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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 3)
Under the Securities Exchange Act of 1934
Einstein/Noah Bagel Corp.
(Name of Issuer)
Common Stock, $.01 par value per share
(Title of Class of Securities)
282577-10-5
(CUSIP Number)
Michael R. Daigle
Senior Vice President
Boston Chicken, Inc.
14103 Denver West Parkway, P.O. Box 4086
Colorado 80401-4086
303-278-9500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 26, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
The information required in the remainder of this cover page (the page numbered
2 herein) shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities
of that section of the Act but shall be subject to all other provisions of the
Act.
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CUSIP NO. 282577-10-5 13D PAGE 2 OF 5 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Boston Chicken, Inc.
I.R.S. Identification No.: 36-3904053
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
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SOLE VOTING POWER
7
NUMBER OF 19,427,381*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 19,427,381*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
19,427,381*
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
53.7%
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TYPE OF REPORTING PERSON*
14
CO
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*SEE ITEM 5 OF TEXT BELOW.
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This Amendment No. 3 relates to the Schedule 13D filed by Boston Chicken,
Inc. (the "Reporting Person") on December 5, 1996, as amended by Amendments No.
1 and 2 (as so amended, the "Schedule 13D"), relating to the shares of Common
Stock, $0.01 par value per share (the "Common Stock"), of Einstein/Noah Bagel
Corp. (the "Issuer"). All terms used herein unless otherwise defined shall have
the same meaning as in the Schedule 13D. This Amendment No. 3 amends and
supplements the Schedule 13D and should be read in conjunction therewith.
ITEM 2. IDENTITY AND BACKGROUND.
Item 2 of the Schedule 13D is amended and supplemented by deleting the
Appendix A referred to therein and substituting therefor the Appendix A attached
hereto.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended to include the following
paragraph:
On May 26, 1998, the Reporting Person retained Morgan Stanley & Co.
Incorporated ("Morgan Stanley") to advise and assist the Reporting Person in
evaluating the sale of all or a portion of the shares of Common Stock of the
Issuer owned by the Reporting Person to one or more third parties. The Reporting
Person also announced that it anticipated that any such sale would likely be
made in a privately negotiated transaction with a single purchaser and would be
subject to agreement upon price and other terms and conditions to be negotiated.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is hereby amended and restated to read in its
entirety as follows:
(a) The Reporting Person has been informed by the Issuer that there were
34,083,681 issued and outstanding shares of Common Stock as of May 26, 1998. The
Reporting Person is the beneficial owner as of May 26, 1998 of 19,427,381 shares
of Common Stock, which represents approximately 53.7% of the issued and
outstanding shares of Common Stock (including for this purpose shares of Common
Stock for which the BCI Option is exercisable). The Common Stock beneficially
owned by the Reporting Person includes 2,124,579 shares of Common Stock that the
Reporting Person has the right to acquire within 60 days of May 26, 1998 through
the exercise of the BCI Option.
(b) The Reporting Person has the sole power to vote, or to direct the vote,
and the sole power to dispose of, or direct the disposition of, the shares of
Common Stock beneficially owned by it in paragraph (a) above.
(c) During the 60 days preceding May 26, 1998, the Reporting Person, has
not effected any transactions in the Common Stock, other than the vesting of
shares of Common Stock pursuant to the BCI Option and other options described
herein in accordance with their respective terms.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
Item 6 of the Schedule 13D is hereby amended to include the following
paragraph:
The Reporting Person has pledged as security under its senior credit
facilities the shares of Common Stock of the Issuer owned by the Reporting
Person. In the event the Reporting Person sells all or a portion of the Common
Stock of the Issuer which it owns, (a) any non-cash proceeds received by the
Reporting Person shall be pledged to secure the Reporting Person's obligations
under its senior credit facilities and (b) net cash proceeds received by the
Reporting Person from such sale up to the lesser amount of all net cash proceeds
received from such sale or the Hold-Back Amount (as defined herein) shall be
deposited with the common collateral agent under the senior credit facilities
and pledged for the benefit of the lenders under the senior credit facilities
pursuant to documentation reasonably acceptable to the lenders under the senior
credit facilities. The Hold-Back Amount shall mean the lesser of (i) twenty-five
percent (25%) of the net cash proceeds received by the Reporting Person from the
sale of Common Stock of the Issuer or (ii) $50.00 million.
Pursuant to a Letter Agreement between the Reporting Person and Morgan
Stanley dated as of May 26, 1998 (a copy of which is attached hereto as Exhibit
1), the Reporting Person has agreed to pay, in the event of any sale in one or
more transactions of at least 10% but less than 50% of the outstanding Common
Stock of the Issuer (a "Sale Transaction"), payable at the time of any Sale
Transaction, a fee (the "Sale Transaction Fee") equal to (a) $1.5 million, plus
(b) 2.75% of the excess over $50 million of the Transaction Value (as defined
herein) in connection with such Sale Transaction or series of Sale Transactions
in excess of $50 million, plus (c) in the event that such Sale Transaction is
agreed to or publicly announced on or prior to July 6, 1998 (or, if later,
within forty-five days of the first public trading on or following the Reporting
Person's issuance of a press release announcing the Reporting Person's
consideration of a sale of the Issuer's Common Stock owned by the Reporting
Person), an additional $0.5 million.
For purposes of the Letter Agreement, "Transaction Value" means the
aggregate amount of the consideration received by the Reporting Person and/or
its stockholders in any Sale Transaction. Any amounts to be paid contingent upon
future events shall be estimated for purposes of the Sale Transaction Fee
calculation at an expected value mutually agreeable to the Reporting Person and
Morgan Stanley at the time of closing.
In addition to fees discussed above, the Reporting Person has agreed to
reimburse Morgan Stanley, upon request from time to time, for all reasonable and
customary out-of-pocket expenses incurred by Morgan Stanley in connection with
Morgan Stanley's services under the Letter Agreement (including reasonable fees
and disbursements of counsel and other professional advisors retained by Morgan
Stanley with the consent of the Reporting Person) up to $50,000, after which the
Reporting Person's consent will be required.
The Reporting Person has agreed to indemnify Morgan Stanley for certain
liabilities and expenses incurred by Morgan Stanley in connection with its
services rendered under the Letter Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
See Exhibit Index appearing elsewhere herein, which is incorporated herein
by reference.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
BOSTON CHICKEN, INC.
By: /s/ Michael R. Daigle
-----------------------------
Senior Vice President
Date: May 27, 1998
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APPENDIX A
The following individuals are executive officers or directors of Boston
Chicken. Each individual is a citizen of the United States, and unless otherwise
noted, the business address of each executive officer of the Reporting Person is
14123 Denver West Parkway, P.O. Box 4086, Golden, Colorado 80401-4086.
TITLE AT
NAME REPORTING PERSON
J. Michael Jenkins Chairman of the Board, Chief Executive
Officer and President
Lawrence E. White Chief Financial Officer
Michael R. Daigle Senior Vice President and General Counsel
Mark A. Link Vice President-Financial Reporting
Arnold C. Greenberg Director
Mr. Greenberg is an attorney and self-employed private investor.
J. Bruce Harreld Director
Mr. Harreld is Senior Vice President-Strategy of International Business
Machines Corporation. Mr. Harreld's business address is Old Orchard Road,
Armonk, New York 10504.
M Howard Jacobson Director
Mr. Jacobson is a Senior Advisor to Bankers Trust, Private Advisory
Services, and a director of Allmerica Property and Casualty Companies,
Inc., Wyman-Gordon Company, and Stonyfield Farm, Inc.
Peer Pedersen Director
Mr. Pedersen is managing partner of Pedersen & Houpt, P.C., a Chicago law
firm. Mr. Pedersen also serves as a director of Waste Management, Inc., Aon
Corporation, Extended Stay America, Inc. and Latin America Growth Fund. Mr.
Pedersen's business address is 161 N. Clark Street, Suite 3100, Chicago,
Illinois 60601-3224.
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EXHIBIT INDEX
NUMBER
DESCRIPTION
1. Letter Agreement dated as of May 26, 1998 between the Reporting Person
and Morgan Stanley & Co. Incorporated.
<PAGE>
Exhibit 1
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1999 AVENUE OF THE STARS
LOS ANGELES, CA 90067
(310) 788-2000
May 26, 1998
PERSONAL AND CONFIDENTIAL
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Mr. J. Michael Jenkins
Chief Executive Officer
Boston Chicken, Inc.
14123 Denver West Parkway
Golden, CO 80401
Dear Mr. Jenkins:
Pursuant to our recent discussions, I am pleased to confirm the arrangements
under which Morgan Stanley will be engaged by Boston Chicken, Inc. ("Boston
Chicken" or the "Company") to assist you in the sale of common stock of
Einstein/Noah Bagel Corp. ("Einstein") owned by you to a third party.
During the term of our engagement we will provide you with financial advice and
assistance in connection with any sale in one or more transactions of at least
10% but less than 50% of the outstanding common stock of Einstein (a "Sale
Transaction"), including advice and assistance with respect to defining
objectives, identifying, contacting and eliciting responses from potential
strategic and financial investors, performing valuation analysis and
structuring, planning and negotiating the Sale Transaction.
Upon your request and at no additional expense, we will render a financial
opinion letter in accordance with our customary practice and with respect to the
consideration to be received in any Sale Transaction. The terms of our opinion
and the nature and scope of any analysis and investigation we undertake in order
to render such opinion shall be such as we consider appropriate in the
circumstances.
In consideration of our services as set forth above, Morgan Stanley shall
charge, and the Company agrees to pay, in the event of a Sale Transaction and
payable at the time of any such Sale Transaction, and in any event before the
closing of such Sale Transaction, a fee (the "Sale Transaction Fee") equal to
(a) $1.5 million, plus (b) 2.75% of the excess over $50 million of the
Transaction Value in connection with such Sale Transaction or series of Sale
Transactions in excess of $50 million, plus (c) in the event that such Sale
Transaction is agreed to or publicly announced on or prior to July 6, 1998 (or,
if later, within forty-five days of the first public trading day on or following
your issuance of a
<PAGE>
Mr. J. Michael Jenkins
May 26, 1998 MORGAN STANLEY
Page 2
press release announcing your consideration of a sale of the Einstein stock), an
additional $0.5 million.
For purposes of this Agreement, "Transaction Value" means the aggregate amount
of consideration received by the Company and/or its stockholders in any Sale
Transaction. Any amounts to be paid contingent upon future events shall be
estimated for purposes of the Sale Transaction Fee calculation at an expected
value mutually agreeable to you and to us at the time of closing, except that
amounts held in escrow shall be deemed paid at closing.
The provisions of the letter agreement between Morgan Stanley and Boston Chicken
dated August 1, 1997 (the "Prior Boston Chicken Letter Agreement") and the
letter agreement between Morgan Stanley and Einstein dated August 1, 1997 (the
"Prior Einstein Letter Agreement" and, together with the Prior Boston Chicken
Letter Agreement, the "Prior Letter Agreements"), except where inconsistent with
the provisions of this letter agreement, shall remain in full force and effect.
However, Morgan Stanley agrees that the provisions in this Agreement are the
sole understanding between Boston Chicken and Morgan Stanley with respect to
potential Sale Transactions, and there will be no additional compensation due to
Morgan Stanley as a result of the Prior Boston Chicken Letter Agreement for any
Sale Transaction or series of Sale Transactions covered by this Agreement. In
addition, Morgan Stanley agrees that the full and timely payment by Boston
Chicken of its obligations hereunder will release Einstein from any obligation
that may arise pursuant to the Prior Einstein Letter Agreement with respect to a
Sale Transaction. However, a sale by Boston Chicken - whether in a single
transaction or series of transactions - of at least 50% of the share of Einstein
shall continue to be governed by the terms of the Prior Letter Agreements, and
any Sale Transaction Fee paid hereunder shall be credited against the
compensation due under the Prior Letter Agreements for such transaction.
Any advice or opinions provided by Morgan Stanley may not be disclosed or
referred to publicly or to any third party except in accordance with our prior
written consent.
In addition to our fee for professional services, the Company agrees to
reimburse Morgan Stanley, upon request from time to time, for all reasonable and
customary out-of-pocket expenses incurred by Morgan Stanley in connection with
Morgan Stanley's services hereunder (including reasonable fees and disbursements
of counsel and other professional advisors retained by Morgan Stanley with the
consent of the Company, travel costs and document production costs) up to
$50,000, after which the Company's consent shall be required.
Morgan Stanley will act under this letter agreement as an independent contractor
with duties solely to Boston Chicken. Because we will be acting on your behalf
in this
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Mr. J. Michael Jenkins
May 26, 1998 MORGAN STANLEY
Page 3
capacity, it is our practice to receive indemnification. A copy of our standard
indemnity form is attached to this letter.
Please note that Morgan Stanley is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking, financing and financial advisory services. In the ordinary course of
our trading, brokerage and financing activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, and may trade or
otherwise effect transactions, for our own account or the accounts of customers,
in debt or equity securities or senior loans of Boston Chicken or any other
company that may be involved in any transaction.
If, in connection with this assignment, Boston Chicken effects a repurchase of
or a public sale or private placement of equity, preferred or debt securities or
Boston Chicken effects real estate financings, asset or property sales, and
Boston Chicken requires investment banking services in connection therewith,
Boston Chicken agrees to offer to retain Morgan Stanley on mutually agreeable
terms to assist it with such transaction. In addition, if in connection with
this assignment Boston Chicken effects any interest rate, equity-related or
currency hedges or currency conversions, including but not limited to currency
transactions on a spot or forward basis and currency options, Boston Chicken
agrees to offer to retain Morgan Stanley on mutually agreeable terms to assist
it with such transaction.
Our services hereunder may be terminated with or without cause by you or by us
at any time and without liability or continuing obligation to you or to us
(except for any compensation earned and expenses incurred by us to the date of
termination and except, in the case of termination by you, for our right to fees
pursuant to this letter for any Sale Transactions effected within twelve months
of the date of such termination) and provided that the indemnity provisions will
remain operative regardless of any such termination.
Morgan Stanley and Boston Chicken (on its own behalf and, to the extent
permitted by law, on behalf of its shareholders) each waives any right to trial
by jury in any action, claim, suit or proceeding with respect to Morgan
Stanley's engagement as financial advisor or its role in connection herewith.
The validity and interpretation of this Agreement shall be governed by the laws
of the State of New York applicable to agreements made and to be performed
therein, without regard to the conflicts of laws provisions thereof.
<PAGE>
Mr. J. Michael Jenkins
May 26, 1998 MORGAN STANLEY
Page 4
If the terms of our engagement as set forth in this letter are satisfactory,
kindly sign the enclosed copy of this letter and indemnification form and return
them to us.
We look forward to working with Boston Chicken on this very important
assignment.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Charles S. Hilliard
-------------------------------
Charles S. Hilliard
Principal
Accepted:
BOSTON CHICKEN, INC.
By: /s/ Michael R. Daigle
-----------------------------------------
Title: Senior Vice President and General Counsel
-----------------------------------------
Date: 5/27/98
-----------------------------------------
<PAGE>
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Gentlemen:
This letter will confirm that we have engaged Morgan Stanley & Co.
Incorporated to advise and assist us in connection with the matters referred to
in our letter agreement dated May 26, 1998 (the "Engagement Letter"). In
consideration of your agreement to act on our behalf in connection with such
matters, we agree to indemnify and hold harmless you and your affiliates and
your and their respective officers, directors, employees and agents and each
other person, if any, controlling you or any of your affiliates (you and each
such other person being an "Indemnified Person") from and against any losses,
claims, damages or liabilities related to, and arising out of or in connection
with the engagement (the "Engagement") under the Engagement Letter, and will
reimburse each Indemnified Person for all expenses (including fees and expenses
of counsel) as they are incurred in connection with investigating, preparing,
pursuing or defending any action, claim, suit, investigation or proceeding
related to, arising out of or in connection with the Engagement, whether or not
pending or threatened and whether or not any Indemnified Person is a party. We
will not, however, be responsible for any losses, claims, damages or liabilities
(or expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of any Indemnified Person. We
also agree that no Indemnified Person shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to us for or in connection with
the Engagement except for any such liability for losses, claims, damages or
liabilities incurred by us that are finally judicially determined to have
resulted from the bad faith or gross negligence of such Indemnified Person.
We will not, without your prior written consent, settle, compromise,
consent to the entry of any judgment in or otherwise seek to terminate any
action, claims, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes a release of
each Indemnified Person from any liabilities arising out of such action, claim,
suit or proceeding. No Indemnified Person seeking indemnification, reimbursement
or contribution under this agreement will, without our prior written consent,
settle, compromise, consent to the entry of any judgment in or otherwise seek to
terminate any action, claim, suit, investigation or proceeding referred to in
the preceding paragraph.
If the indemnification provided for in the first paragraph of this
agreement is judicially determined to be unavailable (other than in accordance
with the terms hereof) to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to herein, then, in lieu of indemnifying
such Indemnified Person hereunder, we shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities (and expenses relating thereto) (i) in such proportion as is
appropriate to reflect the relative benefits to you, on the one hand, and us, on
the other hand, of the Engagement or (ii) if the allocation provided by clause
(i) above is not available, in such proportion as is appropriate to reflect not
only the relative benefits referred to in such clause (i) but also the relative
fault of each of you and us, as well as any other relevant equitable
considerations; provided, however, in no event shall your aggregate contribution
to the amount paid or payable exceed the aggregate amount of fees actually
received by you under the Engagement Letter. For the purposes of this agreement,
the relative benefits to us and you of the Engagement shall be deemed to be in
the same proportion as (a) the total value paid or contemplated to be paid or
received or contemplated to be received by us or our stockholders, as the case
may be, in the transaction or transactions that are the subject of the
Engagement, whether or not any such transaction is consummated, bears to (b) the
fees paid or to be paid to you under the Engagement Letter.
The provisions of this agreement shall apply to the Engagement and any
modification thereof and shall remain in full force and effect regardless of any
termination or the completion of your services under the Engagement Letter.
This agreement and the Engagement Letter shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
executed in and to be performed in that state.
Very truly yours,
Boston Chicken, Inc.
----------------------------
By /s/ Michael R. Daigle
--------------------------
Senior Vice President and
General Counsel
Accepted:
MORGAN STANLEY & CO. INCORPORATED
By
--------------------------------
Date: 9/95
