<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 12, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
COMMISSION FILE NUMBER 0-22802
BOSTON CHICKEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3904053
(State or other jurisdiction of (IRS Employer
incorporation or organization ) Identification No.)
14123 Denver West Parkway
P. O. Box 4086
Golden, CO 80401-4086
(Address of principal executive offices, including zip code)
(303) 278-9500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares of Common Stock, $.01 par value per share, outstanding as of
August 17, 1998: 77,130,853.
<PAGE>
BOSTON CHICKEN, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 28, 1997 and
July 12, 1998............................................................2
Consolidated Statements of Operations for the quarters and two quarters
ended July 13, 1997 and July 12, 1998....................................3
Consolidated Statements of Cash Flows for the
quarters and two quarters ended July 13, 1997 and July 12, 1998..........4
Notes to Consolidated Financial Statements...............................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............................13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................19
Item 4. Submission of Matters to a Vote of Security Holders................19
Item 6. Exhibits and Reports on Form 8-K...................................19
Signature Page..............................................................21
Exhibit Index......................................................Exhibit - 1
</TABLE>
1
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 28, July 12,
1997 1998
------------------- -------------------
<S> <C> <C>
(unaudited)
ASSETS
------
Current Assets:
Cash and cash equivalents (including $10,000 of
restricted cash at July 1998)........................... $ 90,559 $ 24,549
Accounts receivable, net................................ 13,894 5,922
Inventories............................................. 16,132 16,716
Prepaid expenses and other current assets............... 1,436 3,914
Deferred income taxes................................... 2,353 2,353
------------------- -------------------
Total current assets................................ 124,374 53,454
Property and Equipment, net.................................. 530,582 533,327
Notes Receivable, net........................................ 609,175 232,139
Deferred Financing Costs, net................................ 24,570 21,986
Goodwill, net................................................ 639,364 694,862
Other Assets, net............................................ 77,062 71,399
------------------- -------------------
Total assets....................................... $2,005,127 $1,607,167
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable........................................ $ 33,205 $ 15,939
Accrued expenses........................................ 85,207 84,957
Other current liabilities............................... 14,119 11,171
Senior Secured Revolver-Boston Chicken, Inc............. - 48,000
------------------- -------------------
Total current liabilities.......................... 132,531 160,067
Deferred Franchise Revenue................................... 5,723 5,268
Convertible Subordinated Debt-Boston Chicken, Inc............ 417,020 417,020
Convertible Subordinated Debt-Einstein/Noah Bagel Corp....... 125,000 125,000
Liquid Yield Option Notes.................................... 197,442 205,955
Senior Debt-Einstein/Noah Bagel Corp......................... 24,000 25,825
Deferred Income Taxes........................................ 2,353 2,353
Other Noncurrent Liabilities................................. 44,753 47,904
Minority Interests........................................... 253,630 244,510
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: 71,400,179 shares at
December 1997 and 72,335,078 shares at
July 1998............................................... 714 723
Additional paid-in capital.............................. 918,266 925,897
Accumulated deficit..................................... (116,305) (553,355)
------------------- -------------------
802,675 373,265
------------------- -------------------
Total liabilities and stockholders' equity......... $2,005,127 $1,607,167
=================== ===================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Two
Quarter Ended Quarters Ended
------------------------- -------------------------
July 13, July 12, July 13, July 12,
1997 1998 1997 1998
------------ ----------- ------------ -----------
Revenue:
<S> <C> <C> <C> <C>
Company stores................................... $ 58,086 $ 170,583 $108,178 $ 374,512
Royalties and franchise related fees............. 37,318 145 78,750 4,687
Interest income.................................. 21,192 - 46,432 3,221
------------ ----------- ------------ -----------
Total revenue................................. 116,596 170,728 233,360 382,420
Costs and Expenses:
Store operations:
Food and paper................................ 21,481 59,465 40,215 131,674
Labor......................................... 15,009 51,407 26,762 110,426
Other controllable costs...................... 5,255 14,380 9,995 36,507
Rent, occupancy and related................... 4,885 19,801 8,115 39,248
Contractual and discretionary marketing....... 5,295 10,078 9,258 21,156
General and administrative....................... 15,455 67,160 33,677 120,864
Depreciation and amortization
(excluding goodwill amortization)............... 7,573 12,744 15,794 29,550
Goodwill amortization............................ 1,797 4,739 3,677 10,693
Provision for loan losses........................ - 10,000 - 212,000
Losses of Boston Chicken Inc.'s area
developers.................................... - 35,258 - 93,337
------------ ----------- ------------ -----------
Total costs and expenses...................... 76,750 285,032 147,493 805,455
------------ ----------- ------------ -----------
Income (Loss) from Operations...................... 39,846 (114,304) 85,867 (423,035)
Other Income (Expense):
Interest expense, net............................ (9,311) (13,925) (16,540) (30,692)
Gain (loss) on issuances of subsidiary's
stock.......................................... (619) - 82 (17)
Other income (expense), net...................... 1,667 (3,940) 1,641 (2,930)
------------ ----------- ------------ -----------
Total other income (expense).................. (8,263) (17,865) (14,817) (33,639)
------------ ----------- ------------ -----------
Income (Loss) Before Income Taxes
and Minority Interest......................... 31,583 (132,169) 71,050 (456,674)
Income Taxes....................................... 12,509 - 27,942 -
Minority Interest in (Earnings) Loss
of Subsidiaries............................... (1,836) 7,676 (4,422) 19,624
------------ ----------- ------------ -----------
Net Income (Loss).................................. $ 17,238 $(124,493) $ 38,686 $(437,050)
============ =========== ============ ===========
Basic Earnings (Loss) Per Share.................... $0.26 $(1.72) $0.59 $(6.09)
============ =========== ============ ===========
Diluted Earnings (Loss) Per Share.................. $0.25 $(1.72) $0.56 $(6.09)
============ =========== ============ ===========
Weighted Average Number of
Common Shares Outstanding:
Basic.......................................... 65,724 72,303 65,145 71,809
============ =========== ============ ===========
Diluted........................................ 72,080 72,303 72,371 71,809
============ =========== ============ ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Two Quarters Ended
------------------------------------------
July 13, July 12,
1997 1998
------------------ -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................................... $ 38,686 $(437,050)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization................................. 20,109 40,243
Interest on liquid yield option notes......................... 7,873 8,513
Deferred income taxes......................................... 3,504 -
Loss (gain) on sale of subsidiary's stock..................... (82) 17
Minority interests............................................ 4,422 (19,624)
Warrant and option expense.................................... - 3,945
Provision for write-down of assets............................ - 28,306
Provision for loan losses..................................... - 212,000
Revenue not recognized from Boston Chicken, Inc.'s area
developers.................................................... - 85,677
Losses of Boston Chicken, Inc.'s area developers.............. - 93,337
Gain on disposal of assets.................................... (1,057) (496)
Changes in assets and liabilities, excluding effects from
acquisition:
Accounts receivable and due from affiliates................. (6,811) 7,753
Accounts payable and accrued expenses....................... (49,402) (26,641)
Deferred franchise revenue.................................. (7,439) -
Other assets and liabilities................................ (5,798) (10,092)
------------------ -----------------
Net cash provided by (used in) operating activities....... 4,005 (14,112)
------------------ -----------------
Cash Flows from Investing Activities:
Purchase of property and equipment............................ (37,710) (13,780)
Proceeds from the sale of assets.............................. 10,599 3,118
Acquisition of other assets................................... (7,654) -
Issuance of notes receivable.................................. (783,121) (316,929)
Repayments of notes receivable................................ 472,468 225,682
------------------ -----------------
Net cash used in investing activities..................... (345,418) (101,909)
------------------ -----------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock........................ 5,747 186
Proceeds from issuance of subsidiary's common stock........... 9,985 -
Proceeds from issuance of convertible subordinated debt....... 412,500 -
Increase in deferred financing costs.......................... (11,487) -
Proceeds from credit facilities............................... 283,200 69,700
Repayments of credit facilities............................... (283,200) (19,875)
------------------ -----------------
Net cash provided by financing activities................. 416,745 50,011
------------------ -----------------
Net Increase (Decrease) in Cash and Cash Equivalents............ 75,332 (66,010)
Cash and Cash Equivalents, beginning of period.................. 100,800 90,559
------------------ -----------------
Cash and Cash Equivalents, end of period........................ $ 176,132 $ 24,549
================== =================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
<PAGE>
BOSTON CHICKEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION; SEC COMMENTS
The consolidated interim financial statements have been prepared by Boston
Chicken, Inc. (the "Company") and are unaudited. The financial statements and
notes thereto have been prepared in accordance with the instructions for Form
10-Q and, therefore, do not necessarily include all information and footnotes
required by generally accepted accounting principles. In the opinion of the
Company, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position,
results of operations and cash flows as of July 12, 1998 and for all periods
presented have been made. The statements are subject to year-end audit
adjustment. A description of the Company's accounting policies and other
financial information is included in the audited consolidated financial
statements as filed with the Securities and Exchange Commission in the Company's
Form 10-K for the year ended December 28, 1997. The consolidated results of
operations for the quarter and two quarters ended July 12, 1998 are not
necessarily indicative of the results expected for the full year.
On August 19, 1998, the Company received a letter from the staff of the
Division of Corporation Finance of the Securities and Exchange Commission (the
"SEC Staff") containing comments of the SEC Staff regarding the Company's
Annual Report on Form 10-K for the fiscal year ended December 28, 1997 (the
"Form 10-K"), as well as related comments on the Company's Quarterly Report on
Form 10-Q for the quarterly period ended April 19, 1998 and the Company's
Current Reports on Form 8-K dated May 19, 1998 and June 16, 1998 (collectively,
with the Form 10-K, the "SEC Documents"). Such comments relate to the accounting
for the Company's transactions with its financed area developers and other
matters and have been the subject of ongoing discussion between the Company and
the SEC Staff since its May 5, 1998 comment letter, previously noted in the
Company's June 25, 1998 Form 8-K. The Company intends to continue to attempt to
resolve such comments with the SEC Staff in the near future, but has not done so
as of the date hereof.
The Company's accounting and reporting for such matters in this 10-Q are
generally consistent with the accounting and reporting employed in its previous
filings with the SEC. However, there can be no assurance that the Company's
positions with respect to such comments made by the SEC Staff will be accepted.
If such positions are not accepted, the Company may be required to amend the SEC
Documents to modify or restate filings with the Securities and Exchange
Commission.
The Comments made by the SEC Staff with respect to the SEC Documents may have
a number of effects on the Company, including, for example: (i) until such
comments are resolved with the SEC Staff, the Company will not be able to cause
the shelf registration statement that is required to be filed with respect to
the preferred stock and common stock of the Company to be issued to the holders
of interests in BCEF and Market Partners to become effective; (ii) until such
comments are resolved with the SEC Staff, the Company may experience delays to
other transactions involving the Company that are subject to review by the
Securities and Exchange Commission; and (iii) any material additional or
restated disclosure may have an effect on the progress or outcome of the current
securities class action litigation against the Company and certain other
persons.
2. GOING CONCERN
Based upon the decline in store cash flow of the Boston Market system during
1998, unless the Company is able to renegotiate its senior credit facilities,
sell assets and/or improve Boston Market store performance, the Company may not
generate sufficient liquidity to meet its financial obligations in 1998. As
announced in a May 19, 1998 press release and the May 27, 1998 Form 8-K, Arthur
Andersen LLP, the Company's independent public accountants, has reissued its
report on the Company's 1997 financial statements to include a qualification
which states there exists substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities, that might result
should the Company be unable to continue as a going concern. See Note 8;
Subsequent Events.
3. AREA DEVELOPER FINANCING
Area Developer Financing
The Company has historically offered convertible and non-convertible secured
debt financing to Boston Market area developers to partially finance store
development and working capital needs. Interest is set at the applicable
reference rate of Bank of America National Trust and Savings Association as
established from time to time (8.5% at July 12, 1998 and an average rate of 8.5%
for 1998) 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. As
previously announced, the Company has established provisions for potential loan
losses on all but one of its area developers' notes and, subsequent to July 12,
1998, the Company has converted outstanding loans to ten area developers into
majority equity interests in those area developers. See Note 3(c) herein; Area
Developer Information and Note 8; Subsequent Events.
(a) LOAN CONVERSION OPTION
Under the convertible loans extended to area developers, the Company is
entitled to convert all or any portion of the loan amount, subject to a
moratorium period, 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 Company received a waiver of the moratorium period from all but
one of its area developers and on July 15, 1998, the Company converted $564
million of gross loans ($173 million of net loans) to ten of the 13 area
developers into a majority equity interest in each of those area developers (see
Note 8).
Default provisions contained in the area developer loans typically include
default in payment of principal and interest, breach of a representation or
warranty or of any covenant contained in the loan agreement or security
instruments, bankruptcy or bankruptcy-related act of the borrower, resignation
or termination of key management personnel, default under the area development
agreement, termination of three or more franchise agreements, dissolution or
liquidation, material adverse change in financial condition, default of other
indebtedness such as the
5
<PAGE>
master lease, sublease or any real estate lease, a judgment in excess of
$100,000 (not satisfied, vacated or covered by insurance) and the invalidity or
termination of any security instrument. 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.
In March 1998, the Company converted its $119.2 million of loans to BC Great
Lakes, L.L.C. ("Great Lakes") into an 85% equity interest in Great Lakes. Prior
to conversion, the Company had previously established a $34.4 million provision
for potential loan losses related to Great Lakes' loans, reducing the net
carrying value of the loans to $84.8 million. The Great Lakes transaction added
113 Boston Market' stores, operating in the Chicago, Detroit, Milwaukee, Toledo
metropolitan areas and parts of Indiana to the Company store base. As part of
this transaction, the Company assumed approximately $11 million in liabilities
owed to third parties. The transaction has been accounted for as a purchase,
and, accordingly, the purchase price was allocated to identified assets and
liabilities based upon their fair values at the date of the transaction,
resulting in goodwill of approximately $63.0 million (based upon a preliminary
allocation), which is being amortized over a 35-year life. The operating results
of Great Lakes are included in results of operations from the date of
acquisition.
The following represents the unaudited pro forma results of operations as if
the purchase transaction described above had occurred at the beginning of the
Company's 1998 fiscal year (in thousands of dollars, except per share data):
Total revenue............ $ 406,005
Net loss................. (438,868)
Basic loss per share..... $ (6.11)
Diluted loss per share... (6.11)
(b) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING
The following tables summarize loan commitments, loan availability,
outstanding loan balances (included in Notes Receivable on the Company's balance
sheets) and contributed capital for Boston Market and area developers (in
thousands of dollars, except number of area developers):
<TABLE>
<CAPTION>
DECEMBER 28, JULY 12,
1997 1998
------------------- --------------------
<S> <C> <C>
Boston Market:
- ----------------------------------------------------------
Number of area developers receiving financing............. 14 13
Loan commitments.......................................... $ 842,148 $ 810,672
Loan availability......................................... (42,105) (41,596)
------------------- --------------------
Loans outstanding, gross.................................. 800,043 769,076
Loan allowances and loan reductions....................... (198,371) (546,445)
------------------- --------------------
Loans outstanding, net.................................... $ 601,672 $ 222,631
=================== ====================
Contributed capital....................................... $ 276,104 $ 250,499
=================== ====================
</TABLE>
As of July 12, 1998, giving effect to the conversion of loans to ten of the
Company's area developers into a majority equity interest (see Note 8), the
total loan commitments, gross loans outstanding and net loans outstanding, to
the remaining three area developers, were $208.1 million, $207.8 million and
$47.1 million respectively.
6
<PAGE>
The following tables summarize area developer financing activity of boston
market area developers (in thousands of dollars):
<TABLE>
<CAPTION>
TWO QUARTERS ENDED
-----------------------------------------------
JULY 13, JULY 12,
1997 1998
-------------------- --------------------
<S> <C> <C>
Boston Market:
- ----------------------------------------------------------
Area developer loan balances, beginning of year........... $ 647,265 $ 800,043
Additional loan advances.................................. 549,956 314,923
Loan repayments........................................... (362,875) (225,681)
Loans converted into equity or eliminated
in consolidation....................................... (80,000) (120,209)
-------------------- --------------------
Area developer loan balances, end of quarter.............. $ 754,346 $ 769,076
==================== ====================
</TABLE>
The majority of the loan advance and repayment activity reflects the revolving
nature of the loans, that is, amounts are drawn and repaid to optimize cash
management.
(C) AREA DEVELOPER INFORMATION
Three Boston Market area developers accounted for approximately 13%, 11%, and
11% of the Boston Market area developers' gross notes receivable balance at July
12, 1998 and no other Boston Market area developer individually accounted for
10% or more of such notes receivable balance as of such date. Subsequent to
July 12, 1998 (see Note 8), the Company converted two of these area developer
loans, representing 13% and 11% of the gross notes receivable balance, into a
majority equity interest.
A loan is considered impaired if it is probable that the Company will be
unable to collect all contractual principal and interest when due. As of
December 28, 1997 and July 12, 1998, the Company believed that each of the area
developer loans may be impaired. Once a loan is deemed impaired, the Company
determines the ultimate collectibility of the loan without regard to the
contractual terms of the existing loan. Such evaluation has resulted in a
provision for potential loan losses of $212.0 million during the two quarters
ended July 12, 1998 (in addition to the $128.0 million provision for potential
loan losses during fiscal 1997), which related to 13 of the area developer loans
aggregating $881.9 million (including Great Lakes' loans) at July 12, 1998. No
provision for potential loan losses was deemed necessary for the remaining one
area developer loan which had a loan balance of $7.4 million at July 12, 1998.
The provision for potential loan losses has been based upon management's review
of use of loan proceeds, the form and amount of consideration in the acquisition
of BCEF and Market Partners (see Note 8) and evaluations regarding the cost and
availability of capital and the value of the collateral securing the loans.
Management will continue to evaluate the extent to which loans are impaired and
determine if additional provisions for potential loan losses may be required in
future quarters. The provision for potential loan losses does not relieve the
area developers of their obligation to repay their indebtedness to the Company.
The balance at the beginning of fiscal 1998, average balance for the two
quarters ended July 12, 1998 and balance at the end of the second quarter of
1998, of all of the Company's area developer loans, was $800.0 million, $790.3
million and $769.1 million, respectively. The Company recognizes interest
income on impaired loans, if in its judgement, the interest is ultimately
collectible. Total interest income for the two quarters ended July 12, 1998
recognized on impaired loans was $3.2 million, all of which has been collected
by the Company. The total interest income the Company would have earned based
upon the contractual terms of the loans was $41.0 million for the two quarters
ended July 12, 1998. The activity in the allowance for loan losses for the two
quarters ended July 12, 1998 was as follows (in thousands of dollars):
Balance at December 28, 1997............. $128,000
Provision for loan losses................ 212,000
Great Lakes loan conversion.............. (34,419)
Costs charged to the allowance........... (4,450)
Loan write-offs.......................... -
------------------
Balance at July 12, 1998................. $301,131
==================
Commencing from the date the Company announced its intent in October 1997
to acquire BCEF and Market Partners, the Company has recognized in a single line
item on its consolidated statement of operations, the net losses of
7
<PAGE>
the area developers in which BCEF and Market Partners have preferred equity
interests, which aggregated $93.3 million for the two quarters ended July 12,
1998. The losses, which exclude fees to the Company, were primarily non-cash and
were due to goodwill and fixed asset writedowns by the area developers. The
Company continues to charge such area developers royalties, franchise and
related fees and interest, but no longer recognizes these payments as revenue.
The area developer net losses recognized by the Company have been
correspondingly reduced by the amount of the royalties, franchise and related
fees and interest not recognized by the Company, which amounts aggregated $66.2
million for the two quarters ended July 12, 1998. In addition, if an area
developer generates insufficient cash on a cumulative basis from store
operations, capital contributions and other sources (excluding borrowings from
the Company) to pay royalties, interest and franchise fees when due, the Company
will not recognize such fees, which amounts aggregated $19.5 million for the two
quarters ended July 12, 1998. The area developer losses and revenue not
recognized by the Company have been presented as a reduction of the notes
receivable balance from area developers in the accompanying balance sheet. The
Boston Market area developer notes receivable balance as of December 28, 1997
and July 12, 1998, is summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
December 28, July 12,
1997 1998
--------------------- ---------------------
<S> <C> <C>
Notes Receivable.................. $ 800,043 $ 769,076
Provision for loan losses......... (128,000) (301,131)
Losses of area developers......... (49,352) (142,689)
Revenue from area developers
not recognized.................... (21,019) (102,625)
--------------------- ---------------------
Notes Receivable, net............. $ 601,672 $ 222,631
===================== =====================
</TABLE>
The following tables set forth certain combined financial information provided
to the Company by Boston Market financed area developers. During 1996, two
financed area developers were formed, and their data have been included in the
table for 1996 from the dates of their respective formation and two financed
area developers combined with two other financed area developers with
geographically contiguous territories. The table excludes Mid-Atlantic
Restaurant Systems L.P., New Jersey Rose, L.L.C., and BC New York, L.L.C. for
both years and Mayfair Partners, L.P. and Great Lakes for 1997, 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 29, DECEMBER 28,
1996 1997
------------------- -------------------
Boston Market Financed Area Developers:
- ----------------------------------------------------------
<S> <C> <C>
Total number of financed area developers.................. 14 13
Total number of financed area developer stores open....... 841 734
Balance sheet data:
Total gross assets..................................... $ 640,534 $ 516,300
Total debt:
To the Company...................................... 555,105 687,366
To third parties (including capital lease 23,797 20,462
obligations).......................................
Total other liabilities (including trade payables)..... 105,635 108,974
Total stockholder/partner/member deficit............... (102,754) (377,960)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
-------------------- -------------------
<S> <C> <C>
Statement of operations data:
Gross revenue.......................................... $ 865,082 $ 801,792
Income (loss) from continuing operations............... (156,505) (337,342)
Statement of cash flows data:
Cash flows from (used in) operating activities......... $(128,819) $(244,435)
Cash flows from (used in) investing activities......... (82,307) (35,555)
Cash flows from (used in) financing activities......... 212,366 272,555
-------------------- -------------------
Net change in cash................................ $ 1,240 $ (7,435)
==================== ===================
</TABLE>
4. ROYALTIES AND FRANCHISE RELATED FEES
Royalties and franchise related fees are comprised of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
Quarter Ended Two Quarters Ended
--------------------------------- ---------------------------------
July 13, July 12, July 13, July 12,
1997 1998 1997 1998
-------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Royalties............................................. $15,308 $ 107 $36,164 $1,982
Lease and real estate services income................. 7,447 38 16,691 2,534
Initial franchise and area developer fees............. 5,210 - 12,075 -
Software license and maintenance fees................. 9,353 - 13,820 171
-------------- -------------- ------------- ---------------
$37,318 $ 145 $78,750 $4,687
============== ============== ============= ===============
</TABLE>
5. Commitments
Bagel Store Development Funding, L.L.C. ("Bagel Funding") has invested a total
of approximately $89.5 million, representing an approximately 21% equity
interest in Einstein/Noah Bagel Partners, L.P. ("Bagel Partners"), a majority
owned subsidiary of Einstein/Noah Bagel Corp. ("ENBC"), a majority owned
subsidiary of the Company. ENBC is the manager of Bagel Funding. Bagel Funding
has the right to require Bagel Partners or ENBC to redeem Bagel Funding's equity
interest in Bagel Partners at a pre-determined formula price based on store
level cash flow of Bagel Partners in the event that, at any time after December
5, 1999 and prior to June 5, 2001, ENBC does not consent to a public offering of
such equity interests or the termination of certain rights and obligations under
franchise and license agreements between ENBC and Bagel Partners. Such right
becomes exercisable prior to December 5, 1999 if there is a Change in Control
(as defined in the Bagel Partners partnership agreement) of ENBC. ENBC or Bagel
Partners may pay the purchase price for such equity interests in cash, shares of
the ENBC's common stock or any combination thereof.
The Company and ENBC have entered into agreements with certain vendors which
provide for minimum purchases over specified terms. Such agreements call for
retroactive rate adjustments or cash settlement in the event of purchase
shortfalls. For the quarter ended July 12, 1998, the Company had established
provisions of $11.4 million for the amount of rate adjustments or cash
settlements anticipated to result from projected shortfalls. In the event there
are additional projected shortfalls, the Company and ENBC will be subject to
additional charges.
6. CONTINGENCIES
The Company, Saad J. Nadhir, former Co-Chairman of the Board and Chief
Executive Officer and a former director of the Company, Scott A. Beck, former
Co-Chairman of the Board and President and a former director of the Company, and
Mark W. Stephens, former Vice-Chairman of the Board and Chief Financial Officer
and a former director of the Company (the "Individual Defendants"), and
investment banking firms which had underwritten securities offerings by the
Company (the "Underwriter Defendants") and the Company's independent public
accountants are defendants in a class action lawsuit filed in the United States
District Court for the District of Colorado (the "federal proceeding"). The
federal proceeding is comprised of separate actions that were consolidated into
one
9
<PAGE>
action for pre-trial purposes on August 8, 1997. The Company, the Individual
Defendants, the Underwriter Defendants and the Company's independent public
accountants, are defendants in a separate class action lawsuit filed in
Jefferson County District Court in the State of Colorado (the "state
proceeding"). The state proceeding is comprised of two separate actions that
were consolidated into one action on November 13, 1997. Also on November 13,
1997, the judge in the state proceeding agreed to stay the state proceeding
until resolution of the federal proceeding. The complaints in the federal
proceeding and the state proceeding allege, among other things, that the Company
and the other defendants violated Sections 11, 12(2) and 15 of the Securities
Act of 1933, as amended, and Section 10(b) of the Securities Act of 1934, as
amended, and Rule 10b-5 promulgated thereunder, as well as certain similar
provisions of Colorado state securities statutes. The plaintiffs are seeking,
among other things, (i) to certify each of the complaints as a class action on
behalf of all persons who purchased securities of the Company during the
purported class period, (ii) an award of unspecified compensatory damages,
interests and costs to all members of the purported class period and (iii)
equitable relief permitted by law, equity or federal or state statutes. On
February 10, 1998, the Company filed a motion to dismiss the complaint in the
federal case. The Company believes that the complaints are without merit and
intends to vigorously defend against the allegations made in such complaints.
ENBC, Scott A. Beck, former Chairman of the Board and a former director of
ENBC, Mark R. Goldston, former President and Chief Executive Officer and a
former director of ENBC, Theodore R. Heininger, former Vice President-Controller
of ENBC, W. Eric Carlborg, Chief Financial Officer of ENBC, the underwriters in
ENBC's initial public offering and ENBC's independent public accountants are
defendants in a class action lawsuit filed in the United States District Court
for the District of Colorado. The lawsuit is comprised of separate actions that
were consolidated into one action for pre-trial purposes. ENBC and certain of
the other defendants are also defendants in a class action lawsuit filed in
state court in Jefferson County Colorado, although such action has been stayed
pending resolution of the federal case. The complaints allege, among other
things, that ENBC and the other defendants violated Sections 11, 12(2) and 15 of
the Securities Act of 1933, as amended, and Section 10(b) of the Securities
Exchange Act of 1934, as amended and Rule 10b-5 promulgated thereunder, as well
as certain similar provisions of Colorado state securities statutes. In each
case, the plaintiffs are seeking, among other things, (i) to certify their
complaint as a class action on behalf of all persons who purchased the
securities of ENBC during the purported class period, (ii) an award of
unspecified compensatory damages, interest and costs to all members of the
purported class and (iii) equitable relief permitted by law, equity or federal
or state statutes. On February 10, 1998, ENBC filed a motion to dismiss the
complaint in the federal case. ENBC has stated in its most recent Form 10-Q
that it believes that the complaints are without merit and intends to vigorously
defend against the allegations made in such complaints.
In July 1997, GFI America, Inc. a former vendor of processed beef products to
the Company and its area developers, initiated an action against the Company by
filing a complaint in the District Court for Hennepin County, Minnesota. In the
complaint, the plaintiff asserted various causes of action including
misappropriation of trade secrets, breach of unilateral and bilateral contract,
breach of fiduciary duty, fraud, promissory estoppel, equitable estoppel and
violation of Minnesota trade secrets law arising from the Company's decision to
stop purchasing processed beef products from the plaintiff and commence
purchasing such products from another vendor. The plaintiff sought injunctive
relief and unspecified damages, reasonable attorneys' fees and costs, and such
other relief available under state law. The matter was removed to federal
court, and in October 1997, the court denied the plaintiff's motion for
injunctive relief. The Company filed a motion to dismiss the complaint in
September 1997, which motion was granted in part in May 1998. The court
dismissed certain of the plaintiff's breach of contract claims and plaintiff's
claims for breach of fiduciary duty and negligent misrepresentation and ruled
that the plaintiff may amend its complaint to replead certain of its other
claims. The plaintiff has requested the court reconsider an earlier discovery
motion ruling or, in the alternative, dismiss the case. The case is in the
discovery phase. The Company denies the material allegations asserted in the
complaint and intends to vigorously defend against the complaint.
The Company is subject to various other lawsuits, claims, and other legal
matters in the course of conducting its business, including its business as a
franchisor. The Company believes that the outcome of such lawsuits, claims, and
other legal matters will not have a material impact on the Company's
consolidated financial position or results of operations.
7. SEGMENT INFORMATION
The Financial Accounting Standards Board has issued Financial Accounting
Standard No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS No. 131") which became effective for the Company commencing
in the first quarter of 1998. SFAS No. 131 requires disclosure of operating
segments, which as defined, are components of an enterprise about which separate
financial information is available that is evaluated regularly by
10
<PAGE>
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company operates in two different segments; home meal
replacement and retail bagel sales. The Company's Boston Market operations
operate in the home meal replacement segment and ENBC's operations operate in
the retail bagel segment. The following provides information on the Company's
segments (in thousand of dollars):
<TABLE>
<CAPTION>
Two Quarters Ended Two Quarters Ended
July 13, 1997 July 12, 1998
------------------------------------------ -------------------------------------------
Home Meal Home Meal
Replacement Retail Bagels Replacement Retail Bagels
------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Revenue from external
customers................. $ 203,357 $ 30,003 $ 184,046 $198,374
Intersegment revenue....... 2,221 - 3,020 -
Income (loss) before
income taxes and minority
interests................. 51,827 14,801 (410,925) (26,125)
Total assets............... 1,488,269 517,502 956,390 650,777
</TABLE>
8. Subsequent Events
On July 15, 1998, BCEF and Market Partners merged into a wholly owned
subsidiary of the Company. The consideration for BCEF was 1,553,991 shares of
common stock, 1,204,593 shares of 10% series A exchangeable preferred stock (the
"Preferred Stock") with an aggregate liquidation preference of $60.2 million,
but initially redeemable at 50% of such face amount increasing over time to 110%
of such amount, and $4.5 million in cash. The consideration for Market Partners
was 1,946,000 shares of common stock, 1,331,400 shares of Preferred Stock with
an aggregate liquidation preference of $66.6 million, but initially redeemable
at 50% of such face amount increasing over time to 110% of such amount, and $5.5
million in cash.
The Company has agreed to file a shelf registration statement to register the
common stock and Preferred Stock (the "Registration Statement") by September 13,
1998 and use its reasonable best efforts to cause the Registration Statement to
be declared effective by December 12, 1998. In the event the Shelf Registration
is not filed by September 13, 1998, the Company is required to pay $2.5 million
to the holders of the common stock and Preferred Stock, excluding certain
individuals. In the event the Shelf Registration Statement is not declared
effective by December 12, 1998, commencing December 13, 1998, the annual
dividend rate on the Preferred Stock will increase to 11% and will further
increase by 0.5% for each 90 day period thereafter, up to a maximum rate of 12%.
In the event the dividend rate increases, on the date immediately following the
date on which the Shelf Registration is declared effective, the dividend rate
will be reduced to 10%.
Dividends on the Preferred Stock are payable quarterly and may, at the option
of the Company, be paid either in cash or additional shares of Preferred Stock
for the first twelve dividend payments. Thereafter, dividends will be paid in
cash. Commencing with the thirteenth dividend payment, the annual dividend rate
will permanently increase by 25 basis points per quarter for each dividend
period in which dividends are not paid.
In the event of the dissolution, liquidation or winding up of the Company,
the Preferred Stock ranks senior to common stock and any other issued junior
preferred stock.
The holders of the Preferred Stock do not have any voting rights, except as
provided by Delaware law.
The Company is required to redeem the Preferred Stock on July 15, 2005 at a
redemption price equal to 110% of its liquidation preference, plus any unpaid
dividends. The Company, at its option, may redeem at any time the Preferred
Stock at prices ranging from 50% to 110% of the original liquidation preference,
plus unpaid dividends.
Upon the occurrence of a change in control, as defined, the Company will be
required to make an offer to repurchase all or any part of the Preferred Stock
at prices ranging from 65% to 110% of the original liquidation preference, plus
unpaid dividends.
At any time, the Company has the option to exchange the Preferred Stock in
whole for exchange debentures (the "Exchange Debentures"), the principal amount
of which will be equal to the liquidation preference. The preferred
11
<PAGE>
holders will also be paid all unpaid dividends in cash. The Exchange Debentures,
if issued, will have an interest rate, redemption provisions and maturity
equivalent to the dividend rate, redemption provisions and maturity of the
Preferred Stock.
On July 15, 1998, the Company also converted its outstanding loans, to ten of
the 11 area developers in which BCEF and Market Partners had preferred equity
investments, into majority equity interests. The following is a listing of the
amount of the gross loans converted and the percentage of common equity interest
acquired in each area developer (in thousands):
<TABLE>
<CAPTION>
COMMON EQUITY
INTEREST ACQUIRED
LOAN CONVERTED
AREA DEVELOPER
- -------------------------------------- --------------------- -------------------
<S> <C> <C>
P&L Food Services, L.L.C.............. $ 52,277 86%
BC Boston, L.P........................ 51,585 91%
BCE West, L.P......................... 47,540 83%
BC GoldenGate, L.L.C.................. 57,759 96%
Finest Foodservice, L.L.C............. 87,936 98%
BC Superior, L.L.C.................... 56,893 74%
BC Heartland, L.L.C................... 7,370 97%
B.C.B.M. Southwest, L.P............... 60,002 95%
BC Tri-States, L.L.C.................. 39,636 75%
R&A Food Services, L.P................ 103,154 90%
</TABLE>
The acquisitions of BCEF, Market Partners and the area developers will be
accounted for as purchases, and accordingly, the purchase prices will be
allocated to identified assets and liabilities based upon an estimate of their
fair values at the date of the acquisitions.
The following represents the unaudited pro forma results of operations for
the two quarters ended July 12, 1998, as if the purchase transactions described
above and the BC Great Lakes purchase transaction as described in Note 3 had
occurred at the beginning of the Company's 1998 fiscal year (in thousands of
dollars, except per share data):
Total revenue....................... $ 654,931
Net loss............................ (331,475)
Basic loss per share................ $ (4.53)
Diluted loss per share.............. (4.53)
Also on July 15, 1998, the Company amended its senior revolving credit
facility ("Revolver Facility") and 1996 master lease facility (the "1996 Master
Lease Facility" and together with the "Revolver Facility", the "Credit
Facility"). The amended Revolver Facility provides the Company with an
additional revolving credit facility of $39.3 million consisting of a $4.3
million revolving loan and a $35.0 million revolving liquidity facility.
Proceeds of the $4.3 million loan were used to satisfy required payments on the
1995 master lease facility. All borrowings outstanding on the Credit Facility
become due October 17, 1998. For any letters of credit which were issued
pursuant to the Credit Facility which remain outstanding on October 17, 1998,
the Company is required to pledge cash collateral to the lenders for the
outstanding balance or provide an irrevocable standby letter of credit to the
lenders. As of July 15, 1998, the Company had $4.8 million in letters of
credit. All borrowings on the Revolver Facility bear interest at the agent's
base rate, plus an applicable margin, or at a eurodollar rate, plus an
applicable margin. A commitment fee of 0.5% per annum of the average daily
unused portion of the Revolver Facility is required. In connection with the
amendment to the Revolver Facility, the Company has guaranteed obligations
totaling $4.9 million of certain employees or former employees to one of the
Comapany's senior lenders. Pursuant to the amendment of the 1996 Master Lease
Facility, the Company agreed to purchase all the assets leased under the
facility and to pay the outstanding balance due under the facility of $166.1
million on October 17, 1998.
9. RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial statements to
conform to the 1998 presentation.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CERTAIN STATEMENTS IN THIS FORM 10-Q 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. (THE "COMPANY") AND
EINSTEIN/NOAH BAGEL CORP. ("ENBC") AND THEIR RESPECTIVE AREA DEVELOPERS,
FRANCHISEES AND LICENSEES, BOSTON MARKET(R) STORES, EINSTEIN BROS.(R) BAGELS AND
NOAH'S NEW YORK BAGELS(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: THE SUCCESS OF THE COMPANY'S EFFORTS TO REFINANCE
ITS SENIOR CREDIT FACILITIES, RESTRUCTURE ITS PUBLICLY TRADED CONVERTIBLE
SUBORDINATED DEBT AND TO SELL ALL OR SOME OF ITS EQUITY INTERESTS IN ENBC, AND
TO RAISE CAPITAL THROUGH DEBT OR EQUITY FINANCING; STORE PERFORMANCE (INCLUDING
SALES AND PROFIT MARGINS); COMPETITION; SUCCESS OF OPERATING INITIATIVES;
DEVELOPMENT AND OPERATING COSTS; ADVERTISING AND PROMOTIONAL EFFORTS; BRAND
AWARENESS; ADVERSE PUBLICITY; ACCEPTANCE OF NEW PRODUCT OFFERINGS (E.G., MENU
ITEMS AND PRICING STRUCTURES); CHANGES IN BUSINESS STRATEGY; CHANGES IN
DEVELOPMENT PLANS; AVAILABILITY AND COST OF CAPITAL; FOOD, LABOR AND EMPLOYEE
BENEFIT COSTS; CHANGES IN GOVERNMENT REGULATIONS; REGIONAL WEATHER CONDITIONS;
AND OTHER FACTORS REFERENCED IN THIS FORM 10-Q AND IN THE COMPANY'S OTHER
FILINGS WITH THE COMMISSION. THE CAUTIONARY STATEMENTS MADE PURSUANT TO THE
REFORM ACT HEREIN AND ELSEWHERE BY THE COMPANY SHOULD NOT BE CONSTRUED AS
EXHAUSTIVE OR AS ANY ADMISSION REGARDING THE ADEQUACY OF DISCLOSURES MADE BY THE
COMPANY PRIOR TO THE EFFECTIVE DATE OF THE REFORM ACT. THE COMPANY CANNOT ALWAYS
PREDICT OR DETERMINE AFTER THE FACT WHAT FACTORS WOULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING STATEMENTS OR
OTHER STATEMENTS. IN ADDITION, READERS ARE URGED TO CONSIDER STATEMENTS THAT
INCLUDE THE TERMS "BELIEVES", "BELIEF", "EXPECTS", "PLANS", "OBJECTIVES",
"ANTICIPATES", "INTENDS" OR THE LIKE TO BE UNCERTAIN AND FORWARD-LOOKING. ALL
CAUTIONARY STATEMENTS MADE HEREIN SHOULD BE READ AS BEING APPLICABLE TO ALL
FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR.
ALL FORWARD-LOOKING STATEMENTS RELATING TO THE COMPANY'S ATTEMPT TO
REFINANCE AND RESTRUCTURE ITS SENIOR DEBT, 1995 MASTER LEASE AND ITS OUTSTANDING
PUBLICLY TRADED CONVERTIBLE SUBORDINATED DEBENTURES AND TO RAISE ADDITIONAL DEBT
AND/OR EQUITY FINANCING ARE SUBJECT, AMONG OTHER THINGS, TO THE FORMULATION BY
THE COMPANY AND ITS CREDITORS OF AN ACCEPTABLE REFINANCING AND RESTRUCTURING
PLAN, THE CONSENT OF THE REQUIRED PERCENTAGE OF SUCH CREDITORS TO SUCH PLAN, THE
AVAILABILITY TO THE COMPANY OF VARIOUS REFINANCING ALTERNATIVES AND MARKET
CONDITIONS GENERALLY. ARTHUR ANDERSEN, LLP, THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS, HAS REISSUED ITS REPORT ON THE COMPANY'S 1997 FINANCIAL STATEMENTS
TO INCLUDE A QUALIFICATION WHICH STATES THERE IS SUBSTANTIAL DOUBT ABOUT THE
COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN.
ALL STATEMENTS MADE CONCERNING EXPECTED FINANCIAL PERFORMANCE, ONGOING
BUSINESS STRATEGIES AND POSSIBLE FUTURE ACTIONS WHICH THE COMPANY INTENDS TO
PURSUE CONSTITUTE FORWARD-LOOKING STATEMENTS. THE IMPLEMENTATION OF THESE
STRATEGIES AND OF SUCH FUTURE ACTIONS AND THE ACHIEVEMENT OF SUCH FINANCIAL
PERFORMANCE ARE EACH SUBJECT TO NUMEROUS CONDITIONS, UNCERTAINTIES AND RISK
FACTORS. ACCORDINGLY, NO ASSURANCE CAN BE GIVEN THAT THE COMPANY WILL BE ABLE TO
SUCCESSFULLY ACCOMPLISH ITS STRATEGIC OBJECTIVES OR ACHIEVE SUCH FINANCIAL
PERFORMANCE.
THE COMPANY IS ATTEMPTING TO RESOLVE CERTAIN COMMENTS OF THE SEC STAFF WITH
RESPECT TO CERTAIN OF ITS PERIODIC FILINGS UNDER THE SECURITIES EXCHANGE ACT OF
1934. IF THE COMPANY'S POSITIONS ARE NOT ACCEPTED, THE COMPANY MAY BE REQUIRED
TO AMEND SUCH FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. SEE NOTE 1 TO
THE FINANCIAL STATEMENTS.
GENERAL
The move to a Company-controlled system has significantly impacted the
Company's results of operations and financial position. Commencing from the date
the Company announced its intent to acquire BC Equity Funding, L.L.C. ("BCEF")
and Market Partners, L.L.C. ("Market Partners"), the Company recognized, in a
single line item on its consolidated statement of operations, the net losses of
the area developers in which BCEF and Market Partners have preferred equity
investments. The Company continues to charge such area developers royalties,
franchise and related fees and interest, but the Company no longer recognizes
these payments as revenue. As a result, the area developers' net losses
recognized by the Company have been correspondingly reduced by the amount of the
royalties, franchise and related fees and interest not recognized by the
Company. Additionally during the fourth quarter of 1997, ENBC acquired a
majority equity interest in all of its area developers. As a result of this
acquisition, the revenue generated by ENBC as a lender, franchisor and service
provider is eliminated in consolidation and replaced with store revenue and
operating expenses. As a result of the foregoing, the Company's results of
operations for the quarter and two quarters ended July 12, 1998 are not readily
comparable to the quarter and two quarters ended July 13, 1997. Commencing in
the third quarter of 1998, the Company completed the acquisition of BCEF and
Market Partners and converted its loans
13
<PAGE>
into a majority equity interest in ten of its 13 area developers. Consequently,
the results of operations in future quarters will not be readily comparable to
prior quarters.
RESULTS OF OPERATIONS
Revenue. Total revenue increased $54.1 million or 46% for the quarter ended
July 12, 1998 over the quarter ended July 13, 1997 and increased $149.1 million
or 64% for the two quarters ended July 12, 1998 over the comparable prior
period. Royalties and franchise related fees decreased $37.2 million or nearly
100% and interest income decreased $21.2 million or 100% for the quarter ended
July 12, 1998 over the quarter ended July 13, 1997. Royalties and franchise
related fees decreased $74.1 million or 94% and interest income decreased $43.2
million or 93% for the two quarters ended July 12, 1998 over the comparable
prior period. As a result of the Company's anticipated acquisition of BCEF and
Market Partners, the Company did not recognize royalties, franchise and related
fees and interest income totaling $25.1 million for the quarter ended July 12,
1998 and $66.2 million for the two quarters ended July 12, 1998, from 11 of its
14 area developers. Also, as a result of certain area developers generating
insufficient cash on a cumulative basis from store operations, capital
contributions and other sources (excluding borrowings from the Company) to pay
royalties, interest and franchise fees when due, the Company did not recognize
revenue aggregating $12.1 million and $19.5 million during the second quarter of
1998 and two quarters ended July 12, 1998, respectively. Further, ENBC's
conversion to a company-owned system has resulted in its royalties and franchise
and related fees and interest income being replaced with company-owned store
revenue.
Revenue from Company restaurants is significantly affected by the average
number of restaurants in the periods being compared. The average number of
Company-owned Boston Market restaurants was 413 for the quarter ended July 12,
1998 compared to 225 Company-owned Boston Market restaurants for the quarter
ended July 13, 1997. The average number of Company-owned Boston Market
restaurants was 351 for the two quarters ended July 12, 1998 compared to 173
Company-owned Boston Market restaurants for the two quarters ended July 13,
1997. The increase in the average number of Company-owned Boston Market
restaurants was primarily attributable to the acquisition of majority equity
interests in Mayfair Partners, L.P. and B.C. Great Lakes, L.L.C. ("Great
Lakes"). The average number of ENBC company-owned stores was 554 for the
quarter ended July 13, 1998 compared to none for the quarter ended July 13,
1997. The average number of ENBC company-owned stores was 557 for the two
quarters ended July 12, 1998 compared to seven ENBC company-owned stores for the
two quarters ended July 13, 1997. The increase in the average number of ENBC
company-owned stores was attributable to the acquisition of a majority equity
interest in all of its area developers in December 1997. Revenue from Company-
owned restaurants and ENBC company-owned stores increased $112.5 million or 194%
for the quarter ended July 12, 1998 compared to the quarter ended July 13, 1997.
Company-owned Boston Market restaurants accounted for $24.6 million or 22% of
the increase and ENBC company-owned stores accounted for $87.9 million or 78% of
the increase. Revenue from Company-owned and ENBC company-owned restaurants
increased $266.3 million or 246% for the two quarters ended July 12, 1998
compared to the two quarters ended July 13, 1997. Company-owned Boston Market
restaurants accounted for $70.1 million or 26% of the increase and ENBC company-
owned stores accounted for $196.2 million or 74% of the increase. Commencing in
the third quarter of 1998, the Company anticipates further increases in revenue
from Company-owned restaurants as a result of the Company's conversion of its
loans into a majority equity interest in ten of its 13 area developers.
Cost of operations. The cost of restaurant operations (food and paper; labor;
other controllable costs, including telephone, utilities, security, repairs and
maintenance, supplies, help wanted advertisements, uniforms and laundry; rent;
other occupancy and related and contractual and discretionary marketing)
increased $103.2 million or 199% for the quarter ended July 12, 1998 over the
quarter ended July 13, 1997, and increased $244.7 million or 259% for the two
quarters ended July 12, 1998 over the comparable prior period. The increases
were primarily due to an increase in the number of Company-owned Boston Market
restaurants and ENBC company-owned stores. For the quarter ended July 12, 1998,
Company-owned Boston Market restaurants accounted for $27.5 million or 27% of
the increase and ENBC company-owned stores accounted for $75.7 million or 73% of
the increase. For the two quarters ended July 12, 1998, Company-owned Boston
Market restaurants accounted for $72.9 million or 30% of the increase and ENBC
company-owned stores accounted for $171.8 million or 70% of the increase. Cost
of restaurant operations for Company-owned Boston Market restaurants, as a
percentage of restaurant revenue, increased from 89.4% for the quarter ended
July 13, 1997 to 96.1% for the quarter ended July 12, 1998. Cost of restaurant
operations for Company-owned Boston Market restaurants, as a percentage of
restaurant revenue, increased from 87.3% for the two quarters ended July 13,
1997 to 94.0% for the two quarters ended July 12, 1998. The increases were
primarily attributable to higher labor costs, coupled with lower revenue which
resulted in rent, utilities and other fixed store operating costs representing a
greater percentage of restaurant revenue. Cost of store operations for ENBC
company-owned stores, as a percentage of store
14
<PAGE>
revenue, was 86.1% for the quarter ended July 12, 1998. There were no ENBC
company-owned stores for the comparable 1997 period. Cost of store operations
for ENBC company-owned stores, as a percentage of store revenue, increased from
81.2% for the two quarters ended July 13, 1997 to 87.4% for the two quarters
ended July 12, 1998. The increases were due to differences in store concept and
configuration. ENBC company-owned stores operating in 1997 were significantly
smaller in size and were staffed with fewer employees. Stores operating in the
1998 quarters operate under ENBC's current Einstein Bros. Bagels and Noah's New
York Bagels concepts.
General and administrative expenses. Included in general and administrative
expenses for the quarter ended July 12, 1998, were $30.0 million of special
charges consisting of $11.4 of provisions for vendor commitments for the Boston
Market system associated with anticipated purchase shortfalls, $8.6 million of
computer software and fixed asset write-offs for assets no longer in use, $5.5
million of severance charges (including $3.5 million of stock option expense)
for former management and $4.5 million of restaurant closure and impairment
losses. Disregarding these special charges, general and administrative expenses
increased $21.7 million or 140% for the quarter ended July 12, 1998 over the
quarter ended July 13, 1997, representing general and administrative expenses
attributable to the Boston Market system which increased $17.5 million or 150%
for the quarter ended July 12, 1998 compared to the prior comparable quarter and
ENBC's general and administrative expenses increased $4.2 million or 111% for
the quarter ended July 12, 1998 compared to the prior comparable quarter.
Disregarding these special charges, general and administrative expenses
increased $57.2 million or 170% for the two quarters ended July 12, 1998 over
the two quarters ended July 13, 1997 representing expenses attributable to the
Boston Market system which increased $44.1 million or 185% for the two quarters
ended July 12, 1998 compared to the prior comparable period and ENBC's general
and administrative expenses increased $13.1 million or 133% for the two quarters
ended July 12, 1998 compared to the prior comparable period. The increases in
both the Boston Market's and ENBC's general and administrative expenses were
primarily due to larger company-owned restaurant and store bases in 1998
compared to 1997. Commencing in the third quarter of 1998, the Company
anticipates further increases in general and administrative expenses as a result
of the Company's conversion of its loans into a majority equity interest in ten
of its 13 area developers.
Depreciation and amortization (excluding goodwill amortization). Depreciation
and amortization increased $5.2 million or 68% for the quarter ended July 12,
1998 over the quarter ended July 13, 1997. The Company's depreciation and
amortization increased $0.4 million or 6% for the quarter ended July 12, 1998
compared to the prior comparable quarter and ENBC's depreciation and
amortization increased $4.8 million or 524% for the quarter ended July 12, 1998
compared to the prior comparable quarter. Depreciation and amortization
increased $13.8 million or 87% for the two quarters ended July 12, 1998 over the
prior comparable period. The Company's depreciation and amortization increased
$3.0 million or 21% for the two quarters ended July 12, 1998 compared to the
prior comparable period and ENBC's depreciation and amortization increased $10.8
million or 30% for the two quarters ended July 12, 1998 compared to the prior
comparable period. The increases in both the Company's and ENBC's depreciation
and amortization were primarily due to larger company-owned restaurant and store
bases in 1998 compared to 1997. Commencing in the third quarter of 1998, the
Company anticipates further increases in depreciation and amortization as a
result of the Company's conversion of its loans into a majority equity interest
in ten of its 13 area developers.
Goodwill amortization. Goodwill amortization increased $2.9 million or 164%
for the quarter ended July 12, 1998 over the quarter ended July 13, 1997. The
Company's goodwill amortization increased $0.9 million or 70% for the quarter
ended July 12, 1998 compared to the prior comparable quarter and ENBC's goodwill
amortization increased $2.0 million or 438% for the quarter ended July 12, 1998
compared to the prior comparable quarter. Goodwill amortization increased $7.0
million or 191% for the two quarters ended July 12, 1998 over the comparable
prior period. The Company's goodwill amortization increased $2.4 million or 92%
for the two quarters ended July 12, 1998 compared to the prior comparable period
and ENBC's goodwill amortization increased $4.6 million or 27% for the two
quarters ended July 12, 1998 compared to the prior comparable period. The
increases in both the Company's and ENBC's goodwill amortization were primarily
due to acquisitions of controlling interests in area developers in 1998 and
1997. Commencing in the third quarter of 1998, the Company anticipates further
increases in goodwill amortization as a result of the Company's conversion of
its loans into a majority equity interest in ten of its 13 area developers.
Provision for loan losses. Primarily as a result of lower than expected store
sales and customer transactions in 1998, the Company established a $10.0 million
provision for potential loan losses in the second quarter of 1998 and $212.0
million provision for potential loan losses for the two quarters ended July 12,
1998 (in addition to the $128.0 million provision for potential loan losses
established in the fourth quarter of 1997), after a determination that an
additional portion of its loans to certain of its area developers may not be
recoverable. There can be no assurance that
15
<PAGE>
the Company's loan recoverability analysis will not result in additional
provisions for potential loan losses in subsequent quarters. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 13.
Losses of Boston Chicken, Inc.'s Area Developers. As a result of the
Company's anticipated acquisition of BCEF and Market Partners, the Company has
recognized, in a single line item on its statement of operations, the net losses
of the area developers in which BCEF and Market Partners had preferred equity
interests. The losses, which totaled $35.3 million for the quarter ended July
12, 1998 and $93.3 million for the two quarters ended July 12, 1998, were
primarily non-cash due to goodwill and fixed asset write-downs by the area
developers. Such amount represents the net losses (reduced by royalties,
franchise and related fees and interest not recognized by the Company) of the
area developers. The recognition of the area developer losses has been
accounted for as a reduction of the area developers' note receivable balance.
The Company will continue to recognize the area developer net losses in a single
line item on its statement of operations until it has acquired a majority equity
interest in such area developers through conversion of its convertible loans to
such area developers or other acquisition by the Company of such area
developers. Beginning in the third quarter of 1998, the Company acquired a
majority equity interest in ten of the eleven area developers in which BCEF and
Market Partners have preferred equity interests. Commencing in the third
quarter of 1998, the Company will consolidate such area developer's results of
operations in its financial statements. Due in part to significant depreciation
charges associated with an increased Company restaurant base and significant
goodwill amortization charges which would result from the transactions, the
Company would expect to report a net loss in at least 1998. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 13.
Other Income (Expense). The Company incurred $17.9 million of other expenses
for the second quarter of 1998 compared to $8.3 million for the second quarter
of 1997. The Company incurred $33.6 million of other expenses for the two
quarters ended July 12, 1998 compared to $14.8 million for the comparable prior
period. The increases primarily related to additional interest expense incurred
on the Company's $287.5 million of convertible subordinated debentures and
ENBC's $125.0 million of convertible subordinated debentures, both issued in the
second quarter of 1997.
Income Taxes. Due to the uncertainty of having sufficient taxable income to
utilize losses generated in the 1998 quarters, no income tax benefit was
provided.
Minority Interest. For the quarter ended July 12, 1998, the minority
interests in subsidiaries absorbed $7.7 million of such subsidiaries' losses
whereas for the quarter ended July 13, 1997, the minority interests in
subsidiaries represented a charge of $1.8 million. For the two quarters ended
July 12, 1998, the minority interests in subsidiaries absorbed $19.6 million of
such subsidiaries' losses whereas for the two quarters ended July 13, 1997, the
minority interests in subsidiaries represented a charge of $4.4 million. The
changes were primarily due to ENBC incurring a loss in 1998 compared to
reporting income in the prior comparable periods.
LIQUIDITY AND CAPITAL RESOURCES
Historic Sources and Uses of Cash
Cash used in operations totaled $14.1 million for the two quarters ended July
12, 1998 compared to $4.0 million of cash generated from operations for the two
quarters ended July 13, 1997. The reduction in cash was primarily attributable
to less cash generated from operations before non-cash charges and credits
partially offset by less cash used for working capital purposes. Included in
the cash flows from operating activities for 1998, was $85.7 million of
royalties, franchise related fees and interest paid to the Company by its area
developers but not recognized as revenue. For the two quarters ended July 12,
1998, certain area developers utilized loan proceeds from the Company to pay
these royalties, franchise related fees and interest.
Through the two quarters ended July 12, 1998, the Company borrowed $10.0
million from its revolving credit facility to fund the escrow account pursuant
to the Agreement and Plan of Merger to acquire BCEF and Market Partners and
borrowed an additional $38.0 million from its revolving credit facility to fund
scheduled contractual payments on indebtedness and for working capital purposes.
During the two quarters ended July 12, 1998, ENBC had $1.8 million in net
borrowings on its senior credit facilities.
The Company's primary use of capital has been to fund loan obligations to its
financed area developers. Net loan advances to Boston Market area developers
were $89.2 million for the two quarters ended July 12, 1998 (consisting
16
<PAGE>
of $314.9 million of loan advances, net of $225.7 million of loan repayments).
Net loan advances by the Company and ENBC to their area developers for the two
quarters ended July 13, 1997 were $305.5 million (consisting of $772.1 million
of loan advances, net of $466.6 million of loan repayments). The net amounts
advanced during 1998 were primarily used to fund operating expenses. During the
first quarter of 1998, the Company converted its $119.2 million of loans to
Great Lakes, the Company's area developer for the Great Lakes region, into an
85% equity interest in Great Lakes.
On July 15, 1998, the Company acquired BCEF and Market Partners in exchange
for consideration of $126.8 million aggregate liquidation preference of
Preferred Stock, 3.5 million shares of common stock and $10.0 million in cash
from the escrow account discussed above. The 10% dividend on the Preferred
Stock is payable in additional shares of Preferred Stock for a period of three
years and payable in cash thereafter. The Preferred Stock is optionally
redeemable by the Company at any time, in cash, at redemption prices which start
at 50% of its face value and increase over time. The Preferred Stock is
mandatorily redeemable in 2005 at a price of 110% of its face value. Also, on
July 15, 1998, the Company converted $564 million of loans by the Company to ten
financed area developers into a majority equity interest in each of those area
developers. As a result of the conversions, the number of company-owned Boston
Market restaurants increased by 527, bringing the total number of company-owned
stores to 936, or approximately 81% of the Boston Market system.
The Company's and ENBC's other uses of capital have included the opening of
new ENBC stores, maintaining their existing restaurants and maintaining their
corporate infrastructure. Total other capital expenditures were $13.8 million
for the two quarters ended July 12, 1998 and $33.7 million for the two quarters
ended July 13, 1997.
Expected Sources and Uses of Cash
The Company's uses of capital for the remainder of 1998, other than providing
working capital for operating losses (including scheduled payments on the
Company's lease obligations) and expenses associated with the restructuring of
existing indebtedness, will be maintaining stores and paying interest and
principal on outstanding indebtedness. ENBC's primary uses of capital in 1998,
other than providing working capital for normal operating expenses, will be
maintaining stores, opening new stores and paying principal and interest on
outstanding indebtedness.
For the remainder of 1998, the Company expects its primary sources of cash
will be from additional senior financing described below and sale of assets.
On July 15, 1998, the Company renegotiated its revolving credit facility (the
"Revolver Facility") and its 1996 master lease financing (the "1996 Master Lease
Facility," and together with the "Revolver Facility," the "Credit Facility").
The senior lenders who are party to the Credit Facility provided the Company
with $39.3 million in additional financing, consisting of a $35.0 million
liquidity facility ("Liquidity Facility") and a $4.3 million term loan facility
(together the "1998 Credit Facility"). The Liquidity Facility is being used
primarily for working capital, refinancing and restructuring costs and scheduled
debt service. The 1998 Credit Facility matures on October 17, 1998. Pursuant to
the 1998 Credit Facility, the lenders thereunder have agreed to forbear the
second quarter net weekly per store average revenue covenant contained in the
Credit Facility. Covenants contained in the 1998 Credit Facility include, among
others, a minimum cumulative systemwide cash flow requirement and adherence by
the Company to an agreed upon operating budget. Pursuant to the 1998 Credit
Facility, the Company also agreed to change the maturity date of the Credit
Facility to October 17, 1998, at which time $52.8 million, including $4.8
million in letters of credit under the Revolver Facility and $166.1 million
under the 1996 Master Lease Facility, become due. The Company also had
outstanding as of July 15, 1998 an additional $51.0 million of master lease
financing (the "1995 Master Lease Facility") that contains cross-default and
cross-acceleration provisions with the facilities agreement governing the Credit
Facility. Any such acceleration would also permit holders of other subordinated
debt of the Company to exercise their remedies, which include acceleration of
their debt, which in the aggregate totaled approximately $623 million as of July
15, 1998. Also, in early October 1998, a portion of the 1995 Master Lease
Facility expires. The Company has agreed to purchase the assets being leased for
$21.1 million. The Company will attempt to renegotiate the terms of the 1995
Master Lease or refinance the 1995 Master Lease in conjunction with its
refinancing of its other senior debt.
The Company will attempt to refinance its senior debt, restructure its
outstanding publicly traded convertible subordinated debt and raise additional
debt and/or equity financing before the Credit Facility and 1998 Credit Facility
mature. There can be no assurance the Company will be successful in such
restructuring and refinancing efforts. Any such restructuring, refinancing
and/or additional financing may entail significant equity dilution to the
holders of the Company's common stock at that time. Should the Company be
unable to refinance its senior debt, restructure its
17
<PAGE>
outstanding publicly traded convertible subordinated debt and raise additional
debt and/or equity, it may be forced to seek protection under applicable
bankruptcy law.
The Company's current liquidity may adversely affect its relationship with
its suppliers which could have a material adverse effect on the Company's
business, financial condition and results of operations. Although the Company is
evaluating the sale of assets in an effort to improve its liquidity position,
there can be no assurance that the Company will be successful in obtaining the
additional capital needed to implement its business plan and meet its financial
obligations. Additionally, should the Company be able to sell assets, there can
be no assurance the Company will recover the full amount invested in such
assets.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth under Note 6 of the Company's Notes to
Consolidated Financial Statements contained in Part I of this Form 10-Q is
incorporated herein by reference thereto.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting was held on May 20, 1998. Each of the
Company's current directors was elected. The votes cast for and withheld for
each such director were as follows:
Director For Withheld
-------- --- --------
J. Michael Jenkins 58,477,387 974,538
Arnold C. Greenberg 58,315,351 1,136,574
J. Bruce Harreld 58,332,807 1,119,118
M Howard Jacobson 58,300,193 1,151,732
Peer Pedersen 58,348,704 1,103,221
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits: See Exhibit Index appearing elsewhere herein, which is
incorporated herein by reference.
B. Reports on Form 8-K: The Company filed three reports on Form 8-K for the
quarter ended July 12, 1998.
The first report was dated May 1, 1998 and reported under Item 5 (Other
Events) that the Company had named J. Michael Jenkins as Chairman of the Board,
Chief Executive Officer and President of the Company. The Company also reported
under Item 5 (Other Events) that Saad J. Nadhir, Scott A. Beck and Mark W.
Stephens had resigned from their various executive officer and director
positions with the Company.
The second report was dated May 27, 1998 and reported, among other things,
under Item 5 (Other Events) (i) the Company's first quarter results of
operations, (ii) that Arthur Andersen LLP, the Company's auditors, had included
an explanatory paragraph in its audit report that there is substantial doubt
about the Company's ability to continue as a going concern, (iii) that Lawrence
E. White was named Chief Financial Officer of the Company, and (iv) that the
Company had retained Morgan Stanley & Co. Incorporated to advise and assist the
Company in evaluating the sale of all or a portion of the shares of common stock
of ENBC owned by the Company to one or more third parties. In addition, the
Company also reported under Item 5 (Other Events) certain financial statement
and risk factor disclosure included in its Joint Information Statement/Offering
Memorandum circulated to holders of interests in BCEF and Market Partners
seeking their consent to the Merger.
The third report was dated June 25, 1998 and reported under Item 5 (Other
Events) (i) the status of the Company's negotiations with the agent banks under
its senior credit facilities and its intention to attempt to refinance and
restructure its existing senior debt and publicly traded convertible
subordinated debt and (ii) that comments were received, and additional comments
were expected to be received, from the Securities and Exchange Commission
regarding certain filings by the Company.
Subsequent to the end of the quarter, the Company has to date filed two
reports on Form 8-K.
The first report was dated July 15, 1998 and reported under Item 5 (Other
Events) (i) the renegotiation of its senior credit facility with Bank of America
National Trust and Savings Association and General Electric Capital Corporation
to provide the Company with an additional $39.3 million in financing expiring
October 17, 1998 at which time approximately $219 million of other senior debt
also becomes due, (ii) announce the engagement of BT Alex.Brown to assist in the
restructuring the Company's publicly traded convertible subordinated debt, (iii)
conversion by the Company of a total of $564 million of loans to ten area
developers into a majority equity interest in those area developers and (iv) the
acquisition of BC Equity Funding, L.L.C. and Market Partners, L.L.C., funds that
previously held preferred equity interests in 11 of the Company's 13 area
developers, for aggregate consideration of (a) $126.8
19
<PAGE>
million of the Company's 10% Series A Exchangeable Preferred stock, (b) 3.5
million shares of the Company's common stock and (c) $10.0 million in cash.
The second report was dated July 15, 1998 and reported under Item 2
(Acquisition or Disposition of Assets) that the Company on July 15, 1998, had
completed the acquisition of the following area developers pursuant to the
conversion of approximately $564 million of loans into a majority equity
interest in each of those area developers: B.C.B.M. Southwest, L.P. (formerly
BC Texas, Inc.), R&A Food Services, L.P. (formerly R&A Food Services, Inc.),
Finest Foodservice, L.L.C., P&L Food Services, L.L.C., BC Boston, L.P., BCE
West, L.P., GoldenGate, L.L.C., BC Tri-States, L.L.C., BC Superior, L.L.C. and
BC Heartland, L.L.C.
The Company also reported that on July 15, 1998, it also acquired BC
Equity Funding, L.L.C. and Market Partners, L.L.C., funds that previously held
preferred equity interests in 11 of the Company's 13 area developers, including
the ten area developers whose loans were converted. The Company reported that
the required historical and pro forma financial statements for the
aforementioned acquisitions would be filed as soon as practicable.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSTON CHICKEN, INC.
Date: August 25, 1998 /s/ J. MICHAEL JENKINS
-----------------------------------------------------
J. Michael Jenkins
Chairman of the Board, Chief Executive Officer
and President
Date: August 25, 1998 /s/ LAWRENCE E. WHITE
-----------------------------------------------------
Lawrence E. White
Chief Financial Officer
(Principal Financial Officer)
21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
----------
EXHIBIT PAGE
- ------- ----
NUMBER Exhibits NUMBER
- ------ -------- ------
<S> <C>
4.1 Registration Rights Agreement dated as of July 15, 1998 among Boston Chicken, Inc.,
BCI Acquisition Sub, L.L.C. and BC Equity Funding, L.L.C. and Market Partners, L.L.C.
10.1 First Amendment and Consent to Amended and Restated Facilities Agreement dated as of
July 15, 1998 by and among Boston Chicken, Inc., Bank of America National Trust and
Savings Association and General Electric Capital Corporation (each individually and
in their representative capacities).
10.2 Second Amendment and Consent to Secured Revolving Credit Agreement dated as of July
15, 1998 by and among Boston Chicken, Inc., Bank of America National Trust and
Savings Association, General Electric Capital Corporation, LaSalle National Bank and
Sanwa Business Credit Corporation and Hour LLC (each individually and/or in their
representative capacities).
10.3 Amendment No. 2 to Master Lease Agreement No. 2 dated as of July 15, 1998 by and
among Boston Chicken, Inc. and General Electric Capital Corporation (individually
and in its representative capacity).
10.4 Second Amendment dated June 25, 1998 to the Amended and Restated Accounting and
Administrative Services Agreement between the Company and Einstein/Noah Bagel Corp.
("ENBC") (incorporated by reference to Exhibit 10.4 to ENBC's quarterly report on
Form 10-Q for the quarter ended July 12, 1998).
10.5 Second Amendment dated June 25, 1998 to the Amended and Restated Computer and
Communications Systems Services Agreement between the Company and ENBC (incorporated
by reference to Exhibit 10.5 to ENBC's quarterly report on Form 10-Q for the quarter
ended July 12, 1998).
10.6 Termination Agreement dated June 25, 1998 between the Company and ENBC terminating
the Loan Agreement dated May 27, 1996, as amended, between the Company and ENBC
(incorporated by reference to Exhibit 10.6 to ENBC's quarterly report on Form 10-Q
for the quarter ended July 12, 1998).
10.7 First Amendment to Office Sublease effective as of May 1, 1998 between the Company
and ENBC (incorporated by reference to Exhibit 10.7 to ENBC's quarterly report on
Form 10-Q for the quarter ended July 12, 1998).
27 Financial Data Schedule.
</TABLE>
________________________________________
*In the case of incorporation by reference to documents filed by Einstein/Noah
Bagel Corp. under the Securities Exchange Act of 1934, as amended, Einstein/Noah
Bagel Corp.'s file number under that Act is 0-21097.
EXHIBIT 1
<PAGE>
EXHIBIT 4.1
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated July 15, 1998
among
BOSTON CHICKEN, INC.
BCI ACQUISITION SUB, L.L.C.
and
BC EQUITY FUNDING, L.L.C.
MARKET PARTNERS, L.L.C.
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into on July 15, 1998, among BOSTON CHICKEN, INC., a Delaware
corporation (the "Company"), BCI ACQUISITION SUB, L.L.C., a Delaware limited
liability company and a wholly owned subsidiary of the Company ("BCI Sub"), BC
EQUITY FUNDING, L.L.C., a Delaware limited liability company ("BCEF"), and
MARKET PARTNERS, L.L.C., a Delaware limited liability company ("Market
Partners").
This Agreement is made pursuant to the Agreement and Plan of Merger
dated March 16, 1998, between the Company, BCI Sub, BCEF and Market Partners
(the "Merger Agreement"), which provides for the merger (the "Merger") of BCEF
and Market Partners with and into BCI Sub, with BCI Sub as the surviving
corporation. As a result of the Merger, holders of limited liability company
interests in BCEF or Market Partners (the "Holders") will receive, in the
aggregate, (i) $126.8 million aggregate liquidation preference 10% Series A
Exchangeable Preferred Stock of the Company (the "Preferred Stock"), (ii)
3,500,000 shares of Common Stock, par value $0.01 per share, of the Company (the
"Common Stock") and (iii) $10,000,000 in cash (to be divided among only those
Holders who are not BCI Insiders). As part of the consideration provided for in
the Merger Agreement and, with respect only to Holders who have not previously
executed and delivered to BCI a Letter of Transmittal containing the release set
forth therein, in consideration of such Holders providing the Release
substantially in the form set forth in the Letter of Transmittal, the Company
has agreed to provide to the Holders who are not BCI Insiders the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Merger Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
--------
to time, and the rules and regulations of the SEC promulgated thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
--------
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"BCEF" shall have the meaning set forth in the preamble to this
----
Agreement and shall also include BCEF's successors.
"BCI Insiders" shall have the meaning set forth in the Merger
------------
Agreement.
"Certificate of Designations" shall mean the Certificate of
---------------------------
Designations relating to the Preferred Stock dated as of the date hereof,
executed by the Company and duly filed on the
<PAGE>
date hereof with the Delaware Secretary of State, and as the same may be amended
from time to time.
"Closing Date" shall mean the "Closing Date" as defined in the Merger
------------
Agreement.
"Common Stock" shall have the meaning set forth in the preamble to
------------
this Agreement.
"Company" shall have the meaning set forth in the preamble to this
-------
Agreement and shall also include the Company's successors.
"Counsel for the Holders" shall mean Weil, Gotshal & Manges LLP, or
-----------------------
such other counsel as shall be selected by the Majority Holders.
"Exchange Debentures" shall mean the exchange debentures into which
-------------------
the Preferred Stock is exchangeable, at the option of the Company, pursuant to
the Certificate of Designations.
"Exchange Indenture" shall mean the indenture relating to the Exchange
------------------
Debentures between the Company and a trustee meeting the requirements of the TIA
that will be selected by the Company in the event the Company determines to
exchange the shares of Preferred Stock for Exchange Debentures, and as the same
may be amended from time to time in accordance with the terms thereof.
"Holders" shall mean any holders of limited liability company
-------
interests in BCEF or Market Partners who are not BCI Insiders, for so long as
they own any Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Securities.
"Letter of Transmittal" shall have the meaning set forth in the Merger
---------------------
Agreement.
"Majority Holders" shall mean the Holders of a majority of the (a)
----------------
aggregate liquidation preference of outstanding shares of Preferred Stock or the
aggregate principal amount of the outstanding Exchange Debentures (as
applicable) and (b) the outstanding shares of Common Stock issued pursuant to
the Merger, in each case that are also Registrable Securities; provided that
--------
whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or any of its affiliates (as such term is defined in Rule 405 under the
1933 Act) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage or amount.
"Market Partners" shall have the meaning set forth in the preamble to
---------------
this Agreement and shall also include Market Partners' successors.
2
<PAGE>
"Merger Agreement" shall have the meaning set forth in the preamble to
----------------
this Agreement.
"Merger" shall have the meaning set forth in the preamble to this
------
Agreement.
"Original Issuance Date" shall have the meaning set forth in the
----------------------
Certificate of Designations.
"Person" shall mean an individual, partnership, corporation, business
------
trust, joint stock company, limited liability company, trust or unincorporated
association, joint venture, government authority or other entity of whatever
nature.
"Preferred Stock" shall have the meaning set forth in the preamble to
---------------
this Agreement and any additional shares of Preferred Stock issued as a dividend
thereon pursuant to the Certificate of Designations in respect thereof.
"Prospectus" shall mean the prospectus included in the Shelf
----------
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, and
including all material incorporated by reference therein.
"Registrable Securities" shall mean all Securities held by Holders who
----------------------
are not BCI Insiders; provided, however, that such Securities shall cease to be
-------- -------
Registrable Securities (i) when a Shelf Registration Statement with respect to
such Securities shall have been declared effective under the 1933 Act and such
Securities shall have been disposed of pursuant to such Shelf Registration
Statement, (ii) when such Securities have been sold to the public pursuant to
Rule 144 (or any similar provision then in force, but not Rule 144A) under the
1933 Act, (iii) when such securities are permitted to be sold pursuant to Rule
144 (k) (or any similar provision then in force) or (iv) when such Securities
shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration, listing and filing fees, (ii) all fees
and expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel for any
Holders in connection with blue sky qualification of any of the Registrable
Securities), (iii) all expenses of the Company in preparing, word processing,
printing and distributing any Shelf Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, (iv) all fees and disbursements relating to the
qualification of the Exchange Indenture under applicable securities laws, (v)
the fees and disbursements of the Trustee and its counsel, (vi) the fees and
disbursements of counsel for the Company and the fees and disbursements of
Counsel for the Holders through the date on which the Shelf Registration
Statement is initially declared effective by the SEC and (vii) the fees and
disbursements of the independent public accountants of the Company, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
3
<PAGE>
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities" shall mean, collectively, the Preferred Stock, the
----------
Exchange Debentures and the Common Stock.
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(a) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company pursuant to the provisions of Section 2(a) of this
Agreement which covers all of the Registrable Securities (which may include
other securities of the Company held by persons or entities having been
previously granted registration rights by the Company) on an appropriate form
under Rule 415 under the 1933 Act, or any similar rule that may be adopted by
the SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
---
"Trustee" shall mean the trustee with respect to the Exchange
-------
Debentures under the Indenture.
2. Registration Under the 1933 Act.
(a) Within 60 days after the Original Issuance Date the Company shall
file a Shelf Registration Statement providing for the sale by the Holders of all
of the Registrable Securities. The Company shall use its reasonable best
efforts to cause such Shelf Registration Statement to be declared effective by
the SEC within 150 days after the Original Issuance Date. The Company agrees to
use its reasonable best efforts to keep the Shelf Registration Statement
continuously effective until two years after the Original Issuance Date or such
shorter period that will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement in order to permit the Prospectus to be usable by the
Holders. The Company further agrees to supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration and to use its reasonable best efforts to
cause any such amendment to become effective and such Shelf Registration
Statement to become usable as soon as practicable thereafter. The Company
agrees to furnish Counsel for to the Holders of Registrable Securities copies of
any such supplement or amendment promptly after its being used or filed with the
SEC.
(b) The Company shall pay all Registration Expenses in connection with
the registration pursuant to Section 2(a). Each Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement.
4
<PAGE>
(c) A Shelf Registration Statement pursuant to Section 2(a) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
-------- -------
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, the
Company shall extend the period during which the Shelf Registration Statement
shall be maintained effective pursuant to this Agreement by the number of days
of such interference, to and including the date on which the offering of
Registrable Securities pursuant to such Shelf Registration Statement may legally
resume. In the event the Shelf Registration Statement is not filed with the SEC
within 60 days after the Original Issuance Date, the Company will immediately be
required to pay a penalty in the aggregate amount of $2,500,000 in cash to the
Holders on a pro rata basis based on the Registrable Securities held by each
Holder. In the event the Shelf Registration Statement is not declared effective
on or before the 150th day after the Original Issuance Date, commencing on the
151st day after the Original Issuance Date the annual dividend rate on the
Preferred Stock (or the interest rate on the Exchange Debentures, if applicable)
will increase to 11% and shall further increase by 0.5% for each period of 90
days thereafter (for greater certainty, if applicable the first 90-day period
would commence on the 241st day after the Original Issuance Date and end on the
330th day after the Original Issuance Date and the next 90-day period would
commence on the 331st day after the Original Issuance Date) until the Shelf
Registration Statement is declared effective, up to a maximum rate of 12%. In
the event the annual dividend rate on the Preferred Stock (or the interest rate
on the Exchange Debentures) increases pursuant to this Section 2(c), on the date
immediately following the date on which the Shelf Registration Statement is
declared effective by the SEC, such annual dividend rate (or interest rate) will
be reduced to 10%. Any payments to be made to Holders pursuant to this Section
2(c) shall be delivered to the Holders at their address in accordance with
Section 5(c) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect to the
Shelf Registration Statement pursuant to Section 2(a) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by
the Company and (y) shall be available for the sale of the Registrable
Securities by the selling Holders thereof and (z) shall comply as to form
in all material respects with the requirements of the applicable form, and
use its reasonable best efforts to cause such Shelf Registration Statement
to become effective and remain effective in accordance with Section 2
hereof;
(b) promptly prepare and file with the SEC post-effective
amendments to such Shelf Registration Statement as may be necessary to keep
such Shelf Registration Statement effective for the applicable period
provided for in Section 2 hereof and cause each Prospectus to be
supplemented by any required
5
<PAGE>
prospectus supplement and, as so supplemented, to be filed pursuant to Rule
424 under the 1933 Act;
(c) furnish to each Holder and Counsel for the Holders, without
charge, as many copies of the Prospectus, including the preliminary
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities; and the
Company consents to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the selling
Holders in connection with the offering and sale of the Registrable
Securities covered by and in the manner described in the Prospectus or any
amendment or supplement thereto in accordance with applicable law;
(d) use its reasonable best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue sky"
laws of such jurisdictions as any Holder of Registrable Securities covered
by a Shelf Registration Statement shall reasonably request in writing by
the time the applicable Shelf Registration Statement is declared effective
by the SEC, to cooperate with such Holders in connection with any filings
required to be made with the National Association of Securities Dealers,
Inc. and do any and all other acts and things which may be reasonably
necessary to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
--------
however, that the Company shall not be required to (i) qualify as a foreign
-------
corporation or as a dealer in securities in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(d), (ii) file
any general consent to service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not so subject;
(e) notify each Holder and Counsel for the Holders promptly and,
if requested by any such Holder or Counsel for the Holders, confirm such
advice in writing (i) when the Shelf Registration Statement has become
effective and when any post-effective amendment thereto has been filed and
becomes effective, (ii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of the Shelf
Registration Statement or the initiation of any proceedings for that
purpose, (iii) of the happening of any event during the period the Shelf
Registration Statement is effective which, in the good faith determination
of the Board of Directors of the Company upon the advice of counsel, makes
any statement made in such Shelf Registration Statement or the related
Prospectus untrue in any material respect or which requires the making of
any changes in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading and (iv) of any determination by
the Company that a post-effective amendment to the Shelf Registration
Statement would be appropriate;
6
<PAGE>
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement
at the earliest possible moment and provide to each Holder immediate notice
of the withdrawal of any such order;
(g) furnish to Counsel for the Holders, without charge, at
least one conformed copy of the Shelf Registration Statement and any post-
effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) upon the occurrence of any event contemplated by Section
3(e)(iii) hereof, use its reasonable best efforts to prepare and file with
the SEC as promptly as practicable a supplement or post-effective amendment
to the Shelf Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading;
(i) a reasonable time prior to the filing of the Shelf
Registration Statement, the Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus or any document which
is to be incorporated by reference into the Shelf Registration Statement or
the Prospectus after the initial filing of the Shelf Registration
Statement, provide copies of such document to the Counsel for the Holders
and make such of the representatives of the Company as shall be reasonably
requested by Counsel for the Holders available for discussion of such
document, and shall not at any time file or make any amendment to the Shelf
Registration Statement, the Prospectus or any amendment of or supplement to
the Shelf Registration Statement or the Prospectus or any document which is
to be incorporated by reference into the Shelf Registration Statement or
the Prospectus of which Counsel for the Holders shall not have previously
been advised and furnished a copy;
(j) obtain a CUSIP number for all Registrable Securities not
later than the effective date of the Shelf Registration Statement;
(k) cause the Exchange Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Debentures, cooperate with the Trustee and the
Holders to effect such changes to the Exchange Indenture as may be required
for the Exchange Indenture to be so qualified in accordance with the terms
of the TIA and execute, and use its reasonable best efforts to cause the
Trustee to execute, all documents as may be required to effect such changes
and all other forms and
7
<PAGE>
documents required to be filed with the SEC to enable the Exchange
Indenture to be so qualified in a timely manner;
(l) use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange or any automated
quotation system on which similar securities issued by the Company are then
listed to the extent such Registrable Securities satisfy applicable listing
requirements;
(m) maintain a transfer agent and registrar, which may be the
same entity, for the Registrable Securities, not later than the effective
date of the Shelf Registration Statement; and
(n) if reasonably requested by any Holder of Registrable
Securities covered by the Shelf Registration Statement, (i) to the extent
counsel for the Company deems the inclusion of such information reasonably
necessary in order to enable such Holder to be able to sell Registrable
Securities, promptly incorporate in a Prospectus supplement such
information with respect to such Holder as such Holder reasonably requests
to be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to
be incorporated in such filing.
The Company may require each Holder to furnish to the Company
such information regarding the Holder and the proposed distribution by such
Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e)(iii)
hereof, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Shelf Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. The Company agrees to notify the Holders to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event, and
the Holders hereby agree to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or omission.
If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to the Shelf Registration Statement, the Company
shall extend the period during which the Shelf Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during the
period from and including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions. Any such suspensions
may not exceed 50 days (whether or not consecutive) during any 365-day period.
4. Indemnification and Contribution.
8
<PAGE>
(a) The Company agrees to indemnify and hold harmless each Holder
and each person, if any, who controls any Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common
control with, or is controlled by, any Holder, from and against all losses,
claims, damages, liabilities and expenses (including, without limitation, any
legal or other expenses reasonably incurred by any Holder or any such
controlling or affiliated person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration Statement (or
any amendment thereto) pursuant to which Registrable Securities were registered
under the 1933 Act, including all documents incorporated therein by reference,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any such untrue statement or omission or
alleged untrue statement or omission (i) based upon information relating to any
Holder furnished to the Company in writing by any selling Holder or Counsel for
the Holders expressly for use therein or (ii) included or omitted from a
preliminary Prospectus, but corrected in the final Prospectus (or an amendment
or supplement thereto), if the Holder did not deliver a copy of the final
Prospectus (and any then current amendment or supplement thereto) to the person
asserting such loses, claims, damages, liabilities or expenses at or prior to
the written confirmation of the sale of the Registrable Securities to such
person.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company and the other selling Holders, and each of their
respective directors, officers who sign the Shelf Registration Statement and
each Person, if any, who controls the Company and any other selling Holder
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act to the same extent as the foregoing indemnity from the Company to the
Holders, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder or Counsel for the Holders
expressly for use in the Shelf Registration Statement (or any amendment thereto)
or the Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
to represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding; provided, however, that the failure of any
-------- -------
indemnified party to give notice shall not relieve the indemnifying party of its
obligations under paragraph (a) or (b) above, except to the extent that the
indemnifying party is prejudiced by reason of such failure. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such
9
<PAGE>
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) in the opinion of counsel of the indemnified
party a conflict of interest may exist between the indemnified and indemnifying
parties. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings, be liable for (a) the fees and
expenses of more than one counsel (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning Section 15 of
the 1933 Act or Section 20 of the 1934 Act and (b) the fees and expenses of more
than one counsel (in addition to any local counsel) for all Holders and all
persons, if any, who control any Holders within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In such case involving the Holders and such persons who control any
Holders, such firm shall be designated in writing by the Majority Holders. In
all other cases, such firm shall be designated by the Company. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent (which consent may be withheld in its sole discretion) but,
if settled with such consent, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in this Section 4 is
unavailable to hold harmless an indemnified party under paragraph (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying and indemnified party from the
registration of the Registrable Securities or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, the relative fault of the
indemnifying party and the indemnified party in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this paragraph (d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this paragraph (d). No person guilty of
fraudulent
10
<PAGE>
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. The obligations of the Holders in this Section (d) to
contribute shall be several in proportion to the percentage of Registrable
Securities registered by them and not joint.
(e) Notwithstanding the provisions of this Section 4, no Holder
shall be required to indemnify or contribute any amount in excess of the amount
by which the total price at which Registrable Securities were sold by such
Holder exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
The indemnity provisions contained in this Section 4 shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Holder or any
person controlling any Holder, or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) any sale of
Registrable Securities pursuant to the Shelf Registration Statement.
5. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered into, and
--------------------------
on or after the date of this Agreement will not enter into, any agreement which
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of the
Majority Holders affected by such amendment, modification, supplement, waiver or
consent; provided, however, that whenever the written consent of Holders of a
-------- -------
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by Insiders shall not be counted in determining
whether such consent was given by the Holders of such required percentage of
amount.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a
Holder, at the address of such Holder on the books and records of the Company or
its transfer agent on the date hereof or at the most current address given by
such Holder to the Company by means of a notice given in accordance with the
provisions of this Section 5(c), and (ii) if to the Company, initially at the
Company's address set forth in the Merger Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 5(c).
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is
11
<PAGE>
acknowledged, if telecopied; and on the next business day if timely delivered to
an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any Holder shall acquire
Registrable Securities, in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(e) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company and BCI Sub,
on the one hand, and BCEF and Market Partners, on the other hand, and any Holder
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BOSTON CHICKEN, INC.
By_____________________________________________
Name: Michael R. Daigle
Title: Senior Vice President
BCI ACQUISITION SUB, L.L.C.
By Boston Chicken, Inc., as Manager
By_____________________________________________
Name: Michael R. Daigle
Title: Senior Vice President
Confirmed and accepted as of
the date first above written:
BC EQUITY FUNDING, L.L.C.
By Boston Chicken, Inc., as Manager
By___________________________________
Name: Michael R. Daigle
Title: Senior Vice President
MARKET PARTNERS, L.L.C.
By___________________________________
Name: Alberto Finol, as Manager
By___________________________________
Name: Thomas Githens, as Manager
13
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
FIRST AMENDMENT AND CONSENT TO
AMENDED AND RESTATED FACILITIES AGREEMENT
THIS FIRST AMENDMENT AND CONSENT (this "AMENDMENT") dated as of July
15, 1998 is entered into by and among BOSTON CHICKEN, INC., a Delaware
corporation (the "COMPANY" or the "BORROWER"), BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois) (in
its individual capacity, "BOFA"), as agent for the Lenders and the Issuing
Lender referred to below (in such capacity, together with its successors and
assigns, the "LOAN AGENT"), GENERAL ELECTRIC CAPITAL CORPORATION, for itself and
as agent for the 1996 Lease Lenders referred to below (in its individual
capacity, "GECC"; and in such dual capacity, together with its successors and
assigns, the "1996 LEASE AGENT"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION and GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Agents for the
Liquidity Lenders (individually, a "CO-AGENT" and collectively, the "CO-AGENTS")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the initial
Common Collateral Agent.
W I T N E S S E T H:
-------------------
WHEREAS, the Company, the financial institutions from time to time
party thereto (the "ORIGINAL LENDERS"), Bankers Trust Company, as documentation
agent (in such capacity, together with its successors and assigns, the
"DOCUMENTATION AGENT"), and BofA, as letter of credit issuing bank (in such
capacity, the "ISSUING LENDER", and together with the Original Lenders, the
"REVOLVING LENDERS") and as Loan Agent entered into that certain Secured
Revolving Credit Agreement dated as of December 9, 1996, as amended by the First
Amendment and Consent thereto (the "FIRST CREDIT AMENDMENT") dated as of October
24, 1997 (the Secured Revolving Credit Agreement as so amended, the "ORIGINAL
CREDIT AGREEMENT");
WHEREAS, concurrently herewith, the Original Credit Agreement has been
further amended pursuant to the terms of that certain Second Amendment and
Consent thereto (the "SECOND CREDIT AMENDMENT") entered into among the Company,
the Loan Agent, the Documentation Agent, the Co-Agents, GECC, the Revolving
Lenders and the "Liquidity Lenders" (as defined in the Second Credit Amendment)
(the Original Credit Agreement as amended by the Second Credit Amendment, and as
further amended, supplemented, modified, restated, refinanced, refunded or
renewed from time to time, the "CREDIT AGREEMENT");
WHEREAS, the Company and the 1996 Lease Agent have entered into that
certain Master Lease Agreement No. 2, dated as of December 9, 1996 (the
"ORIGINAL 1996 LEASE AGREEMENT"), as amended by Amendment No. 1 thereto dated
February 28, 1997 and Amendment No. 2 thereto of even date herewith ("1996 LEASE
AMENDMENT NO. 2") (as further amended,
1
<PAGE>
supplemented, modified, restated, refinanced, refunded or renewed from time to
time, the "1996 MASTER LEASE AGREEMENT");
WHEREAS, subject to the terms of the 1996 Master Lease Agreement, GECC
has heretofore and may hereafter convey to certain financial institutions
(collectively with GECC, the "1996 LEASE LENDERS", and together with the
Revolving Lenders and Liquidity Lenders, the "SECURED CREDITORS") participation
interests in its rights, duties and obligations under the 1996 Master Lease
Agreement;
WHEREAS, concurrently with the execution and delivery of the Original
Credit Agreement and the Original 1996 Master Lease Agreement, the Company, the
Loan Agent, the 1996 Lease Agent and the Common Collateral Agent entered into
that certain Intercreditor Agreement dated as of December 9, 1996 (as amended,
supplemented, modified or restated from time to time, the "ORIGINAL
INTERCREDITOR AGREEMENT"), which sets forth certain agreements with respect to,
among other things, voting rights and collateral issues;
WHEREAS, concurrently with the execution and delivery of the First
Credit Amendment, the Company, the Loan Agent, the 1996 Lease Agent and the
Common Collateral Agent entered into that certain Amended and Restated
Facilities Agreement (the "RESTATED FACILITIES AGREEMENT") and that certain
Amended and Restated Intercreditor Agreement (the "RESTATED INTERCREDITOR
AGREEMENT"), each dated as of October 24, 1997;
WHEREAS, concurrently herewith, the Company, the Loan Agent, the 1996
Lease Agent, the Lenders, GECC in its capacity as the "Lead 1996 Lease Lender"
(as defined below), the "Other Creditors" and the "Cash Management Banks" (each
as defined in the Intercreditor Agreement referred to below) have entered into
that certain Second Amended and Restated Intercreditor Agreement, pursuant to
which the Restated Intercreditor Agreement has been amended and restated in its
entirety (as so amended and restated, and as the same may be further amended,
modified, supplemented and/or restated from time to time, the "INTERCREDITOR
AMENDMENT"), which sets forth certain agreements with respect to, among other
things, voting rights and collateral issues between the parties thereto;
WHEREAS, the Company hereby reaffirms the covenants, representations
and warranties made in the Restated Facilities Agreement, to the extent the same
are not affected hereby, and agrees that all such covenants, representations and
warranties shall be deemed to have been remade as of the effective date hereof;
WHEREAS, the Company has requested that the Loan Agent, the 1996 Lease
Agent and the Common Collateral Agent agree to certain modifications to the
Restated Facilities Agreement;
WHEREAS, the Company, the Loan Agent (on behalf of itself and the
Revolving Lenders and the Liquidity Lenders (the Revolving Lenders and Liquidity
Lenders being sometimes
2
<PAGE>
referred to herein as the "LENDERS")), the 1996 Lease Agent (on behalf of itself
and the 1996 Lease Lenders) and the Common Collateral Agent have agreed to enter
into this Amendment on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Company, the Loan Agent, the 1996 Lease Agent and the
Common Collateral Agent hereby agree as follows:
SECTION 1. AMENDMENT TO THE FACILITIES AGREEMENT. Effective as of the
-------------------------------------
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 2 below, and in reliance on the representations and warranties
---------
set forth in Section 3 below, on and after the date hereof, the parties hereto
---------
agree that the Facilities Agreement is amended as follows:
1.1 THE PREAMBLE TO THE FACILITIES AGREEMENT IS DELETED IN ITS ENTIRETY
AND THE FOLLOWING SUBSTITUTED THEREFOR:
(a) THE FIRST PARAGRAPH OF THE PREAMBLE TO THE FACILITIES AGREEMENT
IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING:
THIS AMENDED AND RESTATED FACILITIES AGREEMENT originally dated
as of October 24, 1997 and amended by the First Amendment and Consent
thereto (the "FIRST AMENDMENT") dated as of July 15, 1998 is among BOSTON
CHICKEN, INC., a Delaware corporation (the "COMPANY"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of
America Illinois)(in its individual capacity,"BOFA"), as agent for the
Lenders and the Issuing Lender referred to below (in such capacity,
together with its successors and assigns, the "LOAN AGENT"), GENERAL
ELECTRIC CAPITAL CORPORATION, for itself and as agent for the 1996 Lease
Lenders referred to below (in its individual capacity, "GECC"; and in such
dual capacity, together with its successors and assigns, the "1996 LEASE
AGENT"), BofA and GECC, as Co-Agents for the Liquidity Lenders
(individually a "CO-AGENT" and collectively, the "CO-AGENTS") and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the initial Common
Collateral Agent.
(b) THE REMAINING PARAGRAPHS OF THE PREAMBLE TO THE FACILITIES
AGREEMENT ARE HEREBY DELETED IN THEIR ENTIRETY AND THE PREAMBLE TO THIS
AMENDMENT INCORPORATED THEREIN BY REFERENCE.
1.2 SECTION 1.1 OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS:
-----------
(a) TO DELETE THE CURRENT DEFINITIONS FOR THE TERMS SET FORTH BELOW
IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
3
<PAGE>
"COLLATERAL ASSIGNMENT OF LEASE" means any Collateral Assignment
of Tenant's Rights in Lease in substantially the form of Exhibit A
---------
executed by the Company or any Restricted Subsidiary in favor of the
Common Collateral Agent for the benefit of each of the Creditor
Classes. Unless the context otherwise indicates, each reference to
"Collateral Assignment of Lease" shall be to the several Collateral
Assignments of Lease entered into for each of the various Creditor
Classes.
"COLLATERAL ASSIGNMENT OF LOAN" means a Collateral Assignment of
Loan Documentation in substantially the form of Exhibit B executed by
---------
the Company in favor of the Common Collateral Agent for the benefit of
each of the Creditor Classes. Unless the context otherwise indicates,
each reference to "Collateral Assignment of Loan" shall be to the
several Collateral Assignments of Loan entered into for each of the
various Creditor Classes.
"COMMON COLLATERAL AGENT" means the Loan Agent, on behalf of each
of the Creditor Classes; provided, that at such time as the Credit
--------
Agreement shall no longer be in effect, Common Collateral Agent shall
mean, for so long as the 1996 Master Lease is in effect, the 1996
Lease Agent.
"COMMON COLLATERAL DOCUMENTS" means, collectively, (i) the
Security Agreements, the Trademark Security Agreements, the Collateral
Assignments of Loan, the Mortgages, the Collateral Assignments of
Lease, the Landlords' Consents, the Pledge Agreements and all other
security agreements, mortgages, deeds of trust, patent and trademark
assignments, lease assignments, guarantees and other similar
agreements between the Company, any Guarantor or their respective
Subsidiaries and the Common Collateral Agent for the benefit of any of
the Creditor Classes now or hereafter delivered to the Common
Collateral Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable
documents now or hereafter filed in accordance with the Uniform
Commercial Code or comparable law) against the Company, any Guarantor
or their respective Subsidiaries, as debtor, in favor of the Common
Collateral Agent for the benefit of the Creditor Classes, as secured
party, and (ii) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of
the foregoing.
"CREDITORS" has the meaning assigned to that term in the
Intercreditor Agreement; provided, however, solely for purposes of
-------- -------
the use of that term in the definition of Termination Date, in the
prefatory language to Articles II through V-A, and in Sections 2.4,
2.11, 3.7 through 3.9, 4.8, 4.15, 4.16 and 7.4, "CREDITORS" means,
collectively, the Loan Agent, the Revolving Lenders, the Liquidity
Lenders, the 1996 Lease Agent, the 1996 Lease Lenders and the Common
Collateral Agent; and "Creditor" means any of the foregoing Persons.
4
<PAGE>
"EVENT OF DEFAULT" has the meaning set forth in Section 6.1
-----------
hereof; provided, that any requirement for the giving of notice, the
--------
lapse of time, or both, or any other condition, has been satisfied..
"FINANCIAL LEASE" means with respect to any Person at any date,
any Capital Lease of such Person and any operating lease of such
Person entered into outside of the ordinary course of business
(including, without limitation, the 1995 Master Lease but excluding
the 1996 Master Lease).
"FINANCIAL LEASE DEBT" means, as of any date, (1) with respect to
any Capital Lease under which the Company or any of its Restricted
Subsidiaries is the lessee, the principal amount thereof as of such
date as determined in accordance with GAAP, but specifically excluding
Capital Leases of Financed Subsidiaries existing on the date each
Financed Franchisee becomes a Financed Subsidiary; (2) with respect to
the 1995 Master Lease Agreement, the termination value (as defined
therein) as of such date; and (3) with respect to any other Financial
Lease under which the Company or any of its Restricted Subsidiaries is
the lessee, the present value (using a market rate of interest) as of
such date of all remaining rental payments of the Company or such
Restricted Subsidiary under such Financial Leases.
"GUARANTOR" means any Person which from time to time is a party
to a Guaranty, whether as an initial party thereto or by supplement
thereto.
"GUARANTY" means that certain Subsidiary Guaranty dated as of
July 15, 1998 and issued by each of the Restricted Subsidiaries as of
such date in favor of either the Loan Agent for the benefit of the
Revolving Lenders, Issuing Lenders , Liquidity Lenders or the 1996
Lease Agent for the benefit of the 1996 Lease Lenders, substantially
in the form of Exhibit C, in each case as amended from time to time by
---------
the addition through a Guaranty Supplement (in the form attached to
each such Guaranty) of each new Restricted Subsidiary as a party
thereto.
"INTERCREDITOR AGREEMENT" - See Recitals.
"LENDERS" or "LENDER" shall have the meaning assigned to such
term in the Recitals and shall include Bank of America National Trust
and Savings Association while acting in the capacity of a Lender,
unless otherwise expressly indicated herein.
"MORTGAGE" means a mortgage or deed of trust in substantially the
form of Exhibit E executed by the Company or a Restricted Subsidiary
---------
in favor of the Common Collateral Agent for the benefit of each of the
Creditor Classes. Unless the
5
<PAGE>
context otherwise indicates, each reference to a "Mortgage" or the
"Mortgages" shall be to the Mortgages entered into for each of the
various Creditor Classes.
"1996 LEASE DOCUMENTS" means the 1996 Master Lease Agreement, the
associated Subleases, the respective Guaranties, the Facilities
Agreement, the "Secured Promissory Note" and "Reborrowing Note" (as
both such terms are defined in the 1996 Master Lease Agreement) and
all other agreements, instruments and documents (including, without
limitation, mortgages, deeds of trust, chattel mortgages and security
agreements) delivered from time to time to the 1996 Lease Agent with
respect to the foregoing (as amended, supplemented, modified,
restated, refinanced, refunded or renewed from time to time in
accordance with the terms of the Intercreditor Agreement).
"PLEDGE AGREEMENT" means the pledge agreements in substantially
the form of Exhibit F executed by the Company and certain Restricted
---------
Subsidiaries in favor of the Common Collateral Agent for the benefit
of each of the Creditor Classes. Unless the context otherwise
indicates, each reference to the "Pledge Agreement" shall be to the
Pledge Agreements entered into for each of the various Creditor
Classes.
"SENIOR SECURED INDEBTEDNESS" means, at any time, the aggregate
principal amount of liquidity loans, revolving loans, supplemental
revolving loans and letter of credit obligations (including, without
limitation, the unreimbursed amount of any draws under the letters of
credit) then outstanding under the Credit Agreement, the aggregate
outstanding principal amount of the loans under the 1996 Master Lease
plus the aggregate amount of all Financial Lease Debt then
outstanding..
"SECURITY AGREEMENT" means any Security Agreement in
substantially the form of Exhibit G-1 with respect to the Company and
-----------
Exhibit G-2 with respect to the Restricted Subsidiaries in favor of
-----------
the Common Collateral Agent for the benefit of each of the Creditor
Classes. Unless the context otherwise indicates, each reference to a
"Security Agreement" or the "Security Agreements" shall be to the
Security Agreements entered into for each of the various Creditor
Classes.
"STORE REVENUE" means, for any Store, the weekly net revenue
(i.e. gross revenue net of all coupons, discounts and other amounts
deducted from gross revenues to obtain net revenue) for such Store
(whether such Store is operated by the Company or a Franchisee).
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security
Agreement substantially in the form of Exhibit H executed by the
---------
Company or any Restricted Subsidiary in favor of the Common Collateral
Agent for the benefit of the Creditor Classes. Unless the context
otherwise indicates, each reference to a "Trademark
6
<PAGE>
Security Agreement" or the "Trademark Security Agreements" shall be to
the Trademark Security Agreements entered into for each of the various
Creditor Classes.
(b) TO ADD EACH OF THE FOLLOWING DEFINITIONS IN THE APPLICABLE
ALPHABETICAL LOCATION:
"AGENTS' EXPENSES" means all of the fees, costs and expenses of
the Common Collateral Agent, the Loan Agent or the 1996 Lease Agent
(including, without limitation, all "Attorney Costs" (as defined in
the Intercreditor Agreement), all amounts covered by the terms of
Section 7.5 (including, without limitation, for fees and expenses of
-----------
Ernst & Young as financial advisors), all Indemnified Liabilities of
the type described in Section 7.11 and all other costs and expenses)
------------
(i) arising in connection with the preparation, execution, delivery,
modification, restatement, amendment, waiver, termination,
interpretation of this Agreement, the Intercreditor Agreement and each
other Credit Document or the enforcement (whether in the context of a
civil action, adversary proceeding, workout or otherwise) of any of
the provisions hereof or thereof or any of the Common Collateral
Agent's, Loan Agent's or 1996 Lease Agent's remedies with respect
thereto, or (ii) incurred or required to be advanced in connection
with the sale or other disposition or the custody, preservation or
protection of the Collateral pursuant to any Credit Document and the
exercise or enforcement of the Common Collateral Agent's, Loan
Agent's, or 1996 Lease Agent's rights under this Agreement, the other
Credit Documents, the 1996 Lease Documents and in and to the
Collateral.
"ASSET SALE" has the meaning set forth in Section 3.15(a)(i)
------------------
hereof.
"ASSET SALE PREPAYMENT" has the meaning set forth in Section
-------
3.15(a)(i) hereof.
----------
"BUDGET" shall mean the Budget and related parameters attached as
Exhibit A to the Confidential Agreement as amended from time to time
---------
in accordance with the provisions of the Intercreditor Agreement.
"COLLATERAL" has the meaning given that term in the Intercreditor
Agreement.
"COLLECTION ACCOUNT" means each lock-box and blocked depository
account maintained by the Company and each of its Subsidiaries,
subject to a Collection Account Agreement, for the collection of daily
receipts from the Stores and other proceeds of Collateral.
"COLLECTION ACCOUNT AGREEMENT" means a written agreement
substantially in the form of Exhibit L attached hereto (with such
---------
changes as may be acceptable
7
<PAGE>
to the Common Collateral Agent) among the Company or its Subsidiaries,
the Common Collateral Agent, and, as applicable, each of the banks at
which the Company and its Subsidiaries maintains a Collection Account.
"COLLECTION ACCOUNT BLOCKAGE DATE" means the date, following the
occurrence of a Default (other than, during the Suspension Period, a
Suspended Default), on which (a) the Loan Agent and the Lease Agent,
(b) the Majority Liquidity Lenders or (c) the Majority Revolving
Lenders, the Majority 1996 Lease Lenders and the Required 1996 Lenders
(as each such term is defined in the Intercreditor Agreement), in the
sole discretion of any of the groups identified in clause (a), (b) or
(c), instruct(s) the Common Collateral Agent to instruct any financial
institution party to a Collection Account Agreement as described in
the applicable Collection Account Agreement to remit, during the
continuance of such Default, all amounts deposited in the relevant
Collection Account to the Common Collateral Agent or as the Common
Collateral Agent shall direct.
"CONFIDENTIAL AGREEMENT" shall mean that certain Confidential
Agreement dated as of the Restructuring Effective Date entered into
among the Company, the Loan Agent, the 1996 Lease Agent and the Common
Collateral Agent.
"CREDITOR CLASSES" means the following three groups of Creditors:
(1) the Liquidity Lenders, the Revolving Lenders, the Issuing Lender
and the 1996 Lease Lenders; (2) the Cash Management Banks; and (3) the
Other Creditors.
"ENBC SALE" has the meaning set forth in Section 3.15(b)(i)
------------------
hereof.
"ENBC SALE PREPAYMENT" has the meaning set forth in Section
-------
3.15(b)(i) hereof.
----------
"EXCLUDED ASSET SALE" means any Asset Sale consummated pursuant
to the provisions of clauses (1),(2) or (4) of Section 4.7 hereof.
-----------
"EXISTING 1996 REAL ESTATE COLLATERAL DOCUMENTS" has the meaning
set forth in Section 3.13 hereof.
------------
"FIXED FEE DISTRIBUTION AGREEMENT" shall mean that certain Fixed
Fee Distribution Agreement dated September 30, 1996 by and between
Marriott and the Company, as the same may be amended, modified,
supplemented, renewed, or restated from time to time in accordance
with the terms hereof.
"GENERAL EBITDAL COVENANT" has the meaning set forth in Section
-------
5A.1 hereof.
----
8
<PAGE>
"LEAD 1996 LEASE LENDER" has the meaning given that term in the
Credit Agreement.
"LIQUIDITY EBITDAL COVENANT" has the meaning set forth in Section
-------
5A.2 hereof.
----
"LIQUIDITY PERCENTAGE" has the meaning given that term in the
Credit Agreement.
"LIQUIDITY PERIOD" has the meaning given that term in the
Intercreditor Agreement.
"MARRIOTT" shall mean Marriott Distribution Services, Inc.
"NET CASH PROCEEDS" shall mean, in the case of any Asset Sale or
any ENBC Sale, cash payments received (including any cash received by
way of deferred payment pursuant to a note receivable or otherwise,
but only as and when so received) by the Company or any of its
Restricted Subsidiaries from any Asset Sale or ENBC Sale less the
----
amount of reasonable fees and commissions payable to persons other
than the Company or such Restricted Subsidiary, and other normal
expenses of sale, including reasonable costs and expenses related to
such sale or other disposition that are to be paid in cash.
"1996 LEASE AGENT" has the meaning set forth in the preamble.
All references in this Agreement to the "Lease Agent" shall mean and
be a reference to the 1996 Lease Agent.
"1996 LEASE LENDERS" has the meaning set forth in the preamble.
All references in this Agreement to the "Lease Participants" shall
mean and be a reference to the 1996 Lease Lenders. Notwithstanding
the foregoing, any Reborrowing Loan or other amount to be made by the
1996 Lease Lenders or any payment that is required to be made
hereunder or under the Intercreditor Agreement to the 1996 Lease
Lenders shall in either such case be made by or to the Lead 1996 Lease
Lender, and the Lead 1996 Lease Lender shall collect amounts from or
distribute amounts to the 1996 Lease Lenders in accordance with the
terms of the applicable participation agreements.
"1996 LENDER" has the meaning given that term in the
Intercreditor Agreement.
"PRO RATA 1996 SHARE" means with respect to any 1996 Lender, the
percentage obtained by dividing (A) the sum of the principal amount of
such 1996 Lender's Revolving Obligations and 1996 Lease Obligations at
such time by (B) the
9
<PAGE>
sum of the aggregate principal amount of the Revolving Obligations and
1996 Lease Obligations at such time.
"REBORROWING AVAILABILITY" means, as of any time of
determination, the aggregate Reborrowing Availability Amount minus the
aggregate amount of Reborrowing Loans outstanding as of such time.
"REBORROWING AVAILABILITY AMOUNT" has the meaning set forth in
Section 3.15(b)(iv)(A) hereof.
----------------------
"REBORROWING AVAILABILITY COMMENCEMENT DATE" has the meaning set
forth in Section 3.15(b)(iv)(B) hereof.
----------------------
"REBORROWING AVAILABILITY PERIOD" means the period from the
Reborrowing Availability Commencement Date through the Reborrowing
Availability Termination Date.
"REBORROWING AVAILABILITY TERMINATION DATE" means the first date
to occur of (i) the occurrence of an Event of Default (other than,
during the Suspension Period, a Suspended Default) and (ii) October
17, 1998.
"REBORROWING COMMITMENTS" means the Reborrowing Commitments -
Revolver and Reborrowing Commitments - 1996 Master Lease.
"REBORROWING COMMITMENTS - REVOLVER" means for each Revolving
Lender, as of any time of determination, its provisional commitment to
make Reborrowing Loans in an amount not to exceed its Pro Rata 1996
Share of Reborrowing Availability at such time.
"REBORROWING COMMITMENTS - 1996 MASTER LEASE" means for each 1996
Lease Lender, as of any time of determination, its provisional
commitment to make Reborrowing Loans in an amount not to exceed its
Pro Rata 1996 Share of Reborrowing Availability at such time.
"REBORROWING LOAN" has the meaning set forth in Section
-------
3.15(b)(iv)(D) hereof.
--------------
"REBORROWING PERIOD" means the period commencing on the
Reborrowing Availability Commencement Date and ending on the first
date thereafter on which all of the Reborrowing Loans have been paid
in full and the Reborrowing Commitment has been terminated.
10
<PAGE>
"REBORROWING REQUEST" has the meaning set forth in Section
-------
3.15(b)(iv)(C) hereof.
--------------
"RESTRUCTURING EFFECTIVE DATE" means the date on which all of
the conditions precedent to the effectiveness of the First Amendment
hereto shall have been satisfied or waived.
"SPECIFIED LIQUIDITY PERIOD" means the period from and after the
Restructuring Effective Date until the date on which (i) the Liquidity
Obligations have been paid in full and all Liquidity Commitments have
been terminated and (ii) the Reborrowing Loans have been paid in full
and the Reborrowing Commitments have been terminated.
"SUSPENDED DEFAULTS" has the meaning given that term in the
Intercreditor Agreement.
"SUSPENSION PERIOD" means the period from the Restructuring
Effective Date to the Suspension Termination Date.
"SUSPENSION TERMINATION DATE" means October 17, 1998, or such
earlier date after the Restructuring Effective Date on which any
Default other than a Suspended Default has occurred.
"TAX REFUND PREPAYMENT" has the meaning set forth in Section 3.15
------------
hereof.
"TERMINATION DATE" has the meaning given that term in the Credit
Agreement.
(c) TO DELETE THE DEFINED TERM "AGENCY AGREEMENT" THEREFROM; AND
(d) TO ADD THE FOLLOWING AT THE END THEREOF:
In the event that capitalized terms are used in this Agreement and not
defined in this Agreement, such terms shall have the meaning given to them
in the Intercreditor Agreement.
1.3 ARTICLE II OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS:
--------
(a) SECTION 2.4 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE
-----------
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 2.4 Financial Statements. The Company's audited
--------------------
consolidated financial statements as of December 28, 1997 (the
"Audited Statements") and its unaudited consolidated financial
statements as of April 19, 1998, ("Unaudited
11
<PAGE>
Statements") have been furnished to each Creditor. The Audited
Statements have been prepared in conformity with GAAP and fairly
present the financial condition of the Company and its Subsidiaries as
of such dates and the results of operations for the periods then
ended. The Unaudited Statements have been prepared in a manner
consistent (except for changes in accounting policies permitted by
GAAP which have been or are contemporaneously disclosed in writing to
each Creditor) with the Audited Statements, except for the lack of
normal year-end accruals, reclassifications, and audit adjustments and
financial statement footnotes. Except as has been disclosed prior to
the Restructuring Effective Date in public filings made by the Company
with the Securities and Exchange Commission and except as set forth in
the Budget, since the date of the Unaudited Statements, there has been
no Material Adverse Change. No information, exhibit, or report
furnished by the Company to the Creditors in connection with the
negotiation of this Agreement (including, without limitation, any
amendment thereto), considered as a whole with all other information,
exhibits and reports furnished to the Creditors in connection with the
negotiation of this Agreement (including, without limitation, any
amendment thereto) at the time it was furnished (and as modified or
superseded by any information, exhibits and reports subsequently
furnished to the Creditors), contained any material misstatement of
fact or omitted to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which
they were made, not materially misleading; provided, that except as
expressly provided below, the Company makes no representation,
--------
warranty, or guaranty as to (1) any projections furnished to the
Creditors (it being understood that such projections have been
prepared by management of the Company on the basis of assumptions
which such management believed were reasonable as of the date of such
projections in light of the historical financial performance of the
business of the Company and of current and reasonably foreseeable
business conditions) or (2) any information supplied by Franchisees or
contained in analyst reports or other reports prepared by third
parties or derived therefrom unless in the case of this clause (2) the
Company has actual knowledge at the time such information is delivered
to the Creditors that such information contains a material
misstatement of fact or omits to state a material fact necessary to
make the statements contained therein, in light of the circumstances
under which they were made, not materially misleading.
(b) SECTION 2.19 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE
------------
CLAUSE (d) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING
THEREFOR:
(d) The Company and each of its Restricted Subsidiaries have
entered into documents which are effective to create the security
interests and Liens as follows::
(i) Liens to secure the Liquidity Obligations, 1996 Lease
Obligations and the Revolving Obligations by the 1996 Collateral;
12
<PAGE>
(ii) Liens to secure the Cash Management Obligations by the
1996 Collateral; and
(iii) Liens to secure the Supplemental Obligations by the
1996 Collateral,
and each of such documents secure the "Secured Obligations" purported
to be secured thereby.
1.5 ARTICLE III OF THE FACILITIES AGREEMENT IS HEREBY AMENDED AS FOLLOWS:
-----------
(a) SECTION 3.4 OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE
-----------
FOLLOWING IN THE PROVISO THERETO, IMMEDIATELY PRIOR TO THE PARENTHETICAL
CONTAINED THEREIN:
;provided, further, however, that the Net Cash Proceeds of any such
sale or other disposition shall be paid to the Common Collateral Agent
to the extent required pursuant to Section 3.15 below
------------
(b) SECTION 3.5 OF THE FACILITIES AGREEMENT IS AMENDED BY INSERTING
-----------
THE FOLLOWING AT THE END THEREOF:
The Company shall deliver to the Common Collateral Agent endorsements
(y) to all "All Risk" physical damage insurance policies on all of the
Company's and its Restricted Subsidiaries' tangible real and personal
property and assets and business interruption insurance policies
naming the Common Collateral Agent loss payee or, in the case of the
"Lease Assets" (as defined in the 1996 Master Lease), as additional
loss payee in addition to the 1996 Lease Agent, and (z) to all general
liability and other liability policies naming the Common Collateral
Agent on behalf of itself and the Creditors as additional insured. In
the event the Company or any of its Restricted Subsidiaries, at any
time or times hereafter shall fail to obtain or maintain any of the
policies or insurance required herein or to pay any premium in whole
or in part relating thereto, then the Common Collateral Agent or any
Creditor, without waiving or releasing any obligations or resulting
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 premiums and take any other action with respect
thereto which the Common Collateral Agent or such Creditor deems
advisable. All sums so disbursed by the Common Collateral Agent or
any Creditor shall constitute part of the Secured Obligations, payable
as provided in this Agreement and the other Credit Documents.
(c) TO DELETE THE TERMS OF SECTION 3.8(4) OF THE FACILITIES AGREEMENT
--------------
IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
13
<PAGE>
3.8(4) Compliance Certificate; Budget Reconciliation. Together
---------------------------------------------
with the financial statements furnished by the Company under the
preceding clauses (1), (2) and (3), a duly completed compliance
----------- ---- ---
certificate in the form of Exhibit I signed by the Chief Financial
---------
Officer, Chief Accounting Officer, Vice President - Finance or any
Senior Vice President of the Company (in his or her capacity as such,
and without personal liability therefor) and together with the
financial statements furnished by the Company under the preceding
clauses (1) and (2), a reconciliation report of actual to projected
----------- ---
experience on the Budget, in form and substance and containing such
supporting information as is reasonably acceptable to the Agents,
signed by the Chief Financial Officer, Chief Accounting Officer, Vice
President - Finance or any Senior Vice President of the Company (in
his or her capacity as such, and without personal liability therefor)
and ;
(d) TO DELETE THE TERMS OF SECTION 3.8(6) OF THE FACILITIES AGREEMENT
--------------
IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
(6) Updated Schedules. On the Restructuring Effective Date and
-----------------
as soon as reasonably available thereafter (but in any event within
forty-five (45) days after the end of each fiscal quarter of the
Company or if requested in writing by any Creditor within forty-five
(45) days after the end of each Retail Period), updated Schedules
---------
2.16, 2.17 (on which Schedule it shall identify whether such
----
Collateral is collateral securing the 1995 Master Lease (the "1995
COLLATERAL") or the "Collateral" (as such term is defined in the
Intercreditor Agreement)) and 2.18 hereto, which updated schedules
----
shall be deemed as of the date of delivery to amend and restate (a)
the previously delivered Schedules 2.16, 2.17 and 2.18 in their
-------------- ---- ----
entirety, (b) in the case of Schedule 2.16, Attachment I to each of
-------------
the Pledges Agreement in their entirety (provided, that the following
--------
items listed on Schedule 2.16 shall be deleted before such schedule
-------------
shall be deemed to be Attachment I to the Pledge Agreements: (A) the
equity interests designated with an asterisk ("*") on the initial
Schedule 2.16 attached hereto and (B) notes or other instruments
-------------
evidencing loans and advances permitted by clause (ii) of Section
----------- -------
4.8), (c) in the case of Schedule 2.17, Schedule I to each of the
-------------
Security Agreements in its entirety and (d) in the case of Schedule
--------
2.18, Schedule I to each of the Collateral Assignments of Loan in its
----
entirety;
(e) TO DELETE THE REFERENCE TO CLAUSE (4) OF SECTION 4.7 CONTAINED IN
-----------
SECTION 3.8(14) THEREFROM IN ITS ENTIRETY AND TO SUBSTITUTE A REFERENCE TO
---------------
CLAUSE (5) OF SECTION 4.7 THEREFOR.
-----------
(f) TO DELETE THE TERMS OF SECTION 3.8 (15) OF THE FACILITIES
----------------
AGREEMENT IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
14
<PAGE>
(16) General information. Such other information respecting the
-------------------
condition or operations, financial or otherwise, of the Company or any
Subsidiary as any of the Loan Agent, the Lease Agent, the
Documentation Agent, the Common Collateral Agent or the Required
Creditors may from time to time reasonably request. Without limiting
the foregoing, the Company and its Subsidiaries shall cooperate with
the Agents and their financial advisors and provide access to
information sufficient so that such financial advisors can prepare a
reconciliation of the Company and its Subsidiaries' actual performance
to that projected in the short-term treasury (cash-flow) model
prepared by the Company and previously delivered to the Creditors (as
the same may be updated from time to time).
(g) TO INSERT THE FOLLOWING AFTER SECTION 3.8(14) OF THE FACILITIES
---------------
AGREEMENT:
(15) Weekly Store Revenue. As soon as available and in any
--------------------
event within five Business Days after the end of each calendar week,
a report of Store Revenue for all Stores operated by the Company, its
Restricted Subsidiaries and each Financed Franchisee, in form and
substance and containing such supporting information as is reasonably
acceptable to the Agents, signed by the Chief Financial Officer, Chief
Accounting Officer, Vice President - Finance or any Senior Vice
President of the Company (in his or her capacity as such, and without
personal liability therefor), including, without limitation, the
"flash" report of sales by week by unit in the most complete form as
previously delivered to each of the Agents; and
(h) TO DELETE THE TERMS OF SECTION 3.10 IN THEIR ENTIRETY AND TO
------------
SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 3.10 [Intentionally Blank.]
(i) TO AMEND SECTION 3.11 OF THE FACILITIES AGREEMENT BY AMENDING
------------
EACH REFERENCE THEREIN TO THE "PLEDGE AGREEMENT" TO BE A REFERENCE TO "EACH
OF THE PLEDGE AGREEMENTS" AND TO FURTHER AMEND SECTION 3.11 OF THE
------------
FACILITIES AGREEMENT BY DELETING CLAUSE (y) THEREOF IN ITS ENTIRETY AND TO
SUBSTITUTE THE FOLLOWING THEREFOR:
(y) is consistent with the terms of this Agreement and the other
Credit Documents.
(j) TO AMEND SECTION 3.13 OF THE FACILITIES AGREEMENT BY ADDING THE
------------
FOLLOWING AT THE END THEREOF:
In addition, as of the Restructuring Effective Date, the Company shall
and shall cause each of its Restricted Subsidiaries to:
15
<PAGE>
(A) Enter into amendments and/or amendments and restatements, in
form and substance reasonably acceptable to the Agents and the
Liquidity Lenders, to each of the Mortgages and Collateral Assignments
of Lease previously delivered (the "EXISTING 1996 REAL ESTATE
COLLATERAL DOCUMENTS") to add the Liquidity Obligations to the
obligations secured thereby;
(B) Enter into additional Mortgages and Collateral Assignments
of Lease in form and substance substantially similar to the Existing
1996 Real Estate Collateral Documents, as amended, and covering the
same real estate interests together with the interests pledged to the
1996 Lease Agent (subject to the terms of the Intercreditor Agreement)
in order to secure:
(1) the Cash Management Obligations; and
(2) the Supplemental Obligations
together with such other documentation as shall be necessary in the
reasonable determination of the Common Collateral Agent to effect the
assignment of the rights, title and interest of the Company or such
Restricted Subsidiary, as the case may be, in and to such owned and
leased real property.
(K) TO AMEND SECTION 3.14 OF THE FACILITIES AGREEMENT BY DELETING THE
------------
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 3.14 Further Assurances. Promptly upon request by
------------------
the Common Collateral Agent, the Loan Agent, the 1996 Lease Agent or
any of the Majority Liquidity Lenders, the Majority 1996 Lease
Lenders, the Majority Revolving Lenders, any Cash Management Bank or
any Other Creditor, as applicable, the Company shall (and shall cause
any of its Subsidiaries to) do, execute, acknowledge where necessary,
deliver, record, re-record, file, re-file, register and re-register,
any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices
of assignment, transfers, certificates, assurances and other
instruments as the Common Collateral Agent or such Creditors, as the
case may be, may reasonably require from time to time in order (i) to
carry out more effectively the intent and purposes of this Agreement
or any other Common Collateral Document, (ii) to subject to the Liens
created by any of the Common Collateral Documents any of the
properties, rights or interests covered by any of the Common
Collateral Documents, and (iii) to perfect and maintain the validity,
effectiveness and priority of any of the Common Collateral Documents
and the Liens intended to be created thereby. Without in any way
limiting the foregoing, on or prior to the date that is 30 days
following the Restructuring Effective Date, the Company shall and
shall cause each of its
16
<PAGE>
Restricted Subsidiaries to provide to the Common Collateral Agent all
legal descriptions which were not available for owned or leased
locations as of the Restructuring Effective Date sufficient to permit
the filing of UCC fixture filings for such locations.
(l) TO ADD THE FOLLOWING AFTER SECTION 3.14 OF THE FACILITIES
------------
AGREEMENT:
SECTION 3.15 Mandatory Prepayments.
---------------------
(a) Asset Sales and Tax Refunds.
---------------------------
(i) Asset Sale Prepayments. Upon the consummation by the
----------------------
Company or any Restricted Subsidiary of any transaction, whether
voluntary or involuntary (including, as a result of any condemnation
proceeding) involving the sale, lease, assignment, transfer, or other
disposition of any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Restricted Subsidiaries (but not including the sale, assignment,
transfer or other disposition of the shares of stock of ENBC),
receivables, real property, leasehold interests, franchise agreements,
trademarks, trade names, copyrights, licenses and other general
intangible interests) (an "ASSET SALE") (other than the Excluded Asset
Sales), except to the extent that the gross amount of the proceeds of
such Asset Sale, when combined with the gross amount of the proceeds
of all such Asset Sales during the period from the Restructuring
Effective Date to the date of such Asset Sale, do not exceed
$5,100,000, on the Business Day of the Company's or any of its
Restricted Subsidiaries' (i) receipt of any Net Cash Proceeds from any
such Asset Sale, or (ii) conversion to cash or cash equivalents of
non-cash proceeds (whether principal or interest and including
securities, release of escrow arrangements, success payments, earnouts
or lease payments) received from any Asset Sale, the Company shall
make a mandatory prepayment of the Secured Obligations in an amount
equal to one hundred percent (100%) of such Net Cash Proceeds or such
proceeds converted from non-cash to cash or cash equivalents (an
"ASSET SALE PREPAYMENT"). Notwithstanding anything herein to the
contrary, no Asset Sale Prepayment shall be required from the proceeds
of the sale, lease, assignment, transfer or other disposition of (y)
any of the 1995 Collateral or (z) any of the Sanwa Collateral
(although amounts received therefrom shall be included for purposes of
determining whether the Company has exceeded the $5,100,000 threshold
above). The Company shall make each such Asset Sale Prepayment to the
Common Collateral Agent for the benefit of the Creditors as their
interests appear and the Common Collateral Agent shall distribute the
proceeds thereof in accordance with the terms of clause (iii) below.
(ii) Tax Refund Prepayments. Upon the receipt by the Company or
----------------------
any Restricted Subsidiary of any payments from federal, state or local
tax refunds, the
17
<PAGE>
Company shall make a mandatory prepayment of the Secured Obligations
in an amount equal to one hundred percent (100%) of such tax refund
payments (a "TAX REFUND PREPAYMENT"). The Company shall make each such
Tax Refund Prepayment to the Common Collateral Agent for the benefit
of the Creditors as their interests appear and the Common Collateral
Agent shall distribute the proceeds thereof in accordance with the
terms of clause (iii) below.
(iii) Application of Asset Sale and Tax Refund Prepayments.
----------------------------------------------------
Each Asset Sale Prepayment and each Tax Refund Prepayment shall be
allocated and applied to the Secured Obligations as follows:
FIRST: If such prepayment is made after the occurrence of
an Actionable Default, to the Common Collateral Agent in an
amount equal to the Agents' Expenses that are unpaid as of such
date, and to any of the Creditors that has theretofore advanced
or paid any such Agents' Expenses in an amount equal to the
amount thereof so advanced or paid by such Creditor prior to such
date;
SECOND: If such prepayment is made after the occurrence of
an Actionable Default, to the Liquidity Lenders for the payment
of the accrued and unpaid interest and fees with respect to the
Liquidity Obligations, pro rata in accordance with each Liquidity
Lender's Liquidity Percentage;
THIRD: To the Liquidity Lenders for the prepayment of the
outstanding principal balance of the Liquidity Obligations, pro
rata in accordance with each Liquidity Lender's Liquidity
Percentage and the Liquidity Commitments of such Liquidity Lender
shall be permanently reduced pro tanto;
--- -----
FOURTH: If such prepayment is made after the occurrence of
an Actionable Default, to the 1996 Lenders for the payment of the
accrued and unpaid interest and fees with respect to the
Revolving Obligations and 1996 Lease Obligations, pro rata in
accordance with each 1996 Lender's Pro Rata 1996 Share;
FIFTH: To the 1996 Lenders, for the payment of the
outstanding principal balance of the Revolving Obligations and
the 1996 Lease Obligations, pro rata in accordance with such 1996
Lender's Pro Rata 1996 Share, as a permanent reduction of the
Revolving Obligations and 1996 Lease Obligations so repaid; and
SIXTH: To the Common Collateral Agent for application
pursuant to clauses FIRST through FIFTH of Section 3.3(a) of the
--------------
Intercreditor
18
<PAGE>
Agreement, as applied without regard to whether or not an
Actionable Default exists.
(iv) Miscellaneous Matters. In the event that a portion of the
---------------------
Revolving Obligations to be repaid pursuant to clause (iii) FOURTH
-------------------
above shall include contingent reimbursement obligations in respect of
Letters of Credit, the allocable amount with respect thereto shall be
deposited with the Common Collateral Agent as cash collateral in
respect of such letter of credit obligations. On each date on which a
payment is made to a beneficiary pursuant to a draw on a Letter of
Credit, the Common Collateral Agent shall distribute to the Issuing
Lender from the amounts held pursuant to this subsection (iv) for
---------------
application to the payment of the reimbursement obligation due to
Issuing Lender with respect to such draw an amount equal to the
product of (1) the total amount then held pursuant to this clause
------
(iv), and (2) a fraction, the numerator of which is the amount of such
draw and the denominator of which is the aggregate undrawn amount of
all outstanding Letters of Credit immediately prior to such draw. On
each date on which a reduction in the undrawn amount of any
outstanding Letter of Credit occurs other than on account of a payment
made to a beneficiary pursuant to a draw on such Letter of Credit, the
Agent shall distribute from the amounts held pursuant to this clause
------
(iv) an amount equal to the product of (1) the total amount then held
----
pursuant to this clause (iv) and (2) a fraction the numerator of which
-----------
is the amount of such reduction and the denominator of which is the
aggregate undrawn amount of all outstanding Letters of Credit
immediately prior to such reduction, which amount shall be distributed
as provided in clause (iii) above. At such time as no Letters of
------------
Credit are outstanding, any remaining amount held pursuant to this
clause (iv), after the distribution therefrom as provided above, shall
-----------
be distributed as provided in clause (iii) above. No amounts repaid
------------
under this Section 3.15(a) shall be permitted to be reborrowed.
---------------
(b) ENBC Prepayments.
----------------
(i) ENBC Sale Prepayments. Upon the consummation by the Company
---------------------
of any transaction involving the sale, assignment, transfer, or other
disposition of any of the capital stock of ENBC owned of record or
beneficially by the Company (an "ENBC SALE"), the Company shall make a
mandatory prepayment of the Secured Obligations in an amount equal to
one hundred percent (100%) of the Net Cash Proceeds from such ENBC
Sale or such proceeds converted from non-cash to cash or cash
equivalents (an "ENBC PREPAYMENT"). The Company shall make such
mandatory prepayment to the Common Collateral Agent for the benefit of
the Creditors as their interests appear and the Common Collateral
Agent shall distribute the proceeds thereof in accordance with the
terms of clause (ii) below.
-----------
(ii) Application of ENBC Prepayments. Each ENBC Prepayment
-------------------------------
shall be allocated and applied to the Secured Obligations as follows:
19
<PAGE>
FIRST: If such ENBC Prepayment is made after the occurrence
of an Actionable Default, to the Common Collateral Agent in an
amount equal to the Agents' Expenses that are unpaid as of such
date, and to any of the Creditors that has theretofore advanced
or paid any such Agents' Expenses in an amount equal to the
amount thereof so advanced or paid by such Creditor prior to such
date;
SECOND: An amount equal to twenty-five percent (25%) of the
remaining Net Cash Proceeds from such ENBC Sale Prepayment to the
1996 Lenders for the payment of (a) first, if such ENBC
Prepayment is made after the occurrence of an Actionable Default,
the accrued and unpaid interest and fees with respect to the
Revolving Obligations and 1996 Lease Obligations, pro rata in
accordance with each 1996 Lender's Pro Rata 1996 Share; and (b)
second, the outstanding principal balance of the Revolving
Obligations and the 1996 Lease Obligations, pro rata in
accordance with each 1996 Lender's Pro Rata 1996 Share as a
permanent reduction of the Revolving Obligations and 1996 Lease
Obligations so repaid;
THIRD: An amount equal to the lesser of: (a) the
outstanding amount of the Liquidity Obligations (calculated to
include interest and fees only if such calculation is made after
the occurrence of an Actionable Default) and (b) the remaining
amount of the ENBC Prepayment after payment of the amounts under
clauses FIRST and SECOND above, to the Liquidity Lenders for the
payment of (a) first, if such ENBC Prepayment is made after the
occurrence of an Actionable Default, the accrued and unpaid
interest and fees with respect to the Liquidity Obligations, pro
rata in accordance with each Liquidity Lender's Liquidity
Percentage and (b) second, the outstanding principal balance of
the Liquidity Obligations, pro rata in accordance with each
Liquidity Lender's Liquidity Percentage and, upon such prepayment
of principal, the Liquidity Commitments of each Liquidity Lender
shall be permanently reduced pro tanto (subject to further
--- -----
reduction pursuant to clause FOURTH below);
FOURTH: An amount equal to the lesser of: (a) the sum of
the outstanding amount of the Revolving Obligations and the 1996
Lease Obligations (in each case calculated to include interest
and fees only if such calculation is made after the occurrence of
an Actionable Default) and (b) the remaining amount of the ENBC
Prepayment after payment of the amounts under clauses FIRST,
SECOND and THIRD above to the 1996 Lenders, for the payment of
(i) first, if the calculation above was made after the occurrence
of an Actionable Default, the accrued and unpaid interest and
fees with respect to the Revolving Obligations and 1996 Lease
Obligations pro rata in accordance with each 1996 Lender's Pro
Rata 1996 Share and
20
<PAGE>
(ii) second, the outstanding principal balance of the Revolving
Obligations and 1996 Lease Obligations pro rata in accordance
with each 1996 Lender's Pro Rata 1996 Share; and
FIFTH: Any excess, to the Common Collateral Agent for
application pursuant to clauses FIRST through FIFTH of Section
-------
3.3(a) of the Intercreditor Agreement, as applied without regard
------
to whether or not an Actionable Default exists.
(iii) Miscellaneous Matters. In the event that a portion of the
---------------------
Revolving Obligations to be repaid pursuant to clause (ii) above shall
-----------
include contingent reimbursement obligations in respect of Letters of
Credit, the allocable amount (the "L/C Amount") with respect thereto
shall be deposited with the Common Collateral Agent as cash collateral
in respect of such letter of credit obligations. On each date on
which a payment is made to a beneficiary pursuant to a draw on a
Letter of Credit, the Common Collateral Agent shall distribute to the
Issuing Lender from the amounts held pursuant to this subsection (iii)
----------------
for application to the payment of the reimbursement obligation due to
Issuing Lender with respect to such draw an amount equal to the
product of (1) the total amount then held pursuant to this clause
------
(iii), and (2) a fraction, the numerator of which is the amount of
-----
such draw and the denominator of which is the aggregate undrawn amount
of all outstanding Letters of Credit immediately prior to such draw.
On each date on which a reduction in the undrawn amount of any
outstanding Letter of Credit occurs other than on account of a
Reborrowing Loan or a payment made to a beneficiary pursuant to a draw
on such Letter of Credit, the Agent shall distribute from the amounts
held pursuant to this clause (iii) an amount equal to the product of
------------
(1) the total amount then held pursuant to this clause (iii) and (2) a
------------
fraction the numerator of which is the amount of such reduction and
the denominator of which is the aggregate undrawn amount of all
outstanding Letters of Credit immediately prior to such reduction,
which amount shall be distributed as provided in clause (ii). At such
-----------
time as no Letters of Credit are outstanding, any remaining amount
held pursuant to this clause (iii), after the distribution therefrom
------------
as provided above, shall be distributed as provided in clause (ii)
-----------
above. Notwithstanding anything herein to the contrary, the L/C
Amount shall be subject to reborrowing either (a) from the cash
collateral deposited with the Common Collateral Agent and/or (b) from
amounts distributed in payment of reimbursement obligations due with
respect to any Letter of Credit at the times, in the amounts and
otherwise on the same terms and conditions as though such amount had
been distributed to the Revolving Lenders pursuant to the terms of
clause FOURTH above.
(iv) Effect of ENBC Prepayments; Reborrowing Availability
----------------------------------------------------
Amount; Procedure for Reborrowing.
---------------------------------
21
<PAGE>
(A) The "REBORROWING AVAILABILITY AMOUNT" shall initially be
zero ($0.00). Upon each payment pursuant to the preceding clause
------
(ii) FOURTH (each a "LEVEL 4 PAYMENT"), the Reborrowing
-----------
Availability Amount shall be increased by an amount equal to the
lesser of (x) the aggregate amount of the Liquidity Facility
Commitments, if any, that remain after the reduction thereof
pursuant to the preceding clause (ii) THIRD that corresponds to
-----------------
such Level 4 Payment and (y) the aggregate principal amount of
such Level 4 Payment. Concurrent with any increase in the
Reborrowing Availability Amount as provided in the preceding
sentence, the Liquidity Commitments of each Liquidity Lender
shall be permanently reduced pro tanto.
--- -----
(B) From and after the time at which the Reborrowing
Availability Amount is first increased from zero pursuant to the
preceding clause (iv)(A) (the date of the first such increase in
the Reborrowing Availability Amount, the "REBORROWING
AVAILABILITY COMMENCEMENT DATE"):
(1) each of the Revolving Lenders and the Lead 1996
Lease Lender shall be obligated, in accordance with the
terms hereof and of Section 2.7(4) of the Credit Agreement
--------------
and Section IIA of the 1996 Lease Agreement and subject to
-----------
the other terms and conditions contained herein and therein
and applicable thereto, to reloan its Pro Rata 1996 Share of
the Reborrowing Availability Amount; and
(2) No Liquidity Loans shall be made at any time at
which there are unused Reborrowing Commitments hereunder.
(C) Any authorized officer of the Company may request a
Reborrowing Loan on behalf of the Company during the Reborrowing
Availability Period by giving simultaneous written notice to the
Loan Agent and the 1996 Lease Agent in the form of Exhibit J
---------
attached hereto ("REBORROWING REQUEST") or such other form as
shall be acceptable to the Loan Agent and the 1996 Lease Agent.
Each Reborrowing Request shall constitute a deemed representation
and warranty by the Company that the conditions contained in each
of the Credit Documents to the making of such a Reborrowing Loan
have been satisfied. Each Reborrowing Request must be received by
the Loan Agent and the 1996 Lease Agent prior to 10:00 A.M.,
Chicago time, on the proposed date of such borrowing (which must
be a Business Day) and shall specify (i) the aggregate principal
amount of such borrowing, (ii) the amount of such borrowing to be
funded by the 1996 Lease Lenders and the amount of such borrowing
to be funded by the Revolving Lenders, allocated between the 1996
Lease Lenders and the Revolving Lenders in accordance with their
respective Pro Rata 1996 Shares, and (iii) the proposed date of
borrowing (which must be a Business Day).
22
<PAGE>
(D) Subject to the terms and conditions set forth in this
Agreement, the Credit Agreement, the 1996 Master Lease and the
other Credit Documents, each of the Revolving Lenders and 1996
Master Lease Lenders, severally and for itself alone, from time
to time during the Reborrowing Availability Period agrees to make
loans to the Company on a revolving basis, at such times and in
an amount equal to its Pro Rata 1996 Share of the Reborrowing
Availability Amount (each, a "REBORROWING LOAN" and collectively,
the "REBORROWING LOANS"). It is expressly understood and agreed
that, notwithstanding anything to the contrary in any Credit
Document, all of the conditions for the making or repayment of
Reborrowing Loans that are specified in this Agreement or any of
the Credit Agreement, the 1996 Master Lease or the other Credit
Documents must be satisfied before any 1996 Lender has any
obligation to fund its respective share of the relevant
Reborrowing Loan.
(E) The aggregate amount requested from the 1996 Lenders in
connection with each Reborrowing Loan shall be in a principal
amount of $1,000,000 or an integral multiple thereof. All
Reborrowing Loans shall be pro rata among the 1996 Lease Lenders
and the Revolving Lenders in accordance with their respective Pro
Rata 1996 Share.
(F) Voluntary prepayments of the Reborrowing Loans shall be
governed by and subject to the terms of each of Section 2.7 of
-----------
the Credit Agreement and Section IIA of the 1996 Master Lease
-----------
Agreement.
(c) Mandatory Prepayments resulting from Budget Variance. In
----------------------------------------------------
addition to repayments under clauses (a) and (b) above, if at any time and
----------- ---
for any reason the amounts borrowed pursuant to the Liquidity Loans or the
Reborrowing Loans are not used for the purposes and within the parameters
established in the Budget, the Company shall immediately make a mandatory
prepayment of the applicable Secured Obligations in an amount equal to the
amount utilized other than in conformity with the Budget.
(d) Nothing in this Section 3.15 shall be construed to constitute the
------------
consent of any of the parties to this Agreement to any transaction
referred to in clauses (a) and (b) above which is prohibited by other terms
----------- ---
of this Agreement, the Credit Agreement or the 1996 Master Lease Agreement.
In addition, nothing in this Section 3.15 or anywhere else in the Agreement
------------
shall be construed to constitute the consent of Sanwa Business Credit
Corporation to any transaction referred to in clause (a) above with respect
----------
to the Sanwa Collateral which is prohibited by the terms of the documents,
instruments or agreements governing the Supplemental Obligations secured by
the Sanwa Collateral..
23
<PAGE>
SECTION 3.16 Collection Account Arrangements. (a) All collections
--------------------------------
of receipts from each individual Store and other proceeds of Collateral
shall be deposited in a Collection Account which prior to the date that is
30 days after the Restructuring Effective Date is subject to a Collection
Account Agreement or pursuant to another similar arrangement for the
collection of such amounts established by the Company or any of its
Subsidiaries and the Common Collateral Agent and shall be transferred in
accordance with the provisions of the respective Collection Account
Agreements. Any of the foregoing collections received by the Company or
any of its Subsidiaries and not so deposited, shall be deemed to have been
received by the Company or such Subsidiary as the Common Collateral Agent's
trustee and, upon the Company's or such Subsidiary's receipt thereof, the
Company shall or shall cause such Subsidiary to immediately transfer all
such amounts into a Collection Account in their original form. Such
deposits shall be remitted to the Common Collateral Agent, the Company or
as the Common Collateral Agent may direct, all in accordance with the
provisions of the Collection Account Agreements. The Company hereby
represents and warrants that as of the Restructuring Effective Date,
Schedule 3.16(a) contains a true and accurate list of all bank accounts
----------------
maintained by the Company and each of its Subsidiaries.
(b) Following the Collection Account Blockage Date and during the
continuance of a Default (other than, during the Suspension Period, a
Suspended Default) giving rise thereto, all payments received by the Common
Collateral Agent and all proceeds of other Collateral received by the
Common Collateral Agent, whether through payment or otherwise, will be the
sole property of the Common Collateral Agent for the benefit of each of the
holders of Secured Obligations and will be deemed received by the
Collateral Agent for application to the Secured Obligations pursuant to the
terms of the Intercreditor Agreement.
(c) Notwithstanding the foregoing, the Company and its Subsidiaries
shall be permitted to maintain bank accounts with parties which are not
subject to Collection Account Agreements provided that (i) the balances in
such accounts are deposited not less frequently than once per week into one
of the Collection Accounts and (ii) the aggregate balance in all such
accounts shall not exceed $350,000 at any time.
1.6 ARTICLE IV OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS:
----------
(A) SECTION 4.1 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE
-----------
CLAUSES (10) AND (11) THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE
FOLLOWING THEREFOR:
(10) Liens arising (i) pursuant to the 1996 Lease Documents, (ii)
pursuant to the 1995 Lease Documents, (iii) in favor of the Common
Collateral Agent to secure the Liquidity Obligations, the Revolving
Obligations, the 1996 Lease Obligations, the Cash Management
Obligations and the Supplemental Obligations and (iv) on the Sanwa
Collateral to secure
24
<PAGE>
the Supplemental Obligations owing to Sanwa Business Credit Corporation;
provided, that:
--------
(a) at no time shall the Financial Lease Debt arising from
the 1995 Lease Documents exceed in principal amount $59,670,000,
(b) at no time shall the obligations under the 1995 Lease
Documents be secured by any collateral other than the 1995 Lease
Collateral;
(c) at no time shall the Supplemental Obligations to Sanwa
Business Credit Corporation exceed in principal amount
$6,980,000; and
(d) each holder of the Debt secured by such Liens other than
the 1995 Lease Lenders and the 1996 Lease Lenders (other than the
Lead 1996 Lease Lenders) shall be a party to the Intercreditor
Agreement and each of the 1996 Lease Lenders and each other
participant in any of the Liquidity Obligations, the Revolving
Obligations, the 1996 Lease Obligations, the Cash Management
Obligations and the Supplemental Obligations shall acknowledge
and agree to be bound by the terms of the Intercreditor
Agreement;
(11) Other Liens incurred prior to the Restructuring Effective
Date and which are not of the type permitted by the foregoing clauses
-------
(1) through (10), provided, that the aggregate amount of Debt secured
--- ---- --------
by such Liens shall in no event exceed Ten Million Dollars
($10,000,000).
(B) SECTION 4.2 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE
-----------
CLAUSES (1), (6), (8), (9), (12) AND (13) THEREOF IN THEIR ENTIRETY AND TO
SUBSTITUTE THE FOLLOWING THEREFOR:
(1) Debt of the Company:
(a) under the Credit Documents, provided, that at no time
--------
shall (i) Debt consisting of Revolving Obligations arising from
the Credit Agreement exceed $57,115,000, (ii) Debt consisting of
Liquidity Obligations arising from the Credit Agreement exceed
$35,000,000, (iii) Debt arising from the 1996 Master Lease
Agreement exceed $166,125,000;
(b) arising out of the Cash Management Arrangements; and
(c) Financial Lease Debt arising from the 1995 Lease
Documents, provided at no time shall such Financial Lease Debt
--------
exceed in principal amount $59,670,000; ...
25
<PAGE>
(6) Debt which constitutes indebtedness for borrowed money owed
by a Financed Franchisee to a Person other than the Company
(including, without limitation, any funding by landlords of leasehold
improvements) which indebtedness is in existence on the date such
Financed Franchisee becomes a Financed Subsidiary, and any renewal,
extension or refinancing of such Debt, provided, that both before and
--------
after giving effect to such Financed Franchisee becoming a Financed
Subsidiary no Default or Event of Default (other than, during the
Suspension Period, a Suspended Default) shall exist or be continuing,
and provided further, that the outstanding principal amount of such
-------- -------
Debt shall at no time exceed the principal amount of such Debt
outstanding on the date such Financed Franchisee becomes a Financed
Subsidiary;
(8) Debt which constitutes Current Pay Subordinated Debt,
provided, that such Debt was incurred prior to the Restructuring
--------
Effective Date;
(9) Debt which constitutes Non-Current Pay Subordinated
Debt, provided that such Debt was incurred prior to the
--------
Restructuring Effective Date;...
(12) Debt incurred or assumed in connection with
Investments and other acquisitions permitted under this
Agreement, provided, that such Debt was incurred prior to the
--------
Restructuring Effective Date; and
(13) Unsecured Debt not of the type described in the
foregoing clauses (1) through (12) in an aggregate principal
----------- ----
amount not to exceed at any one time outstanding Twenty-Five
Million Dollars ($25,000,000), provided, that such Debt was
--------
incurred prior to the Restructuring Effective Date and not in
contemplation thereof.
(C) SECTION 4.4 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE
REFERENCES THEREIN TO "A MASTER LEASE" OR THE "THE MASTER LEASES" THEREFROM
AND TO SUBSTITUTE THE TERMS "THE 1995 MASTER LEASE" THEREFOR.
(D) SECTION 4.5 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 4.5 Sale and Leaseback. Sell, transfer, or otherwise
------------------
dispose of, or permit any Restricted Subsidiary to sell, transfer, or
otherwise dispose of, any real or personal property or fixtures to any
Person and thereafter directly or indirectly lease back the same or similar
property.
26
<PAGE>
(E) SECTION 4.6 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE
-----------
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 4.6 Dividends. Declare or pay any dividends; or
---------
purchase, redeem, retire, or otherwise acquire for value any of its
capital stock now or hereafter outstanding; or make any distribution
of assets to its stockholders as such whether in cash, assets, or
obligations of the Company; or allocate or otherwise set apart any sum
for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or permit any
of its Restricted Subsidiaries (unless failure to so permit would
constitute a breach of fiduciary duty) to purchase or otherwise
acquire for value any stock of the Company or another Restricted
Subsidiary, except that (1) the Company may declare and deliver
dividends and make distributions payable solely in (a) common capital
stock of the Company or (b) dividends on any Permitted Junior
Securities (as defined below) payable in Permitted Junior Securities
of the same type, (2) in connection with the purchase of minority
equity interests held by Persons in any Restricted Subsidiary of the
Company, the Company may issue its 10% Series A Exchangeable Preferred
(par value .01 per share) or other equity securities which are pari
passu or junior thereto; provided (x) the redemption date thereof
--------
shall not be earlier than the redemption date in the 10% Series A
Exchangeable Preferred as of the Restructuring Effective Date, (y) no
cash dividends shall be payable in respect thereof and (z) the terms
and conditions thereof shall not be adverse in any respect to the
interests of the Lenders (collectively, the "Permitted Junior
Securities") or (3) Guarantors may purchase or otherwise acquire for
value stock of the Company, provided, that any such Guarantor shall
--------
use such stock as consideration for or in connection with any
acquisition permitted pursuant to this Agreement.
(F) SECTION 4.7 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE
-----------
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 4.7 Sale of Assets. Provided the proceeds thereof
--------------
are paid in accordance with the provisions of Section 3.15(a), if
---------------
applicable, sell, lease, assign, transfer, or otherwise dispose of, or
permit any Restricted Subsidiary to sell, lease, assign, transfer, or
otherwise dispose of, any of its now owned or hereafter acquired
assets (including, without limitation, shares of stock and
indebtedness of Restricted Subsidiaries, receivables, real property,
leasehold interests, franchise agreements, trademarks, trade names,
copyrights, licenses and other general intangible interests), except:
(1) for assets disposed of in the ordinary course of
business;
27
<PAGE>
(2) for the sale or other disposition of assets no longer
used or useful in the conduct of its business provided that the
aggregate amount of all such dispositions from and after the
Restructuring Effective Date shall not exceed $250,000;
(3) for (a) the sale, leasing or other disposition of real
property or the subleasing of leasehold interests entered into
prior to the Restructuring Effective Date (or, in the case of the
five properties for which de facto lease arrangements were
-- -----
entered into prior to the Restructuring Effective Date but for
which the formal leases are not entered into until after the
Restructuring Effective Date and the cash flow from which is
reflected in the Budget, entered into after the Restructuring
Effective Date) to an Unrestricted Subsidiary or a franchisee of
an Unrestricted Subsidiary for the operation of a retail bagel
outlet or (b) the leasing of real property or the subleasing of
leasehold interests to any other Person entered into prior to the
Restructuring Effective Date;
(4) that any Restricted Subsidiary may sell, lease, assign,
or otherwise transfer its assets (other than the Sanwa
Collateral) to the Company or any Guarantor; provided, adequate
--------
provision has been made, on or prior to the consummation of such
transaction for the continuation of the liens of the Common
Collateral Agent and (if applicable) the 1996 Lease Agent in the
assets so transferred pursuant to documentation reasonably
acceptable to the Common Collateral Agent and and (if
applicable) the 1996 Lease Agent provided further that in the
case of a transfer to a Guarantor which is a Special Purpose
Subsidiary, such assets are of a type permitted to be owned by a
Special Purpose Subsidiary pursuant to clause (3) of the
definition of "Special Purpose Subsidiary";
(5) that the Company or any Restricted Subsidiary may sell,
lease, assign or otherwise transfer to a Franchisee any real
property, leasehold interests or personal property associated
with the operation of Stores, provided that (i) such sale, lease,
--------
assignment or transfer is on commercially reasonable terms
negotiated at arms' length; (ii) after giving effect to such
sale, lease, assignment or transfer no Default or Event of
Default shall exist or be continuing (other than, during the
Suspension Period, a Suspended Default) and (iii) the Net
28
<PAGE>
Cash Proceeds thereof are paid to the Common Collateral Agent
pursuant to Section 3.15;
------------
(6) that the Company may sell the capital stock of ENBC
which it owns (and the Common Collateral Agent shall promptly
release any Liens in favor of the Common Collateral Agent on such
capital stock); provided, that (a) such sale is on commercially
--------
reasonable terms negotiated at arms' length; (b) at least ninety
percent (90%) of the aggregate sales price is for cash; (c) any
non-cash proceeds received by the Company are pledged to the
Common Collateral Agent pursuant to the Pledge Agreement; and (d)
all Net Cash Proceeds received by the Company from such sale are
paid to the Common Collateral Agent pursuant to Section 3.15.
------------
(7) for any issuances or sales of the capital stock,
partnership units or other equity interests of any Restricted
Subsidiary or other Person permitted pursuant to Section 4.11;
------------
provided the Net Cash Proceeds thereof are paid to the Common
Collateral Agent as an Asset Sale Prepayment;
(8) for any sale, lease, assignment, transfer or other
disposition permitted or required by any Master Lease as such
agreement is constituted as of the Restructuring Effective Date
and without taking into account any subsequent amendment thereto
other than, in the case of the 1996 Master Lease, amendments
thereto that are not in contravention of the Intercreditor
Agreement;
(9) for any disposition of operating assets permitted by the
first proviso in Section 3.4; provided the Net Cash Proceeds
-----------
thereof are, subject to the second proviso of Section 3.4, paid
to the Common Collateral Agent as an Asset Sale Prepayment;
(10) for any transfer by the Company to a Guarantor of the
Company's conversion rights, options, first refusal rights or
preemptive rights provided in any Financed Franchisee Loan
Documents or otherwise, provided that such conversion rights or
--------
other rights are exercised by the Guarantor within 10 days after
such transfer and in connection therewith the Company shall be in
compliance with the provisions of Section 3.11; and
------------
(11) for other dispositions by the Company or any Restricted
Subsidiary not of the type described in the foregoing clauses (1)
-----------
29
<PAGE>
through (10), provided, that the Net Cash Proceeds thereof are
-- --------
paid to the Common Collateral Agent as an Asset Sale Prepayment;
and in the case of any such sale, assignment, transfer or other
disposition of title, the Common Collateral Agent and (if applicable)
the 1996 Lease Agent shall promptly execute, at the Company's expense,
all documents reasonably necessary to release any Lien in favor of the
Common Collateral Agent or the 1996 Lease Agent, as the case may be,
on the disposed assets (but not the proceeds thereof).
(G) SECTION 4.8 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE
-----------
TERMS OF CLAUSES (1), (3), (5) AND (11) THEREOF IN THEIR ENTIRETY AND TO
----------- --- --- ----
SUBSTITUTE THE FOLLOWING THEREFOR:
(1) loans and advances made by the Company to (a) Financed
Franchisees and either (y) outstanding as of the Restructuring
Effective Date or (z) made after the Restructuring Effective Date
provided such loans and advances are made consistent with and within
the parameters set forth in the Budget; provided, that (i) the initial
--------
loans or advances to any Financed Franchisee are or have been made
pursuant to Financed Franchisee Loan Documents in which the Common
Collateral Agent for the benefit of the Creditors as their interests
appear shall have been granted a security interest pursuant to, and
which Financed Franchisee Loan Documents are subject to the terms of,
the Collateral Assignment of Loan, (ii) such loans or advances are
evidenced by promissory notes pledged to the Common Collateral Agent
for the benefit of the Creditors as their interests appear pursuant to
the Pledge Agreement, (iii) all such loans and advances to Financed
Franchisees shall be secured in the manner described in paragraph (3)
-------------
of Schedule 1.1.B, and (iv) all Liens in favor of the Company securing
--------------
such loans and advances are duly perfected; (b) Financed Subsidiaries;
provided, that (i) such loans and advances are made pursuant to
--------
Financed Subsidiary Loan Documents in which the Common Collateral
Agent for the benefit of the Creditors as their interests appear shall
have been granted a security interest pursuant to, and which Financed
Subsidiary Loan Documents are subject to the terms of, the Collateral
Assignment of Loan, (ii) such loans or advances are evidenced by
promissory notes pledged to the Common Collateral Agent for the
benefit of the Creditors as their interests appear pursuant to the
Pledge Agreement and (iii) all Liens in favor of the Company securing
such loans and advances are duly perfected prior to the initial loan
or advance thereunder; (c) Guarantors; provided, that such loans and
--------
advances are evidenced by promissory notes pledged to the Common
Collateral Agent for the benefit of the Creditors as their interests
appear pursuant to the Pledge Agreement; and (d) to the extent and
only to the extent a Sublease may be deemed to be
30
<PAGE>
a loan or advance, to Franchisees or Financed Subsidiaries as lessees
under a Sublease; ...
(3) Investments in Unrestricted Subsidiaries made prior to the
Restructuring Effective Date;...
(5)(a) Investments in Progressive Food Concepts, Inc., a
Delaware corporation, made after the Restructuring Effective Date but
only to the extent committed to prior to (but not in contemplation of)
the Restructuring Effective Date and consistent with the Budget; and
(b) loans and advances by the Company or Progressive Food Concepts,
Inc. to Harry's Farmer's Market, Inc., a Georgia corporation, in a
maximum outstanding principal amount not to exceed at any time the
amount of loans and advances which are outstanding on, or for which
commitments have otherwise been made prior to (but not in
contemplation of) the Restructuring Effective Date and consistent with
the Budget, provided, that all such Investments (whether in the form
--------
of equity or Debt) are pledged to the Common Collateral Agent for the
benefit of the Creditors as their interests appear pursuant to the
Pledge Agreement;...
(11) loans and advances not of the type described in the
foregoing clauses (1) through (10) in the aggregate principal amount
not to exceed at any one time outstanding Six Million Dollars
($6,000,000), provided such loans and advances are pledged to the
Common Collateral Agent pursuant to the Pledge Agreement.
(H) SECTION 4.9 OF THE FACILITIES AGREEMENT IS AMENDED TO RENUMBER
-----------
CLAUSE (5) THEREOF AS CLAUSE (6) AND TO ADD THE FOLLOWING THERETO AS NEW
CLAUSE (5 ):
(5) guaranties executed by the Company or any of its
Subsidiaries to guaranty any Cash Management Obligations or
Supplemental Obligations or otherwise entered into in favor of any of
the Creditors on or prior to the Restructuring Effective Date and
which are described on Schedule 4.9 hereto; and
------------
(I) SECTION 4.12 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE
------------
CLAUSE (1) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING
THEREFOR:
(1) the Company, any Guarantor, any Financed Subsidiary or any
Special Purpose Subsidiary may purchase, acquire or otherwise take
title to real property and to "Lease Asset" (as defined in the 1996
Master Lease) (a) in accordance with the terms and provisions of the
1996 Master Lease Agreement or (b) on which Stores are to be operated;
provided that such real property or Lease Asset are subject to a lien
in favor of either the Common
31
<PAGE>
Collateral Agent or the 1996 Lease Agent, in either event, on behalf
of the Creditors as their interests appear;
(j) SECTION 4.13 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE
------------
CLAUSE (2) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING
THEREFOR:
(2) Subordinated Debt and interest thereon may be converted into
equity of the Company.
(k) SECTION 4.14 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE
------------
CLAUSE (2) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING
THEREFOR:
(2) permit the aggregate principal amount of Debt of all Financed
Franchisees which is owed to Persons other than the Company and which
is senior to any Debt of such Financed Franchisee owed to the Company
to exceed at any time $14,575,000.
(l) SECTION 4.15 OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE
------------
FOLLOWING AT THE END THEREOF:
During the Specified Liquidity Period, the Company shall not, and
shall not suffer or permit any Subsidiary to, use any portion of the
credit accommodations extended by the Creditors after the
Restructuring Effective Date, directly or indirectly, for any purpose
or in any amount not consistent with the Budget.
(m) ARTICLE IV OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE
FOLLOWING AT THE END THEREOF:
SECTION 4.16 Fixed Fee Distribution Agreement. During the
--------------------------------
Specified Liquidity Period, the Company shall not amend, modify or
supplement (or consent to any amendment, modification or supplement
of), the Fixed Fee Distribution Agreement where such amendment,
modification or supplement provides for the following or which has any
of the following effects:
(i) requires the Company, any Restricted Subsidiary, any
Financed Subsidiary, any Financed Franchisee, any Affiliate of
the Company, any Affiliate of any of the foregoing, or any other
party to whom the Fixed Fee Distribution Agreement applies to
make payment to Marriott or any other party for goods or services
within fewer than seven (7) days from the date of the provision
of such goods or services (five (5) days on each Friday for goods
delivered the prior weekend); or
32
<PAGE>
(ii) amends or modifies any condition, covenant or default
therein or supplements such agreement with additional
conditions, covenants or defaults in a manner which is more
onerous or more restrictive to the Company, any Restricted
Subsidiary, any Financed Subsidiary, any Financed Franchisee, any
Affiliate of the Company, any Affiliate of any of the foregoing,
or any other party to whom the Fixed Fee Distribution Agreement
applies or which is otherwise materially adverse to the Company,
any Restricted Subsidiary, any Financed Subsidiary, any Financed
Franchisee, any Affiliate of the Company, any Affiliate of any of
the foregoing, or any other party to whom the Fixed Fee
Distribution Agreement applies and/or the Creditors.
1.7 ARTICLE V OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE LEAD-IN
LANGUAGE AT THE BEGINNING OF SECTION 5.3 IN ITS ENTIRETY AND TO SUBSTITUTE THE
-----------
FOLLOWING THEREFOR:
Maintain, for each fiscal quarter occurring during the respective
fiscal periods set forth below, average Store Revenues for all Stores
(whether operated by the Company or any of its Subsidiaries or
Franchisees), as determined as of the last day of each fiscal period,
of not less than the amount set forth below opposite such fiscal
period:
1.8 THE FACILITIES AGREEMENT IS AMENDED TO ADD THE FOLLOWING ARTICLE V-A
-----------
IMMEDIATELY PRECEDING ARTICLE VI.
----------
ARTICLE V-A
RESTRUCTURING COVENANTS
-----------------------
So long as any Debt of the Company or any Guarantor arising under any
of the Credit Documents shall remain unpaid or any Creditor shall have any
contractual obligation under any Credit Document to extend credit of any
nature to the Company, the Company will:
SECTION 5A.1 General EBITDAL. Maintain cumulative System EBITDAL,
---------------
tested for the period from April 20, 1998 to the end of each
accounting period set forth below, that is at least the amount set
forth below for the period ended with the accounting period set forth
below (the "GENERAL EBITDAL COVENANT"):
33
<PAGE>
MEASUREMENT PERIOD: MINIMUM CUMULATIVE
FROM APRIL 20, 1998 TO THE END EBITDAL FOR SUCH
OF THE ACCOUNTING PERIOD SET MEASUREMENT PERIOD
FORTH BELOW
- -------------------------------------------------
Accounting Period 6 ending ($4,400,000)
June 14, 1998
- -------------------------------------------------
Accounting Period 7 ending July ($10,800,000)
12, 1998
- -------------------------------------------------
Accounting Period 8 ending ($18,300,000)
August 9, 1998
- -------------------------------------------------
Accounting Period 9 ending ($20,400,000)
September 8, 1998
- -------------------------------------------------
Accounting Period 10 ending ($21,800,000)
October 4, 1998
- -------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement
or the 1996 Master Lease Agreement, the Company shall, on and after
the Restructuring Effective Date, continue to calculate System
EBITDAL on a basis consistent with its calculations prior to the
Restructuring Effective Date.
SECTION 5A.2 Liquidity EBITDAL. Maintain during the Specified
-----------------
Liquidity Period cumulative System EBITDAL, tested for the period from
April 20, 1998 to the end of each accounting period set forth below,
that is at least the amount set forth below for the period ended with
the accounting period set forth below (the "LIQUIDITY EBITDAL
COVENANT"):
MEASUREMENT PERIOD: MINIMUM CUMULATIVE
FROM APRIL 20, 1998 TO THE END EBITDAL FOR SUCH
OF THE ACCOUNTING PERIOD SET MEASUREMENT PERIOD
FORTH BELOW
- -------------------------------------------------
Accounting Period 6 ending ($4,000,000)
June 14, 1998
- -------------------------------------------------
Accounting Period 7 ending July ($10,000,000)
12, 1998
- -------------------------------------------------
34
<PAGE>
MEASUREMENT PERIOD: MINIMUM CUMLATIVE
FROM APRIL 20, 1998 TO THE END EBITDAL FOR SUCH
OF THE ACCOUNTING PERIOD SET MEASUREMENT PERIOD
FORTH BELOW
Accounting Period 8 ending ($17,000,000)
August 9, 1998
Accounting Period 9 ending ($18,500,000)
September 8, 1998
Accounting Period 10 ending ($19,500,000)
October 4, 1998
- ------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement
or the 1996 Master Lease Agreement, the Company shall, on and after
the Restructuring Effective Date, continue to calculate System
EBITDAL on a basis consistent with its calculations prior to the
Restructuring Effective Date.
SECTION 5A.3 Budget Variance. Not, and will not permit its
---------------
Restricted Subsidiaries, Financed Subsidiaries, and Financed
Franchisees, during the Specified Liquidity Period to permit actual
expenditures to vary from the Budget by more than the variance
parameters set forth therein.
1.9 ARTICLE VI OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS:
(A) TO DELETE THE TERMS OF SECTION 6.1 THEREOF IN THEIR ENTIRETY AND
-----------
TO SUBSTITUTE THE FOLLOWING THEREFOR:
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1 Events of Default. If any of the following events
("EVENTS OF DEFAULT") shall occur:
(1) Any representation or warranty made or deemed made
(pursuant to any Credit Document) by the Company or any
Subsidiary in this Agreement or any other Credit Document or
which is contained in any certificate, document, opinion, or
financial or other statement furnished at any time under or in
connection with any Credit Document shall prove, in light of the
circumstances under which it was made, to have been incorrect in
any material respect on or as of the date made or deemed made;
35
<PAGE>
(2) The Company or any Subsidiary shall fail to perform or
observe any term, covenant or agreement contained in Sections
3.15(a), 3.15(b), 3.16, 4.3, 4.4, or 4.6 through 4.14 of this
Agreement applicable thereto;
(3) The Company or any Subsidiary shall fail to perform or
observe any term, covenant or agreement contained in Sections
4.1, 4.2, 4.5, in Article V or in Section 5A.1 of this Agreement
and such failure shall continue for four (4) Business Days after
the earlier of discovery, notification or final calculation
thereof applicable thereto;
(4) The Company or any Subsidiary shall fail to perform or
observe any other term, covenant, or agreement contained in any
Credit Document applicable thereto (other than those Sections
referenced in the foregoing clauses (2) and (3) and other than
those defaults arising under clause (14) below) on its part to be
performed or observed and such failure shall continue for fifteen
(15) Business Days following notice thereof from any of the Loan
Agent, the 1996 Lease Agent, the Required Liquidity Lenders
(during the Specified Liquidity Period) or the Required
Creditors;
(5) The Company or any Restricted Subsidiary shall (i) fail
to make any payment of principal, interest, premium, rents or
fees with respect to any indebtedness for borrowed money
(including, without limitation, the Liquidity Note, the Revolving
Notes and the 1996 Lease Obligations) or any Financial Lease Debt
of the Company or such Restricted Subsidiary in an amount (for
indebtedness other than under the Credit Documents) in excess of
$1,000,000, when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired (and in the case of
indebtedness for borrowed money, other than the Revolving Notes,
the Liquidity Note or the 1996 Lease Obligations or Financial
Lease Debt, the amount which the Company or any Restricted
Subsidiary so fails to pay is in excess of $1,000,000), or (ii)
fail to perform or observe any term, covenant, or condition on
its part to be performed or observed under any agreement or
instrument relating to any indebtedness for borrowed money
(including, without limitation, the Revolving Notes, the
Liquidity Note and the 1996 Lease Obligations) or any Financial
Lease Debt of the Company or such Restricted Subsidiary in an
amount in excess of $1,000,000, when required to be performed or
observed, if the effect of such failure to perform or observe is
to accelerate, or to
36
<PAGE>
permit the acceleration, after the giving of notice, of the
maturity of such indebtedness, unless such failure to perform or
observe shall be waived by the holder of such indebtedness or
Financial Lease Debt without any material payment or other
material accommodation on the part of the Company or such
Restricted Subsidiary; or any such indebtedness or Financial
Lease Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(6) The Company, any of its Significant Subsidiaries or any
aggregation of its Subsidiaries which together would constitute a
Significant Subsidiary (a) shall generally not, or shall be
unable to, or shall admit in writing its inability to pay its
debts as such debts become due; or (b) shall make an assignment
for the benefit of creditors, petition or apply to any tribunal
for the appointment of a custodian, receiver, or trustee for it
or a substantial part of its assets; or (c) shall commence any
proceeding under any bankruptcy, reorganization, arrangements,
readjustment of debt, dissolution, or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or (d)
shall have any such petition or application filed or any such
proceeding commenced against it in which an order for relief is
entered or adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more; or (e) by
any act or omission shall indicate its consent to, approval of,
or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a
custodian, receiver, or trustee for all or any substantial part
of its properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a
period of sixty (60) days or more;
(7) Any Financed Franchisee shall fail to pay when due
(whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) amounts which individually or
in the aggregate equal or exceed $2,000,000 owed to the Company
in connection with indebtedness for borrowed money (including any
interest or premium thereon) and any applicable grace period
shall have expired;
(8) One or more judgments, decrees, or orders for the
payment of money in excess of the greater of 3% of the
consolidated net worth of the Company and its Restricted
Subsidiaries at such time or of two million Dollars ($2,000,000)
in the aggregate shall be rendered against the Company or any of
its Subsidiaries, and such judgments, decrees, or orders shall
continue unsatisfied and in effect for a period of twenty (20)
37
<PAGE>
consecutive days without being vacated, discharged, satisfied,
escrowed, stayed or bonded pending appeal;
(9) Any of the following events occur or exist with respect
to the Company or any ERISA Affiliate: (a) any Prohibited
Transaction involving any Plan; (b) any Reportable Event with
respect to any Plan; (c) the filing under Section 4041 of ERISA
of a notice of intent to terminate any Plan or the termination of
any Plan; (d) any event or circumstance that might reasonably
constitute grounds entitling the PBGC to institute proceedings
under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; (e) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency, or
termination of any Multiemployer Plan; and in each case above,
such event or condition, together with all other events or
conditions, if any, would be reasonably likely in the opinion of
either the Loan Agent or the Lease Agent to subject the Company
to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed two million Dollars
($2,000,000) and such event or condition remains unsatisfied
after fifteen (15) Business Days from its initial occurrence or
results in a Lien (subject to Liens permitted under Section 4.1)
on Company's assets;
(10) Any Guaranty shall, at any time after its execution
and delivery and for any reason cease to be in full force and
effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the respective
Guarantor, or the respective Guarantor shall deny it has any
further liability or obligation under or shall fail to perform
its material obligations under such Guaranty (subject to any
applicable grace periods set forth therein);
(11) With respect to any Common Collateral Document or 1996
Lease Document (to the extent it grants to the 1996 Lease Agent a
security interest or other Lien):
(a) any such Common Collateral Document or 1996 Lease
Document shall for any reason cease to be valid and binding
on or enforceable against the Company or any Subsidiary
party thereto or the Company or any Subsidiary shall so
state in writing or bring an action to limit its obligations
or liabilities thereunder; or
38
<PAGE>
(b) such Common Collateral Document or 1996 Lease
Document shall for any reason (other than pursuant to the
terms thereto) cease to create a valid security interest in
the Collateral purported to be covered thereby or such
security interest shall for any reason cease to be a
perfected security interest having the priority as set forth
in the Credit Documents subject only to Permitted Liens
(other than as a result of a release).
(12) Any Change of Control;
(13) Any Material Adverse Change; or
(14) Any of the following shall occur at any time during the
Specified Liquidity Period:
(a) Marriott, any party entitled to take such
action pursuant to the Fixed Fee Distribution
Agreement, or any party providing the types of goods or
services that were being provided pursuant to the Fixed
Fee Distribution Agreement as of the Restructuring
Effective Date shall either (i) require the Company,
any Subsidiary, any Financed Subsidiary, any Financed
Franchisee, any Affiliate of the Company, any Affiliate
of any of the foregoing, or any other party to whom the
Fixed Fee Distribution Agreement applies to make
payment to Marriott or any other party for goods or
services within less than seven (7) days from the date
of the provision of such goods or services (five (5)
days on each Friday for goods delivered the prior
weekend), or (ii) declare a default, event of default,
breach, or take any enforcement or similar action
pursuant to the Fixed Fee Distribution Agreement or any
other agreement (whether or not written) pursuant to
which goods or services are being provided and such
requirement under clause (i) or declaration under
clause (ii) continues for five (5) Business Days from
the date of its initial occurrence provided it is
--------
expressly understood and agreed that during such five-
Business Day period the Borrower shall not make
payments or otherwise reduce the outstanding principal
balance of the accounts payable to Marriott other than
as a result of ordinary
39
<PAGE>
course fluctuations in the daily distribution
requirements of the Company and its Subsidiaries; or
(b) The Company or any Subsidiary shall fail to
perform or observe any term, covenant or agreement
contained in Section 3.15(c), the last sentence of
---------------
Section 4.15, Section 4.16, Section 5A.2, Section 5A.3,
------------ ------------ ------------ ------------
Section 6.1(14) or Section 2(c) of the Confidential
--------------- ------------
Agreement.
(B) TO ADD THE FOLLOWING THERETO IMMEDIATELY AFTER SECTION 6.2:
-----------
SECTION 6.3 Suspension Period Forbearance. During the
-----------------------------
Suspension Period, the Common Collateral Agent, the Revolving Lenders,
Liquidity Lenders and Issuing Lenders, acting herein through the Loan
Agent and the 1996 Lease Lenders, acting herein through the 1996 Lease
Agent, agree to refrain from exercising the enforcement rights
afforded to such parties under the Credit Agreement, 1996 Lease
Agreement, Intercreditor Agreement or the other Credit Documents and
applicable law in each case which arise upon the occurrence of a
Suspended Default (it being understood that for all purposes hereof
and under the other Credit Documents, any Suspended Default that shall
have occurred or shall occur during the Suspension Period, shall be
deemed, during such Suspension Period, not to be a "Default"),
provided that such Creditors shall retain their rights that exist
prior to the occurrence of a Suspended Default with respect to the
disposition by any of the Company or any of its Subsidiaries of any
collateral securing the Secured Obligations. On the Suspension
Termination Date, each such Suspended Default, shall be deemed to have
occurred and be continuing from and after the original date on which
such Suspended Default shall have actually occurred and such Creditors
shall have full right, power and authority to exercise the enforcement
rights afforded to such Creditors upon the occurrence of a Default
under the Credit Documents and applicable law.
1.10 ARTICLE VII OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE
FOLLOWING AT THE END THEREOF:
7.13 Press Releases. The Company shall not and shall not permit
--------------
any of its Affiliates to issue any press release or other public
disclosure with respect to this Agreement, the other Credit Documents
or the transactions which are the subject matter thereof which
mentions or uses the name of any of the Lenders or 1996 Lease Lenders
(in their individual capacities or in any of their various
representative capacities) or any of their respective Affiliates
without the prior written approval of such Lender. The Company shall
not and shall not permit any of its Affiliates to issue in the future
any press releases or other public disclosure using the name of any of
the Lenders or 1996 Lease Lenders (in their
40
<PAGE>
individual capacities or in any of their various representative
capacities) or any of their respective Affiliates or referring to this
Agreement or the other Credit Documents without the prior written
consent of such Lender or 1996 Lease Lender unless the Company or such
Affiliate is required to do so under law and then, in any event, the
Company or such Affiliate will consult with the applicable Lender,
1996 Lease Lender, Lenders, 1996 Lease Lenders before issuing such
press release or other public disclosure.
7.14. No Duties Imposed Upon Co-Agents. None of the Persons
--------------------------------
identified in this Agreement as a "Co-Agent" shall have any right,
power, obligation, liability, responsibility or duty under this
Agreement or any of the other Credit Documents in such capacity.
Without limiting the foregoing, none of the Persons identified in this
Agreement as a "Co-Agent" shall have or be deemed to have any
fiduciary duty to or fiduciary relationship with any Lender. Each of
the Lenders acknowledges that it has not relied, and will not rely, on
any of the Persons so identified in deciding to enter into this
Agreement, the Second Credit Agreement Amendment or the Intercreditor
Agreement or in taking or not taking action hereunder or thereunder.
1.11 THE FACILITIES AGREEMENT IS FURTHER AMENDED TO DELETE THE SCHEDULES
AND EXHIBITS THERETO IN THEIR ENTIRETY AND TO SUBSTITUTE THE ATTACHED SCHEDULE
AND EXHIBITS THEREFOR.
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall not
---------------------------
become effective unless on or before July 16, 1998 each of the following shall
have occurred:
(a) this Amendment shall have been executed by the Company, the Loan
Agent and the 1996 Lease Agent;
(b) each of the conditions set forth in Section 3 of the Second Credit
---------
Amendment and Section 3 of the 1996 Lease Amendment No. 2 shall have been
---------
satisfied;
(c) the Company shall have paid all fees required to be paid to the
Agents (whether for their own accounts or the accounts of the Creditors set
forth therein) pursuant to the terms of the Confidential Agreement on or
prior to the effectiveness hereof;
(d) the Company shall have reimbursed the Agents for all fees and
expenses of counsel, financial advisors and other professionals;
41
<PAGE>
(e) the Agents shall have received the other documents, instruments
and agreements set forth on the List of Closing Documents (Restructuring)
and the List of Closing Documents (Rollup) attached as Exhibit K hereto,
---------
in each case in form and substance acceptable to the Agents and duly
executed by the parties thereto; and
(f) the Agents shall have received such other approvals, opinions or
documents as the Agents or any Creditor may reasonably request.
SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Agents to
------------------------------
enter into this Amendment, the Company represents and warrants to each such
party as of the date hereof that:
(a) This Amendment and the Facilities Agreement as previously executed and
as amended hereby, constitute legal, valid and binding obligations of the
Company and are enforceable against the Company in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Company hereby reaffirms
all covenants, representations and warranties made in the Facilities Agreement
and the other Loan Documents and 1996 Lease Documents to the extent the same are
not amended or waived hereby or pursuant to the Second Credit Agreement
Amendment or the 1996 Lease Amendment No. 2, as the case may be, agrees that all
such covenants, representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Default or Event of Default, other than the Suspended Defaults,
has occurred under the Facilities Agreement, the Credit Agreement or the 1996
Master Lease.
SECTION 4. REFERENCE TO THE EFFECT ON THE FACILITIES AGREEMENT.
---------------------------------------------------
(a) Upon the effectiveness of Section 1 hereof, on and after the date
---------
hereof, each reference in the Facilities Agreement and the other Credit
Documents to "this Facilities Agreement," "hereunder," "hereof," "herein,"
"thereunder," "thereof," "therein" or words of like import shall mean and be a
reference to the Facilities Agreement as amended hereby.
(b) Except as specifically modified or waived above, the Facilities
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect, and
are hereby ratified and confirmed.
SECTION 5. GOVERNING LAW. This Amendment shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York.
42
<PAGE>
SECTION 6. HEADINGS. Section headings in this Amendment are
--------
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
SECTION 7. COUNTERPARTS. This Amendment may be executed by one or
------------
more of the parties to the Amendment on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. Facsimile transmission of the signature of any party
hereto sent to either the Loan Agent or its counsel shall be effective as an
original signature provided each party agrees to promptly submit original
signature pages hereto in sufficient quantity for each of the parties hereto.
SECTION 8. NO STRICT CONSTRUCTION. The parties hereto have
----------------------
participated jointly in the negotiation and drafting of this Amendment, the
Facilities Agreement and the other Credit Documents. In the event an ambiguity
or question of intent or interpretation arises, this Amendment and the
Facilities Agreement as hereby amended and the other Credit Documents shall be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Amendment, the Facilities Agreement or any
of the other Credit Documents.
[Remainder of this Page Intentionally Blank.]
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above
BOSTON CHICKEN, INC.
By:_____________________________________
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Loan Agent and Common Collateral
Agent
By:_____________________________________
Title:____________________________________
GENERAL ELECTRIC CAPITAL CORPORATION, as the 1996
Lease Agent
By:_____________________________________
Title:____________________________________
<PAGE>
EXHIBIT 10.2
EXECUTION COPY
SECOND AMENDMENT AND CONSENT TO
SECURED REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT AND CONSENT (this "AMENDMENT") dated as of July
15, 1998 is entered into by and among BOSTON CHICKEN, INC., a Delaware
corporation (the "BORROWER"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, GENERAL ELECTRIC CAPITAL CORPORATION, LASALLE NATIONAL BANK, SANWA
BUSINESS CREDIT CORPORATION AND HOUR LLC (the "LIQUIDITY LENDERS), GENERAL
ELECTRIC CAPITAL CORPORATION, in its individual capacity and joining the Credit
Agreement as a Revolving Lender ("GECC"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION AND GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Agents for
the Liquidity Lenders (individually a "CO-AGENT" and collectively, the "CO-
AGENTS"), those Revolving Lenders identified on the signature pages hereto as
"Non-Participating Lenders" (the "NON-PARTICIPATING LENDERS"; the Liquidity
Lenders and Non-Participating Lenders being referred to collectively as the
"LENDERS"), BANKERS TRUST COMPANY, as Documentation Agent, and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of
America Illinois), as Issuing Lender and as agent for the Lenders (herein, in
such capacity, the "LOAN AGENT").
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower, certain of the Liquidity Lenders, the Non-
Participating Lenders and the Issuing Lender (referred to collectively as the
"REVOLVING LENDERS"), the Documentation Agent and the Loan Agent are parties to
that certain Secured Revolving Credit Agreement dated as of December 9, 1996, as
amended by the First Amendment and Consent to Secured Revolving Credit Agreement
(the "FIRST AMENDMENT"), and as such agreement may be further amended, modified,
supplemented or restated from time to time (the "CREDIT AGREEMENT"; terms used
but not otherwise defined herein are used herein as defined in the Credit
Agreement, as amended and supplemented by this Amendment);
WHEREAS, the Borrower has entered into that certain Master Lease
Agreement No. 2, dated as of December 9, 1996, as amended by Amendment No. 1 to
Master Lease Agreement No. 2 dated as of February 28, 1997 and Amendment No. 2
to Master Lease No. 2 of even date herewith (as amended, the "1996 MASTER LEASE
AGREEMENT"), among the Borrower and GECC, for itself and as agent for the 1996
Lease Lenders referred to below (in such dual capacity the "1996 LEASE LOAN
AGENT");
WHEREAS, subject to the terms and conditions of the 1996 Master Lease
Agreement, GECC (in its capacity as the lead lender under the 1996 Master Lease
Agreement, the "LEAD 1996 LEASE LENDER") has heretofore and may hereafter
convey to certain financial institutions (together
<PAGE>
collectively with the Lead 1996 Lease Lender, the "1996 LEASE LENDERS")
participating interests in its rights, duties and obligations under the 1996
Master Lease Agreement;
WHEREAS, concurrently with the execution and delivery of the Credit
Agreement and the 1996 Master Lease Agreement, the Borrower, the Loan Agent and
the 1996 Lease Loan Agent entered into that certain Facilities Agreement and
that certain Intercreditor Agreement, each dated as of December 9, 1996;
WHEREAS, concurrently with the execution and delivery of the First
Amendment, the Borrower, the Loan Agent, the 1996 Lease Loan Agent and BofA, in
its capacity as the Common Collateral Agent entered into that certain Amended
and Restated Facilities Agreement ("AMENDED FACILITIES AGREEMENT") and that
certain Amended and Restated Intercreditor Agreement (the "AMENDED INTERCREDITOR
AGREEMENT"), each dated as of October 24, 1997;
WHEREAS, concurrently herewith, the Borrower, the Loan Agent, the 1996
Lease Loan Agent, the Co-Agents, the Common Collateral Agent, the Lenders and
the Lead 1996 Lease Lender have entered into that certain First Amendment and
Consent to the Amended Facilities Agreement, pursuant to which the Amended
Facilities Agreement has been amended (as so amended, and as the same may be
further amended, modified, supplemented and/or restated from time to time, the
"FACILITIES AGREEMENT"), which sets forth certain agreements with respect to,
among other things, representations, warranties, covenants and defaults among
the parties thereto;
WHEREAS, concurrently herewith, the Borrower, the Loan Agent, the 1996
Lease Loan Agent, the Co-Agents, the Common Collateral Agent, the Lenders, the
Lead 1996 Lease Lender, the "Other Creditors" and the "Cash Management Banks"
(each as defined in the Intercreditor Agreement referred to below) have entered
into that certain Second Amended and Restated Intercreditor Agreement, pursuant
to which the Amended Intercreditor Agreement has been amended and restated in
its entirety (as so amended and restated, and as the same may be further
amended, modified, supplemented and/or restated from time to time, the
"INTERCREDITOR AGREEMENT"), which sets forth certain agreements with respect to,
among other things, voting rights and collateral issues between the parties
thereto;
WHEREAS, the Borrower has requested, among other things, that the
Credit Agreement be amended and supplemented in certain respects, including,
without limitation, to provide (i) a supplemental revolving loan to the Borrower
and (ii) a liquidity facility to the Borrower;
WHEREAS, subject to the terms and conditions set forth herein, the
Loan Agent, the Documentation Agent, the Co-Agents, the Issuing Lender, the Non-
Participating Lenders and the Liquidity Lenders which are currently parties to
the Credit Agreement have agreed to amend and supplement the Credit Agreement;
2
<PAGE>
WHEREAS, subject to the terms and conditions set forth herein, the
Liquidity Lenders that are not currently parties to the Credit Agreement have
agreed to become parties to the Credit Agreement as Liquidity Lenders; and
WHEREAS, subject to the terms and conditions set forth herein, GECC
has agreed to become a party to the Credit Agreement as a Revolving Lender;
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Borrower, the Loan Agent, the Documentation Agent, the
Co-Agents, the Liquidity Lenders, the Issuing Lender, GECC and the Non-
Participating Lenders hereby agree as follows:
SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT. Effective as of the date
---------------------------------
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 3 below, and in reliance on the representations and warranties set forth
- ---------
in Section 4 below, on and after the date hereof, the parties hereto agree that
---------
the Credit Agreement is amended as follows:
1.1 THE PREAMBLE TO THE CREDIT AGREEMENT IS HEREBY DELETED IN ITS ENTIRETY
AND REPLACED WITH THE FOLLOWING:
THIS SECURED REVOLVING CREDIT AGREEMENT dated as of December 9, 1996,
is entered into among BOSTON CHICKEN, INC., a Delaware corporation (the
"BORROWER"), BANKERS TRUST COMPANY, having its principal place of business
at 130 Liberty Street, One Bankers Trust Plaza, New York, New York 10006,
as Documentation Agent for the Lenders (as defined below) (herein in such
capacity, together with any successor thereto in such capacity, called the
"DOCUMENTATION AGENT"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (as successor by merger to Bank of America Illinois), a
national bank having its principal place of business at 231 South LaSalle
Street, Chicago, Illinois 60697 (together with any successor thereto,
"BOFA"), as agent for the Lenders (herein in such capacity, together with
any successors thereto in such capacity, called the "LOAN AGENT") and as
letter of credit issuing bank (herein in such capacity, together with any
successors thereto in such capacity, called the "ISSUING LENDER"), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION AND GENERAL ELECTRIC CAPITAL
CORPORATION, as co-agents for the Liquidity Lenders (individually a "CO-
AGENT" and collectively the "CO-AGENTS"), and the financial institutions
parties hereto as lenders (whether as original signatories or pursuant to
Section 10.5, or whether signatories hereto as additional parties in
------------
connection with Amendment No. 2 (herein, together with any assignees
thereof, collectively called the "LENDERS" and each individually called a
"LENDER").
1.2 SECTION 1.1 OF THE CREDIT AGREEMENT IS AMENDED AS FOLLOWS:
-----------
3
<PAGE>
(A) TO DELETE THE CURRENT DEFINITIONS FOR THE TERMS SET FORTH BELOW
IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
"APPLICABLE MARGIN" or "APPLICABLE COMMITMENT FEE," as the case may
be, means at any time, a margin or fee as follows:
(1) in the case of the Applicable Margin:
(a) with respect to the Liquidity Obligations and the
Reborrowing Loans, two percent (2.0%) per annum; and
(b) with respect to the Revolving Obligations (other than the
Reborrowing Loans), (i) for any Eurodollar Loan, two and three-
quarters percent (2.75%) per annum and (ii) for all other Revolving
Obligations, one and one-half percent (1.50%) per annum; and
(2) in the case of the Applicable Commitment Fee, a per annum fee of
one-half of one percent (0.50%).
"BORROWING" means (1) a borrowing hereunder consisting of Revolving
Loans made to the Borrower at the same time by the Revolving Lenders
pursuant to Article II (including, without limitation, Reborrowing Loans
----------
hereunder made pursuant to Section 2.7), (2) the Supplemental Revolving
-----------
Loan made to the Borrower pursuant to Section 2.2 and/or (3) a borrowing
-----------
hereunder consisting of Liquidity Loans made to the Borrower at the same
time by the Liquidity Lenders pursuant to Article IIA. Any Borrowing
-----------
outstanding as of the Restructuring Effective Date which is a Eurodollar
Rate Borrowing may continue as a Eurodollar Rate Borrowing until the end of
the applicable Interest Period. Any other Borrowing outstanding as of the
Restructuring Effective Date or any Borrowing made on or after the
Restructuring Effective Date shall be a Floating Rate Borrowing.
"BORROWING REQUEST" means a Reborrowing Request or a Liquidity
Borrowing Request.
"COLLATERAL" has the meaning given that term in the Intercreditor
Agreement; provided, however, in no event shall the Collateral include the
-------- -------
Sanwa Collateral (as defined in the Intercreditor Agreement).
"COMMITMENT" means at any time (i) as to any Revolving Lender, such
Revolving Lender's Reborrowing Commitment - Revolver then in effect and
(ii) as to any Liquidity Lender, such Liquidity Lender's Liquidity
Commitment then in effect.
"ELIGIBLE ASSIGNEE" shall mean (i) a commercial bank having total
assets in excess of $1,500,000,000 and (ii) a finance company, insurance
company or other financial
4
<PAGE>
institution or fund, in each case consented to by the Loan Agent (such
consent not to be unreasonably withheld), which in the ordinary course of
business extends credit of the type evidenced by the Revolving Notes and,
if applicable, the Liquidity Notes and has total assets in excess of
$250,000,000 and whose becoming an assignee would not constitute a
prohibited transaction under Section 4975 of ERISA.
"FLOATING RATE LOAN" means (i) any Revolving Loan (including the
Supplemental Revolving Loan and the Reborrowing Loans) which bears interest
at a rate determined by reference to the Floating Rate and (ii) each
Liquidity Loan.
"GUARANTOR" means any Subsidiary which from time to time executes a
Guaranty or becomes a party to a Guaranty.
"INTERCREDITOR AGREEMENT" -- See Recitals to Amendment No. 2.
--------
"LENDERS" or "LENDER" shall have the meaning assigned to such term in
the Preamble and shall include, without limitation, the Revolving Lenders
and the Liquidity Lenders and shall include BofA acting in its capacity as
Issuing Lender; for purposes of clarification only, to the extent that BofA
may have any rights or obligations in addition to those of the Lenders due
to its status as Issuing Lender, its status as such will be specifically
referenced.
"LOAN DOCUMENTS" means this Agreement, the Revolving Notes, the
Liquidity Note, the Facilities Agreement, the Intercreditor Agreement, each
Guaranty, the Mortgages, each LC Application and all other agreements,
instruments and documents delivered from time to time to the Loan Agent or
the Issuing Lender with respect to this Agreement or with respect to any
liabilities arising in connection herewith, as the same may be amended,
supplemented, modified, restated or renewed from time to time.
"MORTGAGE" means a mortgage or deed of trust substantially in the form
of Exhibit E attached hereto with respect to any parcel of real property
---------
referenced on Schedule IV hereto and designated with an "*" executed by
-----------
BCRE in favor of the Loan Agent and/or Common Collateral Agent (i) in the
case of a Mortgage covering Tranche A Collateral, for the benefit of
itself and the Lenders, and (ii) in the case of a Mortgage covering either
Tranche B Collateral or Tranche C Collateral, for the benefit of itself and
the Creditors generally.
"OBLIGATIONS" means all Revolving Loans, Liquidity Loans, advances,
debts, liabilities, obligations, reimbursement and indemnification
obligations, covenants and duties owing by the Borrower to the Loan Agent,
any Lender, the Issuing Lender, any Affiliate of
5
<PAGE>
any such Person, or any Indemnitee, of any kind or nature, present or
future, arising under this Agreement, the Revolving Notes, the Liquidity
Notes or any other Loan Document, whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest, charges, expenses, fees,
attorneys' fees and disbursements, paralegals' fees and all other amounts
payable pursuant to Section 10.6 (in each case whether or not allowed), and
------------
any other sum chargeable to the Borrower under this Agreement or any other
Loan Document.
"REQUIRED LENDERS" means: (i) at any time prior to the occurrence of
an Actionable Default, Lenders then holding at least 66-2/3% of (A) the
then aggregate unpaid principal amount of the Revolving Loans, plus (B) the
----
face amount of Letters of Credit issued and outstanding pursuant to Section
-------
3.1 or drawn and not reimbursed pursuant to Section 3.9 (to the extent such
--- -----------
unreimbursed draws do not constitute Revolving Loans), plus (C) the Total
----
Liquidity Commitment Amount, and (ii) at any time after the occurrence of
an Actionable Default, Lenders then holding at least 66-2/3% of (A) the
then aggregate unpaid principal amount of the Revolving Loans, plus (B) the
----
aggregate face amount of Letters of Credit issued and outstanding pursuant
to Section 3.1 or drawn and not reimbursed pursuant to Section 3.9 (to the
----------- -----------
extent such unreimbursed draws do not constitute Revolving Loans), plus (C)
----
the then aggregate unpaid principal amount of the Liquidity Loans.
Notwithstanding anything herein to the contrary, to the extent that the
Intercreditor Agreement provides for parties in addition to or in lieu of
the Required Lenders with respect to various amendments and/or waivers set
forth therein, the terms of the Intercreditor Agreement shall govern.
"TERMINATION DATE" means October 17, 1998.
(B) TO ADD EACH OF THE FOLLOWING DEFINITIONS IN THE APPLICABLE
ALPHABETICAL LOCATION:
"AMENDMENT NO. 2" shall mean that certain Second Amendment and Consent
to Secured Revolving Credit Agreement dated as of July 15, 1998 amending
and supplementing this Agreement.
"BUDGET" shall have the meaning assigned to such term in the
Facilities Agreement.
"CO-AGENT(S)" -- See Preamble to Amendment No. 2.
--------
6
<PAGE>
"CONFIDENTIAL AGREEMENT" shall have the meaning assigned to such term
in the Facilities Agreement.
"DEFAULT RATE" means a per annum interest rate at all times equal to
the sum of (a) the otherwise applicable interest rate under Sections 2.4(1)
---------------
or 2A.4(1) plus (b) two percent (2.00%). The Default Rate shall be
------- ----
adjusted simultaneously with any change in the applicable interest rates
under such Sections.
"LEAD 1996 LEASE LENDER" -- See Recitals to Amendment No. 2.
--------
"LIQUIDITY AVAILABILITY PERIOD" shall mean the period from the
Restructuring Effective Date through the date upon which the Liquidity
Commitments are terminated in accordance with the terms hereof.
"LIQUIDITY BORROWING REQUEST" -- See Section 2A.2.
------------
"LIQUIDITY COMMITMENT" means, at any time, the commitments of the
Liquidity Lenders to make Liquidity Loans pursuant to Section 2A.1, in the
------------
aggregate amount set forth on Schedule IIA, as such amount may be adjusted
------------
from time to time in accordance with the terms hereof.
"LIQUIDITY LOAN(S)" -- See Section 2A.1(1).
---------------
"LIQUIDITY NOTE" -- See Section 2A.6.
------------
"LIQUIDITY OBLIGATIONS" shall have the meaning assigned to such term
in the Intercreditor Agreement.
"LIQUIDITY PERCENTAGE" means, at any time as to any Liquidity Lender,
the percentage set forth opposite such Liquidity Lender's name on Schedule
--------
IIA.
---
"LIQUIDITY PERIOD" shall have the meaning assigned to such term in the
Intercreditor Agreement.
"LOAN AGENT" -- see Preamble to Amendment No. 2. From and after the
--------
Restructuring Effective Date, all references in the Credit Agreement and
the other Loan Documents to the "Agent" shall mean and be a reference to
the Loan Agent.
"MAJORITY LIQUIDITY LENDERS" shall have the meaning assigned to such
term in the Intercreditor Agreement.
7
<PAGE>
"1995 MASTER LEASE AGREEMENT" shall have the meaning assigned to such
term in the Facilities Agreement.
"1996 LEASE LOAN AGENT" -- See Recitals. From and after the
--------
Restructuring Effective Date, all references in the Credit Agreement and
the other Loan Documents to the "Lease Agent" shall mean and be a reference
to the 1996 Lease Loan Agent.
"1996 LEASE LENDERS" -- See Recitals to Amendment No. 2. 1996 Lease
--------
Lenders shall in each case include each such Person's respective successors
and assigns. From and after the Restructuring Effective Date, all
references in the Credit Agreement and the other Loan Documents to the
"Lease Participants" shall mean and be a reference to the 1996 Lease
Lenders.
"1996 MASTER LEASE AGREEMENT" -- See Recitals to Amendment No. 2.
--------
"NON-PARTICIPATING LENDER" -- See Preamble to Amendment No. 2.
--------
"PRO RATA 1996 SHARE" shall have the meaning assigned to such terms in
the Facilities Agreement.
"REBORROWING AVAILABILITY AMOUNT" shall have the meaning assigned to
such term in the Facilities Agreement.
"REBORROWING AVAILABILITY PERIOD" shall have the meaning assigned to
such term in the Facilities Agreement.
"REBORROWING COMMITMENTS-REVOLVER" shall have the meaning assigned to
such term in the Facilities Agreement.
"REBORROWING LOAN" -- has the meaning given that term in the
Facilities Agreement. Reborrowing Loans constitute Revolving Loans and the
terms and conditions of this Agreement applicable to Revolving Loans shall
be equally applicable to the Reborrowing Loans.
"REBORROWING REQUEST" has the meaning given that term in the
Facilities Agreement
"RESTRUCTURING EFFECTIVE DATE" means the date on which all of the
conditions precedent to the effectiveness of Amendment No. 2 shall have
been satisfied or waived.
8
<PAGE>
"REVOLVING LENDER(S)" -- See Recitals to Amendment No. 2. From and
--------
after the making of the Supplemental Revolving Loan, GECC shall be a
Revolving Lender and one of the Revolving Lenders.
"REVOLVING OBLIGATIONS" shall have the meaning given to such term in
the Intercreditor Agreement.
"REVOLVING PERCENTAGE" means, at any time as to any Revolving Lender,
the percentages set forth opposite such Revolving Lender's name on Schedule
--------
II. The Revolving Percentage for each Revolving Lender applicable with
--
respect to the Letters of Credit and the Revolving Lenders' risk
participation therein shall be the Letter of Credit Revolving Percentage
set forth on Schedule II. The Revolving Percentage for each Revolving
-----------
Lender applicable with respect to all other provisions of this Agreement
shall be the Revolving Loan Percentage set forth on Schedule II.
-----------
"SECURED OBLIGATIONS" shall have the meaning given to that term in the
Intercreditor Agreement.
"SUPPLEMENTAL REVOLVING LOAN" -- See Section 2,2.
-----------
"SUSPENDED DEFAULTS" shall have the meaning given such term in the
Intercreditor Agreement.
"SUSPENSION PERIOD" shall have the meaning given such term in the
Facilities Agreement.
"TOTAL LIQUIDITY COMMITMENT AMOUNT" means the sum of all of the
Liquidity Lenders' Liquidity Commitments, it being understood that on the
Restructuring Effective Date, the Total Liquidity Commitment Amount is
$35,000,000.
(c) TO DELETE EACH OF THE FOLLOWING DEFINITIONS IN THEIR ENTIRETY:
"CONTINUATION/CONVERSION NOTICE," "IMPLIED DEBT RATING," "IMPLIED DEBT
RATING LEVEL," "LEASE AGENT," "LEASE PARTICIPANTS," "OUTSTANDING
PERCENTAGE," "PERCENTAGE," AND "TOTAL COMMITMENT AMOUNT".
(d) TO ADD THE FOLLOWING AT THE END THEREOF:
In the event that capitalized terms are used in this Agreement and not
defined in this Agreement, such terms shall have the meaning given to them
in the Intercreditor Agreement, if such terms are defined therein, or
otherwise, in the Facilities Agreement, if such terms are defined therein.
From and after the Restructuring Effective Date, and notwithstanding
9
<PAGE>
anything herein to the contrary, (1) the term Revolving Loan used herein
and in the other Loan Documents shall include the Supplemental Revolving
Loan made by GECC pursuant to the terms of Section 2.2, (2) the term
-----------
Revolving Lender shall include GECC as the maker of the Supplemental
Revolving Loan, and (3) all of the provisions of this Agreement and the
other Loan Documents applicable to the Revolving Loans and the Revolving
Lenders shall be applicable to the Supplemental Revolving Loan and GECC all
as though the Supplemental Revolving Loan had been made as part of a
syndicated Borrowing of a Floating Rate Loan under and pursuant to the
terms of this Agreement.
1.3 ARTICLE II OF THE CREDIT AGREEMENT IS AMENDED BY DELETING THE TERMS
----------
THEREOF IN THEIR ENTIRETY AND SUBSTITUTING THE FOLLOWING THEREFOR:
SECTION 2.1. Outstanding Revolving Loans.
---------------------------
(1) Prior to the Restructuring Effective Date, each of the
Revolving Lenders has made Revolving Loans to the Borrower in an amount
equal to such Lender's Revolving Percentage of the amounts set forth below:
(a) loans to the Borrower in an aggregate amount equal to
$23,227,100 (the "REVOLVING A LOANS"); and
(b) loans to the Borrower in an aggregate amount equal to
$29,585,660 (the "REVOLVING B LOANS");
all of which Revolving Loans are outstanding as of the Restructuring
Effective Date. On the Restructuring Effective Date, after the making of
the Supplemental Revolving Loan to the Borrower by GECC, the outstanding
amount of the Revolving B Loans shall be equal to $33,885,660. On the
Restructuring Effective Date the face amount of all outstanding Letters of
Credit is$4,812,760.
(2) [Intentionally Omitted.]
(3) [Intentionally Omitted.]
(4) All Revolving Loans shall be repaid by the Borrower on the
Termination Date, unless paid or payable sooner pursuant to the provisions
of this Agreement.
(5) Each Revolving Loan which is a Eurodollar Loan as of the
Restructuring Effective Date shall continue as a Eurodollar Loan until the
end of the applicable Interest Period, at which time such Revolving Loan
shall be converted to a
10
<PAGE>
Floating Rate Loan and shall continue as a Floating Rate Loan thereafter
(each being herein called a "TYPE" of Revolving Loan). Each Revolving Loan
which is a Floating Rate Loan as of the Restructuring Effective Date shall
continue as a Floating Rate Loan.
SECTION 2.2. Supplemental Revolving Loan. Notwithstanding any
---------------------------
other term contained in this Agreement to the contrary, on the
Restructuring Effective Date, GECC agrees to make a loan (the "SUPPLEMENTAL
REVOLVING LOAN") to the Borrower in an amount equal to $4,300,000 on the
terms and conditions set forth in this Section 2.2.
-----------
(a) The proceeds of the Supplemental Revolving Loan shall be
made available by GECC to the Borrower by causing immediately
available funds in the amount thereof to be deposited to the account
of the Borrower at the principal office of the Loan Agent in Chicago.
(b) Any Authorized Officer of the Borrower may request the
Supplemental Revolving Loan on behalf of the Borrower and such request
shall constitute a deemed representation and warranty by the Borrower
that the conditions contained in Section 5.2 have been satisfied. The
-----------
Borrower shall have provided to GECC and the Loan Agent irrevocable
directions authorizing the proceeds of the Supplemental Revolving Loan
to be paid directly to GECC, as fiscal agent under the 1995 Master
Lease Agreement for itself and the other lease participants under the
1995 Master Lease Agreement for the payment of all obligations of the
Borrower as lessee under the 1995 Master Lease which are due and
payable on or prior to the Restructuring Effective Date.
(c) The Supplemental Revolving Loan shall constitute a Revolving
Loan subject to the terms of this Agreement and the other Loan
Documents, including, without limitation the provisions of Sections
--------
2.1, 2.4, 2.7 and 2.8 and the term "REVOLVING LOANS" shall include,
--- --- --- ---
without limitation, Revolving Loans made by the Revolving Lenders
prior to the Restructuring Effective Date, the Supplemental Revolving
Loan made on the Restructuring Effective Date and Reborrowing Loans
made after the Restructuring Effective Date. Without limiting the
foregoing, the Supplemental Revolving Loan shall be repaid by the
Borrower on the Termination Date, unless paid or payable sooner
pursuant to the provisions of this Agreement. The Supplemental
Revolving Loan shall be a Floating Rate Loan.
(d) Except as otherwise provided below with respect to Letters
of Credit, for all purposes set forth herein and in the other Loan
Documents, upon the making of the Supplemental Revolving Loan, GECC
shall be treated as one of the Revolving Lenders. Notwithstanding the
foregoing, GECC shall not be deemed to have purchased any
participation in or be required to fund, pursuant to Section 3.4 or
-----------
otherwise, any amount in connection with the Letters of Credit, and
its Revolving
11
<PAGE>
Percentage with respect to the rights and obligations of the Revolving
Lenders applicable to the Letters of Credit shall be 0%.
(e) Notwithstanding that the amount of the Supplemental
Revolving Loan shall increase the outstanding principal balance of the
Revolving B Loans by the amount of such Supplemental Revolving Loan,
upon the making of the Supplemental Revolving Loan, GECC shall be
deemed to hold its Revolving Percentage in both the Revolving A Loans
and the Revolving B Loans. To effect the provisions hereof, upon the
making of the Supplemental Revolving Loan, (i) GECC shall be deemed to
have purchased and each of the other Revolving Lenders shall be deemed
to have sold and assigned, without recourse, representation or
warranty, Revolving A Loans and (ii) the other Revolving Lenders shall
be deemed to have purchased and GECC shall be deemed to have sold and
assigned, without recourse, representation or warranty, Revolving B
Loans, in each case in an amount such that after such purchase and
assignment GECC and each of the other Revolving Lenders each hold its
applicable Revolving Percentage of both the Revolving A Loans and the
Revolving B Loans.
SECTION 2.3. [Intentionally Omitted.]
SECTION 2.4. Interest.
--------
(1) Interest Rates. With respect to each Revolving Loan, the
--------------
Borrower hereby promises to pay interest on the unpaid principal amount
thereof for the period commencing on the date of such Revolving Loan until
such Revolving Loan is paid in full, as follows:
(a) At all times while such Revolving Loan is a Floating Rate
Loan, at a rate per annum equal to the Floating Rate from time to time
in effect plus the Applicable Margin for Floating Rate Loans
consisting of Revolving Loans; and
(b) At all times while such Revolving Loan is a Eurodollar Loan,
for each Interest Period, at a rate per annum equal to the Eurodollar
Rate (Reserve Adjusted) applicable to such Interest Period, plus the
Applicable Margin for Eurodollar Loans.
(2) Interest Payment Dates. Accrued interest on each Revolving
----------------------
Loan which is a Floating Rate Loan shall be due and payable monthly in
arrears on the first Business Day of each calendar month and at maturity.
Accrued interest on each Eurodollar Loan shall be due and payable on the
last day of the applicable Interest Period and at maturity. After maturity,
accrued interest on all Revolving Loans shall be payable on demand.
12
<PAGE>
(3) Interest Periods. Each "Interest Period" for the
----------------
outstanding Eurodollar Loans shall expire as follows:
OUTSTANDING EURODOLLAR EXPIRATION OF INTEREST PERIOD
LOAN AMOUNT
- -------------------------------------------------------
$10,000,000 7/27/98
- -------------------------------------------------------
$ 8,610,125 7/24/98
- -------------------------------------------------------
$ 1,643,580 8/06/98
- -------------------------------------------------------
$ 4,389,875 7/24/98
- -------------------------------------------------------
$17,356,420 8/06/98
- -------------------------------------------------------
$ 6,000,000 7/20/98
- -------------------------------------------------------
(4) [Intentionally Omitted.]
(5) Default Interest. After the occurrence and during the
----------------
continuance of any Default (other than, during the Suspension Period, a
Suspended Default), the Revolving Loans shall, to the extent permitted by
applicable law, thereafter bear interest (compounded monthly and payable
upon demand) at the Default Rate.
SECTION 2.5. [Intentionally Omitted.]
SECTION 2.6. Revolving Notes. All Revolving A Loans made by
---------------
each Revolving Lender under this Agreement shall be evidenced by, and
repaid with interest in accordance with, the promissory note of the
Borrower, a copy of which is attached as Exhibit A-1, payable to the Loan
-----------
Agent for the benefit of the Revolving Lenders (the "REVOLVING A NOTE");
and all Revolving B Loans made by each Revolving Lender under this
Agreement shall be evidenced by, and repaid with interest in accordance
with, the promissory note of the Borrower a copy of which is attached as
Exhibit A-2, payable to the Loan Agent for the benefit of the Revolving
-----------
Lenders (the "REVOLVING B NOTE"). The Loan Agent is hereby authorized by
the Borrower and each Revolving Lender to endorse on the schedule attached
to the respective Revolving Note the amount of each respective Revolving
Loan and of each payment of principal received by the Loan Agent on account
of such Revolving Loan, which endorsement shall, in the absence of
demonstrable error, be conclusive as to the outstanding balance of such
Revolving Loan made by the Revolving Lenders; provided, that the failure
--------
13
<PAGE>
to make such notation with respect to any Revolving Loan or payment shall
not limit or otherwise affect the obligations of the Borrower or the
Revolving Lenders under this Agreement or the respective Revolving Note.
SECTION 2.7. Prepayments; Reborrowing from ENBC Proceeds. (1)
-------------------------------------------
Voluntary Prepayments. The Borrower may prepay, at any time when there are
---------------------
no Liquidity Loans or Liquidity Commitments outstanding, the Revolving
Notes in whole or in part (provided, with respect to any partial prepayment
of a Eurodollar Loan, the remaining principal amount of such Eurodollar
Loan shall not be less than $1,000,000 or any larger integral multiple of
$500,000) with accrued interest to the date of such prepayment on the
amount prepaid; provided, that (a) any prepayment of a Eurodollar Loan
--------
shall be made subject to the Borrower's payment obligations set forth in
Section 4.6, (b) each partial prepayment shall be in a principal amount of
-----------
not less than $1,000,000 or such greater amount which shall be an integral
multiple thereof, and (c) unless otherwise provided in this Agreement, the
Intercreditor Agreement or the Facilities Agreement, any such prepayments
shall be applied, first, to prepay Revolving B Loans, if any, and, second,
----- ------
to prepay Revolving A Loans, if any. Except with respect to the
Reborrowing Loans under clause (4) below, amounts prepaid may not be
----------
reborrowed hereunder. The right of the Borrower to voluntarily prepay the
Revolving Loans shall be exercisable by delivery of written notice
(including by facsimile) or telephonic notice (thereafter promptly
confirmed in writing) to the Loan Agent prior to 12:00 noon, Chicago time,
at least two Business Days prior to the proposed prepayment, which notice
shall specify the amount by which the Borrower proposes to prepay the
Revolving Loans and the proposed date of such prepayment.
(2) [Intentionally Omitted.]
(3) Mandatory Prepayments. The Borrower shall prepay the Revolving
---------------------
Loans in the amounts and at the times specified in Section 3.15 of the
------------
Facilities Agreement. Except as provided in clause (4) below, amounts
prepaid may not be reborrowed hereunder.
(4) Reborrowing from ENBC Proceeds. During the Reborrowing
------------------------------
Availability Period the following terms shall be applicable:
(a) Subject to the terms and conditions set forth in this
Agreement, the Facilities Agreement and the other Loan Documents, each
of the Revolving Lenders, severally and for itself alone, from time to
time thereafter to but not including the Termination Date, agrees to
make Reborrowing Loans as set forth in Section 3.15(b)(iv) of the
-------------------
Facilities Agreement; provided, no Reborrowing Loan may be made
---------
hereunder unless on the date of the Reborrowing Loan the Borrower is
simultaneously borrowing from the 1996 Lease Lenders an amount such
that the Reborrowing Loan hereunder does not exceed, as a percentage
of the total amount
14
<PAGE>
of Reborrowing Loans being made to the Borrower on such date hereunder
and by the 1996 Lease Lenders under Article IIA of the 1996 Master
-----------
Lease Agreement, the percentage of the prepayments received by the
Revolving Lenders pursuant to Section 3.15(b)(ii) and (iii) of the
------------------- -----
Facilities Agreement of the total prepayments received by the
Revolving Lenders and 1996 Lease Lenders under Section 3.15(b)(ii) and
-----------
(iii).
-----
(b) Reborrowing Loans made by the Revolving Lenders shall be
applied, first, against the Commitment A until such Commitment is
-----
exhausted, thereby constituting Revolving A Loans and second, against
------
the Commitment B until such Commitment is exhausted, thereby
constituting Revolving B Loans.
(c) All Reborrowing Loans made by the Revolving Lenders shall
constitute Revolving Loans subject to the terms of this Agreement and
the other Loan Documents, including, without limitation the provisions
of Sections 2.1, 2.4, 2.7 and 2.8, and the term "REVOLVING LOANS"
------------ --- --- ---
shall include, without limitation, Revolving Loans made by the
Revolving Lenders prior to the Restructuring Effective Date, the
Supplemental Revolving Loan made on the Restructuring Effective Date
and Reborrowing Loans made by the Revolving Lenders after the
Restructuring Effective Date. Without limiting the foregoing, all
Reborrowing Loans hereunder shall be repaid by the Borrower on the
Termination Date, unless paid or payable sooner pursuant to the
provisions of this Agreement.
(d) Each Reborrowing Loan hereunder shall be a Floating Rate
Loan.
(e) Any Authorized Officer of the Borrower may request a
Reborrowing Loan hereunder on behalf of the Borrower in accordance
with the terms of Section 3.15(b)(iv) of the Facilities Agreement.
--------------------
Promptly upon receipt of each Reborrowing Request under Section
-------
3.15(b)(iv)(C) of the Facilities Agreement, the Loan Agent shall
--------------
advise each Revolving Lender thereof. Not later than 11:00 A.M.,
Chicago time, on the date of a proposed Borrowing, each Revolving
Lender shall provide the Loan Agent at its principal office in Chicago
with immediately available funds in an amount equal to such Revolving
Lender's Pro Rata 1996 Share of the aggregate principal amount of the
proposed borrowing specified in the Reborrowing Request. All
Borrowings hereunder shall be pro rata among the Revolving Lenders in
accordance with their respective Revolving Percentages. Not later
than 1:00 P.M., Chicago time, on the proposed date of Borrowing
specified in the Reborrowing Request, subject to the satisfaction of
the applicable conditions precedent set forth in the Facilities
Agreement and in Article V hereof, the Loan Agent shall make the
---------
proceeds of each Reborrowing Loan available to the Borrower by causing
an amount of immediately available funds equal to the principal amount
of such Reborrowing
15
<PAGE>
Loan to be credited to the account of the Borrower at BofA unless
otherwise required pursuant to the terms of this Agreement.
(f) Unless the Loan Agent shall have been notified by telephone,
confirmed in writing, by any Revolving Lender by 11:00 A.M., Chicago
time, on the day of a Borrowing hereunder that such Revolving Lender
will not make available the amount which would constitute its
Revolving Percentage of such Borrowing on the date specified therefor,
the Loan Agent may assume, subject to the satisfactory fulfillment by
the Borrower of the conditions precedent set forth in the Facilities
Agreement and in Article V, that such Revolving Lender has made such
---------
amount available to the Loan Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If
and to the extent that such Revolving Lender shall not have made such
amount available to the Loan Agent, such Revolving Lender and the
Borrower severally agree to repay the Loan Agent forthwith on demand
such corresponding amount together with interest thereon, for each day
from the date the Loan Agent made such amount available to the
Borrower to the date such amount is repaid to the Loan Agent, (i) in
the case of payment by a Revolving Lender, at the Federal Funds Rate
from time to time in effect based on a year of 360 days or (ii) in the
case of payment by the Borrower, at a rate per annum equal to the
Floating Rate from time to time in effect plus the Applicable Margin
for Floating Rate Loans consisting of Reborrowing Loans.
SECTION 2.8. Method of Payment. The Borrower shall make each
-----------------
payment under this Agreement with respect to the Revolving Loans and under
the Revolving Notes not later than 12:00 noon, Chicago time, on the date
when due in lawful money of the United States to the Loan Agent for the
account of the Revolving Lenders pro rata according to their respective
Revolving Percentages. The Loan Agent shall promptly remit to each
Revolving Lender its pro rata share (based on its Revolving Percentage) of
all such payments received in collected funds by the Loan Agent for the
benefit of such Revolving Lender. The Borrower hereby authorizes the Loan
Agent, if and to the extent payment is not made when due under this
Agreement or under the Revolving Notes, to charge from time to time against
any account of the Borrower with the Loan Agent any amount so due. Whenever
any payment to be made under this Agreement or under the Revolving Notes
shall be stated to be due on a Saturday, Sunday, or a public holiday, or
the equivalent for banks generally under the laws of the State of Illinois,
such payment shall be made on the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of the
payment of interest. All payments under Sections 4.2 and 4.3 shall be made
------------ ---
by the Borrower directly to the Lender or Lenders entitled thereto.
SECTION 2.9. Use of Proceeds. The proceeds of the Supplemental
---------------
Revolving Loan shall be used solely to make payments of amounts due and
payable on the Restructuring Effective Date with respect to the 1995 Master
Lease Agreement. The
16
<PAGE>
proceeds of the Revolving Loans have not been and will not be used,
directly or indirectly, for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock. The
proceeds of the Reborrowing Loans shall be used by the Borrower only for
the purposes, and within the parameters set forth for such purposes,
indicated in the Budget. The Borrower hereby covenants, represents and
warrants that such use will be solely to fund the Borrower's and its
Subsidiaries' working capital requirements in the ordinary course of its
business and for the Borrower's and its Subsidiaries' other general
corporate purposes not prohibited by this Agreement and consistent with the
purposes and within the parameters set forth in the Budget.
SECTION 2.10. Sharing of Payments.
-------------------
(1) If any Revolving Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or
otherwise) on account of any Revolving Loan in excess of its pro rata
share (based on its Revolving Percentage) of payments and other
recoveries obtained by all Revolving Lenders on account of principal
of and interest on Revolving Loans, such Revolving Lender shall
purchase from the other Revolving Lenders such participations in the
Revolving Loans as shall be necessary to cause such purchasing
Revolving Lender to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of
-------- -------
the excess payment or other recovery is thereafter recovered from such
purchasing Revolving Lender, the purchase shall be rescinded and each
Revolving Lender which has sold a participation to the purchasing
Revolving Lender shall repay to the purchasing Revolving Lender the
purchase price to the ratable extent of such recovery together with an
amount equal to such selling Revolving Lender's ratable share
(according to the proportion of (a) the amount of such selling
Revolving Lender's required repayment to the purchasing Revolving
Lender to (b) the total amount so recovered from the purchasing
Revolving Lender) of any interest or other amount paid or payable by
the purchasing Revolving Lender in respect of the total amount so
recovered.
(2) The Borrower agrees that any Revolving Lender so purchasing a
participation from another Revolving Lender pursuant to Section
-------
2.10(1) may, to the fullest extent permitted by law, exercise all of
-------
its rights of payment with respect to such participation as fully as
if such Revolving Lender were the direct creditor of the Borrower in
the amount of such participation. If under any applicable bankruptcy,
insolvency or other similar law, any Revolving Lender receives a
secured claim in lieu of a setoff pursuant to Section 10.7, such
------------
Revolving Lender shall, to the extent
17
<PAGE>
practicable, exercise its rights in respect to such secured claim in a
manner consistent with the rights of the Revolving Lenders entitled
under this Section 2.10 to share in the benefits of any recovery of
------------
such secured claim.
SECTION 2.11. Computation of Fees and Interest. (1) All computations
--------------------------------
of interest for Floating Rate Loans when the Floating Rate is determined by
BofA's "reference rate" shall be made on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed. All other computations
of fees and interest shall be made on the basis of a 360-day year and
actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day or 366-day year). Interest and fees
shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(2) Each determination of an interest rate by the Loan Agent
shall be conclusive and binding on the Borrower and the Lenders in the
absence of manifest error.
SECTION 2.12. [Intentionally Omitted.]
1.4 THE CREDIT AGREEMENT IS AMENDED BY INSERTING THE FOLLOWING ARTICLE IIA
IMMEDIATELY FOLLOWING ARTICLE II:
ARTICLE IIA
AMOUNT AND TERMS OF THE LIQUIDITY LOANS
---------------------------------------
SECTION 2A.1 Liquidity Loan Commitment.
-------------------------
(1) Subject to the terms and conditions set forth in this Article
-------
IIA and the other Loan Documents, each of the Liquidity Lenders, severally
---
and for itself alone, from time to time during the Liquidity Availability
Period agrees to make loans to the Borrower on a revolving basis, at such
times and in an amount equal to such Liquidity Lender's Liquidity
Percentage of such aggregate amounts as the Borrower may request from all
of the Liquidity Lenders under the Liquidity Commitment (the "LIQUIDITY
LOANS"); provided, that in no event shall: (x) the aggregate principal
--------
amount of Liquidity Loans then outstanding or which any Liquidity Lender
shall be committed to have outstanding to the Borrower exceed at any time
such Liquidity Lender's Liquidity Percentage of the Total Liquidity
Commitment Amount; and (y) the aggregate principal amount of all Liquidity
Loans then in effect which all the Liquidity Lenders shall be committed to
have outstanding to the Borrower exceed at any one time the Total Liquidity
Commitment Amount then in effect; and provided, further, that no Liquidity
-------- -------
Loans shall be required to be made hereunder at a time when the Borrower
has any unutilized Reborrowing Availability.
18
<PAGE>
(2) In the event the aggregate outstanding principal balance of
all Liquidity Loans exceeds the Total Liquidity Commitment Amount, the
Borrower shall, without notice or demand of any kind, immediately make such
repayments of the Liquidity Loans in an amount equal to such excess or take
such other actions as shall be necessary to eliminate such excess.
(3) All Liquidity Loans shall be repaid by the Borrower on the
Termination Date, unless paid or payable sooner pursuant to the provisions
of this Article IIA , Section 8.2 or the Facilities Agreement.
----------- -----------
SECTION 2A.2. Liquidity Borrowing Procedure. Any Authorized
-----------------------------
Officer of the Borrower may request a Liquidity Loan on behalf of the
Borrower during the Liquidity Period in Dollars on any Business Day by
giving the Loan Agent telephonic, telex or facsimile notice (which notice
shall be irrevocable once given and shall be promptly confirmed in writing
if given telephonically) in the form of Exhibit B-1 attached hereto
-----------
("LIQUIDITY BORROWING REQUEST") or such other form as shall be acceptable
to the Loan Agent. Each Liquidity Borrowing Request shall constitute a
deemed representation and warranty by the Borrower that the conditions
contained in Section 5.2 have been satisfied. Each Liquidity Borrowing
-----------
Request must be received by the Loan Agent prior to 10:00 A.M., Chicago
time, on the proposed date of such Liquidity Borrowing (which must be a
Business Day) and shall specify (a) the principal amount of such Liquidity
Borrowing, and (b) the proposed date of the Liquidity Loan (which must be a
Business Day). Promptly upon receipt of such Liquidity Borrowing Request,
the Loan Agent shall advise each Liquidity Lender thereof. Not later than
11:00 A.M., Chicago time, on the date of a proposed Liquidity Loan, each
Liquidity Lender shall provide the Loan Agent at its principal office in
Chicago with immediately available funds in an amount equal to such
Liquidity Lender's Liquidity Percentage of the principal amount of the
proposed Liquidity Loan specified in the Liquidity Borrowing Request. Each
Liquidity Loan shall be in a principal amount of $1,000,000 or an integral
multiple thereof. All Liquidity Loans shall be pro rata among the
Liquidity Lenders in accordance with their respective Liquidity
Percentages. Not later than 1:00 P.M., Chicago time, on the proposed date
of any Liquidity Loan specified in the Liquidity Borrowing Request, subject
to the satisfaction of the applicable conditions precedent set forth in
Section 5.2, the Loan Agent shall make the proceeds of each Liquidity Loan
-----------
received by it available to the Borrower by causing an amount of
immediately available funds equal to the principal amount of such Liquidity
Loans received by it to be credited to the account of the Borrower at BofA
unless otherwise required pursuant to the terms of this Article IIA.
-----------
SECTION 2A.3 Funding Reliance. Unless the Loan Agent shall have
----------------
been notified by telephone, confirmed in writing, by any Liquidity Lender
by 11:00 A.M., Chicago time, on the day of a Liquidity Loan that such
Liquidity Lender will not make available the amount which would constitute
its Liquidity Percentage of such Liquidity Loan on the date specified
therefor, the Loan Agent may assume, subject to the satisfactory
fulfillment by the
19
<PAGE>
Borrower of the applicable conditions precedent, that such Liquidity Lender
has made such amount available to the Loan Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If and
to the extent that such Liquidity Lender shall not have made such amount
available to the Loan Agent, such Liquidity Lender and the Borrower
severally agree to repay the Loan Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the
date the Loan Agent made such amount available to the Borrower to the date
such amount is repaid to the Loan Agent, (i) in the case of payment by a
Liquidity Lender, at the Federal Funds Rate from time to time in effect
based on a year of 360 days or (ii) in the case of payment by the Borrower,
at a rate per annum equal to the Floating Rate from time to time in effect
plus the Applicable Margin for Liquidity Loans.
SECTION 2A.4 Interest.
--------
(1) Interest Rates. With respect to each Liquidity Loan, the
--------------
Borrower hereby promises to pay interest on the unpaid principal amount
thereof for the period commencing on the date of such Liquidity Loan until
such Liquidity Loan is paid in full at a rate per annum equal to the
Floating Rate from time to time in effect plus the Applicable Margin for
Liquidity Loans.
(2) Interest Payment Dates. Accrued interest on all outstanding
----------------------
Liquidity Loans shall be due and payable monthly in arrears on the first
Business Day of each calendar month and at maturity. After maturity,
accrued interest on all Liquidity Loans shall be payable on demand.
(3) Default Interest. After the occurrence and during the
----------------
continuance of any Default (other than, during the Suspension Period, a
Suspended Default), the Liquidity Loans shall, to the extent permitted by
applicable law, thereafter bear interest (compounded monthly and payable
upon demand) at the Default Rate.
SECTION 2A.5 Fees. (1) The Borrower agrees to pay to the Loan
---
Agent for the account of the Persons set forth therein the fees in the
amounts and at the times set forth in the Confidential Agreement.
(2) The Borrower further agrees to pay a non-refundable unused
commitment fee on the average daily amount by which the Total Liquidity
Commitment Amount exceeds the aggregate outstanding Liquidity Loans during
the Liquidity Availability Period, at a rate per annum equal to the
Applicable Commitment Fee, payable monthly in arrears on the first Business
Day of each calendar month and at maturity, and payable to the Loan Agent
for the account of each Liquidity Lender in accordance with such Lender's
Liquidity Percentage.
20
<PAGE>
SECTION 2A.6 Liquidity Note. All Liquidity Loans made by each
--------------
Liquidity Lender under this Article IIA shall be evidenced by, and repaid
-----------
with interest in accordance with, a single promissory note of the Borrower
in substantially the form of Exhibit A-4 attached hereto, duly completed in
-----------
a principal amount equal to the Total Liquidity Commitment Amount, payable
to the Loan Agent for the benefit of the Liquidity Lenders (the "LIQUIDITY
NOTE"). The Loan Agent is hereby authorized by the Borrower and each
Liquidity Lender to endorse on the schedule attached to the Liquidity Note
the amount of each respective Liquidity Loan and of each payment of
principal received by the Loan Agent on account of such Liquidity Loan,
which endorsement shall, in the absence of demonstrable error, be
conclusive as to the outstanding balance of such Liquidity Loans made by
the Liquidity Lenders; provided, that the failure to make such notation
--------
with respect to any Liquidity Loan or payment shall not limit or otherwise
affect the obligations of the Borrower or the Liquidity Lenders under this
Article IIA or the Liquidity Note.
-----------
SECTION 2A.7 Voluntary Prepayments; Voluntary Reduction of
---------------------------------------------
Commitment; Mandatory Prepayments.
---------------------------------
(1) Voluntary Prepayments. The Borrower may prepay at any time
---------------------
the Liquidity Note in whole or in part with accrued interest to the date of
such prepayment on the amount prepaid, in which event such prepaid amount
may be reborrowed under this Article IIA to the extent outstanding amounts
-----------
under this Article IIA shall not exceed the Total Liquidity Commitment
-----------
Amount at such time; provided, that each partial prepayment shall be in a
--------
principal amount which when combined with prepayments being made under the
1996 Master Lease Agreement at the same time is not less than $1,000,000 or
such greater amount which shall be an integral multiple thereof. The right
of the Borrower to voluntarily prepay the Liquidity Loans shall be
exercisable by delivery of written notice (including by facsimile) or
telephonic notice (thereafter promptly confirmed in writing) to the Loan
Agent prior to 12:00 noon, Chicago time, at least two Business Days prior
to the proposed prepayment, which notice shall specify the amount by which
the Borrower proposes to prepay the Liquidity Loans and the proposed date
of such prepayment.
(2) Voluntary Liquidity Commitment Reduction. The Borrower shall
----------------------------------------
have the right, at any time and from time to time, without premium or
penalty, to permanently reduce the Total Liquidity Commitment Amount
hereunder; provided, that any such reduction in the Total Liquidity
--------
Commitment Amount shall reduce the Liquidity Commitment of each Liquidity
Lender pro rata based on its Liquidity Percentage; and provided, further,
-------- -------
that no such reduction shall reduce the Total Liquidity Commitment Amount
to an amount less than the then outstanding Liquidity Loans. The right of
the Borrower to voluntarily reduce the Total Liquidity Commitment Amount
shall be exercisable by delivery of written notice (including by facsimile)
or telephonic notice (thereafter promptly confirmed in writing) to the Loan
Agent prior to 12:00 noon, Chicago time, at least two Business Days prior
to the proposed reduction in the Total Liquidity Commitment Amount, which
notice shall specify
21
<PAGE>
the amount by which the Borrower proposes to reduce the Total Liquidity
Commitment Amount and the proposed date of such reduction.
(3) Mandatory Prepayments; Liquidity Commitment Reductions. The
------------------------------------------------------
Borrower shall prepay the Liquidity Loans in the amounts and at the times
specified in Section 3.15 of the Facilities Agreement and the Liquidity
------------
Commitments shall be permanently reduced on the terms and in the amounts
set forth therein.
SECTION 2A.8 Method of Payment. The Borrower shall make each
-----------------
payment under this Article IIA and under the Liquidity Note not later than
-----------
12:00 noon, Chicago time, on the date when due in lawful money of the
United States to the Loan Agent for the account of the Liquidity Lenders
pro rata according to their respective Liquidity Percentages. The Loan
Agent shall promptly remit to each Liquidity Lender its pro rata share
(based on its Liquidity Percentage) of all such payments received in
collected funds by the Loan Agent for the benefit of such Liquidity Lender.
The Borrower hereby authorizes the Loan Agent, if and to the extent payment
is not made when due under this Article IIA or under the Liquidity Note, to
-----------
charge from time to time against any account of the Borrower with the Loan
Agent any amount so due. Whenever any payment to be made under this
Article IIA or under the Liquidity Note shall be stated to be due on a
-----------
Saturday, Sunday, or a public holiday, or the equivalent for banks
generally under the laws of the State of Illinois, such payment shall be
made on the next succeeding Business Day, and such extension of time in
such case shall be included in the computation of the payment of interest.
All payments under Section 4.2 and 4.3 shall be made by the Borrower
----------- ---
directly to the Lender or Lenders entitled thereto.
SECTION 2A.9 Use of Proceeds. The proceeds of the Liquidity
---------------
Loans shall be used by the Borrower only for the purposes, and within the
parameters set forth for such purposes, indicated in the Budget. The
Borrower hereby covenants, represents and warrants that such use will be
solely to fund the Borrower's and its Subsidiaries' working capital
requirements in the ordinary course of its business and for the Borrower's
and its Subsidiaries' other general corporate purposes not prohibited by
this Agreement and consistent with the purposes and within the parameters
set forth in the Budget. The Borrower will not, directly or indirectly, use
any part of such proceeds for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock.
SECTION 2A.10 Sharing of Payments.
-------------------
(1) If any Liquidity Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or
otherwise) on account of any Liquidity Loan in excess of its pro rata share
(based on its Liquidity Percentage) of payments and other recoveries
obtained by all Liquidity Lenders on
22
<PAGE>
account of principal of and interest on Liquidity Loans, such Liquidity
Lender shall purchase from the other Liquidity Lenders such participations
in the Liquidity Loans as shall be necessary to cause such purchasing
Liquidity Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
-------- -------
payment or other recovery is thereafter recovered from such purchasing
Liquidity Lender, the purchase shall be rescinded and each Liquidity Lender
which has sold a participation to the purchasing Liquidity Lender shall
repay to the purchasing Liquidity Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling
Liquidity Lender's ratable share (according to the proportion of (a) the
amount of such selling Liquidity Lender's required repayment to the
purchasing Liquidity Lender to (b) the total amount so recovered from the
purchasing Liquidity Lender) of any interest or other amount paid or
payable by the purchasing Liquidity Lender in respect of the total amount
so recovered.
(2) The Borrower agrees that any Liquidity Lender so purchasing a
participation from another Liquidity Lender pursuant to Section 2A.10(1)
----------------
may, to the fullest extent permitted by law, exercise all of its rights of
payment with respect to such participation as fully as if such Liquidity
Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other
similar law, any Liquidity Lender receives a secured claim in lieu of a
setoff pursuant to Section 10.7, such Liquidity Lender shall, to the extent
------------
practicable, exercise its rights in respect to such secured claim in a
manner consistent with the rights of the Liquidity Lenders entitled under
this Section 2A.10 to share in the benefits of any recovery of such secured
-------------
claim.
SECTION 2A.11 Computation of Fees and Interest. (1) All
--------------------------------
computations of interest for Liquidity Loans when the Floating Rate is
determined by BofA's "reference rate" shall be made on the basis of a year
of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest in respect of the Liquidity Loans shall
be made on the basis of a 360-day year and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365-
day or 366-day year). Interest and fees shall accrue during each period
during which interest or such fees are computed from the first day thereof
to the last day thereof.
(2) Each determination of an interest rate by the Loan Agent
shall be conclusive and binding on the Borrower and the Liquidity Lenders
in the absence of manifest error.
1.5 ARTICLE III OF THE CREDIT AGREEMENT IS AMENDED TO (A) DELETE ALL
REFERENCES TO "LENDER," "LENDERS," AND "PERCENTAGE" THEREIN AND TO SUBSTITUTE
"REVOLVING LENDER,"
23
<PAGE>
"REVOLVING LENDERS," AND "REVOLVING PERCENTAGE" RESPECTIVELY THEREFOR. ARTICLE
III OF THE CREDIT AGREEMENT IS FURTHER AMENDED AS FOLLOWS:
(A) TO DELETE THE TERMS OF SECTION 3.1 THEREIN IN THEIR ENTIRETY AND TO
-----------
SUBSTITUTE THE FOLLOWING THEREFOR:
3.1 Outstanding Letters of Credit. Prior to the Restructuring
-----------------------------
Effective Date, the Letters of Credit listed on Schedule III have been
------------
issued by the Issuing Lender for the account of the Borrower. All
references in this Agreement to Letters of Credit shall mean and be a
reference to the Letters of Credit listed on Schedule III and the Issuing
------------
Lender shall have no further obligation to issue or extend the expiration
date of any letters of credit.
(B) TO DELETE THE TERMS OF SECTION 3.2 THEREIN IN THEIR ENTIRETY AND TO
-----------
SUBSTITUTE THE FOLLOWING THEREFOR:
3.2. [Intentionally Omitted.]
(C) TO DELETE THE TERMS OF SECTION 3.3 THEREIN IN THEIR ENTIRETY AND TO
-----------
SUBSTITUTE THE FOLLOWING THEREFOR:
3.3 Expiration. For each Letter of Credit which does not expire
----------
prior to the Termination Date, on or prior to the Termination Date the
Borrower shall have either (i) pledged cash collateral to the Loan Agent
therefor in an amount, and pursuant to documentation, reasonably
satisfactory to the Loan Agent and the Issuing Lender or (ii) provided to
Loan Agent an irrevocable standby letter of credit with respect to each
Letter of Credit which shall (w) be issued by one or more financial
institutions acceptable to the Loan Agent and the Issuing Lender, (x) be
issued for the benefit of the Issuing Lender in an amount reasonably
satisfactory to the Loan Agent and the Issuing Lender, (y) not expire until
the date that is at least fifteen (15) Business Days following the latest
expiration date of the outstanding Letters of Credit and (z) contain other
terms and conditions reasonably acceptable to the Loan Agent and the
Issuing Lender (a "BACKSTOP LC")
(D) TO AMEND SECTION 3.9 BY DELETING THE SECOND SENTENCE THEREOF IN ITS
-----------
ENTIRETY.
(E) TO AMEND SECTION 3.10 BY DELETING THE FIRST SENTENCE THEREOF IN ITS
------------
ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
If the Issuing Lender makes any payment or disbursement under any Letter of
Credit and the Borrower has not reimbursed the Issuing Lender in full for
such payment or disbursement
24
<PAGE>
on the date on which payment is made under a Letter of Credit, or if any
reimbursement received by the Issuing Lender from the Borrower is or must
be returned or rescinded upon or during any bankruptcy or reorganization of
the Borrower or otherwise, each Revolving Lender other than GECC shall
provide the Loan Agent, for the account of the Issuing Lender, at its
principal office in Chicago with immediately available funds in an amount
equal to such Lender's Revolving Percentage of the amount of such payment
or disbursement.
(F) TO AMEND SECTION 3.13 BY DELETING THE REFERENCE IN THE FIRST SENTENCE
------------
THEREOF TO SECTION 3.15.
------------
(G) TO AMEND SECTION 3.14(1) BY DELETING THE PHRASE "PAYABLE IN ARREARS ON
---------------
THE LAST DAY OF EACH CALENDAR QUARTER" IN THE LAST SENTENCE THEREOF IN ITS
ENTIRETY AND TO SUBSTITUTE THE PHRASE "PAYABLE IN ARREARS ON THE FIRST DAY OF
EACH CALENDAR MONTH FOR THE IMMEDIATELY PRECEDING MONTH" THEREFOR.
(H) TO DELETE THE TERMS OF SECTION 3.15 THEREIN IN THEIR ENTIRETY AND TO
------------
SUBSTITUTE THE FOLLOWING THEREFOR:
3.15. [Intentionally Omitted.]
(I) TO DELETE THE TERMS OF SECTION 3.16 THEREIN IN THEIR ENTIRETY AND TO
------------
SUBSTITUTE THE FOLLOWING THEREFOR:
3.16. [Intentionally Omitted.]
1.6 ARTICLE IV OF THE CREDIT AGREEMENT IS AMENDED TO MAKE THE PROVISIONS
THEREOF APPLICABLE NOT ONLY TO THE REVOLVING LOANS AND REVOLVING LENDERS BUT
ALSO THE LIQUIDITY LOANS AND LIQUIDITY LENDERS.
1.7 ARTICLE V OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS OF
SECTION 5.2 THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 5.2. Conditions Precedent to All Loans. The obligation
---------------------------------
of GECC to make the Supplemental Revolving Loan, of the Liquidity Lenders
to make each Liquidity Loan and of the Revolving Lenders to make each
Reborrowing Loan shall be subject to the further conditions precedent that
on the date of such Supplemental Revolving Loan, Liquidity Loan or
Reborrowing Loan:
25
<PAGE>
(1) The following statements shall be true and the Loan Agent
shall have received a certificate signed by a duly Authorized Officer
of the Borrower (in his or her capacity as such, and without any
personal liability therefor) dated the date of such Supplemental
Revolving Loan, Liquidity Loan or Reborrowing Loan, stating that:
(a) The representations and warranties contained in Article VI
----------
of this Agreement, in Section II of the Facilities Agreement (or any
----------
successor section therein) and in each other Loan Document are correct
in all material respects on and as of the date of such Supplemental
Revolving Loan, Liquidity Loan or Reborrowing Loan as though made on
and as of such date, except to the extent that such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all
material respects on and as of such earlier date);
(b) No Default or Event of Default (other than, during the
Suspension Period, a Suspended Default) has occurred and is
continuing, or would result from the borrowing of such Supplemental
Revolving Loan, Liquidity Loan or Reborrowing Loan; and
(c) With respect to (a) the Supplemental Revolving Loan, the
proceeds thereof are to be used solely to make payments of amounts due
and payable on the Restructuring Effective Date with respect to the
1995 Master Lease Agreement, or (b) each Liquidity Loan or Reborrowing
Loan, the purpose for which such Liquidity Loan or Reborrowing Loan is
to be used is consistent with the Budget and the Borrower is, and
after taking into account the use of such proceeds, will be in within
the parameters set forth in the Budget.
(2) The Loan Agent shall have received such other information,
approvals, opinions, or documents as the Loan Agent or any Lender may
reasonably request.
1.8 ARTICLE VI OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS
THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 6.1 Real Property. Schedule IV hereto sets forth, as of
------------- -----------
the Restructuring Effective Date, a complete and accurate listing of the
common address of each parcel of real property owned or leased by the
Borrower or any of its Subsidiaries and by each Financed Franchisee
(identifying for each such parcel the owner, lessor and lessee) together
with a complete and accurate listing of all mortgages, leasehold mortgages
or
26
<PAGE>
collateral assignments of lease granted in respect thereof (identifying
for each the mortgagor/grantor, the mortgagee/grantee and the debt secured
thereby).
SECTION 6.2 Mortgages. Each Mortgage delivered to the Loan Agent
---------
is effective to grant to the Loan Agent (a) in the case of a Mortgage
covering Tranche A Collateral for the benefit of itself and the Lenders and
(b) in the case of a Mortgage covering either Tranche B Collateral or
Tranche C Collateral for the benefit of itself and the Lenders, the 1996
Lease Loan Agent, and the 1996 Lease Lenders, a legal, valid and enforceable
Lien on all the right, title and interest of the mortgagor under such
Mortgage in the mortgaged property described therein to secure (a) the
Tranche A Loans with respect to the Tranche A Collateral and (b) all
Liquidity Obligations, Revolving Obligations, L/C Obligations and the "1996
Lease Obligations" (as defined in the Intercreditor Agreement) with respect
to the Tranche B Collateral and Tranche C Collateral. When each such
Mortgage is duly recorded in the offices listed on the schedule to such
Mortgage and the mortgage recording fees and taxes in respect thereof are
paid and compliance is otherwise had with the formal requirements of state
law applicable to the recording of real estate mortgages generally, each
such mortgaged property, subject to the encumbrances and exceptions to title
set forth therein and except as noted in the title policies delivered to the
Loan Agent pursuant to Section 5.1(9), will be subject to a legal, valid,
--------------
enforceable and perfected first priority Lien.
1.9 ARTICLE VII OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS OF
SECTION 7.1 THEREOF IN THEIR ENTIRETY.
- -----------
1.10 ARTICLE VIII OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS
THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 8.1. Events of Default. It shall be an "EVENT OF
-----------------
DEFAULT" hereunder if any of the following events ("EVENTS OF DEFAULT")
shall occur:
(1) The Borrower should fail to pay (a) the principal of, or interest
or fees on any Obligation owing hereunder, including the Revolving Notes or
Liquidity Note or any reimbursement obligations, interest or fee with
respect to any LC Obligations, as and when due and payable;
(2) Any representation or warranty made or deemed made (pursuant to
Section 2.2 or Section 2A.2) by the Borrower in this Agreement or any other
----------- ------------
Loan Document other than the Facilities Agreement or which is contained in
any certificate, document, opinion, or financial or other statement
furnished at any time under or in connection with any Loan Document other
than the Facilities Agreement shall prove, in light of the circumstances
under which it was made, to have been incorrect in any material respect on
or as of the date made or deemed made;
27
<PAGE>
(3) The Borrower or any Subsidiary shall fail to perform or observe
any term, covenant or agreement contained in Section 2.9 or Section 2A.9
----------- ------------
applicable thereto;
(4) The Borrower or any Subsidiary shall fail to perform or observe
any other term, covenant, or agreement contained in any Loan Document
applicable thereto (other than the Revolving Notes or Liquidity Note and the
Sections referenced in the foregoing clause (3) or the Facilities Agreement)
----------
on its part to be performed or observed and such failure shall continue for
fifteen (15) Business Days following notice thereof from the Loan Agent or
the Required Lenders;
(5) The occurrence of a Default (as such term is defined in the
Facilities Agreement) under the Facilities Agreement (other than, during the
Suspension Period, a Suspended Default) and any requirement set forth
therein for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied;
(6) Any Mortgage shall for any reason (other than pursuant to the
terms thereof or as a result of the Loan Agent's action) cease to create a
valid security interest in the Collateral purported to be covered thereby or
such security interest shall for any reason cease to be a perfected and
first priority security interest subject only to Liens permitted by Section
-------
4.1 of Facilities Agreement (or any successor section therein) and such
---
Mortgage; or
(7) The subordination and standstill provisions of the
Intercreditor Agreement shall, at any time, be invalidated or otherwise
cease to be in full force and effect or the Borrower shall make any payments
in contravention of the terms thereof.
SECTION 8.2. Effect of Event of Default. If any Event of Default
--------------------------
arising from the occurrence of an "Event of Default" described in Section
-------
6.1(6) of (and as defined in) the Facilities Agreement (or any successor
------
section therein) shall occur, automatically the Commitments of each of the
Lenders hereunder shall immediately terminate and the outstanding principal
amount of the Revolving Notes and the Liquidity Note, all interest thereon
and all other amounts payable under this Agreement and the other Loan
Documents (including cash collateral for all Letters of Credit) shall become
immediately due and payable. In the case of any other Event of Default
hereunder, (a) the Loan Agent may (or shall, upon the written request of the
Required Lenders), by notice to the Borrower, subject to the Intercreditor
Agreement, (1) declare the Commitments of each of the Lenders to be
terminated, (2) declare the outstanding principal amount of the Revolving
Notes and/or Liquidity Note, all interest thereon, and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith
due and payable, whereupon the Revolving Notes, the Liquidity Note, all such
interest, and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice of any
kind, all of which are hereby expressly waived by the Borrower, and (b) the
Loan Agent may (or shall, upon the written request of the Majority Liquidity
Lenders), by notice to the Borrower, subject to the
28
<PAGE>
Intercreditor Agreement, (1) declare the Liquidity Commitments of each of
the Liquidity Lenders to be terminated, (2) declare the outstanding
principal amount of the Liquidity Note, all interest thereon, and all other
amounts payable under this Agreement and the other Loan Documents with
respect to the Liquidity Loans to be forthwith due and payable, whereupon
the Liquidity Note, all such interest, and all such amounts shall become and
be forthwith due and payable, without presentment, demand, protest, or
further notice of any kind, all of which are hereby expressly waived by the
Borrower. Following any such declaration, the Loan Agent may exercise, in
the case of the Tranche A Collateral, on behalf of itself and the Lenders,
and, in the case of the Tranche B Collateral and Tranche C Collateral, on
behalf of all Creditors, all rights and remedies available under the Loan
Documents or applicable law. The Loan Agent and/or Issuing Lender may also
require, by notice to the Borrower, the Borrower to either (i) pledge cash
collateral to the Loan Agent in an amount, and pursuant to documentation,
reasonably satisfactory to the Required Lenders, the Loan Agent and the
Issuing Lender with respect to all issued and outstanding or drawn and not
reimbursed Letters of Credit or (ii) provide to the Loan Agent an
irrevocable standby letter of credit with respect to each such issued and
outstanding Letter of Credit, which standby letter of credit shall (w) be
issued by one or more financial institutions acceptable to the Loan Agent
and the Issuing Lender, (x) be issued for the benefit of the Issuing Lender
in an amount reasonably satisfactory to the Loan Agent and the Issuing
Lender, (y) not expire until the date that is at least fifteen (15) Business
Days following the latest expiration date of the outstanding Letters of
Credit and (z) contain other terms and conditions reasonably acceptable to
the Loan Agent and the Issuing Lender.
1.11 ARTICLE IX OF THE CREDIT AGREEMENT IS AMENDED AS FOLLOWS:
(A) SECTION 9.8 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE
-----------
FINAL SENTENCE THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING
THEREFOR:
With respect to its Revolving Loans or Liquidity Loans, BofA shall have the
same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Loan Agent, and the terms
"Lender" and "Lenders" include BofA in its individual capacity.
(B) SECTION 9.11 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE
------------
CLAUSES (2) AND (3) THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE
FOLLOWING THEREFOR:
(2) The Lenders irrevocably authorize the Loan Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Loan Agent upon any Collateral (a) subject to the terms of the Intercreditor
Agreement, upon termination of the Commitments, expiration or other
termination of all Letters of Credit (or the posting of cash collateral
therefor or provision of a Backstop LC (as defined in Section 3.3) therefor)
-----------
and payment in
29
<PAGE>
full of all Revolving Loans, Liquidity Loans and all other Obligations known
to the Loan Agent and payable under this Agreement or any other Loan
Document; or (b) if approved, authorized or ratified in writing in
accordance with the Intercreditor Agreement. Upon request by the Loan Agent
at any time, the Lenders will confirm in writing the Loan Agent's authority
to release particular types or items of Collateral pursuant to this Section
-------
9.11(2), provided that the absence of any such confirmation for whatever
-------
reason shall not affect the Loan Agent's rights under this Section 9.11.
------------
(3) Each Lender agrees with and in favor of each other Lender
(which agreement shall not be for the benefit of the Borrower or any
Subsidiary) that the Borrower's obligation to such Lender under this
Agreement and the other Loan Documents is not and shall not be secured by
any real property collateral now or hereafter acquired by the Borrower or
any of its Subsidiaries other than the real property described in the
Mortgages and the real property subject from time to time to the 1996 Master
Lease Agreement.
(B) SECTION 9.12 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE
------------
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
9.12. No Duties Imposed Upon Documentation Agent or Co-Agents. None
-------------------------------------------------------
of the Persons identified in this Agreement as a "Documentation Agent" or
"Co-Agent" shall have any right, power, obligation, liability,
responsibility or duty under this Agreement or any of the other Loan
Documents in such capacity. Without limiting the foregoing, none of the
Persons identified in this Agreement as a "Documentation Agent" or "Co-
Agent" shall have or be deemed to have any fiduciary duty to or fiduciary
relationship with any Lender. In addition to the agreements set forth in
Section 9.6, each of the Lenders acknowledges that it has not relied, and
-----------
will not rely, on any of the Persons so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.
1.12 ARTICLE X OF THE CREDIT AGREEMENT IS AMENDED AS FOLLOWS:
---------
(A) SECTION 10.1 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE
------------
TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 10.1. Waivers and Amendments. The provisions of this
----------------------
Agreement and of each of the other Loan Documents may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing, is made in accordance with the Intercreditor Agreement and is
consented to by the Borrower, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given; provided, that no such amendment, modification or waiver:
--------
(a) which would modify any requirement hereunder that any
particular action be taken by (i) all Lenders or by the Required Lenders
shall be effective without the
30
<PAGE>
consent of each Lender or (ii)the Liquidity Lenders or the Majority
Liquidity Lenders, shall be effective without the consent of each
Liquidity Lender;
(b) which would modify this Section 10.1, change the definition
------------
of "Required Lenders,", change the definition of "Majority Liquidity
Lenders," change any Revolving Percentage or Liquidity Percentage for
any Lender (except in accordance with Section 10.5 pursuant to an
------------
Assignment and Acceptance), reduce any fees, extend the Termination
Date, or subject any Lender to any additional obligations, shall be
effective without the consent of each affected Lender;
(c) which would extend the due date for, or reduce the amount
of, any payment or prepayment of principal of or interest on or any fee
related to any Revolving Loan, Liquidity Loan or any LC Obligation, or
reduce the rate of interest payable with respect to any Revolving Loan,
Liquidity Loan or any LC Obligation, shall be effective without the
consent of each affected Lender; provided the Majority Liquidity Lenders
--------
shall be permitted to change the amount, timing or rate of the Default
Rate applicable to the Liquidity Loans and the Majority Revolving
Lenders (as defined in the Intercreditor Agreement) shall be permitted
to change the amount, timing or rate of the Default Rate applicable to
the Revolving Loans;
(d) which would affect adversely the interests, rights or
obligations of the Loan Agent or the Issuing Lender (in such capacity),
shall be effective without the consent of the Loan Agent or the Issuing
Lender, respectively; or
(e) release any Guarantor from its obligations under its
respective Guaranty or release or subordinate any Lien on any portion
of the Collateral, except as contemplated by the Intercreditor
Agreement and except as otherwise may be provided in Section 9.11
above. ------------
Upon the effectiveness of any consent, amendment, modification or waiver
under this Agreement, the Loan Agent shall promptly give each Lender written
notice (including a description) of such consent, amendment, modification or
waiver.
(B) SECTION 10.5 IS AMENDED TO DELETE SUBCLAUSE (B) AT THE END OF
------------ -------------
CLAUSE (1) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
----------
(b) after giving effect to such assignment (i) no Lender shall have
greater than 25% of the Revolving Percentage and (ii) no Liquidity Lender
shall have greater than 49% of the Liquidity Percentage as a result of such
assignment.
31
<PAGE>
(C) SECTION 10.5 OF THE CREDIT AGREEMENT IS FURTHER AMENDED TO ADD THE
------------
FOLLOWING AT THE END THEREOF:
(6) Notwithstanding anything in this Section 10.5 or otherwise to the
------------
contrary, no Liquidity Lender shall be permitted to assign any or all of its
interest in its Liquidity Loans and Liquidity Commitments or sell
participating interests therein unless:
(a) such Liquidity Lender shall assign or sell a participation of
a constant and not varying percentage of the Liquidity Loans and
Liquidity Commitments; and
(b) simultaneously with such assignment or participation
transaction, the Liquidity Lender shall assign or sell to such assignee
or participant the same percentage of the Liquidity Lender's rights and
obligations with respect to either (i) the 1996 Lease Obligations and
the Reborrowing Commitment - 1996 Master Lease (as defined in the
Facilities Agreement) or (ii) the Revolving Loans and Reborrowing
Commitment-Revolver; provided, however, if such Liquidity Lender's
-------- -------
percentage of the Liquidity Loans and Liquidity Commitments at the time
of such assignment or participation transaction exceeds such Liquidity
Lender's Pro Rata 1996 Share, such Liquidity Lender shall be permitted
to assign or sell a non-pro rata portion of the Liquidity Facility and
Liquidity Commitments to any purchaser provided that after taking into
account such transaction such selling Liquidity Lender's percentage of
the Liquidity Loans and Liquidity Commitments is not less than its Pro
Rata 1996 Share.
(D) SECTION 10.6 IS AMENDED TO ADD THE FOLLOWING AT THE END THEREOF:
------------
Without limiting the foregoing, the Borrower agrees to pay on demand all
reasonable costs and expenses incurred by the Loan Agent in connection
with (i) the preparation, execution, delivery, filing, recording, and
administration of any of the Loan Documents, (ii) any amendment,
modification or waiver of, consent with respect to, or termination of,
any of the Loan Documents or advice in connection with the
administration thereof, (iii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by the Loan Agent or any other
Person, and whether as a party, witness or otherwise) in any way
relating to the Loan Documents or any other agreement to be executed or
delivered in connection with the Loan Documents, (iv) any work-out or
restructuring of the Obligations, and (v) any attempt to enforce any
remedies of the Loan Agent against the Borrower or any other Person that
may be obligated to the Loan Agent by virtue of any of the Loan
Documents, including as to all of the foregoing clauses (i)-(v) the
reasonable fees and expenses of counsel, advisors, accountants,
consultants (including environmental and management consultants and
appraisers) and auditors retained for advice, assistance, or other
representation in connection with any of the foregoing matters. In
addition, the Borrower shall pay any and all stamp and other taxes and
fees payable or determined
32
<PAGE>
to be payable by the Loan Agent in connection with the execution,
delivery, filing and recording of any of the Loan Documents and the
other documents to be delivered under the Loan Documents, and agrees to
save the Loan Agent harmless from and against any and all liabilities
with respect to or resulting from any delay attributed to the Borrower
in paying or failing to pay such taxes and fees.
(d) SECTION 10.15 IS AMENDED TO DELETE THE TERMS THEREOF IN THEIR
-------------
ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR:
SECTION 10.15. Facilities Agreement. The Lenders hereby consent
--------------------
to the execution and delivery by the Loan Agent of the First Amendment and
Consent to Amended and Restated Facilities Agreement (as such agreement is
to take effect on the Restructuring Effective Date) and acknowledge and
agree that they will be bound by the terms of the Facilities Agreement (as
so amended and as further amended, modified, restated or supplemented from
time to time hereafter in accordance with the terms hereof and the
Intercreditor Agreement).
(e) ALL OTHER PROVISIONS OF ARTICLE X ARE AMENDED TO MAKE THE
---------
PROVISIONS THEREOF APPLICABLE TO REVOLVING LOANS OR REVOLVING NOTES EQUALLY
APPLICABLE TO THE LIQUIDITY LOANS AND THE LIQUIDITY NOTE.
(f) ALL PROVISIONS OF ARTICLE X ARE AMENDED TO MAKE THE PROVISIONS
---------
THEREOF WHICH ARE APPLICABLE TO THE DOCUMENTATION AGENT EQUALLY APPLICABLE
TO THE CO-AGENTS.
1.13 THE CREDIT AGREEMENT IS FURTHER AMENDED TO DELETE ALL OF THE SCHEDULES
AND EXHIBITS THERETO AND TO SUBSTITUTE THE SCHEDULES AND EXHIBITS ATTACHED
HERETO THEREFOR.
SECTION 2. CONSENT. Effective as of the date of this Amendment and
-------
subject to the satisfaction of the conditions precedent set forth in Section 3
---------
below, and in reliance on the Borrower's representations and warranties set
forth in Section 4 below, the parties hereto hereby consent to the transactions
---------
contemplated by the documents, instruments and agreements set forth on the List
of Closing Documents attached hereto as Exhibit K.
---------
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall not
---------------------------
become effective unless on or before July 15, 1998 each of the following shall
have occurred:
(a) this Amendment shall have been executed by the Borrower, the Loan
Agent, the Documentation Agent, the Co-Agents, the Issuing Lender, each of
the Lenders currently party to the Credit Agreement, GECC and each
additional Lender being added as a Liquidity Lender;
33
<PAGE>
(b) the Loan Agent shall have received an executed copy of the
Intercreditor Agreement in the form attached hereto as Exhibit I, duly
---------
executed by the parties thereto;
(c) the Loan Agent shall have received an executed copy of the First
Amendment and Consent to the Amended Facilities Agreement in the form
attached hereto as Exhibit J, duly executed by the parties thereto;
----------
(d) the Loan Agent shall have received a duly executed original
Liquidity Notes in the form attached hereto as Exhibit A-4;
-----------
(e) the Loan Agent shall have received an executed copy of Amendment
No. 2 to Master Lease Agreement No. 2 in form and substance acceptable to
the Loan Agent and the Lenders duly executed by the Borrower and the 1996
Lease Loan Agent as consented to by each of the 1996 Lease Lenders;
(f) the Borrower shall have paid (i) all fees required to be paid to
the Loan Agent pursuant to the terms of the Confidential Agreement on or
prior to the effectiveness hereof and (ii) all fees required to be paid to
GECC on the Restructuring Effective Date pursuant to the terms of its fee
agreement with the Borrower of even date herewith;
(g) the Borrower shall have reimbursed the Loan Agent for all fees and
expenses of counsel, financial advisors and other professionals;
(h) the corporate structure of and the Persons which are Subsidiaries
of the Borrower shall be acceptable to the Liquidity Lenders;
(i) the Loan Agent shall have received an executed copy of the
Confidential Agreement in form and substance acceptable to the Loan Agent
and (i) the Lenders with respect to the provisions thereof regarding fees
and (ii) the Liquidity Lenders with respect to the provisions thereof
regarding the Budget;
(j) the Loan Agent shall have received a certificate or certificates of
the Secretary or Assistant Secretary of the Borrower and each of its
Subsidiaries certifying: (i) a copy of the Certificate or Articles of
Incorporation of such entity, as theretofore amended; (ii) a copy of the
bylaws of such entity, as theretofore amended; (iii) copies of all
corporate action taken by such entity, including resolutions of its board of
directors, authorizing the execution, delivery, and performance of this
Amendment by the Borrower and each other instrument and document to be
delivered by the Borrower and its Subsidiaries pursuant to this Amendment
and the Facilities Agreement; and (iv) the names and true signatures of the
officers of the Borrower and its Subsidiaries authorized to sign this
Amendment and the other instruments and documents to be delivered by the
Borrower and its Subsidiaries under this Amendment;
34
<PAGE>
(k) the Loan Agent shall have received the opinions of Akin, Gump,
Hauer & Feld and the Borrower's General Counsel in form and substance
acceptable to the Loan Agent;
(l) the Loan Agent shall have received evidence that the Common
Collateral Loan Agent has been named as loss payee under all policies of
casualty insurance, and as additional insured under all policies of
liability insurance, required by any Common Collateral Document (as such
term is defined in the Facilities Agreement);
(m) the Loan Agent shall have received the other documents, instruments
and agreements set forth on the List of Closing Documents (Restructuring)
and the List of Closing Documents (Rollup) attached as Exhibit K hereto, in
---------
each case in form and substance acceptable to the Loan Agent and duly
executed by the parties thereto; and
(n) the Loan Agent shall have received such other approvals, opinions
or documents as the Loan Agent, the Common Collateral Agent or any Lender
may reasonably request.
SECTION 4. REPRESENTATIONS AND WARRANTIES. To induce the Loan Agent,
------------------------------
the Documentation Agent, the Co-Agents, the Issuing Lender, the Liquidity
Lenders, and the Revolving Lenders to enter into this Amendment, the Borrower
represents and warrants to each such party as of the date hereof that:
(a) This Amendment and the Credit Agreement as previously executed and as
amended hereby, constitute legal, valid and binding obligations of the Borrower
and are enforceable against the Borrower in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrower hereby reaffirms
all covenants, representations and warranties made in the Credit Agreement and
the other Loan Documents to the extent the same are not amended or waived
hereby, and agrees that all such covenants, representations and warranties shall
be deemed to have been remade as of the effective date of this Amendment.
(c) Other than the Suspended Defaults, no Default or Event of Default has
occurred under the Credit Agreement or the Facilities Agreement.
SECTION 5. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT.
-----------------------------------------------
(a) Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Credit Agreement to "this Credit Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference to the Credit
Agreement in any other "Credit Document" (as defined in
35
<PAGE>
the Intercreditor Agreement) shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically modified or waived above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect, and are hereby
ratified and confirmed.
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
regard to its conflicts of laws provisions.
SECTION 7. HEADINGS. Section headings in this Amendment are included
--------
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
SECTION 8. COUNTERPARTS. This Amendment may be executed by one or
------------
more of the parties to this Amendment on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. Facsimile transmission of the signature of any party
hereto sent to either the Loan Agent or its counsel shall be effective as an
original signature provided each party agrees to promptly submit original
signature pages hereto in sufficient quantity for each of the parties hereto.
SECTION 9. NO STRICT CONSTRUCTION. The parties hereto have
----------------------
participated jointly in the negotiation and drafting of this Amendment, the
Credit Agreement and the other Loan Documents. In the event an ambiguity or
question of intent or interpretation arises, this Amendment and the Credit
Agreement as hereby amended and the other Loan Documents shall be construed as
if drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Amendment, the Credit Agreement or any of the other Loan
Documents.
[Remainder of this Page Intentionally Blank.]
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BOSTON CHICKEN, INC.
By:_____________________________________
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Loan Agent and as a Co-Agent
By:_____________________________________
Title:____________________________________
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Issuing Lender, as a Revolving
Lender and as a Liquidity Lender
By:_____________________________________
Title:____________________________________
<PAGE>
BANKERS TRUST COMPANY, as Documentation Agent and
as a Revolving Lender and as a Non-Participating
Lender
By:____________________________________
Title:___________________________________
<PAGE>
BANK BUMIPUTRA MALAYSIA BERHAD,
as a Revolving Lender and as a Non-Participating Lender
By:____________________________________
Title:___________________________________
<PAGE>
BANCO POPULAR DE PUERTO RICO, as a Revolving
Lender and as a Non-Participating Lender
By:____________________________________
Title___________________________________
<PAGE>
HARRIS TRUST AND SAVINGS BANK, as a Revolving
Lender and as a Non-Participating Lender
By:____________________________________
Title___________________________________
<PAGE>
LASALLE NATIONAL BANK, as a Revolving Lender and
as a Liquidity Lender
By:____________________________________
Title:___________________________________
<PAGE>
SAKURA BANK, as a Revolving Lender and as a Non-
Participating Lender
By:____________________________________
Title:___________________________________
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION, as a Co-
Agent, as a Revolving Lender and as a Liquidity
Lender
By:____________________________________
Daniel P. Gioia, Senior Risk Manager
Notices to:
General Electric Capital Corporation
777 Long Ridge Road
Building B, 1st Floor
Stamford, Connecticut 06927
Attn: Daniel P. Gioia
Fax: 203-703-1777
Confirmation:203-357-6245
<PAGE>
SANWA BUSINESS CREDIT CORPORATION, as a Liquidity Lender
By:____________________________________
Title:___________________________________
Notices to:
One South Wacker Drive
Chicago, Illinois 60606
Attn:__________________________
Fax:___________________________
Confirmation:____________________
<PAGE>
HOUR LLC, as a Liquidity Lender
By: Sunrise Partners L.L.C., its Manager
By: Dawn General Partner Corp., its Manager
By:_____________________________
Title:____________________________
Notices to:
2 American Lane
Grenwich, Connecticut 06836
Attn: Paul Guggenheimer
Fax: (203) 862-7229
Confirmation: (203) 861-3269
<PAGE>
EXHIBIT 10.3
EXECUTION COPY
AMENDMENT NO. 2 TO
MASTER LEASE AGREEMENT NO. 2
AND RELATED SCHEDULES
by and among
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lessor
and
BOSTON CHICKEN, INC.,
as Lessee
Dated as of July 15, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
-----
<C> <S> <C>
RECITALS.......................................................................................................... 1
- --------
AGREEMENT......................................................................................................... 2
- ---------
1. Acknowledgments Re: 1996 Master Lease Transaction; Amount of Outstanding Obligation....................... 2
-----------------------------------------------------------------------------------
2. Amendment of 1996 Master Lease and Schedules.............................................................. 3
--------------------------------------------
2.1. Reference to Facilities Agreement........................................................... 3
---------------------------------
2.2. Definitions................................................................................. 3
-----------
2.3. Section I (Leasing); Termination of Commitments............................................. 8
-----------------------------------------------
2.4. Section II (Term, Rent and Payment)......................................................... 9
-----------------------------------
2.5. Section IIA (Reborrowing Loans) [New]....................................................... 9
-------------------------------------
2.6. Section IIB (Interest; Payments and Prepayments) [New]...................................... 11
------------------------------------------------------
2.7. Section III (Taxes)......................................................................... 13
-------------------
2.8. Section V (Delivery, Use and Operation; Substitution)....................................... 14
-----------------------------------------------------
2.9 Section VII (Loss or Damage; Stipulated Loss Value)......................................... 15
---------------------------------------------------
2.10. Section IX (Insurance)...................................................................... 15
----------------------
2.11. Section X (Return of Lease Assets).......................................................... 15
----------------------------------
2.12. Section XI (Default; Remedies).............................................................. 16
------------------------------
2.13. Section XII (Assignment; Subletting)........................................................ 18
------------------------------------
2.14. Section XIII (Net Lease; No Set-Off, Etc.................................................... 19
-----------------------------------------
2.15. Section XIV (Indemnification)............................................................... 19
-----------------------------
2.16. Section XVI (Representations, Warranties and Covenants of Lessee)........................... 19
-----------------------------------------------------------------
2.17. Section XVII (Ownership for Tax Purposes; Grant of Security Interest; Usury Savings)........ 20
------------------------------------------------------------------------------------
2.18. Section XVIII (End of Lease Options)........................................................ 23
------------------------------------
2.19. Section XIX (Miscellaneous)................................................................. 23
---------------------------
a........................................................................................... 23
2.20. Section XXII (Early Termination)............................................................ 24
--------------------------------
2.21. Schedules................................................................................... 25
---------
a. Paragraph B.3 (Basic Term)................................................... 25
--------------------------
b. Paragraph B.10 (Renewal Term)................................................ 25
-----------------------------
c. Paragraph B.11 (Maximum Lease Term).......................................... 25
-----------------------------------
d. Paragraph C (Term and Rent).................................................. 25
---------------------------
e. Annex E (Amortization Schedule).............................................. 25
-------------------------------
f. Annex F (Return Provisions).................................................. 25
---------------------------
2.22. References to Deleted Sections............................................... 25
------------------------------
3. Conditions Precedent...................................................................................... 25
--------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
3.1. Second Amendment and Related Amendment Documents; Satisfactory Legal Form.......................... 25
-------------------------------------------------------------------------
3.2. Facilities Agreement Amendment; Second Credit Agreement Amendment; Other Related Documents......... 26
------------------------------------------------------------------------------------------
3.3. Confidential Agreement............................................................................. 26
----------------------
3.4. Termination of Agency Agreement.................................................................... 26
-------------------------------
3.5. Payments........................................................................................... 26
--------
3.6. Corporate Structure................................................................................ 26
-------------------
4. Representations and Warranties........................................................................... 26
------------------------------
5. Miscellaneous............................................................................................ 26
-------------
5.1. Headings........................................................................................... 26
--------
5.2. Counterparts....................................................................................... 27
------------
5.3. Interpretation..................................................................................... 27
--------------
5.4. Complete Agreement................................................................................. 27
------------------
5.5. Ratification of 1996 Master Lease and Schedules.................................................... 27
-----------------------------------------------
5.6. Reaffirmation of Grant of Security Interest........................................................ 27
-------------------------------------------
5.7. Governing Law...................................................................................... 27
-------------
5.8. Effect............................................................................................. 27
------
5.9. Use of Defined Terms............................................................................... 27
--------------------
5.10. Conflict of Terms.................................................................................. 27
-----------------
5.11. No Novation........................................................................................ 28
-----------
</TABLE>
ii
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
----------------------------------------
Annex A - List of Schedules
Schedule 1.4 - Acquisition Loan Principal Amount as of Restructuring
Effective Date
Exhibit A-1 - Form of Secured Promissory Note
Exhibit A-2 - Form of Reborrowing Note
Exhibit B - Form of Omnibus Participation Agreement Amendment
Exhibit C - Form of Second Amended and Restated Intercreditor
Agreement
Exhibit D - Form of First Amendment and Consent to Amended and
Restated Facilities Agreement
Exhibit E - Form of Agency Agreement Termination Letter
Exhibit F - Form of Amended Memorandum of Master Lease
Exhibit G - Form of Collateral Assignment of Lease Amendment
iii
<PAGE>
AMENDMENT NO. 2 TO MASTER LEASE AGREEMENT NO. 2
AND RELATED SCHEDULES
This AMENDMENT NO. 2 TO MASTER LEASE AGREEMENT NO. 2 AND RELATED
SCHEDULES (the "Second Amendment") is entered into as of July 15, 1998 by and
----------------
among General Electric Capital Corporation, a corporation organized under the
banking laws of the State of New York, for itself and as Agent (in both such
capacities, "Lessor") for the Participants under the Participation Agreements
------
(as defined below) and BOSTON CHICKEN, INC., a Delaware corporation ("Lessee")
------
with reference to the following RECITALS, which shall be construed as part of
this Second Amendment:
RECITALS
--------
A. Lessor and Lessee are parties to (i) that certain Master Lease
Agreement No. 2 dated as of December 9, 1996 (such agreement, as amended by
Amendment No. 1 to Master Lease Agreement No. 2 dated as of February 28, 1997,
Amendment No. 2 to Master Lease Agreement dated as of March 18, 1997 (the "Prior
-----
Second Amendment"; such Master Lease Agreement No. 2, as so amended, will be
- ----------------
referred to in these RECITALS as the "1996 Master Lease") and (ii) those
-----------------
Schedules identified in ANNEX A hereto (each, a "Schedule," and collectively,
--------
the "Schedules"), each dated the date specified therefor in ANNEX A.
---------
Capitalized terms used in these RECITALS that are not otherwise defined in these
RECITALS are as defined in the 1996 Master Lease without regard to this Second
Amendment.
B. Pursuant to the 1996 Master Lease and the Schedules, Lessor "leased"
certain real and personal property, defined as the "Lease Assets" in the 1996
Master Lease, to Lessee, for the purposes and with the intent specified in
Section XVII thereof.
C. Lessor and certain financial institutions are parties to that certain
Participation Agreement dated as of December 9, 1996 (such agreement, as amended
by Amendment No. 1 to Participation Agreement dated as of February 28, 1997,
"Participation Agreement A"). Lessor and AT&T Commercial Finance Corporation
- --------------------------
are parties to that certain Participation Agreement dated as of February 28,
1997 (such agreement, "Participation Agreement B"; Participation Agreement A and
-------------------------
Participation Agreement B will be referred to collectively as the "Participation
-------------
Agreements"). Pursuant to the Participation Agreements, among other things, the
- ----------
Participants and ATTCFC (as such terms are defined therein) acquired
participation interests in a portion of the obligations of Lessee to Lessor
under the 1996 Master Lease and the Schedules (Lessor, such Participants, and
ATTCFC will be referred to collectively as the "1996 Lease Lenders").
------------------
D. In connection and concurrent with the 1996 Master Lease, among other
things:
1. Lessee, Bank of America Illinois (now known as Bank of America
National Trust and Savings Association), as agent (in such capacity "Loan
----
Agent") and as a lender, and certain other financial institutions as
-----
additional lenders (all such lenders will be referred to collectively as
the "Bank Lenders") entered into that certain Secured Revolving Credit
------------
Agreement dated as of December 9, 1996 (which agreement was amended by the
First Amendment and Consent to Secured Revolving Credit Agreement dated as
of October 24, 1997);
1
<PAGE>
2. Lessee, Lessor and Loan Agent entered into that certain Facilities
Agreement dated as of December 9, 1996, which agreement was amended and
restated pursuant to that certain Amended and Restated Facilities Agreement
dated as of October 24, 1997 (such agreement, as so amended and restated,
the "Existing Facilities Agreement"); and
-----------------------------
3. Lessee, Lessor and Loan Agent entered into that certain
Intercreditor Agreement dated as of December 9, 1996 (such agreement, as it
was amended and restated pursuant to that certain Amended and Restated
Intercreditor Agreement dated as of October 24, 1997, the "Existing
--------
Intercreditor Agreement").
-----------------------
E. Lessee has requested, among other things, that Lessor and the Bank
Lenders provide certain financial accommodations to Lessee including, among
other things, (i) the commitment by some or all of the "1996 Lenders" (as
defined in the DEFINITIONS section below) to fund the "Liquidity Loans" (as
defined in the Second Amendment and Consent to Secured Revolving Credit
Agreement of even date herewith (the "Second Credit Agreement Amendment"), (ii)
---------------------------------
the commitment by all of the Bank Lenders and Lessor to fund their pro-rata
share of any "Reborrowing Loans" (as defined in and made pursuant to the
"Facilities Agreement Amendment" (as defined in the DEFINITIONS section below)),
(iii) the agreement by the 1996 Lease Lenders to extend the principal payments
required to be made on the next two Rent Payment Dates under the 1996 Master
Lease (which Rent Payment Dates are on or about July 15, 1998 and October 7,
1998) to October 17, 1998, and (iv) the agreement of the Bank Lenders and Lessor
to make certain amendments to the Existing Facilities Agreement and the Existing
Intercreditor Agreement.
F. Subject to the terms and conditions hereof, Lessor is willing to
accommodate the foregoing requests of Lessee and to amend the 1996 Master Lease
and the Schedules and to enter into the Related Amendment Documents (as defined
below), all as more fully set forth herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the receipt and adequacy of which are hereby
acknowledged, it is agreed as follows:
1. Acknowledgments Re: 1996 Master Lease Transaction; Amount of Outstanding
------------------------------------------------------------------------
Obligation. The parties acknowledge and agree, consistent with the express
- ----------
provisions of SECTION XVII of the 1996 Master Lease as in effect without regard
to this Second Amendment, as follows:
1.1. As set forth in SECTION XVII of the 1996 Master Lease as in effect
without regard to this Second Amendment, it was the original intent of Lessor
and Lessee that (i) for the purposes of Lessee's financial reporting, the
transaction contemplated by the 1996 Master Lease be treated by Lessee as an
operating lease from Lessor to Lessee, and (ii) for all other purposes,
including Federal and state income tax, bankruptcy and Uniform Commercial Code
purposes, (1) Lessee would be treated as the owner of the Lease Assets, (2)
Lessee would grant to Lessor a security interest or lien, as the case may be, in
the Lease Assets and other collateral, and (3) the obligations of Lessee to pay
Rent would be treated as payments of principal and interest to Lessor by Lessee.
From and after the Restructuring Effective Date, the transactions contemplated
by the 1996 Master Lease shall also be treated as a financing transaction for
financial reporting purposes, involving secured loans by Lessor to Lessee
(collectively, the "Acquisition Loan") to acquire the Lease
2
<PAGE>
Assets. Accordingly, on the Restructuring Effective Date, Lessee shall deliver
to Lessor the Secured Promissory Note evidencing Lessee's obligation to repay
the outstanding balance of the Acquisition Loan together with interest thereon.
1.2. Notwithstanding the fact that title to the Lease Assets may be in the
name of Lessor, the Lease Assets are the property of Lessee, and Lessor is
merely holding title thereto as an accommodation to Lessee. Lessor is hereby
authorized to convey or transfer record title to the Lease Assets to Lessee at
such time or times as are mutually agreeable to Lessor and Lessee, it being
understood and agreed that any such conveyance or transfer shall be on an AS IS,
WHERE IS BASIS, and Lessor shall not be required to make and may specifically
disclaim any representation or warranty as to the condition of the relevant
Lease Assets and other matters, and notwithstanding any such transfer the Lease
Assets shall in all events remain subject to the Lien of Lessor provided for
herein.
1.3. Notwithstanding the characterization of Lessee's obligation to pay
amounts owing to Lessor pursuant to the 1996 Master Lease as an obligation to
pay "principal and interest" and/or "rent" (which obligation was absolute and
unconditional), Lessee's obligation to pay amounts owing to Lessor as of the
Restructuring Effective Date pursuant to the 1996 Master Lease shall, from and
after the Restructuring Effective Date, be an obligation to repay the
Acquisition Loan (and all interest thereon), which obligation is absolute and
unconditional.
1.4. As of the date hereof, the principal amount of the Acquisition Loan is
as set forth on SCHEDULE 1.4 hereto.
2. Amendment of 1996 Master Lease and Schedules. The 1996 Master Lease and
--------------------------------------------
the Schedules are hereby amended, effective as of the Restructuring Effective
Date, as follows (and all section references in this SECTION 2 shall, unless the
context otherwise requires, be references to sections in the 1996 Master Lease):
2.1. REFERENCE TO FACILITIES AGREEMENT. DELETE THE SECOND PARAGRAPH OF THE
---------------------------------
PREAMBLE OF THE 1996 MASTER LEASE AND REPLACE IT WITH THE FOLLOWING:
This Agreement is executed concurrently with the "Facilities
Agreement" (as defined in the "Definitions" section below) and is
subject to the provisions thereof and of the "Intercreditor Agreement"
(as defined in the "Definitions" section below). Capitalized terms
used herein without definition shall be as defined in the Facilities
Agreement.
2.2. DEFINITIONS. ADD A NEW SECTION ENTITLED "DEFINITIONS" IMMEDIATELY
-----------
BEFORE SECTION I, AS FOLLOWS (IT BEING UNDERSTOOD THAT THE DEFINITIONS SPECIFIED
BELOW SHALL SUPERSEDE THE CORRESPONDING DEFINITIONS, IF ANY, IN THE 1996 MASTER
LEASE):
DEFINITIONS.
-----------
In addition to the defined terms appearing in this Agreement,
capitalized terms used in this Agreement shall have (unless otherwise
provided elsewhere in this Agreement) the following respective
meanings:
"Acquisition Loan" shall be as defined in SECTION 1.1 of the Second
----------------
Amendment.
3
<PAGE>
"Agreement" means the 1996 Master Lease Agreement No. 2 dated as of
---------
December 9, 1996, as amended by Amendment No. 1 to Master Lease
Agreement No. 2 dated as of February 28, 1997, Amendment No. 2 to
Master Lease Agreement dated as of March 18, 1997 (the "Prior Second
------------
Amendment"), and Amendment No. 2 to Master Lease Agreement No. 2 dated
---------
as of the Restructuring Effective Date (the "Second Amendment"), and
----------------
(subject to the Intercreditor Agreement) as it may be thereafter be
amended, modified, extended, amended and restated, or replaced.
Although the Prior Second Amendment and the Second Amendment are each
denominated an "Amendment No. 2," the Second Amendment does not
supersede or replace the Prior Second Amendment, which remains in
effect in accordance with its terms.
"Amended Memorandum of Lease" means an Amended and Restated Memorandum
---------------------------
of Master Lease and Mortgage substantially in the form of EXHIBIT F to
the Second Amendment.
"ATTCFC" is defined in SECTION XII(B)(3), and includes its permitted
------
successors and assignees.
"Bank Lenders" means the "Revolving Lenders" under and as defined in
------------
the Credit Agreement.
"BCRE" is defined in SECTION I(B).
----
"BofA" means Bank of America National Trust and Savings Association.
----
"Business Day" means any day other than Saturday, Sunday, and any day
------------
on which banking institutions located in the States of Connecticut,
New York, or Colorado are authorized by law and other governmental
action to close.
"Budget" is defined in the Facilities Agreement.
------
"Collateral Assignment of Lease" is defined in SECTION I(C), as any
------------------------------
such agreement may be amended by a Collateral Assignment of Lease
Amendment and as it may from time to time be amended, modified,
extended, amended and restated, or replaced in accordance with its
respective terms.
"Collateral Assignment of Lease Amendment" means a First Amendment to
----------------------------------------
Collateral Assignment and Leasehold Mortgage substantially in the form
of EXHIBIT G to the Second Amendment.
"Common Collateral Agent" is defined in the Facilities Agreement.
-----------------------
"Credit Agreement" means the Secured Revolving Credit Agreement dated
----------------
as of December 9, 1996, as amended by the First Amendment and Consent
to Secured Revolving Credit Agreement dated as of October 24, 1997,
and the Second Credit Agreement Amendment, and as it may from time to
time be amended, modified, extended, amended and restated, or replaced
in accordance with the provisions of the Intercreditor Agreement.
"Default" is defined in SECTION XI(A).
-------
4
<PAGE>
"Equipment" is defined in SECTION I(A).
---------
"Estoppel/Waiver Agreement" is defined in SECTION I(C).
-------------------------
"Facilities Agreement" means the Amended and Restated Facilities
--------------------
Agreement dated as of October 24, 1997 as amended by the Facilities
Agreement Amendment and as it may from time to time be amended,
modified, extended, amended and restated, or replaced in accordance
with its terms and the terms of the Intercreditor Agreement.
"Facilities Agreement Amendment" means the First Amendment and Consent
------------------------------
to Amended and Restated Facilities Agreement dated as of the
Restructuring Effective Date, in substantially the form of EXHIBIT D
to the Second Amendment.
"FAD"; "FADs" are defined in SECTION I(A).
--- ----
"Fee Improvements" is defined in SECTION I(C).
----------------
"Fee Property" is defined in SECTION I(A).
------------
"Federal Funds Rate" means, for any day, a floating rate equal to the
------------------
weighted average of the rates on overnight federal funds transactions
among members of the Federal Reserve System, as determined by Lessor
in its sole discretion, which determination shall be final, binding
and conclusive (absent manifest error).
"Floating Rate" shall be as defined in the Credit Agreement; provided,
------------- --------
that if BofA ceases to be the Loan Agent, "Floating Rate" shall mean
for any day a floating rate equal to the higher of (i) the rate
publicly quoted from time to time by The Wall Street Journal as the
-----------------------
"base rate on corporate loans at large U.S. money center commercial
banks" (or, if The Wall Street Journal ceases quoting a base rate of
-----------------------
the type described, the highest per annum rate of interest published
by the Federal Reserve Board in Federal Reserve statistical release
H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan
rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis
points per annum.
---------
"GE Agreement" is defined in SECTION XI(J).
------------
"Ground-Lease Leasehold Improvements" is defined in SECTION I(A).
-----------------------------------
"Ground Leases" is defined in SECTION I(A).
-------------
"Intercreditor Agreement" means the Second Amended and Restated
-----------------------
Intercreditor Agreement dated as of the Restructuring Effective Date,
in substantially the form of EXHIBIT C to the Second Amendment, as it
may from time to time be amended, modified, extended, amended and
restated, or replaced in accordance with its terms.
"Interest Period" means (i) the period beginning on the Restructuring
---------------
Effective Date and ending on the first Rent Payment Date thereafter
and (ii) each period thereafter that begins on a Rent Payment Date and
ends on the next succeeding Rent Payment Date.
5
<PAGE>
"Interest Rate" means (subject to SECTION XIX(I)) the Floating Rate in
-------------
effect from time to time plus (i) in the case of the Acquisition Loan,
----
1.50% and (ii) in the case of any Reborrowing Loans, 2.00%.
"Landlord's Waiver" is defined in SECTION I(C).
-----------------
"Lease Assets" is defined in SECTION I(A).
------------
"Lease Assets Location" is defined in SECTION IV(C).
---------------------
"Lease Commencement Date" is defined in SECTION II.
-----------------------
"Lease Obligations" means all loans, advances, debts, liabilities, and
-----------------
obligations for the performance of covenants, tasks or duties or for
payment of monetary amounts now or hereafter owing by Lessee to Lessor
or any Participant, arising under this Agreement, the Schedules, the
Notes and the other 1996 Lease Documents (including all principal,
interest (including interest which accrues after the commencement of
any case or proceeding in bankruptcy after the insolvency of, or for
the reorganization of, Lessee, whether or not allowed in such
proceeding)), fees, charges, expenses, attorneys' fees and any other
amount chargeable to Lessee under any of the provisions hereof or
thereof.
"Leasehold Improvements" is defined in SECTION I(A).
----------------------
"Lessee" is defined in the PREAMBLE to the Second Amendment.
------
"Lessor" is defined in the PREAMBLE to the Second Amendment.
------
"Loan Payment" means (i) any Rent payment and (ii) each and every
------------
payment that is required to be made hereunder with respect to the
Reborrowing Loans, including any interest payment or mandatory
prepayment (including on an acceleration) or scheduled principal
payment.
"Maturity Date" means the first to occur of (i) the Termination Date
-------------
and (ii) the acceleration of the Acquisition Loan and/or the
Reborrowing Loan pursuant to SECTION XI(A).
"Memorandum of Lease" is defined in SECTION I(C), as any such document
-------------------
may be amended and restated pursuant to an Amended Memorandum of Lease
and as it may from time to time be amended, modified, extended,
amended and restated, or replaced in accordance with its respective
terms.
"Mortgage" is defined in SECTION I(C).
--------
"Notes" means, collectively, the Reborrowing Note and the Secured
-----
Promissory Note.
"Omnibus Participation Agreement Amendment" means "Amendment No. 2 To
-----------------------------------------
Participation Agreement Dated As Of December 9, 1996 And Amendment No.
1 To Participation Agreement Dated As Of February 28, 1997" in
substantially the form of EXHIBIT B to the Second Amendment and dated
as of the Restructuring Effective Date.
6
<PAGE>
"Participants" means the Participant Parties (under and as defined in
------------
the Participation Agreements), (ii) any other person who becomes a
Participant pursuant to SECTION XII(B)(2), and (iii) any assignee of
any of the foregoing.
"Participation Agreements" are as defined in RECITAL C of the Second
------------------------
Amendment, as the same are amended by the Omnibus Participation
Agreement Amendment and as they may from time to time be amended,
modified, extended, amended and restated, or replaced in accordance
with their respective terms.
"Permitted Liens" is defined in SECTION V(C).
---------------
"Potential Default" means any of the events specified in SECTION
-----------------
XI(A), whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
"Premises-Lease Leasehold Improvements" is defined in SECTION I(A).
-------------------------------------
"Premises Leases" is defined in SECTION I(A).
---------------
"Pro Rata 1996 Share" is defined in the Facilities Agreement.
-------------------
"Real Estate" is defined in SECTION I(A).
-----------
"Real Estate Taxes" is defined in SECTION III(B).
-----------------
"Reborrowing Availability Period" is defined in the Facilities
-------------------------------
Agreement.
"Reborrowing Availability Termination Date" shall be as defined in the
-----------------------------------------
Facilities Agreement.
"Reborrowing Commitment-1996 Master Lease" shall be as defined in the
----------------------------------------
Facilities Agreement.
"Reborrowing Loan" is defined in SECTION IIA(A).
----------------
"Reborrowing Note" is defined in SECTION IIA(E).
----------------
"Reborrowing Request" is defined in SECTION 3.15(B)(IV)(C) of the
-------------------
Facilities Agreement.
"Related Amendment Documents" means the Omnibus Participation
---------------------------
Agreement Amendment, the Intercreditor Agreement, the Facilities
Agreement Amendment, the Notes, each Amended Memorandum of Lease, each
Collateral Assignment of Lease Amendment, the "Guaranty" (as defined
in the Facilities Agreement) in favor of Lessor, and the "Collateral
Documents" (as defined in the Facilities Agreement) to the extent that
they secure such Guaranty or any Lease Obligations.
"Rent" means each and every payment that is required to be made
----
hereunder with respect to the Acquisition Loan, including interest
payments and mandatory prepayments (including on an acceleration) and
scheduled principal payments.
"Rent Payment Date" means (i) August 1, 1998, (ii) the first day of
-----------------
each subsequent calendar month through and including October 1, 1998,
and (iii) October 17, 1998
7
<PAGE>
(provided, that if any of the foregoing dates is not a Business Day,
--------
the relevant Rent Payment Date shall be the immediately succeeding
Business Day).
"Restructuring Effective Date" means the date upon which all of the
----------------------------
conditions precedent to the effectiveness of the Second Amendment
shall have been satisfied or waived.
"Second Amendment" means Amendment No. 2 to Master Lease Agreement No.
----------------
2 dated as of the Restructuring Effective Date.
"Second Credit Agreement Amendment" is defined in RECITAL E of the
---------------------------------
Second Amendment.
"Secured Obligations" is defined in SECTION XVII(B).
-------------------
"Secured Promissory Note" means the Secured Promissory Note in
-----------------------
substantially the form of EXHIBIT A-1 to the Second Amendment (as it
may from time to time be amended, modified, extended, amended and
restated, or replaced).
"Schedule" is defined in SECTION I(A), as the same are amended
--------
pursuant to the Second Amendment and as they be amended, modified,
extended, amended and restated, or replaced.
"Sublease" is defined in Section XII(A).
--------
"Sublessee" is defined in Section XII(A).
---------
"Subordination and Intercreditor Agreement" is defined in SECTION
-----------------------------------------
I(C).
"Taxes" is defined in SECTION III(A).
-----
"Term" is defined in SECTION II.
----
"Termination Date" means October 17, 1998.
----------------
"1995 Master Lease Agreement" is defined in SECTION I(C).
---------------------------
"1996 Lease Documents" is defined in the Facilities Agreement.
--------------------
"1996 Lease Lenders" means, collectively, Lessor (in its capacity as
------------------
"lessor," but not in its capacity as Agent, hereunder) and the
Participants.
"1996 Lenders" means, collectively, the Bank Lenders and the 1996
------------
Lease Lenders.
"1996 Master Lease" shall have the same meaning as "Agreement."
-----------------
2.3. SECTION I (LEASING); TERMINATION OF COMMITMENTS.
-----------------------------------------------
a. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION I OF THE 1996
MASTER LEASE OR OTHERWISE, AS OF THE RESTRUCTURING EFFECTIVE DATE, ALL
OBLIGATIONS AND COMMITMENTS OF LESSOR TO PROVIDE FUNDING OR FINANCIAL
ACCOMMODATIONS TO LESSEE UNDER THIS AGREEMENT (OTHER THAN THE OBLIGATION TO
MAKE REBORROWING LOANS PURSUANT TO SECTION IIA), INCLUDING THE OBLIGATION
OF LESSOR TO ACQUIRE LEASE ASSETS AND TO LEASE THEM TO LESSEE PURSUANT TO
SECTION I, SHALL TERMINATE. LESSEE SHALL PAY TO LESSOR, ON
8
<PAGE>
THE RESTRUCTURING EFFECTIVE DATE, THE ACCRUED AND UNPAID UNUSED COMMITMENT
FEE, IF ANY, PAYABLE PURSUANT TO SECTION XIX(M) AS DETERMINED (WITHOUT
REGARD TO THIS SECOND AMENDMENT) AS OF SUCH DATE (THE "ACCRUED UNUSED
--------------
COMMITMENT FEE").
--------------
b. DELETE SECTION I(D) AND REPLACE IT WITH THE FOLLOWING:
(d) [Intentionally Omitted.]
2.4. SECTION II (TERM, RENT AND PAYMENT). DELETE SECTION II AND REPLACE IT
-----------------------------------
WITH THE FOLLOWING:
II. TERM:
Lessee's obligation with respect to the payment of Rent shall commence
on the date of execution by Lessee of the Certificate of Acceptance
with respect to the Lease Assets (the "LEASE COMMENCEMENT DATE"). The
term of this Agreement (the "TERM") shall be the period from the Lease
Commencement Date through and including the Maturity Date. Prior to
the Restructuring Effective Date, Rent payments shall be made in
accordance with the 1996 Master Lease without regard to the Second
Amendment. From and after the Restructuring Effective Date, Rent
payments hereunder shall be made as provided in Section IIB(b).
2.5. SECTION IIA (REBORROWING LOANS) [NEW]. ADD A NEW SECTION IIA AS
-------------------------------------
FOLLOWS:
IIA. REBORROWING LOANS:
(a) Subject to the terms and conditions specified herein and
in Section 3.15(b)(iv) of the Facilities Agreement, during the
Reborrowing Availability Period, Lessor agrees to make advances
available to Lessee from time to time (each, a "Reborrowing Loan," and
----------------
collectively, the "Reborrowing Loans"); provided, that the aggregate
----------------- --------
amount of Reborrowing Loans outstanding hereunder shall not exceed at
any time (i) the amount of the Reborrowing Commitment-1996 Master
Lease or (ii) the 1996 Lease Lenders' 1996 Pro Rata Share of the sum
of (A) all Reborrowing Loans hereunder and (B) all "Reborrowing Loans"
under and as defined in the Credit Agreement.
(b) During the Reborrowing Availability Period, Lessee may from
time to time borrow, repay and reborrow under this SECTION IIA,
subject in all cases to the provisions of SECTION IIA(G) hereof and
SECTION 3.15(B)(IV) of the Facilities Agreement. Borrower may request
a Reborrowing Loan hereunder in accordance with Section 3.15(b)(iv) of
the Facilities Agreement. Each Reborrowing Request sent to Lessor
shall be sent to the representatives of Lessor identified under
Lessor's signature block hereof at the addresses specified thereon.
(c) Unless Lessor shall have been notified by telephone,
confirmed in writing, by any other 1996 Lease Lender by 12:00 noon
(New York) time, on the day of a Reborrowing Loan hereunder that such
1996 Lease Lender will not make available the amount of its Pro Rata
1996 Share of the aggregate amount requested in the relevant
Reborrowing Request, Lessor may assume, subject to the satisfactory
9
<PAGE>
fulfillment by Lessee of the conditions precedent set forth in CLAUSE
(G) below, that such 1996 Lease Lender has made such amount available
to Lessor in accordance with the relevant Participation Agreement and,
in reliance upon such assumption, make available to Lessee a
corresponding amount. If and to the extent that such 1996 Lease Lender
shall not have made such amount available to Lessor, Borrower agrees
to repay Lessor forthwith on demand such corresponding amount together
with interest thereon, for each day from the date Lessor made such
amount available to Lessee to the date such amount is repaid to Lessor
at a rate per annum equal to the relevant Interest Rate. Not later
than 2:00 P.M. (New York time) on the proposed date of a Reborrowing
Loan specified in the Reborrowing Request, subject to the satisfaction
of the applicable conditions precedent set forth herein and in the
Facilities Agreement, Lessor shall make the proceeds of each
Reborrowing Loan available to the Lessee in immediately available
funds equal to the principal amount of such Reborrowing Loan to be
credited to the account of Lessee.
(d) [INTENTIONALLY OMITTED.]
(e) Lessee shall execute and deliver to Lessor a Reborrowing Note,
which note shall be (A) dated the Restructuring Effective Date and (B)
substantially in the form of EXHIBIT A-2 to the Second Amendment (such
note, as it may be amended, modified, extended, amended and restated,
or replaced, the "Reborrowing Note"). The Reborrowing Note shall
----------------
represent the obligation of Lessee to pay the amount of the
Reborrowing Loans made to Lessee, together with interest thereon, as
provided for herein.
(f) The proceeds of the Reborrowing Loans (i) have not been and
will not be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock within the meaning of
Regulation U or to extend credit to any "Person" (as defined in the
Facilities Agreement) for the purpose of purchasing or carrying any
such margin stock and (ii) shall be used by Lessee only for the
purposes, and in the amounts set forth for such purposes, indicated in
the "Budget" (as defined in the Facilities Agreement). Lessee hereby
covenants, represents and warrants that such use will be solely to
fund Lessee's and its "Subsidiaries'" (as defined in the Facilities
Agreement) working capital requirements in the ordinary course of its
business and for Lessee's and its Subsidiaries' other general
corporate purposes not prohibited by this Agreement and consistent
with the purposes and amounts set forth in the Budget.
(g) The obligation of Lessor to make each Reborrowing Loan shall
be subject to the further conditions precedent that on the date of
such Reborrowing Loan:
(1) The following statements shall be true and Lessor
shall have received a certificate signed by a duly authorized
officer of Lessee (in his or her capacity as such, and without
any personal liability therefor) dated the date of such
Reborrowing Loan, stating that:
10
<PAGE>
(a) The representations and warranties contained in
SECTION XVI of this Agreement, in SECTION II of the
Facilities Agreement (or any successor section therein) and
in each other 1996 Lease Document are correct in all
material respects on and as of the date of such Reborrowing
Loan as though made on and as of such date, except to the
extent that such representations and warranties expressly
relate to an earlier date (in which case such
representations and warranties shall be true and correct in
all material respects on and as of such earlier date);
(b) No Default or Potential Default has occurred
and is continuing, or would result from the borrowing of
such Reborrowing Loan; and
(c) Set forth on the schedule attached to the
certificate is a true and accurate list of the uses for
which the proceeds of such Reborrowing Loan will be used
and such uses are consistent with the Budget;
(2) All of the conditions precedent to the making of such
Reborrowing Loan as set forth in the Facilities Agreement, and
all of the conditions precedent to the making of the
corresponding "Reborrowing Loan" (under and as defined in the
Credit Agreement) by the Bank Lenders shall have been satisfied;
(3) Concurrently with the making of such Reborrowing Loan,
the Bank Lenders shall have made a "Reborrowing Loan" under and
as defined in the Credit Agreement in an amount equal to their
1996 Pro Rata Share of the total aggregate Reborrowing Loan
requested from the 1996 Lenders in the relevant Reborrowing
Request; and
(4) Lessor shall have received such other information,
approvals, opinions, or documents as Lessor may reasonably
request.
2.6. SECTION IIB (INTEREST; PAYMENTS AND PREPAYMENTS) [NEW]. ADD A NEW
------------------------------------------------------
SECTION IIB AS FOLLOWS:
IIB. INTEREST; PAYMENTS AND PREPAYMENTS:
(a) Applicable Interest Rates; Interest Calculations. The
------------------------------------------------
Acquisition Loan and the Reborrowing Loans shall each bear interest at
the respective applicable Interest Rates (including as such rates may
be adjusted pursuant to SECTION XIX(I)). All computations of interest
hereunder when the Floating Rate is determined by BofA's "reference
rate" shall be made on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed. All other computations of
interest shall be made on the basis of a 360-day year and actual days
elapsed (which results in more interest being paid than if computed on
the basis of a 365-day year). Interest
11
<PAGE>
and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Payments of Interest. Accrued interest on the Acquisition
--------------------
Loan and the Reborrowing Loans shall be due and payable in arrears on
each Rent Payment Date through the Maturity Date. After the Maturity
Date, interest shall accrue on the Acquisition Loan and the
Reborrowing Loans at the respective applicable Interest Rates, and
shall be payable on demand.
(c) Due Date for Acquisition Loan and Reborrowing Loans. The
---------------------------------------------------
entire unpaid Acquisition Loan and all other noncontingent obligations
of Lessee to Lessor (other than the Reborrowing Loans) shall be
immediately due and payable in full in immediately available funds on
the Maturity Date. The entire unpaid Reborrowing Loan shall be
immediately due and payable in full in immediately available funds on
the first to occur of the Maturity Date and the Reborrowing
Availability Termination Date.
(d) Loan Payments. All Loan Payments shall be:
-------------
(i) paid to Lessor by wire transfer of immediately
available funds for receipt prior to 11:00 a.m. New York
time to:
BANKERS TRUST
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK 10006,
ACCOUNT NO. 50-259-088
ABA NO. 021-001-033
REFERENCE: BOSTON CHICKEN-CFN 2107-S. DERAFFELE
or to such other account as Lessor may direct in writing;
(ii) effective upon receipt, and
(iii) in the amount set forth in, and due in accordance
with, the provisions hereof.
In no event shall any Loan Payment be refunded to Lessee (except in
instances of manifest error). All payments due under this Agreement,
whether or not specifically denominated as Loan Payments, shall be
collectible in the same manner as Loan Payments.
(e) Voluntary Prepayments of Reborrowing Loans. Lessee may
------------------------------------------
prepay, at any time when there are no "Liquidity Loans" (as defined in
the Credit Agreement) outstanding, the Reborrowing Loans in whole or
in part with accrued interest to the date of such prepayment on the
amount prepaid; provided, that each such partial prepayment shall be
--------
in a principal amount of not less than $1,000,000 or such greater
amount which shall be an integral multiple thereof or such lesser
amount as
12
<PAGE>
is agreed to by Lessor in its sole discretion. Amounts prepaid in
accordance with this SECTION IIB(E) may be reborrowed hereunder,
subject to the satisfaction of all of the conditions to the making of
Reborrowing Loans as set forth in the Facilities Agreement and SECTION
IIA. The right of Lessee to voluntarily prepay the Reborrowing Loans
shall be exercisable by delivery of written notice (including by
facsimile) or telephonic notice (thereafter promptly confirmed in
writing) to Lessor prior to 11:00 a.m. New York time, at least two
Business Days prior to the proposed prepayment, which notice shall
specify the amount by which Lessee proposes to prepay the Reborrowing
Loans and the proposed date of such prepayment. Payments may not be
made under this SECTION IIB(E) at any time at which a Default has
occurred and is continuing.
(f) Application of Prepayments.
--------------------------
(i) All voluntary and mandatory prepayments of the Lease
Obligations (excluding payments made pursuant to the preceding
CLAUSE (E)), whether made or required hereunder, pursuant to
Section 3.15 or any other provision of the Facilities Agreement, or
the Intercreditor Agreement, shall be applied, except to the extent
otherwise provided herein or therein, first to any accrued and
-----
unpaid fees and expenses of Lessor (whether in its capacity as
Agent or in its individual capacity), second to accrued interest on
------
the Acquisition Loan, third to accrued interest on the Reborrowing
-----
Loans, fourth, to the principal portion of the Acquisition Loan,
------
and fifth to the principal portion of the Reborrowing Loans.
-----
(ii) Any prepayment of the Lease Obligations that, pursuant to this
Agreement, the Facilities Agreement or the Intercreditor Agreement,
is required to be applied to the principal portion of the Lease
Obligations without any specification as to the allocation thereof
between the Acquisition Loan and the Reborrowing Loan, shall be
applied first to the Acquisition Loan and second to the
----- ------
Reborrowing Loan.
(iii) Except for (a) payments applied to the Acquisition Loan
pursuant to SECTION 3.15(B)(II) FOURTH of the Facilities Agreement
(which may be subject to reborrowing in accordance with SECTION
3.15(B)(IV) of the Facilities Agreement and SECTION IIB hereof) and
(b) voluntary prepayments of the Reborrowing Loans pursuant to the
preceding CLAUSE (E), no payments or prepayments of principal on
the Acquisition Loan or the Reborrowing Loans may be reborrowed.
It is understood and agreed that on the Restructuring Effective Date,
Lessee shall pay to Lessor that portion of the "Rent" (as defined in the
1996 Master Lease and Schedules without regard to this Second Amendment)
constituting interest that has accrued under the 1996 Master Lease and the
Schedules for the period through and including the Restructuring Effective
Date, calculated in accordance with the 1996 Master Lease and the Schedules
as in effect without regard to this Second Amendment (such interest, the
"Pre-Amendment Accrued Interest").
-------------------------------
13
<PAGE>
2.7. SECTION III (TAXES).
-------------------
a. DELETE THE LAST SENTENCE OF SECTION III(A) AND REPLACE IT WITH THE
FOLLOWING:
Lessee shall be obligated to indemnify Lessor for any Taxes incurred
or imposed in connection with, or attributable to, any conveyance or
transfer of any Lease Assets to or for the benefit of Lessee, and all
other reasonable and documented expenses incurred by Lessor in
connection therewith.
b. IN THE FIRST PARAGRAPH OF SECTION III(B), DELETE EVERYTHING OTHER
THAN THE FIRST SENTENCE.
2.8. SECTION V (DELIVERY, USE AND OPERATION; SUBSTITUTION).
-----------------------------------------------------
a. DELETE SECTIONS V(B), V(C), V(E), V(F) AND V(G) AND REPLACE THEM
WITH THE FOLLOWING:
(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
and the Facilities 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 neither Lessee nor any FAD shall
discontinue use of the Lease Assets, except (i) as provided in the
first sentence of this SECTION V(B) and (ii) that Lessee may
temporarily discontinue use of 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, that Lessee
--------
shall not temporarily discontinue use of the Equipment or discontinue
use of other Lease Assets pursuant to this CLAUSE (II) 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 in favor of the Lessor, the Loan
Agent and the Common Collateral Agent as security for the Secured
Obligations, (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
14
<PAGE>
collateral assignment of lease in respect of any Premises Lease or
Ground Lease made by a Sublessee to Lessee, (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, (7) liens securing the Cash
Management Obligations (as defined in, and subject to, the
Intercreditor Agreement), and (8) liens securing the Supplemental
Obligations (as defined in, and subject to, the Intercreditor
Agreement). The liens and encumbrances described in CLAUSES (1)
through (8) 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 (or from any other 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. 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 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.
(e) [Intentionally Omitted.]
(f) [Intentionally Omitted.]
(g) [Intentionally Omitted.]
2.9. SECTION VII (LOSS OR DAMAGE; STIPULATED LOSS VALUE). DELETE SECTION
---------------------------------------------------
VII AND REPLACE IT WITH THE FOLLOWING:
[INTENTIONALLY OMITTED]
2.10. SECTION IX (INSURANCE). DELETE THE LAST TWO SENTENCES OF SECTION IX
----------------------
AND REPLACE THEM WITH THE FOLLOWING:
If Lessor or Lessee receives any insurance proceeds arising from a
loss, damage or destruction to any of the Lease Assets or related real
property or any condemnation proceeds from a taking of any Lease
Assets, Lessee may, (i) if no Potential Default or Default shall have
occurred and be continuing and (ii) subject to any conditions with
respect to such proceeds as are applicable pursuant to the Facilities
Agreement and any relevant "Security Agreement" and/or "Mortgage" (as
such terms are defined in the Facilities Agreement), use such proceeds
to repair or replace such property. Any such proceeds that are not so
used by Lessee shall be paid directly to Lessor, and Lessor shall
(subject to the Intercreditor Agreement) apply such proceeds as
provided in SECTION IIB(F).
2.11. SECTION X (RETURN OF LEASE ASSETS). DELETE SECTION X AND REPLACE IT
----------------------------------
WITH THE FOLLOWING (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT THE LEASE
ASSETS ARE THE PROPERTY OF
15
<PAGE>
LESSEE AND THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE 1996 MASTER
LEASE OR IN ANY SCHEDULE, IN NO CIRCUMSTANCE MAY LESSEE ELECT TO RETURN THE
LEASE ASSETS TO LESSOR (PROVIDED, THAT NOTHING IN THE FOREGOING IS INTENDED TO
--------
LIMIT LESSOR'S RIGHTS OR REMEDIES UNDER THE 1996 MASTER LEASE OR ANY OTHER
DOCUMENT)):
X. [Intentionally Omitted.]
2.12. SECTION XI (DEFAULT; REMEDIES). DELETE SECTION XI AND REPLACE IT
------------------------------
WITH THE FOLLOWING:
XI. DEFAULT; REMEDIES:
(a) Lessor may in writing declare this Agreement in default if any
of the following (each, a "Default") shall occur (provided that such
events shall constitute "Defaults" regardless of whether written
notice declaring a Default is or has been given):
(1) Lessee breaches its obligation to pay any Loan Payment or any
other sum hereunder to Lessor as and when due and payable;
(2) Lessee breaches any of its insurance obligations under SECTION
IX hereof, or its obligations under SECTION I(C) 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) a "Default" under and as defined in the Facilities Agreement
shall have occurred and any requirement set forth therein for the
giving of notice, the lapse of time, or both, or any other
condition, has been satisfied;
(7) this Agreement or any document executed and delivered in
connection herewith shall (except in accordance with the terms
hereof or 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; or
(8) The subordination and standstill provisions of the
Intercreditor Agreement shall, at any time, be invalidated or
otherwise cease to be in full force and effect or Lessee shall make
any payments in contravention of the terms thereof.
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
16
<PAGE>
THAT A NOTICE FROM LESSOR NOT BECOME EFFECTIVE UNTIL A PERIOD
OF DAYS HAS ELAPSED.
(b) If any Default shall have occurred and be continuing, Lessor
may, without notice, do any or all of the following: (i) terminate the
Reborrowing Commitment-1996 Master Lease; (ii) declare all or any
portion of the obligations hereunder (including, without limitation,
the outstanding principal amount under the Acquisition Loan, the
outstanding Reborrowing Loans, all interest on the foregoing, and any
other amounts due hereunder) to be forthwith due and payable
(provided, that with respect to any default arising due to an Event of
--------
Default under Section 6.1(6) of the Facilities Agreement, (A) the
Reborrowing Commitment-1996 Master Lease shall automatically terminate
and (B) all of the Lease Obligations shall become immediately due and
payable), all without presentment, demand, protest or further notice
of any kind, all of which are expressly waived by Lessee; or (iii)
exercise any rights and remedies provided to Lessor under this
Agreement or at law or in equity.
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 as provided in the
Intercreditor Agreement. 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 and shall provide Lessor and its authorized representatives and
prospective purchasers access to the Lease Assets for remarketing
purposes.
(c) [Intentionally Omitted.]
(d) [Intentionally Omitted.]
(e) [Intentionally Omitted.]
(f) After a Default, 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
17
<PAGE>
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, 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, 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 unpaid Loan Payments and all
other Lease Obligations) together with costs, fees, and expenses of
such proceedings, including reasonable attorneys' fees and any of the
other expenses and fees of the type described in SECTION XIX(k). 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 and all other remedies provided for
herein 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 Lessor 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 fees
and expenses of the type described in SECTION XIX(k) (including,
without limitation, fees of attorneys, accountants, appraisers and
consultants) 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 Agreement 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.
18
<PAGE>
2.13. SECTION XII (ASSIGNMENT; SUBLETTING). DELETE CLAUSES (1)-(2) OF
------------------------------------
SECTION XII(B) AND REPLACE THEM WITH THE FOLLOWING:
(1) Lessor may, upon written notice to Lessee (but without
Lessee's consent), assign this Agreement. Lessee agrees that it will
pay all Loan Payments and other Lease Obligations to the assignee;
provided, however, if Lessee receives written notice of an assignment
--------
from Lessor, Lessee will pay all Loan Payments and other Lease
Obligations to such assignee or as instructed by Lessor. 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 the Participants who are parties to Participation Agreements
or who may become Participants hereunder. Any new participation
interest shall be in a minimum principal amount of $5,000,000.00 or an
integral multiple of $1,000,000.00 in excess thereof. Lessee agrees
reasonably to cooperate with Lessor in connection with the assignment
of any such participation interest, including the execution and
delivery of such other documents, instruments, notices, opinions,
certificates and acknowledgments as reasonably may be required by
Lessor or the relevant new 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 (A) cause a trust to be created to serve as agent hereunder or
(B) appoint a successor Agent which shall be either a 1996 Lease
Lender or a commercial bank or trust company having a combined capital
and surplus of at least $250,000,000.
2.14. SECTION XIII (NET LEASE; NO SET-OFF, ETC.. DELETE SECTION XIII AND
-----------------------------------------
REPLACE IT WITH THE FOLLOWING:
XIII. ABSOLUTE OBLIGATIONS; NO SET-OFF, ETC.:
Lessee's obligation to pay Loan Payments and all other Lease
Obligations shall be absolute and unconditional. Lessee shall not be
entitled to any abatement or reductions of, or set-offs against, said
Loan Payments or other Lease Obligations, 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 Loan Payments and all
other
19
<PAGE>
Lease Obligations shall continue to be payable in all events in
the manner and at the times set forth herein.
2.15. SECTION XIV (INDEMNIFICATION). DELETE SUBCLAUSE (Y) OF SECTION
-----------------------------
XIV(B).
2.16. SECTION XVI (REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE).
-----------------------------------------------------------------
DELETE SECTION XVI(I) AND REPLACE IT WITH THE FOLLOWING:
(i) [Intentionally Omitted.]
2.17. SECTION XVII (OWNERSHIP FOR TAX PURPOSES; GRANT OF SECURITY
-----------------------------------------------------------
INTEREST; USURY SAVINGS).
- ------------------------
A. DELETE SECTIONS XVII(A)-(B) AND REPLACE THEM WITH THE FOLLOWING:
(a) Lessee is the beneficial 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 or any Participant 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 for all purposes, including from and after the
Restructuring Effective Date with respect to Lessee's financial
reporting, and at all times from and after the Lease Commencement Date
with respect to 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 constitute a
loan obligation with respect to principal and interest payments on the
Acquisition Loan.
(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
cross-collateralized. In order to secure the prompt payment of (i)
all of the Lease Obligations from time to time owing hereunder and
with respect to the Schedules, and (ii) all "Obligations" under and as
defined in 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 (all of the foregoing being
collectively referred to as the "Secured Obligations"):
-------------------
20
<PAGE>
(1) Lessee hereby grants to Lessor, in its capacities as (A)
Agent for the 1996 Lease Lenders, (B) Agent for the Loan Agent, and
(C) Agent for the Common Collateral Agent (and as used in this SECTION
XII(B), all references to "Lessor, as Agent" or words of like import
shall mean and refer to Lessor in the foregoing capacities), 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 the
relevant Sublessee of any option contained in the relevant Sublease),
(iii) any and all proceeds of any insurance required under the
Subleases, (iv) the security interest granted to Lessee by the
Sublessees pursuant to the Subleases, and (v) all products and
proceeds of the foregoing; provided, that Lessor shall not exercise
--------
its rights hereunder unless and until a Potential Default has occurred
and is continuing. Notwithstanding the foregoing assignment, Lessee
shall cause each 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 any and all Sublessees (or, if requested by Lessor, Lessee
shall notify such Sublessees) to pay directly to Lessor all rentals
and other sums payable and to become payable under the Subleases. Upon
any Sublessee's receipt of such notice, Lessee hereby authorizes and
directs such Sublessee to pay Lessor all rentals and other sums
payable and to become payable under the relevant Sublease; provided,
--------
that so long as no Potential Default has then occurred, Lessor shall
retain only such of the rentals herein assigned as are required from
time to time to discharge the Secured Obligations and, subject to the
Intercreditor Agreement, 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, as Agent." 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
21
<PAGE>
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 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 first priority 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;
(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, 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
Potential Default has occurred and is continuing;
(5) Lessee also grants to Lessor, as Agent, a security interest
in all accounts receivable and general intangibles 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 Subleases 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");
----------------------------
22
<PAGE>
Upon Lessee's request, Lessor shall, at such time as all of the
Secured Obligations have been paid or performed in full (but subject
to the Intercreditor Agreement) execute and deliver termination
statements and other appropriate documentation reasonably 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.
Notwithstanding anything to the contrary set forth herein, the parties
acknowledge and agree that (a) solely with respect to any Lease Assets
located in any of the States of Florida, Tennessee, Maryland and
Virginia (such States, the "Designated States"; as to any Designated
-----------------
State, the relevant Lease Assets being hereinafter referred to as the
"Allocated Lease Assets"), the security interest granted herein with
----------------------
respect to any such Allocated Lease Assets shall secure only the
prompt payment and performance of the Rent obligations attributable to
such Allocated Lease Assets, (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 any Designated State,
(as to any Designated State, the leaseholds that are subject to the
relevant Collateral Assignment(s) of Lease will be hereinafter
referred to as the "Allocated Leaseholds") shall secure only the
--------------------
prompt payment and performance of the Rent obligations of Lessee
attributable to the Leasehold Improvements and Equipment that
correspond to the relevant Allocated Leaseholds (or such other amount
as is specified or determined by Lessor in its sole and absolute
discretion), and (c) any Memorandum of Lease or any Mortgage
(collectively, the "Fee Property Mortgages") relating to a Fee
----------------------
Property located in any Designated State (as to any Designated State,
the Fee Properties in such State that are subject to a Fee Property
Mortgage will be hereinafer referred to as the "Allocated Fee
-------------
Properties"), shall secure only the prompt payment and performance of
----------
the Rent obligations of Lessee attributable to the relevant Allocated
Fee Property and the corresponding Leasehold Improvements and
Equipment (or such other amount as is specified or determined by
Lessor in its sole and absolute discretion).
B. ADD A NEW CLAUSE (G) (WHICH CONSISTS OF THE FORMER SECTION X(C) TO
SECTION XVII) AS FOLLOWS:
(g) 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, and Lessee shall indemnify, defend, protect,
and hold Lessor and the Participants 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 or
the Participants be guilty of forcible entry or forcible detainer.
2.18. SECTION XVIII (END OF LEASE OPTIONS). DELETE SECTION XVIII (AND ANY
------------------------------------
NOTICE OF AN ELECTION THAT LESSEE MAY HAVE PREVIOUSLY GIVEN WITH RESPECT TO ANY
OF THE OPTIONS SPECIFIED IN SECTION XVIII SHALL BE NULL AND VOID AB INITIO) AND
---------
REPLACE IT WITH THE FOLLOWING:
XVIII. [Intentionally Omitted.]
23
<PAGE>
2.19. SECTION XIX (MISCELLANEOUS).
---------------------------
a. DELETE CLAUSES (d), (i), AND (k)-(m) OF SECTION XIX AND REPLACE
THEM WITH THE FOLLOWING:
(d) Lessee agrees that it shall, and shall cause each
Sublessee to, at Lessee's expense and upon request of Lessor, duly
execute and deliver, or cause to be duly executed and delivered, to
Lessor such further instruments (including, without limitation, any
instruments necessary or expedient for filing, recording or
perfecting the interest of Lessor, as Agent, as provided herein) and
do and cause to be done such further acts as may be necessary or
proper in the reasonable opinion of Lessor to carry out more
effectually the provisions and purposes of this Agreement.
. . .
(i) After the occurrence and during the continuance of any
Default, the Interest Rate applicable to the Acquisition Loan and
the Reborrowing Loans shall be increased by 2.0% above the otherwise
applicable rates (as specified in the definition of "Interest Rate"
without regard to this SECTION XIX(I)), compounded monthly and
payable upon demand.
(k) Lessee agrees to pay on demand all reasonable costs and
expenses incurred by Lessor (provided, that Lessee shall not be
--------
responsible for such costs and expenses incurred by any Participant)
in connection with (i) the preparation, execution, delivery, filing,
recording, and administration of any of the 1996 Lease Documents,
(ii) any amendment, modification or waiver of, consent with respect
to, or termination of, any of the 1996 Lease Documents or advice in
connection with the administration thereof, (iii) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by
Lessor or any other Person, and whether as a party, witness or
otherwise) in any way relating to the 1996 Lease Documents or any
other agreement to be executed or delivered in connection with the
1996 Lease Documents, (iv) any work-out or restructuring of the
Lease Obligations, and (v) any attempt to enforce any remedies of
Lessor against Lessee or any other Person that may be obligated to
Lessor by virtue of any of the 1996 Lease Documents, including as to
all of the foregoing CLAUSES (I)-(V) (including, without limitation,
the reasonable fees and expenses of counsel, advisors, consultants
(including environmental and management consultants and appraisers)
and auditors retained for advice, assistance, or other
representation in connection with any of the foregoing matters. 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. Without in any way limiting the foregoing, Lessee
shall, on the Restructuring Effective Date, pay all fees and
expenses of Lessor's attorneys and
24
<PAGE>
accountants incurred in connection with the preparation and
negotiation of the Second Amendment, the Related Amendment Documents
(including the Facilities Agreement Amendment and the Intercreditor
Agreement), and all other documents contemplated hereby and thereby.
(l) [Intentionally Omitted.]
(m) [Intentionally Omitted.]
2.20. SECTION XXII (EARLY TERMINATION). DELETE SECTION XXII AND REPLACE
--------------------------------
IT WITH THE FOLLOWING:
XXII. [Intentionally Omitted.]
2.21. SCHEDULES. AMEND EACH SCHEDULE AS FOLLOWS:
---------
a. PARAGRAPH B.3 (BASIC TERM). THE "BASIC TERM" (AS DEFINED IN
--------------------------
PARAGRAPH B.3 OR OTHERWISE IN EACH SCHEDULE), SHALL BE EQUAL TO THE "TERM"
UNDER AND AS DEFINED IN THE 1996 MASTER LEASE.
b. PARAGRAPH B.10 (RENEWAL TERM). DELETE PARAGRAPH B.10 IN EACH
-----------------------------
SCHEDULE (IT BEING UNDERSTOOD THAT THERE SHALL BE NO RENEWAL OPTION WITH
RESPECT TO THE 1996 MASTER LEASE OR THE SCHEDULES), AND REPLACE IT WITH THE
FOLLOWING:
10. [Intentionally Omitted.]
c. PARAGRAPH B.11 (MAXIMUM LEASE TERM). THE "MAXIMUM LEASE TERM" (AS
-----------------------------------
DEFINED IN PARAGRAPH B.11 OR OTHERWISE IN EACH SCHEDULE) SHALL BE THE SAME
AS THE BASIC TERM;
d. PARAGRAPH C (TERM AND RENT). DELETE PARAGRAPH C OF EACH SCHEDULE
---------------------------
AND REPLACE IT WITH THE FOLLOWING:
C. [Intentionally Omitted.]
e. ANNEX E (AMORTIZATION SCHEDULE). AS TO ANY SCHEDULE IN WHICH THE
-------------------------------
HEADING OF THE THIRD COLUMN OF ANNEX E IS "AMORTIZED PRINCIPAL BALANCE,"
SUCH HEADING IS DELETED AND REPLACED WITH "UNAMORTIZED PRINCIPAL BALANCE."
f. ANNEX F (RETURN PROVISIONS). DELETE ANNEX F TO EACH SCHEDULE.
---------------------------
2.22. REFERENCES TO DELETED SECTIONS. TO THE EXTENT THAT ANY SECTIONS OR
------------------------------
PARAGRAPHS OF THE 1996 MASTER LEASE OR ANY SCHEDULES ARE BEING DELETED PURSUANT
TO THIS SECOND AMENDMENT, ANY REFERENCES TO SUCH DELETED SECTIONS OR PARAGRAPHS
IN THE 1996 MASTER LEASE OR ANY SCHEDULE ARE DEEMED TO BE DELETED AS WELL.
3. Conditions Precedent. Notwithstanding any other provision of this Second
--------------------
Amendment or any Related Amendment Document, this Second Amendment shall be of
no force or effect, and Lessor shall have no obligations hereunder or under any
Related Amendment Document to which it is a party, until the following
conditions have been satisfied, in Lessor's sole discretion, or waived in
writing by Lessor:
25
<PAGE>
3.1. Second Amendment and Related Amendment Documents; Satisfactory Legal
--------------------------------------------------------------------
Form. Lessor shall have received this Second Amendment and the Related
- ----
Amendment Documents duly executed by Lessee (to the extent Lessee is a party
thereto) and the other parties thereto and delivered to Lessor (including (i) in
the case of each Fee Property, an Amended Memorandum of Lease, and (ii) in the
case of each now existing Collateral Assignment of Lease, a Collateral
Assignment of Lease Amendment, in all cases duly executed by Lessee and the
other parties thereto and in recordable form), and all of the other documents,
instruments, certificates, opinions, agreements and other materials listed in
the List of Closing Documents (Restructuring) and the List of Closing Documents
(Rollup) attached as Exhibit K to the Facilities Agreement Amendment, each in
form and substance satisfactory to the Lessor. All legal matters incident to
the transactions contemplated by this Second Amendment and the Related Amendment
Documents shall be satisfactory to Lessor and its counsel.
3.2. Facilities Agreement Amendment; Second Credit Agreement Amendment;
------------------------------------------------------------------
Other Related Documents. (i) The Facilities Agreement Amendment (and all
- -----------------------
documents to be delivered in connection therewith) and the Second Credit
Agreement Amendment (and all documents to be delivered in connection therewith)
shall be in form and substance acceptable to Lessor, (ii) all conditions
precedent to the effectiveness of the Facilities Agreement Amendment and the
Second Credit Agreement Amendment shall have been satisfied, and (iii) the
Restructuring Effective Date (under and as defined in the Second Credit
Agreement Amendment) shall have occurred.
3.3. Confidential Agreement. Lessor shall have received an executed copy
----------------------
of the Confidential Agreement (as defined in the Facilities Agreement Amendment)
in form and substance (with respect to the provisions thereof regarding fees)
acceptable to Lessor and the other 1996 Lease Lenders.
3.4. Termination of Agency Agreement. The Agency Agreement shall have been
-------------------------------
terminated effective as of the Restructuring Effective Date pursuant to a
Termination Letter in substantially the form of EXHIBIT E.
3.5. Payments. Lessee shall have made the following payments by wire
--------
transfer to Lessor in immediately available funds: (i) the "Pre-Amendment
Accrued Interest" (as defined in SECTION 2.6 of this Second Amendment), (ii) the
"Accrued Unused Commitment Fee" (as defined in SECTION 2.3(A) of this Second
Amendment), (iii) all of the fees and costs of Lessor's special counsel, Murphy
Sheneman Julian & Rogers and Ober Kaler Grimes & Shriver, and (iv) payment of
all fees required to be paid to Lessor and the other 1996 Lease Lenders as of
the Restructuring Effective Date pursuant to the terms of the Confidential
Agreement.
3.6. Corporate Structure. The corporate structure of Lessee shall be
-------------------
acceptable to Lessor.
4. Representations and Warranties. To induce Lessor to enter into this Second
------------------------------
Amendment and the other Related Amendment Documents to which it is a party,
Lessee hereby represents and warrants as follows:
4.1. That its representations and warranties contained in SECTION XVI of
the 1996 Master Lease (as amended pursuant to this Second Amendment) are true
and correct as of the Restructuring Effective Date;
26
<PAGE>
4.2. That this Second Amendment (and the Related Amendment Documents) and
the 1996 Master Lease and other 1996 Lease Documents as previously executed and
as amended hereby, constitute legal, valid and binding obligations of Lessee and
are enforceable against Lessee in accordance with their terms; and
4.3. That no Default has occurred under the 1996 Master Lease.
5. Miscellaneous.
-------------
5.1. Headings. The various headings of this Second Amendment are inserted
--------
for convenience of reference only and shall not affect the meaning or
interpretation of this Second Amendment or any provisions hereof.
5.2. Counterparts. This Second Amendment may be executed by the parties
------------
hereto in several counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
5.3. Interpretation. No provision of this Second Amendment shall be
--------------
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party's
having or being deemed to have structured, drafted or dictated such provision.
5.4. Complete Agreement. This Second Amendment, together with the Related
------------------
Amendment Documents, constitutes the complete agreement between the parties with
respect to the subject matter hereof and thereof, and supersedes any prior
written or oral agreements, writings, communications or understandings of the
parties with respect thereto.
5.5. Ratification of 1996 Master Lease and Schedules. Except as expressly
-----------------------------------------------
modified under this Second Amendment or in any Related Amendment Document,
Lessee hereby acknowledges, confirms and ratifies all of the terms and
conditions set forth in, and all of its respective obligations under, the 1996
Master Lease, the Schedules, and the other 1996 Lease Documents.
5.6. Reaffirmation of Grant of Security Interest. Lessee hereby reaffirms
-------------------------------------------
the grant and pledge of a security interest in favor of Lessor, as Agent and for
the benefit of the 1996 Lease Lenders and the Bank Lenders, as was provided in
the 1996 Master Lease as in effect prior to the Restructuring Effective Date,
and confirms that such security interest continues in effect.
5.7. Governing Law. This Second Amendment shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of New York
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws.
5.8. Effect. Upon the effectiveness of this Second Amendment, each
------
reference in the 1996 Master Lease to "this Agreement," "hereunder," "hereof"
or words of like import, shall mean and be a reference to the 1996 Master Lease
as amended hereby, and each reference in the Schedules or any other 1996 Lease
Document to the 1996 Master Lease, "thereunder," "thereof," or words of like
import shall mean and be a reference to the 1996 Master Lease as amended hereby.
27
<PAGE>
5.9. Use of Defined Terms. Capitalized terms which without reference to
--------------------
SECTION 2 hereof are not otherwise defined herein shall be as defined in the
1996 Master Lease as amended hereby (unless the context otherwise requires that
any such term be as defined in the 1996 Master Lease without regard to the
amendments provided for herein).
5.10. Conflict of Terms. In the event of any inconsistency between the
-----------------
provisions of this Second Amendment and any provision of the 1996 Master Lease
or any Schedule, the terms and provisions of this Second Amendment shall govern
and control.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
28
<PAGE>
5.11. No Novation. Except as specifically set forth in this Second
-----------
Amendment, the execution, delivery and effectiveness of this Second Amendment
shall not (i) limit, impair, constitute a waiver by, or otherwise affect any
right, power or remedy of, Lessor or any Participant with respect to the 1996
Master Lease, any Schedule or any other 1996 Lease Document, (ii) constitute a
waiver of any provision in the 1996 Master Lease, any Schedule or any other 1996
Lease Document, or (iii) alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the 1996
Master Lease, any Schedule any other 1996 Lease Document.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the day and year first above written.
"LESSOR": "LESSEE":
GENERAL ELECTRIC CAPITAL BOSTON CHICKEN, INC.
CORPORATION, FOR ITSELF AND AS
AGENT FOR CERTAIN
PARTICIPANTS By:_____________________
Name:___________________
By:___________________________ Title:__________________
Name: Daniel P. Gioia
Title: Senior Risk Manager
ADDRESSES FOR REBORROWING REQUESTS:
Yoav Haron
Portfolio Analyst
201 High Ridge Road
Stamford, CT 06927
Phone: 203/316-7899
Fax: 203/316-7817
and
Sandy DeRaffele
Transaction Coordinator
777 Long Ridge Road
Bldg. B, 1st Floor
Stamford, CT 06927
Phone: 203/357-3529
Fax: 203/316-7989
<PAGE>
SCHEDULE 1.4
------------
(Principal Amounts Outstanding on
Acquisition Loan as of
the Restructuring Effective Date)
PRINCIPAL AMOUNT
TRANCHE/SERIES OUTSTANDING
--------------------------------------------------------
Series A $ 15,752,001.51
Series B $ 30,489,983.28
Series C $119,877,443.07
--------------------------------------------------------
TOTAL $166,119,427.86
--------------------------------------------------------
<PAGE>
ANNEX A
-------
"SCHEDULES"
SCHEDULE SERIES SERIES NO. SCHEDULE DATE
SERIES A: A-1 12/13/96
A-2 12/13/96
A-3 12/13/96
A-4 12/13/96
SERIES B: B-1 12/13/96
SERIES C-EQUIPMENT: C-Equipment-1 12/13/96
C-Equipment-2 12/13/96
C-Equipment-3 12/13/96
C-Equipment-4 12/13/96
SERIES C-REAL ESTATE: C-Real Estate-1 12/13/96
C-Real Estate-2 12/13/96
C-Real Estate-3 12/13/96
C-Real Estate-4 12/13/96
C-Real Estate-5 12/13/96
C-Real Estate-6 12/13/96
C-Real Estate-7 12/13/96
C-Real Estate-8 12/13/96
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE SERIES SCHEDULE DATE
C-Real Estate-9 12/13/96
C-Real Estate-10 12/13/96
C-Real Estate-11 12/13/96
C-Real Estate-12 12/13/96
C-Real Estate-13 12/13/96
C-Real Estate-14 12/13/96
C-Real Estate-15 12/13/96
C-Real Estate-16 12/13/96
C-Real Estate-17 12/13/96
C-Real Estate-18 12/13/96
C-Real Estate-19 12/13/96
C-Real Estate-20 12/13/96
C-Real Estate-21 12/13/96
C-Real Estate-22 12/13/96
C-Real Estate-23 12/13/96
C-Real Estate-24 12/13/96
C-Real Estate-25 12/13/96
C-Real Estate-26 12/13/96
<PAGE>
SCHEDULE SERIES SCHEDULE DATE
C-Real Estate-27 12/13/96
C-Real Estate-28 12/13/96
C-Real Estate-29 12/13/96
C-Real Estate-30 12/13/96
C-Real Estate-31 12/13/96
C-Real Estate-32 12/13/96
C-Real Estate-33 12/13/96
C-Real Estate-34 12/13/96
C-Real Estate-35 12/13/96
C-Real Estate-36 12/13/96
C-Real Estate-37 12/13/96
C-Real Estate-38 12/13/96
C-Real Estate-39 12/13/96
C-Real Estate-40 12/13/96
C-Real Estate-41 12/13/96
- ----------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> JUL-12-1998
<CASH> 24,549
<SECURITIES> 0
<RECEIVABLES> 5,922
<ALLOWANCES> 0
<INVENTORY> 16,716
<CURRENT-ASSETS> 53,454
<PP&E> 533,327
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,607,167
<CURRENT-LIABILITIES> 160,067
<BONDS> 747,975
0
0
<COMMON> 723
<OTHER-SE> 372,542
<TOTAL-LIABILITY-AND-EQUITY> 1,607,167
<SALES> 374,512
<TOTAL-REVENUES> 382,420
<CGS> 131,674
<TOTAL-COSTS> 459,875
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 30,692
<INCOME-PRETAX> (456,674)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (437,050)
<EPS-PRIMARY> (6.09)
<EPS-DILUTED> (6.09)
</TABLE>
