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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22802
BOSTON CHICKEN, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-3904053
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14103 Denver West Parkway
P.O. Box 4086
Golden, CO 80401-4086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 278-9500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.01 par value
4 1/2% Convertible Subordinated Debentures Due 2004
Liquid Yield Option Notes Due 2015
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days: Yes: X No:
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K.[ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY
$1,693,426,000 AT MARCH 10, 1997 (BASED ON THE CLOSING SALE PRICE ON THE NASDAQ
NATIONAL MARKET ON MARCH 10, 1997, AS REPORTED BY THE WALL STREET JOURNAL
(WESTERN EDITION)). AT MARCH 10, 1997, THE REGISTRANT HAD ISSUED AND OUTSTANDING
AN AGGREGATE OF 64,725,510 SHARES OF ITS COMMON STOCK OF RECORD.
DOCUMENTS INCORPORATED BY REFERENCE
THOSE SECTIONS OR PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997 DESCRIBED IN PART III HEREOF
ARE INCORPORATED BY REFERENCE IN THIS REPORT.
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-K UNDER "ITEM 1. BUSINESS", "ITEM 3.
LEGAL PROCEEDINGS", "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS", AND ELSEWHERE IN THIS FORM 10-K CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF BOSTON
CHICKEN, INC. ("BCI"), EINSTEIN/NOAH BAGEL CORP. ("ENBC"), BOSTON MARKET
INTERNATIONAL, INC. ("BMI"), THEIR AREA DEVELOPERS, FRANCHISEES, AND LICENSEES,
BOSTON MARKET/R/ STORES, EINSTEIN BROS./TM/ BAGEL STORES AND NOAH'S NEW YORK
BAGEL/R/ STORES, AND PROGRESSIVE FOOD CONCEPTS, INC. ("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/ SYSTEM AT BOSTON MARKET/R/ 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
FORM 10-K. THE SUCCESS OF THE COMPANY, ENBC, AND BMI IS DEPENDENT ON THEIR
RESPECTIVE AREA DEVELOPERS, FRANCHISEES, AND LICENSEES AND THE MANNER IN WHICH
THEY OPERATE AND DEVELOP BOSTON MARKET STORES, EINSTEIN BROS. BAGELS STORES, AND
NOAH'S NEW YORK BAGELS STORES.
ITEM 1. BUSINESS
Unless otherwise indicated, references in this report to the "Company" mean
Boston Chicken, Inc., its predecessors, and its and their subsidiaries from time
to time (excluding Einstein/Noah Bagel Corp.). SPECIAL NOTE: CERTAIN STATEMENTS
SET FORTH BELOW UNDER THIS CAPTION CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE REFORM ACT. SEE "SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS" FOR ADDITIONAL FACTORS RELATING TO SUCH STATEMENTS.
GENERAL
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 stores, and 18 of which are operated
by other franchisees. 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 currently estimates that there will be approximately 1,400
stores in operation systemwide by the end of 1997. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ABOVE.
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. 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/R/ and Extreme Carver/tm/ brand names;
fresh-baked chicken pot pies; chicken and other soups; beverages; desserts; and
other items.
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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/R/ 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 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.
The Company owns approximately 17.3 million shares (representing
approximately 53%) of the outstanding common stock of Einstein/Noah Bagel Corp.
("ENBC") (NASDAQ:ENBX) as of March 7, 1997. 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 Company was incorporated as a Massachusetts corporation in March 1988
and reincorporated in the State of Delaware in 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.
AREA DEVELOPERS
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 area developer 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. At December 29, 1996, the Company had 15 domestic area
developers compared with 19 domestic area developers at the end of its 1995
fiscal year.
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 loans to its area developers to partially finance
store development and working capital needs and provides to certain area
developers various equipment and real estate leasing programs. See Note 9 of
Notes to Consolidated Financial Statements. The Company's loan agreements with
its area developers generally require the area 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 equal to three to four times the amount of the area developer's
contributed capital. The loans are typically convertible into a majority equity
interest in the area developer after the expiration 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 in any area developer 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. Upon conversion, the
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Company would typically become majority equity owner of the area developer,
resulting in the Company consolidating the area developer's operations in its
financial statements. Consequently, the franchise and related fees earned by the
Company (including interest, royalties, real estate related fees, software fees,
and other fees) from such 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 April 1996, the Company acquired a 93% interest in Mid-Atlantic
Restaurant Systems L.P., its Boston Market area developer for the Philadelphia
area ("Mid-Atlantic"). At the date of the acquisition, Mid-Atlantic operated 78
stores. In July 1996, Mid-Atlantic acquired 100% of the equity interest in New
Jersey Rose, L.L.C., the Boston Market area developer for the southern New
Jersey area ("New Jersey Rose"), which operated 12 stores. In March 1997, the
Company converted its loan to BC New York, L.L.C. ("BCNY") into a majority
equity interest in BCNY. Additionally, the Company has agreed to acquire 40% of
the current equity holders' interest in BCNY, which, after giving effect to the
conversion, will result in the Company having an equity interest in BCNY of
approximately 84%. The BCNY transaction added 118 Boston Market stores,
operating in the metropolitan New York area, northern New Jersey, and
Connecticut, to the Company store base. As of the date of conversion, total loan
advances to BCNY were $80.0 million.
Each loan agreement contains representations, warranties, terms, and
covenants standard to those of a secured loan agreement. The Company's loans to
its area developers subject the Company to the risks of being a secured lender.
The Company considers 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
it deems relevant at the time in evaluating whether to establish an allowance
for potential loan losses. See Note 10 of Notes to Consolidated Financial
Statements.
As a result of executing the rapid expansion strategy required by the
Company, Boston Market financed area developers have incurred net losses in each
of the last three years. The net losses incurred over this three-year period,
which aggregated $156.5 million in 1996, $148.3 million in 1995, and $51.3
million in 1994, include (a) depreciation and amortization charges of
approximately $93.0 million, (b) approximately $148.0 million attributable to
investment 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, 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. The
net loss amounts for each of the fiscal years represent the aggregate net loss
amounts for all financed area developers, the operations of which were not
consolidated into the Company's financial statements as of the date the Company
first reported such losses for such fiscal year. As a result of the foregoing
factors, as well as ongoing improvements to store operating performance and
increases in scale efficiencies, the Company does not consider these start-up
losses to be a meaningful financial measure during this rapid expansion phase
(i.e., that period during which new stores constitute a significant percentage
of the store base). 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 ("ADI"). 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 investment 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 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 ADIs, the Company
believes substantially all of its financed area developers will remain in the
rapid expansion phase during 1997 in most of their ADIs; however, the Company
expects that area developer aggregate net losses will be lower in fiscal 1997
than in fiscal 1996. Subsequent to the completion of the rapid expansion phase,
the Company expects area developer profitability to be a more meaningful factor
in assessing loan recoverability and any future loan commitments. Although the
Company believes its current financed area developers will achieve
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 2.
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The Company's success is dependent upon its area developers and franchisees
and the manner in which they develop and operate Boston Market stores and
manage their organizational and financial resources. The opening and success of
stores is dependent upon a number of factors, including the availability of
suitable sites, the negotiation of acceptable lease or purchase terms for such
sites, permitting and regulatory compliance, the ability to meet construction
schedules, the ability to hire and train qualified personnel, the financial and
other capabilities of the Company and 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.
At times, the Company or its area developers or franchisees may determine
that a specific store should be closed due to operating or site-related issues
specific to that store, changes in the market or trade area, changes in store
development strategy, or failure of the store to meet desired sales or
profitability levels. The cost to close a store varies depending upon whether
the site is owned or leased, and if leased, the remaining renewal terms, and the
ability of the site to be sublet, as well as the type, quantity and condition of
the equipment installed and the cost to remove such equipment and improvements
from the site. During fiscal 1996, the Company's area developers and
franchisees closed 15 stores and the Company closed no stores. The Company has
been informed by its area developers and franchisees that the costs incurred by
them to close such stores ranged from $430,000 to $890,000 per store.
DEVELOPMENT AGREEMENTS
Area development agreements provide for the opening of a specified number
of stores within a defined geographic territory in accordance with a schedule of
dates. As of December 29, 1996, the Company had entered into area development
agreements that provide for the development of 2,494 additional stores. An area
developer's development schedule generally covers three to seven years and
typically has benchmarks for the number of stores to be opened and in operation
at six-month intervals. Area developers are required to pay a development fee of
$5,000 per store and a $35,000 store franchise fee described in "--Franchise
Agreements". Area development agreements generally provide that the area
developer has the exclusive right to open Boston Market stores within the
specified territory during the term of the development schedule, except that the
Company reserves the right to engage in certain limited special distribution
arrangements and, in the event the area developer does not choose to develop
them, to develop target sites and conversion sites within the specified
territory. Target sites are sites which the Company believes should be developed
for competitive or market reasons regardless of the applicable development
schedule or the location of pre-existing sites. Conversion sites are sites
obtained from other companies which are suitable for conversion for use as
Boston Market stores.
Failure to meet development schedules or other breaches of the area
development agreement may lead to termination of the limited exclusivity
provided by the agreement, renegotiation of development and franchise
provisions, or termination of the right to build future stores, although such
termination does not generally affect existing franchise agreements for
developed locations.
FRANCHISE AGREEMENTS
Once an acceptable lease for an approved store site has been fully
executed, the Company and the area developer enter into a franchise agreement
under which the area developer becomes the franchisee for the specific store to
be developed at the site.
Franchise agreements typically provide for payment of a $35,000 per store
franchise fee (less any applicable franchise deposit), a 5% royalty on gross
revenue minus sales/service taxes, customer refunds and coupons, and the portion
of employee meals not charged to the employee, a 2% national advertising fund
contribution, a 4% local advertising fund contribution, and a $10,000 minimum
grand opening expenditure. Under the majority of applicable franchise
agreements, the local advertising fund contribution may be increased by .25% per
calendar year up to an aggregate 5% local advertising fund contribution. The
Company has sought and received from certain of its area developers commitments
for higher advertising expenditures during the initial phases of development.
Certain of the Company's older franchise and area development agreements provide
for 4% royalties and reduced franchise and area development fees. In addition,
stores opened or to be opened pursuant to such older forms of agreements need
not make combined national and local advertising contributions in excess of 5%.
Such older forms of agreements constitute a decreasing percentage of all
franchise agreements.
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The Company's franchise agreements generally provide that the Company may
from time to time specify computer hardware and software for use in the stores,
including the use of licensed software designated or created by or for the
Company and its franchisees. The computer hardware specified by the Company
costs approximately $21,000 to $49,000 per store. The Company charges a one-time
$15,000 fee for its licensed software for store systems, plus approximately
$1,500 for certain specified third-party software purchased through the Company.
Current franchise agreements also generally provide for a maintenance fee to the
Company of $323 per four-week accounting period for modifications and
enhancements made to the licensed software and certain other maintenance and
support services. The Company believes that its integrated hardware and licensed
software systems facilitate better communication with, and monitoring of, the
Boston Market system. The Company makes extensive use of computer systems and
electronic data transmission in evaluating the results of the Boston Market
system, polling a majority of its stores daily by modem to gather revenue and
other financial and statistical information.
Franchise agreements generally provide for an area of limited exclusivity
surrounding the Boston Market store in which the Company may neither develop nor
grant to others the right to develop additional Boston Market stores, except
that the Company generally reserves the right to engage in certain limited
special distribution arrangements and, in the event that the franchisee does not
choose to develop them, to develop regional shopping mall sites and conversion
sites within the franchisee's designated territory. Designated territories in
suburban locations are generally a one mile radius surrounding the Boston Market
store, while urban locations generally have a smaller (e.g., one-half mile)
radius or a trade-area-specific designated territory.
All of the Company's franchise agreements require that the store be
operated in accordance with the operating procedures and menu established by the
Company and meet applicable quality, service, and cleanliness standards. The
Company may default and terminate any franchisee who does not comply with such
standards. The Company is specifically authorized to take accelerated action in
the event that any franchisee operation presents a health risk. The Company
believes that maintaining superior food quality, a clean and pleasing
environment, and excellent customer service is critical to the reputation and
success of the Boston Market system and intends to act aggressively to enforce
applicable contractual requirements. Franchisees could contest such defaults or
terminations. See "Item 3. Legal Proceedings".
CURRENT INITIATIVES IN THE BOSTON MARKET SYSTEM
Menu
The Company believes that variety is a primary factor influencing customer
trial and frequency. As a result, the Company has expanded its menu offerings to
include additional dinner entrees and a line of salads, soups, and Boston Carver
sandwiches. The Company is currently extending its Boston Carver sandwich brand
with a line of four indulgent sandwiches marketed under the Extreme Carver brand
name. In addition, the Company has expanded its Boston Hearth (TM) brand of
holiday foods to include Boston Hearth breasts of turkey, which are marinated
and slow-roasted in Boston Market rotisserie ovens, and banquet meal packages
which serve from 10 to 24 people. The Company continually evaluates the Boston
Market menu, including product price points, in its attempt to maximize customer
trial and frequency.
F.A.S.T. Track(TM)
The Company and its area developers are currently in the process of
implementing a new customer service system, 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 Boston Market stores and
being retrofitted to many existing Boston Market stores. 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 begins
preparing the 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. The F.A.S.T. Track system has been
shown to significantly reduce service times in stores in which the new system
has been implemented and optimized.
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Organizational Strategy
The Company and its area developers are exploring alternative
organizational strategies in an effort to minimize area developer overhead
expenses while maximizing store level performance. These initiatives include
possible area developer combinations and store manager incentive programs.
Programs under consideration include store level bonus compensation plans that
are based upon store performance and potential store level ownership
opportunities for the store manager. 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 consistently superior performance at
the store level. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE
2.
Boston Market International
The Company is in the preliminary stage of taking the Boston Market brand
into foreign markets, which could 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. In January 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.
IN ADDITION TO FACTORS DISCUSSED IN "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 2, 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.
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.
MARKETING AND COMPETITION
The Company markets through television, radio, newspapers and other print
media (including use of free-standing inserts and promotional coupons), signage,
direct mail, and in-store point-of-purchase displays. The Company's advertising,
coupons, menus, and in-store displays concentrate on value through the purchase
of meals or meal combinations, as opposed to a la carte selections. Both Company
and franchise stores contribute to a national advertising fund to pay for the
development of advertising material and to a local advertising fund to pay for
advertising in their respective ADIs. See "--Area Developers--Franchise
Agreements" and Note 8 of Notes to Consolidated Financial Statements.
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 national, regional, and
local take-out food service companies, quick service restaurants, casual full-
service dine-in restaurants, delicatessens, cafeteria-style buffets, and
prepared food stores, as well as with supermarkets and convenience stores.
Competitors include pizza restaurants, Chinese food restaurants, other purveyors
of carry-out food, and convenience dining establishments, including such chains
as Pizza Hut, McDonald's, Kenny Rogers Roasters, and others. The Company
believes that Boston Market stores compete favorably in the important factors of
taste, food quality, convenience, customer service, and value, and that its area
developer organizational structure, communication systems, and concentrated
market development provide it with competitive advantages.
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Competition in the food service business is often affected by changes in
consumer tastes, national, regional, and local economic and real estate
conditions, demographic trends, traffic patterns, the cost and availability of
labor, purchasing power, availability of product, and local competitive factors.
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. The Company attempts to manage or adapt to
these factors, but it should be recognized that some or all of these factors
could cause the Company and some or all of its area developers and franchisees
to be adversely affected.
VENDORS
The Company maintains relationships with a variety of suppliers of
proteins, fresh vegetables, fruits, and other produce, spices and seasonings,
paper products, smallwares, furniture, equipment, fixtures, and other items and
services, although the Company is working to consolidate the number of such
vendors. See "--Current Initiatives in the Boston Market System-Vendor
Consolidation." The Company has a national account relationship with Marriott
Distribution Services Corporation, which provides for deliveries of food, paper,
and smallware products to participating stores several times a week at a
negotiated standardized mark-up above cost. The Company has entered into supply
agreements with Hudson Foods, Inc. and Tyson Foods, Inc. to purchase a
significant portion of the system's chicken and turkey needs. The Boston Market
system utilizes a number of other poultry suppliers and the Company believes
that alternative sources are available if current suppliers are unable to
provide adequate quantities of poultry or other products or services at
acceptable prices. The Boston Market system is subject to potential shortages or
interruptions in supply caused by transportation strikes, adverse weather, or
other conditions which could adversely affect the availability, quality, and
cost of ingredients. The Boston Market system purchases in excess of 10% of its
supplies from each of Marriott Distribution Services Corporation and Hudson
Foods, Inc.
TRADEMARKS AND SERVICE MARKS
The Company owns a number of trademarks and service marks that have been
registered with the United States Patent and Trademark Office, including Boston
Market(R), Boston Chicken(R), Boston Carver(R), and the current Boston Market
logo. In addition, the Company has trademark applications pending for a number
of additional marks, including Extreme Carver(TM) and Boston Hearth(TM). The
Company has also made application for other trademarks and service marks,
primarily designations of particular food products and services with a "Boston"
appellation.
In addition, the Company has registered or made application to register its
name (or, in certain cases, its name in connection with additional words or
graphics) in more than 70 foreign countries and is currently registering the
Boston Market(R) name or logo in most of such countries, although there can be
no assurance that any mark is registrable in every country registration is
sought. The Company considers its intellectual property rights to be important
to its business and actively defends and enforces them.
ENBC owns a number of federal trademarks and service mark registrations and
has federal trademark applications pending for additional trademarks and service
marks. ENBC has made application to register certain of its trademarks in more
than 30 countries.
REGULATION
Boston Market stores are required to comply with Federal, state, and local
government regulations applicable to consumer food service businesses generally,
including those relating to the preparation and sale of food, minimum wage
requirements, overtime, working and safety conditions, and citizenship
requirements, as well as regulations relating to zoning, construction, health,
business licensing, and employment. The Company believes that it and its area
developers and franchisees are in material compliance with these provisions.
8
<PAGE>
Certain states and the Federal Trade Commission require a franchisor to
transmit specified disclosure statements to potential franchisees before
granting a franchise. Additionally, some states require the franchisor to
register its franchise with the state before it may offer a franchise. The
Company believes that its Uniform Franchise Offering Circular (together with any
applicable state versions or supplements) complies with both the Federal Trade
Commission guidelines and all applicable state laws regulating franchising in
those states in which it has offered franchises.
EINSTEIN/NOAH BAGEL CORP.
In March 1995, the Company made an investment in Einstein/Noah Bagel Corp.
("ENBC") (NASDAQ:ENBX), which was created through the combination of a number of
leading regional bagel retailers. The Company owns approximately 17.3 million
shares (representing approximately 53%) of the outstanding common stock of ENBC
as of March 7, 1997. 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 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.
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
ENBC company stores. 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 1,016 additional stores, the
majority of which are scheduled to open over the next three years. ENBC's area
developers are pursuing a rapid expansion strategy similar to that of the
Company's area developers. Consequently, the Company believes that ENBC's area
developers will also incur net losses during their rapid expansion phase. The
Company also believes, however, that the factors applicable to start-up losses
and recovery of such losses by the Boston Market area developers should apply to
ENBC area developers as well. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS" ON PAGE 2 AND "--AREA DEVELOPERS".
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 December 31, 1996, the Company owned approximately 51.3% of
the outstanding common stock of ENBC and had the right to purchase 441,788
shares of common stock of ENBC at prices ranging from $28.575 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 of 1933, as amended (the "Securities Act"), with respect to
shares of ENBC common stock owned by the Company.
The Company has also provided to ENBC a $50.0 million unsecured,
subordinated, non-convertible loan. 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
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.
9
<PAGE>
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 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.
EMPLOYEES
As of March 11, 1997, the Company and ENBC had approximately 975 employees,
including approximately 630 employed at their support centers in Golden,
Colorado, and approximately 345 employed as salaried or hourly personnel at
Company stores and ENBC company stores. None of the Company's or ENBC's
employees are represented by any labor union or covered by any collective
bargaining contract. The Company and ENBC believes their relationship with their
employees is good.
EXECUTIVE OFFICERS
Set forth below are the names and ages of the executive officers of the
Company, the positions they hold with the Company, and summaries of their
business experience. Executive officers are elected by, and serve at the
discretion of, the Board of Directors. The executive officers of the Company are
as follows:
Scott A. Beck, age 38, joined the Company as Chairman of the Board, Chief
Executive Officer, and a director in June 1992 and has been Chairman or Co-
Chairman since that date. In January 1997, he also assumed the responsibilities
of President of the Company. He was Vice Chairman of the Board of Blockbuster
Entertainment Corporation ("Blockbuster") from September 1989 until his
retirement in January 1992, and Chief Operating Officer from September 1989 to
January 1991. From June 1987 to August 1989, Mr. Beck was Managing Partner of
Blockbuster's first and largest franchisee ("Blockbuster Midwest") until its
acquisition by Blockbuster in 1989. Since 1980, Mr. Beck has served as President
of Pace Affiliates, Inc., an investment banking firm which he founded. Mr. Beck
is the Company's officer principally in charge of overseeing the Company's
investment in ENBC and serves as their Chairman of the Board.
10
<PAGE>
Mark W. Stephens, age 42, joined the Company as Chief Financial Officer in
October 1993 and, in addition, became a Vice Chairman of the Board and a
director in December 1995. From November 1992 until October 1993, he was
Managing Director of Haas, Wheat & Partners Incorporated, a private investment
firm. From April 1989 until November 1992, Mr. Stephens was a Senior Vice
President of Grauer & Wheat Investments, Inc. Prior thereto, Mr. Stephens was
Senior Vice President of Donaldson, Lufkin & Jenrette Securities Corporation
from 1985 until 1989 and Vice President of Merrill Lynch Private Capital from
1984 to 1985.
Laurence M. Zwain, age 44, joined the Company in January 1996 as President
and Chief Executive Officer of the Company's Boston Market division and, in
addition, became a Vice Chairman of the Board and a director in August 1996.
From November 1994 until joining the Company, Mr. Zwain served as President and
Chief Operating Officer of PepsiCo Restaurants International, a division of
PepsiCo, Inc. From September 1992 until November 1994, he served as President
and Chief Executive Officer of KFC International. From February 1991 until
September 1992, he served as Senior Vice President of Operations for KFC
International. From October 1988 until February 1991, he served as Division Vice
President of Pizza Hut, Inc.'s Western U.S. region. Mr. Zwain was Vice
President of New Concepts for Pizza Hut from 1987 to 1988, and served as Vice
President of National Marketing for Pizza Hut from 1986 to 1987. KFC and Pizza
Hut, Inc. are subsidiaries of PepsiCo, Inc.
Mark R. Goldston, age 41, joined the Company in January 1996 to undertake
various special projects and became a Vice Chairman of the Board and a director
in August 1996. Mr. Goldston also serves as President, Chief Executive Officer
and a director of ENBC. From July 1994 to April 1996, Mr. Goldston was the
Chairman and Chief Executive Officer of The Goldston Group, a strategic advisory
firm which advises high-growth companies on improving performance and creating
operating leverage and efficiencies. From October 1991 to June 1994, Mr.
Goldston served as President and Chief Operating Officer of L.A. Gear, Inc.
John J. Todd, age 36, joined the Company in April 1996 as Chief Financial
Officer of the Company's Boston Market division. From 1988 to 1996, he was
employed at Pizza Hut, Inc. in a variety of positions including Manager -
Strategic Planning, Division Finance Director and Vice President of
Acquisitions. Before Pizza Hut, he served as a Senior Financial Analyst at
General Foods.
Mark A. Link, age 38, became Vice President-Financial Reporting of the
Company in March 1995 and became Principal Accounting Officer in December 1995.
Mr. Link joined the Company in December 1993 as Director of SEC and Financial
Reporting and served in that capacity until March 1995. From 1980 until December
1993, Mr. Link was employed by Deloitte & Touche, LLP where he was a Senior
Manager for five years prior to joining the Company. Mr. Link is a certified
public accountant.
ITEM 2. PROPERTIES
The Company and ENBC lease their support centers (containing its principal
executive offices, Boston Market and Einstein Bros. test kitchens, and training
facilities), which are located in approximately 157,000 square feet of space in
Golden, Colorado. The Company also leases approximately 25,000 square feet of
additional office space in a building near its support center. The Company
considers its offices to be in good condition.
The Company also owns or leases land or buildings for its Company stores.
In certain circumstances, the Company owns or leases land or buildings which it
then leases or subleases to its area developers. Stores leased by the Company
are typically leased under "triple net" leases that require the Company to pay
real estate taxes, maintenance costs, and insurance premiums and, in a few
cases, to pay percentage rent based on sales in excess of specified amounts.
Generally, the Company's leases have initial terms of five years with options to
renew for three additional five year periods.
11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company and ENBC, like others in the food service business, are from
time to time the subject of complaints, threat letters, or litigation from
customers alleging illness, injury, or other food quality, health (including
food-borne illness claims), or operational concerns. 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. Adverse
publicity resulting from such allegations may materially adversely affect the
Company and ENBC and one or more of their brands, regardless of whether such
allegations are valid or whether the Company or ENBC are liable. In addition,
the Company encounters complaints and allegations from former or prospective
employees or others from time to time, as well as other matters which are common
for large businesses such as the Company. The Company does not believe that any
such matters of which it is aware are material to the Company individually or in
the aggregate, but matters may arise which could adversely affect the Company or
the business operations.
The Company believes that the lawsuits, claims, and other legal matters to
which it and ENBC have become subject in the course of their business are not
material to the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of fiscal 1996.
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the high and low sales prices of the common
stock during each of the Company's fiscal quarters for the last two years 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
</TABLE>
As of February 28, 1997, there were approximately 2,900 record holders of
the common stock.
The Company does not pay cash dividends on its common stock and the Board
of Directors intends to continue a policy of retaining 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 cash dividends.
During the fourth quarter of 1996, the Company issued a warrant to purchase
an aggregate of 69,600 shares of the Company's common stock. The warrant has an
exercise price of $37.75 per share and is exercisable at any time through
December 12, 2001. The warrant was issued without registration under the
Securities Act in reliance on section 4(2) of the Securities Act and Rule 506 of
Registration D promulgated under the Securities Act.
12
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial and store
data for the Company, including ENBC from the date of conversion (June 17, 1996)
of the Company's loan to ENBC. This data should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto included
in Item 8 hereof and Management's Discussion and Analysis of Financial Condition
and Results of Operations included in Item 7 hereof.
<TABLE>
<CAPTION>
Fiscal years ended (1)
---------------------------------------------------------------------
Dec. 27, Dec. 26, Dec. 25, Dec. 31, Dec. 29,
1992 1993 1994 1995 1996(2)
-------- -------- -------- -------- --------
(In thousands, except per share data and number of stores)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Royalties and franchise related fees............... $ 2,627 $ 11,551 $ 43,603 $ 74,662 $ 115,510
Interest income.................................... - 1,130 11,632 33,251 65,048
Company stores..................................... 5,656 29,849 40,916 51,566 83,950
------- -------- -------- --------- ---------
Total revenue.................................... 8,283 42,530 96,151 159,479 264,508
Costs and expenses:
Cost of products sold.............................. 2,241 11,287 15,876 19,737 31,160
Salaries and benefits.............................. 7,110 15,437 22,637 31,137 42,172
General and administrative......................... 5,241 13,879 27,930 41,367 99,847(3)
Provision for relocation........................... - - 5,097 - -
------- -------- -------- --------- ---------
Total costs and expenses......................... 14,592 40,603 71,540 92,241 173,179
------- -------- -------- --------- ---------
Income (loss) from operations........................ (6,309) 1,927 24,611 67,238 91,329
Other income (expense)............................... 459 (280) (4,161) (12,865) 23,854(4)
------- -------- -------- --------- ---------
Income (loss) before income taxes
and minority interest............................ (5,850) 1,647 20,450 54,373 115,183
Minority interest in (earnings) of subsidiary........ - - - - (5,235)
Income taxes......................................... - - 4,277 20,814 42,990
------- -------- -------- --------- ---------
Net income (loss).................................... $(5,850) $ 1,647 $ 16,173 $ 33,559 $ 66,958
======= ======== ======== ========= =========
Net income (loss) per common and
equivalent share................................ $ (0.21) $ 0.06 $ 0.38 $ 0.66 $ 1.01
======= ======== ======== ========= =========
Weighted average number of common
and equivalent shares outstanding............... 28,495 32,667 42,861 50,972 66,501
STORE DATA (UNAUDITED):
Systemwide Boston Market store revenue(5)........ $42,654 $152,056 $383,691 $ 792,948 $1,166,591
Number of Boston Market stores:
Beginning of year............................... 34 83 217 534 829
Opened.......................................... 50 138 323 310 273
Closed.......................................... (1) (4) (6) (15) (15)
------- -------- -------- --------- ---------
End of year..................................... 83 217 534 829 1,087
======= ======== ======== ========= =========
Company stores.................................. 19 38 41 3 105
Franchised stores............................... 64 179 493 826 982
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................. $ 7,816 $ 2,788 $ 32,049 $ 313,483 $ 58,829
Notes receivable................................ 773 45,716 202,500 456,034 800,519
Total assets.................................... 22,670 110,064 426,982 1,073,877 1,543,616
Long-term debt.................................. - - 130,000 307,178 312,454
Stockholders' equity............................ $17,037 $ 94,906 $259,815 $ 716,831 $ 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
fiscal year ended December 31, 1995 includes 53 weeks of operations.
(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 of the Company's loan conversion as of the beginning of the
Company's fiscal year, total revenue, net income, and net income per
common and equivalent share were $292,030,000, $59,522,000, and $0.90,
respectively.
(3) Includes non-recurring ended December 29, 1996 charges of approximately
$38.0 million.
(4) Includes non-recurring ended December 29, 1996 gains of approximately $38.2
million.
(5) Includes gross revenue for all stores in the Boston Market system.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
During fiscal year 1996, the Company converted its loan into a majority
equity interest in ENBC and acquired a 93% interest in Mid-Atlantic, its Boston
Market area developer for the Philadelphia area. Subsequent to the Company's
acquisition of its interest in Mid-Atlantic, Mid-Atlantic acquired 100% of the
equity interest in New Jersey Rose, the Boston Market area developer for the
southern New Jersey area. In March 1997, the Company converted its loan to BCNY
into a majority equity interest in BCNY, its Boston Market area developer for
the metropolitan New York, northern New Jersey, and Connecticut areas.
Additionally, the Company agreed to acquire 40% of the current equity holders'
interest in BCNY, which, after giving effect to the conversion, will result in
the Company having an equity interest in BCNY of approximately 84%.
As a result of these transactions, the revenue previously generated by the
Company as a lender and service provider to ENBC and as a lender, franchisor,
and service provider to such area developers prior to the date of the respective
transactions has been or will be eliminated in consolidation and replaced with
revenue and operating expenses from ENBC franchise operations as well as from
ENBC company-owned stores and from Company-owned stores from and after the dates
of the respective transactions. The foregoing results are adjusted in the
"minority interest" line item to reflect the minority interests not owned by the
Company. As a result of these transactions, the operating results for the 1996
fiscal year are not, and for the 1997 fiscal year will not be, readily
comparable to those for the 1995 and 1994 fiscal years.
COMPANY-OWNED STORES
As part of its rapid store development strategy, the Company had a practice
of "seeding" a start-up market with Company stores, which the Company would
subsequently sell to a newly-formed area developer for that market. In 1994 and
1995, as part of its store seeding practice, the Company sold 54 and 91 Boston
Market stores, respectively, to newly-formed area developers. As a result of the
completion of the area developer network in 1995, the Company no longer has the
need to "seed" start-up markets with Boston Market stores. ENBC is currently
seeding markets in a manner similar to that previously undertaken by the
Company. In 1996, ENBC sold 59 stores to its area developers and anticipates
completing its store seeding program in 1997. As a result of the sale of Company
stores to newly-formed area developers, revenue and operating expenses from such
stores (while owned by the Company and ENBC) was replaced with revenue generated
as a franchisor and service provider. There have been no material gains or
losses recognized as a result of the sales.
Because of the store seeding program, stores owned by the Company in 1994
and 1995 were generally newer stores in start-up markets. Typically, these
stores tend to have higher costs due to employee inexperience and resulting
inefficiencies, a lack of store-specific operating history to assist in
forecasting daily food and labor needs, and lack of brand awareness in their
market area. Beginning with the acquisition of the Mid-Atlantic stores, the
Company has established a base of Company-owned stores that it believes are more
reflective of mature store performance in an established market. The following
table sets forth store performance data for these stores from the date of their
acquisition through December 29, 1996 (in thousands of dollars):
<TABLE>
<S> <C> <C>
Net sales......................... $73,512.7 100.0%
Food and paper costs.............. 27,441.7 37.3%
Salaries and benefits............. 18,470.6 25.1%
Operating expenses................ 5,656.8 7.7%
Occupancy and advertising costs... 8,080.8 11.0%
--------- ------
Store cash flow................... $13,862.8 18.9%
========= ======
</TABLE>
14
<PAGE>
RESULTS OF OPERATIONS
Fiscal Year 1996 Compared to Fiscal Year 1995
Revenue. Total revenue increased 66% for 1996 over 1995. Royalties and
franchise related fees increased 55%, primarily attributable to higher royalties
resulting from an increase in revenue from Boston Market franchised stores and
the inclusion of ENBC royalties from the date of conversion of the Company's
loan into ENBC common stock. Total Boston Market systemwide store revenue
increased to $1.2 billion in 1996, up 47% from $792.9 million in 1995. The
increase in systemwide store revenue was due primarily to an increase in the
number of Boston Market stores open and higher average revenue per store. Weekly
per store average ("WPSA") revenue per Boston Market store increased 6.6% to
$24,064 for 1996, from $22,570 in 1995. 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. ENBC's
royalties and franchise related fees accounted for 37% of the increase in
royalty and franchise related fees for 1996. Interest income increased 96% over
1995 due to higher outstanding loan balances associated primarily with the
increases in stores opened by Boston Market and ENBC area developers. ENBC's
interest income from area developer financing accounted for 16% of the increase
in interest income.
Revenue from Company-owned stores is significantly affected by the average
number of such stores operating in the periods being compared. The average
number of Company stores for 1996 was 64 compared to 37 for 1995. This change in
average number of stores is attributable to the timing of store sales to area
developers in 1995 and the acquisition of stores in 1996. Revenue from Company
stores increased 63% for 1996 compared with 1995. The increase for the fiscal
year was due to a combination of a higher average number of Company stores
operating during fiscal 1996 and the inclusion of ENBC's company stores from the
date of conversion of the ENBC loan. Revenue from ENBC company stores accounted
for 24% of the increase in store revenue for the fiscal year.
Cost of Products Sold. As a result of a higher average number of Company
stores operating during the year, cost of products sold increased 58% for 1996
compared with 1995. ENBC's company stores accounted for 24% of the increase in
cost of products sold for the fiscal year.
Salaries and Benefits. Salaries and benefits increased 35% for 1996 from
1995, primarily as a result of the higher average number of Company stores
operating in 1996. The increase was also due to the inclusion of ENBC employees
from the date of conversion of the Company's loan to ENBC and an increased
number of employees at the Company's support center necessary to support
systemwide expansion. ENBC accounted for 39% of the increase in salaries and
benefits for the year.
General and Administrative. Included in general and administrative expenses
for 1996 were non-recurring charges of approximately $38 million for asset
write-downs and a provision to purchase certain store equipment from Boston
Market area developers related to the introduction of the new F.A.S.T. Track
service system designed to provide faster service to Boston Market customers.
Absent these items, general and administrative expenses increased 50% for 1996.
The increase for the year 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 of the
Company's loan to ENBC. Excluding the non-recurring charges, ENBC accounted for
38% of the increase in general and administrative expenses for the year.
Included in general and administrative expenses were depreciation and
amortization charges of $22.9 million in 1996 compared with $11.4 million in
1995. The increase in depreciation and amortization expense was primarily
attributable to a higher fixed asset base reflecting the Company's and ENBC's
investment in support center infrastructure as well as the goodwill associated
with the acquisition of the interest in Mid-Atlantic and the conversion of the
ENBC loan.
Other Income (Expense). Included in other income (expense) for the year
was a $38.2 million gain recognized as a result of ENBC issuing approximately
8.9 million shares of ENBC common stock to third parties at prices per share
greater than the Company's carrying value. See Note 13 of Notes to Consolidated
Financial Statements. Absent this gain, the Company had a net expense of $14.3
million compared with a net expense of $12.9 million in 1995. This increase was
due to additional interest expense incurred in 1996 resulting from the
Company's Liquid Yield Option Notes due June 1, 2015 ("LYONs") being
outstanding during all of 1996 versus only a portion of the year in 1995.
15
<PAGE>
Income Taxes. The provision for income taxes for 1996 reflects the
Company's expected effective tax rate.
Minority Interest. The minority interest in the earnings of subsidiary of
$5.2 million for 1996 represents the minority ownership interest in the earnings
of ENBC.
Fiscal Year 1995 Compared to Fiscal Year 1994
Revenue. Total revenue increased 66% for 1995 from 1994. Royalty and
franchise related fees increased 71% 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 and an
increase in lease and real estate services income. Interest income increased as
a result of increased loans made to certain area developers.
Revenue from Company stores increased 26% for 1995 due to a combination of
a higher average number of Company stores open and higher average store revenue
during 1995. The Company had three Company stores at December 31, 1995, compared
to 41 at December 25, 1994. During 1995, the Company sold 91 Company stores that
it had opened to seed development in start-up markets prior to executing area
development agreements for such markets. The Company's seeding program
concluded in 1995 as a result of the completion of its nationwide area developer
network.
Cost of Products Sold. Cost of products sold increased 24% for 1995 from
1994 primarily due to an increase in the number of Company stores open and
higher average store revenue during the year.
Salaries and Benefits. Salaries and benefits increased 38% in 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 stores due to a higher average
number of Company 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
stores resulting from a higher average number of Company 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%
convertible subordinated debentures (the "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 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 277% 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, and an
increase in franchise fees related to the increase in the number of stores that
commenced operation as franchised stores during the year. 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 that
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. Interest income increased as a result of increased loans made to certain
area developers.
16
<PAGE>
Revenue from Company stores increased 37% for 1994 from 1993. This
increase was due to a higher average number of Company stores open during the
year. The Company had 38 Company stores at December 26, 1993 compared to 41 at
December 25, 1994. During 1994, the Company sold 54 Company stores that 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
stores open during 1994.
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 stores due to a higher average
number of Company 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 stores
resulting from a higher average number of Company 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 $130.0 million of 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
Cash provided from operations increased to $144.9 million in 1996 from
$55.5 million in 1995 and from $35.9 million in 1994. Income before non-cash
charges and credits increased to $99.4 million in 1996 compared to $65.4 million
in 1995 and $26.2 million in 1994. The annual increases were due primarily to
increased net income. Cash provided from working capital was $45.5 million in
1996 compared with a decrease of working capital of $10.0 million in 1995 and an
increase in working capital of $9.8 million in 1994. The change in working
capital in 1996 compared to 1995 was primarily attributable to increases in
accounts payable and accrued expenses experienced as a result of the general
growth of the business. The working capital generated in 1994 resulted from an
increase in accounts payable and accrued expenses due to the general growth in
the business and an increase in deferred franchise revenue associated with
executing franchise agreements for new stores.
Cash provided from financing activities over the past three years reflect
the Company's use of various sources of capital to fund its business. During
1996, the Company sold 2,992,000 shares of its common stock for net proceeds of
approximately $100.3 million and ENBC sold 8,670,000 shares of ENBC common
stock, which raised net proceeds of $174.6 million, including purchases by the
Company of $45.9 million of shares of ENBC's common stock.
17
<PAGE>
In 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 the eurodollar rate plus an
applicable margin, at the Company's option. 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, which provides financing for equipment and real
estate 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 to retire the existing outstanding
balance under a prior master lease and to finance equipment and real estate for
new stores. 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. As of December 29, 1996, the Company and ENBC had $50.1 million
and $50.7 million, respectively, available in cash and cash equivalents. In
addition, the Company and ENBC had $110.0 million and $45.0 million,
respectively, available under their revolving credit facilities.
During 1995, the Company completed the sale of LYONs, for which the Company
received gross proceeds of approximately $172.5 million and sold 10,350,000
shares of its common stock for net proceeds of approximately $342.0 million. See
Note 6 of Notes to Consolidated Financial Statements. During 1994, the Company
issued $130.0 million of 4-1/2% Debentures. See Note 6 of Notes to Consolidated
Financial Statements. During 1994, the Company also sold 6,900,000 shares of its
common stock for net proceeds of approximately $120.0 million.
Over the last three years the Company's primary use of capital reflects
its goal of establishing brand awareness and market leadership by providing
partial financing to its area developers for their use in rapid store
development and to finance their working capital needs. As of December 29, 1996,
the Company had secured loan commitments to its Boston Market financed area
developers aggregating $838.0 million of which $647.3 million had been advanced.
As of December 29, 1996, ENBC had secured loan commitments to its area
developers aggregating $283.2 million, of which $140.8 million had been
advanced. Net loan advances were $473.9 million in 1996, $253.5 million in 1995,
and $156.8 million in 1994. The annual increases in loan advances were
attributable to more stores being opened each year by the Company's and ENBC's
area developers and consolidation among area developers.
In addition to providing financing to its area developers, the Company's
capital requirements relate to continued development of its corporate
infrastructure, which supports systemwide expansion, acquisition and development
of Company stores, and funding commitments to PFCI and any future commitments to
BMI. The Company has committed to provide PFCI a $17.0 million convertible
secured loan and expects to make a convertible secured loan to BMI. See "Item 1.
Business-Progressive Food Concepts, Inc.", and "Item 1. Business-Current
Initiatives in the Boston Market System-Boston Market International". In 1996,
the Company expended $50.5 million on its corporate infrastructure and $49.3
million to acquire and develop Company stores. During 1995 and 1994, the Company
expended $24.9 million and $46.3 million, respectively, on its corporate
infrastructure and $87.5 million and $115.8 million, respectively, to develop
Company stores and acquire real estate for store development. These capital
expenditures have been partially offset with cash proceeds from selling Company
stores as a result of the Company's store seeding practice. The Company
generated $54.1 million and $40.5 million in 1995 and 1994, respectively, from
selling Company stores to newly-formed area developers. As a result of
completing the Boston Market area developer network in 1995, the Company no
longer has the need to seed new markets. Accordingly, in 1996, the Company did
not, and in the future the Company does not anticipate it will realize cash
proceeds from the sale of stores to newly-formed area developers. ENBC is
currently seeding markets in a manner similar to that previously undertaken by
the Company. During 1996, ENBC generated $30.1 million from the sale of ENBC
company stores to newly-formed area developers. ENBC anticipates completing its
store seeding program in 1997. In addition to this seeding program, the Company
generated cash from financing land, building and equipment of $45.4 million,
$18.4 million, and $6.1 million in 1996, 1995, and 1994, respectively.
18
<PAGE>
The Company anticipates that it and ENBC, and their respective area
developers, will have need for additional financing dependent primarily upon 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 upon 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 2.
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 and ENBC believe 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 Bagel stores.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
The following table shows quarterly financial results for fiscal 1995 and 1996.
The first quarter consists of four four-week periods and the second and third
quarters consist of three four-week periods. The fourth quarter of 1995 contains
two four-week periods and one five-week period. The fourth quarter of 1996
contains three four-week periods.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
1996:
- ----
Revenue........................ $ 47,347 $ 64,561 $ 74,310 $ 78,290
Income from Operations......... 28,547 29,860 19,513 13,409
Net Income..................... 15,649 15,916 17,300 18,093
Net Income per Common and
Equivalent Share............ $ 0.24 $ 0.24 $ 0.26 $ 0.27
1995:
- ----
Revenue........................ $ 40,107 $ 34,800 $ 38,671 $ 45,901
Income from Operations......... 13,527 14,412 18,881 20,418
Net Income..................... 7,116 7,420 8,814 10,209
Net Income per Common and
Equivalent Share............ $ 0.15 $ 0.15 $ 0.17 $ 0.19
</TABLE>
19
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Public Accountants................................................. 21
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1995 and December 29, 1996.............. 22
Consolidated Income Statements for the fiscal years ended
December 25, 1994, December 31, 1995, and December 29, 1996........................ 23
Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 25, 1994, December 31, 1995, and December 29, 1996........................ 24
Consolidated Statements of Cash Flows for the fiscal years ended
December 25, 1994, December 31, 1995, and December 29, 1996........................ 25
Notes to Consolidated Financial Statements.......................................... 26
Report of Independent Public Accountants on Schedule..................................... 43
Supplemental Schedule.................................................................... 44
</TABLE>
20
<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 subsidiaries as of December 31, 1995
and December 29, 1996, and the related consolidated income statements,
statements of stockholders' equity and cash flows for the fiscal years ended
December 25, 1994, December 31, 1995, and December 29, 1996. 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
subsidiaries as of December 31, 1995 and December 29, 1996, and the results of
their operations and their cash flows for the fiscal years ended December 25,
1994, December 31, 1995, and December 29, 1996 in conformity with generally
accepted accounting principles.
Denver, Colorado
March 18, 1997
21
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents...................................................... $ 310,436 $ 100,800
Accounts receivable, net....................................................... 13,445 22,438
Due from affiliates............................................................ 9,614 10,246
Notes receivable............................................................... 5,462 -
Prepaid expenses and other current assets...................................... 1,536 4,050
Deferred income taxes.......................................................... 3,322 8,928
---------- ----------
Total current assets......................................................... 343,815 146,462
Property and Equipment, net...................................................... 258,550 334,748
Notes Receivable................................................................. 450,572 800,519
Deferred Financing Costs, net.................................................... 15,745 13,361
Goodwill, net.................................................................... - 190,439
Other Assets, net................................................................ 5,195 58,087
---------- ----------
Total assets................................................................. $1,073,877 $1,543,616
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable............................................................... $ 12,292 $ 40,430
Accrued expenses............................................................... 9,095 36,547
Deferred franchise revenue..................................................... 8,945 10,656
---------- ----------
Total current liabilities.................................................... 30,332 87,633
Deferred Franchise Revenue....................................................... 2,072 7,740
Convertible Subordinated Debt.................................................... 129,872 129,841
Liquid Yield Option Notes........................................................ 177,306 182,613
Deferred Income Taxes............................................................ 16,631 40,216
Other Noncurrent Liabilities..................................................... 833 6,292
Minority Interest................................................................ - 153,441
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 480,000,000
shares; issued and outstanding: 59,129,301 shares in 1995
and 64,245,868 in 1996.................................................... 591 642
Additional paid-in capital................................................... 675,611 827,611
---------- ----------
Retained earnings............................................................ 40,629 107,587
---------- ----------
716,831 935,840
---------- ----------
Total liabilities and stockholders' equity............................. $1,073,877 $1,543,616
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
22
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------------------
December 25, December 31, December 29,
1994 1995 1996
------------ ------------ ------------
(53 weeks)
<S> <C> <C> <C>
Revenue:
Royalties and franchise related fees............ $43,603 $ 74,662 $115,510
Company stores.................................. 40,916 51,566 83,950
Interest income................................. 11,632 33,251 65,048
------- -------- --------
Total revenue................................ 96,151 159,479 264,508
Costs and Expenses:
Cost of products sold........................... 15,876 19,737 31,160
Salaries and benefits........................... 22,637 31,137 42,172
General and administrative...................... 27,930 41,367 99,847
Provision for relocation........................ 5,097 - -
------- -------- --------
Total costs and expenses..................... 71,540 92,241 173,179
------- -------- --------
Income From Operations............................ 24,611 67,238 91,329
Other Income (Expense):
Interest expense, net........................... (4,235) (13,179) (14,446)
Gain on issuances of subsidiary's stock......... - - 38,163
Other income, net............................... 74 314 137
------- -------- --------
Total other income (expense)................. (4,161) (12,865) 23,854
------- -------- --------
Income Before Income Taxes
and Minority Interest.......................... 20,450 54,373 115,183
Income Taxes...................................... 4,277 20,814 42,990
Minority Interest in (Earnings)
of Subsidiary.................................. - - (5,235)
------- -------- --------
Net Income........................................ $16,173 $ 33,559 $ 66,958
======= ======== ========
Net Income Per Common and
Equivalent Share................................ $ 0.38 $ 0.66 $ 1.01
======= ======== ========
Weighted Average Number of
Common and Equivalent Shares
Outstanding..................................... 42,861 50,972 66,501
======= ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
23
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
---------------------------------------------------------
December 25, December 31, December 29,
1994 1995 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Common Stock
Balance at beginning of year........ $ 347 $ 447 $ 591
Issuance of common stock............ 85 125 30
Conversion of convertible debt
into common stock.................. - 1 -
Conversion of liquid yield option
notes into common stock............ - 1 3
Issuance of common stock in
connection with acquisitions....... 11 12 5
Exercise of stock options........... 4 5 13
-------------- --------------- --------------
Balance at end of year.............. $ 447 $ 591 $ 642
============== =============== ==============
Additional Paid-in Capital
Balance at beginning of year........ $103,662 $252,298 $675,611
Issuance of common stock, net of
offering cost of $1,475 in 1994,
$13,851 in 1995, and $848 in 1996.. 124,905 383,784 100,232
Conversion of convertible debt
into common stock.................. - 127 31
Conversion of liquid yield option
notes into common stock............ - 3,232 8,192
Issuance of common stock in
connection with acquisitions....... 19,920 30,675 14,709
Issuance of warrants................ - - 8,373
Exercise of stock options, including
income tax benefits of $3,102 in 1994,
$4,049 in 1995 and $15,204 in 1996. 3,811 5,495 20,463
-------------- --------------- --------------
Balance at end of year.............. $252,298 $675,611 $827,611
============== =============== ==============
Retained Earnings (Deficit)
Balance at beginning of year....... $ (9,103) $ 7,070 $ 40,629
Net income......................... 16,173 33,559 66,958
-------------- --------------- --------------
Balance at end of year............. $ 7,070 $ 40,629 $107,587
============== =============== ==============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
24
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
-------------------------------------------------------
December 25, 1994 December 31, 1995 December 29, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income................................................................ $ 16,173 $ 33,559 $ 66,958
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................................... 6,074 11,442 22,887
Interest on liquid yield option notes................................... - 8,075 13,793
Gain on issuances of subsidiary's stock................................. - - (38,163)
Deferred income taxes................................................... 4,277 12,133 14,059
Minority interest....................................................... - - 5,235
Provision for write-down of assets...................................... - - 14,550
Loss (gain) on disposal of assets....................................... (368) 231 68
Changes in assets and liabilities, excluding effects from acquisitions:
Accounts receivable and due from affiliates........................... (7,800) (10,057) (7,193)
Accounts payable and accrued expenses................................. 13,724 3,661 48,674
Deferred franchise revenue............................................ 5,926 (303) 3,174
Other assets and liabilities.......................................... (2,088) (3,265) 868
----------------- ----------------- -----------------
Net cash provided by operating activities........................... 35,918 55,476 144,910
----------------- ----------------- -----------------
Cash Flows from Investing Activities:
Purchase of property and equipment...................................... (163,622) (145,756) (115,062)
Proceeds from the sale of assets........................................ 62,342 80,910 86,320
Acquisition of other assets............................................. (5,175) (3,475) (22,370)
Issuance of notes receivable............................................ (225,282) (661,033) (1,467,065)
Repayment of notes receivable........................................... 68,498 407,499 993,151
----------------- ----------------- -----------------
Net cash used in investing activities............................... (263,239) (321,855) (525,026)
----------------- ----------------- -----------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock and warrants..................... 125,703 385,360 112,863
Proceeds from issuance of subsidiary's common stock..................... - - 135,422
Proceeds from issuance of convertible subordinated debt................. 130,000 - -
Proceeds from issuance of liquid yield option notes..................... - 172,464 -
Increase in deferred financing costs.................................... (7,615) (6,313) (3,799)
Proceeds from revolving credit facilities............................... 96,130 229,240 43,250
Repayments of revolving credit facilities............................... (96,130) (229,240) (117,256)
----------------- ----------------- -----------------
Net cash provided by financing activities........................... 248,088 551,511 170,480
----------------- ----------------- -----------------
Net Increase (Decrease) in Cash and Cash Equivalents...................... 20,767 285,132 (209,636)
Cash and Cash Equivalents, beginning of year........................ 4,537 25,304 310,436
----------------- ----------------- -----------------
Cash and Cash Equivalents, end of year.............................. $ 25,304 $ 310,436 $ 100,800
================= ================= =================
Supplemental Cash Flow Information:
Interest paid........................................................... $ 3,395 $ 7,195 $ 7,131
================= ================= =================
Income taxes paid....................................................... $ - $ 3,299 $ 5,055
================= ================= =================
Non-Cash Transactions:
Tax benefit of stock options exercised.................................... $ 3,102 $ 4,049 $ 15,204
================= ================= =================
Conversion of notes receivable into equity interests...................... $ - $ - $ 123,500
================= ================= =================
Conversion of convertible subordinated notes and liquid yield
option notes, net of related deferred financing costs, into
common stock............................................................. $ - $ 3,361 $ 8,226
================= ================= =================
Issuance of common stock and note payable
for net assets acquired.................................................. $ 19,931 $ 30,687 $ 21,562
================= ================= =================
The accompanying notes to the consolidated financial statements are an integral part of these statements
</TABLE>
25
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Boston Chicken, Inc. ("BCI") franchises and operates food service stores
under the Boston Market brand name which specialize in fresh, convenient meal
solutions featuring home style entrees, sandwiches, freshly prepared vegetables,
salads, and other side dishes. BCI's majority-owned subsidiary, Einstein/Noah
Bagel Corp. ("ENBC"), operates and franchises specialty retail stores that
feature fresh-baked bagels, proprietary cream cheeses, specialty coffees and
teas, and creative soups, salads, and sandwiches. Unless otherwise indicated,
BCI and its subsidiaries (excluding ENBC), are hereinafter referred to
collectively as the "Company".
At December 29, 1996, there were 1,087 Boston Market stores systemwide in
the United States, consisting of 982 franchise stores and 105 Company stores. In
1994 and 1995, in connection with its practice of opening new stores to seed
development in targeted markets, the Company sold 54 and 91 Company stores,
respectively, to area developers or franchisees of the Company. At December 29,
1996, there were 315 ENBC stores systemwide in the United States, consisting of
301 franchise stores and 14 ENBC company stores. In 1996, ENBC sold 59 ENBC
company stores (since conversion of the Company's loan to ENBC on June 17, 1996)
to its area developers. The Company discontinued its practice of seeding stores
in new markets in 1995, and ENBC anticipates discontinuing its practice of
seeding stores in new markets in 1997. Pursuant to the provisions of its
franchise agreements, the Company is obligated to allow franchisees to utilize
its trademarks, copyrights, recipes, operating procedures, and other elements of
the Boston Market system in the operation of franchised Boston Market stores.
ENBC has a similar obligation under its franchise agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries (including
ENBC). All material intercompany accounts and transactions have been eliminated
in consolidation.
Fiscal Year. The Company's and ENBC'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
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 1994 and 1996 each contained 52 weeks, or 13 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 with buildings
and improvements being depreciated over 15 to 30 years, leasehold improvements
being amortized over the lesser of their useful lives or their lease term,
including option periods, furniture, fixtures, equipment, and computer software
being depreciated over three to eight years, and pre-opening costs being
depreciated over one year.
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 expenses relating to the set-up, initial stocking, training,
and general store management activities incurred prior to the opening of new
stores.
26
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Expenditures for maintenance and repairs are charged to expense as
incurred. Development costs for franchised stores are expensed when the store
opens.
Long-Lived Assets. The Company and ENBC evaluate whether events and
circumstances have occurred that indicate revision to the remaining useful life
or the remaining balances of long-lived assets may be appropriate. Such events
and circumstances include, but are not limited to, change in business strategy
or change in current and long-term projected operating performance. When factors
indicate that the carrying amount of an asset may not be recoverable, the
Company estimates the future cash flows expected to result from the use of such
asset and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, the Company will recognize an impairment loss equal to the excess of
the carrying amount over the fair value of the asset.
Deferred Financing Costs. Deferred financing costs are amortized over the
period of the related financing, which ranges from two to 20 years.
Revenue Recognition. Revenue from Company stores and from ENBC company
stores is recognized in the period during which related food and beverage
products are sold. Royalties are recognized in the same period that related
franchise store revenue is generated. Revenue derived from initial franchise
fees and area development fees is recognized when the franchised 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>
Fiscal Years Ended
------------------------------------
<S> <C> <C> <C>
Dec. 25, Dec. 31, Dec. 29,
1994 1995 1996
---------- ---------- -----------
Royalties......................................... $17,421 $ 34,841 $ 55,821
Initial franchise and area development fees....... 13,057 13,712 18,715
Lease and real estate services income............. 5,361 17,939 27,537
Software license and maintenance fees............. 6,480 7,723 13,104
Other............................................. 1,284 447 333
---------- ---------- -----------
Total royalties and franchise related fees..... $43,603 $ 74,662 $115,510
========== ========== ===========
</TABLE>
Per Share Data. Earnings per share are computed based upon the weighted
average number of common stock and common equivalent shares outstanding during
the period.
Issuances of Subsidiaries' Stock. Changes in the Company's proportionate
interest in the net assets of its subsidiaries that result from issuances of the
subsidiaries' stock are recognized in earnings as gains or losses in the period
during which such issuances occur.
Advertising Costs. Advertising costs are expensed in the period incurred.
Employee Stock Options. The Company and ENBC account for their employee stock
options in accordance with the intrinsic value method prescribed by Accounting
Principles Board No. 25. Required pro forma disclosures of compensation expense
determined under the fair value method of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
are presented in Note 11.
Employee Benefit Plan. The Company and ENBC each have a 401(k) plan to which
neither the Company nor ENBC makes a contribution.
27
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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
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 the 1995 and
1994 amounts to conform with the 1996 presentation.
3. ACQUISITIONS
In April 1996, the Company delivered 450,640 shares of common stock with a
market value of approximately $15.0 million and a $6.8 million promissory note
to acquire the equity interests of certain investors in Mid-Atlantic Restaurant
Systems L.P. ("Mid-Atlantic"), its Boston Market area developer for the
Philadelphia area. As part of this transaction, the Company assumed $38.5
million in liabilities owed to third parties. The transaction resulted in the
Company acquiring a 93% equity interest in Mid-Atlantic. Subsequent to the
Company acquiring its interest in Mid-Atlantic, Mid-Atlantic acquired 100% of
the equity interest in New Jersey Rose, L.L.C., the Boston Market area developer
for the southern New Jersey area ("New Jersey Rose") for a purchase price of
$12.3 million, including the assumption of $1.1 million in liabilities owed to
third parties. Also, in June 1996, the Company converted its $120.0 million loan
to ENBC into shares of common stock of ENBC and subsequently invested an
additional $45.9 million in ENBC common stock, resulting in an ownership
interest of approximately 53% of the outstanding shares of common stock of ENBC
as of March 7, 1997. These transactions have been accounted for as purchases,
and, accordingly, the purchase prices were allocated to identified assets and
liabilities based upon their fair values at the date of the transactions,
resulting in goodwill of $110.1 million on the ENBC transactions and $81.4
million on the Mid-Atlantic transactions, both of which are being amortized over
a 35-year life. The operating results of each acquisition are included in
consolidated net income from the date of acquisition.
The following represents the unaudited pro forma results of operations as if
the purchase transactions described above had occurred at the beginning of the
periods presented (in thousands of dollars, except per share data):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Revenue.......................... $257,248 $326,758
Net income (loss)................ $(11,025) $ 53,733
Net income (loss) per share...... $ (0.23) $ 0.80
</TABLE>
This pro forma information does not purport to be indicative of the results of
operations that actually would have been reported if the transactions had
occurred at the beginning of the periods presented. The pro forma information is
not intended to be a projection of future results or trends.
28
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT DATA
Accounts receivable are net of an allowance for doubtful accounts of
$486,000 at December 31, 1995 and $424,000 at December 29, 1996.
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 29, 1996
------------- -------------
<S> <C> <C>
Property and equipment consist of (in thousands of dollars):
Land................................................................ $106,244 $104,914
Buildings and improvements.......................................... 92,935 148,642
Furniture, fixtures, equipment, and computer software............... 64,338 98,817
Development in progress............................................. 5,170 5,184
Pre-opening costs................................................... 163 248
------------- -------------
268,850 357,805
Less: Accumulated depreciation and amortization..................... (10,300) (23,057)
------------- -------------
Total property and equipment, net............................. $258,550 $334,748
============= =============
</TABLE>
Included in land and buildings and improvements are $171.0 million (net of
accumulated depreciation and amortization of $3.7 million) and $183.1 million
(net of accumulated depreciation and amortization of $6.1 million) of assets
leased to others at December 31, 1995 and December 29, 1996, respectively.
Accumulated amortization at December 29, 1996 on goodwill was $4.3 million.
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 29, 1996
------------- -------------
<S> <C> <C>
Accrued expenses consist of (in thousands of dollars):
Accrued payroll and fringe benefits................................ $1,556 $ 4,090
Accrued interest................................................... 2,538 2,888
Accrued F.A.S.T. Track conversion costs............................ - 14,778
Accrued real estate disposition costs.............................. - 5,866
Accrued other...................................................... 5,001 8,925
------------- -------------
Total accrued expenses........................................ $9,095 $36,547
============= =============
</TABLE>
<TABLE>
<CAPTION>
Fiscal Years Ended
---------------------------------------------
Dec. 25, 1994 Dec. 31, 1995 Dec. 29, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Interest expense, net consists of (in thousands of dollars):
Interest income..................................................... $ 1,592 $ 2,173 $ 6,427
Interest expense.................................................... (5,827) (15,352) (20,873)
------------- ------------- -------------
Interest expense, net......................................... $(4,235) $(13,179) $(14,446)
============= ============= =============
</TABLE>
5. 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.
29
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes Receivable. The estimated fair value of notes receivable, including
the conversion option (See Note 10), is 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 debt instruments is 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 are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, 1995 December 29, 1996
-------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents........ $310,436 $310,436 $100,800 $100,800
Notes Receivable................. 456,034 456,034 800,519 800,519
Convertible Subordinated Debt.... 129,872 154,872 129,841 163,600
Liquid Yield Option Notes........ 177,306 228,148 182,613 232,334
</TABLE>
6. DEBT
The Company and ENBC each have a revolving bank credit facility. The
Company's facility provides for borrowings of up to $110.0 million through
December 1, 1999, and ENBC's facility provides for borrowings up to $45.0
million through April 30, 1998. Borrowings under the Company's facility are
subject to a borrowing formula and may be either floating rate loans with
interest at the agent's base rate plus an applicable margin or eurodollar rate
loans with interest at the eurodollar rate plus an applicable margin. Borrowings
under ENBC's facility may be either floating rate loans with interest at the
agent's base rate plus an applicable margin or eurodollar rate loans with
interest at the eurodollar rate plus an applicable margin. In addition, a
commitment fee applicable to each facility (.25% for the Company's facility and
.5% for ENBC's facility) of the average daily unused portion of the loan is
required. The credit facility agreements contain covenants that, among other
things, restrict other borrowings, prohibit cash dividends, require specified
store-level sales, and require maintenance of specified cash flow ratios. As of
December 29, 1996, no amount was outstanding under either facility. The
Company's facility and its 1996 master lease facility (See Note 9) are
collateralized by assets with a net book value of $795.4 million and ENBC's
facility is collateralized by substantially all of its assets.
In February 1994, the Company issued $130.0 million of 4-1/2% convertible
subordinated debentures due February 1, 2004. Interest is payable semiannually
on February 1 and August 1 of each year. The debentures are convertible at any
time prior to maturity into shares of the Company's common stock at a conversion
rate of $27.969 per share, subject to adjustment under certain conditions. The
debentures may be redeemed at the option of the Company initially at 103.15% of
their principal amount and at declining prices thereafter, plus accrued
interest. In 1995 and 1996, $128,000 and $31,000 of convertible subordinated
debentures were converted into 4,576 shares and 1,107 shares of common stock,
respectively.
30
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 approximately $172.5
million. The LYONs are zero-coupon subordinated notes that 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 and 1996, $3.2 million and $8.2 million of LYONs were converted
into 127,980 shares and 328,942 shares of common stock, respectively.
7. INCOME TAXES
The primary components that comprise the deferred tax assets and
liabilities at December 31, 1995 and December 29, 1996 are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 29, 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Accounts payable and accrued expenses............. $ 841 $ 7,303
Deferred franchise revenue........................ 3,495 2,804
Other noncurrent liabilities...................... 181 504
Alternative minimum tax credit.................... 827 -
Other............................................. 651 1,348
-------- --------
Total deferred tax assets...................... 5,995 11,959
Deferred tax liabilities:
Gain on issuances of subsidiary's stock........... - (14,883)
Property and equipment............................ (18,340) (12,065)
Goodwill.......................................... - (8,678)
Other............................................. (964) (7,621)
-------- --------
Total deferred tax liabilities................. (19,304) (43,247)
-------- --------
Net deferred tax liability..................... $(13,309) $(31,288)
======== ========
</TABLE>
Income taxes consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------
Dec. 25, Dec. 31, Dec. 29,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ - $ 7,784 $24,359
State........................................... - 897 4,572
------ ------- -------
- 8,681 28,931
Deferred:
Federal......................................... 3,614 10,743 11,841
State........................................... 663 1,390 2,218
------ ------- -------
4,277 12,133 14,059
------ ------- -------
$4,277 $20,814 $42,990
====== ======= =======
</TABLE>
31
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the years ended December 25, 1994, December 31, 1995, and December 29,
1996, the Company recognized income tax benefits pertaining to the exercise of
stock options of $3,102,000, $4,049,000, and $15,204,000, respectively, which
are accounted for as a direct increase to additional paid-in capital and do not
reduce reported income tax expense.
The Company's conversion of its loan to ENBC resulted in the recognition
of a deferred tax asset of $14.8 million, which amount has been offset by a
valuation allowance due to the uncertainty in realizing the benefits of the
deferred tax asset. During 1996, the Company recognized $2.5 million of the
deferred tax asset as a reduction of the goodwill which resulted from the ENBC
loan conversion. As of December 29, 1996, the Company had a deferred tax asset
of $10.3 million associated with ENBC's temporary differences, which amount has
been offset by a valuation allowance. The decrease in the valuation allowance
from the date of conversion to December 29, 1996 results from realization of a
portion of the deferred tax asset. ENBC files a separate tax return from the
Company. As of December 29, 1996, ENBC has a net operating loss carryforward of
$17.0 million that begins to expire in 2010.
The difference between the Company's actual tax provision and the tax
provision that would result from applying the statutory federal income tax rate
to income before income taxes and minority interest is attributable to the
following (in thousands of dollars):
<TABLE>
<CAPTION>
Fiscal Years Ended
-----------------------------
Dec. 25, Dec. 31, Dec. 29,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at statutory rate.............. $ 6,953 $19,031 $40,314
State taxes, net of Federal benefit............... 818 1,740 4,492
Tax attributes of minority interest
in earnings of subsidiary....................... - - (2,042)
Other............................................. 26 43 226
Change in valuation allowance..................... (3,520) - -
------ ------- -------
Provision for income taxes........................ $4,277 $20,814 $42,990
====== ======= =======
</TABLE>
8. NATIONAL AND LOCAL ADVERTISING FUNDS
The Company administers a National Advertising Fund (the "Fund") to which
all stores make contributions based on individual franchise agreements (2% of
net revenue). Collected amounts are spent primarily on developing marketing and
advertising materials for use systemwide. In addition, the Company maintains
Local Advertising Funds ("LAFs") that provide comprehensive advertising and
sales promotion support (primarily television and radio media time) for stores
in particular markets. Periodic contributions are made by all stores (a minimum
of 4% of net revenue). The Company disburses funds and accounts for all
transactions related to such Fund and LAFs. Such amounts are not segregated from
the cash resources of the Company; however, consistent with Statement of
Financial Accounting Standards No. 45 "Accounting for Franchise Fee Revenue",
such amounts are accounted for separately and are not included in the financial
statements of the Company because the Company acts only as an agent for its
franchisees in placing orders for advertising and paying related invoices out of
such accounts.
The Fund had an accumulated deficit of $9.6 million at December 31, 1995
and $15.2 million at December 29, 1996, which was funded by advances from the
Company.
ENBC, as agent for its franchisees, administers similar national and local
advertising funds. ENBC accounts for these funds in a similar manner.
32
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. COMMITMENTS AND CONTINGENCIES
Through December 29, 1996, BC Equity Funding, L.L.C. ("BCEF") had invested
an aggregate of $58.3 million in certain Boston Market area developers in the
form 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"). In the event the Company's conversion and
option rights under its secured loan agreement with any of these area developers
expire unexercised (See Note 10) and the Company does not consent to an area
developer's request to undertake a firm commitment underwritten public offering
of the stock of such area developer, the Company has agreed to purchase the
preferred equity of such area developer from BCEF at the Redemption Price.
Through December 29, 1996, Bagel Store Development Funding, L.L.C. ("Bagel
Funding") had invested an aggregate of $70.2 million in ENBC's area developers
in the form of common equity. 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 its loan into
or otherwise acquires a majority equity interest in the area developer; (ii)
ENBC does not consent to the area developer's request to undertake a firm
commitment underwritten public offering of stock of the area developer after
ENBC's conversion and option rights under its loan agreement with the area
developer have expired unexercised; or (iii) ENBC does not consent to the area
developer's request to terminate the area developer's area development and
franchise agreements with ENBC after ENBC's conversion and option rights
under its loan agreement with the area developer have expired unexercised.
The Company has entered into two master lease facilities (the "1995
Facility" and the "1996 Facility") for the purpose of leasing equipment and real
estate for stores owned by the Company and its area developers. Financing
available under the 1995 Facility is $95.6 million and financing available under
the 1996 Facility is $190.0 million. Both the 1995 Facility and the 1996
Facility bear interest at LIBOR plus an applicable margin and have terms,
including renewal options, of between three and five years and contain a
purchase option. The 1996 Facility is cross-collateralized and cross-defaulted
with the Company's revolving credit facility (See Note 6). The Company
subleases a majority of the leased assets to its area developers. The subleases
to area developers contain substantially the same terms as the master leases.
The Company would be contingently liable for $192.6 million if it utilized the
entire amount available under the facilities and elected not to purchase the
leased assets or renew the leases. Such contingent obligation would be reduced
by a portion of the proceeds received by the lessor on the sale of the leased
assets and payments received from the sublessees.
The Company leases sites for stores and for its support center in Golden,
Colorado. 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 real estate and equipment that 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 arm's length on commercially reasonable terms. The Company is
contingently liable for all lease costs, including common area maintenance
charges.
33
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a schedule of future minimum rental payments that are
required under operating leases that have initial or remaining noncancellable
lease terms in excess of one year, sublease proceeds, guarantees and
assignments, and rental receipts due under leases on property and equipment
owned by the Company as of December 29, 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
Minimum
Rental Receipts
Net on Property and
Minimum Minimum Guarantees Equipment
Rental Sublease Rental and Owned
Payments Proceeds Payments Assignments by the Company
-------- -------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
1997................ $ 73,802 $ 74,095 $ - $ 12,822 $ 18,675
1998................ 57,114 57,178 - 12,048 18,359
1999................ 24,003 23,153 850 11,089 18,475
2000................ 22,032 20,942 1,090 10,591 19,003
2001................ 18,373 17,924 449 16,640 19,465
Later Years......... 82,802 68,432 14,370 67,552 88,323
-------- -------- ------- -------- --------
$278,126 $261,724 $16,759 $130,742 $182,300
======== ======== ======= ======== ========
</TABLE>
Rent expense, net of sublease income, under operating leases was
$3,242,000, $4,495,000, and $4,637,000 for fiscal years 1994, 1995, and 1996,
respectively.
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.
ENBC has entered into a supply agreement relating to the purchase of
certain minimum levels of cream cheese, which expires in October 2000, or
earlier in certain circumstances. The agreement requires ENBC, its subsidiaries,
area developers, and other authorized purchasers to purchase the lesser of
160,000 pounds of cream cheese per week or 60% of their requirements for cream
cheese (excluding certain requirements that may be satisfied through other
commitments and certain requirements of acquired companies). The price per pound
is determined over the term of the contract based upon production costs.
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 consolidated
financial position or results of operations.
10. AREA DEVELOPER FINANCING
The Company currently offers convertible secured debt financing to certain
Boston Market area developers to partially finance store development and working
capital needs. Only developers that are developing a significant portion of an
area of dominant influence or metropolitan area of a major city and that 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 toward developing stores prior to drawing on its
revolving loan facility provided by the Company, with advances permitted during
a two- or three-year draw period (or additional draw period in the event of a
loan amendment) in a predetermined maximum amount, generally equal to three 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 the applicable reference rate of Bank of America
Illinois as established from time to time (8.25% at December 29, 1996 and an
average rate of 8.27% for 1996) plus 1%, and is payable each four-week 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.
34
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
ENBC offers secured debt financings 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 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 developer commitments 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, which is at a 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 by 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.
In March 1997, the Company converted its loan to BC New York, L.L.C.
("BCNY") into a majority equity interest in BCNY. Additionally, the Company has
agreed to acquire 40% of the current equity holders' interest in BCNY, which,
after giving effect to the conversion, will result in the Company having an
equity interest in BCNY of approximately 84%. The BCNY transaction added 118
Boston Market stores, operating in the metropolitan New York area, northern New
Jersey, and Connecticut, to the Company store base. As of the date of
conversion, total loan advances to BCNY were $80.0 million.
There can be no assurance that the Company or ENBC will exercise future
rights to convert their loans to any other area developers or acquire an equity
interest in any other area developers to which they provide financing, or that
such exercise or acquisition will result in a majority interest in such area
developer.
(b) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING
The following tables summarize credit commitments and outstanding balances
set forth on the Company's balance sheets for area developer financing of
Boston Market area developers as of December 31, 1995 and December 29, 1996 and
ENBC area developers as of December 29, 1996 (in thousands of dollars, except
number of area developers):
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Boston Market:
Number of area developers receiving financing ..... 17 15
Loan commitments .................................. $614,094 $838,043
Loan availability ................................. (202,676) (190,778)
------------ -----------
Loans outstanding (included in Notes Receivable) .. $411,418 $647,265
============ ===========
</TABLE>
35
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 29,
1996
------------
<S> <C>
ENBC:
Number of area developers receiving financing ................ 11
Loan commitments ............................................. $ 283,200
Loan availability ............................................ (142,446)
------------
Loans outstanding (included in Notes Receivable) ............. $ 140,754
============
</TABLE>
The following tables summarize area developer financing activity of Boston
Market area developers during fiscal years 1995 and 1996 and of ENBC area
developers from conversion (June 17, 1996) through December 29, 1996 (in
thousands of dollars):
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------------
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Boston Market:
Area developer loan balances, beginning of year .. $ 201,266 $ 411,418
Additional loan advances ......................... 549,174 1,044,861
Loan repayments .................................. (339,022) (766,114)
Loans converted into equity or eliminated
in consolidation ................................ - (42,900)
------------ -----------
Area developer loan balances, end of year ........ $ 411,418 $ 647,265
============ ===========
Fiscal Year
Ended
December 29,
1996
------------
<S> <C>
ENBC:
Area developer loan balances, at conversion
(June 17, 1996) of the Company loan ........................ $ 41,224
Loan advances ............................................... 153,961
Loan repayments ............................................. (54,431)
-----------
Area developer loan balances, end of year ................... $ 140,754
===========
The principal maturities of the aforementioned receivables are as follows (in
thousands of dollars):
<S> <C> <C>
1997 ........................................ $ -
1998 ........................................ 16,471
1999 ........................................ 61,006
2000 ........................................ 71,004
2001 ........................................ 78,802
Thereafter .................................. 560,736
------------
$ 788,019
============
</TABLE>
(c) CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Three Boston Market area developers accounted for approximately 14%, 13%,
and 12% of the Boston Market area developers' notes receivable balance at
December 29, 1996 and no other Boston Market area developer individually
accounted for 10% or more of such notes receivable balance as of such date. Five
ENBC area developers accounted for approximately 21%, 17%, 15%, 10%, and 10% of
the ENBC area developer's notes receivable balance at December 29, 1996 and no
other ENBC area developer individually accounted for 10% or more of such notes
receivable balance as of such date.
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 management's review of use of loan proceeds, adherence to store development
schedules, store performance trends, type and amount of collateral securing the
loan, prevailing economic conditions, and other factors that 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 December 29, 1996.
36
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following tables set forth certain aggregate financial information as
of the dates indicated provided by the Company's and ENBC's financed area
developers, excluding Mid-Atlantic and New Jersey Rose for both years and BCNY
for 1996, the loans to which have been converted into equity or eliminated in
consolidation (in thousands, except number of financed area developers and store
data):
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
Boston Market:
Total number of financed area developers ........ 15 14
Total number of financed area developer
stores open .................................... 627 841
Total gross assets .............................. $513,926 $640,899
Total debt:
To the Company ................................. 372,081 555,105
To third parties (including capital
lease obligations) ............................ 14,456 23,098
Total stockholder/partner/member deficit ........ (9,891) (106,076)
</TABLE>
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
------------ ------------
<S> <C> <C>
ENBC:
Total number of financed area developers ........ 2 11
Total number of financed area developer
stores open .................................... 13 301
Total gross assets .............................. $ 9,262 $220,015
Total debt:
To ENBC ....................................... 3,538 140,754
To third parties (including capital
lease obligations) ........................... - -
Total partner/member equity ..................... 2,676 33,847
</TABLE>
37
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. STOCKHOLDERS' EQUITY
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.
Warrants
The Company has issued warrants to purchase 819,600 shares of common stock
to third parties exercisable at prices ranging from $25.00 to $37.75. The
warrants expire at various dates through December 2001.
Stock Option Plans
The Company has 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 each director who is not an officer or employee of the
Company, options to purchase shares having a fair market value of $200,000 at
the date of grant, each time they are elected or reelected 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.
ENBC has an employee stock option plan under which options to purchase up
to 5,500,000 shares of common stock of ENBC may be granted. ENBC also has a
stock option plan for non-employee directors under which options to purchase up
to 100,000 shares of common stock of ENBC may be granted. The terms of these
plans are similar to the Company's plans, however, option grants to each
director who is not an officer or employee of the Company are limited to a
market value of $50,000 at the date of grant.
38
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the Company's stock
option plans. Had employee compensation expense for the Company's plans been
determined based on the fair value at the grant date for awards in 1995 and 1996
consistent with the provisions of SFAS No. 123, the Company's net income and
net income per common and equivalent share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share data):
1995 1996
------- -------
Net income - as reported............ $33,559 $66,958
Net income - pro forma.............. $33,015 $62,638
Net income per common and
equivalent share - as reported... $ 0.66 $ 1.01
Net income per common and
equivalent share - pro forma..... $ 0.65 $ 0.95
The fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
1995 1996
-------- --------
Expected volatility................. 38.0% 37.1%
Risk-free interest rate............. 6.8% 6.3%
Expected lives...................... 5 years 5 years
Dividend yield...................... 0 0
Activity under the option plans is as follows:
<TABLE>
<CAPTION>
Weighted Average Share
Number of Company Options Exercise Price
--------------------------------------- ----------------------------------
1994 1995 1996 1994 1995 1996
--------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Company plans:
Options outstanding at
beginning of fiscal year......... 6,698,024 8,140,421 8,668,265 $ 2.59 $ 5.81 $ 8.36
Options Granted................. 2,362,133 1,141,955 1,647,550 14.70 24.37 26.31
Options Exercised............... (384,905) (539,899) (1,343,647) 1.85 2.68 3.94
Options Forfeited............... (534,831) (74,212) (267,787) 4.19 21.07 15.13
---------- ---------- ----------- --------- --------- ---------
Options outstanding at
end of fiscal year............... 8,140,421 8,668,265 8,704,381 $ 5.81 $ 8.36 $12.33
========== ========== =========== ========= ========= =========
Options exercisable at
end of fiscal year............... 1,302,984 2,693,143 4,152,163
========== ========== ===========
</TABLE>
39
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Information on options outstanding and options exercisable as of December
29, 1996, is as follows:
<TABLE>
<CAPTION>
Company Options Outstanding Company Options Exercisable
-------------------------------------------------- -----------------------------
Weighted
average Weighted
remaining Weighted average
Range of Number of contractual average Number of exercise price
exercise prices options life (years) exercise price options per share
- --------------- --------- ------------ -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 3.00 2,752,263 5.27 $ 1.56 2,707,263 $ 1.55
$ 3.00 - $ 6.00 1,721,579 6.29 4.02 860,402 4.11
$12.00 - $15.00 940,955 7.92 14.88 256,131 14.88
$15.01 - $18.00 871,962 7.55 17.43 199,973 17.37
$18.01 - $21.00 178,940 7.66 19.59 47,695 19.54
$21.01 - $24.00 53,662 8.58 23.32 13,486 22.67
$24.01 - $27.00 971,085 9.50 25.36 4,529 24.97
$27.01 - $30.00 313,109 9.05 27.96 237 29.69
$30.01 - $33.00 711,133 9.02 31.24 60,497 31.00
$33.01 - $36.00 186,042 9.28 34.66 1,950 34.78
$36.01 - $39.00 3,651 9.30 36.36 - -
--------- ---- ------ --------- ------
8,704,381 7.06 $12.33 4,152,163 $ 4.41
========= ==== ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
Number of Weighted
ENBC Average Share
Options Exercise Price
--------- --------------
<S> <C> <C>
ENBC plans:
Outstanding as of the date of conversion
(June 17, 1996)................................. 3,410,734 $ 6.50
Granted....................................... 239,714 12.57
Exercised..................................... (47,440) 5.89
Canceled...................................... (124,933) 7.98
--------- ------
Outstanding as of December 29, 1996............... 3,478,075 $ 6.87
========= ======
Exercisable as of December 29, 1996............... 275,824 $ 5.93
========= ======
</TABLE>
40
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Information on options outstanding and exercisable as of December 29, 1996,
is as follows:
<TABLE>
<CAPTION>
ENBC Options Outstanding ENBC Options Exercisable
-------------------------------------------------- -----------------------------
Weighted
average Weighted
remaining Weighted average
Range of Number of contractual average Number of exercise price
exercise prices options life (years) exercise price options per share
- --------------- --------- ------------ -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 5.88 1,616,739 8.46 $ 5.88 257,700 $5.88
$ 6.00 - $ 9.00 1,433,755 9.04 6.58 18,124 6.54
$ 9.01 - $12.00 417,411 9.41 11.36 - -
$12.01 - $15.00 8,109 9.58 15.00 - -
$27.01 - $30.00 685 9.70 29.13 - -
$30.01 - $33.00 1,376 9.76 32.63 - -
--------- ---- ------ ------- -----
3,478,075 8.81 $ 6.87 275,824 $5.93
========= ==== ====== ======= =====
</TABLE>
As of December 29, 1996, the Company had 22,328,419 shares of common stock
reserved for issuance upon exercise of stock options and warrants and conversion
of convertible subordinated debentures and LYONs.
12. RELATED-PARTY TRANSACTIONS
The Company and ENBC have 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, ENBC and members of their families
have a direct or indirect equity interest. The Company and ENBC (since
conversion on June 17, 1996) have received from these entities in 1994, 1995,
and 1996, approximately $30.9 million, $46.0 million, and $84.6 million,
respectively, in area development, franchise, royalty, software license,
software maintenance, accounting, and other miscellaneous fees, rent, and
interest on their loans from the Company and ENBC. In addition, these entities
have paid approximately $11.3 million, $20.0 million, and $41.0 million in
national and local advertising contributions during the same periods. The
Company and ENBC (since conversion on June 17, 1996) have also sold to certain
of these entities, stores, inventory, equipment, and other miscellaneous assets,
including reimbursement of the Company's and ENBC's general and administrative
costs and expenses, common stock, and warrants to purchase common stock for
which they received approximately $47.1 million, $14.6 million, and $30.5
million in 1994, 1995, and 1996, 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
ENBC. For the Company's 1995 fiscal year, ENBC paid to the Company approximately
$1.2 million for the purchase of furniture, equipment, and other miscellaneous
assets. In addition, ENBC paid to the Company approximately $3.0 million and
$7.6 million in software license, software maintenance, real estate, financial
advisory, accounting fees, and interest on its loan with the Company during
fiscal 1995 and 1996 (prior to conversion on June 17, 1996), respectively.
Certain officers and directors of the Company are officers and minority
investors in BCEF, having invested $7.3 million of an aggregate of $60.0 million
at December 29, 1996. The Company has been engaged by BCEF to be its manager for
which it received fees of $375,000 in 1995 and $125,000 in 1996. Neither the
Company nor ENBC has an equity interest in BCEF.
41
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Certain officers and directors of the Company are investors in Bagel
Funding, having invested $15.2 million of an aggregate of $75.0 million at
December 29, 1996. ENBC is the manager of Bagel Funding. Bagel Funding paid
$250,000 to ENBC (since conversion on June 17, 1996) in its capacity as manager
during 1996. Neither the Company nor ENBC has an equity interest in Bagel
Funding.
Certain officers and directors of the Company have an equity interest in
Market Partners, L.L.C. ("Market Partners"), having invested $9.0 million of an
aggregate of $38.3 million at December 29, 1996. As of such date, Market
Partners had invested $35.6 million in certain area developers of the Company.
Neither the Company nor ENBC has an equity interest in Market Partners.
A director/officer and a former director/officer of the Company control BC
Midwest Trust, successor to the interests previously held by BC Midwest L.P.
During 1994, 1995, and 1996, the Company paid approximately $528,000,
$662,000, and $282,000, respectively, to Bowana Aviation, Inc. ("Bowana") for
the use of aircraft. The Company's chief executive officer and a relative owned
Bowana. The Company believes that the amounts charged are at rates at least
comparable to those charged by third parties.
13. ENBC EQUITY OFFERINGS
During 1996, from the date of the conversion of the Company's loan to ENBC,
ENBC issued approximately 8.9 million shares of its common stock to third
parties pursuant to an initial and a subsequent public offering, a concurrent
non-underwritten public offering, and through the exercise of stock options and
warrants at prices ranging from $5.88 per share to $28.58 per share. Prior to
these transactions, the Company held approximately a 70% interest in ENBC, and
subsequent to these transactions at December 29, 1996, the Company held
approximately a 54% interest in ENBC. These transactions generated a pretax gain
of approximately $38.2 million as a result of ENBC issuing shares of common
stock at prices per share greater than the Company's carrying value. Deferred
income taxes have been provided on the gain.
14. 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.
42
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Boston Chicken, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Boston Chicken, Inc. and subsidiaries
as of December 31, 1995 and December 29, 1996, and for the fiscal years ended
December 25, 1994, December 31, 1995, and December 29, 1996 included in this
Form 10-K, and have issued our report thereon dated March 18, 1997. Our audits
were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule listed in Part IV, Item
14 of this Form 10-K is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Denver, Colorado
March 18, 1997
43
<PAGE>
SCHEDULE II
BOSTON CHICKEN, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance charged to Balance
at beginning costs and at end of
Classifications of period expenses Deductions(a) period
- --------------------------------------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C>
Fiscal year ended December 29, 1996:
Allowance for Doubtful Accounts...... $1,042,585 $402,307 $1,020,892 $ 424,000
Fiscal year ended December 31, 1995:
Allowance for Doubtful Accounts...... 246,193 796,392 - 1,042,585
Fiscal year ended December 25, 1994:
Allowance for Doubtful Accounts...... 323,234 186,510 263,551 246,193
</TABLE>
(a) Deductions represent recoveries of doubtful accounts and write-offs of
uncollectible accounts.
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors. The information appearing under the caption "Election of
Directors" in the Company's Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held May 13, 1997 (the "Proxy Statement"), is
incorporated herein by reference.
Executive Officers. Information with respect to executive officers of the
Company is set forth under the caption "Executive Officers" in Item 1 of this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Executive Compensation" in the
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the caption "Principal Stockholders and
Securities Ownership of Management" in the Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Transactions" in the
Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
1. The Company's Consolidated Financial Statements are set forth in Part
II, Item 8.
A. Report of Independent Public Accountants (Arthur Andersen LLP);
B. Consolidated Balance Sheets at December 31, 1995 and December 29,
1996;
C. Consolidated Income Statements for each of the three years ended
December 25, 1994, December 31, 1995, and December 29, 1996;
D. Consolidated Statements of Stockholders' Equity for each of the
three years ended December 25, 1994, December 31, 1995, and
December 29, 1996;
E. Consolidated Statements of Cash Flows for each of the three years
ended December 25, 1994, December 31, 1995, and December 29, 1996;
and
F. Notes to Consolidated Financial Statements.
45
<PAGE>
2. The following schedules are set forth in Part II, Item 8.
A. Report of Independent Public Accountants (Arthur Andersen LLP);
B. Schedule II - Valuation and Qualifying Accounts.
3. Exhibits
The exhibits to this report are listed in the Exhibit Index included
elsewhere herein. Included in the exhibits listed therein are the following
exhibits which constitute management contracts or compensatory plans or
arrangements:
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of fiscal 1996.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 18, 1997
Boston Chicken, Inc.
By: /s/ SCOTT A. BECK
------------------------------------------
Name: Scott A. Beck
Title: Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of March 18, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ SCOTT A. BECK Chairman of the Board, President
----------------------------- and Chief Executive Officer, and
Scott A. Beck Director (Principal Executive
Officer)
/s/ LAURENCE M. ZWAIN Vice Chairman of the Board,
----------------------------- President and Chief Executive
Laurence M. Zwain Officer of Boston Market and
Director
/s/ MARK W. STEPHENS Vice Chairman of the Board and
----------------------------- Chief Financial Officer
Mark W. Stephens (Principal Financial Officer)
/s/ MARK R. GOLDSTON Vice Chairman of the Board and
----------------------------- Director
Mark R. Goldston
/s/ MARK A. LINK Vice President--Financial
----------------------------- Reporting (Principal Accounting
Mark A. Link Officer)
/s/ DEAN L. BUNTROCK Director
-----------------------------
Dean L. Buntrock
/s/ ARNOLD C. GREENBERG Director
-----------------------------
Arnold C. Greenberg
/s/ Director
-----------------------------
J. Bruce Harreld
/s/ M HOWARD JACOBSON Director
-----------------------------
M Howard Jacobson
/s/ PEER PEDERSEN Director
-----------------------------
Peer Pedersen
</TABLE>
47
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Exhibits Number
- ------ -------- ------
<C> <S> <C>
3.1(a) Certificate of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on
Form S-8 (Reg. No. 33-71930)).
3.1(b) Certificate of Amendment to Certificate of
Incorporation dated May 14, 1996 of the Company
(incorporated by reference to Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended April 21, 1996).
3.2 Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1
(Reg. No. 33-81001).
4.1(a) Certificate of Incorporation of the Company, as
amended (included in Exhibit 3.1(a)).
4.1(b) Certificate of Amendment to Certificate of
Incorporation (included in Exhibit 3.1(b)).
4.2 Amended and Restated Bylaws of the Company (included
in Exhibit 3.2).
4.3 Indenture dated as of February 1, 1994 by and
between the Company and Harris Trust and Savings
Bank, as Trustee, which includes as Exhibit A the
form of Debenture for the Company's 4-1/2%
Convertible Subordinated Debentures Due 2004
(the "Debenture Indenture") (incorporated by
reference to Exhibit 4.1 to the Company's 1993 annual
report on Form 10-K).
4.4 Secured Revolving Credit Agreement dated as of
December 9, 1996 among the Company, Bankers Trust
Company, as Documentation Agent, Bank of America
Illinois, as Agent, and the Lenders Named Therein
("Credit Agreement") (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement
on Form S-3 (Reg. No. 333-22917)).
4.5(a) Facilities Agreement dated as of December 9, 1996
among the Company, Bank of America Illinois, as
Agent for Certain Lenders, and General Electric Capital
Corporation ("Facilities Agreement") (incorporated
by reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-3 (Reg. No. 333-22917)).
4.5(b) Amendment No. 1 to Facilities Agreement dated
February 28, 1997 ("Amendment No. 1 to Facilities
Agreement") among the Company, 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 Company'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 Company'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 Company's
Registration Statement on Form S-1 (Reg. No. 33-69256)).
</TABLE>
Exhibit - 1
<PAGE>
<TABLE>
<CAPTION>
Sequential
----------
Exhibit Page
- ------- ----
Number Exhibits Number
- ------ -------- ------
<C> <S> <C>
4.9 Stock Purchase Agreements dated as of March 24, 1995 by and between the
Company and Einstein/Noah Bagel Corp. ("ENBC"), formerly known as
Einstein Bros. Bagels, Inc., formerly known as Progressive Bagel
Concepts, Inc. (the "ENBC Stock Purchase Agreements") (incorporated
by reference to Exhibit 4.10 to the Company's 1994 annual report on
Form 10-K).
4.10 Stock Purchase Agreement dated March 31, 1995 by and between the
Company and ENBC (the "Third ENBC Stock Purchase Agreement")
(incorporated by reference to Exhibit 4.11 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-79280)).
4.11 Registration Rights Agreements dated as of March 24, 1995 between the
Company and ENBC (incorporated by reference to Exhibit 4.11 to the
Company's 1994 annual report on Form 10-K).
4.12 Registration Rights Agreement dated as of March 31, 1995 by and between
the Company and ENBC (incorporated by reference to Exhibit 4.13 to the
Company's Registration Statement on Form S-1 (Reg. No. 33-79280)).
4.13 Indenture dated as of June 1, 1995 by and between the Company and
Chemical Bank, as Trustee, which includes as an Exhibit the form of
LYON for the Company's Liquid Yield Option Notes due 2015 (the "LYONs
Indenture") (incorporated by reference to Exhibit 4.14 to the
Company's Registration Statement on Form S-3 (Reg. No. 33-93872)).
4.14 Stock Purchase Agreement dated August 10, 1995 by and between the
Company and ENBC (the "Fourth ENBC Stock Purchase Agreement")
(incorporated by reference to Exhibit 4.15 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-96230)).
4.15 Registration Rights Agreement dated August 10, 1995 by and between the
Company and ENBC (incorporated by reference to Exhibit 4.16 to the
Company'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
Company and Market Partners, L.L.C. ("Market Partners"), including the
form of Warrant (incorporated by reference to Exhibit 4.17 to the
Company'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 Company and Market Partners (incorporated by reference to
Exhibit 4.18 to the Company's Registration Statement on Form S-8 (Reg.
No. 333-15389)).
4.18 Warrant Certificate of the Company dated December 12, 1996 issued to
General Electric Capital Corporation (incorporated by reference to
Exhibit 4.18 to the Company's Registration Statement on Form S-3 (Reg.
No. 333-22917)).
</TABLE>
Exhibit - 2
<PAGE>
<TABLE>
<CAPTION>
Sequential
----------
Exhibit Page
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<C> <S> <C>
4.19 Registration Rights Agreement dated as of December 12, 1996 by and
between the Company and General Electric Capital Corporation
(incorporated by reference to Exhibit 4.19 to the Company's
Registration Statement on Form S-3 (Reg. No. 333-22917)).
10.1 Credit Agreement (included in Exhibit 4.4).
10.2(a) Facilities Agreement (included in Exhibit 4.5(a)).
10.2(b) Amendment No. 1 to Facilities Agreement (included in 4.5(b)).
10.3 Debenture Indenture (included in Exhibit 4.3).
10.4 Amended and Restated 1991 Employee Stock Option Plan (incorporated by
reference to Exhibit 10.5 to the Company's Registration Statement on
Form S-1 (Reg. No. 33-69256)).
10.5 1995 Employee Stock Option Plan (incorporated by reference to Exhibit
10.6 to the Company's Registration Statement on Form S-1 (Reg. No. 33-
81001)).
10.6 Amended and Restated 1991 Stock Option Plan for Non-Employee Directors
(the "Directors Plan") (incorporated by reference to Exhibit 10.6 to
the Company's Registration Statement on Form S-1 (Reg. No. 33-69256)).
10.7 Amendment to Directors Plan dated as of December 7, 1995 (incorporated
by reference to Exhibit 10.8 to the Company's Registration Statement on
Form S-1 (Reg. No. 33-81001)).
10.8 Concurrent Private Placement Agreement dated November 8, 1993 (included
in Exhibit 4.6).
10.9(a) Aircraft Dry Leases dated November 15, 1993 between the Company and
Bowana Aviation, Inc. ("Bowana") (incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on Form S-1 (Reg.
No. 33-73870)).
10.9(b) Letter Agreement dated May 19, 1994 between the Company and Bowana
amending the Aircraft Dry Leases dated November 15, 1993 (incorporated
by reference to Exhibit 10.9(b) to the Company's Registration
Statement on Form S-1 (Reg. No. 33-79280)).
10.10 Boston Chicken Relocation Programs for Officers (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-
Q for the quarter ended October 2, 1994).
10.11(a) Accounting and Administration Services Agreement by and between the
Company and ENBC (incorporated by reference to Exhibit 10.14 to the
Company's 1994 annual report on Form 10-K).
</TABLE>
Exhibit - 3
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Exhibits Number
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<C> <S> <C>
10.11(b) Amended and Restated Accounting and Administration Services Agreement
dated as of May 28, 1996 between the Company and ENBC (incorporated by
reference to Exhibit 10.12(a) to the Registration Statement on Form S-1
of ENBC (Registration No.333-04725)).
10.11(c) First Amendment to Amended and Restated Accounting and Administration
Services Agreement dated as of June 17, 1996 between the Company and
ENBC (incorporated by reference to Exhibit 10.12(b) to the Registration
Statement on Form S-1 of ENBC (Registration No.333-04725)).
10.12(a) Financial Services Agreement by and between the Company and ENBC
(incorporated by reference to Exhibit 10.15 to the Company's 1994
annual report on Form 10-K).
10.12(b) First Amendment to Financial Services Agreement dated as of March 7,
1996 between the Company and ENBC (incorporated by reference to Exhibit
10.13(b) to the Registration Statement on Form S-1 of ENBC
(Registration No.333-04725)).
10.12(c) Financial Services Termination Agreement dated as of May 28, 1996
between the Company and ENBC (incorporated by reference to Exhibit
10.13(c) to the Registration Statement on Form S-1 of ENBC
(Registration No.333-04725)).
10.13(a) Real Estate Services Agreement by and between the Company and ENBC
(incorporated by reference to Exhibit 10.16 to the Company's 1994
annual report on Form 10-K).
10.13(b) Amended and Restated Real Estate Services Agreement dated as of May 28,
1996 between the Company and ENBC (incorporated by reference to Exhibit
10.14(a) to the Registration Statement on Form S-1 of ENBC
(Registration No.333-04725)).
10.13(c) Amended and Restated Real Estate Service Termination Agreement dated as
of June 17, 1996 between the Company and ENBC (incorporated by
reference to Exhibit 10.14(b) to the Registration Statement on Form S-1
of ENBC (Registration No.333-04725)).
10.14(a) Computer and Communication Services Agreements by and between the
Company and ENBC (incorporated by reference to Exhibit 10.17 to the
Company's 1994 annual report on Form 10-K).
10.14(b) Amended and Restated Computer and Communications Systems Services
Agreement dated as of June 17, 1996 between the Company and ENBC
(incorporated by reference to Exhibit 10.15(a) to the Registration
Statement on Form S-1 of ENBC (Registration No.333-04725)).
10.14(c) First Amendment to the Amended and Restated Computer Communications
Systems Services Agreement dated as of June 17, 1996 between the
Company and ENBC (incorporated by reference to Exhibit 10.15(b) to the
Registration Statement on Form S-1 of ENBC (Registration No.333-04725))
10.15 ENBC Stock Purchase Agreements (included in Exhibit 4.9).
</TABLE>
Exhibit - 4
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Exhibits Number
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<C> <S> <C>
10.16 Third ENBC Stock Purchase Agreement (included in Exhibit 4.10).
10.17 Fourth ENBC Stock Purchase Agreement (included in Exhibit 4.14).
10.18(a) Amended and Restated Loan Agreement dated May 17, 1996 between the
Company and Boston Chicken (incorporated by reference to Exhibit
10.1(a) to ENBC's Registration Statement on Form S-1 (Reg. No.333-
04725)).
10.18(b) First Amendment to the Amended and Restated Loan Agreement between the
Company and ENBC dated July 19, 1996 (incorporated by reference to
Exhibit 10.1(b) to the Registration Statement on Form S-1 of ENBC
(Registration No.333-04725)).
10.18(c) Second Amendment to the Amended and Restated Loan Agreement between the
Company and ENBC dated September 16, 1996 and Second Amendment to
Secured Demand Note of ENBC dated September 16, 1996 (incorporated by
reference to Exhibit 10.1(c) to ENBC's Registration Statement on Form
S-1 (Registration No.333-12395)).
10.18(d) Second demand note of ENBC dated January 30, 1996, in favor of the
Company (incorporated by reference to Exhibit 10.23(d) to the
Company's 1995 annual report on Form 10-K).
10.18(e) First Amendment to Secured Demand Note of ENBC dated as of March 7,
1996 (incorporated by reference to Exhibit 10.3(b) to ENBC's
Registration Statement on Form S-1 (Reg. No.333-04725)).
10.19 LYONs Indenture (included in Exhibit 4.13).
10.20 Form of Area Development between the Company and its Area Developers
(incorporated by reference to Exhibit 99 to the Company's Current
Report on Form 8-K dated April 10, 1996).
10.21 Form of Franchise Agreement between the Company and Boston Market
Franchisees (incorporated by reference to Exhibit 99 to the Company's
Current Report on Form 8-K dated April 10, 1996).
10.22 Form of Secured Loan Agreement between the Company and Area Developers
partially financed by the Company (incorporated by reference to Exhibit
99 to the Company's Current Report on Form 8-K dated April 10, 1996).
10.23 Letter Agreement dated January 15, 1996 relating to employment of
Laurence M. Zwain.
10.24 Consulting Agreement dated October 14, 1995, between the Company and J.
Bruce Harreld (incorporated by reference to Exhibit 10.30 to the
Company's 1995 annual report on Form 10-K).
</TABLE>
Exhibit - 5
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Exhibits Number
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<C> <S> <C>
10.25 Merger Agreement dated as of January 22, 1996, as amended, among ENBC,
NNYB Acquisition Corporation, Noah's New York Bagels, Inc. ("Noah's"),
and the shareholders of Noah's (incorporated by reference to Exhibit
2.5 to the Registration Statement on Form S-1 of ENBC (Registration No.
333-04725)).
10.26 Purchase and Supply Agreement (Amended and Restated as of April 1,
1996) between the Company and Hudson Foods, Inc. (incorporated by
reference to Exhibit 10 to Form 10-Q for the quarter ended March 30,
1996 filed by Hudson Foods, Inc., Commission File No.1-9050).
10.27 Letter Agreement dated April 5, 1996 between ENBC and Mark R. Goldston
(incorporated by reference to Exhibit 10.18 to the Registration
Statement on Form S-1 of ENBC (Registration No.333-04725)).
10.28 Concurrent Private Placement Agreement and Registration Agreement dated
August 1, 1996 between the Company and ENBC (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 14, 1996).
10.29 Option Agreement between the Company and Mark W. Stephens dated as of
April 23, 1996 (incorporated by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter ended July 14,
1996).
10.30 Option Agreement between the Company and Laurence M. Zwain dated as of
April 23, 1996 (incorporated by reference to Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the quarter ended July 14,
1996).
10.31 Option Agreement between the Company and Mark R. Goldston dated as of
April 23, 1996 (incorporated by reference to Exhibit 10.6 to the
Company's Quarterly Report on Form 10-Q for the quarter ended July 14,
1996).
10.32(a) Secured Credit Agreement dated as of May 17, 1996 among ENBC, the
Lenders named therein, and Bank of America Illinois, as Agent
(incorporated by reference to Exhibit 10.9 to the Registration
Statement on Form S-1 of ENBC (Registration No. 333-04725)).
10.32(b) First Amendment and Waiver dated August 27, 1996 to Secured Credit
Agreement dated as of May 17, 1996 among ENBC, the Lenders named
therein, and Bank of America Illinois, as Agent (incorporated by
reference to Exhibit 10.9(b) to ENBC's Registration Statement on Form
S-1 (Registration No.333-12395)).
10.33 Option Agreement dated August 27, 1996 among ENBC, Harlan Bagel Supply
Company, L.L.C., and Hal P. Harlan, Hugh P. Harlan, and Doug H. Harlan
(the "Harlans") (incorporated by reference to Exhibit 10.25 ENBC's
Registration Statement on Form S-1 (Registration No.333-12395)).
</TABLE>
Exhibit - 6
<PAGE>
<TABLE>
<CAPTION> Sequential
Exhibit Page
Number Exhibits Number
- ------- -------- ----------
<C> <S> <C>
10.34 Project and Approved Supplier Agreement among Harlan Bagel Supply
Company, Harlan Bakeries, Inc. and ENBC (incorporated by reference to
Exhibit 10.24 to the Registration Statement on Form S-1 of ENBC
(Registration No.333-04725)).
10.35 Right of First Refusal Agreement among ENBC, Harlan Bakeries, Inc.
and the Harlans (incorporated by reference to Exhibit 10.26 to ENBC's
Registration Statement on Form S-1 (Registration No.333-12395)).
10.36 Warrant Purchase Agreement (included in Exhibit 4.16).
10.37 Option Agreement between the Company and Saad J. Nadhir dated as of
July 25, 1996 (incorporated by reference to Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter ended October
6, 1996).
10.38 Option Agreement between the Company and John Todd dated as of July 29,
1996 (incorporated by reference to Exhibit 10.8 to the Company's
Quarterly Report on Form 10-Q for the quarter ended October 6, 1996).
10.39 Letter Agreement between the Company and Jeffry J. Shearer dated as of
August 19, 1996 (incorporated by reference to Exhibit 10.9 to the
Company's Quarterly Report on Form 10-Q for the quarter ended October
6, 1996).
10.40 Fourth Amended and Restated Limited Liability Company Agreement of
Bagel Store Development Funding, L.L.C. dated as of July 1, 1996
(incorporated by reference to Exhibit 10.28 to ENBC's Registration
Statement on Form S-1 (Registration No.333-12395)).
10.41 Concurrent Offering Purchase Agreement dated November 26, 1996 between
the Company and ENBC.
10.42 Consulting Agreement dated November 13, 1996 between the Company and
Donald J. Bingle.
10.43 Letter Agreement dated December 27, 1996 between the Company and Thomas
R. Sprague.
10.44(a) Master Lease Agreement No.2 dated as of December 9, 1996 between the
Company, as Lessee, and General Electric Capital Corporation, for
itself and as Agent for certain participants.
10.44(b) Amendment No. 1 to Master Lease Agreement No.2 dated as of February
28, 1997 between the Company, as Lessee, and General Electric Capital
Corporation, for itself and as Agent for certain participants.
10.45 Secured Loan Agreement dated as of January 31, 1997 between the Company
and HFMI Acquisition Corporation, now known as Progressive Food
Concepts, Inc.
</TABLE>
Exhibit - 7
<PAGE>
<TABLE>
<CAPTION> Sequential
Exhibit Page
Number Exhibits Number
- ------- -------- ----------
<C> <S> <C>
11 Statement re Computation of Earnings Per Share.
21 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule
99.1 Form of Amended and Restated Agreements between the Company and BC
Equity Funding, L.L.C. (incorporated by reference to Exhibit 99.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended July
14, 1996).
99.2 Form of Agreement between ENBC and Bagel Funding, L.L.C. relating to
ENBC's purchase of Bagel Funding's interest in area developers
(incorporated by reference to Exhibit 10.30 to the Registration
Statement on Form S-1 of ENBC (Registration No.333-04725)).
</TABLE>
Exhibit - 8
<PAGE>
Exhibit 4.5(b)
AMENDMENT NO. 1 TO
FACILITIES AGREEMENT
THIS AMENDMENT NO. 1 TO FACILITIES AGREEMENT (this "Agreement") is
made as of the 28th day of February, 1997, among BOSTON CHICKEN, INC. (the
"Company"), BANK OF AMERICA ILLINOIS, as agent for the Lenders and the Issuing
Lender (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 (in its individual capacity, together with its successors
and assigns, the "Lease Agent").
The parties have heretofore executed that certain Facilities Agreement
dated as of December 9, 1996 (the "Facilities Agreement"), and desire to amend
the Facilities Agreement as hereinafter set forth. Capitalized terms used
herein without definition shall have the meaning given such terms in the
Facilities Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Facilities Agreement is hereby amended as follows:
a. In the definition of "Permitted Changes" in Section 1.1, in
clause (iii) thereof the phrase "or any Guarantor" is inserted after the phrase
"a failure of the Company".
b. In Section 3.7, the following provisions are added between the
word "accountants" and the immediately following ".":
", and to take samples from the air, water, soil or building materials
at, on or under any property of the Company or any Subsidiary, which is
mortgaged, hypothecated or pledged as Collateral (as such term is defined
in the Intercreditor Agreement); provided, that upon the occurrence and
during the continuance of a Default, any Creditor may exercise the
foregoing rights set forth in this Section at any time and at the expense
of the Company."
c. In Subsection (7) of Section 3.8, the phrase "or any Guarantor"
is inserted between the phrases "ability of the Company" and "to perform".
d. In Subsection (2) of Section 3.10, the phrase "due within 10" is
deleted and is replaced with the phrase "made promptly, but in no event later
than 5".
e. In Subsection (2) of Section 4.3, the phrase "which is not a
Guarantor" is inserted between the phrases "Restricted Subsidiary" and "may be
dissolved".
<PAGE>
f. In Subsection (2) of Section 4.8, the following provisions are
inserted between the phrase "Financed Subsidiaries or Guarantor" and the first
";" that appears in such Subsection:
"unless in the case of a Guarantor which is a Special Purpose
Subsidiary, such capital stock, partnership units or equity interests are
not of a type permitted pursuant to the definition of "Special Purpose
Subsidiary"
g. In Subsection (6) of Section 6.1: (i) in the phrase "Company or
any", "or" is changed to "," and (ii) the phrase "or any aggregation of its
Subsidiaries which together would constitute a Significant Subsidiary" is
inserted between the phrases "its Significant Subsidiaries" and "(a) shall
generally not".
h. In the first sentence of Section 7.10: (i) the phrase ", other
Creditors" is inserted between the phrases "Lease Agent" and "and the officers";
(ii) in the phrase "Loan Agent and the Lease Agent", "and" is changed to ",";
and (iii) the phrase "and other Creditors" is inserted between the phrase "Lease
Agent" and ", (collectively, the "Indemnitees")".
2. The parties hereto acknowledge and agree that the provisions of the
Facilities Agreement (as amended hereby) are in no way intended to diminish any
rights of the Lease Agent or Lease Participants under the 1996 Master Lease
Agreement or diminish any obligations of the Lessee under the 1996 Master Lease
Agreement. In the event of any inconsistencies between the provisions of the
Facilities Agreement (as amended hereby) and the 1996 Master Lease Agreement in
connection with any such rights or obligations with respect to the Lease Assets
(as such term is defined in the 1996 Master Lease Agreement), the provisions of
the 1996 Master Lease Agreement shall control with respect to the parties
thereto. The parties hereto acknowledge and agree that the provisions of the
Facilities Agreement (as amended hereby) are in no way intended to diminish any
rights of the Loan Agent or Lenders under the Credit Agreement or diminish any
obligations of the Borrower under the Credit Agreement. In the event of any
inconsistencies between the provisions of the Facilities Agreement (as amended
hereby) and the Credit Agreement in connection with any such rights or
obligations with respect to the Collateral (as such term is defined in the
Credit Agreement), the provisions of the Credit Agreement shall control with
respect to the parties thereto.
3. Except as expressly set forth herein, the Facilities Agreement remains
unmodified and in full force and effect.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH
STATE) INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
5. This Amendment may be executed in any number of counterparts, each of
which taken together shall constitute one and the same agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to Facilities Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
BOSTON CHICKEN, INC.
By: /s/ Bernadette Dennehy
----------------------------------------------
Name: Bernadette Dennehy
--------------------------------------------
Title: Vice President
-------------------------------------------
BANK OF AMERICA ILLINOIS,
as Loan Agent
By: /s/ David A. Johanson
----------------------------------------------
Name: David A. Johanson
--------------------------------------------
Title: Vice President
-------------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lease Agent
By: /s/ David Avigdor
----------------------------------------------
Name: David Avigdor
--------------------------------------------
Title: Transaction and Syndication Senior Manager
-------------------------------------------
3
<PAGE>
Exhibit 10.23
Laurence Zwain
6523 Waggoner
Dallas, TX. 75230
January 15,1996
Dear Larry,
Boston Chicken, Inc.(the Company) is pleased to confirm our offer and
your acceptance of employment as CEO of Boston Market reporting to Saad Nadhir
and Scott Beck, Co-Chairmen. Your bi-weekly base salary will be $15,400
($400,000 annualized) subject to annual performance review. Additionally, you
will participate in an annual bonus plan with a target payout equal to 50% of
base pay($200,000), dependent on meeting certain performance criteria. For 1996,
$100,000 of your bonus will be guaranteed and paid coincidental with your bi-
weekly salary. Your tentative start date will be Feb. 5,1996.
As a regular, full-time employee, you are eligible to participate in
the employee benefit plans which the Company offers to employees. A description
of the benefit plans currently being offered is enclosed with this letter.
These plans may, from time to time, be amended or terminated.
As an executive officer of the Company, you will be entitled to
participate in the Company's Employee Stock Option Plan. The current guidelines
would provide for an annual grant equal to three times your annual salary
prorated from your start date. Additionally, management intends to recommend at
the next Stock Option Committee meeting that you be given a bonus grant which
would bring your 1996 options to a total of 200,000 shares. The options will
vest over a four year period at the rate of 10%, 20%, 30% and 40% per year, as
further detailed in the Employee Stock Option Plan. Further, these options will
be subject to all the provisions of the Employee Stock Option Plan as it may be
amended from time to time. On an ongoing basis, as an executive officer of the
Company, management intends to recommend you for an annual option grant equal to
three times your base salary.
In addition, you will have an option on $250,000 worth of Einstein Bros.
Bagels, Inc.("EBBI") Stock. These options will be subject to an identical
vesting rate as noted above. You will also be allowed to invest up to $500,000
in Einstein's Equity Funding (EEF).
<PAGE>
Additionally, the Company will reimburse you for all reasonable costs for
your relocation to the Denver area. All reimbursed amounts will be tax protected
at 35% to help compensate for the taxes you may incur as a result of the
allowance. The actual incremental taxes you pay will depend upon the
deductibility of the relocation expenses you incur. You will also be advanced
$30,000 as a miscellaneous relocation allowance payable after your start date
You will be an employee at will of the Company, terminable for any reason
or no reason whatsoever. In the event of termination without cause, your salary
will be continued for a period of one year from notice of termination. In such
circumstances, your options will continue to vest with a guarantee of a minimum
of two years of vesting from start date.
As a condition of employment, you will be required to enter into a
confidentiality and non-compete agreement as drafted by the company. In
consideration, the Company, at its sole discretion , will continue your salary
for one year. You represent and warrant that you are not a party to any non-
compete, confidentiality or similar agreement, whether written or oral, with any
person or entity that would restrict or otherwise affect your employment with
the Company.
Everyone here , especially Saad and myself are delighted that you have
decided to become a member of our team. We look forward to what we believe will
be an enormous contribution by you to the Company and we will do all that we can
to make your association with Boston Chicken, Inc. and its people as personally
fulfilling as possible.
....
Again, welcome to the team!
Sincerely,
/s/ Scott A. Beck
Scott A. Beck
CEO and Co-Chairman
enclosures
I hereby accept the offer as stated above:
Signature: /s/ Laurence Zwain Date: January 15, 1996
-------------------------- ----------------
2
<PAGE>
Exhibit 10.41
500,000 SHARES OF COMMON STOCK
OF
EINSTEIN/NOAH BAGEL CORP.
CONCURRENT OFFERING PURCHASE AGREEMENT
DATED NOVEMBER 26, 1996
<PAGE>
CONCURRENT OFFERING PURCHASE AGREEMENT
THIS AGREEMENT is made as of November 26, 1996, between Einstein/Noah Bagel
Corp., a Delaware corporation (the "Company"), and Boston Chicken, Inc., a
Delaware corporation (the "Purchaser"). Except as otherwise indicated herein,
capitalized terms used herein are defined in Section 7 hereof.
R E C I T A L S:
---------------
WHEREAS, the Company is concurrently offering shares of its common stock,
$.01 par value per share ("Common Stock"), in an underwritten public offering
(the "Underwritten Public Offering"); and
WHEREAS, the Company desires to sell to the Purchaser and the Purchaser
desires to purchase from the Company, concurrently with, and subject to, the
closing of the Underwritten Public Offering, an aggregate of 500,000 shares of
Common Stock (the "Shares"), for a purchase price per Share equal to $______,
the price per share to be paid by the public in the Underwritten Public
Offering, net of underwriting discount (the "Price Per Share"), upon the terms
and conditions hereinafter set forth; and
WHEREAS, to facilitate the offering and sale of the Shares to the Purchaser
(the "Concurrent Offering" and together with the Underwritten Public Offering,
the "Offerings" ), the Company has registered the Shares under the Securities
Act of 1933, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase and Sale of Shares. Subject to the terms and conditions set
forth herein, the Company hereby agrees to issue and sell to the Purchaser, and
the Purchaser hereby agrees to purchase from the Company at the Closing (as
hereinafter defined), the Shares for an aggregate purchase price equal to the
Price Per Share multiplied by the number of Shares.
2. The Closing of the Purchase and Sale of Shares.
A. Authorization. On or before the Closing, the Company will have
authorized the issuance and sale to the Purchaser of the Shares.
B. Time and Place of Closing. The closing of the purchase and sale
of the Shares (the "Closing") will take place at the offices of Bell, Boyd &
Lloyd, 70 W. Madison Street, Chicago, Illinois, on the date of, and subject to
the concurrent closing of, the sale of shares of Common Stock in the
Underwritten Public Offering (the "Closing Date"). At the Closing, the Company
will deliver to the Purchaser a stock certificate or stock certificates (in such
denominations requested by Purchaser at least three business days prior to the
Closing) evidencing the Shares to be purchased by the Purchaser, registered in
the Purchaser's or its nominee's name, upon payment of the purchase price
thereof by wire transfer of immediately available funds to the Company's account
at Bank of America Illinois, Chicago, Illinois.
<PAGE>
3. Conditions of the Purchaser's Obligation at the Closing. The
obligation of the Purchaser to purchase and pay for the Shares at the Closing is
subject to the satisfaction (or waiver by the Purchaser) as of the Closing of
the following conditions:
A. Closing of the Underwritten Public Offering. The Underwritten
Public Offering shall close concurrently with the Concurrent Offering, and such
closing shall have occurred on or before the end of the fifteenth business day
after the date hereof.
B. Representations and Agreements; No Material Adverse Change. At
the Closing Date, (i) the representations and warranties in Section 5 hereof
shall be true and correct with the same force and effect as though expressly
made at and as of Closing Date; (ii) the Company shall have complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to Closing Date; and (iii) there shall not have been,
since the date hereof, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business.
C. Blue Sky Clearances. The Company shall have timely made all
filings and taken all other necessary action under applicable state securities
laws to permit the consummation of the Concurrent Offering contemplated hereby.
D. Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Sections 3A, 3B and 3C,
inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors and, if required, by the Company's
stockholders authorizing the execution, delivery, and performance of
this Agreement, and each of the other agreements contemplated hereby,
and the issuance and sale of the Shares;
(iii) certified copies of the Company's restated certificate of
incorporation and amended and restated bylaws, each as in effect at
the Closing;
(iv) copies of all third party and governmental consents,
approvals, and filings obtained in connection with the transactions
hereunder (including, without limitation, all blue sky law filings and
waivers of all preemptive rights and rights of first refusal), if any;
and
(v) copies of the Prospectus (as defined in Section 7 hereof)
and any amendments or supplements thereto and the Registration
Statement (as defined in Section 7 hereof) and any amendments thereto,
as filed by the Company with the Securities and Exchange Commission in
connection with the Offerings.
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E. Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing shall have been taken and all
documents incident thereto shall be satisfactory in form and substance to
counsel to the Purchaser.
F. Opinion of Company's Counsel. The Purchaser shall have received
from Bell, Boyd & Lloyd, counsel for the Company, an executed copy of its
opinion to the Purchaser, dated the date of the Closing, in form and substance
reasonably satisfactory to the Purchaser.
G. Receipt of Consents. The Purchaser shall have received the
written consent of any persons or entities whose consent is contractually
required to consummate the transactions contemplated hereby.
H. Termination of Agreement.
(i) If any condition specified in this Section 3 shall not have
been fulfilled when and as required to be fulfilled, this Agreement
may be terminated by the Purchaser by notice to the Company at any
time at or prior to the Closing.
(ii) Notwithstanding anything herein to the contrary, the
Purchaser may terminate this Agreement, by written notice to the
Company, at any time at or prior to Closing Date (a) if there has
been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus,
any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, or (b) the
underwriters in the Underwritten Public Offering or the
representatives of such underwriters have terminated the Purchase
Agreement relating to the Underwritten Public Offering pursuant to
Section 8 of such Agreement or otherwise.
(iii) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other
party; provided that Section 10 shall survive such termination and
remain in full force and effect.
4. Current Public Information. Until such time as the Purchaser shall, in
the opinion of its legal counsel, be entitled to transfer the Shares without
compliance with the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act"), in reliance on the exemption contained in Section 4(1)
thereof, the Company shall at all times file all reports required to be filed by
it under the 1933 Act, the rules and regulations adopted by the Securities and
Exchange Commission (the "Commission") thereunder (the "1933 Act Regulations")
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations adopted by the Commission thereunder, and shall take such further
action to provide current public information, in each case to the extent
required to enable the Purchaser to sell the Shares pursuant to Rule 144 adopted
by the Commission under the 1933 Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Commission.
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<PAGE>
5. Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as of the date hereof, and agrees with the
Purchaser, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the Company, are contemplated by the Commission,
and any request on the part of the Commission for additional
information has been complied with.
At the respective times the Registration Statement 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 did 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, 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 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 Options 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 the
Purchaser expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and, if
applicable, each preliminary prospectus and the Prospectus was identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
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(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly, where applicable, the financial
position of the respective entity to which such financial statements relate
(including, where applicable, the consolidated subsidiaries of such entity)
at the dates indicated and, where applicable, the statement of operations,
stockholders' equity and cash flows of such entity (including, where
applicable, the consolidated subsidiaries of such entity) for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The pro forma financial
statements and the related notes thereto included in the Registration
Statement and the Prospectus have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
5
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(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, other than
the pledge of such stock pursuant to the Company's secured revolving bank
credit agreement dated May 17, 1996 with Bank of America Illinois, as agent
for the lenders named therein, as amended (the "Credit Agreement"). The
only subsidiaries of the Company are the subsidiaries listed on Exhibit
21.1 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, in the Underwritten Public Offering and 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 or options referred to in the Prospectus). The
shares of issued and outstanding capital stock have been duly authorized
and validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any security holder of the
Company.
(viii) Authorization of Agreement. This Agreement has been duly
executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Shares have
been duly authorized for issuance and sale to the Purchaser pursuant to
this Agreement and, when issued and delivered by the Company pursuant to
this Agreement against payment of the consideration set forth herein, will
be validly issued and fully paid and non-assessable; the Common Stock
conforms to all statements relating thereto contained in the Prospectus;
and the issuance of the Shares is not subject to preemptive or other
similar rights of any security holder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any of
its subsidiaries is in violation of its charter or by-laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition
6
<PAGE>
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company or
any subsidiary is subject (collectively, "Agreements and Instruments")
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein and compliance by
the Company with its obligations hereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or without
the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches, defaults or Repayment Events or liens, charges or encumbrances
that would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of the
Company or any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their assets, properties or operations.
As used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. Except as disclosed in the Prospectus,
no labor dispute with the employees of the Company or any subsidiary that
could reasonably be expected to result in a Material Adverse Effect exists
or, to the knowledge of the Company, has been threatened.
(xii) Absence of Proceedings. Except as disclosed in the Prospectus,
there is no action, suit, proceeding, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or foreign,
now pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any subsidiary, which is required to be disclosed
in the Prospectus, or which the Company reasonably believes is likely to
result in a Material Adverse Effect, or which the Company reasonably
believes is likely to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations hereunder;
the aggregate of all pending legal or governmental proceedings to which the
Company or any subsidiary is a party or of which any of their respective
property or assets is the subject which are not described in the
Prospectus, including ordinary routine litigation incidental to the
business, are not likely to result in a Material Adverse Effect.
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<PAGE>
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or reasonably believe that they can acquire on
reasonable terms, the patents, patent rights, licenses, invention,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") currently employed by them
in connection with the business now operated by them, and, except as
disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has received any notice or, to the best of their respective
knowledge, is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to carry on the business of the Company or any of its
subsidiaries, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Shares hereunder or the consummation of the transactions contemplated
by this Agreement, except such as have been already obtained or as may be
required under state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such certificates, permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them,
except where the failure to so possess such Government Licenses would not,
singly or in the aggregate, have a Material Adverse Effect; the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject
8
<PAGE>
of an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xvii) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
or is exempt therefrom.
(xviii) Registration Rights. There are no persons with registration
or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act, except as described in the Registration Statement.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Shares as herein contemplated and the sale of
shares of Common Stock in the Underwritten Public Offering and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
6. Covenants of Company. The Company covenants with the Purchaser to take
the following actions prior to the Closing:
(i) Compliance with Securities Regulations and Commission
Requests. The Company will comply with the requirements of Rule 430A
under the 1993 Act, as applicable, and will notify the Purchaser
immediately, and confirm the notice in writing (which confirmation
shall include copies of all relevant documents relating to the subject
matter of such notice), (A) 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, (B) of
the receipt of any comments from the Commission, (C) 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, and (D) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the shares of
Common Stock being offered and sold in the Offerings under any
applicable state securities laws, or of the initiation or threatening
of any proceedings for any of such purposes. 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 for filing 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
9
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issuance of any stop order and, if any stop order is issued, to obtain
the lifting thereof at the earliest possible moment.
(ii) Listing. The Company will file all documents and notices
required by the Nasdaq National Market to permit the quotation of the
Shares thereon.
7. Definitions. For the purpose of this Agreement, the following terms
have the meanings set forth below:
"Officer's Certificate" means a certificate signed by the Company's
chairman, vice chairman, president, chief executive officer, chief financial
officer, or chief operating officer, stating that (i) the officer signing such
certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate, taken as a whole with the other documents delivered in connection
with this Agreement, does not misstate any material fact and does not omit to
state any material fact necessary to make the certificate not misleading.
"Prospectus" means the final prospectus in the form first furnished to
the Purchaser in connection with the Concurrent Offering.
"Registration Statement" means the registration statement on Form S-1
filed with the Commission under the 1933 Act relating to the Offerings,
including the exhibits thereto and schedules, if any, at the time it became
effective and including any information deemed part of such registration
statement at the time it became effective pursuant to paragraph (b) of Rule 430A
under the 1933 Act; and if any Rule 462(b) Registration Statement shall have
been filed with the Commission relating to the Offerings, the term "Registration
Statement" shall include such Rule 462(b) Registration Statement.
"Rule 462(b) Registration Statement" means any registration statement
filed pursuant to Rule 462(b) under the 1933 Act.
8. Registration Rights. The Company and the Purchaser are parties to a
Registration Agreement dated as of August 1, 1996 (the "Registration
Agreement"). The Shares to be purchased by Purchaser pursuant hereto shall be
deemed to be Registrable Securities (as such term is defined in the Registration
Agreement) for all purposes of the Registration Agreement to the same extent as
if the Shares had been acquired by the Purchaser pursuant to the Concurrent
Private Placement Agreement dated as of August 1, 1996 between the Company and
the Purchaser.
9. Purchaser's Representation. The Purchaser hereby represents to the
Company that the Purchaser is acquiring the Shares for its own account and not
with a view to any distribution thereof in violation of the federal securities
laws.
10. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith will survive the
10
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, regardless of any investigation made by the
Purchaser or on its behalf, until 30 days after audited financial statements for
the Company's fiscal year 1997 are delivered to the Purchaser. Nothing herein
shall imply any duty of the Company after the execution and delivery of this
Agreement to update any representations or warranties made herein.
11. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind the respective successors and assigns of
the parties hereto whether so expressed or not. References herein to Purchaser
shall be deemed to include such assignees. A sale or other transfer of Shares
shall not, however, of itself without express assignment of rights or
obligations hereunder, be deemed an assignment of any such rights or
obligations.
12. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by, or
invalid under, applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
13. Counterparts. This Agreement may be executed simultaneously in
counterparts, any one of which need not contain the signature of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.
14. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
15. GOVERNING LAW. THE DELAWARE GENERAL CORPORATION LAW WILL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL
OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF COLORADO.
16. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
express courier service (charges prepaid) or by facsimile transmission, or three
business days after being mailed to the recipient by certified or registered
mail, return receipt requested and postage prepared. Such notices, demands and
other communications will be sent to the Purchaser as follows:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 384-5339
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and to the Company as follows:
Einstein/Noah Bagel Corp.
14123 Denver West Parkway
P.O. Box 4086
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 216-3490
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written
EINSTEIN/NOAH BAGEL CORP.
By: /s/ Joel M. Alam
---------------------
Name: Joel M. Alam
-------------------
Title: Vice President
------------------
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
---------------------
Name: Donald J. Bingle
-------------------
Title: Vice President
------------------
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Exhibit 10.42
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made and entered into this
13th day of November, 1996, by and between BOSTON CHICKEN, INC. (the "Company")
DONALD J. BINGLE ("Bingle").
WHEREAS, Bingle is employed by the Company in the positions of Vice
President, General Counsel, and Secretary; and
WHEREAS, Bingle intends to resign from such offices of the Company and any
other offices or directorships of any of the Company's subsidiaries effective
December 13, 1996, but will continue to remain employed by the Company until
February 14, 1997; and
WHEREAS, on February 14, 1997, Bingle's employment with the Company will
terminate; and
WHEREAS, the Company desires to obtain the services of Bingle from the date
hereof through the Employment Termination Date and, thereafter, for an
additional period of time in connection with issues relating to transition of
his job functions or that are otherwise within the scope of his knowledge and
expertise, on the terms and conditions set forth in this Agreement; and
WHEREAS, Bingle desires to provide the services set forth under the terms
of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Employment/Consultant Status.
----------------------------
(a) On December 13, 1996, Bingle and the Company will announce that
effective immediately (the "Officer Resignation Date"), Bingle will resign from
the offices of Vice President, General Counsel, and Secretary of the Company and
all offices and directorships of any of the Company's subsidiaries. From the
date hereof through and including the Officer Resignation Date, Bingle will
remain an employee of the Company (working at least 35 hours per week) at his
salary level as of the date hereof and will continue participation in, and be
entitled to receive, all employee benefits offered by the Company to full-time
employees during such period.
(b) From the Officer Resignation Date until February 14, 1997, Bingle will
remain an employee of the Company (working at least 15 hours per week) at his
salary level as of the date
<PAGE>
hereof and will continue participation in, and be entitled to receive, all
employee benefits offered by the Company to part-time employees during such
period.
(c) Bingle will resign from the employment of the Company effective on
February 14, 1997 (the "Employment Termination Date"). Bingle hereby confirms
that he is an employee at will with the Company and that as of the Employment
Termination Date his status as an employee of the Company will be properly
terminated.
(d) Bingle acknowledges that as of the Employment Termination Date he
will be an independent contractor and not an employee of the Company. Effective
upon the Officer Resignation Date except as otherwise provided herein, Bingle
will not be authorized to act on behalf of the Company and may not enter into
any contracts or make any promises or commitments of any kind whatsoever on
behalf of the Company without express written authorization from a Chairman, a
Vice Chairman, or General Counsel of the Company to do so. The Company will
maintain a voice-box for Bingle during the term of this Agreement. Bingle agrees
to promptly forward any voice-mail messages intended for his successor or other
Company personnel to the proper Company personnel.
2. Term.
The term of this Agreement shall be from the date hereof through
February 14, 1998; provided that the term hereof will be automatically extended
for successive one year periods unless either party gives the other written
notice of termination at least sixty (60) days prior to the expiration date or
any extension date; provided further that the Company may terminate this
Agreement upon thirty (30) days notice upon and breach hereof or any conduct
hereunder which constitutes malpractice. Inc the event that the Release attached
hereto as Exhibit A is not executed and returned to the Company within thirty
(30) days of the Employment Termination Date or such Release is properly revoked
in accordance with its terms, this Agreement shall terminate and all amounts
paid hereunder and all profits on stock option exercises after the fifteenth day
following the Employment Termination Date in excess of the profits that would
have been garnered had such options been exercised on the last day exercisable
but for the existence of this Agreement shall immediately be paid over to the
Company.
3. Scope of Work.
From and after the Employment Termination Date, Bingle shall, upon request
by the Company, provide information, advice, and assistance concerning matters
that were within the scope of his knowledge and expertise during the course of
his employment by the Company. The scope of Bingle's work shall include, but not
necessarily be limited to, consultation regarding the history of the Company and
precedent created during his employment; advice related to problem resolution,
transaction structuring, and corporate culture events; providing transition
assistance to the employee or employees performing job functions similar to
those previously performed by Bingle; providing assistance to the Company in
connection with any litigation that is pending or that may arise during the term
of this Agreement; and providing other advice and assistance that reasonably
fall with Bingle's knowledge and expertise and the scope.
2
<PAGE>
of his prior activities as an employee. The Company acknowledges that Bingle is
acting as a consultant and adviser and that the Company is solely responsible
for business decisions based on such advice.
Bingle shall not be required to be available any more than fifteen (15)
hours per month from and after the Employment Termination Date through the
expiration or earlier termination of this Agreement, provided that Bingle may be
required to be available for short periods for a reasonable number of days as
may be required in the event of any crisis or significant litigation.
4. Compensation.
From and after the Employment Termination Date, Bingle will be paid at an
annual rate of $50,000 per year through the expiration or earlier termination of
this Agreement, payable in monthly installments of $4,166.66 during the first
week of each month (the "Consulting Fee"). In addition to the Consulting Fee, in
the event that Bingle is required to consult in excess of fifteen (15) hours per
month after the Employment Termination Date, upon written notice from Bingle
documenting such additional devotion of time, the Company shall pay Bingle
$213.33 per hour for each additional hour in excess of fifteen (15), payable by
the Company in the ordinary course after receipt of such supporting
documentation. The Company agrees to reimburse Bingle for his COBRA insurance
expenses (at a $1,000 deductible level for family coverage) from and after the
Officer Resignation Date for the maximum time permitted under applicable law and
regulation. If the Company elects to pay bonuses pursuant to the terms of the
Company's 1996 Employee Incentive Plan, Bingle shall be eligible to receive a
bonus in an amount determined in accordance with the terms of the Company's 1996
Employee Incentive Plan (based upon his salary as of the date hereof), as if
Bingle were still a full-time employee of the Company throughout 1996 and on the
date such bonuses, if any, are paid.
5. Reimbursement for Reasonable Expenses.
Bingle shall be reimbursed for reasonable expenses incurred in performing
the work contemplated by this Agreement which are approved in writing by a
Chairman, a Vice Chairman or General Counsel of the Company upon the submission
of an itemized statement of expenses supported by receipts for any such
expenses, including, but not limited to, all costs associated with maintaining
his license to practice law in the State of Colorado and expenses related to
attendance at Continuing Legal Education courses in accordance with the
Company's regular travel and entertainment policies. Bingle will be reimbursed
for all reasonable expenses incurred in the performance of his duties in his
prior position as an employee, upon submission of expense reports in accordance
with the Company's regular travel and entertainment policies.
6. Stock Options.
It is understood and agreed by the parties that the time during which this
Agreement is in effect, and for twelve months after the expiration or
termination of this Agreement (the "Continuation Period"), shall be credited
toward satisfying the requirements for vesting of stock options and
exercisability of vested options pursuant to the terms of the Company's Amended
3
<PAGE>
and Restated 1991 Employee Stock Option Plan and the Company's 1995 Employee
Stock Option Plan and any successor or subsequent similar plan under which he
receives or holds options, subject to all of the other provisions, terms, and
conditions of such plans, as they may be amended or modified from time to time.
Upon the expiration of the Continuation Period, all stock options held by
Bingle, whether vested or unvested, shall be terminated and of no further force
or effect. If any broad-based annual grant shall be made to employees of the
Company from the date hereof until the Employment Termination Date, management
of the Company shall recommend to the Stock Option Committee of the Board of
Directors that Bingle receive an annual grant of stock options under such plans
having a value equal to two (2) times Bingle's salary as of the date hereof,
subject to the plan's other standard provisions and restrictions. If any
broad-based annual grant shall be made to employees of the Company from the
Employment Termination Date to the termination of this Agreement, management of
the Company shall recommend to the Stock Option Committee of the Board of
Directors that Bingle receive an annual grant of stock options under such plans
having a value equal to two (2) times the Consulting Fee, subject to the plan's
other standard provisions and restrictions. Bingle currently has options to
purchase, pursuant to the foregoing plans and subject to the vesting,
acceleration, and other terms and requirements thereof, shares of the Company's
common stock as reflected on the Company's records on the date hereof and in the
Stock Option Summary delivered to Bingle coincident herewith.
7. Confidentiality and Non-Compete; Return of Company Property.
Bingle acknowledges that he has executed, and hereby reaffirms his
obligations under a confidentiality and Non-Compete Agreement dated as of June
1, 1992 (the "Confidentiality Agreement"), and Non-Compete Agreement dated as of
September 1, 1992 (the "Non-Compete Agreement"), copies of which are attached
hereto as Exhibit B. The parties hereto agree (i) that the two year period
referred to in Section 2 of the Non-Compete Agreement shall not commence until
the expiration or earlier termination of this Agreement, and (ii) that the
period during which this Agreement is in effect shall be included within the
"Applicable Term," as defined in the Confidentiality Agreement, so that the
two-year period in Section 6 of the Confidentiality Agreement shall not commence
until at least the expiration or earlier termination of this Agreement, or until
such later period as provided in such Section 6.
Bingle shall return to the Company on the Employment Termination Date all
Company documents (including any and all copies) and other Company property in
his possession or under his control. Bingle hereby agrees that he shall keep no
Company documents of any kind whatsoever, and agrees that he shall promptly
return any such documents that may come into his possession. Bingle shall not
return the lap-top computer provided to him by the Company until expiration or
termination of this Agreement. During the term of this Agreement, Bingle shall
continue on the Company's Lotus Notes database and shall have access thereto.
4
<PAGE>
8. Ownership of Work Product.
Bingle agrees that any and all ideas, improvements, and inventions
conceived, created, or first reduced to practice in the performance of work
under this Agreement shall be the sole and exclusive property of the Company.
Bingle further agrees that the Company is and shall be vested with all
rights, title, and interest including patent, copyright, trade secret, and
trademark rights in Bingle's work product under this Agreement.
Bingle shall execute all papers including patent applications, inventing
assignments, and copyright assignments, and otherwise shall assist the Company
at the Company's expense and as reasonably shall be required to perfect in the
Company the rights, title, and other interests in Bingle's work product
expressly granted to the Company under this Agreement.
9. Indemnification.
Notwithstanding the resignation by Bingle of his status as an officer of
the Company or termination of Bingle's employment with the Company, the Company
shall, in accordance with the terms of the Company's Certificate of
Incorporation, as amended (the "Certificate"), indemnify and hold harmless
Bingle against all expense, liability, and loss reasonably incurred or suffered
by Bingle as a result of being made a party or threatened to be made a party to
or involved in any action, suit, or proceeding, by reason of the fact that he
was an officer or employee of the Company.
After the Employment Termination Date, the Company shall, in accordance
with the terms of the Company's Certificate, (i) indemnify and hold harmless
Bingle against all expense, liability, and loss reasonably incurred or suffered
by Bingle that result from any claims arising out of or relating to Bingle's
services hereunder to the same extent as officers of the Company are indemnified
by the Company, and (ii) reimburse Bingle for all expenses incurred by Bingle in
connection with any such action or claim. Furthermore, in the event the Company
chooses not to provide to Bingle malpractice insurance coverage, to the extent
permitted by law, the Company agrees to waive any rights it may have to bring an
action, whether legal or administrative, against Bingle for malpractice based
upon legal advice rendered by Bingle to the Company hereunder from the Officer
Resignation Date through expiration of the term of this Agreement; provided,
however, notwithstanding the Company's waiver of such right, any such claim or
action which would otherwise arise in favor of the Company may give rise to
termination pursuant to Section 2. The Company acknowledges it has consulted
with legal counsel other than Bingle in making such waiver.
10. Release.
Bingle acknowledges and agrees that this Agreement is partial consideration
for the release of any and all claims, liabilities, demands, and causes of
action arising out of his former
5
<PAGE>
employment or the termination of his employment with the Company that Bingle may
have against the Company, all as described more fully in the "Release" attached
hereto as Exhibit "A".
11. Remedies for Breach by the Consultant.
THE PARTIES INTEND THIS AGREEMENT TO BE GOVERNED BY THE LAWS OF THE STATE
OF COLORADO. If the scope of any provision contained herein is too broad to
permit enforcement of such provision to its full extent, then such provision
shall be enforced to the maximum extent permitted by law and Bingle hereby
consents and agrees that such scope may be judicially modified in any proceeding
brought with respect to the enforcement of such provision. Except as otherwise
provided in the previous sentence, if any provision of this Agreement shall be
construed to be illegal or invalid, the legality or validity of any other
provision hereof shall not be affected thereby, and any illegal or invalid
provision of this Agreement shall be severable, and all other provisions shall
remain in full force and effect. Bingle recognizes that money damages alone
would not adequately compensate the Company in the event of any breach of this
Agreement, and he or she therefore agrees that, in addition to all other
remedies available to the Company at law or in equity, the Company shall be
entitled to injunctive relief for the enforcement hereof. All payments to be
made to Bingle in accordance with the terms of this Agreement, and the
performance by the Company of its obligations hereunder, shall be conditioned on
Bingle's continued cooperation and performance of his obligations hereunder,
during the term hereof.
12. Amendment.
This Agreement, and each section thereof, may be amended only in writing,
signed by the party against whom enforcement of any such amended provision is
sought.
13. Headings.
Any headings of sections of this Agreement are solely for the convenience
of the parties and are not a part of this Agreement nor are they to be used in
its interpretation.
14. Counterparts.
This Agreement may be executed in several counterparts; each such
counterpart shall be considered as an original agreement and all such executed
counterparts shall constitute one Agreement.
15. Notices.
Any notice, request, instruction, or other document required to be given
under this Agreement by either party to the other shall be in writing and
delivered in person or by reputable express delivery service, or by facsimile
transmission or mailed by certified mail, postage prepaid, return receipt
requested (such mailed notice to be effective on the date such receipt is
acknowledged) as follows:
6
<PAGE>
To the Company:
General Counsel
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Facsimile: (303) 384-5339
To the Consultant:
Donald J. Bingle
21982 Paradise Circle
Golden, CO 80401
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BOSTON CHICKEN, INC. CONSULTANT
By: /s/ Mark W. Stephens /s/ Donald J. Bingle
-------------------------- -------------------------
Title: Chief Financial Officer Donald J. Bingle
-----------------------
7
<PAGE>
EXHIBIT A
<PAGE>
Exhibit "A"
RELEASE
I, Donald J. Bingle, am giving this release to Boston Chicken, Inc. (the
"Company") in partial consideration of the payment of consideration pursuant to
the Consulting Agreement between me and Boston Chicken, Inc. dated as of
November 13, 1996, to which it is attached and forms a part.
In exchange for this and other valuable consideration, I hereby agree to release
the Company, its parents, subsidiaries, and affiliated organizations, if any,
and their respective past, present, and future directors, officers, agents,
attorneys, franchisees, and employees (collectively referred to as the
"Company") from any and all claims, liabilities, demands, and causes of action
of any nature or type whatsoever which I or any of my heirs or personal
representatives may have, either now or at any time before now, against the
Company based on any action, inaction, fact, occurrence, cause, or matter
whatsoever, including but not limited to: any judicial, quasi-judicial, or
administrative action relating to my employment or termination of my employment
or arising under the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, the Employee Retirement Income Security Act, the Fair
Labor Standards Act, the Illinois Human Rights Act, the Massachusetts Fair
Employment Practice Law or other similar applicable federal, state, or local
statute; my service as an employee of the Company; or otherwise; provided,
however, this release shall not affect (i) the Company's indemnification
obligations to me, if any, that currently exist or may subsequently arise as
provided for by the Company's Certificate of Incorporation and Bylaws, each as
amended, in connection with my service to the Company in my capacity as an
officer or pursuant to the above-referenced Consulting Agreement, and (ii) my
rights to recovery under any applicable directors and officers policy of
insurance in connection with my service to the Company in my capacity as an
officer.
I acknowledge that before signing this Release the Company has advised me in
writing to consult with an attorney before signing this Release.
Before signing this Release, I acknowledge that I am being given at least 21
days within which to consider the Release.
This Release may be revoked by me within seven (7) days following my signing of
this Release if, within (7) days following my signing, I serve a written notice
of revocation to the General Counsel of Boston Chicken, Inc. at 14103 Denver
West Parkway, Golden, CO 80401. The payments and/or consideration referred to in
the Consulting Agreement shall not be eligible for payment in accordance with
its terms, and subject to the provisions in Section 2 of the Consulting
Agreement any amounts previously paid or profits received shall be paid over,
and this Release shall not become binding and enforceable until the seven (7)
day revocation period has expired.
Signed:
------------------------------------
Donald J. Bingle
Date Signed: November 13, 1996
<PAGE>
Exhibit 10.43
December 27, 1996
Thomas Sprague
5241 Preserve Pkwy. S.
Greenwood Village, Colorado 80121
Dear Tom:
Effective December 27, 1996 your employment with Boston Chicken, Inc. (the
"Company") terminated. While you were employed with the Company you received
stock options to purchase common stock of the Company pursuant to and in
accordance with the Company's Amended and Restated 1991 Employee Stock Option
Plan and 1995 Employee Stock Option Plan (together, the "Plans"). Details on the
options remaining for exercise, the exercise price and vesting of your options
are set forth on Exhibit A to this letter.
The terms of the Plans provide that, upon the termination of your
employment with the Company, vesting immediately terminates and your options
(vested and unvested) expire and all rights to purchase shares pursuant thereto
terminate immediately, except that vested options may be exercised within
fifteen days of the date of termination. However, in recognition of your hard
work for and dedication to the Company, the Stock Option Committee of the Board
of Directors of the Company ("Committee") has agreed to continue the vesting of
your options and exercisability of vested options until January 31, 1998.
Finally, in partial consideration for the Committee continuing the vesting
of your options, we are requiring you to execute the release attached hereto as
Exhibit B.
<PAGE>
Please execute and return to me the enclosed copy of this letter and the
release. If you have any questions about your options, please do not hesitate to
call me at 303-384-5476.
Very truly yours,
/s/ Fredrick Ley
-----------------------
Fredrick Ley
Chief Personnel Officer
enclosures
ACKNOWLEDGED
/s/ Thomas R. Sprague
- ----------------------------
Name: Thomas R. Sprague
Date: December 27, 1996
----------------------
2
<PAGE>
EXHIBIT A
Thomas Sprague
5241 Preserve Pkwy. 3.
Greenwood Village, CO 80121
<TABLE>
<CAPTION>
Boston Chicken, Inc. Run Date 03/12/97
As of 03/12/97
Page No. 1
Date of Option Options Option Date of Availability
Grant Type of Grant Granted Outst. Price Expir. Options Vested For Exercise
- -------- ------------- ------- ------- -------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
04/08/93 48,000 19,200 $4.1667 04/08/03 0 (CURRENT) 0
19,200 on 04/08/97
06/23/93 60,000 24,000 $4.1667 06/23/03 0 (CURRENT) 0
24,000 on 06/23/97
06/23/93 2,448 979 $4.1667 06/23/03 0 (CURRENT) 0
979 on 06/23/97
01/03/94 13,334 5,334 $18.0000 01/03/04 0 (CURRENT) 0
5,334 on 01/03/98
12/02/94 16,134 11,294 $14.8750 12/02/04 0 (CURRENT) 0
4,840 on 12/02/97
6,454 on 12/02/98
12/21/95 19,355 17,420 $31.0000 12/21/05 0 (CURRENT) 0
3,871 on 12/21/97
5,806 on 12/21/98
7,743 on 12/21/99
07/16/96 11,823 11,823 $23.3750 07/16/06 0 (CURRENT) 0
1,182 on 07/16/97
2,364 on 07/16/98
3,547 on 07/16/99
4,730 on 07/16/00
------- ------
Shares 171,094 90,050
</TABLE>
This summary supercedes any and all summaries previously delivered, is for
informational purposes only, and does not create any entitlement, ownership, or
other right to options or shares of Boston Chicken, Inc. regardless of whether
options or shares are listed above. Options may only be granted in accordance
with the Company's Employee Stock Option Plan, the Company's Stock Option Plan
for Non-Employee Directors, or action of the Company's Board of Directors or
other appropriate body are subject to the terms, vesting schedule, and
conditions of such plan or grant.
<PAGE>
EXHIBIT B
<PAGE>
RELEASE
I, Thomas Sprague, am giving this release to Boston Chicken, Inc. (the
"Company") in partial consideration of the continued vesting of options granted
to me by the Company.
In exchange for this and other valuable consideration, I hereby agree to release
the Company, its parents, subsidiaries, and affiliated organizations, if any,
and their respective past, present, and future directors, officers, agents,
attorneys, franchisees, and employees (collectively referred to as the
"Company") from any and all claims, liabilities, demands, and causes of action
of any nature or type whatsoever which I or any of my heirs or personal
representatives may have, either now or at any time before now, against the
Company based on any action, inaction, fact, occurrence, cause, or matter
whatsoever, including but not limited to: any judicial, quasi-judicial, or
administrative action relating to my employment or termination of my employment
or arising under the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, the Employee Retirement Income Security Act, the Fair
Labor Standards Act, the Illinois Human Rights Act, the Massachusetts Fair
Employment Practice Law or other similar applicable federal, state, or local
statute; my service as an employee of the Company; or otherwise; provided,
however, this release shall not affect (i) the Company's indemnification
obligations to me, if any, that currently exist or may subsequently arise as
provided for by the Company's Certificate of Incorporation and Bylaws, each as
amended, in connection with my service to the Company in my capacity as a
director or officer, and (ii) my rights to recovery under any applicable
directors and officers policy of insurance in connection with my service to the
Company in my capacity as a director or officer.
I acknowledge that before signing this Release the Company has advised me in
writing to consult with an attorney before signing this Release.
Before signing this Release, I acknowledge that I am being given at least 21
days within which to consider the Release.
This Release may be revoked by me within seven (7) days following my signing of
this Release if, within (7) days following my signing I serve a written note of
revocation to the General Counsel of Boston Chicken, Inc. at 14103 Denver West
Parkway, Golden, CO 80401. The terms of that letter agreement between me and the
Company dated as of December 27, 1996, and this Release shall not become binding
and enforceable until the seven (7) day revocation period has expired.
Signed:
--------------------------------
Name:
--------------------------
Date Signed:
---------------------------
<PAGE>
Exhibit 10.44(a)
MASTER LEASE AGREEMENT NO. 2
between
GENERAL ELECTRIC CAPITAL CORPORATION,
FOR ITSELF AND AS AGENT
FOR CERTAIN PARTICIPANTS, Lessor
and
BOSTON CHICKEN, INC., Lessee
<PAGE>
MASTER LEASE AGREEMENT NO. 2
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
<S> <C>
I. LEASING........................................................... 1
II. TERM, RENT AND PAYMENT............................................ 8
III. TAXES............................................................. 9
IV. REPORTS........................................................... 10
V. DELIVERY, USE AND OPERATION, SUBSTITUTION......................... 11
VI. SERVICE........................................................... 16
VII. LOSS OR DAMAGE; STIPULATED LOSS VALUE............................. 17
VIII. RISK OF LOSS...................................................... 20
IX. INSURANCE......................................................... 20
X. RETURN OF LEASE ASSETS............................................ 21
XI. DEFAULT........................................................... 22
XII. ASSIGNMENT; SUB-LETTING........................................... 25
XIII. NET LEASE; NO SET-OFF, ETC........................................ 27
XIV. INDEMNIFICATION................................................... 27
XV. DISCLAIMER........................................................ 29
XVI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE............... 30
XVII. OWNERSHIP FOR TAX PURPOSES, ETC.; GRANT OF SECURITY
INTEREST; USURY SAVINGS........................................... 31
XVIII. END OF LEASE OPTIONS.............................................. 36
(a) Extension..................................................... 36
(b) Renewal....................................................... 37
(c) Return........................................................ 37
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(d) Purchase......................................................... 38
(e) Notice of Election............................................... 38
XIX. MISCELLANEOUS........................................................ 38
XX. CHOICE OF LAW; JURISDICTION.......................................... 42
XXI. CHATTEL PAPER........................................................ 42
XXII. EARLY TERMINATION.................................................... 42
</TABLE>
EXHIBIT NO. 1 - FORM OF SCHEDULE
ANNEX A - DESCRIPTION OF LEASE ASSETS
ANNEX B - BILL OF SALE
ANNEX C - CERTIFICATE OF ACCEPTANCE
ANNEX D - STIPULATED LOSS AND TERMINATION VALUE TABLE
ANNEX E - AMORTIZATION SCHEDULE
ANNEX F - RETURN PROVISIONS
EXHIBIT NO. 2 - FORM OF ESTOPPEL/WAIVER AGREEMENT
EXHIBIT NO. 3 - FORM OF MASTER SUBLEASE AGREEMENT
EXHIBIT NO. 4 - FORM OF COLLATERAL ASSIGNMENT AND LEASEHOLD MORTGAGE
EXHIBIT NO. 5A - FORM OF LANDLORD'S AGREEMENT (GROUND LEASE)
EXHIBIT NO. 5B - FORM OF LANDLORD'S AGREEMENT (PREMISES LEASE)
EXHIBIT NO. 6 - FORM OF MEMORANDUM OF MASTER LEASE
EXHIBIT NO. 7 - FORM OF MORTGAGE
EXHIBIT NO. 8 - FORM OF DEED OF TRUST
EXHIBIT NO. 9 - FORM OF SUBORDINATION AND INTERCREDITOR AGREEMENT
ii
<PAGE>
MASTER LEASE AGREEMENT NO. 2
THIS MASTER LEASE AGREEMENT NO. 2 is made as of the 9th day of December,
1996 ("AGREEMENT"), between GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS, with an office at 4 Northpark Drive, Suite
500, Hunt Valley, Maryland 21030 (hereinafter called, together with its
successors and assigns, if any, "LESSOR"), and BOSTON CHICKEN, INC., a Delaware
corporation with its mailing address and chief place of business at 14103 Denver
West Parkway, Golden, Colorado 80401-4086 (hereinafter called "LESSEE").
This Agreement is executed concurrently with that certain Facilities
Agreement dated as of the date hereof (as the same may from time to time be
amended, modified, extended, or replaced, the "FACILITIES AGREEMENT"), by and
among Lessor, Lessee and Bank of America Illinois, as Agent for Certain Lenders
and is subject to the provisions thereof. Capitalized terms used herein without
definition and not defined or specified in a Schedule (as hereinafter defined)
shall have the meanings ascribed to them in the Facilities Agreement.
WITNESSETH:
I. LEASING:
(a) This Agreement shall be effective from and after the date of execution
hereof. Subject to the terms and conditions set forth below, Lessor will (a)
acquire and lease to Lessee certain parcels of real property, including land,
buildings and/or other improvements constructed or made thereon (collectively,
the "FEE PROPERTY"), (b) acquire and/or construct and lease to Lessee certain
improvements (collectively, the "GROUND-LEASE LEASEHOLD IMPROVEMENTS") located
on real property leased by Lessee or by one or more financed area developers
(collectively, the "FADs") pursuant to ground leases (collectively, the "GROUND
LEASES"), (c) acquire and/or construct and lease to Lessee certain improvements
(the "PREMISES-LEASE LEASEHOLD IMPROVEMENTS" to be made to or installed in
complete buildings leased by Lessee or one or more FADs pursuant to premises
leases (collectively, the "PREMISES LEASES") and (d) acquire and lease to Lessee
certain items of equipment (collectively, the "EQUIPMENT"). The Ground-Lease
Leasehold Improvements and the Premises-Lease Leasehold Improvements are
hereinafter sometimes collectively referred to as the "LEASEHOLD IMPROVEMENTS".
The Leasehold Improvements leased hereunder shall be limited to (1) new
improvements, and (2) improvements which were completed not more than two (2)
years prior to the date on which such Leasehold Improvements are leased
hereunder. The Fee Property and the Leasehold Improvements are hereinafter
sometimes collectively referred to as the "REAL ESTATE". The Real Estate and the
Equipment are sometimes hereinafter collectively referred to as the "LEASE
ASSETS". The Real Estate shall be limited to those locations at which the
Equipment will be installed and operated by Lessee and/or its FADs as a "Boston
Market" or "Boston Carver" location; provided, however, that a portion of any
such location may be subleased for the operation of an "Einstein Bros. Bagels"
or "Noah's New York Bagels" location. Lessor shall acquire and lease to Lessee
only such Lease Assets as are, or shall from time to time be, described in Annex
A to any schedule hereto (which schedule shall be in substantially the form
attached hereto as Exhibit No. 1
<PAGE>
(the "SCHEDULE")). Terms specified in a Schedule and not otherwise defined or
specified herein shall have the meanings ascribed to them in such Schedule.
(b) Lessor, Lessee, BC Real Estate Investments, Inc. ("BCRE") and the FADs
have heretofore entered into that certain Agency Agreement dated as of September
25, 1996, as extended pursuant to that certain First Amendment to Agency
Agreement dated as of November 1, 1996 (as the same may from time to time be
amended, modified, or extended, the "AGENCY AGREEMENT"), pursuant to which
Lessor appointed Lessee, BCRE and the FADs as its agents to acquire and pay for,
in the name and on behalf of Lessor, the Real Estate in accordance with the
terms and conditions of the Agency Agreement.
(c) The obligation of Lessor to lease the Lease Assets to Lessee shall be
subject to (1) Lessor being satisfied that there shall have been no material
adverse change in the condition (financial or otherwise), business operations or
prospects of Lessee from the date of execution hereof, and (2) receipt by
Lessor, on or prior to the earlier of the Lease Commencement Date (as
hereinafter defined) or Last Delivery Date therefor, of each of the following
documents in form and substance satisfactory to Lessor (provided, however, that
Sections I(c)(iii), (viii), (ix) through (xviii), and (xx) through (xxiv) shall
not be applicable with respect to Lease Assets comprised solely of Equipment):
(i) Schedules relating to the Lease Assets then to be leased
hereunder (including separate Schedules for each Fee Property);
(ii) a Bill of Sale with respect to the applicable Equipment and/or
Leasehold Improvements executed by Lessee, a FAD or other vendor with respect
thereto, in favor of Lessor, in the form of Annex B-1 or B-2, as applicable to
the applicable Schedule;
(iii) a copy of the recorded deed of any Fee Property conveying fee
simple title to any Fee Property to Lessor or, if the recorded deed is not yet
available, then a certified true copy of the executed deed, together with a
certification by Lessee that such original executed deed has been sent to the
appropriate records office for recording or a confirmation from the applicable
title company that such original executed deed has been delivered to the title
company to be sent to the appropriate records office for recording;
(iv) evidence of insurance with respect to the Lease Assets then to be
leased hereunder, which complies with the applicable requirements of Section IX
hereof;
(v) an Estoppel/Waiver Agreement (each an "Estoppel/Waiver
Agreement"), in substantially the form of Exhibit No. 2 attached hereto, from
the Landlord with respect to those locations at which the Equipment is located
and with respect to which Lessee does not provide to Lessor a Landlord's Waiver
(as hereinafter defined), or an opinion of local counsel (reasonably
satisfactory to Lessor);
2
<PAGE>
(vi) a certificate of an authorized officer of Lessee stating that he
has reviewed the activities of Lessee and that, to the best of his knowledge and
without personal liability, there exists no Default (as hereinafter defined) or
event which, with the giving of notice or the lapse of time (or both), would
become such a Default hereunder;
(vii) such Uniform Commercial Code financing statements, and
statements of termination, release or partial release with respect to the
Equipment, as Lessor reasonably may require;
(viii) for any Ground-Lease Leasehold Improvements, a copy of the
Ground Lease of the real property upon which such Ground-Lease Leasehold
Improvements have been constructed, which Ground Lease shall expressly (1)
permit a collateral assignment or leasehold mortgage to, and re-assignment by,
Lessor, (2) provide for an initial lease term of not less than five (5) years
and renewal terms which may be entered into in the discretion of Lessee or the
applicable FAD such that the total number of years covered by the initial term
and discretionary renewal terms shall be not less than ten (10) years, and (3)
otherwise be in form and content satisfactory to Lessor in all respects
(provided, however, that the requirements of clauses (1) and (2) hereof shall
not be applicable if the Landlord's Waiver (as hereinafter defined) is delivered
to Lessor with respect to such Ground Lease);
(ix) with respect to any Premises-Lease Leasehold Improvements, a copy
of the Premises Lease for the premises in which such Leasehold Improvements are
to be placed or constructed, which Premises Lease shall (1) permit a collateral
assignment to, and re-assignment by Lessor, (2) provide for an initial lease
term and discretionary renewal terms such that the total number of years covered
by the initial term and discretionary renewal terms shall be not less than the
total term (including any renewal terms) of the applicable Schedule, and (3)
otherwise be in form and content satisfactory to Lessor in all respects
(provided, however, that the requirements of clauses (1) and (2) hereof shall
not be applicable if the Landlord's Waiver is delivered with respect to such
Premises Lease; and provided, further, that solely with respect to the Premises
Lease with respect to Store 816 (BC Northwest, L.L.C.) Lessee shall cause to be
provided to Lessor within ten (10) days after the Lease Commencement Date with
respect to the Schedule applicable to such Equipment Location, the landlord's
consent to the assignment to Lessor pursuant to the Collateral Assignment (as
hereinafter defined));
(x) with respect to any Fee Property, a fully-executed memorandum of
lease (each a "MEMORANDUM OF LEASE") in substantially the form of Exhibit No. 6
attached hereto, with such amendments and modifications as shall be necessary to
record such Memorandum of Lease among the land records of the jurisdiction in
which the Fee Property is located together with such supplements to this
Agreement as may be necessary to comply with the requirements of applicable
state or local laws relating to the leasing of real property;
(xi) with respect to any Fee Property, an ALTA owner's title insurance
policy (or marked-up title insurance commitment) issued by First American Title
Insurance Company or such other title insurance company reasonably acceptable to
Lessor, which policy or commitment shall
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(1) insure that Lessor has fee simple title to the Fee Property, free and clear
of all liens and encumbrances other than Permitted Liens (as hereinafter
defined), (2) be accompanied by copies of all documents related to any
exceptions to the insurance provided thereby, (3) contain no exceptions which in
Lessor's reasonable judgment are objectionable or, if any such exceptions are
objectionable, Lessee shall cause such exceptions to be removed, or shall
satisfy Lessor that such objections should not be objectionable, within thirty
(30) days after the Lease Commencement Date with respect to the Schedule
pertaining to the applicable Fee Property, (4) insure the Fee Property for an
amount not less than the Capitalized Lessor's Cost of the Fee Property and all
Leasehold Improvements located thereon, (5) contain a recharacterization
endorsement (where available) and such other affirmative coverages as Lessor
reasonably shall require, and (6) in connection with any Mortgage (as
hereinafter defined), insure Lessor's lien upon Lessee's leasehold estate;
(xii) with respect to any Fee Property for which Lessee is unable to
deliver a recharacterization endorsement in form and substance satisfactory to
Lessor in all respects, a fully executed mortgage or deed of trust,
substantially in the form of Exhibit No. 7 or Exhibit No. 8 attached hereto
(each a "MORTGAGE"), with such amendments and modifications as shall be
necessary to record such Mortgage among the land records of the jurisdiction in
which the Fee Property is located, pursuant to which Lessee shall have conveyed
to Lessor and granted to Lessor a first priority lien upon Lessee's leasehold
interest in the Fee Property and any other estate, title, or interest of Lessee
in the Fee Property;
(xiii) with respect to any Ground-Lease Leasehold Improvements, an
ALTA title insurance policy (or marked-up title insurance commitment) issued by
First American Title Insurance Company or such other title insurance company
reasonably acceptable to Lessor, which policy or commitment shall (1) insure
that Lessee has a leasehold interest in the real property subject to the Ground
Lease, free and clear of all liens and encumbrances other than Permitted Liens,
(2) be accompanied by copies of all documents related to any exceptions to the
insurance provided thereby, (3) contain no exceptions which in Lessor's
reasonable judgment are objectionable, (4) contain such affirmative coverages as
Lessor shall reasonably require, and (5) if required by Lessor, insure Lessor's
lien upon Lessee's leasehold estate;
(xiv) with respect to any Real Estate, an affidavit or certificate
from Lessee as to zoning compliance, copies of a use and occupancy permit and
all other necessary permits or governmental approvals (provided, however, that
such copies may be provided within twenty (20) days after the Lease Commencement
Date of the applicable Schedule), and evidence reasonably satisfactory to Lessor
of completion of the construction of the Leasehold Improvements or the
improvements to be constructed on the Fee Property (the "FEE IMPROVEMENTS") and
the installation of the Equipment on the Real Estate such that the Real Estate
is suitable for operation by Lessee or a FAD as a "Boston Market" or "Boston
Carver" location subject to the right of Lessee or a FAD to sublease a portion
of such Real Estate for the operation of an "Einstein Bros. Bagels" or "Noah's
New York Bagels" location;
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(xv) a certificate or affidavit from Lessee that the Leasehold
Improvements, as constructed, comply in all respects with the requirements of
the applicable Ground Lease or Premises Lease;
(xvi) a Phase I environmental audit with respect to any Fee Property
and any real property upon which the Ground-Lease Leasehold Improvements are to
be made (and such further environmental audits or evidence of the absence of
hazardous wastes as Lessor reasonably shall deem necessary), which audit must be
satisfactory in Lessor's sole discretion as to form and substance;
(xvii) an appraisal of any Fee Property acquired by Lessee, BCRE, or
a FAD more than one year prior to the Lease Commencement Date with respect to
such Fee Property;
(xviii) with respect to any Fee Property or any real property subject
to a Ground Lease, if required by Lessor, a current ALTA/ALSM survey certified
to Lessor and the title company and satisfactory in all respects to Lessor and
the title company, prepared by a registered land surveyor or engineer
satisfactory to Lessor, and showing (1) the location on the real property of
all Fee Improvements or Ground-Lease Leasehold Improvements and established
building setback lines, (2) the boundary lines of such real property, (3) all
access and other easements appurtenant to such real property or necessary for
the use of the Equipment and/or the Ground-Lease Leasehold Improvements or the
Fee Improvements, (4) all roadways, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the real property,
whether recorded or apparent from a physical inspection of the real property,
(5) any encroachments on any adjoining property by the Fee Improvements or the
Ground-Lease Leasehold Improvements, (6) a metes and bounds legal description
of the real property, and (7) such other related items as reasonably may be
required by Lessor. Such survey shall be certified to Lessor and the title
company and shall be in form and substance reasonably satisfactory to Lessor.
Such surveys may be provided within twenty (20) days of completion of the Fee
Improvements or the Ground-Lease Leasehold Improvements, as applicable;
(xix) for any Leasehold Improvements, a collateral assignment of
lease from Lessee or the applicable FAD covering the applicable Ground Lease or
Premises Lease (each a "Collateral Assignment of Lease"), in substantially the
form of Exhibit No. 4 attached hereto; with such changes as reasonably may be
necessary (in the case of any Ground Lease) to record such Collateral
Assignment of Lease among the land records of the jurisdiction in which the
Leasehold Improvements are located; and Lessee shall provide to Lessor within
ten (10) days of the Lease Commencement Date with respect to the applicable
Schedule, the original or a certified photocopy of the memorandum of lease
executed with respect to the applicable Ground Lease or Premises Lease;
(xx) for any property leased by a FAD pursuant to a Ground Lease or
Premises Lease that has been collaterally assigned by the FAD to Lessee as
security for such FAD's obligations to Lessee and for which a Collateral
Assignment of Lease is required to be delivered to Lessor pursuant
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to clause (xix), a Subordination and Intercreditor Agreement (each a
"Subordination and Intercreditor Agreement"), in substantially the form of
Exhibit No. 9 attached hereto;
(xxi) a Landlord's Agreement (each a "Landlord's Waiver"), in
substantially the form of Exhibit No. 5A (for any Ground Lease) or Exhibit No.
5B (for any Premises Lease) attached hereto, duly executed by the landlord of
the real property upon which the Leasehold Improvements are located, or
evidence satisfactory to Lessor in all respects that the Ground Lease or
Premises Lease (as applicable) expressly permits the collateral assignment of
such lease to Lessor, gives Lessor appropriate notice and cure rights, and
permits the assignment of such lease by Lessor without further consent from or
notice to the Landlord or subject only to such restrictions as are acceptable
to Lessor in all respects; provided, however, that such Landlord's Waivers may
be provided within sixty (60) days after the Lease Commencement Date of the
applicable Schedule;
(xxii) evidence that all real estate taxes on the Real Estate which
are then due and payable (or, if permissible under applicable law, all
installments thereof which are then due and payable) have been paid unless
any such taxes are being contested by Lessee in accordance with Section
III(c);
(xxiii) lien waivers signed by the general contractor and all major
subcontractors and suppliers for all work done and materials furnished in
connection with the construction of Leasehold Improvements or the Fee
Improvements and the installation of the Equipment therein; provided,
however, that in the event that Lessee shall not, as a result of Lessee's
good faith dispute with any general contractor or subcontractor, have
obtained a lien waiver from the same, Lessee shall be deemed to have complied
with the provisions of this clause (xxiii), (1) if the amount in dispute is
not greater than $50,000.00 and Lessee is diligently attempting to resolve
such dispute, or (2) if the amount in dispute is bonded or guaranteed by a
surety in accordance with applicable laws; provided, further, that such lien
waivers may be provided within twenty (20) days after the Lease Commencement
Date of the applicable Schedule;
(xxiv) a copy of Lessee's prototype plans pursuant to which any
Ground-Lease Leasehold Improvements or Fee Improvements were constructed
(which prototype plans may be provided within twenty (20) days after the Lease
Commencement Date with respect to the first Schedule executed pursuant
hereto), and a certification by Lessee's in-house architect that such
improvements were completed substantially in conformity with such plans, as
modified to comply in all material respects with all applicable laws and
regulations;
(xxv) if the Lease Assets described on the applicable Schedule are to
be subleased to a FAD pursuant to Section XII(a) hereof, the chattel paper
original of the Sublease (as hereinafter defined) and of the applicable Sublease
Schedule, together with an opinion of counsel for such FAD, a certified
resolution with respect to such FAD, evidence of insurance on behalf of such FAD
which complies with the requirements of Section IX hereof (provided that the
foregoing, other than the original Sublease Schedule, need only be delivered on
the date the applicable Sublease is executed), and Uniform Commercial Code
financing statements, all as reasonably may be required by Lessor;
(xxvi) an opinion of counsel for Lessee in form and substance
satisfactory to Lessor;
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(xxvii) a Corporate Lessee's Board of Directors Resolution certified
by the Secretary of Lessee;
(xxviii) an Affidavit of Ownership of Lessee with respect to the
applicable Equipment;
(xxix) such Uniform Commercial Code financing statements or
statements of termination, release, or partial release related to the Mortgages
as Lessor reasonably may require;
(xxx) if any portion of the Leased Assets are subleased by Lessee
(other than to a Sublessee (as hereinafter defined)), or are subleased by a
Sublessee, a subordination agreement executed by the applicable sublessee, which
subordination agreement shall be in form and substance satisfactory to Lessor;
(xxxi) such other documents as Lessor reasonably may request to carry
out the intent and purpose of this Agreement;
(xxxii) an amendment with respect to Section XI(a)(9) of that certain
Master Lease Agreement dated as of September 27, 1995 (the "1995 Master Lease
Agreement"), between Lessee and General Electric Capital Corporation, for Itself
and as Agent for Certain Participants, in form and substance satisfactory to
Lessor;
(xxxiii) the Facilities Agreement, the Guaranty duly executed by each
Subsidiary (as such terms are defined in the Credit Agreement) of Lessee which
is required pursuant to Section 4.11(1) of the Facilities Agreement to execute a
Guaranty, and the Pledge Agreement (as such term is defined in the Credit
Agreement) and related documents; and
(xxxiv) with respect to any Premises-Lease Leasehold Improvements, a
copy of the previously issued title insurance commitment issued by a title
insurance company reasonably acceptable to Lessor, which commitment shall
establish to the reasonable satisfaction of Lessor that (1) the landlord with
respect to the Premises Lease had sufficient title to convey the leasehold
interest to the tenant under such Premises Lease, and (2) such tenant took such
leasehold interest free of any liens, encumbrances or other matters which (A)
created prior rights in the property subject to such Premises Lease, (B)
adversely affect the ability to use such property for its intended purposes, or
(C) adversely affect Lessor's ability freely to dispose of such Premises Lease
and/or the leasehold interest thereunder after the occurrence of a Default
hereunder; provided, however, that such title insurance commitment may be
provided within thirty (30) days after the Lease Commitment Date with respect to
the Schedule pertaining to the applicable Premises-Lease Leasehold Improvements.
Simultaneously with the execution of the Bill of Sale, Lessee shall execute
a Certificate of Acceptance, in the form of Annex C to the applicable Schedule,
covering all of the Equipment and/or Leasehold Improvements described in the
Bill of Sale. Upon execution by Lessee of any Certificate
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of Acceptance, the Lease Assets described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Lessee for lease hereunder.
(d) Anything in the foregoing to the contrary notwithstanding, Lessor will
acquire and lease to Lessee certain Real Estate and related Equipment in
locations which are not yet completed and ready to commence operations (such
Real Estate and Equipment being hereinafter called "Incomplete Store Assets"),
subject to the following conditions:
(i) Lessor shall be satisfied that there shall have been no material
adverse change in the condition (financial or otherwise), business operations or
prospects of Lessee from the date of execution hereof;
(ii) the aggregate Capitalized Lessor's Cost for all Incomplete Store
Assets shall be no more than $10,650,000;
(iii) Lessor shall receive, for each location upon which any
Incomplete Store Assets are located, evidence satisfactory to Lessor in all
respects, that construction has commenced, and that Lessee has the ability to
complete all Leasehold Improvements, install all necessary Equipment, and obtain
all necessary licenses and permits in order to commence operations within 120
days after the date on which such Incomplete Store Assets are leased hereunder.
(iv) Lessor shall have received all of the items listed in Section
I(c) hereof, except that (1) Lessee shall be required to deliver lien waivers
only for work completed prior to the date of funding, and (2) Lessee shall not
be required to deliver a use and occupancy permit or other evidence of final
completion; and
(v) within one hundred twenty (120) days after the date on which such
Incomplete Store Assets are leased hereunder, Lessee shall complete all
Leasehold Improvements, install all necessary Equipment, obtain all necessary
permits to commence operations, and provide Lessor evidence of the same, and
Lessee shall either (1) request Lessor to lease to Lessee all of the new or
newly-completed Lease Assets at such Lease Assets Location pursuant to the terms
of this Lease (if sufficient commitments remain available and Lessee meets all
of the conditions set forth herein), or (2) provide to Lessor evidence that
Lessee has paid for all of the Leasehold Improvements and Equipment located at
such Lease Assets Location (other than the Incomplete Store Assets funded by
Lessor and leased to Lessee pursuant hereto), and provide to Lessor a valid,
perfected, first priority security interest in all such Leasehold Improvements
and Equipment. In connection therewith, Lessee shall execute and deliver to
Lessor such security agreements, mortgages or deeds of trust, financing
statements, and other documents and instruments as Lessor reasonably shall
require in order perfect such lien and security interest (to be recorded at
Lessee's expense).
In the event that Lessee is unable to commence operations within such one
hundred twenty (120) day period, Lessee shall, if required by Lessor, purchase
the Incomplete Store Assets from Lessor on the next Rent Payment Date, for a
price equal to the Termination Value of such Incomplete Store Assets, together
with all taxes and charges upon transfer, and all other reasonable and
documented expenses incurred by Lessor in connection with such transfer.
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II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder (the "Rent") and Lessee's right to use th
Lease Assets shall commence on the date of execution by Lessee of the
Certificate of Acceptance for such Lease Assets ("Lease Commencement Date"). The
term of lease pursuant to this Agreement and the applicable Schedule (the
"Term") shall be the period specified in the applicable Schedule. If any Term is
extended or renewed, the word "Term" shall be deemed to refer to all extended or
renewed terms, and all provisions of this Agreement shall apply during any
extended or renewed terms, except as may be otherwise specifically provided in
writing.
(b) Rent shall be paid to Lessor by wire transfer of immediately available
funds for receipt prior to 11:00 a.m. New York time to: Bankers Trust New York,
New York, New York 10006, Account No. 50-202-962, ABA No. 021-001-033, or to
such other account as Lessor may direct in writing; and shall be effective upon
receipt. Payments of Rent shall be in the amount set forth in, and due in
accordance with, the provisions of the applicable Schedule. In no event shall
any Rent payments be refunded to Lessee (except in instances of manifest error).
If Rent is not paid within ten (10) days of its due date, Lessee agrees to pay a
late charge of Five Cents ($0.05) per dollar on, and in addition to, the amount
of such Rent but not exceeding the lawful maximum, if any. Without affecting
Lessee's absolute and unconditional obligation to pay Rent hereunder, in an
independent suit Lessee may seek damages for breach by Lessor of its obligations
under this Lease. All payments due under this Agreement whether or not
specifically denominated as Rent shall be collectible in the same manner as
Rent.
III. TAXES:
(a) Taxes in General. Lessee shall have no liability for taxes imposed by
the United States of America or any state or political subdivision thereof which
are on or measured by the net income of Lessor or any Participant (as
hereinafter defined). Lessee shall report (to the extent that it is legally
permissible) and, subject to Section III (b) hereof, pay promptly all other
taxes, fees and assessments due, imposed, assessed or levied against any Lease
Assets (or the purchase, ownership, delivery, leasing, possession, use or
operation thereof), this Agreement (or any rentals or receipts hereunder), any
Schedule, Lessor (to the extent relating to the transactions contemplated by
this Agreement) or Lessee by any foreign, Federal, state or local government or
taxing authority during or related to the term of this Agreement, including,
without limitation, all license and registration fees, and all sales, use,
personal property, real property, excise, gross receipts, franchise, transfer,
recordation, stamp or other taxes, imposts, duties and charges (including those
related to the original acquisition of any Lease Assets, any transfer of any
interest in any Lease Assets, the granting of any lien by Lessee, or the sale of
any Lease Assets to any third party pursuant to the terms hereof), together with
any penalties, fines or interest thereon (all hereinafter called "Taxes").
Lessee shall (i) reimburse Lessor upon receipt of written request for
reimbursement for any Taxes charged to or assessed against Lessor and submission
of written evidence of payment, (ii) on request of Lessor, submit to Lessor
written evidence of Lessee's payment of Taxes, (iii) on all reports or returns
with
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respect to personal property taxes show the ownership of the Lease Assets by
Lessee or Sublessee (as hereinafter defined), and (iv) send a copy of all
reports or returns pertaining to personal property taxes to Lessor. Lessee shall
not be obligated to indemnify Lessor under this Section for any Taxes that are
attributable to a transfer by Lessor of the Lease Assets or any interest
therein, unless such transfer arises as a result of (1) the occurrence of a
Default (as hereinafter defined), or (2) the exercise by Lessee of its options
pursuant to Sections XVIII(a) or (d) or Section XXII hereof, or (3) the exercise
by Lessee of its option pursuant to Section V(e) hereof, or (4) the occurrence
of a Casualty Occurrence (as hereinafter defined).
(b) Special Provisions Related to Real Estate Taxes. From and after the
date of each Schedule relating to Real Estate, Lessee shall pay directly to the
appropriate taxing authority all Real Estate Taxes (as hereinafter defined)
applicable to such Real Estate . If the Term of such Schedule expires or
otherwise terminates at any time other than the beginning of a taxable year,
Lessee's obligation to pay Real Estate Taxes shall be prorated on the basis of a
365-day year so as to include only that portion of the taxable year which is
part of the Term of such Schedule. Unless the termination of a Schedule results
from the purchase of the Real Estate pursuant to Section XVIII(d) below, any
Real Estate Taxes levied against any Real Estate which accrue during the Term of
such Schedule but which would not yet be due and payable to the appropriate
taxing authority until after the expiration of the Term of such Schedule shall
be paid by Lessee to Lessor upon termination of such Schedule. Lessor shall pay
such amounts to the appropriate taxing authority on a timely basis. Unless the
termination of a Schedule results from the purchase of the Real Estate pursuant
to Section XVIII(d) hereof, or unless a Default or event which, with the giving
of notice, or the lapse of time, or both, would constitute a Default has then
occurred hereunder, all Real Estate Taxes paid by Lessee with respect to the
Real Estate described on such Schedule prior to such termination, but
attributable to the period following such termination, shall be paid by Lessor
to Lessee upon such termination.
Except to the extent that Real Estate Tax bills are sent directly to Lessee
by the taxing authorities, upon receipt by Lessor of such tax bills or
statements, Lessor shall use reasonable efforts to advise Lessee promptly in
writing of all Real Estate Taxes and shall use reasonable efforts promptly (but
not less than fifteen (15) days prior to delinquency) to deliver copies of all
applicable tax bills or statements to Lessee. Lessee shall, subject to Section
III(c) below, pay directly to the taxing authority all Real Estate Taxes prior
to the earlier of (i) thirty (30) days after receipt by Lessee of a copy of the
applicable tax bills or statements, or (ii) five (5) days prior to delinquency.
Lessor shall use reasonable efforts to direct the appropriate taxing authority
to send Real Estate Tax bills directly to Lessee. As used herein, "Real Estate
Taxes" shall mean any and all taxes, governmental fees and similar charges and
assessments levied or assessed against the Real Estate, including, without
limitation, ad valorem taxes and special assessments applicable to the Real
Estate.
(c) Right to Contest. Lessee shall not be required to pay any Real Estate
Taxes or other Taxes for which Lessee is liable hereunder so long as (i) Lessee
is contesting the same in good faith and by appropriate proceedings, which
postpone the collection thereof, (ii) Lessee has provided to Lessor evidence
that the position taken by Lessee would have a realistic possibility of success
if litigated, such evidence to be satisfactory to Lessor in its discretion,
(iii) Lessee provides, if required under applicable law, a bond or similar
surety pending appeal, in a manner acceptable to the
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appropriate taxing authority, if approval is required, prior to the time when
penalty attaches for non-payments, (iv) such proceedings do not involve any
substantial danger (as determined in Lessor's sole discretion) of the sale,
forfeiture or loss of the Lease Assets or any interest therein, and (v) Lessee
shall indemnify and hold Lessor harmless from and against any costs and expenses
incurred in connection with the contest of such taxes, and any interest, fees,
or penalties attaching with respect thereto.
IV. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10) days after Lessee
becomes aware that any tax or other lien (with respect to an amount in excess of
$50,000.00 (other than a Permitted Lien, as hereinafter defined) shall attach to
any Lease Assets, of the full particulars thereof and of the location of such
Lease Assets on the date of such notification.
(b) Lessee will permit Lessor (at Lessor's expense) to inspect any Lease
Assets during normal business hours upon reasonable notice, whether the
Equipment is located on Lessee's premises or on the premises of any Sublessee
(as hereinafter defined) to whom Lessee has leased any or all of the Lease
Assets hereunder, provided that such inspections shall not unreasonably
interfere with the day to day business of Lessee or such Sublessee (provided,
however, that if a Default has then occurred and is continuing, at Lessee's
expense, Lessor may inspect any Lease Assets without restriction).
(c) Subject to the other terms of this Agreement, Lessee will keep the
Equipment at the Lease Assets Location specified in the applicable Schedule
within the continental United States and will notify Lessor of any relocation of
Equipment in accordance with Section V(h) hereof. As used herein, "Lease Assets
Location" means the location at which the Lease Assets initially are located as
specified in the applicable Schedule. Upon the written request of Lessor not
more than once per calendar quarter, Lessee will notify Lessor forthwith in
writing of the location of any Equipment as of the date of such notification.
(d) Lessee will promptly and fully report to Lessor in writing if any Lease
Assets are lost or damaged (where the estimated repair costs would exceed
$100,000 per Lease Assets Location, or is otherwise involved in an accident
causing personal injury or property damage which is likely to result in
liability to Lessor in excess of $100,000).
(e) Lessee promptly will give Lessor copies of any notices received by
Lessee from the landlord under any Ground Lease or Premises Lease.
V. DELIVERY, USE AND OPERATION, SUBSTITUTION:
(a) The parties acknowledge that a portion of this transaction relating to
the Equipment and Leasehold Improvements is a sale/leaseback transaction and a
portion of the Equipment and Leasehold Improvements is in Lessee's or
Sublessee's possession as of the Lease Commencement
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Date. All other Equipment shall be shipped directly from the supplier to Lessee
or the Sublessee. All Fee Property acquired after the date hereof shall be
acquired, and all Leasehold Improvements for which construction is commenced
after the date hereof shall be constructed, pursuant to the Agency Agreement.
(b) The parties acknowledge and agree that Lessee and/or the FADs may close
or relocate stores in the ordinary course of its or their business, subject in
all events to the provisions of this Agreement. Lessee agrees that the Lease
Assets will be used by Lessee or by FADs pursuant to Section XII(a) hereof
operating under franchise agreements with Lessee, solely in the conduct of its
or their business and in a manner complying with all applicable Federal, state,
and local laws and regulations, and any applicable insurance policies, and
Lessee or the FAD, as applicable, shall not discontinue use of the Lease Assets,
except (i) as provided in Sections V(e) and VII hereof, and (ii) that Lessee may
temporarily discontinue use of and store Equipment or temporarily discontinue
use of other Lease Assets, in either case only in connection with the closing or
relocation of Lessee's store at a Lease Assets Location, for a period not to
exceed forty-five (45) days; provided, however, that Lessee shall not
temporarily discontinue use of and store Equipment or discontinue use of other
Lease Assets pursuant to clause (ii) hereof with respect to more than twenty-
five (25) of Lessee's stores at any one time.
(c) Lessee will keep the Lease Assets free and clear of all liens and
encumbrances other than (1) those which result from acts of Lessor or of the
Loan Agent, (2) those arising from the rights and interest of Lessee in any
Sublease which shall have been assigned to Lessor, (3) liens for fees, taxes,
levies, duties or other governmental charges of any kind, liens of mechanics,
materialmen, laborers, employees or suppliers and similar liens arising by
operation of law incurred by Lessee or a Sublessee in the ordinary course of
business for sums that are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof (provided, however, that such proceedings do not involve any substantial
danger (as determined in Lessor's sole discretion) of the sale, forfeiture or
loss of the Lease Assets or any interest therein), (4) liens arising out of any
judgments or awards against Lessee or a Sublessee which have been adequately
bonded to protect Lessor's interest or with respect to which a stay of execution
has been obtained pending an appeal or a proceeding for review, (5) any
collateral assignment of lease in respect of any Premises Lease or Ground Lease
made by a Sublessee to Lessee, and (6) minor encumbrances (including, without
limitation, easements, rights of way, covenants, zoning variances and similar
encumbrances) which do not materially affect the value of the Lease Assets. The
liens and encumbrances described in clauses (1) through (6) hereof are referred
to as "Permitted Liens". Lessee will defend, at its own expense, Lessor's
interest in the Lease Assets from such claims, liens or legal processes. Lessee
will also notify Lessor immediately upon receipt of notice of any lien,
attachment or judicial proceeding affecting the Lease Assets in whole or in
part.
(d) Lessee shall, and shall cause each Sublessee to, comply with each and
every covenant, term and condition of each applicable Ground Lease and Premises
Lease.
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(e) Provided that no Default shall then have occurred and be continuing, at
Lessee's expense, Lessee may elect to replace a unit of Equipment (a
"Substituted Item") with another unit of Equipment (a "Replacement Item"), due
to the obsolescence (as determined by Lessee in accordance with Lessee's
customary method of operation) of the Substituted Item (in accordance with the
provisions of this Paragraph) or upon the occurrence of a Casualty Occurrence
(as hereinafter defined). Each Replacement Item shall be free and clear of all
liens and encumbrances (other than Permitted Liens) and shall have at least the
value, residual value, utility and remaining useful life and be in as good an
operating condition as the Substituted Item, assuming that the Substituted Item
had been maintained in accordance with the provisions of this Agreement. Lessee
shall provide to Lessor such substantiation with respect to the lien status, the
value, residual value, utility and remaining useful life, and the operating
condition, of the Replacement Item as reasonably may be required by Lessor and
such substitution is expressly conditioned upon Lessor having determined to its
reasonable satisfaction that the conditions specified in this paragraph have
been satisfied.
(1) Lessee shall notify Lessor within fifteen (15) days after the end
of each quarter of Lessee's fiscal year of all replacements of items of
Equipment having a Capitalized Lessor's Cost per item in excess of $10,000
effected during such fiscal quarter, identifying the Substituted Items and the
Replacement Items per Lease Assets Location; provided, however, that if the
Capitalized Lessor's Cost of any Substituted Item of Equipment exceeds $15,000,
then replacement of such Substituted Item shall be subject to Lessor's prior
written consent, which consent shall not unreasonably be withheld or delayed.
Such request for consent to replacements pursuant hereto shall be limited to
once per quarter for any number of Substituted Items. Notwithstanding the
foregoing, Lessor's consent shall not be required with respect to any
replacement pursuant to this Section V(e) made in connection with a "FAST track"
refit by Lessee of a store.
(2) In addition to, and apart from, any rights and obligations Lessee
may have under Section VII(b) hereof, if the store at a particular Lease Assets
Location has been closed and the Equipment previously used at such Lease Assets
Location has been relocated in accordance with the provisions of Section V(f)
hereof, then Lessee may elect to substitute for the Real Estate at such Lease
Assets Location fee simple property and/or leasehold improvements, as
applicable, having an equal or greater value (as determined to the reasonable
satisfaction of Lessor), with respect to such new Lease Assets Location,
provided that the acquisition of such substituted Real Estate satisfies the
conditions for acquisition of the original Real Estate so replaced, and Lessee
shall be responsible for all costs and expenses incurred by Lessor in connection
with such substitution.
(3) Lessee shall execute and deliver, or shall cause to be executed
and delivered, to Lessor a Bill of Sale, special or limited warranty deed and
related documents, copy of any applicable Ground Lease or Premises Lease,
Collateral Assignment of Lease, Landlord's Waiver, Estoppel/Waiver Agreement
(all as applicable), and an amended Annex A to the applicable Schedule with
respect to each Replacement Item, together with such documents and instruments
as reasonably may be required by Lessor in connection with such replacement,
including (without limitation) title insurance policies, environmental audits,
surveys, Uniform Commercial Code financing statements
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and mortgage documents, if applicable, to be filed at Lessee's expense, all of
such documents and instruments to be in form and substance reasonably
satisfactory to Lessor.
(4) Upon compliance by Lessee with the provisions hereof, provided
that no Default shall then have occurred and be continuing, Lessor will transfer
to Lessee, on an AS IS BASIS (as hereinafter defined), without recourse or
warranty, express or implied, of any kind whatsoever, all of Lessor's interest
in and to the Substituted Item and/or the replaced Real Estate. Lessor shall not
be required to make and may specifically disclaim any representation or warranty
as to the condition of the Substituted Item and/or the replaced Real Estate and
any other matters (except that Lessor shall warrant that it conveyed whatever
interest it received in such Substituted Item and/or the replaced Real Estate
free and clear of any lien or encumbrance created by Lessor). Lessor shall
execute and deliver to Lessee such Uniform Commercial Code statements of
termination, deeds of the Fee Property, releases of Collateral Assignments of
Leases, releases of Mortgages, and other documents and instruments, as
reasonably may be required in order to terminate any interest of Lessor in and
to such Substituted Item and/or the replaced Real Estate.
(f) Provided that no Default shall then have occurred and be continuing, at
Lessee's expense, (1) Lessee may elect to replace all (but not less than all) of
the Equipment located at any one or more Lease Assets Locations operated by a
FAD with Equipment located at Lease Assets Locations not operated by such FAD,
if Lessee has acquired a majority interest in such FAD, (2) Lessee may elect to
replace all (but not less than all) of the Equipment located at any one or more
Lease Assets Locations operated by Mid-Atlantic Restaurant Systems L.P. or any
other subsidiary of Lessee with Equipment located at Lease Assets Locations not
operated by Mid-Atlantic Restaurant Systems L.P. or any other subsidiary of
Lessee, and (3) Lessee may elect to replace all (but not less than all) of the
Affected Equipment (as hereinafter defined) with Equipment, on the following
terms and conditions:
(A) The new Equipment shall: (i) be free and clear of all liens and
encumbrances (other than Permitted Liens); (ii) have at least the value, utility
and remaining useful life and be in as good an operating condition as the
Equipment which is replaced, assuming that the Equipment which is replaced had
been maintained in accordance with the provisions of this Agreement; (iii)
constitute all of the equipment used at the new Lease Assets Location; and (iv)
be less than twelve (12) months old. Lessee shall provide to Lessor such
substantiation with respect to the conditions specified in this Paragraph (A) as
reasonably may be required by Lessor and such substitution is expressly
conditioned upon Lessor having determined to its reasonable satisfaction that
the conditions specified in this Paragraph (A) have been satisfied.
(B) Lessee shall notify Lessor not less than thirty (30) days prior to
the proposed substitution of Equipment pursuant to Section V(f)(1) or (2)
hereof. Such replacement pursuant to Section V(f)(1) or (2) hereof shall be
limited to once per quarter. If Lessee elects to substitute Equipment pursuant
to Section V(f)(3) hereof, Lessee shall notify Lessor of its election within ten
(10) days of the Notice Date (as hereinafter defined) and such substitution
shall be completed within twenty (20) days of the Notice Date.
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(C) Lessee shall execute and deliver, or shall cause to be executed
and delivered, to Lessor a Bill of Sale, an Estoppel/Waiver Agreement, and an
amended Annex A to the applicable Schedule with respect to the new Equipment,
together with such documents and instruments as reasonably may be required by
Lessor in connection with such replacement, including (without limitation)
Uniform Commercial Code financing statements to be filed at Lessee's expense,
all of such documents and instruments to be in form and substance reasonably
satisfactory to Lessor. Lessee shall be responsible for all costs and expenses
incurred by Lessor in connection with such substitution.
(D) Upon compliance by Lessee with the provisions hereof, provided
that no Default shall then have occurred and be continuing, Lessor will transfer
to Lessee, on an AS IS BASIS, without recourse or warranty, express or implied,
of any kind whatsoever, all of Lessor's interest in and to the replaced
Equipment. Lessor shall not be required to make and may specifically declaim any
representation or warranty as to the condition of the replaced Equipment and any
other matters (except that the Lessor shall warrant that it conveyed whatever
interest it received in such replaced Equipment, free and clear of any lien or
encumbrance created by Lessor). Lessor shall execute and deliver to Lessee such
Uniform Commercial Code Statements of Termination and other documents and
instruments, as reasonably may be required in order to terminate or convey any
interest of Lessor in and to such replaced Equipment.
(g) Provided that no Default shall then have occurred and be continuing, at
Lessee's expense, if (1) Lessee or any FAD defaults under any Ground Lease or
any Premises Lease, or (2) there occurs a default under any Collateral
Assignment of Lease, any Mortgage, or other document executed by Lessee or a FAD
in connection with the Real Estate and such default has not been waived or cured
and all applicable waiver or cure periods with respect thereto have then
expired, or (3) Lessee is unable timely to comply with any requirement to
satisfy any of those conditions specified in Section I(c) hereof which permit
satisfaction after the applicable Lease Commencement Date, then, within ten (10)
days of Lessee's obtaining knowledge thereof, Lessee shall replace all (but not
less than all) of the Lease Assets with respect to which such default or non-
compliance has occurred, on the following terms and conditions:
(A) the new Lease Assets shall (i) be free and clear of all liens and
encumbrances other than Permitted Liens; (ii) have at least the value, utility
and remaining useful life and be in as good an operating condition as the Lease
Assets which are replaced, assuming that the Lease Assets which are replaced had
been maintained in accordance with the provisions of this Agreement or, if such
new Lease Assets are not of the same type as the Lease Assets to be replaced,
having a value, utility and remaining useful life, and being in such operating
condition, as is acceptable to Lessor; (iii) constitute all of the Lease Assets
used at the new Lease Assets Location; (iv) be less than twelve (12) months old;
and (v) the acquisition of any such substituted Real Estate satisfies the
conditions for acquisition of any original Real Estate so replaced. Lessee shall
provide to Lessor such substantiation with respect to the conditions specified
in this Paragraph (A) as reasonably may be required by Lessor and such
substitution is expressly conditioned upon Lessor having determined to its
reasonable satisfaction that the conditions specified in this Paragraph (A) have
been satisfied.
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(B) Lessee shall execute and deliver, or shall cause to be executed
and delivered, to Lessor, a Bill of Sale, special or limited warranty deed and
related documents, copy of any applicable Ground Lease or Premises Lease,
Collateral Assignment of Lease, Landlord's Waiver, Estoppel/Waiver Agreement
(all as applicable) and an amended Annex A to the applicable Schedule with
respect to the new Lease Assets, together with such documents and instruments as
reasonably may be required by Lessor in connection with such replacement,
including (without limitation) title insurance policies, environmental audits,
surveys, Uniform Commercial Code financing statements and mortgage documents, if
applicable, to be filed at Lessee's expense, all of such documents and
instruments to be in form and substance reasonably satisfactory to Lessor.
Lessee shall be responsible for all costs and expenses incurred by Lessor in
connection with such substitution.
(C) Upon compliance by Lessee with the provisions hereof, provided
that no Default shall then have occurred and be continuing, Lessor will transfer
to Lessee, on an AS IS BASIS, without recourse or warranty, express or implied,
of any kind whatsoever, all of Lessor's interest in and to the replaced Lease
Assets. Lessor shall not be required to make and may specifically declaim any
representation or warranty as to the condition of the replaced Lease Assets and
any other matters (except that Lessor shall warrant that it conveyed whatever
interest it received in such replaced Lease Assets, free and clear of any lien
or encumbrance created by Lessor). Lessor shall execute and deliver to Lessee
such Uniform Commercial Code Statements of Termination and other documents and
instruments, as reasonably may be required in order to terminate or convey any
interest of Lessor in and to such replaced Lease Assets.
(h) Lessee may relocate any unit of Equipment to a store operated by
Lessee, the same FAD or another FAD with written notice to Lessor within thirty
(30) days after such relocation, describing the subject Equipment, the prior
Lease Assets Location of such Equipment and the new Lease Assets Location where
the Equipment has been relocated. In addition, Lessee shall deliver to Lessor
such documents and instruments as reasonably may be required by Lessor in
connection with such relocation, including, in each case if necessary, an
Estoppel/Waiver Agreement with respect to the new Lease Assets Location or an
opinion of local counsel satisfactory to Lessor, and Uniform Commercial Code
financing statements to be filed at Lessee's expense.
(i) Conditioned upon Lessee performing all of the covenants and conditions
hereof on its part to be performed, neither Lessor nor any person acting by,
through or under Lessor, shall take any actions to interfere with Lessee's quiet
enjoyment of the Lease Assets during the Term. Conditioned upon Lessee
performing all of the covenants and conditions hereof and upon a Sublessee
performing all of the covenants and conditions of the applicable Sublease,
neither Lessor nor any person acting by or through Lessor, shall take any
actions to interfere with Sublessee's quiet enjoyment of the applicable Lease
Assets during the term of such Sublease.
VI. SERVICE:
(a) Lessee will, or will cause each Sublessee to, at its sole expense,
maintain all Lease Assets in good operating order, repair, condition and
appearance in accordance with Lessee's
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customary practices which are intended to ensure the continuing utility of such
Lease Assets to Lessee's or Sublessee's (as applicable) business, but in no
event less than industry standards, normal wear and tear excepted. As between
Lessor and Lessee, Lessee shall pay all costs, expenses, fees and charges
incurred during the Term of a Schedule in connection with the use, occupancy,
construction, installation, repair, maintenance, or replacement of any of the
Lease Assets described on such Schedule.
(b) Lessee will not, without the prior consent of Lessor, affix or install
any accessory, equipment or device on any Lease Assets if such addition will
impair the value, utility, residual value, useful life, originally intended
function or use of such Lease Assets. Notwithstanding the foregoing, Lessee,
from time to time, at its own expense: (1) may affix or install any equipment,
device or accessory or make any improvements to the Lease Assets in connection
with any remodeling, or similar undertaking in the ordinary course of business,
of such Lease Assets so long as such remodeling or undertaking does not impair
the value, utility, or residual value of or useful life of the Lease Assets; and
(2) shall affix or install any accessory, equipment or device on any Lease
Assets, and shall make any alterations or modifications to the Lease Assets,
that may be necessary, from time to time, to comply in all material respects
with any applicable laws, rules or regulations or any provision of any insurance
policy required to be kept under Section IX hereof; provided, however, that in
connection with Lessee's obligations under the foregoing clause (2), Lessee may
contest by appropriate proceedings or actions, diligently conducted in good
faith, the validity or application of any law or regulation or provisions of any
insurance policy, provided that any such delay in compliance therewith will not
result in the incurrence of any lien or any charge of any kind against the Lease
Assets and will not subject Lessor to any criminal liability for failure so to
comply. All additions and repairs made, and all parts, supplies, accessories,
equipment, and devices furnished, attached or affixed to any Lease Assets which
are not readily removable shall be made or furnished, attached or affixed only
in compliance with applicable law, shall be free and clear of all liens,
encumbrances or rights of others (other than Permitted Liens), and shall become
subject to the interest of Lessor. Lessee will not, without the prior written
consent of Lessor and subject to such conditions as Lessor may impose for its
protection, affix or install more than fifteen (15) percent of the Capitalized
Lessor's Cost of the Equipment to or in any other personal property or real
property (other than the Real Estate).
(c) Any alterations or modifications to the Lease Assets that may, at any
time during the Term, be required to comply with any applicable law, rule,
regulation, or insurance policy, shall be made at the expense of Lessee. Except
as expressly provided herein or in the Agency Agreement, Lessor shall not be
required to build any improvements, make any repairs, replacements, alterations
or renewals of any nature or description, or make any expenditure in connection
with this Agreement or to maintain the Lease Assets. Lessee waives any right to
(i) require Lessor to maintain, repair, or rebuild all or any of the Lease
Assets, or (ii) make repairs at the expense of Lessor pursuant to any applicable
law, contract, insurance agreement or other covenant at any time in effect.
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VII. LOSS OR DAMAGE; STIPULATED LOSS VALUE:
If any Lease Assets shall be or become worn out, lost, stolen, destroyed,
irreparably damaged in the reasonable determination of Lessee, or permanently
rendered unfit for use from any cause whatsoever, including but not limited to
an exercise of eminent domain or condemnation rights (such occurrences being
hereinafter called "Casualty Occurrences"), Lessee shall promptly and fully
notify Lessor in writing thereof if the aggregate original Capitalized Lessor's
Cost of all Lease Assets at any single Lease Assets Location subject to Casualty
Occurrences is in excess of $100,000.
(a) With respect to any unit of Equipment having suffered a Casualty
Occurrence, on the Rent Payment Date next succeeding the later of the Casualty
Occurrence or thirty (30) days after such Casualty Occurrence (but in no event
later than the date of expiration of the Term with respect to such unit of
Equipment having suffered the Casualty Occurrence) (the "Equipment Payment
Date"), Lessee shall (regardless of whether Lessee is required to notify Lessor
thereof pursuant hereto) either (as selected by Lessee, if applicable):
(1) so long as no Default or event which, with the giving of notice or
the lapse of time (or both), would become such a Default has then occurred
hereunder and the Real Estate upon which the Equipment having suffered the
Casualty Occurrence is installed has not also suffered a Casualty Occurrence,
replace the unit of Equipment having suffered the Casualty Occurrence with
equipment of at least the value, utility and remaining useful life and in as
good an operating condition as the unit of Equipment having suffered the
Casualty Occurrence immediately before the Casualty Occurrence, assuming that
such unit of Equipment had been maintained in accordance with the provisions of
this Agreement, and otherwise in accordance with the provisions of Section V(e)
hereof; or
(2) pay Lessor the sum of (x) the Stipulated Loss Value of such unit
of Equipment calculated in accordance with Annex D to the applicable Schedule as
of the Rent Payment Date next preceding such Casualty Occurrence (the "Equipment
Calculation Date"); and (y) all Rents and other amounts which are due hereunder
as of the Equipment Payment Date. Upon payment of all sums due hereunder, the
Term as to such unit of Equipment shall terminate and (except in the case of the
loss, theft or complete destruction of such of Equipment) Lessee shall be
entitled to recover possession of such unit of Equipment and, to the extent not
previously applied toward the payment of such sums, to receive and keep all
insurance and/or condemnation proceeds paid to Lessee (or Lessor) on account of
such Casualty Occurrence.
(b) With respect to any Real Estate having suffered a Casualty Occurrence,
on the Rent Payment Date next succeeding the later of the Casualty Occurrence or
ninety (90) days after such Casualty Occurrence (but in no event later than the
date of expiration of the Term with respect to such unit of Equipment having
suffered the Casualty Occurrence) (the "Real Estate Payment Date"), Lessee shall
(regardless of whether Lessee is required to notify Lessor thereof pursuant
hereto) either (as selected by Lessee):
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(1) proceed to repair, rebuild, or replace such Real Estate (and
replace any Equipment located thereon in accordance with Section V(e) hereof),
subject to the terms and conditions set forth herein (provided that such repair,
rebuilding or replacement is completed within (1) year after the Real Estate
Payment Date); or
(2) pay Lessor the sum of (x) the Stipulated Loss Value of such Real
Estate calculated in accordance with Annex D to the applicable Schedule as of
the Rent Payment Date next preceding such Casualty Occurrence (the "Real Estate
Calculation Date"); and (y) all Rents and other amounts which are due hereunder
as of the Real Estate Payment Date. Upon payment of all sums due hereunder, the
Term as to such Real Estate shall terminate and Lessee shall be entitled to
recover possession of such Real Estate and, to the extent not previously applied
toward the payment of such sums, to receive and keep all insurance and/or
condemnation proceeds paid to Lessee (or Lessor) on account of such Casualty
Occurrence.
Lessee shall have the option of repairing, rebuilding or
replacing damaged or destroyed Real Estate only if:
(i) no Default or event which, with the giving of notice or the
lapse of time (or both), would become such a Default has then occurred
hereunder;
(ii) such restoration or replacement is permitted by the terms of
the Ground Lease or Premises Lease (if applicable) or the landlord under such
Ground Lease or Premises Lease otherwise consents in writing to such restoration
or replacement;
(iii) restoration or replacement of the damaged Real Estate will
not result in any decrease in value or other impairment of the Real Estate; and
(iv) the funds available for any restoration or replacement
(including, without limitation, any insurance or condemnation proceeds) are
sufficient to pay the cost of restoration or replacement of the damaged Real
Estate.
If Lessee chooses to repair, rebuild, or replace the Real Estate,
any condemnation proceeds or the proceeds of any casualty insurance covering
such Real Estate may be applied to the restoration or replacement if all of the
following conditions are met, to the satisfaction of Lessor in its reasonable
discretion:
(A) the proceeds and, if deemed necessary by Lessor,
additional deposits made by Lessee which may be necessary to restore or replace
the Real Estate to substantially the same condition as existed immediately prior
to the damage, shall be deposited in an interest- bearing escrow account to be
held by Lessor or, if no Default or event which, with the giving of notice or
the lapse of time, or both, would become a Default has then occurred hereunder,
Lessor may invest such amount in Permitted Investments (as hereinafter defined)
at the risk and expense of Lessee;
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(B) Lessee promptly shall proceed to restore or replace that
portion of the Real Estate so damaged to substantially the same condition as
existed prior to the Casualty Occurrence, with such non-material changes,
alterations and modifications (including the substitution and addition of other
property) as may be desired by Lessee, permitted by the Ground Lease or Premises
Lease (if any), and approved by Lessor, such approval not to be unreasonably
withheld, conditioned or delayed;
(C) all work shall be performed in accordance with all
applicable laws and regulations;
(D) Lessee will cause and Lessor shall permit withdrawals to
be made from the escrow account to pay the costs of such restoration or
replacement as the work progresses, as certified by Lessee's in-house architect
or engineer reasonably acceptable to Lessor, by submitting to Lessor such
requisitions and accompanying documents as Lessor reasonably shall require; and
(E) Lessee promptly will replace any lost or damaged
Equipment located on or in such Real Estate in accordance with the provisions of
Section V(e) hereof.
As used herein, "Permitted Investments" shall mean investments of the type
expressly provided in clauses (6) through (9) of Section 4.8 of the Facilities
Agreement.
VIII. RISK OF LOSS:
As between Lessor and Lessee, Lessee hereby assumes and shall bear the
entire risk of any loss, theft, damage to, or destruction of, any Equipment from
any cause whatsoever from the time the Equipment is shipped or delivered to
Lessee or a FAD, and Lessee hereby assumes and shall bear the entire risk of any
loss, theft, damage to, or destruction of, any Real Estate from any cause
whatsoever from the time Lessee enters into a Ground Lease or Premises Lease, or
from the time a deed is delivered under the Agency Agreement, as applicable
during the Term of a Schedule with respect to the Lease Assets described on such
Schedule unless Lessee or a FAD, as applicable, shall not be in actual
possession of such Lease Assets by reason of Lessor's exercise of its remedies
of repossession or dispossession pursuant to Article XI hereof and such loss,
theft, damage to, or destruction of, such Lease Assets was not caused by acts or
omissions prior to any such repossession or dispossession. No loss of or damage
to the Lease Assets or any item thereof shall impair any obligation of Lessee
hereunder or under the Agency Agreement, and all such obligations of Lessee
shall continue in full force and effect.
IX. INSURANCE:
Lessee agrees, at its own expense, to keep or cause the FADs, at their own
expense, to keep: (a) all Equipment insured for such amounts as specified in
Paragraph D of the applicable Schedule
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and against such hazards as Lessor may require, including, but not limited to,
insurance for damage to or loss of such Equipment, with a loss payable clause in
favor of Lessor, as its interest may appear, irrespective of any breach of
warranty or other act or omission of Lessee; (b) all Real Estate insured in an
amount at least equal to the replacement value of such Real Estate, against such
hazards as Lessor shall require, including (but not limited to) loss or damage
resulting from fire and other risks insured against by extended coverage, with a
standard mortgagee's endorsement in favor of Lessor, as its interest may appear,
irrespective of any breach of warranty or act or omission of Lessee; (c) in full
force and effect liability coverage against personal injuries, death or property
damage, relating to the Lease Assets for such amounts as specified in Paragraph
D of the applicable Schedule, with Lessor named as additional insured; and (d)
in full force and effect a flood insurance policy in an amount equal to the
maximum limit of coverage available with respect to any Real Estate located in a
special flood hazard area; provided that Lessee shall not be required to have
such flood insurance policy with respect to such Real Estate if Lessor receives
an acceptable flood zone determination from Transamerica, a registered land
surveyor, or another reputable flood certification company reasonably acceptable
to Lessor to the effect that such Real Estate is not located in a special flood
hazard area. All such policies shall be with companies, and on terms,
satisfactory to Lessor. All insurance required hereunder may be subject to such
deductibles as reasonably are acceptable to Lessor. Lessee agrees to deliver to
Lessor evidence of insurance satisfactory to Lessor. No insurance shall be
subject to any co-insurance clause. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make proof of loss and claim for insurance, and to make
adjustments with insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a result of such
insurance policies to the extent that they cover the Lease Assets. Any expense
of Lessor in adjusting or collecting insurance shall be borne by Lessee. Lessee
will not make adjustments with insurers except (i) with respect to claims for
damage to any Lease Assets at any one Lease Assets Location where the repair
costs do not exceed $100,000, or (ii) with Lessor's written consent. Said
policies shall provide that the insurance may not be altered or canceled by the
insurer until after thirty (30) days written notice to Lessor. Provided that
Lessee is not then in Default, Lessor will (subject to Lessee's election
pursuant to Section VII hereof) apply any insurance proceeds received by Lessor
on account of a Casualty Occurrence to the cost of repairing or replacing the
Lease Assets having suffered such Casualty Occurrence or to Lessee's obligation
to pay the Stipulated Loss Value pursuant to Sections VII(a)(2) or VII(b)(3)
hereof. After Default, Lessor may (subject to the Intercreditor Agreement), at
its option, apply proceeds of insurance, in whole or in part, to (i) repair or
replace Lease Assets or any portion thereof, or (ii) satisfy any obligation of
Lessee to Lessor hereunder and/or any obligation of Lessee pursuant to the
Facilities Agreement, the Credit Agreement or related documents.
X. RETURN OF LEASE ASSETS:
(a) Upon the expiration or termination of the Term of any Schedule, unless
Lessee shall have exercised its early termination option pursuant to Section
XXII hereof or its extension option pursuant to Section XVIII(a) hereof, or its
purchase option pursuant to Section XVIII(d) hereof or unless Lessee shall be
deemed to have elected to exercise its purchase option pursuant to Section
XVIII(e) hereof, Lessee shall promptly, at its own cost and expense: (i) perform
any testing and repairs required to place the affected units of Equipment in the
same condition and appearance as
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when received by Lessee (reasonable wear and tear excepted) and in good working
order for their originally intended purpose; (ii) if deinstallation, disassembly
or crating is required, cause such units of Equipment to be deinstalled,
disassembled and crated by an authorized manufacturer's representative or such
other service person as is satisfactory to Lessor; (iii) return such units of
Equipment, free and clear of all liens and encumbrances (other than those
described in Section V(c)(1) hereof), to a location within the continental
United States as Lessor shall direct; (iv) remove all debris and rubbish and
such items of furniture and equipment owned by Lessee and placed on any Real
Estate as Lessor shall require to be removed, and (v) surrender possession of
the Real Estate and (if applicable) assign the applicable Ground Lease or
Premises Lease to Lessor. In addition, Lessee shall comply with the provisions
of Annex F to the applicable Schedule. At Lessor's sole discretion, Lessor may
elect to abandon any or all of the Real Estate upon written notice to Lessee;
whereupon all interest of Lessor in such Real Estate shall be conveyed to
Lessee.
(b) If Lessee is required to comply with the requirements of Paragraph (a)
above, until Lessee has fully complied with the requirements of Paragraph (a)
above, Lessee's Rent payment obligation with respect to the applicable Lease
Assets and all other obligations under this Agreement shall continue from month
to month notwithstanding any expiration or termination of the Term. Lessor may
terminate such continued leasehold interest upon ten (10) days' written notice
to Lessee. In addition to these Rents, Lessor shall have all of its other rights
and remedies available as a result of such nonperformance. The delivery of keys
to any Real Estate other than in connection with the termination of this
Agreement or any Schedule or pursuant to any termination option validly
exercised by Lessee, shall not constitute a surrender of such Real Estate or
effect a termination of the Lease as to such Real Estate, whether or not such
keys are retained by Lessor. The return of Lease Assets, whether or not
acceptable by Lessor, or the mutual termination of this Agreement, shall not
work a merger and, at the option of Lessor, shall operate as an assignment to
Lessor of all subleases or subtenancies.
(c) Lessee hereby waives, to the extent permitted by law, all claims for
damages or other liability in connection with Lessor's re-entering and taking
possession of the Lease Assets after the occurrence of a Default hereunder, and
Lessee shall indemnify, defend, protect, and hold Lessor harmless from and
against any such claims, damages, or other liability, and no such re-entry shall
be considered or construed to be a forcible entry, nor shall Lessor be guilty of
forcible entry or forcible detainer.
XI. DEFAULT; REMEDIES:
(a) Lessor may in writing declare this Agreement in default ("Default") if:
(1) Lessee breaches its obligation to pay Rent or any other sum hereunder to
Lessor as and when due and payable and such failure shall continue for two (2)
Business Days; (2) Lessee breaches any of its insurance obligations under
Section IX hereof, or its obligations under Sections I(c), V(g) or XVI(i)
hereof, or its payment obligations under Section III hereof; (3) Lessee breaches
any of its obligations under any Subordination and Intercreditor Agreement; (4)
Lessee breaches any of its other obligations hereunder and fails to cure that
breach within thirty (30) days after written notice thereof; (5) Lessee ceases
to do business as a going concern; (6) Lessee is in default under the Facilities
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Agreement and such default has not been waived or cured and all applicable grace
or cure periods with respect thereto have then expired; or (7) this Agreement or
any document executed and delivered in connection herewith shall (except in
accordance with the terms thereof) cease to be effective, or any security
interest or lien granted in connection herewith shall (except as a result of a
failure by Lessor to file a continuation statement) cease to be a perfected
first lien. Such declaration of Default shall apply to all Schedules. IN
CONNECTION WITH THE DECLARATION OF ANY DEFAULT HEREUNDER, LESSEE HEREBY WAIVES
(TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY REQUIREMENT UNDER APPLICABLE LAW
OR REGULATIONS THAT A NOTICE FROM LESSOR NOT BECOME EFFECTIVE UNTIL A PERIOD OF
DAYS HAS ELAPSED.
(b) After a Default, Lessee shall, without further demand, forthwith pay to
Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the
Stipulated Loss Value of the Lease Assets (calculated in accordance with Annex D
to the applicable Schedule(s) as of the Rent Payment Date next preceding the
declaration of Default), and (ii) all Rents and other sums then due hereunder
(including any breakage expense actually incurred by Lessor or any Participant
in connection with such Default). If Lessee fails to pay the amounts specified
in the preceding sentence, then in addition to the obligation to pay such
amounts, at the request of Lessor, Lessee shall comply with the provisions of
Section X hereof relating to the return of Lease Assets. Lessee hereby
authorizes Lessor to enter, with or without legal process, any Real Estate or
Lease Assets Location and take possession of the Lease Assets. Lessor may, but
shall not be required to, sell Lease Assets at private or public sale, in bulk
or in parcels, with or without notice, and without having the Lease Assets
present at the place of sale; or Lessor may, but shall not be required to,
lease, otherwise dispose of or keep idle all or part of the Lease Assets and
Lessor may use Lessee's premises for the foregoing without liability for rent,
costs, damages or otherwise. Lessor may also exercise any and all available
remedies under the Mortgages, including selling any of the Fee Property; or any
and all available remedies under the Collateral Assignments of Lease, including
(but not limited to) selling, transferring or assigning the leasehold estate
created by the Ground Leases or the Premises Leases. The proceeds of sale, lease
or other disposition, if any, shall be applied in the following order of
priorities: (1) to pay all of Lessor's costs, charges and expenses incurred in
taking, removing, holding, repairing and selling, leasing or otherwise disposing
of Lease Assets; then, (2) to the extent not previously paid by Lessee, to pay
Lessor all sums due from Lessee hereunder; then (3) to reimburse to Lessee any
sums previously paid by Lessee as liquidated damages; and (4) any surplus shall
be paid to Lessee. Lessee shall pay any deficiency in clauses (1) and (2)
forthwith. Upon the occurrence of any Default hereunder, Lessor shall have a
period of twelve (12) months in which to sell the Equipment and Leasehold
Improvements on site at the Lease Assets Locations which are Fee Properties.
During such period, Lessee shall continue to insure and maintain the Lease
Assets as provided herein (but shall not be required to pay Rent with respect
thereto) and shall provide Lessor and its authorized representatives and
prospective purchasers access to the Lease Assets for remarketing purposes.
(c) In addition to the foregoing rights, after a Default, Lessor may, by
notice to Lessee, rescind or terminate this Agreement as to any or all of the
Lease Assets; provided, however, that (1) no reletting, reentry or taking
possession of any of the Lease Assets by Lessor shall be construed as an
election on Lessor's part to terminate this Agreement, (2) notwithstanding any
reletting, reentry,
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or taking of possession, Lessor may at any time thereafter elect to terminate
this Agreement for a continuing Default, and (3) no agreement accepting a
surrender of any or all of the Lease Assets shall be valid unless the same be
made in writing and executed by the Lessor.
(d) After a Default, Lessor may, at its option, elect not to terminate this
Agreement and continue to collect all Rent payments and other amounts due
hereunder and enforce Lessee's obligations hereunder as and when the same become
due, or are to be performed; provided that it does not require Lessee to return
any of the Lease Assets or to pay the amounts specified in the first sentence of
Section XI(b) hereof, and at the option of Lessor, upon any abandonment of the
Lease Assets by Lessee or reentry of same by Lessor, Lessor may, at its sole
discretion, make necessary repairs in order to relet the Leased Assets, and
relet the Leased Assets (or any part thereof) for such term or terms (which may
be for a term extending beyond the Term of this Agreement) and at such rental or
rentals, and upon such other terms and conditions as Lessor in its discretion
shall deem advisable; and upon such reletting, all rentals actually received by
Lessor shall be applied to Lessee's obligations hereunder in the order set forth
in the fifth sentence of Section XI(b) hereof. Anything in this Agreement or
applicable law to the contrary notwithstanding Lessor shall have no obligation
to relet the Lease Assets after a Default.
(e) After a Default, and only if Lessee fails to pay the amounts specified
in the first sentence of Section XI(b) hereof, separate suits may be brought to
collect any damages for any periods, and such suits shall not in any manner
prejudice Lessor's right to collect any such damages for any subsequent periods,
or Lessor may defer any such suits until after the expiration of the Term, in
which event the right to bring such suits shall not be deemed to have accrued
until the end of the Term.
(f) After a Default, and only if Lessee fails to pay the amounts specified
in the first sentence of Section XI(b) hereof, Lessor may, as a matter of right
and without notice to Lessee, and without regard to the value of the Lease
Assets or the solvency of Lessee, apply to any court having jurisdiction to
appoint a receiver or receivers of the Lease Assets, and Lessee irrevocably
consents to any such appointment. Any such receiver(s) shall have all of the
usual powers of receivers in similar cases and all of the powers and duties of
Lessor in case of entry, and shall continue to have such powers until
confirmation of the sale of the Lease Assets, unless such receivership is sooner
terminated.
(g) After a Default, and only if Lessee fails to pay the amounts specified
in the first sentence of Section XI(b) hereof, Lessor may require any subtenant
or other person in possession of any or all of the Lease Assets to attorn to
Lessor, in which event Lessor shall undertake the obligations of Lessee under
any Sublease; provided, however, that Lessor shall not be liable for any amounts
paid by a Sublessee to Lessee or for any defaults by Lessee.
(h) After a Default, and only if Lessee fails to pay the amounts specified
in the first sentence of Section XI(b) hereof, an action of mortgage foreclosure
and trustee's sale as now or hereafter provided by law may be commenced and
prosecuted to judgment, execution, and sale, for the collection of all amounts
due hereunder (including any Rent payments and Stipulated Loss
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Value), together with costs, fees, and expenses of such proceedings, including a
reasonable attorney's fee. All errors in any such proceedings, together with any
stays of or exemptions from execution, or extensions of time of payment, which
may be given by any applicable laws are hereby forever waived and released.
(i) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies which may be
available at law, in equity, or under statute and Lessee may exercise any or all
such remedies to enforce the terms hereof or recover damages for breach hereof.
Lessee waives notice of sale or other disposition (and the time and place
thereof), and the manner and place of any advertising. If permitted by law,
Lessee shall pay reasonable attorney's fees actually incurred by Lessor or any
Participant after the occurrence of a Default in connection with such Default or
otherwise in enforcing the provisions of this Lease and any ancillary documents.
Waiver of any Default shall not be a waiver of any other or subsequent Default.
(j) Any Default under the terms of this Agreement may be declared by Lessor
a default under any other agreement between Lessor and Lessee (other than the
Facilities Agreement, the Intercreditor Agreement, or (except in accordance with
the express terms thereof) the 1995 Master Lease Agreement) with respect to any
material obligation for borrowed money, for the deferred purchase price of
property or any lease agreement for an amount in excess of One Million Dollars
($1,000,000) (a "GE Agreement"); and any default which is not cured within any
applicable grace periods specified therein, under the terms of any GE Agreement
may be declared by Lessor a default under this Agreement.
(k) The provisions of this Section XI are subject to the terms and
conditions of the Intercreditor Agreement.
WAIVER OF CERTAIN RIGHTS. IF THIS AGREEMENT OR ANY SCHEDULE SHALL BE TERMINATED
AS HEREIN ABOVE SET FORTH, LESSEE WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, (A) ANY NOTICE OF RE-ENTRY OR THE INSTITUTION OF LEGAL PROCEEDINGS TO
OBTAIN RE-ENTRY OR REPOSSESSION; (B) ANY RIGHT OF RE-ENTRY OR REPOSSESSION; AND
(C) THE BENEFIT OF ANY LAW NOW OR HEREAFTER EXEMPTING PROPERTY FROM LIABILITY
FOR RENT OR FOR DEBT OR LIMITING LESSOR WITH RESPECT TO THE ELECTION OF
REMEDIES.
XII. ASSIGNMENT; SUB-LETTING:
(a)(1) EXCEPT AS EXPRESSLY PROVIDED HEREIN (INCLUDING, WITHOUT LIMITATION,
SUBLEASING A PORTION OF ANY REAL ESTATE FOR OPERATION OF AN "EINSTEIN BROS.
BAGELS" OR "NOAH'S NEW YORK BAGELS" LOCATION), LESSEE SHALL NOT ASSIGN,
MORTGAGE, SUBLET OR HYPOTHECATE ANY LEASE ASSETS OR THE INTEREST OF LESSEE
HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR WHICH MAY BE WITHHELD IN
LESSOR'S SOLE AND ABSOLUTE DISCRETION. Notwithstanding the foregoing, Lessee
may, subject to the following terms and conditions, without any consent of
Lessor being required, sublease the Lease Assets to FADs (collectively referred
to
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as "Sublessee") pursuant to the terms and provisions hereof and pursuant to
written subleases satisfying the conditions hereof and in substantially the form
attached hereto as Exhibit No. 3 (each being hereinafter referred to as a
"Sublease" and, collectively, as the "Subleases"). Lessee promptly shall
reimburse Lessor for all expenses incurred by Lessor in connection with any
Sublease or with the enforcement of any Sublease. Lessee hereby acknowledges
that it is now and continues to be obligated and bound by all of the provisions
hereof, including but not limited to the provisions relating to the indemnity
and the obligation to pay Rent, notwithstanding any delegation of duties or
other term of the Sublease. Any such delegation shall be effective only as
between Lessee and Sublessee. Lessee further acknowledges that it is not
authorized to dispose of the Lease Assets (except as otherwise expressly
provided herein and by sublease in accordance with the terms hereof). Lessee is
not prohibited from terminating any Sublease at any time; provided, however,
that notwithstanding any such termination of a Sublease, Lessee's use of the
Lease Assets shall remain subject to the terms and conditions of this Agreement.
(2) Lessee agrees that at any time and from time to time, upon the written
request of Lessor, Lessee will promptly and duly execute and deliver or cause to
be duly executed and delivered any and all further instruments and documents as
Lessor reasonably may deem desirable to perfect and maintain the priority of its
security interest in the Subleases. Lessee shall deliver to Lessor the original
copies of the Subleases promptly upon execution thereof, and shall mark
prominently all other copies of the Subleases "Not an Original".
(b)(1) Lessor may, upon written notice to Lessee (but without Lessee's
consent, except as provided in Section XII(b)(2) hereof), assign this Agreement
or any Schedule, or the right to enter into any Schedule. Lessee agrees that it
will pay all Rent and other amounts payable under each Schedule to Lessor named
therein; provided, however, if Lessee receives written notice of an assignment
from Lessor, Lessee will pay all Rent and other amounts payable under any
assigned Schedule to such assignee or as instructed by Lessor. Each Schedule,
incorporating by reference the terms and conditions of this Agreement,
constitutes a separate instrument of lease, and the Lessor named therein or its
assignee shall have all rights as "Lessor" thereunder separately exercisable by
such named Lessor or assignee as the case may be, exclusively and independently
of Lessor or any assignee with respect to other Schedules executed pursuant
hereto, but in all events subject to the Intercreditor Agreement. Lessee further
agrees to confirm in writing receipt of a notice of assignment as reasonably may
be requested by assignee. Lessee hereby waives and agrees not to assert against
any such assignee any defense, set-off, recoupment claim or counterclaim which
Lessee has or may at any time have against Lessor or any other person for any
reason whatsoever.
(2) Lessee acknowledges that it has been advised that General Electric
Capital Corporation is acting hereunder for itself and as agent for certain
third parties (each being herein referred to as a "Participant" and,
collectively, as the "Participants"); that the interest of the Lessor in this
Agreement, the Schedules, related instruments and documents and/or the Lease
Assets may be conveyed to, in whole or in part, and may be used as security for
financing obtained from, one or more third parties upon notice to Lessee (but
without Lessee's consent, except as provided in Section XII(b)(3) hereof) (the
"Syndication"). Each participation interest syndicated hereunder shall be in a
minimum principal amount of $5,000,000.00 or an integral multiple of
$1,000,000.00 in
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excess thereof. Lessee agrees reasonably to cooperate with Lessor in connection
with the Syndication, including the execution and delivery of such other
documents, instruments, notices, opinions, certificates and acknowledgments as
reasonably may be required by Lessor or such Participant; provided, however in
no event shall Lessee be required to consent to any change that would adversely
affect any of the material terms of the transactions contemplated herein. Lessor
agrees that it shall continue to act hereunder as agent for the Participants and
any assignees of the Participants or shall cause a trust to be created to serve
as agent hereunder.
(3) Anything to the contrary set forth herein notwithstanding, so long as
no Default has occurred hereunder, any assignee or Participant hereunder shall
(x) (i) not be a direct competitor of Lessee or any of its subsidiaries, or any
Affiliate (hereinafter defined) of such a competitor, or be engaged in the same
or similar business as Lessee or any of its subsidiaries, and (ii) have (or its
ultimate parent shall have) a net worth or combined capital and surplus of not
less than $50,000,000, or (y) be approved by Lessee (which approval shall not be
unreasonably withheld, delayed or conditioned) upon Lessor's request. As used
herein, "Affiliate" shall mean any person that directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, such person.
(c) Subject always to the foregoing, this Agreement inures to the benefit
of, and is binding upon, the successors and assigns of the parties hereto and
the Participants.
XIII. NET LEASE; NO SET-OFF, ETC.:
This Agreement is a net lease. Lessee's obligation to pay Rent and other
amounts due hereunder shall be absolute and unconditional. Lessee shall not be
entitled to any abatement or reductions of, or set-offs against, said Rent or
other amounts, including, without limitation, those arising or allegedly arising
out of claims (present or future, alleged or actual, and including claims
arising out of strict liability in tort or negligence of Lessor) of Lessee
against Lessor or any Participant under this Agreement or otherwise. This
Agreement shall not terminate and the obligations of Lessee shall not be
affected by reason of any defect in or damage to, or loss of possession, use or
destruction of, any Lease Assets from whatsoever cause. It is the intention of
the parties that Rents and other amounts due hereunder shall continue to be
payable in all events in the manner and at the times set forth herein unless the
obligation to do so shall have been terminated pursuant to the express terms
hereof.
XIV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, the
Participants, and its and their Affiliates, successors and assigns, directors,
officers, employees and agents, from and against any and all losses, damages,
penalties, injuries, claims, actions and suits, including legal expenses, of
whatsoever kind and nature, in contract or tort, and including, but not limited
to, Lessor's strict liability in tort, arising out of (i) the selection,
manufacture, purchase, construction,
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acceptance or rejection of Lease Assets, the ownership of Lease Assets during
the Term, and the delivery, lease, possession, maintenance, uses, condition,
return or operation of the Lease Assets (including, without limitation, latent
and other defects, whether or not discoverable by Lessor or Lessee and any claim
for patent, trademark or copyright infringement or environmental damage), or
(ii) the condition of Lease Assets sold or disposed of after use by Lessee, any
Sublessee or employees of Lessee or any Sublessee; provided, however, that
Lessee shall have no obligation hereunder to Lessor, any Participant, or their
agents, employees, successors and assigns to the extent that any of the
foregoing results from the gross negligence or willful misconduct of Lessor or
any such Participant, respectively. Lessee shall, upon request, defend any
actions based on, or arising out of, any of the foregoing.
(b) Lessee shall defend, indemnify and hold harmless Lessor, the
Participants, and its and their Affiliates, successors and assigns, directors,
officers, employees and agents, from and against any Environmental Claim or
Environmental Loss and, unless Lessee is then contesting in good faith such
Environmental Claim or Environmental Loss and Lessee has set aside on its books
appropriate reserves therefor, Lessee shall fully and promptly pay, perform and
discharge any such Environmental Claim or Environmental Loss; provided, however,
that Lessee shall have no obligation hereunder with respect to any Environmental
Claim or Environmental Loss (i) to the extent any of the foregoing arises from
the gross negligence or willful misconduct of Lessor, any such Participant, or
any of their respective Affiliates, respectively, or (ii) for any use,
generation, storage, Environmental Emission, or presence in violation of any
Environmental Laws of any Contaminant initially introduced onto a Lease Assets
Location after (x) Lessor's exercise of its remedies of repossession or
dispossession pursuant to Section XI hereof with respect to such Lease Assets
Location, or (y) the return or surrender of the Real Estate at such Lease Assets
Location by Lessee in accordance with Section X hereof.
As used herein,
(1) "Adverse Environmental Condition" shall refer to (i) the existence
or the continuation of the existence, of an Environmental Emission
(including, without limitation, a sudden or non-sudden accidental or non-
accidental Environmental Emission), of, or exposure to, any Contaminant,
odor or audible noise in violation of any applicable Environmental Law, at,
in, by, from or related to any Lease Assets, (ii) the environmental aspect
of the transportation, storage, treatment or disposal of materials in
connection with the operation of any Lease Assets in violation of any
applicable Environmental Law, or (iii) the violation, or alleged violation,
of any Environmental Law connected with any Lease Assets.
(2) "Affiliate" shall refer, with respect to any given Person, to any
Person that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
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(3) "Contaminant" shall refer to those substances which are regulated
by or form the basis of liability under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls ("PCBs"), and
radioactive substances.
(4) "Environmental Claim" shall refer to any accusation, allegation,
notice of violation, claim, demand, abatement or other order or direction
(conditional or otherwise) by any governmental authority or any Person for
personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment or other adverse
effects on the environment, or for fines, penalties or restrictions,
resulting from or based upon any Adverse Environmental Condition.
(5) "Environmental Emission" shall refer to any actual or threatened
release, spill, omission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any of the Lease Assets, including, without
limitation, the movement of any Contaminant or other substance through or
in the air, soil, surface water, groundwater, or property.
(6) "Environmental Law" shall mean any Federal, foreign, state or
local law, rule or regulation pertaining to the protection of the
environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section
9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section
1801 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section
1251 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 1361
et seq.), and the Occupational Safety and Health Act (19 U.S.C. Section
651 et seq.), as these laws have been or may hereafter be amended or
supplemented, and any analogous foreign, Federal, state or local statutes,
and the regulations promulgated pursuant thereto.
(7) "Environmental Loss" shall mean any loss, cost, damage, liability,
deficiency, fine, penalty or expense (including, without limitation,
reasonable attorneys' fees, engineering and other professional or expert
fees), investigation, removal, cleanup and remedial costs (voluntarily or
involuntarily incurred to the extent required by Environmental Laws) and
damages to, loss of the use of or decrease in value of the Lease Assets
arising out of or related to any Adverse Environmental Condition.
(8) "Person" shall include any individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority, or other
entity of whatever nature.
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(c) All of Lessor's rights, privileges and indemnities contained in this
Section shall survive the expiration or other termination of this Agreement and
the rights, privileges and indemnities contained herein are expressly made for
the benefit of, and shall be enforceable by Lessor, the Participants, and its
and their successors and assigns.
XV. DISCLAIMER:
LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE LEASE ASSETS WITHOUT ANY
ASSISTANCE FROM LESSOR, THE PARTICIPANTS, ITS AND THEIR AFFILIATES, DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS. LESSOR AND THE PARTICIPANTS DO NOT MAKE, HAVE
NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor and the Participants shall have no responsibility
or liability to Lessee or any other person with respect to any of the following
(i) any liability, loss or damage caused or alleged to be caused directly or
indirectly by any Lease Assets, any inadequacy thereof, any deficiency or defect
(latent or otherwise) therein, or any other circumstance in connection
therewith; (ii) the use, operation or performance of any Lease Assets or any
risks relating thereto; (iii) any interruption of service, loss of business or
anticipated profits or consequential damages; or (iv) the delivery, operation,
servicing, maintenance, repair, improvement or replacement of any Lease Assets.
If, and so long as, no Default exists under this Lease, Lessee shall be, and
hereby is, authorized during the term of this Lease to assert and enforce, at
Lessee's sole cost and expense, from time to time, in the name of and for the
account of Lessor and/or Lessee, as their interests may appear, whatever claims
and rights Lessor may have against any Supplier of the Lease Assets (which
claims and rights Lessee may allow FADs to exercise on its behalf).
XVI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE:
Lessee hereby represents, warrants and covenants to Lessor that on the date
hereof and on the date of execution of each Schedule:
(a) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property, regardless of the degree of its annexation to
any real property and shall not by reason of any installation in, or affixation
to, real or personal property become a part thereof. Any Leasehold Improvements
which do not constitute personal property shall be affixed only to real
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property leased to Lessee or a FAD pursuant to Ground Leases or Premises Leases
which have been duly and validly collaterally assigned to Lessor.
(b) The Lease Assets will at all times be used for commercial or business
purposes.
(c) Assuming the recordation of a Memorandum of Lease and a Mortgage among
the land records of the jurisdiction in which any of the Fee Property is
located, Lessor will have a first priority perfected lien on the Fee Property.
(d) Lessee and the FADs are in compliance in all material respects with
all applicable Environmental Laws with respect to the Real Estate and each Lease
Assets Location where Leasehold Improvements are located and, to Lessee's
knowledge, no circumstances exist which would prevent or interfere with such
compliance. Except as set forth in any Phase I environmental audit delivered to
Lessor in connection with the acquisition by Lessor of Real Property after the
date hereof, to the knowledge of Lessee, (1) there are no pending or threatened
Environmental Claims related to any of the Real Estate or any of the Lease
Assets Locations where Leasehold Improvements are located which, if adversely
determined, would have a material adverse effect on Lessee or any of the FADs,
(2) no Contaminants are present on any of the Real Estate or Lease Assets
Locations where Leasehold Improvements are located other than such materials as
(i) are handled or stored in accordance with all applicable Environmental Laws,
or (ii) would not require the conduct of investigative or remedial action
pursuant to Environmental Laws, and (3) Lessee and its Sublessees have not
transported, disposed of, or arranged for the disposal of any Contaminants on
any of the Real Estate or Lease Assets Locations where Leasehold Improvements
are located except (i) in accordance with all applicable Environmental Laws, or
(ii) in concentrations or conditions which would not require the conduct of
investigative or remedial action pursuant to Environmental Laws.
(e) The current and proposed use of the Real Estate is authorized under
all applicable laws and regulations which, absent such authorization, would have
a material adverse effect on the operations of Lessee or any FAD, and Lessee or
such FAD, as applicable, has obtained all licenses and permits necessary for the
operation of each unit of Real Estate and each Lease Assets Location as a
"Boston Market" or "Boston Carver" location. Lessee shall not modify or rescind
any such licenses or permits or take any action which would cause the loss of
such licenses or permits. Lessee shall take all action to obtain all necessary
extensions or renewals of such licenses and permits.
(f) Each unit of Real Estate is connected to and serviced by all water,
sewage, disposal, gas and electrical facilities necessary for the operation of
such unit of Real Estate.
(g) There are no claims for payment for labor performed or materials
furnished to any of the Real Estate which could give rise to a mechanic's lien
or materialman's lien on such Real Estate except those being contested in good
faith, for which Lessee has obtained a bond pending appeal.
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(h) All Leasehold Improvements and Fee Improvements have been constructed
in a good and workmanlike manner, substantially in accordance with (1) approved
prototype plans, (2) all land use and construction permits and approvals and (3)
all applicable laws and regulations, including all zoning rules and the
Americans with Disabilities Act.
(i) Each FAD delivering to Lessor a Bill of Sale shall represent to Lessor
that it has good title to the Equipment and/or the Leasehold Improvements
described therein, free and clear of all liens and encumbrances (subject only to
Lessee's security interest therein, which security interest shall be released
upon Lessee's execution and delivery of a Certificate of Acceptance relating
thereto, and to the lien of this Agreement and the Sublease). In the event
Lessor determines that such representation as to title by any FAD shall prove
untrue in any material respect, then, within ten (10) days of written notice
from Lessor to Lessee of such occurrence (the date on which Lessee receives such
notice from Lessor is referred to as the "Notice Date"), Lessee shall purchase
all units of the Equipment (the "Affected Equipment") with respect to which such
representation is untrue for a purchase price equal to the then Stipulated Loss
Value of such units of the Affected Equipment or (if applicable) Lessee may
exercise its option to replace such Equipment pursuant to Section V(f)(3)
hereof.
XVII. OWNERSHIP FOR TAX PURPOSES, ETC.; GRANT OF SECURITY INTEREST; USURY
SAVINGS:
(a) For income tax purposes, Lessor will treat Lessee as the owner of the
Lease Assets. Accordingly, Lessor agrees (i) to treat Lessee as the owner of the
Lease Assets on its Federal income tax return, (ii) not to take actions or
positions inconsistent with such treatment on or with respect to its Federal
income tax return, and not claim any tax benefits available to an owner of the
Lease Assets on or with respect to its Federal income tax return. The foregoing
undertakings by Lessor shall not be violated by Lessor's taking a tax position
through inadvertence so long as such inadvertent tax position is reversed by
Lessor promptly upon its discovery. Lessor shall in no event be liable to
Lessee if Lessee fails to secure any of the tax benefits available to the owner
of the Lease Assets unless (x) Lessor has breached its undertakings set forth in
the second sentence of this Section XVII(a), and (y) such breach is the direct
cause of the Lessee's failure to secure such tax benefits. It is the intent of
the parties hereto that: (i) for the purposes of Lessee's financial reporting,
the transaction contemplated hereby shall be treated by Lessee as an operating
lease from Lessor to Lessee, (ii) for other purposes, including Federal and
state income tax, bankruptcy and Uniform Commercial Code purposes (1) Lessee
shall be treated as the owner of the Lease Assets, (2) this Agreement grants a
security interest or lien, as the case may be, in the Lease Assets and other
collateral to Lessor, and (3) the obligations of Lessee to pay Rent shall be
treated as payments of principal and interest to Lessor by Lessee.
(b) The parties acknowledge and agree that the obligations of Lessee under
this Agreement and all Schedules, and the obligations of Lessee under the
Facilities Agreement and the Credit Agreement, are to be cross-collateralized.
If the Credit Agreement is terminated, Lessee shall cause the Loan Agent to
assign to Lessor (at Lessee's expense) all right, title and interest of the Loan
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Agent in and to all Collateral (as such term is defined in the Credit Agreement)
as further security hereunder. In order to secure the prompt payment of the Rent
and all of the other amounts from time to time outstanding hereunder and with
respect to the Schedules and the Credit Agreement, and the performance and
observance by Lessee of all the agreements, covenants and provisions hereof
(including, without limitation, all of the agreements, covenants and provisions
hereof that are incorporated in the Schedules) and thereof and of the Facilities
Agreement:
(1) Lessee hereby grants to Lessor, as Agent, a first priority
security interest in the Equipment and Leasehold Improvements leased hereunder,
together with all additions, attachments, accessories and accessions thereto
whether or not furnished by the supplier of the
Equipment or Leasehold Improvements and any and all substitutions or
replacements therefor, in each such case in which Lessee shall from time to time
acquire an interest, and any and all insurance and/or other proceeds (but
without Lessee having any power of sale) of the property in and against which a
security interest is granted hereunder;
(2) Lessee hereby grants to Lessor, as Agent, a first priority
security interest in, and assigns, sets over, and transfers to Lessor, as Agent,
its successors and assigns, all (except as otherwise provided herein) of its
right, title and interest in and to (i) the Subleases and all extensions and
renewals thereof, (ii) all rentals and other sums due, now or hereafter, under
the Subleases (including, without limitation, all amounts paid pursuant to the
exercise by Sublessee of any option contained in the Sublease), (iii) any and
all proceeds of any insurance required under the Subleases, except proceeds used
to purchase a Replacement Item or to substitute Real Estate pursuant to Section
V(e) hereof, or to restore or replace Lease Assets pursuant to Sections VII(a)
or (b) hereof, (iv) the security interest granted to Lessee by the Sublessees
pursuant to the Subleases, and (v) all products and proceeds of the foregoing;
provided, however, that Lessor shall not exercise its rights hereunder unless
and until a Default or event which, with notice and the lapse of time or both,
would constitute a Default hereunder has occurred and is continuing.
Notwithstanding the foregoing assignment, Lessee shall cause Sublessee to pay
Lessee all rentals and other sums payable under the Subleases until Lessor
delivers to Lessee notice of a Default hereunder. Upon giving such notice to
Lessee, Lessor may notify Sublessee (or, if requested by Lessor, Lessee shall
notify Sublessee) to pay directly to Lessor all rentals and other sums payable
and to become payable under the Subleases. Upon Sublessee's receipt of such
notice, Lessee hereby authorizes and directs Sublessee to pay Lessor all rentals
and other sums payable and to become payable under the Subleases; provided
however, that so long as no Default or event which, with the giving of notice or
the lapse of time (or both), would become a Default has then occurred, Lessor
shall retain only such of the rentals herein assigned as are required from time
to time to discharge Lessee's obligations hereunder and shall remit any excess
to Lessee. If any remittance is received by Lessee relating to such Subleases
after a Default, such remittances immediately will be delivered to Lessor
bearing the endorsement "Pay to the order of General Electric Capital
Corporation, for Itself and as Agent for Certain Participants." If the
remittance is in a form which precludes an endorsement, Lessee shall, after a
Default, hold all such funds in trust for Lessor and immediately pay the amount
of the remittance to Lessor. Lessee hereby appoints Lessor its attorney-in-fact
to negotiate any remittance which is received by Lessor from Sublessee after a
Default and made payable to Lessee. Notwithstanding the foregoing, if after a
Default Lessee receives the proceeds of any insurance maintained by a Sublessee
as a result
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of a casualty suffered by subleased Equipment, Lessee immediately will remit
such insurance proceeds to Lessor;
(3) to the extent the Equipment and Leasehold Improvements may
constitute or be deemed to be Lessee's inventory (the "Inventory"), Lessee
hereby grants to Lessor, as Agent, a security interest in such Inventory, which
shall mean all Equipment and Leasehold Improvements offered or furnished under
any contract of service or intended for sale or lease, any and all additions,
attachments, accessories and accessions thereto, any and all substitutions,
replacements or exchanges therefor, any and all leases, subleases, rentals,
accounts and contracts with respect to the Equipment and Leasehold Improvements
which may now exist or hereafter arise, together with all rights thereunder and
all rental and other payments and purchase options due and to become due
thereunder, any and all sales proceeds payable for such property, all insurance,
bonds and/or other proceeds of the property and all returned or repossessed
Equipment and Leasehold Improvements now or at any time or times hereafter in
the possession or under the control of Lessee or Lessor; PROVIDED, HOWEVER, THAT
LESSEE IS NOT AUTHORIZED TO SELL THE EQUIPMENT AND/OR LEASEHOLD IMPROVEMENTS OR
THE INVENTORY EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS AND CONDITIONS OF
CERTAIN OPTIONS IN THE SUBLEASE AFTER PRIOR WRITTEN NOTICE TO LESSOR OF THE
EXERCISE BY SUBLESSEE OF ANY OF SUCH OPTIONS;
(4) Lessee hereby grants to Lessor, as Agent, a first priority
security interest in, and assigns, sets over and transfers to Lessor, as Agent,
its successors and assigns, all (except as otherwise provided herein) of its
right, title and interest in and to each Ground Lease and Premises Lease and all
extensions and renewals thereof; and, in furtherance thereof, shall execute and
deliver to Lessor a Collateral Assignment of Lease with respect to each Ground
Lease and Premises Lease; provided, however, that Lessee or the FAD, as
applicable, shall continue to pay and perform all obligations required to be
paid and performed by Lessee or the FAD, as applicable, pursuant to the Ground
Leases and Premises Leases notwithstanding such assignment for collateral
security purposes; and provided, further, that Lessor shall not exercise its
rights hereunder unless and until a Default or event which, with notice or the
lapse of time or both, would constitute a Default hereunder has occurred and is
continuing; and
(5) Lessee also grants to Lessor, as Agent, a security interest in
all accounts receivable now owned by Lessee or hereafter acquired or owned by
Lessee that might arise or result from any lease or other disposition of any of
the Lease Assets or the Inventory, including, but not limited to, the Sublease
or any right of Lessee to payment for Lease Assets sold or leased or for
services rendered whether or not evidenced by an instrument or chattel paper,
and whether or not such right has been earned by performance (the "Sublease
Accounts Receivable").
(6) Upon Lessee's request, Lessor shall at such time as all of the
obligations with respect to Lease Assets under this Agreement have been paid or
performed in full (including, without limitation, the payment in full of all
amounts required pursuant to the first sentence of Section XI(b) hereof) execute
and deliver termination statements and other appropriate documentation
reasonably
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requested by Lessee, all at Lessee's expense, to evidence Lessor's
release of its security interest in such Lease Assets, and the related
Subleases, Inventory, and Sublease Accounts Receivable.
(7) Notwithstanding anything to the contrary set forth herein, the
parties acknowledge and agree that (a) solely with respect to any Schedule
describing Lease Assets located in any of the States of California, Florida,
Tennessee or Maryland (each such Schedule being hereinafter referred to as an
"Allocated Schedule" and, collectively, as the "Allocated Schedules"), the
security interest granted herein with respect to any collateral described in an
Allocated Schedule or relating to the Lease Assets described in such Allocated
Schedule separately shall secure only the prompt payment and performance of the
obligations of Lessee pursuant to such separate Allocated Schedule (including
the provisions of this Agreement to the extent incorporated by reference in such
separate Allocated Schedule) and the security interest granted herein with
respect to any other collateral shall not secure such obligations, and (b) any
Collateral Assignment of Lease executed and delivered by Lessee or a FAD in
connection with a Ground Lease or Premises Lease of property located in the
States of California, Florida, Tennessee, or Maryland shall secure only the
prompt payment and performance of the obligations of Lessee pursuant to the
Allocated Schedule describing the Lease Assets located at such property and any
other Collateral Assignment of Lease shall not secure such obligations.
(c) To the extent that any Uniform Commercial Code financing statement
filed pursuant to this Agreement inadvertently covers property which Lessee
specifically identifies and demonstrates, to the reasonable satisfaction of
Lessor, is not intended to be subject to the security interest granted pursuant
to this Agreement, Lessor shall, at Lessee's sole cost and expense, execute such
instruments as are provided to it by Lessee and as reasonably may be necessary
to release such property from such financing statements, without representation
or warranty, except that such property is free and clear of any liens in favor
of Lessor or arising by reason of any act or omission of Lessor not contemplated
by this Agreement.
(d) Lessee has advised Lessor that the FADs have granted to Lessee a
security interest in some or all of the Equipment which has been perfected by
the filing of certain Uniform Commercial Code financing statements ("Lessee's
Security Interest"). On or before the Lease Commencement Date with respect to a
Schedule hereunder, Lessee shall release Lessee's Security Interest in the
Equipment described on such Schedule and shall cause Lessee's Security Interest
in such Equipment to be released of record in all applicable Uniform Commercial
Code filing offices.
(e) If Lessor receives a Uniform Commercial Code lien search report which
report reflects a financing statement purporting to perfect a security interest
granted to a third party with respect to the Equipment described on a Schedule,
then Lessor shall notify Lessee thereof in writing (the date on which Lessee
receives such notice from Lessor is hereinafter referred to as the "Notice
Date"). Within twenty (20) days after the Notice Date, Lessee shall cause such
third party security interest in the Equipment to be released of record in the
applicable Uniform Commercial Code filing office(s).
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(f) It is the intention of the parties hereto to comply with any
applicable usury laws to the extent that any Schedule is determined to be
subject to such laws; accordingly, it is agreed that, notwithstanding any
provision to the contrary in any Schedule or the Agreement, in no event shall
any Schedule require the payment or permit the collection of interest in excess
of the maximum amount permitted by applicable law. If any such excess interest
is contracted for, charged or received under any Schedule or the Agreement, or
in the event that all of the principal balance shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, charged or
received under any Schedule or the Agreement shall exceed the maximum amount of
interest permitted by applicable law, then in such event (1) the provisions of
this paragraph shall govern and control, (2) neither Lessee nor any other person
or entity now or hereafter liable for the payment hereof shall be obligated to
pay the amount of such interest to the extent that it is in excess of the
maximum amount of interest permitted by applicable law, (3) any such excess
which may have been collected shall be either applied as a credit against the
then unpaid principal balance or refunded to Lessee, at the option of the
Lessor, and (4) the effective rate of interest automatically shall be reduced to
the maximum lawful contract rate allowed under applicable law as now or
hereafter construed by the courts having jurisdiction thereof. It is further
agreed that without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received under any Schedule or the Agreement
which are made for the purpose of determining whether such rate exceeds the
maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the indebtedness evidenced
hereby, all interest at any time contracted for, charged or received from Lessee
or otherwise by Lessor in connection with such indebtedness; provided, however,
that if any applicable state law is amended or the law of the United States of
America preempts any applicable state law, so that it becomes lawful for Lessor
to receive a greater interest per annum rate than is presently allowed, the
Lessee agrees that, on the effective date of such amendment or preemption, as
the case may be, the lawful maximum hereunder shall be increased to the maximum
interest per annum rate allowed by the amended state law or the law of the
United States of America (but not in excess of the interest rate contemplated
hereunder).
XVIII. END OF LEASE OPTIONS.
Upon the expiration of the Basic Term or any Renewal Term, as applicable,
of each Schedule, Lessee shall return, or purchase, or renew (if applicable) the
Term with respect to, all (but not less than all) of the Lease Assets (i) leased
under all Schedules executed hereunder during any calendar year (if Lessee
returns the Lease Assets), or (ii) leased under all Schedules of a particular
series executed hereunder during any calendar year (if Lessee elects to
purchase, or renew the Term with respect to, the Lease Assets) (the Schedules
having the same Maximum Lease Term executed hereunder during each calendar year
shall be designated as being Schedules of a particular series), upon the
following terms and conditions. The parties acknowledge and agree that the
option set forth in Section XVIII(c) hereof is exercisable by Lessee with
respect to all (but not less than all) of the Lease Assets leased under all
Schedules executed hereunder during any calendar year, and the options set forth
in Sections XVIII(a), (b) and (d) hereof are exercisable by Lessee with respect
to all (but not less than all) of the Lease Assets leased under all Schedules of
a particular series
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executed hereunder during any calendar year, and that the options applicable
with respect to the first Schedule of a series automatically shall be applicable
with respect to all Schedules of such series.
(a) Extension. So long as Lessee shall not have exercised its early
termination option pursuant to Section XXII hereof, or its option to return the
Lease Assets, or its purchase option pursuant to this Section, and provided that
Lessee shall have exercised its option to renew this Agreement pursuant to this
Section with respect to all applicable Renewal Terms, with Lessor's prior
written consent (which consent may be withheld at Lessor's sole discretion)
Lessee shall have the option, upon the expiration of the applicable Renewal Term
of the first Schedule of a particular series to be executed under this
Agreement, to extend the Agreement with respect to all, but not less than all,
of the Lease Assets leased under all Schedules of such series for an additional
term of one (1) year (the "Extension Term") at a quarterly rental to be paid in
arrears on the same day of each quarter on which the prior Renewal Term Rent
installment was paid, and calculated as the product of (i) the Capitalized
Lessor's Cost, times (ii) a lease rate factor calculated by Lessor, which when
so multiplied times the Capitalized Lessor's Cost, will result in a product that
is equal to the amount necessary fully to repay to Lessor any unpaid balance of
the Capitalized Lessor's Cost (determined as of the date on which such Renewal
Term expired), together with interest thereon at the Interest Rate, in four (4)
equal quarterly installments. At the end of the Extension Term, provided that
Lessee is not then in Default under this Agreement or any other agreement
between Lessor and Lessee, Lessee shall purchase all, and not less than all,
such Lease Assets, for $1.00 cash, together with all Rent and other sums then
due on such date, plus all taxes and charges upon transfer and all other
reasonable and documented expenses incurred by Lessor in connection with such
transfer. Upon satisfaction of the conditions specified in this Paragraph,
Lessor will transfer to the Purchaser of such Lease Assets, on an AS IS, WHERE
IS BASIS, without recourse to or warranty from Lessor, express or implied, of
any kind whatsoever ("AS IS BASIS"), all of Lessor's interest in and to such
Lease Assets and assign Lessee's or Sublessee's rights under the applicable
Ground Leases and Premises Leases. Lessor shall not be required to make and may
specifically disclaim any representation or warranty as to the condition of such
Lease Assets and any other matters (except that Lessor shall warrant that it has
conveyed whatever interest it received in such Lease Assets free and clear of
any lien or encumbrance created by Lessor). Lessor shall execute and deliver to
Lessee such Uniform Commercial Code statements of termination, bills of sale,
quitclaim deeds, and other documents and instruments as reasonably may be
required in order to terminate or convey any interest of Lessor in and to such
Lease Assets.
(b) Renewal. So long as Lessee shall not have exercised its early
termination option pursuant to Section XXII hereof, or its option to return the
Lease Assets or its purchase option pursuant to this Section, Lessee shall have
the option, upon the expiration of the Basic Term of the first Schedule of a
particular series executed hereunder, or the initial Renewal Term, as
applicable, to renew the Agreement with respect to all, but not less than all,
of the Lease Assets leased under all Schedules of such series, for the Renewal
Term at the Renewal Term Rent. Including the Renewal Term, the maximum term of
any Schedule of a particular series executed hereunder shall be the Maximum
Lease Term.
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(c) Return. Unless Lessee shall have exercised its early termination
option pursuant to Section XXII hereof, or its extension option or its purchase
option pursuant to this Section, upon the expiration of the Term of each
Schedule of a particular series executed hereunder, Lessee shall return to
Lessor all (but not less than all) of the Lease Assets described on all
Schedules of a particular series executed hereunder, upon the following terms
and conditions: Lessee shall (i) pay to Lessor on the last day of the Term of
this Agreement with respect to each individual Schedule of that particular
series, in addition to the scheduled Rent then due on such date and all other
sums then due hereunder, a terminal rental adjustment amount equal to the
Lessee's Obligation with respect to such Lease Assets, (ii) return the Lease
Assets to Lessor in accordance with Section X hereof , and (iii) assign the
applicable Ground Leases and Premises Leases to Lessor or its assignee.
Thereafter, upon return of all of the Lease Assets described on all Schedules of
such series, Lessor and Lessee shall arrange for the commercially reasonable
sale, scrap or other disposition of such Lease Assets and the assignment of
Lessee's or Sublessee's rights under the applicable Ground Leases and Premises
Leases. Upon satisfaction of the conditions specified in this Paragraph, Lessor
will transfer to the purchaser of such Lease Assets, on an AS IS BASIS, all of
Lessor's interest in and to such Lease Assets and assign Lessee's or
Sublessee's rights under the applicable Ground Leases and Premises Leases.
Lessor shall not be required to make and may specifically disclaim any
representation or warranty as the condition of such Lease Assets and other
matters (except that Lessor shall warrant that it has conveyed whatever interest
it received in such Lease Assets free and clear of any liens or encumbrances
created by Lessor). Lessor shall execute and deliver to Lessee such Uniform
Commercial Code statements of termination, bills of sale and other documents and
instruments, as reasonably may be required in order to terminate or convey any
interest of Lessor in and to such Lease Assets. Upon the sale, scrap or other
disposition of such Lease Assets the net sales proceeds with respect to such
Lease Assets sold will be paid to, and held and applied by, Lessor as follows:
Lessor shall promptly thereafter pay to Lessee an amount equal to the net
proceeds, if any, of such sale (less all reasonable costs, expenses and fees,
including storage, reasonable and necessary maintenance and other remarketing
fees incurred by Lessor in connection with the sale, scrap, or disposition of
such Lease Assets) in excess of the Residual Risk Amount of such Lease Assets
and applicable taxes, if any.
(d) Purchase. So long as Lessee shall not have exercised its early
termination option pursuant to Section XXII hereof, or its extension option or
its option to return the Lease Assets pursuant to this Section, Lessee shall
have the option, upon the expiration of the Term of the first Schedule of a
particular series, to purchase all (but not less than all) of the Lease Assets
described on all Schedules of such series upon the following terms and
conditions: If Lessee desires to exercise this option, Lessee shall pay to
Lessor on the last day of the Term with respect to each individual Schedule of
such series, in addition to the scheduled Rent (if any) then due on such date
and all other sums then due hereunder, in cash the purchase price for the Lease
Assets so purchased, determined as hereinafter provided. The purchase price of
the Lease Assets shall be an amount equal to the Fixed Purchase Price of such
Lease Assets, plus all taxes and charges upon sale and all other reasonable and
documented expenses incurred by Lessor in connection with such sale, including,
without limitation, any such expenses incurred based on a notice from Lessee to
Lessor that Lessee intended to return any such items of Lease Assets. Upon
satisfaction of the conditions specified in this Paragraph, Lessor will
transfer, on an AS IS BASIS, all of Lessor's interest in and to such Lease
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Assets and release the applicable Collateral Assignment of Lease. Lessor shall
not be required to make and may specifically disclaim any representation or
warranty as to the condition of such Lease Assets and other matters (except that
Lessor shall warrant that it has conveyed whatever interest it received in such
Lease Assets free and clear of any lien or encumbrance created by Lessor).
Lessor shall execute and deliver to Lessee such Uniform Commercial Code
statements of termination, bills of sale, quit claim deeds, and other documents
and instruments, as reasonably may be required in order to terminate or convey
any interest of Lessor in and to such Lease Assets.
(e) Notice of Election. Lessee shall give Lessor written notice of its
election of the options specified in this Section not less than one hundred
eighty (180) days nor more than three hundred sixty-five (365) days before the
expiration of the Basic Term or the Renewal Term of the first Schedule of a
particular series to be executed under this Agreement. Such election shall be
effective with respect to all Lease Assets described on all Schedules of such
series. If Lessee fails timely to provide such notice, without further action
Lessee automatically shall be deemed to have elected (1) to renew the term of
this Agreement pursuant to Paragraph (b) of this Section if a Renewal Term is
then available hereunder, or (2) to purchase the Lease Assets pursuant to
Paragraph (d) of this Section if a Renewal Term is not then available hereunder.
XIX. MISCELLANEOUS:
(a) EACH OF LESSOR AND LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,
DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS
BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR
ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
BETWEEN LESSEE AND LESSOR. The scope of this waiver is intended to be all
encompassing of any and all disputes that may be filed in any court (including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims). THIS WAIVER IS IRREVOCABLE MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
(b) Any cancellation or termination by Lessor, pursuant to the provisions
of this Agreement, any Schedule, supplement or amendment hereto, or the lease of
any Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder.
(c) Time is of the essence of this Agreement. Lessor's failure at any time
to require strict performance by Lessee of any of the provisions hereof shall
not waive or diminish Lessor's right thereafter to demand strict compliance
therewith.
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(d) Lessee agrees, upon Lessor's request, to execute any instrument
necessary or expedient for filing, recording or perfecting the interest of
Lessor. Lessor shall, to the extent reasonably requested by Lessee, cooperate
with Lessee to allow Lessee to obtain the contemplated tax benefits of this
Agreement, including, without limitation, the filing of any statement with
respect to any tax abatements or other requirements.
(e) All notices required to be given hereunder shall be in writing,
personally delivered, delivered by overnight courier service, sent by facsimile
transmission (with confirmation of receipt), or sent by certified mail, return
receipt requested, addressed to the other party at its respective address stated
above or at such other address as such party shall from time to time designate
in writing to the other party; and shall be effective from the date of receipt.
(f) This Agreement and its exhibits, and any Schedule and Annexes thereto,
the Agency Agreement and the Facilities Agreement, constitute the entire
agreement of the parties with respect to the subject matter hereof. If there is
any inconsistency between the terms of the Agency Agreement and this Agreement,
this Agreement shall control. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR
ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN
WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. 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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
(g) The representations, warranties and covenants of Lessee herein shall
be deemed to survive the closing hereunder. The obligations of Lessee under
Sections III, X, XIV, XVIII(c) and XIX (k) hereof which accrue during the Term
of this Agreement and obligations which by their express terms survive the
termination of this Agreement, shall survive the termination of this Agreement.
(h) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated, to effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance (together
with interest thereon at the rate specified in Paragraph (i) of this Section)
shall constitute additional Rent due to Lessor within five (5) days after the
date Lessor sends notice to Lessee requesting payment. Lessor's effecting such
compliance shall not be a waiver of Lessee's default.
(i) Any Rent or other amount not paid to Lessor when due hereunder shall
bear interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
(j) Any provisions in this Agreement and any Schedule which are in
conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.
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(k) Lessee agrees to pay on demand all reasonable costs and expenses
incurred by Lessor (provided, however, that Lessee shall not be responsible for
such costs and expenses incurred by any Participant) in connection with the
preparation, execution, delivery, filing, recording, and administration of any
of the 1996 Lease Documents, including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel for Lessor, and all costs and expenses, if
any, in connection with the enforcement of any of the 1996 Lease Documents. In
addition, Lessee shall pay any and all stamp and other taxes and fees payable or
determined to be payable by Lessor in connection with the execution, delivery,
filing and recording of any of the 1996 Lease Documents and the other documents
to be delivered under the 1996 Lease Documents, and agrees to save Lessor
harmless from and against any and all liabilities with respect to or resulting
from any delay attributed to Lessee in paying or failing to pay such taxes and
fees.
(l) Lessee agrees to pay on demand the interest paid by GE Capital to the
Participants (as such term is defined in that certain Participation Agreement
dated as of the date hereof, among GE Capital and the financial institutions now
or hereafter specified therein; the "Participation Agreement"), in connection
with the pre-closing funding of such Participants' Purchase Price on the Funding
Date (as such terms are defined in the Participation Agreement). In addition,
if the funding by GE Capital of the Capitalized Lessor's Cost of the Lease
Assets on the Closing Date (as such term is defined in the Participation
Agreement) relating to such Funding Date does not occur on the Closing Date as a
result of the failure of Lessee to satisfy the conditions specified in Section
I(c) hereof (as applicable), then Lessee agrees to pay on demand any breakage
costs incurred by the Participants as a result thereof.
(m) Lessee agrees to pay to Lessor a non-refundable unused commitment fee
on the average daily amount by which the Total Lease Commitment exceeds the
aggregate amount of Capitalized Lessor's Cost then having been funded by Lessor
pursuant hereto, 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 Expiration Date, payable quarterly in
arrears on the first Business Day of March, June, September and December of each
year and at maturity. As used herein, "Total Lease Commitment " shall mean the
aggregate amount of the commitments of GE Capital and the Participants, it being
understood that on the date hereof, the Total Lease Commitment is
$173,991,959.97 (provided, that in no event shall the Total Lease Commitment
exceed $300,000,000.00); "Applicable Commitment Fee" shall mean a per annum fee
based on the Implied Debt Rating Level then in effect as follows:
<TABLE>
<CAPTION>
Implied Debt Rating Level Applicable Commitment Fee
<S> <C>
I 0.200%
II 0.250%
III 0.300%
IV 0.375%
V 0.500%
</TABLE>
41
<PAGE>
It is acknowledged that, as of the date hereof, the Implied Debt Rating Level is
V; "Implied Debt Rating" means the implied senior unsecured debt rating issued
for Lessee 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 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 Levels, (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 Level S&P Implied Debt Moody's Implied
Rating Debt Rating
<S> <C> <C>
I BBB- and higher Baa3 and higher
II BB+ Ba1
III BB Ba2
IV BB- Ba3
V B+ and below B1 and below
</TABLE>
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". "Moody's" means Moody's Investors Services, Inc.;
"S&P" means Standard and Poor's Rating Group, a division of The McGraw-Hill
Companies, Inc.; and "Expiration Date" shall mean December 31, 1996.
XX. CHOICE OF LAW; JURISDICTION:
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE
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<PAGE>
LOCATION OF THE LEASE ASSETS. The parties agree that any action or proceeding
arising out of or relating to this Agreement may be commenced in the United
States District Court for the Southern District of New York.
XXI. CHATTEL PAPER:
To the extent that any Schedule would constitute chattel paper, as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest therein may be created through the transfer
or possession of this Agreement in and of itself without the transfer or
possession of the original of a Schedule executed pursuant to this Agreement and
incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
XXII. EARLY TERMINATION:
(a) Lessee may, so long as no Default exists hereunder, terminate this
Agreement as to all (but not less than all) of the Lease Assets described on all
Schedules executed hereunder, as of a Rent Payment Date ("Termination Date")
upon at least thirty (30) days' prior written irrevocable notice to Lessor. In
such notice, Lessee shall specify whether Lessee elects to purchase the Lease
Assets pursuant to Paragraph (ii) hereof, or to cause the Lease Assets to be
sold to a third party pursuant to Paragraph (i) hereof.
(i) If Lessee elects to cause the Lease Assets to be sold to a third
party, Lessee shall, and Lessor may, solicit cash bids for the Lease Assets on
an AS IS BASIS. Prior to the Termination Date, Lessee shall (1) certify to
Lessor any bids received by Lessee and (2) pay to Lessor the sum of (A) the
Termination Value (calculated as of the Termination Date) for the Lease Assets,
plus (B) all Rent and other sums due and unpaid as of the Termination Date ,
plus (C) any applicable Prepayment Premium. As used herein, "Prepayment
Premium" shall mean an amount equal to one and one-half percent (1.5%) of the
Termination Value (calculated as of the Termination Date) if the Termination
Date is on or before the fourth (4th) Rent Payment Date with respect to the
first Schedule executed hereunder, or one percent (1%) of the Termination Value
(calculated as of the Termination Date) if the Termination Date is after the
fourth (4th) Rent Payment Date but on or before the eighth (8th) Rent Payment
Date with respect to the first Schedule executed hereunder; or zero if the
Termination Date occurs after the eighth (8th) Rent Payment Date with respect to
the first Schedule executed hereunder. Provided that all amounts due hereunder
have been paid on or before the Termination Date, Lessor and Lessee shall sell
the Lease Assets on an AS IS BASIS for cash to the bidder specified by Lessee
and Lessor shall refund to Lessee the proceeds of such sale (net of any related
expenses incurred by Lessor ) up to the amount of the Termination Value to
Lessee. Lessor shall not be required to make and may specifically disclaim any
representation or warranty as to the condition of the Lease Assets and any other
matters (except that Lessor shall warrant that
43
<PAGE>
it has conveyed whatever interest it received in such Lease Assets free and
clear of any lien or encumbrance created by, through or under Lessor). If such
sale is not consummated, no termination shall occur and (provided that no
Default shall then have occurred and be continuing) Lessor shall refund to
Lessee an amount equal to the sum of (A) the Termination Value and (B) any
applicable Prepayment Premium (less any expenses incurred by Lessor).
(ii) If Lessee elects to purchase the Lease Assets, on the
Termination Date, Lessee shall pay to Lessor in cash the purchase price for the
Lease Assets, determined as hereinafter provided. The purchase price of the
Lease Assets shall be an amount equal to the sum of (A) the Termination Value
(calculated as of the Termination Date) for the Lease Assets, plus (B) all
taxes and charges upon sale, plus (C) all Rent and other sums due and unpaid as
of the Termination Date, plus (D) any applicable Prepayment Premium. Upon
satisfaction of the conditions specified in this Paragraph (ii), Lessor will
transfer, on an AS IS BASIS, all of Lessor's interest in and to the Lease Assets
and release the applicable Collateral Assignment of Lease. Lessor shall not be
required to make and may specifically disclaim any representation or warranty as
to the condition of such Lease Assets and other matters. Lessor shall execute
and deliver to Lessee such Uniform Commercial Code statements of termination,
bills of sale and other documents and instruments, as reasonably may be required
in order to terminate or convey any interest of Lessor in and to the Lease
Assets.
(b) So long as no Default exists hereunder, if the store at a particular
Lease Assets Location has been closed and the Lease Assets previously used at
such Lease Assets Location have not been relocated in accordance with Sections
V(b) or (f) hereof, or substituted in accordance with Section V(e) hereof, then
Lessee may terminate this Agreement as to all (but not less than all) of the
Lease Assets located at such Lease Assets Location, as of a Rent Payment Date
(the "Special Termination Date"), upon at least thirty (30) days' prior written
irrevocable notice to Lessor. In such notice, Lessee shall specify whether
Lessee elects to purchase the Lease Assets pursuant to Paragraph (ii) hereof, or
to cause the Lease Assets to be sold to a third party pursuant to Paragraph (i)
hereof.
(i) If Lessee elects to cause the Lease Assets to be sold to a third
party, Lessee shall, and Lessor may, solicit cash bids for the Lease Assets on
an AS IS BASIS. Prior to the Special Termination Date, Lessee shall (1) certify
to Lessor any bids received by Lessee and (2) pay to Lessor the sum of (A) the
Termination Value (calculated as of the Special Termination Date) for the Lease
Assets, plus (B) all rent and other sums due and unpaid as of the Special
Termination Date, plus (C) any applicable Special Prepayment Premium. As used
herein, "Special Prepayment Premium" shall mean an amount equal to one and one-
half percent (1.5%) of the Termination Value (calculated as of the Special
Termination Date) if the Special Termination Date is on or before the fourth
(4th) Rent Payment Date with respect to the first Schedule executed hereunder,
or one percent (1%) of the Termination Value (calculated as of the Special
Termination Date) if the Special Termination Date is after the fourth (4th) Rent
Payment Date but on or before the eighth (8th) Rent Payment Date with respect to
the first Schedule executed hereunder; or zero if the Special Termination Date
occurs after the eighth (8th) Rent Payment Date with respect to the first
Schedule executed hereunder; provided, however, that there shall be no
prepayment premium unless the
44
<PAGE>
aggregate Capitalized Lessor's Cost of the Lease Assets so terminated pursuant
to this Section XXII(b) during any calendar year exceeds $7,500,000, and any
prepayment penalty shall be based on the excess above $7,500,000. Provided that
all amounts due hereunder have been paid on or before the Special Termination
Date, Lessor and Lessee shall sell the Lease Assets and assign Lessee's or
Sublessee's rights under the applicable Ground Leases and Premises Leases on an
AS IS BASIS for cash to the bidder specified by Lessee and refund to Lessee the
proceeds of such sale (net of any related expenses) up to the amount of the
Termination Value to Lessee. Lessor shall not be required to make and may
specifically disclaim any representation or warranty as to the condition of the
Lease Assets and any other matters (except that Lessor shall warrant that it has
conveyed whatever interest it received in such Lease Assets free and clear of
any lien or encumbrance created by Lessor). If such sale is not consummated, no
termination shall occur and (provided that no Default shall then have occurred
and be continuing) Lessor shall refund to Lessee an amount equal to the sum of
(A) the Termination Value and (B) any applicable Special Prepayment Premium
(less any expenses incurred by Lessor).
(ii) If Lessee elects to purchase the Lease Assets, on the Special
Termination Date, Lessee shall pay to Lessor in cash the purchase price for the
Lease Assets, determined as hereinafter provided. The purchase price of the
Lease Assets shall be an amount equal to the sum of (A) the Termination Value
(calculated as of the Special Termination Date) for the Lease Assets, plus (B)
all taxes and charges upon sale, plus (C) all Rent and other sums due and unpaid
as of the Special Termination Date, plus (D) any applicable Special Prepayment
Premium. Upon satisfaction of the conditions specified in this Paragraph (ii),
Lessor will transfer, on an AS IS BASIS, all of Lessor's interest in and to the
Lease Assets and release the applicable Collateral Assignment of Lease. Lessor
shall not be required to make and may specifically disclaim any representation
or warranty as to the condition of such Lease Assets and other matters. Lessor
shall execute and deliver to Lessee such Uniform Commercial Code statements of
termination, bills of sale and other documents and instruments, as reasonably
may be required in order to terminate or convey any interest of Lessor in and to
the Lease Assets.
(c) So long as no Default exists hereunder, if Lessee acquires a majority
interest in a FAD, then Lessee may terminate this Agreement as to all (but not
less than all) of the Lease Assets (as to which Lessee has not then exercised
its substitution option pursuant to Section V(f) hereof), located at all Lease
Assets Locations operated by such FAD, as of a rent payment date (the "FAD
Special Termination Date"), upon at least thirty (30) days' prior written
irrevocable notice to Lessor. In such notice, Lessee shall specify whether
Lessee elects to purchase the Lease Assets pursuant to Paragraph (ii) hereof, or
to cause the Lease Assets to be sold to a third party pursuant to Paragraph (i)
hereof.
(i) If Lessee elects to cause the Lease Assets to be sold to a third
party, Lessee shall, and Lessor may, solicit cash bids for the Lease Assets on
an AS IS BASIS. Prior to the FAD Special Termination Date, Lessee shall (1)
certify to Lessor any bids received by Lessee and (2) pay to Lessor the sum of
(A) the Termination Value (calculated as of the FAD Special Termination Date)
for the Lease Assets, plus (B) all rent and other sums due and unpaid as of the
FAD Special Termination Date. Provided that all amounts due hereunder have been
paid on or before the FAD
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<PAGE>
Special Termination Date, Lessor and Lessee shall sell the Lease Assets on an AS
IS BASIS for cash to the bidder specified by Lessee and refund to Lessee the
proceeds of such sale (net of any related expenses incurred by Lessor) up to the
amount of the Termination Value. Lessor shall not be required to make and may
specifically disclaim any representation or warranty as to the condition of the
Lease Assets and any other matters (except that Lessor shall warrant that it has
conveyed whatever interest it received in such Lease Assets free and clear of
any lien or encumbrance created by Lessor). If such sale is not consummated, no
termination shall occur and (provided that no Default shall then have occurred
and be continuing) Lessor shall refund the Termination Value (less any expenses
incurred by Lessor) to Lessee.
(ii) If Lessee elects to purchase the Lease Assets, on the FAD
Special Termination Date, Lessee shall pay to Lessor in cash the purchase price
for the Lease Assets, determined as hereinafter provided. The purchase price of
the Lease Assets shall be an amount equal to the sum of (A) the Termination
Value (calculated as of the FAD Special Termination Date) for the Equipment,
plus (B) all taxes and charges upon sale, plus (C) all Rent and other sums due
and unpaid as of the FAD Special Termination Date. Upon satisfaction of the
conditions specified in this Paragraph (ii), Lessor will transfer, on an AS IS
BASIS, all of Lessor's interest in and to the Lease Assets. Lessor shall not be
required to make and may specifically disclaim any representation or warranty as
to the condition of such Lease Assets and other matters. Lessor shall execute
and deliver to Lessee such Uniform Commercial Code statements of termination,
bills of sale and other documents and instruments, as reasonably may be required
in order to terminate or convey any interest of Lessor in and to the Lease
Assets.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
46
<PAGE>
IN WITNESS WHEREOF, Lessee and Lessor have caused this Master Lease
Agreement No. 2 to be executed by their duly authorized representatives as of
the date first above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION, BOSTON CHICKEN, INC.
FOR ITSELF AND AS AGENT FOR CERTAIN
PARTICIPANTS
By: /s/ David Avigdor By: /s/ M. David White
--------------------------------- -------------------------------
Name: David Avigdor Name: M. David White
------------------------------- -----------------------------
Title: Transaction & Syndication Title: V. P. Finance
------------------------------ ----------------------------
Senior Manager
------------------------------
47
<PAGE>
EXHIBIT NO. 1
SCHEDULE
SCHEDULE SERIES NO. _______
DATED THIS ___________ DAY OF ____________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
Lessor & Mailing Address: Lessee & Mailing Address:
GENERAL ELECTRIC CAPITAL CORPORATION, BOSTON CHICKEN, INC.
FOR ITSELF AND AS AGENT FOR CERTAIN 14103 Denver West Parkway
PARTICIPANTS Golden, Colorado 80401-4086
4 Northpark Drive
Suite 500
Hunt Valley, Maryland 21030
This Schedule is executed pursuant to, and incorporates by reference the terms
and conditions of, and capitalized terms not defined herein shall have the
meanings assigned to them in, the Master Lease Agreement identified above (as
amended, modified or supplemented, the "Agreement"; said Agreement and this
Schedule being collectively referred to as "Lease"). This Schedule,
incorporating by reference the Agreement, constitutes a separate instrument of
lease. This Schedule is designated as a Series ___ Schedule.
A. Lease Assets.
------------
Pursuant to the terms of the Lease, Lessor agrees to lease to Lessee the
Lease Assets listed on Annex A attached hereto and made a part hereof.
B. Financial Terms.
----------------
1. Capitalized Lessor's Cost: $________________________________________.
2. Daily Lease Rate Factor:___________________________________________%.
3. Basic Term: [Two (2) years/Three (3) years].
4. Basic Term Commencement Date:_________________________________, 199_.
5. Lease Asset Location:________________________________________________
6. Lessee Federal Tax ID No.:___________________________________________
7. Supplier: various
8. Last Delivery Date:___________________________________________, 199_.
9. Lessee agrees and acknowledges that the Assets as stated on the
Schedule is equal to the fair market value of the Lease Capitalized
Lessor's Cost of the Lease Assets on the date hereof.
10. Renewal Term: [One (1) year/Two (2) one (1)-year terms/Three (3)
one (1)-year terms].
11. Maximum Lease Term: [Three (3) years/Four (4) years/Five (5) years].
<PAGE>
12. Stipulated Loss Values: See Annex D.
13. Termination Values: See Annex D.
C. Term and Rent.
-------------
1. Interim Rent. For the period from and including the Lease
Commencement Date to the Basic Term Commencement Date ("Interim Period"), Lessee
shall pay as rent ("Interim Rent") the product of the Daily Lease Rate Factor
times the Capitalized Lessor's Cost of the Equipment times the number of days in
the Interim Period. Interim Rent shall be due on __________, 199__ (the
"Interim Rent Payment Date").
2. Basic Term and Renewal Term Rent. Commencing on ___________, 199__,
and on the third day of each fiscal quarter of Lessee thereafter (each, a "Rent
Payment Date") during the Basic Term ("Basic Term Rent") and any Renewal Term
("Renewal Term Rent"), Lessee shall pay as rent quarterly installments of
principal and interest, in arrears, each installment in the principal amount
specified on the attached Amortization Schedule together with interest on the
Unamortized Principal Balance (specified on the attached Amortization Schedule)
as of the immediately preceding Rent Payment Date (after application of the Rent
paid on such date) at the Interest Rate for the Interest Period following such
immediately preceding Rent Payment Date. Interest shall be calculated on the
basis of a 360 day year for the actual number of days elapsed. Said Rent
consists of principal and interest components, such principal components being
as provided in the Amortization Schedule attached hereto.
3. Contingent Rent. Contingent Rent calculated as hereinafter specified
shall accrue on a quarterly basis and shall be payable by Lessee to Lessor upon
return of the Lease Assets pursuant to Section XVIII(c) of the Lease. As used
herein, "Contingent Rent" shall be calculated as the product of (x) ninety-five
percent (95%) of any per annum increase in the Consumer Price Index ("CPI") for
all items as published by the Department of Labor Bureau of Economics and
Statistics (or if the CPI is not available, such replacement index as is
acceptable to Lessor) reported during the preceding calendar quarter, and (y)
the Capitalized Lessor's Cost of the Lease Assets; provided, however, that the
maximum Contingent Rent shall not exceed that amount calculated as
____________________ percent (______%) of the Capitalized Lessor's Cost of the
Lease Assets.
As used herein, the following terms shall have the following meanings:
"Interest Period" shall mean the period beginning on the Lease Commencement
Date and ending on the next Rent Payment Date (provided, however, that if such
Rent Payment Date is not a Business Day, then the Interest Period shall end on
the immediately preceding Business Day), and each subsequent quarterly period
ending on the next Rent Payment Date (provided, however, that if such Rent
Payment Date is not a Business Day, then the Interest Period shall end on the
immediately preceding Business Day).
"Interest Rate" shall mean that percentage per annum calculated as the sum
of (a) the LIBOR Rate redetermined quarterly, plus (b) [250/300/350] basis
points (or [350/400/450] basis points during any Extension Term).
"LIBOR Rate" shall mean, with respect to any Interest Period occurring
during the term of the Lease, an interest rate per annum equal at all times
during such Interest Period to the quotient of
2
<PAGE>
(1) the rate per annum as determined on the basis of the average of the offered
rates for deposits in U.S. dollars for ninety (90) days, which appears on
Telerate Page 3750 as of 11:00 a.m., London, England time on the date that is
two (2) Business Days prior to the first day of such Interest Period, divided by
(2) a number equal to 1.00 minus the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of the LIBOR Reserve Requirements
current on the date that is two (2) Business Days prior to the first day of the
Interest Period; provided, however, that if Telerate Page 3750 is not available,
then the Reuters Rate shall be used in lieu thereof.
"LIBOR Reserve Requirements" shall mean the daily average for the
applicable Interest Period of the maximum rate applicable to Lessor or its
Participants at which reserves (including, without limitation, any supplemental,
marginal and emergency reserves) are imposed during such Interest Period by the
Board of Governors of the Federal Reserve System (or any successor) on
"Eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that include deposits by reference
to which the interest rates on Eurodollar loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any lender to United States residents), having a term equal to such
Interest Period, subject to any amendments of such reserve requirement by such
Board or its successor, taking into account any transitional adjustments
thereto.
"Reuters Rate" means a rate equal to the arithmetic average of the rates of
interest per annum (rounded upwards, if necessary to the nearest 1/100 of 1%)
for deposits in U.S. dollars for ninety (90) days, which appears on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace the LIBO page on the service for the purpose of
displaying London interbank offered rates of major banks) as of 11:00 a.m.,
London, England time on the date which is two (2) Business Days prior to the
first day of such Interest Period; provided, however, that the Reuters Rate
shall not be calculated if fewer than two (2) such offered rates appear on such
Reuters Screen LIBO Page.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).
If at any time Lessor or any Participant determines that either adequate
and reasonable means do not exist for ascertaining the LIBOR Rate, or it becomes
impractical for Lessor or any Participant to obtain funds to make or maintain
the financing hereunder with interest at the LIBOR Rate, or Lessor or any
Participant shall have determined that the LIBOR Rate will not adequately and
fairly reflect the cost to Lessor or any Participant (or, without duplication,
the bank holding company of which such Participant is a subsidiary) of making,
maintaining, or funding the transaction hereunder at the LIBOR Rate, or Lessor
or any Participant reasonably determines that, as a result of changes to
applicable law after the date of execution of the Agreement, or the adoption or
making after such date of any interpretations, directives or regulations
(whether or not having the force of law) by any court, governmental authority or
reserve bank charged with the interpretation or administration thereof, it shall
be or become unlawful or impossible to make, maintain, or fund the transaction
hereunder at the LIBOR Rate, then Lessor promptly shall give notice to Lessee of
such determination, and Lessor and Lessee shall negotiate in good faith a
mutually acceptable alternative method of calculating the Interest Rate (which
shall produce an alternative rate of interest which is
3
<PAGE>
comparable to the Interest Rate) and shall execute and deliver such documents as
reasonably may be required to incorporate such alternative method of calculating
the Interest Rate in this Schedule, within thirty (30) days after the date of
Lessor's notice to Lessee. If the parties are unable mutually to agree to such
alternative method of calculating the Interest Rate in a timely fashion, on the
Rent Payment Date next succeeding the expiration of such thirty (30) day period
Lessee shall purchase all (but not less than all) of the Lease Assets described
on all Schedules executed pursuant to the Agreement and shall pay to Lessor, in
cash, the purchase price for the Lease Assets so purchased, determined as
hereinafter provided. The purchase price of the Lease Assets shall be an amount
equal to the Stipulated Loss Value of such Lease Assets calculated in accordance
with Annex D as of the date of payment, together with all rent and other sums
then due on such date, plus all taxes and charges upon sale and all other
reasonable and documented expenses incurred by Lessor in connection with such
sale. Upon satisfaction of the conditions specified in this paragraph, Lessor
will transfer, on an AS IS BASIS, all of Lessor's interest in and to the Lease
Assets. Lessor shall not be required to make and may specifically disclaim any
representation or warranty as to the condition of the Lease Assets and other
matters. Lessor shall (simultaneously with such transfer) execute and deliver
to Lessee such Uniform Commercial Code statements of termination, bills of sale
and other documents and instruments, as reasonably may be required in order to
terminate any interest of Lessor in and to the Lease Assets.
4. If the Interim Rent Payment Date or any Rent Payment Date is not a
Business Day, the Rent otherwise due on such date shall be payable on the
immediately preceding Business Day. As used herein, "Business Day" shall mean
any day other than Saturday, Sunday, and any day on which banking institutions
located in London, England, or in the States of Connecticut, New York or
Colorado are authorized by law or other governmental action to close.
5. Lessee shall pay to Lessor, for the account of each Participant, from
time to time the amounts as such Participant may determine to be necessary to
compensate it for any costs which such Participant determines are attributable
to its making or maintaining its interest in the Lease and the Equipment (the
"Interest") or any reduction in any amount receivable by such Participant in
respect of any such Interest (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs") resulting from any Regulatory
Change (as defined below) which:
(i) changes the basis of taxation of any amounts payable to Lessor
for the account of such Participant in respect of such Interest (other than
taxes imposed on or measured by the overall net income of such Participant
in respect of the Interest by the jurisdiction in which such Participant
has its principal office or its lending office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, such Participant; or
(iii) imposes any other condition adversely affecting this Lease or
any Interest.
For purposes hereof, "Regulatory Change" shall mean any change after the date of
this Lease in United States Federal, state or foreign law or regulations
(including, without limitation, Regulation
4
<PAGE>
D of the Board of Governors of the Federal Reserve System (or any successor), as
amended or supplemented from time to time) or the adoption or making after such
date of any interpretation, directive or request applying to a class of banks
including any Participant or any financial institution which provides funds to
such Participant in connection with the funding of the Interest, or under any
United States Federal, state or foreign law (and whether or not failure to
comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
Without limiting the effect of the foregoing paragraph (but without
duplication), Lessee shall pay to Lessor, for the account of each Participant,
from time to time on request such amounts as such Participant may determine to
be necessary to compensate such Participant (or, without duplication, the bank
holding company of which such Participant is a subsidiary) for any costs which
it determines are attributable to the maintenance by such Participant (or any
lending office or such bank holding company) or which are payable by such
Participant to a financial institution which provides funds to such Participant
in connection with the funding of the Interest, pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law) of any court or governmental or monetary authority (i)
following any Regulatory Change or (ii) implementing any risk-based capital
guideline or requirement (whether or not having the force of law and whether or
not the failure to comply therewith would be unlawful) heretofore or hereafter
issued by any government or governmental or supervisory authority implementing
at the national level the Basle Accord (including, without limitation, the Final
Risk-Based Capital Guidelines of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the
Final Risk-Based Capital Guidelines of the Office of the Comptroller of the
Currency (12 C.F.R. Part 3, Appendix A)), of capital in respect of such
Participant's Interest (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of such
Participant or such financial institution which provides funds to such
Participant in connection with the funding of the Interest (or any lending
office or bank holding company) to a level below that which such Participant or
such financial institution which provides funds to such Participant in
connection with the funding of the Interest (or any lending office or bank
holding company) could have achieved but for such law, regulation,
interpretation, directive or request). For purposes of this paragraph, "Basle
Accord" shall mean the proposals for risk-based capital framework described by
the Basle Committee on Banking Regulations and Supervisory Practices in its
paper entitled "International Convergence of Capital Measurement and Capital
Standards" dated July 1988, as amended, modified and supplemented and in effect
from time to time or any replacement thereof. Notwithstanding the foregoing,
Lessee shall not be required to pay such amounts to the extent that such costs
are already included in the interest rate calculation hereunder.
Each Participant shall notify Lessee in writing of any event occurring
after the date of this Lease that will entitle such Participant to compensation
under the preceding two paragraphs as promptly as practicable, but in any event
within forty-five (45) days, after such Participant obtains actual knowledge
thereof; provided, that (i) if such Participant fails to give such notice in
writing within forty-five (45) days after it obtains actual knowledge of such an
event, such Participant shall, with respect to compensation payable pursuant to
the preceding two paragraphs in respect of any costs resulting from such event,
only be entitled to payment under the referenced paragraphs for costs incurred
from and after the date forty-five (45) days prior to the date that such
Participant does give
5
<PAGE>
such notice, and (ii) prior to requesting such compensation hereunder, such
Participant will designate a different lending office for the Interest if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Participant, be disadvantageous to
such Participant. Each Participant will furnish to Lessee a certificate of an
authorized officer of such Participant setting forth the basis and amount of
each request by such Participant for compensation under the preceding two
paragraphs. Determinations and allocations by each Participant for purposes of
the preceding two paragraphs shall be conclusive, absent manifest error.
If a Participant notifies Lessee of the occurrence of an event, as
contemplated in the proceeding paragraph, then Lessee may, so long as no Default
exists under the Lease, elect to prepay all (but not less than all) of such
Participant's interest in the Lease, as of a Rent Payment Date (the "Prepayment
Date"), upon at least thirty (30) days' prior written irrevocable notice to
Lessor. On the Prepayment Date, Lessee shall pay to Lessor the amount
calculated by Lessor as is required to prepay in full such Participant's
interest in the Lease, together with any required breakage or make-whole amount,
if any.
D. Insurance.
----------
1. Public Liability: $2,000,000.00, total liability per occurrence.
2. Casualty and Property Damage: An amount equal to the higher of the
Stipulated Loss Value or the full replacement cost of the Lease Assets.
E. Fixed Purchase Price, Lessee's Obligation and Residual Risk Amount
------------------------------------------------------------------
End of Term Fixed Lessee's Obligation Residual
----------- Purchase ------------------- Risk
Price Amount
-------- --------
Basic Term
[First] Renewal
Term
[Second Renewal
Term]
expressed as a percentage of the Capitalized Lessor's Cost of the Equipment.
This Schedule is not binding or effective with respect to the Agreement or
the Lease Assets until executed on behalf of Lessor and Lessee by authorized
representatives of Lessor and Lessee, respectively.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION, BOSTON CHICKEN, INC.
FOR ITSELF AND AS AGENT FOR CERTAIN
PARTICIPANTS
By:_____________________________ By:______________________________
Name:___________________________ Name:____________________________
Title:__________________________ Title:___________________________
Attest:
By:______________________________
Name:____________________________
Title:___________________________
7
<PAGE>
ANNEX A
TO
SCHEDULE SERIES NO. ________
DATED THIS _____ DAY OF ________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
DESCRIPTION OF LEASE ASSETS
================================================================================
Initials:---------- ----------
Lessor Lessee
<PAGE>
ANNEX B-1
TO
SCHEDULE SERIES NO. ______
DATED THIS _____ DAY OF ________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS: BOSTON CHICKEN, INC. ("Seller"), for and
in consideration of the sum of One Dollar ($1.00) and other good and valuable
consideration, provided by GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS ("Buyer"), with offices at 4 Northpark Drive,
Suite 500, Hunt Valley, Maryland 21030, the receipt of which is hereby
acknowledged, does hereby sell, assign, transfer, set over and convey to Buyer
the equipment (the "Equipment") leased under Schedule No. _____ dated as of
__________, 199_, between Seller and Buyer, executed pursuant to the Master
Lease Agreement No. 2 dated as of December 9, 1996 ("Lease"), between Seller and
Buyer.
Buyer and Seller agree and acknowledge that the sale and conveyance
contemplated hereby is solely for the purpose of granting to Buyer a security
interest in the Equipment and Seller shall retain legal title to such Equipment.
All Equipment in which an interest is conveyed hereby shall remain in the
possession of Seller pursuant to the Lease.
Buyer is purchasing the Equipment described above in reliance upon its
personal inspection and knowledge of the Equipment and in an "AS-IS, WHERE-IS",
condition.
SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE
EXCEPT THAT (1) SELLER HAS GOOD TITLE TO THE EQUIPMENT, FREE AND CLEAR OF ALL
LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY TO PERMITTED LIENS (AS SUCH TERM IS
DEFINED IN THE LEASE)), AND (2) BUYER WILL ACQUIRE ITS INTEREST IN THE EQUIPMENT
FREE FROM ALL LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY TO PERMITTED LIENS
AND TO THE LIEN OF THE LEASE), AND (3) SELLER HAS THE RIGHT TO SELL AND CONVEY
THE EQUIPMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER MAKES NO
WARRANTIES WITH RESPECT TO THE QUALITY, CONTENT, CONDITION, MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE OF THE EQUIPMENT AND NO WARRANTIES AGAINST
PATENT INFRINGEMENT OR THE LIKE.
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have executed this Bill of Sale this
_____ day of _______________, 199_.
BUYER: SELLER:
GENERAL ELECTRIC CAPITAL CORPORATION, BOSTON CHICKEN, INC.
FOR ITSELF AND AS AGENT FOR CERTAIN
PARTICIPANTS
By:_____________________ By:_____________________
Name:___________________ Name:___________________
Title:__________________ Title:__________________
2
<PAGE>
ANNEX B-2
TO
SCHEDULE SERIES NO. ______
DATED THIS _____ DAY OF ________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS: __________________ ("Seller"), for and in
consideration of the sum of One Dollar ($1.00) and other good and valuable
consideration, provided by GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS ("Buyer"), with offices at 4 Northpark Drive,
Suite 500, Hunt Valley, Maryland 21030, the receipt of which is hereby
acknowledged, does hereby sell, assign, transfer, set over and convey to Buyer
the equipment (the "Equipment") leased under Schedule No. _____ dated as of
__________, 199_, between Boston Chicken, Inc. ("Lessee") and Buyer, executed
pursuant to the Master Lease Agreement No. 2 dated as of December 9, 1996
("Lease"), between Lessee and Buyer. The Equipment is to be subleased under
Schedule No. ____ dated as of ________________, 199_, between Lessee and Seller,
executed pursuant to the Master Sublease Agreement No. 2 dated as of
____________________, 1996 ("Sublease"), between Lessee, as sublessor, and
Seller, as sublessee.
Buyer and Seller agree and acknowledge that the sale and conveyance
contemplated hereby is solely for the purpose of Lessee granting to Buyer a
security interest in the Equipment and Seller shall retain legal title to such
Equipment. All Equipment in which an interest is conveyed hereby shall remain
in the possession of Seller pursuant to the sublease.
Buyer is purchasing the Equipment described above in reliance upon its
personal inspection and knowledge of the Equipment and in an "AS-IS, WHERE-IS",
condition.
SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE
EXCEPT THAT (1) SELLER HAS GOOD TITLE TO THE EQUIPMENT, FREE AND CLEAR OF ALL
LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY TO LESSEE'S SECURITY INTEREST
THEREIN, WHICH SECURITY INTEREST SHALL BE RELEASED UPON LESSEE'S EXECUTION AND
DELIVERY OF A CERTIFICATE OF ACCEPTANCE RELATING THERETO, AND TO PERMITTED LIENS
(AS SUCH TERM IS DEFINED IN THE LEASE)), (2) BUYER WILL ACQUIRE ITS INTEREST IN
THE EQUIPMENT FREE FROM ALL LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY TO
PERMITTED LIENS AND TO THE LIEN OF THE LEASE AND THE SUBLEASE), AND (3) SELLER
HAS THE RIGHT TO SELL AND CONVEY THE EQUIPMENT. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, SELLER MAKES NO WARRANTIES WITH RESPECT TO THE QUALITY,
CONTENT, CONDITION, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE
EQUIPMENT AND NO WARRANTIES AGAINST PATENT INFRINGEMENT OR THE LIKE.
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have executed this Bill of Sale
this_____ day of _______________, 199_.
BUYER: SELLER:
GENERAL ELECTRIC CAPITAL CORPORATION,
FOR ITSELF AND AS AGENT FOR CERTAIN
PARTICIPANTS
By:___________________________ By:__________________________
Name:_________________________ Name:________________________
Title:________________________ Title:_______________________
2
<PAGE>
ANNEX C
TO
SCHEDULE SERIES NO. ___
DATED THIS _____ DAY OF __________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
CERTIFICATE OF ACCEPTANCE
To: General Electric Capital Corporation,
for Itself and as Agent for Certain Participants
Pursuant to the provisions of the above-referenced Schedule and Master
Lease Agreement No. 2 (collectively, the "Lease"), Lessee hereby certifies and
warrants that (a) all Lease Assets described on Annex A to the Schedule are in
good condition and appearance, installed (if applicable), and in working order;
and (b) Lessee accepts the Lease Assets for all purposes of the Lease and all
attendant documents.
Lessee does further certify that as of the date hereof (i) Lessee is not in
Default under the Lease; and (ii) the representations and warranties made by
Lessee pursuant to or under the Lease are true and correct on the date hereof.
__________________________________
Lessee's Authorized Representative
Dated: ______________, 199__
<PAGE>
ANNEX D
TO
SCHEDULE SERIES NO.
DATED THIS _____ DAY OF ______________________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
STIPULATED LOSS AND TERMINATION VALUE TABLE*
RENT PAYMENT DATE STIPULATED LOSS VALUE TERMINATION VALUE
----------------- --------------------- -----------------
Initials:_______________ ___________________
Lessor Lessee
- -------------------------
*The Stipulated Loss and Termination Value for any Lease Assets shall be equal
to the Capitalized Lessor's Cost of such unit multiplied by the appropriate
percentage derived from the above table. In the event that the Lease is for any
reason extended, then the last percentage figure shown above shall control
throughout any such extended term.
<PAGE>
ANNEX E
TO
SCHEDULE SERIES NO.
DATED THIS _____ DAY OF _________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
AMORTIZATION SCHEDULE*
UNAMORTIZED PRINCIPAL
RENT PAYMENT DATE PRINCIPAL* BALANCE*
----------------- ---------- ---------------------
Initials:____________________ ____________________
Lessor Lessee
- ----------------------------
*The Principal and Unamortized Principal Balance as of any Rent Payment Date
shall be equal to the Capitalized Lessor's Cost of such unit multiplied by the
appropriate percentage derived from the above table.
<PAGE>
ANNEX F
TO
SCHEDULE SERIES NO.
DATED THIS _____ DAY OF ____________, 199__
TO MASTER LEASE AGREEMENT NO. 2 DATED AS OF DECEMBER 9, 1996
RETURN PROVISIONS: In addition to the provisions provided for in Section X of
this Lease, and provided that Lessee has elected not to exercise its extension
option pursuant to Section XVIII(a) of the Lease or its purchase option pursuant
to Section XVIII(d) of the Lease, Lessee shall, at its expense:
(A) At least one hundred eighty (180) days and not more than two hundred
forty (240) days prior to expiration or earlier termination of the Lease,
provide to Lessor a detailed inventory of all components of the Equipment. The
inventory should include, but not be limited to, a listing of model, serial
numbers and size description (length, width, height, diameter) for all
components comprising the Equipment.
(B) At least one hundred eighty (180) days prior to expiration or earlier
termination of the Lease, upon receiving reasonable notice from Lessor, provide
or cause the vendor(s) or manufacturer(s) to provide to Lessor the following
documents: (1) one set of service manuals, blue prints, process flow diagrams
and operating manuals including replacements and/or additions thereto, such that
all documentation is completely up-to-date; and (2) one set of documents,
detailing equipment configuration, operating requirements, maintenance records,
and other technical data concerning the set-up and operation of the Equipment,
including replacements and/or additions thereto, such that all documentation is
completely up-to-date.
(C) At least one hundred eighty (180) days prior to expiration or earlier
termination of the Lease, upon receiving reasonable notice from Lessor, make the
Equipment available for on-site operational inspections by potential purchasers,
under power, and provide personnel, power and other requirements necessary to
demonstrate electrical, mechanical and functionality of each item of the
Equipment.
(D) At least forty-five (45) days prior to expiration or earlier
termination of the Lease, cause the manufacturer's representative(s) or
qualified equipment maintenance provider(s), acceptable to Lessor, to perform a
comprehensive physical inspection, including testing all material and
workmanship of the Equipment. The authorized inspector should ensure the
equipment is clean and cosmetically acceptable, and in such condition so that it
may be immediately installed and placed into use in a similar retail store
environment. There shall be no missing screws, bolts, fasteners, etc. The
equipment will be free from all large scratches, marks, gouges, dents,
discoloration or stains. There shall be no evidence of extreme use or
overloading, i.e. bowed or sagging shelves, etc. If during such inspection,
examination and test, the authorized inspector finds any of the material or
workmanship to be defective or the Equipment not operating within manufacturer's
specifications, then Lessee shall repair or replace such defective material and,
after corrective measures are completed, Lessee will provide for a follow-up
inspection of the Equipment by the authorized inspector as outlined in the
preceding clause.
(E) Have each item of Equipment returned with an in-depth field service
report detailing said inspection as outlined in Section D of this Annex F. The
report shall certify that the Equipment
<PAGE>
has been properly inspected, examined and tested and is operating within the
manufacturer's specifications.
(F) Properly remove all Lessee installed markings which are not necessary
for the operation, maintenance or repair of the Equipment.
(G) Ensure all Equipment and equipment operations conform to all applicable
local, state, and federal laws, health and safety guidelines.
(H) Redeliver the Equipment with all component parts in good operating
condition. All components must meet or exceed the manufacturer's minimum
recommended specifications unless otherwise specified.
(I) Provide for the deinstallation, packing, transporting, and certifying
of the Equipment to include, but not be limited to, the following: (1) the
manufacturer's representative shall de-install all Equipment (including all
wire, cable and mounting hardware) in accordance with the specifications of the
manufacturer; (2) each item of the Equipment will be returned with a certificate
supplied by the manufacturer's representative qualifying the Equipment to be in
good condition and (where applicable) to be eligible for the manufacturer's
maintenance plan; the certificate of eligibility shall be transferable to
another operator of the Equipment; (3) the Equipment shall be packed properly
and in accordance with the manufacturer's recommendations; and (4) Lessee shall
transport the Equipment in a manner consistent with the manufacturer's
recommendations and practices.
(J) Upon sale of the Equipment to a third party, provide transportation to
any locations anywhere in the continental United States selected by Lessor.
(K) Obtain and pay for a policy of transit insurance for the redelivery
period in an amount equal to the replacement value of the Equipment and Lessor
shall be named as the loss payee on all such policies of insurance.
(L) Promptly deliver to Lessor any Real Estate, clean and in good
condition, reasonable wear and tear excepted.
(M) Promptly remove from the Real Estate all of Lessee's property, and all
trash and debris, and repair any damage caused by or during the removal of
Lessee's property.
(N) Promptly deliver to Lessor all keys to the Real Estate and any
improvements located thereon, and all combinations to any vaults, secure areas,
and security systems.
(O) Permit Lessor and its authorized representatives to enter the Real
Estate at all reasonable times to inspect or show the Real Estate, or make any
repairs thereto.
(P) Deliver to Lessor any personal property, licenses, permits, and other
instruments as reasonably are necessary to continue to operate the Real Estate
as a retail food establishment, together with such assignments, consents, and
other documents as shall be necessary to transfer any such property, licenses,
permits, or other instruments to Lessor or its nominee.
Initials:____________ ____________
Lessor Lessee
2
<PAGE>
EXHIBIT NO. 2
ESTOPPEL/WAIVER AGREEMENT
-------------------------
Address of Property:_____________________
_____________________
_____________________
THIS ESTOPPEL/WAIVER AGREEMENT is made as of the date of execution hereof
by the undersigned in favor of General Electric Capital Corporation, for Itself
and as Agent for Certain Participants ("Equipment Lessor").
Equipment Lessor has entered into, or is about to enter into, a Master
Equipment Lease Agreement No. 2 dated as of December 9, 1996 (the "Equipment
Lease"), with Boston Chicken, Inc. ("Lessee"), pursuant to which the Lessee has
leased, or will lease, from Equipment Lessor certain Equipment described in the
attached Annex A (such property, together with any replacements thereof; the
"Equipment"). Some or all of the Equipment is, or will be, located at the
premises described above (the "Premises"). Execution of this Agreement is a
condition precedent to Equipment Lessor's obligations under the Equipment Lease.
The undersigned agrees that: (i) the Equipment is, and shall remain,
personal property regardless of the method by which it may be, or becomes,
affixed to the Premises; (ii) Equipment Lessor's interest in the Equipment and
any proceeds thereof (including, without limitation, proceeds of any insurance
therefor) shall be, and remain, subject to the rights and interests of Equipment
Lessor (until and unless Equipment Lessor shall formally release or transfer its
interest in the Equipment to Lessee); (iii) the undersigned waives and agrees
not to assert any lien, claim or interest which the undersigned may now have or
hereafter acquire against or in the Equipment by virtue of the undersigned's
interest in the Premises; (iv) the undersigned shall not take any action that
would affect the Equipment (or the interest of Equipment Lessor therein) or
cause the Equipment to be removed from the Premises without giving Equipment
Lessor fifteen (15) days' prior written notice of such action (provided,
however, that the foregoing shall not restrict the exercise of remedies against
Lessee that do not affect the Equipment or the interest of Equipment Lessor
therein; (v) Equipment Lessor, and its employees and agents, shall have the
right with prior notice, from time to time, to enter the Premises for the
purpose of inspecting the Equipment; and (vi) Equipment Lessor, and its
employees and agents, shall have the right, upon any default by Lessee under the
Equipment Lease, to enter the Premises and remove the Equipment from the
Premises provided that Equipment Lessor reimburses the undersigned for any
damages actually caused to the Premises by Equipment Lessor, or its employees or
agents, during any such removal. The undersigned acknowledges and agrees that
<PAGE>
Equipment Lessor is relying on this Agreement in providing the financing
pursuant to the Equipment Lease, and this Agreement shall be binding upon, and
shall inure to the benefit of, the successors and assigns of the undersigned and
Equipment Lessor.
____________________________
By:_________________________
Name:_______________________
Title:______________________
Date:_____________________, 199_
Interest in the Premises (check applicable box)
___ Owner
___ Mortgagee
___ Landlord
___ Realty Manager
2
<PAGE>
EXHIBIT NO. 3
FORM OF MASTER SUBLEASE AGREEMENT
---------------------------------
<PAGE>
SUBLEASE AGREEMENT NO. 2
between
BOSTON CHICKEN, INC.
as Sublessor
[ ]
as Sublessee
This Sublease is subject to a senior lien in favor of General Electric Capital
Corporation, for Itself and as Agent for Certain Participants ("GECC"), as
Lessor, under the Master Lease Agreement No. 2, dated as of December __, 1996,
between GECC and Boston Chicken, Inc. This Sublease has been executed in
several counterparts. To the extent, if any, that this Sublease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no lien on this Sublease may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by GECC on the signature
page hereof.
<PAGE>
SUBLEASE AGREEMENT NO. 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. LEASING............................................................... 1
II. TERM, RENT AND PAYMENT................................................ 7
III. TAXES................................................................. 8
IV. REPORTS...............................................................10
V. DELIVERY, USE AND OPERATION, SUBSTITUTION.............................11
VI. SERVICE...............................................................17
VII. LOSS OR DAMAGE; STIPULATED LOSS VALUE.................................18
VIII. RISK OF LOSS..........................................................21
IX. INSURANCE.............................................................21
X. RETURN OF LEASE ASSETS................................................22
XI. DEFAULT...............................................................23
XII. ASSIGNMENT; SUB-LETTING...............................................27
XIII. NET LEASE; NO SET-OFF, ETC............................................27
XIV. INDEMNIFICATION.......................................................28
XV. DISCLAIMER............................................................30
XVI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBLESSEE................31
XVII. OWNERSHIP FOR TAX PURPOSES, ETC.; GRANT OF SECURITY INTEREST;
USURY SAVINGS.........................................................34
XVIII. END OF SUBLEASE OPTIONS...............................................37
(a) Extension........................................................38
(b) Renewal..........................................................39
(c) Return...........................................................39
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(d) Purchase.........................................................40
(e) Sublessor's Return Option........................................40
(f) Purchase in Connection with Default Under the Master Lease.......41
(g) Notice of Election...............................................41
XIX. MISCELLANEOUS.........................................................42
XX. CHOICE OF LAW; JURISDICTION...........................................44
XXI. CHATTEL PAPER.........................................................45
XXII. EARLY TERMINATION.....................................................46
</TABLE>
EXHIBIT NO. 1 - FORM OF SCHEDULE
ANNEX A - DESCRIPTION OF LEASE ASSETS
ANNEX B - BILL OF SALE
ANNEX C - CERTIFICATE OF ACCEPTANCE
ANNEX D - STIPULATED LOSS AND TERMINATION VALUE TABLE
ANNEX E - AMORTIZATION SCHEDULE
ANNEX F - RETURN PROVISIONS
ii
<PAGE>
SUBLEASE AGREEMENT NO. 2
THIS SUBLEASE AGREEMENT NO. 2 is made as of the ___ day of December, 1996
("Sublease" or "Agreement"), between BOSTON CHICKEN, INC., a Delaware
corporation with its mailing address and chief place of business at 14103 Denver
West Parkway, Golden, Colorado 80401-4086 (hereinafter called "BCI" or
"Sublessor"), and the Company whose name and principal address appear on the
signature pages hereof (the "Company" or "Sublessee").
WITNESSETH:
WHEREAS, BCI has entered into the Master Lease Agreement No. 2 (as the same
may be amended or supplemented from time to time, the "Master Lease") dated as
of December __, 1996 between General Electric Capital Corporation, for Itself
and as Agent for Certain Participants (the "Lessor"), and BCI, and certain
related documents (the "Master Lease Documents");
AND WHEREAS, BCI desires to sublease to the Company, and the Company
desires to sublease from BCI, the Lease Assets (as hereinafter defined) located
at each Lease Assets Location (as hereinafter defined) (specified in each
applicable Schedule (as hereinafter defined)) and as described in Annex A to any
such Schedule;
AND WHEREAS, to secure Sublessee's obligations under this Sublease,
Sublessee has granted to Sublessor a security interest in the Lease Assets
(which security interest together with this Sublease has been assigned by
Sublessor to Lessor to secure Sublessor's performance under the Master Lease and
the Master Lease Documents).
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
I. LEASING:
(a) This Agreement shall be effective from and after the date of execution
hereof. Subject to the terms and conditions set forth below, Sublessor will (a)
sublease to Sublessee certain parcels of real property, including land,
buildings and/or other improvements constructed or made thereon (collectively,
the "Fee Property"), (b) sublease to Sublessee certain improvements
(collectively, the "Ground-Lease
<PAGE>
Leasehold Improvements") located on real property leased by Sublessee pursuant
to ground leases (collectively, the "Ground Leases"), (c) sublease to Sublessee
certain improvements (collectively, the "Premises-Lease Leasehold Improvements")
to be made to or installed in complete buildings leased by Sublessee pursuant to
premises leases (collectively, the "Premises Leases") and (d) sublease to
Sublessee certain items of equipment (collectively, the "Equipment"). The
Ground-Lease Leasehold Improvements and the Premises-Lease Leasehold
Improvements are hereinafter sometimes collectively referred to as the
"Leasehold Improvements". The Leasehold Improvements subleased hereunder shall
be limited to (1) new improvements, and (2) improvements which were completed
not more than two (2) years prior to the date on which such Leasehold
Improvements are subleased hereunder. The Fee Property and the Leasehold
Improvements are hereinafter sometimes collectively referred to as the "Real
Estate". The Real Estate and the Equipment are sometimes hereinafter
collectively referred to as the "Lease Assets". The Real Estate shall be limited
to those locations at which the Equipment will be installed and operated by
Sublessee as a "Boston Market" or "Boston Carver" location; provided, however,
that a portion of any such location may be further subleased for the operation
of an "Einstein Bros. Bagels" or "Noah's New York Bagels" location. Sublessor
shall sublease to Sublessee only such Lease Assets as are, or shall from time to
time be, described in Annex A to any schedule hereto (which schedule shall be in
substantially the form attached hereto as Exhibit No. 1 (the "Schedule")). Terms
specified in a Schedule and not otherwise defined or specified herein shall have
the meanings ascribed to them in such Schedule.
(b) Lessor, BCI, BC Real Estate Investments, Inc. ("BCRE") and certain
financed area developers (collectively, the "FADs"), including the Company, have
heretofore entered into that certain Agency Agreement dated as of September 25,
1996 (as the same may from time to time be amended, modified, or extended, the
"Agency Agreement"), pursuant to which Lessor appointed BCI, BCRE and the FADs,
including the Company, as its agents to acquire and pay for, in the name and on
behalf of Lessor, the Real Estate in accordance with the terms and conditions of
the Agency Agreement.
(c) The obligation of Sublessor to sublease the Lease Assets to Sublessee
shall be subject to (1) Sublessor being satisfied that there shall have been no
material adverse change in the condition (financial or otherwise), business
operations or prospects of Sublessee from the date of execution hereof, and (2)
receipt by Sublessor, on or prior to the earlier of the Sublease Commencement
Date (as hereinafter defined) or Last Delivery Date therefor, of each of the
following documents in form and substance satisfactory to Sublessor (provided,
however, that Sections I(c)(vii) through (xviii) shall not be applicable with
respect to Lease Assets comprised solely of Equipment):
2
<PAGE>
(i) Schedules relating to the Lease Assets then to be subleased
hereunder (including separate Schedules for each Fee Property);
(ii) a Bill of Sale with respect to the applicable Equipment and/or
Leasehold Improvements executed by Sublessee in favor of Lessor, in the form of
Annex B to the applicable Schedule;
(iii) evidence of insurance with respect to the Lease Assets then to
be subleased hereunder, which complies with the applicable requirements of
Section IX hereof;
(iv) an Estoppel/Waiver Agreement (each an "Estoppel/Waiver
Agreement"), in substantially the form of Exhibit No. 2 attached to the Master
Lease, from the Landlord with respect to those locations at which Equipment is
located and with respect to which Sublessee does not provide to Lessor a
Landlord's Waiver (as hereinafter defined) or an opinion of local counsel
(reasonably satisfactory to Sublessor);
(v) a certificate of an authorized officer of Sublessee stating that
he has reviewed the activities of Sublessee and that, to the best of his
knowledge and without personal liability, there exists no Default (as
hereinafter defined) or event which, with the giving of notice or the lapse of
time (or both), would become such a Default hereunder;
(vi) such Uniform Commercial Code financing statements, and statements
of termination, release or partial release with respect to the Equipment, as
Sublessor reasonably may require;
(vii) for any Ground-Lease Leasehold Improvements, a copy of the
Ground Lease of the real property upon which such Ground-Lease Leasehold
Improvements have been constructed, which Ground Lease shall expressly (1)
permit a collateral assignment or leasehold mortgage to, and re-assignment by,
Lessor and Sublessor, (2) provide for an initial lease term of not less than
five (5) years and renewal terms which may be entered into in the discretion of
Sublessee such that the total number of years covered by the initial term and
discretionary renewal terms shall be not less than ten (10) years, and (3)
otherwise be in form and content reasonably satisfactory to Sublessor in all
respects (provided, however, that the requirements of clauses (1) and (2) hereof
shall not be applicable if the Landlord's Waiver (as hereinafter defined) is
delivered to Lessor or Sublessor with respect to such Ground Lease);
(viii) with respect to any Premises-Lease Leasehold Improvements, a
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copy of the Premises Lease for the premises in which such Leasehold Improvements
are to be placed or constructed, which Premises Lease shall (1) permit a
collateral assignment to, and re-assignment by Lessor and Sublessor, (2) provide
for an initial lease term and discretionary renewal terms such that the total
number of years covered by the initial term and discretionary renewal terms
shall be not less than the total term (including any renewal terms) of the
applicable Schedule, and (3) otherwise be in form and content reasonably
satisfactory to Sublessor in all respects (provided, however, that the
requirements of clauses (1) and (2) hereof shall not be applicable if the
Landlord's Waiver is delivered with respect to such Premises Lease);
(ix) with respect to any Ground-Lease Leasehold Improvements, an
ALTA title insurance policy (or marked-up title insurance commitment) issued by
First American Title Insurance Company or such other title insurance company
reasonably acceptable to Sublessor, which policy or commitment shall meet the
requirements specified in clause (xiii) of Section I(c) of the Master Lease;
(x) with respect to any Real Estate, an affidavit or certificate from
Sublessee as to zoning compliance, copies of a use and occupancy permit and all
other necessary permits or governmental approvals, and evidence reasonably
satisfactory to Sublessor of completion of the construction of the Leasehold
Improvements or the improvements to be constructed on the Fee Property (the "Fee
Improvements") and the installation of the Equipment on the Real Estate such
that the Real Estate is suitable for operation by Sublessee as a "Boston Market"
or "Boston Carver" location subject to the right of Sublessee to further
sublease a portion of such Real Estate for the operation of an "Einstein Bros.
Bagels" or "Noah's New York Bagels" location;
(xi) a certificate or affidavit from Sublessee that the Leasehold
Improvements, as constructed, comply in all respects with the requirements of
the applicable Ground Lease or Premises Lease;
(xii) a Phase I environmental audit with respect to any Fee Property
and any real property upon which the Ground-Lease Leasehold Improvements are to
be made (and such further environmental audits or evidence of the absence of
hazardous wastes as Sublessor shall deem necessary), which audit must be
satisfactory in Sublessor's sole discretion as to form and substance;
(xiii) an appraisal of any Fee Property acquired by Sublessee more
than one year prior to the Lease Commencement Date with respect to such Fee
Property;
(xiv) with respect to any Fee Property or any real property subject to
a Ground Lease, if required by Sublessor, a current ALTA/ALSM survey meeting the
requirements specified in clause (xviii) of Section I(c) of the Master Lease;
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(xv) for any Leasehold Improvements, a collateral assignment of lease
from Sublessee covering the applicable Ground Lease or Premises Lease (each a
"Collateral Assignment of Lease"), in substantially the form of Exhibit No. 4
attached to the Master Lease, with such changes as reasonably may be necessary
(in the case of any Ground Lease) to record such Collateral Assignment of Lease
among the land records of the jurisdiction in which the Leasehold Improvements
are located;
(xvi) a Landlord's Agreement (each a "Landlord's Waiver"), in
substantially the form of Exhibit No. 5A (for any Ground Lease) or Exhibit No.
5B (for any Premises Lease) attached to the Master Lease, duly executed by the
landlord of the real property upon which the Leasehold Improvements are located,
or evidence satisfactory to Sublessor in all respects that the Ground Lease or
Premises Lease (as applicable) expressly permits the collateral assignment of
such lease to Lessor, gives Lessor appropriate notice and cure rights and
permits the assignment of such lease by Lessor without further consent from or
notice to the Landlord or subject only to such restrictions as are acceptable to
Sublessor in all respects; provided, however, that such Landlord's Waivers may
be provided within thirty (30) days after the Lease Commencement Date of the
applicable Schedule;
(xvii) evidence that all real estate taxes on the Real Estate which
are then due and payable (or, if permissible under applicable law, all
installments thereof which are then due and payable) have been paid unless any
such taxes are being contested by Sublessee in accordance with Section III(c);
(xviii) lien waivers signed by the general contractor and all major
subcontractors and suppliers for all work done and materials furnished in
connection with the construction of Leasehold Improvements or the Fee
Improvements and the installation of the Equipment therein; provided, however,
that in the event that Sublessee shall not, as a result of Sublessee's good
faith dispute with any general contractor or subcontractor, have obtained a lien
waiver from the same, Sublessee shall be deemed to have complied with the
provisions of this clause (xviii), (1) if the amount in dispute is not greater
than $50,000.00 and Sublessee is diligently attempting to resolve such dispute,
or (2) if the amount in dispute is bonded or guaranteed by a surety in
accordance with applicable laws;
(xix) an opinion of counsel for Sublessee in form and substance
satisfactory to Sublessor;
(xx) Sublessee's Resolution certified by the Secretary or similar
officer of Sublessee;
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(xxi) such Uniform Commercial Code financing statements or statements
of termination, release, or partial release related to the Mortgages as
Sublessor reasonably may require;
(xxii) if any portion of the Lease Assets are subleased by Sublessee,
a subordination agreement executed by the applicable sublessee, which
subordination agreement shall be in form and substance satisfactory to
Sublessor; and
(xxiii) such other documents as Sublessor reasonably may request to
carry out the intent and purpose of this Agreement.
Simultaneously with the execution of the Bill of Sale, Sublessee shall
execute a Certificate of Acceptance, in the form of Annex C to the applicable
Schedule, covering all of the Equipment and/or Leasehold Improvements described
in the Bill of Sale. Upon execution by Sublessee of any Certificate of
Acceptance, the Lease Assets described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Sublessee for sublease hereunder.
(d) Anything in the foregoing to the contrary notwithstanding, Sublessor
will sublease to Sublessee certain Real Estate and related Equipment in
locations which are not yet completed and ready to commence operations (such
Real Estate and Equipment being hereinafter called "Incomplete Store Assets"),
subject to the following conditions:
(i) Sublessor shall be satisfied that there shall have been no
material adverse change in the condition (financial or otherwise), business
operations or prospects of Sublessee from the date of execution hereof;
(ii) Sublessor shall receive, for each location upon which any
Incomplete Store Assets are located, evidence satisfactory to Sublessor in all
respects, that the construction has commenced, and that Sublessee has the
ability to complete all Leasehold Improvements, install all necessary Equipment,
and obtain all necessary licenses and permits in order to commence operations
within 120 days after the date on which such Incomplete Store Assets are
subleased hereunder;
(iii) Sublessor shall have received all of the items listed in Section
I(c) hereof, except that (1) Sublessee shall be required to deliver lien waivers
only for work completed prior to the date of funding, and (2) Sublessee shall
not be required to deliver a use and occupancy permit or other evidence of final
completion; and
(iv) within one hundred and twenty (120) days after the date on which
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such Incomplete Store Assets are subleased hereunder, Sublessee shall complete
all Leasehold Improvements, install all necessary Equipment, obtain all
necessary permits to commence operations, and provide Sublessor evidence of the
same, and Sublessee shall either (1) request Sublessor to sublease to Sublessee
all of the new or newly-completed Lease Assets at such Lease Assets Location
pursuant to the terms of this Agreement (if Sublessor is then able to lease such
Lease Assets under the Master Lease and Sublessee meets all of the conditions
set forth herein), or (2) provide to Sublessor evidence that Sublessee has paid
for all of the Leasehold Improvements and Equipment located at such Lease Assets
Location (other than the Incomplete Store Assets leased by Sublessor under the
Master Lease and subleased to Sublessee pursuant hereto), and provide to
Sublessor a security interest in all such Leasehold Improvements and Equipment.
In connection therewith, Sublessee shall execute and deliver to Sublessor such
security agreements, mortgages or deeds of trust, financing statements, and
other documents and instruments as Sublessor reasonably shall require in order
perfect such lien and security interest (to be recorded at Sublessee's expense).
In the event that Sublessee is unable to commence operations within
such one hundred and twenty (120) day period, Sublessee shall, if required by
Sublessor, purchase the Incomplete Store Assets from Sublessor on the next Rent
Payment Date, for a price equal to the Termination Value of such Incomplete
Store Assets, together with all taxes and charges upon transfer, and all other
reasonable and documented expenses incurred by Sublessor in connection with such
transfer.
(e) Sublessor shall have the right to assign, and Sublessee acknowledges
that Sublessor has assigned to Lessor pursuant to the Master Lease and granted
to Lessor, a security interest in, this Agreement (including the security
interest granted under Section XVII(b)(1)) and in the Equipment and Leasehold
Improvements. Such assignment and grant shall (i) be superior to Sublessee's
rights hereunder; (ii) not relieve Sublessor of any of its obligations
hereunder; and (iii) not be construed to be an assumption by Lessor of any
obligations of Sublessor hereunder. Sublessee shall, upon request, execute and
deliver such instruments and take such other action as may reasonably be
requested to protect Sublessor's or Lessor's interests, including (without
limitation) the perfection and priority of Lessor's security interest. Sublessee
acknowledges the assignments and grants of security interests described in this
Section I(e) and that Sublessee's interest in the Equipment and Leasehold
Improvements is subject and subordinated in all respects to the security
interest and liens in the Equipment and Leasehold Improvements assigned to
Lessor by Sublessor under the Master Lease.
(f) Sublessee acknowledges that this Agreement is in all respects subject
and subordinate to the Master Lease and the liens created thereby. Without
limiting the foregoing, if for any reason Lessor shall exercise rights or
remedies thereunder, such
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exercise may include the termination hereof, notwithstanding, to the maximum
extent permitted by law, any right of Sublessee hereunder. Upon the occurrence
of a default under the Master Lease and notice to Sublessor, Sublessee shall,
upon the direction of the Lessor, attorn to Lessor as lessor under this
Agreement.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder (the "Rent") and Sublessee's right to use
the Lease Assets shall commence on the date of execution by Sublessee of the
Certificate of Acceptance for such Lease Assets ("Sublease Commencement Date").
The term of sublease pursuant to this Agreement and the applicable Schedule (the
"Term") shall be the period specified in the applicable Schedule. If any Term is
extended or renewed, the word "Term" shall be deemed to refer to all extended or
renewed terms, and all provisions of this Agreement shall apply during any
extended or renewed terms, except as may be otherwise specifically provided in
writing.
(b) Rent shall be paid to Sublessor by wire transfer of immediately
available funds or other means acceptable to Sublessor for receipt prior to 9:30
a.m. Denver time to Sublessor pursuant to instructions provided from time to
time to Sublessee or such other account as Lessor may direct in writing; and
shall be effective upon receipt. Payments of Rent shall be in the amount set
forth in, and due in accordance with, the provisions of the applicable Schedule.
In no event shall any Rent payments be refunded to Sublessee. If Rent is not
paid within one (1) day of its due date, Sublessee agrees to pay a late charge
of Five Cents ($0.05) per dollar on, and in addition to, the amount of such Rent
but not exceeding the lawful maximum, if any. If at any time after the
termination of this Agreement (other than following Sublessee's purchase of the
Lease Assets) Sublessee shall remain in possession of the Lease Assets,
Sublessee shall continue to pay the Rent. Upon termination of the Master Lease
pursuant to Section XI(c) thereof, and upon written notice to Sublessor and
receipt by Sublessee of written demand from Lessor, payments of all amounts
payable hereunder, shall be made as directed by Lessor. All payments due under
this Agreement whether or not specifically denominated as Rent shall be
collectible in the same manner as Rent.
III. TAXES:
(a) Taxes in General. Sublessee shall have no liability for taxes imposed
by the United States of America or any state or political subdivision thereof
which are on or measured by the net income of Sublessor. Sublessee shall report
(to the extent that it is legally permissible) and, subject to Section III (b)
hereof, pay promptly all other taxes, fees and assessments due, imposed,
assessed or levied against any Lease Assets
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(or the purchase, ownership, delivery, leasing, possession, use or operation
thereof), this Agreement (or any rentals or receipts hereunder), any Schedule,
Sublessor (to the extent relating to the transactions contemplated by this
Agreement) or Sublessee by any foreign, Federal, state or local government or
taxing authority during or related to the term of this Agreement, including,
without limitation, all license and registration fees, and all sales, use,
personal property, real property, excise, gross receipts, franchise, transfer,
recordation, stamp or other taxes, imposts, duties and charges (including those
related to the original acquisition of any Lease Assets, any transfer of any
interest in any Lease Assets, the granting of any lien by Sublessee, or the sale
of any Lease Assets to any third party pursuant to the terms hereof), together
with any penalties, fines or interest thereon (all hereinafter called "Taxes").
Sublessee shall (i) reimburse Sublessor upon receipt of written request for
reimbursement for any Taxes charged to or assessed against Sublessor and
submission of written evidence of payment, (ii) on request of Sublessor, submit
to Lessor written evidence of Sublessee's payment of Taxes, (iii) on all reports
or returns with respect to personal property taxes show the ownership of the
Lease Assets by Sublessee, and (iv) send a copy of all reports or returns
pertaining to personal property taxes to Sublessor.
(b) Special Provisions Related to Real Estate Taxes. Unless paid directly
to the landlord of the real property on which Leasehold Improvements are
located, from and after the date of each Schedule relating to Real Estate,
Sublessee shall pay directly to the appropriate taxing authority all Real Estate
Taxes (as hereinafter defined) applicable to such Real Estate. If the Term of
such Schedule expires or otherwise terminates at any time other than the
beginning of a taxable year, Sublessee's obligation to pay Real Estate Taxes
shall be prorated on the basis of a 365-day year so as to include only that
portion of the taxable year which is part of the Term of such Schedule. Unless
the termination of a Schedule results from the purchase of the Real Estate
pursuant to Section XVIII(d) below, any Real Estate Taxes levied against any
Real Estate which accrue during the Term of such Schedule but which would not
yet be due and payable to the appropriate taxing authority until after the
expiration of the Term of such Schedule shall be paid by Sublessee to Sublessor
upon termination of such Schedule. Sublessee shall pay such amounts to the
appropriate taxing authority on a timely basis. Unless the termination of a
Schedule results from the purchase of the Real Estate pursuant to Section
XVIII(d) hereof, or unless a Default or event which, with the giving of notice,
or the lapse of time, or both, would constitute a Default has then occurred
hereunder, all Real Estate Taxes paid by Sublessee with respect to the Real
Estate described on such Schedule prior to such termination, but attributable to
the period following such termination, shall be paid by Sublessor to Sublessee
upon such termination.
Except to the extent that Real Estate Tax bills are sent directly to
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Sublessee by the taxing authorities, upon receipt by Sublessor of such tax bills
or statements, Sublessor shall use reasonable efforts to advise Sublessee
promptly in writing of all Real Estate Taxes and shall use reasonable efforts
promptly (but not less than (15) days prior to delinquency) to deliver copies of
all applicable tax bills or statements to Sublessee. Sublessee shall, subject
to Section III(c) below, pay directly to the taxing authority all Real Estate
Taxes prior to the earlier of (i) thirty (30) days after receipt by Sublessee of
a copy of the applicable tax bills or statements, or (ii) five (5) days prior to
delinquency. Sublessor shall use reasonable efforts to direct the appropriate
taxing authority to send Real Estate Tax bills directly to Sublessee. As used
herein, "Real Estate Taxes" shall mean any and all taxes, governmental fees and
similar charges and assessments levied or assessed against the Real Estate,
including, without limitation, ad valorem taxes and special assessments
applicable to the Real Estate.
(c) Right to Contest. Sublessee shall not be required to pay any Real
Estate Taxes or other Taxes for which Sublessee is liable hereunder so long as
(i) Sublessee is contesting the same in good faith and by appropriate
proceedings, which postpone the collection thereof, (ii) Sublessee has provided
to Sublessor evidence that the position taken by Sublessee would have a
realistic possibility of success if litigated, such evidence to be satisfactory
to Sublessor in its sole discretion, (iii) Sublessee provides, if required under
applicable law, a bond or similar surety pending appeal, in a manner acceptable
to the appropriate taxing authority, if approval is required, prior to the time
when penalty attaches for non-payments, (iv) such proceedings do not involve any
substantial danger (as determined in Sublessor's sole discretion) of the sale,
forfeiture or loss of the Lease Assets or any interest therein, and (v)
Sublessee shall indemnify and hold Sublessor harmless from and against any costs
and expenses incurred in connection with the contest of such taxes, and any
interest, fees, or penalties attaching with respect thereto.
IV. REPORTS:
(a) Sublessee will notify Sublessor in writing, within five (5) days after
Sublessee becomes aware that any tax or other lien (other than a Permitted Lien,
as hereinafter defined) shall attach to any Lease Assets, of the full
particulars thereof and of the location of such Lease Assets on the date of such
notification.
(b) Sublessee will permit (i) Sublessor or its designated employee(s) or
agent(s) or (ii) Lessor or its designated employee(s) or agent(s) to inspect any
Lease Assets during normal business hours upon reasonable notice (provided,
however, that if a Default has then occurred and is continuing, Sublessor or
Lessor may, at Sublessee's
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expense, inspect any Lease Assets without restriction).
(c) Subject to the other terms of this Agreement, Sublessee will keep the
Equipment at one of its stores and will effect the relocation of any Equipment
to another of its stores only upon the prior consent in writing of the
Sublessor. Upon the written request of Sublessor, Sublessee will notify
Sublessor forthwith in writing of the location of any Equipment as of the date
of such notification.
(d) Sublessee will promptly and fully report to Sublessor in writing if any
Lease Assets are lost or damaged (where the estimated repair costs would exceed
$5,000 per Lease Assets Location, or is otherwise involved in an accident
causing personal injury or property damage which is likely to result in
liability to Lessor in excess of $5,000). As used herein, "Lease Assets
Location" means the location at which the Lease Assets initially are located as
specified in the applicable Schedule.
(e) Sublessee promptly will give Sublessor copies of any notices received
by Sublessee from the landlord under any Ground Lease or Premises Lease.
(f) Within twenty (20) days after any request by Sublessor, Sublessee will
furnish a certificate of an authorized officer of Sublessee (an "Officer's
Certificate") stating that he or she has reviewed the activities of Sublessee
and that, to the best of his or her knowledge and without personal liability,
there exists no Default (as hereinafter defined) or event which, with the giving
of notice or the lapse of time (or both), would become such a Default.
(g) Promptly thereafter, Sublessee will notify Sublessor of the existence
of any Default or event which, with the giving of notice or the lapse of time
(or both), would become such a Default.
V. DELIVERY, USE AND OPERATION, SUBSTITUTION:
(a) Sublessee agrees that the Lease Assets will be used by Sublessee solely
in the conduct of its business and in a manner complying with all applicable
Federal, state, and local laws and regulations, and any applicable insurance
policies, and Sublessee shall not discontinue use of the Lease Assets, except
(i) as provided in Sections V(e) and VII hereof, and (ii) that Sublessee may,
with the prior written consent of Sublessor, temporarily discontinue use of and
store Equipment or temporarily discontinue use of other Lease Assets, in either
case only in connection with the closing or relocation of Sublessee's store for
a period not to exceed thirty (30) days.
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(b) Sublessee agrees that the Lease Assets will not be used by Sublessee
outside the continental United States.
(c) Sublessee will keep the Lease Assets free and clear of all liens and
encumbrances other than (1) those which result from acts of Lessor, the Loan
Agent (as defined in the Facilities Agreement, dated as of the date hereof,
among BCI, Lessor and Bank of America Illinois, as agent for the lenders party
thereto) and Sublessor, (2) those arising from the rights and interest of Lessor
or Sublessor in any Sublease which shall have been assigned to Lessor, (3) liens
for fees, taxes, levies, duties or other governmental charges of any kind, liens
of mechanics, materialmen, laborers, employees or suppliers and similar liens
arising by operation of law incurred by Sublessee in the ordinary course of
business for sums that are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings which suspend the collection
thereof (provided, however, that such proceedings do not involve any substantial
danger (as determined in Sublessor's sole discretion) of the sale, forfeiture or
loss of the Lease Assets or any interest therein), (4) liens arising out of any
judgments or awards against Sublessee which have been adequately bonded to
protect Lessor's and Sublessor's interest or with respect to which a stay of
execution has been obtained pending an appeal or a proceeding for review, (5)
any collateral assignment of lease in respect of any Premises Lease or Ground
Lease made by a Sublessee to Sublessor, and (6) minor encumbrances (including,
without limitation, easements, rights of way, covenants, zoning variances and
similar encumbrances) which do not materially affect the value of the Lease
Assets. The liens and encumbrances described in clauses (1) through (6) hereof
are referred to as "Permitted Liens". Sublessee will defend, at its own expense,
Lessor's and Sublessor's interest in the Lease Assets from such claims, liens or
legal processes. Sublessee will also notify Sublessor immediately upon receipt
of notice of any lien, attachment or judicial proceeding affecting the Lease
Assets in whole or in part.
(d) Sublessee shall comply with each and every covenant, term and condition
of each applicable Ground Lease and Premises Lease.
(e) Provided that no Default shall then have occurred and be continuing, at
Sublessee's expense, Sublessee may elect to replace a unit of Equipment (a
"Substituted Item") with another unit of Equipment (a "Replacement Item"), due
to the obsolescence of the Substituted Item (in accordance with the provisions
of this Paragraph) or upon the occurrence of a Casualty Occurrence (as
hereinafter defined); provided, however, that (i) any replacement pursuant
hereto shall be made upon thirty (30) days' written notice to Sublessor, which
written notice shall identify the Substituted Items and the Replacement Items
per Lease Assets Location, and (ii)
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replacements of items of Equipment having a Capitalized Sublessor's Cost per
item in excess of $10,000 shall be subject to Sublessor's prior consent in
writing. Each Replacement Item shall be free and clear of all liens and
encumbrances (other than Permitted Liens) and shall have at least the value,
residual value, utility and remaining useful life and be in as good an operating
condition as the Substituted Item, assuming that the Substituted Item had been
maintained in accordance with the provisions of this Agreement. Sublessee shall
provide to Sublessor such substantiation with respect to the lien status, the
value, residual value, utility and remaining useful life, and the operating
condition, of the Replacement Item as reasonably may be required by Sublessor
and such substitution is expressly conditioned upon Sublessor having determined
to its reasonable satisfaction that the conditions specified in this paragraph
have been satisfied.
(1) If a Boston Market Unit (as hereinafter defined) at a particular
Lease Assets Location operated by Sublessee has been closed and the Equipment
previously used at such Lease Assets Location has been relocated in accordance
with the provisions of Section V(h) hereof, then Sublessee may elect to
substitute for the Real Estate at such Lease Assets Location fee simple property
and/or leasehold improvements ("Replacement Real Estate"), as applicable, having
an equal or greater value (as determined to the reasonable satisfaction of
Sublessor), with respect to such new Lease Assets Location, provided that the
acquisition of such Replacement Real Estate satisfies the conditions for
acquisition of the original Real Estate so replaced, and Sublessee shall be
responsible for all costs and expenses incurred by Sublessor in connection with
such substitution and provided, further, that any substitution of Real Estate
pursuant hereto (i) shall be made upon thirty days' written notice to Sublessor,
which written notice shall identify the substituted Real Estate and the
Replacement Real Estate per Lease Assets Location, and (ii) shall be subject to
Sublessor's prior written consent.
(2) Sublessee shall execute and deliver to Lessor a Bill of Sale,
special or limited warranty deed and related documents, copy of any applicable
Ground Lease or Premises Lease, Collateral Assignment of Lease, Landlord's
Waiver, Estoppel/Waiver Agreement (all as applicable), and an amended Annex A to
the applicable Schedule with respect to each Replacement Item and any
Replacement Real Estate, together with such documents and instruments as may be
required by Sublessor in connection with such replacement, including (without
limitation) title insurance policies, environmental audits, surveys, Uniform
Commercial Code financing statements and mortgage documents, if applicable, to
be filed at Sublessee's expense, all of such documents and instruments to be in
form and substance satisfactory to Sublessor.
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(3) Upon compliance by Sublessee with the provisions hereof, and upon
receipt from Lessor of documentation acceptable to Sublessor releasing the
Substituted Items and/or the substituted Real Estate from the Agreement,
provided that no Default shall then have occurred and be continuing, Sublessor
will transfer to Sublessee, on an AS IS BASIS, without recourse or warranty,
express or implied, of any kind whatsoever, all of Sublessor's interest in and
to the Substituted Item and/or the substituted Real Estate. Sublessor shall not
be required to make and may specifically disclaim any representation or warranty
as to the condition of the Substituted Item and/or the substituted Real Estate
and any other matters (except that Sublessor shall warrant that it conveyed
whatever interest it received in such Substituted Item and/or the substituted
Real Estate free and clear of any lien or encumbrance created by Sublessor).
Sublessor shall, at Sublessee's expense, execute and deliver to Sublessee such
Uniform Commercial Code statements of termination and other documents and
instruments, as reasonably may be required in order to terminate any interest of
Sublessor in and to such Substituted Item and/or the substituted Real Estate.
If Sublessee requests that Sublessor cause Lessor to replace a Substituted Item
with a Replacement Item or substituted Real Estate with Replacement Real Estate,
and Lessor purchases such Replacement Item and/or Replacement Real Estate and
leases same to Sublessor, Sublessor shall sublease to Sublessee such Replacement
Item and/or Replacement Real Estate. Without limiting the foregoing, Sublessee
shall not remove the Substituted Item from the Lease Assets Location at which
such Substituted Item is located or dispose of the substituted Real Estate until
such time as Sublessor is satisfied that Sublessee has executed all documents
requested by Sublessor to perfect the security interests of Lessor and Sublessor
in the Replacement Item and the Replacement Real Estate.
(f) Upon the written request of Sublessor and at Sublessee's expense,
Sublessee shall, in accordance with Section XVI(n), replace all Affected
Equipment (as hereinafter defined) with other Equipment, on the following terms
and conditions:
(A) The new Equipment shall: (i) be free and clear of all liens and
encumbrances (other than Permitted Liens); (ii) have at least the value, utility
and remaining useful life and be in as good an operating condition as the
Equipment which is replaced, assuming that the Equipment which is replaced had
been maintained in accordance with the provisions of this Agreement; (iii)
constitute all of the equipment used at the new Lease Assets Location; and (iv)
be less than twelve (12) months old. Sublessee shall provide to Sublessor such
substantiation with respect to the requirements specified in this Paragraph (A)
as reasonably may be required by Sublessor.
(B) Sublessee shall execute and deliver to Lessor a Bill of Sale, an
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Estoppel/Waiver Agreement and an amended Annex A to the applicable Schedule with
respect to the new Equipment, together with such documents and instruments as
reasonably may be required by Sublessor in connection with such replacement,
including (without limitation) Uniform Commercial Code financing statements to
be filed at Sublessee's expense, all of such documents and instruments to be in
form and substance reasonably satisfactory to Sublessor. Sublessee shall be
responsible for all costs and expenses incurred by Sublessor in connection with
such substitution.
(C) Upon compliance by Sublessee with the provisions hereof, and upon
receipt from Lessor of documentation acceptable to Sublessor, provided that no
Default shall then have occurred and be continuing, Sublessor will transfer to
Sublessee, on an AS IS BASIS, without recourse or warranty, express or implied,
of any kind whatsoever, all of Sublessor's interest in and to the replaced
Equipment. Sublessor shall not be required to make and may specifically disclaim
any representation or warranty as to the condition of the replaced Equipment and
any other matters (except that the Sublessor shall warrant that it conveyed
whatever interest it received in such replaced Equipment, free and clear of any
lien or encumbrance created by Sublessor). Sublessor shall, at Lessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
Statements of Termination and other documents and instruments, as reasonably may
be required in order to terminate or convey any interest of Sublessor in and to
such replaced Equipment.
(g) If Sublessee defaults under any Ground Lease or any Premises Lease, or
there occurs a default by Sublessee under any Collateral Assignment of Lease,
any Mortgage (as defined in the Master Lease), or other document executed by
Sublessee in connection with the Real Estate and such default has not been
waived or cured and all applicable waiver or cure periods with respect thereto
have then expired, then, within five (5) days of Sublessee's receipt of a
written request from Sublessor, Sublessee shall replace all of the Lease Assets
with respect to which such default has occurred, on the following terms and
conditions:
(A) The new Lease Assets shall (i) be free and clear of all liens and
encumbrances other than Permitted Liens; (ii) have at least the value, utility
and remaining useful life and be in as good an operating condition as the Lease
Assets which are replaced, assuming that the Lease Assets which are replaced had
been maintained in accordance with the provisions of this Agreement or, if such
new Lease Assets are not of the same type as the Lease Assets to be replaced,
having a value, utility and remaining useful life, and being in such operating
condition, as is acceptable to Sublessor; (iii) constitute all of the Lease
Assets used at the new Lease Assets Location; (iv) be less than twelve (12)
months old; and (v) the acquisition of any such substituted Real Estate
satisfies the conditions for acquisition of any original Real
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Estate so replaced. Sublessee shall provide to Sublessor such substantiation
with respect to the requirements specified in this Paragraph (A) as may be
required by Sublessor.
(B) Sublessee shall execute and deliver to Lessor a Bill of Sale,
special or limited warranty deed and related documents, copy of any applicable
Ground Lease or Premises Lease, Collateral Assignment of Lease, Landlord's
Waiver, Estoppel/Waiver Agreement (all as applicable) and an amended Annex A to
the applicable Schedule with respect to the new Lease Assets, together with such
documents and instruments as reasonably may be required by Sublessor in
connection with such replacement, including (without limitation) title insurance
policies, environmental audits, surveys, Uniform Commercial Code financing
statements and mortgage documents, if applicable, to be filed at Sublessee's
expense, all of such documents and instruments to be in form and substance
reasonably satisfactory to Sublessor. Sublessee shall be responsible for all
costs and expenses incurred by Sublessor in connection with such substitution.
(C) Upon compliance by Sublessee with the provisions hereof, and upon
receipt from Lessor of documentation acceptable to Sublessor, provided that no
Default shall then have occurred and be continuing, Sublessor will transfer to
Sublessee, on an AS IS BASIS, without recourse or warranty, express or implied,
of any kind whatsoever, all of Sublessor's interest in and to the replaced Lease
Assets. Sublessor shall not be required to make and may specifically disclaim
any representation or warranty as to the condition of the replaced Lease Assets
and any other matters (except that Sublessor shall warrant that it conveyed
whatever interest it received in such replaced Lease Assets, free and clear of
any lien or encumbrance created by Sublessor). Sublessor shall, at Sublessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
Statements of Termination and other documents and instruments, as reasonably may
be required in order to terminate or convey any interest of Sublessor in and to
such replaced Lease Assets.
(h)(i) Upon a Store Closure (as hereinafter defined) of a Boston Market
Unit (as hereinafter defined) operated by Sublessee at which Lease Assets are
located, Sublessee shall, within the sixty (60) day period immediately following
such Store Closure and in accordance with Sublessor's instructions, relocate any
such items of Equipment constituting such Lease Assets to another Boston Market
Unit operated by Sublessee. In connection with any such relocation, Sublessee
shall deliver to Lessor such documents and instruments as may be required by
Sublessor in connection with such relocation, including, in each case if
necessary, an Estoppel/Waiver Agreement with respect to the new Lease Assets
Location or an opinion of local counsel satisfactory to Sublessor, and Uniform
Commercial Code financing statements to be
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filed at Sublessee's expense. If Sublessee determines it is impracticable to
relocate such items of Equipment as provided in the first sentence of this
clause (h)(i), Sublessee shall deliver to Sublessor within such sixty (60) day
period an Officer's Certificate certifying that (x) such Boston Market Unit has
been permanently closed, (y) it is impracticable to transfer such items of
Equipment to any to any other Boston Market Unit operated by Sublessee and (z)
Sublessee desires to remove such items of Equipment and the other Lease Assets
(other than any Real Estate not acquired pursuant to the Agency Agreement)
located at such Boston Market Unit from this Sublease. If such Sublessee
delivers the Officer's Certificate described in the preceding sentence, and
Sublessor accepts such Officer's Certificate, Sublessee shall, in accordance
with Sublessor's instructions and prior to the expiration of such sixty (60) day
period, pay to Sublessor in immediately available funds an amount equal to the
purchase price for each such item of Equipment and such other Lease Assets to be
released from the Sublease, determined as hereinafter provided. The purchase
price of such items of Equipment and such other Lease Assets shall be an amount
equal to the sum of (A) the Termination Value (calculated as of the Special
Termination Date (as defined in the Master Lease)) for such Lease Assets, plus
(B) all taxes and charges upon sale, plus (C) all rent and other sums due and
unpaid under this Agreement as of the Special Termination Date, plus (D) any
applicable Special Payment Premium (as defined in the Master Lease). Upon
Sublessee's payment to Sublessor of such amounts, Sublessor will, upon receipt
from Lessor of documentation acceptable to Sublessor releasing such Lease Assets
from the Lease, execute and deliver to Sublessee, at Sublessee's expense, such
documents and instruments as Sublessor may deem appropriate to release such
Lease Assets from the term and scope of this Sublease.
(ii) A "Store Closure" shall mean, as to a Boston Market Unit, the date
that (x) Sublessee notifies Sublessor in writing that such store has ceased
selling products authorized by Sublessor to be sold at such store, (y) such
store shall be abandoned, or (z) there is a termination of the lease for, or the
operator of such store losses possession of, the premises for such store and
such possession is not immediately assumed by the Sublessor or a substitute
sublessor. "Boston Market Unit" shall mean an open and operating "Boston Market"
store or "Boston Carver" store or Boston Market flagship store which is operated
either directly by BCI or by a franchisee of BCI that has entered into an
agreement with BCI to develop and operate Boston Market Units (an "Authorized
Entity") pursuant to a franchise agreement between BCI and such Authorized
Entity.
VI. SERVICE:
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(a) Sublessee will, at its sole expense, maintain all Lease Assets in good
operating order, repair, condition and appearance in accordance with, with
respect to Equipment, manufacturer's recommendations, and with respect to other
Lease Assets, Sublessee's customary practices which are intended to ensure the
continuing utility of such Lease Assets to Sublessee's business (but in no event
less than industry standards) normal wear and tear excepted. Sublessee shall
pay all costs, expenses, fees and charges incurred during the Term of a Schedule
in connection with the use, occupancy, construction, installation, repair,
maintenance, or replacement of any of the Lease Assets described on such
Schedule.
(b) Sublessee will not, without the prior consent of Sublessor, affix or
install any accessory, equipment or device on any Lease Assets if such addition
will impair the value, utility, residual value, useful life, originally intended
function or use of such Lease Assets. Notwithstanding the foregoing, Sublessee,
from time to time, at its own expense: (1) may affix or install any equipment,
device or accessory or make any improvements to the Lease Assets in connection
with any remodeling, or similar undertaking in the ordinary course of business,
of such Lease Assets so long as such remodeling or undertaking does not impair
the value, utility, or residual value of or useful life of the Lease Assets; and
(2) shall affix or install any accessory, equipment or device on any Lease
Assets, and shall make any alterations or modifications to the Lease Assets,
that may be necessary, from time to time, to comply in all material respects
with any applicable laws, rules or regulations or any provision of any insurance
policy required to be kept under Section IX hereof; provided, however, that in
connection with Sublessee's obligations under the foregoing clause (2),
Sublessee may contest by appropriate proceedings or actions, diligently
conducted in good faith, the validity or application of any law or regulation or
provisions of any insurance policy, provided that any such delay in compliance
therewith will not result in the incurrence of any lien or any charge of any
kind against the Lease Assets and will not subject Sublessor to any criminal
liability for failure so to comply. All additions and repairs made, and all
parts, supplies, accessories, equipment, and devices furnished, attached or
affixed to any Lease Assets which are not readily removable shall be made or
furnished, attached or affixed only in compliance with applicable law, shall be
free and clear of all liens, encumbrances or rights of others (other than
Permitted Liens), and shall become subject to the interest of Lessor and
Sublessor.
(c) Any alterations or modifications to the Lease Assets that may, at any
time during the Term, be required to comply with any applicable law, rule,
regulation, or insurance policy, shall be made at the expense of Sublessee.
Sublessor shall not be required to build any improvements, make any repairs,
replacements, alterations or renewals of any nature or description, or make any
expenditure in connection with this Agreement or to maintain the Lease Assets.
Sublessee waives any right to (i) require
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Sublessor to maintain, repair, or rebuild all or any of the Lease Assets, or
(ii) make repairs at the expense of Sublessor pursuant to any applicable law,
contract, insurance agreement or other covenant at any time in effect.
VII. LOSS OR DAMAGE; STIPULATED LOSS VALUE:
If any Lease Assets shall be or become worn out, lost, stolen, destroyed,
irreparably damaged in the reasonable determination of Sublessee, or permanently
rendered unfit for use from any cause whatsoever, including but not limited to
an exercise of eminent domain or condemnation rights (such occurrences being
hereinafter called "Casualty Occurrences"), Sublessee shall promptly and fully
notify Sublessor in writing thereof if the aggregate original Capitalized
Sublessor's Cost of all Lease Assets at any single Lease Assets Location subject
to Casualty Occurrences is in excess of $5,000.
(a) With respect to any unit of Equipment having suffered a Casualty
Occurrence, on the Rent Payment Date next succeeding the later of the Casualty
Occurrence or twenty (20) days after such Casualty Occurrence (but in no event
later than the date of expiration of the Term with respect to such unit of
Equipment having suffered the Casualty Occurrence) (the "Equipment Payment
Date"), Sublessee shall (regardless of whether Sublessee is required to notify
Sublessor thereof pursuant hereto) either (as selected by Sublessee, if
applicable):
(1) so long as no Default or event which, with the giving of notice or
the lapse of time (or both) would become such a Default has then occurred
hereunder and the Real Estate upon which the Equipment having suffered the
Casualty Occurrence is installed has not also suffered a Casualty Occurrence,
request Sublessor to cause Lessor to replace the unit of Equipment having
suffered the Casualty Occurrence with equipment of at least the value, utility
and remaining useful life and in as good an operating condition as the unit of
Equipment having suffered the Casualty Occurrence immediately before the
Casualty Occurrence, assuming that such unit of Equipment had been maintained in
accordance with the provisions of this Agreement, and otherwise in accordance
with the provisions of Section V(e) hereof; or
(2) pay Sublessor the sum of (x) the Stipulated Loss Value of such
unit of Equipment calculated in accordance with Annex D to the applicable
Schedule as of the Rent Payment Date next preceding such Casualty Occurrence
(the "Equipment Calculation Date"); and (y) all Rents and other amounts which
are due hereunder as of the Equipment Payment Date. Upon payment of all sums due
hereunder, the Term as to such unit of Equipment shall terminate and (except in
the case of the loss, theft or
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complete destruction of such of Equipment) Sublessee shall be entitled to
recover possession of such unit of Equipment and, to the extent not previously
applied toward the payment of such sums, to receive and keep all insurance
and/or condemnation proceeds paid to Sublessee (or Sublessor) on account of such
Casualty Occurrence.
(b) With respect to any Real Estate having suffered a Casualty Occurrence,
on the Rent Payment Date next succeeding the later of the Casualty Occurrence or
sixty (60) days after such Casualty Occurrence (but in no event later than the
date of expiration of the Term with respect to such unit of Equipment having
suffered the Casualty Occurrence) (the "Real Estate Payment Date"), Sublessee
shall (regardless of whether Sublessee is required to notify Sublessor thereof
pursuant hereto) either:
(1) proceed to repair, rebuild, or replace such Real Estate (and
replace any Equipment located thereon in accordance with Section V(e) hereof),
subject to the terms and conditions set forth herein (provided that such repair,
rebuilding or replacement is completed within one (1) year after the Real Estate
Payment Date); or
(2) pay Sublessor the sum of (x) the Stipulated Loss Value of such
Real Estate calculated in accordance with Annex D to the applicable Schedule as
of the Rent Payment Date next preceding such Casualty Occurrence (the "Real
Estate Calculation Date"); and (y) all Rents and other amounts which are due
hereunder as of the Real Estate Payment Date. Upon payment of all sums due
hereunder, the Term as to such Real Estate shall terminate and Sublessee shall
be entitled to recover possession of such Real Estate and, to the extent not
previously applied toward the payment of such sums, to receive and keep all
insurance and/or condemnation proceeds paid to Sublessee (or Sublessor) on
account of such Casualty Occurrence.
Sublessee shall have the option of repairing, rebuilding or
replacing damaged or destroyed Real Estate only if (x) Sublessor consents
thereto in writing (which consent may be withheld by Sublessor in its sole
discretion) and (y):
(i) no Default or event which, with the giving of notice or the
lapse of time (or both), would become such a Default has then occurred
hereunder;
(ii) such restoration or replacement is permitted by the terms of
the Ground Lease or Premises Lease (if applicable) or the landlord under such
Ground Lease or Premises Lease otherwise consents in writing to such restoration
or replacement;
(iii) restoration or replacement of the damaged Real Estate will
not result in any decrease in value or other impairment of the Real Estate; and
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(iv) the funds available for any restoration or replacement
(including, without limitation, any insurance or condemnation proceeds) are
sufficient to pay the cost of restoration or replacement of the damaged Real
Estate.
If Sublessee chooses to repair, rebuild, or replace the Real
Estate, any condemnation proceeds or the proceeds of any casualty insurance
covering such Real Estate may be applied to the restoration or replacement if
all of the following conditions are met, to the satisfaction of Sublessor in its
sole discretion:
(A) the proceeds and, if deemed necessary by Sublessor,
additional deposits made by Sublessee which may be necessary to restore or
replace the Real Estate to substantially the same condition as existed
immediately prior to the damage, shall be deposited in an interest-bearing
escrow account as provided in clause (2)(A) of Section VII(b) of the Master
Lease;
(B) Sublessee promptly shall proceed to restore or replace
that portion of the Real Estate so damaged to substantially the same condition
as existed prior to the Casualty Occurrence, with such non-material changes,
alterations and modifications (including the substitution and addition of other
property) as may be desired by Sublessee, permitted by the Ground Lease or
Premises Lease (if any), and approved by Sublessor;
(C) all work shall be performed in accordance with all
applicable laws and regulations;
(D) Sublessee will request Sublessor to cause withdrawals to
be made from the escrow account to pay the costs of such restoration or
replacement as the work progresses, as certified by an architect or engineer
reasonably acceptable to Sublessor, by submitting to Sublessor such requisitions
and accompanying documents as Sublessor shall require; and
(E) Sublessee promptly will replace any lost or damaged
Equipment located on or in such Real Estate in accordance with the provisions of
Section V(e) hereof.
VIII. RISK OF LOSS:
Sublessee hereby assumes and shall bear the entire risk of any loss,
theft, damage to, or destruction of, any Equipment from any cause whatsoever
from the
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time the Equipment is shipped or delivered to Sublessee, and Sublessee hereby
assumes and shall bear the entire risk of any loss, theft, damage to, or
destruction of, any Real Estate from any cause whatsoever from the time
Sublessee enters into a Ground Lease or Premises Lease, or from the time a deed
is delivered under the Agency Agreement, as applicable during the Term of a
Schedule with respect to the Lease Assets described on such Schedule unless
Sublessee shall not be in actual possession of such Lease Assets by reason of
Sublessor's exercise of its remedies of repossession or dispossession pursuant
to Article XI hereof and such loss, theft, damage to, or destruction of, such
Lease Assets was not caused by acts or omissions prior to any such repossession
or dispossession. No loss of or damage to the Lease Assets or any item thereof
shall impair any obligation of Sublessee hereunder or under the Agency
Agreement, and all such obligations of Sublessee shall continue in full force
and effect.
IX. INSURANCE:
Sublessee agrees, at its own expense, to keep: (a) all Equipment
insured for such amounts as specified in Paragraph D of the applicable Schedule
and against such hazards as Sublessor may require, including, but not limited
to, insurance for damage to or loss of such Equipment, with a loss payable
clause in favor of Lessor and Sublessor, as their interests may appear,
irrespective of any breach of warranty or other act or omission of Sublessee;
(b) all Real Estate insured in an amount at least equal to the replacement value
of such Real Estate, against such hazards as Sublessor shall require, including
(but not limited to) loss or damage resulting from fire and other risks insured
against by extended coverage, with a standard mortgagee's endorsement in favor
of Lessor and Sublessor, as their interests may appear, irrespective of any
breach of warranty or act or omission of Sublessee; (c) in full force and effect
liability coverage against personal injuries, death or property damage, relating
to the Lease Assets for such amounts as specified in Paragraph D of the
applicable Schedule, with Lessor and Sublessor named as additional insured; and
(d) in full force and effect a flood insurance policy in an amount equal to the
maximum limit of coverage available with respect to any Real Estate located in a
special flood hazard area; provided that Sublessee shall not be required to have
such flood insurance policy with respect to such Real Estate if Sublessor
receives an acceptable flood zone determination from Transamerica, a registered
land surveyor, or another reputable flood certification company reasonably
acceptable to Sublessor to the effect that such Real Estate is not located in a
special flood hazard area. All such policies shall be with companies, and on
terms, satisfactory to Sublessor. All insurance required hereunder may be
subject to such deductibles as reasonably are acceptable to Sublessor. Sublessee
agrees to deliver to Sublessor evidence of insurance satisfactory to Sublessor.
No insurance shall be subject to any co-insurance clause. Sublessee hereby
appoints Sublessor as Sublessee's
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attorney-in-fact to make proof of loss and claim for insurance, and to make
adjustments with insurers and to receive payment of and execute or endorse all
documents, checks or drafts in connection with payments made as a result of such
insurance policies to the extent that they cover the Lease Assets. Any expense
of Sublessor in adjusting or collecting insurance shall be borne by Sublessee.
Sublessee will not make adjustments with insurers except (i) with respect to
claims for damage to any Lease Assets at any one Lease Assets Location where the
repair costs do not exceed $25,000, or (ii) with Sublessor's written consent.
Said policies shall provide that the insurance may not be altered or canceled by
the insurer until after thirty (30) days written notice to Sublessor. Provided
that Sublessee is not then in Default, Sublessor will (subject to Sublessee's
election pursuant to Section VII hereof) apply any insurance proceeds received
by Sublessor on account of a Casualty Occurrence to the cost of repairing or
replacing the Lease Assets having suffered such Casualty Occurrence or to
Sublessee's obligation to pay the Stipulated Loss Value pursuant to Sections
VII(a)(2) or VII(b)(3) hereof. After Default, Sublessor may, at its option,
apply proceeds of insurance, in whole or in part, to (i) repair or replace Lease
Assets or any portion thereof, or (ii) satisfy any obligation of Sublessee to
Sublessor hereunder.
X. RETURN OF LEASE ASSETS:
(a) Upon the expiration or termination of the Term of any Schedule, or upon
exercise of Sublessor's option to return the Lease Assets pursuant to Section
XVIII(c) of the Master Lease, unless Sublessee shall have exercised its
extension option pursuant to Section XVIII(a) hereof, or its purchase option
pursuant to Section XVIII(d) hereof or unless Sublessee shall be deemed to have
elected to exercise its purchase option pursuant to Section XVIII(e) hereof,
Sublessee shall promptly, at its own cost and expense: (i) perform any testing
and repairs required to place the affected units of Equipment in the same
condition and appearance as when received by Sublessee (reasonable wear and tear
excepted) and in good working order for their originally intended purpose; (ii)
if deinstallation, disassembly or crating is required, cause such units of
Equipment to be deinstalled, disassembled and crated by an authorized
manufacturer's representative or such other service person as is satisfactory to
Sublessor; (iii) return such units of Equipment, free and clear of all liens and
encumbrances (other than those described in Section V(c)(1) hereof), to a
location within the continental United States as Sublessor shall direct; (iv)
remove all debris and rubbish and such items of furniture and equipment owned by
Sublessee and placed on any Real Estate as Sublessor shall require to be
removed, and (v) surrender possession of the Real Estate and (if applicable)
assign the applicable Ground Lease or Premises Lease to Sublessor. In addition,
Sublessee shall comply with the provisions of Annex F to the applicable
Schedule. At Sublessor's sole discretion, Sublessor may
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elect to abandon any or all of the Real Estate upon written notice to Sublessee;
whereupon all interest of Sublessor in such Real Estate shall be conveyed to
Sublessee.
(b) If Sublessee is required to comply with the requirements of Paragraph
(a) above, until Sublessee has fully complied with the requirements of Paragraph
(a) above, Sublessee's Rent payment obligation with respect to the applicable
Lease Assets and all other obligations under this Agreement shall continue from
month to month notwithstanding any expiration or termination of the Term.
Sublessor may terminate such continued leasehold interest upon five (5) days'
written notice to Sublessee. In addition to these Rents, Lessor shall have all
of its other rights and remedies available as a result of such nonperformance.
The delivery of keys to any Real Estate other than in connection with the
termination of this Agreement or any Schedule or pursuant to any termination
option validly exercised by Sublessee, shall not constitute a surrender of such
Real Estate or effect a termination of the Lease as to such Real Estate, whether
or not such keys are retained by Sublessor. The return of Lease Assets, whether
or not accepted by Sublessor, or the mutual termination of this Agreement, shall
not work a merger and, at the option of Sublessor, shall operate as an
assignment to Sublessor of all subleases or subtenancies.
(c) Sublessee hereby waives, to the extent permitted by law, all claims for
damages or other liability in connection with Sublessor's re-entering and taking
possession of the Lease Assets after the occurrence of a Default hereunder, and
Sublessee shall indemnify, defend, protect, and hold Sublessor harmless from and
against any such claims, damages, or other liability, and no such re-entry shall
be considered or construed to be a forcible entry, nor shall Sublessor be guilty
of forcible entry or forcible detainer.
XI. DEFAULT; REMEDIES:
(a) Sublessor may in writing declare this Agreement in default ("Default")
if: (1) Sublessee breaches its obligation to pay Rent or any other sum to
Sublessor when due and payable and fails to cure the breach within one (1) day;
(2) Sublessee breaches any of its insurance obligations under Section IX hereof,
or its obligations under Sections V(g) or the second sentence of XVI(n) hereof,
or its payment obligations under Section III hereof; (3) Sublessee breaches any
of its other obligations hereunder and fails to cure that breach within twenty
(20) days after written notice thereof; (4) any representation or warranty made
by Sublessee in connection with this Sublease shall be false or misleading in
any material respect; (5) Sublessee becomes insolvent or ceases to do business
as a going concern; (6) a petition is filed by or against Sublessee under any
bankruptcy or insolvency laws and, if such petition is filed against Sublessee,
such petition has not been dismissed in 60 days; (7) Sublessee shall have
terminated its existence, consolidated with, merged into, or conveyed or leased
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substantially all of its assets as an entirety to any person without Sublessor's
prior consent in writing; (8) Sublessee shall be in default ("Material
Indebtedness Default") under any material obligation for borrowed money, for the
deferred purchase price of property or any lease agreement for an amount in
excess of One Million Dollars ($1,000,000) ("Material Indebtedness") and such
Material Indebtedness Default is not cured within the applicable grace period,
if any (provided, however, that if such Material Indebtedness is accelerated by
the creditor with respect thereto as a result of the Material Indebtedness
Default, then such Material Indebtedness Default immediately shall constitute a
Default hereunder); (9) Sublessee shall be in default under, or breach any
provision of, the Associated Documents (as defined in the [Second] Amended and
Restated Inducement Agreement, dated as of the date hereof, between Sublessor
and Sublessee); (10) there shall have occurred any default or violation or
breach in the performance or observation of any obligation or condition to be
performed or observed by Sublessee under any agreement between Sublessor and
Sublessee; or (11) this Agreement or any document executed and delivered in
connection herewith shall (except in accordance with the terms thereof) cease to
be effective, or any security interest or lien granted in connection herewith
shall (except as a result of any action taken by Sublessor or a failure by
Sublessor to file a continuation statement) cease to be a perfected first lien.
Such declaration of Default shall apply to all Schedules. IN CONNECTION WITH THE
DECLARATION OF ANY DEFAULT HEREUNDER, SUBLESSEE HEREBY WAIVES (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) ANY REQUIREMENT UNDER APPLICABLE LAW OR REGULATIONS
THAT A NOTICE FROM SUBLESSOR NOT BECOME EFFECTIVE UNTIL A PERIOD OF DAYS HAS
ELAPSED.
(b) After a Default, Sublessee shall, without further demand, forthwith pay
to Sublessor (i) as liquidated damages for loss of a bargain and not as a
penalty, the Stipulated Loss Value of the Lease Assets (calculated in accordance
with Annex D to the applicable Schedule(s) as of the Rent Payment Date next
preceding the declaration of Default), (ii) all Rents and other sums then due
hereunder (iii) its allocable share of any other costs incurred by Sublessor as
a result of such Default (including its allocable share of breakage expenses
paid by Sublessor to Lessor pursuant to Section XI(b) of the Master Lease). If
Sublessee fails to pay the amounts specified in the preceding sentence, then in
addition to the obligation to pay such amounts, at the request of Sublessor,
Sublessee shall comply with the provisions of Section X hereof relating to the
return of Lease Assets. Sublessee hereby authorizes Sublessor to enter, with or
without legal process, any Real Estate or Lease Assets Location and take
possession of the Lease Assets. Sublessor may, but shall not be required to,
sell Lease Assets at private or public sale, in bulk or in parcels, with or
without notice, and without having the Lease Assets present at the place of
sale; or Sublessor may, but shall not be required to, lease, otherwise dispose
of or keep idle all or part of the Lease Assets and
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Sublessor may use Sublessee's premises for the foregoing without liability for
rent, costs, damages or otherwise. Sublessor may also exercise any and all
available remedies under any collateral assignment of lease made by Sublessee to
Sublessor or Lessor including, without limitation, the Collateral Assignments of
Lease, including (but not limited to) selling, transferring or assigning the
leasehold estate created by the Ground Leases or the Premises Leases. The
proceeds of sale, lease or other disposition, if any, shall be applied in the
following order of priorities: (1) to pay Sublessee's pro rata share of any
amounts owed by Sublessor to Lessor under the Master Lease; then (2) to pay all
of Sublessor's costs, charges and expenses incurred in taking, removing,
holding, repairing and selling, leasing or otherwise disposing of Lease Assets;
then, (3) to the extent not previously paid by Sublessee, to pay Sublessor all
sums due from Sublessee hereunder; and (4) any surplus shall be paid to
Sublessee. Sublessee shall pay any deficiency in clauses (1), (2) and (3)
forthwith. Upon the occurrence of any Default hereunder, Sublessor shall have a
period of twenty-four (24) months in which to sell the Equipment and Leasehold
Improvements on site at the Lease Assets Locations which are Fee Properties.
During such period, Sublessee shall continue to insure and maintain the Lease
Assets as provided herein (but shall not be required to pay Rent with respect
thereto) and shall provide Sublessor and its authorized representatives and
prospective purchasers access to the Lease Assets for remarketing purposes.
(c) In addition to the foregoing rights, after a Default, Sublessor may, by
notice to Sublessee, rescind or terminate this Agreement as to any or all of the
Lease Assets; provided, however, that (1) no reletting, reentry or taking
possession of any of the Lease Assets by Sublessor shall be construed as an
election on Sublessor's part to terminate this Agreement, (2) notwithstanding
any reletting, reentry, or taking of possession, Sublessor may at any time
thereafter elect to terminate this Agreement for a continuing Default, and (3)
no agreement accepting a surrender of any or all of the Lease Assets shall be
valid unless the same be made in writing and executed by the Sublessor.
(d) After a Default, Sublessor may, at its option, elect not to terminate
this Agreement and continue to collect all Rent payments and other amounts due
hereunder and enforce Sublessee's obligations hereunder as and when the same
become due, or are to be performed, provided that it does not require Sublessee
to return any of the Lease Assets or to pay the amounts specified in the first
sentence of Section XI(b) hereof; and at the option of Sublessor, upon any
abandonment of the Lease Assets by Sublessee or reentry of same by Sublessor,
Sublessor may, at its sole discretion, make necessary repairs in order to relet
the Leased Assets, and relet the Leased Assets (or any part thereof) for such
term or terms (which may be for a term extending beyond the Term of this
Agreement) and at such rental or rentals, and upon such other terms
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and conditions as Sublessor in its discretion shall deem advisable; and upon
such reletting, all rentals actually received by Sublessor shall be applied to
Sublessee's obligations hereunder in the order set forth in the sixth sentence
of Section XI(b) hereof. Anything in this Agreement or applicable law to the
contrary notwithstanding Sublessor shall have no obligation to relet the Lease
Assets after a Default.
(e) After a Default, and only if Sublessee fails to pay the amounts
specified in the first sentence of Section XI(b) hereof, separate suits may be
brought to collect any damages for any periods, and such suits shall not in any
manner prejudice Sublessor's right to collect any such damages for any
subsequent periods, or Sublessor may defer any such suits until after the
expiration of the Term, in which event the right to bring such suits shall not
be deemed to have accrued until the end of the Term.
(f) After a Default, and only if Sublessee fails to pay the amounts
specified in the first sentence of Section XI(b) hereof, Sublessor may, as a
matter of right and without notice to Sublessee, and without regard to the value
of the Lease Assets or the solvency of Sublessee, apply to any court having
jurisdiction to appoint a receiver or receivers of the Lease Assets, and
Sublessee irrevocably consents to any such appointment. Any such receiver(s)
shall have all of the usual powers of receivers in similar cases and all of the
powers and duties of Sublessor in case of entry, and shall continue to have such
powers until confirmation of the sale of the Lease Assets, unless such
receivership is sooner terminated.
(g) After a Default, and only if Sublessee fails to pay the amounts
specified in the first sentence of Section XI(b) hereof, Sublessor may require
any subtenant or other person in possession of any or all of the Lease Assets to
attorn to Sublessor, in which event Sublessor shall undertake the obligations of
Sublessee under any sublease; provided, however, that Sublessor shall not be
liable for any amounts paid by a subtenant to Sublessee or for any defaults by
Sublessee.
(h) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies which may be
available at law, in equity, or under statute and Sublessor may exercise any or
all such remedies to enforce the terms hereof or recover damages for breach
hereof. Sublessee waives notice of sale or other disposition (and the time and
place thereof), and the manner and place of any advertising. If permitted by
law, Sublessee shall pay reasonable attorney's fees actually incurred by
Sublessor in enforcing the provisions of this Agreement and any ancillary
documents. Waiver of any Default shall not be a waiver of any other or
subsequent Default.
(i) Any Default under the terms of this Agreement may be declared by
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Sublessor a default under any other agreement between Sublessor and Sublessee.
WAIVER OF CERTAIN RIGHTS. IF THIS AGREEMENT OR ANY SCHEDULE SHALL BE TERMINATED
AS HEREIN ABOVE SET FORTH, SUBLESSEE WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, (A) ANY NOTICE OF RE-ENTRY OR THE INSTITUTION OF LEGAL PROCEEDINGS TO
OBTAIN RE-ENTRY OR REPOSSESSION; (B) ANY RIGHT OF REDEMPTION, RE-ENTRY OR
REPOSSESSION; AND (C) THE BENEFIT OF ANY LAW NOW OR HEREAFTER EXEMPTING PROPERTY
FROM LIABILITY FOR RENT OR FOR DEBT OR LIMITING LESSOR WITH RESPECT TO THE
ELECTION OF REMEDIES.
XII. ASSIGNMENT; SUB-LETTING:
(a) EXCEPT AS EXPRESSLY PROVIDED HEREIN (INCLUDING, WITHOUT LIMITATION,
SUBLEASING A PORTION OF ANY REAL ESTATE FOR OPERATION OF AN "EINSTEIN BROS.
BAGELS" OR "NOAH'S NEW YORK BAGELS" LOCATION), SUBLESSEE SHALL NOT ASSIGN,
MORTGAGE, SUBLET OR HYPOTHECATE ANY LEASE ASSETS OR THE INTEREST OF SUBLESSEE
HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF SUBLESSOR WHICH MAY BE WITHHELD
IN SUBLESSOR'S SOLE AND ABSOLUTE DISCRETION.
(b) Subject always to the foregoing, this Agreement inures to the benefit
of, and is binding upon, the successors and assigns of the parties hereto.
XIII. NET LEASE; NO SET-OFF, ETC.:
This Agreement is a net lease. Sublessee's obligation to pay Rent and other
amounts due hereunder shall be absolute and unconditional. Sublessee shall not
be entitled to any abatement or reductions of, or set-offs against, said Rent or
other amounts, including, without limitation, those arising or allegedly arising
out of claims (present or future, alleged or actual, and including claims
arising out of strict liability in tort or negligence of Sublessor) of Sublessee
against Sublessor under this Agreement or otherwise. This Agreement shall not
terminate and the obligations of Sublessee shall not be affected by reason of
any defect in or damage to, or loss of possession, use or destruction of, any
Lease Assets from whatsoever cause. It is the intention of the parties that
Rents and other amounts due hereunder shall continue to be payable in all events
in the manner and at the times set forth herein unless the obligation to do so
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shall have been terminated pursuant to the express terms hereof.
XIV. INDEMNIFICATION:
(a) Sublessee hereby agrees to indemnify, save and keep harmless Sublessor
and its Affiliates, successors and assigns, directors, officers, employees and
agents, from and against any and all losses, damages, penalties, injuries,
claims, actions and suits, including legal expenses, of whatsoever kind and
nature, in contract or tort, and including, but not limited to, Sublessor's
strict liability in tort, arising out of (i) the selection, manufacture,
purchase, construction, acceptance or rejection of Lease Assets, the ownership
of Lease Assets during the Term, and the delivery, lease, possession,
maintenance, uses, condition, return or operation of the Lease Assets
(including, without limitation, latent and other defects, whether or not
discoverable by Sublessor or Sublessee and any claim for patent, trademark or
copyright infringement or environmental damage), or (ii) the condition of Lease
Assets sold or disposed of after use by Sublessee or employees of Sublessee;
provided, however, that Sublessee shall have no obligation hereunder to
Sublessor or its agents, employees, successors and assigns to the extent that
any of the foregoing results from the gross negligence or willful misconduct of
Sublessor. Sublessee shall, upon request, defend any actions based on, or
arising out of, any of the foregoing.
(b) Sublessee shall defend, indemnify and hold harmless Sublessor and its
Affiliates, successors and assigns, directors, officers, employees and agents,
from and against any Environmental Claim or Environmental Loss and Sublessee
shall fully and promptly pay, perform and discharge any such Environmental Claim
or Environmental Loss; provided, however, that Sublessee shall have no
obligation hereunder with respect to any Environmental Claim or Environmental
Loss (i) to the extent any of the foregoing arises from the gross negligence or
willful misconduct of Sublessor or any of its Affiliates or (ii) for any use,
generation, storage, Environmental Emission, or presence in violation of any
Environmental Laws of any Contaminant initially introduced onto a Lease Assets
Location after (x) Sublessor's exercise of its remedies of repossession or
dispossession pursuant to Section XI hereof with respect to such Lease Assets
Location, or (y) the return or surrender of the Real Estate at such Lease Assets
Location by Sublessee in accordance with Section X hereof.
As used herein,
(1) "Adverse Environmental Condition" shall refer to (i) the existence
or the continuation of the existence, of an Environmental Emission
(including, without limitation, a sudden or non-sudden
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accidental or non-accidental Environmental Emission), of, or exposure to,
any Contaminant, odor or audible noise in violation of any applicable
Environmental Law, at, in, by, from or related to any Lease Assets, (ii)
the environmental aspect of the transportation, storage, treatment or
disposal of materials in connection with the operation of any Lease Assets
in violation of any applicable Environmental Law, or (iii) the violation,
or alleged violation, of any Environmental Law connected with any Lease
Assets.
(2) "Affiliate" shall refer, with respect to any given Person, to any
Person that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person.
(3) "Contaminant" shall refer to those substances which are regulated
by or form the basis of liability under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls ("PCBs"), and
radioactive substances.
(4) "Environmental Claim" shall refer to any accusation, allegation,
notice of violation, claim, demand, abatement or other order or direction
(conditional or otherwise) by any governmental authority or any Person for
personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment or other adverse
effects on the environment, or for fines, penalties or restrictions,
resulting from or based upon any Adverse Environmental Condition.
(5) "Environmental Emission" shall refer to any actual or threatened
release, spill, omission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any of the Lease Assets, including, without
limitation, the movement of any Contaminant or other substance through or
in the air, soil, surface water, groundwater, or property.
(6) "Environmental Law" shall mean any Federal, foreign, state or
local law, rule or regulation pertaining to the protection of the
environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section
9601 et seq.), the Hazardous Material Transportation
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Act (49 U.S.C. Section 1801 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. Section 1361 et seq.), and the Occupational Safety and Health Act
(19 U.S.C. Section 651 et seq.), as these laws have been or may hereafter
be amended or supplemented, and any analogous foreign, Federal, state or
local statutes, and the regulations promulgated pursuant thereto.
(7) "Environmental Loss" shall mean any loss, cost, damage, liability,
deficiency, fine, penalty or expense (including, without limitation,
reasonable attorneys' fees, engineering and other professional or expert
fees), investigation, removal, cleanup and remedial costs (voluntarily or
involuntarily incurred to the extent required by Environmental Laws) and
damages to, loss of the use of or decrease in value of the Lease Assets
arising out of or related to any Adverse Environmental Condition.
(8) "Person" shall include any individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority, or other
entity of whatever nature.
(c) All of Sublessor's rights, privileges and indemnities contained in this
Section shall survive the expiration or other termination of this Agreement and
the rights, privileges and indemnities contained herein are expressly made for
the benefit of, and shall be enforceable by Sublessor and its successors and
assigns.
XV. DISCLAIMER:
(a) SUBLESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE LEASE ASSETS WITHOUT
ANY ASSISTANCE FROM SUBLESSOR OR ITS AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS. SUBLESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE
OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN
OR ORAL, WITH RESPECT TO THE EQUIPMENT SUBLEASED HEREUNDER OR ANY COMPONENT
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO
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DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP,
MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT,
TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between
Sublessor and Sublessee, are to be borne by Sublessee. Without limiting the
foregoing, Sublessor shall have no responsibility or liability to Sublessee or
any other person with respect to any of the following (i) any liability, loss or
damage caused or alleged to be caused directly or indirectly by any Lease
Assets, any inadequacy thereof, any deficiency or defect (latent or otherwise)
therein, or any other circumstance in connection therewith; (ii) the use,
operation or performance of any Lease Assets or any risks relating thereto;
(iii) any interruption of service, loss of business or anticipated profits or
consequential damages; or (iv) the delivery, operation, servicing, maintenance,
repair, improvement or replacement of any Lease Assets. If, and so long as, no
Default exists under this Agreement, Sublessee shall be, and hereby is,
authorized during the term of this Agreement to assert and enforce, at
Sublessee's sole cost and expense, from time to time, in the name of and for the
account of Sublessor and/or Sublessee, as their interests may appear, whatever
claims and rights Sublessor may have against any supplier of the Lease Assets.
In no event shall Lessor be deemed to be a supplier of Lease Assets for purposes
of this Section XV(a).
(b) In the absence of a Default under this Agreement or a Lease Default (as
hereinafter defined) and subject to the provisions of Sections I(e) and I(f)
hereof, neither Sublessor nor any person acting by, through or under Sublessor,
shall take any actions to interfere with Sublessee's quiet enjoyment of the
Lease Assets during the Term.
(c) Sublessee acknowledges and agrees that Sublessor assumes no obligation
or liability with respect to this Agreement or the delivery of any document
referred to herein, and Sublessee agrees that it shall look solely to Sublessor
for the performance of such obligations, except in the event that Sublessee,
upon the direction of Lessor, shall attorn to such Lessor as lessor under this
Sublease or Lessor has otherwise assumed Sublessor's responsibilities hereunder.
XVI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBLESSEE:
Sublessee hereby represents, warrants and covenants to Sublessor that on
the date hereof and on the date of execution of each Schedule:
(a) Sublessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "Documents") and
is
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duly qualified to do business wherever necessary to carry on its present
business and operations, including the jurisdictions where the Equipment or
other Lease Assets are (or are to be) located.
(b) The Documents have been duly authorized, executed and delivered by
Sublessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into or
performance by Sublessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Sublessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Sublessee or
any provision of Sublessee's articles of incorporation, charter or by-laws, if
Sublessee is a corporation, or Sublessee's partnership agreement, if Sublessee
is a partnership, or Sublessee's certificate of formation and operating
agreement, if Sublessee is a limited liability company; or (ii) result in any
breach of, constitute a default (which breaches or default would have,
individually or in the aggregate, a material adverse effect) under or result in
the creation of any lien, charge, security interest or other encumbrance upon
any Lease Assets pursuant to any agreement, indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument (other than this Agreement) to
which Sublessee is a party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Sublessee, which will adversely affect the ability of Sublessee to fulfill its
obligations under this Agreement.
(f) Sublessee is a corporation, limited liability company or partnership,
as the case may be, duly organized, validly existing and in good standing under
the laws of the State of its organization (specified in the first sentence of
this Sublease).
(g) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property, regardless of the degree of its annexation to
any real property and shall not by reason of any installation in, or affixation
to, real or personal property become a part thereof. Any Leasehold Improvements
which do not constitute personal property shall be affixed only to the real
property leased to Sublessee pursuant to Ground Leases or Premises Leases which
have been duly and validly collaterally assigned to Lessor or Sublessor.
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(h) The Lease Assets will at all times be used for commercial or business
purposes.
(i) Sublessee is in compliance in all material respects with all applicable
Environmental Laws with respect to the Real Estate and each Lease Assets
Location where Leasehold Improvements are located and, to Sublessee's knowledge,
no circumstances exist which would prevent or interfere with such compliance.
Except as set forth in any Phase I environmental audit delivered to Lessor and
Sublessor in connection with the acquisition of Real Estate after the date
hereof, to the knowledge of Sublessee, (1) there are no pending or threatened
Environmental Claims related to any of the Real Estate or any of the Lease
Assets Locations where Leasehold Improvements are located which, if adversely
determined, would have a material adverse effect on Sublessee, (2) no
Contaminants are present on any of the Real Estate or Lease Assets Locations
where Leasehold Improvements are located other than such materials as (i) are
handled or stored in accordance with all applicable Environmental Laws, or (ii)
would not require the conduct of investigative or remedial action pursuant to
Environmental Laws, and (3) Sublessee has not transported, disposed of, or
arranged for the disposal of any Contaminants on any of the Real Estate or Lease
Assets Locations where Leasehold Improvements are located except (i) in
accordance with all applicable Environmental Laws, or (ii) in concentrations or
conditions which would not require the conduct of investigative or remedial
action pursuant to Environmental Laws.
(j) The current and proposed use of the Real Estate is authorized under all
applicable laws and regulations which, absent such authorization, would have a
material adverse effect on the operations of Sublessee, and Sublessee has
obtained all licenses and permits necessary for the operation of each unit of
Real Estate and each Lease Assets Location as a "Boston Market" or "Boston
Carver" location. Sublessee shall not modify or rescind any such licenses or
permits or take any action which would cause the loss of such licenses or
permits. Sublessee shall take all action to obtain all necessary extensions or
renewals of such licenses and permits.
(k) Each unit of Real Estate is connected to and serviced by all water,
sewage, disposal, gas and electrical facilities necessary for the operation of
such unit of Real Estate.
(l) There are no claims for payment for labor performed or materials
furnished to any of the Real Estate which could give rise to a mechanic's lien
or materialman's lien on such Real Estate except those being contested in good
faith, for which Sublessee has obtained a bond pending appeal.
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(m) All Leasehold Improvements and Fee Improvements have been constructed
in a good and workmanlike manner, substantially in accordance with (1) approved
prototype plans, (2) all land use and construction permits and approvals and (3)
all applicable laws and regulations, including all zoning rules and the
Americans with Disabilities Act.
(n) Sublessee represents to Sublessor that it has good title to the
Equipment and/or the Leasehold Improvements described in any Bill of Sale
delivered hereunder, free and clear of all liens and encumbrances (subject only
to Sublessor's security interest therein and to Permitted Liens). In the event
Sublessor determines that such representation as to title by Sublessee shall
prove untrue in any material respect, then, within five (5) days of written
notice from Sublessor to Sublessee of such occurrence (the date on which
Sublessee receives such notice from Sublessor is referred to as the "Notice
Date"), Sublessee shall either (i) purchase all units of the Equipment (the
"Affected Equipment") with respect to which such representation is untrue for a
purchase price equal to the then Stipulated Loss Value of such units of the
Affected Equipment or (ii) if Sublessor requires, replace such Equipment
pursuant to Section V(f) hereof.
(o) Sublessee 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.
XVII. OWNERSHIP FOR TAX PURPOSES, ETC.; GRANT OF SECURITY INTEREST; USURY
SAVINGS:
(a) For income tax purposes, Sublessor will treat Sublessee as the owner of
the Lease Assets. Accordingly, Sublessor agrees (i) to treat Sublessee as the
owner of the Lease Assets on its Federal income tax return, (ii) not to take
actions or positions inconsistent with such treatment on or with respect to its
Federal income tax return, and not claim any tax benefits available to an owner
of the Lease Assets on or with respect to its Federal income tax return. The
foregoing undertakings by Sublessor shall not be violated by Sublessor's taking
a tax position through inadvertence so long as such inadvertent tax position is
reversed by Sublessor promptly upon its discovery. Sublessor shall in no event
be liable to Sublessee if Sublessee fails to secure any of the tax benefits
available to the owner of the Lease Assets. It is the intent of the parties
hereto that: (i) for the purposes of Sublessee's financial reporting, the
transaction contemplated hereby shall be treated by Sublessee as an operating
lease from Sublessor to Sublessee, (ii) for other purposes, including Federal
and state income tax, bankruptcy and Uniform Commercial Code purposes (1)
Sublessee shall be treated as
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the owner of the Lease Assets, (2) this Agreement grants a security interest or
lien, as the case may be, in the Lease Assets and other collateral to Sublessor,
and (3) the obligations of Sublessee to pay Rent shall be treated as payments of
principal and interest to Sublessor by Sublessee.
(b) In order to secure the prompt payment of the Rent and all of the other
amounts from time to time outstanding hereunder and with respect to the
Schedules, and the performance and observance by Sublessee of all the
agreements, covenants and provisions hereof and thereof (including, without
limitation, all of the agreements, covenants and provisions hereof that are
incorporated in the Schedules):
(1) Sublessee hereby grants to Sublessor a security interest in the
Equipment and Leasehold Improvements subleased hereunder, together with all
additions, attachments, accessories and accessions thereto whether or not
furnished by the supplier of the Equipment or Leasehold Improvements and any and
all substitutions or replacements therefor, in each such case in which Sublessee
shall from time to time acquire an interest, and any and all insurance and/or
other proceeds (but without Sublessee having any power of sale) of the property
in and against which a security interest is granted hereunder;
(2) to the extent the Equipment and Leasehold Improvements may
constitute or be deemed to be Sublessee's inventory (the "Inventory"), Sublessee
hereby grants to sublessor a security interest in such Inventory, which shall
mean all Equipment and Leasehold Improvements offered or furnished under any
contract of service or intended for sale or lease, any and all additions,
attachments, accessories and accessions thereto, any and all substitutions,
replacements or exchanges therefor, any and all leases, subleases, rentals,
accounts and contracts with respect to the Equipment and Leasehold Improvements
which may now exist or hereafter arise, together with all rights thereunder and
all rental and other payments and purchase options due and to become due
thereunder, any and all sales proceeds payable for such property, all insurance,
bonds and/or other proceeds of the property and all returned or repossessed
Equipment and Leasehold Improvements now or at any time or times hereafter in
the possession or under the control of Sublessee or Sublessor;
(3) Sublessee hereby grants to Sublessor a security interest in, and
assigns, sets over and transfers to Sublessor, its successors and assigns, all
(except as otherwise provided herein) of its right, title and interest in and to
each Ground Lease and Premises Lease and all extensions and renewals thereof;
and, in furtherance thereof, shall execute and deliver to Sublessor a Collateral
Assignment of Lease with respect to each Ground Lease and Premises Lease;
provided, however, that Sublessee shall continue to pay and perform all
obligations required to be paid and performed by
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Sublessee, pursuant to the Ground Leases and Premises Leases notwithstanding
such assignment for collateral security purposes; and provided, further, that
Sublessor shall not exercise its rights hereunder unless and until a Default or
event which, with notice or the lapse of time or both, would constitute a
Default hereunder has occurred and is continuing.
(4) Upon Sublessee's request, and upon receipt from Lessor of
documentation acceptable to Sublessor, Sublessor shall at such time as all of
the obligations with respect to Lease Assets under this Agreement have been
indefeasibly paid or performed in full (including, without limitation, the
payment in full of all amounts required pursuant to the first sentence of
Section XI(b) hereof) execute and deliver termination statements and other
appropriate documentation reasonably requested by Sublessee, all at Sublessee's
expense, to evidence Sublessor's release of its security interest in such Lease
Assets and the related Inventory.
(5) Notwithstanding anything to the contrary set forth herein, the
parties acknowledge and agree that (a) solely with respect to any Schedule
describing Lease Assets located in any of the States of California, Florida,
Tennessee or Maryland (each such Schedule being hereinafter referred to as an
"Allocated Schedule" and, collectively, as the "Allocated Schedules"), the
security interest granted herein with respect to any collateral described in an
Allocated Schedule or relating to the Lease Assets described in such Allocated
Schedule separately shall secure only the prompt payment and performance of the
obligations of Sublessee pursuant to such separate Allocated Schedule (including
the provisions of this Agreement to the extent incorporated by reference in such
separate Allocated Schedule), and (b) any Collateral Assignment of Lease
executed and delivered by Sublessee in connection with a Ground Lease or
Premises Lease of property located in the States of California, Florida,
Tennessee or Maryland shall secure only the prompt payment and performance of
the obligations of Sublessee pursuant to the Allocated Schedule describing the
Lease Assets located at such property.
(c) To the extent that any Uniform Commercial Code financing statement
filed pursuant to this Agreement inadvertently covers property which Sublessee
specifically identifies and demonstrates, to the reasonable satisfaction of
Sublessor, is not intended to be subject to the security interest granted
pursuant to this Agreement, Sublessor shall, at Sublessee's sole cost and
expense, execute such instruments as are provided to it by Sublessee and as
reasonably may be necessary to release such property from such financing
statements, without representation or warranty, except that such property is
free and clear of any liens in favor of Sublessor or arising by reason of any
act or omission of Sublessor.
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(d) It is the intention of the parties hereto to comply with any applicable
usury laws to the extent that any Schedule is determined to be subject to such
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in any Schedule or the Agreement, in no event shall any Schedule
require the payment or permit the collection of interest in excess of the
maximum amount permitted by applicable law. If any such excess interest is
contracted for, charged or received under any Schedule or the Agreement, or in
the event that all of the principal balance shall be prepaid, so that under any
of such circumstances the amount of interest contracted for, charged or received
under any Schedule or the Agreement shall exceed the maximum amount of interest
permitted by applicable law, then in such event (1) the provisions of this
paragraph shall govern and control, (2) neither Sublessee nor any other person
or entity now or hereafter liable for the payment hereof shall be obligated to
pay the amount of such interest to the extent that it is in excess of the
maximum amount of interest permitted by applicable law, (3) any such excess
which may have been collected shall be either applied as a credit against the
then unpaid principal balance or refunded to Sublessee, at the option of the
Sublessor, and (4) the effective rate of interest automatically shall be reduced
to the maximum lawful contract rate allowed under applicable law as now or
hereafter construed by the courts having jurisdiction thereof. It is further
agreed that without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received under any Schedule or the Agreement
which are made for the purpose of determining whether such rate exceeds the
maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the indebtedness evidenced
hereby, all interest at any time contracted for, charged or received from
Sublessee or otherwise by Sublessor in connection with such indebtedness;
provided, however, that if any applicable state law is amended or the law of the
United States of America preempts any applicable state law, so that it becomes
lawful for Sublessor to receive a greater interest per annum rate than is
presently allowed, Sublessee agrees that, on the effective date of such
amendment or preemption, as the case may be, the lawful maximum hereunder shall
be increased to the maximum interest per annum rate allowed by the amended state
law or the law of the United States of America (but not in excess of the
interest rate contemplated hereunder).
XVIII. END OF SUBLEASE OPTIONS.
Upon the expiration of the Basic Term or any Renewal Term, as applicable,
of each Schedule, Sublessee shall, provided Sublessee is not then in default
under this Agreement, return, or purchase, or renew (if applicable) the Term
with respect to, all (but not less than all) of the Lease Assets (i) subleased
under all Schedules executed
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hereunder during any calendar year (if Sublessee returns the Lease Assets) or
(ii) subleased under all Schedules of a particular series executed hereunder
during any calendar year if Sublessee elects to purchase, or renew the Term with
respect to, the Lease Assets) (the Schedules having the same Maximum Sublease
Term executed hereunder during each calendar year shall be designated as being
Schedules of a particular series) upon the following terms and conditions. The
parties acknowledge and agree that the options set forth in Section XVIII(c)
hereof are exercisable by Sublessee with respect to all (but not less than all)
of the Lease Assets leased under all Schedules executed hereunder during any
calendar year and the options set forth in Sections XVIII(a), (b), and (d)
hereof are exercisable by Sublessee with respect to all (but not less than all)
of the Lease Assets leased under all Schedules of a particular series executed
hereunder during any calendar year and that the options applicable with respect
to the first Schedule of such series automatically shall be applicable with
respect to all Schedules of such series.
(a) Extension. So long as Sublessee shall not have exercised its option to
return the Lease Assets, or its purchase option pursuant to this Section, and
provided that Sublessee shall have exercised its option to renew this Agreement
pursuant to this Section with respect to all applicable Renewal Terms, with
Sublessor's and Lessor's prior written consent (which consent may be withheld at
their sole discretion) Sublessee shall have the option, upon the expiration of
the applicable Renewal Term of the first Schedule of a particular series to be
executed under this Agreement, to extend the Agreement with respect to all, but
not less than all, of the Lease Assets leased under all Schedules of such series
for an additional term of one (1) year (the "Extension Term") at a quarterly
rental to be paid in arrears on the same day of each quarter on which the prior
Renewal Term Rent installment was paid, and calculated as the product of (i) the
Capitalized Sublessor's Cost, times (ii) a lease rate factor calculated by
Sublessor, which when so multiplied times the Capitalized Sublessor's Cost, will
result in a product that is equal to the amount necessary fully to repay to
Sublessor any unpaid balance of the Capitalized Sublessor's Cost (determined as
of the date on which such Renewal Term expired), together with interest thereon
at the Interest Rate, in four (4) equal quarterly installments. At the end of
the Extension Term, provided that Sublessee is not then in Default under this
Agreement or any other agreement between Sublessor and Sublessee, Sublessee
shall purchase all, and not less than all, such Lease Assets, for $1.00 cash,
together with all Rent and other sums then due on such date, plus all taxes and
charges upon transfer and all other reasonable and documented expenses incurred
by Sublessor in connection with such transfer. Upon satisfaction of the
conditions specified in this Paragraph, and upon receipt from Lessor of
documentation acceptable to Sublessor, Sublessor will transfer to the purchaser
of such Lease Assets, on an AS IS, WHERE IS BASIS, without recourse to or
warranty from Sublessor, express or implied, of any kind whatsoever ("AS IS
BASIS"), all of
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Sublessor's interest in and to such Lease Assets and assign Sublessee's rights
under the applicable Ground Leases and Premises Leases. Sublessor shall not be
required to make and may specifically disclaim any representation or warranty as
to the condition of such Lease Assets and any other matters (except that
Sublessor shall warrant that it has conveyed whatever interest it received in
such Lease Assets free and clear of any lien or encumbrance created by
Sublessor). Sublessor shall, at Sublessee's expense, execute and deliver to
Sublessee such Uniform Commercial Code statements of termination and other
documents and instruments as reasonably may be required in order to terminate or
convey any interest of Sublessor in and to such Lease Assets.
(b) Renewal. So long as Sublessee shall not have exercised its option to
return the Lease Assets or its purchase option pursuant to this Section, and so
long as Sublessor shall not have exercised its option to return the Lease Assets
pursuant to Section XVIII(c) of the Master Lease, nor its purchase option
pursuant to Section XVIII(d) thereof, Sublessee shall have the option, upon the
expiration of the Basic Term of the first Schedule of a particular series
executed hereunder, or the initial Renewal Term, as applicable, to renew the
Agreement with respect to all, but not less than all, of the Lease Assets
leased under all Schedules of such series, for the Renewal Term at the Renewal
Term Rent. Including the Renewal Term, the maximum term of any Schedule of a
particular series executed hereunder shall be the Maximum Sublease Term.
(c) Return. Unless Sublessee shall have exercised its extension option or
its purchase option pursuant to this Section, and so long as Sublessor shall not
have exercised its option to return the Lease Assets pursuant to Section
XVIII(c) of the Master Lease, nor its purchase option pursuant to Section
XVIII(d) thereof, and subject to Sections XVIII(e) and (f) hereof, upon the
expiration of the Term of each Schedule of a particular series executed
hereunder, Sublessee shall return to Sublessor all (but not less than all) of
the Lease Assets described on all Schedules of a particular series executed
hereunder, upon the following terms and conditions: Sublessee shall (i) pay to
Sublessor on the last day of the Term of this Agreement with respect to each
individual Schedule of that particular series, in addition to the scheduled Rent
then due on such date and all other sums then due hereunder, a terminal rental
adjustment amount equal to the Sublessee's Obligation with respect to such Lease
Assets, (ii) return the Lease Assets to Sublessor in accordance with Section X
hereof, and (iii) assign the applicable Ground Leases and Premises Leases to
Sublessor or its assignee. Thereafter, upon return of all of the Lease Assets
described on all Schedules of such series, Sublessor and Sublessee shall arrange
for the commercially reasonable sale, scrap or other disposition of such Lease
Assets and the assignment of Sublessee's rights under the applicable Ground
Leases and Premises Leases. Upon satisfaction of the conditions specified in
this Paragraph, Sublessor will transfer to the purchaser of
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such Lease Assets, on an AS IS BASIS, all of Sublessor's interest in and to such
Lease Assets and assign Sublessee's rights under the applicable Ground Leases
and Premises Leases. Sublessor shall not be required to make and may
specifically disclaim any representation or warranty as the condition of such
Lease Assets and other matters (except that Sublessor shall warrant that it has
conveyed whatever interest it received in such Lease Assets free and clear of
any liens or encumbrances created by Sublessor). Sublessor shall, at Sublessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
statements of termination and other documents and instruments, as reasonably may
be required in order to terminate or convey any interest of Sublessor in and to
such Lease Assets. Upon the sale, scrap or other disposition of such Lease
Assets the net sales proceeds with respect to such Lease Assets sold will be
paid to, and held and applied by, Sublessor as follows: Sublessor shall promptly
thereafter pay to Sublessee an amount equal to the net proceeds, if any, of such
sale (less all reasonable costs, expenses and fees, including storage,
reasonable and necessary maintenance and other remarketing fees incurred by
Sublessor in connection with the sale, scrap, or disposition of such Lease
Assets) in excess of the Residual Risk Amount of such Lease Assets and
applicable taxes, if any.
(d) Purchase. So long as Sublessee shall not have exercised its extension
option or its option to return the Lease Assets pursuant to this Section, and so
long as Sublessor shall not have exercised its option to return the Lease Assets
pursuant to Section XVIII(c) of the Master Lease, nor its purchase option
pursuant to Section XVIII(d) thereof, and subject to Section XVIII(f) hereof,
Sublessee shall have the option, upon the expiration of the Term of the first
Schedule of a particular series, to purchase all (but not less than all) of the
Lease Assets described on all Schedules of such series (other than any Real
Estate not acquired pursuant to the Agency Agreement) upon the following terms
and conditions: If Sublessee desires to exercise this option, Sublessee shall
pay to Sublessor on the last day of the Term with respect to each individual
Schedule of such series, in addition to the scheduled Rent (if any) then due on
such date and all other sums then due hereunder, in cash the purchase price for
the Lease Assets so purchased, determined as hereinafter provided. The purchase
price of the Lease Assets shall be an amount equal to the Fixed Purchase Price
of such Lease Assets, plus all taxes and charges upon sale and all other
reasonable and documented expenses incurred by Sublessor in connection with such
sale, including, without limitation, any such expenses incurred based on a
notice from Sublessee to Sublessor that Sublessee intended to return any such
items of Lease Assets. Upon satisfaction of the conditions specified in this
Paragraph, and upon receipt from Lessor of documentation acceptable to
Sublessor, Sublessor will transfer, on an AS IS BASIS, all of Sublessor's
interest in and to such Lease Assets and release the applicable Collateral
Assignment of Lease. Sublessor shall not be required to make and may
specifically disclaim any representation or warranty as to the condition of such
Lease Assets and
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other matters (except that Sublessor shall warrant that it has conveyed whatever
interest it received in such Lease Assets free and clear of any lien or
encumbrance created by Sublessor). Sublessor shall, at Sublessee's expense,
execute and deliver to Sublessee such Uniform Commercial Code statements of
termination and other documents and instruments, as reasonably may be required
in order to terminate or convey any interest of Sublessor in and to such Lease
Assets.
(e) Sublessor's Return Option. In the event that Sublessor exercises its
option to return the Lease Assets pursuant to Section XVIII(c) of the Master
Lease, Sublessee shall return the Lease Assets to Sublessor in accordance with
Sections X and XVIII(c) hereof.
(f) Purchase in Connection with Default Under the Master Lease. Within
fifteen (15) days of Sublessee's receipt of written notice from Lessor that a
default under the Master Lease (a "Master Lease Default") has occurred,
Sublessee may, provided there has not occurred a Default under this Agreement,
by written irrevocable notice to Lessor, indicate its intention to purchase
Lessor's right, title and interest in the Lease Assets (other than any Real
Estate not acquired pursuant to the Agency Agreement). Any such purchase must
be completed no later than ninety (90) calendar days (the "Purchase Period")
from the date Sublessee receives the written notice from Lessor of such Master
Lease Default. The purchase price for such Lease Assets shall be an amount
equal to the Stipulated Loss Value of such Lease Assets, plus all Rents (as such
term is defined in the Master Lease) and other sums then due under the Master
Lease with respect to such Lease Assets, plus the allocated portion of any
breakage expense actually incurred by Lessor or any Participant (as such term is
defined in the Master Lease) in connection with such Master Lease Default
(allocated on the basis of the Capitalized Lessor's Cost of such Lease Assets to
the Capitalized Lessor's Cost of all Lease Assets (as such term is defined in
the Master Lease) lease pursuant to the Master Lease), plus all taxes and
charges upon sale and all other reasonable and documented expenses incurred by
Lessor in connection with such sale. Sublessee shall be unconditionally
obligated to purchase such Lease Assets upon the expiration of the Purchase
Period. Upon satisfaction of the conditons specified in this Paragraph,
including payment to Lessor of all amounts required hereunder, Lessor will
transfer to Sublessee, on an AS IS BASIS, all of Lessor's interest in and to
such Lease Assets. Lessor shall not be required to make and may specifically
disclaim any representation or warranty as to the condition of the Lease Assets
and other matters (except that Lessor shall warrant that it has conveyed
whatever interest it received in such Lease Assets free and clear of any lien or
encumbrance created by Lessor). Lessor shall execute and deliver to Sublessee
such Uniform Commercial Code statements of termination and other documents and
instruments as reasonably may be required in order to terminate or convey any
interest of Lessor in and to such Lease Assets.
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(g) Notice of Election. Sublessee shall give Sublessor written notice of
its election of the options specified in this Section not less than two hundred
and forty (240) days nor more than three hundred sixty-five (365) days before
the expiration of the Basic Term or the Renewal Term of the first Schedule of a
particular series to be executed under this Agreement. Such election shall be
effective with respect to all Lease Assets described on all Schedules of such
series. If Sublessee fails timely to provide such notice, without further action
Sublessee automatically shall be deemed to have elected (1) to renew the term of
this Agreement pursuant to Paragraph (b) of this Section if a Renewal Term is
then available hereunder, or (2) to purchase the Lease Assets pursuant to
Paragraph (d) of this Section if a Renewal Term is not then available hereunder.
XIX. MISCELLANEOUS:
(a) EACH OF SUBLESSOR AND SUBLESSEE HEREBY UNCONDITIONALLY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF, DIRECTLY OR INDIRECTLY, THIS SUBLEASE, ANY OF THE RELATED DOCUMENTS, ANY
DEALINGS BETWEEN SUBLESSEE AND SUBLESSOR RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED BETWEEN SUBLESSEE AND SUBLESSOR. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court (including, without limitation, contract claims, tort claims, breach of
duty claims, and all other common law and statutory claims). THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
(b) Any cancellation or termination by Sublessor, pursuant to the
provisions of this Agreement, any Schedule, supplement or amendment hereto shall
not release Sublessee from any then outstanding obligations to Sublessor
hereunder.
(c) Time is of the essence of this Agreement. Sublessor's failure at any
time to require strict performance by Sublessee of any of the provisions hereof
shall not
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waive or diminish Sublessor's right thereafter to demand strict compliance
therewith.
(d) Sublessee agrees, upon Lessor's or Sublessor's request, to execute any
instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor or Sublessor. Sublessor shall, to the extent reasonably
requested by Sublessee, cooperate with Sublessee to allow Sublessee to obtain
the contemplated tax benefits of this Agreement, including, without limitation,
the filing of any statement with respect to any tax abatements or other
requirements.
(e) All notices required to be given hereunder shall be in writing,
personally delivered, delivered by overnight courier service, sent by facsimile
transmission (with confirmation of receipt), or sent by certified mail, return
receipt requested, addressed to the other party at its respective address stated
above or at such other address as such party shall from time to time designate
in writing to the other party; and shall be effective from the date of receipt.
(f) This Agreement and its exhibits, and any Schedule and Annexes thereto,
and the Agency Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof. If there is any inconsistency between the
terms of the Agency Agreement and this Agreement, this Agreement shall control.
NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS
PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(g) The representations, warranties and covenants of Sublessee herein shall
be deemed to survive the closing hereunder. The acquisition and subleasing to
Sublessee by Sublessor of specific Lease Assets shall be conditioned upon
Sublessee providing to Sublessor such information with respect to Sublessee's
financial condition as Sublessor may require, and Sublessor being satisfied that
there shall have been no material adverse change in the business or financial
condition of Sublessee from the date of execution hereof. The obligations of
Sublessee under Sections III, X, XIV, XVIII(c) and XIX (k) hereof which accrue
during the Term of this Agreement and obligations which by their express terms
survive the termination of this Agreement, shall survive the termination of this
Agreement.
(h) In case of a failure of Sublessee to comply with any provision of this
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Agreement, Sublessor shall have the right, but shall not be obligated, to effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Sublessor in effecting such compliance
(together with interest thereon at the rate specified in Paragraph (i) of this
Section) shall constitute additional Rent due to Sublessor within five (5) days
after the date Sublessor sends notice to Sublessee requesting payment.
Sublessor's effecting such compliance shall not be a waiver of Sublessee's
default.
(i) Any Rent or other amount not paid to Sublessor when due hereunder
shall, in addition to the late charge as provided in Section II(b) hereof, bear
interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
(j) Any provisions in this Agreement and any Schedule which are in conflict
with any statute, law or applicable rule shall be deemed omitted, modified or
altered to conform thereto.
(k) Sublessee agrees to pay on demand all reasonable costs and expenses
incurred by Sublessor in connection with the preparation, execution, delivery,
filing, recording, and administration of any of the Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for Sublessor, and all costs and expenses, if any, in connection with the
enforcement of any of the Documents. In addition, Sublessee shall pay any and
all stamp and other taxes and fees payable or determined to be payable by
Sublessor in connection with the execution, delivery, filing and recording of
any of the Documents and the other documents to be delivered then under, and
agrees to save Sublessor harmless from and against any and all liabilities with
respect to or resulting from any delay attributed to Sublessee in paying or
failing to pay such taxes and fees.
(l) Sublessee agrees to pay on demand its pro-rata share of any interest
paid by Sublessor to Lessor in connection with the pre-closing funding of the
Participants' Purchase Price on the Funding Date (as such terms are defined in
that certain Participation Agreement, dated as of the date hereof, among Lessor
and the financial institutions now or hereafter specified therein (the
"Participation Agreement")). In addition, if the funding by Lessor of the
Capitalized Lessor's Cost (as defined in the Master Lease) of the Lease Assets
on the Closing Date (as defined in the Participation Agreement) relating to such
Funding Date does not occur on the Closing Date as a result of any failure to
satisfy the conditions specified in Section I(c) hereof or Section I(c) of the
Master Lease, then Sublessee agrees to pay on demand its pro rata share of any
costs incurred by Sublessor as a result thereof.
(m) Sublessee waives, and agrees that it will not assert against Lessor or
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Sublessor, or any successor or assignee of Lessor or Sublessor, any defense,
set-off, recoupment, claim or counterclaim which Sublessee may at any time have
against Lessor or Sublessor for any reason whatsoever.
XX. CHOICE OF LAW; JURISDICTION:
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE LEASE ASSETS.
(b) Each party hereto irrevocably and unconditionally:
(1) submits for itself and its property in any legal action or
proceeding relating to this Sublease, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of any
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(2) consents that any such action or proceeding may be brought to such
court, and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or any objection that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(3) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such party at its
address set forth in the Preamble hereto or referred to herein or at such other
address of which the other parties hereto shall have been notified pursuant to
Section XIX(f); and
(4) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
XXI. CHATTEL PAPER:
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To the extent that any Schedule would constitute chattel paper, as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest therein may be created through the transfer
or possession of this Agreement in and of itself without the transfer or
possession of the original of a Schedule executed pursuant to this Agreement and
incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
XXII. EARLY TERMINATION:
(a) If Sublessor exercises its early termination option pursuant to Section
XXII(a) of the Master Lease, Sublessor shall provide thirty (30) days' prior
written notice to Sublessee. Within twenty (20) days after receipt of such
notice, Sublessee shall, in a written notice to Sublessor, specify whether
Sublessee elects to purchase the Lease Assets (other than any Real Estate not
acquired pursuant to the Agency Agreement) pursuant to Paragraph (ii) hereof, or
to cause the Lease Assets to be sold to a third party pursuant to Paragraph (i)
hereof.
(i) If Sublessee elects to cause the Lease Assets to be sold to a
third party, Sublessee shall cooperate with Sublessor in soliciting cash bids
for the Lease Assets on an AS IS BASIS. Prior to the Termination Date (as
defined in the Master Lease), Sublessee shall (1) certify to Sublessor any bids
received by Sublessee and (2) pay to Sublessor the sum of (A) the Termination
Value (calculated as of the Termination Date) for the Lease Assets, plus (B) all
Rent and other sums due and unpaid as of the Termination Date , plus (C) any
applicable Prepayment Premium (as defined in the Master Lease). Provided that
all amounts due hereunder have been paid on or before the Termination Date,
Sublessor and Sublessee shall sell the Lease Assets on an AS IS BASIS for cash
to the bidder specified by Sublessor and Sublessor shall refund to Sublessee the
proceeds of such sale (net of any related expenses incurred by Sublessor) up to
the amount of the Termination Value. Sublessor shall not be required to make and
may specifically disclaim any representation or warranty as to the condition of
the Lease Assets and any other matters (except that Sublessor shall warrant that
it has conveyed whatever interest it received in such Lease Assets free and
clear of any lien or encumbrance created by, through or under Sublessor). If
such sale is not consummated, no termination shall occur and (provided that no
Default shall then have occurred and be continuing) Sublessor shall refund to
Sublessee an amount equal to the sum of (A) the Termination Value and (B) any
applicable Prepayment Premium (less any expenses incurred by Sublessor).
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(ii) If Sublessee elects to purchase such Lease Assets, on the
Termination Date, Sublessee shall pay to Sublessor in cash the purchase price
for such Lease Assets, determined as hereinafter provided. The purchase price of
such Lease Assets shall be an amount equal to the sum of (A) the Termination
Value (calculated as of the Termination Date) for the Lease Assets, plus (B) all
taxes and charges upon sale, plus (C) all Rent and other sums due and unpaid as
of the Termination Date, plus (D) any applicable Prepayment Premium (as defined
in the Master Lease). Upon satisfaction of the conditions specified in this
Paragraph (ii), Sublessor will transfer, on an AS IS BASIS, all of Sublessor's
interest in and to the Lease Assets. Sublessor shall not be required to make and
may specifically disclaim any representation or warranty as to the condition of
such Lease Assets and other matters. Sublessor shall, at Sublessee's expense,
execute and deliver to Sublessee such Uniform Commercial Code statements of
termination and other documents and instruments, as reasonably may be required
in order to terminate or convey any interest of Sublessor in and to the Lease
Assets.
(b) If Sublessor exercises its termination option pursuant to Section
XXII(c) of the Master Lease, Sublessor shall provide thirty (30) days' prior
written notice to Sublessee. Within twenty (20) days after receipt of such
notice, Sublessee shall, in a written notice to Sublessor, specify whether
Sublessee elects to purchase the Lease Assets (other than any Real Estate not
acquired pursuant to the Agency Agreement) pursuant to Paragraph (ii) hereof, or
to cause the Lease Assets to be sold to a third party pursuant to Paragraph (i)
hereof.
(i) If Sublessee elects to cause such Lease Assets to be sold to a
third party, Sublessee shall cooperate with Sublessor in soliciting cash bids
for the Lease Assets on an AS IS BASIS. Prior to the FAD Special Termination
Date (as defined in the Master Lease), Sublessee shall (1) certify to Sublessor
any bids received by Sublessee and (2) pay to Sublessor the sum of (A) the
Termination Value (calculated as of the FAD Special Termination Date) for such
Lease Assets, plus (B) all Rent and other sums due and unpaid as of the FAD
Special Termination Date. Provided that all amounts due hereunder have been paid
on or before the FAD Special Termination Date, Sublessor and Sublessee shall
sell the Lease Assets on an AS IS BASIS for cash to the bidder specified by
Sublessor and Sublessor shall refund to Sublessee the proceeds of such sale (net
of any related expenses incurred by Sublessor) up to the amount of the
Termination Value. Sublessor shall not be required to make and may specifically
disclaim any representation or warranty as to the condition of the Lease Assets
and any other matters (except that Sublessor shall warrant that it has conveyed
whatever interest it received in such Lease Assets free and clear of any lien or
encumbrance created by, through or under Sublessor). If such sale is not
consummated, no termination shall occur and (provided that no Default shall then
have occurred and be continuing) Sublessor shall refund to Sublessee an amount
equal to the Termination Value (less any expenses incurred by Sublessor).
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(ii) If Sublessee elects to purchase such Lease Assets, on the
Termination Date, Sublessee shall pay to Sublessor in cash the purchase price
for such Lease Assets, determined as hereinafter provided. The purchase price of
such Lease Assets shall be an amount equal to the sum of (A) the Termination
Value (calculated as of the FAD Special Termination Date) for such Lease Assets,
plus (B) all taxes and charges upon sale, plus (C) all Rent and other sums due
and unpaid as of the FAD Special Termination Date. Upon satisfaction of the
conditions specified in this Paragraph (ii), Sublessor will transfer, on an AS
IS BASIS, all of Sublessor's interest in and to such Lease Assets. Sublessor
shall not be required to make and may specifically disclaim any representation
or warranty as to the condition of such Lease Assets and other matters.
Sublessor shall, at Sublessee's expense, execute and deliver to Sublessee such
Uniform Commercial Code statements of termination and other documents and
instruments, as reasonably may be required in order to terminate or convey any
interest of Sublessor in and to such Lease Assets.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
49
<PAGE>
IN WITNESS WHEREOF, Sublessee and Sublessor have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
SUBLESSOR: SUBLESSEE:
BOSTON CHICKEN, INC. [ ]
By:______________________________ By:__________________________________
Name:____________________________ Name:________________________________
Title:___________________________ Title:_______________________________
Receipt of this original counterpart of the foregoing Sublease Agreement is
hereby acknowledged on this __ day of December, 1996.
GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND AS AGENT FOR CERTAIN
PARTICIPANTS
By: _________________________________
Name Printed:
Title:
50
<PAGE>
EXHIBIT NO. 1
SCHEDULE
SCHEDULE SERIES NO. ______
DATED THIS _______DAY OF_______, 199__
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
Sublessor & Mailing Address: Sublessee & Mailing Address:
BOSTON CHICKEN, INC. [
14103 Denver West
Golden, Colorado 80401-4086 ]
This Schedule is executed pursuant to, and incorporates by reference the terms
and conditions of, and capitalized terms not defined herein shall have the
meanings assigned to them in, the Sublease Agreement No. 2 identified above (as
amended, modified or supplemented, the "Agreement"; said Agreement and this
Schedule being collectively referred to as "Sublease"). This Schedule,
incorporating by reference the Agreement, constitutes a separate instrument of
lease. This Schedule is designated as a Series ___ Schedule.
A. Lease Assets.
------------
Pursuant to the terms of the Sublease, Sublessor agrees to sublease to
Sublessee the Lease Assets listed on Annex A attached hereto and made a part
hereof.
B. Financial Terms.
---------------
1. Capitalized Sublessor's Cost: $
--------------------------------------.
2. Daily Sublease Rate Factor: %.
-----------------------------------------
3. Basic term: [Two (2) years/Three (3) years).
4. Basic term Commencement Date: , 199 .
-------------------------------- --
5. Lease Assets Location:
----------------------------------------------
6. Sublessee Federal Tax ID No.:
----------------------------------------
7. Suppliers: various
8. Last Delivery Date: , 199 .
------------------------------------------ --
9. Sublessee agrees and acknowledges that the Capitalized Sublessor's
Cost of the Lease Assets as stated on the Schedule is equal to the
fair market value of the Lease Assets on the date hereof.
10. Renewal Term: [One (1) year/Two (2) one (1)-year terms/Three (3) one
(1)-year terms].
<PAGE>
11. Maximum Sublease Term: [Three (3) years/Four (4) years/Five (5)
years].
12. Stipulated Loss Values: See Annex D.
13. Termination Values: See Annex D.
C. Term and Rent.
-------------
1. Interim Rent. For the period from and including the Sublease
Commencement Date to the Basic Term Commencement Date ("Interim Period"),
Sublessee shall pay as rent ("Interim Rent") the product of the Daily Sublease
Rate Factor times the Capitalized Sublessor's Cost of the Equipment times the
number of days in the Interim Period. Interim rent shall be due on _________,
199__ (the "Interim Rent Payment Date").
2. Basic Term and Renewal Term Rent. Commencing on __________, 199__,
and on the third day of each fiscal quarter of Sublessor thereafter (each, a
"Rent Payment Date") during the Basic Term ("Basic Term Rent") and any Renewal
Term ("Renewal Term Rent") Sublessee shall pay as rent quarterly installments of
principal and interest, in arrears, each installment in the principal amount
specified on the attached Amortization Schedule together with interest on the
Unamortized Principal Balance (specified on the attached Amortization Schedule)
as of the immediately preceding Rent Payment Date (after application of the Rent
paid on such date) at the Interest Rate for the Interest Period following such
immediately preceding Rent Payment Date. Interest shall be calculated on the
basis of a 360 day year for the actual number of days elapsed. Said Rent
consists of principal and interest components, such principal components being
as provided in the Amortization Schedule attached hereto.
3. Contingent Rent. Contingent Rent calculated as hereinafter specified
shall accrue on a quarterly basis and shall be payable by Sublessee to Sublessor
upon return of the Lease Assets pursuant to Section XVIII(c) of the Sublease.
As used herein, "Contingent Rent" shall be calculated as the product of (x)
ninety-five percent (95%) of any per annum increase in the Consumer Price Index
for all items as published by the Department of Labor Bureau of Economics and
Statistics (or if the CPI is not available, such replacement index as is
acceptable to Sublessor) reported during the preceding calendar quarter, and (y)
the Capitalized Sublessor's Cost of the Lease Assets; provided, however, that
the maximum Contingent Rent shall not exceed that amount calculated as _________
percent (____%) of the Capitalized Sublessor's Cost of the Lease Assets.
As used herein, the following terms shall have the following meanings:
"Interest Period" shall mean the period beginning on the Sublease
Commencement Date and ending on the next Rent Payment date (provided, however,
that if such Rent Payment Date is not a Business Day, then the Interest Period
shall
<PAGE>
end on the immediately preceding Business Day), and each subsequent quarterly
period ending on the next Rent Payment Date (provided, however, that if such
Rent Payment Date is not a Business Day, then the Interest Period shall end on
the immediately preceding Business Day).
"Interest Rate" shall mean that percentage per annum calculated as the sum
of (a) the LIBOR Rate redetermined quarterly, plus (b) [250/300/350] basis
points (or [350/400/450] basis points during any Extension Term).
"LIBOR Rate" shall mean, with respect to any Interest Period occurring
during the term of the Sublease, an interest rate per annum equal at all times
during such Interest Period to the quotient of (1) the rate per annum as
determined on the basis of the average of the offered rates for deposits in U.S.
dollars for ninety (90) days, which appears on Telerate page 3750 as of 11:00
a.m., London, England time on the date that is two (2) Business Days prior to
the first day of such Interest Period, divided by (2) a number equal to 1.00
minus the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the LIBOR Reserve Requirements current on the date that is two (2)
Business Days prior to the first day of the Interest Period; provided, however,
that if Telerate Page 3750 is not available, then the Reuters Rate shall be used
in lieu thereof.
"LIBOR Reserve Requirements" shall mean the daily average for the
applicable Interest Period of the maximum rate applicable to Sublessor at which
reserves (including, without limitation, any supplemental, marginal and
emergency reserves) are imposed during such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) on "Eurocurrency
liabilities", as defined in such Board's Regulation D (or in respect of any
other category of liabilities that include deposits by reference to which the
interest rates on Eurodollar loans is determined or any category of extensions
of credit or other assets that include loans by non-United States offices of any
lender to United States residents), having a term equal to such Interest Period,
subject to any amendments of such reserve requirement by such Board or its
successor, taking into account any transitional adjustments thereto.
"Reuters Rate" means a rate equal to the arithmetic average of the rates of
interest per annum (rounded upwards, if necessary to the nearest 1/100 of 1%)
for deposits in U.S. dollars for ninety (90) days, which appears on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace the LIBO page on the service for the purpose of
displaying London interbank offered rates of major banks) as of 11:00 a.m.,
London, England time on the date which is two (2) Business Days prior to the
first day of such Interest Period; provided, however, that the Reuters Rate
shall not be calculated if fewer than two (2) such offered rates appear on such
Reuters Screen LIBO Page.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such
<PAGE>
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar deposits).
If at any time Sublessor determines that either adequate and reasonable
means do not exist for ascertaining the LIBOR Rate, or it becomes impractical
for Sublessor to obtain funds to make or maintain the financing hereunder with
interest at the LIBOR Rate, or Sublessor shall have determined that the LIBOR
Rate will not adequately and fairly reflect the cost to Sublessor of making,
maintaining, or funding the transaction hereunder at the LIBOR Rate, or
Sublessor reasonably determines that, as a result of changes to applicable law
after the date of execution of the Agreement, or the adoption or making after
such date of any interpretations, directives or regulations (whether or not
having the force of law) by any court, governmental authority or reserve bank
charged with the interpretation or administration thereof, it shall be or become
unlawful or impossible to make, maintain, or fund the transaction hereunder at
the LIBOR Rate, then Sublessor promptly shall give notice to Sublessee of such
determination, and Sublessor and Sublessee shall negotiate in good faith a
mutually acceptable alternative method of calculating the Interest Rate (which
shall produce an alternative rate of interest which is comparable to the
Interest Rate) and shall execute and deliver such documents as reasonably may be
required to incorporate such alternative method of calculating the Interest Rate
in this Schedule, within thirty (30) days after the date of Sublessor's notice
to Sublessee. If the parties are unable mutually to agree to such alternative
method of calculating the Interest Rate in a timely fashion, on the Rent Payment
Date next succeeding the expiration of such thirty (30) day period Sublessee
shall purchase all (but not less than all) of the Lease Assets described on all
Schedules executed pursuant to the Agreement (other than any Real Estate not
acquired pursuant to the Agency Agreement) and shall pay to Sublessor, in cash,
the purchase price for the Lease Assets so purchased, determined as hereinafter
provided. The purchase price of such Lease Assets shall be an amount equal to
the Stipulated Loss Value of such Lease Assets calculated in accordance with
Annex D as of the date of payment, together with all rent and other sums then
due on such date, plus all taxes and charges upon sale and all other reasonable
and documented expenses incurred by Sublessor in connection with such sale. Upon
satisfaction of the conditions specified in this paragraph, Sublessor will
transfer, on an AS IS BASIS, all of Sublessor's interest in and to the Lease
Assets. Sublessor shall not be required to make and may specifically disclaim
any representation or warranty as to the condition of the Lease Assets and other
matters. Sublessor shall (simultaneously with such transfer), at Sublessee's
expense, execute and deliver to Sublessee such Uniform Commercial Code
statements of termination, bills of sale and other documents and instruments, as
reasonably may be required in order to terminate any interest of Sublessor in
and to the Lease Assets.
4. If the Interim Rent Payment Date or any Rent Payment Date is not a
Business Day, the Rent otherwise due on such date shall be payable on the
immediately preceding Business Day. As used herein, "Business Day" shall mean
any day other than Saturday, Sunday, and any day on which banking institutions
<PAGE>
located in London, England, or in the States of Connecticut, New York or
Colorado are authorized by law or other governmental action to close.
D. Insurance.
---------
1. Public Liability: $ , total liability per occurrence.
------------
2. Casualty and Property Damage: An amount equal to the higher of the
Stipulated Loss Value or the full replacement cost of the Lease Assets.
E. Fixed Purchase Price, Sublessee's Obligation and Residual Risk Amount
---------------------------------------------------------------------
End of Term Fixed Purchase Sublessee's Residual Risk
----------- Price Obligation Amount
----- ---------- ------
Basic Term
[First] Renewal
Term
[Second Renewal
Term]
expressed as a percentage of the Capitalized Lessor's Cost of the Lease Assets.
This Schedule is not binding or effective with respect to the Agreement or
the Lease Assets until executed on behalf of Sublessor and Sublessee by
authorized representatives of Sublessor and Sublessee, respectively.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Sublessee and Sublessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.
SUBLESSOR: SUBLESSEE:
BOSTON CHICKEN, INC. [ ]
By: By:
----------------------------- -----------------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
Attest:
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
ANNEX A
TO
SCHEDULE SERIES NO.____________
DATED THIS__ DAY OF______, 199_
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
DESCRIPTION OF LEASE ASSETS
________________________________________________________________________________
Initials:
---------- ----------
Sublessor Sublessee
<PAGE>
ANNEX B
TO
SCHEDULE SERIES NO.____
DATED THIS ____ DAY OF __________, 199_
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS: [ _______________ ] ("Seller"), for and in
consideration of the sum of One Dollar ($1.00) and other good and valuable
consideration, provided by GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS ("Buyer"), with offices at
[ _________________ ], the receipt of which is hereby acknowledged, does hereby
sell, assign, transfer, set over and convey to Buyer the equipment (the
"Equipment") [and leasehold improvements (the "Leasehold Improvements")] leased
under Schedule No. _____ dated as of _____________, 199_, between Boston
Chicken, Inc. ("Lessee") and Buyer, executed pursuant to the Master Lease
Agreement No. 2 dated as of December __, 1996 ("Lease"), between Lessee and
Buyer. The Equipment [and Leasehold Improvements] is [are] to be subleased under
Schedule No.____ dated as of _________, 199_, between Lessee and Seller,
executed pursuant to the Sublease Agreement No. 2 dated as of __________, 1996
("Sublease"), between Lessee, as Lessor, and Seller, as Sublease.
Buyer and Seller agree and acknowledge that the sale and conveyance
contemplated hereby is solely for the purpose of granting to Buyer a security
interest in the Equipment [and Leasehold Improvements] and Seller shall retain
legal title to such Equipment [and Leasehold Improvements]. All Equipment [and
Leasehold Improvements] in which an interest is conveyed hereby shall remain in
the possession of Seller pursuant to the Sublease.
Buyer is purchasing the Equipment [and Leasehold Improvements] described
above in reliance upon its personal inspection and knowledge of the Equipment
and in an "AS-IS, WHERE-IS", condition.
SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE
EXCEPT THAT (1) SELLER HAS GOOD TITLE TO THE EQUIPMENT [AND LEASEHOLD
IMPROVEMENTS], FREE AND CLEAR OF ALL LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT
ONLY TO LESSEE'S SECURITY INTEREST THEREIN, WHICH SECURITY INTEREST SHALL BE
RELEASED UPON LESSEE'S EXECUTION AND DELIVERY OF A CERTIFICATE OF ACCEPTANCE
RELATING THERETO, AND TO PERMITTED LIENS (AS SUCH TERM IS DEFINED IN THE
SUBLEASE)), (2) BUYER WILL ACQUIRE ITS INTEREST IN THE EQUIPMENT [AND LEASEHOLD
IMPROVEMENT] FREE FROM ALL LIENS, CLAIMS AND ENCUMBRANCES (SUBJECT ONLY TO
PERMITTED LIENS AND TO THE LIEN OF THE LEASE AND THE SUBLEASE),
<PAGE>
AND (3) SELLER HAS THE RIGHT TO SELL AND CONVEY THE EQUIPMENT [AND LEASEHOLD
IMPROVEMENTS]. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER MAKES NO
WARRANTIES WITH RESPECT TO THE QUALITY, CONTENT, CONDITION, MERCHANTABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE OF THE EQUIPMENT AND NO WARRANTIES AGAINST
PATENT INFRINGEMENT OR THE LIKE.
IN WITNESS WHEREOF, Buyer and Seller have executed this Bill of Sale this
day of 199
- -------- -------------, -.
BUYER: SELLER:
GENERAL ELECTRIC CAPITAL [ ]
CORPORATION, FOR ITSELF AND
AS AGENT FOR CERTAIN PARTICIPANTS
By: By:
---------------------- ------------------------
Name: Name:
-------------------- ----------------------
Title: Title:
------------------- ---------------------
<PAGE>
ANNEX C
TO
SCHEDULE SERIES NO.__
DATED THIS __ DAY OF __________, 199_
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
CERTIFICATE OF ACCEPTANCE
To: Boston Chicken, Inc.
Pursuant to the provisions of the above-referenced Schedule and Sublease
Agreement No. 2 (collectively, the "Sublease"), Sublessee hereby certifies and
warrants that (a) all Equipment [and Leasehold Improvements] Lease Assets
described on Annex A to the Schedule are in good condition and appearance,
installed (if applicable), and in working order; and (b) Sublessee accepts such
Equipment [and Leasehold Improvements] for all purposes of the Sublease and all
attendant documents.
Sublessee does further certify that as of the date hereof (i) Sublessee is
not in Default under the Sublease; and (ii) the representations and warranties
made by Sublessee pursuant to or under the Sublease are true and correct on the
date hereof.
-------------------------------------
Sublessee's Authorized Representative
Dated:______________ __, 199_
<PAGE>
ANNEX D
TO
SCHEDULE SERIES NO.____________
DATED THIS ____ DAY OF _______________, 199_
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
STIPULATED LOSS AND TERMINATION VALUE TABLE/1/
RENT PAYMENT DATE STIPULATED LOSS VALUE TERMINATION VALUE
----------------- --------------------- -----------------
Initials:___________ ____________
Sublessor Sublessee
- -----------------
/1/ The Stipulated Loss and Termination Value for any Lease Assets shall be
equal to the Capitalized Sublessor's Cost of such unit multiplied by the
appropriate percentage derived from the above table. In the event that the
Sublease is for any reason extended, then the last percentage figure shown
above shall control throughout any such extended term.
<PAGE>
ANNEX E
TO
SCHEDULE SERIES NO. ___________
DATED THIS ______ DAY OF ____________, 199__
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER __, 1996
AMORITIZATION SCHEDULE
OUTSTANDING
RENT PAYMENT DATE PRINCIPAL PRINCIPAL BALANCE
- ----------------- --------- -----------------
Initials: __________________ ________________________
Sublessor Sublessee
<PAGE>
ANNEX F
TO
SCHEDULE SERIES NO. _________
DATED THIS _______ DAY OF ____________, 199__
TO SUBLEASE AGREEMENT NO. 2 DATED AS OF DECEMBER ___, 1996
RETURN PROVISIONS: In addition to the provisions provided for in Section X of
this Sublease, and provided that Sublessee has elected not to exercise its
extension option pursuant to Section XVIII(a) of the Sublease or its purchase
option pursuant to Section XVIII(d) of the Sublease, Sublessee shall, at its
expense:
(A) At least one hundred eighty (180) days and not more than two hundred
forty (240) days prior to expiration or earlier termination of the Sublease,
provide to Sublessor a detailed inventory of all components of the Equipment.
The inventory should include, but not be limited to, a listing of model, serial
numbers and size description (length, width, height, diameter) for all
components comprising the Equipment.
(B) At least one hundred eighty (180) days prior to expiration or earlier
termination of the Sublease, upon receiving reasonable notice from Sublessor,
provide or cause the vendor(s) or manufacturer(s) to provide to Sublessor the
following documents: (1) one set of service manuals, blue prints, process flow
diagrams and operating manuals including replacements and/or additions thereto,
such that all documentation is completely up-to-date; and (2) one set of
documents, detailing Equipment configuration, operating requirements,
maintenance records, and other technical data concerning the set-up and
operation of the Equipment, including replacements and/or additions thereto,
such that all documentation is completely up-to-date.
(C) At least one hundred eighty (180) days prior to expiration or earlier
termination of the Sublease, upon receiving reasonable notice from Sublessor,
make the Equipment available for on-site operational inspections by potential
purchasers, under power, and provide personnel, power and other requirements
necessary to demonstrate electrical, mechanical and functionality of each item
of the Equipment.
(D) At least forty-five (45) days prior to expiration or earlier
termination of the Sublease, cause the manufacturer's representative(s) or
qualified Equipment maintenance provider(s), acceptable to Sublessor, to perform
a comprehensive physical inspection, including testing all material and
workmanship of the Equipment. The authorized inspector should ensure the
Equipment is clean and cosmetically acceptable, and in such condition so that
it may be immediately installed and placed into use in a similar retail store
environment. There shall be no missing screws, bolts, fasteners, etc. The
Equipment will be free from all large scratches, marks, gouges, dents,
discoloration or stains. There shall be no evidence of extreme use or
overloading, i.e. bowed or sagging shelves, etc. If during such inspection,
examination and test, the authorized inspector finds any of the material or
workmanship to be defective or the Equipment not operating within manufacturer's
specifications, then Sublessee shall repair or replace such defective material
and, after corrective measures are completed, Sublessee will
<PAGE>
provide for a follow-up inspection of the Equipment by the authorized inspector
as outlined in the preceding clause.
(E) Have each item of Equipment returned with an in-depth field service
report detailing said inspection as outlined in Section D of this Annex F. The
report shall certify that the Equipment has been properly inspected, examined
and tested and is operating within the manufacturer's specifications.
(F) Properly remove all Sublessee installed markings which are not
necessary for the operation, maintenance or repair of the Equipment.
(G) Ensure all Equipment and Equipment operations conform to all
applicable local, state, and federal laws, health and safety guidelines.
(H) Redeliver the Equipment with all component parts in good operating
condition. All components must meet or exceed the manufacturer's minimum
recommended specifications unless otherwise specified.
(I) Provide for the deinstallation, packing, transporting, and certifying
of the Equipment to include, but not be limited to, the following: (1) the
manufacturer's representative shall de-install all Equipment (including all
wire, cable and mounting hardware) in accordance with the specifications of the
manufacturer; (2) each item of the Equipment will be returned with a certificate
supplied by the manufacturer's representative qualifying the Equipment to be in
good condition and (where applicable) to be eligible for the manufacturer's
maintenance plan; the certificate of eligibility shall be transferable to
another operator of the Equipment; (3) the Equipment shall be packed properly
and in accordance with the manufacturer's recommendations; and (4) Sublessee
shall transport the Equipment in a manner consistent with the manufacturer's
recommendations and practices.
(J) Upon sale of the Equipment to a third party, provide transportation to
any locations anywhere in the continental United States selected by Sublessor.
(K) Obtain and pay for a policy of transit insurance for the redelivery
period in an amount equal to the replacement value of the Equipment and
Sublessor shall be named as the loss payee on all such policies of insurance.
(L) Promptly deliver to Sublessor any Real Estate, clean and in good
condition, reasonable wear and tear excepted.
(M) Promptly remove from the Real Estate all of Sublessee's property, and
all trash and debris, and repair any damage caused by or during the removal of
Sublessee's property.
(N) Promptly deliver to Sublessor all keys to the Real Estate and any
improvements located thereon, and all combinations to any vaults, secure areas,
and security systems.
<PAGE>
(O) Permit Sublessor and its authorized representatives to enter the Real
Estate at all reasonable times to inspect or show the Real Estate, or make any
repairs thereto.
(P) Deliver to Sublessor any personal property, licenses, permits, and
other instruments as reasonably are necessary to continue to operate the Real
Estate as a retail food establishment, together with such assignments, consents,
and other documents as shall be necessary to transfer any such property,
licenses, permits, or other instruments to Sublessor or its nominee.
Initials:__________ ___________
Sublessor Sublessee
<PAGE>
EXHIBIT NO. 4
COLLATERAL ASSIGNMENT AND LEASEHOLD MORTGAGE
$_________________
(principal amount
secured hereby)
THIS COLLATERAL ASSIGNMENT AND LEASEHOLD MORTGAGE (this "Mortgage") is made
as of the ____ day of ____________, 199_, by _________________, a _____________
(the "Mortgagor"), to GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT (the
"Mortgagee").
R E C I T A L S
---------------
WHEREAS, Boston Chicken, Inc., a Delaware Corporation ("BCI") and General
Electric Capital Corporation, for Itself and as Agent for Certain Participants
(the "Lease Agent") have entered into that certain Master Lease Agreement No. 2,
dated as of December 9, 1996 (such Master Lease Agreement No. 2, as the same may
be amended or supplemented from time to time to the extent permitted by the
terms thereof, being herein called the "Master Lease"), whereby, subject to the
terms and conditions set forth therein, the Lease Agent has agreed to lease to
BCI, and BCI has agreed to lease from the Mortgagee certain Lease Assets, as
more particularly described therein. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Master Lease.
WHEREAS, BCI has also entered into that certain Secured Revolving Credit
Agreement dated as of December __, 1996 (as the same may be amended or
supplemented from time to time to the extent permitted by the terms thereof,
being herein called the "Credit Agreement") by and among BCI, the financial
institutions from time to time parties thereto (the "Lenders"), Bank of America
Illinois, as letter of credit issuing bank (in such capacity, the "Issuing
Lender") and as Loan Agent (in such capacity, the "Loan Agent"), pursuant to
which BCI has executed and delivered those certain Revolving Notes dated
December __, 1996 in the aggregate principal amount of $150,000,000
(collectively, the "Revolving Notes").
WHEREAS, the Loan Agent and the Lease Agent have entered into that certain
Intercreditor Agreement dated as of December __, 1996 (as the same may from time
to time be amended, restated, supplemented, or otherwise modified, the
"Intercreditor Agreement") which sets forth certain agreements with respect to
voting rights and collateral issues, among other things. Pursuant to the
Intercreditor Agreement, the Mortgagee is acting hereunder as agent for the Loan
Agent and the Lease Agent.
WHEREAS, BCI, the Loan Agent, and the Lease Agent have entered into that
certain Facilities Agreement dated as of December _____, 1996 (as the same may
from time to time be amended, restated, supplemented, or otherwise modified, the
"Facilities Agreement").
WHEREAS, prior to the execution and delivery of this Mortgage, the
Mortgagor and __________________ (the "Landlord") have entered into a _______
Lease dated as of __________,
<PAGE>
199_ (such _______ Lease, as the same may be amended or supplemented from time
to time to the extent permitted by the terms thereof, being herein called the
"Lease"), whereby, subject to the terms and conditions set forth therein, the
Mortgagor has leased the real property located at the premises described in
Exhibit A attached hereto and made a part hereof (the "Land") from the Landlord,
for the term specified therein. The Lease has been recorded or will be recorded
among the Land Records of _______________ County, _____________, immediately
prior to the recordation of this Mortgage.
WHEREAS, BCI has subleased to the Mortgagor certain Lease Assets to be used
on the Land.
WHEREAS, as security for the payment of the Rent and the performance of all
other obligations of BCI under the Master Lease and all obligations evidenced by
the Revolving Notes (all of the foregoing being hereinafter called collectively,
the "Obligations"), the Mortgagee has required that the Mortgagor execute and
deliver this Mortgage assigning and securing to Mortgagee (among other things)
all of Mortgagor's leasehold interest in the Land.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
conclusively acknowledged by the Mortgagor, in order to secure the full and
punctual payment and performance of the Obligations, the Mortgagor does hereby
grant, convey, bargain, sell, assign, pledge, transfer and set over to the
Mortgagee and its successors and assigns, and does hereby grant to the
Mortgagee, and its successors and assigns, a lien on and a security interest in,
all and each of the properties, rights, interests and privileges described in
the following paragraphs:
ALL of the Mortgagor's right, title and interest in and to the Lease and
the leasehold estate created thereunder and any acquisition hereafter by the
Mortgagor of the fee simple interest in the Land.
TOGETHER with all right, title and interest of the Mortgagor including any
after-acquired right, title or reversion, in and to the beds of the ways,
streets, avenues and alleys adjoining the Land.
TOGETHER with all right, title and interest of the Mortgagor in and to all
and singular the rights, alleys, ways, tenements, hereditaments, easements,
appurtenances, passages, waters, water rights, water courses, riparian rights,
liberties, advantages, accessions and privileges now or hereafter appertaining
to the Property (hereinafter defined) or any part thereof, including, but not
limited to, any homestead or other claim at law or in equity, the reversion or
reversions, remainder or remainders thereof, and also all the estate, property,
claim, right, title or interest now owned and hereafter acquired by the
Mortgagor in or to the Property or any part thereof.
TOGETHER with all right, title and interest of the Mortgagor in and to all
improvements, structures and buildings now or hereafter erected or placed on the
Land and all replacements thereof, (collectively, the "Improvements").
TOGETHER with all right, title and interest of the Mortgagor in and to all
building materials, furniture, fixtures, machinery, equipment and tangible
personal property of every kind and nature
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whatsoever, now or hereafter located or contained in or upon or attached to, the
Land or the Improvements or any part thereof, and used or usable in connection
with any present or future use or operations of the Land or the Improvements or
any part thereof, both now owned and hereafter acquired by the Mortgagor,
together with all additions, substitutions, alterations or improvements thereto
(the "Additions") and all cash and non-cash proceeds thereto (all of the
foregoing being hereinafter sometimes referred to collectively as the "Equipment
Collateral"). All of the Equipment Collateral, so far as permitted by law,
shall be deemed to be fixtures and part of the Land and of the Improvements, and
as to any part of the Equipment Collateral not deemed or permitted by law to be
fixtures, this Mortgage shall also constitute a security agreement under the
Uniform Commercial Code currently in effect in the State of ________ (the
"State").
Unless specifically designated otherwise, all of the Mortgagor's right,
title and interest in and to the Land, the Improvements, the Equipment
Collateral and all other items, rights, interests, privileges and property
described in the preceding paragraphs hereof, together with all Additions
thereto, shall be herein referred to collectively as the "Property".
TOGETHER with any and all judgments, awards of damages (including but not
limited to severance and consequential damages), payments, proceeds, settlements
or other compensation heretofore or hereafter made, including interest thereon,
and the right to receive the same, as a result of, in connection with, or in
lieu of any taking of title, of use, or of any other property interest of the
Property or any part thereof under the exercise of the power of eminent domain,
either temporarily or permanently by any governmental authority or by any person
acting under governmental authority to the extent of all of the Obligations
which may be secured by this Mortgage at the date of receipt of any such
judgments, awards on other compensation by the Mortgagee, and of the reasonable
counsel fees, costs and disbursements, if any, incurred by the Mortgagee in
connection with the collection of such judgments, awards on other compensation.
TOGETHER with all unearned premiums, accrued, accruing or to accrue under
insurance policies with respect to the Property, now or hereafter obtained by
the Mortgagor, and the Mortgagor's interest in and to all proceeds of the
conversion, voluntary or involuntary, and the interest payable thereon, of the
Property or any part thereof, into cash or liquidated claims, including, without
limitation, proceeds of casualty insurance, title insurance or any other
insurance maintained on the Property, and the right to collect and receive the
same.
TOGETHER with all of the rents, royalties, issues, profits, revenues,
income and other benefits of the Property, or arising from the use or enjoyment
of all or any portion thereof, or from any lease or agreement pertaining
thereto, and all right, title and interest of the Mortgagor in and to, and
remedies under, any and all leases and subleases of the Property, or any part
thereof, both now in existence or hereafter entered into and all contract
rights, accounts receivable and general intangibles growing out of or in
connection with such leases and subleases, together with all proceeds thereof;
and including, without limitation, all cash or securities deposited thereunder
to secure performance by the lessees of their obligations thereunder whether
such cash or securities are to be held until the expiration of the terms of such
leases or are to be applied to one or more of the installments of rent coming
due immediately prior to the expiration of such terms; reserving in the
Mortgagor a license terminable upon the occurrence of a Default (hereinafter
defined) hereunder to collect and receive the same.
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TO HAVE AND TO HOLD the Property and all other interests described above
unto the Mortgagee and its successors and assigns, for and during all of the
rest, residue and remainder of the term of years yet to come and unexpired under
the Lease.
PROVIDED, HOWEVER, that until the occurrence of a Default hereunder, and
subject to any provisions hereof to the contrary, the Mortgagor shall have the
right to remain in quiet and peaceful possession of the Property, and to
collect, receive and retain the rents, revenues, profits, proceeds, income and
royalties therefrom.
PROVIDED FURTHER, that upon the full payment and performance of all of the
Obligations at the time and in the manner stated in the Master Lease, at any
time before the sale hereinafter provided for, this Mortgage and the lien
granted hereby shall cease, determine and become void, and upon proof given to
the satisfaction of the Mortgagee that all of the Obligations have been so paid
and performed , the Mortgagee shall release and discharge the lien and security
interest of this Mortgage upon payment to the Mortgagee of all costs and
expenses related to the release and reconveyance of the Property or any partial
release and reconveyance thereof.
PROVIDED FURTHER, that upon the occurrence of a substitution under the
Master Lease pursuant to which the Mortgagee is required to release this
Mortgage, the Mortgagee shall release and discharge the lien and security
interest of this Mortgage upon payment to the Mortgagee of all costs and
expenses related to the release and reconveyance of the Property or any partial
release and reconveyance thereof.
AND THIS MORTGAGE FURTHER WITNESSETH, that the Mortgagor hereby represents,
warrants, covenants and agrees as follows, and stipulates that a breach of any
of the following representations, warranties, covenants and agreements shall be
deemed a breach of a material condition of this Mortgage:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Mortgagor represents and
warrants to the Mortgagee that the following statements are true and complete:
(a) The copy of the Lease previously delivered to the Mortgagee is a true,
correct and complete copy of the Lease. The Lease constitutes the legally
binding obligation of the Mortgagor and the Landlord and is fully enforceable in
accordance with its terms. Neither the Mortgagor nor (to the knowledge of the
Mortgagor) the Landlord is in default under any of the terms thereof.
(b) As of the date hereof, the Mortgagor is the owner of the entire
lessee's interest in the Lease and, except for this Mortgage, the Mortgagor has
not assigned the lessee's interest in the Lease or any part thereof to any other
party except for a collateral assignment to BCI (the "BCI Assignment"), which
BCI Assignment is made subject and subordinate to this Mortgage pursuant to a
Subordination and Intercreditor Agreement of even date herewith by and between
BCI and the Mortgagee (the "Subordination Agreement"). Upon the execution and
recordation of this Mortgage and the Subordination Agreement, the Mortgagee and
its assigns shall have a first lien on the lessee's interest in the Lease.
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SECTION 2. GENERAL COVENANTS AND AGREEMENTS. The Mortgagor covenants and
agrees with the Mortgagee as follows:
(a) The Mortgagor will promptly pay, when due and payable, all Lease
payments and all other sums and charges due and to become due under the Lease;
provided that the Mortgagor may withhold payments or contest taxes, if and to
the extent expressly permitted under the Lease.
(b) The Mortgagor will promptly perform and observe all of the terms,
covenants and conditions required to be performed and observed by the Mortgagor
as lessee under the Lease, if failure to so perform or observe the same would
have a material adverse effect on the Mortgagor's interest under the Lease or
the Mortgagee's interest hereunder and will do all things necessary to preserve
and to keep unimpaired its rights under the Lease, if failure to so perform or
observe the same would have a material adverse effect on the Mortgagor's
interest under the Lease or the Mortgagee's interest hereunder.
(c) The Mortgagor will promptly notify the Mortgagee in writing of any
default by the Mortgagor or, upon knowledge of the same, by the Landlord in the
performance or observance of any of the terms, covenants or conditions on the
part of the Mortgagor or the Landlord to be performed or observed under the
Lease.
(d) The Mortgagor will promptly notify the Mortgagee in writing of the
receipt by the Mortgagor of any notice from the Landlord claiming any default by
the Mortgagor in the performance or observance of any of the terms, covenants or
conditions on the part of the Mortgagor to be performed or observed under the
Lease.
(e) As of the date hereof, the Lease is, to the knowledge of the
Mortgagee, the only Lease covering the Property, and the Mortgagor will not,
without the prior written consent of the Mortgagee, enter into any other leases
or any subleases of such Property other than Subleases as defined and permitted
by the Master Lease.
(f) Except for this Mortgage and as expressly permitted under the Master
Lease, the Mortgagor will not, without the prior written consent of the
Mortgagee, assign, transfer or encumber the lessee's interest in the Lease or
permit the assignment, transfer or encumbrance of the lessee's interest in the
Lease.
(g) The Mortgagor will, within fifteen (15) days after written demand from
the Mortgagee, which demand shall not be made more than once per calendar
quarter (except in connection with a transfer of Mortgagee's interest in this
Mortgage), obtain from the Landlord and deliver to the Mortgagee, a certificate
stating that the Lease is in full force and effect, is unmodified, that no
notice of termination thereon has been served on the Mortgagor, stating the date
to which all rental payments and other sums and charges due under the Lease have
been paid and stating whether or not there are any defaults thereunder and
specifying the nature of such defaults, if any.
(h) The Mortgagor will furnish to the Mortgagee, within fifteen (15) days
after demand therefor, reasonable proof of payment of all items which are
required to be paid by the Mortgagor pursuant to the Lease.
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<PAGE>
(i) The Mortgagor shall not consent to any waiver or material modification
or cancellation of any provision of the Lease nor, subject to the provisions of
the Lease, to the subordination of the Lease to any mortgage or other
encumbrances covering the Property without the prior written consent of the
Mortgagee.
(j) The Mortgagor shall execute and deliver, on request of the Mortgagee,
such instruments as the Mortgagee may deem useful or require to permit the
Mortgagee to cure any default under the Lease or permit the Mortgagee to take
such other action as the Mortgagee considers desirable to cure or remedy the
matter in default and preserve the interest of the Mortgagee in the Property,
unless BCI shall have made a substitution in accordance with the provisions of
the Master Lease, pursuant to which Mortgagee is required to release this
Mortgage.
(k) If the Lease is terminated prior to the natural expiration of its term
due to default by the Mortgagor thereunder, and if, pursuant to any provision of
the Lease or any provision hereof, or any other document now existing or
hereafter entered into, the Mortgagee or its designee shall acquire a new lease
of the Land, the Mortgagor, subject to the provisions of the Master Lease,
shall have no right, title, or interest in or to any such new lease or the
leasehold estate created thereby, or any renewal privileges contained therein.
(l) As additional collateral for the Obligations, the Mortgagor hereby
assigns to the Mortgagee, its successors and assigns, and does hereby grant to
the Mortgagee, its successors and assigns, all of the Mortgagor's right, title
and interest in and to any right or option to purchase or lease, all or any part
of the Land, or the property in which the Land is located, in fee simple which
the Mortgagor may now or hereafter have, pursuant to the Lease or any documents
executed in connection therewith. The Mortgagor shall not exercise any such
right or option to purchase or lease the Land or such other property, without
the prior written consent of the Mortgagee.
(m) The Mortgagor shall not without the prior written consent of the
Mortgagee, permit the fee title to the Land to merge with the leasehold estate
created by the Lease, but shall always keep such estates separate and distinct
notwithstanding the union of such estates; and in case the Mortgagor acquires
the fee title to the Land, this Mortgage shall, subject to applicable laws,
attach to and cover and be a lien upon the fee title so acquired and such fee
title shall, without further assignment, mortgage or conveyance, become and be
subject to the lien of and covered by this Mortgage. The Mortgagor shall
immediately notify the Mortgagee of any such acquisition by the Mortgagor, and,
on written request by the Mortgagee shall cause to be executed and recorded all
such other and further assurances or instruments in writing as may pursuant to
applicable law, be necessary to carry out the intent and meaning of this
subparagraph.
SECTION 3. DEFAULT.
- ------------------
The occurrence of any one or more of the following events shall constitute
a default under the provisions of this Mortgage, and the term "Default" shall
mean, whenever it is used in this Mortgage, any one or more of the following
events:
(A) The failure of the Mortgagee to perform, observe or comply with any of
the provisions of this Mortgage; or
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<PAGE>
(B) The occurrence of a default under the Master Lease or the Lease or the
Credit Agreement, or the Facilities Agreement which is not cured within any
applicable notice and cure periods.
SECTION 4. RIGHTS AND REMEDIES.
- ------------------------------
(A) Upon the occurrence of any Default, the Mortgagee, without in any way
waiving such Default, in addition to any other rights and remedies that it may
have under applicable law and subject to the terms of the Master Lease, may at
its option and subject to the terms and conditions of the Lease, (1) cure (at
the sole expense of the Mortgagor) any default by the Mortgagor under the Lease,
(2) declare the Obligations to be immediately due and payable, (3) sell, assign
or transfer the entire lessee's interests in the Lease to any third party or (4)
take possession of the Property by foreclosure or otherwise and have, hold,
manage, lease and operate or sell the same on such terms and for such period of
time as the Mortgagee may deem proper and in connection therewith, subject to
the provisions of applicable law, the Mortgagor hereby (a) assents to the
passage of the decree for the sale of the Property by the equity court having
jurisdiction, and (b) authorizes and empowers the Mortgagee and its successors
and assigns to take possession of and sell (or in case of the default of any
purchaser to resell) the Property, or any part thereof, all in accordance with
the applicable laws and rules of court relating to mortgages or deeds of trust.
In the case of any sale under this Mortgage, by virtue of judicial proceedings
or otherwise, the Property may be sold as an entirety or in parcels, by one sale
or by several sales, as may be deemed by the Mortgagee to be appropriate and
without regard to any right of the Mortgagor or any other person to the
marshalling of assets. Any sale hereunder may be made at public auction, at
such time or times, at such place or places, and upon such terms and conditions
and after such previous public notice as the Mortgagee shall deem appropriate
and advantageous and as required by law. Upon the terms of such sale being
complied with, the Mortgagee shall convey to, and at the cost of, the purchaser
or purchasers the interest of the Mortgagor in the Property so sold, free and
discharged of and from all estate, title or interest of the Mortgagor, at law or
in equity, such purchaser or purchasers being hereby discharged from all
liability to see to the application of the purchase money. The profits and
proceeds derived from the managing and operating of the Property or from the
sale or assignment of the Mortgagee's interest in the Lease, following a Default
and the exercise by Mortgagee of the remedies herein provided, shall be applied
in accordance with the terms and provisions of the Master Lease and the
Intercreditor Agreement. The Mortgagor hereby agrees to pay the Mortgagee on
demand all of the costs incurred by the Mortgagee in curing any default by the
Mortgagor under the Lease and all of the costs and expenses incurred by the
Mortgagee in taking, managing, operating and insuring the Property and/or
assigning or selling the Mortgagee's interest in the Lease.
(B) Unless the Mortgagee exercises its option to take over the Property as
provided above, following a Default, the Mortgagee shall not be obligated to
perform or discharge, nor does it hereby undertake to perform or discharge, any
obligation, duty or liability under the Lease, or under or by reason of this
Mortgage, and the Mortgagor shall and does hereby agree to indemnify the
Mortgagee for and to hold the Mortgagee harmless of and from any and all
liability, loss or damage which it might incur under the Lease or under or by
reason of this Mortgage, and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged obligations
or undertakings on its part to perform or discharge any of the terms, covenants
or agreements contained in the Lease, except for liability, loss, damage, claims
or demands arising from the gross negligence or willful misconduct of the
Mortgagee. Should the Mortgagee incur any such the gross negligence or willful
misconduct of the Mortgagee. Should the Mortgagee incur any such
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<PAGE>
liability, loss or damage under the Lease or under or by reason of this Mortgage
or in the defense of any such claims or demand, the amount thereof including
costs, expenses and reasonable attorneys' fees shall be secured hereby, and the
Mortgagor shall reimburse the Mortgagee there for immediately upon demand, and
upon the failure of the Mortgagor to do so, the Mortgagee may declare all sums
secured hereby immediately due and payable. Except to the extent that the
Mortgagee shall exercise its option to take over the Property as described
above, this Mortgage shall not operate to place responsibility for the control,
care, management or repair of the Property upon the Mortgagee, nor for the
carrying out of any of the terms and conditions of the Lease, or for any waste
committed on or with respect to the Property by the Mortgagor or any other
parties, or for any dangerous or defective condition of the Property, or, to the
extent that the same is attributable to any period prior to the exercise of such
rights, for any negligence in the management, upkeep, repair or control of the
Property resulting in loss or injury or death to any tenant, licensee, employee
or stranger.
SECTION 5. MISCELLANEOUS.
- ------------------------
(a) The Mortgagee may take or release other security, may release any
party primarily or secondarily liable for any of the Obligations, may grant
extensions, renewals or indulgences with respect to the Obligations and may
apply any other security therefor held by it, to the satisfaction of the
Obligations without prejudice to any of its rights hereunder.
(b) Nothing herein contained and no act done or omitted by the Mortgagee
pursuant to the powers and rights granted it herein shall be deemed to be a
waiver by the Mortgagee of its rights and remedies hereunder or under the Master
Lease, but this Mortgage is made and accepted without prejudice to any of the
rights and remedies possessed by the Mortgagee. The right of the Mortgagee to
collect the Obligations and to enforce any other security therefor may be
exercised by the Mortgagee either prior to, simultaneously with, or subsequent
to any action taken by it hereunder.
(c) The Mortgagor hereby covenants and agrees that all the provisions
herein contained shall be applied to and inure to the benefit of the Mortgagee
and its successors and assigns.
(d) The Mortgagor hereby waives acceptance of this Mortgage by the
Mortgagee and its successors and assigns.
(e) This Mortgage, having been executed, sealed and delivered in the
State, shall be interpreted and construed in accordance with and governed by the
laws of the State.
(f) If fulfillment of any provisions hereof or any transaction related
hereto, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if any clause or provision herein contained operates or would prospectively
operate to invalidate this Mortgage in whole or in part, then such clause or
provision only shall be void, as though not herein contained, and the remainder
of this Mortgage shall remain operative and in full force and effect;.
(g) Subject to the terms of the Master Lease, the Mortgagee may assign all
of its rights under this Mortgage to a third party at any time either before or
after a Default has occurred.
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Wherever in this Mortgage the Mortgagee is referred to, such reference shall be
deemed to include the successors and assigns of the Mortgagee, and all
covenants, promises and agreements by the Mortgagor contained herein shall inure
to the benefit of the successors and assigns of the Mortgagee.
(h) This Mortgage may be amended only by an instrument in writing executed
by the Mortgagor and the Mortgagee.
(i) All notices hereunder shall be sufficiently given and shall be deemed
given when sent by confirmed overnight courier or three (3) business days after
being mailed by certified mail, return receipt requested, postage prepaid,
addressed to the Mortgagor or the Mortgagee at the appropriate addresses
designated in the Master Lease. The Mortgagor or the Mortgagee may, by notice
given hereunder designate any further or different addresses to which subsequent
notices shall be sent.
(j) Notwithstanding anything in the foregoing to the contrary, this
Mortgage shall not be effective until the Mortgagor shall have received the
consent of Landlord as provided in Section _____ of the Lease.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be executed
as of the day and year first written above.
WITNESS: _________________________________________
_______________________________ By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
STATE OF ________, CITY/COUNTY OF _____________________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of __________,
199_, before me, the undersigned Notary Public of said State, personally
appeared _________________, who acknowledged himself/herself to be a
____________ of ______________________________________, a
______________________________________________, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same for the purposes therein contained
as the duly authorized __________ of said ______________________________ by
himself/herself as ____________.
WITNESS my hand and Notarial Seal.
_________________________________________
Notary Public
My commission expires:
[THE UNDERSIGNED attorney hereby certifies that the above instrument was
prepared by an attorney or by one of the parties named in the instrument.
________________________________________]
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<PAGE>
EXHIBIT A TO
COLLATERAL
ASSIGNMENT AND
LEASEHOLD
MORTGAGE
--------
Description of Premises
-----------------------
Street Address: ________________________________________________________
County: ________________________________________________________
State: ________________________________________________________
Metes and Bounds Description: (See attachment)
<PAGE>
EXHIBIT B TO
COLLATERAL
ASSIGNMENT AND
LEASEHOLD
MORTGAGE
--------
[FORM OF Lease]
<PAGE>
EXHIBIT NO. 5A
LANDLORD'S AGREEMENT
THIS LANDLORD'S AGREEMENT is made as of the _____ day of ________, 199_, by
___________________ (the "Landlord") to GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT ("GE Capital").
RECITALS
--------
The Landlord owns fee simple title to certain real property located in
________________________________ (the "Land") as more particularly described in
the Lease Agreement dated _______________, 199_ (which Ground Lease Agreement
together with all modifications, alterations, amendments, supplements and
renewals thereof is hereinafter referred to as the "Ground Lease"), by and
between the Landlord and ______________________________ (the "Tenant"). Pursuant
to the Ground Lease, the Landlord leased to the Tenant and the Tenant leased
from the Landlord the land and any and all improvements on such land not
otherwise owned by Tenant (hereinafter referred to collectively as the
"Premises").
Pursuant to a Master Lease Agreement No. 2 dated as of December 9, 1996, by
and between Boston Chicken, Inc., a Delaware corporation, ("BCI") and General
Electric Capital Corporation for Itself and Certain Participants (the "Lease
Agent") (which, as the same may from time to time be amended, restated,
supplemented, or otherwise modified is hereinafter called the "Master Lease"),
the Lease Agent leased to BCI (among other things) certain equipment and
leasehold improvements as more particularly described in Annex A attached hereto
(the "Lease Assets"), and BCI has subleased certain of such Lease Assets to the
Tenant. BCI has also entered into that certain Secured Credit Agreement dated
December __, 1996 (as the same may be amended or supplemented from time to time,
the "Credit Agreement") by and among BCI, the financial institutions from time
to time parties thereto (the "Lenders"), Bank of America Illinois, as letter of
credit issuing bank (in such capacity, the "Issuing Lender") and as Loan Agent
(in such capacity, the "Loan Agent"), pursuant to which BCI has executed and
delivered certain Revolving Notes (collectively, the "Revolving Notes").
The Loan Agent and GE Capital Corporation as Lease Agent (the "Lease
Agent") have entered into that certain Intercreditor Agreement dated as of
December __, 1996 (as the same may from time to time be amended, restated,
supplemented, or otherwise modified, the "Intercreditor Agreement") which sets
forth certain agreements with respect to voting rights and collateral issues,
among other things.
As additional security for the payment and performance of all obligations
of BCI under the Master Lease and the Revolving Notes (collectively, the
"Obligations"), the Tenant has executed and delivered to GE Capital, as agent
for the Loan Agent and the Lease Agent, a Collateral Assignment and Leasehold
Mortgage covering (among other things) the interest of the Tenant in the Ground
Lease and the Premises (the "Assignment of Lease").
<PAGE>
As a condition precedent to entering into the Master Lease, GE Capital has
required that the Landlord consent to the Assignment of Lease and acknowledge GE
Capital's rights with respect to the Lease Assets, upon the terms and conditions
hereinafter set forth.
AGREEMENTS
----------
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Landlord hereby
agrees as follows:
1. The copy of the Ground Lease attached hereto as Exhibit No. 1 is a
full and complete copy of the Ground Lease (and includes all modifications,
additions, amendments, supplements and renewals thereof.)
2. The Landlord hereby consents to the lien of GE Capital on the Tenant's
right, title and interest in and to the leasehold interest in the Ground Lease
and the Premises, which has been granted to GE Capital as security for the
Obligations pursuant to the Assignment of Lease. The Landlord agrees that GE
Capital shall not assume or be obligated for any of the duties, undertakings or
obligations to be performed by the Tenant under the Ground Lease, unless GE
Capital shall notify the Landlord in writing that GE Capital has elected to
assume such duties, undertakings or obligations.
3. The Landlord hereby certifies that all payments due under the Ground
Lease as of the date hereof have been paid and that, to the best of Landlord's
knowledge, there is no default or event with which the passage of time and/or
the giving of notice would constitute a default under the Ground Lease. So long
as the Tenant or its assigns (including without limitation, GE Capital) shall
make all payments required to be made under the Ground Lease and shall observe
and perform all of the terms of the Ground Lease required to be observed and
performed by the Tenant thereunder, the Landlord agrees that the Ground Lease
shall not be terminated during the term of the Ground Lease (including any
renewal thereof) and the Tenant or its assigns (including without limitation GE
Capital) may peacefully and quietly have, hold and enjoy the Premises for the
term of the Ground Lease (including any renewals thereof) without hindrance,
interruption by the Landlord or any other person or persons claiming by, through
or under the Landlord.
4. The Landlord shall provide GE Capital with copies of any and all
notices of default which it gives the Tenant under the Ground Lease at the same
time that it gives such notices to the Tenant. The Landlord shall provide GE
Capital with written notice of any default by the Tenant under the Ground Lease
and the Landlord agrees that GE Capital shall have a period of thirty (30) days
after the later to occur of (i) the expiration of Tenant's cure period under the
Ground Lease, or (ii) delivery by the Landlord to GE Capital of notice thereof
as set forth above. The Landlord will not terminate or take any action to
foreclose any claim with respect to the Ground Lease until after the giving of
such written notice and the expiration of such cure period.
5. The Landlord agrees that GE Capital shall not be bound by any waiver,
modification or cancellation of any provision of the Ground Lease which
materially adversely affects the interest of GE Capital as assignee of the
leasehold estate of the Tenant under the Ground Lease unless the
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<PAGE>
Tenant shall have obtained GE Capital's prior written consent to such waiver,
modification, or cancellation.
6. The Landlord agrees that in the event that the Tenant fails to
exercise any option to renew the term of the Ground Lease within the time set
forth in the Ground Lease, the Landlord shall notify GE Capital in writing and
provide GE Capital or its assigns with the right to exercise such option to
renew the Ground Lease within thirty (30) days of receipt of such written
notice.
7. Upon the occurrence of a default under the Master Lease, GE Capital
may exercise any of the rights and remedies that it may have under applicable
law and under the Master Lease including, without limitation, the right to sell,
assign or transfer the lessee's interest under the Ground Lease. The Landlord
further agrees that upon the occurrence of any such default under the Master
Lease, GE Capital (after notifying the Landlord of its election to do so) shall
have the right to (a) make any payment required to be made by the Tenant under
the Ground Lease, (b) to perform any other term, covenant, condition or
agreement of the Tenant under the Ground Lease and (c) exercise any other rights
which the Tenant may have under the Ground Lease, including without limitation
the right to assign the lessee's rights under the Ground Lease to another party
and the right to exercise any option (now or hereafter provided in the Lease) to
purchase the Premises. In the event that the Tenant shall become a debtor under
the Federal Bankruptcy Code and, in connection therewith, the Tenant shall
reject the Ground Lease as an executory contract, then upon the request by GE
Capital made within thirty (30) days following such rejection, the Landlord
shall enter into a new lease of the Premises with GE Capital or its designee
(who shall be reasonably acceptable to the Landlord), which new lease (i) shall
be effective as of the date of the termination of the Ground Lease, (ii) shall
be for a term expiring as of the last day of the term of the Ground Lease, and
(iii) shall be on substantially the same terms and conditions as the Ground
Lease (including any provisions for renewal or extension of the term of the
Ground Lease); provided that GE Capital or its designee, as the case may be,
shall be required, as a condition precedent to the effectiveness of such new
lease, to pay to the Landlord an amount equal to any rent due and remaining
unpaid by the Tenant under the Ground Lease.
8. The Landlord will, within fifteen (15) days after receipt of a written
request from GE Capital, which request (except in the case of a transfer of all
or a part of GE Capital's rights under and interest in the Master Lease) shall
not be made more often then once per calendar quarter, deliver to GE Capital a
certificate stating that (a) the Ground Lease is in full force and effect and is
unmodified, (b) that no notice of termination of the Ground Lease has been sent
to the Tenant, (c) the date to which all payments due under the Ground Lease
have been paid, and (d) whether or not, to the best of Landlord's knowledge,
there are any defaults under the Ground Lease and if so, the nature of such
defaults.
9. The Landlord hereby (i) acknowledges that the Lease Assets are owned
by GE Capital and that the Tenant has the right to use and operate the Lease
Assets only during the term of and pursuant to the Master Lease, (ii) waives,
relinquishes and releases all claims and demands of every kind that it has or
may have against the Lease Assets (except for reversionary rights in
improvements), (iii) agrees that none of the Lease Assets shall be subject to
levy and sale on distress for any non-payment of any rent or any other payments
now due or which may hereafter become due under the Ground Lease, and (iv)
agrees that GE Capital's lien on the Lease Assets (pursuant to the
3
<PAGE>
Master Lease) shall be prior to any claim of the Landlord in the Lease Assets,
such waiver and agreements to continue until such date as all of the Obligations
have been paid in full.
10. The Landlord hereby consents to the location of the Lease Assets on
the Premises and authorizes and empowers GE Capital, its lawful attorneys,
agents and employees, to enter upon the Premises at any reasonable time to
remove the Lease Assets upon payment of the current monthly rent for a period of
up to twelve (12) months.
11. GE Capital may, without affecting the validity of this Agreement,
extend, amend or otherwise modify the time of the payment of any sum due under
or the performance of any of the other terms and conditions of the Master Lease,
without the consent of, and without giving notice thereof to, the Landlord.
12. The Landlord will notify any purchaser of the Premises and any
mortgagee or other holder of an encumbrance on the Premises of the existence of
this Agreement which shall be binding upon the successors, assigns and
transferees of the Landlord and shall inure to the benefit of the successors and
assigns of GE Capital.
13. All notices to be given hereunder shall be deemed received when sent
by confirmed overnight courier, or three business days after being deposited in
the U.S. mail, postage prepaid, return receipt requested, to the following
addresses:
to the Landlord:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
to GE Capital: General Electric Capital Corporation, as Agent for
4 Northpark Drive
Suite 500
Hunt Valley, Maryland 21030
Attention: Manager - Credit/Operations
IN WITNESS WHEREOF, the Landlord has caused this Agreement to be duly
executed as of the date first above set forth.
WITNESS:
------------------------------------------------------
By:
- --------------------- ---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
4
<PAGE>
ANNEX A TO
LANDLORD'S
AGREEMENT
---------
Lease Assets
------------
<PAGE>
EXHIBIT NO. 1
TO LANDLORD'S
AGREEMENT
---------
[FORM OF GROUND LEASE]
<PAGE>
EXHIBIT NO. 5B
Location:
-------------------------
Store:
-------------------------
CONSENT TO COLLATERAL ASSIGNMENT AND LEASEHOLD MORTGAGE
AND
LANDLORD'S LIEN WAIVER AGREEMENT
Date of Agreement: ______________________, 19____ ("Agreement")
Date of Lease: ______________________, 19____ ("Lease")
Landlord: ______________________________ ("Landlord")
______________________________
______________________________
Tenant: ______________________________ ("Tenant")
Mortgage: General Electric Capital Corporation ("Mortgagee")
Address of Premises: ______________________________
______________________________
See Exhibit 1 attached ("Premises")
Boston Chicken, Inc., ("BCI") and General Electric Capital Corporation, for
Itself and as Agent for Certain Participants (the "Lease Agent") have entered
into a Master Lease Agreement No. 2 dated as of December 9, 1996 (as the same
may from time to time be amended, restated, supplemented, or otherwise modified,
the "Master Lease") pursuant to which the Lease Agent has agreed to lease to BCI
certain Lease Assets described therein, a portion of which have been subleased
to Tenant. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Master Lease.
BCI has also entered into that certain Secured Credit Agreement dated as of
December 9, 1996 (as the same may from time to time be amended, restated,
supplemented, or otherwise modified, the "Credit Agreement") by and among BCI,
certain financial institutions (the "Lenders"), Bank of America Illinois, as
letter of credit issuing bank (in such capacity, the "Issuing Lender"), and as
Loan Agent (in such capacity, "Loan Agent"), pursuant to which BCI has delivered
certain Revolving Notes (collectively, the "Revolving Notes").
The Loan Agent and the Lease Agent have entered into that certain
Intercreditor Agreement dated as of December 9, 1996 (as the same may from time
to time be amended, restated, supplemented, or otherwise modified, the
"Intercreditor Agreement"). To secure BCI's obligations under the Master Lease
and the Credit Agreement, Tenant has executed and delivered to Mortgagee
2
<PAGE>
a Collateral Assignment and Leasehold Mortgage (the "Mortgage"), covering all of
Tenant's leasehold interest in and to the Lease and the Premises and including
all improvements, fixtures, personal property, etc. located thereon
(collectively, the "Tenant Property"). Pursuant to the Intercreditor Agreement,
Mortgagee is acting under the Mortgage as agent for the Loan Agent and the Lease
Agent.
Landlord agrees that: (i) Tenant's Property is, and shall remain, personal
property regardless of the method by which it may be, or becomes, affixed to the
Premises; (ii) the Landlord's interest in Tenant's Property and any proceeds
thereof (including, without limitation, proceeds of any insurance therefor)
shall be, and remain, subject to the rights and interests of Mortgagee (unless
and until Mortgagee shall formally release or transfer its interest in Tenant's
Property, the Lease and Premises); (iii) Landlord waives and agrees not to
assert any lien, claim or interest (statutory, contractual or otherwise) which
the Landlord may now have or hereafter acquire against or in the Tenant's
Property by virtue of the Landlord's interest in the Lease and Premises; (iv)
the Landlord shall not take any action that would affect Tenant's Property (or
the interest of Mortgagee therein) or cause the Tenant's Property to be removed
from the Premises without giving Mortgagee thirty (30) days' prior written
notice of such action (provided, however, that the foregoing shall not restrict
the exercise of any remedies against Tenant that do not affect Tenant's Property
or the interest of Mortgagee therein); (v) Mortgagee and its employees and
agents, shall have the right with prior notice, from time to time, to enter the
Premises for the purpose of inspecting Tenant's Property; and (vi) Mortgagee and
its employees and agents, shall have the right, upon any default by Tenant under
the Loan, to enter the Premises and remove Tenant's Property from the Premises
provided that Mortgagee reimburses Landlord for any damages actually caused to
the Premises by Mortgagee, or its employees or agents, during any such removal.
Landlord represents that the copy of the Lease attached hereto as Exhibit A is a
true and correct copy of the Lease, and acknowledges and agrees that Mortgagee
is relying on this Agreement.
All notices by Landlord to Mortgagee shall be in writing, deemed received
when sent by confirmed overnight courier, or three (3) business days after sent
by certified mail, postage prepaid, return receipt requested, and addressed to
the following address (or to such other address as Mortgagee may specify from
time to time by notice to the Landlord):
General Electric Capital Corporation, as agent
4 Northpark Drive
Suite 500
Hunt Valley, Maryland 21030
Attention: Manager, Credit/Operations
with a copy to BCI, to the following address (or such other address as BCI may
specify from time to time by notice to the Landlord):
14103 Denver West Parkway
Golden, CO 80401
Attention: Legal Department
3
<PAGE>
Tenant shall execute the Mortgage in favor of Mortgagee and Landlord hereby
consents to said Mortgage and agrees as follows:
(a) to notify Mortgagee and BCI in writing simultaneously with any
notice or demand to Tenant with respect to a default or suspected default
of Tenant under the Lease;
(b) that Mortgagee or BCI shall have the right, but shall not be
obligated, to cure any default by Tenant or of exercising any election,
option or privilege of Tenant under the Lease within thirty (30) days after
the later to occur of (i) the expiration of Tenant's cure period under the
Lease, or (ii) delivery by Landlord of notice thereof in accordance with
the above;
(c) if the Tenant defaults on its obligations to Mortgagee and the
Mortgagee undertakes to enforce their security interest in the Lease and/or
to foreclose on the Tenant's leasehold estate pursuant to the Mortgage, the
Mortgagee may, at its option and by written notice to Landlord, (i) lease
the Premises from the Landlord on the same terms as set forth in the Lease
and exercise the other rights as lessee thereunder as described therein
(provided that the Mortgagee at its sole expense cures any default by the
Tenant under the Lease within the thirty (30) days cure period noted above,
and further provided, that if Mortgagee is diligently pursuing the cure of
any such default and cannot do so within the thirty (30) day cure period
provided herein, Mortgagee shall have a reasonable extension of time to
cure such default), and/or (ii) assign or sublet the Lease to a purchaser
of all or any part of the Tenant's Property, subject to Landlord's prior
written consent, which consent Landlord agrees not to unreasonably
withhold, dely or condition. Landlord agrees to cooperate with any such
enforcement action or foreclosure and consent to the assignment of the
Lease, the sublet of the Premises or foreclosure sale of the leasehold
estate to a party reasonably satisfactory to the Landlord;
(d) in the event that the Tenant shall become a debtor under the
Federal Bankruptcy Code and, in connection therewith the Tenant shall
reject the Lease as an executory contract, then upon the request by the
Mortgagee made within thirty (30) days following such rejection, the
Landlord shall enter into a new lease of the Premises with the Mortgagee,
BCI or their designee (who shall be reasonably acceptable to the Landlord),
which new lease (i) shall be effective as of the date of the termination of
the Lease, (ii) shall be for a term expiring as of the last day of the term
of the Lease, and (iii) shall be on substantially the same terms and
conditions as the Lease (including any provisions for renewal or extension
of the term of the Lease); provided that the Mortgagee, BCI or such
designee, as the case may be, shall be required, as a condition to the
effectiveness of such new lease, to pay the Landlord an amount equal to any
rent due and remaining unpaid by the Tenant under the Lease;
(e) the Mortgagee shall have the right to settle and adjust insurance
claims to receive the proceeds of insurance with respect to the Premises as
set forth in the Mortgage; and
4
<PAGE>
(f) if at any time there is a conflict between any provision of this
Agreement and any provisions of the Lease, then such provision of this
Agreement shall govern and control.
(g) In the event that Tenant fails to exercise any option to renew
the term of the Lease within the time set forth in the Lease, the Landlord
shall notify the Mortgagee in writing and provide the Mortgagee or its
assigns with the right to exercise such option to renew the Lease within
thirty (30) days of such notice.
(h) Mortgagee shall not be bound by any waiver, modification or
cancellation of any provision of the lease which adversely affects the
interest of the Mortgagee as assignee of the leasehold estate of the
Tenant, unless the Tenant shall have obtained the Mortgagee's prior written
consent to such waiver, modification, or cancellation.
(i) So long as the Tenant or its assigns (including, without
limitation, the Mortgagee) shall make all payments required to be made
under the Lease and shall observe and perform all of the terms of the Lease
required to be performed or observed by the Tenant thereunder, the Landlord
agrees that the Lease shall not be terminated during the term of the Lease
(including any renewals thereof) and Tenant or its assigns (including,
without limitation, the Mortgagee) may peacefully and quietly have, hold
and enjoy the Premises without hindrance or interruption by the Landlord or
other person or persons claiming by, through or under the Landlord.
This Agreement shall insure to the benefit of and be binding upon the
Mortgagee, Landlord, Tenant, and BCI, their successors in interest, assigns,
heirs and personal representatives, upon any successor owner or transferee of
the Premises and upon any purchaser(s) including any mortgagee of the Premises,
from the Landlord.
LANDLORD:
By:______________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
Date:____________________, 19_______
Landlord's Notice Address:
_________________________________________
_________________________________________
Telephone:_______________________________
5
<PAGE>
STATE OF ________, _____________ OF _____________, TO WIT:
I HEREBY CERTIFY that on this ______ day of __________, 199_, before me,
the undersigned, a Notary Public of the State of __________, personally appeared
____________________, known to me to be the person whose name is subscribed to
the within Agreement, who acknowledged himself to be the ___________ of
________________________, and acknowledged that he executed the same for the
purposes therein contained as the duly authorized _____________ of said
______________ and that the same is its act and deed.
WITNESS my hand and Notarial Seal.
______________________________
Notary Public
My Commission Expires:
6
<PAGE>
EXHIBIT NO. 1
TO LANDLORD'S
AGREEMENT
---------
[DESCRIPTION OF PREMISES]
<PAGE>
EXHIBIT NO. 2
TO LANDLORD'S
AGREEMENT
---------
[FORM OF GROUND LEASE]
<PAGE>
EXHIBIT NO. 6
MEMORANDUM OF MASTER LEASE
THIS MEMORANDUM OF MASTER LEASE ("Memorandum of Lease") is made as of the
_______ day of _________________________, 199__, by and between GENERAL ELECTRIC
CAPITAL CORPORATION, AS AGENT FOR BANK OF AMERICA ILLINOIS, AS LOAN AGENT, AND
GENERAL ELECTRIC CAPITAL CORPORATION, AS LEASE AGENT ("Lessor") and BOSTON
CHICKEN, INC., a Delaware corporation ("Lessee").
RECITALS
--------
WHEREAS, Lessor and Lessee have executed that certain Master Lease
Agreement No.2 ("Master Lease") dated as of ___________ __, 1996, covering
certain real property and equipment as more particularly described in Annex A
attached hereto and incorporated herein by this reference and all improvements
which may come to be located on the real property more fully described on
Exhibit No. 1 attached hereto and incorporated herein by this reference ("Land")
(the Land, all equipment and the improvements are referred to herein as the
"Parcels"); and
WHEREAS, Lessor and Lessee desire to record notice of the Master Lease in
the real estate records of ____________ County, ____________;
NOW, THEREFORE, in consideration of the foregoing, Lessor and Lessee hereby
declare as follows:
Demise. Lessor hereby leases the Parcels to Lessee and Lessee hereby
leases the Parcels from Lessor, subject to the terms, covenants and conditions
contained in the Master Lease.
Expiration Date. The term of the Master Lease ("Term") shall commence
on _______ __, 199__ and shall expire on __________ __, ____.
Option to Purchase. Lessee has an option to purchase the Parcels, as
more particularly described in the Master Lease, during the Term.
Restrictions on Encumbrances. Lessor is prohibited from recording
against the Parcels liens (including, without limitation, deeds of trust),
encumbrances, and other matters that would constitute exceptions to title,
except for those which result from acts of Lessor or otherwise referenced in or
permitted under the Master Lease, and from amending or modifying any of the
foregoing that may exist now or during the Term, as more particularly described
in the Master Lease.
Restrictions on Transfers by Lessor. Subject to certain exceptions,
Lessor may transfer its interest in the Parcels to a third party subject to the
restrictions which are set forth with more particularity in the Master Lease.
<PAGE>
Counterparts. This Memorandum of Master Lease may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall comprise but a single instrument.
Remedies. If a court of competent jurisdiction rules that the Master
Lease is a mortgage, deed of trust, or other secured financing, then Lessee
hereby mortgages and grants to Lessor a lien against the Parcels. Subject to
availability of such remedies under state law, upon the occurrence of any
Default (as defined in the Master Lease) under the Master Lease, Lessor, may
without in any way waiving such Default, in addition to any other rights and
remedies that it may have under applicable law and subject to the Master Lease,
(1) declare the obligations of Lessee under the Master Lease to be immediately
due and payable, (2) sell, assign or transfer the entire lessee's interests in
the Master Lease to any third party or (3) take possession of the Parcels by
foreclosure or otherwise and have, hold, manage, lease and operate or sell the
same on such terms and for such period of time as Lessor may deem proper, and in
connection therewith subject to applicable law, the Lessee, hereby (a) assents
to the passage of the decree for the sale of the Parcels by the equity court
having jurisdiction, and (b) authorizes and empowers Lessor and its successors
and assigns to take possession of and sell (or in case of the default of any
purchaser to resell) the Parcels, or any part thereof, all in accordance with
the applicable laws and rules of court relating to mortgages or deeds of trust.
In the case of any sale hereunder, by virtue of judicial proceedings or
otherwise, the Parcels may be sold as an entirety or in separate parcels, by one
sale or by several sales, as may be deemed by Lessor to be appropriate and
without regard to any right of Lessee or any other person to the marshalling of
assets. Any sale hereunder may be made at public auction, at such time or
times, at such place or places, and upon such terms and conditions and after
such previous public notice as Lessor shall deem appropriate and advantageous
and as required by law. Upon the terms of such sale being complied with, Lessor
shall convey to, and at the cost of, the purchaser or purchasers the interest of
the Lessee in the Parcels so sold, free and discharged of and from all estate,
title or interest of Lessee, at law or in equity, such purchaser or purchasers
being hereby discharged from all liability to see to the application of the
purchase money. The profits and proceeds derived from the managing and operating
of the Parcels or from the sale or assignment of Lessor's interest in the Master
Lease or from the sale of the Parcels shall be applied to the payment of the
obligations owed to Lessor in such order of priority as Lessor in its sole
discretion may determine and after the payment of all attorneys' fees and any
expenses as a result of a sale, assignment or foreclosure, subject, however, to
the provisions of that certain Intercreditor Agreement dated as of December
____, 1996 by and among Bank of America Illinois as Loan Agent and General
Electric Capital Corporation, as Lease Agent.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Memorandum of
Master Lease as of the date and year first written above.
"Lessee"
BOSTON CHICKEN, INC.,
a Delaware corporation
By:______________________________________
2
<PAGE>
Name:____________________________________
Title:___________________________________
STATE OF ________, CITY/COUNTY OF _____________________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of __________, 199__, before me,
the undersigned Notary Public of said State, personally appeared
____________________, who acknowledged himself/herself to be a ____________ of
Boston Chicken, Inc., a Delaware corporation, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same for the purposes therein contained
as the duly authorized __________ of said corporation by himself/herself as
____________.
WITNESS my hand and Notarial Seal.
______________________________
Notary Public
My commission expires:
[signatures continued on next page]
3
<PAGE>
"Lessor"
GENERAL ELECTRIC CAPITAL
CORPORATION, AS AGENT
By:______________________________________
Name:____________________________________
Title:___________________________________
STATE OF ________, CITY/COUNTY OF _____________________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of __________, 199__, before me,
the undersigned Notary Public of said State, personally appeared
____________________, who acknowledged himself/herself to be a ____________ of
General Electric Capital Corporation, as Agent, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same for the purposes therein contained
as the duly authorized __________ of said corporation by himself/herself as
____________.
WITNESS my hand and Notarial Seal.
______________________________
Notary Public
My commission expires:
[ THE UNDERSIGNED attorney hereby certifies that the above instrument was
prepared by an attorney or by one of the parties named in the instrument.
____________________________]
4
<PAGE>
ANNEX A TO
MEMORANDUM OF
MASTER LEASE
------------
Description of Real Property
and Equipment
<PAGE>
EXHIBIT NO. 1 TO
MEMORANDUM OF
MASTER LEASE
-----------------
LEGAL DESCRIPTION OF THE PROPERTY
TAX I.D. NUMBER:______________________
Address of Property:__________________
City:_________________________________
County:_______________________________
State:________________________________
<PAGE>
EXHIBIT NO. 7
FORM OF MORTGAGE
----------------
MORTGAGE, ASSIGNMENT
AND SECURITY AGREEMENT
$_________________
(principal amount
secured hereby)
THIS MORTGAGE, ASSIGNMENT AND SECURITY AGREEMENT (this "Mortgage") is
made as of the ____ day of ____________, 199_, by BOSTON CHICKEN, INC., a
Delaware corporation (hereinafter the "Mortgagor") to GENERAL ELECTRIC CAPITAL
CORPORATION, AS AGENT ("GE Capital").
R E C I T A L S
---------------
WHEREAS, the Mortgagor and General Electric Capital Corporation, for
Itself and as Agent for Certain Participants (the "Lease Agent") have entered
into that certain Master Lease Agreement No. 2 dated as of December 9, 1996
(such Master Lease Agreement No. 2, as the same may be amended or supplemented
from time to time to the extent permitted by the terms thereof, being herein
called the "Master Lease"), whereby, subject to the terms and conditions set
forth therein, the Lease Agent has agreed to lease to the Mortgagor, and the
Mortgagor has agreed to lease from the Lease Agent certain Lease Assets, as more
particularly described therein. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Master Lease.
WHEREAS, pursuant to such Master Lease, the Lease Agent has leased to
the Mortgagor certain real property located in __________________________ as
more particularly described in Exhibit A attached hereto and made a part hereof
(the "Land"), for the term specified therein. A Memorandum of the Master Lease
has been recorded or will be recorded among the Land Records of _______________
immediately prior to the recordation of this Mortgage.
WHEREAS, the Mortgagor has also entered into that certain Secured
Credit Agreement dated as of December _____, 1996 (as the same may be amended or
supplemented from time to time to the extent permitted by the terms thereof,
being herein called the "Credit Agreement") by and among the Mortgagor, the
financial institutions from time to time parties thereto (the "Lenders"), Bank
of America Illinois, as letter of credit issuing bank (in such capacity, the
"Issuing Lender") and as Loan Agent (in such capacity, the "Loan Agent"),
pursuant to which the Mortgagor has executed and delivered those certain
Revolving Notes dated December __, 1996 in the aggregate principal amount of
$150,000,000 (collectively, the "Revolving Notes").
WHEREAS, the Loan Agent and the Lease Agent have entered into that
certain Intercreditor Agreement dated December __, 1996 (as the same may from
time to time be amended,
<PAGE>
restated, supplemented, or otherwise modified, the "Intercreditor Agreement")
which sets forth certain agreements with respect to voting rights and collateral
issues, among other things. Pursuant to the terms of the Intercreditor
Agreement, GE Capital is acting hereunder as agent for the Loan Agent and the
Lease Agent.
WHEREAS, the Mortgagor, the Loan Agent, and the Lease Agent have
entered into that certain Facilities Agreement dated as of even date herewith
(as the same may from time to time be amended, restated, supplemented, or
otherwise modified, the "Facilities Agreement").
WHEREAS, as security for the payment of Mortgagor's obligation under
the Master Lease and the Revolving Notes and the performance of all other
obligations of the Mortgagor under the Master Lease, the Revolving Notes, or any
documents related thereto (collectively, the "Obligations"), GE Capital has
required that the Mortgagor execute and deliver this Mortgage assigning and
securing to GE Capital, as agent, (among other things) all of Mortgagor's
interest in the Property (as hereinafter defined) now owed or hereafter
acquired, including without limitation, Mortgagor's leasehold interest in the
Master Lease and the Property.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
conclusively acknowledged by the Mortgagor, in order to secure the full and
punctual payment and performance of the Obligations, the Mortgagor does hereby
grant, convey, bargain, sell, assign, pledge, transfer and set over to GE
Capital and its successors and assigns, and does hereby grant to GE Capital, and
its successors and assigns, a lien on and a security interest in, all and each
of the properties, rights, interests and privileges described in the following
paragraphs:
ALL of the Mortgagor's right, title and interest in and to the Master
Lease and the leasehold estate created thereunder and any possible future
acquisition by the Mortgagor of the fee simple interest in the Property.
TOGETHER with all right, title and interest of the Mortgagor including
any after-acquired right, title or reversion, in and to the beds of the ways,
streets, avenues and alleys adjoining the Property.
TOGETHER with all right, title and interest of the Mortgagor in and to
all and singular the rights, alleys, ways, tenements, hereditaments, easements,
appurtenances, passages, waters, water rights, water courses, riparian rights,
liberties, advantages, accessions and privileges now or hereafter appertaining
to the Property or any part thereof, including, but not limited to, any
homestead or other claim at law or in equity, the reversion or reversions,
remainder or remainders thereof, and also all the estate, property, claim,
right, title or interest now owned and hereafter acquired by the Mortgagor in or
to the Property or any part thereof.
TOGETHER with all right, title and interest of the Mortgagor in and to
all improvements, structures and buildings now or hereafter erected or placed on
the Property and all replacements thereof, (collectively, the "Improvements").
2
<PAGE>
TOGETHER with all right, title and interest of the Mortgagor in and to
all building materials, furniture, fixtures, machinery, equipment and tangible
personal property of every kind and nature whatsoever, now or hereafter located
or contained in or upon or attached to, the Property or the Improvements or any
part thereof, and used or usable in connection with any present or future use or
operations of the Property or the Improvements or any part thereof, both now
owned and hereafter acquired by the Mortgagor, together with all additions,
substitutions, alterations or improvements thereto (the "Additions") and all
cash and non-cash proceeds thereto (all of the foregoing being hereinafter
sometimes referred to collectively as the "Equipment Collateral"). All of the
Equipment Collateral, so far as permitted by law, shall be deemed to be fixtures
and part of the Property and of the Improvements, and as to any part of the
Equipment Collateral not deemed or permitted by law to be fixtures, this
Mortgage shall also constitute a security agreement under the Uniform Commercial
Code currently in effect in the State of ________ (the "State").
Unless specifically designated otherwise, all of the Mortgagor's
right, title and interest in and to the Property, the Improvements, the
Equipment Collateral and all other items, rights, interests, privileges and
property described in the preceding paragraphs hereof, together with all
Additions thereto, shall be herein referred to collectively as the "Property".
TOGETHER with any and all judgments, awards of damages (including but
not limited to severance and consequential damages), payments, proceeds,
settlements or other compensation heretofore or hereafter made, including
interest thereon, and the right to receive the same, as a result of, in
connection with, or in lieu of any taking of title, of use, or of any other
property interest of the Property or any part thereof under the exercise of the
power of eminent domain, either temporarily or permanently by any governmental
authority or by any person acting under governmental authority to the extent of
all of the Obligations which may be secured by this Mortgage at the date of
receipt of any such judgments, awards on other compensation by GE Capital, and
of the reasonable counsel fees, costs and disbursements, if any, incurred by GE
Capital in connection with the collection of such judgments, awards on other
compensation.
TOGETHER with all unearned premiums, accrued, accruing or to accrue
under insurance policies with respect to the Property, now or hereafter obtained
by the Mortgagor, and the Mortgagor's interest in and to all proceeds of the
conversion, voluntary or involuntary, and the interest payable thereon, of the
Property or any part thereof, into cash or liquidated claims, including, without
limitation, proceeds of casualty insurance, title insurance or any other
insurance maintained on the Property, and the right to collect and receive the
same.
TOGETHER with all of the rents, royalties, issues, profits, revenues,
income and other benefits of the Property, or arising from the use or enjoyment
of all or any portion thereof, or from any lease or agreement pertaining
thereto, and all right, title and interest of the Mortgagor in and to, and
remedies under, any and all leases and subleases of the Property, or any part
thereof, both now in existence or hereafter entered into and all contract
rights, accounts receivable and general intangibles growing out of or in
connection with such leases and subleases, together with all proceeds thereof;
and including, without limitation, all cash or security deposited thereunder to
secure performance by the lessees of their obligations thereunder whether such
cash or security is to be held until the expiration of the terms of such leases
or are to be applied to one
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or more of the installments of rent coming due immediately prior to the
expiration of such terms; reserving in the Mortgagor a license terminable upon
the occurrence of a Default (hereinafter defined) hereunder to collect and
receive the same.
TO HAVE AND TO HOLD the Property and all other interests described
above unto GE Capital and its successors and assigns, for and during all of the
rest, residue and remainder of the term of years yet to come and unexpired under
the Master Lease.
PROVIDED, HOWEVER, that until the occurrence of a Default hereunder,
and subject to any provisions hereof to the contrary, the Mortgagor shall have
the right to remain in quiet and peaceful possession of the Property, and to
collect, receive and retain the rents, revenues, profits, proceeds, income and
royalties therefrom.
PROVIDED FURTHER, that upon the full payment and performance of all of
the Obligations at the time and in the manner stated in the Master Lease, this
Mortgage, at any time before the sale hereinafter provided for, the lien granted
hereby shall cease, determine and become void, and upon proof given to the
satisfaction of GE Capital that all of the Obligations have been so paid and
performed, this Mortgage shall be deemed null and void and GE Capital shall
release and discharge the lien and security interest of this Mortgage upon
payment to GE Capital of all costs and expenses related to the release and
reconveyance of the Property or any partial release and reconveyance thereof.
PROVIDED FURTHER, that upon the occurrence of a substitution under the
Master Lease pursuant to which GE Capital is required to release the Property,
GE Capital shall release and discharge the lien and security interest of this
Mortgage upon payment of all costs and expenses related to the release and
reconveyance of the Property or any partial release or reconveyance thereof.
AND THIS MORTGAGE FURTHER WITNESSETH, that the Mortgagor hereby
represents, warrants, covenants and agrees as follows, and stipulates that a
breach of any of the following representations, warranties, covenants and
agreements shall be deemed a breach of a material condition of this Mortgage:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Mortgagor represents and
warrants to GE Capital that as of the date hereof, the Mortgagor is the owner of
the entire lessee's interest in the Master Lease and, except for this Mortgage,
the Mortgagor has not assigned the lessee's interest in the Master Lease or any
part thereof to any other party. Upon the execution and recordation of this
Mortgage, GE Capital and its assigns shall have a first lien on the lessee's
interest in the Master Lease and the Mortgagor's interest in the Property.
SECTION 2. GENERAL COVENANTS AND AGREEMENTS. The Mortgagor covenants and
agrees with GE Capital as follows:
(a) Upon and subject to the terms of the Master Lease, the Mortgagor
will pay, when due and payable, all Rent payments and all other sums and charges
due and to become due under the Master Lease.
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(b) Upon and subject to the terms of the Master Lease, the Mortgagor
will perform and observe all of the terms, covenants and conditions required to
be performed and observed by the Mortgagor as lessee under the Master Lease, and
will do all things necessary to preserve and to keep unimpaired the rights of GE
Capital under the Master Lease.
(c) As of the date hereof, the Master Lease is the only lease covering
the Property and the Mortgagor will not, without the prior written consent of GE
Capital, enter into any other leases or any subleases (except Subleases, as
defined in and permitted by the Master Lease) of such Property.
(d) Except for this Mortgage, (or as expressly permitted pursuant to
the Master Lease) the Mortgagor will not, without the prior written consent of
GE Capital, assign, transfer or encumber the lessee's interest in the Master
Lease or permit the assignment, transfer or encumbrance of the lessee's interest
in the Master Lease.
(e) The Mortgagor shall execute and deliver, within ten (10) days
after request of GE Capital, such instruments as GE Capital may reasonably deem
useful or necessary to permit GE Capital to take such other action as GE Capital
considers desirable preserve the interest of GE Capital in the Property as
intended hereby.
(f) If the Mortgagor acquires the fee title to the Property during the
Term of the Master Lease, whether by purchase or otherwise, this Mortgage shall
attach to and cover and be a lien upon the fee title so acquired and such fee
title shall, subject to applicable law, without further assignment, mortgage or
conveyance, become and be subject to the lien of and covered by this Mortgage.
On written request by GE Capital, Mortgagor shall cause to be executed and
recorded all such other and further assurances or instruments in writing as may,
pursuant to applicable law, be required to carry out the intent and meaning of
this subparagraph.
SECTION 3. DEFAULT.
The occurrence of any one or more of the following events shall
constitute a default under the provisions of this Mortgage, and the term
"Default" shall mean, whenever it is used in this Mortgage, any one or more of
the following events:
(A) The failure of GE Capital to perform, observe or comply with any
of the provisions of this Mortgage; or
(B) The occurrence of a default under the Master Lease, the Revolving
Notes, the Credit Agreement or the Facilities Agreement which is not cured
within any applicable notice and cure periods.
SECTION 4. RIGHTS AND REMEDIES.
(A) Upon the occurrence of any Default, GE Capital, without in any way
waiving such Default, in addition to any other rights and remedies that it may
have under applicable law and subject to the terms of the Master Lease, (1)
declare the Obligations to be immediately due
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and payable, (2) sell, assign or transfer the entire lessee's interests in the
Master Lease to any third party or (3) take possession of the Property by
foreclosure or otherwise and have, hold, manage, lease and operate or sell the
same on such terms and for such period of time as GE Capital may deem proper and
in connection therewith, subject to applicable law, the Mortgagor hereby (a)
assents to the passage of the decree for the sale of the Property by the equity
court having jurisdiction, and (b) authorizes and empowers GE Capital and its
successors and assigns to take possession of and sell (or in case of the default
of any purchaser to resell) the Property, or any part thereof, all in accordance
with the applicable laws and rules of court relating to mortgages or deeds of
trust. In the case of any sale under this Mortgage, by virtue of judicial
proceedings or otherwise, the Property may be sold as an entirety or in parcels,
by one sale or by several sales, as may be deemed by GE Capital to be
appropriate and without regard to any right of the Mortgagor or any other person
to the marshalling of assets. Any sale hereunder may be made at public auction,
at such time or times, at such place or places, and upon such terms and
conditions and after such previous public notice as GE Capital shall deem
appropriate and advantageous and as required by law. Upon the terms of such sale
being complied with, GE Capital shall convey to, and at the cost of, the
purchaser or purchasers the interest of the Mortgagor in the Property so sold,
free and discharged of and from all estate, title or interest of the Mortgagor,
at law or in equity, such purchaser or purchasers being hereby discharged from
all liability to see to the application of the purchase money. The profits and
proceeds derived from the managing and operating of the Property or from the
sale or assignment of GE Capital's interest in the Master Lease shall be applied
in accordance with the terms of the Master Lease and the Intercreditor
Agreement. The Mortgagor hereby agrees to pay GE Capital on demand all of the
costs incurred by GE Capital in taking, managing, operating and insuring the
Property and/or assigning or selling GE Capital's interest in the Master Lease
following a Default and the exercise by GE Capital of the remedies provided
herein.
(B) Unless GE Capital exercises its option to take over the Property
as provided above following a Default, GE Capital shall not be obligated to
perform or discharge, nor does it hereby undertake to perform or discharge, any
obligation, duty or liability under the Master Lease, or under or by reason of
this Mortgage, and the Mortgagor shall and does hereby agree to indemnify GE
Capital for and to hold GE Capital harmless of and from any and all liability,
loss or damage which it might incur under the Master Lease or under or by reason
of this Mortgage, and of and from any and all claims and demands whatsoever
which may be asserted against it by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in the Master Lease, except for liability, loss, damage,
claims or demands arising from the gross negligence or willful misconduct of GE
Capital. Should GE Capital incur any such liability, loss or damage under the
Master Lease or under or by reason of this Mortgage or in the defense of any
such claims or demand, the amount thereof including costs, expenses and
reasonable attorneys' fees shall be secured hereby, and the Mortgagor shall
reimburse GE Capital there for immediately upon demand, and upon the failure of
the Mortgagor to do so, GE Capital may declare all sums secured hereby
immediately due and payable. Except to the extent GE Capital shall exercise its
option to take over the Property as provided above, this Mortgage shall not
operate to place responsibility for the control, care, management or repair of
the Property upon GE Capital, nor for the carrying out of any of the terms and
conditions of the Master Lease, or for any waste committed on or with respect to
the Property by the Mortgagor or any other parties, or for any dangerous or
defective condition of
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the Property, or, to the extent the same is attributable to any period prior to
the exercise of such rights, for any negligence in the management, upkeep,
repair or control of the Property resulting in loss or injury or death to any
tenant, licensee, employee or stranger.
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SECTION 5. MISCELLANEOUS.
(a) GE Capital may take or release other security, may release any
party primarily or secondarily liable for any of the Obligations, may grant
extensions, renewals or indulgences with respect to the Obligations and may
apply any other security therefor held by it, to the satisfaction of the
Obligations without prejudice to any of its rights hereunder.
(b) Nothing herein contained and no act done or omitted by GE Capital
pursuant to the powers and rights granted it herein shall be deemed to be a
waiver by GE Capital of its rights and remedies hereunder or under the Master
Lease, but this Mortgage is made and accepted without prejudice to any of the
rights and remedies possessed by GE Capital. The right of GE Capital to collect
the Obligations and to enforce any other security therefor may be exercised by
GE Capital either prior to, simultaneously with, or subsequent to any action
taken by it hereunder.
(c) The Mortgagor hereby covenants and agrees that all the provisions
herein contained shall be applied to and inure to the benefit of GE Capital and
its successors and assigns.
(d) The Mortgagor hereby waives acceptance of this Mortgage by GE
Capital and its successors and assigns.
(e) This Mortgage, having been executed, sealed and delivered in the
State, shall be interpreted and construed in accordance with and governed by the
laws of the State.
(f) If fulfillment of any provisions hereof or any transaction related
hereto, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if any clause or provision herein contained operates or would prospectively
operate to invalidate this Mortgage in whole or in part, then such clause or
provision only shall be void, as though not herein contained, and the remainder
of this Mortgage shall remain operative and in full force and effect.
(g) Subject to the terms of the Master Lease GE Capital may assign all
of its rights under this Mortgage to a third party at any time either before or
after a Default has occurred. Wherever in this Mortgage GE Capital is referred
to, such reference shall be deemed to include the successors and assigns of GE
Capital, and all covenants, promises and agreements by the Mortgagor contained
herein shall inure to the benefit of the successors and assigns of GE Capital.
(h) This Mortgage may be amended only by an instrument in writing
executed by the Mortgagor and GE Capital.
(i) All notices hereunder shall be sufficiently given and shall be
deemed given when sent by confirmed overnight courier service or three (3)
business days after being mailed return receipt requested, postage prepaid,
addressed to the Mortgagor or GE Capital at the appropriate addresses designated
in the Master Lease. The Mortgagor or GE Capital may, by
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<PAGE>
notice given hereunder designate any further or different addresses to which
subsequent notices shall be sent.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be
executed as of the day and year first written above.
WITNESS: BOSTON CHICKEN, INC.
By:
- --------------------------- --------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
STATE OF ________, CITY/COUNTY OF _____________________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of __________, 199_, before
me, the undersigned Notary Public of said State, personally appeared
____________________, who acknowledged himself/herself to be a ____________ of
Boston Chicken, Inc., a Delaware corporation, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same for the purposes therein contained as
the duly authorized __________ of said corporation by himself/ herself as
____________.
WITNESS my hand and Notarial Seal.
-----------------------------------------
Notary Public
My commission expires:
THE UNDERSIGNED attorney hereby certifies that the above instrument
was prepared by an attorney or by one of the parties named in the instrument.
------------------------------------------
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EXHIBIT NO. 8
FORM OF DEED OF TRUST
---------------------
DEED OF TRUST, ASSIGNMENT
AND SECURITY AGREEMENT
$
-----------------
(principal amount
secured hereby)
THIS DEED OF TRUST, ASSIGNMENT AND SECURITY AGREEMENT (this "Deed of
Trust") is made as of the ____ day of ____________, 199_, by BOSTON CHICKEN,
INC., a Delaware corporation (hereinafter the "Grantor") to
______________________________ (collectively Trustee" or "Trustees") for the
benefit of GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT (collectively, "GE
Capital").
R E C I T A L S
---------------
WHEREAS, the Grantor and General Electric Capital Corporation, for
Itself and as Agent for Certain Participants (the "Lease Agent") have entered
into that certain Master Lease Agreement No. 2 dated as of December 9, 1996
(such Master Lease Agreement No. 2, as the same may be amended or supplemented
from time to time to the extent permitted by the terms thereof, being herein
called the "Master Lease"), whereby, subject to the terms and conditions set
forth therein, the Lease Agent has agreed to lease to the Grantor, and the
Grantor has agreed to lease from the Lease Agent certain Lease Assets, as more
particularly described therein. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Master Lease.
WHEREAS, pursuant to such Master Lease, the Lease Agent has leased to
the Grantor certain real property located in ________________________ as more
particularly described in Exhibit A attached hereto and made a part hereof (the
"Land"), for the term specified therein. A Memorandum of the Master Lease has
been recorded or will be recorded among the Land Records of _______________
immediately prior to the recordation of this Deed of Trust.
WHEREAS, the Grantor has also entered into that certain Secured Credit
Agreement dated as of December __, 1996 (as the same may be amended or
supplemented from time to time to the extent permitted by the terms thereof,
being herein called the "Credit Agreement") by and among the Grantor, the
financial institutions from time to time parties thereto (the "Lenders"), Bank
of America Illinois, as letter of credit issuing bank (in such capacity, the
"Issuing Lender") and as Loan Agent (in such capacity, the "Loan Agent"),
pursuant to which the Grantor has executed and delivered those certain Revolving
Notes dated December __, 1996 in the aggregate principal amount of $150,000,000
(collectively, the "Revolving Notes").
<PAGE>
WHEREAS, the Loan Agent and the Lease Agent have entered into that
certain Intercreditor Agreement dated December __, 1996 (as the same may from
time to time be amended, restated, supplemented, or otherwise modified, the
"Intercreditor Agreement") which sets forth certain agreements with respect to
voting rights and collateral issues, among other things. Pursuant to the terms
of the Intercreditor Agreement, GE Capital is acting hereunder as agent for the
Loan Agent and the Lease Agent.
WHEREAS, the Grantor, the Loan Agent, and the Lease Agent have entered
into that certain Facilities Agreement dated as of even date herewith (as the
same may from time to time be amended, restated, supplemented, or otherwise
modified, the "Facilities Agreement").
WHEREAS, as security for the payment of Grantor's obligation under the
Master Lease and the Revolving Notes (as hereinafter defined) in the amount not
to exceed _________________Dollars ($________) and the performance of all other
obligations of the Grantor under the Master Lease, the Revolving Notes, or any
documents related thereto (collectively, the "Obligations"), GE Capital has
required that the Grantor execute and deliver this Deed of Trust assigning and
securing to GE Capital, as agent, (among other things) all of Grantor's interest
in the Property now owed or hereafter acquired, including without limitation,
Grantor's leasehold interest in the Master Lease and the Property.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
conclusively acknowledged by the Grantor, in order to secure the full and
punctual payment and performance of the Obligations, the Grantor does hereby
grant, convey, bargain, sell, assign, pledge, transfer and set over to GE
Capital and its successors and assigns, and does hereby grant to GE Capital, and
its successors and assigns, a lien on and a security interest in, all and each
of the properties, rights, interests and privileges described in the following
paragraphs:
ALL of the Grantor's right, title and interest in and to the Master
Lease and the leasehold estate created thereunder and any possible future
acquisition by the Grantor of the fee simple interest in the Property.
TOGETHER with all right, title and interest of the Grantor including
any after-acquired right, title or reversion, in and to the beds of the ways,
streets, avenues and alleys adjoining the Property.
TOGETHER with all right, title and interest of the Grantor in and to
all and singular the rights, alleys, ways, tenements, hereditaments, easements,
appurtenances, passages, waters, water rights, water courses, riparian rights,
liberties, advantages, accessions and privileges now or hereafter appertaining
to the Property or any part thereof, including, but not limited to, any
homestead or other claim at law or in equity, the reversion or reversions,
remainder or remainders thereof, and also all the estate, property, claim,
right, title or interest now owned and hereafter acquired by the Grantor in or
to the Property or any part thereof.
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TOGETHER with all right, title and interest of the Grantor in and to
all improvements, structures and buildings now or hereafter erected or placed on
the Property and all replacements thereof, (collectively, the "Improvements").
TOGETHER with all right, title and interest of the Grantor in and to
all building materials, furniture, fixtures, machinery, equipment and tangible
personal property of every kind and nature whatsoever, now or hereafter located
or contained in or upon or attached to, the Property or the Improvements or any
part thereof, and used or usable in connection with any present or future use or
operations of the Property or the Improvements or any part thereof, both now
owned and hereafter acquired by the Grantor, together with all additions,
substitutions, alterations or improvements thereto (the "Additions") and all
cash and non-cash proceeds thereto (all of the foregoing being hereinafter
sometimes referred to collectively as the "Equipment Collateral"). All of the
Equipment Collateral, so far as permitted by law, shall be deemed to be fixtures
and part of the Property and of the Improvements, and as to any part of the
Equipment Collateral not deemed or permitted by law to be fixtures, this Deed of
Trust shall also constitute a security agreement under the Uniform Commercial
Code currently in effect in the State of ________ (the "State").
Unless specifically designated otherwise, all of the Grantor's right,
title and interest in and to the Property, the Improvements, the Equipment
Collateral and all other items, rights, interests, privileges and property
described in the preceding paragraphs hereof, together with all Additions
thereto, shall be herein referred to collectively as the "Property".
TOGETHER with any and all judgments, awards of damages (including but
not limited to severance and consequential damages), payments, proceeds,
settlements or other compensation heretofore or hereafter made, including
interest thereon, and the right to receive the same, as a result of, in
connection with, or in lieu of any taking of title, of use, or of any other
property interest of the Property or any part thereof under the exercise of the
power of eminent domain, either temporarily or permanently by any governmental
authority or by any person acting under governmental authority to the extent of
all of the Obligations which may be secured by this Deed of Trust at the date of
receipt of any such judgments, awards on other compensation by GE Capital, and
of the reasonable counsel fees, costs and disbursements, if any, incurred by GE
Capital in connection with the collection of such judgments, awards on other
compensation.
TOGETHER with all unearned premiums, accrued, accruing or to accrue
under insurance policies with respect to the Property, now or hereafter obtained
by the Grantor, and the Grantor's interest in and to all proceeds of the
conversion, voluntary or involuntary, and the interest payable thereon, of the
Property or any part thereof, into cash or liquidated claims, including, without
limitation, proceeds of casualty insurance, title insurance or any other
insurance maintained on the Property, and the right to collect and receive the
same.
TOGETHER with all of the rents, royalties, issues, profits, revenues,
income and other benefits of the Property, or arising from the use or enjoyment
of all or any portion thereof, or from any lease or agreement pertaining
thereto, and all right, title and interest of the Grantor in and to, and
remedies under, any and all leases and subleases of the Property, or any part
thereof, both now in existence or hereafter entered into and all contract
rights, accounts receivable
3
<PAGE>
and general intangibles growing out of or in connection with such leases and
subleases, together with all proceeds thereof; and including, without
limitation, all cash or security deposited thereunder to secure performance by
the lessees of their obligations thereunder whether such cash or security is to
be held until the expiration of the terms of such leases or are to be applied to
one or more of the installments of rent coming due immediately prior to the
expiration of such terms; reserving in the Grantor a license terminable upon the
occurrence of a Default (hereinafter defined) hereunder to collect and receive
the same.
TO HAVE AND TO HOLD the Property and all other interests described
above unto GE Capital and its successors and assigns, for and during all of the
rest, residue and remainder of the term of years yet to come and unexpired under
the Master Lease.
PROVIDED, HOWEVER, that until the occurrence of a Default hereunder,
and subject to any provisions hereof to the contrary, the Grantor shall have the
right to remain in quiet and peaceful possession of the Property, and to
collect, receive and retain the rents, revenues, profits, proceeds, income and
royalties therefrom.
PROVIDED FURTHER, that upon the full payment and performance of all of
the Obligations at the time and in the manner stated in the Master Lease, this
Deed of Trust, at any time before the sale hereinafter provided for, the lien
granted hereby shall cease, determine and become void, and upon proof given to
the satisfaction of GE Capital that all of the Obligations have been so paid and
performed, this Deed of Trust shall be deemed null and void, and GE Capital
shall release and discharge the lien and security interest of this Deed of Trust
upon payment to GE Capital of all costs and expenses related to the release and
reconveyance of the Property or any partial release and reconveyance thereof.
PROVIDED FURTHER, that upon the occurrence of a substitution under the
Master Lease pursuant to which GE Capital is required to release the Property,
GE Capital shall release and discharge the lien and security interest of this
Deed of Trust upon payment of all costs and expenses related to the release and
reconveyance of the Property or any partial release or reconveyance thereof.
AND THIS DEED OF TRUST FURTHER WITNESSETH, that the Grantor hereby
represents, warrants, covenants and agrees as follows, and stipulates that a
breach of any of the following representations, warranties, covenants and
agreements shall be deemed a breach of a material condition of this Deed of
Trust:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants
to GE Capital that as of the date hereof, the Grantor is the owner of the entire
lessee's interest in the Master Lease and, except for this Deed of Trust, the
Grantor has not assigned the lessee's interest in the Master Lease or any part
thereof to any other party. Upon the execution and recordation of this Deed of
Trust, GE Capital and its assigns shall have a first lien on the lessee's
interest in the Master Lease and the Grantor's interest in the Property.
SECTION 2. GENERAL COVENANTS AND AGREEMENTS. The Grantor covenants and agrees
with GE Capital as follows:
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(a) Upon and subject to the terms of the Master Lease, the Grantor
will pay, when due and payable, all Rent payments and all other sums and charges
due and to become due under the Master Lease.
(b) Upon and subject to the terms of the Master Lease, the Grantor
will perform and observe all of the terms, covenants and conditions required to
be performed and observed by the Grantor as lessee under the Master Lease, and
will do all things necessary to preserve and to keep unimpaired the rights of GE
Capital under the Master Lease.
(c) As of the date hereof, the Master Lease is the only lease covering
the Property and the Grantor will not, without the prior written consent of GE
Capital, enter into any other leases or any subleases (except Subleases, as
defined in and permitted by the Master Lease) of such Property.
(d) Except for this Deed of Trust, (or as expressly permitted pursuant
to the Master Lease) the Grantor will not, without the prior written consent of
GE Capital, assign, transfer or encumber the lessee's interest in the Master
Lease or permit the assignment, transfer or encumbrance of the lessee's interest
in the Master Lease.
(e) The Grantor shall execute and deliver, within ten (10) days after
request of GE Capital, such instruments as GE Capital may reasonably deem useful
or require to permit GE Capital to take such other action as GE Capital
considers desirable preserve the interest of GE Capital in the Property as
intended hereby.
(f) If the Grantor acquires the fee title to the Property during the
Term of the Master Lease, whether by purchase or otherwise, this Deed of Trust
shall attach to and cover and be a lien upon the fee title so acquired and such
fee title shall, subject to applicable law, without further assignment, mortgage
or conveyance, become and be subject to the lien of and covered by this Deed of
Trust. On written request by GE Capital, Grantor shall cause to be executed and
recorded all such other and further assurances or instruments in writing as may,
pursuant to applicable law, be required to carry out the intent and meaning of
this subparagraph.
SECTION 3. DEFAULT.
The occurrence of any one or more of the following events shall
constitute a default under the provisions of this Deed of Trust, and the term
"Default" shall mean, whenever it is used in this Deed of Trust, any one or more
of the following events:
(A) The failure of GE Capital to perform, observe or comply with any
of the provisions of this Deed of Trust; or
(B) The occurrence of a default under the Master Lease, the Revolving
Notes, the Credit Agreement or the Facilities Agreement which is not cured
within any applicable notice and cure periods.
SECTION 4. RIGHTS AND REMEDIES.
5
<PAGE>
(A) Upon the occurrence of any Default, GE Capital, without in any way
waiving such Default, in addition to any other rights and remedies that it may
have under applicable law and subject to the terms of the Master Lease, (1)
declare the Obligations to be immediately due and payable, (2) sell, assign or
transfer the entire lessee's interests in the Master Lease to any third party or
(3) take possession of the Property by foreclosure or otherwise and have, hold,
manage, lease and operate or sell the same on such terms and for such period of
time as GE Capital may deem proper and in connection therewith, subject to
applicable law, the Grantor hereby (a) assents to the passage of the decree for
the sale of the Property by the equity court having jurisdiction, and (b)
authorizes and empowers GE Capital and its successors and assigns to take
possession of and sell (or in case of the default of any purchaser to resell)
the Property, or any part thereof, all in accordance with the applicable laws
and rules of court relating to mortgages or deeds of trust. In the case of any
sale under this Deed of Trust, by virtue of judicial proceedings or otherwise,
the Property may be sold as an entirety or in parcels, by one sale or by several
sales, as may be deemed by GE Capital to be appropriate and without regard to
any right of the Grantor or any other person to the marshalling of assets. Any
sale hereunder may be made at public auction, at such time or times, at such
place or places, and upon such terms and conditions and after such previous
public notice as GE Capital shall deem appropriate and advantageous and as
required by law. Upon the terms of such sale being complied with, GE Capital
shall convey to, and at the cost of, the purchaser or purchasers the interest of
the Grantor in the Property so sold, free and discharged of and from all estate,
title or interest of the Grantor, at law or in equity, such purchaser or
purchasers being hereby discharged from all liability to see to the application
of the purchase money. The profits and proceeds derived from the managing and
operating of the Property or from the sale or assignment of GE Capital's
interest in the Master Lease shall be applied to the payment of the Obligations
in accordance with the terms of the Master Lease and the Intercreditor
Agreement. The Grantor hereby agrees to pay GE Capital on demand all of the
costs incurred by GE Capital in taking, managing, operating and insuring the
Property and/or assigning or selling GE Capital's interest in the Master Lease
following a Default and the exercise by GE Capital of the remedies provided
herein.
(B) Unless GE Capital exercises its option to take over the Property
as provided above following a Default, GE Capital shall not be obligated to
perform or discharge, nor does it hereby undertake to perform or discharge, any
obligation, duty or liability under the Master Lease, or under or by reason of
this Deed of Trust, and the Grantor shall and does hereby agree to indemnify GE
Capital for and to hold GE Capital harmless of and from any and all liability,
loss or damage which it might incur under the Master Lease or under or by reason
of this Deed of Trust, and of and from any and all claims and demands whatsoever
which may be asserted against it by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in the Master Lease, except for liability, loss, damage,
claims or demands arising from the gross negligence or willful misconduct of GE
Capital. Should GE Capital incur any such liability, loss or damage under the
Master Lease or under or by reason of this Deed of Trust or in the defense of
any such claims or demand, the amount thereof including costs, expenses and
reasonable attorneys' fees shall be secured hereby, and the Grantor shall
reimburse GE Capital there for immediately upon demand, and upon the failure of
the Grantor to do so, GE Capital may declare all sums secured hereby immediately
due and payable. Except to the extent GE Capital shall exercise its option to
take over the Property as provided above, this Deed of Trust shall not operate
to place responsibility for the control,
6
<PAGE>
care, management or repair of the Property upon GE Capital, nor for the carrying
out of any of the terms and conditions of the Master Lease, or for any waste
committed on or with respect to the Property by the Grantor or any other
parties, or for any dangerous or defective condition of the Property, or to the
extent the same is attributable to any period prior to the exercise of such
rights, for any negligence in the management, upkeep, repair or control of the
Property resulting in loss or injury or death to any tenant, licensee, employee
or stranger.
SECTION 5. MISCELLANEOUS.
(a) GE Capital may take or release other security, may release any
party primarily or secondarily liable for any of the Obligations, may grant
extensions, renewals or indulgences with respect to the Obligations and may
apply any other security therefor held by it, to the satisfaction of the
Obligations without prejudice to any of its rights hereunder.
(b) Nothing herein contained and no act done or omitted by GE Capital
pursuant to the powers and rights granted it herein shall be deemed to be a
waiver by GE Capital of its rights and remedies hereunder or under the Master
Lease, but this Deed of Trust is made and accepted without prejudice to any of
the rights and remedies possessed by GE Capital. The right of GE Capital to
collect the Obligations and to enforce any other security therefor may be
exercised by GE Capital either prior to, simultaneously with, or subsequent to
any action taken by it hereunder.
(c) The Grantor hereby covenants and agrees that all the provisions
herein contained shall be applied to and inure to the benefit of GE Capital and
its successors and assigns.
(d) The Grantor hereby waives acceptance of this Deed of Trust by GE
Capital and its successors and assigns.
(e) This Deed of Trust, having been executed, sealed and delivered in
the State, shall be interpreted and construed in accordance with and governed by
the laws of the State.
(f) If fulfillment of any provisions hereof or any transaction related
hereto, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if any clause or provision herein contained operates or would prospectively
operate to invalidate this Deed of Trust in whole or in part, then such clause
or provision only shall be void, as though not herein contained, and the
remainder of this Deed of Trust shall remain operative and in full force and
effect.
(g) Subject to the terms of the Master Lease, GE Capital may assign
all of its rights under this Deed of Trust to a third party at any time either
before or after a Default has occurred. Wherever in this Deed of Trust GE
Capital is referred to, such reference shall be deemed to include the successors
and assigns of GE Capital, and all covenants, promises and agreements by the
Grantor contained herein shall inure to the benefit of the successors and
assigns of GE Capital.
7
<PAGE>
(h) This Deed of Trust may be amended only by an instrument in writing
executed by the Grantor and GE Capital.
(i) All notices hereunder shall be sufficiently given and shall be
deemed given when sent by confirmed overnight courier service, or three (3)
business days after being mailed certified mail, return receipt requested,
postage prepaid, addressed to the Grantor or GE Capital at the appropriate
addresses designated in the Master Lease. The Grantor or GE Capital may, by
notice given hereunder designate any further or different addresses to which
subsequent notices shall be sent.
IN WITNESS WHEREOF, the Grantor has caused this Deed of Trust to be
executed as of the day and year first written above.
WITNESS: BOSTON CHICKEN, INC.
By:
- --------------------------- --------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
STATE OF ________, CITY/COUNTY OF _____________________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of __________, 199_, before me, the
undersigned Notary Public of said State, personally appeared __________________
____________________, who acknowledged himself/herself to be a ____________ of
Boston Chicken, Inc., a Delaware corporation, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same for the purposes therein contained as
the duly authorized __________ of said corporation by himself/ herself as
____________.
WITNESS my hand and Notarial Seal.
------------------------------------
Notary Public
My commission expires:
[_________THE UNDERSIGNED attorney hereby certifies that the above
8
<PAGE>
instrument was prepared by an attorney or by one of the parties named in the
instrument.
_______________________ ]
9
<PAGE>
EXHIBIT A
Description of Premises
-----------------------
Street Address:
-------------------------------------------------
County:
-------------------------------------------------
State:
-------------------------------------------------
Metes and Bounds Description: (See attachment)
<PAGE>
EXHIBIT NO. 9
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") is made
as of the ______ day of ____________________, 19___, by and between (a) GENERAL
ELECTRIC CAPITAL CORPORATION AS AGENT ("GE Capital"), and (b) BOSTON CHICKEN,
INC.(the "Lessee").
R E C I T A L S
---------------
The Lessee and General Electric Capital Corporation, for Itself and as
Agent for Certain Participants (the "Lease Agent") have entered into that
certain Master Lease Agreement No. 2 dated as of ___________, 1996 (such Master
Lease Agreement No. 2., together with any supplements, annexes, or schedules
thereto, as the same may from time to time be amended, restated, supplemented,
and as modified, being hereinafter called the "Master Lease"), pursuant to which
the Lease Agent has agreed to lease to the Lessee, and the Lessee has agreed to
lease from the Lease Agent, certain Lease Assets, as more particularly described
in the Master Lease.
The Lessee has also entered into that certain Secured Credit Agreement
dated __________, 1996 (as the same may from time to time be amended, restated,
supplemented, or otherwise modified, the "Credit Agreement") by and among the
Lessee, Bank of America Illinois, as letter of credit issuing bank (in such
capacity, the "Issuing Lender") and as Loan Agent (in such capacity the "Loan
Agent"), pursuant to which the Lessee has executed and delivered those certain
Revolving Credit Notes dated __________, 1996 in the aggregate principal amount
of $150,000,000 (collectively, as the same may from time to time be amended,
restated, supplemented, or substituted, the "Revolving Notes").
The Loan Agent and the Lease Agent have entered into that certain
Intercreditor Agreement dated as of December __, 1996 (as the same may from time
to time be amended, restated, supplemented, or otherwise modified, the
"Intercreditor Agreement"), which sets forth, among other things, certain
agreements with respect to voting rights and collateral issues. Pursuant to the
terms of the Intercreditor Agreement, GE Capital is acting hereunder as agent
for the Loan Agent and the Lease Agent.
The Lessee, the Loan Agent, and the Lease Agent have entered into that
certain Facilities Agreement dated as of December __, 1996 (as the same may from
time to time be amended, restated, supplemented, or otherwise modified, the
"Facilities Agreement")
_____________________ (the "Tenant") has entered into a lease demising the
property described on Exhibit A attached hereto (the "Premises") (such lease, as
the same may from time to time be amended, restated, supplemented, or otherwise
modified being hereinafter called the "Lease").
In order to secure to GE Capital the payment and performance of all of the
Obligations of the Lessee under the Master Lease and the Revolving Notes, the
Tenant has executed
<PAGE>
and delivered to GE Capital a Collateral Assignment and Leasehold Mortgage dated
of even date herewith (as the same may from time to time be amended, restated,
supplemented, or otherwise modified, the "GE Capital Collateral Assignment"),
pursuant to which the Tenant has assigned all of its interest in and to the
Lease and the Premises.
Pursuant to that certain Secured Loan Agreement dated as of December, 1996
by and between the Tenant and the Lessee (as the same may from time to time be
amended, restated, supplemented, or otherwise modified, the "Loan Agreement"),
the Lessee may from time to time make loans or other financial accommodations to
or for the benefit of the Tenant. In order to secure the Tenant's obligations
under the Loan Agreement, the Tenant has executed and delivered to the Lessee a
Collateral Assignment of Tenant's Interest in Lease dated as of December __,
1996 (as the same may from time to time be amended, restated, supplemented, or
otherwise modified, the "Lessee's Collateral Assignment").
The parties desire hereby to subordinate the lien, operation, and effect of
the Lessee's Collateral Assignment to the lien, operation, and effect of the GE
Capital Collateral Assignment, and to set forth certain other agreements between
the parties.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
SUBORDINATION
SECTION 1.1. Lien Subordination; Security Interest and Lien on Premises.
(a) The Lessee hereby consents to execution of the GE Capital
Collateral Assignment.
(b) The Lessee hereby (i) subordinates the lien, operation and effect
of Lessee's Collateral Assignment to the lien, operation and effect of the GE
Capital Collateral Assignment and (ii) agrees that the lien, operation and
effect of the GE Capital Collateral Assignment shall be deemed to be prior and
senior to the lien, operation and effect of the Lessee's Collateral Assignment,
and the lien, operation and effect of the Lessee's Collateral Assignment shall
be in all respects subject and subordinate to the lien, operation and effect of
the GE Capital Collateral Assignment, irrespective of the time, order or method
of attachment or perfection of the respective liens of GE Capital and the Lessee
upon the Lease and/or the Premises or the time or order of recordation of the GE
Capital Collateral Assignment and the Lessee's Collateral Assignment.
(c) Lessee shall not commence or continue any default or foreclosure
proceedings or exercise any other remedies in respect of the Lessee's Collateral
Assignment unless:
(i) The Lessee shall give GE Capital not less than five (5) days
advanced written notice of its intent to take such action;
2
<PAGE>
(ii) The Lessee shall simultaneously with such action terminate
any sublease to the Tenant of any equipment leased by GE Capital to the Lessee
under the Master Lease;
(iii) If the Lessee takes over the Tenant's rights and
obligations under the Lease, the Lessee shall immediately execute and deliver to
GE Capital a Collateral Assignment and Leasehold Mortgage in substantially the
form attached to the Master Lease as Exhibit No. 4.
(d) As security for Lessee's obligations under the Master Lease, the
Credit Agreement, and the Revolving Notes, the Lessee hereby grants, assigns,
and conveys to GE Capital a lien on and security interest in, any right title
and interest the Lessee now or hereafter has in the Lease or the Premises,
whether obtained through the Lessee's Collateral Assignment or otherwise, and
Lessee hereby agrees to execute and deliver such further documents, instruments,
and other documentation as GE Capital shall reasonably require in connection
with such grant and conveyance.
ARTICLE II
MISCELLANEOUS
SECTION 2.1. Course of Dealing; Amendment. No course of dealing between
GE Capital and the Lessee shall be effective to amend, modify or change any
provision of this Agreement. This Agreement may not be amended, modified, or
changed in any respect except by an agreement in writing signed by the parties
hereto.
SECTION 2.2. Waiver of Default. GE Capital may, at any time and from time
to time, execute and deliver to the Lessee a written instrument waiving, on
such terms and conditions as GE Capital may specify, any of the requirements of
this Agreement, provided that any such waiver shall be for such period and
subject to such conditions as shall be specified in any such instrument.
SECTION 2.3. Notices. All notices to GE Capital or to the Lessee shall be
sent to the addresses set forth in the Master Lease. All notices which are
required to be given in writing by the provisions hereof shall be deemed to have
been given or made when delivered by hand, or three days after being deposited
in the mail, postage prepaid by registered or certified mail, return receipt
requested, or one day after being sent for overnight delivery by Federal Express
or other reputable overnight delivery service.
Section 2.4. Consent to Jurisdiction, Etc. The Lessee and GE Capital
irrevocably submit and consent to the jurisdiction and venue of any state or
federal court sitting in the State of New York over any suit, action or
proceeding arising out of or relating to this Agreement.
SECTION 2.5. Severability. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable laws, but if any provision contained in this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
remaining provisions contained herein shall remain effective and shall not be
affected or impaired.
3
<PAGE>
SECTION 2.6. Assignment. GE Capital may, subject to the provisions of the
Master Lease, and the Facilities Agreement, without consent of the Lessee,
sell, assign or transfer to any person or persons all or any part of the
obligations secured by the GE Capital Collateral Assignment, and each such
person or persons shall have the right to enforce the provisions of this
Agreement as fully as GE Capital.
SECTION 2.7. Binding Effect. This Agreement shall be binding upon the
Lessee and its successors and assigns, and shall inure to the benefit of GE
Capital and its successors and assigns.
SECTION 2.8. Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of New York, both
in interpretation and performance.
SECTION 2.9. Duplicate Originals and Counterparts. This Agreement may be
executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Subordination and Intercreditor Agreement as of the day and year first above
written.
WITNESS: GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT
By:
- ------------------------------- ------------------------------------
Name:
---------------------------
Title:
---------------------------
BOSTON CHICKEN, INC.
By:
- ------------------------------- -------------------------------
Name:
----------------------------
Title:
----------------------------
Acknowledged and Accepted:
- ---------------------------------------
Tenant
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
5
<PAGE>
STATE OF ___________, COUNTY OF ___________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of December, 1996, before me,
a Notary Public of said State, personally appeared ____________, a
__________________ of GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT, known to
me (or satisfactorily proven) to be the person whose name is subscribed to the
foregoing instrument and acknowledged that he/she executed the same for the
purposes therein contained as the duly authorized ______________ of said
corporation by signing the name of the corporation by herself/himself as
_________________.
WITNESS my Hand and Notarial Seal.
_________________________________________
Notary Public
STATE OF ___________, COUNTY OF ____________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of December, 1996, before me,
a Notary Public of said State, personally appeared __________________, a
_________________ of BOSTON CHICKEN, INC., Delaware corporation, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the
foregoing instrument and acknowledged that he/she executed the same for the
purposes therein contained as the duly authorized ____________________ of said
corporation by signing the name of the corporation by herself/himself as
________________.
WITNESS my Hand and Notarial Seal.
_________________________________________
Notary Public
6
<PAGE>
STATE OF ______________, COUNTY OF ______________, TO WIT:
I HEREBY CERTIFY, that on this ____ day of December, 1996, before me,
a Notary Public of said State, personally appeared ____________, ___, a
_________________ of ___________, a __________ organized under the laws of
__________, known to me (or satisfactorily proven) to be the person whose name
is subscribed to the foregoing instrument and acknowledged that he/she executed
the same for the purposes therein contained as the duly authorized
____________________ of said ____________ by signing the name of the ___________
by herself/himself as ________________.
WITNESS my Hand and Notarial Seal.
_________________________________________
Notary Public
My commission expires: _______________________.
7
<PAGE>
STATE OF _______________________:
COUNTY OF ______________________: TO WIT:
AFFIDAVIT OF OWNERSHIP
The undersigned, being duly sworn according to law, upon his oath
deposes and says:
I am the Vice President-Finance of BOSTON CHICKEN, INC. ("Lessee") and
I am authorized to make this affidavit on behalf of Lessee.
As of the date of this Affidavit, Lessee has good and marketable title
to all of the equipment leased under Schedule No. _________ dated as of
___________, 199__, executed pursuant to (that certain Master Lease Agreement
No. 2 dated as of December 9, 1996 (the "Agreement") each between General
Electric Capital Corporation, for Itself and as Agent for Certain Participants
("Lessor"), as lessor, and Lessee, as lessee, free and clear of all liens,
claims, security interests and encumbrances, except for the liens granted in
favor of Lessor under the aforesaid Master Lease Agreement and Permitted Liens
(as defined in the Agreement).
Signed and sealed as of the ___________ day of ________, 199___.
_________________________________________
Name:____________________________________
Title: Vice President-Finance
_________________________________________
Notary Public
[SEAL]
My Commission Expires:_______ , 199__
<PAGE>
ATTACHMENT TO UNIFORM COMMERCIAL CODE FINANCING STATEMENT
1. SECURED PARTY: GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND AS
AGENT FOR CERTAIN PARTICIPANTS
DEBTOR: BOSTON CHICKEN, INC.
2. DESCRIPTION OF PROPERTY:
(a) The Equipment and Leasehold Improvements leased pursuant to (and as
defined in) that certain Master Lease Agreement No. 2 dated as of the
9th day of December, 1996 (the "Agreement"), between Secured Party, as
lessor, and Debtor, as lessee, together with all additions,
attachments, accessories, accessions, substitutions and replacements
therefor, and proceeds (including insurance proceeds) thereof (but
without Debtor having any power of sale); as more fully described on
the attached Annex(es) A.
(b) All right, title and interest of Debtor in and to (i) each sublease of
the Lease Assets, now existing or hereafter created (collectively, the
"Subleases"), and all extensions and renewals thereof, (ii) all
rentals and other sums due, now or hereafter, under the Sublease
(including, without limitation, all amounts paid pursuant to the
exercise by Sublessee of any option contained in the Subleases), (iii)
any and all proceeds of any insurance required under the Subleases,
except proceeds used to purchase a Replacement Item or substitute Real
Estate pursuant to Section V(e) hereof, or to restore or replace Lease
Assets pursuant to Sections VII(a) or (b) of the Agreement, (iv) the
security interest granted to Lessee by the Sublessees pursuant to the
Subleases, and (v) any and all proceeds of any insurance required
under the Subleases, and (v) all products and proceeds of the
foregoing.
(c) To the extent the Equipment and Leasehold Improvements may constitute
or be deemed to be Debtor's inventory (the "Inventory"), all right,
title and interest of Debtor in and to (i) such Inventory, which shall
mean all Equipment and Leasehold Improvements offered or furnished
under any contract of service or intended for lease, any and all
additions, attachments, accessories and accessions thereto, any and
all substitutions, replacements or exchanges therefor, any and all
leases, subleases, rentals, accounts and contracts with respect to the
Equipment and Leasehold Improvements which may now exist or hereafter
arise, together with all rights thereunder and all rental and other
payments and purchase options due and to become due thereunder, any
and all proceeds payable for such property, all insurance, bonds
and/or other proceeds of the property and all returned or repossessed
Equipment and Leasehold Improvements now or at any time or times
hereafter in the possession or under the control of Debtor or Secured
Party; and (ii) all accounts receivable now owned by Debtor or
hereafter acquired or owned by Debtor solely to the extent that such
arise or result from, any lease or other disposition of any of the
Equipment and Leasehold Improvements or the Inventory, including, but
not limited to, the Sublease or any right of Debtor to payment for the
Equipment and Leasehold Improvements sold or leased or for services
rendered whether or not evidenced by an instrument or chattel paper,
and whether or not such right has been earned by performance;
PROVIDED, HOWEVER, THAT DEBTOR IS NOT AUTHORIZED TO SELL THE EQUIPMENT
AND LEASEHOLD IMPROVEMENTS
<PAGE>
OR INVENTORY EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS AND
CONDITIONS OF CERTAIN OPTIONS IN THE SUBLEASE AFTER PRIOR WRITTEN
NOTICE TO SECURED PARTY OF THE EXERCISE BY SUBLESSEE OF ANY OF SUCH
OPTIONS.
(d) All right, title and interest of Debtor in and to all (except as
otherwise provided in the Agreement) of its right, title and interest
in and to each Ground Lease and Premises Lease and all extensions and
renewals thereof.
Capitalized terms used herein without definition shall have the meaning
given them in the Agreement.
3. A PORTION OF THE EQUIPMENT AND LEASEHOLD IMPROVEMENTS DESCRIBED HEREIN WAS
PURCHASED BY SECURED PARTY FROM DEBTOR AS PART OF A SALE-LEASEBACK
TRANSACTION.
2
<PAGE>
ATTACHMENT TO UNIFORM COMMERCIAL CODE FINANCING STATEMENT
1. SECURED PARTY: BOSTON CHICKEN, INC.
DEBTOR: _________________________________________
ASSIGNEE OF
SECURED PARTY: GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF
AND AS AGENT FOR CERTAIN PARTICIPANTS
2. DESCRIPTION OF PROPERTY:
The Lease Assets subleased pursuant to that certain Sublease Agreement
No. 2 dated as of the 9th day of December, 1996 (the "Sublease"),
between Secured Party, as sublessor, and Debtor, as sublessee,
together with all additions, attachments, accessories, accessions,
substitutions and replacements therefor, and proceeds (including
insurance proceeds) thereof (but without Debtor having any power of
sale); as more fully described on the attached Annex(es) A.
Capitalized terms used herein without definition shall have the
meaning given them in the Sublease.
<PAGE>
SUGGESTED FORM OF OPINION LETTER
(LESSEE)
__________________, 1996
General Electric Capital Corporation,
for Itself and as Agent for Certain
Participants
4 Northpark Drive
Suite 500
Hunt Valley, Maryland 21030
Gentlemen:
As counsel for Boston Chicken, Inc. (the "Lessee"), we are furnishing
this opinion in connection with that certain Master Lease Agreement No. 2 dated
as of December 9, 1996 (the "Lease"), between General Electric Capital
Corporation, for Itself and as Agent for Certain Participants, as lessor (the
"Lessor"), and Lessee, as lessee.
All terms used herein which are defined in the Lease shall have the
meanings given them therein, unless the terms are specifically defined herein.
We have reviewed originals or copies, certified or otherwise identified
to our satisfaction, of the Lease. We have examined the Charter, By-Laws, and
records of corporate proceedings of Lessee, and such additional documents, and
we have obtained such other certificates, affidavits and advices from officers
of Lessee or from public officials as we have deemed necessary or appropriate
for the purposes of this opinion.
On the basis of the foregoing and on the basis of our consideration of
such facts and laws as we have deemed necessary, we are of the opinion that:
(a) Lessee is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware and is duly qualified to
transact business as a foreign corporation in the State of Colorado and in each
other jurisdiction in which its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the failure so
to qualify would not materially adversely affect Lessee's ability to conduct its
business as presently conducted.
(b) The execution, delivery and performance of the Lease, the Schedule,
the Bill of Sale, the Agency Agreement, the Sublease, the Collateral Assignment
of Lease, the Memorandum of Lease, the Mortgage, and Intercreditor and
Subordination Agreement, and all related instruments and documents, (i) have
been duly authorized by all necessary corporate action on the part of Lessee;
(ii) do not require any stockholder approval or approval or consent of any
trustee or holders of any indebtedness or obligations of Lessee except such as
have been duly obtained; and (iii) do not and will not contravene any
<PAGE>
law, governmental rule, regulation or order now binding on Lessee, or the
charter or by-laws of Lessee, or contravene the provisions of or constitute a
default under, or result in the creation of any lien or encumbrance upon the
property of Lessee under, any indenture, mortgage, contract or other agreement
to which Lessee is a party or by which it or its property is bound.
(c) The Lease, the Schedule, the Bill of Sale, the Agency Agreement,
the Sublease, the Collateral Assignment of Lease, the Memorandum of Lease, the
Mortgage, the Intercreditor and Subordination Agreement, and all other related
documents, when entered into, will constitute legal, valid and binding
obligations of Lessee, enforceable against Lessee in accordance with the terms
thereof, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally, and by applicable laws (including any applicable common law and
equity) and judicial decisions which may affect the remedies provided therein.
No filing or recordation must be made, no notice must be given, and no other
action must be taken with respect to any state or local jurisdiction, or any
person, except such as have been duly made, given or taken, in order to preserve
to Lessor all the rights transferred by the Bill of Sale.
(d) There are no pending actions or proceedings to which Lessee is a
party, and there are no other pending or threatened actions or proceedings of
which Lessee has knowledge, before any court, arbitrator or administrative
agency which, either individually or in the aggregate, would materially
adversely affect the financial condition of Lessee, or the ability of Lessee to
perform its obligations under the Lease. Further, Lessee is not in default under
any material obligation which, either individually or in the aggregate, would
have the same such effect.
This opinion is given for the benefit of, and may be relied on by, the
addressee, the Participants and its and their successors and assigns.
Sincerely yours,
2
<PAGE>
CORPORATE LESSEE'S
BOARD OF DIRECTORS RESOLUTION
The undersigned hereby certifies that she/he is the Secretary of BOSTON
CHICKEN, INC.; that the following is a true and correct copy of resolutions duly
adopted at a meeting of the Board of Directors of said Corporation duly held on
the ____________________ day of ____________________, 1996; and that the
resolutions have not been amended, rescinded, modified or revoked, and are in
full force and effect:
"RESOLVED, that each of the officers of this Corporation, whose name
appears below:
--------------------------- ----------------------------
President Treasurer
--------------------------- ----------------------------
Vice President Secretary
or the duly elected or appointed successor in office of any or all of them, be,
and each hereby is, authorized and empowered in the name and on behalf of this
Corporation to enter into, execute and deliver a Master Lease Agreement No. 2
with General Electric Capital Corporation, for Itself and as Agent for Certain
Participants, and its successors and assignors ("Lessor") as lessor, providing
for the leasing to (or sale and leaseback by) this Corporation, from time to
time, of certain assets, and further providing for this Corporation to indemnify
said Lessor against certain occurrences; and
FURTHER RESOLVED, that each officer of this Corporation be, and hereby
is, authorized and empowered in the name and on behalf of this Corporation to
enter into, execute and deliver any other documents and to do and perform all
other acts and deeds which may be necessary or appropriate to effectuate the
lease (or sale and leaseback) of assets from Lessor; and
FURTHER RESOLVED, that Lessor may rely upon the aforesaid resolutions
until receipt by it of written notice of any change."
<PAGE>
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said
Corporation this ________ day of December, 1996.
_________________________________
Secretary
(CORPORATE SEAL)
2
<PAGE>
SUGGESTED FORM OF OPINION LETTER
(SUBLESSEE)
__________________, 199__
General Electric Capital Corporation,
for Itself and as Agent for Certain
Participants
4 Northpark Drive
Suite 500
Hunt Valley, Maryland 21030
Gentlemen:
As counsel for ____________________ (the "Sublessee"), we are furnishing
this opinion in connection with that certain Master Sublease Agreement No. 2
dated as of __________, 199__ (the "Sublease"), between Boston Chicken, Inc., as
Sublessor (the "Sublessor"), and Sublessee, as Sublessee.
All terms used herein which are defined in the Sublease shall have the
meanings given them therein, unless the terms are specifically defined herein.
We have reviewed originals or copies, certified or otherwise identified to
our satisfaction, of the Sublease. We have examined the Charter, By-Laws, and
records of corporate proceedings of Sublessee, and such additional documents,
and we have obtained such other certificates, affidavits and advices from
officers of Sublessee or from public officials as we have deemed necessary or
appropriate for the purposes of this opinion.
On the basis of the foregoing and on the basis of our consideration of such
facts and laws as we have deemed necessary, we are of the opinion that:
(a) Sublessee is a [corporation] duly organized and validly existing in
good standing under the laws of the State of __________ and is duly qualified to
transact business as a foreign [corporation] in each other jurisdiction in which
its ownership or leasing of properties or the conduct of its business requires
such qualification, except where the failure so to qualify would not materially
adversely affect Sublessee's ability to conduct its business as presently
conducted.
(b) The execution, delivery and performance of the Sublease, the Schedule,
the Bill of Sale, the Agency Agreement, the Collateral Assignment of Lease, and
all related instruments and documents, (i) have been duly authorized by all
necessary corporate action on the part of Sublessee; (ii) do not require any
stockholder approval or approval or consent of any trustee or holders of any
indebtedness or obligations of Sublessee except such as have been duly obtained;
and (iii) do not and will not contravene any law, governmental rule, regulation
or order now binding on Sublessee, or the charter or by-laws of Sublessee, or
contravene the provisions of or constitute a default under, or result in the
creation of any lien
<PAGE>
or encumbrance upon the property of Sublessee under, any indenture, mortgage,
contract or other agreement to which Sublessee is a party or by which it or its
property is bound.
(c) The Sublease, the Schedule, the Bill of Sale, the Agency Agreement,
the Collateral Assignment of Lease, and all other related documents, when
entered into, will constitute legal, valid and binding obligations of Sublessee,
enforceable against Sublessee in accordance with the terms thereof, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally, and by
applicable laws (including any applicable common law and equity) and judicial
decisions which may affect the remedies provided therein. No filing or
recordation must be made, no notice must be given, and no other action must be
taken with respect to any state or local jurisdiction, or any person, except
such as have been duly made, given or taken, in order to preserve to Sublessor
all the rights transferred by the Bill of Sale. Although the Sublease is
expressed to be governed by the laws of the State of New York, for the purpose
of the opinion set forth in this paragraph we have assumed that the laws of the
State of ________ are applicable to the transaction.
(d) There are no pending actions or proceedings to which Sublessee is a
party, and there are no other pending or threatened actions or proceedings of
which Sublessee has knowledge, before any court, arbitrator or administrative
agency which, either individually or in the aggregate, would materially
adversely affect the financial condition of Sublessee, or the ability of
Sublessee to perform its obligations under the Sublease. Further, Sublessee is
not in default under any material obligation which, either individually or in
the aggregate, would have the same such effect.
This opinion is given for the benefit of, and may be relied on by, the
addressee, the Participants and its and their successors and assigns.
Sincerely yours,
2
<PAGE>
CORPORATE SUBLESSEE'S
BOARD OF DIRECTORS RESOLUTION
The undersigned hereby certifies that she/he is the Secretary of
____________________; that the following is a true and correct copy of
resolutions duly adopted at a meeting of the Board of Directors of said
Corporation duly held on the ____________________ day of ____________________,
1996; and that the resolutions have not been amended, rescinded, modified or
revoked, and are in full force and effect:
"RESOLVED, that each of the officers of this Corporation, whose name
appears below:
--------------------------- ---------------------------
President Treasurer
--------------------------- -------------------------
Vice President Secretary
or the duly elected or appointed successor in office of any or all of them, be,
and hereby is, authorized and empowered in the name and on behalf of this
Corporation to enter into, execute and deliver a Master Sublease Agreement No. 2
with Boston Chicken, Inc., and its successors and assignors ("Sublessor") as
Sublessor, providing for the leasing to (or sale and leaseback by) this
Corporation, from time to time, of certain assets, and further providing for
this Corporation to indemnify said Sublessor against certain occurrences; and
FURTHER RESOLVED, that each officer of this Corporation be, and hereby is,
authorized and empowered in the name and on behalf of this Corporation to enter
into, execute and deliver any documents and to do and perform all other acts and
deeds which may be necessary or appropriate to effectuate the Sublease (or sale
and leaseback) of assets from Sublessor; and
FURTHER RESOLVED, that Sublessor and General Electric Capital Corporation,
for Itself and as Agent for Certain Participants, may rely upon the aforesaid
resolutions until receipt by it of written notice of any change."
<PAGE>
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said
Corporation this ________ day of _______________, 199__.
-------------------------------------
Secretary
(CORPORATE SEAL)
2
<PAGE>
CERTIFICATE CONCERNING
PAYMENT OF PERSONAL PROPERTY TAXES
To: General Electric Capital Corporation, for Itself and as Agent for Certain
Participants
To insure compliance with the provisions of a Master Lease Agreement No. 2
dated as of December 9, 1996 (the "Lease"), by the undersigned ("Lessee") by and
between Lessee, as lessee, and General Electric Capital Corporation, for Itself
and as Agent for Certain Participants, as lessor, Lessee hereby agrees to one of
the following options with respect to the payment of personal property taxes on
the Equipment described in Annex A to each Schedule to the Lease, such agreement
to be conclusively evidenced by the initials and signature of an authorized
Agent of Lessee in the appropriate spaces provided below:
Please choose one of the options below by initialing where indicated.
Initial ONLY ONE Choice of Option
OPTION 1 (NOT AVAILABLE)
(Applicable in Jurisdictions Requiring Lessor to List Equipment): Lessee agrees
that it will not list any of such Equipment for property tax purposes or report
any property tax assessed against such Equipment until otherwise directed in
writing by Lessor. Upon receipt of any property tax bill pertaining to such
Equipment from the appropriate taxing authority, Lessor will pay such tax and
will invoice Lessee for the expense. Upon receipt of such invoice, Lessee will
promptly reimburse Lessor for such expense;
OPTION 2 Lessee's Initials: ________________________
(Applicable in Jurisdictions Permitting Lessee to List Equipment): Lessee
agrees that it will (a) list all such Equipment, (b) report all property taxes
assessed against such Equipment, and (c) pay all such taxes when due directly to
the appropriate taxing authority until Lessor shall otherwise direct in writing.
LESSEE:
BOSTON CHICKEN, INC.
By:______________________________
Name:____________________________
Title:___________________________
Date: December _____, 1996
<PAGE>
Exhibit 10.44(b)
AMENDMENT NO. 1 TO
MASTER LEASE AGREEMENT NO. 2
THIS AMENDMENT NO. 1 TO MASTER LEASE AGREEMENT NO. 2 (this "Amendment") is
made as of the 28th day of February, 1997, between GENERAL ELECTRIC CAPITAL
CORPORATION, for itself and as agent for certain Participants (hereinafter
called, together with its successors and assigns, if any, "Lessor"), and BOSTON
CHICKEN, INC. (hereinafter called "Lessee").
Lessor and Lessee have heretofore executed that certain Master Lease
Agreement No. 2 dated as of December 9, 1996 (the "Agreement"), and desire to
amend the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Agreement is hereby amended as follows:
(a) In clause (xvi) of Section I(c), the phrase ", petroleum or
hazardous substances" is inserted between the phrases "hazardous wastes"
and "as Lessor".
(b) In the third sentence of Section III(a): (i) the phrase "and the
Participants (on an after-tax basis)" is inserted between the phrases
"reimburse Lessor" and "upon receipt", and (ii) the phrase "or any
Participant" is inserted between the phrases "against Lessor" and "and
submission".
(c) In clause (v) of Section III(c), the phrase "and the Participants"
is inserted between the word "Lessor" and the phrase "harmless from".
(d) In Section IV(b), the following provisions are added as the final
sentence to thereof:
"Such inspection may include the taking of samples of the soil,
air, water or building materials on, at or under any Fee Property or
subject to any Ground Lease."
(e) In Section V(c), the following provisions are added as the final
sentence thereof:
"Notwithstanding any other provision to the contrary, a
"Permitted Lien" shall not be any lien or encumbrance in favor of a
governmental entity for any
<PAGE>
damages arising from, or costs incurred by such governmental entity in
response to, a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of any
pollutant, contaminant, chemical, or industrial, toxic or hazardous
substances or wastes (including, but not limited to, asbestos and
petroleum) into the indoor or outdoor environment, which has not been
adequately bonded."
(f) In Section X(c), the phrase "and the Participants" is inserted
between the word "Lessor" and the phrase "harmless from" and the phrase "or
the Participants" is inserted between the phrases "shall Lessor" and "be
guilty".
(g) In clause (2) of the sixth sentence of Section XI(b), the phrase
"and the Participants" is inserted between the word "Lessor" and the phrase
"all sums due".
(h) In Subsection (3) of Section XII(b), the first sentence thereof is
amended and restated as follows:
"Anything to the contrary set forth herein notwithstanding, any
assignee or Participant hereunder shall (x) (i) so long as no Default
shall have occurred and be continuing, not be engaged in the quick-
service restaurant business (nor shall any Affiliate of such assignee
or Participant be engaged in the quick-service restaurant business)
(at the time of acquisition or transfer of a Participant's interest)
and (ii) have (or its ultimate parent shall have) a net worth or
combined capital and surplus of not less than $50,000,000 or (y) be
approved by Lessee (which approval shall not be unreasonably withheld,
delayed or conditioned) upon Lessor's or a Participant's request;
provided, that AT&T Commercial Finance Corporation ("ATTCFC") may
sell, assign or otherwise transfer all or any portion of its interest
as a Participant without it or its assignee satisfying clause (x)(i)
or clause (y) above if (m) such sale, assignment or transfer occurs in
connection with a sale of all or substantially all of the assets of
the Capital Markets Division of ATTCFC, and (n) the assets and
revenues of the quick-service restaurant business of the proposed
assignee and its Affiliates do not constitute more than 20% of the
consolidated assets and 20% of the consolidated revenues of the
proposed assignee and its Affiliates taken as a whole during the
fiscal year immediately preceding the date of such proposed sale,
assignment or transfer."
(i) In Section XIV(a), the word "or" between the phrases
"environmental damage)," and "(ii) the condition" is hereby deleted, and
the following provisions are hereby added after the words "or any
Sublessee" and before the semi-colon:
2
<PAGE>
"or (iii) in connection with the transactions contemplated by, or
the provisions of, (A) the Intercreditor Agreement or (B) any
participation or similar agreement between or among the Lessor and any
Participant or Participants".
(j) In Section XIV(b)(3), the word "petroleum," is inserted between
the phrase "polychlorinated biphenyls ("PCBs")," and "and radioactive
substances".
(k) In Section XIV(c), the words "and Participants'" are inserted
between the phrases "of Lessor's" and "rights, privileges".
(l) In the fourth sentence of Section XVII(a), the phrase "or any
Participant" is inserted between the word "Lessor" and the phrase "shall in
no event".
(m) In Subsection (3) of Section XVII(b), the phrase "first priority"
is inserted between the word "a" and the phrase "security interest".
2. The form of Sublease Agreement No. 2, attached as Exhibit No. 3 to the
Agreement, is hereby amended as follows:
(a) In Section IV(b), the following provisions are added as the final
sentence thereof:
"Such inspection may include the taking of samples of the soil,
air, water or building materials on, at or under any Fee Property or
subject to any Ground Lease."
(b) In Section V(c), the following provisions are added as the final
sentence thereof:
"Notwithstanding any other provision to the contrary, a
"Permitted Lien" shall not be any lien or encumbrance in favor of a
governmental entity for any damages arising from, or costs incurred by
such governmental entity in response to, a release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration or any pollutant, contaminant, chemical, or
industrial, toxic or hazardous substances or wastes (including, but
not limited to, asbestos and petroleum) into the indoor or outdoor
environment, which has not been adequately bonded."
(c) In Section XIV(b)(3), the word "petroleum" is inserted between the
phrase "polychlorinated biphenyls ("PCBs")," and "and radioactive
substances".
3. Except as expressly set forth herein, the terms and conditions of the
Agreement remain unmodified and in full force and effect.
3
<PAGE>
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
5. This Amendment may be executed in counterparts, each of which taken
together shall constitute one and the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment No. 1 to
Master Lease Agreement No. 2 to be executed by their duly authorized
representatives as of the date first above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL BOSTON CHICKEN, INC.
CORPORATION, FOR ITSELF AND AS
AGENT FOR CERTAIN PARTICIPANTS
By: /s/ David Avigdor By: /s/ Bernadette Dennehy
--------------------------------- ----------------------------------
Name: David Avigdor Name: Bernadette Dennehy
------------------------------- -------------------------------
Title: Transaction and Syndication Title: Vice President
Senior Manager ------------------------------
-----------------------------
5
<PAGE>
Exhibit 10.45
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into this
31st day of January, 1997 by and between HFMI Acquisition Corporation, a
Delaware corporation (the "Company"), and Boston Chicken, Inc., a Delaware
corporation ("Boston Chicken").
Recitals
--------
The Company intends to engage in the business of owning and operating,
outside the states of Georgia and Alabama, megastores, supermarkets, or other
retail or convenience stores specializing in perishable food products, including
by way of example and not by limitation, fresh fruits and vegetables, fresh
meats, poultry and seafood; fresh bakery goods; freshly made ready-to-eat,
ready-to-heat and ready-to-cook prepared foods; deli, cheese and dairy products;
and/or specialty; hard-to-find; and gourmet nonperishable food products,
kitchen-oriented housewares, floral items, grocery items, natural health and
beauty aids, wines and imported and domestic beers. In order to facilitate
implementation of its business plan, the Company desires to enter into this
Agreement and to borrow up to $17,000,000 from Boston Chicken, and Boston
Chicken desires to enter into this Agreement and to make such loan to the
Company, upon the terms and subject to the conditions set forth herein.
Covenants
---------
In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of the Company by Boston Chicken, the parties hereto agree as
follows:
ARTICLE I
The Loan
--------
1.1 The Loan; Promissory Note. Boston Chicken agrees, on the terms
and subject to the conditions hereinafter set forth, including, but not limited
to the limitation on the amount available from time to time to be borrowed
hereunder set forth in Section 1.2 hereof, to advance at any time and from time
to time during the period commencing on the date hereof and ending on the last
day of the second Retail Period (defined below) in Boston Chicken's fiscal year
2000 (the "Draw Loan Termination Date"), amounts requested by the Company in an
aggregate principal amount not to exceed $17,000,000 (the "Loan"). Each advance
of the Loan (an "Advance") shall be in a minimum amount of $100,000, and shall
be made by wire transfer of Boston Chicken to the account of the Company. The
Loan shall be evidenced by a promissory note (the "Note") of even date herewith
in the form attached hereto as Exhibit A.
<PAGE>
1.2 Maximum Principal Balance. The maximum aggregate principal
balance of the Loan at any time outstanding shall not exceed $17,000,000, less
the principal amount of conversions under Section 1.7 and option exercises under
Section 1.8 ("Maximum Principal Balance"), provided that, notwithstanding the
foregoing, at the time of each Advance hereunder, and after giving effect
thereto, the ratio of the outstanding principal balance of the Loan to the
funded cash equity of the Company shall not exceed 1.31 to 1 (the "Borrowing
Ratio"). In the event the Company receives the proceeds of an Advance on a day
when, after giving effect to such Advance, the Borrowing Ratio is exceeded, the
Company shall repay to Boston Chicken such amount of the Loan as is necessary to
cause compliance with the Borrowing Ratio.
1.3 The Loan Account. Boston Chicken shall maintain a loan account
on its books in which shall be recorded all Advances made by Boston Chicken to
the Company pursuant to this Agreement, and all payments made by the Company
with respect to the Loan; provided, however, that failure to maintain such
account or record any Advances therein shall not relieve the Company of its
obligations to repay the outstanding principal amount of the Loan, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Agreement and the Note.
1.4 Interest Rate and Payment. (a) Interest shall accrue daily on
the aggregate outstanding principal balance of the Loan, for the period
commencing on the date the Loan is made until the Loan is paid in full, at a per
annum rate equal to the rate designated and announced by Bank of America
Illinois or its successor in interest (the "Bank") from time to time as its
"reference rate" in effect at its principal office in Chicago, Illinois, plus
1%. The interest rate shall be adjusted, from time to time, on the same day on
which the Bank adjusts its "reference rate." Interest on the outstanding
principal amount of the Loan shall be payable in arrears on the dates set forth
herein and at maturity (whether at stated maturity, by acceleration or
otherwise).
(b) During the Interest Payment Period (as defined below) the
Company shall pay to Boston Chicken interest only on the outstanding principal
balance of the Loan on the first day of each Retail Period, commencing on the
first day of the Retail Period immediately following the first Retail Period in
which the Company initially draws on the Loan under this Agreement through and
including the Draw Loan Termination Date (the "Interest Payment Period").
Thereafter the Company shall pay principal and interest as provided in Section
1.5.
(c) Interest shall be computed on the basis of a 360-day year
and the actual number of days elapsed.
(d) Any principal payment due under the Note 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).
2
<PAGE>
1.5 Repayment of the Loan. If not earlier paid or if not accelerated
for payment, the outstanding principal amount of the Loan shall, at the close of
business on the Draw Loan Termination Date, thereafter become an amortized term
Loan payable as follows: the principal balance of the Loan shall be payable to
Boston Chicken in 65 substantially equal periodic installments of principal (the
amount of which periodic installments of principal shall be determined at the
close of business on the Draw Loan Termination Date based on a schedule
amortizing such outstanding principal balance of the Loan as of such date in 130
substantially equal periodic installments of principal), plus accrued but unpaid
interest, on the first day of each of Boston Chicken's 13 consecutive four-week
periods used for accounting purposes (each a "Retail Period"), commencing on the
first day of the third Retail Period in Boston Chicken's fiscal year 2000 and
continuing until the first day of the third Retail Period in Boston Chicken's
fiscal year 2005, when the entire remaining principal balance of the Loan and
all interest accrued thereon shall be due and payable.
1.6 Term of this Agreement. This Agreement and all covenants and
agreements of the Company hereunder shall be effective as of the date of its
execution (the "Closing Date") and shall continue in effect until the last to
occur of (i) the exercise, expiration, or other termination of all remaining
option rights granted in Section 1.8 hereof, (ii) the exercise, expiration, or
other termination of all of the remaining conversion rights granted in Section
1.7 hereof, (iii) the date on which there is no amount (principal or interest)
remaining outstanding under the Note, and (iv) the date on which Boston Chicken
no longer has an obligation to make any Advances hereunder if the Company were
to make a valid request for an Advance pursuant to and in accordance with
Article III hereof.
1.7 Convertibility. (a) On the terms and subject to the conditions
set forth in the Note, any portion of the outstanding principal balance of the
Loan is convertible at the election of the holder of the Note into shares of
voting common stock of the Company (herein called the "Common Stock"), at any
time and from time to time after both of the following have occurred: (i)
February 1, 1998, and (ii) the earlier to occur of (A) completion of an initial
public offering of shares of Common Stock of the Company registered pursuant to
the Securities Act of 1933, as amended, with the Securities and Exchange
Commission, pursuant to which the Company receives gross proceeds of not less
than $15,000,000 (a "Qualified Public Offering"), or (B) the Tangible Net Worth
(as defined below) of the Company equals or exceeds $25,000,000 as of the end of
any fiscal quarter of the Company ending after February 1, 1998, and up to the
later of (x) the date on which the Company has properly repaid the outstanding
principal balance of the Loan and all accrued interest thereon in full or (y)
the first day of the ninth Retail Period in the Company's fiscal year 2005;
provided, however, that nothing herein shall impair, restrict or prohibit the
exercise of remedies, including exercise of the conversion right, under Section
8.2 hereof upon the occurrence of a Default. Upon such conversion, that portion
of principal so converted shall be deemed to be paid in full upon the delivery
to the holder of the Note of a certificate or certificates representing the
proper number to be issued to the holder of the Note upon such conversion.
Conversion of any portion of the principal balance of the Loan shall not relieve
the Company of its obligation to pay any accrued but unpaid interest through the
date of conversion on the portion of the principal balance of the Loan so
converted. In no event shall interest be convertible into Common Stock in the
Company. For purposes hereof, "Tangible
3
<PAGE>
Net Worth" of the Company shall mean, as of any date, (a) the amount of any
capital stock, paid in capital and similar equity accounts plus (or minus in the
case of a deficit) the capital surplus and retained earnings of the Company,
less (b) the net book value of all items of the following character which are
included in the assets of such person: (i) goodwill, including, without
limitation, the excess of cost over book value of any asset, (ii) organization
or experimental expenses, (iii) unamortized debt discount and expense, (iv)
patents, trademarks, trade names and copyrights, (v) deferred taxes and deferred
charges, (vi) franchises, licenses and permits, and (vii) other assets which are
deemed intangible assets under generally accepted accounting principles.
(b) Upon any conversion under this Section 1.7, Boston Chicken's
obligation to make additional advances to the Company under this Agreement shall
be reduced by an amount equal to such conversion amount.
1.8 Option. (a) Boston Chicken shall have the option, at any time
and from time to time after both of the following have occurred: (i) February
1, 1998, and (ii) the earlier to occur of (A) completion of a Qualified Public
Offering, or (B) the Tangible Net Worth of the Company equals or exceeds
$25,000,000 as of the end of any fiscal quarter of the Company ending after
February 1, 1998, and up to the later of (x) the date on which the Company has
properly repaid the outstanding principal balance of the Loan and all accrued
interest thereon in full or (y) the first day of the ninth Retail Period in the
Company's fiscal year 2005, to purchase at the Conversion Price (as defined in
the Note) up to that number of Shares equal to (A) the Option Amount, divided by
(B) the Conversion Price (the "Option"); provided, however, that nothing herein
shall impair, restrict or prohibit the exercise of remedies, including exercise
of the Option, under Section 8.2 hereof upon the occurrence of a Default. For
purposes of this Section 1.8, the Option Amount shall mean (x) the Maximum
Principal Balance (without giving effect to any borrowing limitation set forth
in this Agreement), less (y) the sum of (1) the dollar amount of the outstanding
principal balance of the Loan (whether such amount is the result of a reduction
in principal due to the repayment of the Loan or the failure by the Company to
request advances hereunder or otherwise) and (2) the dollar amount of all
previous conversions under Section 1.7 hereof and exercises of the Option under
this Section 1.8, in each case on the date Boston Chicken notifies the Company
of its intention to exercise the Option.
(b) Upon exercise of any portion of the Option under this
Section 1.8, Boston Chicken's obligations to make additional Advances to the
Company under this Agreement shall be reduced by an amount equal to the amount
of such Option exercise.
1.9 One Obligation. All Advances made hereunder, and all interest
accrued thereon, shall constitute one obligation of the Company secured by the
security interests granted by this Agreement and by all other security
interests, liens, claims, and encumbrances from time to time hereafter granted
to Boston Chicken by the Company.
1.10 Credit Resources. The Company acknowledges that Boston Chicken
has informed it that Boston Chicken does not currently and may not from time to
time in the future have cash, cash equivalents, and credit resources sufficient
to permit Boston Chicken to necessarily make all requested Advances under this
Agreement and all other similar agreements with financed
4
<PAGE>
area developers and franchisees while maintaining sufficient working capital for
Boston Chicken's operating needs. The Company agrees that in the event Boston
Chicken shall fail to fund the Loan as and to the extent required hereby solely
as a result of the unavailability to Boston Chicken of cash and/or credit
resources to fund the Loan and not as a result of any failure of the Company to
satisfy the conditions precedent to Advances or of the occurrence of a Default
or Event of Default hereunder (a "Funding Default"), such Funding Default shall
not (a) constitute fraud (by any person or entity, including Boston Chicken and
its successors and assignees) or (b) give rise to any liability of any person or
entity (other than Boston Chicken and its successors and assignees) in any other
tort, and the Company further agrees that it shall be limited to its remedies in
contract and in tort as specified in clause (b) above against Boston Chicken.
Boston Chicken and the Company agree that this Section 1.10 shall not diminish
or otherwise affect in any way the amount of damages for which Boston Chicken
may be liable to the Company in a contract or non-fraud tort action for a
Funding Default.
1.11 Payment Method. (a) All payments to be made by the Company
hereunder shall be made in lawful money of the United States, in immediately
available funds, without setoff, counterclaim, deduction or withholding of any
type.
(b) So long as funds are available to be borrowed by the Company
hereunder, the Company authorizes Boston Chicken (i) to make daily Advances on
behalf of the Company under the Loan Agreement in accordance with Boston
Chicken's customary practices and procedures to provide funds to the Company to
cover payables, intercompany charges, and other charges previously approved by
the Company, and regardless of whether the Company has specifically requested
such Advance and without waiver of any rights of Boston Chicken hereunder, and
(ii) to make Advances hereunder from time to time to pay interest on the Loan if
the Company does not pay interest when due.
ARTICLE II
Security and Collateral
-----------------------
2.1 Security Interest. To secure payment and performance of the
Company's obligations hereunder and under the Note, and all other obligations of
the Company to Boston Chicken, whether now existing or hereafter arising, the
Company hereby grants to Boston Chicken a continuing security interest in and to
the following property and interests in property, whether now owned or hereafter
acquired by the Company and wheresoever located:
(a) all of the Company's real estate, accounts, equipment
(including, but not limited to machinery, furniture, fixtures, tools, vehicles,
and other tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, trademarks, service marks, trade names, logos, trade secrets,
copyrights, patents, licenses, intellectual property, deposit accounts, tax
refunds, chattel paper, instruments, notes, letters of credit, documents,
documents of title, and equity interests in any Subsidiary (as defined in
Section 6.11 hereof) of the Company;
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(b) all insurance proceeds of or relating to any of the
foregoing;
(c) all of the Company's books, records, and computer programs
and data relating to any of the foregoing; and
(d) all accessories and additions to, substitutions for, and
replacements, products, and proceeds of, any of the foregoing (all of the
foregoing, and all of the security described in Sections 2.2, being referred to
collectively as the "Collateral").
2.2 Subsidiary Security Documents. The Company shall cause each
person or entity becoming a Subsidiary of the Company from time to time to
execute and deliver to Boston Chicken, within five days after such person or
entity becomes a Subsidiary, a security agreement substantially in the form
attached hereto as Exhibit D, together with all financing statements and other
related documents (including real estate mortgages) as Boston Chicken may
request and such closing documents with respect to such Subsidiary of the type
described in Article VII as Boston Chicken may request, sufficient to grant to
Boston Chicken liens and security interests in all assets of each Subsidiary of
the type described in Section 2.1. The Company shall from time to time execute
and deliver to Boston Chicken, within five days after a person or entity becomes
a Subsidiary of the Company, a pledge agreement substantially in the form of
Exhibit C and modified appropriately (or other agreement collaterally assigning
all equity interest in such Subsidiary), pursuant to which the Company shall
grant a security interest in favor of Boston Chicken in and to all shares of
capital stock (or other equity interests) of such Subsidiary, together with the
stock certificates or other evidence of ownership and accompanied by a stock
power executed in blank. Any such pledge or other collateral agreements
executed by the Company and security agreements and other documents executed by
a Subsidiary of the Company from time to time shall be included in the term
"Security Instruments" used herein and the stock and assets of such Subsidiary
covered by such Security Instruments shall be included in the term "Collateral"
used herein.
2.3 Preservation of Collateral and Perfection of Security Interests
Therein. (a) The Company shall execute and deliver to Boston Chicken,
concurrently with the execution of this Agreement, and shall execute and deliver
or cause any Subsidiary of the Company to execute and deliver to Boston Chicken
at any time or times hereafter at the request of Boston Chicken or the Agent (as
defined below), all financing statements or other documents, including mortgages
on real estate owned by the Company or its Subsidiaries, intellectual property
security agreements and Subsidiary security agreements (the "Security
Instruments") (and pay the cost of filing or recording the same in all public
offices deemed necessary by Boston Chicken), as Boston Chicken or the Agent may
request, in forms satisfactory to Boston Chicken, and take all further action
that Boston Chicken or the Agent may request, or which may be reasonably
necessary or desirable, to perfect and keep perfected the security interest in
the Collateral granted by the Company to Boston Chicken, to create and perfect
the security interests in the assets of any Subsidiaries of the Company provided
in Section 2.2 hereof, or otherwise to protect and preserve the Collateral and
Boston Chicken's security interest therein. Should the Company fail to do so,
Boston Chicken is authorized to sign any such Security Instruments as the
Company's agent.
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(b) The Company will furnish to Boston Chicken from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Boston Chicken may
reasonably request, all in reasonable detail.
(c) The Company shall notify Boston Chicken, within five days
after the occurrence thereof, of the acquisition by the Company or any
Subsidiary of any property that is not subject to the existing liens and
security interests, in favor of Boston Chicken, of any person or entity's
becoming a Subsidiary, and of any other event or condition that may require
additional action of any nature in order to create, preserve, or perfect the
liens and security interests of Boston Chicken.
(d) The Company shall, and shall cause each Subsidiary to, cause
all tangible Collateral to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual.
2.4 Alternate Security and Pledge Agreements. If requested by Boston
Chicken in order for the transactions contemplated by this Agreement to comply
with the limitations and restrictions of that certain Facilities Agreement,
dated as of December 9, 1996 among Boston Chicken, Bank of America Illinois, as
agent ("Agent") and General Electric Capital Corporation, for itself and as
agent for certain participants, as amended and as it may be further amended from
time to time (the "BC Credit Line"), or to obtain a waiver therefrom, the
Company hereby agrees that a security interest as referred to in Section 2.1
hereof, and the additional security interests described in Section 2.2 hereof
may be granted directly to the Agent in lieu of or in addition to such grants to
Boston Chicken, in which event appropriate alterations may be made to this
Article II, and references herein to such security, pledges, and deliveries
thereof to Boston Chicken may be deemed to refer to the Agent, as appropriate.
ARTICLE III
Conditions of Advances
----------------------
Notwithstanding any other provisions contained in this Agreement, the
making of any Advance (including the initial Advance) provided for in Section
1.1 shall be conditioned upon the following:
3.1 The Company's Written Request. Boston Chicken shall have
received, at least five (5) business days prior to the day an Advance is to be
made hereunder, (a) a written request from an authorized officer of the Company
for an Advance in a specific amount, (b) with respect to the initial Advance
hereunder, a certificate of the Company in the form attached hereto as Exhibit
B-1, which shall be signed by a duly authorized officer of the Company, and with
respect to subsequent Advances hereunder, a certificate of the Company in the
form attached hereto as Exhibit B-2, which shall be signed by a duly authorized
officer of the Company, and (c) copies of all other documents required to be
delivered to Boston Chicken under Section 5.1 below or otherwise reasonably
requested.
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3.2 No Material Adverse Change. No material adverse change in the
financial condition, results of operations, assets, or business of the Company
and its Subsidiaries, taken as a whole, shall have occurred at any time or times
subsequent to the date hereof.
3.3 No Default. Neither a Default (as that term is defined in
Article VIII hereof) nor any event which, through the passage of time or the
service of notice or both, would mature into a Default (an "Event of Default")
shall have occurred and be continuing.
3.4 Representations and Warranties. The representations and
warranties contained in Article IV hereof and the other Security Instruments
shall be true and correct on and as of the date such Advance is made.
3.5 Borrowing Ratio. After giving effect to the Advance, the Company
is in compliance with the Borrowing Ratio.
3.6 Other Requirements. Boston Chicken shall have received, in form
and substance satisfactory to it, all certificates, consents, affidavits,
schedules, instruments, and other documents which the Company is obligated to
provide to Boston Chicken hereunder or which Boston Chicken may at any time
reasonably request.
3.7 Amount of Advances. Boston Chicken shall have received a
certificate of the Company, which shall be signed by an authorized officer of
the Company and which shall certify that the amount of the requested Advance is
the amount the Company reasonably expects (and which Boston Chicken reasonably
believes is necessary) to expend within the 30-day period immediately following
the receipt of the Advance for working capital purposes.
ARTICLE IV
Representations and Warranties
------------------------------
The Company represents and warrants that:
4.1 Financial Statements. The financial statements to be furnished
to Boston Chicken or the Agent in accordance with Section 5.1 below will be
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, and will fairly present
the financial condition of the Company and its Subsidiaries at the dates thereof
and its results of operations for the periods indicated (subject, in the case of
financial statements covering less than one full fiscal year, to normal,
recurring year-end adjustments).
4.2 Capital Stock. The Company's authorized capital stock (subject
to increases in accordance with Section 5.8 hereof) consists solely of 100,000
shares of Common Stock, $.01 par value per share and 50,000 shares of preferred
stock, $.01 par value per share. As of the date hereof, of the Company's
authorized capital stock, (i) 9,379.0416 shares of Common Stock are issued and
outstanding, (ii) 14,782.6087 shares of Common Stock are reserved for issuance
upon the conversion of the Note or exercise of the Option, and (iii) 0 shares
of
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Common Stock are reserved for issuance upon the exercise of options granted
under the Company's 1997 Employee Stock Option Plan (the "Stock Option Plan").
Such issued and outstanding shares of Common Stock are fully paid and non-
assessable and are free and clear of all liens, claims, and encumbrances of any
kind, other than those arising hereunder. The shares of Common Stock to be
issued and delivered to the holder of the Note upon any conversion of the Note
or exercise of the Option, when so issued and delivered, will be fully paid and
non-assessable and free and clear of all liens, claims, and encumbrances of any
kind. Except for options granted under the Stock Option Plan and except as
otherwise provided herein and in the Note, there are no outstanding options,
warrants, rights, contracts, or agreements of any kind for the issuance or sale
of any shares of capital stock of the Company or for the issuance or sale of any
other securities or obligations of the Company or for the purchase by the
Company of any of its shares.
4.3 No Material Adverse Change. Since the date hereof, there has
been no material adverse change in the financial condition, results of
operations, assets, or business of the Company and its Subsidiaries, taken as a
whole.
4.4 No Pending Material Litigation or Proceedings. There are no
actions, suits, investigations or proceedings pending or, to the knowledge of
the Company or its Subsidiaries, threatened against or affecting the Company or
its Subsidiaries or the business or properties of the Company or its
Subsidiaries, in any court or before or by any governmental department,
commission, board, agency or instrumentality, or any arbitrator. Neither the
Company nor any of its Subsidiaries is in default with respect to any order,
writ, injunction, or decree of any court or arbitrator or governmental agency.
4.5 Valid Organization; Due Authorization; Valid and Binding
Agreement. (a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with corporate
power and authority to enter into and perform this Agreement and to issue the
Note and incur the indebtedness to be evidenced thereby. The Company is
qualified to do business and is in good standing in each jurisdiction in which
failure to so qualify could have a material adverse affect on its property,
business, operations, or prospects.
(b) This Agreement and the Note have each been duly authorized by
all required corporate action on the part of the Company, and each of this
Agreement and the Note have been duly executed and delivered by the Company and
constitutes the legal, valid, and binding obligation of the Company enforceable
in accordance with its terms.
(c) The execution and delivery of this Agreement and the Note and
the performance by the Company of its obligations hereunder and thereunder will
not conflict with or result in any breach of any of the provisions, or
constitute a default under or result in the creation or imposition of any lien
or encumbrance (except as expressly provided herein) upon any of the property of
the Company pursuant to any of the provisions of the certificate of
incorporation of the Company or the bylaws of the Company or any agreement or
instrument to which the Company is a party or by which it or its assets is
bound.
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(d) No consent, authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any other person, which has not been obtained or taken, is required for the
execution and delivery of, or the performance by the Company of its obligations
under, this Agreement or the Note.
4.6 Intentionally Omitted.
4.7 Absence of Material Liabilities. Neither the Company nor any
Subsidiary has any material liabilities or obligations, either accrued,
absolute, contingent, or otherwise, except (a) as set forth in its most recent
unaudited balance sheet, (b) normal liabilities and obligations incurred in the
ordinary course of business since the date of its most recent unaudited balance
sheet, and (c) obligations under contracts and agreements entered into in the
ordinary course of business.
4.8 Tax Matters. The Company and its Subsidiaries have filed all
federal, state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided.
4.9 Ownership of Collateral; Security Interest Priority. At the time
any Collateral becomes subject to a security interest of Boston Chicken
hereunder, unless Boston Chicken shall otherwise consent, (a) the Company or a
Subsidiary shall be the lawful owner of such Collateral and have the right and
authority to subject the same to the security interest of Boston Chicken, (b)
none of the Collateral shall be subject to any lien or encumbrance other than
that in favor of Boston Chicken, and (c) there shall be no effective financing
statement covering any of the Collateral on file in any public office, other
than in favor of Boston Chicken. This Agreement creates in favor of Boston
Chicken a valid and perfected first-priority security interest in the Collateral
enforceable against the Company or its Subsidiary, as the case may be, and all
third parties and secures the payment of the Company's obligations hereunder and
under the Note, and all other obligations of the Company to Boston Chicken,
whether now existing or hereafter arising, and all filings and other actions
necessary or desirable to create, preserve, or perfect such security interest
have been duly taken.
4.10 Location of Offices, Records, and Facilities. The Company's
chief executive office and chief place of business and the office where the
Company keeps its records concerning its accounts, contract rights, chattel
papers, instruments, general intangibles, and other obligations arising out of
or in connection with the operation of its business or otherwise
("Receivables"), and all originals of all leases and other chattel paper which
evidence Receivables, are located in the State of Colorado, at the address of
the Company set forth in Section 9.4 hereof (as such address may be changed from
time to time in accordance therewith). The federal tax identification number of
the Company has been applied for. The name of the Company is "HFMI Acquisition
Corporation" and the Company operates under no other names.
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4.11 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
All Collateral consisting of inventory, fixtures, machinery, or equipment is and
will be located in the State of Colorado, and at no other locations without the
prior written consent of Boston Chicken.
(b) If the Collateral described in clause (a) is kept at leased
locations, the Company has used its best efforts to obtain appropriate landlord
lien waivers or subordination satisfactory to Boston Chicken, unless such has
been waived in writing by Boston Chicken for the particular instance.
(c) If the Collateral described in clause (a) is warehoused, the
Company has sent appropriate warehousemen's notices, each satisfactory to Boston
Chicken, unless such has been waived by Boston Chicken for the particular
instance.
4.12 Investment Company Act. The Company 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.
4.13 Public Utility Holding Company Act. The Company is not 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.
4.14 Subsidiaries. The Company has no Subsidiaries as of the date of
this Agreement.
4.15 Intellectual Property Agreements. Each of the intellectual
property agreements described on Schedule 4.15 hereto (the "Intellectual
Property Agreements") is in full force and effect and has not been amended,
modified or terminated.
ARTICLE V
Affirmative Covenants
---------------------
The Company covenants and agrees that so long as this Agreement
remains in effect:
5.1 Financial Statements. (a) The Company shall cause to be
furnished to Boston Chicken and, at Boston Chicken's request, to the Agent: (i)
as soon as practicable and in any event within 20 days after the end of each
Retail Period, statements of income and cash flow of the Company and its
Subsidiaries for such period and for the period from the beginning of the then
current fiscal year to the end of such quarter and a balance sheet of the
Company and its Subsidiaries as of the end of such quarter, setting forth in
each case, in comparative form, figures for the corresponding periods in the
preceding fiscal year; (ii) as soon as practicable and in any event within 20
days after the end of each interim calendar quarter, statements of income and
cash flow of the Company and its Subsidiaries for such period and for the period
from the beginning of the then current fiscal year to the end of such quarter
and a balance sheet of the Company and its
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Subsidiaries as of the end of such quarter, setting forth in each case, in
comparative form, figures for the corresponding periods in the preceding fiscal
year, certified as accurate by the chief financial officer or treasurer of the
Company, subject to changes resulting from normal, recurring year-end
adjustments; (iii) as soon as practicable and in any event within 60 days after
the end of each fiscal year, statements of income and cash flows of the Company
and its Subsidiaries for such year, and a balance sheet of the Company and its
Subsidiaries as of the end of such year, setting forth in each case, in
comparative form, corresponding figures for the preceding fiscal year and as of
the end of the preceding fiscal year, audited by independent certified public
accountants selected by Boston Chicken and reasonably satisfactory to the
Company; and (iv) as soon as practicable (but in any event not more than five
business days after the president or chief financial officer of the Company
obtains knowledge of the occurrence of an event or the existence of a
circumstance giving rise to an Event of Default or a Default), notice of any and
all Events of Default or Defaults hereunder.
(b) All financial statements delivered to Boston Chicken, and if
applicable, the Agent pursuant to the requirements of Section 5.1(a) shall be
prepared in accordance with generally accepted accounting principles
consistently applied. Together with each delivery of financial statements
required by Section 5.1(a)(ii) and (iii), the Company shall deliver to Boston
Chicken an officer's certificate stating that there exists no Default or Event
of Default, or, if any Default or Event of Default exists, specifying the nature
thereof, the period of existence thereof and what action the Company proposes to
take or has taken with respect thereto. Together with each delivery of
financial statements required by Section 5.1(a)(iii) above, the Company shall
deliver to Boston Chicken a certificate of the accountants who performed the
audit in connection with such statements stating that in making the audit
necessary to the issuance of a report on such financial statements, they have
obtained no knowledge of any Default or Event of Default, or, if such
accountants have obtained knowledge of a Default or Event of Default, specifying
the nature and period of existence thereof. Such accountants shall not be
liable by reason of any failure to obtain knowledge of any Default or Event of
Default which would not be disclosed in the ordinary course of an audit. The
Company authorizes Boston Chicken to discuss the financial condition of the
Company with the Company's independent public accountants and agrees that such
discussion or communication shall be without liability to either Boston Chicken
or the Company's independent public accountants.
5.2 Inspection. Boston Chicken, or any person designated from time
to time by Boston Chicken, shall have the right, from time to time hereafter, to
call at the Company's or its Subsidiaries' place or places of business during
ordinary business hours, and, without hindrance or delay, (a) to inspect, audit,
check, and make copies of and extracts from the Company's and its Subsidiaries'
books, records, journals, orders, receipts, and any correspondence and other
data relating to the business of the Company or its Subsidiaries or to any
transactions between the parties hereto, and (b) to discuss the affairs,
finances, and business of the Company and its Subsidiaries with the officers of
the Company and its Subsidiaries.
5.3 Conduct of Business. (a) The Company shall, and shall cause
each Subsidiary to (i) maintain its corporate or other entity existence and
qualification to do business in good standing in each jurisdiction where the
failure to be so qualified would have a material adverse effect on the financial
condition of the Company or its Subsidiaries, (ii) maintain in full
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force and effect all licenses, bonds, franchises, leases, patents, contracts,
and other rights necessary to the conduct of its business, and (iii) comply with
all applicable laws and regulations of any federal, state, or local governmental
authority, including those relating to environmental matters, labor and
employment laws and employee benefit matters.
(b) The Company shall, and shall cause its Subsidiaries to, duly
pay and discharge (i) all lawful claims, whether for labor, materials, supplies,
services, or anything else, which might or could, if unpaid, become a lien or
charge upon its property or assets, unless and to the extent only that the
validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with their
original terms, and (iii) all taxes unless and to the extent that the validity
thereof is being contested by the Company in good faith and by appropriate
proceedings and for which the Company has provided adequate reserves.
(c) The Company shall not, and shall not permit any Subsidiary
to, engage in any business other than the business of owning and operating,
outside the states of Georgia and Alabama, megastores, supermarkets, or other
retail or convenience stores specializing in perishable food products, including
by way of example and not by limitation, fresh fruits and vegetables or fresh
meats, poultry and seafood; fresh bakery goods; freshly made ready-to-eat,
ready-to-heat and ready-to-cook prepared foods; and deli, cheese and dairy
products; and/or specialty; hard-to-find; and gourmet nonperishable food
products, kitchen-oriented housewares, floral items, grocery items, natural
health and beauty aids, wines and imported and domestic beers.
5.4 Insurance. (a) The Company shall keep and maintain, and shall
cause its Subsidiaries to keep and maintain, at their sole cost and expense, (i)
insurance on their assets for at least 80% of the full replacement value thereof
against loss or damage by fire, theft, explosion, and all other hazards and
risks ordinarily insured against by other owners or users of such properties in
similar businesses; and (ii) public liability insurance relating to the
Company's and its Subsidiaries' ownership and use of their assets.
(b) All such policies of insurance shall be in such form and in
such amounts as is customary in the case of other owners or users of like
properties in similar businesses, with insurers as shall be reasonably
satisfactory to Boston Chicken. Upon demand, the Company shall deliver to Boston
Chicken the original (or certified) copy of each policy of insurance, and
evidence of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability) shall contain an endorsement in
form and substance acceptable to Boston Chicken, showing Boston Chicken as an
additional insured. Such endorsement, or an independent instrument furnished to
Boston Chicken, shall provide that all insurance companies will give Boston
Chicken at least 30 days prior written notice before any such policy or policies
of insurance shall be altered or canceled. The Company and each Subsidiary
hereby directs all insurers under such policies of insurance (except those of
public liability) to pay all proceeds payable thereunder for claims in excess of
the aggregate amount of $50,000 directly to Boston Chicken, and the Company and
each Subsidiary irrevocably appoints Boston Chicken (and all officers,
employees, or agents designated by Boston Chicken), as the Company's and the
Subsidiaries' true and lawful agent (and attorney-in-fact) for the purpose of
endorsing the name of the Company or such Subsidiary on any check, draft,
instrument, or other item of payment for such proceeds. Any
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proceeds received by Boston Chicken shall be applied to the Company's
obligations hereunder, and any overage shall be paid to the Company. The Company
and each Subsidiary irrevocably appoints Boston Chicken, from and after a
Default or an Event of Default, as the Company's and each Subsidiary's true and
lawful agent (and attorney-in-fact) for the purpose of making, settling, and
adjusting claims under such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance. In the
event the Company or any Subsidiary at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then Boston Chicken, without
waiving or releasing any Default or Event of Default hereunder, may at any time
or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Boston Chicken deems advisable. All sums so
disbursed by Boston Chicken, including reasonable attorneys' fees, court costs,
expenses, and other charges relating thereto, shall be part of the Company's
obligations hereunder, payable by the Company to Boston Chicken on demand.
5.5 Notice of Suit or Adverse Change in Business. The Company shall
give written notice to Boston Chicken of the following (a) as soon as possible,
and in any event within five business days after the Company receives actual
notice of any material proceeding(s) being instituted or threatened to be
instituted by or against the Company or any Subsidiary in any federal, state, or
local court or before any commission or other regulatory body (federal, state,
or local), and (b) as soon as possible and in any event within five business
days after the Company learns of any material adverse change in the financial
condition, results of operations, business, or assets of the Company or any
Subsidiary.
5.6 Use of Proceeds. Except as otherwise authorized in writing by
Boston Chicken, the Company shall use the net proceeds from the Loan solely for
general working capital. The Company will not, directly or indirectly, use any
part of such proceeds for the purpose of purchasing or carrying any securities
of another entity (including options and warrants to purchase securities) and
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any person for the purpose of
purchasing or carrying any such margin stock.
5.7 Reservation of Common Stock. The Company covenants that it will
at all times reserve and keep available, solely for the purpose of issuance upon
conversion of the Note or exercise of the Option, or both, such number of shares
of Common Stock as would be issuable upon the conversion of, or exercise of the
Option for, $17,000,000. The initial Conversion Price (subject to adjustment as
provided in the Note) is $1,150.00 per share. The Company covenants that if any
shares of its Common Stock required to be reserved for issuance upon conversion
of the Note or exercise of the Option require registration with or approval of
any governmental authority under any Federal or state law before such shares may
be issued upon such conversion of exercise, the Company will, at its expense and
as expeditiously as possible, cause such shares to be duly registered or
approved, as the case may be.
5.8 Rights with Respect to Additional Debt Financing and Equity
Issuances. The Company grants to Boston Chicken a continuing right, on the
terms and subject to
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the limitations described below, to (i) supply additional debt financing to the
Company, (ii) purchase (the "Preemptive Right") a portion of any Common Stock of
the Company that the Company from time to time proposes to issue and sell to
third parties ("Subject Shares"), (iii) purchase additional Common Stock in the
event Common Stock is issued by the Company pursuant to its Stock Option Plan,
and (iv) in certain circumstances, purchase additional Common Stock if the
voting power of Boston Chicken's Common Stock is reduced below a designated
percentage of the aggregate voting power of the Company's voting securities.
(a) If the Company determines that it requires additional debt
financing (including, but not limited to, financing provided by means of any
capital-type transaction or sale/leaseback transaction) ("Debt Financing"), the
Company agrees (i) to negotiate in good faith with Boston Chicken for a period
of 60 days with regard to any portion or the entire amount (at the option of
Boston Chicken) of such Debt Financing prior to negotiating with any other
entity with regard thereto; and (b) in the event the Company has engaged in good
faith negotiations under this paragraph (a) of this Section 5.8 and such
negotiations have been unsuccessful, to notify Boston Chicken of the existence
of any other Debt Financing arrangement it proposes to consummate and the terms
and conditions contained therein and upon receipt of such notice (setting forth
in detail all relevant terms and conditions of such financing), Boston Chicken
shall have 30 days thereafter in which to agree to assume all of the Debt
Financing on substantially the same terms and conditions. Boston Chicken
acknowledges that the right of first negotiation as set forth in this paragraph
(a) does not preclude the Company from making inquiries in the relevant
marketplace to obtain information regarding the terms of a financing solely for
purposes of comparison.
(b) Prior to the Termination Time (as defined in paragraph (h)
of this Section 5.8), if the Company proposes to issue any Subject Shares to any
person other than Boston Chicken, except as provided in paragraph (f) of this
Section 5.8, and such issuance would cause Boston Chicken to have less than
Majority Beneficial Ownership (as defined below) of the Company immediately
after such issuance, the Company shall deliver to Boston Chicken written notice
of such intention to sell such Subject Shares (the "Offer"), which notice shall
include a reasonably detailed term sheet specifying (i) the number of the
Subject Shares, (ii) the proposed sale price or other applicable pricing terms
of the Subject Shares and (iii) any other material terms of the Subject Shares
and their issuance. Boston Chicken shall then have 30 days from receipt of the
Offer in which to elect by written notice to the Company (i) to accept such
Offer with respect to some or all of that portion of the Subject Shares that
will, after such issuance, allow Boston Chicken to maintain Majority Beneficial
Ownership of the Company (a "Purchasable Portion"), or (ii) to reject the Offer.
The failure by Boston Chicken to elect to accept an Offer, or the delivery of an
acceptance that is late, shall be deemed an election by Boston Chicken to reject
the Offer. As used herein, "Majority Beneficial Ownership" means Ownership (as
defined below) by Boston Chicken of Common Stock of the Company both (x)
representing not less than 51% of the common equity of the Company (the "Common
Equity") and (y) possessing not less than 51% of the voting power ("Voting
Power") of all securities of the Company having the power generally (and not
merely upon the happening of a contingency) to vote in the election of the
Company's directors ("Voting Stock"), the calculation of such Common Equity and
Voting Power to include all Common Stock and other capital stock and
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voting securities of the Company subject to outstanding options, rights and
warrants of the Company, whether or not then exercisable, including Common Stock
of which Boston Chicken has Ownership hereunder, either through its conversion
rights pursuant to Section 1.7 or its Option pursuant to Section 1.8 hereof or
under any Top-Up Option (as hereinafter defined), but specifically excluding any
Common Stock subject to options granted under the Stock Option Plan. For
purposes of this Section 5.8, Boston Chicken will be deemed to have "Ownership"
of all Common Stock it owns of record, either directly or through a nominee, or
Common Stock that it currently has or has had the right to acquire under this
Agreement (without regard to the satisfaction, waiver, expiration, or
termination of any conditions to the consumation of such acquisition and other
than rights to acquire which expired unexercised by any person) regardless of
whether it shall have transferred such Common Stock or the right to acquire such
Common Stock hereunder to any other person or entity; provided, however, that,
except for Common Stock acquired or that may be acquired pursuant to this
Agreement, Boston Chicken shall in no event be deemed to have "Ownership" for
purposes of this Section 5.8 of (i) any securities of the Company held by
affiliates, officers, directors or employees of Boston Chicken and its
subsidiaries or (ii) any securities of the Company held by any person or entity
that would not be counted under generally accepted accounting principles for
determining whether Boston Chicken holds a majority of the Voting Stock for
consolidated financial reporting purposes.
(c) If Boston Chicken accepts an Offer with respect to a
Purchasable Portion of the Subject Shares, the price to be paid by Boston
Chicken for each of the Subject Shares shall be equal to the price per share
(net of any underwriting discount or commission, selling commission, brokerage
commission or other similar selling expense payable in connection therewith)
received by the Company (or if there is more than one such price, the average of
the prices so received) in connection with the issuance and sale thereof by the
Company. If the purchase price received by the Company is in a form of
consideration other than cash, the value of such consideration will be
determined as follows: (i) if such consideration includes securities which are
freely tradeable and as to which an active trading market exists, such
securities will be valued in as nearly as practicable the same manner as the
Fair Market Value of the Common Stock is to be determined in such circumstances
as set forth in Section 5.8(l) and (ii) if such consideration includes any other
securities or other property or assets, such securities or other property or
assets shall be valued as agreed between Boston Chicken and the Company or if no
such agreement can be reached, by an investment banking or other appraisal firm
chosen by Boston Chicken and reasonably acceptable to the Company based on a
valuation methodology deemed appropriate by such firm.
(d) Upon acceptance by Boston Chicken of any Offer for a
Purchasable Portion of the Subject Shares, the parties shall consummate the sale
of such Purchasable Portion contemporaneously with the closing of the sale of
the Subject Shares to other purchasers thereof (or if there is more than one
such closing contemplated, contemporaneously with the first such closing). At
such closing Boston Chicken shall:
(i) either pay to the Company (i) Approved Consideration (as defined
in Section 5.8(n)) or (ii) if the other purchasers of the Subject Shares
shall have paid for the Subject Shares with consideration that is other
than Approved
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Consideration, then at the election of Boston Chicken, substantially the
same type of consideration as has been paid by such purchasers, in either
case (i) or (ii) in an amount equal to the purchase price for the Subject
Shares to be purchased as provided in Section 5.8(c); and upon payment by
Boston Chicken of the purchase price, the Company shall deliver to Boston
Chicken (or any nominee, Subsidiary or Affiliate of Boston Chicken
designated by it) certificates evidencing the purchased Subject Shares free
and clear of any liens or other security interests; or
(ii) increase the Maximum Principal Balance by the dollar amount that,
when such amount is converted into Common Stock upon exercise of Boston
Chicken's conversion or Option rights at a conversion price equal to 115%
of the purchase price that would have been payable in cash for such Subject
Shares, will result in Boston Chicken acquiring upon such exercise a number
of shares of Common Stock equal to such Purchasable Portion.
(e) After Boston Chicken exercises its rights with respect to a
Purchasable Portion of the Subject Shares or rejects an Offer, the Subject
Shares described in the Offer (or such portion thereof that is not being
purchased by Boston Chicken) may be sold by the Company to any person for such
price as the Company shall determine and upon other terms not materially more
favorable to the purchaser (either individually or in the aggregate) from those
set forth in the Offer at any time within 120 calendar days following Boston
Chicken's exercise of its right to purchase the Purchasable Portion or Boston
Chicken's non-acceptance of such Offer. If the Subject Shares are not sold by
the Company within the time and on the terms set forth in the preceding
sentence, any subsequent sale shall again be subject to the right of Boston
Chicken to purchase such securities pursuant to this Section 5.8.
(f) The rights of Boston Chicken under paragraphs (b) through
(e) this Section 5.8 shall not apply to (i) any issuances of securities of the
Company pursuant to the Stock Option Plan, as to which Boston Chicken shall have
the rights set forth in paragraph (g) of this Section 5.8, and (ii) any issuance
by the Company of any securities as part of, or following, a Qualified Public
Offering, as to which Boston Chicken shall have the rights set forth in
paragraph (i) of this Section 5.8.
(g) On the terms and subject to the conditions set forth herein,
the Company hereby grants to Boston Chicken, at each time prior to the
Termination Time that (i) an option is exercised pursuant to the Stock Option
Plan and (ii) immediately after the exercise of such option Boston Chicken would
have less than 51% of the Fully Diluted Ownership (as defined below) of the
Company, an option (each, a "Top-Up Option") to purchase such number of shares
of Common Stock as may be necessary, when added to all other shares of Common
Stock as to which Boston Chicken has Ownership, to enable Boston Chicken to have
Ownership, immediately after such option exercise under the Stock Option Plan,
of Majority Fully Diluted Ownership. As used herein, "Majority Fully Diluted
Ownership" means Ownership by Boston Chicken of Common Stock both (x)
representing not less than 51% of the Common Equity and (y) possessing not less
than 51% of the Voting Power, in each case on a fully diluted basis (the
calculation of such Common Equity and Voting Power on a fully diluted basis to
include all
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Common Stock and other capital stock and voting securities of the Company
subject to outstanding options, rights and warrants of the Company, whether or
not exercisable, including shares of Common Stock of which Boston Chicken has
Ownership hereunder, either through its conversion rights pursuant to Section
1.7 or its Option pursuant to Section 1.8 hereof or under any outstanding Top-Up
Option, and specifically including all Shares subject to options granted under
the Stock Option Plan).
(h) If at any time Boston Chicken shall be entitled to, but
shall fail to, exercise a Preemptive Right hereunder, it shall cease to have any
(i) Preemptive Right with respect any issuances thereafter by the Company of any
Common Stock, (ii) Top-Up Options granted thereafter hereunder; provided,
however, that all then outstanding Top-Up Options shall continue to be
outstanding and shall remain exercisable until the thirtieth day following a
Qualified Public Offering, and (iii) Public Company Options (as defined below).
The Preemptive Right of Boston Chicken shall also terminate immediately prior to
the Company having completed a Qualified Public Offering (the "Termination
Time"), and commencing at the Termination Time, no further Top-Up Options shall
be granted hereunder; provided, however, that all then outstanding Top-Up
Options shall continue to be outstanding and shall remain exercisable until the
thirtieth day following a Qualified Public Offering.
(i) The following provisions shall apply only to the issuance by
the Company of Voting Stock coincident with, or at any time following, a
Qualified Public Offering. On the terms and subject to the conditions set forth
herein, if at any time the Company issues shares of Voting Stock either in a
Qualified Public Offering or otherwise and such issuance causes Boston Chicken
to have Ownership of less than 51% of the Voting Power of the aggregate of (x)
the then outstanding Voting Stock plus (y) any unissued Voting Stock that is
then issuable pursuant to this Agreement (the "Primary Voting Stock"), the
Company hereby grants to Boston Chicken an option (each, a "Public Company
Option") to purchase such number of shares of Common Stock (the "Requisite
Shares") as may be necessary, when added to all other Common Stock as to which
Boston Chicken then has Ownership, to enable Boston Chicken to have Ownership of
Voting Stock of the Company possessing not less than 51% of the Voting Power of
the Primary Voting Stock. Each Public Company Option shall be deemed to be
granted by the Company on the date that the Company issues the shares of Voting
Stock that creates the Public Company Option. Each Public Company Option shall
be exercisable for a period of 120 days from its date of grant, at which time
such Public Company Option shall expire. Each Public Company Option shall be
exercisable, at the price and on the other terms provided below, in whole or in
part from time to time during the period during which it may be exercised.
(j) Each outstanding Public Company Option shall terminate:
(i) if as a result of any voluntary sale or transfer of Voting Stock,
Boston Chicken has Ownership of less than 51% of the Voting Power of the
Primary Voting Stock (based on the most recent information given in writing
by the Company to Boston Chicken regarding the number of such shares
outstanding prior to such sale); or
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(ii) if Boston Chicken fails to exercise any outstanding Public
Company Option for the Requisite Shares prior to its expiration or
otherwise fails to acquire the Requisite Shares prior to its expiration.
(k) For purposes of determining the amount of Voting Stock as to
which Boston Chicken has Ownership pursuant to Section 5.8(j) in connection with
a transaction in which there occurs a voluntary sale or transfer of Common Stock
simultaneously with an issuance of Voting Stock by the Company, such Common
Stock shall be deemed to have sold or transferred prior to the Company's
issuance. The Public Company Options and the Top-Up Options are sometimes
referred to collectively herein as the "BC Options."
(l) The purchase price payable upon each exercise of a BC Option
shall be an amount equal to the Fair Market Value (as hereinafter defined) of
the Common Stock to be issued pursuant to such BC Option. As used herein, "Fair
Market Value" as of a particular date (the "valuation date"), shall mean an
amount equal to (i) the average of the closing sale price of the Common Stock on
the Nasdaq National Market or, if the Common Stock is not then listed on the
Nasdaq National Market, on the principal securities exchange or other securities
market, if any, on which the Common Stock is then listed for trading, on the
five consecutive trading days ending with (and inclusive of) the second trading
day prior to the valuation date, as reported in the Wall Street Journal (Western
Edition), or, (ii) if no sales take place on any one or more of such days on the
Nasdaq National Market or (as the case may be) such principal securities
exchange or securities market, the average of the closing bid and asked prices
on such day or days as officially reported or listed on the Nasdaq National
Market or such other principal securities exchange or securities market, or,
(iii) if the Common Stock is not then listed or admitted to trading on the
Nasdaq National Market or other principal securities exchange or securities
market, the last sale price on such days if reported by a reputable entity or
system engaged in the regular reporting of securities prices. If there is no
such entity or system or the Common Stock is not publicly traded, "Fair Market
Value" shall be determined in good faith as of the valuation date by the board
of directors of the Company. The valuation date for purposes of determining the
Fair Market Value of a Top-Up Option shall be the date of the transaction
pursuant to which the Option is granted. The valuation date for purposes of
determining the Fair Market Value of a Public Company Option is the date of the
exercise of such Public Company Option.
(m) Boston Chicken shall exercise any BC Option by delivery of a
written exercise notice to the Company designating a date (the "Issue Date"),
which date shall be not less than five nor more than 25 business days from the
date of such exercise notice. On the Issue Date, provided that all applicable
regulatory approvals shall have been obtained and all applicable waiting periods
have expired, and there are no injunctions outstanding prohibiting such transfer
or any other regulatory or governmental impediments to such transfer
(collectively, "Governmental Impediments"), the Company shall issue to Boston
Chicken the number of Shares as to which the BC Options have been exercised
against payment of the purchase price therefor as determined pursuant to Section
5.8(l). If there is any Governmental Impediment, the Issue Date shall be
postponed until the tenth business day after the first day on which no
Governmental Impediment remains outstanding (and references herein to the Issue
Date shall be
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construed accordingly), unless Boston Chicken and the Company agree on some
other date. Boston Chicken's obligation to purchase the Common Stock on an Issue
Date pursuant to the exercise of a BC Option is conditioned, in its discretion,
on no material adverse change having occurred in the financial condition,
results of operations, assets or business of the Company since the date of
Boston Chicken's exercise notice; provided, however, that if Boston Chicken
determines not to purchase Common Stock as a result of the occurrence of a
material adverse change, such 120 day exercise period shall be tolled during the
pendency of such material adverse change and such failure to purchase shall not
be deemed to be a failure by Boston Chicken to have exercised any right for
purposes of this Agreement. Notwithstanding any contrary provision contained
herein, no outstanding BC Option shall expire until such material adverse change
has either ceased to exist (or has been waived by Boston Chicken) and Boston
Chicken has elected to nevertheless forgo exercise of such option or the
applicable 120 day exercise period has expired after tolling ceases.
(n) (i) The purchase price payable upon any exercise of any BC
Option (the "Option Exercise Price") shall be payable by, at the option of
Boston Chicken, (x) in check or wire transfer in immediately available funds to
an account designated by the Company, or (y) in that number of registered shares
of common stock, $.01 par value per share, of Boston Chicken ("Boston Chicken
Shares") equal to the fair market value of the Common Stock to be issued
pursuant to the Option divided by the average closing sales price per share of
Boston Chicken Shares quoted on the Nasdaq National Market, as reported in the
Wall Street Journal (Western Edition), for the five consecutive trading days
ending with (and inclusive of) the second trading day prior to the Issue Date,
rounded up to the nearest whole share, or (z) if the Company shall agree, with
such other tangible or intangible assets or services, valued as agreed between
the Company and Boston Chicken (any of the foregoing, "Approved Consideration").
Notwithstanding the foregoing, Boston Chicken's right to pay the Option Exercise
Price in Boston Chicken Shares is subject to any restriction on the Company
contained in the documents then governing any loan the Company has with a bank
or banks; provided, however, that the Company agrees to use its reasonable best
efforts to obtain any necessary waivers or consents requested by Boston Chicken
to allow the Option Exercise Price to be paid in Boston Chicken Shares.
(ii) If the Option Exercise Price with respect to a particular BC
Option exercise is paid in Boston Chicken Shares and (x) the Company sells
all of Boston Chicken Shares received by it with respect to such exercise
within that number of trading days commencing on the first trading day on
which the Nasdaq National Market is open for business following the Issue
Date and ending on the day that is that number of days thereafter
determined by dividing the number of such Boston Chicken Shares so received
by 100,000 (rounding up to the next whole day), plus two additional days
(the "Guarantee Period") for cash in one or more bona fide broker's or
market maker transactions through or to Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") or as otherwise provided in any
prospectus pursuant to which the sale and the Company's resale of the
Boston Chicken Shares is registered (the "Purchaser Prospectus") to one or
more persons not affiliated with, related to, or associated with the
Company, (y) the
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aggregate proceeds from the sale of such Boston Chicken Shares received by
the Company, net of broker's commissions, is less than the dollar amount of
the Option Exercise Price (the "Shortfall"), and (z) Boston Chicken
receives notice from the Company within 14 days of the expiration of the
Guarantee Period of the amount of the Shortfall with copies of applicable
confirmation slips or other evidence reasonably satisfactory to Boston
Chicken attached thereto, Boston Chicken shall, within three business days
of the receipt of such notice, in it sole discretion, either (A) pay to the
Company an amount in cash equal to the Shortfall, or (B) deliver that
number of Boston Chicken Shares determined in the manner provided in
subparagraph (n)(iv) below.
(iii) Notwithstanding anything herein to the contrary, Boston Chicken
may not exercise its right to pay the Option Exercise Price through the
issuance of Boston Chicken Shares at any time that the distribution of
Boston Chicken Shares by Boston Chicken or the resale of Boston Chicken
Shares by the Company during the Guarantee Period would be prohibited by
law, including pursuant to Rule 10b-6 under the Securities Exchange Act of
1934, as amended (the "1934 Act").
(iv) In the event Boston Chicken elects to pay the Shortfall in
Boston Chicken Shares, the number of Boston Chicken Shares to be delivered
to the Company shall be determined by dividing the Shortfall by the average
closing per share sales price of Boston Chicken Shares quoted on the Nasdaq
National Market, as reported in the Wall Street Journal (Western Edition),
for the five consecutive trading days ending with (and inclusive of) the
second trading day prior to the date on which Boston Chicken delivers
Boston Chicken Shares to the Company in payment of the Shortfall. In the
event Boston Chicken elects to pay the Shortfall in Boston Chicken Shares,
the provisions of this Section 5.8(n), as applicable, shall apply for
purposes of determining the length of a new Guarantee Period, which shall
commence on the trading day immediately following the date on which the
Company (or its representative) receives such Boston Chicken Shares, and
other terms relating to the sale of such Boston Chicken Shares, including,
without limitation, any additional Shortfall.
(v) In the event Boston Chicken pays the Option Exercise Price
hereunder with Boston Chicken Shares, the Company agrees that (i) during
any trading day during the Guarantee Period the Company will not sell more
than 100,000 Boston Chicken Shares; provided, that, notwithstanding the
limitations on sales set forth in this paragraph, on any day during the
Guarantee Period, Boston Chicken may permit the Company to sell all, or
more than 100,000, Boston Chicken Shares received in payment of the Option
Exercise Price subject to the volume limitations contained from time to
time in the Purchaser Prospectus, and (ii) it will not sell any Boston
Chicken Shares during any period when Boston Chicken has notified the
Company that the resale of the Boston Chicken Shares may be prohibited by
Rule 10b-6 under the 1934 Act or that such resale may
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violate other applicable securities laws, rules or regulations; provided,
that if such prohibition occurs during the Guarantee Period the Guarantee
Period shall be extended one full day for each day that the Company is
prohibited from selling as a result of the limitations in this Section
5.8(n).
(vi) Boston Chicken agrees that in the event the Company is unable
to trade all or part of Boston Chicken Shares permitted to be traded by the
Company on any trading day during the Guarantee Period through no fault of
the Company, the Guarantee Period shall be extended by one trading day for
each such trading day on which the Company is so unable to trade. The
Company will notify Boston Chicken of such extension of the Guarantee
Period by the close of business on the third trading day following the date
on which the Company is so unable to trade.
(vii) The provisions of this Section 5.8(n) shall apply, mutatis
mutandis, to the payment of the purchase price by Boston Chicken upon any
exercise of its Preemptive Right.
(o) The Common Stock to be issued on each exercise of a BC
Option or the Preemptive Right shall rank pari passu in all respects with the
Company's Common Stock outstanding on the date of issuance thereof, save only as
to any dividend, rights or distribution the record date for which shall have
occurred before such date. All Common Stock issued upon an exercise of a BC
Option or the Preemptive Right shall be subject to such limitations, and shall
have such rights and privileges, under the Company's charter and bylaws, as are
applicable generally to the Common Stock. Each share of Common Stock issued
pursuant to an exercise of a BC Option or the Preemptive Right shall be duly
authorized, validly issued and fully paid and nonassessable, and will not be
subject to any restriction under the Company's charter or bylaws, as such may be
amended from time to time, that is not applicable to shares of Common Stock of
the Company generally.
(p) The Company shall, promptly after the Issue Date applicable
to an exercise of a BC Option, cause a certificate for the Common Stock issued
on such exercise to be delivered to Boston Chicken or as it may direct. The
Company shall, as soon as reasonably practicable after the issue of Common Stock
pursuant to the exercise of an BC Option or the Preemptive Right, cause the
Common Stock so issued to be listed on the Nasdaq National Market or principal
securities exchange on which the Common Stock is then listed for trading.
(q) The Company shall maintain reserved for issuance at all
times during the period that BC Options are exercisable hereunder that number of
authorized but unissued Common Stock issuable upon exercise of such BC Options
from time to time.
(r) (i) Boston Chicken agrees to reimburse, to the extent
permitted by law, the Company, its directors, officers, employees and agents,
and each person, if any, who controls the Company within the meaning of the
Securities Act of 1933, as amended (the "1933 Act") for any and all losses,
claims, damages, expenses and liabilities to which they or any of them may
become subject under the 1933 Act or any other statute or common law or
otherwise by reason of its offer and sale of Boston Chicken Shares pursuant to
this Section 5.8, and to
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reimburse the Company for any reasonable legal or other expenses actually and
reasonably incurred in connection with investigating any claims and defending
any actions, insofar as such losses, claims, damages, expenses, liabilities, or
actions arise out of, or are based upon:
(x) any untrue statement of a material fact or any alleged
untrue statement of a material fact contained in or incorporated by
reference in the registration statement which contains the Purchaser
Prospectus (the "Purchaser Registration Statement") or any post-
effective amendment thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or
(y) any untrue statement of a material fact or any alleged
untrue statement of a material fact contained or incorporated by
reference in the Purchaser Prospectus (as amended or supplemented if
Boston Chicken shall have filed with the Securities and Exchange
Commission any amendment or supplement thereto), if used within the
period during which Boston Chicken is required to keep the Purchaser
Registration Statement in which such Purchaser Prospectus is contained
current, or the omission or alleged omission to state therein a
material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading;
provided, however, that Boston Chicken's obligations contained herein shall
not apply to losses, claims, damages, expenses, liabilities, or actions
arising out of, or based upon any such untrue statement or any such
omission or alleged omission, if such statement or omission was made in
reliance upon, and in conformity with, information relating to the Company
furnished to Boston Chicken by the Company expressly for use in connection
with the preparation of the Purchaser Registration Statement or any
prospectus contained in the Purchaser Registration Statement or any such
amendment or supplement thereto.
(ii) The Company shall (in the same manner and to the same extent as
set forth in subparagraph (r)(i) above), reimburse, to the extent permitted
by law, Boston Chicken, its directors, officers, employees and agents, and
each person, if any, who controls Boston Chicken within the meaning of the
1933 Act, if such statement or omission was made in reliance upon and in
conformity with information relating to the Company furnished to Boston
Chicken by the Company expressly for use in connection with the preparation
of the Purchaser Registration Statement or the Purchaser Prospectus or any
amendment or supplement thereto.
(iii) Any person entitled to reimbursement hereunder will (x) give
written notice to the reimbursing party of any claim with respect to which
it seeks
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reimbursement within 14 days of the person entitled to reimbursement paying
the reimbursable amount (provided, however, that any failure by a person
entitled to reimbursement hereunder to give such prompt written notice
shall not adversely affect such person's rights hereunder unless and then
only to the extent that such failure prejudices the rights of the
reimbursing party hereunder) and (y) unless in such party's reasonable
judgment a conflict or interest between such party and the reimbursing
parties may exist with respect to such claim, permit such reimbursing party
to assume the defense of such claim with counsel reasonably satisfactory to
the party being reimbursed. If such defense is assumed, the reimbursing
party will not be subject to any liability for any settlement made by the
party being reimbursed without its consent (but such consent will not be
unreasonably withheld). A reimbursing party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties being
reimbursed by such reimbursing party with respect to such claim, unless in
the reasonable judgment of such counsel a conflict of interest may exist
between such party being reimbursed and any other of such reimbursed
parties with respect to such claim.
(iv) If the reimbursement provided for in Sections 5.8(r)(i) and
(ii) is unavailable to or insufficient to hold harmless the party being
reimbursed under such subparagraphs in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then each applicable
reimbursing party, in lieu of reimbursing such party, shall contribute to
the amount paid or payable by such party being reimbursed as a result of
such losses, claims, damages, expenses, or liabilities in such proportion
as is appropriate to reflect the relative fault of Boston Chicken and the
Company in connection with the statements or omissions which resulted in
such losses, claims, damages, expenses, or liabilities. The relative fault
of Boston Chicken and the Company shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by Boston Chicken or by the Company, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable
by a party as a result of the losses, claims, damages, expenses, and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The Purchaser and the
Company agree that it would not be just and equitable if contribution
pursuant to this Section 5.8(r) were determined by pro rata allocation or
by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
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(s) Boston Chicken agrees to reimburse the Company, within 14
days after receipt of written evidence of payment thereof, for the reasonable
legal fees and expenses incurred by the Company in connection with the sale of
any Boston Chicken Shares received pursuant to Section 5.8(n).
(t) The rights of Boston Chicken under this Section 5.8 shall be
automatically transferred in their entirety to any successor to Boston Chicken
by merger, consolidation or transfer of all or substantially all of Boston
Chicken's assets. Boston Chicken may assign or transfer any of its rights under
this Section 5.8 to any other person or entity at any time without the Company's
consent. Any reference herein to Boston Chicken shall be deemed to mean its
assignee or transferree to the extent that such rights are assigned or
transferred thereto.
(u) Except as expressly provided herein, Boston Chicken and the
Company shall bear their own expenses in connection with the transactions
contemplated by this Section 5.8.
(v) In order to prevent dilution of the rights granted to Boston
Chicken under this Section 5.8, the exercise price of and number of shares of
Common Stock subject to any Top-Up Option shall be adjusted in the event the
Company shall at any time (i) make a subdivision of or combine shares of Common
Stock outstanding or (ii) pay a dividend or make a distribution in cash, in
kind, or in securities of any kind (including, but not limited to, any stock
split). In the event the Company makes a subdivision of shares of Common Stock
or pays a dividend or makes a distribution in cash, in kind, or in securities of
any kind, the exercise price of any Top-Up Option in effect immediately prior to
such action shall be appropriately decreased, and in the event that Company
shall at any time combine the shares of Common Stock outstanding, the exercise
price of any Top-Up Option in effect immediately prior to such combination shall
be appropriately increased. An adjustment made pursuant to this Section 5.8(v)
shall, in the event of a subdivision or combination, become effective
retroactively immediately after the effective date thereof, and shall, in the
event of a dividend or distribution, become effective retroactively immediately
after the record date for the determination of stockholders entitled thereto.
(w) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of any Top-Up Option as herein provided, such number of
shares of Common Stock as shall be issuable upon the exercise of all Top-Up
Options. The Company covenants that all shares of Common Stock which shall be so
issuable shall be duly and validly issued and fully-paid and non-assessable upon
payment of the exercise price therefor as provided for herein.
5.9 BC Credit Line Compliance. The Company agrees that, at the time
that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever, it
will not incur any additional indebtedness or create any additional lien which
would cause Boston Chicken to be in default of the BC Credit Line.
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5.10 BC Credit Line Representations. The Company agrees that, at the
time that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever,
it will conduct its business and take such action (or refrain from taking such
action) as to cause to be true and correct at all relevant times the
representations or warranties applicable to a "Subsidiary" contained in the BC
Credit Line.
5.11 Company Subsidiaries. Each corporation or other entity becoming
a Subsidiary of the Company after the date hereof will be duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
organization and will be duly qualified to do business in each additional
jurisdiction where such qualification is or may be necessary under applicable
law. Each Subsidiary of the Company will have all requisite power to own or
lease the properties used in its business and to carry on its business as now
being conducted and as proposed to be conducted. All outstanding shares of
capital stock or other units of ownership interest of each class of each
Subsidiary of the Company will be validly issued and will be fully paid and
nonassessable and will be owned, beneficially and of record, by the Company or
another Subsidiary of the Company free and clear of any liens.
5.12 Place of Business. The Company will provide Boston Chicken with
60 days' prior written notice of any proposed change in the location of its
chief executive office. The Company shall not change its name without the prior
written consent of Boston Chicken.
5.13 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
All Collateral consisting of inventory, fixtures, machinery, and equipment shall
at all times be located in the State of Colorado and at no other locations
without the prior written consent of Boston Chicken.
(b) If the Collateral described in clause (a) is at any time
kept at leased locations, the Company shall use its best efforts to obtain
appropriate landlord lien waivers or subordination satisfactory to Boston
Chicken, unless such has been waived in writing by Boston Chicken for a
particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, the Company shall send appropriate warehousemen's notices, each
satisfactory to Boston Chicken, unless such has been waived by Boston Chicken
for the particular instance.
5.14 HSR Act Compliance. In the event Boston Chicken determines that
any filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") in connection with any exercise of the
conversion rights pursuant to Section 1.7 hereof or of the Option pursuant to
Section 1,8 hereof, the Company agrees to prepare and file with the Federal
Trade Commission and the United States Department of Justice within 10 business
days from the date of notice from Boston Chicken any notification required to be
filed under the HSR Act or any rules or regulations promulgated thereunder.
Boston Chicken shall pay any filing fees required under the HSR Act in
connection with such filing. Any such filing shall be true and accurate in all
material respects and responsive to the requirements of the HSR Act and any such
rules and regulations. Each of the Company and Boston Chicken shall make
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available to the other party such information as may be required for the
preparation of any such notification or related reports.
5.15 Company's Fiscal Year. The Company shall adopt a fiscal year
consistent with the fiscal year adopted by Boston Chicken from time to time. As
of the date of this Agreement, the Company acknowledges that Boston Chicken's
fiscal year is the 52/53-week period ending on the last Sunday in December and
consists of 13 four-week periods.
5.16 Annual Budget. The Company shall deliver to Boston Chicken, as
soon as practicable and in any event no later than the last day of the first
Retail Period of each fiscal year, an operating budget for the Company for such
fiscal year.
ARTICLE VI
Negative Covenants
------------------
The Company covenants and agrees that, so long as this Agreement
remains in effect (unless Boston Chicken shall give its prior written consent
thereto):
6.1 Guarantees; Loans; etc. The Company shall not, and shall not
permit any Subsidiary to (a) guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business, or (b) make loans or advances to any person, other than a loan by the
Company to Harry's Farmers Markets, Inc. ("Harry's") pursuant to loan documents
the terms and conditions of which are satisfactory to Boston Chicken (the
"Harry's Loan Documents").
6.2 Disposal of Property. The Company shall not, and shall not
permit any Subsidiary to, sell, lease, transfer, or otherwise dispose of any of
its properties, assets, and rights (or agree to sell, lease, transfer, or
otherwise dispose of any of its properties, assets, and rights) (including the
Collateral) to any party except in the ordinary course of business.
6.3 Compensation to Stockholders and Related Parties. Other than
reasonable salaries and normal benefits (including options pursuant to the Stock
Option Plan), the Company shall not pay any compensation, bonuses, fees,
options, or other amounts to any Stockholder or to any of the stockholders,
affiliates or immediate family members of any such Stockholder. The Company
shall not, without the prior written consent of Boston Chicken, amend its Stock
Option Plan.
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6.4 Dividends and Stock Redemptions. The Company shall not, directly
or indirectly, (a) redeem, purchase, or otherwise retire any of its shares of
capital stock, (b) declare or pay any dividends in any fiscal year on any of its
shares of capital stock or make any distributions of or with respect to its
shares of capital stock or (c) return capital of the Company to its
stockholders.
6.5 Additional Indebtedness. The Company shall not, and shall not
permit any Subsidiary to, incur additional indebtedness in excess of $5,000 as
to any one item and $50,000 in the aggregate without the consent of Boston
Chicken, other than (a) as provided in Section 5.8 and (b) trade payables in the
ordinary course of business.
6.6 Mergers, Consolidations, Acquisitions, etc. The Company shall
not, and shall not permit any Subsidiary to (a) be a party to any consolidation,
reorganization, or merger; (b) sell or otherwise transfer any part of its assets
(except in the ordinary course of business and except as part of a financing as
to which Boston Chicken has waived its rights pursuant to and in accordance with
Section 5.8 hereof); (c) except as provided in Sections 5.8 hereof, effect any
change in its capital structure or in any of its business objectives, purposes,
and operations; (d) acquire any capital in or equity ownership of another
corporation, partnership, or other business organization; (e) engage in any
other business than the business described in Section 5.3(c) hereof; or (f)
liquidate or dissolve or take any action with a view toward liquidation or
dissolution.
6.7 Certificate of Incorporation and Bylaws. The Company shall not
make any changes in or amendments to its certificate of incorporation or bylaws
as they are in effect as of the date hereof; except that the Company may amend
the certificate of incorporation solely to increase the number of authorized
shares of its common stock by the amount necessary to consummate any financing
as to which Boston Chicken has waived its rights pursuant to and in accordance
with Section 5.8 hereof.
6.8 Issuance of Stock. Except for (a) shares of Common Stock of the
Company which may be issued upon (i) exercise of options granted under the Stock
Option Plan, (ii) exercise of the Option, (iii) conversion of any portion of the
outstanding principal balance of the Loan as provided in the Note, (iv)
consummation of any financing or offering as to which Boston Chicken has waived
its rights pursuant to and in accordance with Section 5.8 hereof, and (b)
options granted under the Stock Option Plan, the Company will not issue any
additional shares of any class of its capital stock, issue any convertible debt
to any person or entity other than Boston Chicken, create any additional classes
of capital stock, whether common or preferred, or grant any option, warrant, or
similar right to acquire shares of any class of its capital stock.
6.9 Liens. The Company shall not, and shall not permit any
Subsidiary to, create, incur, or suffer to exist any lien on any of the assets,
rights, revenues or property, real, personal, or mixed, tangible or intangible,
whether now owned or hereafter acquired, of the Company or any Subsidiary, other
than liens in favor of Boston Chicken.
6.10 Transactions with Affiliates. The Company shall not, and shall
not permit any Subsidiary to, become a party to, or become liable in respect of,
any contract or undertaking
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with any affiliate except as otherwise expressly permitted under this Agreement
and except in the ordinary course of business and on terms not less favorable to
the Company or such Subsidiary than those which could be obtained if such
contract or undertaking were an arms length transaction with a person other than
an affiliate.
6.11 Subsidiaries. The Company shall not, and shall not permit any
Subsidiary to, create or otherwise invest in any corporation, partnership, or
other entity unless the Company or such Subsidiary owns directly 100% of the
issued and outstanding equity interests therein (such 100% owned entity to be
referred to herein as a "Subsidiary").
6.12 Intellectual Property Agreements. The Company shall not amend
the Intellectual Property Agreements without Boston Chicken's prior written
consent.
6.13 Harry's Loan Documents. The Company shall not amend the Harry's
Loan Documents, or waive any provision of, or default under, the Harry's Loan
Documents, without Boston Chicken's prior written consent.
ARTICLE VII
Conditions of Closing
---------------------
Boston Chicken's obligations hereunder shall be subject to (a) the
performance by the Company prior to or on the Closing Date of all of its
covenants theretofore to be performed under this Agreement, (b) the accuracy of
the Company's representations and warranties contained in this Agreement on the
Closing Date, and (c) the satisfaction, prior to or on the Closing Date, of the
following further conditions:
7.1 Opinion of Counsel. Boston Chicken shall have received on the
Closing Date from Sutherland, Asbill & Brennan an opinion, dated the Closing
Date, in form and substance satisfactory to Boston Chicken.
7.2 Proceedings and Documents. All proceedings to be taken in
connection with the transaction contemplated by this Agreement and all documents
incident to such transaction shall be satisfactory in form and substance to
Boston Chicken and its counsel, and Boston Chicken shall have received all
documents or other evidence which it and its counsel may reasonably have
requested in connection with such transaction, including copies of records of
all corporate proceedings in connection with such transaction and compliance
with the conditions set forth in this Article VII, in form and substance
satisfactory to Boston Chicken and its counsel.
7.3 Executed Documents. The Company shall have duly executed the
following documents to which it is a party, and shall have delivered to Boston
Chicken the following:
(a) this Agreement;
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(b) the Note;
(c) any intellectual property security agreement and related
security documents as may be required by the Company;
(d) such financing statements or other documents for filing with
public officials with respect to the Security Instruments as
Boston Chicken may reasonably request;
(e) original promissory note or notes from Harry's to the
Company, duly endorsed in blank;
(f) original warrants to acquire shares of common stock in
Harry's, together with transfer documents executed in blank.
7.4 No Defaults. There shall exist no Event of Default or Default.
7.5 Additional Deliveries. Boston Chicken shall have received, in
form and substance satisfactory to it, the following:
(a) the Company's certificate of incorporation certified as true
and correct by the Secretary of State of Delaware, dated within five days prior
to the Closing Date, and certified as true and correct as of the Closing Date by
a duly authorized officer of the Company;
(b) the Company's bylaws, as in force and effect on the Closing
Date, certified as true and correct by the Secretary of the Company;
(c) certificate of good standing of the Company from the
Secretary of State of the States of Delaware and Colorado dated within five days
prior to the Closing Date;
(d) authorizing resolutions of the board of directors and
stockholders of the Company and evidence satisfactory in form and substance to
Boston Chicken of other corporate action taken by the Company to authorize,
among other things, the execution, delivery, and performance by the Company of
this Agreement, the Note and the Security Instruments and the consummation of
the transactions contemplated hereby, including the reservation of shares of
common stock for issuance upon the conversion of the Loan and the exercise of
the Option, and consummation of the transactions with Harry's, certified as true
and correct as of the Closing Date by a duly authorized officer of the Company;
(e) copies, in form and substance satisfactory to Boston
Chicken, of the executed Transaction Agreement between the Company and Harry's
dated as of January 31, 1997 (the "Transaction Agreement"), the executed
Intellectual Property Agreements, the executed Harry's Loan Documents, and such
other executed documents relating to the Transaction Agreement, the Harry's Loan
Documents and the Intellectual Property Agreements as are required to be
delivered thereunder or as Boston Chicken shall reasonably request; and
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(f) copy of an executed Registration Rights Agreement between
the Company and Boston Chicken, in form and substance satisfactory to Boston
Chicken.
7.6 Opinion of Auditors. Boston Chicken shall have received on the
Closing Date from Boston Chicken's independent public accountants an opinion,
dated the Closing Date, in form and substance satisfactory to Boston Chicken, to
the effect that the Note and the obligations incurred hereunder are deemed to be
debt, and not equity, in accordance with generally accepted accounting
principles.
7.7 Stockholders' Equity. Boston Chicken shall have received
evidence satisfactory to it that the Company has, on the Closing Date, cash or
cash equivalents of at least $8,666,667, and stockholders' equity of at least
$8,666,667.
7.8 Compliance with BC Credit Line. Boston Chicken shall (a)
determine in good faith that this Agreement complies with applicable
restrictions or limitations under the BC Credit Line, (b) obtain a written
waiver of noncompliance of the transactions contemplated hereby with the BC
Credit Line, or (c) deliver to Agent from the Company such pledges, collateral,
and other documentation as may be required to evidence compliance of the
transactions contemplated hereby with the BC Credit Line.
ARTICLE VIII
Default, Rights and Remedies of Boston Chicken
----------------------------------------------
8.1 Default. The occurrence of any of the following events or acts
shall constitute a default ("Default"):
(a) Default in the payment when due of any portion of the
principal on the Note and the continuance of such default for a period of three
days;
(b) Default in the payment when due of any portion of the
interest on the outstanding principal of the Note and the continuance of such
default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Note, any Security Instrument, or any certificate hereunder or
thereunder shall not be true, or any certificate, statement, report, financial
data, or notice furnished at any time by the Company to Boston Chicken shall be
materially inaccurate;
(d) any breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in any Security Instrument, which in
each case shall continue unremedied for a period of 10 calendar days following
notice thereof from Boston Chicken, provided that such grace period shall not
apply, and the Company shall be in Default immediately
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upon such breach, if, in Boston Chicken's judgment, such breach may not be
reasonably cured by the Company during such cure period;
(e) the breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in Sections 5.6, 6.1, 6.2, 6.4, 6.6,
6.8, 6.10, or 6.11 of this Agreement;
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or the Note which
shall continue unremedied for a period of 10 calendar days following notice
thereof from Boston Chicken, provided that such grace period shall not apply,
and the Company shall be in Default immediately upon such breach, if, in Boston
Chicken's judgment, such breach may not reasonably be cured by the Company
during such cure period;
(g) the Company or any Subsidiary shall (i) generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts as
such debts become due, (ii) 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, (iii) 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, (iv) 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 60 days or more, (v) by any act or omission, 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 (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
(h) dissolution or liquidation of the Company;
(i) there occurs a material adverse change in the financial
condition, results of operations, assets, or business of the Company and its
Subsidiaries taken as a whole;
(j) the Company or any Subsidiary shall (a) fail to pay any
indebtedness for borrowed money (other than the Note) of the Company or such
Subsidiary, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired, or (b) fail to perform or observe
any term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, 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, or (c) default in the performance or observance
of any obligations under leases or subleases of real property;
(k) one or more judgments, decrees or orders for the payment of
money in excess of $100,000 in the aggregate shall be rendered against the
Company or any of its
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Subsidiaries, and such judgments, decrees, or orders shall continue unsatisfied
and in effect for a period of 20 consecutive days without being vacated,
discharged, satisfied, escrowed, stayed or bonded pending appeal or covered in
full by insurance;
(l) any Security Instrument, or the security interests created
under this Agreement shall be terminated, invalidated, or set aside or be
declared ineffective or inoperative or in any way cease to give or provide to
Boston Chicken the benefits purported to be created thereby;
(m) there occurs a default under the Intellectual Property
Agreements, or the Intellectual Property Agreements shall be terminated,
canceled, materially modified or amended to the detriment of the Company or
otherwise cease to be in full force and effect.
8.2 Default; Remedies. (a) In the event a Default shall exist or
occur Boston Chicken may:
(i) terminate its obligations under this Agreement and cease
to make any further advances under Section 1.1, and shall have the right to
declare the Note due and payable in full, without demand, presentment, or
notice of any kind;
(ii) in its sole and absolute discretion, exercise any one or
more of the rights and remedies accruing to a secured party under the
Uniform Commercial Code with respect to the Collateral and any other
applicable law upon default by a debtor;
(iii) exercise its rights under the Security Instruments;
(iv) convert any portion of the outstanding principal balance
of the Loan into shares of Common Stock in the Company as provided in the
Note;
(v) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 8.1(g) with respect to the Company or any Subsidiary, Boston Chicken's
obligations under this Agreement shall automatically terminate forthwith and all
amounts owed by the Company hereunder and under the Note shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) In connection with the exercise of Boston Chicken's rights
and remedies provided in Section 8.2(a)(ii), the Company hereby agrees to
assemble the Collateral and make it available to Boston Chicken at a place to be
designated by Boston Chicken which is reasonably convenient to both parties,
authorizes Boston Chicken to take possession of the Collateral with or without
demand and with or without process of law and to sell and dispose of the same at
public or private sale and to apply the proceeds of such sale to the costs and
expenses thereof (including reasonable attorneys' fees and disbursements
incurred by Boston Chicken) and then to the payment and satisfaction of the
Loan. Any requirement of reasonable notice shall be
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met if Boston Chicken sends such notice to the Company, by registered or
certified mail, at least five days prior to the date of sale, disposition, or
other event giving rise to a required notice. Boston Chicken may be the
purchaser at any such sale. The Company expressly authorizes such sale or sales
of the Collateral in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing the Loan. Boston Chicken
shall have no obligation to preserve rights against prior parties. The Company
hereby waives as to Boston Chicken any right of subrogation or marshaling of
such Collateral and any other collateral for the Loan. To this end, the Company
hereby expressly agrees that any such collateral or other security of the
Company or any other party which Boston Chicken may hold, or which may come to
any of them or any of their possession, may be dealt with in all respects and
particulars as though this Agreement were not in existence. The parties hereto
further agree that public sale of the Collateral by auction conducted in any
county in which any Collateral is located or in which Boston Chicken or the
Company does business after advertisement of the time and place thereof shall,
among other manners of public and private sale, be deemed to be a commercially
reasonable disposition of the Collateral. The Company shall be liable for any
deficiency remaining after disposition of the Collateral.
(c) All of Boston Chicken's rights and remedies under this
Agreement are cumulative and nonexclusive. Any conversion of, or exercise of the
Option with respect to, less than all of the principal balance outstanding under
the Note shall not affect Boston Chicken's rights and remedies with respect to
any portion not so converted or exercised.
8.3 No Waiver. Boston Chicken's failure, at any time or times
hereafter, to require the Company's strict compliance with or performance of any
provision of this Agreement shall not waive, affect, or diminish any right of
Boston Chicken thereafter to demand such strict compliance or performance
therewith. Any suspension or waiver by Boston Chicken of a Default or an Event
of Default by the Company under this Agreement or the Note shall not suspend,
waive, or affect any other Default or Event of Default by the Company under this
Agreement or the Note, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants, and representations of the
Company contained in this Agreement or the Note and no Default or Event of
Default by the Company under this Agreement or the Note shall be deemed to have
been suspended or waived by Boston Chicken unless such suspension or waiver is
in writing signed by an officer of Boston Chicken.
ARTICLE IX
Miscellaneous
-------------
9.1 No Oral Change. This Agreement may not be changed orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification, or discharge is sought.
9.2 Assignment. The Company may not assign any of its rights or
delegate any of its obligations under this Agreement without Boston Chicken's
written consent. Boston Chicken
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may assign (including any participation in) any of its rights or delegate any of
its obligations under this Agreement (including assignment of or participation
in this Agreement, the Note, and the Security Instruments), (a) without notice
to the Company, (i) to any Affiliate of Boston Chicken (except the Company) or
(ii) in connection with any pledge of its assets under the BC Credit Line or
similar credit agreement and (b) with notice, but without any requirement of
consent or approval, to any other person or entity (except the Company);
provided, however, that Boston Chicken shall not make any such assignment of its
obligations unless at the time thereof Boston Chicken reasonably believes the
assignee is able to perform such obligations. Any such assignment shall vest in
the assignee all of the benefits under the documents so assigned. For purposes
of this Agreement, the term Affiliate shall mean any person or entity which
directly or indirectly controls or is controlled by, or is under common control
with, Boston Chicken.
9.3 Costs and Attorneys' Fees. (a) Except as provided in Section
2.4 hereof and subsection (b) or (c) of this Section 9.3, each of the parties
hereto shall pay its own expenses (including accounting fees) incident to the
negotiation and execution of this Agreement and to the consummation of the
transactions contemplated hereby.
(b) The Company shall pay all reasonable attorneys' fees and any
costs and charges relating to or arising out of (1) the negotiation and drafting
of this Agreement and all related documents and (2) the enforcement by Boston
Chicken of its rights to collect any portion of the Loan.
(c) In any action not founded solely on grounds covered by
subsection (b) of this Section 9.3, the party to the action who does not prevail
shall pay to the prevailing party the court costs and reasonable attorneys fees
and other expenses (including, but not limited to, fees and expenses of expert
witnesses or consulting experts) incurred directly or indirectly by the
prevailing party in connection with its prosecution or defense of the action, as
the case may be.
9.4 Communications and Notices. All communications and notices
provided for in this Agreement or under the Note shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to the Company:
HFMI Acquisition Corporation
14123 Denver West Parkway
Golden, CO 80401
Attention: President
Facsimile: 303-216-5550
If to Boston Chicken:
Boston Chicken, Inc.
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14123 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 216-5339
with a copy to:
Bell, Boyd & Lloyd
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
Attention: Paul T. Metzger
Facsimile: (312) 372-2098
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall
be deemed to have been given on the earlier of the date it is actually received
or one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
9.6 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
9.7 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, and
the provisions of this Agreement shall be severable in any such instance.
9.8 Avoidance. To the extent that Boston Chicken receives any
payment on account of the Company's obligations hereunder, and any such
payment(s) and/or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, subordinated, and/or
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment(s) or proceeds received, the Company's obligations
hereunder, or part thereof intended to
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be satisfied, shall be revived and continue in full force and effect, as if such
payment(s) and/or proceeds had not been received by Boston Chicken.
9.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
9.10 Entire Agreement. This Agreement, the Note, the Security
Instruments and the exhibits to each of the foregoing contain the entire
agreement of the parties hereto with respect to the transactions contemplated
herein, and collectively supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof.
9.11 General Indemnity. In addition to the payments pursuant to
Section 9.3, the Company agrees to indemnify, pay, and hold Boston Chicken and
any holder of the Note, and the officers, directors, employees, agents, and
affiliates of Boston Chicken and any such holder (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, the Note, the Security Instruments and the
exhibits or any other agreements or document executed and delivered by the
Company in connection therewith, the Company's operation of its business
(including any damage to public or worker health and safety or the environment),
Boston Chicken's agreement to make the Loan hereunder, or the use or intended
use of the proceeds of the Loan (the "indemnified liabilities"); provided that
the 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. 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 9.11 shall survive satisfaction and payment of the Company's obligations
hereunder and termination of this Agreement.
9.12 Limitation on Damages. Notwithstanding anything to the contrary
herein no party hereto shall be liable for consequential, indirect, incidental,
special, speculative, or punitive damages (including, but not limited to, loss
of revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory.
9.13 Submission to Jurisdiction. The Company agrees that any legal
action or proceeding with respect to this Agreement, the Note, or any Security
Instrument or the transactions contemplated hereby may be brought in any court
of the State of Colorado, or in any court of the United States of America
sitting in Colorado, and the Company hereby submits to and accepts
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<PAGE>
generally and unconditionally the jurisdiction of those courts with respect to
their respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
the Company or by the mailing thereof by registered or certified mail, postage
prepaid to the Company at the address for the Company set forth in Section 9.4.
Nothing in this paragraph shall affect the right of Boston Chicken to serve
process in any other manner permitted by law or limit the rights of Boston
Chicken to bring any such action or proceeding against the Company or property
in the courts of any other jurisdiction. The Company hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
9.14 Waiver of Jury Trial. No party to this instrument, which
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this Agreement, the Note, any
Security Instrument, any related instrument, or the dealings or the relationship
between the parties. If the subject matter of any such litigation is one in
which the waiver of a jury trial is prohibited, if at all, under the controlling
law of the applicable jurisdiction, by constitutional or statutory provision, no
party hereto will present as a defense or counterclaim in such litigation any
claim which would reduce or offset any amount or rights claimed under the
provisions of this Agreement. No party will seek to consolidate any such
action, in which a jury has been waived, with any other action in which a jury
trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 9.14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS
AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
HFMI ACQUISITION CORPORATION
By: /s/ Saad J. Nadhir
-------------------
Title: President
---------
BOSTON CHICKEN, INC.
By: /s/ Bernadette M. Dennehy
-------------------------
Title: Vice President
39
<PAGE>
EXHIBIT A
CONVERTIBLE SECURED NOTE
<PAGE>
CONVERTIBLE SECURED NOTE
$17,000,000 January ___, 1997
FOR VALUE RECEIVED, HFMI Acquisition Corporation, a Delaware
corporation (the "Company"), promises to pay to the order of Boston Chicken,
Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Boston Chicken may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of SEVENTEEN MILLION DOLLARS
($17,000,000) and any interest thereon, or, if less, the aggregate unpaid amount
of the Loan made pursuant to Section 1.1 of the Loan Agreement and any interest
thereon.
This Note evidences the Loan made under, and is referred to in and is
executed and delivered pursuant to, a Secured Loan Agreement dated of even date
herewith between the Company and Boston Chicken (the "Loan Agreement"), to which
reference is hereby made for a statement of the terms and conditions under which
this Note may be repaid and accelerated and for a description of the collateral
and security securing this Note. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Loan for the period commencing on the date the Loan is made until
the Loan is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." Interest
on the outstanding principal amount of the Loan shall be payable in arrears on
the first day of each Retail Period during the Interest Payment Period, as
otherwise provided herein in connection with principal payments, and at maturity
(whether by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note 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 Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
<PAGE>
During the Interest Payment Period the Company shall pay to Boston
Chicken interest only on the outstanding principal balance of the Loan on the
first day of each Retail Period, commencing on the first day of the Retail
Period immediately following the first Retail Period in which the Company
initially draws on the Loan under this Agreement through and including the last
day of the second Retail Period in Boston Chicken's fiscal year 2000.
Thereafter the Company shall pay principal and interest as provided below.
Except as otherwise provided in the Loan Agreement, unless
accelerated, the outstanding principal amount of the Loan shall be payable to
Boston Chicken in 65 substantially equal periodic installments of principal (the
amount of which periodic installments of principal shall be determined at the
close of business on the Draw Loan Termination Date based on a schedule
amortizing such balance in 130 substantially equal periodic installments of
principal), plus accrued but unpaid interest, on the first day of each Retail
Period, commencing on the first day of the third Retail Period in Boston
Chicken's fiscal year 2000 and continuing until the first day of the third
Retail Period in Boston Chicken's fiscal year 2005, when the entire principal
balance of the Loan and all interest accrued thereon shall be due and payable.
This Note may be prepaid at any time without premium or penalty. All
payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
ARTICLE I
Conversion of Note
------------------
1.1 The holder of this Note shall have the right, at such holder's
option, to convert, subject to the terms, conditions and provisions of this
Article I, the outstanding principal balance of this Note or any portion thereof
into shares of common stock, $0.01 par value per share, of the Company (the
"Common Stock") at the price of $1,150.00 per share for any conversion of (or
Option exercise (as provided in the Loan Agreement) for) the principal amount of
the Loan, or, in the event an adjustment of such price has occurred pursuant to
the provisions of Section 1.3, then at the price as last adjusted (referred to
herein as the "Conversion Price"), at any time after both of the following have
occurred: (i) February 1, 1998, and (ii) such time as the earlier to occur of
(A) completion of a Qualified Public Offering, or (B) the Tangible Net Worth of
the Company equals or exceeds $25,000,000 as of the end of any fiscal quarter of
the Company ending after February 1, 1998, and up to the later of (x) the date
on which the Company has properly repaid the outstanding principal balance of
the Loan and all accrued interest thereon in
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<PAGE>
full or (y) the first day of the ninth Retail Period in the Company's fiscal
year 2005; provided, however, that nothing shall impair, restrict or prohibit
the exercise of remedies, including the exercise of the conversion right, under
Section 8.2 of the Loan Agreement upon the occurrence of a Default. In the event
the outstanding principal balance of this Note is to be converted, the holder
shall surrender this Note to the Company at any time during usual business hours
together with written notice (hereinafter referred to as "Conversion Notice")
that the holder elects to convert this Note into such shares of Common Stock in
accordance with the provisions of this Article I, and specifying the name or
names in which the certificate or certificates evidencing the shares of Common
Stock issuable upon such conversion shall be registered, together with the
addresses of the persons so named, and, if so required by the Company,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company duly executed by the registered holder or his
attorney duly authorized in writing. In the event this Note is to be converted
in part only, the Company shall, upon surrender of this Note, execute and
deliver to the holder thereof, at the expense of the Company, a new Note in
principal amount equal to the unconverted portion of this Note. In no event
shall accrued interest be convertible into shares of Common Stock.
1.2 As promptly as practicable after the surrender, as herein
provided, of this Note for conversion and the receipt of the Conversion Notice
relating thereto, the Company shall deliver to or upon the written order of the
holder of this Note a certificate or certificates, representing the number of
fully-paid and non-assessable shares of Common Stock of the Company into which
this Note may be converted in accordance with the provisions of this Article I
and a new Note for any unconverted portion of the principal amount hereof.
Subject to the following provisions of this Section 1.2, such conversion shall
be deemed to have been made immediately before the close of business on the date
that this Note shall have been surrendered for conversion together with the
Conversion Notice, so that the rights of the holder of this Note as a Noteholder
shall cease at such time and the person or persons entitled to receive the
shares of Common Stock upon conversion of this Note shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such conversion shall be at the Conversion Price in
effect at such time. If the last day for the exercise of the conversion right
shall not be a business day, then such conversion right may be exercised on the
next succeeding business day.
1.3 (a) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon conversion of this Note, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, limited liability company, or other entity (other than a merger in
which the Company is the surviving corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock, other than a
change in number of shares issuable upon conversion of this Note) or in case of
any sale or conveyance to any partnership, corporation, or other entity of the
property of the Company as an entirety or substantially as an entirety, then the
holder of this Note shall have the right thereafter to convert this Note into
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale, or
conveyance by a holder of the number of shares of Common Stock of the Company
issuable upon conversion of this Note immediately prior to such
reclassification, change, consolidation, merger, sale, or conveyance, subject to
3
<PAGE>
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for herein.
(b) The Conversion Price shall be adjusted in the event the Company
shall at any time (i) make a subdivision of or combine shares of Common Stock
outstanding or (ii) pay a dividend or make a distribution in cash, in kind, or
in securities of any kind (including, but not limited to, any stock split). In
the event the Company makes a subdivision of shares of Common Stock or pays a
dividend or makes a distribution in cash, in kind, or in securities of any kind,
the Conversion Price in effect immediately prior to such action shall be
appropriately decreased, and in the event the Company shall at any time combine
the shares of Common Stock outstanding, the Conversion Price in effect
immediately prior to such combination shall be appropriately increased. An
adjustment made pursuant to this Section 1.3(b) shall, in the event of a
subdivision or combination, become effective retroactively immediately after the
effective date thereof, and shall, in the event of a dividend or distribution,
become effective retroactively immediately after the record date for the
determination of stockholders entitled thereto. Whenever the Conversion Price
is adjusted, pursuant to this Section 1.3(b), the Company shall promptly cause a
notice to be given to such holder of this Note which will state the adjusted
Conversion Price.
(c) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon conversion of this Note as herein provided, such number of shares of Common
Stock as shall be issuable upon the conversion of the entire Maximum Principal
Balance of the Loan. The Company covenants that all shares of Common Stock
which shall be so issuable shall be duly and validly issued and fully-paid and
non-assessable.
(d) The Company covenants that if shares of Common Stock to be issued
upon conversion of this Note require registration with or approval of any
governmental authority under any federal or state law before such shares may be
issued upon conversion, the Company will, at its expense and as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
(e) The issuance of certificates for shares of Common Stock upon the
conversion of this Note shall be made without charge to the converting
Noteholder for any tax in respect of the issuance of such certificates shall be
issued in the respective names of, or in such names as may be directed by, the
holder of this Note; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of this Note, and the Company shall not be required to issue or deliver
such certificates unless and until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the reasonable satisfaction of the Company that such tax has been
paid.
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<PAGE>
(f) Conversion of any portion of the principal balance of this
Note shall not relieve the Company of its obligation to pay any accrued but
unpaid interest on the portion of the principal balance of this Note so
converted.
(g) To the extent that any portion of this Note is not converted
into shares of Common Stock, such portion shall remain a secured debt of the
Company payable in accordance with the terms of the Loan Agreement.
ARTICLE II
Advances
--------
2.1 Loan advances may be made from time to time by Boston Chicken to
the Company in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance, Boston Chicken
shall record the making and amount of such advance on its books in a separate
loan account, and shall also record in the loan account all payments made by the
Company with respect to the Loan. The aggregate amount of all loan advances
recorded in the loan account, less the amounts of payment of principal made by
the Company and recorded in such account, shall be the principal amount
outstanding under this Note. The loan account shall be prima facie evidence of
the unpaid amount of principal outstanding under this Note; provided, however,
that failure to maintain such account or record any advances therein shall not
relieve the Company of its obligations to repay the outstanding principal amount
of the Loan, all accrued interest thereon, and any amount payable with respect
thereto in accordance with the terms of this Note.
ARTICLE III
Default, Rights and Remedies of Holder
--------------------------------------
3.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
3.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
5
<PAGE>
ARTICLE IV
Miscellaneous
-------------
4.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
4.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
4.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither Boston Chicken nor any holder hereof shall
in any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Boston Chicken or any holder hereof shall be
paid, as interest, a sum greater than the maximum amount permitted by applicable
law to be charged to the person primarily obligated to pay this Note at the time
in question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
Boston Chicken or any holder hereof to ask for, demand, or receive any larger
sum as interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that this
Note, the Loan Agreement, and all other documents executed or delivered in
connection herewith shall in all ways comply with applicable law and proper
adjustments shall automatically be made accordingly. In the event that Boston
Chicken or any holder hereof ever receives, collects, or applies as interest,
any sum in excess of the maximum amount permitted by applicable law, if any,
such excess amount shall be applied to the reduction of the unpaid principal
balance of this Note, and if this Note is paid in full, any remaining excess
shall be paid to the Company. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the maximum amount permitted
by applicable law, if any, the Company and any holder hereof shall, to the
maximum extent permitted under applicable law: (a) characterize any non-
principal payment as an expense or fee rather than as interest, and (b) "spread"
the total amount of interest throughout the entire term of this Note.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its name by the undersigned officer, thereunto duly authorized.
HFMI ACQUISITION CORPORATION
By:___________________________
Title: __________________________
7
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE TO ACCOMPANY INITIAL ADVANCE
<PAGE>
CERTIFICATE TO ACCOMPANY INITIAL ADVANCE
The undersigned, the _____________ of HFMI Acquisition Corporation (the
"Company"), borrower under that certain Secured Loan Agreement dated as of
January ___, 1997, as amended from time to time (the "Loan Agreement") between
the Company and Boston Chicken, Inc. ("Boston Chicken"), hereby requests an
Advance under the Loan Agreement in the amount of $_____________ to be made on
January ___, 1997. In support of this request, the Company hereby represents,
warrants and certifies to Boston Chicken as follows:
1. The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith are
true and correct on and as of the date hereof, and will be true and correct on
the date the Advance is made pursuant to this Certificate.
2. No Default or Event of Default has occurred and is continuing.
3. There has been no material adverse change in the financial conditions,
results of operations, assets or business of the Company since January ___,
1997.
4. The amount of the Advance is required and will be used by the Company
for the purposes permitted under in the Loan Agreement and for no other purpose.
The amount of the Advance is the amount the Company reasonably expects to expend
within the 30-day period immediately following the date hereof for working
capital.
5. After giving effect to the Advance, the Company is in compliance with
the Borrowing Ratio.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
HFMI ACQUISITION CORPORATION
By:__________________________________
Its: ________________________________
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE TO ACCOMPANY ADVANCES
<PAGE>
CERTIFICATE
The undersigned, the ________________ of HFMI Acquisition Corporation (the
"Company"), borrower under that certain Secured Loan Agreement dated as of
_______________, 19__ (the "Loan Agreement") between the Company and Boston
Chicken, Inc. ("Boston Chicken"), hereby certifies to Boston Chicken as follows:
1. Loan proceeds in the aggregate amount of $_______________ were
disbursed by Boston Chicken for the benefit of the Company under the Loan
Agreement during the two-week borrowing period ended ____________, 199__ (the
"Borrowing Period"). The Company confirms that (a) Boston Chicken was authorized
to disburse such amount on behalf of the Company, and (b) such amount was
required and used by the Company for the purposes permitted under the Loan
Agreement and for no other purpose.
2. As of _______________, 199___, the outstanding principal balance of
the Loan is $____________________.
3. The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith were
true and correct at all times during the Borrowing Period, are true and correct
on and as of the date hereof, and will be true and correct at all times during
the next succeeding two-week borrowing period.
4. No Default or Event of Default has occurred and is continuing.
5. There has been no material adverse change in the financial conditions,
results of operations, assets or business of the Company since ________________,
______.
6. After giving effect to the Advances during the Borrowing Period, the
Company is in compliance with the Borrowing Ratio.
7. Boston Chicken is entitled to rely on this Certificate and the
representations contained herein when disbursing loan proceeds during the next
succeeding two-week borrowing period.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
HFMI ACQUISITION CORPORATION
By:_____________________________
Its: __________________________
<PAGE>
EXHIBIT C
SUBSIDIARY STOCK PLEDGE AGREEMENT
<PAGE>
SUBSIDIARY STOCK PLEDGE AGREEMENT
This Subsidiary Stock Pledge Agreement ("Pledge Agreement"), dated
____________, 1997 is made and entered into by and between
______________________, a Delaware corporation (the "Company") and Boston
Chicken, Inc., a Delaware corporation ("Boston Chicken").
Recitals
--------
1. The Company owns _______ shares of common stock of
_____________________________ a Delaware corporation (the "Pledged Subsidiary"),
which is 100% of the issued and outstanding capital stock thereof.
2. The Company has entered into a Secured Loan Agreement dated as of
January ___, 1997 (the "Loan Agreement") with Boston Chicken pursuant to which
Boston Chicken has agreed on the terms and subject to the conditions therein, to
make a Loan (as defined in the Loan Agreement) to the Company, which Loan is
evidenced by a promissory note of even date herewith from the Company to Boston
Chicken (the "Note").
3. As an inducement to Boston Chicken to enter into the Loan Agreement
and as a condition to the effectiveness of Boston Chicken's obligations under
the Loan Agreement, the Company has agreed, among other things, to pledge to
Boston Chicken, and grant a first-priority security interest to Boston Chicken,
in and to, 100% of the issued and outstanding capital stock of the Pledged
Subsidiary.
NOW, THEREFORE, the Company and Boston Chicken have agreed as follows:
1. Certain Definitions. The capitalized terms and phrases not otherwise
defined herein, shall have the meanings given them in the Loan Agreement, and
the following terms or phrases shall have the following meanings:
"Affiliate" shall mean, with respect to a specified person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified.
"Collateral" shall mean the Pledged Shares and any other property in
which Boston Chicken acquires a security interest pursuant to this Pledge
Agreement to secure any indebtedness or other obligation of the Company to
Boston Chicken.
"Default" shall have the meaning given it in Section 10 of this Pledge
Agreement.
<PAGE>
"Pledged Shares" shall mean all the issued and outstanding shares of
the capital stock of the Pledged Subsidiary owned by the Company, the
certificates representing those shares and any stock powers executed by the
Company in connection with those shares.
"Secured Obligations" shall mean the obligations secured by this
Pledge Agreement described in Section 3 of this Pledge Agreement.
2. Grant of Security Interest. (a) The Company hereby grants to Boston
Chicken a security interest in all of its right, title, and interest in and to
the Pledged Shares. The Company further grants to Boston Chicken a security
interest in any stock rights, rights to subscribe, liquidating dividends,
dividends paid in stock, new securities, or any other property to which the
Company is or may hereafter become entitled to receive whether on account of the
Pledged Shares or otherwise. If the Company receives additional property of
such nature, it shall immediately deliver such property to Boston Chicken to be
held by Boston Chicken in the same manner as the property held pursuant to this
Pledge Agreement.
(b) The Company grants a further security interest to Boston
Chicken in the proceeds or products of any sale or other disposition of the
Pledged Shares.
3. Obligations Secured. The security interest created hereby secures
payment and performance of (a) the indebtedness evidenced by the Note, and all
obligations contained in the Note, (b) all of the other obligations, agreements,
covenants, and representations of the Company under the Loan Agreement whether
or not, either on the date of this Pledge Agreement or thereafter, evidenced by
any note, instrument, or other writing, and (c) any and all other indebtedness,
obligation, or liability of the Company to Boston Chicken, however evidenced,
whether existing on the date of this Pledge Agreement or arising thereafter,
direct or indirect, absolute or contingent, joint and/or several.
4. Representations and Warranties. To induce Boston Chicken to enter
into this Pledge Agreement, the Company represents and warrants as follows:
(a) The Company has full right, power, and capacity to enter
into and perform this Pledge Agreement; and this Pledge Agreement has been duly
authorized, executed and delivered and constitutes a legal, valid, and binding
obligation of the Company enforceable in accordance with its terms.
(b) The Company has good and marketable title to the Pledged
Shares, and the Pledged Shares are not subject to any lien, charge, pledge,
encumbrance, claim, or security interest other than the security interest
created by this Pledge Agreement.
(c) The Pledged Shares constitute one hundred percent (100%) of
the issued and outstanding equity interest of the Pledged Subsidiary.
(d) The Pledged Shares are fully paid and nonassessable.
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<PAGE>
(e) The Company has not entered into any stock restriction or purchase
agreement with respect to the Pledged Shares which would in any way restrict the
sale, pledge, or other transfer of the Pledged Shares or of any interest in or
to the Pledged Shares.
5. Duration of Security Interest. Boston Chicken, its successors and
assigns, shall hold the Pledged Shares and security interest created hereby upon
the terms of this Pledge Agreement, and this security interest shall continue
until all the Secured Obligations have been paid in full.
6. Maintaining Freedom from Liens. The Company shall keep the Pledged
Shares and other Collateral free and clear of liens and shall pay all amounts,
including taxes, assessments, or charges, which might result in a lien against
the Pledged Shares or other Collateral if left unpaid. If any such lien,
assessment, claim, or charge shall nevertheless exist, and the Company fails to
pay such amounts promptly, Boston Chicken may, but is not obligated to, pay such
amounts, and such payment shall be conclusive evidence of the legality or
validity thereof. The Company shall promptly reimburse Boston Chicken for any
such payments, and until reimbursement, such payments shall be a part of the
Secured Obligations.
7. Certain Rights Respecting Pledged Shares.
(a) The Company shall continue to be the owner of the Pledged Shares
and other Collateral so long as no Default has occurred and is continuing and
may collect and retain all cash dividends now or hereafter payable on or on
account of the Pledged Shares and other Collateral which are permitted under the
Loan Agreement, and, so long as no Default has occurred, may exercise voting
rights with respect to the Pledged Shares and other Collateral.
(b) The Company shall not sell, transfer, or attempt to sell or
transfer the Pledged Shares or other Collateral, or any part thereof or interest
therein, without the prior express written consent of Boston Chicken. Any such
consent of Boston Chicken shall not constitute the release by Boston Chicken of
its interest in the Pledged Shares or other Collateral, and any such sale or
transfer consented to shall transfer the Pledged Shares or other Collateral
subject to the security interest of Boston Chicken. Any such transfer shall be
subject to the transferee stockholder's agreement to be bound by the terms and
subject to the conditions of this Pledge Agreement, such agreement to be
evidenced by the transferee stockholder's execution of this Pledge Agreement.
(c) Boston Chicken, at its option upon any Default, may exercise all
voting rights and privileges whatsoever with respect to the Pledged Shares and
other Collateral, including, without limitation, the right to receive dividends,
and to that end the Company hereby constitutes any officer of Boston Chicken as
its proxy and attorney-in-fact for all purposes of voting the Pledged Shares and
other Collateral after any Default at any annual regular or special meeting of
the Company, and this appointment shall be deemed coupled with an interest and
is and shall be irrevocable until all of the Secured Obligations have been fully
paid and terminated,
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<PAGE>
and all persons whatsoever shall be conclusively entitled to rely upon any oral
or written certification of Boston Chicken that it is entitled to vote the
Pledged Shares and other Collateral hereunder. The Company shall execute and
deliver to Boston Chicken any additional proxies and powers of attorney that
Boston Chicken may desire in its own name in order to exercise the rights
expressly granted to Boston Chicken under this Section 7(c). In addition to any
other voting rights, Boston Chicken may, upon any Default, vote the Pledged
Shares and other Collateral to remove the directors and officers of the Pledged
Subsidiary, or any of them, and to elect new directors and officers of the
Pledged Subsidiary, who may thereafter manage the affairs of the Pledged
Subsidiary, operate its properties and carry on its business and otherwise take
any action with respect thereto as it shall deem necessary and appropriate, and
may also liquidate its business, and may authorize the borrowing of money in the
name of the Pledged Subsidiary, and the pledge of its assets to secure such
borrowing.
8. Issuance or Acquisition of New Stock or Sale of Treasury Shares;
Mergers, Sales and Other Disposition of Assets. The Company shall not permit
the Pledged Subsidiary to (a) issue new shares of its capital stock, or any
options, subscription rights, or warrants with respect thereto, (b) sell any
treasury shares, (c) merge into or with or consolidate with any other entity,
(d) sell or otherwise transfer any part of its assets (except in the ordinary
course of business) or (e) liquidate or dissolve or take any action with a view
toward liquidation or dissolution, in each case without Boston Chicken's prior
written consent.
9. Delivery of Certificates and Stock Powers. Upon execution of this
Pledge Agreement, the Company shall deliver to Boston Chicken the share
certificates representing the Pledged Shares in form suitable for transfer
together with executed blank stock powers. If for any reason the Company
acquires any interest in any additional capital stock of the Pledged Subsidiary,
the Company shall immediately deliver certificates representing that stock in
form suitable for transfer and blank stock powers to Boston Chicken to be held
by Boston Chicken in the same manner as the Pledged Shares, and such stock shall
be pledged under this Pledge Agreement and constitute a part of the Collateral.
10. Default. At the option of Boston Chicken, the occurrence of any
Default (as defined in the Loan Agreement) under the Loan Agreement shall
constitute a default under this Pledge Agreement.
11. Remedies. (a) Upon the occurrence of any Default, Boston Chicken
shall have all of the rights and remedies provided by law and/or by this Pledge
Agreement, including but not limited to all of the rights and remedies of a
secured party under the Uniform Commercial Code, and the Company hereby
authorizes Boston Chicken to hold such Pledged Shares or to sell all or any part
of the Pledged Shares at public or private sale and to apply the proceeds of
such sale to the costs and expenses thereof (including the reasonable attorneys'
fees and disbursements incurred by Boston Chicken) and then to the payment of
the other Secured Obligations. Boston Chicken may be the purchaser at any such
sale. The Company expressly authorizes such sale or sales of the Pledged Shares
in advance of and to the exclusion of any sale or sales of or other
4
<PAGE>
realization upon any other collateral securing indebtedness or other obligations
owed to Boston Chicken. Boston Chicken shall be under no obligation to preserve
rights against prior parties.
(b) The Company agrees and acknowledges that because there may be no
public market for the Pledged Shares and because of applicable securities laws,
a public sale of the Pledged Shares may not be possible or advisable and sales
at a private sale may be on terms less favorable than if such Pledged Shares
were sold at a public sale and may be at a price less favorable than a public
sale. The Company agrees that all such private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
12. Exercise of Remedies. The rights and remedies of Boston Chicken shall
be deemed to be cumulative, and any exercise of any right or remedy shall not be
deemed to be an election of that right or remedy to the exclusion of any other
right or remedy. Notwithstanding the foregoing, Boston Chicken shall be
entitled to recover by the cumulative exercise of all remedies no more than the
sum of (a) the Secured Obligations remaining outstanding at the time of the
exercise of remedies, plus (b) the costs, fees, and expenses Boston Chicken is
otherwise entitled to recover.
13. Return of Collateral. Boston Chicken may at any time deliver the
Pledged Shares or other Collateral, or any part thereof, to the Company. The
receipt by the Company of the Pledged Shares or other Collateral, or any part
thereof, shall be a complete and full discharge of Boston Chicken, and Boston
Chicken shall be discharged from any liability or responsibility with respect
thereto.
14. Communications and Notices. (a) Any requirement of the Uniform
Commercial Code of reasonable notice shall be met if such notice is given at
least five business days before the time of sale, disposition, or other event or
thing giving rise to the requirement of notice.
(b) All communications and notices shall be in writing and shall be
deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as set forth
in Section 9.4 of the Loan Agreement. Any party may change the address to which
notices hereunder are to be sent to it by giving written notice of such change
of address in the manner herein provided for giving notice. Any notice
delivered personally shall be deemed to have been given when so delivered. Any
notice delivered by facsimile transmission shall be deemed to have been given on
the earlier of the date it is actually received or one day after such
transmission. Any notice delivered by overnight express courier will be deemed
to have been given on the next succeeding business day after the day it is sent
to the intended recipient at the address set forth above, and any notice
delivered by registered or certified mail or express mail delivery service shall
be deemed to have been duly given on the earlier of the date it is actually
received or three business days after it is sent to the intended recipient at
the address set forth above.
5
<PAGE>
15. Further Assurances. The Company shall sign any such other documents
or instruments, and take such other action, as Boston Chicken may request to
more fully create and maintain, or to verify, ratify, or perfect the security
interest intended to be created by this Pledge Agreement.
16. Multiple Counterparts. This Pledge Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Pledge Agreement or the terms thereof
to produce or account for more than one such counterpart.
17. Miscellaneous (a) Failure by Boston Chicken to exercise any right
shall not be deemed a waiver of that right, and any single or partial exercise
of any right shall not preclude the further exercise of that right. Every right
of Boston Chicken shall continue in full force and effect until such right is
specifically waived in writing signed by Boston Chicken.
(b) If any provision of this Pledge Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of the Pledge Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Pledge Agreement shall be severable in any such instance.
(c) The headings of the sections of this Pledge Agreement are inserted
for convenience only and shall not be deemed to constitute a part of this Pledge
Agreement.
(d) This Pledge Agreement shall benefit Boston Chicken, its successors
and assigns, and all obligations of the Company shall bind their successors and
assigns. The Company acknowledges that Boston Chicken may assign or otherwise
transfer (in whole or in part) the Note, the Loan Agreement, or this Pledge
Agreement to any other person, and such other person shall thereupon become
vested with all of the benefits in respect thereof granted to Boston Chicken
thereunder (including the benefits under this Pledge Agreement).
(E) THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF.
(f) This Pledge Agreement and the Loan Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
all prior understandings with respect to the subject matter hereof. No change,
modification, addition, or termination of this Pledge Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought.
6
<PAGE>
(g) The Company agrees that any legal action or proceeding with
respect to this Pledge Agreement or the transactions contemplated hereby may be
brought in any court of the State of Colorado, or in any court of the United
States of America sitting in Colorado, and the Company hereby submits to and
accepts generally and unconditionally the jurisdiction of those courts with
respect to its person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
the Company or by the mailing thereof by registered or certified mail, postage
prepaid addressed to the Company at the address for notices as provided in
Section 14 hereof. Nothing in this paragraph shall affect the right of Boston
Chicken to serve process in any other manner permitted by law or limit the right
of Boston Chicken to bring any such action or proceeding against the Company or
property in the courts of any other jurisdiction. The Company hereby
irrevocably waives any objection to the laying of venue of any such suit or
proceeding in the above described courts.
18. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. No party will seek to
consolidate any such action, in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 18 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement to be
effective as of the date and year first above written.
____________________________________
By: ____________________________________
Its: ____________________________________
BOSTON CHICKEN, INC.
By: ___________________________________
Title: ___________________________________
8
<PAGE>
EXHIBIT D
SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February __, 1997 (this "Security
Agreement"), is made by _________________________________ (the "Company"), in
favor of Boston Chicken, Inc., a Delaware corporation ("Boston Chicken").
WITNESSETH:
WHEREAS, Boston Market International, Inc., a Delaware corporation
(the "Borrower") has entered into a Secured Loan Agreement, dated as of January
__, 1997 (the "Loan Agreement"), with Boston Chicken and pursuant to which
Boston Chicken has agreed on the terms and conditions therein, to make a Loan
(as defined in the Loan Agreement) to the Borrower; and
WHEREAS, the Company is a wholly-owned subsidiary of the Borrower;
WHEREAS, as a condition to the effectiveness of Boston Chicken's
obligations under the Loan Agreement, the Company has agreed, among other
things, to grant to Boston Chicken a first-priority security interest in and to
the Collateral hereinafter described;
NOW, THEREFORE, to secure (a) the payment of the principal sum of
[Seventeen Million Dollars ($17,000,000)], together with interest thereon, in
accordance with the terms of a convertible secured promissory note dated January
__, 1997, issued by the Borrower pursuant to the Loan Agreement (the "Note"),
(b) the performance of the covenants herein contained and any monies expended by
Boston Chicken in connection therewith, (c) the payment of all obligations and
performance of all covenants of the Borrower under the Loan Agreement, the
Subsidiary Stock Pledge Agreement and all other Security Instruments (as defined
in the Loan Agreement) and any other documents, agreements or instruments
between the Borrower or the Company and Boston Chicken given in connection
therewith, and (d) any and all other indebtedness, obligations and liabilities
of any kind of the Borrower and/or the Company to Boston Chicken now or
hereafter existing, direct or indirect, absolute or contingent, joint and/or
several, secured or unsecured, arising by operation of law or otherwise, and
whether incurred by the Company as principal, surety, endorser, guarantor,
accommodation party or otherwise (all of the aforesaid indebtedness, obligations
and liabilities of the Borrower and/ or the Company being herein called the
"Secured Obligations", and all of the documents, agreements and instruments
between the Company and Boston Chicken evidencing or securing the repayment of,
or otherwise pertaining to the Secured Obligations being herein collectively
called the "Operative Documents"), for value received and pursuant to the Loan
Agreement, the Company hereby grants, assigns and transfers to Boston Chicken a
security interest in and to the following described property whether now owned
or
<PAGE>
existing or hereafter acquired or arising and wherever located (all of which is
herein collectively called the "Collateral"):
(a) all of the Company's real estate, accounts, equipment (including, but
not limited to machinery, furniture, fixtures, tools, vehicles, and other
tangible property), inventory, chattel paper, leasehold improvements, contract
rights (including its rights as lessee under all leases of real property),
general intangibles, deposit accounts, tax refunds, instruments, notes, letters
of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Company's books, records, and computer programs and data
relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions for, and
replacements, products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The Company
further represents, warrants, covenants, and agrees with Boston Chicken as
follows:
(a) Ownership of Collateral; Security Interest Priority At the time
any Collateral becomes subject to a security interest of Boston Chicken
hereunder, unless Boston Chicken shall otherwise consent, the Company shall be
deemed to have represented and warranted that (i) the Company is the lawful
owner of such Collateral and has the right and authority to subject the same to
the security interest of Boston Chicken; (ii) none of the Collateral is subject
to any lien other than that in favor of Boston Chicken and there is no effective
financing statement covering any of the Collateral on file in any public office,
other than in favor of Boston Chicken. This Security Agreement creates in favor
of Boston Chicken a valid and perfected first-priority security interest in the
Collateral enforceable against the Company and all third parties and securing
the payment of the Secured Obligations and all filings and other actions
necessary or desirable to create, preserve or perfect such security interests
have been duly taken.
(b) Location of Offices, Records and Facilities. The Company's chief
executive office and chief place of business and the office where the Company
keeps its records concerning its accounts, contract rights, chattel paper,
instruments, general intangibles and other obligations arising out of or in
connection with the sale or lease of goods or the rendering of services or
otherwise ("Receivables"), and all originals of all leases and other chattel
paper which evidence Receivables, are located in the State of __________, County
of __________ at _____________ _________________. The Company will provide
Boston Chicken with prior written notice of any proposed change in the location
of its chief executive office and will not change the location of its chief
executive office without the prior written consent of Boston Chicken. The
federal tax identification number of the Company is __________________________.
The name of the Company is _____________________, and the Company operates
under no other names
2
<PAGE>
[except for _______________]. The Company shall not change its name without the
prior written consent of Boston Chicken.
(c) Location of Inventory, Fixtures, Machinery and Equipment. All
Collateral consisting of inventory, fixtures, machinery or equipment is, and
will be, located within the States of ________________________________________,
and at no other locations without the prior written consent of Boston Chicken.
If the Collateral described in this paragraph 1(c) is kept at leased locations
or warehoused, the Company has obtained appropriate landlord's lien waivers or
appropriate warehousemen's notices have been sent, each satisfactory to Boston
Chicken, unless waived by Boston Chicken.
(d) Liens, Etc. The Company will keep the Collateral free at all times
from any and all liens, security interests or encumbrances other than those
described in paragraph 1(a)(ii) and those consented to in writing by Boston
Chicken. The Company will not, without the prior written consent of Boston
Chicken, sell or lease, or permit or suffer to be sold or leased, any of the
Collateral except inventory which is sold or, subject to Boston Chicken's
security interest therein, is leased in the ordinary course of the Company's
business, and tangible Collateral, which is disposed of in the ordinary course
of the Company's business as being obsolete. Boston Chicken or its attorneys may
at any and all reasonable times inspect the Collateral and for such purpose may
enter upon any and all premises where the Collateral is or might be kept or
located.
(e) Insurance. The Company shall keep the tangible Collateral insured at
all times against loss by theft, fire and other casualties and shall otherwise
comply with the insurance provisions set forth in Section 5.4 of the Loan
Agreement.
(f) Taxes, Etc. The Company will pay promptly, and within the time that
they can be paid without interest or penalty, any taxes, assessments and similar
imposts and charges, not being contested in good faith, which are now or
hereafter may become a lien, charge or encumbrance upon any of the Collateral.
If the Company fails to pay any such taxes, assessments or other imposts or
charges in accordance with this Section, Boston Chicken shall have the option to
do so and the Company agrees to repay forthwith all amounts so expended by
Boston Chicken with interest at the default rate set forth in the Loan
Agreement.
(g) Further Assurances. The Company will do all acts and things and will
execute all financing statements and writings requested by Boston Chicken to
establish, maintain and continue a perfected and valid security interest of
Boston Chicken in the Collateral, and will promptly on demand pay all reasonable
costs and expenses of filing and recording all instruments, including the costs
of any searches deemed necessary by Boston Chicken to establish and determine
the validity and the priority of Boston Chicken's security interests. A carbon,
photographic or other reproduction of this Security Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
(h) Maintenance of Tangible Collateral. The Company will cause the
tangible Collateral to be maintained and preserved in the same condition, repair
and working order as when
3
<PAGE>
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and shall forthwith, or, in the case of any loss or damage to any of the
tangible Collateral as quickly as practicable after the occurrence thereof, make
or cause to be made all repairs, replacements, and other improvements made in
connection therewith which are necessary or desirable to such end. The Company
shall promptly furnish to Boston Chicken a statement respecting any loss or
damage to any of the tangible Collateral.
(i) Maintenance of Intangible Collateral. The Company shall preserve and
maintain all rights of the Company and Boston Chicken in the intangible
Collateral, including without limitation the payment of all maintenance fees and
the taking of appropriate action at the Company's expense to halt the
infringement of any of the intangible Collateral.
(j) Special Rights Regarding Accounts Receivable. Boston Chicken or any of
its agents may, at any time and from time to time in its sole discretion and
irrespective of the existence of any event of default under this Security
Agreement, verify directly with the Company's account debtors the accounts
pledged hereunder in any manner. Boston Chicken or any of its agents may, at any
time from time to time in its sole discretion, notify the Company's account
debtors of the security interest of Boston Chicken in the Collateral and/or
direct such account debtors that all payments in connection with such
obligations and the Collateral be made directly to Boston Chicken in Boston
Chicken's name. If Boston Chicken or any of its agents shall collect such
obligations directly from the Company's account debtors, Boston Chicken or any
of its agents shall have the right to resolve any disputes relating to returned
goods directly with the Company's account debtors in such manner and on such
terms as Boston Chicken or any of its agents shall deem appropriate. The Company
directs and authorizes any and all of its present and future account debtors to
comply with requests for information from Boston Chicken, Boston Chicken's
designees and agents and/or auditors, relating to any and all business
transactions between the Company and the Company's account debtors. The Company
further directs and authorizes all of its account debtors upon receiving a
notice or request sent by Boston Chicken or Boston Chicken's agents or designees
to pay directly to Boston Chicken any and all sums of money or proceeds now or
hereafter owing by the Company's account debtors to the Company, and any such
payment shall act as a discharge of any debt of such account debtor to the
Company in the same manner as if such payment had been made directly to the
Company. The Company agrees to take any and all action as Boston Chicken may
request to assist Boston Chicken in exercising the rights described in this
Section.
2. Events of Default. The occurrence of any Default specified in the Loan
Agreement shall be deemed a default under this Security Agreement.
3. Remedies. Upon the occurrence of any such event of default, Boston
Chicken shall have and may exercise any one or more of the rights and remedies
provided to it under this Security Agreement or any of the other Operative
Documents or provided by law, including but not limited to all of the rights and
remedies of a secured party under the Uniform Commercial Code, and the Company
hereby agrees to assemble the Collateral and make it available to Boston Chicken
at a place to be designated by Boston Chicken which is reasonably convenient to
both parties,
4
<PAGE>
authorizes Boston Chicken to take possession of the Collateral with or without
demand and with or without process of law and to sell and dispose of the same at
public or private sale and to apply the proceeds of such sale to the costs and
expenses thereof (including reasonable attorneys' fees and disbursements,
incurred by Boston Chicken) and then to the payment of the indebtedness and
satisfaction of other Secured Obligations. Any requirement of reasonable notice
shall be met if Boston Chicken sends such notice to the Company, by registered
or certified mail, at least 5 days prior to the date of sale, disposition or
other event giving rise to a required notice. Boston Chicken may be the
purchaser at any such sale. The Company expressly authorizes such sale or sales
of the Collateral in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing the Secured Obligations.
Boston Chicken shall have no obligation to preserve rights against prior
parties. The Company hereby waives as to Boston Chicken any right of subrogation
or marshaling of such Collateral and any other collateral for the Secured
Obligations. To this end, the Company hereby expressly agrees that any such
collateral or other security of the Company or any other party which Boston
Chicken may hold, or which may come to any of them or any of their possession,
may be dealt with in all respects and particulars as though this Security
Agreement were not in existence. The parties hereto further agree that public
sale of the Collateral by auction conducted in any county in which any
Collateral is located or in which Boston Chicken or the Company does business
after advertisement of the time and place thereof shall, among other manners of
public and private sale, be deemed to be a commercially reasonable disposition
of the Collateral. The Company shall be liable for any deficiency remaining
after disposition of the Collateral.
4. Remedies Cumulative. No right or remedy conferred upon or reserved to
Boston Chicken under any Operative Document is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative in
addition to every other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy of Boston Chicken
under any Operative Document or under applicable law may be exercised from time
to time and as is often as may be deemed expedient by Boston Chicken. To the
extent that it lawfully may, the Company agrees that it will not at any time
insist upon, plead, or in any manner whatever claim or take any benefit or
advantage of any applicable present or future stay, extension or moratorium law,
which may effect observance or performance of any provisions of any Operative
Document; nor will it claim, take or insist upon any benefit or advantage of any
present or future law providing for the valuation or appraisal of any security
for its obligations under any Operative Document prior to any sale or sales
thereof which may be made under or by virtue of any instrument governing the
same; nor will it, after any such sale or sales, claim or exercise any right,
under any applicable law to redeem any portion of such security so sold.
5. Conduct No Waiver. No waiver of default shall be effective unless in
writing executed by Boston Chicken and waiver of any default or forbearance on
the part of Boston Chicken in enforcing any of its rights under this Security
Agreement shall not operate as a waiver of any other default or of the same
default on a future occasion or of such right.
6. Governing Law; Definitions. This Security Agreement is a contract made
under, and the rights and obligations of the parties hereunder shall be governed
by and construed in
5
<PAGE>
accordance with, the laws of the State of Colorado applicable to contracts made
and to be performed entirely within such State. Terms used but not defined
herein shall have the respective meaning ascribed thereto in the Loan Agreement.
Unless otherwise defined herein or in the Loan Agreement, terms used in Article
9 of the Uniform Commercial Code in the State of Colorado are used herein as
therein defined on the date hereof. The headings of the various subdivisions
hereof are for convenience of reference only and shall in no way modify any of
the terms or provisions hereof.
7. Notices. All notices, demands, requests, consents and other
communications hereunder shall be delivered and shall be effective in the manner
specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. Boston Chicken neither assumes nor
shall it have any duty of performance or other responsibility under any
contracts in which Boston Chicken has or obtains a security interest hereunder.
If the Company fails to perform any agreement contained herein, Boston Chicken
may but is in no way obligated to itself perform, or cause performance of, such
agreement, and the expenses of Boston Chicken incurred in connection therewith
shall be payable by the Company under paragraph 11.
9. Amendments. None of the terms and provisions of this Security
Agreement may be modified or amended in any way except by an instrument in
writing executed by each of the parties hereto.
10. Severability. If any one or more provisions of this Security Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Company agrees to indemnify Boston Chicken from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
Boston Chicken's gross negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until full payment and performance of the Secured
Obligations (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of Boston Chicken hereunder, to the
benefit of Boston Chicken and its successors, transferees and assigns. Upon the
full payment and performance of the Secured Obligations the security interests
granted hereby shall terminate and all rights to the Collateral shall revert to
the Company. Upon any such termination, Boston Chicken will, at the Company's
expense, execute and deliver to the Company such documents as the Company shall
reasonably request to evidence such termination.
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly
6
<PAGE>
executed as of the day and year first set forth above.
__________________________________________
By:
______________________________________
Its:
______________________________________
7
<PAGE>
SCHEDULE 4.15
INTELLECTUAL PROPERTY AGREEMENTS
. Transfer Agreement between and among Harry's Farmers Market, Inc., HFMI
Trust, and HFMI Acquisition Corporation, dated as of January 31, 1997; and
. HFMI License Agreement between HFMI Trust and Harry's Farmers Market, Inc.,
dated as of January 31, 1997; and
. Administration and Servicing Agreement between and among HFMI Acquisition
Corporation and Harry's Farmers Market, Inc., dated as of January 31, 1997;
and
. Newco License Agreement between HFMI Trust and HFMI Acquisition
Corporation, dated as of January 31, 1997; and
. Trust Agreement between and among Wilmington Trust Company, HFMI
Acquisition Corporation, and Harry's Farmers Market, Inc., dated as of
January 31, 1997.
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
December December December
25, 1994 31, 1995 29, 1996
---------- ---------- ----------
<S> <C> <C> <C>
Primary earnings per share:
Weighted average number of shares
outstanding.......................... 37,830,423 47,312,488 62,856,770
Dilutive effect of common stock
options, warrants and stock purchase
agreements........................... 5,030,443 3,659,185 3,644,330
---------- ---------- ----------
Adjusted primary weighted average
number of common and equivalent
shares outstanding................... 42,860,866 50,971,673 66,501,100
========== ========== ==========
Fully diluted earnings per share:
Weighted average number of shares
outstanding.......................... 37,830,423 47,312,488 62,856,770
Dilutive effect of common stock
options, warrants, convertible
subordinated debentures and stock
purchase agreements.................. 5,048,460 3,759,512 8,286,648
---------- ---------- ----------
Adjusted fully diluted weighted
average number of common and
equivalent shares outstanding........ 42,878,883 51,072,000 71,143,418
========== ========== ==========
</TABLE>
Under the fully diluted weighted average share calculation, net income
would be adjusted for interest expense, net of income taxes, incurred on the
Company's convertible subordinated debentures.
<PAGE>
Exhibit 21
SUBSIDIARIES
------------
NAME JURISDICTION
---- ------------
Einstein/Noah Bagel Corp. Delaware
BC Real Estate Investments, Inc. Delaware
Mid-Atlantic Restaurant Systems L.P. Delaware
Mid-Atlantic Restaurant Systems, Inc. Delaware
BC New York L.L.C. Delaware
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 33-71930, 33-91512, 33-93872, 333-15389 and
333-22917.
Arthur Andersen LLP
Denver, Colorado
March 18, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 100,800
<SECURITIES> 0
<RECEIVABLES> 22,438
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 146,462
<PP&E> 334,748
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,543,616
<CURRENT-LIABILITIES> 87,633
<BONDS> 312,454
<COMMON> 0
0
642
<OTHER-SE> 935,198
<TOTAL-LIABILITY-AND-EQUITY> 1,543,616
<SALES> 83,950
<TOTAL-REVENUES> 264,508
<CGS> 31,160
<TOTAL-COSTS> 31,160
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,446
<INCOME-PRETAX> 115,183
<INCOME-TAX> 42,990
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,958
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 0
</TABLE>
