Collateral and Tranche C
Collateral, on behalf of itself and the Lenders, and, in the case of the Tranche
B Collateral, on behalf of all Creditors, all rights and remedies available
under the Loan Documents or applicable law. The Agent and/or Issuing Lender may
also require, by notice to the Borrower, the Borrower to pledge cash collateral
to the Agent (pursuant to documentation reasonably satisfactory to the Required
Lenders, the Issuing Lender and the Agent) with respect to all issued and
outstanding or drawn and not reimbursed Letters of Credit, and in the event the
Borrower fails to make such pledge of cash collateral, irrespective of the
Borrower's ability to satisfy the conditions precedent set forth in Section 5.2,
the Borrower automatically shall be deemed to have requested, as of the date of
the Agent's initial request for such cash collateral, and the Lenders shall
promptly make a Floating Rate Loan (it being understood that the proceeds of
such Floating Rate Loan shall be held by the Agent as cash Collateral) pursuant
to Section 2.2 in the amount of the previously demanded cash collateral (which
need not be in the principal amount of $500,000 or an integral multiple
thereof).
ARTICLE IX
THE AGENT
---------
SECTION 9.1. Appointment and Authorization; "Agent"; Issuing Lender.
(1) Each Lender hereby irrevocably (subject to Section 9.9) appoints, designates
and authorizes the Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. As to matters not expressly provided in this
Agreement (including, without limitation, enforcement or collection of this
Agreement or any
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Loan Document) the Agent shall not be required to exercise any discretion, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders and such instructions shall be binding on all the Lenders.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein and in the other Loan
Documents, nor shall the Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
(2) The Issuing Lender shall act on behalf of the Lenders with respect
to any Letters of Credit issued by it and the documents associated therewith
until such time and except for so long as the Agent may agree at the request of
the Required Lenders to act for such Issuing Lender with respect thereto;
provided, however, that the Issuing Lender shall have all of the benefits and
immunities (a) provided to the Agent in this Article IX with respect to any acts
taken or omissions suffered by the Issuing Lender in connection with Letters of
Credit issued by it or proposed to be issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent," as used in this Article IX, included the Issuing Lender
with respect to such acts or omissions, and (b) as additionally provided in this
Agreement with respect to the Issuing Lender.
SECTION 9.2. Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
SECTION 9.3. Liability of Agent. None of the Agent-Related Persons
shall (1) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
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misconduct), or (2) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by the Borrower or any
Subsidiary or Affiliate of the Borrower, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
for the value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Borrower or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower or any of the Borrower's
Subsidiaries or Affiliates.
SECTION 9.4. Reliance by Agent. (1) The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Agent. Subject to the Intercreditor Agreement, the Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders (or in accordance with Section 10.1, all Lenders) as it
deems appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders (or in accordance with Section 10.1,
all Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
(2) For purposes of determining compliance with the conditions
specified in Sections 5.1 and 5.2, each Lender that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Lender for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
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SECTION 9.5. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Lenders, unless the
Agent shall have received written notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." The Agent will promptly notify the Lenders
of its receipt of any such notice. The Agent shall take such action with respect
to such Default or Event of Default as may be requested by the Required Lenders
in accordance with Section 8.2; provided, that unless and until the Agent has
received any such request, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of the
Lenders.
SECTION 9.6. Credit Decision. Each Lender acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Agent hereinafter taken, including any review of the affairs
of the Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries, the value of and title to
any Collateral, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower hereunder. Each Lender also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents (i) expressly herein required to be furnished to the Lenders by
the Agent or (ii) delivered to the Agent (which the Agent hereby agrees to
provide to each Lender) pursuant to Section 3.8 of the Facilities Agreement (or
any successor section therein), the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
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condition or creditworthiness of the Borrower which may come into the possession
of any of the Agent-Related Persons.
SECTION 9.7. Indemnification of Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Borrower and without limiting the obligation of the Borrower to do
so), pro rata, from and against any and all Indemnified Liabilities (it being
understood that such Indemnified Liabilities shall not include the payment of
principal, interest or fees with respect to the Agent's Commitment in its
capacity as a Lender); provided, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified Liabilities
resulting solely from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender shall reimburse the Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including
Attorney Costs) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.
SECTION 9.8. Agent in Individual Capacity. BAI and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Borrower and
its Subsidiaries and Affiliates as though BAI were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BAI or its Affiliates may receive information
regarding the Borrower or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Borrower or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Revolving Loans, BAI shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" include BAI in its individual capacity.
SECTION 9.9. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Required Lenders upon thirty (30) days'
prior written notice
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to the Agent. Upon any such resignation or removal, the Required Lenders shall
have the right to appoint a successor Agent (which Agent shall be approved by
the Borrower, which approval shall not be unreasonably withheld). If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation or the Required Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent
(which Agent shall be approved by the Borrower, which approval shall not be
unreasonably withheld) which shall be either a Lender or a commercial bank
having a combined capital and surplus of at least $250,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations in its capacity as
Agent under this Agreement. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article IX and Sections 10.6 and
10.12 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement.
SECTION 9.10. Withholding Tax. (1) If any Lender is a "foreign
corporation, partnership or trust" within the meaning of the Code and such
Lender claims exemption from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of the
Agent, to deliver to the Agent:
(a) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under this
Agreement;
(b) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid
under this Agreement; and
(c) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
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Such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(2) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Borrower, such Lender agrees to notify the Agent of the
percentage amount in which it is no longer the beneficial owner of Obligations
of the Borrower. To the extent of such percentage amount, the Agent will treat
such Lender's IRS Form 1001 as no longer valid.
(3) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(4) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
subsection (1) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Lender not providing such forms
or other documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction.
(5) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered or was not properly executed, or because such
Lender failed to notify the Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Agent fully for all amounts paid,
directly or indirectly, by the Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
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SECTION 9.11. Collateral Matters. (1) The Agent is authorized on
behalf of all the Lenders, without the necessity of any notice to or further
consent from the Lenders, from time to time to take any action with respect to
any Collateral or the Mortgages or the Pledge Agreement which may be necessary
to perfect and maintain perfected the security interest in and Liens upon the
Collateral granted pursuant to the Mortgages or the Pledge Agreement.
(2) The Lenders irrevocably authorize the Agent, at its option and in
its discretion, to release any Lien granted to or held by the Agent upon any
Collateral (a) upon termination of the Commitments and payment in full of all
Revolving Loans and all other Obligations known to the Agent and payable under
this Agreement or any other Loan Document; (b) with respect to any sixteen (16)
parcels of real property referenced on Schedule IV with an "*" (in accordance
with Section 5.1(9)); (c) if approved, authorized or ratified in writing in
accordance with the Intercreditor Agreement; or (d) in accordance with Section
7.3 or the Pledge Agreement. Upon request by the Agent at any time, the Lenders
will confirm in writing the Agent's authority to release particular types or
items of Collateral pursuant to this subsection 9.11(2), provided that the
absence of any such confirmation for whatever reason shall not affect the
Agent's rights under this Section 9.11.
(3) Each Lender agrees with and in favor of each other Lender (which
agreement shall not be for the benefit of the Borrower or any Subsidiary) that
the Borrower's obligation to such Lender under this Agreement and the other Loan
Documents is not and shall not be secured by any real property collateral now or
hereafter acquired by the Borrower other than the real property described in the
Mortgages and the real property subject from time to time to the 1996 Master
Lease Agreement.
SECTION 9.12. Duties of the Documentation Agent. Notwithstanding any
other provision contained in this Agreement to the contrary, the Documentation
Agent, in its capacity as Documentation Agent, shall have no duties or
obligations with respect to this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1. Waivers and Amendments. The provisions of this
Agreement and of each of the other Loan Documents may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing, is made in accordance with the Intercreditor Agreement and consented to
by
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the Borrower and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given and; provided,
that no such amendment, modification or waiver:
(a) which would modify any requirement hereunder that any particular
action be taken by all Lenders or by the Required Lenders, shall be
effective without the consent of each Lender;
(b) which would modify this Section 10.1, change the definition of
"Required Lenders," change any Percentage for any Lender (except in
accordance with Section 10.5 pursuant to an Assignment and Acceptance or an
assignment pursuant to Section 2.12), reduce any fees, extend the
Termination Date, or subject any Lender to any additional obligations,
shall be effective without the consent of each Lender;
(c) which would extend the due date for, or reduce the amount of, any
payment or prepayment of principal of or interest on or any fee related to
any Revolving Loan or any LC Obligation, shall be effective without the
consent of each Lender;
(d) which would affect adversely the interests, rights or obligations
of the Agent or the Issuing Lender (in such capacity), shall be effective
without consent of the Agent or the Issuing Lender, respectively; or
(e) release any Guarantor from its obligations under its respective
Guaranty or release or subordinate any portion of the Collateral, except as
otherwise may be provided in Section 9.11 above.
Upon the effectiveness of any consent, amendment, modification or waiver under
this Agreement, the Agent shall promptly give each Lender written notice
(including a description) of such consent, amendment, modification or waiver.
SECTION 10.2. Notices, Etc. All notices and other communications
provided for under this Agreement and under the other Loan Documents to which
the Borrower is a party shall be in writing (including telegraphic, telex or
facsimile communication) and mailed or telecommunicated or delivered to the
address of the respective party as set forth on the signature pages hereto; or,
as to each party, at such other address as shall be designated by such party in
a written notice to the other party complying as to delivery with the terms of
this Section 10.2. All such notices and communications shall, when mailed or
telecommunicated, be effective upon the earlier of actual receipt or three (3)
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Business Days after deposited in the mails, or one (1) Business Day after
transmitted by telex and the appropriate answerback received, transmitted by
facsimile or delivered to the telegraph company, respectively, addressed as
aforesaid, except that notices to the Agent and/or the Issuing Lender pursuant
to the provisions of Articles II and III shall not be effective until received
by the Agent or the Issuing Lender, as the case may be.
SECTION 10.3. No Waiver; Remedies. No failure on the part of any
party to exercise, and no delay in exercising, any right, power, or remedy under
any Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
SECTION 10.4. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lenders and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights under any Loan Document to which the Borrower is a
party without the prior written consent of the Agent and all the Lenders and the
rights of the Lenders to make assignments or grant participations are subject to
the provisions of Section 10.5.
SECTION 10.5. Assignments and Participations, etc. (1) Any Lender
may, with the written consent of the Agent and the Issuing Lender, which consent
shall not be unreasonably withheld, at any time assign and delegate to one or
more Eligible Assignees (provided that no written consent of the Agent or the
Issuing Lender shall be required in connection with any assignment and
delegation by a Lender to an Eligible Assignee that is an Affiliate of such
Lender or is then a Lender) (each an "Assignee") all, or any ratable part of
all, of the Revolving Loans, the Commitments, the L/C Obligations and the other
rights and obligations of such Lender hereunder, in a minimum amount of
$5,000,000 (or such lesser amount if such amount represents the total Commitment
of such Lender) or an integral multiple of $1,000,000 in excess thereof;
provided, however, (a) that the Borrower and the Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Lender and
the Assignee; (ii) such Lender and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in the form of Exhibit G
attached hereto ("Assignment and Acceptance") and (iii) the assignor Lender or
Assignee has paid to the Agent a processing
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fee in the amount of $3,500, and (b) after giving effect to such assignment no
Lender's Percentage shall exceed 25%.
(2) From and after the date that the Agent notifies the assignor
Lender that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
(3) Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(4) Any Lender may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Borrower (a "Participant") participating
interests in any Revolving Loans, the Commitment of that Lender and the other
interests of that Lender (the "originating Lender") hereunder and under the
other Loan Documents; provided, however, that (a) the originating Lender's
obligations under this Agreement shall remain unchanged, (b) the originating
Lender shall remain solely responsible for the performance of such obligations,
(c) the Borrower, the Issuing Lender and the Agent shall continue to deal solely
and directly with the originating Lender in connection with the originating
Lender's rights and obligations under this Agreement and the other Loan
Documents and (d) no Lender shall transfer or grant any participating interest
under which the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment, consent or waiver would require unanimous
consent of the Lenders as described in the proviso to Section 10.1. In the case
of any such participation, the Participant shall not have any rights under this
Agreement, or any of the other Loan Documents, and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have
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the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement.
(5) Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A or U.S. Treasury Regulation 31 CFR
(S)203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
SECTION 10.6. Costs, Expenses, and Taxes. The Borrower agrees:
(1) to pay within five Business Days after demand all reasonable costs
and expenses of the Agent in connection with the preparation, execution,
delivery, filing, recording, and administration of any of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent, and local counsel who may be retained by said counsel in
connection with perfecting security interests, with respect thereto, and all
costs and expenses of the Agent and any Lender, if any, in connection with the
enforcement of any of the Loan Documents;
(2) pay within five Business Days after demand any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing, and recording of any of the Loan Documents and the
other documents to be delivered under any such Loan Documents, and agrees to
save the Agent harmless from and against any and all liabilities with respect to
or resulting from any delay attributed to the Borrower in paying or omission to
pay such taxes and fees;
(3) pay or reimburse BAI (including in its capacity as Agent) within
five Business Days after demand for all appraisal (including the reasonable
allocated cost of internal appraisal services), audit, environmental inspection
and review (including the allocated cost of such internal services), search and
filing costs, fees and expenses, incurred or sustained by BAI (including in its
capacity as Agent) in connection with the matters referred to under subsections
(1) and (2) of this Section 10.6.
SECTION 10.7. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized at any
time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set off and apply any and all
deposits (general
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or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement or the Revolving Notes or any
other Loan Document, irrespective of whether or not the Agent shall have made
any demand under this Agreement or the Revolving Notes or such other Loan
Document and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after any such setoff and application; provided,
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender under this Section 10.7 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Lenders may have. NOTWITHSTANDING THE FOREGOING, NO
LENDER SHALL EXERCISE, OR ATTEMPT TO EXERCISE, ANY RIGHT OF SET-OFF, BANKER'S
LIEN, OR THE LIKE, AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF THE LENDER OR ANY
SUBSIDIARY OF THE BORROWER HELD OR MAINTAINED BY THE LENDER WITHOUT THE PRIOR
WRITTEN CONSENT OF THE REQUIRED LENDERS.
SECTION 10.8. Governing Law. This Agreement and the Revolving Notes
shall be governed by, and construed in accordance with, the laws of the State of
New York without regard to its conflict of laws provisions.
SECTION 10.9. Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 10.10. Headings. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 10.11. SUBMISSION TO JURISDICTION; WAIVER OF VENUE. EACH OF
THE BORROWER, ON BEHALF OF ITSELF AND EACH SUBSIDIARY, THE AGENT, THE
DOCUMENTATION AGENT, AND EACH LENDER (1) (A) WITH RESPECT TO ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
OR FEDERAL COURT SITTING IN NEW YORK CITY, NEW YORK, AND (B) WITH RESPECT TO ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY MORTGAGE, SUCH OTHER
STATE COURT OR FEDERAL CIRCUIT COURT SITTING IN OR NEAREST TO THE COUNTY IN
WHICH THE PROPERTY IN QUESTION SUBJECT TO SUCH MORTGAGE IS LOCATED AND EACH OF
THE BORROWER, ON BEHALF OF ITSELF AND EACH SUBSIDIARY, THE AGENT, THE
DOCUMENTATION AGENT, AND EACH LENDER HEREBY IRREVOCABLY AGREES
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THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT OR SUCH OTHER STATE OR
FEDERAL COURT SPECIFIED IN THIS SECTION 10.11 AND (2) AGREES NOT TO INSTITUTE
ANY LEGAL ACTION OR PROCEEDING AGAINST ANY OTHER PARTY TO THIS AGREEMENT,
INCLUDING SUCH PARTY'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY
THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN
AS HEREINABOVE SPECIFIED IN THIS SECTION 10.11. EACH OF THE BORROWER, ON BEHALF
OF ITSELF AND EACH SUBSIDIARY, THE AGENT, THE DOCUMENTATION AGENT, AND EACH
LENDER, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION
OR PROCEEDING (WHETHER BROUGHT BY THE BORROWER, ANY SUBSIDIARY, THE AGENT, ANY
LENDER OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 10.11 AS
WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE, TO REMOVE ANY SUCH ACTION OR
PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON
CONVENIENS OR OTHERWISE. EACH OF THE BORROWER, ON BEHALF OF ITSELF AND EACH
SUBSIDIARY, THE AGENT, THE DOCUMENTATION AGENT, AND EACH LENDER AGREES THAT A
FINAL, NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 10.12. Borrower Indemnification. (1) Whether or not the
transactions contemplated hereby are consummated, the Borrower shall indemnify,
defend and hold the Agent-Related Persons, and each Lender and each of its
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnitee") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Revolving Loans and the termination, resignation or replacement
of the Agent or replacement of any Lender) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any insolvency
proceeding or appellate proceeding) related to or arising out of this Agreement
or the Revolving Loans (including without limitation the enforcement of this
Agreement and any of the Loan Documents), or the use of the proceeds thereof
whether or not any Indemnitee is a party thereto (all the foregoing,
collectively, the "Indemnified Liabilities"); provided, that the Borrower shall
have no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities resulting from the gross negligence or willful misconduct of such
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Indemnitee. The agreements in this Section shall survive payment of all other
Obligations.
(2) (a) The Borrower shall indemnify, defend and hold harmless each
Indemnitee, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses or
disbursements (including Attorney Costs and the allocated cost of internal
environmental audit or review services), which may be incurred by or
asserted against such Indemnitee in connection with or arising out of any
pending or threatened investigation, litigation or proceeding, or any
action taken by any Person, with respect to any Environmental Claim arising
out of or related to any property subject to a Mortgage in favor of the
Agent or any Lender (all the foregoing, collectively, "Environmental
Liabilities"). No action taken by legal counsel chosen by the Agent or any
Lender in defending against any such investigation, litigation or
proceeding or requested remedial, removal or response action shall vitiate
or any way impair the Borrower's obligation and duty hereunder to indemnify
and hold harmless the Agent and each Lender. Notwithstanding anything
herein to the contrary, (A) neither the Borrower nor BCRE shall have any
obligation hereunder to any Indemnitee with respect to (i) Environmental
Liabilities resulting from the gross negligence or willful misconduct of
such Indemnified person or (ii) any use, generation, storage, release,
threatened release, discharge, disposal or presence in violation of any
Environmental Laws of any Hazardous Substances introduced onto property
subject to a Mortgage after any foreclosure of such Mortgage or any
conveyance by BCRE in lieu of such foreclosure and (B) the Borrower's
obligations under this Section 10.12(2) shall not be secured by the Tranche
C Collateral.
(b) In no event shall any site visit, observation, or testing by the
Agent or any Lender (or any contractee of the Agent or any Lender) be
deemed a representation or warranty that Hazardous Substances are or are
not present in, on, or under, the site, or that there has been or shall be
compliance with any Environmental Law. Neither the Borrower nor any other
Person is entitled to rely on any site visit, observation, or testing by
the Agent or any Lender. Neither the Agent nor any Lender owes any duty of
care to protect the Borrower or any other Person against, or to inform the
Borrower or any other party of, any Hazardous Substances or any other
adverse condition affecting any site or property. Neither the Agent nor any
Lender shall be obligated to disclose to the Borrower or any other Person
any report or findings made as a result of, or in connection with, any site
visit, observation, or testing by the Agent or any Lender.
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(3) Survival; Defense. The obligations in this Section 10.12 shall
survive payment of all other Obligations. At the election of any Indemnitee, the
Borrower shall defend such Indemnitee using legal counsel satisfactory to such
Indemnitee in such Person's sole discretion, at the sole cost and expense of the
Borrower. All amounts owing under this Section shall be paid within 30 days
after demand.
SECTION 10.13. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND
EACH OF THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR UNDER ANY OTHER
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY;
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT ENTERING INTO THIS
AGREEMENT.
SECTION 10.14. SERVICE OF PROCESS. THE BORROWER, THE AGENT, AND THE
LENDERS HEREBY IRREVOCABLY CONSENT TO SERVICE OF PROCESS BY MEANS OF CERTIFIED
MAIL AT THE ADDRESS PROVIDED FOR IN SECTION 10.2. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF THE LENDERS, THE AGENT OR THE BORROWER TO SERVE SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.15. Facilities Agreement and Intercreditor Agreement. The
Lenders hereby consent to the execution and delivery by the Agent of the
Facilities Agreement and the Intercreditor Agreement (as such agreements are in
effect on the Effective Date) and acknowledge and agree that they will be bound
by the terms of the Facilities Agreement and the Intercreditor Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BOSTON CHICKEN, INC.
By: /s/ BERNADETTE DENAELEY
---------------------------------
Name: Bernadette Denaeley
Title:
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Attn: General Counsel
Telephone: (303) 278-9500
Facsimile: (303) 216-5339
BANK OF AMERICA ILLINOIS, as Agent
By: /s/ DAVID A. JOHANSON
---------------------------------
Name: David A. Johanson
Title: Vice President
231 South LaSalle Street
Chicago, Illinois 60697
Attn: David Johanson
Telephone: (312) 828-3782
Facsimile: (312) 974-0333
BANK OF AMERICA ILLINOIS,
as Issuing Lender
By: /s/ MARCIA CLAUSEN
---------------------------------
Name: Marcia Clausen
Title: Vice President
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Marcia Clausen
Telephone: (312) 828-3782
Facsimile: (312) 974-0333
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BANK OF AMERICA ILLINOIS, in its individual corporate
capacity as a Lender
By: /s/ MARCIA CLAUSEN
---------------------------------
Name: Marcia Clausen
Title: Vice President
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Marcia Clausen
Telephone: (312) 828-3782
Facsimile: (312) 974-0333
BANKERS TRUST COMPANY, as Documentation Agent and in its
individual corporate capacity as a Lender
By: /s/ MARY KAY COYLE
---------------------------------
Name: Mary Kay Coyle
Title: Managing Director
130 Liberty Street
New York, New York 10006
Attn: Mary Kay Coyle
Telephone: (212) 250-9094
Facsimile: (212) 250-7218
BANK BUMIPUTRA
By: /s/ ABDUL KADIR MAHMUD
---------------------------------
Name: Abdul Kadir Mahmud
Title: General Manager
900 Third Ave., Suite 1100
New York, NY 10022
Attn: Abdul Kadir Mahmud
Telephone: (212) 644-1280 ext. 246
Facsimile: (212) 644-1874
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<PAGE>
BANCO POPULAR DE PUERTO RICO
By: /s/ KURT LOZAW
---------------------------------
Name: Kurt Lozaw
Title: Assistant Vice President
7 West 51st Street
New York, NY 10019
Attn: Kurt Lozaw
Telephone: (212) 445-1824
Facsimile: (212) 586-3537
HARRIS TRUST AND SAVINGS BANK
By: /s/ JOHN M. DILLON
---------------------------------
Name: John M. Dillon
Title: Vice President
111 West Monroe Street
Chicago, IL 60690
Attn: John M. Dillon
Telephone: (312) 461-6780
Facsimile: (312) 461-2591
LASALLE NATIONAL BANK
By: /s/ JOHN C. THURSTON
---------------------------------
Name: John C. Thurston
Title: Loan Officer
135 South LaSalle Street
Suite 211
Chicago, IL 60603
Attn: John C. Thurston
Telephone: (312) 904-5487
Facsimile: (312) 904-6225
-65-
<PAGE>
THE MITSUBISHI TRUST AND BANKING CORPORATION, Chicago
Branch
By: /s/ AKIRA SUZUKI
---------------------------------
Name: Akira Suzuki
Title: Deputy General Manager
311 S. Wacker Drive
Suite 6300
Chicago, IL 60606
Attn: Vicki L. Kamm
Telephone: (312) 408-6014
Facsimile: (312) 663-0863
SAKURA BANK
By: /s/ OFUSA SATO
---------------------------------
Name: Ofusa Sato
Title: SVP & Assistant General Manager
616 S. Figueroa St., Suite 400
Los Angeles, CA 90071
Attn: CREDIT
Telephone: (213) 489-6278
Facsimile: (213) 623-8692
-66-
<PAGE>
EXHIBIT A-1
-----------
Form of Revolving A Note
------------------------
$23,227,100 December 9, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Bank of
America Illinois, in its capacity as agent for the ratable benefit of the
Lenders (as hereinafter defined) (the "Agent") at its principal office in
Chicago, Illinois, the principal amount of $23,227,100 (Twenty Three Million Two
Hundred Twenty Seven Thousand One Hundred Dollars) or, if less, the aggregate
unpaid principal amount of all Revolving A Loans (as defined in the Credit
Agreement hereinafter referenced) outstanding, as duly shown in the records of
the Agent or, at the Agent's option, on the schedule attached hereto (and any
continuation thereof), on the Termination Date.
The undersigned also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in immediately available funds.
This Note is the Revolving A Note described in, and is subject to the terms
and provisions of, the Secured Revolving Credit Agreement, dated as of December
9, 1996 (as the same may at any time be amended, modified or supplemented from
time to time, the "Credit Agreement"), among the undersigned, the lenders who
are or from time to time become party thereto (the "Lenders"), Bankers Trust
Company, as documentation agent for the Lenders, and Bank of America Illinois,
as Agent for the Lenders. Terms used herein and not otherwise defined herein are
used herein as defined in the Credit Agreement.
Reference is hereby made to the Credit Agreement for a statement of the
prepayment rights and obligations of the undersigned and for a statement of the
terms and conditions under which the due date of this Note may be accelerated.
Upon the occurrence of any Event of Default as specified in the Credit
Agreement, the principal balance hereof and the interest accrued hereon may be
declared to be forthwith due and payable, and any indebtedness of the Lenders or
other holder hereof to the undersigned may be appropriated and applied hereon.
-1-
<PAGE>
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
BOSTON CHICKEN, INC.
By:
------------------------
Name: Bernadette M. Dennehy
Title: Vice President
THIS REVOLVING A NOTE IS SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT
DATED DECEMBER 9, 1996, AMONG BOSTON CHICKEN, INC., BANK OF AMERICA ILLINOIS AS
AGENT FOR CERTAIN LENDERS, AND GENERAL ELECTRIC CAPITAL CORPORATION FOR ITSELF
AND AS AGENT FOR CERTAIN LEASE PARTICIPANTS.
This is to certify that this is one of the Revolving Notes described in and
secured by a Deed of Trust, Security Agreement and Fixture Filing, With
Collateral Assignment of Rents and Leases dated as of even date herewith on
property located in Hampton County, Virginia and by a Deed of Trust, Security
Agreement and Fixture Filing, With Collateral Assignment of Rents and Leases
dated as of even date herewith on property located in Prince William County,
Virginia.
__________________________________
Notary Public
My Commission Expires:____________
-2-
<PAGE>
Schedule attached to Revolving A Note dated December 9, 1996 of BOSTON CHICKEN,
INC., payable to the order of Bank of America Illinois in its capacity as Agent
for the ratable benefit of the Lenders.
Date of Loan, Interest
Continuation or Interest Amount of Rate Per Amount of Notation
Conversion Period Loan Annum Repayment Made By
- --------------- -------- --------- -------- --------- --------
-3-
<PAGE>
EXHIBIT A-2
-----------
Form of Revolving B Note
------------------------
$123,074,500 December 9, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Bank of
America Illinois, in its capacity as agent for the ratable benefit of the
Lenders (as hereinafter defined) (the "Agent") at its principal office in
Chicago, Illinois, the principal amount of $123,074,500 (One Hundred Twenty
Three Million Seventy Four Thousand Five Hundred Dollars) or, if less, the
aggregate unpaid principal amount of all Revolving B Loans (as defined in the
Credit Agreement hereinafter referenced) outstanding, as duly shown in the
records of the Agent or, at the Agent's option, on the schedule attached hereto
(and any continuation thereof), on the Termination Date.
The undersigned also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in immediately available funds.
This Note is the Revolving B Note described in, and is subject to the terms
and provisions of, the Secured Revolving Credit Agreement, dated as of December
9, 1996 (as the same may at any time be amended, modified or supplemented from
time to time, the "Credit Agreement"), among the undersigned, the lenders who
are or from time to time become party thereto (the "Lenders"), Bankers Trust
Company, as documentation agent for the Lenders, and Bank of America Illinois,
as Agent for the Lenders. Terms used herein and not otherwise defined herein are
used herein as defined in the Credit Agreement.
Reference is hereby made to the Credit Agreement for a statement of the
prepayment rights and obligations of the undersigned and for a statement of the
terms and conditions under which the due date of this Note may be accelerated.
Upon the occurrence of any Event of Default as specified in the Credit
Agreement, the principal balance hereof and the interest accrued hereon may be
declared to be forthwith due and payable, and any indebtedness of the Lenders or
other holder hereof to the undersigned may be appropriated and applied hereon.
-1-
<PAGE>
In additional to and in limitation of the foregoing and the provisions of
the Credit Agreement, the undersigned further agrees, subject only to any
limitation imposed by applicable law, to pay all expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
BOSTON CHICKEN, INC.
By:
------------------------
Name: Bernadette M. Dennehy
Title: Vice President
THIS REVOLVING B NOTE IS SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT
DATED DECEMBER 9, 1996, AMONG BOSTON CHICKEN, INC., BANK OF AMERICA ILLINOIS AS
AGENT FOR CERTAIN LENDERS, AND GENERAL ELECTRIC CAPITAL CORPORATION FOR ITSELF
AND AS AGENT FOR CERTAIN LEASE PARTICIPANTS.
This is to certify that this is one of the Revolving Notes described in and
secured by a Deed of Trust, Security Agreement and Fixture Filing, With
Collateral Assignment of Rents and Leases dated as of even date herewith on
property located in Hampton County, Virginia and by a Deed of Trust, Security
Agreement and Fixture Filing, With Collateral Assignment of Rents and Leases
dated as of even date herewith on property located in Prince William County,
Virginia.
- -----------------------------------------
Notary Public
My Commission Expires:
--------------------
-2-
<PAGE>
Schedule attached to Revolving B Note dated December 9, 1996 of BOSTON CHICKEN,
INC., payable to the order of Bank of America Illinois in its capacity as Agent
for the ratable benefit of the Lenders.
Date of Loan, Interest
Continuation or Interest Amount of Rate Per Amount of Notation
Conversion Period Loan Annum Repayment Made By
- --------------- -------- --------- -------- --------- --------
<PAGE>
EXHIBIT A-3
Form of Revolving C Note
$3,698,400 December 9, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Bank of
America Illinois, in its capacity as agent for the ratable benefit of the
Lenders (as hereinafter defined) (the "Agent") at its principal office in
Chicago, Illinois, the principal amount of $3,689,400 (Three Million Six Hundred
Eighty Nine Thousand Four Hundred Dollars) or, if less, the aggregate unpaid
principal amount of all Revolving C Loans (as defined in the Credit Agreement
hereinafter referenced) outstanding, as duly shown in the records of the Agent
or, at the Agent's option, on the schedule attached hereto (and any continuation
thereof), on the Termination Date.
The undersigned also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in immediately available funds.
This Note is the Revolving C Note described in, and is subject to the terms
and provisions of, the Secured Revolving Credit Agreement, dated as of December
9, 1996 (as the same may at any time be amended, modified or supplemented from
time to time, the "Credit Agreement"), among the undersigned, the lenders who
are or from time to time become party thereto (the "Lenders"), Bankers Trust
Company, as documentation agent for the Lenders, and Bank of America Illinois,
as Agent for the Lenders. Terms used herein and not otherwise defined herein are
used herein as defined in the Credit Agreement.
Reference is hereby made to the Credit Agreement for a statement of the
prepayment rights and obligations of the undersigned and for a statement of the
terms and conditions under which the due date of this Note may be accelerated.
Upon the occurrence of any Event of Default as specified in the Credit
Agreement, the principal balance hereof and the interest accrued hereon may be
declared to be forthwith due and payable, and any indebtedness of the Lenders or
other holder hereof to the undersigned may be appropriated and applied hereon.
In addition to and not in limitation of the foregoing and the provisions of
the Credit Agreement, the undersigned further
-1-
<PAGE>
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
BOSTON CHICKEN, INC.
By:
-------------------------------------------------
Name: Bernadette M. Dennehy
Title: Vice President
THIS REVOLVING C NOTE IS SUBJECT TO THE TERMS OF THE INTERCREDITOR AGREEMENT
DATED DECEMBER 9, 1996, AMONG BOSTON CHICKEN, INC., BANK OF AMERICA ILLINOIS AS
AGENT FOR CERTAIN LENDERS, AND GENERAL ELECTRIC CAPITAL CORPORATION FOR ITSELF
AND AS AGENT FOR CERTAIN LEASE PARTICIPANTS.
-2-
<PAGE>
Schedule attached to Revolving C Note dated December 9, 1996 of BOSTON CHICKEN,
INC., payable to the order of Bank of America Illinois in its capacity as Agent
for the ratable benefit of the Lenders.
<TABLE>
<CAPTION>
Date of Loan, Interest
Continuation or Interest Amount of Rate Per Amount of Notation
Conversion Period Loan Annum Repayment Made By
- --------------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
---------
Form of Borrowing Request
-------------------------
Bank of America Illinois
as Agent for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: _________________
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to Sections 2.2(1)
of the Secured Revolving Credit Agreement, dated as of December 9, 1996 (as
amended or modified, the "Credit Agreement"), among Boston Chicken, Inc., a
Delaware corporation (the "Borrower"), the lenders that are or from time to time
become party thereto (the "Lenders"), Bankers Trust Company, as documentation
agent for the Lenders, and Bank of America Illinois, as agent for the Lenders
(in such capacity, the "Agent"). Unless otherwise defined herein, capitalized
terms used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that a Revolving Loan be made in the
aggregate principal amount of $_________ on _________, 199_ as a [Floating Rate
Loan] [Eurodollar Loan having an Interest Period of _______months].
The Borrower hereby certifies and warrants that on the date the
Revolving Loan requested hereby is made, after giving effect to the making of
such Revolving Loan:
(a) No Default or Event of Default has occurred and is continuing or
will result from the borrowing of such Revolving Loan.
(b) The representations and warranties of the Borrower contained in
the Credit Agreement, in Article II of the Facilities Agreement and in each
other Loan Document are correct in all material respects on and as of the
date of such Revolving Loan as though made on and as of such date, except
to the extent that such representations and warranties expressly relate to
an earlier date (in which case such representations and warranties shall
have been true and correct in all material respects on and as of such
earlier date).
-1-
<PAGE>
(c) The Borrower is in compliance with Section 3.10 of the Facilities
Agreement.
The Borrower agrees that if prior to the time of the Revolving Loan
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the Agent.
Except to the extent, if any, that prior to the time of the Revolving Loan
requested hereby the Agent shall receive written notice to the contrary from the
Borrower, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such Revolving Loan as if then
made.
Please make the proceeds of the Revolving Loan available in accordance
with the instructions previously provided to you or as set forth on Annex I
attached hereto.
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
an Authorized Officer this ____ day of _____________, 199__.
BOSTON CHICKEN, INC.
By:_______________________________
Name: Bernadette M. Dennehy
Title: Vice President
-2-
<PAGE>
ANNEX I
Instructions
------------
-3-
<PAGE>
EXHIBIT C
---------
Form of Continuation/Conversion Notice
--------------------------------------
Bank of America Illinois
as Agent for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: __________________
Ladies and Gentlemen:
This Continuation/Conversion Notice is delivered to you pursuant
to Section 2.2(2) of the Secured Revolving Credit Agreement, dated as of
December 9, 1996 (as amended or modified, the "Credit Agreement"), among Boston
Chicken, Inc., a Delaware corporation (the "Borrower"), the lenders that are or
from time to time become party thereto (the "Lenders"), Bankers Trust Company,
as documentation agent for the Lenders, and Bank of America Illinois, as agent
for the Lenders (in such capacity, the "Agent"). Unless otherwise defined
herein, capitalized terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that on ________________, 199__,
(1) $___________ of the presently outstanding principal
amount of the Revolving Loans originally made on __________, 199_,
(2) and all presently being maintained as [Floating Rate
Loans] [Eurodollar Loans],
(3) be [converted into] [continued as],
(4) [Floating Rate Loans] [Eurodollar Loans having an
Interest Period of ____________ months].
The Borrower hereby certifies and warrants that on the date the
conversion or continuation herein requested is made, after giving effect to the
making of such conversion or continuation:
(a) No Default or Event of Default has occurred and is continuing or
will result from the conversion or continuation herein requested.
(b) The representations and warranties of the Borrower contained in
the Credit Agreement, in Article II of the Facilities Agreement and
-1-
<PAGE>
in each other Loan Document are correct in all material respects on and as
of the date of such conversion or continuation requested hereby as though
made on and as of such date, except to the extent that such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all material
respects on and as of such earlier date).
(c) The Borrower is in compliance with Section 3.10 of the Facilities
Agreement.
Except to the extent, if any, that prior to the time of the
continuation or conversion requested hereby the Agent shall receive written
notice to the contrary from the Borrower, each matter certified to herein shall
be deemed to be certified at the date of such continuation or conversion as if
then made.
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered, and the certification and warranties contained herein to
be made, by an Authorized Officer this ___ day of _________, 199_.
BOSTON CHICKEN, INC.
By:_______________________________
Name: Bernadette M. Dennehy
Title: Vice President
-2-
<PAGE>
EXHIBIT D1
(212) 373-3000
(212) 757-3990
December 13, 1996
The Agent, the Documentation Agent and
each of the Lenders party to
the Secured Revolving Credit
Agreement referred to below
c/o Bank of America Illinois, as Agent
231 South LaSalle Street
Chicago, Illinois 60697
Ladies and Gentlemen:
We have acted as special counsel to Boston Chicken, Inc., a Delaware
corporation (the "Borrower"), BC Real Estate Investments, Inc., a Delaware
--------
corporation ("BCRE"), Mid-Atlantic Restaurant Systems, Inc., a Delaware
----
corporation ("Mid-Atlantic, Inc."), and Mid-Atlantic Restaurant Systems L.P., a
------------------
limited partnership formed under the laws of the State of Delaware ("Mid-
---
Atlantic L.P." and, together with the Borrower, BCRE and Mid-Atlantic, Inc., the
- -------------
"Principal Parties"), in connection with the transactions contemplated by the
-----------------
Secured Revolving Credit Agreement dated as of December 9, 1996 among the
Borrower, the lenders from time to time party thereto (the "Lenders"), Bankers
-------
Trust New York
<PAGE>
The Agent, the Documentation Agent 2
and each of the Lenders
Corporation, as documentation agent for the Lenders (the "Documentation Agent"),
--------------------
and Bank of America Illinois, as agent for the Lenders (the "Agent") (the
-----
"Credit Agreement"). Capitalized terms used herein and not otherwise defined
----------------
have the respective meanings given those terms in the Credit Agreement. This
opinion is being furnished to you at the request of the Borrower.
In connection with this opinion, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents, each dated as of December 9, 1996, unless otherwise indicated
(collectively, the "Transaction Documents;" and the Transaction Documents,
---------------------
excluding (v) below, the "Operative Documents"):
-------------------
(i) The Credit Agreement;
(ii) The Revolving A Note of the Borrower delivered pursuant to the
Credit Agreement;
(iii) The Revolving B Note of the Borrower delivered pursuant to the
Credit Agreement;
(iv) The Revolving C Note of the Borrower delivered pursuant to the
Credit Agreement;
(v) The Form of Mortgage, in the form of Exhibit E to the Credit
Agreement;
<PAGE>
The Agent, the Documentation Agent 3
and each of the Lenders
(vi) The Facilities Agreement among the Borrower, the Agent and
General Electric Capital Corporation for itself and as agent
for certain Lease Participants;
(vii) The Pledge Agreement made by the Borrower and Mid-Atlantic,
Inc. in favor of the Agent, in its capacity as Collateral Agent
(the "Collateral Agent") (the "Pledge Agreement");
---------------- ----------------
(viii) The Guaranty made by Mid-Atlantic L.P. in favor of the Agent
(the "Mid-Atlantic L.P. Guaranty");
--------------------------
(ix) The Guaranty made by Mid-Atlantic, Inc. in favor of the Agent
(the "Mid-Atlantic, Inc. Guaranty"); and
---------------------------
(x) The Guaranty made by BCRE in favor of the Agent (together with
the Mid-Atlantic L.P. Guaranty and the Mid-Atlantic, Inc.
Guaranty, the "Guaranties").
----------
In addition, we have examined such certificates, agreements and
documents as we deemed relevant and necessary as a basis for the opinions
hereinafter expressed.
In our examination of the aforesaid documents, we have assumed,
without independent investigation, (i) the genuineness of all signatures; (ii)
the enforceability of the Transaction Documents against each party thereto other
than the Principal Parties; (iii) the authenticity of all documents submitted to
us as originals;
<PAGE>
The Agent, the Documentation Agent 4
and each of the Lenders
(iv) the conformity to the original documents of all documents submitted to us
as certified, photostatic, reproduced or conformed copies of valid existing
agreements or other documents and the authenticity of all such latter documents;
(v) the necessary power and authority of each Principal Party to execute,
deliver and perform its obligations under each of the Transaction Documents to
which it is a party; (vi) the due authorization, execution and delivery of the
Transaction Documents by each party thereto; (vii) the legal capacity of all
individuals who have executed any of the documents; and (viii) that there are
not agreements between any of the parties to the Transaction Documents which
would alter any of the agreements set forth in the Transaction Documents.
In expressing the opinions set forth herein, we have relied upon the
factual matters contained in the representations and warranties of the Principal
Parties made in the Transaction Documents and upon certificates of public
officials and officers of the Principal Parties.
Based upon the foregoing, and subject to the assumptions, exceptions
and qualifications set forth herein, we are of the opinion that:
1. The Operative Documents constitute the legal, valid and binding
obligations of each Principal Party which is a party thereto, enforceable
against such Principal Party in accordance with the terms thereof.
<PAGE>
The Agent, the Documentation Agent 5
and each of the Lenders
2. The execution and delivery by each Principal Party of each of the
Transaction Documents to which it is a party and the consummation by such
Principal Party of the transactions contemplated thereby do not violate or
result in a breach of or default under any applicable law or regulation of the
United States (including Regulation U of the Board of Governors of the Federal
Reserve System of the United States) or the State of New York.
3. Except for filings which are necessary to perfect the security
interests granted under the Operative Documents and such other filings,
authorizations or approvals specifically contemplated by the Operative
Documents, no authorizations or approvals of, and no filings with, any
governmental or regulatory authority or agency of the United States or the State
of New York are necessary for the execution, delivery or performance by any
Principal Party of the Operative Documents to which it is a party.
4. Assuming that the Lenders, the Documentation Agent and the Agent
are entering into the Credit Agreement, General Electric Capital Corporation,
for itself and as agent for certain Participants (the "Lessor"), is entering
------
into Master Lease Agreement No. 2 dated as of December 9, 1996 between the
Lessor, as lessor, and the Borrower, as lessee (the "Lease"), the Lessor and the
-----
Lease Participants (as defined in the Intercreditor Agreement) are entering
into the Participation Agreement (as defined in the Intercreditor Agreement),
the Agent and the Lessor are entering
<PAGE>
The Agent, the Documentation Agent 6
and each of the Lenders
into the Intercreditor Agreement and the Collateral Agent is entering into the
Pledge Agreement, in each case, in good faith without notice of any adverse
claims to the partnership interests of Mid-Atlantic L.P. listed on Item A of
Attachment I to the Pledge Agreement (the "Pledged Units") and after giving
-------------
effect (x) to the transfer of the Existing BAI Letters of Credit and the
Borrower's reimbursement obligations with respect thereto from the Amended and
Restated Credit Agreement dated as of May 18, 1994 among the Borrower, the Agent
and the lenders party thereto (the "Amended and Restated Credit Agreement") to
-------------------------------------
the Credit Agreement on the date hereof, and (y) to the funding of the Lease
Assets (as defined in the Lease) pursuant to the Lease on the date hereof, the
Collateral Agent has a valid security interest to secure the Secured Obligations
(as defined in the Pledge Agreement) in all right, title and interest of the
Borrower and Mid-Atlantic, Inc. in and to such Pledged Units.
5. Assuming that (i) the Collateral Agent has, at the date hereof,
possession of the instruments representing the notes listed on Item B of
Attachment I to the Pledge Agreement (the "Pledged Notes") in the State of New
-------------
York and maintains continuous possession of such Pledged Notes in the State of
New York and (ii) the Lenders, the Documentation Agent and the Agent are
entering into the Credit Agreement, the Lessor is entering into the Lease, the
Lessor and the Lease Participants are entering into the Participation Agreement,
the Agent and the Lessor are entering into the Intercreditor Agreement and the
Collateral Agent is entering into
<PAGE>
The Agent, the Documentation Agent 7
and each of the Lenders
the Pledge Agreement, in each case, in good faith without notice of any adverse
claim to such Pledged Notes, and after giving effect (x) to the transfer of the
Existing BAI Letters of Credit and the Borrower's reimbursement obligations with
respect thereto from the Amended and Restated Credit Agreement to the Credit
Agreement on the date hereof (y) to the funding of Lease Assets pursuant to the
Lease on the date hereof, the Collateral Agent has a valid and perfected
security interest, for the benefit of the Creditors (as defined in the Pledge
Agreement) to secure the Secured Obligations in all right, title and interest of
the Borrower and Mid-Atlantic, Inc. in and to such Pledged Notes which security
interest has priority over any other security interest in the Pledged Notes
which can be perfected by possession under the NY-UCC.
The foregoing opinions are subject to the following assumptions,
exceptions and qualifications:
(a) The enforceability of the Operative Documents may be: (i) subject
to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights generally; (ii) subject
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity); and (iii) subject to the
qualification that certain remedial provisions of the Operative Documents are or
may be unenforceable in whole or in part under the laws of the State of New
York, but the inclusion of such
<PAGE>
The Agent, the Documentation Agent 8
and each of the Lenders
provisions does not make the remedies afforded by such Operative Documents
inadequate for the practical realization of the rights and benefits purported to
be provided thereby except for the economic consequences resulting from any
delay imposed by, or any procedure required by, applicable New York laws, rules,
regulations and court decisions and by constitutional requirements in and of the
State of New York.
(b) We express no opinion as to: (i) the enforceability of any
provisions in the Guaranties purporting to preserve and maintain the liability
of any party thereto despite the fact that the guarantied debt is unenforceable
due to illegality or the fact that the obligee has voluntarily released the
primary obligor's liability on the guaranteed debt; (ii) the enforceability of
any provisions contained in the Operative Documents that purport to establish
(or may be construed to establish) evidentiary standards; (iii) the
enforceability of any provisions contained in the Operative Documents that
constitute waivers which are prohibited under the Uniform Commercial Code of the
State of New York (the "NY-UCC") or any other New York law or which provide that
------
certain terms thereof may be waived or modified only in writing; (iv) the
enforceability of clauses waiving trial by jury; or (v) the availability of
specific performance.
(c) In giving the opinions set forth in paragraphs 4 and 5 above, we
express no opinion as to: (i) any person's right, title or interest in or to
<PAGE>
The Agent, the Documentation Agent 9
and each of the Lenders
any Pledged Units or Pledged Notes, as the case may be, or the description of
such Pledged Units or Pledged Notes, as the case may be, in the Credit Agreement
or the Pledge Agreement; (ii) the laws of any other state or the perfection and
effect of perfection or non-perfection of a security interest in the Pledged
Units or Pledged Notes subject to the laws of any state other than New York;
(iii) the perfection of security interests in fixtures, equipment used in
farming operations, farm products, consumer goods, timber or minerals or the
like, or accounts resulting from the sale of equipment used in farming
operations, farm products, consumer goods, timber or minerals or the like; or
(iv) the creation, validity, perfection, priority or enforceability of any
security interest sought to be created in any patents, trademarks, trade names,
service marks, copyrights, deposit accounts, insurance policies, real property
or any other items of property to the extent that a security interest therein is
excluded from the coverage of Article 9 of the NY-UCC. In addition, except as
specifically set forth in paragraph 5 above, we express no opinion as to the
perfection or priority of any security interest.
(d) We wish to point out that, in the case of proceeds (as defined in
Article 9 of the NY-UCC), the continuation of perfection of any security
interest therein (i) is limited to the extent set forth in Section 9-306 of the
NY-UCC, and (ii) if such proceeds consist of property in which a perfected
security interest cannot be obtained or maintained by the filing of UCC-1
financing statements in filing
<PAGE>
The Agent, the Documentation Agent 10
and each of the Lenders
offices located within the State of New York will require additional compliance
with applicable provisions of the NY-UCC.
(e) We call to your attention the fact that (i) Article 9 of the NY-
UCC requires the filing of continuation statements within the period of six
months prior to the expiration of each five year period from the date of the
original filing of financing statements, as applicable, in order to maintain the
effectiveness of the filings referred to in this opinion, and (ii) additional
filings may be necessary if any debtor changes its name, identity or corporate
structure or the jurisdictions in which its places of business, its chief
executive office or the Pledged Property (as defined in the Pledge Agreement)
are located.
Our opinions expressed above are limited to the laws of the State of
New York and the Federal laws of the United States (other than (i) any Federal
or state franchising laws and (ii) any Federal or state securities laws). Our
opinions are rendered only with respect to the laws, and the rules, regulations
and orders thereunder, which are currently in effect.
<PAGE>
The Agent, the Documentation Agent 11
and each of the Lenders
This letter is furnished by us solely for your benefit in connection
with the transactions referred to in the Credit Agreement and may not be
circulated to, or relied upon by, any other person, except that this letter may
be circulated to any prospective Lender and may be relied upon by (i) any person
who, in the future, becomes a Lender or (ii) the Lessor.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE>
EXHIBIT D2
December __, 1996
To: The Agent and each Lender party
to the Credit Agreement referred to
below, c/o
Bank of America Illinois, as Agent
231 South LaSalle Street
Chicago, IL 60697
Re: Boston Chicken, Inc.
Ladies and Gentlemen:
I have served as general counsel to Boston Chicken, Inc., a Delaware
corporation (the "Borrower"), and as counsel to Mid-Atlantic Restaurant Systems,
Inc., a Delaware corporation ("MidAtlantic Inc."), Mid-Atlantic Restaurant
Systems L.P., a Delaware limited partnership ("MidAtlantic LP"), and BC Real
Estate Investments, Inc., a Delaware corporation ("BCRE"; together with the
Borrower, MidAtlantic Inc. and MidAtlantic LP, collectively the "Credit Parties"
and individually, a "Credit Party"), in connection with the Secured Revolving
Credit Agreement dated as of December ___, 1996 (the "Credit Agreement") among
the Borrower, the lenders named therein (the "Lenders"), Bankers Trust New York
Corporation, as documentation agent for the Lenders, and Bank of America
Illinois, as agent for the Lenders (in such capacity, the "Agent") and the other
Loan Documents referred to below. This opinion is rendered to you pursuant to
SECTION 5.1(8) of the Credit Agreement. Capitalized terms used without
definition in this opinion have the meanings given to them in the Credit
Agreement.
In connection with this opinion, I have, or an attorney under my
supervision has, reviewed originals, or copies certified or otherwise identified
to our satisfaction, of the following documents, each dated as of the date
hereof:
(i) the following, collectively called the "Loan Documents":
the Credit Agreement;
the Revolving Notes;
the Facilities Agreement;
the Mortgages;
<PAGE>
the Pledge Agreement;
the Intercreditor Agreement;
the Guarantee of BCRE;
the Guarantee of MidAtlantic Inc.; and
the Guarantee of MidAtlantic LP;
(ii) A certificate of the Assistant Secretary of each Credit Party
certifying as to (A) the Articles of Incorporation and By-laws (or the
functional equivalent thereof) of such Credit Party (the "Basic
Documents"), and (B) Resolutions by the Board of Directors (or functional
equivalent thereof) of such Credit Party;
(iii)Copies of those indentures, loan or credit agreements, leases,
guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments (the "Other Agreements"), and orders, writs,
judgments, awards, injunctions and decrees (the "Court Orders"), which
affect or purport to affect the Borrower's right to borrow money or to
undertake and perform such Credit Party's obligations under the Loan
Documents.
We have also examined originals or copies of other corporate documents and
records, and other certificates, opinions and instruments as we have deemed
necessary as a basis for the opinions expressed below.
In the examination of the aforesaid documents, I have assumed, without
independent investigation, the genuineness of all signatures (other than the
Credit Parties), the enforceability of the Loan Documents against each party
thereto, the legal capacity of all individuals who have executed any of the Loan
Documents, the authenticity of all documents submitted to me as originals, the
conformity to the original documents of all documents submitted to me as
certified, photostatic, reproduced or conformed copies of valid existing
agreements or other documents and the authenticity of all such latter documents.
In expressing the opinions set forth herein, I have relied upon the factual
matters contained in the representations and warranties of the Credit Parties
made in the Loan Documents and upon certain certificates of public officials and
officers of the Credit Parties.
Based upon the foregoing, and subject to the assumptions, exceptions and
qualifications set forth herein, I am of the opinion that:
1. Each of the Credit Parties is a corporation or limited
partnership, as applicable, duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each of
the Credit Parties is duly qualified to transact business in each
jurisdiction where the nature of its business makes such qualification
necessary or the failure of such Credit Party to be so qualified would have
a material adverse effect on the financial condition or operations of the
Borrower and its subsidiaries taken as a whole.
<PAGE>
2. Each of the Credit Parties has the power to execute, deliver and
perform the terms and provisions of each of the Loan Documents to which it
is a party and has taken all necessary action to authorize the execution,
delivery and performance by it of each of such Loan Documents and each of
the Credit Parties has duly executed and delivered each Loan Document to
which it is a party.
3. The execution, delivery and performance by each Credit Party of
the Loan Documents to which it is a party, and compliance by such Credit
Party with the terms and provisions thereof, will not (i) violate any
provision of any existing law, statute, rule or regulation of the State of
Colorado or the General Corporation Law of the State of Delaware (the
"GCL") now binding on such Credit Party, (ii) result in any breach of, or
constitute a default under, any of the Other Documents and Court Orders to
which such Credit Party is a party, or (iii) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of such Credit Party pursuant to the terms of any of
the Other Agreements and Court Orders to which such Credit Party is a
party, or (iv) contravene or conflict with the Basic Documents of such
Credit Party.
4. To the best of my knowledge, there are no actions or proceedings
pending or overtly threatened before any court, governmental agency or
arbitrator which I reasonably believe are likely to affect the legality,
validity, binding effect or enforceability of any of the Loan Documents.
5. None of the Credit Parties and none of their respective
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
6. None of the Credit Parties and none of their subsidiaries is a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
7. The number of partnership units issued and outstanding of
MidAtlantic L.P. is as set forth on ANNEX I. All partnership units of
MidAtlantic L.P. owned by the Borrower or MidAtlantic Inc., as the case may
be, are free and clear of all liens, claims, limitations on voting rights,
options, security interests and other encumbrances, other than those liens,
claims, security interests, and other encumbrances, arising or created
pursuant to the Loan Documents.
The opinions expressed above are limited to the laws of the State of
Colorado, and the GCL. The opinions are rendered only with respect to the laws,
and the rules, regulations and orders thereunder, which are currently in effect.
<PAGE>
This opinion is given for the benefit of, and may be relied on by, the
addressee, the Lenders and its and their permitted successors and assigns. This
opinion relates solely as of the date hereof and I assume no obligation to
update or supplement this opinion.
Very truly yours,
By: ________________________________
Donald J. Bingle
General Counsel
<PAGE>
EXHIBIT E
MORTGAGE AND SECURITY AGREEMENT WITH
COLLATERAL ASSIGNMENT OF RENTS
AND LEASES
THIS MORTGAGE AND SECURITY AGREEMENT WITH COLLATERAL ASSIGNMENT OF RENTS
AND LEASES (this "Mortgage") is being executed and delivered this _____ day of
December, 1996, by BC REAL ESTATE INVESTMENTS, INC., a Delaware corporation
("BCRE"), whose business address is 14103 Denver West Parkway, Golden, Colorado
80401, to BANK OF AMERICA ILLINOIS, as Collateral Agent (as such term is defined
in the Increditor Agreement referred to below) (herein, together with its
successors and assigns in such capacity, the "Collateral Agent"), whose business
address is 231 South LaSalle Street, Chicago, Illinois 60697.
R E C I T A L S :
- - - - - - - -
WHEREAS, concurrently herewith, Boston Chicken, Inc., a Delaware
corporation ("Company") is entering into that certain Secured Revolving Credit
Agreement dated as of even date herewith (as amended, supplemented, modified,
restated, refinanced, refunded or renewed from time to time in accordance with
the terms of the Intercreditor Agreement referred to below, the "Credit
Agreement") among Company, the financial institutions from time to time party
thereto (the "Lenders"), Bank of America Illinois, as letter of credit issuing
bank (in such capacity, the "Issuing Lender") and as Agent for Lenders ("Loan
Agent"), and Bankers Trust New York Corporation, as Documentation Agent,
pursuant to which Company has executed and delivered to Loan Agent [that certain
Revolving A Note dated as of even date herewith in the original principal amount
of Twenty Three Million Two Hundred Twenty Seven Thousand One Hundred Dollars
($23,227,100) (the "Revolving A Note")], [that certain Revolving B Note dated as
of even date herewith in the original principal amount of One Hundred Twenty
Three Million Seventy Four Thousand Five Hundred Dollars ($123,074,500) (the
"Revolving B Note")], and [that certain Revolving C Note dated as of even date
herewith in the original principal amount of Three Million Six Hundred Ninety
Eight Thousand Four Hundred Dollars ($3,698,400) (the "Revolving C Note")],
([Revolving A Note], [Revolving B Note], [Revolving C Note], together with all
notes delivered in renewal, substitution or exchange of all or any thereof, are
hereinafter referred to as the "Revolving Notes"), together with interest to
accrue thereon as in the Revolving Notes provided and a maturity date, if not
sooner paid or accelerated, of December 1, 1999;
WHEREAS, concurrently herewith, Company is entering into that certain
Master Lease Agreement No. 2 dated as of even date herewith (as amended,
supplemented, modified, restated, refinanced, refunded or renewed from time to
time in accordance with the terms of the Intercreditor Agreement, the "1996
Master Lease Agreement") between Company and General Electric Capital
Corporation, for itself and as agent for the Lease Participants referred to
below (in its individual capacity, "GECC"; and in such dual capacity, the "Lease
Agent") and as agent for Loan Agent, in the original principal amount of Three
Hundred Million Dollars ($300,000,000), together with interest to accrue thereon
as in the 1996 Master Lease Agreement provided and a maturity date, if not
sooner paid or accelerated, of January 1, 2002;
WHEREAS, on the date hereof and/or from time to time hereafter, subject to
the terms of the 1996 Master Lease Agreement, GECC may convey to certain
financial institutions (the "Lease Participants") participating interests in its
rights, duties and obligations under the 1996 Master Lease Agreement;
WHEREAS, concurrently herewith, Company, Loan Agent and Lease Agent are
entering into that certain Intercreditor Agreement dated as of even date
herewith (as the same may be amended, restated or renewed from time to time in
whole or in part, the "Intercreditor Agreement") which sets forth certain
agreements among the Lenders, Issuing Lender, Loan Agent, Lease Agent and the
Lease Participants (collectively, the "Creditors") with respect to, among other
things, voting rights and collateral issues;
WHEREAS, concurrently herewith, Company, Loan Agent and Lease Agent are
entering into that certain Facilities Agreement dated as of even date herewith
(as the same may be amended, restated or
1
<PAGE>
renewed from time to time in whole or in part, the "Facilities Agreement;" any
capitalized term used in this Mortgage and not otherwise defined herein shall
have the same meaning assigned to such term in the Facilities Agreement) which
sets forth certain agreements among them with respect to the obligations and
covenants common to the Loan Documents and the 1996 Lease Documents;
WHEREAS, BCRE is a Subsidiary of Company;
WHEREAS, pursuant to the terms of the Facilities Agreement, BCRE is
required to execute and deliver guaranties in favor of Loan Agent and in favor
of Lease Agent (the "Guaranties") and this Mortgage;
WHEREAS, pursuant to the terms of the Intercreditor Agreement, Loan Agent
and Lease Agent have appointed Collateral Agent as their agent for the purposes
of administering this Mortgage and holding and disposing of the Property (as
hereinafter defined) in accordance with the terms thereof; and
NOW, THEREFORE, BCRE, to secure/1/ payment of the indebtedness and sums due
or to become due pursuant to the Credit Documents (which term includes the
Guaranties and this Mortgage), and the performance of the covenants herein and
therein contained to be performed, kept and observed by BCRE and Company, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, does hereby IRREVOCABLY MORTGAGE, GRANT, CONVEY, ASSIGN
AND TRANSFER unto COLLATERAL AGENT, the real estate situated in the County of
____________________ and State of ____________________, as more particularly
described in Exhibit A attached hereto and made a part hereof;
TOGETHER with all easements, rights of way, licenses, privileges,
tenements, hereditaments and appurtenances belonging thereto, all minerals, oil,
gas and hydrocarbon substances located on or thereunder, all development rights,
air rights, water, water rights and water stock relating thereto, and all rents,
issues, proceeds and profits therefrom, including all right, title, estate and
interest of BCRE therein at law or in equity;
TOGETHER with all improvements now or hereafter erected thereon and all
materials intended for construction, alteration and repair of such improvements
now or hereafter erected thereon, all of which materials shall be deemed to be
included within the real estate immediately upon the delivery thereof to the
premises, and also all machinery, apparatus, equipment, systems and fixtures now
or hereafter located in or upon or affixed to said real estate or any part
thereof, owned or hereafter acquired by BCRE and used or useable in connection
with any present or future operation of the improvements on the real estate,
including all heating, lighting, refrigerating, ventilating, air conditioning,
air cooling, lifting, fire extinguishing, plumbing, cleaning, communications,
and power equipment, systems and apparatus; all gas, water and electrical
equipment, systems and apparatus; all engines, motors, tanks, pumps, screens,
storm doors, storm windows, shades, blinds, awnings, floor coverings, cabinets,
partitions, conduits, ducts and compressors, and all items of furniture,
furnishings, equipment and personal property owned by BCRE and used in the
operation of said real estate, excluding, however, all items of furniture,
furnishings, equipment and personal property leased under the 1995 Lease
Documents or the 1996 Lease Documents (the "Excluded Property");
TOGETHER WITH all of the rights and claims of BCRE, wherever located and
whether now or hereafter owned by, existing in favor of, in the possession of or
in the control of BCRE, including: all accounts, accounts receivable, security
deposits, writings evidencing a monetary obligation, contract rights and other
creditor's interests with respect to the property conveyed hereby; all contracts
relating to the use, operation, occupation, maintenance, repair or construction
of the property conveyed hereby; all permits, licenses, franchises benefitting
the property conveyed hereby, together with the benefit of any deposits
_________________________
/1/ Description of obligations secured to be amended depending on Revolving
Notes secured, one-action and other state law limitations.
2
<PAGE>
or payments now or hereafter made by BCRE or on its behalf in connection with
the foregoing; and all books and records, including all lease documents,
relating to the property conveyed hereby.
TOGETHER WITH all judgments, awards of damages or settlements related to
and all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including proceeds of insurance and/or
condemnation, and all products, additions, accessions, attachments, parts,
replacements and substitutes therefor.
ALL OF THE FOREGOING, taken together with the real estate (but exclusive of
the Excluded Property), are hereinafter sometimes collectively or severally, as
the context requires, referred to as the "Property". It is understood and
agreed that all such machinery, equipment, apparatus, goods, systems and
fixtures that are or will become a part of the real estate are acknowledged to
be a portion of the security for the indebtedness secured hereby and covered by
this Mortgage; and as to any of the aforesaid property which does not so form a
part of the real estate or does not constitute a "Fixture" as defined in the
Uniform Commercial Code of the State of ____________________ (or, if the
security interest in any of such property is governed by the law of a State
other than ____________________, then, as to the matter in question, the Uniform
Commercial Code in effect in that State, in any case, the "Code"), this Mortgage
is hereby deemed to be a Security Agreement under the Code for the purpose of
creating a continuing security interest in such property, which BCRE hereby
grants to Collateral Agent as "Secured Party" (as defined in the Code).
TO HAVE AND TO HOLD the Property unto Collateral Agent, its successors and
assigns, forever, for the uses and purposes set forth herein. BCRE represents
that at the time of the execution and delivery of this Mortgage it holds a good
and valid fee title to that portion of the Property which is real estate and
good and valid title to that portion of the Property for which a security
interest pursuant to the Code has been granted to Collateral Agent; that it has
the right and power to grant, mortgage, and convey the same in the manner and
form herein provided; that the actions required to authorize the execution,
delivery and performance of this Mortgage have been taken; that the Property is
free from all Liens whatsoever excepting only the lien of general real estate
taxes not yet due and payable, Liens permitted pursuant to the terms of the
Facilities Agreement, and any declarations, easements or restrictions listed in
a schedule of exceptions to coverage in any title insurance policy insuring
Collateral Agent's interest in the Property, and that BCRE will defend the
rights and privileges accruing to Collateral Agent on account of this Mortgage
forever against all lawful claims and demands whatsoever.
THIS MORTGAGE IS GIVEN TO SECURE/2/: (1) payment of the indebtedness
evidenced by the Revolving Notes and the 1996 Master Lease Agreement and such
other sums as may become due and payable pursuant to the terms of the Credit
Documents; and (2) the performance of the covenants, conditions and agreements
contained in the Credit Documents.
NOTWITHSTANDING ANYTHING CONTAINED ABOVE OR IN ANY OTHER PROVISION OF THIS
MORTGAGE OR THE CREDIT DOCUMENTS TO THE CONTRARY, THERE SHALL BE SPECIFICALLY
EXCLUDED FROM THE INDEBTEDNESS SECURED BY THIS MORTGAGE, AND THIS MORTGAGE SHALL
NOT SECURE, ANY INDEBTEDNESS EVIDENCED BY [THAT CERTAIN REVOLVING A NOTE DATED
AS OF EVEN DATE HEREWITH IN THE ORIGINAL PRINCIPAL AMOUNT OF $23,227,100 (THE
"REVOLVING A NOTE")] AND/OR [THAT CERTAIN REVOLVING B NOTE OF EVEN DATE HEREWITH
IN THE ORIGINAL PRINCIPAL AMOUNT OF $123,074,500 (THE "REVOLVING B NOTE")],
AND/OR [THAT CERTAIN REVOLVING C NOTE DATED AS OF EVEN DATE HEREWITH IN THE
ORIGINAL PRINCIPAL AMOUNT OF $3,698,400 (THE "REVOLVING C NOTE")] MADE BY
COMPANY PAYABLE TO THE ORDER OF LOAN AGENT WHICH [IS/ARE] REFERRED TO IN SECTION
2.1 OF THE CREDIT AGREEMENT.
_________________________
/2/ Description of obligations secured to be amended depending on Revolving
Notes secured, one-action and other state law limitations.
3
<PAGE>
BCRE, for itself, its legal representatives, successors and assigns, hereby
covenants and agrees with Collateral Agent that:
1. PAYMENT AND COMPLIANCE; APPLICATION OF PAYMENTS.
-----------------------------------------------
A. BCRE will duly and punctually pay and perform all liabilities and
obligations of BCRE to Loan Agent and Lease Agent and will otherwise comply with
all of its obligations under the Credit Documents, at the times and in the
manner therein provided.
B. Prior to an Actionable Default (as such term is defined in the
Intercreditor Agreement), all payments received by Loan Agent shall be applied
in accordance with the terms of the Loan Documents and all payments received by
Lease Agent shall be applied in accordance with the terms of the 1996 Lease
Documents. Upon the occurrence and during the continuance of an Actionable
Default, all payments received by Loan Agent and Lease Agent, including any
Proceeds (as such term is defined in the Intercreditor Agreement) received by
Collateral Agent, shall be applied in accordance with the terms of the
Intercreditor Agreement.
2. PAYMENT OF IMPOSITIONS. BCRE shall pay, prior to delinquency, all property
----------------------
and other taxes, assessments and governmental charges or levies imposed upon
(each an "Imposition"), and pay when due all claims (including claims for labor,
materials and supplies) against, the Property, except to the extent the validity
thereof is being contested in good faith; provided, that BCRE shall in any event
--------
pay such Impositions and claims no later than five (5) days prior to the date of
any proposed sale of which it receives notice under any judgment, writ or
warrant of attachment entered or filed against BCRE as a result of the failure
to make such payment. If any Imposition is payable, or may at the option of the
payor thereof be paid, in installments, BCRE may pay such Imposition, together
with any accrued interest on the unpaid balance of such Imposition, in
installments as the same may become due.
3. INSURANCE.
---------
A. BCRE will maintain or cause to be maintained, with commercially
reasonable and reputable insurers, insurance with respect to the Property
against loss or damage of the kinds customarily insured by corporations of
established reputation engaged in the same or similar businesses and similarly
situated, of such types and in such amounts as are customarily carried under
similar circumstances by such other corporations. Such insurance shall include
property damage insurance and liability insurance and may provide for reasonable
deductibility from coverage thereof. All policies carried by BCRE may be in one
or more blanket, umbrella or excess liability policies covering other locations
and activities of BCRE. Each policy for property damage insurance shall provide
for all losses (except for losses of less than $100,000 per occurrence) to be
paid jointly to Collateral Agent and BCRE. Each policy shall in addition (1)
name BCRE and Collateral Agent as insured parties thereunder (without any
representation or warranty by or obligation upon Collateral Agent) as their
interests may appear, (2) contain an agreement by the insurer that any loss in
excess of $100,000 thereunder shall be payable jointly to Collateral Agent and
BCRE notwithstanding any action, inaction or breach of representation or
warranty by BCRE, (3) have attached thereto a lender's loss payable endorsement
or its equivalent, in form and substance reasonably acceptable to Collateral
Agent, (4) provide that there shall be no recourse against Collateral Agent for
payment of premiums or other amounts with respect thereto, and (5) provide that
at least 30 days' prior written notice of cancellation, material amendment,
reduction in scope or limits of coverage or of lapse shall be given to
Collateral Agent by the insurer. BCRE shall deliver evidence of the coverage
required by this Paragraph 3 contemporaneously with delivery of this Mortgage
and, thereafter, within 30 days of the renewal or extension of such coverage.
BCRE shall, if so requested by Collateral Agent, deliver to Collateral Agent
original or duplicate policies of such insurance and, as often as Collateral
Agent may reasonably request, but not more than once per fiscal quarter of BCRE,
a report of one or more reputable insurance brokers with respect to such
insurance. Further, BCRE shall, if requested by Collateral Agent, duly execute
and deliver to Collateral Agent instruments of assignment of such insurance
policies and cause the respective insurers to acknowledge notice of such
assignment. In the event of a foreclosure
4
<PAGE>
action or other transfer of title to the Property in extinguishment of the debt
secured hereby, all right, title and interest of BCRE in and to any proceeds of
insurance relating to the Property will pass to the purchaser or grantee
thereof.
B. Reimbursement under any liability insurance maintained by BCRE
pursuant to this Paragraph 3 may be paid directly to the Person who shall have
incurred liability covered by such insurance. In the event of any loss to or
damage of the Property by fire or other casualty, BCRE will give prompt notice
thereof to Collateral Agent and Collateral Agent may thereupon make proof of
loss or damage if the same is not promptly made by BCRE. In the case of any
loss involving damage to the Property when Paragraph 3 is not applicable, BCRE
shall have the right to and may make or cause to be made the necessary repairs
to the Property and if BCRE so chooses to repair the Property any proceeds of
insurance maintained by BCRE with respect thereto pursuant to this Paragraph 3
shall, to the extent paid to Collateral Agent, be paid by Collateral Agent to
BCRE as reimbursement for the costs of such repairs or replacements. As
appropriate to each stage of construction, BCRE shall obtain all permits,
licenses and authorizations from any Governmental Authority (as such term is
defined in the Credit Agreement) having jurisdiction over the Property and, upon
Collateral Agent's request, deliver copies thereof to Collateral Agent. Under
no circumstances shall Collateral Agent become personally liable for the
fulfillment of the terms, covenants, and conditions contained in any lease with
respect to the Property nor become obligated to take any action to restore the
improvements.
C. Upon (1) the occurrence and during the continuance of any Event of
Default, or (2) the actual or constructive total loss of the Property and BCRE's
failure to repair the Property within a reasonable period of time thereafter,
all insurance payments in respect of such Property shall be paid to and applied
by Collateral Agent as specified in Paragraph 1.B or as required pursuant to the
terms of the Intercreditor Agreement. Unless Loan Agent, Lease Agent and BCRE
otherwise agree in writing, any such application of proceeds to principal shall
not extend or postpone the due date of the installments payable under the
Revolving Notes or the 1996 Master Lease Agreement. If under Paragraph 14, the
Property is acquired by Collateral Agent, all right, title and interest of BCRE
in and to the proceeds of any insurance policies resulting from damage to the
Property prior to the sale or acquisition shall pass to Collateral Agent to the
extent of sums secured by this Mortgage immediately prior to such sale or
acquisition.
4. CONDEMNATION. All awards made or to be made to BCRE by any Governmental
------------
Authority or other Person for any taking, by condemnation or eminent domain, of
the whole or any part of the Property or any easement therein or appurtenant
thereto are hereby assigned by BCRE to Collateral Agent. Any award in excess of
$100,000 shall be paid jointly to Collateral Agent and BCRE. Collateral Agent
and BCRE shall use or apply the proceeds of such award or awards in the same
manner, and subject to the same limitations, as is set forth in Paragraph 3
with respect to insurance proceeds received subsequent to a fire or other
casualty affecting the Property; provided, however, that in the event of a
taking of all or substantially all of the Property at any Store location, such
proceeds shall be applied first to the indebtedness secured by this Mortgage and
the balance, if any, shall be paid to BCRE. BCRE agrees to give prompt notice
to Collateral Agent of the commencement of any such proceedings under
condemnation or eminent domain affecting all or any material part of the
Property, such notice to be given to Collateral Agent promptly after BCRE's
receipt of notice of such proceedings. So long as an Event of Default has not
occurred and is not continuing, BCRE shall have the right to conduct and settle
all condemnation proceedings with regard to the Property; provided, however,
that, if BCRE does not settle all condemnation proceedings, collect and receive
the award from the condemnation authorities, and give appropriate receipts and
acquittances therefor with reasonable promptness following notice from
Collateral Agent, Collateral Agent is hereby authorized to do so on behalf of
BCRE.
5. MAINTENANCE OF PROPERTY. BCRE will keep and maintain, or cause to be kept
-----------------------
and maintained, the Property in good order, condition and repair, ordinary wear
and tear excepted, and will make, or cause to be made, as and when necessary,
all repairs and replacements; provided, however, that BCRE and Company shall be
permitted to close Stores as provided pursuant to the terms of the Facilities
Agreement. BCRE shall use diligence in the conduct of its business to maintain
and protect the
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Property. BCRE will refrain from and shall not permit or suffer the commission
of waste in or about the Property. Except as otherwise permitted pursuant to
the terms of the Facilities Agreement or the Credit Agreement, BCRE shall not
remove, demolish or alter in any material respect the structural character of
any improvements constituting a portion of the Property except upon the prior
written consent of Collateral Agent; provided, however, that fixtures may be
removed from the Property if BCRE concurrently replaces the same with similar
items of equal value, free of any Lien other than that of this Mortgage.
6. COMPLIANCE WITH LAWS. Except as otherwise permitted pursuant to the terms
--------------------
of the Facilities Agreement, the Property shall be used as a Store and for no
other purpose without the prior written consent of Collateral Agent. BCRE will
comply, or cause compliance with, in all material respects, all applicable
present and future laws, rules, ordinances, regulations and other requirements
of any Governmental Authority having jurisdiction over the Property with respect
to the construction, rehabilitation, use or operation of the Property or any
portion thereof and with the provisions of any covenants, conditions or
restrictions affecting the Property, except to the extent the validity thereof
is being contested in good faith and by appropriate legal proceedings, which
proceedings have the effect of staying or preventing any forfeiture of title to
the Property.
7. ENVIRONMENTAL MATTERS./3/
---------------------
A. As used herein, the following terms have the meanings indicated:
(1) "Environmental Laws" means any and all federal, state, local
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment
including ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
(2) "Hazardous Substances" means (a) petroleum or chemical products,
whether in liquid, solid, or gaseous form, or any fraction or by-product
thereof, (b) asbestos or asbestos-containing materials, (c) polychlorinated
biphenyls (pcbs), (d) radon gas, (e) underground storage tanks, (f) any
explosive or radioactive substances, (g) lead or lead-based paint, or (h)
any other substance, material, waste or mixture which is or shall be
listed, defined, or otherwise determined by any Governmental Authority to
be hazardous, toxic, dangerous or otherwise regulated, controlled or giving
rise to liability under any Environmental Laws.
B. BCRE represents and warrants, as of the date hereof, to Collateral
Agent and the Creditors with respect to the Property as follows:
(1) BCRE has obtained all permits, licenses and other authorizations
which are required under all Environmental Laws, except to the extent
failure to have any such permit, license or authorization would not result
in a Material Adverse Change. Except as disclosed pursuant to the terms of
the Facilities Agreement, BCRE is in compliance with the terms and
conditions of all such permits, licenses and authorizations, and is also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent that any
such failure to comply would not result in a Material Adverse Change.
______________________
/3/ This may be a separate environmental indemnity agreement is some states.
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(2) There have been no material environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or which are
in the possession of the Company or BCRE in relation to the Property which
have not been made available to the Creditors.
(3) Company or BCRE have informed Loan Agent and Lease Agent in
writing of all material non-compliance of BCRE with the terms and
conditions of all (a) permits, licenses or authorizations required under
all Environmental Laws and (b) other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Laws or in any
applicable regulation, code, plan, order, decree, judgment, injunction
notice or demand letter issued, entered, promulgated or approved
thereunder, except for such instances of noncompliance which would not
result in a Material Adverse Change.
(4) No civil, criminal or administrative action, suit, claim,
hearing, investigation or proceeding has been brought or, to BCRE's
knowledge, been threatened, nor have any settlements been reached by or
with any parties or any liens imposed in connection with the Property
concerning Hazardous Substances or Environmental Laws.
C. BCRE shall (1) comply in all material respects with applicable
Environmental Laws, except to the extent the failure to comply would not result
in a Material Adverse Change, (2) notify Collateral Agent promptly upon BCRE's
discovery of any spill, discharge, release or presence of any Hazardous
Substances at, upon, under, within, contiguous to or otherwise affecting the
Property, (3) take all reasonable action required by Environmental Laws and any
Governmental Authority that administers such Environmental Laws to remove such
Hazardous Substances and remediate the Property in compliance with Environmental
Laws, and (4) promptly forward to Collateral Agent copies of all orders,
notices, permits, applications or other communications and reports in connection
with any spill, discharge, release or the presence of any Hazardous Substances
or any other material matters relating to the Environmental Laws as they may
affect the Property or BCRE.
D. BCRE shall not cause, shall prohibit any other person within the
control of BCRE from causing, and shall use prudent, commercially reasonable
efforts to prohibit other persons (including tenants) from (1) causing any
spill, discharge or release, or the use, storage, generation, manufacture,
installation, or disposal, of any Hazardous Substances at, upon, under, within
or about the Property or the transportation of any Hazardous Substances to or
from the Property (except for cleaning and other products used in connection
with routine maintenance or repair of the Property in compliance with
Environmental Laws), (2) installing any underground storage tanks at the
Property, or (3) conducting any activity on the Property that requires a permit
or other authorization under Environmental Laws, other than those required to
conduct the business that BCRE is conducting thereon.
E. BCRE shall provide to Collateral Agent, at BCRE's expense promptly
upon the written request of Collateral Agent from time to time, a Site
Assessment or, if required by Collateral Agent, an update to any existing Site
Assessment, to assess the presence or absence of any Hazardous Substances and
the potential costs in connection with abatement, cleanup or removal of any
Hazardous Substances found on, under, at or within the Property, provided,
however, that only Phase I tests may be conducted to determine the presence of
Hazardous Substances unless there is reasonable evidence that Hazardous
Substances are present justifying Phase II tests. BCRE shall pay the cost of no
more than one such Site Assessment or update in any twelve (12) month period,
unless Collateral Agent's request for a Site Assessment is based on information
provided under Paragraph 7.C, a reasonable suspicion of Hazardous Substances at
or near the Property, a breach of representations under Paragraph 7.B, or an
Event of Default, in which case any such Site Assessment or update shall be at
BCRE's expense. BCRE's obligations under this Paragraph 7.E shall arise upon the
discovery of the presence of any Hazardous Substances, whether or not any
Governmental Authority has taken or threatened any action in connection with the
presence of any Hazardous Substances, and whether or not the existence of any
such Hazardous Substances or potential liability on account thereof is disclosed
in the Site Assessment.
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<PAGE>
F. As between BCRE and Collateral Agent, all risk of loss associated with
non-compliance with Environmental Laws, or with the presence of any Hazardous
Substances at, upon, within, contiguous to or otherwise affecting the Property,
shall lie solely with BCRE. Accordingly, BCRE shall bear all risks and costs
associated with any loss (including any loss in value attributable to Hazardous
Substances), damage or liability therefrom, including all costs of removal of
Hazardous Substances or other remediation required by Environmental Laws. BCRE
shall indemnify, defend and hold Collateral Agent and the Creditors, and their
respective directors, officers, employees, agents, successors and assigns from
and against, any loss, damage, cost, expense or liability directly or indirectly
arising out of or attributable to the use, generation, storage, release,
threatened release, discharge, disposal, or presence of Hazardous Substances on,
under or about the Property, the non-compliance with Environmental Laws, or a
breach of any representation, warranty or covenant contained in this Mortgage,
whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law, including: (1) all foreseeable
consequential damages; (2) the costs of any required or necessary repair,
cleanup or detoxification of the Property, and the preparation and
implementation of any closure, remedial or other required plans; and (3) all
reasonable costs and expenses incurred by the indemnified parties in connection
with clauses (1) and (2), including Attorney Costs; provided, BCRE's indemnity
obligation shall not apply to the extent such loss, damage, cost, expense or
liability arises out of the gross negligence or willful misconduct of any of the
indemnified parties, nor shall it apply to any use, generation, storage,
release, threatened release, discharge, disposal or presence in violation of any
Environmental Laws of any Hazardous Substances proved by Company or BCRE to have
been introduced onto the Property after any foreclosure of the Mortgage or any
conveyance by BCRE in lieu of such foreclosure. At the election of any
indemnified party, BCRE shall defend such indemnitee using legal counsel
satisfactory to such indemnitee in such Person's sole discretion, at the sole
cost and expense of BCRE. Any loss, damage, cost, expense or liability incurred
by the indemnified parties for which BCRE is responsible or for which BCRE has
indemnified them shall be paid to Collateral Agent on demand, and failing prompt
reimbursement shall, together with interest thereon at the per annum rate
applicable to delinquent principal under the Credit Agreement (the "Default
Rate") from the date incurred by until paid by BCRE and be added to the
indebtedness secured by the Credit Documents.
G. Collateral Agent and its respective agents and representatives shall
have the right to enter and visit the Property at any reasonable time for the
purpose of observing it, performing appraisals, taking and removing soil or
groundwater samples, and conducting tests on any part of it. Collateral Agent
agrees to give BCRE not less than forty-eight (48) hours prior notice of
Collateral Agent's entry onto the Property unless the need therefor is the
result of an emergency condition, in which case Collateral Agent shall give such
advance notice as may be reasonable under the circumstances. To the extent
practicable, Collateral Agent shall conduct such visits to the Property and such
tests so as to minimize any interference with BCRE's business operations. Any
costs or expenses reasonably incurred in connection with any of the activities
referred to in the proceeding sentence shall be paid by BCRE to Collateral Agent
on demand, subject to the limitations on costs contained in Paragraph 7.E.
Collateral Agent is not under any duty, however, to visit or observe the
Property or to conduct tests, and any such acts by Collateral Agent shall be
solely for the purposes of protecting Collateral Agent's security and preserving
Collateral Agent's rights under the Credit Documents. In no event shall any
site visit, observation or testing by Collateral Agent be a representation that
Hazardous Substances are or are not present in, on, or under the Property, or
that the construction is free from defective materials or workmanship, or that
there has been or shall be compliance with all Federal, state, county and local
laws, regulations and ordinances, including Environmental Laws. Neither BCRE
nor any other party is entitled to rely on any site visit, observation or
testing by Collateral Agent. Collateral Agent does not owe any duty of care to
protect BCRE or any other party against, or to inform BCRE or any other party
of, any Hazardous Substances, or any other adverse condition affecting the
Property. Collateral Agent shall not be obligated to disclose to BCRE or any
other party any report or findings made as a result of, or in connection with,
any site visit, observation or testing by Collateral Agent; provided, however,
that if Collateral Agent is obligated to disclose the results of any such report
or findings to any Governmental Authority under Environmental Laws, Collateral
Agent agrees that it shall, prior to such disclosure, notify BCRE of such report
or finding and obligation.
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<PAGE>
H. Notwithstanding any provision in this Mortgage or elsewhere in the
Credit Documents, or any rights or remedies granted by the Credit Documents,
Collateral Agent and the Creditors do not waive and expressly reserve all rights
and benefits now or hereafter accruing to any of them under the "security
interest" or "secured creditor" exception under applicable Environmental Laws,
as the same may be amended. No action taken by Collateral Agent or the
Creditors pursuant to the Credit Documents shall be deemed or construed to be a
waiver or relinquishment of any such rights or benefits under the "security
interest exception." All obligations in this Paragraph 7 shall survive any
termination or satisfaction of this Mortgage.
I. Without Collateral Agent's prior written consent in each instance,
which consent shall not be unreasonably withheld or delayed, BCRE shall not take
any remedial action in response to the presence of any Hazardous Substances in,
on, under, or about the Property, nor enter into any settlement agreement,
consent decree, or other compromise in respect of any claimed violation of any
Environmental Law, which remedial action, settlement, consent or compromise
might, in Collateral Agent's reasonable judgment, materially impair the value of
Collateral Agent's security interest under the Mortgage; provided, however, that
Collateral Agent's prior consent shall not be necessary in the event that the
presence of Hazardous Substances in, on, under, or about the Property either
poses an immediate threat to the health, safety or welfare of any individual or
is of such a nature that an immediate remedial response is necessary and it is
not possible to obtain Collateral Agent's consent before taking such action,
provided that in each such instance BCRE shall notify Collateral Agent as soon
as practicable of any action so taken.
8. SALE, TRANSFER, ASSIGNMENT OR ADDITIONAL ENCUMBRANCE. Except to the extent
----------------------------------------------------
that BCRE or Company are otherwise expressly permitted to do so without
Collateral Agent's consent pursuant to the terms of any of the Credit Documents
and except as otherwise permitted pursuant to Paragraph 26.B, BCRE shall not,
without the prior written consent of Collateral Agent, which consent Collateral
Agent may withhold in its sole discretion, option, sell, contract to sell,
assign, transfer, mortgage, pledge, hypothecate or otherwise dispose of or
encumber, whether by operation of law or otherwise, any or all of its interest
in the Property, including any option or contract for deed or similar instrument
providing for retention of title during sale.
9. PRIORITY OF LIEN; AFTER-ACQUIRED PROPERTY.
-----------------------------------------
A. This Mortgage is and will be maintained as a valid lien on and a
valid, binding and enforceable security interest in the Property. Except as
otherwise permitted pursuant to the terms of the Facilities Agreement, BCRE will
not, directly or indirectly, create or suffer or permit to be created, or to
stand against the Property, or any portion thereof, or against the rents, issues
and profits therefrom, any lien, security interest, encumbrance or charge either
prior or subordinate to or on a parity with the lien of this Mortgage. BCRE
hereby represents and warrants that: (1) no effective financing statement or
other similar instrument covering all or any part of the Property is on file in
any recording office except those in favor of Collateral Agent; and (2) no
authorization, approval or other action by, and no notice to or filing (other
than financing statements) with, any Governmental Authority is required for
either (a) the grant by BCRE of the security interest granted hereby, (b) the
execution, delivery or performance of this Mortgage by BCRE or, (c) the
perfection of or the exercise by Collateral Agent of its rights and remedies
hereunder, subject to the provisions of bankruptcy, insolvency and similar laws.
B. Except as otherwise permitted pursuant to the terms of the Facilities
Agreement, BCRE will keep and maintain the Property free from all Liens. If any
such Liens shall be filed against the Property, BCRE agrees to immediately cause
the same to be discharged of record; provided, however, that BCRE shall have the
right to contest, in good faith and with reasonable diligence, the validity of
any such Lien, subject to the conditions that: (1) upon an Authorized Officer
becoming aware of such Lien, BCRE shall promptly give Collateral Agent notice of
the filing of any such Lien and of BCRE's intent to contest the same and
evidence of any reserves required pursuant to the terms of the Facilities
Agreement with respect to such Lien; and (2) on final determination of such
Lien, BCRE shall immediately pay any
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<PAGE>
judgment rendered, with all proper costs and charges, and shall have the Lien
released and any judgment satisfied.
C. In no event shall BCRE do, or permit to be done, or omit to do, or
permit the omission of, any act or thing, the doing of which, or omission to do
which, would impair the security of this Mortgage. Except as otherwise
permitted pursuant to the terms of the Facilities Agreement, BCRE shall not
initiate, join in or consent to any change in any private restrictive covenant,
zoning ordinance or other public or private restriction or agreement materially
adversely affecting the uses which may be made of the Property or any part
thereof without the prior written consent of Collateral Agent, which consent
shall not be unreasonably withheld or delayed.
D. All property of every kind acquired by BCRE after the date hereof
which is required or intended by the terms of this Mortgage to be subjected to
the lien and security interest of this Mortgage shall, immediately upon the
acquisition thereof by BCRE, and without any further mortgage, conveyance,
assignment or transfer, become subject to the lien and security interest of this
Mortgage. BCRE will do such further acts and execute, acknowledge and deliver
such further conveyances, mortgages, security agreements, financing statements
and assurances as Collateral Agent shall reasonably require for accomplishing
the intent and purposes of this Mortgage.
10. COLLATERAL AGENT'S RIGHT TO CURE; BCRE REMAINS LIABLE.
-----------------------------------------------------
A. If BCRE defaults in the performance or observance of any term,
covenant, condition or obligation required to be performed or observed by BCRE
under this Mortgage and such default shall remain uncured for a period of
fifteen (15) Business Days after written notice from Collateral Agent, then,
without waiving or releasing BCRE from any of its obligations hereunder,
Collateral Agent shall have the right, but shall be under no obligation, to make
any payment and/or perform any act or take such action as may be appropriate to
cause such term, covenant, condition or obligation to be promptly performed or
observed on behalf of BCRE; provided, however, that if such default is of a
nature that it cannot be cured within said fifteen (15) Business Day period,
Collateral Agent shall take no action so long as BCRE commences within said
period to cure such default and diligently thereafter proceeds to cure such
default. Notwithstanding anything to the contrary herein contained, if such
default results in a hazardous or emergency situation, Collateral Agent shall
have the right to cure such default without giving the foregoing fifteen (15)
Business Days notice if BCRE does not immediately after the occurrence of such
default or after notice from Collateral Agent commence to cure such default and
to diligently proceed until such default is cured. All reasonable sums expended
by Collateral Agent in connection therewith, including Attorney Costs, shall
become immediately due and payable by BCRE upon written demand therefor with
interest at the Default Rate from the date of advancement until paid and shall
be secured by the Credit Documents. Collateral Agent shall have the same rights
and remedies in the event of nonpayment of any such sums by BCRE as in the case
of a Default by Company in the payment of the indebtedness evidenced by the
Revolving Notes and the 1996 Master Lease Agreement. Collateral Agent is hereby
empowered to enter and to authorize others to enter upon the Property or any
part thereof for the purpose of performing or observing any term, covenant,
condition or obligation that BCRE has failed to perform or observe, such
authorization to be exercised only after expiration of any applicable cure
period afforded to BCRE, without thereby becoming liable to BCRE or any person
holding under BCRE except to the extent such liability arises from the gross
negligence or willful misconduct of Collateral Agent or such other person acting
pursuant to Collateral Agent's authorization. Performance or payment by
Collateral Agent of any obligation of BCRE hereunder shall not relieve BCRE of
said obligation or of the consequences of having failed to perform or pay the
same and shall not effect the cure of any Event of Default.
B. Anything herein to the contrary notwithstanding, (1) BCRE shall remain
liable under the contracts and agreements included in the Property to the extent
set forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Mortgage had not been executed, (2) the exercise by
Collateral Agent of any of its rights and remedies hereunder shall not release
BCRE from any of its duties or obligations under the contracts and agreements
included in the Property, and (3) Collateral Agent shall not have any obligation
or liability under the contracts and agreements included in Property by reason
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<PAGE>
of this Mortgage, nor shall Collateral Agent be obligated to perform any of the
obligations or duties of BCRE thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
11. INDEMNIFICATION. Except where resulting from Collateral Agent's gross
---------------
negligence or willful misconduct, BCRE will protect, indemnify and save harmless
Collateral Agent from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including Attorney Costs),
imposed upon or incurred by or asserted against Collateral Agent by reason of:
(1) the lien and security interest of this Mortgage upon the Property or any
interest therein or receipt of any rents, issues, proceeds or profits therefrom;
(2) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, vaults and vault space, if any, adjacent parking areas,
streets or ways; (3) any use, nonuse or condition in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, vaults and vault
space, if any, the adjacent parking areas, streets or ways; (4) any failure on
the part of BCRE to perform or comply with any of the terms of this Mortgage; or
(5) performance of any labor or services or the furnishing of any materials or
other property in respect of the Property or any part thereof. Any amounts
payable by reason of the application of this paragraph shall become immediately
due and payable upon demand therefor and shall bear interest at the Default Rate
from the date loss or damage is sustained until paid. The obligations of BCRE
under this paragraph shall survive any termination or satisfaction of this
Mortgage.
12. ASSIGNMENT OF RENTS AND LEASES. As additional security for the obligations
------------------------------
secured by this Mortgage, BCRE hereby transfers and assigns to Collateral Agent,
all the right, title and interest of BCRE, as lessor, in and to all current
leases of the Property, if any, and any guarantees, amendments, renewals or
extensions thereof, and all future leases made by BCRE with respect to the
Property, and all of the rents, issues, proceeds and profits therefrom; provided
that BCRE shall have the right to collect and retain such rents so long as an
Event of Default has not occurred and is not continuing. Notwithstanding the
foregoing, the assignment of rents and leases made by BCRE hereunder shall be
deemed a present assignment.
Except as otherwise permitted pursuant to the terms of the Facilities
Agreement, BCRE hereby covenants and agrees that it shall not, without
Collateral Agent's prior written consent, which consent shall not be
unreasonably withheld or delayed: (1) accept any payment of any installment of
rent more than thirty (30) days in advance of the due date therefor; (2) enter
into any assignment of any lease, license or concession pertaining to the
Property; or (3) modify or amend any lease in any material respect or cancel or
terminate any lease except for the non-payment of rent. BCRE further covenants
and agrees that it shall, at its sole cost and expense: (1) promptly abide by,
discharge and perform all of the material covenants, conditions and agreements
contained in all leases of the Property, on the part of the landlord thereunder;
(2) enforce or secure the performance of all of the material covenants,
conditions and agreements contained in any lease of the Property on the part of
any tenant thereunder; and (3) appear in and defend any action or proceeding
arising out of or related to such leases or the obligations, duties or
liabilities of the landlord or of any tenants thereunder.
Collateral Agent shall not be obligated to perform or discharge, nor does
Collateral Agent hereby undertake to perform or discharge, any obligation, duty
or liability under any of such leases, and BCRE hereby agrees to indemnify and
hold Collateral Agent harmless of and from all liability, loss or damage which
it may incur under said leases or under or by reason of the assignment thereof
and all claims and demands whatsoever which may be asserted against Collateral
Agent except to the extent any such claims or demands arise from the gross
negligence or willful misconduct of Collateral Agent. Should Collateral Agent
incur any liability, loss or damage under said leases or under or by reason of
the assignment thereof, or in the defense of any claims or demands made in
connection therewith, except to the extent any such claims or demands arise from
the gross negligence or willful misconduct of Collateral Agent, the amount
thereof, including Attorney Costs, shall be secured hereby, and shall become
immediately due and payable upon demand with interest at the Default Rate from
the date of advancement until paid.
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Upon the occurrence and continuance of an Event of Default and subject to
the terms of the Intercreditor Agreement, Collateral Agent, or any authorized
agent of Collateral Agent or any judicially-appointed receiver, shall be
entitled to enter upon, take possession of and manage the Property and to
collect the rents therefrom, if any, including any rents past due, all as more
specifically provided in Paragraph 14. All rents collected by any of the
foregoing parties shall be applied first to payment of the costs of management
of the Property and collection of rents, including receiver's fees, premiums or
bonds and Attorney Costs, and then to the sums secured by this Mortgage in the
manner provided in the Intercreditor Agreement. Any such party shall be liable
to account only for the rents actually received.
13. EVENTS OF DEFAULT. In case one or more of the following events (an "Event
-----------------
of Default") shall occur or exist, to-wit:
A. If BCRE should fail to pay any amounts required under the terms of
this Mortgage as and when due and payable and such failure shall continue
for two (2) Business Days; or
B. If a default occurs in the performance or observance of any covenant,
term, provision or condition of this Mortgage (relating to other than the
payment of money) to be performed or observed by BCRE, which default shall
remain uncured for a period of fifteen (15) Business Days after written
notice from Collateral Agent; provided, however, that if such default is of
such a nature that it cannot be cured within said fifteen (15) Business Day
period, then BCRE shall not be held in default so long as it commences
within said period to cure such default and diligently thereafter proceeds
to cure such default; provided further, however, that if any such default
results in a hazardous or emergency condition, BCRE shall be in default
hereunder if BCRE does not immediately after the occurrence of such default
or after notice from Collateral Agent commence to cure such default and to
diligently proceed until such default is cured; or
C. If an Event of Default or Default (as therein defined) shall have
occurred under the other Credit Documents; or
D. Any action by any holder of any Lien, whether approved by Collateral
Agent or not, to take possession, to collect rents, to foreclose, or to
otherwise enforce rights against BCRE or the Property;
then, in any such event and at the option of Collateral Agent but subject to the
terms of the Intercreditor Agreement, the entire unpaid principal balances due
on the Revolving Notes and all accrued and unpaid interest thereon and all
amounts due or to become due with respect to and as provided in the 1996 Lease
Documents, and any other sums required to be paid under the Credit Documents
shall become due and payable and thereafter, each of said amounts shall bear
interest at the Default Rate. All costs and expenses incurred by, or on behalf
of, Collateral Agent (including Attorney Costs) which are occasioned by any
Event of Default by BCRE hereunder shall become immediately due and payable,
shall bear interest at the Default Rate from the date of advancement until paid
and shall become additional indebtedness secured hereby. After the occurrence
or existence of an Event of Default, Collateral Agent and the Creditors may
institute, or cause to be instituted, proceedings for the realization of their
respective rights under the Credit Documents subject to the terms of the
Intercreditor Agreement.
14. RIGHTS, POWERS AND REMEDIES OF COLLATERAL AGENT. Upon the occurrence of an
-----------------------------------------------
Event of Default, Collateral Agent may at any time thereafter, at its election
and to the extent permitted by applicable law and the terms of the Intercreditor
Agreement:
A. Declare all sums secured by this Mortgage immediately due and payable
without further notice and to proceed at law or in equity to foreclose the
lien of this Mortgage as against all or any part of the Property and to
have the same sold under the judgment or decree of a court of competent
jurisdiction.
12
<PAGE>
B. Declare all sums secured by this Mortgage to be due and payable
without further notice and advertise the Property or any part thereof for
sale and thereafter sell, assign, transfer and deliver the whole, or from
time to time any part, of the Property, or any interest therein, on such
terms and in such manner as Collateral Agent may, in its discretion, deem
appropriate or as may be required by applicable law. The exercise of this
power of sale by Collateral Agent shall be in accordance with and subject
to the terms of any statute of the state in which the Property is located,
now or hereafter in effect, which authorizes the satisfaction of a lien and
security interest by power of sale.
C. Exercise all remedies available to Collateral Agent as a secured party
under the Code with respect to the Property, in such manner and in such
order as Collateral Agent determines, in its sole discretion. At
Collateral Agent's request, BCRE shall cause all Property which is personal
property to be assembled at one or more reasonably convenient locations.
Any sale under the Code shall be made in accordance with Article 9 of the
Code relating to the sale of collateral after default by a debtor (as the
same may be hereafter amended or succeeded), or by any other present or
subsequent articles or enactments of the same. With respect to any notices
required or permitted under the Code, BCRE agrees that ten (10) days' prior
written notice shall be deemed commercially reasonable.
D. Enter upon and take possession of the Property or any part thereof by
summary proceedings, ejectment or otherwise, and remove BCRE and all other
persons and property therefrom, and take actual possession of the Property,
or any part thereof, personally or by its agents or attorneys, together
with all documents, books, records, papers and accounts of BCRE and may
exclude BCRE, its agents or servants, wholly therefrom and may, as attorney
in fact and agent of BCRE (and for which BCRE hereby irrevocably appoints
Collateral Agent its attorney in fact and agent), or in its own name and
stead and under the powers herein granted: (1) hold, operate, manage, and
control the Property and conduct the business thereof (which right does not
include the right to operate the Store), either personally or by its
agents, and with full power to use such measures, legal or equitable, as in
its discretion or in the discretion of its successors or assigns, may be
deemed proper or necessary to enforce the payment or security of the
avails, rents, issues, and profits of the Property, including actions for
recovery of rent, actions in forcible detainer and actions in distress for
rent, hereby granting full power and authority to exercise each and every
of the rights, privileges, and powers herein granted at any and all times
hereafter, without notice to BCRE; (2) cancel or terminate any lease for
any cause or on any ground which would entitle BCRE to cancel the same; (3)
elect to disaffirm any lease made subsequent to this Mortgage or
subordinated to the lien hereof to the extent permitted by law without
constituting a breach of such lease; (4) extend or modify any then existing
leases and make new leases, which extensions, modifications and new leases
may provide for terms to expire, or for options to lessees to extend or
renew terms to expire, beyond the maturity date of the indebtedness
hereunder and the issuance of a deed or deeds to a purchaser or purchasers
at any sale of the Property, it being understood and agreed that any such
leases, and the options or other such provisions contained therein, shall
be binding upon BCRE and all persons whose interest in the Property are
subject to the lien hereof and also upon the purchaser or purchasers at any
sale of the Property, notwithstanding any discharge of the mortgage
indebtedness, satisfaction of any foreclosure decree or issuance of any
certificate of sale or deed to any purchaser; (5) make all necessary or
proper repairs, decorating, renewals, replacements, alterations, additions,
betterments and improvements to the Property as Collateral Agent may
reasonably deem judicious, to insure and reinsure in reasonable amounts the
Property and all risks incidental to Collateral Agent's possession,
operation, and management thereof and to receive all avails, rents, issues,
and profits; (6) insofar as any of the Property shall consist of accounts
receivable, insurance policies, instruments, chattel paper, things in
action or the like, demand, collect, receipt for, settle, compromise,
adjust, sue for, foreclose or realize upon such Property as Collateral
Agent may reasonably determine, and for the further purpose of realizing
Collateral Agent's rights therein, Collateral Agent may receive, open and
dispose of mail addressed to BCRE and endorse notes, checks, drafts, money
orders, documents or title or other evidences of payment, shipment or
13
<PAGE>
storage or any form of such Property on behalf of and in the name of BCRE;
and (7) file any claims, in the name of BCRE or Collateral Agent, including
any proof of claim in a bankruptcy proceeding, or take any action or
institute any proceedings which Collateral Agent may deem necessary or
desirable for the collection of any of the Property or otherwise to enforce
the rights of Collateral Agent with respect to any of the Property.
Collateral Agent shall not be under any liability for or by reason of such
entry, taking of possession, removal, holding, operation or management,
except to the extent any such claims or demands arise from the gross
negligence or willful misconduct of Collateral Agent and except that any
amounts so received shall be applied as hereinafter provided in this
paragraph; and
E. Make application for the appointment of a receiver for the Property,
whether such receivership be incident to a proposed sale of the Property or
otherwise, and BCRE hereby consents to the appointment of a receiver and
agrees not to oppose any such appointment and, further, agrees that
Collateral Agent may be appointed the receiver of the Property. Each
receiver shall have the power to take possession and maintain control over
the Property and to collect the rents, issues and profits during the
pendency of a foreclosure suit, as well as during any further times when
BCRE, except for the intervention of such receiver, would be entitled to
collect such rents, issues, and profits and all other powers which may be
necessary or are useful for the protection, possession, control,
management, and operation of the Property during the whole of said period.
To the extent permitted by law, any receiver may be authorized by the court
to extend or modify any then-existing leases and to make new leases, which
extensions, modifications and new leases may provide for terms to expire
beyond the maturity date of the indebtedness secured hereunder, it being
understood and agreed that any such leases and the options or other
provisions contained therein shall be binding upon BCRE and all persons
whose interests in the Property are subject to the lien hereof and upon the
purchaser or purchasers at any sale of the Property, notwithstanding any
discharge of the mortgage indebtedness, satisfaction of any foreclosure
decree or issuance of any certificate of sale or deed to any purchaser.
F. Apply any monies or securities on deposit with Collateral Agent or any
depositary designated by Collateral Agent as required to be maintained
under this Mortgage to the obligations of BCRE under the Credit Documents
in the order and manner as set forth in the Intercreditor Agreement.
G. Exercise any and all rights and remedies of Collateral Agent with
respect to the Property or any part thereof as are available at law or in
equity.
At the request of Collateral Agent, after the occurrence of any Event of
Default, BCRE agrees promptly to give notice to all persons (including tenants
of the Property and banking institutions) holding any moneys or securities of
BCRE or owing any moneys to BCRE in which Collateral Agent has a security
interest and to instruct such persons to pay such moneys or securities directly
to or to the order of Collateral Agent for application to the obligations
secured hereby. In lieu of the foregoing, Collateral Agent may give such notice
itself on behalf of BCRE and BCRE agrees to cooperate with Collateral Agent in
connection with such action.
To the extent permitted by applicable law and the terms of the
Intercreditor Agreement, the Property (whether real, personal or mixed) may be
sold in such portions, order or parcels as Collateral Agent, in its sole
discretion, may determine, with or without having first taken possession of
same, and in such manner and order as Collateral Agent, in its sole discretion,
may elect; the right of sale arising out of any Event of Default shall not be
exhausted by any one or more sales or attempted sales, any other action,
proceeding or other exercise of a remedy, and the lien and security interest
granted by this Mortgage shall continue unimpaired. BCRE agrees that Collateral
Agent or any of the Creditors may be a purchaser of the Property or any part
thereof or any interest therein at any sale, whether public or private or
whether pursuant to foreclosure, power of sale or otherwise, and may apply upon
the purchase price the indebtedness secured hereby. Upon any sale, Collateral
Agent or an officer of any court empowered to do so, as may be appropriate,
shall deliver to the purchaser a good and sufficient instrument conveying,
14
<PAGE>
assigning and transferring the Property so sold without any covenant or
warranty, express or implied, subject, however, to any applicable law requiring
special warranty of title. Any purchaser at a sale of the Property shall
acquire good title to the property so purchased, free of the lien of this
Mortgage and free and clear of all the estate, title, interest, claim or demand
of BCRE. The receipt of the officer making the sale under judicial proceedings
or of Collateral Agent shall be sufficient discharge to the purchaser for the
purchase money and such purchaser shall not be responsible for the proper
application thereof. Collateral Agent shall not be required to take possession
of the Property prior to the sale thereof or to deliver possession of the
Property to the purchaser at such sale unless applicable law otherwise provides.
To the extent permitted by law and subject to the terms of the Intercreditor
Agreement, any action may be maintained by Collateral Agent to recover a
deficiency judgment for any balance due under the Credit Documents.
BCRE hereby waives, to the extent permitted by law, all rights to direct
the order in which any of the Property may be sold and the benefit of all
homestead, appraisement, valuation, stay, extension and reinstatement laws now
or hereafter in force and all rights of marshalling in the event of any sale
hereunder of the Property or any part thereof or any interest therein on behalf
of BCRE and each and every person acquiring any interest in or title to the
Property subsequent to the date of this Mortgage. Further, BCRE hereby
expressly waives, to the extent permitted by law, any and all rights of
redemption before, at or after sale under any order or decree of foreclosure of
this Mortgage on behalf of BCRE and each and every person acquiring any interest
in or title to the Property subsequent to the date of this Mortgage. Further,
BCRE hereby expressly waives, to the extent permitted by law, all present and
future statutes of limitations as a defense to any action to enforce this
Mortgage.
The proceeds of any sale of the Property or any part thereof or interest
therein, whether pursuant to foreclosure or power of sale or otherwise, and all
amounts received by Collateral Agent by reason of any possession, operation or
management of the Property or any part thereof, together with any other sums at
the time held by Collateral Agent, shall, unless otherwise required by
applicable law, be applied in the following order:
First: To all costs and expenses of the sale of the Property or any part
thereof or any interest therein, or entering upon, taking possession of,
removal from, holding, operating and managing the Property or any part
thereof, together with (1) the costs and expenses of any receiver of the
Property or any part thereof appointed pursuant hereto; (2) Attorney Costs
and the reasonable fees and expenses of accountants and other professionals
employed by Collateral Agent or those engaged by any receiver; (3) any
indebtedness, taxes, assessments or other charges prior to the lien of this
Mortgage, which Collateral Agent may consider necessary or desirable to
pay; and (4) any amounts as may be sufficient to indemnify Collateral Agent
against any liability, loss or damage on account of any matter or thing
done in good faith in pursuance of the rights and powers of Collateral
Agent hereunder;
Second: To any indebtedness secured by this Mortgage (whether at maturity
or on a date fixed for any installment payment or by declaration of
acceleration or otherwise) in the order and manner as set forth in the
Intercreditor Agreement;
Third: The balance, if any, to the Person then entitled thereto pursuant
to applicable state law.
15. FEES AND EXPENSES. If Collateral Agent incurs or expends any sums,
-----------------
including Attorney Costs, whether or not in connection with any action or
proceeding, in order to sustain the lien of this Mortgage or its priority, or to
protect or enforce any of Collateral Agent's rights hereunder, or to recover any
indebtedness secured hereby, all such sums shall become immediately due and
payable by BCRE with interest at the Default Rate. All such sums shall be
secured by this Mortgage and be a lien on the Property prior to any right,
title, interest or claim in, to or upon the Property attaching or accruing
subsequent to the lien of this Mortgage. Without limiting the generality of the
foregoing, in any sale or suit to foreclose the lien hereof there shall be
allowed and included as additional indebtedness secured hereby
15
<PAGE>
in the notice or decree for sale all costs and expenses which may be paid or
incurred by or on behalf of Collateral Agent for Attorney Costs and reasonable
appraiser's fees, receiver's costs and expenses, insurance, taxes, outlays for
documentary and expert evidence, costs for preservation of the Property,
stenographer's charges, searches and examinations, guarantee policies and
similar data and assurances with respect to title as Collateral Agent may deem
reasonably necessary either to prosecute such suit or to evidence to bidders at
any sale which may be had pursuant to such notice or decree the true condition
of the title to or value of the Property or for any other reasonably necessary
purpose. The amount of any such costs and expenses which may be paid or
incurred after the sale is entered may be estimated and the amount of such
estimate may be allowed and included as additional indebtedness secured hereby.
16. EXERCISE OF RIGHTS. If any of Collateral Agent or the Creditors: (1)
------------------
grants any extension of time or forbearance with respect to the payment of any
indebtedness secured by this Mortgage; (2) takes other or additional security
for the payment thereof; (3) waives or fails to exercise any right granted under
the Credit Documents; (4) grants any release, with or without consideration of
the whole or any part of the security held for the payment of the indebtedness
secured hereby; (5) amends or modifies in any respect with the consent of
Company any of the terms and provisions of the Credit Documents, then, and in
any such event, such act or omission to act shall not release BCRE under any
covenant of this Mortgage, nor preclude Collateral Agent from exercising any
right, power or privilege herein granted or intended to be granted upon the
occurrence or existence of an Event of Default or otherwise and shall not in any
way impair or affect the lien or priority of this Mortgage. No right or remedy
of Collateral Agent or the Creditors shall be exclusive of, but shall be in
addition to, every other right or remedy, now or hereafter existing at law or in
equity. No delay in exercising, or omission to exercise, any right or remedy
accruing upon the occurrence or existence of an Event of Default shall impair
any such right or remedy, or shall be construed to be a waiver of any such Event
of Default, or acquiescence therein, nor shall it affect any subsequent default
of the same or a different nature. Any waiver by Collateral Agent hereunder
shall be effective only if expressed in a writing signed by Collateral Agent and
then only for the time and to the extent stated therein. Every such right or
remedy may be exercised concurrently or independently and when and as often as
may be deemed expedient by Collateral Agent. All rights and remedies of
Collateral Agent hereunder and all obligations of BCRE shall be absolute and
unconditional, irrespective of any lack of validity or enforceability of the
Credit Documents or any other circumstance which might otherwise constitute a
defense available to, or a discharge of, BCRE in respect of its obligations
secured hereby.
17. INSPECTION. BCRE will keep, or cause to be kept, proper books and records
----------
with respect to the Property and the operations thereof. BCRE hereby grants to
Collateral Agent or any person authorized to act on behalf of Collateral Agent
the right to enter on the Property or any place where the books and records are
kept, at all reasonable times, and to inspect the same, including the right to
make photocopies or extracts from the books and records; provided, however,
nothing contained herein shall be construed as an obligation on the part of
Collateral Agent to make such inspections. Collateral Agent agrees that it
shall, in connection with any rights granted to Collateral Agent under this
Mortgage to enter upon the Property, give BCRE not less than forty-eight (48)
hours prior notice of any such entry onto the Property unless the need therefor
is the result of an emergency condition, in which case Collateral Agent shall
give such advance notice as may be reasonable under the circumstances.
18. TAXES ON INDEBTEDNESS. In the event of the passage of any law which
---------------------
deducts from the value of real property, for purposes of taxation, any lien
thereon and which, in turn, imposes a tax, whether directly or indirectly, on
the Revolving Notes, the 1996 Master Lease Agreement or any of the Credit
Documents, BCRE shall, upon demand from Collateral Agent, reimburse Collateral
Agent for the maximum portion that BCRE is permitted to contribute under
applicable law to the payment thereof, together with interest thereon at the
Default Rate from the date such taxes were paid by Collateral Agent until the
date of reimbursement from BCRE.
19. SUBORDINATION. At the option of Collateral Agent, this Mortgage shall
-------------
become subject and subordinate (except with respect to priority of entitlement
to insurance proceeds or any award in condemnation) to any and all leases of all
or any part of the Property upon the execution by Collateral
16
<PAGE>
Agent of a unilateral declaration of subordination and the recording thereof in
the Office of the County Clerk of ___________________ County,
____________________.
20. FUTURE ADVANCES. It is further covenanted and agreed by the parties hereto
---------------
that this Mortgage also secures the payment of and includes all future advances
as shall be made by Loan Agent or its successors or assigns as provided in the
Credit Agreement or as shall be made by Lease Agent or their successors or
assigns as provided in the 1996 Master Lease Agreement to and for the benefit of
BCRE and/or Company to the same extent as if such future advances were made on
the date of the execution of this Mortgage ("Future Advances"). The total
amount of indebtedness that may be secured by this Mortgage may decrease or
increase from time to time and shall include any and all disbursements made by
Collateral Agent for the payment of taxes, levies or insurance on the Property
with interest on such disbursements at the Default Rate and for Attorney Costs
incurred in the collection of any or all of such sums.
21. MODIFICATION. No change, amendment, modification, cancellation or
------------
discharge hereof, or any part hereof, shall be valid unless in writing and
signed by BCRE and Collateral Agent or their respective successors and assigns.
22. NOTICES. Any notices, demands, deliveries or other communications required
-------
or permitted hereunder shall be in writing and shall be deemed properly served
if served in the manner provided in the Facilities Agreement.
23. FURTHER ASSURANCES. BCRE, at its expense, will execute, acknowledge where
------------------
necessary, deliver, record, file or refile such instruments and take such
actions as Collateral Agent from time to time may reasonably request for the
further assurance to Collateral Agent of the properties and rights intended to
be now or hereafter subjected to the lien hereof or assigned hereunder or
intended so to be. BCRE hereby authorizes Collateral Agent to file financing
statements and continuations relative to all or any part of the Property for
which a security interest is granted hereunder without the signature of BCRE
where permitted by law. BCRE further agrees that a photocopy or other
reproduction of this Mortgage or a financing statement is sufficient as a
financing statement.
24. BINDING ON SUCCESSORS AND ASSIGNS; CAPTIONS; GENDER. Subject to the
---------------------------------------------------
provisions hereof restricting or limiting BCRE's rights of assignment and
transfer, all of the terms, covenants, conditions and agreements herein set
forth shall be binding upon and inure to the benefit of the respective heirs,
devisees, legal representatives, successors and assigns of the parties hereto.
The captions and headings of the paragraphs of this Mortgage are for convenience
only and are not to be used to interpret, limit or define the provisions hereof.
In this Mortgage, whenever and wherever the context so requires, the neuter
shall include the feminine and masculine and the singular shall include the
plural, where appropriate. The terms "including" and "includes" shall be
construed, where appropriate, as though followed by the words "without
limitation."
25. APPLICABLE LAW; SEVERABILITY. This Mortgage shall be governed by the
----------------------------
internal laws of the State of New York (without regard to conflicts of laws),
except that the laws of the State of ____________________ shall govern the
validity, priority and enforcement hereof. Every provision hereof is intended
to be severable. If any term of this Mortgage or the application thereof is
determined by a court of competent jurisdiction to be invalid or unenforceable
under applicable law, the remaining terms of this Mortgage shall not be affected
or impaired thereby, but each such remaining term shall be valid and enforceable
to the fullest extent permitted by law.
26. RELEASE; DEFEASANCE.
-------------------
A. If Company and/or BCRE pay all sums due under the Credit Documents in
accordance with the terms thereof or if the requirements of Paragraph 26.B are
satisfied, then this Mortgage and the estate and rights hereby created shall
cease, terminate and become void, and thereupon Collateral Agent,
17
<PAGE>
upon the written request and at the expense of BCRE, shall execute and deliver
to BCRE such instruments as shall be required to evidence of record the
satisfaction of this Mortgage and the lien thereof.
B. Without causing an acceleration of the indebtedness secured by this
Mortgage, Collateral Agent shall from time to time, upon not less than five (5)
Business Days' prior notice from BCRE or Company, execute and deliver to BCRE a
release of the lien of this Mortgage upon all or any portion of the Property for
which the release is requested (the "Released Property"), on the following terms
and conditions:
(1) No release shall be permitted at any time when an Event of
Default shall exist and be continuing;
(2) No release shall be given except in connection with the transfer,
sale or encumbrance of the Released Property except as permitted pursuant
to the terms of the Facilities Agreement and then only after BCRE and
Company have satisfied any conditions precedent contained in the Facilities
Agreement, the Credit Agreement and the 1996 Master Lease Agreement; and
(3) The cost of each release, including Attorney Costs of Collateral
Agent's counsel, shall be paid by BCRE.
27. TIME OF THE ESSENCE. Time is of the essence to this Mortgage, and all
-------------------
provisions pertaining thereto shall be strictly construed.
28. SUBMISSION TO JURISDICTION; WAIVER OF VENUE. BCRE, HEREBY (1) IRREVOCABLY
-------------------------------------------
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK CITY, NEW YORK AND TO THE JURISDICTION OF ANY ____________________
STATE COURT OR FEDERAL COURT SITTING IN OR NEAREST TO THE __________ COUNTY IN
WHICH THE PROPERTY IS LOCATED OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS MORTGAGE, (2) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE,
__________ STATE OR FEDERAL COURT AND (3) AGREES NOT TO INSTITUTE ANY LEGAL
ACTION OR PROCEEDING AGAINST COLLATERAL AGENT OR ANY CREDITOR OR THE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR
RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN
THIS PARAGRAPH 28. BCRE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN ANY SUCH ACTION OR PROCEEDING (WHETHER BROUGHT BY SUCH PARTY OR
OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS PARAGRAPH 28 AS WELL AS
ANY RIGHT IT MAY NOW OR HEREAFTER HAVE, TO REMOVE ANY SUCH ACTION OR PROCEEDING,
ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR
----- --- ----------
OTHERWISE. BCRE AGREES THAT A FINAL, NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
29. WAIVER OF JURY TRIAL. BCRE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
--------------------
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
CONCERNING ANY RIGHTS UNDER THIS MORTGAGE OR UNDER ANY OTHER DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL
INDUCEMENT FOR COLLATERAL AGENT, LOAN AGENT AND LEASE AGENT ENTERING INTO THE
CREDIT DOCUMENTS.
18
<PAGE>
30. SERVICE OF PROCESS. BCRE HEREBY IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
------------------
BY MEANS OF CERTIFIED MAIL AT THE ADDRESS SPECIFIED FOR COMPANY IN THE
FACILITIES AGREEMENT. NOTHING IN THIS MORTGAGE WILL AFFECT THE RIGHT OF
COLLATERAL AGENT TO SERVE SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]
19
<PAGE>
IN WITNESS WHEREOF, BCRE has executed this Mortgage as of the day and year
first above written.
BC REAL ESTATE INVESTMENTS, INC., a Delaware
corporation
By: ________________________________________
Bernadette Dennehy
Its Vice President
[CORPORATE SEAL]
STATE OF ILLINOIS )
) SS.
COUNTY OF ______________________ )
I, the undersigned, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that BERNADETTE DENNEHY, personally known to me to
be the Vice President of BC REAL ESTATE INVESTMENTS, INC., a Delaware
corporation, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged that as such Vice President, she signed, sealed and delivered
said instrument as Vice President of said corporation, and caused the corporate
seal of said corporation to be affixed thereto, pursuant to authority, given by
the Board of Directors of said corporation, as her free and voluntary act, and
as the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
Given under my hand and official seal, this _____ day of December, 1996.
________________________________________
Notary Public
My Commission Expires: _____________
This Instrument Prepared In Chicago, Illinois By
And After Recording, Return To:
Ann Duker
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
20
<PAGE>
Exhibit A
---------
LEGAL DESCRIPTION OF PROPERTY
STORE NO: __________
ADDRESS: ______________________________
______________________________
PERMANENT TAX INDEX NUMBER: ____________________
LEGAL DESCRIPTION:
21
<PAGE>
EXHIBIT F
---------
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of December
9, 1996 made by BOSTON CHICKEN, INC., a Delaware corporation ("Borrower"), and
Mid-Atlantic Restaurant Systems, Inc., a Delaware corporation ("Mid-Atlantic
Inc."; together with Borrower, collectively, the "Pledgors" and individually, a
"Pledgor"), in favor of BANK OF AMERICA ILLINOIS, as collateral agent
("Collateral Agent") pursuant to the terms of the Intercreditor Agreement (as
hereinafter defined).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower has entered into that certain Secured Revolving
Credit Agreement, dated as of even date herewith (said Secured Revolving Credit
Agreement, as amended, supplemented, modified, restated, refinanced, refunded or
renewed from time to time, the "Credit Agreement") among the lenders party
thereto (the "Lenders"), Bank of America Illinois for itself as a Lender, as
agent for the Lenders (in its capacity as agent, together with its successors
and assigns, the "Loan Agent") and as issuing lender (in its capacity as issuing
lender, together with its successors and assigns, the "Issuing Lender") and the
documentation agent named therein, pursuant to which the Lenders have agreed to
make Revolving Loans (as defined herein) to Borrower and the Issuing Lender has
agreed to issue Letters of Credit (as defined herein) on behalf of Borrower,
subject to the terms and conditions of the Credit Agreement;
WHEREAS, the Borrower has entered into that certain Master Lease
Agreement No. 2, dated as of even date herewith (as amended, supplemented,
modified, restated, refinanced, refunded or renewed from time to time, the "1996
Master Lease Agreement") between the Borrower and General Electric Capital
Corporation, for itself and as agent for the Lease Participants referred to
below (in its individual capacity, "GECC"; and in such dual capacity, the "Lease
Agent");
WHEREAS, subject to the terms and conditions of the 1996 Master Lease
Agreement, on the date hereof and/or from time to time hereafter GECC may convey
to certain financial institutions (collectively with GECC, the "Lease
Participants") participating interests in its rights, duties and obligations
under the 1996 Master Lease Agreement;
WHEREAS, the Borrower has entered into that certain Facilities
Agreement dated as of even date herewith (as amended, supplemented, modified,
restated, refinanced, refunded or renewed from time to time in accordance with
the terms of the Intercreditor Agreement referred to below, the "Facilities
-1-
<PAGE>
Agreement") among the Borrower, the Loan Agent and the Lease Agent;
WHEREAS, concurrently herewith the Borrower, the Loan Agent and the
Lease Agent are entering into that certain Intercreditor Agreement dated as of
even date herewith (the "Intercreditor Agreement") which sets forth certain
agreements among the Lenders, the Issuing Bank, the Loan Agent, the Lease Agent
and the Lease Participants with respect to, among other things, voting rights
and collateral issues;
WHEREAS, as a condition precedent to the making of the Revolving Loans
by the Lenders, the issuance of the Letters of Credit by the Issuing Lender and
the financial accommodations by the Lease Participants, each of the Pledgors is
required to execute and deliver this Pledge Agreement;
WHEREAS, Mid-Atlantic Inc. will derive significant direct and indirect
benefits from the making of the Revolving Loans by the Lenders, the issuance of
the Letters of Credit by the Issuing Lender and the making of the financial
accommodations by the Lease Participants; and
WHEREAS, each of the Pledgors has duly authorized the execution,
delivery and performance of this Pledge Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make Revolving Loans to Borrower pursuant to the Credit Agreement, the
Issuing Lender to issue Letters of Credit pursuant to the Credit Agreement and
the Lease Participants to make the financial accommodations pursuant to the 1996
Master Lease Agreement, each of the Pledgors agrees, for the benefit of the
Lenders, the Issuing Lender, the Loan Agent, the Lease Participants and the
Lease Agent (collectively, the "Creditors"), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Terms. The following terms when used in this
Pledge Agreement, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"Borrower" is defined in the Preamble.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the Preamble.
-2-
<PAGE>
"Credit Agreement" is defined in the first Recital.
"Creditors" is defined in the Recitals.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, and other
distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Pledged Units or other shares of capital stock constituting
Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Units made out of capital surplus.
"Issuing Lender" is defined in the first Recital.
"1996 Master Lease Agreement" is defined in the first Recital.
"Lease Agent" is defined in the second Recital.
"Lease Participant" is defined in the second Recital.
"Lenders" is defined in the first Recital.
"Loan Agent" is defined in the first Recital.
"Mid-Atlantic Inc." is defined in the Preamble.
"Pledge Agreement" is defined in the Preamble.
"Pledged Note Issuer" means each Person identified in Item A of
Attachment 1 hereto (as such Attachment 1 shall be updated by any substitute
Attachment 1 delivered by Borrower pursuant to Section 7.3 of the Credit
Agreement) as the issuer of the Pledged Note identified opposite the name of
such Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
which are delivered by either Pledgor to the Collateral Agent as Pledged
Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified, or supplemented from time to time and together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Units, all Pledged Notes, and all
other pledged shares of capital stock or promissory notes, all other securities,
all assignments of any amounts due or to become due, all other instruments which
are now being delivered by either Pledgor to the Collateral Agent or may from
time to time hereafter be delivered by either Pledgor to the Collateral Agent
for the purpose of pledge under this Pledge
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Agreement or any other Loan Document, and all proceeds of any of the foregoing.
"Pledged Unit Issuer" means each Person identified in Item B of
Attachment 1 hereto (as such Attachment 1 shall be updated by any substitute
Attachment 1 delivered by Borrower pursuant to Section 7.3 of the Credit
Agreement) as the issuer of the Pledged Units.
"Pledged Units" means all shares of capital stock, partnership units
or other equity interest of any Pledged Unit Issuer with respect to which either
Pledgor is record owner and which are delivered by either Pledgor to the
Collateral Agent as Pledged Property hereunder, and all of the certificates and
instruments representing such shares of capital stock, partnership units or
other equity interest.
"Pledgor(s)" is defined in the Preamble.
"Secured Obligations" is defined in Section 2.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State
of New York, as the same may be amended from time to time.
SECTION 1.2 Facilities Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the
Facilities Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
ARTICLE II
PLEDGE
SECTION 2.1 Grant of Security Interest. Each of the Pledgors hereby
pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to
the Collateral Agent for the benefit of the Creditors, and hereby grants to the
Collateral Agent for the benefit of the Creditors, a continuing security
interest in, all of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto (as such Attachment 1 shall be updated by any
substitute Attachment 1 delivered by
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<PAGE>
Borrower pursuant to Section 7.3 of the Credit Agreement);
(b) all other Pledged Notes issued from time to time;
(c) all Pledged Units identified in Item B of Attachment 1 hereto (as
such Attachment 1 shall be updated by any substitute Attachment 1 delivered
by Borrower pursuant to Section 7.3 of the Credit Agreement);
(d) all other Pledged Units issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered to
the Collateral Agent in connection with this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property to which either Pledgor is
entitled or entitled to receive a security interest; and
(g) all proceeds of any of the foregoing.
SECTION 2.2 Security for Obligations. This Pledge Agreement secures
the payment in full of all obligations of every nature of the Borrower now or
hereafter existing under the Credit Agreement, the Revolving Notes, any Guaranty
to which Mid-Atlantic Inc. is a party, the other Loan Documents, the 1996 Master
Lease Agreement and the 1996 Lease Documents (such documents collectively, the
"Credit Documents") whether for principal, interest, costs, fees, expenses, or
otherwise (all such obligations of the Borrower being the "Secured
Obligations").
SECTION 2.3 Delivery of Pledged Property; Registration of Pledge,
Transfer, etc. All certificates or instruments representing or evidencing any
Collateral, including all Pledged Units and all Pledged Notes, shall be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto,
shall be in suitable form for transfer by delivery, and shall be accompanied by
all necessary instruments of transfer or assignment, duly executed in blank. If
any interests pledged pursuant to the Pledge Agreement are uncertificated
securities, the applicable Pledgor(s) shall provide evidence satisfactory to the
Collateral Agent that the security interest in such uncertificated securities
has been transferred to and perfected by the Collateral Agent for the benefit of
the Creditors in accordance with Section 8-313 and Section 8-321 (or any
successor sections) of the U.C.C. Prior to the delivery thereof to the
Collateral
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Agent, such certificates or instruments shall be held by the respective Pledgor
separate and apart from its other property and in express trust for the
Collateral Agent. To the extent either Pledgor has such rights, the Collateral
Agent shall have the right, at any time, to transfer to, or to register in the
name of the Collateral Agent or any of its nominees, any or all of such Pledged
Units, subject only to the revocable rights of the Pledgor specified in clause
(c) of Section 4.4. In addition, to the extent either Pledgor has such rights,
the Collateral Agent shall have the right at any time after a Default shall have
occurred and be continuing to exchange certificates or instruments representing
or evidencing any Pledged Units for certificates or instruments of smaller or
larger denominations.
SECTION 2.4 Dividends and Interest. (a) In the event that any Dividend
to which either Pledgor is entitled or entitled to receive a security interest
is to be paid on any Pledged Unit at a time when no Event of Default has
occurred and is continuing, and the proceeds of such Dividend have not
previously been required to be applied to any of the Secured Obligations, such
proceeds may be paid directly to such Pledgor.
(b) In the event that any payment of interest or principal to which either
Pledgor is entitled or entitled to receive a security interest is to be paid on
any Pledged Note at a time when no Event of Default has occurred and is
continuing, and the proceeds of such payment have not previously been required
to be applied to any of the Secured Obligations, such proceeds may be paid
directly to such Pledgor.
SECTION 2.5 Continuing Security Interest; Transfer of Note. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full of all
Secured Obligations and the termination of all contractual obligations of
any Creditor under any Credit Document to extend credit of any nature to
Borrower,
(b) be binding upon the Pledgors and their respective successors,
transferees and assigns, and
(c) inure to the benefit of the Collateral Agent, the Creditors and
their respective successors, transferees, and assigns.
Without limiting the foregoing clause (c), pursuant to the terms of the Credit
Documents, any Creditor may assign, or otherwise transfer (in whole or in part)
its ratable portion of the Secured Obligations held by them to any other Person
or entity, and such
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other Person or entity shall thereupon become vested with all the benefits in
respect thereof granted to such Creditor under any Credit Document (including
this Pledge Agreement) or otherwise. Upon the payment in full of the Secured
Obligations and the termination of all contractual obligations of all Creditors
under any Credit Document to extend Credit of any nature to Borrower, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to the respective Pledgor. Upon any such termination,
the Collateral Agent will, at the Pledgors' sole expense, deliver to the
respective Pledgor, without any representations or warranties of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Units and all Pledged Notes of such Pledgor, together with all other
Collateral held by the Collateral Agent hereunder, and execute and deliver to
the respective Pledgor, at such Pledgor's sole expense, such documents as such
Pledgor shall reasonably request to evidence such termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Pledgor represents and warrants unto the Collateral Agent, as at
the date of each pledge and delivery hereunder (including each pledge of Pledged
Units and each pledge and delivery of a Pledged Note) by such Pledgor to the
Collateral Agent of any Collateral, as follows:
SECTION 3.1 Ownership, No Liens, etc. Each Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) all the Collateral pledged by it under this
Pledge Agreement, free and clear of all liens, security interests, options, or
other charges or encumbrances.
SECTION 3.2 As to Pledged Units. In the case of any Pledged Units
constituting such Collateral, all of such Pledged Units are duly authorized and
validly issued.
SECTION 3.3 As to Pledged Notes. In the case of each Pledged Note, to
the best knowledge of the Borrower, all of such Pledged Notes have been duly
authorized, executed, endorsed, issued and delivered, and are the legal, valid
and binding obligation of the issuers thereof enforceable against such issuers
in accordance with their respective terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights and to general principles of equity. None of
the Pledged Notes is in default.
SECTION 3.4 Authorization, Approval, etc. Except as may have been
obtained, no authorization, approval, or other
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action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by Pledgors of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgors, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Units, as may be required in connection with a disposition of
such Pledged Units by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 Protect Collateral; Further Assurances, etc. The Pledgors
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). Each Pledgor
will warrant and take reasonable action to defend the right and title herein
granted unto the Collateral Agent in and to the Collateral (and all right,
title, and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever. Each Pledgor agrees that at any time, and
from time to time, at the expense of the Pledgors, the Pledgors will promptly
execute and deliver all further instruments, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2 Stock Powers, etc. Each Pledgor agrees that all Pledged
Units (and all other shares of capital stock constituting Collateral) delivered
by such Pledgor pursuant to this Pledge Agreement will be accompanied by duly
executed undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. Each Pledgor will, from time to time upon
the request of the Collateral Agent, promptly deliver to the Collateral Agent
such stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default and
during the continuance
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<PAGE>
thereof to the extent of any right to do such, promptly transfer any Pledged
Units into the name of any nominee designated by the Collateral Agent.
SECTION 4.3 Continuous Pledge. Subject to Section 2.4, each Pledgor
will, at all times, keep pledged to the Collateral Agent pursuant hereto all
Pledged Units and all other shares of capital stock constituting Collateral, all
Dividends and Distributions with respect thereto to which such Pledgor is
entitled, or entitled to receive a security interest in, all Pledged Notes, all
proceeds received by the Collateral Agent or such Pledgor with respect to the
Pledged Notes, and all other Collateral and other securities, instruments,
proceeds, and rights from time to time received by or distributable to such
Pledgor in respect of any Collateral.
SECTION 4.4 Voting Rights; Dividends, etc. Subject to the
Intercreditor Agreement, each Pledgor agrees to deliver (properly endorsed where
required hereby or requested by the Collateral Agent) to the Collateral Agent:
(a) after an Event of Default shall have occurred and be continuing,
promptly upon receipt thereof by either Pledgor and without any request
therefor by the Collateral Agent, all Dividends and Distributions (to which
such Pledgor is entitled or entitled to receive a security interest
therein) and all interest, all other cash payments, and all proceeds of the
Collateral, all of which shall be held by the Collateral Agent as
additional Collateral for use in accordance with Article VI; and
(b) after an Event of Default shall have occurred and be continuing,
promptly upon request of the Collateral Agent, such proxies and other
documents as may be necessary to allow the Collateral Agent to exercise any
voting power to which either Pledgor is entitled with respect to any share
of capital stock (including Pledged Units) constituting Collateral;
provided, however, that unless an Event of Default shall have occurred and be
continuing, each Pledgor shall be entitled:
(c) to exercise, in its reasonable judgment, but in a manner which
would not have a material adverse effect on the value of the Pledged Units,
and in a manner not inconsistent with the terms of the Credit Documents
(including this Pledge Agreement) the voting power and all other incidental
rights of
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ownership with respect to any Pledged Units or other shares of
capital stock constituting Collateral (subject to such Pledgor's obligation
to deliver to the Collateral Agent such Pledged Units and other shares in
pledge hereunder); and
(d) to the prompt receipt of all Dividends in accordance with Section
2.4.
All Dividends, Distributions, interest, cash payments, and proceeds which may at
any time and from time to time be held by either Pledgor but which such Pledgor
is then obligated to deliver to the Collateral Agent, shall, until delivery to
the Collateral Agent, be held by such Pledgor separate and apart from its other
property in trust for the Collateral Agent. The Collateral Agent agrees that
unless an Event of Default shall have occurred and be continuing, the Collateral
Agent shall, upon the written request of either Pledgor, promptly deliver such
proxies and other documents, if any, as shall be reasonably requested by such
Pledgor which are necessary to allow such Pledgor to exercise any voting power
to which such Pledgor is entitled with respect to any share of capital stock
(including Pledged Units) constituting Collateral; provided, however, that no
vote shall be cast, or consent, waiver, or ratification given, or action taken
by such Pledgor that would impair any Collateral or be inconsistent with or
violate any provision of the Credit Agreement, the 1996 Master Lease Agreement
or any other Credit Document (including this Pledge Agreement).
SECTION 4.5 Additional Undertakings. Neither Pledgor will, without
the prior written consent of the Collateral Agent, which will not be
unreasonably withheld or delayed, take or omit to take any action the taking or
the omission of which would result in any material impairment or alteration of
any obligation of the maker of any Pledged Note or other instrument constituting
Collateral. Notwithstanding the foregoing the Borrower may (i) in its ordinary
course of business, amend, restate, supplement, replace, terminate, modify or
waive any provision of any Pledged Note (including any underlying instrument
pursuant to which such Pledged Note is issued), and (ii) exercise its rights to
convert debt or exercise options for equity in any Financed Franchisee at any
time, each as permitted by the Facilities Agreement.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1 Collateral Agents Appointed Attorney-in-Fact. Each
Pledgor hereby irrevocably appoints the Collateral Agent such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name
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of such Pledgor or otherwise, from time to time in the Collateral Agent's
discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights
of the Collateral Agent with respect to any of the Collateral.
SECTION 5.2 Collateral Agent May Perform. If either Pledgor fails to
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Collateral
Agent incurred in connection therewith shall be payable by such Pledgor pursuant
to Section 6.3.
SECTION 5.3 Reasonable Care. The Collateral Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
of the Collateral, if it takes such action for that purpose as the respective
Pledgor reasonably requests in writing at times other than upon the occurrence
and during the continuance of any Event of Default, but failure of the
Collateral Agent to comply with any such request at any time shall not in itself
be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. Subject to the Intercreditor
Agreement, if any Event of Default shall have occurred and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may sell the Collateral or any part thereof after
reasonable notice to the Pledgors in one or more parcels at public or
private sale or broker's board, at any of the Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Collateral Agent may deem commercially reasonable. Each
Pledgor agrees that the Collateral Agent or any Creditor shall be entitled
to bid for or purchase any or all of the Collateral at any such sale. Each
Pledgor agrees that at least ten days' notice to each such Pledgor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Collateral Agent may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) The Collateral Agent may (to the extent either Pledgor could do
so or has done so)
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or
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compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in such
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of such Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2 Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by the Collateral Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral may, in the discretion of the Collateral Agent, be held
by the Collateral Agent as Collateral for, and/or then, or at any other time
thereafter applied, in full or in part by the Collateral Agent against the
Secured Obligations in accordance with the terms of the Intercreditor Agreement.
SECTION 6.3 Indemnity and Expenses. Each Pledgor hereby indemnifies
and holds harmless the Collateral Agent and the Creditors from and against any
and all claims, losses, and liabilities growing out of or resulting from this
Pledge Agreement (including enforcement of this Pledge Agreement), except
claims, losses, or liabilities resulting from the Collateral Agent's and/or any
such Creditor's, as the case may be, gross negligence or willful misconduct.
Upon demand, the Pledgors will pay to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Collateral Agent and/or any
Creditor, as the case may be, may incur in connection with:
(a) the administration of this Pledge Agreement;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
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(c) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder; or
(d) the failure by either Pledgor to perform or observe any of the
provisions hereof.
SECTION 6.4 Rights Exercisable. Notwithstanding anything else to the
contrary herein, the Collateral Agent's rights hereunder are limited to whatever
rights the Pledgors have with respect to the Collateral.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Credit Documents. This Pledge Agreement is a Credit
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions of the Credit Agreement and the Intercreditor
Agreement, including Article IX of the Credit Agreement and Article IV of the
Intercreditor Agreement.
SECTION 7.2 Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by either
Pledgor herefrom shall in any event be effective unless the same shall be in
writing and signed by the Collateral Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
SECTION 7.3 Obligations Not Affected. The obligations of the
Pledgors under this Pledge Agreement shall remain in full force and effect
without regard to, and shall not be impaired or affected by:
(a) any amendment or modification or addition or supplement to the
Credit Agreement, any Revolving Note, any other Loan Document, the 1996
Master Lease Agreement or any other Credit Document any instrument
delivered in connection therewith, or any assignment or transfer thereof;
(b) any exercise, non-exercise, or waiver by the Collateral Agent of
any right, remedy, power, or privilege under or in respect of, or any
release of any guaranty or collateral provided pursuant to, this Pledge
Agreement,
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the Credit Agreement, 1996 Master Lease Agreement or any other
Credit Document;
(c) any waiver, consent, extension, indulgence, or other action or
inaction in respect of this Pledge Agreement, the Credit Agreement, the
1996 Master Lease Agreement or any other Credit Document or any assignment
or transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, or the like, of either Pledgor or
any other Person, whether or not either Pledgor shall have notice or
knowledge of any of the foregoing.
SECTION 7.4 Protection of Collateral. The Collateral Agent may from
time to time, at its option, perform any act which either Pledgor agrees
hereunder to perform and which such Pledgor shall fail to perform after being
requested in writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default) and the Collateral Agent may from time to time take any other action
which the Collateral Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
SECTION 7.5 Notices, Etc. All notices and other communications
provided for under this Pledge Agreement shall be in writing (including
telegraphic, telex or facsimile communication) and mailed or telecommunicated or
delivered at the address of such party set forth at the address set forth on the
signature page of this Pledge Agreement; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section 7.5. All such
notices and communications shall, when mailed or telecommunicated, be effective
upon actual receipt, or one (1) Business Day after transmitted by telex and the
appropriate answerback received, transmitted by facsimile or delivered to the
telegraph company, respectively, addressed as aforesaid.
SECTION 7.6 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.7 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without
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invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
Section 7.8 LAW. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW.
SECTION 7.9 Submission to Jurisdiction. Each of the parties to this
Pledge Agreement hereby irrevocably agree that any legal action or proceeding
pertaining to this Pledge Agreement may be brought in the courts of the State of
New York or Federal Court sitting in New York City, New York. Each of the
parties to this Pledge Agreement hereby irrevocably agree that service of
process in such action or proceeding may be made either by mailing, by
registered or certified mail, postage prepaid, a copy of the summons or
complaint, or other legal process in such action or proceeding to such party at
the address specified pursuant to Section 7.5. Service of process in any such
action or proceeding, effected as aforesaid, shall be effective upon receipt by
party or such agent and shall be deemed personal service upon such party and
shall be legal and binding upon such party for all purposes, notwithstanding any
failure by such party's agent to forward copies of such process to such party.
Each of the parties to this Pledge Agreement hereby waives, to the fullest
extent permitted by law, any objection it may now or hereafter have to the
laying of venue in any such action or proceeding in any such court as well as
any right it may now or hereafter have to remove any such action or proceeding,
once commenced, to another court on the grounds of forum non conveniens or
otherwise.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
BOSTON CHICKEN, INC.
By:
------------------------------------------------
Name: Bernadette M. Dennehy
Title: Vice President
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Telephone: (303) 278-9500
Facsimile: (303) 216-5339
MID-ATLANTIC RESTAURANT SYSTEMS, INC.
By:
------------------------------------------------
Name: Bernadette M. Dennehy
Title: Vice President
14103 Denver West Parkway
P.O. Box 4086
Golden, Colorado 80401-4086
Telephone: (303) 278-9500
Facsimile: (303) 216-5339
BANK OF AMERICA ILLINOIS, as
Collateral Agent
By:
------------------------------------------------
Name: David A. Johanson
Title: Vice President
231 South LaSalle Street
Chicago, Illinois 60697
Attn: David Johanson
Telephone: (312) 828-3782
Facsimile: (312) 828-1974
<PAGE>
ATTACHMENT 1
to
Pledge Agreement
Item A. Pledged Notes (each of such Notes being pledged by Borrower)
Note Issuer Description
- ----------- -----------
BC Boston, L.P. Amended and Restated Convertible
Secured Note dated August 8, 1996
in the original principal amount
of $35,000,000
BC Boston, L.P. Nonconvertible Secured Note dated
September 27, 1996 in the
original principal amount of
$8,000,000
BC Golden Gate, L.L.C. Amended and Restated Convertible
Secured Note dated September 27,
1996 in the original principal
amount of $39,000,000
BC Golden Gate, L.L.C. Nonconvertible Secured Note dated
August 12, 1996 in the original
principal amount of $2,000,000
BC Great Lakes, L.L.C. Amended and Restated Convertible
Secured Note dated August 8, 1996
in the original principal amount
of $76,420,000
BC Great Lakes, L.L.C. Nonconvertible Secured Note dated
October 25, 1996 in the original
principal amount of $10,000,000
BC Great Lakes, L.L.C. Replacement Secured Promissory
Note dated December 9, 1996 in
the original principal amount of
$7,720,000
BC Heartland, L.L.C. Convertible Secured Note dated
October 15, 1996 in the original
principal amount of $1,725,000
BC Heartland, L.L.C. Nonconvertible Secured Note dated
October 15, 1996 in the original
principal amount of $1,625,000
-18-
<PAGE>
BC New York, L.L.C. Amended and Restated Convertible
Secured Note dated August 6, 1996
in the original principal amount
of $38,003,912
BC New York, L.L.C. Amended and Restated
Nonconvertible Secured Note dated
November 19, 1996 in the original
principal amount of $86,440,088
BC Northwest, L.P. Amended and Restated Convertible
Secured Note dated as of August
12, 1996 in the original
principal amount of $30,000,000
BC Northwest, L.P. Nonconvertible Secured Note dated
as of October 4, 1996 in the
original principal amount of
$8,000,000
BC Superior, L.L.C. Amended and Restated Convertible
Secured Note dated August 8, 1996
in the original principal amount
of $37,871,059
BC Texas, Inc. Amended and Restated Convertible
Secured Note dated November 29,
1996 in the original principal
amount of $48,000,000
BCE West, L.P. Amended and Restated Convertible
Secured Note dated August 8, 1996
in the original principal amount
of $40,000,000
BCE West, L.P. Nonconvertible Secured Note dated
October 4, 1996 in the original
principal amount of $10,000,000
Boston West, L.L.C. Convertible Secured Note dated
April 16, 1995 in the original
principal amount of $63,750,000
Finest Foodservice, L.L.C. Amended and Restated Convertible
Secured Note dated November 23,
1996 in the original principal
amount of $52,000,000
Finest Foodservice, L.L.C. Nonconvertible Secured Note dated
December 31, 1995 in the original
principal amount of $2,400,000
Mayfair Partners, L.P. Amended and Restated Convertible
Secured Note dated August 8, 1996
in the original principal amount
of $30,170,000
-19-
<PAGE>
Mayfair Partners, L.P. Amended and Restated
Nonconvertible Secured Note dated
November 29, 1996 in the original
principal amount of $10,000,000
P&L Food Services, L.L.C. Amended and Restated Convertible
Secured Note dated September 27,
1996 in the original principal
amount of $37,000,000
P&L Food Services, L.L.C. Nonconvertible Secured Note dated
September 27, 1996 in the
original principal amount of
$10,000,000
Platinum Rotisserie, L.L.C. Amended and Restated Secured Note
dated August 27, 1996 in the
original principal amount of
$49,634,358
Platinum Rotisserie, L.L.C. Secured Promissory Note dated
December 9, 1994 in the original
principal amount of $6,500,000
R&A Food Services, L.P. Amended and Restated Convertible
Secured Note dated October 6,
1996 in the original principal
amount of $86,505,220
R&A Food Services, L.P. Nonconvertible Secured Note dated
October 6, 1996 in the original
principal amount of $12,000,000
Item B. Pledged Units
-------------
Pledged by the Borrower:
Unit Issuer Units
- ----------- -----
Percentage
----------
Mid-Atlantic Restaurant 9,680,000 93% of Limited
Systems L.P. Partnership Units
Pledged by Mid-Atlantic Restaurant Systems, Inc.:
Unit Issuer Units
- ----------- -----
Percentage
----------
Mid-Atlantic Restaurant 120,000 100% of General
Systems L.P. Partnership Units
-20-
<PAGE>
EXHIBIT G
---------
Form of Assignment and Acceptance ((S)10.5)
-------------------------------------------
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, 199_ is made between
______________________________ (the "Assignor") and __________________________
(the "Assignee").
RECITALS
--------
WHEREAS, the Assignor is party to that certain Secured Revolving
Credit Agreement dated as of December 9, 1996 (as amended, amended and restated,
modified, supplemented or renewed, the "Credit Agreement") among Boston Chicken,
Inc., a Delaware corporation (the "Borrower"), the lenders who are or from time
to time become party thereto (the "Lenders"), Bankers Trust Company, as
documentation agent for the Lenders, and Bank of America Illinois, as agent for
the Lenders (the "Agent") and as letter of credit issuing bank (the "Issuing
Lender"). Any terms defined in the Credit Agreement and not defined in this
Assignment and Acceptance are used herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to make Revolving Loans to the Borrower in an aggregate amount not to
exceed $__________ in the case Revolving A Loans ("Commitment A"), $__________
in the case of Revolving B Loans ("Commitment B"), and $__________ in the case
of Revolving C Loans ("Commitment C"); together with its Commitment A,
Commitment B and Commitment C collectively the "Commitments");
WHEREAS, [the Assignor has made to the Borrower Revolving A Loans in
the aggregate outstanding principal amount of $__________, Revolving B Loans in
the aggregate outstanding principal amount of $__________, and Revolving C Loans
in the aggregate outstanding principal amount of $__________] [no Revolving
Loans are outstanding under the Credit Agreement];
WHEREAS, [the Assignor has acquired a participation in the Issuing
Lender's liability under Letters of Credit in an aggregate principal amount of
$____________ (the "L/C Obligations")] [no Letters of Credit are outstanding
under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement and the
Loan Documents in respect of its Commitments, [together with a corresponding
portion of each of its outstanding Revolving Loans and L/C Obligations] in an
amount
-1-
<PAGE>
equal to $__________ (the "Assigned Amount") on the terms and subject to the
conditions set forth herein and the Assignee wishes to accept assignment of such
rights and to assume such obligations from the Assignor on such terms and
subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
Share") of (A) the Commitment A, Revolving A Loans, Commitment B, Revolving B
Loans, Commitment C and Revolving C Loans and the L/C Obligations of the
Assignor and (B) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Credit Agreement
and the Loan Documents.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Lender under the Credit Agreement and the Loan Documents, including the
requirements concerning confidentiality and the payment of indemnification, with
an aggregate Commitment in an amount equal to the Assigned Amount. The Assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement and the Loan Documents
are required to be performed by it as a Lender. It is the intent of the parties
hereto that the aggregate Commitment of the Assignor shall, as of the Effective
Date, be reduced by an amount equal to the Assigned Amount and the Assignor
shall relinquish its rights and be released from its obligations under the
Credit Agreement and the Loan Documents to the extent such obligations have been
assumed by the Assignee; provided, however, the Assignor shall not relinquish
its rights under Article IV or Sections 10.6 and 10.12 of the Credit Agreement
to the extent such rights relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment A will be $__________,
Commitment B will be $__________ and Commitment C will be $__________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's
-2-
<PAGE>
Commitment A will be $__________, Commitment B will be $__________ and
Commitment C will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Percentage Share of the outstanding principal amount
of all Revolving Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 10.5(1) of the Credit
Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date with
respect to the Commitments, Revolving Loans and L/C Obligations shall be for the
account of the Assignor. Any interest, fees and other payments accrued on and
after the Effective Date with respect to the Assigned Amount shall be for the
account of the Assignee. Each of the Assignor and the Assignee agrees that it
will hold in trust for the other party any interest, fees and other amounts
which it may receive to which the other party is entitled pursuant to the
preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement, including the Schedules and Exhibits thereto, the Intercreditor
Agreement and the Facilities Agreement, together with copies of the most recent
financial statements referred to in Section 3.8 of the Facilities Agreement, and
such other documents and information as it has deemed appropriate to make its
own credit and legal analysis and decision to enter into this Assignment and
Acceptance; and (b) agrees that it will, independently and without reliance upon
the Assignor, the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit and legal decisions in taking or not taking action under the Credit
Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective date for
this Assignment and Acceptance shall be __________, 199__ (the "Effective
Date"); provided that the following conditions precedent have been satisfied on
or before the Effective Date:
-3-
<PAGE>
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the consent of the Issuing Lender and the Agent required
for an effective assignment of the Assigned Amount by the Assignor to the
Assignee under Section 10.5 of the Credit Agreement shall have been duly
obtained and shall be in full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to
the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section 2(c) hereof and
in Section 10.5(1) of the Credit Agreement shall have been paid to the Agent;
and
(v) the Assignor shall have assigned and the Assignee shall
have assumed a percentage equal to the Assignee's Percentage Share of the rights
and obligations of the Assignor under the Credit Agreement and the Loan
Documents (if such agreements exist).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Borrower, the Issuing Lender and
the Agent for acknowledgement by the Issuing Lender and the Agent, a Notice of
Assignment in the form attached hereto as Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement and the Loan Documents as are delegated to the Agent by the Lenders
pursuant to the terms of the Credit Agreement and the Loan Documents.
(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement or the Loan
Documents.]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Lender, the Agent and the
Borrower that under applicable law and treaties no tax will be required to be
withheld by the Lender with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the Borrower prior to the time that the Agent or Borrower is required to make
any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein the Assignee claims entitlement to the
benefits of
-4-
<PAGE>
a tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, and (c) agrees to comply
with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.
8. Representations and Warranties.
------------------------------
(a) The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any Lien or other adverse claim; (ii) it is duly
organized and existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Borrower, or the performance or observance by the Borrower, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other
-5-
<PAGE>
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of, any Person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance; and apart from any
agreements or undertakings or filings required by the Credit Agreement, no
further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is an Eligible Assignee.
9. Further Assurances.
------------------
The Assignor and the Assignee each hereby agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions contemplated by this Assignment and
Acceptance, including the delivery of any notices or other documents or
instruments to the Borrower or the Agent, which may be required in connection
with the assignment and assumption contemplated hereby.
10. Miscellaneous.
-------------
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
-6-
<PAGE>
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and the
Assignee each irrevocably submits to the non-exclusive jurisdiction of any State
or Federal court sitting in New York over any suit, action or proceeding arising
out of or relating to this Assignment and Acceptance and irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court. Each party to this Assignment and
Acceptance hereby irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND
AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER
ORAL OR WRITTEN).
(g) ASSIGNEE HEREBY ACKNOWLEDGES AND AGREES TO BE SUBJECT TO TERMS OF
THE INTERCREDITOR AGREEMENT DATED DECEMBER 9, 1996, AMONG BOSTON CHICKEN, INC.,
BANK OF AMERICA ILLINOIS AS AGENT FOR THE LENDERS, AND GENERAL ELECTRIC CAPITAL
CORPORATION FOR ITSELF AND AS AGENT FOR THE LEASE PARTICIPANTS.
* * * * *
-7-
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
[ASSIGNEE]
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
-8-
<PAGE>
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
_______________, 199_
Bank of America Illinois
as Issuing Lender and
as Agent for the Lenders
231 S. LaSalle Street
Chicago, Illinois 60697
[Name and Address of Borrower]
Ladies and Gentlemen:
We refer to the Secured Revolving Credit Agreement dated as of December 9,
1996 (as amended, amended and restated, modified, supplemented or renewed, the
"Credit Agreement") among Boston Chicken, Inc., a Delaware corporation (the
"Borrower"), the lenders who are or from time to time become party thereto (the
"Lenders"), Bankers Trust Company, as documentation agent for the Lenders, and
Bank of America Illinois, as agent for the Lenders (the "Agent") and as letter
of credit issuing bank (the "Issuing Lender"). Terms defined in the Credit
Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the assignment
by __________________ (the "Assignor") to _______________ (the "Assignee") of
_____% of the right, title and interest of the Assignor in and to the Credit
Agreement (including, without limitation, the right, title and interest of the
Assignor in and to the Commitments of the Assignor[,] [and] all outstanding
Revolving Loans made by the Assignor [and the Assignor's participation in the
Letters of Credit]) pursuant to the Assignment and Acceptance Agreement attached
hereto (the "Assignment and Acceptance").
2. Immediately before giving effect to the assignment and assumption in the
Assignment and Acceptance, (a) the Assignee's Commitment A is $__________,
Commitment B is $__________ and Commitment C is $__________, and (b) the
Assignor's Commitment A is $__________, Commitment B is $__________ and
Commitment C is $__________.
3. Immediately after giving effect to the assignment and assumption in the
Assignment and Acceptance, (a) the Assignee's Commitment A will be $__________,
Commitment B will be $__________ and Commitment C will be $__________, and (b)
the Assignor's Commitment A will be $__________, Commitment B will be
$__________ and Commitment C will be $__________.
-9-
<PAGE>
4. The Assignee agrees that, upon receiving the consent of the Agent and
the Issuing Lender to such assignment, the Assignee will be bound by the terms
of the Credit Agreement and the Loan Documents as fully and to the same extent
as if the Assignee were the Lender originally holding such interest in the
Credit Agreement and the Loan Documents.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: __________________________
Address: _______________________________
_______________________________
_______________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
Telex (Answerback): ____________________
(B) Payment Instructions:
Account No.: ___________________________
At: ___________________________
___________________________
___________________________
Reference: ___________________________
Attention: ___________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
* * * *
-10-
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
Title:________________________
By:
Title:________________________
[NAME OF ASSIGNEE]
By:
Title:________________________
By:
Title:________________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
BANK OF AMERICA ILLINOIS, as Agent
By: __________________________
Its: _________________________
BANK OF AMERICA ILLINOIS, as Issuing Lender
By: __________________________
Its: _________________________
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<PAGE>
EXHIBIT H
---------
SUPPLEMENTAL SIGNATURE PAGE
_____________199_
Re: Boston Chicken, Inc.
--------------------
Ladies and Gentlemen:
Reference is made to the Secured Revolving Credit Agreement, dated as of
December 9, 1996 (as the same may at any time be amended, modified or
supplemented from time to time, the "Credit Agreement"), among the undersigned,
the lenders who are or from time to time become party thereto (the "Lenders"),
Bankers Trust Company, as documentation agent for the Lenders, and Bank of
America Illinois, as Agent for the Lenders. Capitalized terms used and not
otherwise defined herein have the meanings assigned to them in the Credit
Agreement.
As of _____________, 19__ ("Effective Date"), the undersigned agrees to
become a Lender under the Credit Agreement as if originally named therein, with
a Commitment equal to $__________ which represents ___% of the Total Commitment
Amount. The undersigned further agrees to be bound by the terms and conditions
of the Credit Agreement. The undersigned further agrees that, as of the
Effective Date, Schedules I and II to the Credit Agreement are amended in their
entirety to read as set forth on the attached Schedules I and II respectively,
which are incorporated by this reference.
Assignee hereby acknowledges and agrees to be subject to terms of the
Intercreditor Agreement dated December 9, 1996, among Boston Chicken, Inc., Bank
of America Illinois as agent for the Lenders, and General Electric Capital
Corporation for itself and as agent for the Lease Participants.
[NAME OF BANK]
By:___________________________
Name:_________________________
Title:________________________
Address:______________________
______________________
______________________
Telephone: (___) ____________
Facsimile: (___) ____________
-1-
<PAGE>
Acknowledged and Accepted
Bank of America Illinois, as Agent
By:___________________________
Name:_________________________
Title:________________________
Boston Chicken, Inc.
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
================================================================================
INTERCREDITOR AGREEMENT
dated as of December 9, 1996
among
BOSTON CHICKEN, INC.,
BANK OF AMERICA ILLINOIS,
as Agent For Certain Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
For Itself and As Agent For Certain Lease Participants
================================================================================
<PAGE>
The following Table of Contents has been inserted for convenience only and does
not constitute a part of this Agreement.
TABLE OF CONTENTS
PAGE
----
ARTICLE I
<TABLE>
<CAPTION>
<S> <C> <C>
DEFINITIONS............................. 2
1.1. Defined Terms.................................................. 2
1.2. Other Definitions.............................................. 5
ARTICLE II
VOTING................................ 5
2.1. Voting For Amendments.......................................... 6
2.2. Voting For Accelerations....................................... 6
2.3. Voting Following Acceleration.................................. 7
ARTICLE III
COLLATERAL ENFORCEMENT AND SHARING.................... 7
3.1. Collateral..................................................... 7
3.3. Applications Arising From Notice of Actionable
Default....................................................... 8
3.4. Sharing........................................................ 9
3.5. Agreement Not To Act........................................... 9
ARTICLE IV
THE AGENTS.............................. 10
4.1. Appointment and Authorization; "Agent"......................... 10
4.2. Delegation of Duties........................................... 10
4.3. Liability of Agents............................................ 10
4.4. Reliance by Agent.............................................. 11
4.5. Credit Decision................................................ 11
4.6. Indemnification of Agent....................................... 12
4.7. Agent in Individual Capacity................................... 12
ARTICLE V
MISCELLANEOUS............................ 13
5.1. Waivers and Amendments......................................... 13
5.2. Notices, Etc................................................... 13
5.3. No Waiver; Remedies............................................ 13
5.4. Successors and Assigns......................................... 14
5.5. Termination.................................................... 14
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.6. Governing Law................................................. 14
5.7. Severability of Provisions.................................... 14
5.8. Conflicts..................................................... 14
5.9. Headings...................................................... 14
5.10. SUBMISSION TO JURISDICTION; WAIVER OF VENUE................... 14
5.11. WAIVER OF JURY TRIAL.......................................... 15
5.12. SERVICE OF PROCESS............................................ 15
</TABLE>
-ii-
<PAGE>
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT dated as of December 9, 1996 is among
BOSTON CHICKEN, INC., a Delaware corporation (the "Company"), BANK OF AMERICA
ILLINOIS, as agent for the Lenders and the Issuing Lender referred to below (in
such capacity, together with its successors and assigns, the "Loan Agent"), and
GENERAL ELECTRIC CAPITAL CORPORATION, for itself and as agent for the Lease
Participants referred to below (in its individual capacity, "GECC"; and in such
dual capacity, together with its successors and assigns, the "Lease Agent").
WHEREAS, concurrently herewith the Company is entering into that
certain Secured Revolving Credit Agreement dated as of even date herewith (as
amended, supplemented, modified, restated, refinanced, refunded or renewed from
time to time in accordance with the terms of this Agreement, the "Credit
Agreement") among the Company, the financial institutions from time to time
party thereto, Bank of America Illinois, as letter of credit issuing bank
(collectively with such financial institutions from time to time party thereto,
the "Lenders"), and the Loan Agent;
WHEREAS, concurrently herewith the Company is entering into that
certain Master Lease Agreement No. 2, dated as of even date herewith (as
amended, supplemented, modified, restated, refinanced, refunded or renewed from
time to time in accordance with the terms of this Agreement, the "1996 Master
Lease Agreement") between the Company and the Lease Agent;
WHEREAS, on the date hereof and/or from time to time hereafter,
subject to the terms of the 1996 Master Lease Agreement, GECC may convey to
certain financial institutions (collectively with GECC, the "Lease
Participants") participating interests in its rights, duties and obligations
under the 1996 Master Lease Agreement; and
WHEREAS, concurrently herewith the Company, the Loan Agent and the
Lease Agent are entering into that certain Facilities Agreement dated as of even
date herewith (as amended, supplemented, modified or restated from time to time
in accordance with the terms of this Agreement, the "Facilities Agreement")
which sets forth certain agreements and provisions governing the conduct of the
Company and certain of its Subsidiaries.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
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SECTION 1.1. Defined Terms. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Actionable Default" means the occurrence of (1) a Default which, in
accordance with the provisions of Section 2.2, has resulted in an acceleration
of the Obligations under either the Loan Documents or the 1996 Lease Documents
or both, or a declaration of a default under the 1996 Lease Documents or (2) any
event described in Section 6.1(6) of the Facilities Agreement or any successor
to such Section.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Agents" means, collectively, the Loan Agent, the Lease Agent and the
Collateral Agents; and "Agent" means any of the Loan Agent, the Lease Agent or
the Collateral Agent.
"Agent-Related Persons" means, with respect to each Agent, such Agent
and any successor agent thereto duly appointed in accordance with the respective
Credit Documents to which such Agent is a party, together with its Affiliates,
and the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Agreement" means this Intercreditor Agreement, as amended,
supplemented, modified or restated from time to time.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursements of
internal counsel.
"BAI" means Bank of America Illinois, its successors and assigns.
"Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or
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required to close under the laws of the States of Colorado, Illinois or New
York.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Company or any Guarantor and
their respective Subsidiaries in or upon which a Lien now or hereafter exists in
favor of Creditors, or any Agent on behalf of any Creditors, under any Credit
Document or under any statutory or common law right of set off.
"Collateral Agent" - see Section 3.1.
"Combined Percentage" means (1) with respect to any Lender, (a) at any
time prior to the occurrence of an Actionable Default, the ratio (expressed as a
percentage) of (i) such Lender's Loan Commitment divided by (ii) the Total
Facility Commitment and (b) at any time after the occurrence of an Actionable
Default, the ratio (expressed as a percentage) of (i) the aggregate principal
amount of such Lender's loans plus such Lender's pro rata share of any letter of
credit obligations (including, without limitation, any unreimbursed draws under
letters of credit) then outstanding under the Credit Agreement divided by (ii)
the sum of the aggregate principal amount of all loans plus any letter of credit
obligations (including, without limitation, any unreimbursed draws under letters
of credit) then outstanding under the Credit Agreement plus the aggregate
unamortized principal balance then outstanding under the 1996 Master Lease
Agreement and (2) with respect to any Lease Participant, (a) at any time prior
to the occurrence of an Actionable Default, the ratio (expressed as a
percentage) of (i) such Lease Participant's Lease Commitment divided by (ii) the
sum of the Total Facility Commitment and (b) at any time after the occurrence of
an Actionable Default, the ratio (expressed as a percentage) of (i) the
aggregate unamortized principal balance of such Lease Participant then
outstanding under the 1996 Master Lease Agreement divided by (ii) the sum of the
aggregate principal amount of all loans plus any letter of credit obligations
(including, without limitation, any unreimbursed draws under letters of credit)
then outstanding under the Credit Agreement plus the aggregate unamortized
principal balance then outstanding under the 1996 Master Lease Agreement.
"Credit Agreement" - see Recitals.
"Credit Documents" means, collectively, the Loan Documents, the 1996
Lease Documents and this Agreement; and "Credit Document" means any of the
foregoing agreements, instruments or documents.
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"Creditors" means, collectively, the Loan Agent, the Lenders, the
Lease Agent and the Lease Participants; and "Creditor" means any of the
foregoing Persons.
"Default" means any "Event of Default" (as such term is defined in the
Credit Agreement) or any "Default" (as such term is defined in the 1996 Master
Lease Agreement).
"Facilities Agreement" - see Recitals.
"GECC" - see Preamble
"Lease Agent" - see Preamble.
"Lease Commitment" means, with respect to any Lease Participant, the
amount of the purchase price paid by such Lease Participant to purchase
participation interests with respect to the 1996 Master Lease Agreement.
"Lease Participant" - see Recitals.
"Lender Percentage" means, with respect to any Lender, (1) at any time
prior to the occurrence of an Actionable Default, the percentage of the Total
Commitment Amount which such Lender's Loan Commitment then represents and (2) at
any time after the occurrence of an Actionable Default, the percentage of the
aggregate principal amount of all loans plus such Lender's pro rata share of any
letter of credit obligations (including, without limitation, any unreimbursed
draws under letters of credit) then outstanding under the Credit Agreement which
are owed to such Lender.
"Lenders" - see Recitals.
"Lessor Percentage" means at any time, with respect to any Lease
Participant, (1) at any time prior to the occurrence of an Actionable Default,
the percentage of the Total Lease Commitment which such Lease Participant's
Lease Commitment then represents and (2) at any time after the occurrence of an
Actionable Default, the percentage of the aggregate unamortized principal
balance then outstanding under the 1996 Master Lease Agreement which is owed to
such Lease Participant.
"Lien" has the meaning specified in the Facilities Agreement.
"Loan Agent" - see Preamble.
"Loan Commitment" has the meaning assigned to the term "Commitment" in
the Credit Agreement.
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"1996 Master Lease Agreement" - see Recitals.
"Obligations" means all advances, debts, liabilities and obligations
arising under any Credit Document owing by the Company to any Creditor or any
Indemnified Party, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising, and shall in any event include the undrawn face amount of
letters of credit issued pursuant to the Credit Agreement.
"Participation Agreement" means that certain Participation Agreement
dated as of even date herewith (as amended, supplemented, modified or restated
from time to time in accordance with the terms thereof) among GECC and the
financial institutions from time to time party thereto.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority, or other entity of whatever
nature.
"Proceeds" means the aggregate amount of cash and securities received
by any Collateral Agent in connection with the receipt of insurance or
condemnation proceeds or in connection with the sale or other disposition of any
Collateral following the occurrence of a Default.
"Total Commitment Amount" has the meaning specified in the Credit
Agreement.
"Total Facility Commitment" means the sum of the Total Commitment
Amount and the Total Lease Commitment.
"Total Lease Commitment" has the meaning specified in the 1996 Master
Lease.
SECTION 1.2. Other Definitions. All capitalized terms used herein and
not otherwise defined herein shall have the respective meaning assigned thereto
in the Facilities Agreement.
ARTICLE II
VOTING
The Company and the Agents hereby agree, and each other Creditor by
entering into the respective Credit Documents to which it is a party shall be
deemed by the execution and delivery of such Credit Documents to agree, as
follows:
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SECTION 2.1. Voting For Amendments. Amendments, modifications or
waivers may be granted (1) with respect to the Loan Documents, by the
affirmative vote of Lenders whose aggregate Lender Percentage is at least 66
2/3% (or such greater percentage as may be required in specific instances by the
Credit Agreement) and (2) with respect to the 1996 Lease Documents (other than
the Subleases), by the affirmative vote of Lease Participants whose aggregate
Lessor Percentage is at least 66 2/3% (or such greater percentage as may be
required in specific instances by the Participation Agreement); provided, that
amendments, modifications or waivers of this Agreement and the Facilities
Agreement may only be granted by the affirmative vote of (x) Lenders whose
aggregate Lender Percentage is greater than 50%, and (y) Lease Participants
whose aggregate Lessor Percentage is greater than 50%, and (z) Creditors whose
aggregate Combined Percentage is at least 66 2/3% (it being understood that any
amendment, modification or waiver (including, without limitation, any waiver of
any Default that arises as a result of an Event of Default as defined in the
Facilities Agreement) approved pursuant to the foregoing proviso need not be
separately approved pursuant to clauses (1) or (2) of this Section 2.1);
provided, further, that no such amendment, modification or waiver:
(a) which would modify this Article II shall be effective without the
consent of each Creditor;
(b) which would subject any Creditor to any additional obligations
shall be effective without the consent of such Creditor;
(c) which would affect adversely the interests, rights or obligations
of any Agent (in such capacity), shall be effective without the consent of
such Agent;
(d) which would release any Guarantor from its obligations under its
respective Guaranty or release or subordinate any portion of the
Collateral, except for any release of Collateral that is made in accordance
with the terms of any of the Credit Documents (it being understood that any
such release shall not require the consent of any Lender or Lease
Participant, except to the extent required by such Credit Document) shall
be effective without the consent of each Creditor; or
(e) which would amend or modify any Credit Document (other than the
Participant Agreement) shall be effective without the consent of the
Company.
SECTION 2.2. Voting For Accelerations. (1) The Loan Agent shall give
written notice to the Lease Agent of the
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occurrence of any Event of Default (as such term is defined therein) under the
Credit Agreement within two Business Days after the Loan Agent shall have actual
knowledge thereof; and the Lease Agent shall give written notice to the Loan
Agent of the occurrence of any Default (as such term is defined therein) under
the 1996 Master Lease Agreement within two Business Days after the Lease Agent
shall have actual knowledge thereof.
(2) Following the occurrence and during the continuance of a Default,
a declaration of such Default and/or an acceleration may be declared, (a) with
respect to the Loan Documents, by the affirmative vote of Lenders whose
aggregate Lender Percentage is at least 66 2/3% (or such greater percentage as
may be required by the Credit Agreement) and (b) with respect to the 1996 Lease
Documents, by the affirmative vote of Lease Participants whose aggregate Lessor
Percentage is at least 66 2/3% (or such greater percentage as may be required by
the Participation Agreement); provided, that, in the event such Default (whether
under the Credit Agreement, the 1996 Master Lease or both) arises solely as the
result of an Event of Default as defined in the Facilities Agreement, a
declaration of such Default and/or an acceleration may only be declared by the
affirmative vote of (x) Lenders whose aggregate Lender Percentage is greater
than 50%, and (y) Lease Participants whose aggregate Lessor Percentage is
greater than 50%, and (z) Creditors whose aggregate Combined Percentage is at
least 66 2/3%.
SECTION 2.3. Voting Following Acceleration. Except as otherwise set
forth in Article III with respect to the exercise by the Collateral Agents of
remedies against the Collateral, following the declaration of a Default or the
acceleration of any Obligations, the exercise of any other remedy against the
Company or any other obligor under any Credit Document shall require the
affirmative vote of Creditors whose aggregate Combined Percentage is at least
66 2/3%.
ARTICLE III
COLLATERAL ENFORCEMENT AND SHARING
The Company and the Agents hereby agree, and each other Creditor by
entering into the respective Credit Documents to which it is a party shall be
deemed by the execution and delivery of such Credit Documents to agree, as
follows:
SECTION 3.1. Collateral. Any provision in any Credit Document to the
contrary notwithstanding, the Collateral arising under the Loan Documents shall
be held by the Loan Agent for the benefit of, and as collateral agent for, all
of the Creditors and
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the Collateral arising under the 1996 Lease Documents shall be held by the Lease
Agent for the benefit of, and as collateral agent for, all of the Creditors
(each Agent, in its capacity as collateral agent for the Creditors, shall be
referred to as a "Collateral Agent"). Each Collateral Agent independently may
exercise all of its respective rights and remedies arising under the Credit
Documents to which it is a party, including all such rights and remedies with
respect to the Collateral granted to such Collateral Agent under its respective
Credit Documents, subject, however, to the provisions regarding acceleration set
forth in the foregoing Section 2.2. Notwithstanding the foregoing, before
exercising any remedy involving foreclosure on real property, the Collateral
Agent proposing to exercise such remedy shall provide prior written notice
thereof to, and shall consult with, the other Agent with respect to the exercise
of such remedy. Each Creditor shall have an undivided interest in all of the
Collateral, such interest to be equal to such Creditor's Combined Percentage,
subject, however, to the following provisions of this Article 3.
SECTION 3.2. Notice of Actionable Default. The Loan Agent shall give
written notice to the Lease Agent of any Actionable Default under the Credit
Agreement within two Business Days of the occurrence thereof, and the Lease
Agent shall give written notice to the Loan Agent of any Actionable Default
under the 1996 Master Lease Agreement within two Business Days of the occurrence
thereof.
SECTION 3.3. Applications Arising From Notice of Actionable Default.
All Proceeds received by any Collateral Agent following receipt by such
Collateral Agent of a notice of Actionable Default pursuant to the foregoing
Section 3.2 shall be distributed and applied, so long as a Default exists, in
the following order:
FIRST - to the payment of reasonable out-of-pocket expenses due and
payable to such Collateral Agent in connection with the enforcement of such
Collateral Agent's remedies pursuant to the Credit Documents;
SECOND - to the payment of interest and fees then accrued and unpaid
to the Creditors, under the Credit Documents, pro rata to the Creditors
according to the amount of interest and fees owing to each such Creditor;
THIRD - to the payment of principal (including any cash
collateralization of letters of credit required under the Credit Agreement)
then due and payable to the
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Creditors under the Credit Documents, pro rata according to such Creditor's
Combined Percentage;
FOURTH - to the payment of all other Obligations then due and payable
to the Creditors, pro rata according to such Creditor's Combined
Percentage; and
FIFTH - after giving effect to the foregoing applications, any
remaining amount shall be paid to the Company and the Guarantors as
directed by them or as a court of competent jurisdiction may direct.
SECTION 3.4. Sharing. If, following the occurrence of an Actionable
Default, any Creditor or other holder of any of the Obligations (including any
participant or assignee) shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise) on account of any
amounts with respect to any of the Obligations in excess of the share of
payments and other recoveries (whether from the exercise of setoff rights or
otherwise) such Creditor or other holder would have received if such payment or
recovery had been distributed pursuant to Section 3.3, such Creditor or other
holder shall purchase from the other Creditors or holder (in a manner to be
reasonably specified by the Agents jointly), such participations in the
Obligations, held or issued by them as shall be necessary to cause such
purchasing Creditor or other holder to share the excess payment or other
recovery ratably with each of them in accordance with the order of payments set
forth in Sections 3.3; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Creditor or holder, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. The Company and
each Guarantor agrees that any Creditor purchasing a participation from another
Creditor may to the fullest extent permitted by law, but subject to the Credit
Documents, exercise all its rights of payment (including rights of setoff) with
respect to such participation as fully as if such Creditor were the direct
creditor of the Company and each Guarantor in the amount of such participation.
3.5. Agreement Not To Act. Except for the exercise of setoff rights,
each Creditor agrees not to take any action whatsoever to enforce any term or
provision of the Credit Documents or to enforce any of its rights in respect of
the Collateral, except through its respective Agent acting pursuant to this
Agreement and the other Credit Documents.
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ARTICLE IV
THE AGENTS
SECTION 4.1. Appointment and Authorization; "Agent". Each Creditor by
entering into the respective Credit Documents to which it is a party shall be
deemed by the execution and delivery of such Credit Documents, to irrevocably
appoint, designate and authorize each Agent as its Collateral Agent to take such
action on its behalf under the provisions of this Agreement and each other
Credit Document to which such Agent is a party and to exercise such powers and
perform such duties as are expressly delegated to such Agent by the terms of
this Agreement or any other Credit Document to which such Agent is a party,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Credit Document, no Agent shall have any duties or responsibilities,
except those expressly set forth herein or in the respective Credit Documents to
which such Agent is a party, nor shall any Agent have or be deemed to have any
fiduciary relationship with any Creditor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Credit Document or otherwise exist against any Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement or in any other Credit Document with reference to the
Agents is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting
parties.
SECTION 4.2. Delegation of Duties. Each Agent may execute any of its
respective duties under this Agreement or any other Credit Document to which
such Agent is a party by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. No Agent shall be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
SECTION 4.3. Liability of Agents. None of the Agent-Related Persons
of either Agent shall (1) be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or any other Credit
Document or the transactions contemplated thereby (except for its own gross
negligence or willful misconduct), or (2) be responsible in any manner to any of
the Creditors for any recital, statement, representation or warranty made by the
Company, any Guarantor or
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any Subsidiary or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Credit Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by any
Agent under or in connection with, this Agreement or any other Credit Document,
or for the value of or title to or perfection or priority of any security
interest in or lien on any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Credit
Document, or for any failure of the Company or any other party to any Credit
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Creditor to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Credit Document, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates.
SECTION 4.4. Reliance by Agent. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation reasonably believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company or other Agent), independent accountants and other
experts selected by such Agent.
SECTION 4.5. Credit Decision. Each Creditor by entering into the
respective Credit Documents to which it is a party shall be deemed, by the
execution and delivery of such Credit Documents, to:
(1) acknowledge that none of the Agent-Related Persons has made any
representation or warranty to it, and that no act by the Agents hereinafter
taken shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Creditor;
(2) represent to the Agents that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own review and appraisal
of and investigation into the business, prospects, operations, property,
financial and other condition and creditworthiness of the Company and its
Subsidiaries, the value of and title to or interest in any Collateral, and
all applicable environmental and other regulatory laws relating to the
Collateral or to the transactions contemplated hereby
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and by the Credit Documents, and made its own decision to enter into the
respective Credit Documents to which it is a party and to extend credit to
the Company thereunder; and
(3) represents that it will, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under the
respective Credit Documents to which it is a party, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries.
SECTION 4.6. Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, each Creditor shall indemnify upon demand
the Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), from and
against any and all Indemnified Liabilities (it being understood that such
Indemnified Liabilities shall not include the payment of principal, interest or
fees owed to such Agent in its capacity as a Creditor under any Credit Document)
in an amount equal to its respective Combined Percentage share of such
Indemnified Liabilities; provided, that no Creditor shall be liable for the
payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Creditor shall reimburse any Agent
upon demand for its Combined Percentage share of any costs or out-of-pocket
expenses (including reasonable Attorney Costs) incurred by such Agent in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of, or legal advice in respect of rights or responsibilities
arising in connection with the enforcement of, this Agreement, any other Credit
Document to which such Agent is a party, or any document contemplated by or
referred to herein, to the extent that such Agent is not reimbursed for such
expenses by or on behalf of the Company. The undertaking in this Section shall
survive the payment of all Obligations and the resignation or replacement of the
Agents.
SECTION 4.7. Agent in Individual Capacity. BAI and its Affiliates and GECC
and its Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in and generally engage in
any kind of banking, lending, leasing, trust, financial advisory,
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underwriting or other business with the Company and its Subsidiaries and
Affiliates as though BAI or GECC, as the case may be, were not an Agent
hereunder and without notice to or consent of the Creditors. The Creditors
acknowledge that, pursuant to such activities, BAI or its Affiliates and/or GECC
or its Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that the
respective Agent shall be under no obligation to provide such information to
them. To the extent that BAI or its Affiliates and/or GECC or its Affiliates
shall have rights arising from such other activities, none of such parties shall
be under any obligation either (a) to exercise such other rights as it may have,
or (b) in the event of the exercise of such other rights, to apply the proceeds
therefrom on account of the Obligations.
ARTICLE V
MISCELLANEOUS
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SECTION 5.1. Waivers and Amendments. The provisions of this
Agreement and of each of the other Loan Documents may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to in accordance with Section 2.1, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Upon the effectiveness of any consent, amendment,
modification or waiver under this Agreement, the Loan Agent shall promptly give
to each Lender and the Lease Agent shall promptly give to each Lease Participant
written notice (including a description) of such consent, amendment,
modification or waiver.
SECTION 5.2. Notices, Etc. All notices and other communications
provided for under this Agreement shall be in writing and sent by certified mail
or delivered by hand or courier service to the address of the respective party
as set forth on the signature pages hereto; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section 5.2. All such
notices and communications shall be effective upon actual receipt.
SECTION 5.3. No Waiver; Remedies. No failure on the part of any
party to exercise, and no delay in exercising, any right, power, or remedy under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any
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right under this Agreement preclude any other or further exercise thereof or the
exercise of any other right.
SECTION 5.4. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company and the Creditors and their
respective successors and assigns, except that (1) the Company may not assign or
transfer any of its rights under this Agreement without the prior written
consent of all Creditors and (2) a Creditor may only assign its rights under
this Agreement in connection with an assignment by such Creditor of its interest
in the Obligations.
SECTION 5.5. Termination. Upon payment in full of all Obligations
owed to any Creditor, such Creditor shall cease to be a party to this Agreement,
and this Agreement will terminate upon payment in full of all Obligations.
SECTION 5.6. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York without
regard to its conflict of laws provisions.
SECTION 5.7. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 5.8. Conflicts. To the extent any conflict exists or
hereafter arises between the provisions of this Agreement and any provision of
any other Credit Document, the provisions of this Agreement shall control.
SECTION 5.9. Headings. Article and Section headings in this
Agreement are included for the convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 5.10. SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE
PARTIES HERETO, AND EACH CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT
DOCUMENTS TO WHICH IT IS A PARTY SHALL BE DEEMED BY THE EXECUTION AND DELIVERY
OF SUCH CREDIT DOCUMENTS TO, (1) (A) WITH RESPECT TO ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS,
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL
COURT SITTING IN NEW YORK CITY, NEW YORK OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO OR (B) WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING
OUT OF OR
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RELATING TO ANY MORTGAGE, SUCH OTHER STATE COURT OR FEDERAL CIRCUIT COURT
SITTING IN OR NEAREST TO THE COUNTY IN WHICH THE PROPERTY IN QUESTION SUBJECT TO
SUCH MORTGAGE IS LOCATED (2) IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT AND (3) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST ANY AGENT, ANY OTHER PARTY HERETO OR THE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT,
IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN THIS SECTION 5.9. THE
PARTIES HERETO AND EACH CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT
DOCUMENTS TO WHICH IT IS A PARTY SHALL BE DEEMED BY THE EXECUTION AND DELIVERY
OF SUCH CREDIT DOCUMENTS TO, HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN ANY SUCH ACTION OR PROCEEDING (WHETHER BROUGHT BY SUCH PARTY OR
OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 5.9 AS WELL AS ANY
RIGHT THEY MAY NOW OR HEREAFTER HAVE, TO REMOVE ANY SUCH ACTION OR PROCEEDING,
ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR
OTHERWISE. THE PARTIES HERETO AND EACH CREDITOR BY ENTERING INTO THE RESPECTIVE
CREDIT DOCUMENTS TO WHICH IT IS A PARTY SHALL BE DEEMED BY THE EXECUTION AND
DELIVERY OF SUCH CREDIT DOCUMENTS TO, AGREE THAT A FINAL, NON-APPEALABLE
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.
SECTION 5.11. WAIVER OF JURY TRIAL. THE PARTIES HERETO, AND EACH
CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT DOCUMENTS TO WHICH IT IS A PARTY
SHALL BE DEEMED BY THE EXECUTION AND DELIVERY OF SUCH CREDIT DOCUMENTS TO,
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREE THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY;
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS ENTERING INTO THIS
AGREEMENT.
SECTION 5.12. SERVICE OF PROCESS. THE PARTIES HERETO, AND EACH
CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT DOCUMENTS TO WHICH IT IS A PARTY
SHALL BE DEEMED BY THE EXECUTION AND DELIVERY OF SUCH CREDIT DOCUMENTS TO,
HEREBY IRREVOCABLY CONSENT TO SERVICE OF PROCESS BY MEANS OF CERTIFIED MAIL AT
THE ADDRESS PROVIDED FOR IN SECTION 5.2. NOTHING IN THIS AGREEMENT WILL AFFECT
THE RIGHT OF THE AGENTS OR THE COMPANY TO SERVE SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BOSTON CHICKEN, INC.
By:
------------------------------
Name: Bernadette M. Dennehy
Title: Vice President
14123 Denver West Parkway
P.O. Box 4086
Golden, CO 80401-4086
Attn: Bernadette M. Dennehy
Telephone: (303) 278-9500
BANK OF AMERICA ILLINOIS,
as Loan Agent
By:
------------------------------
Name: David A. Johanson
Title: Vice President
231 South LaSalle Street
Chicago, Illinois 60697
Attn: David A. Johanson
Telephone: (312) 828-3782
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lease Agent
By:
------------------------------
Name: David Avigdor
Title: Syndication Senior Manager
777 Long Ridge Road
Building A, 3rd Floor
Stamford, Connecticut 06927
Attn: David Avigdor
Telephone: (203) 316-7702
<PAGE>
Exhibit 4.5
================================================================================
FACILITIES AGREEMENT
dated as of December 9, 1996
among
BOSTON CHICKEN, INC.,
BANK OF AMERICA ILLINOIS,
As Agent For Certain Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
For Itself And As Agent For Certain Lease Participants
================================================================================
<PAGE>
The following Table of Contents has been inserted for convenience only and does
not constitute a part of this Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 2
1.1. Defined Terms................................................. 2
1.2. Accounting Terms.............................................. 13
ARTICLE II REPRESENTATIONS AND WARRANTIES................... 13
2.1. Incorporation, Good Standing, and Due Qualification........... 13
2.2. Corporate Power and Authority................................. 14
2.3. Legally Enforceable Agreement................................. 14
2.4. Financial Statements.......................................... 14
2.5. Other Agreements.............................................. 15
2.6. Litigation.................................................... 15
2.7. No Defaults on Outstanding Judgments or Orders................ 16
2.8. Governmental and Regulatory Approvals......................... 16
2.9. Ownership and Liens........................................... 16
2.10. Subsidiaries etc............................................. 16
2.11. ERISA........................................................ 16
2.12. Stores....................................................... 17
2.13. Hazardous Materials.......................................... 17
2.14. Taxes........................................................ 17
2.15. Debt......................................................... 18
2.16. Financed Franchisee Information.............................. 18
2.17. Investment Company Act....................................... 18
2.18. Public Utility Holding Company Act........................... 18
ARTICLE III AFFIRMATIVE COVENANTS............................ 19
3.1. Maintenance of Existence...................................... 19
3.2. Maintenance of Records........................................ 19
3.3. Maintenance of Properties..................................... 19
3.4. Conduct of Business........................................... 19
3.5. Maintenance of Insurance...................................... 20
3.6. Compliance With Laws.......................................... 20
3.7. Right of Inspection........................................... 20
3.8. Reporting Requirements........................................ 20
3.9. Environmental Laws............................................ 26
3.10. Credit Usage................................................. 26
ARTICLE IV NEGATIVE COVENANTS.............................. 27
4.1. Liens......................................................... 27
4.2. Debt.......................................................... 30
4.3. Mergers, Etc.................................................. 31
4.4. Leases........................................................ 32
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.5. Sale and Leaseback............................................. 33
4.6. Dividends...................................................... 33
4.7. Sale of Assets................................................. 34
4.8. Investments.................................................... 35
4.9. Guaranties, Etc................................................ 38
4.10. Transactions With Affiliate................................... 39
4.11. Subsidiary, Etc............................................... 39
4.12. Real Property................................................. 40
4.13. Subordinated Debt............................................. 40
4.14. Financed Franchisee........................................... 41
ARTICLE V FINANCIAL COVENANTS............................... 41
5.1. Maximum Senior Secured Leverage Ratio.......................... 41
5.2. Maximum Leverage Ratio......................................... 42
5.3. Fixed Charge Coverage Ratio.................................... 42
5.4. Store Revenue.................................................. 42
ARTICLE VI EVENTS OF DEFAULT................................ 42
6.1. Events of Default.............................................. 42
6.2. Effect of Event of Default..................................... 46
ARTICLE VII MISCELLANEOUS.................................. 46
7.1. Waivers and Amendments......................................... 46
7.2. Notices, Etc................................................... 46
7.3. No Waiver; Remedies............................................ 46
7.4. Successors and Assigns......................................... 47
7.5. Costs, Expenses, and Taxes..................................... 47
7.6. Governing Law.................................................. 47
7.7. Severability of Provisions..................................... 47
7.8. Headings....................................................... 47
7.9. SUBMISSION TO JURISDICTION; WAIVER OF VENUE.................... 47
7.10. General Indemnity............................................. 48
7.11. WAIVER OF JURY TRIAL.......................................... 49
7.12. SERVICE OF PROCESS............................................ 49
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
SCHEDULES
- ---------
<S> <C>
Schedule I - Subsidiaries ((S)2.10)
Schedule II - Stores ((S)2.12)
Schedule IIIA - Debt ((S)2.15)
Schedule IIIB - Permitted Debt ((S)4.2)
Schedule IV - Financed Franchisee Information ((S)2.16)
Schedule V - Requirements for Financed Franchisee Loan
Documents ((S)1.1)
Schedule VI - BWRE Parcels ((S)1.1)
EXHIBITS
- --------
EXHIBIT A - Guaranty
</TABLE>
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<PAGE>
FACILITIES AGREEMENT
THIS FACILITIES AGREEMENT dated as of December 9, 1996 is among BOSTON
CHICKEN, INC., a Delaware corporation (the "Company"), BANK OF AMERICA ILLINOIS,
as agent for the Lenders and the Issuing Lender referred to below (in such
capacity, together with its successors and assigns, the "Loan Agent"), and
GENERAL ELECTRIC CAPITAL CORPORATION, for itself and as agent for the Lease
Participants referred to below (in its individual capacity, "GECC"; and in such
dual capacity, together with its successors and assigns, the "Lease Agent").
WHEREAS, concurrently herewith the Company is entering into that
certain Secured Revolving Credit Agreement dated as of even date herewith (as
amended, supplemented, modified, restated, refinanced, refunded or renewed from
time to time in accordance with the terms of the Intercreditor Agreement
referred to below, the "Credit Agreement") among the Company, the financial
institutions from time to time party thereto (the "Lenders"), Bank of America
Illinois, as letter of credit issuing bank (in such capacity, the "Issuing
Lender"), and the Loan Agent;
WHEREAS, concurrently herewith the Company is entering into that
certain Master Lease Agreement No. 2, dated as of even date herewith (as
amended, supplemented, modified, restated, refinanced, refunded or renewed from
time to time in accordance with the terms of the Intercreditor Agreement
referred to below, the "1996 Master Lease Agreement") between the Company and
the Lease Agent;
WHEREAS, on the date hereof and/or from time to time hereafter,
subject to the terms of the 1996 Master Lease Agreement, GECC may convey to
certain financial institutions (collectively with GECC, the "Lease
Participants") participation interests in its rights, duties and obligations
under the 1996 Master Lease Agreement; and
WHEREAS, concurrently herewith the Company, the Loan Agent and the
Lease Agent are entering into that certain Intercreditor Agreement dated as of
even date herewith (the "Intercreditor Agreement") which sets forth certain
agreements among the Lenders, the Issuing Lender, the Loan Agent, the Lease
Agent and the Lease Participants with respect to, among other things, voting
rights and collateral issues.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.1. Defined Terms. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Affiliate" means any Person other than a Financed Franchisee: (1)
which directly or indirectly controls, or is controlled by, or is under common
control with, the Company or a Subsidiary; (2) which directly or indirectly
beneficially owns or holds, at the time of determination, outstanding shares
representing ten percent (10%) or more of any class of capital stock,
partnership units or other equity interests of the Company or any Subsidiary
(including, on a fully diluted basis, any options, warrants and other rights to
acquire capital stock, partnership units or other equity interests which are
exercisable at the time of determination, but excluding any options, warrants
and other rights to acquire capital stock, partnership units or other equity
interests which are not then exercisable); or (3) ten percent (10%) or more of
the capital stock, partnership units or other equity interests of which
(calculated in accordance with the foregoing clause (2)) is directly or
indirectly beneficially owned or held by the Company or a Subsidiary. For
purposes of this definition only, the term control means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise; provided, that for purposes hereof, the
existence of a Franchise Agreement, Area Development Agreement or similar
agreement between the Company and a Person shall not, by itself, evidence that
such Person is controlled by the Company nor shall the Financed Franchisee Loan
Documents executed by a Franchisee evidence that such Franchisee is an Affiliate
of the Company prior to the acquisition by the Company of an equity interest
therein of in excess of ten percent (10%), whether such acquisition occurs by
conversion of debt, exercise of any equity option, or otherwise (including
acquisition by foreclosure following an acceleration under the Financed
Franchisee Loan Documents).
"Agency Agreement" means that certain Agency Agreement dated as of
September 25, 1996 among the Lease Agent, the Company, BC Real Estate
Investments, Inc. and certain Financed Franchisees.
"Agents" means, collectively, the Loan Agent and the Lease Agent; and
"Agent" means the Loan Agent or the Lease Agent.
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<PAGE>
"Agreement" means this Facilities Agreement, as amended, supplemented,
modified, restated, refinanced, refunded or renewed from time to time in
accordance with the Intercreditor Agreement.
"Annualized EBITDAL" means, for each fiscal quarter of the Company the
product of (1)(a) the quotient obtained by dividing EBITDAL for such fiscal
quarter by (b) the number of Retail Periods which occur in such fiscal quarter,
multiplied by (2) thirteen (13).
"Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required to close under the laws
of the States of Colorado, Illinois or New York.
"BWRE" means Boston West Real Estate Investments, L.L.C., a Delaware
limited liability company.
"BWRE Guaranty" means that certain Guaranty dated February 16, 1996 of
the Company in favor of Sanwa Business Credit Corporation, as the same may be
amended from time to time.
"BWRE Parcels" means those certain parcels of real property and
improvements located thereon, the locations of which are set forth on Schedule
VI hereto.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Change of Control" shall be deemed to have occurred at such time
after the date hereof as (i) any person or group of persons (within the meaning
of Section 13 or 14 of the Exchange Act) shall acquire at any time after the
date hereof beneficial ownership of more than 25% of the fully diluted common
stock of the Company or (ii) individuals who as of the date hereof constitute
the Company's Board of Directors (together with any new director whose election
by the Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved), for any reason, cease to constitute a majority of the directors at
any time then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Fixed Charges" means, for any period, the sum of cash
interest expense (including all imputed interest
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<PAGE>
related to any Capital Lease) plus gross rental payments (excluding, in any
event, payments of purchase amounts under Financial Lease Debt) related to any
Financial Leases other than Capital Leases of the Company and its consolidated
Restricted Subsidiaries for such period.
"Credit Agreement" has the meaning set forth in the Recitals.
"Credit Documents" means, collectively, this Agreement, the Loan
Documents, the 1996 Lease Documents and the Intercreditor Agreement; and "Credit
Document" means any of the foregoing agreements, instruments or documents.
"Creditors" means, collectively, the Loan Agent, the Lenders, the
Issuing Lender, the Lease Agent and the Lease Participants; and "Creditor" means
any of the foregoing Persons.
"Current Pay Subordinated Debt" means Debt of the Company which (1) is
subordinated in priority of payment to the Debt of the Company under the Loan
Documents and the 1996 Lease Documents (including refinancings of and post-
petition interest on the Credit Documents); (2) does not have any principal
payment (but may provide for interest payments) prior to the ninety-first (91st)
day succeeding the Termination Date; (3) contains no financial maintenance
covenants other than (a) one or more financial maintenance covenants which are
substantially identical to those contained in this Agreement, provided that such
financial maintenance covenants are less restrictive than the corresponding
covenants contained in this Agreement and (b) such other financial maintenance
covenants which are reasonably acceptable to the Required Creditors; (4)
contains no cross default clause but may contain a cross acceleration clause;
(5) contains no negative pledge clause (other than any such clause that does not
prohibit or otherwise restrict Liens securing Debt under the Credit Documents);
(6) distinguishes between payment and non-payment defaults for purposes of
suspending payments with respect to such subordinated Debt; and (7) contains a
"fish or cut bait" provision with respect to non-payment defaults of at least 89
days (it being understood that the Company's 4 1/2% Convertible Subordinated
Debentures due 2004 constitute Current Pay Subordinated Debt).
"Debt" means with respect to any Person at any date, without
duplication: (1) indebtedness or liability for borrowed money, or for the
deferred purchase price of property or services (including trade obligations)
owed by such Person; (2) obligations of such Person as lessee under Financial
Leases; (3) current liabilities of such Person in respect of unfunded vested
benefits under any Plan; (4) obligations under letters of credit
-4-
<PAGE>
issued for the account of such Person; (5) all obligations arising under
bankers' acceptance facilities issued for the account of such Person; (6) all
guaranties by such Person of the Debt or of operating leases of a third party,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations of such Person to purchase primarily
for the purpose of enabling a third party to make payment of Debt or payments
with respect to operating leases of such third party, to provide funds for
payment of the Debt or of operating leases of a third party, to supply funds to
invest in a third party, or otherwise to assure a creditor of a third party
against loss with respect to the Debt or operating leases of such third party;
and (7) obligations secured by any Lien on property owned by such Person,
whether or not the obligations have been assumed.
"Default" means any of the events specified in Section 6.1, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Denver Support Center" means the approximately 16 acre parcel of real
property and improvements thereon, located in Jefferson County, Colorado and
commonly known as 14103 and 14123 Denver West Parkway.
"EBITDAL" means, for each fiscal period of the Company, the
consolidated pre-tax, pre-minority interest earnings of the Company and its
consolidated Restricted Subsidiaries plus the aggregate amounts actually
deducted in determining such net earnings of such period in respect of (1) gross
interest charges (including all accrued and unpaid interest on any
indebtedness), (2) imputed interest charges related to any Capital Leases, (3)
gross rental payments (excluding, in any event, payments of purchase amounts
under Financial Lease Debt) related to any Financial Leases other than Capital
Leases and (4) provisions for amortization and depreciation.
"ENBC" means Einstein/Noah Bagel Corp., a Delaware corporation.
"ENBC Credit Agreement" means that certain Secured Credit Agreement
dated as of May 17, 1996 among ENBC, the lenders from time to time party thereto
and Bank of America Illinois, as agent for such lenders, as the same may be
amended, modified or restated from time to time.
"ENBC Event of Default" means any "Event of Default" as such term is
defined in the ENBC Credit Agreement.
-5-
<PAGE>
"Environmental Laws" means any and all federal, state, local laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published governmental
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Company would be treated as a single
employer under Section 414(b) or (c) of the Code.
"Event of Default" means any of the events specified in Section 6.1;
provided, that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Financed Franchisee" means any Franchisee (other than a Subsidiary)
which has duly executed and delivered Financed Franchisee Loan Documents.
"Financed Franchisee Loan Documents" means loan documents entered into
between the Company, as lender, and a Franchisee, as borrower, which, taken as a
whole, meet each of the requirements set forth on Schedule V.
"Financed Subsidiary" means any Restricted Subsidiary which (1) is a
Franchisee and (2) was formerly a Financed Franchisee.
"Financed Subsidiary Loan Documents" means loan documents entered into
between the Company, as lender, and a Financed Subsidiary, as borrower, which
provide for loans that are secured by a perfected Lien (subject only to the
types of Liens described in clauses (1) through (10) of Section 4.1) on all of
the assets of the Financed Subsidiary including, without limitation, all real
and personal property of such Financed Subsidiary and all leasehold interests of
such Financed Subsidiary (unless after such Financed Subsidiary's best efforts
(which shall not require unreasonable efforts) such Financed
-6-
<PAGE>
Subsidiary is unable to obtain the consent of the respective landlord for such
leasehold to the extent such consent is required) but excluding any assets
subject to any Sublease; it being understood that such loan documents may permit
the Company to subordinate the indebtedness evidenced by such loan documents and
its perfected Lien securing such indebtedness to the loan and Lien of a third
party lender (to the extent such third party loan is permitted pursuant to
Section 4.2(6)), provided, that the Company shall not agree to subordinate to
the loan and Lien of such third party lender (a) any of its rights of payment
from the Financed Subsidiary arising with respect to royalties, leases or
software or (b) prior to a payment default under the indebtedness owed by such
Financed Subsidiary to a third party lender, the interest payments on the
indebtedness evidenced by such loan documents.
"Financial Lease" means with respect to any Person at any date, any
Capital Lease of such Person and any operating lease of such Person entered into
outside of the ordinary course of business (including without limitation, the
Master Leases).
"Financial Lease Debt" means, as of any date, (1) with respect to any
Capital Lease under which the Company or any of its Restricted Subsidiaries is
the lessee, the principal amount thereof as of such date as determined in
accordance with GAAP; (2) with respect to the 1996 Master Lease Agreement and
the 1995 Master Lease Agreement, the termination value (as defined therein) as
of such date; and (3) with respect to any other Financial Lease under which the
Company or any of its Restricted Subsidiaries is the lessee, the present value
(using a market rate of interest) as of such date of all remaining rental
payments of the Company or such Restricted Subsidiary under such Financial
Leases.
"Franchisee" means any Person (excluding the Company but including any
Subsidiary) who is party to a then existing Franchise Agreement, Area
Development Agreement or similar agreement with the Company or who is otherwise
authorized to operate a Store.
"GAAP" means generally accepted accounting principles in the United
States applied by the Company consistent with past practice (subject to changes
in accounting policies permitted by such generally accepted accounting
principles which have been or are contemporaneously disclosed in writing to each
Agent).
"GECC" has the meaning set forth in the Preamble.
"Guarantor" means any Restricted Subsidiary which from time to time
executes a Guaranty.
-7-
<PAGE>
"Guaranty" means a guaranty issued by a Restricted Subsidiary in favor
of either the Loan Agent for the benefit of the Lenders or in favor of the Lease
Agent for the benefit of GECC and the Participants, in each case in
substantially the form of Exhibit A.
"Indemnity" has the meaning set forth in Section 7.10.
"Intercreditor Agreement" has the meaning set forth in the Recitals.
"Issuing Lender" has the meaning set forth in the Recitals.
"Investment" means, with respect to any Person, any loan or advance to
such Person, any purchase or other acquisition of any capital stock, obligations
or other securities of such Person, any capital contribution to such Person or
any other investment in or acquisition of any interest in such Person.
"Lease Agent" has the meaning set forth in the Preamble.
"Lease Participants" has the meaning set forth in the Recitals.
"Lenders" or "Lender" shall have the meaning assigned to such term in
the Recitals and shall include Bank of America Illinois while acting in the
capacity of a Lender, unless otherwise expressly indicated herein.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement, or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"Loan Agent" has the meaning set forth in the Preamble.
"Loan Documents" has the meaning assigned thereto in the Credit
Agreement (as the same may be amended, supplemented, modified, reinstated,
refinanced, refunded or renewed from time to time in accordance with the terms
of the Intercreditor Agreement).
-8-
<PAGE>
"Master Lease" means either the 1995 Master Lease Agreement or the
1996 Master Lease Agreement; and "Master Leases" means both the 1995 Master
Lease Agreement and the 1996 Master Lease Agreement.
"Material Adverse Change" means a material adverse change in the
condition (financial or otherwise), business, operations or prospects of the
Company and its Restricted Subsidiaries, taken as a whole.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA and covered by Title IV of ERISA which covers employees of the Company or
any ERISA Affiliate.
"1995 Lease Documents" means the 1995 Master Lease Agreement, the
associated Subleases and all documents ancillary to the foregoing; provided,
that the term "1995 Lease Documents" shall not include any amendment or other
modification thereto (other than Permitted Changes) without the prior written
consent of the Required Creditors.
"1995 Master Lease Agreement" means that certain Master Lease
Agreement dated as of September 27, 1995 between the Company and GECC for itself
and as agent for certain participants, as amended by certain amendments dated
September 28, 1995 and as of even date herewith; provided that the term "1995
Master Lease Agreement" shall not include any amendment or other modification
thereto (other than Permitted Changes) without the prior written consent of the
Required Creditors.
"1996 Master Lease Agreement" has the meaning set forth in the
Recitals.
"1996 Lease Documents" means the 1996 Master Lease Agreement, the
associated Subleases, the respective Guaranties, the Facilities Agreement, the
Agency Agreement and all other agreements, instruments and documents (including,
without limitation, mortgages, deeds of trust, chattel mortgages and security
agreements) delivered from time to time to GECC with respect to the foregoing
(as amended, supplemented, modified, restated, refinanced, refunded or renewed
from time to time in accordance with the terms of the Intercreditor Agreement).
"Non-Current Pay Subordinated Debt" means Debt of the Company which
(1) is subordinated in priority of payment to the Debt of the Company under the
Loan Documents, the 1995 Lease Documents and the 1996 Lease Documents (including
refinancings of and post-petition interest on the Credit Documents); (2) does
not have its (a) any interest payment prior to the earlier to occur of the third
anniversary of the date such Debt is issued or the
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<PAGE>
ninety-first (91st) day succeeding the Termination Date or (b) any principal
payment prior to the ninety-first (91st) day succeeding the Termination Date;
(3) contains no financial maintenance covenants other than (a) one or more
financial maintenance covenants which are substantially identical to those
contained in this Agreement, provided that such financial maintenance covenants
are less restrictive than the corresponding covenants contained in this
Agreement and (b) such other financial maintenance covenants which are
reasonably acceptable to the Required Creditors; (4) contains no cross-default
clause but may contain a cross-acceleration clause; (5) contains no negative
pledge clause (other than any such clause that does not prohibit or otherwise
restrict Liens securing Debt of the Company or any Guarantor under the Credit
Documents); (6) distinguishes between payment and non-payment defaults for
purposes of suspending payments with respect to such subordinated debt; and (7)
contains a "fish or cut bait" provision with respect to non-payment defaults of
at least 89 days.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Changes" means (i) waivers in the ordinary course of
business, (ii) amendments and modifications necessary or appropriate to reflect
additions and changes to the assets and related rental obligations covered by
the 1995 Master Lease Agreement and the associated Subleases, as contemplated by
the respective 1995 Lease Documents, (iii) amendments and modifications effected
in connection with the waiver of a default in payment obligations of the Company
under the 1995 Master Lease Agreement, which amendments and modifications would
not constitute or result in a failure of the Company to perform or observe any
term, covenant or agreement in the Credit Documents as in effect immediately
prior to the effectiveness of such amendments or modifications and (iv) other
amendments and modifications that do not change the substance of the
transactions contemplated by the 1995 Lease Documents taken as a whole.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority, or other entity of whatever
nature.
"Plan" means any plan (as defined in Section 3(3) of ERISA and covered
by ERISA) established, maintained, or to which contributions have been made by
the Company or any ERISA Affiliate, which definition, as of the date hereof, the
Company believes does not encompass the following arrangements:
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Company's Amended and Restated 1991 Employee Stock Option Plan, Company's
Amended and Restated 1991 Stock Option Plan for Non-Employee Directors, as
amended, Company's 1995 Employee Stock Option Plan and its deferred compensation
to market partners, managing partners or others pursuant to similar agreements.
"Pledge Agreement" has the meaning assigned thereto in the Credit
Agreement.
"Prohibited Transaction" means any non-exempt transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA other than those events as to which the 30-day notice period is waived
under the regulations thereunder.
"Required Creditors" means Creditors sufficient to amend this
Agreement in accordance with the Intercreditor Agreement.
"Restricted Subsidiary" means, with respect to the Company, any
Subsidiary other than ENBC.
"Retail Period" means any of the thirteen consecutive four-week
periods used by the Company for accounting purposes which begin on or about the
Monday after the last Sunday in December of each year and ending on the last
Sunday in December of the next year.
"Revolving Notes" shall have the meaning assigned thereto in the
Credit Agreement.
"Senior Secured Indebtedness" means, at any time, the aggregate
principal amount of revolving loans and letter of credit obligations (including,
without limitation, the unreimbursed amount of any draws under the letters of
credit) then outstanding under the Credit Agreement plus the aggregate amount of
all Financial Lease Debt then outstanding.
"Significant Subsidiary" means a Restricted Subsidiary which would be
a "significant subsidiary" under either clause (2) or clause (3) of the
definition of "significant subsidiary" in Rule 1-02 of Regulation S-X under the
Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, as
such Regulation is in effect on the date hereof, assuming that the Company is
the "registrant" referred to in such definition.
"Special Purpose Subsidiary" means any Restricted Subsidiary (which is
not a Franchisee): (1) of which the Company
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owns, directly or indirectly through one or more intermediaries, or both, all of
the issued and outstanding voting stock, general partner's interests or other
equity interests having ordinary voting power to elect the board of directors or
other managers of such Restricted Subsidiary; (2) which has executed and
delivered to each of the Loan Agent and the Lease Agent a Guaranty; and (3) the
only assets of which are real property, leases of real property (in which such
Restricted Subsidiary is the landlord) to the extent permitted by Section 4.7 or
general partner interests in Financed Subsidiaries.
"Store" means a retail food service outlet operating under the
tradename of "Boston Market" or "Boston Carver."
"Subleases" means subleases of equipment and/or real property entered
into between the Company, as lessor, and a Franchisee, as lessee, pursuant to
any Master Lease.
"Subordinated Debt" means Current Pay Subordinated Debt and Non-
Current Pay Subordinated Debt.
"Subsidiary" means, as to the Company, a Person (other than an
individual) of which shares of stock, partnership units or other equity
interests having ordinary voting power (other than shares having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such Person are at the time owned, directly or
indirectly through one or more intermediaries, or both, by the Company. For
purposes hereof, the existence of a Franchise Agreement, Area Development
Agreement or similar agreement between the Company and a Person shall not, by
itself, evidence that such Person is controlled by the Company, nor shall the
Financed Franchisee Loan Documents executed by a Franchisee evidence such
control prior to the acquisition by the Company of an equity interest therein
having power to elect or control the majority of the board of directors or other
managers of the Financed Franchisee, whether such acquisition occurs by
conversion of debt, exercise of any equity option, or otherwise, including upon
acceleration under the Financed Franchisee Loan Documents.
"Termination Date" means the date upon which no Debt of the Company or
any Guarantor shall be outstanding under any of the Credit Documents and no
Creditor has any contractual obligations under any Credit Document to extend
credit of any nature to the Company.
"Total Indebtedness" means at any date, without duplication, the sum
of (1) indebtedness for borrowed money of the Company and its consolidated
Restricted Subsidiaries (other
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than (a) the Debt of the Company evidenced by that certain Liquid Yield Option
Notes due 2015 issued by the Company on June 1, 1996, 1995 and (b) any Non-
Current Pay Subordinated Debt); plus (2) obligations of the Company and its
consolidated Restricted Subsidiaries as lessee under Financial Lease Debt; plus
(3) obligations of the Company and its consolidated Restricted Subsidiaries
under letters of credit issued and/or outstanding for the account of such party;
plus (4) all obligations of the Company and its consolidated Restricted
Subsidiaries arising under bankers' acceptance facilities issued for the account
of such party; plus (5) 20% of the notional amount of all derivative instruments
of the Company and its consolidated Restricted Subsidiaries; plus (6) all
guarantees by the Company and its consolidated Restricted Subsidiaries, of
indebtedness and other obligations of the type set forth in the foregoing
clauses (1) through (5); plus (7) the aggregate amount of payments due during
the Company's fiscal year in which such date occurs under all real property
leases of Franchisees which are guaranteed by the Company or any of its
consolidated Restricted Subsidiaries.
"Unrestricted Subsidiary" means ENBC.
SECTION 1.2. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP
consistent with that applied in the preparation of the financial statements
referred to in Section 2.4, and all financial data prepared by the Company and
submitted pursuant to this Agreement shall be prepared in accordance with such
principles except for the financial data submitted pursuant to Section 3.8(1)
and such other financial data which the Company expressly states has not been
prepared in accordance with such principles.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Creditors that:
SECTION 2.1. Incorporation, Good Standing, and Due Qualification.
The Company and each of its Restricted Subsidiaries: (1) is a corporation,
partnership or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization or formation; (2) has the power and authority and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and to transact the business in which it is now engaged or proposed
to
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be engaged; and (3) is duly qualified as a foreign corporation, partnership or
limited liability company, as the case may be, and in good standing under the
laws of each other jurisdiction in which the failure to so qualify would result
in a Material Adverse Change.
SECTION 2.2. Corporate Power and Authority. The execution,
delivery, and performance by the Company and each Guarantor of each of the
Credit Documents to which it is a party and the granting by the Company and each
Guarantor of Liens pursuant to the Credit Documents have been duly authorized by
all necessary corporate or other constitutional action on the part of the
Company or such Guarantor, as the case may be, and do not and will not (1)
contravene or conflict with the organizational documents of the Company or such
Guarantor; (2) violate any provision of, or cause the Company or such Guarantor
to be in default under, any law, rule, regulation (including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination, or award
currently in effect having applicability to the Company or such Guarantor; (3)
result in a breach of, or constitute a default under, any material indenture or
loan or credit agreement or any other material agreement, lease, or instrument
to which the Company or such Guarantor is a party or by which it or its
properties may be bound or affected; or (4) result in, or require, the creation
or imposition of any Lien (except as permitted pursuant to Section 4.1), upon or
with respect to any of the properties now owned or hereafter acquired by the
Company or such Guarantor.
SECTION 2.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Credit Documents will be, legal, valid, and binding
obligations of the Company and each of the Guarantors (to the extent they are
parties to such Credit Documents) enforceable against the Company and such
Guarantor (as applicable) in accordance with their respective terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally and by
general principles of equity.
SECTION 2.4. Financial Statements. The Company's audited
consolidated financial statements as at December 31, 1995 (the "Audited
Statements") and its unaudited consolidated financial statements as at October
6, 1996, ("Unaudited Statements") have been furnished to each Creditor. The
Audited Statements have been prepared in conformity with GAAP and fairly present
the financial condition of the Company and its Subsidiaries as at such dates and
the results of operations for the periods then ended. The Unaudited Statements
have been prepared in a manner consistent (except for changes in accounting
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policies permitted by GAAP which have been or are contemporaneously disclosed in
writing to each Creditor) with the Audited Statements, except for the lack of
normal year-end accruals, reclassifications, and audit adjustments and financial
statement footnotes. Since the date of the most recent financial statements
supplied to each Creditor pursuant to either Section 3.8(2) or (3), whichever is
the most recently delivered, there has been no Material Adverse Change. No
information, exhibit, or report furnished by the Company to the Creditors in
connection with the negotiation of this Agreement, considered as a whole with
all other information, exhibits and reports furnished to the Creditors in
connection with the negotiation of this Agreement at the time it was furnished
(and as modified or superseded by any information, exhibits and reports
subsequently furnished to the Creditors), contained any material misstatement of
fact or omitted to state a material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
materially misleading; provided, that except as expressly provided below, the
Company makes no representation, warranty, or guaranty as to (1) any projections
furnished to the Creditors (it being understood that such projections have been
prepared by management of the Company on the basis of assumptions which such
management believed were reasonable as of the date of such projections in light
of the historical financial performance of the business of the Company and of
current and reasonably foreseeable business conditions) or (2) any information
supplied by Franchisees or contained in analyst reports or other reports
prepared by third parties or derived therefrom unless in the case of this clause
(2) the Company has actual knowledge at the time such information is delivered
to the Creditors that such information contains a material misstatement of fact
or omits to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
materially misleading.
SECTION 2.5. Other Agreements. Neither the Company nor any
Restricted Subsidiary is a party to any material indenture, loan, or credit
agreement, or to any material lease or other agreement or instrument, or subject
to any charter or corporate restriction which would be breached or accelerated
by entering into the Credit Documents or which would have a material adverse
effect on the ability of the Company to carry out its obligations under the
Credit Documents. Neither the Company nor any Restricted Subsidiary is in
default in any respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument which would result in a Material Adverse Change.
SECTION 2.6. Litigation. There is no pending or (to the Company's
knowledge) threatened action or proceeding against
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or affecting the Company or any Restricted Subsidiary before any court,
governmental agency, or arbitrator, which, in any one case or in the aggregate,
is material to the Company and its Restricted Subsidiaries, taken as a whole, or
would materially and adversely affect the ability of the Company to perform its
respective obligations under the Credit Documents.
SECTION 2.7. No Defaults on Outstanding Judgments or Orders. To the
best of the Company's knowledge, the Company and its Restricted Subsidiaries
have satisfied all material final judgments, and neither the Company nor any
Restricted Subsidiary is in default with respect to any final judgment, writ,
injunction, decree, rule, or regulation of any court, arbitrator, or federal,
state, municipal, or other governmental authority, commission, board, bureau,
agency, or instrumentality, domestic or foreign, which default would result in a
Material Adverse Change.
SECTION 2.8. Governmental and Regulatory Approvals. No
authorizations, approvals or consents of, and no filings or registrations with,
any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by the Company or any Guarantor, as the case
may be, of the Credit Documents to which it is a party or for the validity or
enforceability thereof, except for filings necessary to perfect Liens granted
pursuant to the Credit Documents.
SECTION 2.9. Ownership and Liens. The Company and each Restricted
Subsidiary has title to, or valid leasehold interests in, all of its properties
and assets, real and personal, and none of the properties and assets owned by
the Company or any Restricted Subsidiary and none of their leasehold interests
is subject to any Lien, except such as may be permitted pursuant to Section 4.1
of this Agreement.
SECTION 2.10. Subsidiaries etc. Schedule I sets forth as of the
initial date of this Agreement (and as of the date of delivery pursuant to
Section 3.8(6) of any subsequent Schedule I) a true and correct list of all
capital stock, partnership units or other equity interests of any Person owned
or otherwise held (including capital stock, partnership units or other equity
interests held as collateral) by the Company and its Subsidiaries and indicates
whether such capital stock, partnership units or other equity interests are
owned or held in some other capacity by the Company or such Subsidiary.
SECTION 2.11. ERISA. The Company and the ERISA Affiliates are in
compliance in all material respects with the applicable provisions of ERISA.
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SECTION 2.12. Stores. Schedule II hereto sets forth, as of the
Friday immediately preceding the Effective Date (and as of the Friday
immediately preceding any date of delivery pursuant to Section 3.8(6) of any
subsequent Schedule II), a complete and accurate list of the addresses of each
Store and whether such Store is operated by the Company, a Restricted
Subsidiary, a Financed Franchisee or a Franchisee which is not a Financed
Franchisee.
SECTION 2.13. Hazardous Materials. (1) The Company and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required to be obtained by the Company or such Subsidiary under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not result in a Material Adverse Change. Except
as disclosed pursuant to clause (3) below, the Company and each of its
Subsidiaries are in compliance with the terms and conditions of all such
permits, licenses and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent that any such failure to comply would not result in a
Material Adverse Change.
(2) There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of the Company or any of its Subsidiaries in relation to any property
or facility now or previously owned or leased by the Company or any of its
Subsidiaries which have not been made available to the Creditors.
(3) The Company has informed the Creditors in writing of all material
non-compliance of the Company and each of its Subsidiaries with the terms and
conditions of all (a) permits, licenses or authorizations required under all
Environmental Laws and (b) other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any applicable regulation,
code, plan, order, decree, judgment, injunction notice or demand letter issued,
entered, promulgated or approved thereunder, except for such instances of
noncompliance which would not result in a Material Adverse Change.
SECTION 2.14. Taxes. The Company and each Subsidiary have filed all
material tax returns (federal, state, and local) required to be filed and have
paid all taxes, assessments, and
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governmental charges and levies thereon which it is aware are due, including
interest and penalties, except to the extent the validity thereof is being
contested in good faith and by appropriate proceedings.
SECTION 2.15. Debt. As of the date hereof, Schedule IIIA sets forth
a complete and correct list of all credit agreements, indentures, purchase
agreements, guaranties, Capital Leases, and other investments, agreements, and
arrangements currently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of letters of
credit or for bankers' acceptance financing) in respect of which the Company or
any Restricted Subsidiary is in any manner directly or contingently obligated;
and the maximum principal or face amounts of the credit in question, which are
outstanding and which can be outstanding, are correctly stated, and all Liens of
any nature given or agreed to be given as security therefor are correctly
described or indicated in such Schedule.
SECTION 2.16. Financed Franchisee Information. Schedule IV hereto
sets forth, as of the initial date of this Agreement (and as of the date of
delivery pursuant to Section 3.8(6) of any subsequent Schedule IV), a true and
complete list of any Debt owed by each Person to the Company or any Restricted
Subsidiary which is evidenced by a promissory note or other instrument.
SECTION 2.17. Investment Company Act. Neither the Company nor any
of its Subsidiaries is, and each Financed Franchisee has duly represented to the
Company that it is not, an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 2.18. Public Utility Holding Company Act. Neither the
Company nor any of its Subsidiaries is a "holding company," or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company act of 1935, as amended.
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ARTICLE III
AFFIRMATIVE COVENANTS
---------------------
From and after the date hereof, so long as any Debt of the Company or
any Guarantor arising under the Credit Documents shall remain unpaid or any
Creditor shall have any contractual obligation under any Credit Document to
extend credit of any nature to the Company, the Company will:
SECTION 3.1. Maintenance of Existence. Except as otherwise
permitted by Section 4.3, preserve and maintain, and cause each Restricted
Subsidiary to preserve and maintain, its legal existence and good standing in
the jurisdiction of its organization or formation, and qualify and remain
qualified, and cause each Restricted Subsidiary to qualify and remain qualified,
as a foreign entity in each jurisdiction in which the failure to so qualify
would result in a Material Adverse Change.
SECTION 3.2. Maintenance of Records. Keep, and cause each
Subsidiary to keep, adequate records and books of account.
SECTION 3.3. Maintenance of Properties. Maintain, keep, and
preserve, and cause each Restricted Subsidiary to maintain, keep, and preserve,
all of its material properties (tangible and intangible) necessary or useful in
the proper conduct of its business in good working order and condition, ordinary
wear and tear excepted; provided, however, the Company and each Restricted
Subsidiary may close Stores in the ordinary course of business, in which event
the Company shall give prompt written notice to each Agent.
SECTION 3.4. Conduct of Business. Except (1) for the ownership and
operation of Unrestricted Subsidiaries and any Investments permitted therein by
clause (3) of Section 4.8 and (2) to the extent otherwise permitted pursuant to
clause (5) of Section 4.8, continue, and cause each Restricted Subsidiary to
continue (unless causing to so continue would constitute a breach of fiduciary
duty), to engage in the operation of Stores and/or in the franchising of Stores
to other Persons (and other matters and operations incidental to the foregoing,
including, but not limited to, the holding of real estate or leasehold interests
for Store locations and the distribution of Store supplies or inventory items),
and no other line of business; provided, that after each acquisition by the
Company or a Restricted Subsidiary of preexisting operating assets, the Company
or such Restricted Subsidiary, as the case may be, shall have a reasonable
period of time in which to dispose of any assets so acquired which do not
relate, or are not being converted, to the operation of Stores or
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the franchising of Stores to other Persons (and other matters and operations
incidental to the foregoing).
SECTION 3.5. Maintenance of Insurance. Maintain, and cause each
Restricted Subsidiary to maintain, insurance with commercially reasonable and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or a similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
SECTION 3.6. Compliance With Laws. Comply, and cause each
Subsidiary to comply, in all material respects with all material applicable
laws, rules, regulations, and orders, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property except to the extent
the validity thereof is being contested in good faith and by appropriate
proceedings.
SECTION 3.7. Right of Inspection. At any reasonable time and from
time to time, permit any Creditor or any agent or representative thereof to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Company and any Subsidiary, and to discuss
the affairs, finances, and accounts of the Company and any Subsidiary with any
of their respective officers, directors and employees and the Company's
independent accountants.
SECTION 3.8. Reporting Requirements. Furnish to each of the Loan
Agent and the Lease Agent (in such number of copies of each as may be specified
by the Agents):
(1) Retail Period financial statements. As soon as available and in
any event within twenty (20) days after the end of each Retail Period of
the Company (or in the case of the last Retail Period of each fiscal
quarter of the Company, within forty-five (45) days after the end of such
Retail Period), consolidated and consolidating balance sheets of the
Company and its Restricted Subsidiaries as at the end of such Retail
Period, consolidated and consolidating statements of operations of the
Company and its Restricted Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such Retail
Period and for the period commencing at the end of the previous Retail
Period and ending with the end of such Retail Period, and consolidated and
consolidating statements of cash flows of the Company and its Restricted
Subsidiaries for the portion of the
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fiscal year ended with the last day of such Retail Period and for the
period commencing at the end of the previous Retail Period and ending with
the end of such Retail Period, all in reasonable detail and for statements
of operations, stating in comparative form the respective budget figures
for the corresponding period, and a "flash" report of sales by week by unit
in the most complete form as previously delivered to each of the Loan Agent
and the Lease Agent; provided, however, that the Company shall be under no
obligation to deliver to the Loan Agent or the Lease Agent consolidating
financial statements prior to any Creditor's written request therefor or if
the Company has no Significant Subsidiary;
(2) Quarterly financial statements. As soon as available and in any
event within forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Company, consolidated and
consolidating balance sheets of the Company and its Restricted Subsidiaries
as at the end of such fiscal quarter, consolidated and consolidating
statements of operations of the Company and its Restricted Subsidiaries for
the period commencing at the end of the previous fiscal year and ending
with the end of such fiscal quarter, and consolidated and consolidating
statements of cash flows of the Company and its Restricted Subsidiaries for
the portion of the fiscal year ended with the last day of such fiscal
quarter, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures for the corresponding
date and period in the previous fiscal year and certified by the Chief
Financial Officer, Chief Accounting Officer, Vice President - Finance or
any Senior Vice President of the Company (in his or her capacity as such,
without personal liability therefor) as being prepared consistent with the
Company's audited annual financial statements (subject (a) to year-end
adjustments and changes in accounting policies permitted by GAAP which have
been disclosed in writing to the Agents, and (b) to adjustments necessary
to factor out the consolidated results of operations and financial position
of ENBC from such financial statements); provided, however, that the
Company shall be under no obligation to deliver to the Loan Agent or the
Lease Agent consolidating financial statements prior to any Creditor's
written request therefor or if the Company has no Significant Subsidiary;
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(3) Annual financial statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of the
Company, (a) a consolidated and consolidating balance sheet of the Company
and its Subsidiaries as at the end of such fiscal year, consolidated and
consolidating statements of operations of the Company and its Subsidiaries
for such fiscal year, and consolidated and consolidating statements of cash
flows of the Company and its Subsidiaries for such fiscal year, all in
reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the prior
fiscal year and all prepared in accordance with GAAP and as to the
consolidated statements accompanied by an unqualified opinion thereon,
except for such qualifications as may be reasonably acceptable to the
Required Creditors, by Arthur Andersen & Co. or other independent
accountants selected by the Company and reasonably acceptable to the
Required Creditors, and (b) consolidated and consolidating balance sheet of
the Company and its Restricted Subsidiaries as at the end of such fiscal
year, consolidated and consolidating statements of operations of the
Company and its Restricted Subsidiaries for such fiscal year, and
consolidated and consolidating statements of cash flows of the Company and
its Restricted Subsidiaries for such fiscal year, all in reasonable detail
and stating in comparative form the respective consolidated figures for the
corresponding date and period in the prior fiscal year and all and
certified by the Chief Financial Officer, Chief Accounting Officer, Vice
President - Finance or any Senior Vice President of the Company (in his or
her capacity as such, without personal liability therefor) as being
prepared consistent with the Company's audited annual financial statements
(subject to adjustments necessary to factor out the consolidated results of
operations and financial position of ENBC from such financial statements);
provided, however, that in no event shall the Company be obligated to
deliver to the Loan Agent and the Lease Agent consolidating financial
statements prior to any Creditor's written request therefor or if the
Company has no Significant Subsidiary and ENBC is not then a Subsidiary;
(4) Certificate of no Default. Together with the financial
statements furnished by the Company under the preceding clauses (2) and
(3), a certificate of the Chief Financial Officer, Chief Accounting
Officer, Vice President - Finance or any Senior Vice President of the
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Company (in his or her capacity as such, and without personal liability
therefor) (a) certifying that to the best of his or her knowledge no
Default or Event of Default has occurred and is continuing, or if a Default
or Event of Default has occurred and is continuing, a statement as to the
nature thereof and the action which is proposed to be taken with respect
thereto, and (b) showing computations calculated as of the last day of the
fiscal period then ended demonstrating compliance with each of the
covenants contained in Article V;
(5) Accountant's reports. (a) Together with the financial statements
furnished by the Company under the preceding clause (3), a certificate of
the independent public accountants who audited such statements to the
effect that, in making the examination necessary for the audit of such
statements, they have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default, or if such accountants shall
have obtained knowledge of any such condition or event, specify in such
certificate each such condition or event of which they have knowledge and
the nature and status thereof; and (b) promptly upon receipt thereof,
copies of any reports submitted to the Company or any Significant
Subsidiary by independent certified public accountants in connection with
examination of the financial statements of the Company or any Significant
Subsidiary made by such accountants;
(6) Updated Schedules. As soon as reasonably available in final form
and in any event within forty-five (45) days after the end of each Retail
Period, updated Schedules I, II and IV hereto which updated schedules shall
be deemed as of the date of delivery to amend and restate in their entirety
the previously delivered Schedules I, II and IV;
(7) Notice of litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Company or any
Subsidiary, which, in any one case or in the aggregate, are material to the
Company and its Restricted Subsidiaries taken as a whole, or adversely
affect the ability of the Company to perform its obligations under the
Credit Documents;
(8) Notice of Defaults and Events of Default. (a) Promptly after the
Company becomes aware of the
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occurrence of a default (as such term is used in the 1995 Master Lease
Agreement) or any event which with the passage of time, the giving of
notice or both would constitute such a Default, and (b) as soon as possible
and in any event within three (3) Business Days after the Company becomes
aware of the occurrence of any other Default or Event of Default, a written
notice setting forth the details of such Default or Event of Default and
the action which is proposed to be taken by the Company with respect
thereto;
(9) ERISA reports. Promptly after the filing or receiving thereof,
copies of all substantive reports, including annual reports, with respect
to each Plan for which the Company or a Subsidiary is the plan sponsor and
material notices which the Company or any Subsidiary files with or receives
from the PBGC or the U.S. Department of Labor under ERISA; and as soon as
possible and in any event within thirty (30) days after the Company or any
Subsidiary knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the
PBGC or the Company or any Subsidiary has instituted or will institute
proceedings under Title IV of ERISA to terminate any Plan, the Company will
deliver to each of the Loan Agent and the Lease Agent a certificate of the
Chief Financial Officer, Chief Accounting Officer, Vice President - Finance
or any Senior Vice President of the Company (in his or her capacity as such
and with no personal liability therefor) setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the
action the Company proposes to take with respect thereto;
(10) Reports to other creditors. Promptly after the furnishing
thereof, copies of any material statement or report furnished to any other
creditor of the Company pursuant to the terms of any indenture, loan, or
credit or similar agreement and not otherwise required to be furnished to
the Loan Agent and the Lease Agent pursuant to any other clause of this
Section 3.8;
(11) Proxy statements, etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements, reports and
prospectus (whether preliminary or final) which the Company or any
Restricted Subsidiary is required under applicable securities laws to send
to its stockholders,
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and copies of all regular, periodic, and special reports, and all
registration statements which the Company or any Restricted Subsidiary
files with the Securities and Exchange Commission (or any governmental
authority which may be substituted therefor) or with any national
securities exchange;
(12) Financed Franchisee Loan Documents. Promptly after the execution
and delivery by a Financed Franchisee of any Financed Franchisee Loan
Documents, copies of such Financed Franchisee Loan Documents;
(13) Financed Franchisee and Financed Subsidiary quarterly financial
statements. As soon as available and in any event within forty-five (45)
days after the end of each of the first three fiscal quarters of each
fiscal year of each Financed Franchisee and each Financed Subsidiary, and
as soon as available and in any event within ninety (90) days after the end
of each fiscal year of each Financed Franchisee and each Financed
Subsidiary, balance sheets of each such Financed Franchisee and each such
Financed Subsidiary as at the end of such fiscal quarter or fiscal year,
statements of operations of each such Financed Franchisee and each such
Financed Subsidiary for the period commencing at the end of the previous
fiscal year and ending with the end of such fiscal quarter or fiscal year,
and statements of cash flows of each such Financed Franchisee and each such
Financed Subsidiary for the portion of the fiscal year ended with the last
day of such fiscal quarter or fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the previous fiscal year and either (A) certified by the
Chief Financial Officer, Chief Accounting Officer, Vice President - Finance
or any Senior Vice President of the Company (in his or her capacity as
such, without personal liability therefor) as being, to the best of such
officer's knowledge, prepared in accordance with GAAP or (B) certified to
the Creditors by the chief executive officer, the chief financial officer
or treasurer of such Financed Franchisee or Financed Subsidiary as
accurate, subject to changes resulting from normal, recurring year-end
adjustments;
(14) Contingent Lease Liabilities. Together with the financial
statements furnished by the Company under the preceding clauses (2) and
(3), a report showing the aggregate amount of payments due during the
twelve-
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month period succeeding the date of such financial statements under all
leases of Financed Franchisees with respect to which the Company is
primarily liable pursuant to leases transferred to Financed Franchisees in
accordance with clause (4) of Section 4.7; and
(15) General information. Such other information respecting the
condition or operations, financial or otherwise, of the Company or any
Subsidiary as any of the Loan Agent, the Lease Agent, Documentation Agent
or the Required Creditors may from time to time reasonably request.
SECTION 3.9. Environmental Laws. Use and operate, and cause each
Subsidiary to use and operate, all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect and remain in material compliance therewith, and handle all
hazardous substances in material compliance with all applicable Environmental
Laws, except to the extent the failure to comply with the foregoing would not
result in a Material Adverse Change; and provide such information and
certifications which any Creditors may reasonably request from time to time to
evidence compliance with this Section.
SECTION 3.10. Credit Usage.
(1) At the time of each incurrence, and after giving effect thereto,
of Debt under the Credit Agreement or the 1996 Master Lease Agreement
during any fiscal period set forth below (but only at such times and at no
other times) demonstrate to the Loan Agent or the Lease Agent compliance
with the ratio of (1) Senior Secured Indebtedness to (2) Annualized
EBITDAL, for the fiscal quarter then most recently ended for which
financial statements have been delivered to the Loan Agent and the Lease
Agent pursuant to Section 3.8, does not exceed the ratio set forth below
opposite such fiscal period:
<TABLE>
<CAPTION>
Fiscal period(s) Ratio
---------------- -----
<S> <C>
Q4 1996 2.50:1.00
Q1 1997 2.75:1.00
Q2 1997 3.00:1.00
Q3 1997 - Q2 1998 2.75:1.00
Q3, Q4 1998 2.50:1.00
Thereafter 2.25:1.00
</TABLE>
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<PAGE>
(2) In the event the Company receives any proceeds from the incurrence
of Debt under the Credit Agreement or the 1996 Master Lease Agreement on a
day when, after giving effect to such incurrence, the ratio set forth in
the preceding clause was exceeded, the Company shall repay to the Loan
Agent and/or the Lease Agent, as the case may be, proceeds from the
incurrence of such Debt in an amount sufficient to cause compliance with
such ratio as of the date of such incurrence, such repayment to be due
within 10 Business Days of written notice from the Loan Agent or the Lease
Agent, as the case may be, requiring such repayment.
ARTICLE IV
NEGATIVE COVENANTS
------------------
From and after the date hereof, so long as any Debt of the Company or
any Guarantor arising under any of the Credit Documents shall remain unpaid or
any Creditor shall have any contractual obligation under any Credit Document to
extend credit of any nature to the Company, the Company will not:
SECTION 4.1. Liens. Create, incur, assume, or suffer to exist, or
permit any Restricted Subsidiary to create, incur, assume, or suffer to exist
(unless failure to so permit would constitute a breach of fiduciary duty), any
Lien upon or with respect to any of its properties, now owned or hereafter
acquired, except:
(1) Liens securing obligations of a Restricted Subsidiary to the
Company or a Guarantor;
(2) Liens for taxes or assessments or other government charges or
levies if not yet delinquent or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(3) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are
not past due for more than thirty (30) days or which are being contested in
good faith by appropriate proceedings and for which appropriate reserves
have been established;
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<PAGE>
(4) Liens under workers' compensation, unemployment insurance, social
security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of
business;
(6) Judgment and other similar Liens arising in connection with court
proceedings, provided, that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(7) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Company or any Restricted Subsidiary
of the property or assets encumbered thereby in the normal course of its
business or materially impair the value of the property subject thereto;
(8) Liens securing Debt of the types permitted by clauses (6) and (12)
of Section 4.2, provided, that with respect to Debt of the type permitted
by clause (12) of Section 4.2, such Liens are in existence on the assets so
acquired immediately prior to the consummation of the respective Investment
or other acquisition permitted by clause (12) of Section 4.2 and such Liens
were not created in anticipation of such Investment or other acquisition;
(9) Purchase money Liens on any property owned or hereafter acquired
or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or
other title retention agreement or a Capital Lease, provided, that:
(a) Any property subject to any of the foregoing is acquired by
the Company or any Restricted Subsidiary in the ordinary course of its
respective business and the Lien on any such property is created
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<PAGE>
contemporaneously with or prior to such acquisition;
(b) The obligation secured by any Lien so created, assumed, or
existing shall not exceed ninety percent (90%) of the lesser of cost
or fair market value as of the time of acquisition of the property
covered thereby to the Company or Restricted Subsidiary acquiring the
same;
(c) Each such Lien shall attach only to the property so acquired
and fixed improvements thereon; and
(d) The Debt of the Company which is secured by such Liens plus
the Debt of all Restricted Subsidiaries secured by such Liens arising
after such Persons become Restricted Subsidiaries shall not exceed at
any time outstanding in the aggregate Three Million Dollars
($3,000,000);
(10) Liens arising pursuant to (a) the Credit Documents, (b) the 1995
Lease Documents, provided, that at no time shall the Financial Lease Debt
arising from the 1995 Lease Documents exceed in principal amount One
Hundred Twenty Million Dollars ($120,000,000) and (c) documentation
evidencing other Financial Lease Debt, provided, that the documentation
evidencing such Financial Lease Debt shall not contain any representation,
covenant or default which is more restrictive than the respective
representations, covenants and defaults set forth in this Agreement;
(11) Liens on dividends and returned premiums due to the Company with
respect to its insurance policies securing not more than Two Million
Dollars ($2,000,000) at any one time outstanding of insurance premiums due
with respect to such policies;
(12) Liens on the Denver Support Center, provided, that the aggregate
amount of Debt secured by such Liens shall in no event exceed Twenty-Five
Million Dollars ($25,000,000); and
(13) Other Liens not of the type permitted by the foregoing clauses
(1) through (12), provided, that the aggregate amount of Debt secured by
such Liens shall in no event exceed Ten Million Dollars ($10,000,000).
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<PAGE>
SECTION 4.2. Debt. Create, incur, assume, or suffer to exist, or
permit any Restricted Subsidiary to create, incur, assume, or suffer to exist
(unless failure to so permit would constitute a breach of fiduciary duty), any
Debt, except:
(1) Debt of the Company under the Credit Documents, provided, that at
no time shall (a) Debt arising from the Credit Agreement exceed
$150,000,000 or (b) Debt arising from the 1996 Master Lease Agreement
exceed $300,000,000;
(2) Debt described in Schedule IIIB, but no renewals, extensions, or
refinancings thereof;
(3) Accounts payable to trade creditors for goods or services which
are not aged more than ninety (90) days from billing date incurred in the
ordinary course of business and paid within the specified time, unless
contested in good faith and by appropriate proceedings;
(4) Debt of any Restricted Subsidiary to the Company provided such
Debt complies with any applicable requirements set forth in Section 4.8;
(5) Debt of the Company arising with respect to Company's commitment
to provide funds to any Financed Franchisee or to any Financed Subsidiary
so long as such commitment to provide funds complies with the requirements
set forth in Section 4.8;
(6) Debt which constitutes indebtedness for borrowed money owed by a
Financed Franchisee to a Person other than the Company which indebtedness
is in existence on the date such Financed Franchisee becomes a Financed
Subsidiary, and any renewal, extension or refinancing of such Debt,
provided, that both before and after giving effect to such Financed
Franchisee becoming a Financed Subsidiary no Default or Event of Default
shall exist or be continuing, and provided further, that the outstanding
principal amount of such Debt shall at no time exceed the principal amount
of such Debt outstanding on the date such Financed Franchisee becomes a
Financed Subsidiary;
(7) Debt which is secured by Liens of the type described in clauses
(9), (10), (11) or (12) of Section 4.1;
(8) Debt which constitutes Current Pay Subordinated Debt, provided,
that (i) both before and
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<PAGE>
after giving effect to the incurrence of such Debt no Default or Event of
Default shall have occurred or be continuing and (ii) if such Current Pay
Subordinated Debt had been incurred as of the last day of the then most
recently ended fiscal quarter of the Company, after giving effect to the
incurrence of such Debt no Default or Event of Default would have existed;
(9) Debt which constitutes Non-Current Pay Subordinated Debt, provided
that both before and after giving effect to the incurrence of any such Non-
Current Pay Subordinated Debt no Default or Event of Default shall exist or
be continuing;
(10) Debt of the type permitted by Sections 4.4, 4.5, 4.8(1)(b), (c)
and (d) and 4.9;
(11) Debt of the Company arising under the BWRE Guaranty, provided
that (a) the principal amount of indebtedness guaranteed by the BWRE
Guaranty shall at no time exceed $7,350,000 and (b) so long as the BWRE
Guaranty shall remain outstanding, (i) the only assets of BWRE shall be the
BWRE Parcels, those certain Land and Building Leases, each dated February
16, 1996, between Boston West, L.L.C., as tenant, and BWRE, as landlord,
relating to the BWRE Parcels and all rights as landlord arising under such
Land and Building Leases and (ii) Stores shall be operated on the BWRE
Parcels;
(12) Debt incurred or assumed in connection with Investments and other
acquisitions permitted under this Agreement, provided, that the aggregate
principal amount of such Debt shall not exceed $25,000,000 at any one time
outstanding; and
(13) Unsecured Debt not of the type described in the foregoing clauses
(1) through (12) in an aggregate principal amount not to exceed at any one
time outstanding Twenty-Five Million Dollars ($25,000,000); provided, that
(i) before and after giving effect to the incurrence of such Debt no
Default or Event of Default shall have occurred or be continuing and (ii)
if such unsecured Debt had been incurred as of the last day of the then
most recently ended fiscal quarter of the Company, after giving effect to
the incurrence of such unsecured Debt no Default or Event of Default would
have existed.
SECTION 4.3. Mergers, Etc. Merge or consolidate with, or sell,
assign, lease, liquidate, dissolve or otherwise dispose
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<PAGE>
of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to any
Person, or acquire all or substantially all of the assets or the business of any
Person, or permit any Restricted Subsidiary to do so (unless failure to so
permit would constitute a breach of fiduciary duty), except that:
(1) any Restricted Subsidiary may merge into or consolidate with or
transfer assets to the Company or a Guarantor, provided, that in the case
of a Guarantor which is a Special Purpose Subsidiary the only assets of the
Subsidiary so merged, consolidated or transferred shall be assets of the
type permitted pursuant to the definition of "Special Purpose Subsidiary";
(2) any Restricted Subsidiary may be dissolved;
(3) the Company, any Guarantor, any Financed Subsidiary or Special
Purpose Subsidiary may acquire all or substantially all of the assets or
the business of any Person, provided, that (i) in the case of a Special
Purpose Subsidiary the only assets so acquired shall be of a type permitted
pursuant to the definition of "Special Purpose Subsidiary", and (ii) as of
and after giving effect to such acquisition no Default or Event of Default
shall exist or be continuing; and
(4) the Company or any Guarantor may acquire capital stock,
partnership units or other equity interests of a Financed Franchisee or a
Restricted Subsidiary in compliance with clause (2) of Section 4.8.
SECTION 4.4. Leases. Create, incur, assume, or suffer to exist, or
permit any Restricted Subsidiary to create, incur, assume, or suffer to exist
(unless failure to so permit would constitute a breach of fiduciary duty), any
obligation as lessee for the rental or hire of any real or personal property,
except:
(1) operating leases of personal property and Capital Leases which do
not give rise to any Lien except those permitted by Section 4.1 and leases
which would be Capital Leases except that because of their immateriality
GAAP does not require them to be capitalized on the books of the lessee,
provided, that in the case of Capital Leases, the sum as of any date of (i)
the aggregate amount of payments due during the twelve month period
succeeding such date under all such Capital Leases which do not give rise
to any Lien plus
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<PAGE>
(ii) the aggregate amount of payments due during the twelve month period
succeeding such date under all such Capital Leases which give rise to a
Lien permitted only by clauses (13) of Section 4.1 shall at no time exceed
Ten Million Dollars ($10,000,000);
(2) any leases of real property on which the Company or a Franchisee
operates or plans to operate a Store or which the Company or any Restricted
Subsidiary uses or intends to use for office space or similar purposes,
including without limitation any lease by the Company of the Denver Support
Center;
(3) leases between the Company and any Restricted Subsidiary or
between any Restricted Subsidiaries; and
(4) the Master Leases, any Sublease and any other Financial Lease Debt
permitted hereunder.
SECTION 4.5. Sale and Leaseback. Sell, transfer, or otherwise
dispose of, or permit any Restricted Subsidiary to sell, transfer, or otherwise
dispose of (unless failure to so permit would constitute a breach of fiduciary
duty), any real or personal property or fixtures to any Person and thereafter
directly or indirectly lease back the same or similar property, except: any sale
and subsequent lease back of (1) real or personal property and fixtures
consummated in accordance with any Financial Lease Debt or the Subleases;
provided, that the Company shall require any net proceeds from such sale which
are received on or about the effective date of such Financial Lease Debt and
which are paid directly or indirectly to a Financed Franchisee to be used by
such Financed Franchisee to reduce such Financed Franchisee's Debt to the
Company or (2) the Denver Support Center.
SECTION 4.6. Dividends. Declare or pay any dividends; or purchase,
redeem, retire, or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its stockholders as
such whether in cash, assets, or obligations of the Company; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock; or permit any of its Restricted
Subsidiaries (unless failure to so permit would constitute a breach of fiduciary
duty) to purchase or otherwise acquire for value any stock of the Company or
another Restricted Subsidiary, except that (1) the Company may declare and
deliver dividends and make distributions payable solely in capital stock of the
Company
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<PAGE>
and (2) Guarantors may purchase or otherwise acquire for value stock of the
Company, provided, that any such Guarantor shall either (x) sell such stock at
its fair market price within twenty Business Days of its acquisition thereof or
(y) use such stock as consideration for or in connection with any acquisition
permitted pursuant to this Agreement.
SECTION 4.7. Sale of Assets. Sell, lease, assign, transfer, or
otherwise dispose of, or permit any Restricted Subsidiary to sell, lease,
assign, transfer, or otherwise dispose of (unless failure to so permit would
constitute a breach of fiduciary duty), any of its now owned or hereafter
acquired assets (including, without limitation, shares of stock and indebtedness
of Restricted Subsidiaries, receivables, leasehold interests, franchise
agreements, trademarks, trade names, copyrights, licenses and other general
intangible interests), except:
(1) for assets disposed of in the ordinary course of business;
(2) the sale or other disposition of assets no longer used or useful
in the conduct of its business;
(3) the sale, leasing or other disposition of real property or the
subleasing of leasehold interests (a) to ENBC or a franchisee of ENBC for
the operation of a retail bagel outlet or (y) to any other Person,
provided, that the Company and its Restricted Subsidiaries may not lease or
sublease more than 30,000 square feet of retail space to Persons (other
than retail space leased to ENBC or its franchisees to be operated as
retail bagels outlets) during any fiscal year;
(4) that any Restricted Subsidiary may sell, lease, assign, or
otherwise transfer its assets to the Company or any Guarantor unless in the
case of a Guarantor which is a Special Purpose Subsidiary, such assets are
not of a type permitted pursuant to the definition of "Special Purpose
Subsidiary";
(5) that the Company or any Restricted Subsidiary may sell, lease,
assign or otherwise transfer to a Franchisee any real property, leasehold
interests or personal property associated with the operation of Stores,
provided that such sale, lease, assignment or transfer is on commercially
reasonable terms negotiated at arms' length and that after giving effect to
such
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<PAGE>
sale, lease, assignment or transfer no Default or Event of Default shall
exist or be continuing;
(6) sales permitted under Section 4.5;
(7) any issuances or sales of the capital stock, partnership units or
other equity interests of any Restricted Subsidiary or other Person
permitted pursuant to Section 4.11;
(8) any sale, lease, assignment, transfer or other disposition
permitted or required by any Master Lease or the Agency Agreement;
(9) any disposition of operating assets permitted by the proviso in
Section 3.4;
(10) any transfer by the Company to a Guarantor of the Company's
conversion rights, options, first refusal rights or preemptive rights
provided in any Financed Franchisee Loan Documents or otherwise, provided
that such conversion rights are exercised by the Guarantor within 10 days
after such transfer; and
(11) other dispositions by the Company or any Restricted Subsidiary
not of the type described in the foregoing clauses (1) through (10)
provided that the aggregate amount of all such dispositions shall not
exceed $5,000,000 during the term of this Agreement.
SECTION 4.8. Investments. Make, or permit any Restricted Subsidiary
to make (unless failure to so permit would constitute a breach of fiduciary
duty), any Investment in any Person except:
(1) loans and advances made by the Company to (a) Financed
Franchisees; provided, that (i) the initial loans or advances to any
Financed Franchisee are or have been made pursuant to Financed Franchisee
Loan Documents, (ii) such loans or advances are evidenced by promissory
notes pledged to the Loan Agent for the benefit of the Creditors pursuant
to the Pledge Agreement, (iii) all such loans and advances to Financed
Franchisees shall be secured in the manner described in paragraph (3) of
Schedule V, (iv) all Liens in favor of the Company securing such loans and
advances are duly perfected within 30 days of the initial loan or advance
to such Financed Franchisee, and (v) the aggregate principal amount of all
loans and advances made by the Company to any Financed Franchisee
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under the Financed Franchisee Loan Documents shall not exceed at any time
an amount equal to the products of four (4) multiplied by the aggregate
amount of all capital contributions theretofore made to such Financed
Franchisee; (b) Financed Subsidiaries; provided, that (i) such loans and
advances are made pursuant to Financed Subsidiary Loan Documents, (ii) such
loans or advances are evidenced by promissory notes pledged to the Loan
Agent for the benefit of the Creditors pursuant to the Pledge Agreement and
(iii) all Liens in favor of the Company securing such loans and advances
are duly perfected prior to the initial loan or advance thereunder; (c)
Guarantors, provided that such loans and advances are evidenced by
promissory notes; and (d) to the extent and only to the extent a Sublease
may be deemed to be a loan or advance, to Franchisees or Financed
Subsidiaries as lessees under a Sublease;
(2) the acquisition by the Company or any Guarantor of the capital
stock, partnership units or other equity interests of any Financed
Franchisees, Financed Subsidiaries or Guarantor; provided, that before and
after giving effect to such acquisition no Default or Event of Default
shall exist or be continuing;
(3) Investments in ENBC, provided, that (a) the aggregate amount of
all Investments by the Company and its Restricted Subsidiaries in ENBC
(which may be subordinated to Debt of ENBC owed to third parties) after the
date hereof shall at no time exceed the sum of (i) $50,000,000 plus (ii)
the lesser of (x) the product of $25,000,000 multiplied by the number of
anniversaries of the date hereof which have then occurred and (y) 150% of
the cumulative net income (minus any net loss) of ENBC for each full fiscal
quarter of ENBC occurring after July 31, 1996 plus (iii) in the case of
Investments consisting of the acquisition of capital stock of ENBC, such
additional amounts as shall be necessary for the Company to maintain
ownership of greater than 50% of the issued and outstanding voting capital
stock of ENBC; (b) upon the occurrence of an ENBC Event of Default which
constitutes a default in payment, no further Investments may thereafter be
made in ENBC; (c) upon the occurrence of an ENBC Event of Default which
does not constitute a default in payment, (i) for so long as such ENBC
Event of Default remains uncured and unwaived (in accordance with the terms
of the ENBC Credit Agreement), no Investments may be made in ENBC and (ii)
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following the waiver or cure of such ENBC Event of Default (in accordance
with the terms of the ENBC Credit Agreement), additional Investments
thereafter made may not exceed in the aggregate $10,000,000; and (d) in no
event shall the aggregate amount of Investments in ENBC made by the Company
after the date hereof exceed $125,000,000;
(4) loans and advances made by the Company to an employee in
connection with the relocation of such employee provided such loans and
advances are consistent with past practices;
(5) non-hostile strategic Investments consisting of purchases or other
acquisitions of capital stock, obligations or other securities of any
Person or capital contributions to or other investments or acquisitions of
any interest in any Person in an aggregate amount for all such Persons not
in excess of $25,000,000 from the date hereof through the Termination Date,
as approved by the Board of Directors of the Company, provided that such
strategic investments are reasonably related to the Company's existing
business at the time of such investment;
(6) direct obligations of (or obligations fully guaranteed or insured
by) the United States or any agency thereof with maturities of one year or
less from the date of acquisition;
(7) certificates of deposit with maturities of one year or less from
the date of acquisition issued by any commercial bank having capital and
surplus in excess of One-Hundred Million Dollars ($100,000,000);
(8) commercial paper and variable and fixed rate notes issued by any
commercial bank having capital and surplus in excess of One Hundred Million
Dollars ($100,000,000);
(9) commercial paper and variable rate notes issued by, or guaranteed
by, any industrial or financial company with a short term commercial paper
rating of at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc., and in each case maturing within one year after the date of
acquisition;
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(10) stock, obligations, or securities received in settlement of debts
(created in the ordinary course of business) owing to the Company or any
Restricted Subsidiary; and
(11) loans and advances not of the type described in the foregoing
clauses (1) through (10) in the aggregate principal amount not to exceed at
any one time outstanding Six Million Dollars ($6,000,000).
SECTION 4.9. Guaranties, Etc. Assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or liable, or permit
any Restricted Subsidiary to assume, guarantee, endorse, or otherwise be or
become directly or contingently responsible or liable (unless failure to so
permit would constitute a breach of fiduciary duty) for obligations of any
Person (including, but not limited to, an agreement to purchase any obligation,
stock, assets, goods, or services primarily for the purpose of enabling such
Person to make payment of such obligations, or to supply or advance any funds,
assets, goods, or services primarily for such purpose, or to maintain or cause
such Person to maintain a minimum working capital or net worth, or otherwise to
assure the creditors of any Person against loss), except:
(1) guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(2) primary liability for (a) leases transferred to Financed
Franchisees in accordance with clause (5) of Section 4.7 and (b) Subleases
pursuant to the Master Leases;
(3) other guaranties of lease payments of Franchisees, provided that
as of any date the aggregate amount of all payments due during the twelve
month period succeeding such date under all real property leases of
Franchisees which are the subject of such other guaranties do not exceed
$8,000,000 through fiscal year 1997, $10,000,000 during fiscal year 1998,
with annual increases in this limit thereafter of $1,000,000;
(4) guaranties of Debt permitted solely by clause (11) and (13) of
Section 4.2; and
(5) any Guaranty.
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<PAGE>
SECTION 4.10. Transactions With Affiliate. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Financed Franchisee or
Affiliate, or permit any Restricted Subsidiary to enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Financed Franchisee or Affiliate, except
pursuant to the reasonable requirements of the Company's or such Restricted
Subsidiary's business and upon fair and reasonable terms not materially less
favorable to the Company or such Restricted Subsidiary than similar transactions
entered into with a Person not a Financed Franchisee or Affiliate; provided
that, the foregoing shall not prohibit any transaction effected in accordance
with the respective Financed Franchisee Loan Documents, Financed Subsidiary Loan
Documents or Subleases.
SECTION 4.11. Subsidiary, Etc.
(1) Create, acquire or otherwise permit to exist any Subsidiaries
other than: (a) Special Purpose Subsidiaries; (b) Financed Subsidiaries; (c)
other Restricted Subsidiaries the acquisition of which is permitted by Section
4.8(5); (d) the Unrestricted Subsidiaries; (e) one or more wholly-owned
Guarantors the sole business of which is owning, operating, licensing,
franchising or providing support services for Stores which are located outside
of the United States of America and (f) one or more wholly-owned Guarantors the
sole business of which is owning, operating or franchising Stores which operate
under the tradename "Boston Carver" and which do not serve the full menu offered
at a Store operating under the tradename of "Boston Market"; provided, that with
respect to any Subsidiary described in clause (b) or (c) of this Section
4.11(1), in the event the Company shall directly or indirectly acquire all of
the issued and outstanding voting stock, general partners interests or other
equity interests having ordinary voting power to elect the board of directors or
other managers of such Subsidiary, simultaneously with such acquisition such
Subsidiary shall execute and deliver to the Loan Agent and the Lease Agent a
Guaranty;
(2) Sell or otherwise dispose of any shares of the capital stock,
partnership units or other equity interests of any Subsidiary or permit any
Subsidiary to issue any additional shares of its capital stock, partnership
units or other equity interest, other than in connection with stock splits,
stock dividends or similar issuances, except directors qualifying shares or
shares, partnership units or other units or interests issued: (1) for fair
consideration; (2) to the Company or any Guarantor upon exercise of the
Company's or such Guarantor's conversion rights, options, first refusal rights
or preemptive rights provided in the Financed Franchisee Loan Documents or
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<PAGE>
otherwise; or (3) to employees of such Subsidiary upon exercise of employee
stock, unit or other equity options, provided, that at the time such options are
granted the exercise price is not less than the fair market value of such stock,
unit or other equity interest and, provided, further that after giving effect to
the issuance of stock, units or other equity interest upon exercise of such
options, the issuer would continue to be a Subsidiary.
SECTION 4.12. Real Property. Purchase or otherwise acquire, or
permit any Restricted Subsidiary to purchase or otherwise acquire, title to any
real property (excluding leasehold improvements), except:
(1) the Company, any Guarantor, any Financed Subsidiary or any Special
Purpose Subsidiary may purchase or acquire real property (a) in accordance
with the terms and provisions of the 1996 Master Lease Agreement and the
Agency Agreement or (b) on which Stores are to be operated;
(2) the Company, or any Restricted Subsidiary may purchase or acquire
real property to be used for office space or similar purposes, including
without limitation the Denver Support Center;
(3) the Company or any Restricted Subsidiary may purchase and acquire
real property in connection with the sale, lease or other disposition of
such property in accordance with clause (3) of Section 4.7; and
(4) the Company, any Financed Subsidiary and any Special Purpose
Subsidiary may purchase or acquire real property in connection with an
acquisition permitted pursuant to clause (3) of Section 4.3 or clause (5)
of Section 4.8;
provided that at no time shall the book value of all real property owned by the
Company and its Restricted Subsidiaries on a consolidated basis (less the book
value of any leasehold improvements thereon) exceed an aggregate amount equal to
fifty percent (50%) of the Company's then total consolidated assets.
SECTION 4.13. Subordinated Debt. Make any payment or prepayment
with respect to Subordinated Debt except that (1) interest may be paid on
Current Pay Subordinated Debt and Non-Current Pay Subordinated Debt (to the
extent permitted by the terms of such Current Pay Subordinated Debt or Non-
Current Pay Subordinated Debt, including the subordination provisions thereof)
and (2) Subordinated Debt and interest thereon may be
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converted into equity of the Company or may be prepaid solely from the proceeds
of a substantially contemporaneous issuance of equity or Subordinated Debt
(provided that such Subordinated Debt shall be Non-Current Pay Subordinated Debt
if the Subordinated Debt so prepaid is Non-Current Pay Subordinated Debt) of the
Company.
SECTION 4.14. Financed Franchisee. (1) Amend, modify or otherwise
waive in any respect the terms, conditions or provisions of any Financed
Franchisee Loan Document if but for such amendment, modification or waiver and
any previous amendments, modifications or waivers, the Financed Franchisee party
to such Financed Franchisee Loan Documents would have outstanding payment
defaults aggregate in excess of $100,000 thereunder or if such amendment,
modification or waiver would otherwise cause such documents to no longer meet
each of the requirements set forth on Schedule V and (2) permit the aggregate
principal amount of Debt of all Financed Franchisees which is owed to Persons
other than the Company and which is senior to any Debt of such Financed
Franchisee owed to the Company to exceed at any time (a) prior to the first
anniversary of the date hereof, $75,000,000, (b) on or after such first
anniversary but prior to the second anniversary of the date hereof, $100,000,000
and (c) on or after such second anniversary, $125,000,000.
ARTICLE V
FINANCIAL COVENANTS
-------------------
From and after the date hereof, so long as any Debt of the Company or
any Guarantor arising under any of the Credit Documents shall remain unpaid or
any Creditor shall have any contractual obligation under any Credit Document to
extend credit of any nature to the Company, the Company will:
SECTION 5.1. Maximum Senior Secured Leverage Ratio. Maintain, as of
the last day of each fiscal quarter occurring during the respective fiscal
periods set forth below, a ratio of (1) Senior Secured Indebtedness to (2)
Annualized EBITDAL, for the fiscal quarter then most recently ended, of not
greater than the ratio set forth below opposite such fiscal period:
<TABLE>
<CAPTION>
Fiscal Period(s) Covenant Level
---------------- --------------
<S> <C>
Q4 1996 2.75:1.00
Q1, Q2 1997 3.00:1.00
Q3 1997 - Q2 1998 2.75:1.00
Q3, Q4 1998 2.50:1.00
Thereafter 2.25:1.00
</TABLE>
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<PAGE>
SECTION 5.2. Maximum Leverage Ratio. Maintain, as of the last day
of each fiscal quarter occurring during the respective fiscal periods set forth
below, a ratio of (1) Total Indebtedness to (2) Annualized EBITDAL, for the
fiscal quarter then most recently ended, of not greater than the ratio set forth
below opposite such fiscal period:
<TABLE>
<CAPTION>
Fiscal Period(s) Covenant Level
---------------- --------------
<S> <C>
Q4 1996 3.25:1.00
Q1 1997 3.75:1.00
Q2, Q3 1997 3.25:1.00
Q4 1997 - Q4 1998 3.00:1.00
Thereafter 2.75:1.00
</TABLE>
SECTION 5.3. Fixed Charge Coverage Ratio. Maintain, as of the last
day of each fiscal quarter occurring during the respective fiscal periods set
forth below, a ratio of (1) EBITDAL for the four consecutive fiscal quarters
then ended to (2) Consolidated Fixed Charges, for such four consecutive fiscal
quarter period, of not less than the ratio set forth below opposite such fiscal
period:
<TABLE>
<CAPTION>
Fiscal Period(s) Covenant Level
---------------- --------------
<S> <C>
Q4 1996 - Q2 1997 2.50:1.00
Q3 1997 - Q4 1998 2.75:1.00
Thereafter 3.00:1.00
</TABLE>
SECTION 5.4. Store Revenue. Maintain, during each Retail Period
occurring during the fiscal periods set forth below, an average weekly gross
revenue during such Retail Period per Store for all such Stores (whether
operated by the Company or a Franchisee) of not less than the amount set forth
below opposite such fiscal period:
<TABLE>
<CAPTION>
Fiscal Period Covenant Level
------------- --------------
<S> <C>
1996 $20,000
1997 $20,500
1998 $22,000
Thereafter $23,500
</TABLE>
ARTICLE VI
EVENTS OF DEFAULT
-----------------
SECTION 6.1. Events of Default. If any of the following events
("Events of Default") shall occur:
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(1) Any representation or warranty made or deemed made (pursuant to
any Credit Document) by the Company or any Subsidiary in this Agreement or
any other Credit Document or which is contained in any certificate,
document, opinion, or financial or other statement furnished at any time
under or in connection with any Credit Document shall prove, in light of
the circumstances under which it was made, to have been incorrect in any
material respect on or as of the date made or deemed made;
(2) The Company or any Subsidiary shall fail to perform or observe any
term, covenant or agreement contained in Sections 4.3, 4.4, or 4.6 through
4.14 of this Agreement applicable thereto;
(3) The Company or any Subsidiary shall fail to perform or observe any
term, covenant or agreement contained in Sections 4.1, 4.2, 4.5 or 5.1
through 5.4 of this Agreement and such failure shall continue for four (4)
Business Days after the earlier of discovery, notification or final
calculation thereof applicable thereto;
(4) The Company or any Subsidiary shall fail to perform or observe any
other term, covenant, or agreement contained in any Credit Document
applicable thereto (other than those Sections referenced in the foregoing
clauses (2) and (3)) on its part to be performed or observed and such
failure shall continue for fifteen (15) Business Days following notice
thereof from any of the Loan Agent, the Lease Agent or the Required
Creditors;
(5) The Company or any Restricted Subsidiary shall (i) fail to make
any payment of principal, interest, premium, rents or fees with respect to
any indebtedness for borrowed money (including, without limitation, the
Revolving Notes) or any Financial Lease Debt (including, without
limitation, the Master Leases) of the Company or such Restricted Subsidiary
in an amount in excess of $1,000,000, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired (and in the case of
indebtedness for borrowed money, other than the Revolving Notes, or
Financial Lease Debt, other than the Master Leases, the amount which the
Company or any Restricted Subsidiary so fails to pay is in excess of
$1,000,000), or (ii) fail to perform or observe any term, covenant, or
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<PAGE>
condition on its part to be performed or observed under any agreement or
instrument relating to any indebtedness for borrowed money (including,
without limitation, the Revolving Note) or any Financial Lease Debt
(including, without limitation, the Master Leases) of the Company or such
Restricted Subsidiary in an amount in excess of $1,000,000, when required
to be performed or observed, if the effect of such failure to perform or
observe is to accelerate, or to permit the acceleration, after the giving
of notice, of the maturity of such indebtedness, unless such failure to
perform or observe shall be waived by the holder of such indebtedness or
Financial Lease Debt without any material payment or other material
accommodation on the part of the Company or such Restricted Subsidiary; or
any such indebtedness or Financial Lease Debt shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof;
(6) The Company or any of its Significant Subsidiaries (a) shall
generally not, or shall be unable to, or shall admit in writing its
inability to pay its debts as such debts become due; or (b) shall make an
assignment for the benefit of creditors, petition or apply to any tribunal
for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets; or (c) shall commence any proceeding under
any bankruptcy, reorganization, arrangements, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or (d) shall have any such petition or application
filed or any such proceeding commenced against it in which an order for
relief is entered or adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more; or (e) by any act or
omission shall indicate its consent to, approval of, or knowing
acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment of a custodian, receiver, or trustee for all or
any substantial part of its properties; or (f) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged for a
period of sixty (60) days or more;
(7) Any Financed Franchisee shall fail to pay any sum owed to the
Company in connection with indebtedness for borrowed money (including any
interest or premium thereon) in an aggregate amount in excess of two
million dollars ($2,000,000) when due (whether by scheduled maturity,
required prepayment, acceleration,
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<PAGE>
demand, or otherwise) and any applicable grace period shall have expired;
(8) One or more judgments, decrees, or orders for the payment of money
in excess of the greater of 3% of the consolidated net worth of the Company
and its Restricted Subsidiaries at such time or of two million Dollars
($2,000,000) in the aggregate shall be rendered against the Company or any
of its Subsidiaries, and such judgments, decrees, or orders shall continue
unsatisfied and in effect for a period of twenty (20) consecutive days
without being vacated, discharged, satisfied, escrowed, stayed or bonded
pending appeal;
(9) Any of the following events occur or exist with respect to the
Company or any ERISA Affiliate: (a) any Prohibited Transaction involving
any Plan; (b) any Reportable Event with respect to any Plan; (c) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or
the termination of any Plan; (d) any event or circumstance that might
reasonably constitute grounds entitling the PBGC to institute proceedings
under Section 4042 of ERISA for the termination of, or for the appointment
of a trustee to administer, any Plan, or the institution by the PBGC of any
such proceedings; (e) complete or partial withdrawal under Section 4201 or
4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency,
or termination of any Multiemployer Plan; and in each case above, such
event or condition, together with all other events or conditions, if any,
would be reasonably likely in the opinion of either the Loan Agent or the
Lease Agent to subject the Company to any tax, penalty, or other liability
to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed two million Dollars ($2,000,000) and
such event or condition remains unsatisfied after fifteen (15) Business
Days from its initial occurrence or results in a Lien (subject to Liens
permitted under Section 4.1) on Company's assets;
(10) Any Guaranty shall, at any time after its execution and delivery
and for any reason cease to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the respective Guarantor, or the respective Guarantor shall
deny it has any further liability or obligation under or shall fail to
perform its material obligations under such Guaranty (subject to any
applicable grace periods set forth therein);
(11) Any Change of Control; or
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<PAGE>
(12) Any Material Adverse Change.
SECTION 6.2. Effect of Event of Default. If any Event of Default
shall occur, (1) the Loan Agent, the Issuing Lender and the Lenders shall have
all the rights and remedies available to them under the Credit Agreement and the
other Loan Documents subject to the terms of the Intercreditor Agreement and (2)
the Lease Agent, GECC and the Lease Participants shall have all the rights and
remedies available to them under the 1996 Master Lease Agreement and the other
1996 Lease Documents subject to the terms of the Intercreditor Agreement.
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.1. Waivers and Amendments. The provisions of this
Agreement from time to time may be amended, modified or waived in accordance
with the terms of the Intercreditor Agreement.
Upon the effectiveness of any consent, amendment, modification or
waiver under this Agreement, the Loan Agent shall promptly give each Lender and
the Lease Agent shall give each Lease Participant written notice (including a
description) of such consent, amendment, modification or waiver.
SECTION 7.2. Notices, Etc. All notices and other communications
provided for under this Agreement shall be in writing (including telegraphic,
telex or facsimile communication) and mailed or telecommunicated or delivered to
the address of the respective party hereto as set forth on the signature pages
hereto (or, in the case of (1) the Issuing Lender and the Lenders, the address
set forth in the Credit Agreement, and (2) the Lease Participants, the address
set forth in the Participation Agreement); or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section 7.2. All such
notices and communications shall, when mailed or telecommunicated, be effective
upon the earlier of actual receipt or three (3) Business Days after deposited in
the mails, or one (1) Business Day after transmitted by telex and the
appropriate answerback received, transmitted by facsimile or delivered to the
telegraph company, respectively, addressed as aforesaid.
SECTION 7.3. No Waiver; Remedies. No failure on the part of any
party to exercise, and no delay in exercising, any right, power, or remedy under
any Credit Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Credit Documents preclude any other or
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<PAGE>
further exercise thereof or the exercise of any other right. The remedies
provided in the Credit Documents are cumulative and not exclusive of any
remedies provided by law.
SECTION 7.4. Successors and Assigns. (1) This Agreement shall be
binding upon and inure to the benefit of the Company and the Creditors and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights hereunder without the prior written consent of the
Loan Agent and the Lease Agent, all the Lenders and all the Lease Participants
and (2) a Creditor may only assign its rights under this Agreement in connection
with an assignment by such Creditor of its interests under the Credit Documents.
SECTION 7.5. Costs, Expenses, and Taxes. Without duplication of
obligations under other Credit Documents, the Company agrees to pay on demand
all reasonable costs and expenses of the Agents in connection with the
preparation, execution, delivery, filing, recording, and administration of this
Agreement, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Loan Agent and the Lease Agent, and local counsel
who may be retained by said counsel in connection with perfecting security
interests, with respect thereto, and all costs and expenses, if any, of the
Agents and the Creditors in connection with the enforcement of this Agreement.
SECTION 7.6. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York without
regard to its conflict of laws provisions.
SECTION 7.7. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 7.8. Headings. Article and Section headings in this
Agreement are included herein for the convenience of reference only and shall
not constitute a part hereof for any other purpose.
SECTION 7.9. SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE
PARTIES HERETO, AND EACH CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT
DOCUMENTS TO WHICH IT IS A PARTY SHALL BE DEEMED BY THE EXECUTION AND DELIVERY
OF SUCH CREDIT DOCUMENTS TO, (1) (A) WITH RESPECT TO ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS,
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
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<PAGE>
STATE OR FEDERAL COURT SITTING IN NEW YORK CITY, NEW YORK, AND (B) WITH RESPECT
TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY MORTGAGE, SUCH
OTHER STATE COURT OR FEDERAL CIRCUIT COURT SITTING IN OR NEAREST TO THE COUNTY
IN WHICH THE PROPERTY IN QUESTION SUBJECT TO SUCH MORTGAGE IS LOCATED, (2)
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH STATE OR FEDERAL COURT SPECIFIED IN SECTION 7.9(1)
AND (3) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST ANY AGENT,
ANY OTHER PARTY HERETO OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY
OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER
THAN AS HEREINABOVE SPECIFIED IN THIS SECTION 7.9. THE PARTIES HERETO AND EACH
CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT DOCUMENTS TO WHICH IT IS A PARTY
SHALL BE DEEMED BY THE EXECUTION AND DELIVERY OF SUCH CREDIT DOCUMENTS TO,
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION OR
PROCEEDING (WHETHER BROUGHT BY SUCH PARTY OR OTHERWISE) IN ANY COURT HEREINABOVE
SPECIFIED IN THIS SECTION 7.9 AS WELL AS ANY RIGHT THEY MAY NOW OR HEREAFTER
HAVE, TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT
ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. THE PARTIES HERETO AND EACH
CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT DOCUMENTS TO WHICH IT IS A PARTY
SHALL BE DEEMED BY THE EXECUTION AND DELIVERY OF SUCH CREDIT DOCUMENTS TO, AGREE
THAT A FINAL, NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 7.10. General Indemnity. In addition to the payment of
expenses pursuant to Section 7.5 and without duplication of obligations under
the Credit Documents, Company agrees to indemnify, pay and hold the Loan Agent,
the Lease Agent and the officers, directors, employees, agents, and affiliates
of the Loan Agent and the Lease Agent, (collectively, the "Indemnitees"),
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for any of such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not any of such Indemnitees shall be
designated a party thereto) that may be imposed on, incurred by, or asserted
against any Indemnitee, in any manner relating to or arising out of this
Agreement or any other agreements executed and delivered by the Company in
connection herewith (the "indemnified liabilities"); provided, that Company
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee or from any action by an Indemnitee against an officer, director or
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employee of an Indemnitee. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in the preceding sentence may be unenforceable
because it violates any law or public policy, the Company shall contribute the
maximum portion that it is permitted to pay under applicable law to the payment
and satisfaction of all indemnified liabilities incurred by the Indemnitees or
any of them. The provisions of the undertakings and indemnification set out in
this Section 7.10 shall survive satisfaction and payment of the Company's
obligations hereunder and termination of this Agreement.
SECTION 7.11. WAIVER OF JURY TRIAL. THE PARTIES HERETO, AND EACH
CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT DOCUMENTS TO WHICH IT IS A PARTY
SHALL BE DEEMED BY THE EXECUTION AND DELIVERY OF SUCH CREDIT DOCUMENTS TO,
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREE THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY;
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS ENTERING INTO THIS
AGREEMENT.
SECTION 7.12. SERVICE OF PROCESS. THE PARTIES HERETO, AND EACH
CREDITOR BY ENTERING INTO THE RESPECTIVE CREDIT DOCUMENTS TO WHICH IT IS A PARTY
SHALL BE DEEMED BY THE EXECUTION AND DELIVERY OF SUCH CREDIT DOCUMENTS TO,
HEREBY IRREVOCABLY CONSENT TO SERVICE OF PROCESS BY MEANS OF CERTIFIED MAIL AT
THE ADDRESS PROVIDED FOR IN SECTION 7.2. NOTHING IN THIS AGREEMENT WILL AFFECT
THE RIGHT OF THE AGENTS OR THE COMPANY TO SERVE SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BOSTON CHICKEN, INC.
By: /s/ BERNADETTE M. DENNEHY
-----------------------------------
Name: Bernadette M. Dennehy
Title: Vice President
14123 Denver West Parkway
P.O. Box 4086
Golden, CO 80401-4086
Attn: Bernadette M. Dennehy
Telephone: (303) 278-9500
BANK OF AMERICA ILLINOIS, as Loan Agent
By: /s/ DAVID A. JOHANSON
-----------------------------------
Name: David A. Johanson
Title: Vice President
231 South LaSalle Street
Chicago, IL 60697
Attn: David A. Johanson
Telephone: (312) 828-3782
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lease Agent
By: /s/ DAVID AVIGDOR
-----------------------------------
Name: David Avigdor
Title: Syndication Senior Manager
777 Long Ridge Road, Bldg. A, 3rd Floor
Stamford, Connecticut 06927
Attn: David Avigdor
Telephone: (203) 316-7702
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EXHIBIT A
---------
Form of Guaranty
----------------
FOR VALUE RECEIVED and in consideration of any financial accommodations
heretofore or hereafter at any time made or granted to Boston Chicken, Inc., a
Delaware corporation (hereinafter called the "Company"), [by the financial
institutions who are or may become party to that certain Secured Revolving
Credit Agreement, dated as of December __, 1996 (as the same may at any time be
amended, modified or supplemented from time to time, the "Credit Agreement";
capitalized terms used herein and not otherwise defined herein have the
respective meanings assigned thereto in the Facilities Agreement referenced in
the Credit Agreement), among the Company, the lenders party thereto, Bank of
America Illinois, as letter of credit issuer (collectively with such lenders,
the "Creditors"), Bankers Trust Company, as documentary agent, and Bank of
America Illinois, as agent for the Creditors (in such capacity, the "Agent")]
[by financial institutions in connection with that certain Master Lease
Agreement No. 2, dated as of December __, 1996 (as the same may at any time be
amended, modified or supplemented from time to time, the "1996 Master Lease
Agreement"; capitalized terms used herein and not otherwise defined herein have
the respective meanings assigned thereto in the Facilities Agreement referenced
in the 1996 Master Lease Agreement), between the Company and General Electric
Capital Corporation, for itself and as agent for certain financial institutions
which may from time to time acquire participating interest therein (in its
individual capacity, "GECC"; collectively with such financial institutions the
"Creditors"; and in its capacity as agent for the Creditors, the "Agent")]/1/,
the undersigned hereby unconditionally guarantees the full and prompt payment
when due, whether at stated maturity, by required prepayment, declaration,
demand, acceleration or otherwise (including amounts that would become due but
for the operation of the automatic stay under section 362(a) of the Bankruptcy
Code (11 U.S.C.(S) 362(a)), and at all times thereafter, of all obligations of
the Company to the Creditors which arise out of or in connection with the
[Credit Agreement] [1996 Master Lease Agreement]/2/ howsoever created, arising
or evidenced, whether direct or indirect, joint or several, absolute or
contingent, or now or hereafter existing, or due or to become due (all such
obligations being hereinafter collectively called the "Liabilities"), and the
undersigned further agrees to pay all reasonable expenses (including Attorney
Costs) paid or incurred by the Agent or the Creditors in endeavoring to collect
the Liabilities, or any part thereof, and in enforcing this guaranty.
- -----------------
/1/ Select appropriate clause.
/2/ Select appropriate agreement.
1
<PAGE>
1. The undersigned agrees that, in the event of the dissolution or
insolvency of the Company, the undersigned or any Significant Subsidiary, or the
general failure to pay, or admission in writing of the inability of the Company,
the undersigned or any Significant Subsidiary to pay debts as they become due,
or an assignment by the Company, the undersigned or any Significant Subsidiary
for the benefit of creditors, or the institution of any proceeding by or against
the Company, the undersigned or any Significant Subsidiary alleging that the
Company, the undersigned or such Significant Subsidiary is insolvent or unable
to pay debts as they mature, and if such event shall occur at a time when any of
the Liabilities may not then be due and payable, the undersigned will pay to the
Agent for the benefit of the Creditors forthwith the full amount which would be
payable hereunder by the undersigned if all Liabilities were then due and
payable.
2. To secure all obligations of the undersigned hereunder, the Agent for
the benefit of the Creditors shall have a lien upon and security interest in
(and may during the continuance of any [Event of Default (such term is used
herein as defined in the Credit Agreement)] [Default (such term is used herein
as defined in the 1996 Master Lease Agreement)]/3/, without demand or notice of
any kind, at any time and from time to time when any amount shall be due and
payable by the undersigned hereunder, appropriate and apply toward the payment
of such amount, in such order of application as the Agent may elect, subject to
the terms of the Intercreditor Agreement) any and all balances, credits,
deposits, accounts or moneys of or in the name of the undersigned now or
hereafter maintained with the Agent or any Creditor and any and all property of
every kind or description of or in the name of the undersigned now or hereafter,
for any reason or purpose whatsoever, in the possession or control of, or in
transit to, the Agent or any Creditor or any agent or bailee for the Agent or
any Creditor.
3. This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the dissolution of the undersigned) until
all of the Liabilities have been paid in full, subject to discontinuance as to
the undersigned only upon actual receipt by the Agent of written notice from the
undersigned, or any person duly authorized and acting on behalf of the
undersigned, of the discontinuance hereof as to the undersigned; provided, that
no such notice of discontinuance shall affect or impair any of the agreements
and obligations of the undersigned hereunder with respect to any and all
Liabilities existing prior to the time of actual receipt of such notice by the
Agent, any and all Liabilities created or acquired thereafter pursuant to any
previous commitments made by
- -------------------
/3/ Select appropriate reference.
2
<PAGE>
the Creditors, any and all extensions or renewals of any of the foregoing, any
and all interest on any of the foregoing, and any and all expenses paid or
incurred by the Agent or any Creditor in endeavoring to collect any of the
foregoing and in enforcing this guaranty against the undersigned; and all of the
agreements and obligations of the undersigned under this guaranty shall,
notwithstanding any such notice of discontinuance, remain fully in effect until
all such Liabilities (including any extensions or renewals of any thereof) and
all such interest and expenses shall have been paid in full.
4. The undersigned further agrees that, if at any time all or any part of
any payment theretofore applied by the Agent or any Creditor to any of the
Liabilities is or must be rescinded or returned by the Agent or any of the
Creditors for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Company), such Liabilities
shall, for the purposes of this guaranty, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by the Agent or any Creditor, and this guaranty
shall continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Agent or such Creditor had
not been made.
5. The Agent or Creditor may, from time to time, whether before or after
any discontinuance of this guaranty, at its sole discretion and without notice
to the undersigned, take any or all of the following actions: (a) retain or
obtain a security interest in any property to secure any of the Liabilities or
any obligation hereunder, (b) retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to the undersigned, (c)
extend or renew for one or more periods (whether or not longer than the original
period), or alter or exchange, any of the Liabilities, or release or compromise
any obligation of the undersigned hereunder with respect to any of the
Liabilities, (d) release its security interest in, or surrender, release or
permit any substitution or exchange for, all or any part of any property
securing any of the Liabilities or any obligation hereunder, and (e) during the
continuance of any Event of Default resort to the undersigned for payment of any
of the Liabilities, whether or not the Agent or Creditor (i) shall have resorted
to any property securing any of the Liabilities or any obligation hereunder or
(ii) shall have proceeded against any other obligor primarily or secondarily
obligated with respect to any of the Liabilities (all of the actions referred to
in preceding clauses (i) and (ii), and any and all other surety defenses of the
undersigned, being hereby expressly waived by the undersigned).
6. Any amounts received by the Agent from whatsoever source on account of
the Liabilities may be applied by it toward the payment of such of the
Liabilities, and in such order of
3
<PAGE>
application, as the Agent may from time to time elect, subject to the terms of
the Intercreditor Agreement.
7. No payment made by or for the account of the undersigned pursuant to
this guaranty shall entitle the undersigned by subrogation or otherwise to any
payment by the Company or from or out of any property of the Company and the
undersigned shall not exercise any right or remedy against the Company or any
property of the Company by reason of any performance by the undersigned of this
guaranty. The undersigned waives, to the fullest extent permitted by law, all
rights of the undersigned against the Company, arising out of any payment by the
undersigned under this guaranty, whether arising by way of any subrogation,
contribution, reimbursement or otherwise and agrees that, to the extent that any
such rights may not be waived under applicable law, it will contribute such
rights to the Company as a capital contribution concurrently with the arising of
such rights.
8. The undersigned hereby expressly waives: (a) notice of the acceptance
by the Agent of this guaranty, (b) notice of the existence or creation or non-
payment of all or any of the Liabilities, (c) presentment, demand, notice of
dishonor, protest and all other notices whatsoever, and (d) all diligence in
collection or protection of or realization upon the Liabilities or any thereof,
any obligation hereunder, or any security for or guaranty of any of the
foregoing.
9. The Creditors may, from time to time, without notice to the
undersigned, assign or transfer any or all of the Liabilities or any interest
therein subject to [Section 10.5 of the Credit Agreement] [Section 16 of that
certain Participation Agreement dated as of December __, 1996, among GECC and
such other Creditors]/4/; and, notwithstanding any such assignment or transfer
or any subsequent assignment or transfer thereof, such Liabilities shall be and
remain Liabilities for the purposes of this guaranty, and each and every
immediate and successive assignee or transferee of any of the Liabilities or of
any interest therein shall, to the extent of the interest of such assignee or
transferee in the Liabilities, be entitled to the benefits of this guaranty to
the same extent as if such assignee or transferee were a Creditor.
10. The undersigned hereby warrants to the Agent and the Creditors that
the undersigned now has and will continue to have independent means of obtaining
information concerning the affairs, financial condition and business of the
Company. The Agent and the Creditors shall not have any duty or responsibility
- --------------------
/4/ Select appropriate reference.
4
<PAGE>
to provide the undersigned with any credit or other information concerning the
affairs, financial condition or business of the Company which may come into the
Agent's or the Creditors' possession.
11. The undersigned hereby warrants and agrees that: (a) the undersigned
is a [corporation][partnership] duly existing and in good standing under the
laws of ________ and the undersigned is duly qualified and in good standing and
authorized to do business in each jurisdiction where, because of the nature of
its activities or properties, such qualification is required, (b) the
undersigned has full power and authority to execute and deliver this guaranty,
(c) the execution, delivery and performance by the undersigned of this guaranty
are within the undersigned's powers, have been duly authorized by all necessary
action, have received all necessary governmental approval (if any shall be
required), and do not and will not contravene or conflict with any provision of
law or of the organizational documents of the undersigned or of any agreement
binding upon the undersigned, (d) this guaranty is the legal, valid and binding
obligation of the undersigned enforceable against the undersigned in accordance
with its terms, except as enforceability may be limited by bankruptcy or other
laws relating to or affecting creditors' rights generally or by equitable
principles, and (e) this guaranty will directly or indirectly benefit the
undersigned.
12. No delay on the part of the Agent or the Creditors in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Agent or the Creditors of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy;
nor shall any modification or waiver of any of the provisions of this guaranty
be binding upon the Agent or the Creditors except as expressly set forth in a
writing duly signed and delivered on behalf of the Agent for the benefit of the
Creditors. No action of the Agent or the Creditors permitted hereunder shall in
any way affect or impair the rights of the Agent or the Creditors and the
obligations of the undersigned under this guaranty. For the purposes of this
guaranty, Liabilities shall include all obligations of the Company to the Agent
and the Creditors, notwithstanding any right or power of the Company or anyone
else to assert any claim or defense as to the invalidity or unenforceability of
any such obligation, and no such claim or defense shall affect or impair the
obligations of the undersigned hereunder. The obligations of the undersigned
under this guaranty shall be absolute and unconditional irrespective of any
circumstance whatsoever which might constitute a legal or equitable discharge or
defense of the undersigned. The undersigned hereby acknowledges that there are
no conditions to the effectiveness of this guaranty.
13. This guaranty shall be binding upon the undersigned, and upon any
successors and assigns of the undersigned.
14. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
5
<PAGE>
GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW. WHEREVER POSSIBLE EACH
PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS GUARANTY
SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
GUARANTY.
15. The undersigned hereby irrevocably agrees that any legal action or
proceeding pertaining to this guaranty may be brought in the courts of the State
of New York or any Federal Court sitting in New York City, New York. The
undersigned hereby irrevocably agrees that service of process in such action or
proceeding may be made either by mailing, by registered or certified mail,
postage prepaid, a copy of the summons or complaint, or other legal process in
such action or proceeding to the undersigned at the address shown on the
signature page hereof. Service of process in any such action or proceeding,
effected as aforesaid, shall be effective upon receipt by the undersigned and
shall be deemed personal service upon the undersigned and shall be legal and
binding upon the undersigned for all purposes. The undersigned hereby waives,
to the fullest extent permitted by law, any objection it may now or hereafter
have to the laying of venue in any such action or proceeding in any such court
as well as any right it may now or hereafter have to remove any such action or
proceeding, once commenced, to another court on the grounds of forum non
conveniens or otherwise.
16. THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS
GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (B) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
17. The undersigned hereby confirms that it is its intention that this
Guaranty not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar Federal or
state law. To effectuate the foregoing intention, the undersigned hereby
irrevocably agrees that the secured liabilities guaranteed by the undersigned
shall be limited to such amount as will, after giving effect to such maximum
amount and all other (contingent and otherwise) liabilities of the undersigned
that are relevant under such laws, result in the liabilities of the undersigned
in respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
SIGNED AND DELIVERED this ____ day of _______, 199_.
[GUARANTOR]
By:_____________________________________
Title:__________________________________
Address: _____________________________
_____________________________
6
<PAGE>
Exhibit 4.18
This Warrant has not been registered under the Securities
Act of 1933, as amended (the "Securities Act") or under any
applicable state securities law, and in the absence of such
registration may not be sold or transferred unless the
issuer of this Warrant has received an opinion of its
counsel, or of counsel reasonably satisfactory to it, that
the proposed sale or transfer will not violate the
registration requirements of the Securities Act or any
applicable state securities law
BOSTON CHICKEN, INC.
WARRANT CERTIFICATE TO PURCHASE
SHARES OF COMMON STOCK
----------------------
Date of Issuance: December 12, 1996 Certificate W-GE-1
FOR VALUE RECEIVED, Boston Chicken, Inc., a Delaware corporation (the
"Company"), hereby grants to General Electric Capital Corporation (the
"Registered Holder") the right to purchase from the Company 69,600 shares of the
Company's Common Stock, $.01 par value, at a price per share of $37.75 (as
adjusted from time to time in accordance herewith, the "Exercise Price").
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Registered Holder may exercise, in whole or in
part, the purchase rights represented by this Warrant at any time and from time
to time during the period commencing on Date of Issuance of this Warrant set
forth above and ending on the fifth annual anniversary of the Date of Issuance
(the "Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the person exercising all or part of the purchase rights
represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) cash (payable by wire transfer of same day funds or a certified
or bank cashier's check) in an amount equal to the product of the Exercise
Price
<PAGE>
multiplied by the number of shares of Company Common Stock being
purchased upon such exercise (the "Aggregate Exercise Price").
(ii) Certificates for shares of Common Stock, if any, purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser as
soon as reasonably practicable after the Exercise Time. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, as soon as reasonably practicable, deliver
such new Warrant to the person designated for delivery in the Exercise
Agreement.
(iii) The shares of Common Stock issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
record holder of such shares of Common Stock at the Exercise Time irrespective
of the date of delivery of certificates for shares of Common Stock.
(iv) The issuance of certificates for shares of Common Stock, if
any, upon exercise of this Warrant shall be made without charge to the
Registered Holder or the Purchaser for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock (other than the Aggregate Exercise
Price). Each share of Common Stock issuable upon exercise of this Warrant shall,
when issued, be duly and validly issued and free from all taxes, liens and
charges.
(v) The Company shall reasonably assist and cooperate with the
Registered Holder or Purchaser required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant (including, without limitation, making any reasonable filings
required to be made by the Company), provided, however, that the Company will
not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subparagraph
(v), (B) subject itself to taxation in any such jurisdiction, (C) consent to
general service of process in any such jurisdiction, or (D) incur costs or fees
which are inordinate to the value of the securities sought to be sold in such
jurisdiction.
(vi) The Company shall at all times reserve and keep available out
of its authorized but unissued Common Stock solely for the purpose of issuance
upon the exercise of this Warrant the maximum number of shares issuable upon the
exercise of this Warrant. All shares which are so issuable shall, when issued in
accordance herewith upon the payment of the Exercise Price, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Company shall take all such actions as may be reasonably necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock of the Company or their
equivalents may be listed (except for official notice of issuance which shall be
immediately delivered by the Company upon such issuance).
<PAGE>
(vii) Notwithstanding any other provision hereof, if an exercise of
any portion of this Warrant is to be made in connection with a registered public
offering of the Company or any event described in Section 2B hereof, the
exercise of any portion of this Warrant may, at the election of the Registered
Holder hereof, be conditioned upon the consummation of the public offering or
the event described in Section 2B, in which case such exercise shall not be
deemed to be effective until the consummation of such transaction.
(viii) Unless the shares of Common Stock to be issued upon exercise of
this Warrant have been registered under the Securities Act of 1933, as amended,
the certificates for such shares shall contain the following legends:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Securities Act"), or under any
applicable state securities law, and may not be resold or transferred unless
registered under the Securities Act or unless the Company has received an
opinion of its counsel, or of counsel reasonably satisfactory to it, that the
proposed transfer will not violate the registration requirements of the
Securities Act or any applicable state securities law."
1C. Exercise Agreement. Upon any exercise of this Warrant, the Exercise
Agreement shall be substantially in the form set forth in Exhibit I hereto,
except that if the shares of Common Stock are not to be issued in the name of
the person in whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the person to whom the shares of Common Stock are
to be issued. Such Exercise Agreement shall be dated the actual date of
execution thereof.
Section 2. Adjustment of Exercise Price and Number of Shares. The
Exercise Price and the number of shares of Common Stock (or other securities)
obtainable upon exercise of this Warrant shall be subject to adjustment from
time to time as provided in this Section 2.
2A. Subdivision or Combination of Shares of Common Stock. If the Company
at any time subdivides (by any split, dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant shall be proportionately
increased. If the Company at any time combines (by reverse split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be proportionately
decreased.
2B. Reorganization, Reclassification, Consolidation or Merger. The shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted as
follows: (a) in the event of any merger, consolidation or reorganization of the
Company with any other corporation or corporations, there shall be substituted,
on an equitable basis, for each such share of Common Stock the number and kind
of shares of stock or other securities to which the holders of each share of
Common Stock of the Company will be entitled pursuant to the transaction; and
(b) in the event of any other substantially similar change in the capitalization
of the Company (other than
<PAGE>
cash dividends in the ordinary course of business), an equitable adjustment
shall be provided in the number of shares of Common Stock. In the event of any
such adjustment the purchase price per share shall be proportionately adjusted.
2C. Notice of Adjustment. Promptly upon any adjustment of the
Exercise Price or the number of shares of Common Stock issuable upon exercise of
this Warrant, the Company shall give written notice thereof to the Registered
Holder, setting forth in reasonable detail and certifying the calculation of
such adjustment.
2D Other Notices. The Company shall give the Registered Holder
prompt prior notice of all record dates relating to the Common Stock.
Section 3. No Voting Rights; Limitations of Liability. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a holder
of shares of Common Stock in the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Registered Holder
shall give rise to any liability of such holder for the Exercise Price of Shares
of Common Stock acquirable by exercise hereof or as a holder of shares of Common
Stock in the Company.
Section 4. Transferability. Except as provided in this Section 4, this
Warrant and all rights hereunder are not transferable without the prior written
consent of the Company in its sole discretion. The restrictions on transfer of
this Warrant shall continue during the entire term of this Warrant. Subject to
the transfer conditions referred to in the legend endorsed hereon and the
provisions of this Section 4, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant with properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal office
of the Company; provided that no transfer of all or any part of this Warrant may
be made if such transfer would cause the aggregate number of holders of warrants
derived from this Warrant or this series of substantially identical warrants
issued on or after December 12, 1996 to the Registered Holder (the "Warrant
Series") to be held by more than seven persons; and provided, further, each such
transferee must be an "accredited investor" within the meaning of Regulation D
of the Securities Act. The Company shall not impose any fee or charge for such
transfer. No such transferee receiving this Warrant or any warrant derived
herefrom or in this Warrant Series may transfer such warrant or any of its
rights without the prior written consent of the Company in its sole discretion.
Shares issued pursuant to this Warrant or any warrant derived herefrom or any
warrant in the Warrant Series shall be subject to the same transfer restrictions
as set forth herein for this Warrant, provided that the restrictions on
transferability of shares issuable upon exercise of any such warrant shall only
apply until (i) such securities shall have been registered under the Securities
Act of 1933, as amended (the "Securities Act") and disposed of in accordance
with a registration statement covering such securities, or (ii) such time as, in
the reasonable opinion of counsel for the Company, or upon the written opinion
of counsel for the holder thereof reasonably acceptable to the Company, such
restrictions are not required in order to comply with the Securities Act of
1933. Whenever such restrictions shall terminate as to any shares issued upon
exercise of any such warrant, the holder thereof shall be entitled to receive
from the Company, without expense, new certificates of like tenor not bearing
the restrictive legends required hereby.
<PAGE>
Section 5. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
Section 6. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing this Warrant, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Company, or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 7. Notices. Except as otherwise expressly provided herein, all
notices referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid), sent
by fax or sent by registered or certified mail, return receipt requested,
postage prepaid, as follows: (i) if given to the Company, at its principal
executive offices and (ii) if given to the Registered Holder of this Warrant, at
such holder's address as it appears in the records of the Company. Each such
notice shall be deemed to have been given upon the earlier of the receipt of
such notice by the intended recipient thereof, two business days after it is
sent by reliable overnight courier or sent by fax, or five business days after
it is mailed by registered or certified mail, return receipt requested.
Section 8. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Registered
Holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants; provided that no such action may
change the Exercise Price of the Warrants or the number or class of shares of
Common Stock obtainable upon exercise of each Warrant without the written
consent of all of the Registered Holders of Warrants.
Section 9. Descriptive Headings; Governing Law. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and the Registered Holder of this Warrant.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
-------------------------------------
Name:
Its:
[Corporate Seal]
Attest:
/s/Bernadette Dennehy
- ---------------------------------
Asst. Secretary
<PAGE>
EXHIBIT I
---------
EXERCISE AGREEMENT
------------------
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-___________), hereby agrees to purchase __________
shares of Common Stock covered by such Warrant and makes payment herewith in
full therefor at the price per share provided by such Warrant.
Signature
--------------------------------
Address
--------------------------------
<PAGE>
EXHIBIT II
----------
ASSIGNMENT
----------
FOR VALUE RECEIVED, ______________________________ hereby sells, assigns
and transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-________________) with respect to the number of the shares
covered thereby set forth below, unto:
Name of Assignee: ----------------------------------
----------------------------------
----------------------------------
Address: ----------------------------------
----------------------------------
----------------------------------
No. of Shares ----------------------------------
Accompanying this Assignment is a certificate from the proposed transferee
certifying that such assignment and Assignee meet the requirements of Section 4
of the Warrant.
Dated: Signature:
---------------------- ----------------------------
----------------------------
Witness:
----------------------------
<PAGE>
Exhibit 4.19
REGISTRATION RIGHTS AGREEMENT
This registration rights agreement (the "Agreement") is entered into
as of this 12th day of December, 1996, between Boston Chicken, Inc., a Delaware
corporation ("BCI"), and General Electric Capital Corporation, a New York
corporation ("GECC").
SECTION 1. DEMAND REGISTRATION.
(a) Registrable Securities. "Registrable Securities" shall mean those
restricted shares of BCI common stock, $.01 par value, acquired by GECC pursuant
to that (i) warrant certificate issued to GECC of even date herewith (the
"Warrant"), (ii) any warrants derived from such Warrant or, (iii) any warrant in
the Warrant Series (as defined in the Warrant).
(b) Request for Registration. At any time after June 30, 1997, the
holders of at least 51% 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-2 or S-3 or any similar short-
form registration then available to BCI (the "Demand Registration"). The request
for a Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered. Within ten days after receipt of any such
request, BCI shall give written notice of such requested registration to all
other holders of Registrable Securities and shall include in such registration
all Registrable Securities with respect to which BCI has received written
requests for inclusion therein within 15 days after the date of BCI's notice.
(c) Registration. The holders of Registrable Securities shall be
entitled to request one Demand Registration. A registration shall not count as
the permitted Demand Registration until it has become effective (unless such
Demand Registration has not become effective due solely to the fault of the
holders proposed to be included in such registration); provided that a Demand
Registration shall not count as the permitted Demand Registration unless (i) the
holders of Registrable Securities are able to register at least 90% of the
Registrable Securities requested to be included in such registration and (ii)
BCI shall have maintained the effectiveness of such registration for a period of
at least 90 days (or such shorter period as may be required until the sale of
the Registrable Securities so registered); provided, further, that, in any event
BCI shall pay all Registration Expenses as set forth in Section 5 hereof 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
the permitted Demand Registration (unless such Demand Registration does not
become effective due solely to the fault of the holders proposed to be included
in such registration).
(d) Other Securities. BCI shall include in the Demand Registration all
BCI securities ("Earlier Securities") desired to be registered by persons or
entities having superior registration rights pursuant to (i) that certain Second
Amended and Restated Piggyback Registration Rights Agreement dated November 8,
1993 (the "1993 Agreement"), in accordance with the terms and conditions of the
1993 Agreement, and (ii) that certain
<PAGE>
Registration Rights Agreement dated September 27, 1996 (the "1996 Agreement,"
and together with the 1993 Agreement, the "Superior Agreements"), in accordance
with the terms and conditions of the 1996 Agreement.
(e) Restrictions on Registration. Notwithstanding anything herein to
the contrary, BCI shall not be obligated to effect the Demand Registration
within 180 days after the effective date of a previous registration statement 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. BCI may postpone for up to 180 days the
filing or the effectiveness of a registration statement for the Demand
Registration if BCI determines in its reasonable good faith judgment that the
Demand Registration would reasonably be expected to have an adverse effect on
BCI or its subsidiaries or on any proposal or plan by BCI 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 the permitted Demand Registration hereunder and
BCI shall pay all Registration Expenses in connection with such abandoned
registration.
SECTION 2. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. Commencing on the date on which the holders of
Registrable Securities are first entitled to request the Demand Registration
pursuant to paragraph 1(b) above, whenever BCI proposes to register any of
shares of its Common Stock (other than shares of Common Stock underlying any
option, warrant, or convertible debt or other security) under the Securities Act
(other than pursuant to the Demand Registration) in either an underwritten
public offering or in connection with registration of Common Stock for resale on
the public markets and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), BCI shall
give prompt written notice (in any event within five business days after its
receipt of notice of any exercise of demand registration rights other than under
this Agreement) to the holders of Registrable Securities of its intention to
effect such a registration and, subject to the provisions hereof, shall include
in such registration all Registrable Securities with respect to which BCI has
received written requests for inclusion therein within 15 days after the date of
its notice. Notwithstanding anything herein to the contrary, BCI shall not be
required to effect any registration of Registrable Securities under this
paragraph 2: (i) 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 under the Securities Act
or any similar rule that may be adopted by the SEC, or (ii) if the Piggyback
Registration is a primary registration on behalf of BCI (whether or not
underwritten) and BCI determines in its reasonable judgment that including any
Registrable Securities in such registration will adversely effect such primary
registration or BCI's objectives in connection therewith.
<PAGE>
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by BCI in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of BCI, and the managing
underwriters advise BCI 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 BCI, BCI will include in such registration (i) first, the
securities BCI proposes to sell, (ii) second, other securities requested to be
included in such registration pursuant to registration rights under the Superior
Agreements, (iii) third, the Registrable Securities requested to be included in
such registration, pro rata among the holders of Registrable Securities
requesting registration on the basis of the Registrable Securities owned by each
such holder, and (iv) fourth, 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 BCI's
securities, and the managing underwriters advise BCI 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, BCI shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration,
(ii) second, other securities requested to be included in such registration
pursuant to registration rights under the Superior Agreements, (iii) third, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of Registrable Securities requesting registration on the basis
of the Registrable Securities owned by each such holder, and (iv) fourth, other
securities requested to be included in such registration.
SECTION 3. HOLDBACK AGREEMENT.
No holder of Registrable Securities shall effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of BCI,
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 an 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.
SECTION 4. REGISTRATION PROCEDURES.
(a) Whenever the holders of Registrable Securities have properly
requested that any Registrable Securities be registered pursuant to this
Agreement, BCI shall, subject to the provisions hereof, use its reasonable best
efforts to effect the registration and the sale of
<PAGE>
such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto BCI shall as expeditiously as
reasonably practicable:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement and include therein the
Registrable Securities and such Earlier Securities as comply with the
procedures of the Superior Agreements, prepare and file all
amendments, post-effective amendments and supplements to such
registration statement as may be necessary under the Act and the
regulations thereunder to permit the sale of such Earlier Securities
and Registrable Securities to the public, and use its reasonable best
efforts to cause such registration statement to become effective and
remain effective for a period of not less than one year or until such
earlier time as all of the securities covered by such registration
statement have been sold (provided that before filing such
registration statement, BCI will furnish to counsel selected by the
holders of Registrable Securities, if any, copies of the registration
statement for review by such counsel);
(ii) use its reasonable best efforts to (a) register or qualify
such Earlier Securities and Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any of the
sellers of such Earlier Securities and Registrable Securities
(collectively, the "Sellers" and individually, a "Seller") reasonably
request, and (b) do any and all other acts and things which may be
reasonably necessary to allow Sellers to consummate the disposition in
such jurisdictions of such Earlier Securities and Registrable
Securities owned by such Sellers; provided, however, that BCI will not
be required to (w) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this subparagraph (ii), (x) subject itself to taxation in any such
jurisdiction, (y) consent to general service of process in any such
jurisdiction, or (z) incur costs or fees which are inordinate to the
value of the securities sought to be sold in such jurisdiction;
(iii) use its reasonable efforts to cause all such Earlier
Securities and Registrable Securities to be included for quotation on
the Nasdaq National Market;
(iv) furnish to each Seller 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 each Seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Seller;
<PAGE>
(v) notify each Seller, 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 such Seller, 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, in light of the
circumstances in which they were made, not misleading; and
(vi) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the
registration statement.
(b) BCI hereby represents and warrants that it is eligible to file a
registration statement on Form S-3 pursuant to the rules and regulations
pertaining thereto under the Securities Act.
(c) Upon the request of BCI, each Seller will promptly furnish to BCI
in writing, during the period within which BCI is required to effect such
registration, all information and affidavits as may be reasonably requested by
BCI in connection with items required to be included in the registration
statement, or any amendment or supplement thereto. To the extent BCI reasonably
requests such information and affidavits and such Seller does not provide such
information or affidavits in a timely manner, then, BCI's obligation to register
such Seller's Registrable Securities hereunder shall be null and void.
SECTION 5. REGISTRATION EXPENSES.
The Sellers will bear all underwriting discounts and commissions, if
any, and the fees and disbursements of their legal counsel, accountants, and
personnel and agents in connection with the sale of Registrable Securities under
this Agreement. BCI will bear all other reasonable expenses in connection with
any registration or qualification of the Registrable Securities pursuant to this
Agreement.
SECTION 6. INDEMNIFICATION.
(a) BCI agrees to indemnify, to the extent permitted by law, each
Seller, and each person, if any, who controls such Seller within the meaning of
the Act, against any and all losses, claims, damages or liabilities to which
such Seller may become subject under the Act or any other statute or common law
by reason of its offer and sale of Registrable Securities pursuant to the
registration statement, and to reimburse such Seller for any reasonable legal or
other expenses actually and reasonably incurred in connection
<PAGE>
with investigating any claims and defending any actions, insofar as such losses,
claims, damages, 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 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 prospectus (as amended or supplemented if BCI shall
have filed with the Commission any amendment or supplement thereto),
if used within the period during which BCI is required to keep the
registration statement in which such prospectus is contained current
pursuant to the terms of this Agreement, 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 indemnification agreement contained herein shall not
apply to losses, claims, damages, 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 furnished to BCI by or on behalf of the Sellers for use in
connection with the preparation of the registration statement or any prospectus
contained in the registration statement or any such amendment or supplement
thereto.
(b) The Sellers shall (in the same manner and to the same extent as
set forth in Section 6(a)), severally indemnify, to the extent permitted by law,
BCI, each person, if any, who controls BCI within the meaning of the Act, and
their directors and officers, if such statement or omission was made in reliance
upon and in conformity with information furnished to BCI by or on behalf of any
Seller for use in connection with the preparation of the registration statement
or any amendment or supplement thereto; provided, however, that each Seller's
obligations hereunder shall be limited to an amount equal to the proceeds to
such Seller of the Registrable Securities sold pursuant to such Registration
Statement.
(c) Any person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided, however, that any failure by a person
entitled to indemnification hereunder to give such prompt written notice shall
not adversely affect such person's rights hereunder unless such failure
prejudices the rights of the indemnifying party hereunder) 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
<PAGE>
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 will 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 such counsel a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
SECTION 7. REGISTRATION RIGHTS OF OTHER SECURITY HOLDERS. The
registration rights granted pursuant to this Agreement are granted subject to
any and all registration rights granted by BCI to holders of its securities
prior to the date hereof, and no provision herein shall be interpreted so as to
be superior to, inconsistent with, or adversely effect, any such previously
granted registration rights.
SECTION 8. MISCELLANEOUS.
(a) Amendments. The provisions of this Agreement may be amended only
upon the written consent of BCI and GECC, or, in the event there is more than
one holder of Registrable Securities, only upon the written consent of BCI and
the holders of a majority of the Registrable Securities.
(b) Assignment. This Agreement is binding upon the parties hereto and
their respective successors and assigns. GECC may not assign its rights
hereunder without the prior written consent of BCI in its sole discretion,
provided that GECC may transfer rights hereunder to any transferee to which
transfer is made under and in accordance with the Warrant or any such transferee
to which transfer is made under and in accordance with any warrant derived from
the Warrant or in the Warrant Series (as defined in the Warrant). Such
transferee may not further transfer any rights hereunder without the prior
written consent of BCI in its sole discretion. Transfer of the Registrable
Securities shall not, in itself, be deemed an assignment of rights hereunder.
(c) Counterparts. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken together
will constitute one and the same agreement.
(d) Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands and other communications
shall be deemed delivered upon the earlier of actual receipt or two business
days after being so duly sent.
<PAGE>
To BCI:
Boston Chicken, Inc.
14123 Denver West Parkway
Golden, Colorado 80401-4086
Attn: General Counsel
Facsimile: (303) 384-5339
To GECC:
General Electric Capital Corporation
4 Northpark Drive, Suite 500
Hunt Valley, Maryland 21030
Attn: Region Counsel
Facsimile: (410) 229-5979
To any other holder of Registrable Securities:
At such address as such holder notifies BCI from time to time.
(e) Termination. This Agreement shall automatically terminate for any
Registrable Shares at such time as (1) such Registrable Shares are publicly
traded or (2) such Registrable Shares may be publicly traded without
registration under the Securities Act or applicable state securities law.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement on the day and year first above written.
BOSTON CHICKEN, INC.
By: /s/ Bernadette Dennehy
----------------------------------------
Its: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ David Avigdor
----------------------------------------
Its:
----------------------------------------
David Avigdor
Transaction & Syndication Senior Manager
<PAGE>
Exhibit 4.20
-------------------------
BOSTON CHICKEN, INC.
____% Convertible Subordinated Debentures
due 2004
-------------------
INDENTURE
Dated as of , 1997
------------------
Bankers Trust Company
Trustee
-------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Indenture
TIA Section Section
- ----------- ---------
<S> <C>
(S) 310(a)(1)................................................. 9.10
(a)(2)................................................. 9.10
(a)(3)................................................. N.A.**
(a)(4)................................................. N.A.
(a)(5)................................................. 9.10
(b).................................................... 9.8; 9.10
(c).................................................... N.A.
(S) 311(a).................................................... 9.11
(b).................................................... 9.11
(c).................................................... N.A.
(S) 312(a).................................................... 2.5
(b).................................................... 12.3
(c).................................................... 12.3
(S) 313(a).................................................... 9.6
(b)(1)................................................. N.A.
(b)(2)................................................. 9.6
(c).................................................... 9.6; 12.2
(d).................................................... 9.6
(S) 314(a).................................................... 6.2; 6.4;
12.2
(b).................................................... N.A.
(c)(1)................................................. 12.4(a)
(c)(2)................................................. 12.4(a)
(c)(3)................................................. N.A.
(d).................................................... N.A.
(e).................................................... 12.4(b)
(f).................................................... N.A.
(S) 315(a).................................................... 9.1(b)
(b).................................................... 9.5; 12.2
(c).................................................... 9.1(a)
(d).................................................... 9.1(c)
(e).................................................... 8.11
(S) 316(a)(last sentence)..................................... 2.9
(a)(1)(A).............................................. 8.5
(a)(1)(B).............................................. 8.4
(a)(2)................................................. N.A.
(b).................................................... 8.7
(c).................................................... 12.5
(S) 317(a)(1)................................................. 8.8
(a)(2)................................................. 8.9
(b).................................................... 2.4
(S) 318(a).................................................... 12.1
</TABLE>
* This Cross-Reference Table shall not, for any purpose, be deemed a part of
this Indenture.
** N.A. means Not Applicable.
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE................. 1
SECTION 1.1 Definitions............................................ 1
SECTION 1.2 Other Definitions...................................... 4
SECTION 1.3 Trust Indenture Act Provisions......................... 5
SECTION 1.4 Rules of Construction.................................. 5
ARTICLE 2. THE SECURITIES............................................. 6
SECTION 2.1 Form and Dating........................................ 6
SECTION 2.2 Execution and Authentication........................... 6
SECTION 2.3 Registrar, Paying Agent and Conversion Agent........... 7
SECTION 2.4 Paying Agent to Hold Money In Trust.................... 8
SECTION 2.5 Securityholder Lists................................... 8
SECTION 2.6 Transfer and Exchange.................................. 8
SECTION 2.7 Replacement Securities................................. 9
SECTION 2.8 Outstanding Securities................................. 10
SECTION 2.9 Treasury Securities.................................... 10
SECTION 2.10 Temporary Securities................................... 11
SECTION 2.11 Cancellation........................................... 11
ARTICLE 3. REDEMPTION AND PURCHASES................................... 11
SECTION 3.1 Right to Redeem; Notice to Trustee..................... 11
SECTION 3.2 Selection of Securities to Be Redeemed................. 12
SECTION 3.3 Notice of Redemption................................... 12
SECTION 3.4 Effect of Notice of Redemption......................... 13
SECTION 3.5 Deposit of Redemption Price............................ 13
SECTION 3.6 Securities Redeemed in Part............................ 14
SECTION 3.7 Conversion Arrangement on Call for Redemption.......... 14
SECTION 3.8 Purchase of Securities at Option of the Holder
Upon Change in Control............................... 15
SECTION 3.9 Effect of Change in Control Purchase Notice............ 18
SECTION 3.10 Deposit of Change in Control Purchase Price............ 19
SECTION 3.11 Securities Purchased In Part........................... 19
SECTION 3.12 Compliance With Securities Laws Upon Purchase of
Securities........................................... 19
SECTION 3.13 Repayment to the Company............................... 20
ARTICLE 4. CONVERSION................................................. 20
SECTION 4.1 Conversion Privilege................................... 20
SECTION 4.2 Conversion Procedure................................... 21
SECTION 4.3 Fractional Shares...................................... 22
SECTION 4.4 Taxes on Conversion.................................... 22
SECTION 4.5 Company to Provide Stock............................... 23
SECTION 4.6 Adjustment of Conversion Price......................... 23
SECTION 4.7 No Adjustment.......................................... 27
SECTION 4.8 Adjustment for Tax Purposes............................ 28
SECTION 4.9 Notice of Adjustment................................... 28
SECTION 4.10 Notice of Certain Transactions......................... 28
SECTION 4.11 Effect of Reclassification, Consolidation,
Merger or Sale on Conversion Privilege............... 28
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 4.12 Trustee's Disclaimer........................................... 29
SECTION 4.13 Voluntary Reduction............................................ 30
ARTICLE 5. SUBORDINATION...................................................... 30
SECTION 5.1 Securities Subordinated to Senior Indebtedness................. 30
SECTION 5.2 Securities Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation,
Reorganization, Etc., of the Company........................... 31
SECTION 5.3 Securityholders to Be Subrogated to Right of
Holders of Senior Indebtedness................................. 33
SECTION 5.4 Obligations of the Company Unconditional....................... 33
SECTION 5.5 Company Not to Make Payment With Respect to
Securities in Certain Circumstances............................ 34
SECTION 5.6 Notice to Trustee.............................................. 35
SECTION 5.7 Application by Trustee of Monies Deposited With
It............................................................. 36
SECTION 5.8 Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior
Indebtedness................................................... 36
SECTION 5.9 Trustee to Effectuate Subordination............................ 37
SECTION 5.10 Right of Trustee to Hold Senior Indebtedness................... 37
SECTION 5.11 Article 5 Not to Prevent Events of Default..................... 37
SECTION 5.12 No Fiduciary Duty Created to Holders of Senior
Indebtedness................................................... 37
SECTION 5.13 Article Applicable to Paying Agents............................ 37
ARTICLE 6. COVENANTS.......................................................... 38
SECTION 6.1 Payment of Securities.......................................... 38
SECTION 6.2 SEC Reports.................................................... 38
SECTION 6.3 Liquidation.................................................... 39
SECTION 6.4 Compliance Certificates........................................ 40
SECTION 6.5 Notice of Defaults............................................. 40
SECTION 6.6 Further Instruments and Acts................................... 40
ARTICLE 7. SUCCESSOR CORPORATION.............................................. 40
SECTION 7.1 When Company May Merge, Etc.................................... 40
SECTION 7.2 Successor Corporation Substituted.............................. 41
ARTICLE 8. DEFAULT AND REMEDIES............................................... 42
SECTION 8.1 Events of Default.............................................. 42
SECTION 8.2 Acceleration................................................... 43
SECTION 8.3 Other Remedies................................................. 44
SECTION 8.4 Waiver of Defaults and Events of Default....................... 44
SECTION 8.5 Control by Majority............................................ 45
SECTION 8.6 Limitations on Suits........................................... 45
SECTION 8.7 Rights of Holders to Receive Payment........................... 45
SECTION 8.8 Collection Suit by Trustee..................................... 46
SECTION 8.9 Trustee May File Proofs of Claim............................... 46
SECTION 8.10 Priorities..................................................... 47
SECTION 8.11 Undertaking for Costs.......................................... 47
SECTION 8.12 Waiver of Usury, Stay or Extension Laws........................ 47
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 9. TRUSTEE............................................................ 48
SECTION 9.1 Duties of Trustee.............................................. 48
SECTION 9.2 Rights of Trustee.............................................. 49
SECTION 9.3 Individual Rights of Trustee................................... 49
SECTION 9.4 Trustee's Disclaimer........................................... 50
SECTION 9.5 Notice of Default or Events of Default......................... 50
SECTION 9.6 Reports by Trustee to Holders.................................. 50
SECTION 9.7 Compensation and Indemnity..................................... 50
SECTION 9.8 Replacement of Trustee......................................... 51
SECTION 9.9 Successor Trustee by Merger, Etc............................... 52
SECTION 9.10 Eligibility; Disqualification.................................. 52
SECTION 9.11 Preferential Collection of Claims Against
Company........................................................ 53
ARTICLE 10. SATISFACTION AND DISCHARGE OF INDENTURE........................... 53
SECTION 10.1 Termination of Company's Obligations........................... 53
SECTION 10.2 Application of Trust Money..................................... 54
SECTION 10.3 Repayment to Company........................................... 54
SECTION 10.4 Reinstatement.................................................. 54
ARTICLE 11. AMENDMENTS, SUPPLEMENTS AND WAIVERS............................... 55
SECTION 11.1 Without Consent of Holders..................................... 55
SECTION 11.2 With Consent of Holders........................................ 55
SECTION 11.3 Compliance With Trust Indenture Act............................ 56
SECTION 11.4 Revocation and Effect of Consents.............................. 56
SECTION 11.5 Notation on or Exchange of Securities.......................... 57
SECTION 11.6 Trustee to Sign Amendments, etc................................ 57
ARTICLE 12. MISCELLANEOUS..................................................... 57
SECTION 12.1 Trust Indenture Act Controls................................... 57
SECTION 12.2 Notices........................................................ 58
SECTION 12.3 Communications by Holders With Other Holders................... 58
SECTION 12.4 Certificate and Opinion as to Conditions
Precedent...................................................... 58
SECTION 12.5 Record Date for Vote or Consent of
Securityholders................................................ 59
SECTION 12.6 Rules by Trustee, Paying Agent, Registrar,
Conversion Agent............................................... 60
SECTION 12.7 Legal Holidays................................................. 60
SECTION 12.8 Governing Law.................................................. 60
SECTION 12.9 No Adverse Interpretation of Other Agreements.................. 60
SECTION 12.10 No Recourse Against Others..................................... 60
SECTION 12.11 Successors..................................................... 60
SECTION 12.12 Multiple Counterparts.......................................... 61
SECTION 12.13 Separability................................................... 61
SECTION 12.14 Table of Contents, Headings, etc............................... 61
</TABLE>
3
<PAGE>
INDENTURE dated as of , 1997 between BOSTON CHICKEN, INC., a
Delaware corporation (the "Company"), and Bankers Trust Company, a banking
corporation duly organized and existing under the laws of the state of
New York, as Trustee (the "Trustee").
Both parties agree as follows for the benefit of the other and for the equal
and ratable benefit of the registered holders of the Company's ______%
Convertible Subordinated Debentures due 2004.
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or Conversion Agent.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles;
the amount of such indebtedness shall be the capitalized amount of such
obligations determined in accordance with such principles.
"Cash" or "cash" means such coin or currency of the United States as at any
time of payment is legal tender for the payment of public and private debts.
"Common Stock" means the common stock of the Company, $.01 par value, as it
exists on the date of this Indenture or as it may be constituted from time to
time.
<PAGE>
"Company" means the party named as such in this Indenture until a successor
replaces it pursuant to this Indenture, and thereafter means the successor.
"Default" or "default" means any event which is, or after notice or passage
of time, or both, would be an Event of Default.
"Holder" or "Securityholder" means the person in whose name a Security is
registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time to
time pursuant to the terms of this Indenture.
"Officer" means the Chairman or any Co-Chairman of the Board, any Vice
Chairman of the Board, the President, any Vice President, the Chief Financial
Officer, the Secretary or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers;
provided, however, that for purposes of Section 6.4, "Officers' Certificate"
means a certificate signed by the principal executive officer, principal
financial officer or principal accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Person" or "person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust, or
any other entity or organization, including a government or political
subdivision or instrumentality thereof.
"Principal" or "principal" of a debt security, including the Securities,
means the principal of the security plus, when appropriate, the premium, if any,
on the security.
"Redemption Date" or "redemption date," when used with respect to any
Security to be redeemed, means the date fixed for such redemption pursuant to
this Indenture.
"Redemption Price" or "redemption price," when used with respect to any
Security to be redeemed, means the price fixed for such redemption pursuant to
this Indenture, as set forth in the form of Security annexed as Exhibit A
hereto.
"SEC" or "Commission" means the Securities and Exchange Commission.
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"Securities" means the ____% Convertible Subordinated Debentures due 2004
or any of them (each, a "Security"), as amended or supplemented from time to
time, that are issued under this Indenture.
"Senior Indebtedness" means the following: (a) the principal of and
premium, if any, and interest (including, without limitation, any interest
accruing subsequent to the filing of a petition or other action concerning
bankruptcy or other similar proceedings, whether or not constituting an allowed
claim in any such proceedings) on, and fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations in respect of, the following,
whether presently outstanding or hereafter incurred or created: all indebtedness
or obligations of the Company to any person, including, but not limited to,
banks and other lending institutions, for money borrowed (other than that
evidenced by the Securities) or in respect of credit or other banking facilities
and which is evidenced by a note, bond, debenture, loan agreement, a lease
intended as security or similar instrument or agreement (including purchase
money obligations with an original maturity in excess of one year and
noncontingent obligations to reimburse any bank or other person in respect of
amounts paid under letters of credit); (b) commitment or standby fees due and
payable to lending institutions with respect to credit facilities available to
the Company; (c) all noncontingent obligations of the Company (i) for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (ii) under interest rate swaps, caps, collars,
options and similar arrangements, and (iii) under any foreign exchange contract,
currency swap agreement, futures contract, currency option contract, or other
foreign currency hedge; (d) all obligations of the Company for the payment of
money relating to a Capitalized Lease Obligation; (e) any liabilities of others
described in the preceding clauses (a), (b), (c) and (d) which the Company has
guaranteed or which are otherwise its legal liability; and (f) renewals,
extensions, refundings, restructurings, amendments and modifications of any such
indebtedness or guarantee. Notwithstanding anything to the contrary in this
Indenture or the Securities, "Senior Indebtedness" shall not include (w) any
particular indebtedness, lease, fee, obligation, renewal, extension, refunding,
restructuring, amendment or modification if, under the express provisions of the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, such indebtedness, lease, fee, obligation, renewal, extension,
refunding, restructuring, amendment or modification thereof is stated to be not
superior in right of payment to the Securities, (x) indebtedness of the Company
(i) owing, directly or indirectly, to any person under or in respect of any
employee benefit plan of the Company or (ii) owing, directly or indirectly, to
any
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employee of the Company or any Affiliate of the Company, (y) the Securities and
(z) any indebtedness represented by the Company's 4 1/2% Convertible
Subordinated Debentures due 2004 or the Company's Liquid Yield Option Notes due
2015 (which Debentures and Notes shall rank pari passu with the Securities).
"Subsidiary" means any corporation of which at least a majority of the
outstanding capital stock having voting power under ordinary circumstances to
elect directors of such corporation shall at the time be held, directly or
indirectly, by the Company, by the Company and one or more Subsidiaries, or by
one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 and as in effect on the date of this Indenture,
except as provided in Section 11.3, and except to the extent any amendment to
the Trust Indenture Act expressly provides for application of the Trust
Indenture Act as in effect on another date.
"Trading Day" means, with respect to any security, each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on which securities are not
generally traded on the exchange or market in which such security is traded.
"Trustee" means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture, and thereafter
means the successor.
"Trust Officer" means any officer within the Corporate Trust Department (or
any similarly titled or successor group) of the Trustee, including without
limitation, any Vice President, any Assistant Vice President, any trust officer,
any Assistant Secretary or any other officer customarily performing functions
similar to those performed by any of the above-designated officers who shall, in
any case, be responsible for the administration of this Indenture or have
familiarity with it, and also means, with respect to a particular corporate
matter, any other officer of the Trustee to whom corporate trust matters are
referred because of his or her knowledge of and familiarity with the particular
subject.
SECTION 1.2 Other Definitions
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
<S> <C>
"Bankruptcy Law" 8.1
"Change in Control" 3.8
"Change in Control Purchase Date" 3.8
"Change in Control Purchase Notice" 3.8
"Change in Control Purchase Price" 3.8
</TABLE>
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<TABLE>
<S> <C>
"Company Order" 2.2
"Conversion Agent" 2.3
"Conversion Date" 4.2
"Conversion Price" 4.6
"Conversion Shares" 4.6
"Custodian" 8.1
"Default Notice" 5.5
"Determination Date" 4.6
"Distribution Date" 4.6
"Event of Default" 8.1
"Exchange Act" 3.8
"Legal Holiday" 12.7
"Paying Agent" 2.3
"Registrar" 2.3
"Rights" 4.6
"Triggering Distribution" 4.6
"Unissued Shares" 3.8
"U.S. Government Obligations" 10.1
</TABLE>
SECTION 1.3 Trust Indenture Act Provisions
Whenever this Indenture refers to a provision of the TIA, that provision is
incorporated by reference in and made a part of this Indenture. The Indenture
shall also include those provisions of the TIA required to be included herein by
the provisions of the Trust Indenture Reform Act of 1990. The following TIA
terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other terms used in this Indenture that are defined in the TIA, defined
by TIA reference to another statute or defined by SEC rule and not otherwise
defined herein have the meanings assigned to them therein.
SECTION 1.4 Rules of Construction
Unless the context otherwise requires:
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
on the date hereof, and any other reference in this Indenture to "generally
accepted accounting principles" refers to generally accepted accounting
principles in effect on the date hereof;
(3) words in the singular include the plural, and words in the plural
include the singular;
(4) provisions apply to successive events and transactions; and
(5) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE 2.
THE SECURITIES
SECTION 2.1 Form and Dating
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is incorporated in and made part
of this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Company shall approve, with
the consent of the Trustee, the form of the Securities and any notation, legend
or endorsement thereon. Each Security shall be dated the date of its
authentication.
SECTION 2.2 Execution and Authentication
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
Typographic and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security which has been authenticated and delivered by the Trustee.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication
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on the Security. The signature shall be conclusive evidence that the Security
has been authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery Securities
for original issue in the aggregate principal amount of up to [$250,000,000]
(plus up to an additional [$37,500,000] issued pursuant to the exercise of the
over-allotment option described in Section 2(b) of that certain Purchase
Agreement dated _______ ____ , 1997 between the Company and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons
Incorporated and Morgan Stanley & Co. Incorporated) upon a written order or
orders of the Company signed by two Officers of the Company (a "Company Order").
The Company Order shall specify the amount of Securities to be authenticated and
the date on which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
[$250,000,000], except as provided above and in Section 2.7.
The Trustee shall act as the initial authenticating agent. Thereafter, the
Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 Registrar, Paying Agent and Conversion Agent
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency where Securities may be presented for payment (the "Paying
Agent"), an office or agency where Securities may be presented for conversion
(the "Conversion Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Registrar shall keep a register of the Securities and of their transfer and
exchange.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any Agent not a party to this Indenture. If the
Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent
for service of notices and demands, or fails to
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give the foregoing notice, the Trustee shall act as such. The Company or any
Affiliate of the Company may act as Paying Agent (except for the purposes of
Section 6.1 and Article 10), Registrar or Conversion Agent.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands in connection with
the Securities.
SECTION 2.4 Paying Agent to Hold Money In Trust
On or prior to each due date of the principal of or interest on any
Securities, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal or interest so becoming due. Subject to Section 5.7, the
Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Securities, and shall notify the Trustee of any default by the
Company (or any other obligor on the Securities) in making any such payment. If
the Company or an Affiliate of the Company acts as Paying Agent, it shall, on or
before each due date of the principal of or interest on any Securities,
segregate the money and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
the Trustee may at any time during the continuance of any default, upon written
request to a Paying Agent, require such Paying Agent to forthwith pay to the
Trustee all sums so held in trust by such Paying Agent. Upon doing so, the
Paying Agent (other than the Company) shall have no further liability for the
money .
SECTION 2.5 Securityholder Lists
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each semiannual interest payment date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.6 Transfer and Exchange
When a Security is presented to the Registrar with a request to register a
transfer thereof or to exchange such Security for an equal principal amount of
Securities of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested; provided, however, that every
Security presented or surrendered for registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of
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transfer in form satisfactory to the Registrar duly executed by the Holder
thereof or his or her attorney duly authorized in writing. To permit
registration of transfers and exchanges, upon surrender of any Security for
registration of transfer or exchange at the office or agency maintained pursuant
to Section 2.3, the Company shall execute and the Trustee shall authenticate
Securities of a like aggregate principal amount at the Registrar's request. Any
exchange or transfer shall be without charge, except that the Company or the
Registrar may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge that may be imposed in relation thereto, and
provided further that this sentence shall not apply to any exchange pursuant to
Section 2.10, 3.6, 3.11, 4.2 (last paragraph) or 11.5.
Neither the Company, the Registrar nor the Trustee shall be required to
exchange or register a transfer of (a) any Securities for a period of 15 days
next preceding any selection of Securities to be redeemed, (b) any Securities or
portions thereof selected or called for redemption (except, in the case of
redemption of a Security in part, the portion not to be redeemed) or (c) any
Securities or portions thereof in respect of which a Change in Control Purchase
Notice has been delivered and not withdrawn by the Holder thereof (except, in
the case of the purchase of a Security in part, the portion not to be
purchased).
All Securities issued upon any transfer or exchange of Securities shall be
valid obligations of the Company, evidencing the same debt and entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.7 Replacement Securities
If any mutilated Security is surrendered to the Company, the Registrar or
the Trustee, or the Company, the Registrar and the Trustee receive evidence to
their satisfaction of the destruction, loss or theft of any Security, and there
is delivered to the Company, the Registrar and the Trustee such Security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company, the Registrar or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute,
and upon its written request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a new Security of like tenor and principal amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is
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<PAGE>
about to be redeemed or purchased by the Company pursuant to Article 3, the
Company in its discretion may, instead of issuing a new Security, pay, redeem or
purchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.7, the Company
may require the payment of a sum sufficient to cover any tax, assessment or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee or the Registrar) in
connection therewith.
Every new Security issued pursuant to this Section 2.7 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 2.7 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8 Outstanding Securities
Securities outstanding at any time are all Securities authenticated by the
Trustee, except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.8 as not outstanding.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Company receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds on a redemption date or
maturity date money sufficient to pay the principal of, and premium, if any, and
accrued interest on, Securities payable on that date, then on and after that
date such Securities cease to be outstanding and interest on them ceases to
accrue.
Subject to the restrictions contained in Section 2.9, a Security does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Security.
SECTION 2.9 Treasury Securities
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In determining whether the Holders of the required principal amount of
Securities have concurred in any notice, direction, waiver or consent,
Securities owned by the Company or any other obligor on the Securities or by any
Affiliate of the Company or of such other obligor shall be disregarded, except
that, for purposes of determining whether the Trustee shall be protected in
relying on any such notice, direction, waiver or consent, only Securities which
the Trustee knows are so owned shall be so disregarded. Securities so owned
which have been pledged in good faith shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to the Securities and that the pledgee is not the Company or any
other obligor on the Securities or any Affiliate of the Company or of such other
obligor.
SECTION 2.10 Temporary Securities
Until definitive Securities are ready for delivery, the Company may prepare
and execute, and, upon the order of the Company, the Trustee shall authenticate
and deliver, temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
with the consent of the Trustee considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate and deliver definitive Securities in exchange for temporary
Securities.
SECTION 2.11 Cancellation
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee or its agent any Securities surrendered to them for
transfer, exchange, payment or conversion. The Trustee and no one else shall
cancel, in accordance with its standard procedures, all Securities surrendered
for transfer, exchange, redemption, payment, conversion or cancellation and
shall deliver the cancelled Securities to the Company. The Company may not issue
new Securities to replace Securities it has paid or delivered to the Trustee for
cancellation or that any Holder has converted pursuant to Article 4.
ARTICLE 3.
REDEMPTION AND PURCHASES
SECTION 3.1 Right to Redeem; Notice to Trustee
The Securities may be redeemed at the election of the Company, as a whole
or from time to time in part, at any time on or after February 15, 2000, at the
redemption prices specified in
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paragraph 5 of the form of Security attached hereto as Exhibit A, together with
accrued interest up to but not including the Redemption Date.
If the Company elects to redeem Securities pursuant to this Section 3.1 and
paragraph 5 of the Securities, it shall notify the Trustee at least 35 days
prior to the redemption date as fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee) of the redemption date and the principal
amount of Securities to be redeemed. If fewer than all of the Securities are to
be redeemed, the record date relating to such redemption shall be selected by
the Company and given to the Trustee, which record date shall not be less than
ten days after the date of notice to the Trustee.
SECTION 3.2 Selection of Securities to Be Redeemed
If less than all of the Securities are to be redeemed, the Trustee shall,
not more than 60 days prior to the redemption date, select the Securities to be
redeemed by lot or by a method the Trustee considers fair and appropriate;
provided, however, that such method is not prohibited by any stock exchange or
market on which the Securities are then listed or quoted. The Trustee shall make
the selection from the Securities outstanding and not previously called for
redemption. Securities in denominations of $1,000 may only be redeemed in whole.
The Trustee may select for redemption portions (equal to $1,000 or any multiple
thereof) of the principal of Securities that have denominations larger than
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.3 Notice of Redemption
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed a notice of redemption by first-class
mail to each Holder of Securities to be redeemed at such Holder's address as it
appears on the Registrar's books.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the then current Conversion Price;
(4) the name and address of the Paying Agent and the Conversion Agent;
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(5) that Securities called for redemption must be presented and
surrendered to the Paying Agent to collect the redemption price;
(6) that the Securities called for redemption may be converted at any
time before the close of business on the redemption date;
(7) that Holders who wish to convert Securities must satisfy the
requirements in paragraph 8 of the Securities;
(8) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption shall cease accruing
on and after the redemption date and the only remaining right of the Holder
shall be to receive payment of the redemption price upon presentation and
surrender to the Paying Agent of the Securities; and
(9) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon presentation and surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.
SECTION 3.4 Effect of Notice of Redemption
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the redemption price stated
in the notice, except for Securities that are converted in accordance with the
provisions of Section 4.1. Upon presentation and surrender to the Paying Agent,
Securities called for redemption shall be paid at the redemption price, plus
accrued interest up to but not including the redemption date.
SECTION 3.5 Deposit of Redemption Price
On or prior to the redemption date, the Company shall deposit with the
Paying Agent (or, if the Company acts as Paying Agent, shall segregate and hold
in trust) money sufficient to pay the redemption price of and accrued interest
on all Securities to be redeemed on that date, other than Securities or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation or have been converted. The Paying Agent
shall return to the Company any money not required for that purpose because of
the conversion of Securities pursuant to Article 4 or otherwise. If such money
is
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then held by the Company in trust and is not required for such purpose, it shall
be discharged from the trust.
SECTION 3.6 Securities Redeemed in Part
Upon presentation and surrender of a Security that is redeemed in part, the
Company shall execute and the Trustee shall authenticate for and deliver to the
Holder a new Security equal in principal amount to the unredeemed portion of the
Security surrendered.
SECTION 3.7 Conversion Arrangement on Call for Redemption
In connection with any redemption of Securities, the Company may arrange
for the purchase and conversion of any Securities called for redemption by an
agreement with one or more investment bankers or other purchasers to purchase
such Securities by paying to the Paying Agent in trust for the Securityholders,
on or before the close of business on the Redemption Date, an amount that,
together with any amounts deposited with the Paying Agent by the Company for the
redemption of such Securities, is not less than the Redemption Price, together
with interest, if any, accrued to, but not including, the Redemption Date, of
such Securities. Notwithstanding anything to the contrary contained in this
Article 3, the obligation of the Company to pay the Redemption Price of such
Securities, including all accrued interest, if any, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, any Securities not duly
surrendered for conversion by the Holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article 4) surrendered by such purchasers for conversion, all as of
immediately prior to the close of business on the Redemption Date, subject to
payment of the above amount as aforesaid. The Paying Agent shall hold and pay to
the Holders whose Securities are selected for redemption any such amount paid to
it for purchase and conversion in the same manner as it would moneys deposited
with it by the Company for the redemption of Securities. Without the Paying
Agent's prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Securities shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Paying Agent as set forth in this Indenture, and the Company agrees to
indemnify the Paying Agent from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Securities between the Company and such
purchasers, including the costs and expenses incurred by the Paying Agent in the
defense of any claim or liability arising out
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of or in connection with the exercise or performance of any of its powers,
duties, responsibilities or obligations under this Indenture.
SECTION 3.8 Purchase of Securities at Option of the Holder Upon Change in
Control
(a) If at any time that Securities remain outstanding there shall have
occurred a Change in Control, Securities shall be purchased by the Company at
the option of the Holder thereof, on the date that is 40 Business Days after the
occurrence of the Change in Control (the "Change in Control Purchase Date") at a
purchase price (the "Change in Control Purchase Price") equal to the principal
amount thereof plus accrued interest up to but not including the Change in
Control Purchase Date, subject to satisfaction by or on behalf of any Holder of
the requirements set forth in subsection (c) of this Section 3.8.
A "Change in Control" shall be deemed to have occurred at such time after
the original issuance of the Securities as there shall occur:
(1) the acquisition by any person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision, but excluding Scott A. Beck, Saad J. Nadhir, or a
person or group controlled by them or either of them (or their heirs or
legatees)) of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of
transactions, of shares of capital stock of the Company entitling such
person to exercise more than 50% of the total voting power of all shares of
capital stock of the Company entitling the holders thereof to vote
generally in elections of directors; or
(2) any consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the Company, or
any sale, lease or exchange of all or substantially all of the property and
assets of the Company to another person (other than (i) sales or leases of
property to franchisees of the Company in the ordinary course of business
or (ii) a merger which (x) does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock
of the Company or (y) is effected primarily to change the jurisdiction of
incorporation of the Company and results in a reclassification, conversion
or exchange of outstanding shares of Common Stock solely into shares of
common stock of the surviving entity).
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A "beneficial owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of this Indenture, except that, for purposes of this subsection
(a), the number of shares of capital stock of the Company entitling the holders
thereof to vote generally in elections of directors shall be deemed to include,
in addition to all outstanding shares of capital stock of the Company entitling
the holders thereof to vote generally in the election of directors and Unissued
Shares deemed to be held by the Person with respect to which the Change in
Control determination is being made, all Unissued Shares deemed to be held by
all other Persons. As used herein, "Unissued Shares" shall mean shares of
capital stock of the Company not outstanding that are subject to options,
warrants, rights to purchase or conversion privileges exercisable within 60 days
following the date of determination of a Change in Control and that, upon
issuance, shall entitle the holders thereof to vote generally in the election of
directors.
(b) Within ten Business Days after the occurrence of a Change in Control,
the Company shall mail a written notice of Change in Control by first-class mail
to the Trustee and to each Holder (and to beneficial owners as required by
applicable law) and shall cause a copy of such notice to be published in a daily
newspaper of national circulation. The notice shall include the form of a Change
in Control Purchase Notice to be completed by the Holder and shall state:
(1) the date of such Change in Control and, briefly, the events
causing such Change in Control;
(2) the date by which the Change in Control Purchase Notice pursuant
to this Section 3.8 must be given;
(3) the Change in Control Purchase Date;
(4) the Change in Control Purchase Price;
(5) briefly, the conversion rights of the Securities;
(6) the name and address of the Paying Agent and the Conversion Agent;
(7) the then current Conversion Price;
(8) that Securities as to which a Change in Control Purchase Notice
has been given may be converted into Common Stock only to the extent that
the Change in Control Purchase Notice has been withdrawn in accordance with
the terms of this Indenture;
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(9) the procedures that the Holder must follow to exercise rights
under this Section 3.8;
(10) the procedures for withdrawing a Change in Control Purchase
Notice, including a form of notice of withdrawal; and
(11) that the Holder must satisfy the requirements set forth in the
Securities in order to convert the Securities.
(c) A Holder may exercise his or her rights specified in subsection (a) of
this Section 3.8 upon delivery of a written notice of the exercise of such
rights (a "Change in Control Purchase Notice") to the Paying Agent at any time
prior to the close of business on the Change in Control Purchase Date, stating:
(1) the certificate number of each Security that the Holder will
deliver to be purchased;
(2) the portion of the principal amount of each Security that the
Holder will deliver to be purchased, which portion must be $1,000 or an
integral multiple thereof; and
(3) that such Security shall be purchased pursuant to the terms and
conditions specified in this Indenture.
The delivery of such Security to the Paying Agent (together with all
necessary endorsements) at the office of the Paying Agent shall be a condition
to the receipt by the Holder of the Change in Control Purchase Price therefor;
provided, however, that such Change in Control Purchase Price shall be so paid
pursuant to this Section 3.8 only if the Security so delivered to the Paying
Agent shall conform in all respects to the description thereof set forth in the
related Change in Control Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.8, a portion of a Security if the principal amount of such portion is
$1,000 or an integral multiple of $1,000. Provisions of this Indenture that
apply to the purchase of all of a Security pursuant to Sections 3.8 through 3.13
also apply to the purchase of such portion of such Security.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent the Change in Control Purchase Notice contemplated by this
subsection (c) shall have the right to withdraw such Change in Control Purchase
Notice in whole or in a portion thereof that is $1,000 or in an integral
multiple thereof at any time prior to the close of business on the Change
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in Control Purchase Date by delivery of a written notice of withdrawal to the
Paying Agent in accordance with Section 3.9.
The Paying Agent shall promptly notify the Company of the receipt by it of
any Change in Control Purchase Notice or written withdrawal thereof.
SECTION 3.9 Effect of Change in Control Purchase Notice
Upon receipt by the Paying Agent of the Change in Control Purchase Notice
specified in Section 3.8(c), the Holder of the Security in respect of which such
Change in Control Purchase Notice was given shall (unless such Change in Control
Purchase Notice is withdrawn as specified below) thereafter be entitled to
receive solely the Change in Control Purchase Price with respect to such
Security. Such Change in Control Purchase Price shall be paid to such Holder
promptly following the later of (a) the Change in Control Purchase Date with
respect to such Security (provided the conditions in Section 3.8(c) have been
satisfied) and (b) the time of delivery of such Security to the Paying Agent by
the Holder thereof in the manner required by Section 3.8(c). Securities in
respect of which a Change in Control Purchase Notice has been given by the
Holder thereof may not be converted into shares of Common Stock on or after the
date of the delivery of such Change in Control Purchase Notice unless such
Change in Control Purchase Notice has first been validly withdrawn.
A Change in Control Purchase Notice may be withdrawn by means of a written
notice of withdrawal delivered by the Holder to the office of the Paying Agent
at any time prior to the close of business on the Change in Control Purchase
Date, specifying:
(1) the certificate number of each Security in respect of which such
notice of withdrawal is being submitted;
(2) the principal amount of the Security or portion thereof with
respect to which such notice of withdrawal is being submitted; and
(3) the principal amount, if any, of such Security that remains
subject to the original Change in Control Purchase Notice and that has been
or will be delivered for purchase by the Company.
There shall be no purchase of any Securities pursuant to Section 3.8 if
there has occurred (prior to, on or after, as the case may be, the giving, by
the Holders of such Securities, of the required Change in Control Purchase
Notice) and is continuing an Event of Default (other than a default in the
payment of the Change in Control Purchase Price with respect to such
Securities).
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SECTION 3.10 Deposit of Change in Control Purchase Price
On or before the second Business Day immediately following a Change in
Control Purchase Date, the Company shall deposit with the Trustee or with the
Paying Agent (or, if the Company is acting as the Paying Agent, shall segregate
and hold in trust as provided in Section 2.4) an amount of money sufficient to
pay the aggregate Change in Control Purchase Price of all the Securities or
portions thereof that are to be purchased as of such Change in Control Purchase
Date. The manner in which the deposit required by this Section 3.10 is made by
the Company shall be at the option of the Company, provided that such deposit
shall be made in a manner such that the Trustee or the Paying Agent shall have
immediately available funds on the second Business Day immediately following the
Change in Control Purchase Date.
If the Paying Agent holds, in accordance with the terms hereof, money
sufficient to pay the Change in Control Purchase Price of any Security tendered
for purchase, then, on the second Business Day immediately following to the
Change in Control Purchase Date, such Security will cease to be outstanding and
will be deemed paid, whether or not such Security is delivered to the Paying
Agent, and all other rights of the Holder in respect thereof shall terminate
(other than the right to receive the Change in Control Purchase Price upon
delivery of such Security).
SECTION 3.11 Securities Purchased In Part
Any Security that is to be purchased only in part shall be surrendered at
the office of the Paying Agent (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and promptly after the Change in
Control Purchase Date the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without service charge,
a new Security or Securities, of such authorized denomination or denominations
as may be requested by such Holder, in aggregate principal amount equal to, and
in exchange for, the portion of the principal amount of the Security so
surrendered that is not purchased.
SECTION 3.12 Compliance With Securities Laws Upon Purchase of Securities
In connection with any offer to purchase or purchase of Securities under
Section 3.8 (provided that such offer or purchase constitutes an "issuer tender
offer" for purposes of Rule 13e-4 under the Exchange Act (which term, as used
herein, includes any successor provision thereto) at the time of such offer or
purchase), the Company shall (a) comply with Rule 13e-4
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and Rule 14e-1 under the Exchange Act, (b) file the related Schedule 13E-4 (or
any successor schedule, form or report) under the Exchange Act, and (c)
otherwise comply with all federal and state securities laws so as to permit the
rights of the Holders and obligations of the Company under Sections 3.8 through
3.11 to be exercised in the time and in the manner specified therein.
SECTION 3.13 Repayment to the Company
Subject to the provisions of Section 5.7, to the extent that the aggregate
amount of cash deposited by the Company pursuant to Section 3.10 exceeds the
aggregate Change in Control Purchase Price of the Securities or portions thereof
that the Company is obligated to purchase, then promptly after the second
Business Day immediately following the Change in Control Purchase Date the
Trustee or the Paying Agent, as the case may be, shall return any such excess to
the Company.
ARTICLE 4.
CONVERSION
SECTION 4.1 Conversion Privilege
Subject to the further provisions of this Section 4.1, a Holder of a
Security may convert such Security into Common Stock at any time prior to
maturity, at the Conversion Price then in effect; provided, however, that, if
such Security is called for redemption pursuant to Article 3, such conversion
right shall terminate at the close of business on the redemption date for such
Security (unless the Company shall default in making the redemption payment when
due, in which case the conversion right shall terminate at the close of business
on the date such default is cured and such Security is redeemed); provided,
further, that, if the Holder of a Security presents such Security for redemption
prior to the close of business on the redemption date for such Security, the
right of conversion shall terminate upon presentation of the Security to the
Trustee (unless the Company shall default in making the redemption payment when
due, in which case the conversion right shall terminate at the close of business
on the date such default is cured and such Security is redeemed). The number of
shares of Common Stock issuable upon conversion of a Security shall be
determined by dividing the principal amount of the Security or portion thereof
surrendered for conversion by the Conversion Price in effect on the Conversion
Date. The initial Conversion Price is set forth in paragraph 8 of the Securities
and is subject to adjustment as provided in this Article 4.
A Holder may convert a portion of a Security equal to $1,000 or any
integral multiple thereof. Provisions of this Indenture
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that apply to conversion of all of a Security also apply to conversion of a
portion of a Security.
A Security in respect of which a Holder has delivered a Change in Control
Purchase Notice pursuant to Section 3.8(c) exercising the option of such Holder
to require the Company to purchase such Security may be converted only if such
Change in Control Purchase Notice is withdrawn by a written notice of withdrawal
delivered to the Paying Agent prior to the close of business on the Change in
Control Purchase Date in accordance with Section 3.9.
A Holder of Securities is not entitled to any rights of a holder of Common
Stock until such Holder has converted his or her Securities to Common Stock, and
only to the extent such Securities are deemed to have been converted into Common
Stock pursuant to this Article 4.
SECTION 4.2 Conversion Procedure
To convert a Security, a Holder must (a) complete and manually sign the
conversion notice on the back of the Security and deliver such notice to the
Conversion Agent, (b) surrender the Security to the Conversion Agent, (c)
furnish appropriate endorsements and transfer documents if required by the
Registrar or the Conversion Agent, and (d) pay any transfer or similar tax, if
required. The date on which the Holder satisfies all of those requirements is
the "Conversion Date." As soon as practicable after the Conversion Date, the
Company shall deliver to the Holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional shares pursuant to Section 4.3.
The person in whose name the certificate is registered shall be deemed to
be a shareholder of record on the Conversion Date; provided, however, that no
surrender of a Security on any date when the stock transfer books of the Company
shall be closed shall be effective to constitute the person or persons entitled
to receive the shares of Common Stock upon such conversion as the record holder
or holders of such shares of Common Stock on such date, but such surrender shall
be effective to constitute the person or persons entitled to receive such shares
of Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; provided, further, that such conversion shall be at the Conversion
Price in effect on the Conversion Date as if the stock transfer books of the
Company had not been closed. Upon conversion of a Security, such person shall no
longer be a Holder of such Security. No payment or adjustment will be made for
dividends or distributions on shares of Common Stock issued upon conversion of a
Security.
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No payment or adjustment will be made for accrued interest on a converted
Security. If any Holder surrenders a Security for conversion after the close of
business on the record date for the payment of an installment of interest and
before the close of business on the related interest payment date, then,
notwithstanding such conversion, the interest payable on such interest payment
date shall be paid to the Holder of such Security on such record date. In such
event, such Security, when surrendered for conversion, must be accompanied by
delivery of a check or draft payable to the Conversion Agent in an amount equal
to the interest payable on such interest payment date on the portion so
converted. If such payment does not accompany such Security, the Security shall
not be converted. If the Company defaults in the payment of interest payable on
the interest payment date, the Conversion Agent shall repay such funds to the
Holder. Notwithstanding the foregoing, if any Security is called for redemption
on February 15, 2000 and such Security is surrendered for conversion during the
ten Business Days immediately preceding such redemption date, interest shall
accrue on such Security through, but not including, such redemption date, and
shall be payable on such redemption date to the person who surrenders such
Security for conversion and the Conversion Date of such Security will,
notwithstanding anything contained in this Article IV to the contrary, be deemed
to be such redemption date.
If a Holder converts more than one Security at the same time, the number of
shares of Common Stock issuable upon the conversion shall be based on the
aggregate principal amount of Securities converted.
Upon surrender of a Security that is converted in part, the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder, a new
Security equal in principal amount to the unconverted portion of the Security
surrendered.
SECTION 4.3 Fractional Shares
The Company will not issue fractional shares of Common Stock upon
conversion of Securities. In lieu thereof, the Company will pay an amount in
cash based upon the closing sale price of the Common Stock on the Trading Day
immediately prior to the date of conversion.
SECTION 4.4 Taxes on Conversion
If a Holder converts a Security, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon such conversion. However, the Holder shall pay any such tax which is
due because the Holder requests the shares to be issued in a name other than the
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Holder's name. The Conversion Agent may refuse to deliver the certificate
representing the Common Stock being issued in a name other than the Holder's
name until the Conversion Agent receives a sum sufficient to pay any tax which
will be due because the shares are to be issued in a name other than the
Holder's name. Nothing herein shall preclude any tax withholding required by law
or regulation.
SECTION 4.5 Company to Provide Stock
The Company shall, prior to issuance of any Securities hereunder, and from
time to time as it may be necessary, reserve, out of its authorized but unissued
Common Stock, a sufficient number of shares of Common Stock to permit the
conversion of all outstanding Securities into shares of Common Stock.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly authorized,
validly issued, fully paid and nonassessable and shall be free from preemptive
rights and free of any lien or adverse claim.
The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Securities, if any, and will list or cause to have quoted such
shares of Common Stock on each national securities exchange or in the over-the-
counter market or such other market on which the Common Stock is then listed or
quoted.
SECTION 4.6 Adjustment of Conversion Price
The conversion price as stated in paragraph 8 of the Securities (the
"Conversion Price") shall be adjusted from time to time by the Company as
follows:
(a) In case the Company shall (i) pay a dividend in shares of Common Stock
to all holders of Common Stock, (ii) make a distribution in shares of Common
Stock to all holders of Common Stock, (iii) subdivide its outstanding Common
Stock into a greater number of shares, or (iv) combine its outstanding Common
Stock into a smaller number of shares, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the Holder of any Security
thereafter surrendered for conversion shall be entitled to receive that number
of shares of Common Stock which he or she would have owned had such Security
been converted immediately prior to the happening of such event. An adjustment
made pursuant to this subsection (a) shall become effective immediately after
the record date in the case of a dividend in shares or distribution and shall
become effective
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immediately after the effective date in the case of subdivision or combination.
(b) In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
commencing no earlier than the record date described below and expiring not more
than 60 days after such record date) to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the current market price per share of Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) at the record date for the
determination of shareholders entitled to receive such rights or warrants, the
Conversion Price in effect immediately prior thereto shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on such
record date, plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate Conversion
Price of the convertible securities so offered) would purchase at such current
market price, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively whenever
any such rights or warrants are issued, and shall become effective immediately
after such record date. If at the end of the period during which such rights or
warrants are exercisable not all rights or warrants shall have been exercised,
the adjusted Conversion Price shall be immediately readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock any shares of capital stock of the Company (other
than Common Stock), evidences of indebtedness or other non-cash assets
(including securities of any company other than the Company), or shall
distribute to all or substantially all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (excluding those
referred to in subsection (b) of this Section 4.6), then in each such case the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of such distribution by a fraction of which the numerator shall be the
current market price per share (as defined in subsection (e) of this Section
4.6) of the Common Stock on the record date mentioned below less the fair market
value on such
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record date (as determined by the Board of Directors, whose determination shall
be conclusive evidence of such fair market value) of the portion of the capital
stock or assets or evidences of indebtedness so distributed or of such rights or
warrants applicable to one share of Common Stock (determined on the basis of the
number of shares of Common Stock outstanding on the record date), and of which
the denominator shall be the current market price per share (as defined in
subsection (e) of this Section 4.6) of the Common Stock on such record date.
Such adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
Notwithstanding the foregoing, in the event that the Company shall distribute
rights or warrants (other than those referred to in subsection (b) of this
Section 4.6) ("Rights") pro rata to holders of Common Stock, the Company may, in
lieu of making any adjustment pursuant to this Section 4.6, make proper
provision so that each holder of a Security who converts such Security (or any
portion thereof) after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights to be determined as
follows: (i) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of shares of Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the Rights and (ii) if such conversion occurs
after the Distribution Date, the same number of Rights to which a holder of the
number of shares of Common Stock into which the principal amount of the Security
so converted was convertible immediately prior to the Distribution Date would
have been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute (a "Triggering Distribution") to all or substantially all holders of
its Common Stock cash in an aggregate amount that, together with the aggregate
amount of any other cash distributions to all or substantially all holders of
its Common Stock made within the 12 months preceding the date of payment of the
Triggering Distribution and in respect of which no Conversion Price adjustment
pursuant to this Section 4.6 has been made, exceeds 20% of the product of the
current market price per share of Common Stock (as determined in accordance with
subsection (e) of this Section 4.6) on the Business Day (the "Determination
Date") immediately preceding the day on which such Triggering Distribution is
declared by the Company multiplied by the number of shares of Common Stock
outstanding on such date
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(excluding shares held in the Treasury of the Company), the Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying such Conversion Price in effect immediately prior to the
Determination Date by a fraction of which the numerator shall be the current
market price per share of the Common Stock (as determined in accordance with
subsection (e) of this Section 4.6) on the Determination Date less the amount of
cash so distributed within such 12 months (including, without limitation, the
Triggering Distribution) applicable to one share of Common Stock (determined on
the basis of the number of shares of Common Stock outstanding on the
Determination Date) and the denominator shall be such current market price per
share of the Common Stock (as determined in accordance with subsection (e) of
this Section 4.6) on the Determination Date, such reduction to become effective
immediately prior to the opening of business on the day following the date on
which the Triggering Distribution is paid.
(e) For the purpose of any computation under subsections (b), (c) and (d)
of this Section 4.6, the current market price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the 30
consecutive Trading Days commencing 45 Trading Days before (i) the Determination
Date with respect to distributions under subsection (d) of this Section 4.6 or
(ii) the record date with respect to distributions, issuances or other events
requiring such computation under subsection (b) or (c) of this Section 4.6. The
closing price for each day shall be the last reported sales price or, in case no
such reported sale takes place on such date, the average of the reported closing
bid and asked prices in either case on the NASDAQ National Market System or, if
the Common Stock is not listed or admitted to trading on the NASDAQ National
Market System, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, the closing sales price of the Common Stock
as quoted by NASDAQ or, in case no reported sales takes place, the average of
the closing bid and asked prices as quoted by NASDAQ or any comparable system
or, if the Common Stock is not quoted on NASDAQ or any comparable system, the
closing sales price or, in case no reported sale takes place, the average of the
closing bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose. If no such prices are available, the current market
price per share shall be the fair value of a share of Common Stock as determined
by the Board of Directors of the Company.
(f) In any case in which this Section 4.6 shall require that an adjustment
be made following a record date or a Determination Date, as the case may be,
established for purposes
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of this Section 4.6, the Company may elect to defer (but only until five
Business Days following the filing by the Company with the Trustee of the
certificate described in Section 4.9) issuing to the holder of any Security
converted after such record date or Determination Date the shares of Common
Stock and other capital stock of the Company issuable upon such conversion over
and above the shares of Common Stock and other capital stock of the Company
issuable upon such conversion only on the basis of the Conversion Price prior to
adjustment; and, in lieu of the shares the issuance of which is so deferred, the
Company shall issue or cause its transfer agents to issue due bills or other
appropriate evidence prepared by the Company of the right to receive such
shares. If any distribution in respect of which an adjustment to the Conversion
Price is required to be made as of the record date, effective date or
Determination Date therefor is not thereafter made or paid by the Company for
any reason, the Conversion Price shall be readjusted to the Conversion Price
which would then be in effect if such record date had not been fixed or such
effective date or Determination Date had not occurred.
SECTION 4.7 No Adjustment
No adjustment in the Conversion Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price as last adjusted; provided, however, that any adjustments which
by reason of this Section 4.7 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article 4 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be.
No adjustment need be made for a transaction referred to in Section 4.6 if
all Securityholders are entitled to participate in the transaction on a basis
and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction. The Company shall give notice to the Trustee of
any such determination.
No adjustment need be made for rights to purchase Common Stock or issuances
of Common Stock pursuant to a Company plan for reinvestment of dividends or
interest.
No adjustment need be made for a change in the par value or a change to no
par value of the Common Stock.
To the extent that the Securities become convertible into the right to
receive cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
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SECTION 4.8 Adjustment for Tax Purposes
The Company shall be entitled to make such reductions in the Conversion
Price, in addition to those required by Section 4.6, as it in its discretion
shall determine to be advisable in order that any stock dividends, subdivisions
of shares, distributions of rights to purchase stock or securities or
distributions of securities convertible into or exchangeable for stock hereafter
made by the Company to its shareholders shall not be taxable.
SECTION 4.9 Notice of Adjustment
Whenever the Conversion Price is adjusted, the Company shall promptly mail
to Securityholders a notice of the adjustment and file with the Trustee an
Officers' Certificate briefly stating the facts requiring the adjustment and the
manner of computing it. The certificate shall be conclusive evidence of the
correctness of such adjustment.
SECTION 4.10 Notice of Certain Transactions
In the event that:
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and shareholders of
the Company must approve the transaction; or
(3) there is a dissolution or liquidation of the Company,
the Company shall mail to Securityholders and file with the Trustee a notice
stating the proposed record or effective date, as the case may be. The Company
shall mail the notice at least ten days before such date. Failure to mail such
notice or any defect therein shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section 4.10.
SECTION 4.11 Effect of Reclassification, Consolidation, Merger or Sale on
Conversion Privilege
If any of the following shall occur, namely: (a) any reclassification or
change of shares of Common Stock issuable upon conversion of the Securities
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination, or any
other change for which an adjustment is provided in Section 4.6); (b) any
consolidation or merger to which the Company is a party
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other than a merger in which the Company is the continuing corporation and which
does not result in any reclassification of, or change (other than a change in
name, or in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock; or (c) any sale or conveyance of all or substantially
all of the assets of the Company as an entirety, then the Company, or such
successor or purchasing corporation, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation, merger, sale or
conveyance, execute and deliver to the Trustee a supplemental indenture
providing that the Holder of each Security then outstanding shall have the right
to convert such Security into the kind and amount of shares of stock and other
securities and property (including cash) receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock deliverable upon conversion of such Security immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Such supplemental indenture shall provide for adjustments of the
Conversion Price which shall be as nearly equivalent as may be practicable to
the adjustments of the Conversion Price provided for in this Article 4. If, in
the case of any such consolidation, merger, sale or conveyance, the stock or
other securities and property(including cash) receivable thereupon by a holder
of Common Stock include shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the Holders of the
Securities as the Board of Directors shall reasonably consider necessary by
reason of the foregoing. The provisions of this Section 4.11 shall similarly
apply to successive consolidations, mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture pursuant to
this Section 4.11, the Company shall promptly file with the Trustee (x) an
Officers' Certificate briefly stating the reasons therefor, the kind or amount
of shares of stock or securities or property (including cash) receivable by
Holders of the Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance, any
adjustment to be made with respect thereto and that all conditions precedent
have been complied with and (y) an Opinion of Counsel that all conditions
precedent have been complied with.
SECTION 4.12 Trustee's Disclaimer
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The Trustee has no duty to determine if the conditions precedent to the
Company's redemption rights under Section 3 have been satisfied and to determine
when an adjustment under this Article 4 should be made, how it should be made or
what such adjustment should be, but may accept as conclusive evidence of that
fact or the correctness of any such adjustment, and shall be protected in
relying upon, an Officers' Certificate including the Officers' Certificate with
respect thereto which the Company is obligated to file with the Trustee pursuant
to Section 4.9. The Trustee makes no representation as to the validity or value
of any securities or assets issued upon conversion of Securities, and the
Trustee shall not be responsible for the Company's failure to comply with any
provisions of this Article 4.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 4.11, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 4.11.
SECTION 4.13 Voluntary Reduction
The Company from time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least 20 days or such longer period
as may be required by law and if the reduction is irrevocable during the period;
provided, however, that in no event may the Conversion Price be less than the
par value of a share of Common Stock.
ARTICLE 5.
SUBORDINATION
SECTION 5.1 Securities Subordinated to Senior Indebtedness
The Company covenants and agrees, and each holder of Securities issued
hereunder by his or her acceptance thereof likewise covenants and agrees, that
all Securities shall be issued subject to the provisions of this Article 5; and
each person holding any Security, whether upon original issue or upon transfer
or assignment thereof, accepts and agrees to be bound by such provisions.
The payment of the principal of and interest on all Securities issued
hereunder (including, without limitation, in connection with any redemption of
Securities) shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full of
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all Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter created, assumed or guaranteed.
SECTION 5.2 Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation, Reorganization, Etc.,
of the Company
Upon the payment or distribution of the assets of the Company of any kind
or character, whether in cash, property or securities (including any collateral
at any time securing the Securities), to creditors upon any dissolution,
winding-up, total or partial liquidation or reorganization of the Company
(whether voluntary or involuntary, or in bankruptcy, insolvency, reorganization,
liquidation, receivership proceedings, or upon an assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the
Company, or otherwise), then in such event:
(a) all Senior Indebtedness (including principal thereof, interest thereon
and fees and expenses relating thereto) and the reasonable fees and expenses of
the Trustee shall first be paid in full, in cash, or have provision made for
such payment, before any payment is made on account of the principal of or
interest on the indebtedness evidenced by the Securities or any deposit is made
pursuant to Section 6.3;
(b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of the
Company as reorganized or readjusted, or securities of the Company or any other
company, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided in this Article 5, with respect to the Securities, to the
payment of all Senior Indebtedness at that time outstanding and to the payment
of all securities issued in exchange therefor to the holders of the Senior
Indebtedness at the time outstanding), to which the Holders or the Trustee on
behalf of the Holders would be entitled except for the provisions of this
Article 5, including any such payment or distribution which may be payable or
deliverable by reason of the payment of another debt of the Company being
subordinated to the payment of the Securities, shall be paid or delivered by any
debtor, Custodian or other person making such payment or distribution, directly
to the holders of the Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness have been
issued, ratably according to the aggregate amounts remaining unpaid on account
of the principal of, interest on and fees and expenses relating to the Senior
Indebtedness held or represented by each, for application to payment of all
Senior Indebtedness
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remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
after giving effect to any concurrent payment or distribution, or provision
therefor, to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of this
Section 5.2, any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of the
Company as reorganized or readjusted, or securities of the Company or any other
Company, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided for in this Article 5, with respect to the Securities, to
the payment of all Senior Indebtedness at the time outstanding and to the
payment of all securities issued in exchange thereof to the holders of Senior
Indebtedness at the time outstanding), shall be received by the Trustee or the
Holders before all Senior Indebtedness is paid in full, or provision made for
its payment, such payment or distribution (subject to the provisions of Sections
5.6 and 5.7) shall be held in trust for the benefit of, and shall be immediately
paid or delivered by the Trustee or such Holders, as the case may be, to, the
holders of Senior Indebtedness remaining unpaid or unprovided for, or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the principal of, interest on and fees and
expenses relating to the Senior Indebtedness held or represented by each, for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all Senior Indebtedness in full after giving effect to
any concurrent payment or distribution, or provision therefor, to the holders of
such Senior Indebtedness.
The Company shall give prompt notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.
Upon any distribution of assets of the Company referred to in this Article
5, the Trustee, subject to the provisions of Sections 9.1 and 9.2, and the
Holders shall be entitled to rely upon any order or decree by any court of
competent jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceeding is pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable
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thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 5.
SECTION 5.3 Securityholders to Be Subrogated to Right of Holders of Senior
Indebtedness
Subject to the prior payment in full of all Senior Indebtedness then due,
the Holders shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until the principal of and interest on the
Securities shall be paid in full, and, for purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of assets,
whether in cash, property or securities, distributable to the holders of Senior
Indebtedness under the provisions hereof to which the Holders would be entitled
except for the provisions of this Article 5, and no payment pursuant to the
provisions of this Article 5 to the holders of Senior Indebtedness by the
Holders shall, as among the Company, its creditors other than the holders of
Senior Indebtedness, and the Holders, be deemed to be a payment by the Company
to or on account of Senior Indebtedness, it being understood that the provisions
of this Article 5 are, and are intended, solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
SECTION 5.4 Obligations of the Company Unconditional
Nothing contained in this Article 5 or elsewhere in this Indenture or in
any Security is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and interest on the Securities, as and when the same shall become
due and payable in accordance with the terms of the Securities, or to affect the
relative rights of the Holders and other creditors of the Company other than the
holders of Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon the happening of an Event of Default under this Indenture,
subject to the provisions of Article 8, and the rights, if any, under this
Article 5 of the holders of Senior Indebtedness in respect of assets, whether in
cash, property or securities of the Company received upon the exercise of any
such remedy.
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SECTION 5.5 Company Not to Make Payment With Respect to Securities in Certain
Circumstances
(a) Upon the happening of a default in payment (whether at maturity or at a
date fixed for prepayment or by acceleration or otherwise) of the principal of
or interest on any Senior Indebtedness, as such default is defined under or in
respect of such Senior Indebtedness or in any agreement pursuant to which such
Senior Indebtedness has been incurred, then, unless and until the amount of such
Senior Indebtedness then due shall have been paid in full or provision made
therefor in a manner satisfactory to the holders of such Senior Indebtedness, or
such default shall have been cured or waived or shall have ceased to exist, the
Company shall not pay principal of or interest on the Securities or make any
deposit pursuant to Section 6.3 or 10.1 and shall not repurchase, redeem or
otherwise retire any Securities (collectively, "pay the Securities").
(b) Upon the happening of an event of default with respect to any Senior
Indebtedness (other than under circumstances when the terms of subsection (a) of
this Section 5.5 are applicable), as such event of default is defined under or
in respect of such Senior Indebtedness or in any agreement pursuant to which
such Senior Indebtedness has been incurred, permitting the holders thereof to
immediately accelerate the maturity thereof, and upon written notice thereof
given to the Company and the Trustee by any holders of such Senior Indebtedness
or their representative or representatives or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness have been issued (a "Default Notice"), then, unless and until such
event of default shall have been cured or waived in writing by the holders of
such Senior Indebtedness or shall have ceased to exist, no direct or indirect
payment shall be made with respect to the principal of or interest on the
Securities or to acquire any of the Securities or on account of the redemption
or mandatory repurchase provisions of the Securities; provided, however, that
this subsection (b) shall not prevent the making of any such payment (which is
not otherwise prohibited by subsection (a) of this Section 5.5) for more than 89
days after the Default Notice shall have been given unless the Senior
Indebtedness in respect of which such event of default exists has been declared
due and payable in its entirety, in which case no such payment may be made until
such acceleration has been waived, rescinded or annulled, or such Senior
Indebtedness shall have been paid in full, or payment thereof shall be duly
provided for in cash or in any other manner satisfactory to the holders of such
Senior Indebtedness. Notwithstanding the foregoing, not more than one Default
Notice shall be given with respect to the same issue of Senior Indebtedness
within a period of 360 consecutive days, and no event of default which existed
or was continuing on the date of any Default Notice and was known to the holders
of such issue of Senior Indebtedness shall be made the basis for the giving of a
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subsequent Default Notice by the holders of such issue of Senior Indebtedness.
(c) In the event that, notwithstanding the foregoing provisions of this
Section 5.5, any payment on account of the principal of or interest on the
Securities shall be made by or on behalf of the Company and received by the
Trustee, any Holder or any Paying Agent (or, if the Company is acting as its own
Paying Agent, money for any such payment shall be segregated and held in trust),
after the happening of a default under any Senior Indebtedness of the type
specified in subsections (a) and (b) of this Section 5.5, then, unless and until
the amount of such Senior Indebtedness then due shall have been paid in full, or
provision made therefor or such default shall have been cured or waived, such
payment (subject, in each case, to the provisions of Sections 5.6 and 5.7 and
the proviso contained in subsection (b) of this Section 5.5) shall be held in
trust for the benefit of, and shall be immediately paid over to, the holders of
Senior Indebtedness or their representative or representatives or the trustee or
trustees under any indenture under which any instruments evidencing any of the
Senior Indebtedness may have been issued ratably according to the aggregate
amounts remaining unpaid on account of the principal of and interest on, and
fees and other charges in respect of, the Senior Indebtedness held or
represented by each, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of Senior Indebtedness.
SECTION 5.6 Notice to Trustee
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article 5 or any other provision of this Indenture, the Trustee shall not at any
time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee, unless and until the
Trustee shall have received written notice thereof from the Company or from the
holder or holders of Senior Indebtedness or from their representative or
representatives or from the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness have been
issued; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Sections 9.1 and 9.2, shall be entitled to assume
conclusively that such facts do not exist.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a person representing himself or herself to be a holder of Senior
Indebtedness (or a representative of such holder or the trustee under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness have
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been issued) to establish that such notice has been given by a holder of Senior
Indebtedness or a representative of any such holder. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Article 5, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of each person under this Article 5, and, if
such evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
SECTION 5.7 Application by Trustee of Monies Deposited With It
Money or U.S. Government Obligations deposited in trust with the Trustee
pursuant to Sections 6.3 and 10.1 and not in violation of this Article 5 shall
be for the sole benefit of Securityholders and shall thereafter not be subject
to the subordination provisions of this Article 5. Otherwise, any deposit of
monies by the Company with the Trustee or any Paying Agent (whether or not in
trust) for the payment of the principal of or interest on any Securities shall
be subject to the provisions of Sections 5.1, 5.2, 5.3 and 5.5; except that, if
two Business Days prior to the date on which by the terms of this Indenture any
such monies may become payable for any purpose (including, without limitation,
the payment of either the principal of or interest on any Security) the Trustee
shall not have received with respect to such monies the notice provided for in
Section 5.6, then the Trustee or any Paying Agent shall have full power and
authority to receive such monies and to apply such monies to the purpose for
which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such date. This Section 5.7
shall be construed solely for the benefit of the Trustee and the Paying Agent
and shall not otherwise affect the rights that holders of Senior Indebtedness
may have to recover any such payments from the Holders in accordance with the
provisions of this Article 5.
SECTION 5.8 Subordination Rights Not Impaired by Acts or Omissions of Company
or Holders of Senior Indebtedness
No right of any present or future holders of any Senior Indebtedness to
enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
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noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with. The holders of any Senior Indebtedness may extend,
renew, modify or amend the terms of such Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company, all without affecting the liabilities and obligations of the
parties to this Indenture or the Holders. No provision in any supplemental
indenture which affects the superior position of the holders of the Senior
Indebtedness shall be effective against the holders of the Senior Indebtedness
unless the holders of such Senior Indebtedness (required pursuant to the terms
of such Senior Indebtedness to give such consent) have consented thereto.
SECTION 5.9 Trustee to Effectuate Subordination
Each holder of a Security by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article 5 and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 5.10 Right of Trustee to Hold Senior Indebtedness
The Trustee, in its individual capacity, shall be entitled to all of the
rights set forth in this Article 5 in respect of any Senior Indebtedness at any
time held by it to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee of any
of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 9.7.
SECTION 5.11 Article 5 Not to Prevent Events of Default
The failure to make a payment on account of the principal of or interest on
the Securities by reason of any provision in this Article 5 shall not be
construed as preventing the occurrence of an Event of Default under Section 8.1.
SECTION 5.12 No Fiduciary Duty Created to Holders of Senior Indebtedness
Notwithstanding any other provision in this Article 5, the Trustee shall
not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness by
virtue of the provisions of this Article 5.
SECTION 5.13 Article Applicable to Paying Agents
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In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 5 shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article 5 in addition to or in place of the Trustee; provided, however,
that Sections 5.6, 5.10 and 5.12 shall not apply to the Company if it acts as
Paying Agent.
ARTICLE 6.
COVENANTS
SECTION 6.1 Payment of Securities
The Company shall promptly make all payments in respect of the Securities
on the dates and in the manner provided in the Securities and this Indenture. An
installment of principal or interest shall be considered paid on the date it is
due if the Paying Agent (other than the Company) holds on that date money,
deposited by the Company or an Affiliate thereof, sufficient to pay the
installment. The Company shall pay interest on overdue principal at the rate
borne by the Securities per annum; it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
SECTION 6.2 SEC Reports
The Company shall file all reports and other information and documents
which it is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, and within 15 days after it files them with the SEC, the Company
shall file copies of all such reports, information and other documents with the
Trustee. The Company will cause any quarterly and annual reports which it mails
to its shareholders to be mailed to the Holders of the Securities.
In the event the Company is at any time no longer subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
prepare, for the first three quarters of each fiscal year, quarterly financial
statements substantially equivalent to the financial statements required to be
included in a report on Form 10-Q under the Exchange Act. The Company will also
prepare, on an annual basis, complete audited consolidated financial statements,
including, but not limited to, a balance sheet, a statement of operations, a
statement of cash flows and all appropriate notes. All such financial statements
will be prepared in accordance with generally accepted accounting principles.
The Company will cause a copy of such financial
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statements to be filed with the Trustee and mailed to the Holders of the
Securities within 50 days after the end of each of the first three quarters of
each fiscal year and within 95 days after the close of each fiscal year. The
Company will also comply with the other provisions of TIA (S) 314(a).
SECTION 6.3 Liquidation
Subject to the provisions of Article 5, so far as they may be applicable
hereto, the Board of Directors or the shareholders of the Company may not adopt
a plan of liquidation, which plan provides for, contemplates or the effectuation
of which is preceded by (a) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company otherwise than
substantially as an entirety (any such sale, lease, conveyance or other
disposition substantially as an entirety being governed by Article 7) and (b)
the distribution of all or substantially all of the proceeds of such sale,
lease, conveyance or other disposition and of the remaining assets of the
Company to the holders of the capital stock of the Company, unless the Company
shall in connection with the adoption of such plan make provision for, or agree
that prior to making any liquidating distributions it will make provision for,
the satisfaction of the Company's obligations hereunder and under the Securities
as to the payment of the principal and interest thereof. The Company shall be
deemed to make provision for such payments only if (1) the Company irrevocably
deposits in trust with the Trustee money or U.S. Government Obligations maturing
as to principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such interest, to pay
the principal of and interest on the Securities then outstanding to maturity and
to pay all other sums payable by it hereunder or (2) there is an express
assumption of the due and punctual payment of the Company's obligations
hereunder and under the Securities and the performance and observance of all
covenants and conditions to be performed by the Company hereunder, by the
execution and delivery of a supplemental indenture in form satisfactory to the
Trustee by a person who acquires, or will acquire (otherwise than pursuant to a
lease), a portion of the assets of the Company, and which person will have
assets (immediately after the acquisition) and aggregate earnings (for such
person's four full fiscal quarters immediately preceding the acquisition) equal
to not less than the assets of the Company (immediately preceding such
acquisition) and the aggregate earnings of the Company (for its four full fiscal
quarters immediately preceding the acquisition), respectively, and which is a
corporation organized under the laws of the United States, any State thereof or
the District of Columbia; provided, however, that the Company shall not make any
liquidating distribution until after the Company (x) has certified to the
Trustee with an Officers' Certificate at least five days prior to the making of
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any liquidating distribution that it has complied with the provisions of this
Section 6.3 and (y) delivered to the Trustee an Opinion of Counsel that all
conditions precedent to such liquidation have been complied with.
SECTION 6.4 Compliance Certificates
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company, an Officers' Certificate as to the signer's
knowledge of the Company's compliance with all conditions and covenants on its
part contained in this Indenture and stating whether or not the signer knows of
any default or Event of Default. If such signer knows of such a default or Event
of Default, the Officers' Certificate shall describe the default or Event of
Default and the efforts to remedy the same. For the purposes of this Section
6.4, compliance shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this Indenture. The
Officers' Certificate need not comply with Section 12.4 hereof.
SECTION 6.5 Notice of Defaults
In the event (a) that indebtedness of the Company in an aggregate amount in
excess of $10,000,000 is declared due and payable before its maturity because of
the occurrence of any default under such indebtedness, or (b) of the occurrence
of any event which entitles the holder or holders of such indebtedness to
declare such indebtedness due and payable before its maturity and with respect
to which any applicable grace period has lapsed or expired, the Company will
promptly give written notice to the Trustee of such declaration or event.
SECTION 6.6 Further Instruments and Acts
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
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ARTICLE 7.
SUCCESSOR CORPORATION
SECTION 7.1 When Company May Merge, Etc.
The Company shall not consolidate with or merge with or into, or transfer
all or substantially all of its assets to, any person unless:
(a) either the Company shall be the resulting or surviving entity or such
person is a corporation organized and existing under the laws of the United
States, a State thereof or the District of Columbia, and such person expressly
assumes by supplemental indenture executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the
Securities and this Indenture (in which case all such obligations of the Company
shall terminate); and
(b) immediately before and immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company as a result of such transaction as having been incurred by the Company
at the time of such transaction, no default or Event of Default shall have
occurred and be continuing.
The Company shall deliver to the Trustee prior to the proposed transaction
an Officers' Certificate and an Opinion of Counsel, each of which shall comply
with Section 12.4 and shall state that such consolidation, merger or transfer
and such supplemental indenture comply with this Article 7 and that all
conditions precedent herein provided for relating to such transaction have been
complied with; provided, however, that such Opinion of Counsel shall not address
Events of Default, except where such counsel has actual knowledge of any such
Event of Default.
SECTION 7.2 Successor Corporation Substituted
Upon any consolidation or merger, or any transfer of all or substantially
all of the assets of the Company in accordance with Section 7.1, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation had been named as the Company
herein.
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ARTICLE 8.
DEFAULT AND REMEDIES
SECTION 8.1 Events of Default
An "Event of Default" shall occur if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon redemption
or otherwise;
(3) the Company fails to comply with any of its other agreements
contained in the Securities or this Indenture and the default continues for
the period and after the notice specified below;
(4) a default shall occur under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company having an
aggregate outstanding principal amount of in excess of $10,000,000, which
default shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have been due
and payable, without such indebtedness having been discharged, such
acceleration having been rescinded or annulled or there having been
deposited in trust a sum of money sufficient to discharge in full such
indebtedness, in each case within a period of 10 days following the
occurrence of such acceleration;
(5) the Company pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors;
or
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
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(A) is for relief against the Company in an involuntary case or
proceeding;
(B) appoints a Custodian of the Company or for all or
substantially all of its property; or
(C) orders the liquidation of the Company;
and in each case the order or decree remains unstayed and in effect for 60
days.
The term "Bankruptcy Law" means Title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
A default under clause (3) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the Securities then outstanding notify the Company and the Trustee, of the
default, and the Company does not cure the default within 30 days after receipt
of such notice. The notice given pursuant to this Section 8.1 must specify the
default, demand that it be remedied and state that the notice is a "Notice of
Default." When a default is cured, it ceases.
Subject to the provisions of Sections 9.1 and 9.2, the Trustee shall not be
charged with knowledge of any Event of Default unless written notice thereof
shall have been given to a Trust Officer at the corporate trust office of the
Trustee by the Company, the Paying Agent, any Holder or any agent of any Holder.
SECTION 8.2 Acceleration
If an Event of Default (other than an Event of Default specified in clause
(5) or (6) of Section 8.1) occurs and is continuing, the Trustee may, by notice
to the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by notice to the Company and the Trustee, and
the Trustee shall, upon the request of such Holders, declare all unpaid
principal of and accrued interest to the date of acceleration on the Securities
then outstanding (if not then due and payable) to be due and payable upon any
such declaration, and the same shall become and be immediately due and payable.
If an Event of Default specified in clause (5) or (6) of Section 8.1 occurs, all
unpaid principal of and accrued interest on the Securities then outstanding
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholder. The
Holders of a majority in principal amount of the Securities then outstanding
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by notice to the Trustee may rescind an acceleration and its consequences if (a)
all existing Events of Default, other than the nonpayment of the principal of
and accrued interest on the Securities which has become due solely by such
declaration of acceleration, have been cured or waived; (b) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid; (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (d) all payments
due to the Trustee and any predecessor Trustee under Section 9.7 have been made.
Anything herein contained to the contrary notwithstanding, in the event of any
acceleration pursuant to this Section 8.2, the Company shall not be obligated to
pay any premium which it would have had to pay if it had then elected to redeem
the Securities pursuant to paragraph 5 of the Securities, except in the case of
any Event of Default occurring by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding payment of the premium which it would have had to pay if it had then
elected to redeem the Securities pursuant to paragraph 5 of the Securities, in
which case an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law.
SECTION 8.3 Other Remedies
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of the
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 8.4 Waiver of Defaults and Events of Default
Subject to Sections 8.7 and 11.2, the Holders of a majority in principal
amount of the Securities then outstanding by notice to the Trustee may waive an
existing default or Event of Default and its consequence, except a default in
the payment of the principal of or interest on any Security as specified in
clauses (1) and (2) of Section 8.1. When a default or Event of Default is
waived, it is cured and ceases.
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SECTION 8.5 Control by Majority
The Holders of a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Securityholder or the Trustee, or that may
involve the Trustee in personal liability; provided, however, that the Trustee
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 8.6 Limitations on Suits
A Securityholder may not pursue any remedy with respect to this Indenture
or the Securities (except actions for payment of overdue principal or interest
or for the conversion of the Securities pursuant to Article 4) unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Securities then outstanding.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 8.7 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of the principal of and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit
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for the enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of the Holder.
SECTION 8.8 Collection Suit by Trustee
If an Event of Default in the payment of principal or interest specified in
clause (1) or (2) of Section 8.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or another obligor on the Securities for the whole amount of principal
and accrued interest remaining unpaid, together with interest on overdue
principal and, to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 8.9 Trustee May File Proofs of Claim
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company (or any other
obligor on the Securities), its creditors or its property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceeding is hereby authorized by each Securityholder to make
such payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Securityholders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 9.7, and to the extent that such payment
of the reasonable compensation, expenses, disbursements and advances in any such
proceedings shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all distributions, dividends,
monies, securities and other property which the Securityholders may be entitled
to receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to, or, on behalf of any
Securityholder, to authorize, accept or adopt any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof, or to
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authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 8.10 Priorities
If the Trustee collects any money pursuant to this Article 8, it shall pay
out the money in the following order:
First, to the Trustee for amounts due under Section 9.7;
Second, to the holders of Senior Indebtedness to the extent required by
Article 5;
Third, to Securityholders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 8.10.
SECTION 8.11 Undertaking for Costs
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 8.11
does not apply to a suit made by the Trustee, a suit by a Holder pursuant to
Section 8.7, or a suit by Holders of more than 10% in principal amount of the
Securities then outstanding.
SECTION 8.12 Waiver of Usury, Stay or Extension Laws
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted
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to the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE 9.
TRUSTEE
SECTION 9.1 Duties of Trustee
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties as are specifically set
forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. The
Trustee, however, shall examine any certificates and opinions which by any
provision hereof are specifically required to be delivered to the Trustee
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) this paragraph does not limit the effect of subsection (b) of this
Section 9.1;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 8.5.
(d) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability, expense or fee.
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(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 9.2 Rights of Trustee
Subject to Section 9.1:
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to Section
12.4(b). The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Certificate or Opinion.
(c) The Trustee may act through its agents and shall not be responsible for
the misconduct or negligence of any agent appointed with reasonable care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel, and the advice or opinion of such
counsel as to matters of law shall be full and complete authorization and
protection in respect of any such action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
SECTION 9.3 Individual Rights of Trustee
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or an affiliate of
the Company with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
9.10 and 9.11.
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SECTION 9.4 Trustee's Disclaimer
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its certificate of authentication.
SECTION 9.5 Notice of Default or Events of Default
If a default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Securityholder notice of
the default or Event of Default within 90 days after it occurs. Except in the
case of a default or an Event of Default in payment of the principal of or
interest on any Security, the Trustee may withhold the notice if and so long as
a committee of its Trust Officers in good faith determines that withholding
notice is in the interest of Securityholders.
SECTION 9.6 Reports by Trustee to Holders
If such report is required by TIA (S) 313, within 60 days after each
February 1, beginning with the February 1 following the date of this Indenture,
the Trustee shall mail to each Securityholder a brief report dated as of such
February 1 that complies with TIA (S) 313(a). The Trustee also shall comply with
TIA (S) 313(b)(2) and (c).
A copy of each report at the time of its mailing to Securityholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Securities are listed. The Company shall notify the Trustee
whenever the Securities become listed on any stock exchange and any changes in
the stock exchanges on which the Securities are listed.
SECTION 9.7 Compensation and Indemnity
The Company shall pay to the Trustee from time to time reasonable
compensation for its services (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust). The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses may
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless against,
any loss, liability or expense incurred by it in connection with its duties
under this Indenture or any action or failure to act as authorized or within the
discretion or rights or powers conferred upon the Trustee hereunder. The
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Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Trustee shall have the option of
undertaking the defense of such claims; provided, however, that if the Trustee
opts not to defend itself, the Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement without its written consent, which shall not be
unreasonably withheld.
The Company need not reimburse the Trustee for any expense or indemnify it
against any loss or liability incurred by it resulting from its negligence or
bad faith.
To secure the Company's payment obligations in this Section 9.7, the
Trustee shall have a senior claim to which the Securities are hereby made
subordinate on all money or property held or collected by the Trustee, except
such money or property held in trust to pay the principal of and interest on
particular Securities. The obligations of the Company under this Section 9.7 to
compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the Holders of particular
Securities. The obligations of the Company under this Section 9.7 shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (5) or (6) of Section 8.1 occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 9.8 Replacement of Trustee
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities then outstanding may remove the
Trustee by so notifying the Trustee and may, with the Company's written consent,
appoint a successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 9.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of 10% in principal amount of the Securities then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee and be released from its obligations (exclusive of any liabilities that
the retiring Trustee may have incurred while acting as Trustee) hereunder, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession to
each Securityholder.
Notwithstanding replacement of the Trustee pursuant to this Section 9.8,
the Company's obligations under Section 9.7 shall continue for the benefit of
the retiring Trustee.
SECTION 9.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust assets to, another corporation, the
resulting, surviving or transferee corporation, without any further act, shall
be the successor Trustee, provided such transferee corporation shall qualify and
be eligible under Section 9.10.
SECTION 9.10 Eligibility; Disqualification
The Trustee shall always satisfy the requirements of paragraphs (1), (2)
and (5) of TIA (S) 310(a). If at any time the Trustee shall cease to satisfy any
such requirements, it shall resign immediately in the manner and with the effect
specified in this Article 9. The Trustee shall be subject to the provisions of
TIA (S) 310(b). Nothing herein shall prevent the Trustee from filing with the
SEC the application referred to in the penultimate paragraph of TIA (S) 310(b).
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SECTION 9.11 Preferential Collection of Claims Against Company
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 10.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 10.1 Termination of Company's Obligations
Subject to applicable rules of any stock exchange or system on which the
Securities are listed or quoted, the Company may terminate all of its
obligations under the Securities and this Indenture (excepting those obligations
referred to in the immediately succeeding paragraph) if all Securities
previously authenticated and delivered (other than destroyed, lost or stolen
Securities which have been replaced or paid or Securities for whose payment
money has theretofore been held in trust and thereafter repaid to the Company,
as provided in Section 10.3) have been delivered to the Trustee or the Paying
Agent for cancellation and the Company has paid all sums payable by it
hereunder, or if the Company irrevocably deposits in trust with the Trustee or
the Paying Agent, pursuant to a written trust agreement satisfactory to the
Trustee, money or U.S. Government Obligations maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of any reinvestment of such interest, to pay the principal of and
interest on the Securities then outstanding to maturity or to the date fixed for
redemption and to pay all other sums payable by it hereunder. The Company may
make an irrevocable deposit pursuant to this Section 10.1 only if at such time
it is not prohibited from doing so under the provisions of Article 5 and the
Company shall have delivered to the Trustee and any such Paying Agent an
Officers' Certificate and an Opinion of Counsel to that effect and that all
other conditions to such deposit have been complied with.
The Company's obligations in paragraph 13 of the Securities and in Sections
2.3, 2.4, 2.5, 2.6, 2.7, 2.11, 6.1, 9.7, 9.8, 10.4 and Article 4 shall survive
until the Securities are no longer outstanding. Thereafter, the Company's
obligations in such paragraph 13 and in Section 9.7 shall survive.
After such irrevocable deposit, the Trustee upon request shall acknowledge
in writing the discharge of the Company's obligations under the Securities and
this Indenture, except for those surviving obligations specified above.
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"U.S. Government Obligations" means direct noncallable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States is pledged.
SECTION 10.2 Application of Trust Money
The Trustee or the Paying Agent shall hold in trust, for the benefit of the
Holders, money or U.S. Government Obligations deposited with it pursuant to
Section 10.1, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of the
principal of and interest on the Securities. Money and U.S. Government
Obligations so held in trust shall not be subject to the subordination
provisions of Article 5.
SECTION 10.3 Repayment to Company
Subject to Section 10.1, the Trustee and the Paying Agent shall promptly
pay to the Company upon request any excess money or U.S. Government Obligations
held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request any
money held by them for the payment of principal or interest that remains
unclaimed for two years after a right to such money has matured; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such payment, may at the expense of the Company cause to be published once
in a newspaper of general circulation in The City of New York or mail to each
Holder entitled to such money notice that such money remains unclaimed and that
after a date specified therein, which shall be at least 30 days from the date of
such publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company, Securityholders
entitled to money must look to the Company for payment as general creditors
unless otherwise prohibited by law.
SECTION 10.4 Reinstatement
If the Trustee or the Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 10.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 10.1 until
such time as the Trustee or the Paying Agent is permitted to apply all such
money or U.S. Government Obligation in accordance with Section 10.1; provided,
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however, that if the Company has made any payment of the principal of or
interest on any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive any such payment from the money or U.S. Government Obligations held by
the Trustee or the Paying Agent.
ARTICLE 11.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.1 Without Consent of Holders
The Company and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Securityholder:
(a) to comply with Sections 4.11, 6.3 and 7.1;
(b) to provide for uncertificated Securities in addition to or in place of
certificated Securities;
(c) to cure any ambiguity, defect or inconsistency, or to make any other
change that does not adversely affect the rights of any
Securityholder;
(d) to comply with the provisions of the TIA; or
(e) to appoint a successor Trustee.
SECTION 11.2 With Consent of Holders
The Company and the Trustee may amend or supplement this Indenture or the
Securities without notice to any Securityholder with the written consent of the
Holders of a majority in principal amount of the Securities then outstanding.
The Holders of a majority in principal amount of the Securities then outstanding
may waive compliance in a particular instance by the Company with any provision
of this Indenture or the Securities without notice to any Securityholder.
Subject to Section 11.4, without the written consent of each Securityholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 8.4, may not:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest on
any Security;
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(3) reduce the principal of or premium on or change the fixed maturity
of any Security or alter the redemption provisions with respect thereto in
a manner adverse to the Holder thereof;
(4) alter the conversion provisions with respect to any Security in a
manner adverse to the Holder thereof;
(5) waive a default in the payment of the principal of or premium or
interest on any Security;
(6) make any changes in Section 8.4 or 8.7 or in this sentence;
(7) modify the provisions of Article 5 in a manner adverse to the
Holders; or
(8) make any Security payable in money other than that stated in the
Security.
It shall not be necessary for the consent of the Holders under this Section
11.2 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 11.2 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement or waiver.
An amendment under this Section 11.2 may not make any change that adversely
affects the rights under Article 5 of any holder of an issue of Senior
Indebtedness unless the holders of that issue, pursuant to its terms, consent to
the change.
SECTION 11.3 Compliance With Trust Indenture Act
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as in effect at the date of such amendment or supplement.
SECTION 11.4 Revocation and Effect of Consents
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder is a continuing consent by the Holder and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
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Security. However, any such Holder or subsequent Holder may revoke the consent
as to his or her Security or portion of a Security if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective.
After an amendment, supplement or waiver becomes effective, it shall bind
every Securityholder, unless it makes a change described in any of clauses (1)
through (8) of Section 11.2. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 11.5 Notation on or Exchange of Securities
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 11.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplement authorized pursuant to
this Article 11 if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing or refusing to sign such amendment
or supplement, the Trustee shall be entitled to receive and, subject to Section
9.1, shall be fully protected in relying upon, an Opinion of Counsel stating
that such amendment or supplement is authorized or permitted by this Indenture.
The Company may not sign an amendment or supplement until the Board of Directors
approves it.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act Controls
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the TIA through
operation of Section 318(c) thereof, such imposed duties shall control.
57
<PAGE>
SECTION 12.2 Notices
Any notice or communication shall be given in writing and delivered in
person or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401-4086
Attention: Chief Financial Officer
If to the Trustee:
[_______________________]
________________________
________________________
Attention: ____________
Such notices or communications shall be effective when received.
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed by
first-class mail to him or her at his or her address shown on the register kept
by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication to a Securityholder is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 12.3 Communications by Holders With Other Holders
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA (S) 312(c).
SECTION 12.4 Certificate and Opinion as to Conditions Precedent
(a) Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
58
<PAGE>
(1) an Officer's Certificate stating that, in the opinion of the
signers, all conditions precedent (including any covenants, compliance with
which constitutes a condition precedent), if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent (including any covenants, compliance
with which constitutes a condition precedent) have been complied with.
(b) Each Officers' Certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture (other
than annual certificates provided pursuant to Section 6.4) shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 12.5 Record Date for Vote or Consent of Securityholders
The Company (or, in the event deposits have been made pursuant to Section
6.3 or 10.1, the Trustee) may set a record date for purposes of determining the
identity of Securityholders entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture, which record date shall be
the later of ten days prior to the first solicitation of such vote or consent or
the date of the most recent list of Securityholders furnished to the Trustee
pursuant to Section 2.5 prior to such solicitation. Notwithstanding the
provisions of Section 11.4, if a record date is fixed, those persons who were
Holders of Securities at such record date (or their duly designated proxies),
and only those persons, shall be entitled to take such action by vote or consent
or to revoke any vote or
59
<PAGE>
consent previously given, whether or not such persons continue to be Holders
after such record date.
SECTION 12.6 Rules by Trustee, Paying Agent, Registrar, Conversion Agent
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar, Paying Agent or Conversion Agent may make reasonable
rules for its functions.
SECTION 12.7 Legal Holidays
A "Legal Holiday" is a Saturday, Sunday or a day on which state or
federally chartered banking institutions in Chicago, Illinois (or such other
city and state where the Trustee's corporate trust operations are then located)
or New York, New York are not required to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.8 Governing Law
Except as specifically provided in Section 3.8(a), the laws of the State of
New York shall govern this Indenture and the Securities without regard to
principles of conflicts of law.
SECTION 12.9 No Adverse Interpretation of Other Agreements
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 12.10 No Recourse Against Others
All liability described in paragraph 18 of the Securities of any director,
officer, employee or shareholder, as such, of the Company is waived and
released.
SECTION 12.11 Successors
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
60
<PAGE>
SECTION 12.12 Multiple Counterparts
The parties may sign multiple counterparts of this Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent the
same agreement.
SECTION 12.13 Separability
In case any provisions in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.14 Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the 15th day of February, 1997.
BOSTON CHICKEN, INC.
By:
--------------------------------
Name:
Title:
[SEAL]
Attest:
- ---------------------------
Name:
Title:
BANKERS TRUST COMPANY
By:
--------------------------------
Name:
Title:
[SEAL]
Attest:
- ---------------------------
Name:
Title:
62
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
Number
BOSTON CHICKEN, INC.
INCORPORATED UNDER THE
LAWS OF THE STATE OF DELAWARE
_____% Convertible Subordinated Debentures due 2004
Boston Chicken, Inc. promises to pay to ___________, or registered assigns,
the principal sum of ______________ Dollars on , 2004.
Interest Payment Dates:
Record Dates:
This Debenture is convertible as specified on the other side of this
Debenture. Additional provisions of this Debenture are set forth on the other
side of this Debenture.
In Witness Whereof, Boston Chicken, Inc. has caused this instrument to be
duly executed in its corporate name and the facsimile of its corporate seal to
be affixed hereunto or imprinted hereon.
BOSTON CHICKEN, INC.
By:
----------------------------
Chairman
[SEAL]
Attest:
By:
----------------------------
Secretary
Trustee's Certificate of Authentication:
This is one of the Securities referred to in
the within-mentioned Indenture
BANKERS TRUST COMPANY,
as Trustee
By:
------------------------------------
Authorized Signatory
Date of Authorization:
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
BOSTON CHICKEN, INC.
_____% Convertible Subordinated Debentures due 2004
1. Interest
Boston Chicken, Inc., a Delaware corporation (the "Company"), promises to
pay interest on the principal amount of this Debenture at the rate per annum
shown above. The Company shall pay interest semiannually on and
of each year, commencing , 1997. Interest on the Debentures
shall accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of first issuance of the Debentures under
the Indenture (as defined below); provided, however, that if there is not an
existing default in the payment of interest, and if this Debenture is
authenticated between a record date referred to on the face hereof and the next
succeeding interest payment date, interest shall accrue from such interest
payment date. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Method of Payment
The Company shall pay interest on this Debenture (except defaulted
interest) to the person who is the Holder of this Debenture at the close of
business on the February 1 or August 1 next preceding the related interest
payment date. The Holder must surrender this Debenture to the Paying Agent to
collect payment of principal. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company may, however, pay principal and
interest by its check payable in such money. It may mail an interest check to
the Holder's registered address.
3. Paying Agent, Registrar and Conversion Agent
Initially, Bankers Trust Company (the "Trustee") will act as Paying
Agent, Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar or Conversion Agent without notice to the Holder. The Company or any
of its Subsidiaries may act as Paying Agent, Registrar or Conversion Agent.
4. Indenture, Limitations
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its ____% Convertible
2
<PAGE>
Subordinated Debentures due 2004 (the "Debentures"), issued under an Indenture
dated as of ____________, 1997 (the "Indenture"), between the Company and the
Trustee. The terms of this Debenture include those stated in the Indenture and
those required by or made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended, and as in effect on the date of the
Indenture. This Debenture is subject to all such terms, and the Holder of this
Debenture is referred to the Indenture and said Act for a statement of them.
The Debentures are subordinated unsecured obligations of the Company
limited to up to $250,000,000 aggregate principal amount, subject to Section 2.2
of the Indenture. The Indenture does not limit other debt of the Company,
secured or unsecured, including Senior Indebtedness.
5. Optional Redemption
The Debentures are subject to redemption, at any time on or after February
15, 2000, as a whole or in part, at the election of the Company. The Redemption
Prices (expressed as percentages of the principal amount) beginning February 15
of the years indicated are as follows:
Redemption
Year Price
---- ----------
2000
2001
2002
2003
in each case together with accrued interest up to but not including the
Redemption Date.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Debentures to be redeemed at his or her registered address. Debentures in
denominations larger than $1,000 may be redeemed in part, but only in whole
multiples of $1,000. On and after the Redemption Date, subject to the deposit
with the Paying Agent of funds sufficient to pay the Redemption Price, interest
ceases to accrue on Debentures or portions of them called for redemption.
7. Purchase of Debentures at Option of Holder Upon a Change in Control
At the option of the Holder and subject to the terms and conditions of the
Indenture, the Company shall become obligated
3
<PAGE>
to purchase all or any part specified by the Holder (so long as the principal
amount of such part is $1,000 or an integral multiple thereof) of the Debentures
held by such Holder on the date that is 40 Business Days after a Change in
Control. The Holder shall have the right to withdraw any Change in Control
Purchase Notice by delivering a written notice of withdrawal to the Paying Agent
in accordance with the terms of the Indenture. The obligation of the Company to
pay the Change in Control Purchase Price will be subject to the terms of
agreements relating to borrowings which constitute Senior Indebtedness.
8. Conversion
A Holder of a Debenture may convert such Debenture into shares of Common
Stock of the Company at any time prior to maturity; provided, however, that if
the Debenture is called for redemption, the conversion right will terminate at
the close of business on the redemption date for such Debenture (unless the
Company shall default in making the redemption payment when due, in which case
the conversion right shall terminate at the close of business on the date such
default is cured and such Debenture is redeemed); provided, further, that if the
Holder of a Debenture presents such Debenture for redemption prior to the close
of business on the redemption date for such Debenture, the right of conversion
shall terminate upon presentation of the Debenture to the Trustee (unless the
Company shall default in making the redemption payment when due, in which case
the conversion right shall terminate on the close of business on the date such
default is cured and such Debenture is redeemed). The initial conversion price
is [$_________] per share, subject to adjustment under certain circumstances.
The number of shares issuable upon conversion of a Debenture is determined by
dividing the principal amount converted by the conversion price in effect on the
Conversion Date. No payment or adjustment will be made for accrued interest on a
converted Debenture or for dividends or distributions on shares of Common Stock
issued upon conversion of a Debenture. No fractional shares will be issued upon
conversion; in lieu thereof, an amount will be paid in cash based upon the
closing sale price of the Common Stock on the last Trading Day prior to the
Conversion Date.
To convert a Debenture, a Holder must (a) complete and manually sign the
conversion notice set forth below and deliver such notice to the Conversion
Agent, (b) surrender the Debenture to the Conversion Agent, (c) furnish
appropriate endorsements or transfer documents if required by the Registrar or
the Conversion Agent, and (d) pay any transfer or similar tax, if required. If a
Holder surrenders a Debenture for conversion after the close of business on the
record date for the payment of an installment of interest and before the close
of business on the related interest payment date then, notwithstanding such
conversion, the interest
4
<PAGE>
payable on such interest payment date shall be paid to the Holder of such
Debenture on such record date. In such event, the Debenture must be accompanied
by payment of an amount equal to the interest payable on such interest payment
date on the principal amount of the Debenture or portion thereof then converted.
A Holder may convert a portion of a Debenture equal to $1,000 or any integral
multiple thereof.
A Debenture in respect of which a Holder had delivered a Change in Control
Purchase Notice exercising the option of such Holder to require the Company to
purchase such Debenture may be converted only if the Change in Control Purchase
Notice is withdrawn as provided above and in accordance with the terms of the
Indenture.
9. Conversion Arrangement on Call for Redemption
Any Securities called for redemption, unless surrendered for conversion
before the close of business on the Redemption Date, may be deemed to be
purchased from the Holders of such Securities at an amount not less than the
Redemption Price, together with accrued interest, if any, to, but not including,
the Redemption Date, by one or more investment bankers or other purchasers who
may agree with the Company to purchase such Securities from the Holders, to
convert them into Common Stock of the Company and to make payment for such
Securities to the Paying Agent in Trust for such Holders.
10. Subordination
The indebtedness evidenced by the Debentures is, to the extent and in the
manner provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness of the Company. Any Holder
by accepting this Debenture agrees to and shall be bound by such subordination
provisions and authorizes the Trustee to give them effect.
In addition to all other rights of Senior Indebtedness described in the
Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any terms of any instrument relating to the
Senior Indebtedness or any extension or renewal of the Senior Indebtedness.
11. Denominations, Transfer, Exchange
The Debentures are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer of
or exchange Debentures in accordance with the Indenture. The Registrar may
require a
5
<PAGE>
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes or other governmental charges that may be imposed
by law or permitted by the Indenture.
12. Persons Deemed Owners
The Holder of a Debenture may be treated as the owner of it for all
purposes.
13. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for two
years, the Trustee or Paying Agent will pay the money back to the Company at its
request. After that, Holders entitled to money must look to the Company for
payment.
14. Amendment, Supplement and Waiver
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the Holders of a majority in
principal amount of the Debentures then outstanding and any past default or
compliance with any provision may be waived in a particular instance with the
consent of the Holders of a majority in principal amount of the Debentures then
outstanding. Without the consent of or notice to any Holder, the Company and the
Trustee may amend or supplement the Indenture or the Debentures to, among other
things, provide for uncertificated Debentures in addition to or in place of
certificated Debentures, or to cure any ambiguity, defect or inconsistency or
make any other change that does not adversely affect the rights of any Holder.
15. Successor Corporation
When a successor corporation assumes all the obligations of its predecessor
under the Debentures and the Indenture in accordance with the terms and
conditions of the Indenture, the predecessor corporation will be released from
those obligations.
16. Defaults and Remedies
An Event of Default is: default for 30 days in payment of interest on the
Debentures; default in payment of principal on the Debentures when due; failure
by the Company for 30 days after notice to it to comply with any of its other
agreements contained in the Indenture or the Debentures; certain events of
bankruptcy, insolvency or reorganization of the Company; and the acceleration of
certain other indebtedness. If an Event of Default (other than as a result of
certain events of bankruptcy, insolvency or reorganization) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Debentures
6
<PAGE>
then outstanding may declare all unpaid principal of and accrued interest to the
date of acceleration on the Debentures then outstanding to be due and payable
immediately, all as and to the extent provided in the Indenture. If an Event of
Default occurs as a result of certain events of bankruptcy, insolvency or
reorganization, unpaid principal of and accrued interest on the Debentures then
outstanding shall become due and payable immediately without any declaration or
other act on the part of the Trustee or any Holder, all as and to the extent
provided in the Indenture. Holders may not enforce the Indenture or the
Debentures except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Debentures.
Subject to certain limitations, Holders of a majority in principal amount of the
Debentures then outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company is required to file
periodic reports with the Trustee as to the absence of default.
17. Trustee Dealings With the Company
Bankers Trust Company, the Trustee under the Indenture, in its individual
or any other capacity, may make loans to, accept deposits from and perform
services for the Company or an Affiliate of the Company, and may otherwise deal
with the Company or an Affiliate of the Company, as if it were not the Trustee.
18. No Recourse Against Others
A director, officer, employee or shareholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Debentures
or the Indenture nor for any claim based on, in respect of or by reason of such
obligations or their creation. The Holder of this Debenture by accepting this
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of this Debenture.
19. Discharge Prior to Maturity
If the Company deposits with the Trustee or the Paying Agent money or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Debentures to maturity, the Company will be discharged from the Indenture except
for certain sections thereof.
7
<PAGE>
20. Authentication
This Debenture shall not be valid until the Trustee or an authenticating
agent signs the certificate of authentication on the other side of this
Debenture.
21. Abbreviations and Definitions
Customary abbreviations may be used in the name of the Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
All capitalized terms used in this Debenture and not specifically defined
herein are defined in the Indenture and are used herein as so defined.
22. Indenture to Control
In the case of any conflict between the provisions of this Debenture and
the Indenture, the provisions of the Indenture shall control.
The Company will furnish to any Holder, upon written request and without
charge, a copy of the Indenture. Requests may be made to: Boston Chicken, Inc.,
14103 Denver West Parkway, Golden, Colorado 80401-4086, Attention: Chief
Financial Officer.
8
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
I or we assign and transfer this Debenture to
- -------------------------------------------------
| |
- -------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------
- -------------------------------------------------
- -------------------------------------------------
(Print or type assignee's name, address and
zip code)
and irrevocably appoint
- -------------------------------------------------
agent to transfer this Debenture on the books
of the Company. The Agent may substitute
another to act for him or her.
Date:
--------------------------------------------
Your signature:
----------------------------------
(Sign exactly as your name
appears on the other side of
this Debenture)
- -------------------------------------------------
(Sign exactly as your name appears on the
other side of this Debenture)
*Signature guaranteed by:
-------------------------
By:
----------------------------------------------
- -----------------------
* The signature must be guaranteed by a bank, a trust company or a member
firm of the New York Stock Exchange.
<PAGE>
CONVERSION NOTICE
To convert this Debenture into Common Stock of the Company, check the box:
[ ]
To convert only part of this Debenture, state the amount to be converted:
$
--------------------
If you want the stock certificate made out in another person's name, fill in the
form below:
- -------------------------------------------------
| |
- -------------------------------------------------
(Insert other person's soc. sec. or tax I.D. no.)
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
(Print or type assignee's name, address and
zip code)
Date:
---------------------------------------------
Your signature:
-----------------------------------
(Sign exactly as your name appears on the other
side of this Debenture)
- --------------------------------------------------
(Sign exactly as your name appears on the
other side of this Debenture)
*Signature guaranteed by:
-------------------------
By:
-----------------------------------------------
* The signature must be guaranteed by a bank, a trust company or a
member firm of the New York Stock Exchange.
<PAGE>
NOTICE OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 3.8 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Debenture purchased by the
Company pursuant to Section 3.8 of the Indenture, state the amount to be
purchased: $_______
Date:
----------------- Your signature
----------------------------------
(Sign exactly as your name appears
on the other side of this
Debenture)
----------------------------------
(Sign exactly as your name appears
on the other side of this
Debenture)
*Signature guaranteed by:
-------------------
By:
-----------------------------------------
- ---------------------------
* The signature must be guaranteed by a bank, a trust company or a member
firm of the New York Stock Exchange.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF BELL, BOYD & LLOYD APPEARS HERE]
March 5, 1997
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Re: $287,500,000 Principal Amount of
Convertible Subordinated Debentures due 2004
--------------------------------------------
Gentlemen:
We have acted as counsel to Boston Chicken, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission under the Securities Act of 1933 of a
Registration Statement on Form S-3 relating to the offering of up to
$287,500,000 aggregate principal amount of Convertible Subordinated Debentures
due 2004 ("Debentures") and the shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), issuable upon conversion of the Debentures. In
this connection, we have examined such corporate and other records, instruments,
certificates and documents as we considered necessary to enable us to express
this opinion.
Based on the foregoing, it is our opinion as follows:
1. The Company is a corporation duly incorporated in and validly existing
under the laws of the State of Delaware;
2. The Company has taken all action necessary to authorize the execution
and delivery of the Indenture and the Purchase Agreement relating to the
Debentures and the issuance and sale of the Debentures upon the terms and
conditions set forth in the Purchase Agreement;
3. Upon the execution and delivery of the Purchase Agreement and the
Indenture by the respective parties thereto and the execution, authentication
and delivery of the Debentures and the receipt by the Company of the agreed
purchase price therefor in accordance with the terms and conditions of the
Purchase Agreement, the Debentures will be valid and legally binding obligations
of the Company, enforceable in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally and by general equitable principles,
and entitled to the benefits of the Indenture; and
4. The Common Stock initially issuable upon conversion of the Debentures
has been duly authorized and when such Common Stock is issued upon conversion of
the Debentures, it will be legally issued, fully paid and non-assessable.
<PAGE>
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters." In giving this consent, we do not admit that we are within the
category of persons whose consent is required by Section 7 of the Securities Act
of 1933.
Very truly yours,
/s/ Bell, Boyd & Lloyd
<PAGE>
EXHIBIT 12.1
BOSTON CHICKEN, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE QUARTERS ENDED
------------------------------------------------------------------------- -----------------------
DECEMBER 29, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 29, OCTOBER 1, OCTOBER 6,
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes.............. $(2,568) $(5,850) $1,647 $20,450 $54,373 $37,708 $79,857
Add: Total fixed
charges deducted from
earnings (loss)........... 216 202 1,195 6,897 16,835 11,343 16,724
------- ------- ------ ------- ------- ------- -------
Earnings (loss) available
for payment of
fixed charges............. $(2,352) $(5,648) $2,842 $27,347 $71,208 $49,051 $96,581
======= ======= ======= ======= ======= ======= =======
Fixed charges:
Interest expense.......... $ 48 $ -- $ 640 $ 5,827 $15,352 $10,174 $15,777
Portion of operating
lease rentals deemed
to be interest............ 168 202 555 1,070 1,483 1,168 947
------- ------- ------ ------- ------- ------- -------
Total fixed charges........ $ 216 $ 202 $1,195 $ 6,897 $16,835 $11,342 $16,724
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges............. -- -- 2.38 3.97 4.23 4.32 5.77
======= ======= ======= ======= ======= ======= =======
Deficiency of earnings
available to cover
fixed charges............. $ 2,568 $ 5,850
======= =======
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants we hereby consent to the use of our
reports dated February 28, 1996, on our audits of the consolidated financial
statements of Boston Chicken, Inc. and subsidiary, and to all references to our
firm included in or made a part of this registration statement on Form S-3.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Denver, Colorado
March 5, 1997
<PAGE>
EXHIBIT 25.1
_____________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________
___________________________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
BOSTON CHICKEN, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 36-3904053
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
14103 DENVER WEST PARKWAY
GOLDEN, COLORADO 80401-4086
(Address of principal executive offices) (Zip Code)
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority
to which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3. -15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment
of the Organization Certificate of Bankers Trust
Company dated June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1 Statement,
Registration No. 33-65171, and Certificate of Amendment
of the Organization Certificate of Bankers Trust
Company dated March 20, 1996, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended
on September 17, 1996 - Incorporated herein by
reference to Exhibit 4 filed with Form T-1 Statement,
Registration No. 333-15263.
-2-
<PAGE>
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
EXHIBIT 7 - A copy of the latest report of condition of Bankers
Trust Company dated as of September 30, 1996.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 28rd day
of February, 1997.
BANKERS TRUST COMPANY
By: /s/ Matthew Seeley
--------------------
Matthew Seeley
Vice President
-4-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 9/30/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
----------------
C400
----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1)............... 0081 809,000 1.a
b. Interest-bearing balances(2)........................................ 0071 4,453,000 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A).......... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........ 1773 4,133,000 2.b.
3 Federal funds sold and securities purchased under agreements to //////////////////
resell in domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBFs: //////////////////
a. Federal funds sold.................................................. 0276 5,933,000 3.a.
b. Securities purchased under agreements to resell..................... 0277 413,000 3.b.
4. Loans and lease financing receivables: ////////////////// 4.a.
a. Loans and leases, net of unearned income (from Schedule RC-C) ////////////////// 4.b.
RCFD 2122 27,239,000 ////////////////// 4.c.
b. LESS: Allowance for loan and lease losses...........RFCD 3123 917,000 ////////////////// 4.a
c. LESS: Allocated transfer risk reserve ...............RCFD 3128 0 //////////////////
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c)................. 2125 26,322,000 4.d.
5. Assets held in trading accounts............................................. 3545 36,669,000 5.
6. Premises and fixed assets (including capitalized leases).................... 2145 870,000 6.
7. Other real estate owned (from Schedule RC-M)................................ 2150 215,000 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 212,000 8.
9. Customers' liability to this bank on acceptances outstanding................ 2155 577,000 9.
10. Intangible assets (from Schedule RC-M)...................................... 2143 18,000 10.
11. Other assets (from Schedule RC-F)........................................... 2160 8,808,000 11.
12. Total assets (sum of items 1 through 11).................................... 2170 89,432,000 12.
--------------------------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts. City,
State
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 9/30/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC--CONTINUED
Dollar Amounts in Thousands //////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES ////////////////////////
13. Deposits: ////////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule
RC-E, part I) RCON 2200 9,391,000 13.a.
(1) Noninterest-bearing(1) ............RCON 6631 2,734,000........ //////////////////////// 13.a.(1)
(2) Interest-bearing....................RCON 6636 6,657,000........ //////////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule
RC-E part II) RCFN 2200 23,385,000 13.b.
(1) Noninterest-bearing................RCFN 6631 654,000 //////////////////////// 13.b.(1)
(2) Interest-bearing...................RCFN 6636 22,731,000 //////////////////////// 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in ////////////////////////
domestic offices of the bank and of its Edge and Agreement subsidiaries, and ////////////////////////
in IBFs:
a. Federal funds purchased................................................. RCFD 0278 3,090,000 14.a.
b. Securities sold under agreements to repurchase.......................... RCFD 0279 99,000 14.b.
15. a. Demand notes issued to the U.S. Treasury................................ RCON 2840 0 15.a.
b. Trading liabilities..................................................... RCFD 3548 18,326,000 15.b.
16. Other borrowed money: //////////////////////// /
a. With original maturity of one year or less.............................. RCFD 2332 17,476,000 16.a.
b. With original maturity of more than one year............................ RCFD 2333 2,771,000 16.b.
17. Mortgage indebtedness and obligations under capitalized leases.............. RCFD 2910 31,000 17.
18. Bank's liability on acceptances executed and outstanding.................... RCFD 2920 577,000 18.
19. Subordinated notes and debentures........................................... RCFD 3200 1,228,000 19.
20. Other liabilities (from Schedule RC-G)...................................... RCFD 2930 8,398,000 20.
21. Total liabilities (sum of items 13 through 20).............................. RCFD 2948 84,772,000 21.
////////////////////////
22. Limited-life preferred stock and related surplus............................ RCFD 3282 0 22.
EQUITY CAPITAL ////////////////////////
23. Perpetual preferred stock and related surplus............................... RCFD 3838 500,000 23.
24. Common stock................................................................ RCFD 3632 1,002,000 24.
25. Surplus (exclude all surplus related to preferred stock).................... RCFD 3839 527,000 25.
26. a. Undivided profits and capital reserves.................................. RCFD 3632 3,017,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.............................................................. RCFD 8434 ( 16,000) 26.b.
27. Cumulative foreign currency translation adjustments......................... RCFD 3284 ( 370,000) 27.
28. Total equity capital (sum of items 23 through 27)........................... RCFD 3210 4,660,000 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of ////////////////////////
items 21, 22, and 28)....................................................... RCFD 3300 89,432,000 29.
----------------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C>
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank Number
---------------
by independent external auditors as of any date during 1995 ....................... RCFD 6724 N/A M.1
----------------------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm
which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
______________________
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION
8005 OF THE BANKING LAW," dated March 20, 1996, providing for an increase in
authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares
with a par value of $10 each designated as Common Stock and 500 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 21ST day of MARCH in the Year of our Lord
------- ---------
one thousand nine hundred and NINETY-SIX.
/s/ Peter M. Philbin
___________ ------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
_____________________________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a
Managing Director and an Assistant Secretary of Bankers Trust Company, do hereby
certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Three Hundred Fifty One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,351,666,670), divided into
Eighty-Five Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (85,166,667) shares with a par value of $10 each designated as
Common Stock and 500 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into One
Hundred Million, One Hundred Sixty Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 500 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
<PAGE>
6. The foregoing amendment of the organization certificate was authorized
by unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th
day of March , 1996.
/s/ James T. Byrne, Jr.
----------------------------------
James T. Byrne, Jr.
Managing Director
/s/ Lea Lahtinen
----------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
/s/ Lea Lahtinen
----------------------------------
_________ Lea Lahtinen
Sworn to before me this 20th day
of March, 1996.
/s/ Sandra L. West
- ---------------------
Notary Public
SANDRA L. WEST Counterpart filed in the
Notary Public State of New York Office of the Superintendent of
No. 31-4942101 Banks, State of New York,
Qualified in New York County This 21st day of March, 1996
Commission Expires September 19, 1996
