1
EXHIBIT 2.1
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into
as of the _______ day of _________, 199__ between Einstein/Noah Bagel Corp., a
Delaware corporation (the "Company"), and ______________, a Delaware limited
liability company ("DEVELOPER").
RECITALS
The Company and DEVELOPER have entered into an area development
agreement ("Development Agreement") pursuant to which DEVELOPER is required to
establish and operate up to _________________________ stores (the "Stores") in
the area specified in the Development Agreement (the "Development Area") in
compliance with a development schedule set forth therein and to enter into
individual franchise agreements (each a "Franchise Agreement") for such
specific Stores. In order to facilitate the development of the Stores,
DEVELOPER desires to borrow up to $_________ from the Company, and the Company
desires to make such loan to DEVELOPER, upon the terms and subject to the
conditions set forth herein.
COVENANTS
In consideration of the mutual representations, warranties, and
covenants set forth herein, and in consideration of any advances made hereunder
to or for the benefit of DEVELOPER by Company, the parties hereto agree as
follows:
ARTICLE I
THE LOAN
1.1 The Loan. The Company agrees, on the terms and subject to the
conditions set forth herein, including without limitation the conditions to
loan advances set forth in Article III hereof, to advance at any time and from
time to time during the period commencing on the date hereof and ending on the
last day of the ______ Retail Period (as defined in Section 1.7 below) in the
Company's fiscal year ____ (the "Draw Loan Termination Date"), amounts
requested by DEVELOPER in an aggregate principal amount not to exceed
$_________ (the "Loan"). Each advance of the Loan shall be in a minimum amount
of $100,000 and shall be made by wire transfer of Company to the account of
DEVELOPER or by regular check of Company payable to DEVELOPER and forwarded to
DEVELOPER by overnight air express to its address as set forth herein for
delivery on the next regular business day. The Loan shall be evidenced by a
promissory note (the "Note") of even date herewith in the form attached hereto
as Exhibit A.
2
1.2 Purposes of the Loan. Proceeds of the Loan shall be used by
DEVELOPER to pay fees and make payments to the Company, to fund Store operating
costs, to fund general corporate overhead, to provide general working capital
for DEVELOPER, and to finance the purchase, design, construction and equipment
of Stores in the Development Area pursuant to and in accordance with the
Development Agreement.
1.3 Maximum Principal Balance; Additional Loan Amount.
(a) The aggregate outstanding principal balance of the Loan
shall at no time exceed $_________, less the principal amount of conversions
under Section 1.9 and option exercises under Section 1.10 (the "Maximum
Principal Balance").
(b) In the event that Bagel Store Development Funding,
L.L.C. (the "Fund") exercises all or a portion of either or both of the options
("Additional Unit Options") to purchase up to an additional ____,000 Units of
DEVELOPER in the aggregate as provided in the unit purchase agreement dated as
of _____ __, 199_ by and between DEVELOPER and the Fund ("Unit Purchase
Agreement"), the Maximum Principal Balance may be increased by the Company at
the Company's option by an amount to be determined by the Company in its sole
discretion not to exceed four times the total cash proceeds received by
DEVELOPER upon any exercise by the Fund of all or a portion of either or both
of the Additional Unit Options ("Additional Loan Amount").
(c) In the event and each time that the Company increases
the Maximum Principal Balance as provided in Section 1.3(b) above, DEVELOPER
shall execute a new promissory note, substantially in the form of the Note,
reflecting the Maximum Principal Balance under Section 1.3(a) plus the
Additional Loan Amount ("New Note"). Such New Note shall provide that the
Conversion Price (as defined in the Note) for purposes of converting the
Additional Loan Amount pursuant to Section 1.9 hereof or exercising the Option
for the Additional Loan Amount pursuant to Section 1.10 hereof shall be $____
per Voting Unit, and all references in this Agreement, the Unit Pledge
Agreement (as defined in Section 2.2 hereof) and Security Instruments (as
defined in Section 2.4 hereof) to the Note shall thereafter be references to
the New Note.
(d) As used in all other sections of this Agreement
(including in Sections 1.10 and 5.9 hereof), the term "Maximum Principal
Balance" shall mean $_________ plus, in the event that all or any portion of
either or both of the Additional Unit Options has been exercised, the
Additional Loan Amount less the dollar amount of all previous conversions under
Section 1.9 hereof and exercises of the Option under Section 1.10 hereof.
1.4 The Loan Account. The Company shall maintain a loan account
on its books in which shall be recorded all advances under the Loan
(collectively, "Advances") made by Company to DEVELOPER pursuant to this
Agreement, and all payments made by DEVELOPER with respect to the Loan;
provided, however, that failure to maintain such account
2
3
or record any advances therein shall not relieve DEVELOPER of its obligations
to repay the outstanding principal amount of the Loan, all accrued interest
thereon, and any amount payable with respect thereto in accordance with the
terms of this Agreement and the Note.
1.5 Interest Rate.
(a) Interest shall accrue daily on the aggregate
outstanding principal balance of the Loan, for the period commencing on the
date the Loan is made until the Loan is paid in full, at a per annum rate equal
to the rate designated and announced by Bank of America Illinois or its
successor in interest (the "Bank") from time to time as its "reference rate" in
effect at its principal office in Chicago, Illinois, plus 1%. The interest
rate shall be adjusted, from time to time, on the same day on which the Bank
adjusts its "reference rate." Interest on the outstanding principal amount of
the Loan shall be payable in arrears on the dates set forth herein and at
maturity (whether at stated maturity, by acceleration or otherwise).
(b) Interest shall be computed on the basis of a 360-day
year and the actual number of days elapsed.
(c) Any principal payment due under the Note not paid
when due, whether at stated maturity, by notice of repayment, by acceleration
or otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable under this Agreement
in respect of such principal amount until such unpaid amount has been paid in
full (whether before or after judgment).
1.6 Payment of Interest. During the Interest Payment Period (as
defined below) DEVELOPER shall pay to the Company interest only on the
outstanding principal balance of the Loan on the first day of each Retail
Period. The "Interest Payment Period" shall mean the period commencing on the
first day of the Retail Period immediately following the first Retail Period in
which DEVELOPER initially draws on the Loan under this Agreement and continuing
through and including the Draw Loan Termination Date. Thereafter DEVELOPER
shall pay principal and interest as provided in Section 1.7 hereof.
1.7 Repayment of the Loan. If not earlier paid, or if not
accelerated for payment, the outstanding principal amount of the Loan shall, at
the close of business on the Draw Loan Termination Date, thereafter become an
amortized term loan payable as follows: the principal balance of the Loan
shall be payable to the Company in 65 substantially equal periodic installments
of principal (the amount of which periodic installments of principal shall be
determined at the close of business on the Draw Loan Termination Date based on
a schedule amortizing such outstanding principal balance of the Loan as of such
date in 130 substantially equal periodic installments of principal), plus
accrued but unpaid interest, on the first day of
3
4
each of the Company's 13 consecutive four-week accounting periods used for
accounting purposes (each a "Retail Period"), commencing on the first day of
the ______ Retail Period in the Company's fiscal year ____ and continuing until
the first day of the ______ Retail Period in the Company's fiscal year ____,
when the entire remaining principal balance of the Loan and all interest
accrued thereon shall be due and payable.
1.8 Term of this Agreement. This Agreement and all covenants and
agreements of the Company hereunder shall be effective _____ __, 199_ ("Closing
Date") and shall continue in effect until the last to occur of (i) the
exercise, expiration, or other termination of all remaining option rights
granted in Section 1.10 hereof, (ii) the exercise, expiration, or other
termination of all of the remaining conversion rights granted in Section 1.9
hereof, (iii) the date on which there is no amount (principal or interest)
remaining outstanding under the Note and (iv) the date on which the Company no
longer has an obligation to make any Advances hereunder if DEVELOPER were to
make a valid request for an Advance pursuant to and in accordance with Article
III hereof.
1.9 Convertibility.
(a) On the terms and subject to the conditions set forth
in the Note, any portion of the outstanding principal balance of the Loan is
convertible at the election of the holder of the Note into Voting Units (as
defined in the DEVELOPER's limited liability company agreement dated _____ __,
199_, as amended and as it may be amended from time to time (the "LLC
Agreement")) of DEVELOPER at any time and from time to time after both of the
following have occurred: (i) _____ __, 199_ and (ii) such time as DEVELOPER
has completed not less than 80% of the Development Schedule set forth in the
Development Agreement, and up to the later of (x) the date on which DEVELOPER
has properly repaid the outstanding principal balance of the Loan and all
accrued interest thereon in full or (y) the first day of the ______ Retail
Period in the Company's fiscal year ____; provided, however, that nothing
herein shall impair, restrict or prohibit the exercise of remedies, including
exercise of the conversion right, under Section 8.2 hereof upon the occurrence
of a Default. Upon such conversion, that portion of principal so converted
shall be deemed to be paid in full. Conversion of any portion of the principal
balance of the Loan shall not relieve DEVELOPER of its obligation to pay any
accrued but unpaid interest to the date of conversion on the portion of the
principal balance of the Loan so converted. In no event shall interest be
convertible into Voting Units in DEVELOPER.
(b) Upon any conversion under this Section 1.9, the
Company's obligation to make additional Advances to DEVELOPER under this
Agreement shall be reduced by an amount equal to the amount of the principal
balance of the Loan so converted.
4
5
1.10 Option.
(a) The Company shall have the option, at any time and
from time to time after both of the following have occurred: (i) _________ __,
199__, and (ii) such time as DEVELOPER has completed not less than 80% of the
Development Schedule set forth in the Development Agreement, and up to the
later of (x) the date on which DEVELOPER has properly repaid the outstanding
principal balance of the Loan and all accrued interest thereon in full or (y)
the first day of the ______ Retail Period in the Company's fiscal year ____, to
purchase at the Conversion Price (as defined in the Note) up to that number of
Voting Units equal to (A) the Option Amount, divided by (B) the Conversion
Price (the "Option"); provided, however, that nothing herein shall impair,
restrict or prohibit the exercise of remedies, including exercise of the
Option, under Section 8.2 hereof upon the occurrence of a Default. For
purposes of this Section 1.10, the Option Amount shall mean the Maximum
Principal Balance less the dollar amount of the outstanding principal balance
of the Loan (whether such amount is the result of a reduction in principal due
to the repayment of the Loan or the failure by DEVELOPER to request Advances
hereunder or otherwise) on the date the Company notifies DEVELOPER of its
intention to exercise the Option.
(b) Upon exercise of any portion of the Option under this
Section 1.10, the Company's obligations to make additional Advances to
DEVELOPER under this Agreement shall be reduced by an aggregate amount equal to
the amount paid upon such option exercise.
(c) In case of any reclassification or change of
outstanding Units (as defined in the LLC Agreement), or in case of any
consolidation or merger of DEVELOPER with or into any partnership, corporation,
or other entity (other than a merger in which DEVELOPER is the surviving entity
and which does not result in any reclassification or change of outstanding
Units, other than a change in number of Units issuable upon exercise of the
Option) or in case of any sale or conveyance to any partnership, corporation,
or other entity of the property of DEVELOPER as an entirety or substantially as
an entirety, then the holder of the Note shall have the right thereafter to
exercise the Option for the kind and amount of units and other securities and
property receivable upon such reclassification, change, consolidation, merger,
sale, or conveyance by a holder of the number of Voting Units of DEVELOPER
issuable upon exercise of the Option immediately prior to such
reclassification, change, consolidation, merger, sale, or conveyance, subject
to adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for herein.
1.11 One Obligation. All Advances made hereunder, and all interest
accrued thereon, shall constitute one obligation of DEVELOPER secured by the
security interests granted by this Agreement and by all other security
interests, liens, claims, and encumbrances from time to time hereafter granted
to the Company by DEVELOPER.
1.12 Credit Resources. DEVELOPER acknowledges that the Company has
informed it that the Company does not currently and may not from time to time
in the future have cash, cash equivalents, and credit resources sufficient to
permit the Company to necessarily make all requested Advances under this
Agreement and all other similar agreements with its financed area
5
6
developers and franchisees while maintaining sufficient working capital for the
Company's operating needs. DEVELOPER agrees that in the event the Company
shall fail to fund the Loan as and to the extent required hereby solely as a
result of the unavailability to the Company of cash and/or credit resources to
fund the Loan and not as a result of any failure of DEVELOPER to satisfy the
conditions precedent to Advances or of the occurrence of a Default or Event of
Default hereunder (a "Funding Default"), such Funding Default shall not (a)
constitute fraud (by any person or entity, including the Company and its
successors and assignees) or (b) give rise to any liability of any person or
entity (other than the Company and its successors and assignees) in any other
tort, and DEVELOPER further agrees that it shall be limited to its remedies in
contract and in a non-fraud tort action against the Company. The Company and
DEVELOPER agree that this Section 1.12 shall not diminish or otherwise affect
in any way the amount of damages for which the Company may be liable to
DEVELOPER in a contract or non-fraud tort action for a Funding Default.
1.13 Payment Method; Authorization to Advance for Limited Purposes.
(a) All payments to be made by DEVELOPER hereunder shall
be made in lawful money of the United States, in immediately available funds,
without set off, counterclaims, deduction or withholding of any type.
(b) So long as funds are still available to be drawn by
DEVELOPER hereunder, and DEVELOPER is not in Default under this Agreement,
DEVELOPER hereby authorizes the Company (i) to make daily Advances on behalf of
DEVELOPER under this Agreement in accordance with the Company's customary
practices and procedures solely to provide funds to DEVELOPER to cover
payables, intercompany charges and other charges previously approved by
DEVELOPER regardless of whether the DEVELOPER has specifically requested such
Advance and without waiver of any of the Company's rights hereunder, and (ii)
to make Advances under the Loan from time to time solely to pay interest on the
Loan if and only if DEVELOPER does not pay interest when due hereunder. In the
event that the Company makes any such daily Advances, DEVELOPER agrees to
deliver to the Company, every two calendar weeks, a certificate of DEVELOPER in
the form attached hereto as Exhibit B, which shall be signed by a duly
authorized officer of the manager of DEVELOPER.
6
7
ARTICLE II
SECURITY AND COLLATERAL
2.1 Security Interest. To secure payment and performance of
DEVELOPER's obligations hereunder and under the Note, and any and all other
indebtedness, obligations or liabilities of any kind of DEVELOPER to the
Company, whether now existing or hereafter arising, direct or indirect,
absolute or contingent, joint and/or several, arising by operation of law or
otherwise, DEVELOPER hereby grants to the Company a continuing security
interest in and to the following property and interests in property, whether
now owned or hereafter acquired by DEVELOPER and wheresoever located:
(a) all of DEVELOPER's real estate, accounts, equipment
(including, but not limited to machinery, furniture, fixtures, tools, vehicles,
and other tangible property), inventory, leasehold improvements, contract
rights (including its rights as lessee under all leases of real property),
general intangibles, deposit accounts, tax refunds, chattel paper, instruments,
notes, letters of credit, documents, and documents of title, capital stock or
other ownership interests of all Subsidiaries (as defined in Section 6.11
hereof);
(b) all insurance proceeds of or relating to any of the
foregoing;
(c) all of DEVELOPER's books, records, and computer
programs and data relating to any of the foregoing; and
(d) all accessories and additions to, substitutions for,
and replacements, products, and proceeds of, any of the foregoing (all of the
foregoing, and all of the security described in Sections 2.2 and 2.3, being
referred to collectively as the "Collateral").
2.2 Pledge of Units. In addition to the security interest in the
Collateral, DEVELOPER's obligations hereunder and under the Note and all other
obligations of DEVELOPER to Company shall be secured by the security interest
created pursuant to a unit pledge agreement between the Company and all of the
members of DEVELOPER holding Voting Units, other than the Fund (the "Members"),
substantially in the form attached hereto as Exhibit C (the "Unit Pledge
Agreement").
2.3 Subsidiary Security Documents. DEVELOPER shall cause each
person or entity becoming a Subsidiary of DEVELOPER from time to time to
execute and deliver to the Company, within five days after such person or
entity becomes a Subsidiary, a security agreement substantially in the form
attached hereto as Exhibit D, together with all financing statements and other
related documents (including real estate mortgages) as the Company may request
and such closing documents with respect to such Subsidiary of the type
described in Article VII as the Company may request, sufficient to grant to the
Company liens and security interests in all assets of each Subsidiary of the
type described in Section 2.1. DEVELOPER
7
8
shall from time to time execute and deliver to the Company, within five days
after a person or entity becomes a Subsidiary of DEVELOPER, a pledge agreement
substantially in the form of Exhibit C, pursuant to which DEVELOPER shall grant
a security interest in favor of the Company in and to all shares of capital
stock (or other equity interests) of such Subsidiary, together with the stock
certificates evidencing such stock ownership (or other evidence of ownership)
and accompanied by a stock power (or equity assignment) executed in blank. Any
such pledge agreements executed by DEVELOPER and security agreements and other
documents executed by a Subsidiary of DEVELOPER from time to time shall be
included in the term "Security Instruments" used herein and the stock and
assets of such Subsidiary covered by such Security Instruments shall be
included in the term "Collateral" used herein.
2.4 Preservation of Collateral and Perfection of Security
Interests Therein.
(a) DEVELOPER shall execute and deliver to the Company,
concurrently with the execution of this Agreement, and shall execute and
deliver or cause any Subsidiary of DEVELOPER to execute and deliver to the
Company at any time or times hereafter at the request of the Company or the
Agent (as defined in Section 2.5 below), all financing statements or other
documents, including mortgages on real estate owned by DEVELOPER or its
Subsidiaries and Subsidiary security agreements (the "Security Instruments")
(and pay the cost of filing or recording the same in all public offices deemed
necessary by the Company), as the Company or the Agent may request, in forms
satisfactory to the Company, and take all further action that the Company or
the Agent may request, or which may be reasonably necessary or desirable, to
perfect and keep perfected the security interest in the Collateral granted by
DEVELOPER to the Company, to create and perfect the security interests in the
assets of any Subsidiaries of DEVELOPER provided in Section 2.3 hereof, or
otherwise to protect and preserve the Collateral and the Company's security
interest therein. Should DEVELOPER fail to do so, the Company is authorized to
sign any such Security Instruments as DEVELOPER 's agent.
(b) DEVELOPER will furnish to the Company from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Company may
reasonably request, all in reasonable detail.
(c) DEVELOPER shall notify the Company, within five days
after the occurrence thereof, of the acquisition of any property by DEVELOPER
that is not subject to the existing liens and security interests, in favor of
the Company, of any person or entity's becoming a Subsidiary, and of any other
event or condition that may require additional action of any nature in order to
create, preserve, or perfect the liens and security interests of the Company.
(d) DEVELOPER shall, and shall cause each Subsidiary to,
cause all tangible Collateral to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual.
8
9
2.5 Alternate Security and Unit Pledge Agreements. If requested
by the Company in order for the transactions contemplated by this Agreement to
comply with the limitations and restrictions of any applicable agreement
between the Company and its lender or between its lender and its lender's banks
and any bank designated as agent for its lender's banks ("Agent"), as amended
from time to time, or to obtain a waiver therefrom, DEVELOPER hereby agrees
that a security interest as referred to in Section 2.1 hereof, a pledge of
Units as referred to in Section 2.2 hereof, and the additional security
interests described in Sections 2.3 and 2.4 hereof may be granted directly to
the Company's lender or to the Agent in lieu of or in addition to such grants
to the Company, in which event appropriate alterations may be made to this
Article II and to the forms of the other Security Agreements, and references
herein to such security, pledges, and deliveries thereof to the Company may be
deemed to refer to the Agent, as appropriate.
ARTICLE III
CONDITIONS TO ADVANCES
Notwithstanding any other provisions contained in this Agreement, the
Company's obligations to make any Advance (including an initial Advance)
provided for in Section 1.1 shall be conditioned upon the following:
3.1 No Material Adverse Change. No material adverse change, as
determined by the Company in its sole discretion, in the financial condition,
results of operations, assets, or business of DEVELOPER, shall have occurred at
any time or times subsequent to the date thereof, or, in the event such a
material adverse change shall have occurred, such change shall have been fully
remedied without any material adverse effect on the financial condition,
results of operations, assets or other business of DEVELOPER and its
Subsidiaries taken as a whole to the satisfaction of the Company in its sole
discretion.
3.2 No Default. Neither a Default (as that term is defined in
Article VIII hereof) nor any event which, through the passage of time or the
service of notice or both, would mature into a Default (an "Event of Default")
shall have occurred and be continuing.
3.3 Representations and Warranties. The representations and
warranties contained in Article IV hereof and in the Unit Pledge Agreement and
the other Security Instruments shall be true and correct on and as of the date
such Advance is made.
3.4 Development Schedule. DEVELOPER shall be in compliance with
the terms of the Development Schedule (as defined in the Development
Agreement).
3.5 Other Requirements. The Company shall have received, in
form and substance satisfactory to it, all certificates, consents, affidavits,
schedules, instruments, and other
9
10
documents which DEVELOPER is obligated to provide to the Company hereunder or
which the Company may at any time reasonably request.
3.6 Advance Request. Other than the initial Advance, the Company
shall have received, at least five business days prior to the day an Advance is
to be made hereunder, (i) a certificate of DEVELOPER in the form attached
hereto as Exhibit E, which shall be signed by the chief operating officer,
chief financial officer or other officer of the manager of DEVELOPER that the
Company deems appropriate, and (ii) copies of all other documents required to
be delivered to Company under Section 5.1 below or otherwise reasonably
requested.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
DEVELOPER represents and warrants that:
4.1 Financial Statements. The financial statements to be
furnished to the Company or the Agent in accordance with Section 5.1 below will
be prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, and will fairly present
the financial condition of DEVELOPER and its Subsidiaries at the dates thereof
and its results of operations for the periods indicated (subject, in the case
of financial statements covering less than one full fiscal year, to normal
recurring year-end adjustments).
4.2 Member Units. DEVELOPER has previously furnished to the
Company a true and correct copy of the certificate of formation of DEVELOPER
and the LLC Agreement, including in each case all amendments thereto through
the date of this Agreement. The holders of record (and beneficial owners, if
any) of Units in DEVELOPER, and the number of Units owned of record by each
such holder and beneficially owned by each such beneficial owner, are set forth
on Exhibit A to the LLC Agreement, and the number of Units set forth on such
Exhibit A constitute 100% of the issued and outstanding ownership interests in
DEVELOPER. Except for the Additional Unit Options and except for options
granted under DEVELOPER's 199_ Unit Option Plan and except as otherwise
provided herein and in the Note, there are no outstanding options, warrants,
rights, contracts or agreements of any kind for the issuance or sale of any
Units or for the issuance or sale of any other member interests or obligations
of DEVELOPER or for the purchase of any of its member interests.
4.3 No Material Adverse Change. Since the date hereof, there has
been no material adverse change in the financial condition, results of
operations, assets, or business of DEVELOPER and its Subsidiaries, taken as a
whole, or, in the event such a material adverse change shall have occurred,
such change shall have been fully remedied without any material adverse effect
on the financial condition, results of operations, assets or other business of
10
11
DEVELOPER and its Subsidiaries taken as a whole to the satisfaction of the
Company in its sole discretion.
4.4 No Pending Material Litigation or Proceedings. There are no
actions, suits, investigations or proceedings pending or, to the knowledge of
DEVELOPER or its Subsidiaries, threatened against or affecting DEVELOPER or its
Subsidiaries or the business or properties of DEVELOPER or its Subsidiaries, in
any court or before or by any governmental department, commission, board,
agency or instrumentality, or any arbitrator. Neither DEVELOPER nor any of its
Subsidiaries is in default with respect to any order, writ, injunction, or
decree of any court or arbitrator or governmental agency.
4.5 Valid Organization; Due Authorization; Valid and Binding
Agreement.
(a) DEVELOPER is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
with power and authority to enter into and perform this Agreement and to issue
the Note and incur the indebtedness to be evidenced thereby. DEVELOPER is
qualified to do business and is in good standing in the State of
__________________ and in each additional jurisdiction in which failure to so
qualify could have a material adverse affect on its property, business,
operations, or prospects.
(b) This Agreement and the Note have each been duly
authorized by all required action on the part of DEVELOPER, and each of this
Agreement and the Note has been duly executed and delivered by DEVELOPER and
constitutes the legal, valid, and binding obligation of DEVELOPER enforceable
in accordance with its terms.
(c) The execution and delivery of this Agreement and the
Note and the performance by DEVELOPER of its obligations hereunder and
thereunder are not in contravention of any law, rule or regulation, including
without limitation Regulation G, T, U, or X of the Board of Governors of the
Federal Reserve System, and will not conflict with or result in any breach of
any of the provisions, or constitute a default under or result in the creation
or imposition of any lien or encumbrance (except as expressly provided herein)
upon any of the property of DEVELOPER pursuant to any of the provisions of the
certificate of formation of DEVELOPER or the LLC Agreement or any agreement or
instrument to which DEVELOPER is a party or by which it or its assets is bound.
(d) No consent, authorization, approval, or other action
by, and no notice to or filing with, any governmental authority or regulatory
body or any other person, which has not been obtained or taken, is required for
the execution and delivery of, or the performance by DEVELOPER of its
obligations under, this Agreement or the Note.
4.6 Conduct of Business. Since their inception, DEVELOPER and
each Subsidiary has conducted its business and operations in a manner
consistent with that of a franchisee of
11
12
Company and has not engaged in any business other than the business of
establishing, opening, and operating Stores.
4.7 Absence of Material Liabilities. Neither DEVELOPER nor any
Subsidiary has any material liabilities or obligations, either accrued,
absolute, contingent, or otherwise, except (a) as set forth in its most recent
unaudited balance sheet, (b) normal liabilities and obligations incurred in the
ordinary course of business since the date of its most recent unaudited balance
sheet, (c) those assumed from the Company in and pursuant to that certain Asset
Purchase Agreement dated as of _____ __, 199_, and (d) obligations under
contracts and agreements entered into in the ordinary course of business.
4.8 Tax Matters.
(a) DEVELOPER and its Subsidiaries have filed all
federal, state, and local tax returns which are required to be filed, except
for extensions duly obtained, and has paid, or made provisions for the payment
of, all taxes which have become due pursuant to such returns or pursuant to any
assessment received by DEVELOPER or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have
been provided.
(b) DEVELOPER will be classified for tax purposes as a
partnership within the meaning of Section 7701(a)(2) of the Internal Revenue
Code of 1986, as amended ("Code"), and DEVELOPER is not a "publicly traded
partnership" within the meaning of Section 7704 of the Code.
4.9 Ownership of Collateral; Security Interest Priority. At the
time any Collateral becomes subject to a security interest of the Company
hereunder, unless the Company shall otherwise consent, (a) DEVELOPER or a
Subsidiary shall be the lawful owner of such Collateral and have the right and
authority to subject the same to the security interest of the Company, (b) none
of the Collateral shall be subject to any lien or encumbrance other than that
in favor of the Company (and other than federal and state securities law
restrictions on shares of the Company's common stock), and (c) there shall be
no effective financing statement covering any of the Collateral on file in any
public office, other than in favor of the Company. This Agreement creates in
favor of the Company a valid and perfected first-priority security interest in
the Collateral enforceable against DEVELOPER or its Subsidiary, as the case may
be, and all third parties and secures the payment of DEVELOPER's obligations
hereunder and under the Note, and all other obligations of DEVELOPER to the
Company, whether now existing or hereafter arising, and all filings and other
actions necessary or desirable to create, preserve, or perfect such security
interest have been duly taken. Notwithstanding the foregoing provisions of
this Section 4.9, clause (b) and (c) and the immediately preceding sentence of
this Section 4.9 shall not be inaccurate by reason of any purchase money
security interest (including pursuant to a financing lease) in any equipment
for DEVELOPER's Stores.
12
13
4.10 Location of Offices, Records, and Facilities. DEVELOPER's
chief executive office and chief place of business and the office where
DEVELOPER keeps its records concerning its accounts, contract rights, chattel
papers, instruments, general intangibles, and other obligations arising out of
or in connection with the operation of its business or otherwise
("Receivables"), and all originals of all leases and other chattel paper which
evidence Receivables, are located in the State of __________, at the address of
DEVELOPER set forth in Section 9.4 hereof (as such address may be changed from
time to time in accordance therewith). The federal tax identification number
of DEVELOPER is _____________. The name of DEVELOPER is "______________,
_____." and DEVELOPER operates under no other names other than the name
______________ on its Stores pursuant to and in accordance with any applicable
Franchise Agreement with the Company.
4.11 Location of Inventory, Fixtures, Machinery, and Equipment.
(a) All Collateral consisting of inventory, fixtures,
machinery, or equipment is located within the Development Area and at no other
locations without the prior written consent of the Company.
(b) If the Collateral described in clause (a) is kept at
leased locations, DEVELOPER has used its best efforts to obtain appropriate
landlord lien waivers or subordination satisfactory to the Company, unless such
has been waived in writing by the Company for the particular instance.
(c) If the Collateral described in clause (a) is
warehoused, DEVELOPER has sent appropriate warehousemen's notices, each
reasonably satisfactory to the Company, unless such has been waived by the
Company for the particular instance.
4.12 Investment Company Act. DEVELOPER is not an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
4.13 Public Utility Holding Company Act. DEVELOPER is not a
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.14 Subsidiaries. DEVELOPER has no Subsidiaries as of the date of
this Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS
DEVELOPER covenants and agrees that so long as this Agreement remains
in effect:
13
14
5.1 Financial Statements.
(a) DEVELOPER shall cause to be furnished to the Company and,
at the Company's request, to the Company's lender or to the Agent: (i) as soon
as practicable and in any event within 20 days after the end of each interim
fiscal quarter, statements of income and cash flows of DEVELOPER and its
Subsidiaries for such period and for the period from the beginning of the then
current fiscal year to the end of such quarter and a balance sheet of DEVELOPER
and its Subsidiaries as of the end of such quarter, setting forth in each case,
in comparative form, figures for the corresponding periods in the preceding
fiscal year, certified as accurate by the chief financial officer or treasurer
of the manager of DEVELOPER, subject to changes resulting from normal,
recurring year-end adjustments; (ii) as soon as practicable and in any event
within 60 days after the end of each fiscal year, statements of income and cash
flows of DEVELOPER and its Subsidiaries for such year, and a balance sheet of
DEVELOPER and its Subsidiaries as of the end of such year, setting forth in
each case, in comparative form, corresponding figures for the preceding fiscal
year and as of the end of the preceding fiscal year, audited by independent
certified public accountants selected by the Company and reasonably
satisfactory to DEVELOPER; and (iii) as soon as practicable (but in any event
not more than five business days after the president or chief financial officer
of the manager of DEVELOPER obtains knowledge of the occurrence of an event or
the existence of a circumstance giving rise to an Event of Default or a
Default), notice of any and all Events of Default or Defaults hereunder.
(b) All financial statements delivered to the Company,
and if applicable, the Company's lender or the Agent pursuant to the
requirements of Section 5.1(a) shall be prepared in accordance with generally
accepted accounting principles consistently applied. Together with each
delivery of financial statements required by Section 5.1(a), DEVELOPER shall
deliver to the Company an officer's certificate stating that there exists no
Default or Event of Default, or, if any Default or Event of Default exists,
specifying the nature thereof, the period of existence thereof and what action
DEVELOPER proposes to take or has taken with respect thereto. Together with
each delivery of financial statements required by Section 5.1(a)(ii) above,
DEVELOPER shall deliver to the Company a certificate of the accountants who
performed the audit in connection with such statements stating that in making
the audit necessary to the issuance of a report on such financial statements,
they have obtained no knowledge of any Default or Event of Default, or, if such
accountants have obtained knowledge of a Default or Event of Default,
specifying the nature and period of existence thereof. Such accountants shall
not be liable by reason of any failure to obtain knowledge of any Default or
Event of Default which would not be disclosed in the ordinary course of an
audit. DEVELOPER authorizes the Company to discuss the financial condition of
DEVELOPER with DEVELOPER's independent public accountants and agrees that such
discussion or communication shall be without liability to either the Company or
DEVELOPER's independent public accountants.
14
15
5.2 Inspection. The Company, or any person designated from time
to time by the Company, shall have the right, from time to time hereafter, to
call at DEVELOPER's or its Subsidiaries' place or places of business during
ordinary business hours, and, without hindrance or delay, (a) to inspect,
audit, check, and make copies of and extracts from DEVELOPER's and its
Subsidiaries' books, records, journals, orders, receipts, and any
correspondence and other data relating to the business of DEVELOPER or its
Subsidiaries or to any transactions between the parties hereto, and (b) to
discuss the affairs, finances, and business of DEVELOPER and its Subsidiaries
with the officers of DEVELOPER and its Subsidiaries.
5.3 Conduct of Business.
(a) DEVELOPER shall, and shall cause each Subsidiary to (i)
maintain its existence and qualification to do business in good standing in
each jurisdiction where the failure to be so qualified would have a material
adverse effect on the financial condition of DEVELOPER or its Subsidiaries,
(ii) maintain in full force and effect all licenses, bonds, franchises, leases,
patents, contracts, and other rights necessary to the conduct of its business,
and (iii) comply with all applicable laws and regulations of any federal,
state, or local governmental authority, including those relating to
environmental matters, labor and employment laws and employee benefit matters.
(b) DEVELOPER shall, and shall cause its Subsidiaries to,
duly pay and discharge (i) all lawful claims, whether for labor, materials,
supplies, services, or anything else, which might or could, if unpaid, become a
lien or charge upon its property or assets, unless and to the extent only that
the validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with customary
practice, and (iii) all taxes, unless and to the extent that the validity
thereof is being contested by DEVELOPER in good faith and by appropriate
proceedings.
(c) DEVELOPER shall, and shall cause each Subsidiary to,
conduct its business and operations in a manner consistent with that of a
multi-unit food service establishment, and shall not, and shall not permit any
Subsidiary to, engage in any business other than the business of establishing,
opening, and operating Stores in the Development Area.
5.4 Insurance.
(a) DEVELOPER shall keep and maintain, and shall cause its
Subsidiaries to keep and maintain, at their sole cost and expense, (i)
insurance on their assets for at least 80% of the full replacement value (or
the full insurable value) thereof against loss or damage by fire, theft,
explosion, and all other hazards and risks ordinarily insured against by other
owners or users of such properties in similar businesses similarly situated;
and (ii) public liability insurance relating to DEVELOPER's and its
Subsidiaries' ownership and use of their assets.
15
16
(b) All such policies of insurance shall be in such form
and in such amounts as is customary in the case of other owners or users of
like properties in similar businesses, with insurers as shall be reasonably
satisfactory to the Company. Upon demand, DEVELOPER shall deliver to the
Company the original (or certified) copy of each policy of insurance, and
evidence of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability) shall contain an endorsement in
form and substance acceptable to the Company, showing the Company as an
additional insured. Such endorsement, or an independent instrument furnished
to the Company, shall provide that all insurance companies will give the
Company at least 30 days prior written notice before any such policy or
policies of insurance shall be altered or canceled. DEVELOPER and each
Subsidiary hereby directs all insurers under such policies of insurance (except
those of public liability) to pay all proceeds payable thereunder for claims in
excess of the aggregate amount of $50,000 directly to the Company, and
DEVELOPER irrevocably appoints the Company (and all officers, employees, or
agents designated by the Company), as DEVELOPER's and the Subsidiaries' true
and lawful agent (and attorney-in-fact) for the purpose of endorsing the name
of DEVELOPER or such Subsidiary on any check, draft, instrument, or other item
of payment for such proceeds. Any proceeds received by the Company shall be
applied to DEVELOPER's obligations hereunder, and any overage shall be paid to
DEVELOPER. DEVELOPER and each Subsidiary irrevocably appoints the Company,
from and after a Default or an Event of Default, as DEVELOPER's and each
Subsidiary's true and lawful agent (and attorney-in-fact) for the purpose of
making, settling, and adjusting claims under such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. In the event DEVELOPER or any Subsidiary at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in part relating thereto, then
the Company, without waiving or releasing any Default or Event of Default
hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay
such premium and take any other action with respect thereto which the Company
deems advisable. All sums so disbursed by the Company, including reasonable
attorneys' fees, court costs, expenses, and other charges relating thereto,
shall be part of DEVELOPER's obligations hereunder, payable by DEVELOPER to the
Company on demand.
5.5 Notice of Suit or Adverse Change in Business. DEVELOPER shall
give written notice to the Company (a) as soon as possible, and in any event
within five business days after DEVELOPER receives actual notice (written or
oral) of any material proceeding(s) being instituted or threatened to be
instituted by or against DEVELOPER or any Subsidiary in any federal, state, or
local court or before any commission or other regulatory body (federal, state,
or local), and (b) as soon as possible, and in any event within five business
days after DEVELOPER learns of any material adverse change in the financial
condition, results of operations, business, or assets of DEVELOPER or any
Subsidiary.
5.6 Use of Proceeds. Except as otherwise authorized in writing by
the Company, DEVELOPER shall use the proceeds of the Loan solely for the
purposes set forth in Article I
16
17
hereof. DEVELOPER 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 of the Board of Governors of the Federal Reserve System
or to extend credit to any person for the purpose of purchasing or carrying any
such margin stock.
5.7 Registration of Units. DEVELOPER covenants that if any units
to be issued upon conversion of the Note or exercise of the Option require
registration with or approval of any governmental authority under any Federal
or state law before such units may be issued upon such conversion of exercise,
DEVELOPER will, at its expense and as expeditiously as possible, cause such
units to be duly registered or approved, as the case may be.
5.8 Additional Members. DEVELOPER agrees to cause each person
(other than the Company and the Fund) becoming a Member holding Voting Units
from time to time after the date of the Unit Pledge Agreement to execute and
deliver to the Company within five days after such person becomes a Member a
copy of the Unit Pledge Agreement.
5.9 Rights Regarding Future Financings. Except for the exercise
of the Additional Unit Options, if, at any time after the Closing Date through
the later of the date on which the outstanding principal balance of the Loan
and all accrued interest thereon is paid in full or the expiration of the term
of the Option in accordance with the provisions of Section 1.10 hereof,
advances of debt and purchases of equity by the Company under this Agreement
aggregate at least 75% of the Maximum Principal Balance, and DEVELOPER
determines that it requires additional financing (whether debt or equity)
(including, but not limited to, all capital-type transactions and
sale/leaseback transactions), it agrees (a) to negotiate in good faith with the
Company for a period of 60 days with regard to any portion or the entire amount
(at the option of the Company) of such financing prior to negotiating with any
other entity with regard thereto, (b) in the event DEVELOPER has engaged in
good faith negotiations under clause (a) of this Section 5.9 and such
negotiations have been unsuccessful, to notify the Company of the existence of
any other financing arrangement it proposes to consummate and the terms and
conditions thereof and grant to the Company a right of first refusal with
respect to such financing on the same terms and subject to the same conditions
contained therein and upon receipt of such notice (setting forth in detail all
relevant terms and conditions of such financing), in which event the Company
shall have 30 days thereafter in which to agree to assume all of the financing
on the same terms and conditions, and (c) with respect to any financing other
than a pure debt financing in which the debt instrument to be offered has no
equity-type features, to grant to the Company a right to participate therein on
a fully diluted basis for a period of 60 days, which right may be satisfied, at
the Company's option, by increasing the Maximum Principal Balance available to
be borrowed by DEVELOPER hereunder (with corresponding increases in the
Company's conversion and Option rights) rather than purchasing or otherwise
participating in the instrument or security to be offered by DEVELOPER. As
used herein "a right to participate therein on a fully diluted basis" shall
mean the Company's right to maintain the same percentage equity interest in
DEVELOPER (calculated by including as outstanding the
17
18
units subject to all outstanding options and warrants, including units which
the Company then has a right to purchase hereunder either through conversion
pursuant to Section 1.9 or the exercise of its Option pursuant to Section 1.10
hereof) after such financing is completed as it had prior to such financing.
The Company acknowledges that the right of first negotiation as set forth in
clause (a) above does not preclude DEVELOPER from making inquiries in the
relevant marketplace to obtain information regarding the terms of a financing
solely for purposes of comparison. The failure by the Company to exercise its
rights under any provision of this Section 5.9 within the time period specified
shall be deemed to constitute a waiver of its rights under such provision.
5.10 Company Loan Compliance. DEVELOPER agrees that, at the time
that it becomes a subsidiary of the Company, if ever, it will not incur any
indebtedness or create any lien which would cause the Company to be in default
of any lending arrangement or credit agreement to which the Company or its
parent company, if any, is a party.
5.11 Company Loan Agreement Representations. DEVELOPER agrees
that, at the time that it becomes a subsidiary of the Company, if ever, it will
conduct its business and take such action (or refrain from taking such action)
as to cause to be true and correct at all relevant times the representations or
warranties applicable to a subsidiary contained in any lending arrangements or
credit agreements to which the Company and/or its parent company, if any, is a
party.
5.12 Company Subsidiaries. Each corporation or other entity
becoming a Subsidiary of DEVELOPER after the date hereof will be duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of organization and will be duly qualified to do business in each
additional jurisdiction where the failure to be so qualified would have a
material adverse effect on such Subsidiary. Each Subsidiary of DEVELOPER will
have all requisite power to own or lease the properties used in its business
and to carry on its business as now being conducted and as proposed to be
conducted. All outstanding shares of capital stock or other units of ownership
interest of each class of each Subsidiary of DEVELOPER will be validly issued
and will be fully paid and nonassessable and will be owned, beneficially and of
record, by DEVELOPER or another Subsidiary of DEVELOPER free and clear of any
liens.
5.13 Place of Business. DEVELOPER will provide the Company with 60
days' prior written notice of any proposed change in the location of its chief
executive office. DEVELOPER shall not change its name without the prior
written consent of the Company.
5.14 Location of Inventory, Fixtures, Machinery, and Equipment.
(a) All Collateral consisting of inventory, fixtures,
machinery, and equipment, shall at all times be located within the Development
Area, and at no other locations without the prior written consent of the
Company.
18
19
(b) If the Collateral described in clause (a) is at any
time kept at leased locations, DEVELOPER shall use its best efforts to obtain
appropriate landlord lien waivers or subordination satisfactory to the Company,
unless such has been waived in writing by the Company for a particular
instance.
(c) If the Collateral described in clause (a) is at any
time warehoused, DEVELOPER shall send appropriate warehousemen's notices, each
satisfactory to the Company, unless such has been waived by the Company for the
particular instance.
5.15 HSR Act Compliance. In the event the Company determines that
any filing is required under the Xxxx- Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act") in connection with any exercise of the
conversion rights pursuant to Section 1.9 hereof or of the Option pursuant to
Section 1.10 hereof, DEVELOPER agrees to prepare and file with the Federal
Trade Commission and the United States Department of Justice within 15 business
days from the date of notice from the Company any notification required to be
filed under the HSR Act or any rules or regulations promulgated thereunder.
The Company shall pay any filing fees required under the HSR Act in connection
with such filing. Any information about DEVELOPER or its Subsidiaries
contained in such filing shall be true and accurate in all material respects
and responsive to the requirements of the HSR Act and any such rules and
regulations. Each of DEVELOPER and the Company shall make available to the
other party such information as may be required for the preparation of any such
notification or related reports.
5.16 Partnership Status for Tax Purposes. DEVELOPER will maintain
at all times its status for tax purposes as a "partnership" within the meaning
of Section 7701(a)(2) of the Code, and DEVELOPER will not take any action or
omit to take any action that would cause DEVELOPER to become a "publicly traded
partnership" within the meaning of Section 7704 of the Code.
5.17 DEVELOPER's Fiscal Year. DEVELOPER shall adopt a fiscal year
for tax and financial reporting purposes consistent with the fiscal year
adopted by the Company from time to time. As of the date of this Agreement,
DEVELOPER acknowledges that the Company's fiscal year is the 52/53-week period
ending on the last Sunday in December and consists of 13 four-week period.
ARTICLE VI
NEGATIVE COVENANTS
DEVELOPER covenants and agrees that, so long as this Agreement remains
in effect (unless the Company shall give its prior written consent thereto):
19
20
6.1 Guarantees; Loans; etc. DEVELOPER shall not, and shall not
permit any Subsidiary to (a) guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business and (b) make loans or advances to any person, other than the loans
evidenced by those certain promissory notes, each dated as of _____ __, 199_,
from ___________, ___________, and _____________ payable to DEVELOPER in the
principal amounts of $_________, __________, and __________, respectively (the
"Member Notes").
6.2 Disposal of Property. DEVELOPER shall not, and shall not
permit any Subsidiary to, sell, lease, transfer, or otherwise dispose of any of
its properties, assets, and rights (or agree to sell, lease, transfer, or
otherwise dispose of any of its properties, assets, and rights) (including the
Collateral) to any party except in the ordinary course of business.
6.3 Compensation to Members and Others. Other than (a) reasonable
salaries and other normal benefits (including options granted pursuant to a
199_ Unit Option Plan to be adopted by DEVELOPER with the consent of the
Company (the "Plan")) to be paid to Members of DEVELOPER employed by DEVELOPER
or the Manager, which salaries and benefits must be approved by the Company,
and (b) the Member Notes (as defined in Section 6.1 hereof) DEVELOPER shall not
make any loans to, or pay any compensation, bonuses, fees, options, or other
amounts to any equity holder or to any of the affiliates or immediate family
members of any such equity holder. DEVELOPER shall not, without the prior
written consent of the Company, waive any default under the Member Notes or
amend or modify in any way the Member Notes, the Plan, or any employment
arrangement or agreement with any equity holder or any affiliate or immediate
family member of any equity holder previously approved by the Company.
6.4 Distributions and Redemptions.
(a) DEVELOPER shall not, directly or indirectly, (i)
redeem, purchase, or otherwise retire any of its Units, (ii) make any
distributions (in cash or securities) in any fiscal year or (iii) return
capital of DEVELOPER to its members.
(b) Notwithstanding anything to the contrary contained
herein, DEVELOPER shall make cash distributions to its members to the maximum
extent permitted under the laws of the state of its organization, (i) after (A)
satisfactory completion of the Development Schedule under each Development
Agreement between DEVELOPER and the Company, as each such Development Agreement
may be amended from time to time, and (B) establishment of reasonably adequate
reserves for working capital and foreseeable contingencies, in each case so
20
21
long as DEVELOPER is in compliance with the terms and provisions of this
Agreement and maintains at all times Cash Flow during each fiscal quarter which
is at least equal to the Prospective Fixed Charges for the next succeeding
fiscal quarter and (ii) pursuant to and in accordance with Section 6.2 of the
LLC Agreement.
(c) For purposes of this Section 6.4, the term "Cash
Flow" for any fiscal quarter shall mean the sum of Net Earnings during such
fiscal quarter plus all charges made by DEVELOPER during such quarter for
depreciation and amortization in respect of its fixed assets and interest on
the Loan, and any other long-term indebtedness, all as determined in accordance
with generally accepted accounting principles consistently applied. The term
"Net Earnings" shall mean the net income of DEVELOPER during such period as
computed in accordance with generally accepted accounting principles
consistently applied, and, without limiting the foregoing, after deduction from
gross income of all charges and reserves, including charges and reserves for
all taxes on or measured by income, but excluding any profits or losses on the
sale or other disposition not in the ordinary course of business or fixed or
capital assets or on the acquisition, retirement, sale, or other disposition of
securities of DEVELOPER, and also excluding any taxes on such profits and any
tax deductions or credits on account of any such losses. The term "Prospective
Fixed Charges" shall mean for any fiscal quarter the same are to be determined
one-fourth of the sum of (x) any principal payments on the Loan and on any
other long term indebtedness (determined in accordance with generally accepted
accounting principles consistently applied) scheduled to become due within such
fiscal quarter and the succeeding three fiscal quarters and (y) interest to be
paid during such period on the Loan and on any other long-term indebtedness.
In the event any interest required by this Section 6.4 to be included in the
calculation of Prospective Fixed Charges is charged on a floating-rate basis
which cannot be determined as to the future, then such interest shall be
calculated for such period at the rate then in effect.
6.5 Additional Indebtedness. Except as provided in Section 5.9
hereof, and except for trade payables and real estate lease obligations for
Stores, in each case entered into in the ordinary course of business, DEVELOPER
shall not, and shall not permit any Subsidiary to, incur additional
indebtedness in excess of $5,000 as to any one item and $50,000 in the
aggregate without the consent of the Company.
6.6 Mergers, Consolidations, Acquisitions, etc. DEVELOPER shall
not, and shall not permit any Subsidiary (a) to be a party to any
consolidation, reorganization, or merger; (b) sell or otherwise transfer any
part of its assets (except in the ordinary course of business and except as
part of a financing as to which the Company has waived its rights pursuant to
and in accordance with Section 5.9 hereof); (c) except as provided in Section
5.9 hereof, to effect any change in its capital structure or in any of its
business objectives, purposes, and operations; (d) to acquire any capital in or
equity ownership of another limited liability company, corporation,
partnership, or other business organization; (e) to engage in any business
other than the
21
22
operation of Stores; or (f) to liquidate or dissolve or take any action with a
view toward liquidation or dissolution.
6.7 Certificate of Formation and LLC Agreement. DEVELOPER shall
not make any changes in or amendments to its certificate of formation or the
LLC Agreement as they are in effect as of the date hereof; except that
DEVELOPER may amend its LLC Agreement solely to the extent necessary to
consummate any financing as to which the Company has waived its rights pursuant
to and in accordance with Section 5.9 hereof.
6.8 Issuance of Units; Grant of Options; Exercise of Call Right.
Except for (i) Voting Units which may be issued upon (A) exercise of options
granted under DEVELOPER's 199_ Unit Option Plan pursuant to grants approved
under clause (iii) of this Section 6.8, (B) exercise of the Option, (C)
conversion of any portion of the outstanding principal balance of the Loan as
provided in the Note, and (D) consummation of any financing as to which the
Company has waived its rights pursuant to and in accordance with Section 5.9
hereof, (ii) exercise of the Additional Unit Options, (iii) options granted
under the DEVELOPER's 199_ Unit Option Plan which are approved by the Company,
in its sole discretion, and (iv) any increase in the Maximum Principal Balance
as provided herein, DEVELOPER will not issue any additional units of membership
interests or grant any option, warrant, or similar right to acquire units of
membership interests.
6.9 Liens. DEVELOPER shall not, and shall not permit any
Subsidiary to, create, incur, or suffer to exist any lien on any of the assets,
rights, revenues or property, real, personal, or mixed, tangible or intangible,
whether now owned or hereafter acquired, of DEVELOPER or any Subsidiary, other
than liens in favor of the Company and liens otherwise permitted under Section
4.9 hereof.
6.10 Transactions with Affiliates. DEVELOPER shall not, and shall
not permit any Subsidiary to, become a party to, or become liable in respect
of, any contract or undertaking with any Affiliate (as defined in Section 9.2
hereof) except in the ordinary course of business and on terms not less
favorable to DEVELOPER or such Subsidiary than those which could be obtained if
such contract or undertaking was an arms length transaction with a person other
than an affiliate.
6.11 Subsidiaries. DEVELOPER shall not, and shall not permit any
Subsidiary to, create or otherwise invest in any corporation, partnership, or
other entity unless DEVELOPER or such Subsidiary owns directly 100% of the
issued and outstanding equity interests therein (such 100% owned entity to be
referred to herein as a "Subsidiary").
6.12 Key Employee; Manager. DEVELOPER shall not remove, or
otherwise diminish the responsibilities of, ___________ or the manager of
DEVELOPER, for any reason whatsoever, nor shall any interest in the manager of
DEVELOPER be sold, transferred or otherwise assigned, in each case without the
Company's prior written consent.
22
23
ARTICLE VII
CONDITIONS OF CLOSING
The Company's obligations hereunder shall be subject to (a) the
performance by DEVELOPER prior to or on the Closing Date of all of its
covenants theretofore to be performed under this Agreement, (b) the accuracy of
DEVELOPER's representations and warranties contained in this Agreement on the
Closing Date, and (c) the satisfaction, prior to or on the Closing Date, of the
following further conditions:
7.1 Opinion of Counsel.
(a) The Company shall have received on the Closing Date
from _________________________ an opinion, dated the Closing Date, , in the
form attached hereto as Exhibit F with all blanks appropriately completed.
(b) The Company shall have received on the Closing Date
from _________________________ an opinion, dated the Closing Date, that
DEVELOPER will be taxed as a partnership within the meaning of Section
7701(a)(2) of the Code and that DEVELOPER will not be a "publicly traded
partnership" within the meaning of Section 7704 of the Code.
7.2 Proceedings and Documents. All proceedings to be taken in
connection with the transaction contemplated by this Agreement and all
documents incident to such transaction shall be satisfactory in form and
substance to the Company and its counsel, and the Company shall have received
all documents or other evidence which it and its counsel may reasonably have
requested in connection with such transaction, including copies of records of
all proceedings in connection with such transaction and compliance with the
conditions set forth in this Article VII, in form and substance satisfactory to
the Company and its counsel.
7.3 Executed Documents. DEVELOPER and its Subsidiaries, and to
the extent applicable, the members and their respective spouses, shall have
each duly executed the following documents to which they are parties, and shall
have delivered to the Company the following:
(a) this Agreement;
(b) the Note;
(c) the Accounting and Administration Services Agreement
in the form of Exhibit G hereto (the "Accounting and Administration Services
Agreement");
(d) the Investor Representation Letter set forth as
Exhibit H hereto signed by each investor in the DEVELOPER;
23
24
(e) the Unit Pledge Agreement;
(f) the Stock Pledge Agreement, together with stock
certificates in form suitable for transfer and multiple stock powers executed
in blank;
(g) the Subsidiary Security Agreement, where applicable;
(h) Collateral Assignments of Tenant's Interest in Lease
for each lease of real property to which DEVELOPER is a party (other than real
property subleased to DEVELOPER by the Company);
(i) certificates for all shares of common stock of the
Company owned by DEVELOPER in form available for transfer and multiple stock
powers executed in blank; and
(j) such financing statements or other documents for
filing with public officials with respect to the Security Instruments as the
Company may reasonably request, including without limitation financing
statements executed by each Partner.
7.4 No Defaults. There shall exist no Event of Default or
Default.
7.5 Additional Deliveries. The Company shall have received, in
form and substance satisfactory to it, copies of the following documents:
(a) DEVELOPER's certificate of formation, certified as
true and correct by the Secretary of State of Delaware, dated within
ten days prior to the Closing Date, and certified as true and correct
as of the Closing Date by a duly authorized officer of the manager of
DEVELOPER;
(b) the LLC Agreement, as it is in force and effect on
the Closing Date, certified as true and correct by the Secretary or
Assistant Secretary of the manager of DEVELOPER;
(c) certificate of good standing of the DEVELOPER from
the Secretary of State of each of the States included within the
Development Area, dated within 10 days of the Closing Date; and
(d) evidence satisfactory in form and substance to the
Company of all required action taken by DEVELOPER to authorize, among
other things, the execution, delivery, and performance by DEVELOPER of
this Agreement, the Security Agreements and the Note and the
consummation of the transactions contemplated hereby, including
authorization to enter into the Area Development Agreement and any
Franchise Agreement pursuant thereto and to issue Voting Units upon
the conversion of the Loan and the exercise of the Option, certified
as true and correct as of the Closing Date by a duly authorized
officer of the manager of DEVELOPER.
24
25
7.6 Opinion of Auditors. The Company shall have received on the
Closing Date from the Company's independent public accountants an opinion,
dated the Closing Date, in form and substance satisfactory to the Company, to
the effect that the Note and the obligations incurred hereunder are deemed to
be debt, and not equity, in accordance with generally accepted accounting
principles.
7.7 Members' Equity. The Company shall have received evidence
satisfactory to it that DEVELOPER had, as of Closing Date, members' equity of
at least $_________.
7.8 Compliance with Company Credit Agreements. The Company shall
(a) determine in good faith that this Agreement complies with applicable
restrictions or limitations under any lending arrangements or credit agreements
to which Company is a party, (b) obtain a written waiver of noncompliance of
the transactions contemplated hereby with such agreements, or (c) deliver to
its lender or the Agent from DEVELOPER such pledges, collateral, and other
documentation as may be required to evidence compliance with such lending
arrangements or credit agreements of the transactions contemplated hereby.
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES OF THE COMPANY
8.1 Default. The occurrence of any of the following events or
acts shall constitute a default ("Default"):
(a) Default in the payment when due of any portion of the
principal on the Note and the continuance of such default for a period of three
days;
(b) Default in the payment when due of any portion of the
interest on the outstanding principal of the Note and the continuance of such
default for a period of 10 days;
(c) any representation or warranty now or hereafter made
in this Agreement, the Accounting and Administration Services Agreement, the
Unit Pledge Agreement, the Subsidiary Security Agreement, the Note, any other
Security Instrument, or any certificate hereunder or thereunder shall not be
true, or any certificate, statement, report, financial data, or notice
furnished at any time by DEVELOPER to the Company shall be materially
inaccurate;
(d) any breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in the Unit Pledge Agreement, the
Subsidiary Security Agreement or in any other Security Instrument, which in
each case shall continue unremedied for a period of 10 calendar days following
notice thereof from the Company, provided that such grace period shall not
apply, and DEVELOPER shall be in Default immediately upon such breach, if, in
the
25
26
Company's judgment, such breach may not be reasonably cured by DEVELOPER during
such cure period;
(e) the breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in Sections 5.6, 5.16, 5.17, 6.1,
6.2, 6.4, 6.6, 6.7, 6.8, 6.10 or 6.11 of this Agreement;
(f) any breach of, or failure to perform or observe, any
other covenant, condition, or agreement contained in this Agreement or the Note
which shall continue unremedied for a period of 10 calendar days following
notice thereof from the Company, provided that such grace period shall not
apply, and DEVELOPER shall be in Default immediately upon such breach, if, in
the Company's judgment, such breach may not reasonably be cured by DEVELOPER
during such cure period;
(g) DEVELOPER or any Subsidiary shall (i) generally not,
or shall be unable to, or shall admit in writing its inability to pay its debts
as such debts become due, (ii) make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or adjudication or appointment is made and which remains undismissed
for a period of 60 days or more, (v) by any act or omission, indicate its
consent to, approval of, or knowing acquiescence in any such petition,
application, or proceeding, or order for relief, or the appointment of a
custodian, receiver, or trustee for all or any substantial part of its
properties, or (vi) suffer any such custodianship, receivership, or trusteeship
to continue undischarged for a period of 60 days or more;
(h) DEVELOPER's default under, or breach of any provision
of, the Development Agreement (other than a default which constitutes a default
under Section 8.1(o) hereof);
(i) termination of the lesser of (a) 50% or (b) three of
the Franchise Agreements to which DEVELOPER and the Company are parties;
(j) dissolution or liquidation of the Company;
(k) there occurs a material adverse change in the
financial condition, results of operations, assets, or business of DEVELOPER
and its Subsidiaries taken as a whole, or, in the event such a material adverse
change shall have occurred, such change shall not have been fully remedies
without any material averse effect on the financial condition, results of
operations, assets or other business of DEVELOPER and its Subsidiaries taken as
a whole to the satisfaction of the Company in its sole discretion;
26
27
(l) DEVELOPER or any Subsidiary shall (a) fail to pay any
indebtedness for borrowed money (other than the Note) of DEVELOPER or such
Subsidiary, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired, or (b) fail to perform or observe
any term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, when required to
be performed or observed, if the effect of such failure to perform or observe
is to accelerate, or to permit the acceleration, after the giving of notice, of
the maturity of such indebtedness, or (c) default in the performance or
observance of any obligations under leases of real property if the effect of
such default is to permit the termination of such lease and any applicable cure
period therein has expired;
(m) one or more judgments, decrees or orders for the
payment of money in excess of $100,000 in the aggregate and not otherwise fully
covered by insurance shall be rendered against DEVELOPER or any of its
Subsidiaries, and such judgments, decrees, or orders shall continue unsatisfied
and in effect for a period of 20 consecutive days without being vacated,
discharged, satisfied, escorted, stayed, or bonded pending appeal;
(n) the Unit Pledge Agreement, the Subsidiary Security
Agreement, any other Security Instrument, or the security interests created
under this Agreement shall be terminated, invalidated, or set aside or be
declared ineffective or inoperative or in any way cease to give or provide to
the Company the benefits purported to be created thereby;
(o) DEVELOPER fails to satisfy its development
obligations for the Development Area or any Sub-Area (as defined in the
Development Agreement) as set forth in Paragraph 3.C of the Development
Agreement, so long as during the 180-day period immediately preceding the event
giving rise to the default under this Section 8.1(p), both (i) there has been
no Funding Default by the Company hereunder, and (ii) DEVELOPER has had (A)
access to capital, either equity or debt, either directly or through sources
provided by the Company, on commercially reasonable terms for a similarly
situated restaurant business, or (B) income from operations, sufficient in
either case to complete its development obligations; or
[RESERVED]
8.2 Default; Remedies.
(a) In the event a Default shall exist or occur the Company
may:
(i) terminate its obligations under this
Agreement and cease to make any further advances under Section 1.1, and shall
have the right to declare the Note due and payable in full, without demand,
presentment, or notice of any kind;
27
28
(ii) in its sole and absolute discretion, exercise
any one or more of the rights and remedies accruing to a secured party under
the Uniform Commercial Code with respect to the Collateral and any other
applicable law upon default by a debtor;
(iii) exercise its rights under the Unit Pledge
Agreement and/or the other Security Instruments;
(iv) convert any portion of the outstanding
principal balance of the Loan into Voting Units as provided in the Note;
(v) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 8.1(g) with respect to DEVELOPER or any Subsidiary, the Company's
obligations under this Agreement shall automatically terminate forthwith and
all amounts owed by DEVELOPER hereunder and under the Note shall automatically
become immediately due and payable without notice, demand, presentment,
protest, diligence, notice of dishonor, or other formality, all of which are
hereby expressly waived, and provided further that, in the case of any event
described in Section 8.1(o), the Company's sole and exclusive remedies shall be
the remedies described in subparagraphs (iv) and (v) above.
(b) In connection with the exercise of the Company's
rights and remedies provided in Section 8.2(a)(ii), DEVELOPER hereby agrees to
assemble the Collateral and make it available to the Company at a place to be
designated by the Company which is reasonably convenient to both parties,
authorizes the Company to take possession of the Collateral with or without
demand and with or without process of law and to sell and dispose of the same
at public or private sale and to apply the proceeds of such sale to the costs
and expenses thereof (including reasonable attorneys' fees and disbursements
incurred by the Company) and then to the payment and satisfaction of the Loan.
Any requirement of reasonable notice shall be met if the Company sends such
notice to DEVELOPER, by registered or certified mail, at least five days prior
to the date of sale, disposition, or other event giving rise to a required
notice. The Company may be the purchaser at any such sale. DEVELOPER
expressly authorizes such sale or sales of the Collateral in advance of and to
the exclusion of any sale or sales of or other realization upon any other
collateral securing the Loan. The Company shall have no obligation to preserve
rights against prior parties. DEVELOPER hereby waives as to the Company any
right of subrogation or marshaling of such Collateral and any other collateral
for the Loan. To this end, DEVELOPER hereby expressly agrees that any such
collateral or other security of DEVELOPER or any other party which the Company
may hold, or which may come to any of them or any of their possession, may be
dealt with in all respects and particulars as though this Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which the Company or DEVELOPER does business after advertisement of the time
and place thereof shall, among other manners of public and private sale, be
deemed to be a commercially reasonable
28
29
disposition of the Collateral. DEVELOPER shall be liable for any deficiency
remaining after disposition of the Collateral.
(c) All of the Company's rights and remedies under this
Agreement are cumulative and nonexclusive. Any conversion of, or exercise of
the Option with respect to, less than all of the principal balance outstanding
under the Note shall not affect the Company's rights and remedies with respect
to any portion not so converted or exercised.
8.3 No Waiver. The Company's failure, at any time or times
hereafter, to require DEVELOPER's strict compliance with or performance of any
provision of this Agreement shall not waive, affect, or diminish any right of
the Company thereafter to demand such strict compliance or performance
therewith. Any suspension or waiver by the Company of a Default or an Event of
Default by the Company under this Agreement or the Note shall not suspend,
waive, or affect any other Default or Event of Default by DEVELOPER under this
Agreement or the Note, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants, and representations of
DEVELOPER contained in this Agreement or the Note and no Default or Event of
Default by DEVELOPER under this Agreement or the Note shall be deemed to have
been suspended or waived by the Company unless such suspension or waiver is in
writing signed by an officer of the Company.
ARTICLE IX
MISCELLANEOUS
9.1 No Oral Change. This Agreement may not be changed orally, but
only by an agreement in writing and signed by the party against whom
enforcement of any waiver, change, modification, or discharge is sought.
9.2 Assignment. DEVELOPER may not assign any of its rights or
delegate any of its obligations under this Agreement without the Company's
written consent, which consent may be withheld in the Company's sole
discretion. The Company may assign any of its rights or delegate any of its
obligations under this Agreement (including assignment of this Agreement, the
Note, the Unit Pledge Agreement and the Security Instruments), (a) without
notice to DEVELOPER, (i) to any Affiliate of the Company (except DEVELOPER) or
(ii) in connection with any pledge of its assets under the Company's credit
agreements and (b) with notice, but without any requirement of consent or
approval, to any other person entity (except DEVELOPER). Any such assignment
shall vest in the assignee all of the benefits under the documents so assigned.
For purposes of this Agreement, the term "Affiliate" of a specified person
shall mean any person or entity which directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the person specified.
29
30
9.3 Costs and Attorneys' Fees.
(a) Except as provided in Section 2.4 hereof and subsection
(b) or (c) of this Section 9.3, each of the parties hereto shall pay its own
expenses (including accounting fees) incident to the negotiation and execution
of this Agreement and to the consummation of the transactions contemplated
hereby.
(b) DEVELOPER shall pay all reasonable attorneys' fees
and any costs and charges relating to or arising out of (i) the negotiation and
drafting of this Agreement and all related documents and (ii) the enforcement
by the Company of its rights to collect any portion of the Loan.
(c) In any action not founded solely on grounds covered
by subsection (b) of this Section 9.3, the party to the action who does not
prevail shall pay to the prevailing party the court costs and reasonable
attorneys' fees and other expenses (including, but not limited to, fees and
expenses of expert witnesses or consulting experts) incurred directly or
indirectly by the prevailing party in connection with its prosecution or
defense of the action, as the case may be.
9.4 Communications and Notices. All communications and notices
provided for in this Agreement or under the Note shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to DEVELOPER:
with a copy to:
If to the Company:
Einstein/Noah Bagel Corp.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
30
31
with a copy to:
Einstein/Noah Bagel Corp.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
Any party may change the address to which notices hereunder are to be sent to
it by giving written notice of such change of address in the manner herein
provided for giving notice. Any notice delivered personally shall be deemed to
have been given when so delivered. Any notice delivered by facsimile
transmission shall be deemed to have been given on the earlier of the date it
is actually received or one day after such transmission. Any notice delivered
by overnight express courier will be deemed to have been given on the next
succeeding business day after the day it is sent to the intended recipient at
the address set forth above, and any notice delivered by registered or
certified mail or express mail delivery service shall be deemed to have been
duly given on the earlier of the date it is actually received or three business
days after it is sent to the intended recipient at the address set forth above.
9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
9.6 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
9.7 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, and
the provisions of this Agreement shall be severable in any such instance.
9.8 Avoidance. To the extent that the Company receives any
payment on account of DEVELOPER's obligations hereunder, and any such
payment(s) and/or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, subordinated, and/or
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment(s) or proceeds received, DEVELOPER's obligations
hereunder, or part thereof intended to be satisfied, shall be revived and
continue in full force and effect, as if such payment(s) and/or proceeds had
not been received by the Company.
31
32
9.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
9.10 Entire Agreement. This Agreement, the Note, the Unit Pledge
Agreement, the Security Instruments and the exhibits to each of the foregoing
contain the entire agreement of the parties hereto with respect to the
transactions contemplated herein, and collectively supersede all prior
understandings and agreements of the parties with respect to the subject matter
hereof.
9.11 General Indemnity. In addition to the payments pursuant to
Section 9.3, DEVELOPER agrees to indemnify, pay, and hold the Company and any
holder of the Note, and the officers, directors, employees, agents, and
Affiliates of the Company and any such holder (collectively, the
"Indemnitees"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for any of
such Indemnitees in connection with any investigative, administrative, or
judicial proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnity, in any manner relating to or
arising out of this Agreement, the Note, the Unit Pledge Agreement, the
Subsidiary Security Agreement, the Security Instruments and the exhibits or any
other agreements or document executed and delivered by DEVELOPER in connection
therewith, DEVELOPER's use and operation of the Stores, including any damage to
public or worker health and safety or the environment, the Company's agreement
to make the Loan hereunder, or the use or intended use of the proceeds of the
Loan (the "indemnified liabilities"); provided that DEVELOPER shall have no
obligation to an Indemnity hereunder with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of such Indemnity. To
the extent that the undertaking to indemnify, pay, and hold harmless set forth
in the preceding sentence may be unenforceable because it violates any law or
public policy, DEVELOPER shall contribute the maximum portion that it is
permitted to pay under applicable law to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them. The
provisions of the undertakings and indemnification set out in this Section 9.11
shall survive satisfaction and payment of DEVELOPER's obligations hereunder and
termination of this Agreement.
9.12 Limitation on Damages. Notwithstanding anything to the
contrary herein no party hereto shall be liable for consequential, indirect,
incidental, special, speculative, or punitive damages (including, but not
limited to, loss of revenue or profit) whether such claim alleges breach of
contract, tortious conduct including, but not limited to, negligence, or any
other theory, provided that nothing herein shall limit or otherwise restrict
DEVELOPER's obligation to pay fees under the Accounting and Administration
Services Agreement or royalties, advertising fund contributions, fees and all
other payments that may become due under the Development Agreement or any
Franchise Agreement entered into pursuant thereto.
32
33
9.13 Submission to Jurisdiction. DEVELOPER agrees that any legal
action or proceeding with respect to this Agreement, the Note, the Unit Pledge
Agreement, the Subsidiary Security Agreement, the Accounting and Administration
Services Agreement or any Security Instrument or the transactions contemplated
hereby may be brought in any court of the State of Colorado, or in any court of
the United States of America sitting in Colorado, and DEVELOPER hereby submits
to and accepts generally and unconditionally the jurisdiction of those courts
with respect to their respective person and property, and irrevocably consents
to the service of process in connection with any such action or proceeding by
personal delivery to DEVELOPER or by the mailing thereof by registered or
certified mail, postage prepaid to DEVELOPER at the address for DEVELOPER set
forth in Section 9.4. Nothing in this paragraph shall affect the right of the
Company to serve process in any other manner permitted by law or limit the
rights of the Company to bring any such action or proceeding against DEVELOPER
or property in the courts of any other jurisdiction. DEVELOPER hereby
irrevocably waives any objection to the laying of venue of any such suit or
proceeding in the above described courts.
9.14 Waiver of Jury Trial. No party to this instrument, which
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this Agreement, the Note,
the Unit Pledge Agreement, the Subsidiary Security Agreement, the Accounting
and Administration Services Agreement, any Security Instrument, any related
instrument, or the dealings or the relationship between the parties. No party
will seek to consolidate any such action, in which a jury has been waived, with
any other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 9.14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE COMPANY IN ENTERING INTO THIS
AGREEMENT.
33
34
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
EINSTEIN/NOAH BAGEL CORP.
By:
-----------------------
Its: Vice President
----------------------------
By:
-----------------------
Its: Manager
By:
--------------------
Title: President
34
35
EXHIBITS
Exhibit A Convertible Secured Note
Exhibit B Borrowing Certificate
Exhibit C Unit Pledge Agreement
Exhibit D Subsidiary Security Agreement
Exhibit E Advance Certificate
Exhibit F Opinion of Counsel of DEVELOPER
Exhibit G Accounting and Administration Services Agreement
Exhibit H Investor Representation Letter
1
36
EXHIBIT A
CONVERTIBLE SECURED NOTE
$_____________ Golden, Colorado
as of ______ __, 199_
FOR VALUE RECEIVED, ______________________, a Delaware limited
liability company (the "DEVELOPER"), promises to pay to the order of
Einstein/Noah Bagel Corp., a Delaware corporation (the "Company"), pursuant to
the Loan Agreement (as hereinafter defined) at such place as the Company may
from time to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of
_________________ dollars ($_________) and any interest thereon, or, if less,
the aggregate unpaid amount of the Loan made pursuant to Section 1.1 of the
Loan Agreement and any interest thereon.
This Note evidences the Loan made under, and is referred to in and is
executed and delivered pursuant to, a Secured Loan Agreement as of even date
herewith between the DEVELOPER and the Company (the "Loan Agreement"), to which
reference is hereby made for a statement of the terms and conditions under
which this Note may be repaid and accelerated and for a description of the
collateral and security securing this Note. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Loan for the period commencing on the date the Loan is made
until the Loan is paid in full, at a per annum rate equal to the rate
designated and announced by Bank of America Illinois or its successor in
interest (the "Bank") from time to time as its "reference rate" in effect at
its principal office in Chicago, Illinois, plus 1%. The interest rate shall be
adjusted, from time to time, on the same day on which the Bank adjusts its
"reference rate." Interest only on the outstanding principal amount of the
Loan shall be payable in arrears on the first day of each Retail Period during
the Interest Payment Period. Interest on the outstanding principal amount of
the Loan shall also be payable as otherwise provided herein in connection with
principal payments and at maturity (whether by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise,
shall, to the extent permitted by applicable law, thereafter bear interest
(compounded monthly and payable upon demand) at a rate which is 2% per annum in
excess of the rate of interest otherwise payable under this Note in respect of
such principal amount until such unpaid amount has been paid in full (whether
before or after judgment).
1
37
Except as otherwise provided in the Loan Agreement, unless
accelerated, the outstanding principal amount of the Loan shall be payable to
the Company in 65 substantially equal periodic installments of principal (the
amount of which periodic installments of principal shall be determined at the
close of business on the Draw Loan Termination Date based on a schedule
amortizing such outstanding principal balance of the Loan as of such date in
130 substantially equal periodic installments of principal), plus accrued but
unpaid interest, on the first day of each Retail Period, commencing on the
first day of the fourth Retail Period in the Company's fiscal year 2000 and
continuing until the first day of the fourth Retail Period in the Company's
fiscal year 2005, when the entire principal balance of the Loan and all
interest accrued thereon shall be due and payable.
This Note may be prepaid at any time without payment of penalty or
premium. All payments made hereunder shall be applied first to interest and
then to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the DEVELOPER and any endorser
or guarantor.
2
38
ARTICLE I
CONVERSION OF NOTE
1.1 The holder of this Note shall have the right, at such holder's
option, to convert, subject to the terms, conditions and provisions of this
Article I, the outstanding principal balance of this Note or any portion
thereof into Voting Units at the price of $____ per Voting Unit, or, in the
event an adjustment of such price has occurred pursuant to the provisions of
Section 1.3, then at the price as last adjusted (referred to herein as the
"Conversion Price"), at any time after both of the following have occurred: (i)
________ __, 199_ and (ii) such time as DEVELOPER has completed not less than
80% of the Development Schedule set forth in the Development Agreement, and up
to the later of (y) the date on which the DEVELOPER has properly repaid the
outstanding principal balance of the Loan and all accrued interest thereon in
full or (x) the first day of the ______ Retail Period in the Company's fiscal
year ____; provided, however, that nothing herein shall impair, restrict or
prohibit the exercise of remedies, including exercise of the conversion right,
under Section 8.2 of the Loan Agreement upon the occurrence of a Default. In
the event the outstanding principal balance of this Note is to be converted,
the holder shall surrender this Note to the DEVELOPER at any time during usual
business hours together with written notice (hereinafter referred to as
"Conversion Notice") that the holder elects to convert this Note into Voting
Units in accordance with the provisions of this Article I, and specifying the
name or names in which the certificate or certificates, if any, evidencing the
Voting Units issuable upon such conversion shall be registered, together with
the addresses of the persons so named. In the event this Note is to be
converted in part only, the DEVELOPER shall, upon surrender of this Note,
execute and deliver to the holder thereof, at the expense of the DEVELOPER, a
new Note in principal amount equal to the unconverted portion of this Note. In
no event shall accrued interest be convertible into Voting Units.
1.2 As promptly as practicable after the surrender, as herein
provided, of this Note for conversion and the receipt of the Conversion Notice
relating thereto, the DEVELOPER shall deliver to or upon the written order of
the holder of this Note a certificate or certificates, or other evidence of
ownership if Voting Units are uncertificated, representing the number of Voting
Units of the DEVELOPER into which this Note may be converted in accordance with
the provisions of this Article I and a new Note for any unconverted portion of
the principal amount hereof. Subject to the following provisions of this
Section 1.2, such conversion shall be deemed to have been made immediately
before the close of business on the date that this Note shall have been
surrendered for conversion together with the Conversion Notice, so that the
rights of the holder of this Note as a Noteholder shall cease at such time and
the person or persons entitled to receive the Voting Units upon conversion of
this Note shall be treated for all purposes as having become the record holder
or holders of such Voting Units at such time, and such conversion shall be at
the Conversion Price in effect at such time. If the last day for the exercise
of the conversion right shall not be a business day, then such conversion right
may be exercised on the next succeeding business day.
3
39
1.3 (a) In case of any reclassification or change of outstanding
Units, or in case of any consolidation or merger of the DEVELOPER with or into
any partnership, corporation, or other entity (other than a merger in which the
DEVELOPER is the surviving corporation and which does not result in any
reclassification or change of outstanding Units, other than a change in number
of Units issuable upon conversion of this Note) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the DEVELOPER as an entirety or substantially as an entirety, then the holder
of this Note shall have the right thereafter to convert this Note into the kind
and amount of units and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a
holder of the number of Voting Units of the DEVELOPER issuable upon conversion
of this Note immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
(b) The Conversion Price shall be adjusted in the event the
DEVELOPER shall at any time (i) make a subdivision of or combine Units
outstanding or (ii) make a distribution in cash, in kind, or in securities of
any kind (including, but not limited to, any Unit split, other than cash
distributions permitted pursuant to the provisions of Section 6.4 of the Loan
Agreement ("Permitted Distributions")). In the event the DEVELOPER makes a
subdivision of Units or makes a distribution in cash, in kind, or in securities
of any kind (other than Permitted Distributions), the Conversion Price in
effect immediately prior to such action shall be appropriately decreased, and
in the event the DEVELOPER shall at any time combine Units outstanding, the
Conversion Price in effect immediately prior to such combination shall be
appropriately increased. An adjustment made pursuant to this Section 1.3(b)
shall, in the event of a subdivision or combination, become effective
retroactively immediately after the effective date thereof, and shall, in the
event of a distribution, become effective retroactively immediately after the
record date for the determination of members entitled thereto. Whenever the
Conversion Price is adjusted, pursuant to this Section 1.3(b), the DEVELOPER
shall promptly cause a notice to be given to such holder of this Note which
will state the adjusted Conversion Price.
(c) The DEVELOPER covenants that if any Units to be issued upon
conversion of this Note require registration with or approval of any
governmental authority under any federal or state law before such Units may be
issued upon conversion, the DEVELOPER will, at its expense and as expeditiously
as possible, cause such Units to be duly registered or approved, as the case
may be.
(d) Any issuance of certificates, or other evidence of ownership
if Voting Units are uncertificated, for Voting Units upon the conversion of
this Note shall be made without charge to the converting Noteholder for any tax
in respect of the issuance of such certificates or other evidence of ownership,
and such certificates or other evidence of ownership shall be issued in the
respective names of, or in such names as may be directed by, the holder of this
Note;
4
40
provided, however, that the DEVELOPER shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate or other evidence of ownership in a name other
than that of the holder of this Note, and the DEVELOPER shall not be required
to issue or deliver such certificates or other evidence of ownership unless and
until the person or persons requesting the issuance thereof shall have paid to
the DEVELOPER the amount of such tax or shall have established to the
reasonable satisfaction of the DEVELOPER that such tax has been paid.
(e) Conversion of any portion of the principal balance of this
Note shall not relieve the DEVELOPER of its obligation to pay any accrued but
unpaid interest as of the date of conversion on the portion of the principal
balance of this Note so converted.
(f) To the extent that any portion of this Note is not converted
into Voting Units, such portion shall remain a secured debt of the DEVELOPER
payable in accordance with the terms of the Loan Agreement.
ARTICLE II
ADVANCES
2.1 Loan advances may be made from time to time by the Company to
the DEVELOPER in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance, the Company
shall record the making and amount of such advance on its books in a separate
loan account, and shall also record in the loan account all payments made by
the DEVELOPER with respect to the Loan. The aggregate amount of all Advances,
less the amounts of payment of principal made by the DEVELOPER, shall be the
principal amount outstanding under this Note. The loan account shall be prima
facie evidence of the unpaid amount of principal outstanding under this Note;
provided, however, that failure to maintain such account or record any advances
therein shall not relieve the DEVELOPER of its obligations to repay the
outstanding principal amount of the Loan, all accrued interest thereon, and any
amount payable with respect thereto in accordance with the terms of this Note.
ARTICLE III
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
3.1 The occurrence of a Default shall be a default under this
Note. Upon any default under this Note, the holder of this Note may declare
this Note due and payable in full and exercise such other rights and remedies
as are available to the holder under the Loan Agreement or applicable law.
5
41
3.2 If there is any default under this Note, and this Note is
placed in the hands of an attorney for collection, or is collected through any
court, including any bankruptcy court, the DEVELOPER promises to pay to the
order of the holder hereof such holder's reasonable attorneys' fees and court
costs incurred in collecting or attempting to collect or securing or attempting
to secure this Note or enforcing the holder's rights with respect to the
Collateral, to the extent allowed by the laws of the State of Colorado or any
state in which any Collateral is situated.
ARTICLE IV
MISCELLANEOUS
4.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS
OF LAW PROVISIONS THEREOF.
4.2 The holder of this Note may, with or without notice to any
party, and without affecting the obligations of any maker, surety, guarantor,
endorser, accommodation party, or any other party to this Note (i) extend the
time for payment of either principal or interest from time to time, (ii)
release or discharge any one or more parties liable on this Note, (iii) suspend
the right to enforce this Note with respect to any persons, (iv) change,
exchange, or release any property in which the holder has any interest securing
this Note, (v) justifiably or otherwise, impair any of the Collateral or
suspend the right to enforce against any such Collateral, and (vi) at any time
it deems it necessary or proper, call for and, should it be made available,
accept, as additional security, the signature or signatures of additional
parties or a security interest in property of any kind or description or both.
4.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied,
to the contrary notwithstanding, neither the Company nor any holder hereof
shall in any event be entitled to receive or collect, nor shall any amounts
received hereunder be credited, so that the Company or any holder hereof shall
be paid, as interest, a sum greater than the maximum amount permitted by
applicable law to be charged to the person primarily obligated to pay this Note
at the time in question. If any construction of this Note or the Loan
Agreement, or any and all other papers, agreements or commitments, indicate a
different right given to the Company or any holder hereof to ask for, demand,
or receive any larger sum as interest, such is a mistake in calculation or
wording which this clause shall override and control, it being the intention of
the parties that this Note, the Loan Agreement, and all other documents
executed or delivered in connection herewith shall in all ways comply with
applicable law and proper adjustments shall automatically be made
6
42
accordingly. In the event that the Company or any holder hereof ever receives,
collects, or applies as interest, any sum in excess of the maximum amount
permitted by applicable law, if any, such excess amount shall be applied to the
reduction of the unpaid principal balance of this Note, and if this Note is
paid in full, any remaining excess shall be paid to the DEVELOPER. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any,
the DEVELOPER and any holder hereof shall, to the maximum extent permitted
under applicable law: (a) characterize any non-principal payment as an expense
or fee rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, the DEVELOPER has caused this Note to be executed
in its corporate name by the undersigned officer, thereunto duly authorized.
---------------------------
By:
----------------------
Its: Manager
By:
-------------------
Title: President
7
43
EXHIBIT B
BORROWING CERTIFICATE
The undersigned, the __________ of ____________________, the manager
of ______________________ (the "DEVELOPER"), borrower under that certain
Secured Loan Agreement dated _____ __, 199_ (the "Loan Agreement") between the
DEVELOPER and Einstein Bros. Bagels, Inc. (the "Company"), hereby certifies to
the Company as follows:
0.Xxxx proceeds in the aggregate amount of $__________ were disbursed by the
Company for the benefit of DEVELOPER under the Loan Agreement during the
two-week borrowing period ended __________, 199_ (the "Borrowing Period").
DEVELOPER confirms that (a) the Company was authorized to disburse such amount
on behalf of DEVELOPER, and (b) such amount was required and used by DEVELOPER
for the purposes permitted under the Loan Agreement and for no other purpose.
0.Xx of ________, 199_, the outstanding principal balance of the Loan is
$_____________.
3.The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith
were true and correct at all times during the Borrowing Period, are true and
correct on and as of the date hereof, and will be true and correct at all times
during the next succeeding two-week borrowing period.
0.Xx Default or Event of Default has occurred and is continuing.
5.DEVELOPER is in compliance with the Development Schedule (as defined in the
Development Agreement).
The Company is entitled to rely on this Certificate and the representations
contained herein when disbursing loan proceeds during the next succeeding
two-week borrowing period.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
--------------------------------
1
44
EXHIBIT C
UNIT PLEDGE AGREEMENT
This Unit Pledge Agreement ("Pledge Agreement"), dated as of _____ __,
199_, is made and entered into by and between Einstein/Noah Bagel Corp., a
Delaware corporation (the "Company"), and all of the holders of Voting Units
in ______________________, a Delaware limited liability company (the
"DEVELOPER"), and their spouses listed on the signature pages hereof and any
other persons (other than the Company and Bagel Store Development Funding,
L.L.C., referred to herein as the "Fund") who, after the date of this Pledge
Agreement, become holders of Voting Units in the DEVELOPER and their spouses
(collectively, the "Members").
RECITALS
1. The Members own 100% of the issued and outstanding Voting
Units in the DEVELOPER (excluding any such Voting Units held by the Fund), in
the amounts set forth on Schedule A hereto.
2. The DEVELOPER has entered into a Secured Loan Agreement of
even date herewith (the " Loan Agreement") with the Company pursuant to which
the Company has agreed on the terms and subject to the conditions therein, to
make the Loan (as defined in the Loan Agreement) to the DEVELOPER, which Loan
is evidenced by a promissory note of even date herewith from the DEVELOPER to
the Company (the " Note").
3. Certain of the Members have executed promissory notes of even
date herewith to DEVELOPER pursuant to which DEVELOPER has loaned such Members
the money necessary for such Members to purchase certain of the Voting Units
owned by them (each, a "Member Note"). To secure his obligation under his
Member Note, each such Member has granted to DEVELOPER a security interest in
and to the Voting Units (the "Second Pledge Agreement").
4. As an inducement to the Company to enter into the Loan
Agreement and as a condition to the effectiveness of the Company 's obligations
under the Loan Agreement, the Members have agreed, among other things, to
pledge to the Company, and grant a first-priority security interest to the
Company, in and to, 100% of the issued and outstanding Voting Units in the
DEVELOPER (excluding any such Voting Units held by the Fund) of, and its
security interest in and to, the Voting Units will be junior to the pledge of
and security interest in and to the Voting Units granted to the Company as
provided herein.
NOW, THEREFORE, the Company and the Members have agreed as follows:
1. Certain Definitions. The capitalized terms and phrases not
otherwise defined herein, shall have the meanings given them in the Loan
Agreement, and the following terms or phrases shall have the following
meanings:
1
45
"Affiliate" shall mean, with respect to a specified person,
any other person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
"Collateral" shall mean the Pledged Units and any other
property in which the Company acquires a security interest pursuant to this
Pledge Agreement to secure any indebtedness or other obligation of the
DEVELOPER to the Company.
"Default" shall have the meaning given it in Section 10 of
this Pledge Agreement.
"Pledged Units" shall mean all the issued and outstanding
Voting Units in the DEVELOPER now or hereafter owned by the Members.
"Secured Obligations" shall mean the obligations secured by
this Pledge Agreement described in Section 3 of this Pledge Agreement.
"Voting Units" shall have the meaning ascribed thereto in the
limited liability company agreement of DEVELOPER dated _____ __, 199_, as
amended.
2. Grant of Security Interest.
(a) The Members hereby grant to the Company a security
interest in all of their respective right, title, and interest in and to the
Pledged Units whether now owned or hereafter acquired. The Members further
grant to the Company a security interest in any rights to subscribe,
liquidating distributions, distributions paid in units of ownership interest,
new securities, or any other property to which the Members are or may hereafter
become entitled to receive whether on account of the Pledged Units or otherwise
other than cash distributions permitted pursuant to the provisions of Section
6.4 of the Loan Agreement. If the Members receive additional property of such
nature, they shall immediately deliver such property to the Company to be held
by the Company in the same manner as the property held pursuant to this Pledge
Agreement.
(b) The Members grant a further security interest to the
Company in the proceeds or products of any sale or other disposition of the
Pledged Units.
3. Obligations Secured. The security interest created hereby
secures payment and performance of (a) the indebtedness evidenced by the Note,
and all obligations contained in the Note, (b) all of the other obligations,
agreements, covenants, and representations of the DEVELOPER under the Loan
Agreement whether or not, either on the date of this Pledge Agreement or
thereafter, evidenced by any note, instrument, or other writing, and (c) any
and all other indebtedness, obligation, or liability of the DEVELOPER to the
Company, however evidenced, whether existing on the date of this Pledge
Agreement or arising thereafter, direct or indirect, absolute or contingent,
joint and/or several.
2
46
4. Representations and Warranties. To induce the Company to
enter into this Pledge Agreement, each of the Members represents and warrants
for himself as follows:
(a) The Member has full right, power, and capacity to
enter into and perform this Pledge Agreement; and this Pledge Agreement has
been duly authorized, executed and delivered and constitutes a legal, valid,
and binding obligation of the Member enforceable in accordance with its terms.
(b) The Member has good and marketable title to the
Pledged Units owned by him, and such Pledged Units are not subject to any lien,
charge, pledge, encumbrance, claim, or security interest other than a second
priority lien on the Pledged Units (the "Second Lien") in favor of DEVELOPER
pursuant to the Second Pledge Agreement, if applicable, and the security
interest created by this Pledge Agreement.
(c) The Pledged Units owned by him constitute one hundred
percent (100%) of the issued and outstanding equity interest of the DEVELOPER
owned by him.
(d) The Pledged Units owned by him are fully paid and
nonassessable.
(e) Other than the LLC Agreement, the Member has not
entered into any restriction or purchase agreement with respect to the Pledged
Units, which would in any way restrict the sale, pledge, or other transfer of
the Pledged Units or of any interest in or to the Pledged Units.
5. Duration of Security Interest. The Company, its successors
and assigns, shall hold the Pledged Units and security interest created hereby
upon the terms of this Pledge Agreement, and this security interest shall
continue until all the Secured Obligations have been paid in full.
6. Maintaining Freedom from Liens. The Members shall keep the
Pledged Units and other Collateral free and clear of liens, other than the lien
granted hereunder and, if applicable, the Second Lien, and shall pay all
amounts, including taxes, assessments, or charges, which might result in a lien
against the Pledged Units or other Collateral if left unpaid. If any such
lien, assessment, claim, or charge shall nevertheless exist, and the Members
fail to pay such amounts promptly, the Company may, but is not obligated to,
pay such amounts, and such payment shall be conclusive evidence of the legality
or validity thereof. The Members shall promptly reimburse the Company for any
such payments, and until reimbursement, such payments shall be a part of the
Secured Obligations.
7. Certain Rights Respecting Pledged Units.
(a) The Members shall continue to be the owner of the
Pledged Units and other Collateral so long as no Default has occurred and is
continuing and may collect and retain
3
47
all cash distributions now or hereafter payable on or on account of the Pledged
Units and other Collateral which are permitted under the Loan Agreement, and,
so long as no Default has occurred, may exercise voting rights with respect to
the Pledged Units and other Collateral.
(b) The Members shall not sell, transfer, or attempt to
sell or transfer the Pledged Units or other Collateral, or any part thereof or
interest therein, without the prior express written consent of the Company.
Any such consent of the Company shall not constitute the release by the Company
of its interest in the Pledged Units or other Collateral, and any such sale or
transfer consented to shall transfer the Pledged Units or other Collateral
subject to the security interest of the Company. Any such transfer shall be
subject to the transferee member's agreement to be bound by the terms and
subject to the conditions of this Pledge Agreement, such agreement to be
evidenced by the transferee member's execution of this Pledge Agreement. The
parties agree that a sale or transfer of Pledged Units or other Collateral
pursuant to and in accordance with the terms and provisions of each Development
Agreement and Franchise Agreement relating thereto between the DEVELOPER and
the Company shall be deemed to be a sale or transfer of such Pledged Units or
Collateral with the Company's prior express written consent hereunder, provided
that any such transferee agrees to and does pledge to the Company such Pledged
Units or Collateral as provided herein.
(c) The Company, at its option upon any Default, may
exercise all voting rights and privileges whatsoever with respect to the
Pledged Units and other Collateral, including, without limitation, the right to
receive distributions, and to that end the Members hereby constitute any
officer of the Company as their proxy and attorney-in- fact for all purposes of
voting the Pledged Units and other Collateral after any Default at any annual
regular or special meeting of the DEVELOPER, and this appointment shall be
deemed coupled with an interest and is and shall be irrevocable until all of
the Secured Obligations have been fully paid and terminated, and all persons
whatsoever shall be conclusively entitled to rely upon any oral or written
certification of the Company that it is entitled to vote the Pledged Units and
other Collateral hereunder. The Members shall execute and deliver to the
Company any additional proxies and powers of attorney that the Company may
desire in its own name in order to exercise the rights expressly granted to the
Company under this Section 7(c). In addition to any other voting rights, the
Company may, upon any Default, vote the Pledged Units and other Collateral to
remove the managers of the DEVELOPER, or any of them, and to elect new managers
of the DEVELOPER, who may thereafter manage the affairs of the DEVELOPER,
operate its properties and carry on its business and otherwise take any action
with respect thereto as it shall deem necessary and appropriate, and may also
liquidate its business, and may authorize the borrowing of money in the name of
the DEVELOPER, and the pledge of its assets to secure such borrowing.
8. Issuance or Acquisition of New Units; Mergers, Sales and Other
Disposition of Assets. The Members shall not permit the DEVELOPER to (a) issue
new units of ownership interest in DEVELOPER, or any options, subscription
rights, or warrants with respect thereto
4
48
(except as contemplated in and permitted by the Loan Agreement), (b) merge into
or with or consolidate with any other entity, (c) sell or otherwise transfer
any part of its assets (except in the ordinary course of business) or (d)
liquidate or dissolve or take any action with a view toward liquidation or
dissolution, in each case without the Company's prior written consent.
9. Delivery of Certificates and Transfer Documents; Pledge of
Additional Units. If the Pledged Units are at any time represented by
certificates, the Members shall deliver to the Company such certificates in
form suitable for transfer together with executed blank assignment or transfer
documents, and the Company shall hold the certificates as bailee for DEVELOPER.
If for any reason any of the Members acquires any interest in any additional
membership units of the DEVELOPER (voting and nonvoting) such Member shall
immediately deliver certificates representing those units in form suitable for
transfer and blank assignment or transfer documents to the Company to be held
by the Company in the same manner as the Pledged Units, and such units shall be
pledged under this Pledge Agreement and constitute a part of the Collateral.
With respect to any additional Voting Units acquired by any of the Members, the
Company will hold certificates representing those Voting Units as bailee for
DEVELOPER.
10. Default. At the option of the Company, the occurrence of any
Default (as defined in the Loan Agreement) under the Loan Agreement shall
constitute a default under this Pledge Agreement.
11. Remedies.
(a) Upon the occurrence of any Default, the Company shall
have all of the rights and remedies provided by law and/or by this Pledge
Agreement, including but not limited to all of the rights and remedies of a
secured party under the Uniform Commercial Code, and the Members hereby
authorize the Company to hold such Pledged Units or to sell all or any part of
the Pledged Units at public or private sale and to apply the proceeds of such
sale to the costs and expenses thereof (including the reasonable attorneys'
fees and disbursements incurred by the Company) and then to the payment of the
other Secured Obligations. The Company may be the purchaser at any such sale.
The Members expressly authorize such sale or sales of the Pledged Units in
advance of and to the exclusion of any sale or sales of or other realization
upon any other collateral securing indebtedness or other obligations owed to
the Company. The Company shall be under no obligation to preserve rights
against prior parties.
(b) The Members agree and acknowledge that because there
may be no public market for the Pledged Units and because of applicable
securities laws, a public sale of the Pledged Units may not be possible or
advisable and sales at a private sale may be on terms less favorable than if
such Pledged Units were sold at a public sale and may be at a price less
favorable than a public sale. The Members agree that all such private sales
made under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
5
49
12. Exercise of Remedies. The rights and remedies of the Company
shall be deemed to be cumulative, and any exercise of any right or remedy shall
not be deemed to be an election of that right or remedy to the exclusion of any
other right or remedy. Notwithstanding the foregoing, the Company shall be
entitled to recover by the cumulative exercise of all remedies no more than the
sum of (a) the Secured Obligations remaining outstanding at the time of the
exercise of remedies, plus (b) the costs, fees, and expenses the Company is
otherwise entitled to recover.
13. Return of Collateral. If certificates representing the
Pledged Units shall at any time have been delivered to the Company hereunder,
the Company may at any time deliver the Pledged Units or other Collateral, or
any part thereof, to the Members. The receipt by the Members of the Pledged
Units or other Collateral, or any part thereof, shall be a complete and full
discharge of the Company, and the Company shall be discharged from any
liability or responsibility with respect thereto.
14. Communications and Notices.
(a) Any requirement of the Uniform Commercial Code of
reasonable notice shall be met if such notice is given at least five business
days before the time of sale, disposition, or other event or thing giving rise
to the requirement of notice.
(b) All communications and notices shall be in writing
and shall be deemed to have been duly given if delivered personally to the
party to whose attention the notice is directed or sent by overnight express,
facsimile transmission, express mail delivery service, or registered or
certified mail, return receipt requested, postage prepaid, and properly
addressed as follows:
If to the Members:
the addresses shown on the signature pages
If to the Company:
Einstein/Noah Bagel Corp.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Einstein/Noah Bagel Corp.
14123 Denver West Parkway
6
50
Xxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
Any party may change the address to which notices hereunder are to be sent to
it by giving written notice of such change of address in the manner herein
provided for giving notice. Any notice delivered personally shall be deemed to
have been given when so delivered. Any notice delivered by facsimile
transmission shall be deemed to have been given on the earlier of the date it
is actually received or one day after such transmission. Any notice delivered
by overnight express courier will be deemed to have been given on the next
succeeding business day after the day it is sent to the intended recipient at
the address set forth above, and any notice delivered by registered or
certified mail or express mail delivery service shall be deemed to have been
duly given on the earlier of the date it is actually received or three business
days after it is sent to the intended recipient at the address set forth above.
15. Further Assurances. The Members shall sign any such other
documents or instruments, including UCC financing statements, and take such
other action, as the Company may request to more fully create and maintain, or
to verify, ratify, or perfect the security interest intended to be created by
this Pledge Agreement.
16. Multiple Counterparts. This Pledge Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Pledge Agreement or the terms
thereof to produce or account for more than one such counterpart.
17. Miscellaneous
(a) Failure by the Company to exercise any right shall not be
deemed a waiver of that right, and any single or partial exercise of any right
shall not preclude the further exercise of that right. Every right of the
Company shall continue in full force and effect until such right is
specifically waived in writing signed by the Company.
(b) If any provision of this Pledge Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of the Pledge Agreement and the application of
such provision to other persons or circumstances shall not be affected thereby,
and the provisions of this Pledge Agreement shall be severable in any such
instance.
(c) The headings of the sections of this Pledge Agreement
are inserted for convenience only and shall not be deemed to constitute a part
of this Pledge Agreement.
(d) This Pledge Agreement shall benefit the Company, its
successors and assigns, and all obligations of the Members shall bind their
successors and assigns. The Members acknowledge that the Company may assign or
otherwise transfer (in whole or in part)
7
51
the Note, the Loan Agreement, or this Pledge Agreement to any other person, and
such other person shall thereupon become vested with all of the benefits in
respect thereof granted to the Company thereunder (including the benefits under
this Pledge Agreement).
(e) THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAWS PROVISIONS THEREOF.
(f) This Pledge Agreement and the Loan Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all prior understandings with respect to the
subject matter hereof. No change, modification, addition, or termination of
this Pledge Agreement shall be enforceable unless in writing and signed by the
party against whom enforcement is sought.
(g) To the extent any spouse of a Member is deemed, under
applicable law or otherwise, to have an interest in the Collateral, such spouse
hereby waives, relinquishes, and forever releases such interest in such
Collateral and agrees that such Collateral is subject to all of the terms and
provisions of this Pledge Agreement, especially, without limitation, Sections
10 and 11 hereof, and further agrees to be bound by the terms and provisions
hereof and to execute, acknowledge, and deliver such further assignments,
transfers, conveyances, powers of attorney, and assurances as may be required
to sell the Pledged Units as provided in Section 11 hereof, and as may be
otherwise appropriate to carry out the transactions contemplated by this Pledge
Agreement.
(h) Each of the Members agrees that any legal action or
proceeding with respect to this Pledge Agreement or the transactions
contemplated hereby may be brought in any court of the State of Colorado, or in
any court of the United States of America sitting in Colorado, and each of the
Members hereby submits to and accepts generally and unconditionally the
jurisdiction of those courts with respect to its person and property, and
irrevocably consents to the service of process in connection with any such
action or proceeding by personal delivery to each of the Members or by the
mailing thereof by registered or certified mail, postage prepaid addressed to
each of the Members at the address for notices as provided in Section 14
hereof. Nothing in this paragraph shall affect the right of the Company to
serve process in any other manner permitted by law or limit the right of the
Company to bring any such action or proceeding against the Members or property
in the courts of any other jurisdiction. Each of the Members hereby
irrevocably waives any objection to the laying of venue of any such suit or
proceeding in the above described courts.
18. Waiver of Jury Trial. No party to this instrument, which
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this
8
52
Agreement, any related instrument, or the dealings or the relationship between
the parties. If the subject matter of any such litigation is one in which the
waiver of a jury trial is prohibited, if at all, under the controlling law of
the applicable jurisdiction, by constitutional or statutory provision, no party
hereto will present as a defense or counterclaim in such litigation any claim
which would reduce or offset any amount or right claimed under the provisions
of this Pledge Agreement. No party will seek to consolidate any such action,
in which a jury has been waived, with any other action in which a jury trial
cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 18 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE COMPANY IN ENTERING INTO THIS
AGREEMENT.
9
53
IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement
to be effective as of the date and year first above written.
EINSTEIN/NOAH BAGEL CORP.
By:
---------------------
Its: Vice President
MEMBERS
--------------------------
Name:
Address:
--------------------------
Name:
Address:
DEVELOPER hereby executes this Pledge Agreement for purposes of acknowledging
and consenting to its execution by DEVELOPER's members and agrees that its
security interest in and to the Pledged Units is junior to the security
interest in and to the Pledged Units granted to the Company hereunder.
--------------------------
By:
----------------------
its Manager
By:
-------------------
Title: President
10
54
Schedule A
To
Pledge Agreement
Pledged Units at _____ __, 199_
No. of Units Issued To
------------ ---------
1
55
EXHIBIT D
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of __________, 199_ (this "Security
Agreement"), is made by __________________, a ___________ corporation (the
"Subsidiary"), in favor of Einstein/Noah Bagel Corp., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS, ______________________, a Delaware limited liability company
(the "Borrower"), has entered into a Secured Loan Agreement dated as of _____
__, 199_ (the "Loan Agreement"), with the Company pursuant to which the Company
has agreed on the terms and conditions therein, to make the Loan (as defined in
the Loan Agreement) to the Borrower; and
WHEREAS, the Subsidiary is a wholly-owned subsidiary of the Borrower;
WHEREAS, as a condition to the effectiveness of the Company's
obligations under the Loan Agreement, the Subsidiary has agreed, among other
things, to grant to the Company a first-priority security interest in and to
the Collateral hereinafter described;
NOW, THEREFORE, to secure (a) the payment of the principal sum of
_____________ Dollars ($____________), together with interest thereon, in
accordance with the terms of a promissory note dated _______, 19___, issued by
the Borrower pursuant to the Loan Agreement (the " Note"), (b) the performance
of the covenants herein contained and any monies expended by the Company in
connection therewith, (c) the payment of all obligations and performance of all
covenants of the Borrower under the Loan Agreement, the Unit Pledge Agreements
and all other Security Instruments (as defined in the Loan Agreement) and any
other documents, agreements or instruments between the Borrower or the
Subsidiary and the Company given in connection therewith, and (d) any and all
other indebtedness, obligations and liabilities of any kind of the Borrower
and/or the Subsidiary to the Company now or hereafter existing, direct or
indirect, absolute or contingent, joint and/or several, secured or unsecured,
arising by operation of law or otherwise, and whether incurred by the
Subsidiary as principal, surety, endorser, guarantor, accommodation party or
otherwise (all of the aforesaid indebtedness, obligations and liabilities of
the Borrower and/ or the Subsidiary being herein called the "Secured
Obligations", and all of the documents, agreements and instruments between the
Subsidiary and the Company evidencing or securing the repayment of, or
otherwise pertaining to the Secured Obligations being herein collectively
called the "Operative Documents"), for value received and pursuant to the Loan
Agreement, the Subsidiary hereby grants, assigns and transfers to the Company a
security interest in and to the following described property whether now owned
or existing or hereafter acquired or arising and wherever located (all of which
is herein collectively called the "Collateral"):
1
56
(a) all of the Subsidiary's real estate, accounts,
equipment (including, but not limited to machinery, furniture, fixtures, tools,
vehicles, and other tangible property), inventory, leasehold improvements,
contract rights (including its rights as lessee under all leases of real
property), general intangibles, deposit accounts, tax refunds, chattel paper,
instruments, notes, letters of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the
foregoing;
(c) all of the Subsidiary's books, records, and computer
programs and data relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions
for, and replacements, products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The
Subsidiary further represents, warrants, covenants, and agrees with the Company
as follows:
(a) Ownership of Collateral; Security Interest Priority
At the time any Collateral becomes subject to a security interest of the
Company hereunder, unless the Company shall otherwise consent, the Subsidiary
shall be deemed to have represented and warranted that (i) the Subsidiary is
the lawful owner of such Collateral and has the right and authority to subject
the same to the security interest of the Company; (ii) none of the Collateral
is subject to any lien other than that in favor of the Company and there is no
effective financing statement covering any of the Collateral on file in any
public office, other than in favor of the Company. This Security Agreement
creates in favor of the Company a valid and perfected first-priority security
interest in the Collateral enforceable against the Subsidiary and all third
parties and securing the payment of the Secured Obligations and all filings and
other actions necessary or desirable to create, preserve or perfect such
security interests have been duly taken.
(b) Location of Offices, Records and Facilities. The
Subsidiary's chief executive office and chief place of business and the office
where the Subsidiary keeps its records concerning its accounts, contract
rights, chattel papers, instruments, general intangibles and other obligations
arising out of or in connection with the sale or lease of goods or the
rendering of services or otherwise ("Receivables"), and all originals of all
leases and other chattel paper which evidence Receivables, are located in the
State of __________, County of __________ at ____________________________. The
Subsidiary will provide the Company with prior written notice of any proposed
change in the location of its chief executive office and will not change the
location of its chief executive office without the prior written consent of the
Company. The federal tax identification number of the Subsidiary is
___________. The name of the Subsidiary is _____________________, and the
Subsidiary operates under no other names [except for
"________________________"]. The Subsidiary shall not change its name without
the prior written consent of the Company.
2
57
(c) Location of Inventory, Fixtures, Machinery and
Equipment. All Collateral consisting of inventory, fixtures, machinery or
equipment is, and will be, located within the Development Area, and at no other
locations without the prior written consent of the Company. If the Collateral
described in this paragraph 1(c) is kept at leased locations or warehoused, the
Subsidiary has obtained appropriate landlord's lien waivers or appropriate
warehousemen's notices have been sent, each satisfactory to the Company, unless
waived by the Company.
(d) Liens, Etc. The Subsidiary will keep the Collateral
free at all times from any and all liens, security interests or encumbrances
other than those described in paragraph 1(a)(ii) hereof and those consented to
in writing by the Company. The Subsidiary will not, without the prior written
consent of the Company, sell or lease, or permit or suffer to be sold or
leased, any of the Collateral except inventory which is sold or, subject to the
Company's security interest therein, is leased in the ordinary course of the
Subsidiary's business, and tangible Collateral which is disposed of in the
ordinary course of the Subsidiary's business as being obsolete. The Company or
its attorneys may at any and all reasonable times inspect the Collateral and
for such purpose may enter upon any and all premises where the Collateral is or
might be kept or located.
(e) Insurance. The Subsidiary shall keep the tangible
Collateral insured at all times against loss by theft, fire and other
casualties and shall otherwise comply with the insurance provisions set forth
in Section 5.4 of the Loan Agreement.
(f) Taxes, Etc. The Subsidiary will pay promptly, and
within the time that they can be paid without interest or penalty, any taxes,
assessments and similar imposts and charges, not being contested in good faith,
which are now or hereafter may become a lien, charge or encumbrance upon any of
the Collateral. If the Subsidiary fails to pay any such taxes, assessments or
other imposts or charges in accordance with this Section, the Company shall
have the option to do so and the Subsidiary agrees to repay forthwith all
amounts so expended by the Company with interest at the default rate set forth
in the Loan Agreement.
(g) Further Assurances. The Subsidiary will do all acts
and things and will execute all financing statements and writings requested by
the Company to establish, maintain and continue a perfected and valid security
interest of the Company in the Collateral, and will promptly on demand pay all
reasonable costs and expenses of filing and recording all instruments,
including the costs of any searches deemed necessary by the Company to
establish and determine the validity and the priority of the Company's security
interests. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral shall be
sufficient as a financing statement.
(h) Maintenance of Tangible Collateral. The Subsidiary
will cause the tangible Collateral to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and shall
forthwith, or, in the case of any loss or damage to any of the tangible
Collateral as
3
58
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements, and other improvements made in connection therewith
which are necessary or desirable to such end. The Subsidiary shall promptly
furnish to the Company a statement respecting any loss or damage to any of the
tangible Collateral.
(i) Maintenance of Intangible Collateral. The Subsidiary
shall preserve and maintain all rights of the Subsidiary and the Company in the
intangible Collateral, including without limitation the payment of all
maintenance fees and the taking of appropriate action at the Subsidiary's
expense to halt the infringement of any of the intangible Collateral.
(j) Special Rights Regarding Accounts Receivable. The
Company or any of its agents may, at any time and from time to time in its sole
discretion and irrespective of the existence of any event of default under this
Security Agreement, verify directly with the Subsidiary's account debtors the
accounts pledged hereunder in any manner. The Company or any of its agents
may, at any time from time to time in its sole discretion, notify the
Subsidiary's account debtors of the security interest of the Company in the
Collateral and/or direct such account debtors that all payments in connection
with such obligations and the Collateral be made directly to the Company in the
Company's name. If the Company or any of its agents shall collect such
obligations directly from the Subsidiary's account debtors, the Company or any
of its agents shall have the right to resolve any disputes relating to returned
goods directly with the Subsidiary's account debtors in such manner and on such
terms as the Company or any of its agents shall deem appropriate. The
Subsidiary directs and authorizes any and all of its present and future account
debtors to comply with requests for information from the Company, the Company's
designees and agents and/or auditors, relating to any and all business
transactions between the Subsidiary and the Subsidiary's account debtors. The
Subsidiary further directs and authorizes all of its account debtors upon
receiving a notice or request sent by the Company or the Company's agents or
designees to pay directly to the Company any and all sums of money or proceeds
now or hereafter owing by the Subsidiary's account debtors to the Subsidiary,
and any such payment shall act as a discharge of any debt of such account
debtor to the Subsidiary in the same manner as if such payment had been made
directly to the Subsidiary. The Subsidiary agrees to take any and all action as
the Company may request to assist the Company in exercising the rights
described in this Section.
2. Events of Default. The occurrence of any Event of Default
specified in the Loan Agreement shall be deemed an event of default under this
Security Agreement.
3. Remedies. Upon the occurrence of any such event of default,
the Company shall have and may exercise any one or more of the rights and
remedies provided to it under this Security Agreement or any of the other
Operative Documents or provided by law, including but not limited to all of the
rights and remedies of a secured party under the Uniform Commercial Code, and
the Subsidiary hereby agrees to assemble the Collateral and make it available
to the Company at a place to be designated by the Company which is reasonably
convenient to both parties, authorizes the Company to take possession of the
Collateral with or without demand and
4
59
with or without process of law and to sell and dispose of the same at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including reasonable attorneys' fees and disbursements, incurred by
the Company) and then to the payment of the indebtedness and satisfaction of
other Secured Obligations. Any requirement of reasonable notice shall be met
if the Company sends such notice to the Subsidiary, by registered or certified
mail, at least five days prior to the date of sale, disposition or other event
giving rise to a required notice. The Company may be the purchaser at any such
sale. The Subsidiary expressly authorizes such sale or sales of the Collateral
in advance of and to the exclusion of any sale or sales of or other realization
upon any other collateral securing the Secured Obligations. The Company shall
have no obligation to preserve rights against prior parties. The Subsidiary
hereby waives as to the Company any right of subrogation or marshaling of such
Collateral and any other collateral for the Secured Obligations. To this end,
the Subsidiary hereby expressly agrees that any such collateral or other
security of the Subsidiary or any other party which the Company may hold, or
which may come to any of them or any of their possession, may be dealt with in
all respects and particulars as though this Security Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which the Company or the Subsidiary does business after advertisement of the
time and place thereof shall, among other manners of public and private sale,
be deemed to be a commercially reasonable disposition of the Collateral. The
Subsidiary shall be liable for any deficiency remaining after disposition of
the Collateral.
4. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Company under any Operative Document is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative in addition to every other right or remedy given hereunder or now or
hereafter existing under any applicable law. Every right and remedy of the
Company under any Operative Document or under applicable law may be exercised
from time to time and as is often as may be deemed expedient by the Company.
To the extent that it lawfully may, the Subsidiary agrees that it will not at
any time insist upon, plead, or in any manner whatever claim or take any
benefit or advantage of any applicable present or future stay, extension or
moratorium law, which may effect observance or performance of any provisions of
any Operative Document; nor will it claim, take or insist upon any benefit or
advantage of any present or future law providing for the valuation or appraisal
of any security for its obligations under any Operative Document prior to any
sale or sales thereof which may be made under or by virtue of any instrument
governing the same; nor will it, after any such sale or sales, claim or
exercise any right, under any applicable law to redeem any portion of such
security so sold.
5. Conduct No Waiver. No waiver of default shall be effective
unless in writing executed by the Company and waiver of any default or
forbearance on the part of the Company in enforcing any of its rights under
this Security Agreement shall not operate as a waiver of any other default or
of the same default on a future occasion or of such right.
5
60
6. Governing Law; Definitions. This Security Agreement is a
contract made under, and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with, the laws of the State of
Colorado applicable to contracts made and to be performed entirely within such
State. Terms used but not defined herein shall have the respective meaning
ascribed thereto in the Loan Agreement. Unless otherwise defined herein or in
the Loan Agreement, terms used in Article 9 of the Uniform Commercial Code in
the State of Colorado are used herein as therein defined on the date hereof.
The headings of the various subdivisions hereof are for convenience of
reference only and shall in no way modify any of the terms or provisions
hereof.
7. Notices. All notices, demands, requests, consents and other
communications hereunder shall be delivered and shall be effective in the
manner specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. The Company neither assumes
nor shall it have any duty of performance or other responsibility under any
contracts in which the Company has or obtains a security interest hereunder.
If the Subsidiary fails to perform any agreement contained herein, the Company
may but is in no way obligated to itself perform, or cause performance of, such
agreement, and the expenses of the Company incurred in connection therewith
shall be payable by the Subsidiary under paragraph 11.
9. Amendments. None of the terms and provisions of this Security
Agreement may be modified or amended in any way except by an instrument in
writing executed by each of the parties hereto.
10. Severability. If any one or more provisions of this Security
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Subsidiary agrees to indemnify the Company from
and against any and all claims, losses and liabilities growing out of or
resulting from this Security Agreement (including, without limitation,
enforcement of this Security Agreement), except claims, losses or liabilities
resulting from the Company's gross negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until full payment and performance of the
Secured Obligations (b) be binding upon the Subsidiary, its successors and
assigns and (c) inure, together with the rights and remedies of the Company
hereunder, to the benefit of the Company and its successors, transferees and
assigns. Upon the full payment and performance of the Secured Obligations the
security interests granted hereby shall terminate and all rights to the
Collateral shall revert to the Subsidiary. Upon any such termination, the
Company will, at the Subsidiary's expense, execute and deliver to the
6
61
Subsidiary such documents as the Subsidiary shall reasonably request to
evidence such termination.
13. Submission to Jurisdiction. The Subsidiary agrees that any
legal action or proceeding with respect to this Security Agreement or the
transactions contemplated hereby may be brought in any court of the State of
Colorado, or in any court of the United States of America sitting in Colorado,
and the Subsidiary hereby submits to and accepts generally and unconditionally
the jurisdiction of those courts with respect to their respective person and
property, and irrevocably consents to the service of process in connection with
any such action or proceeding by personal delivery to the Subsidiary or by the
mailing thereof by registered or certified mail, postage prepaid addressed to
the Subsidiary at the address for notices as provided in Section 7 hereof.
Nothing in this paragraph shall affect the right of the Company to serve
process in any other manner permitted by law or limit the right of the Company
to bring any such action or proceeding against the Subsidiary or property in
the courts of any other jurisdiction. The Subsidiary hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the
above described courts.
14. Waiver of Jury Trial. No party to this instrument, which
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this Agreement, any related
instrument, or the dealings or the relationship between the parties. If the
subject matter of any such litigation is one in which the waiver of a jury
trial is prohibited, if at all, under the controlling law of the applicable
jurisdiction, by constitutional or statutory provision, no party hereto will
present as a defense or counterclaim in such litigation any claim which would
reduce or offset any amount or right claimed under the provisions of this
Agreement. No party will seek to consolidate any such action, in which a jury
has been waived, with any other action in which a jury trial cannot or has not
been waived.
THE PROVISIONS OF THIS SECTION 14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE COMPANY IN ENTERING INTO THIS
AGREEMENT.
IN WITNESS WHEREOF, the Subsidiary has caused this Security Agreement
to be duly executed as of the day and year first set forth above.
[NAME OF SUBSIDIARY]
By:
----------------------
Its:
----------------------
7
62
EXHIBIT E
CERTIFICATE FOR ADVANCES
The undersigned, the _______________ of ____________________, the manager of
_______________ (the "DEVELOPER"), borrower under that certain Secured Loan
Agreement dated as of _____ __, 199_ (the "Loan Agreement") between the
DEVELOPER and Einstein/Noah Bagel Corp. (the "Company"), hereby requests a Loan
Advance in the amount of $__________ to be made on __________, 19__.
In support of this request, the DEVELOPER hereby represents and warrants to the
Company as follows:
1.The amount of the Advance is required and will be used by the DEVELOPER for
the purposes permitted under Section 1.2 of the Loan Agreement and for no other
purposes.
2.The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith are
true and correct on and as of the date hereof, and will be true and correct on
the date such Advances are made.
0.Xx Default or Event of Default has occurred or is continuing.
4.All of the conditions to Advances set forth in Article III of the Loan
Agreement have been satisfied.
5.DEVELOPER has expended at least 75% of its equity capital (other than equity
represented by the Member Notes) for the purposes set forth in the Loan
Agreement and for no other purposes.
6.DEVELOPER is in compliance with the Development Schedule.
7.The amount of the requested Advance is the amount DEVELOPER reasonably
expects (and which DEVELOPER reasonably believes is necessary) to expend within
the 60-day period immediately following the receipt of the Advance to purchase,
design, construct and equip Stores in accordance with Section 1.2 of the Loan
Agreement that are scheduled to open within 6 months of the Advance date.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
Date: __________________, 199_
--------------------------------------
1
63
EXHIBIT F
[Form of Opinion of Counsel]
_____ __, 199_
Einstein/Noah Bagel Corp.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, XX 00000
Re:
Ladies and Gentlemen:
We have acted as counsel for ______________________, a
Delaware limited liability company (the "Company") in connection with the
preparation, execution, and delivery of the Documents (as hereinafter defined).
This opinion is furnished to you pursuant to Section 7.1 of the Agreement (as
hereinafter defined). As used herein, the term "State" means the State of
[opining jurisdiction] and the term "UCC" means the Uniform Commercial Code as
in effect in the State on the date hereof. Other capitalized terms used herein
and not otherwise defined herein have the meanings provided in the Agreement.
The documents we have examined in rendering this opinion are
the following:
(i) The following, collectively called the "Documents":
(a) the Secured Loan Agreement (the "Agreement"),
of even date herewith, between the Company and Einstein/Noah Bagel
Corp. ("ENBC");
(b) the Convertible Secured Note of the Company,
of even date herewith and delivered pursuant to the Agreement (the "
Note");
(c) the Unit Pledge Agreement (the "Pledge
Agreement");
[(d) the Subsidiary Security Agreement, dated of
even date herewith between _________________ and ENBC pursuant to the
Agreement (the "Subsidiary Security Agreement"); and]
(e) The Development Agreement, of even date
herewith, by and between the Company and ENBC, as amended by [as
applicable] (the "Development Agreement")
(f) [other documents as applicable]
1
64
(ii) A certificate of the Secretary of the Company
certifying as to (A) the certificate of formation and LLC Agreement of
the Company and (B) evidence of authorization of the transactions
contemplated by the Documents;
(iii) Copies of those indentures, loan or credit
agreements, leases, guarantees, mortgages, security agreements, bonds,
notes and other agreements or instruments, and orders, writs,
judgments, awards, injunctions and decrees, which have been certified
by the Secretary of the Company as those documents which affect or
purport to affect the Company's right to borrow money under, or right
to undertake and perform its obligations under, the Documents
(collectively, the "Other Agreements and Court Orders"), a copy of
which certificate is attached hereto as Exhibit A; and
(iv) A certificate of the Secretary of State of the State
of Delaware, dated ________________, attesting to the continued
existence and good standing of the Company in that state.
We have also examined such other documents and records, and
other certificates, opinions and instruments and have conducted such
investigation as we have deemed necessary as a basis for the opinions expressed
below. As to factual matters relevant to our opinions expressed below, we
have, without independent investigation, relied upon all of the foregoing, upon
the factual representations made by the Company in Article VI of the Agreement,
upon certificates of the officers of the Company and of public officials, and
upon public records.
Based upon and subject to the matters stated herein and upon
such investigation as we have deemed necessary, we are of the opinion that:
1. The Company is a limited liability company duly
organized, validly existing, and in good standing under the laws of
the state of its formation, with corporate power and authority to
enter into the Agreement and to issue the Note and incur the
indebtedness to be evidenced thereby.
[2. The Subsidiary is a corporation duly organized,
validly existing, and in good standing under the laws of the state of
its incorporation, with corporate power and authority to enter into
the Documents to which it is a party.]
3. Each of the Documents to which the Company is a party
has been duly authorized by all required action on the part of the
Company, and each of them has been duly executed and delivered by the
Company, and constitutes the legal, valid, and binding obligation of
the Company, enforceable against the Company in accordance with its
terms.
2
65
[4. Each of the Documents to which the Subsidiary is a
party has been duly authorized by all required corporate action on the
part of the Subsidiary, and each of them has been duly executed and
delivered by the Subsidiary, and constitutes the legal, valid, and
binding obligation of the Subsidiary, enforceable against the
Subsidiary in accordance with its terms.]
5. The execution and delivery of the Documents and the
performance by the Company of its obligations thereunder, will not
conflict with or result in any breach of any of the provisions of, or
constitute a default under, or result in the creation or imposition of
any lien or encumbrance upon any of the properties of the Company
pursuant to the provisions of (a) its certificate of formation or LLC
Agreement, (b) any of the Other Agreements and Court Orders, or (c)
any law, rule, or regulation including without limitation Regulation
G, T, U or X of the Board of Governors of the Federal Reserve.
[6. The execution and delivery of the Documents and the
performance by the Subsidiary of its obligations thereunder, will not
conflict with or result in any breach of any of the provisions of, or
constitute a default under, or result in the creation or imposition of
any lien or encumbrance upon any of the properties of the Subsidiary
pursuant to the provisions of (a) its Certificate of Incorporation or
bylaws, (b) any of the Other Agreements and Court Orders, or (c) any
law, rule, or regulation including without limitation Regulation G, T,
U or X of the Board of Governors of the Federal Reserve.]
7. To the best of our knowledge, no consent,
authorization, appraisal, or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other person, which has not been obtained or taken, is required for
the execution and delivery of, or the performance by the Company [or
the Subsidiary] of their respective obligations under, each of the
Documents.
8. Under applicable law, the Company's certificate of
formation or LLC Agreement, and all contracts, agreements, or
restrictions known by us to bind the Company, the vote of the holders
of a majority of the Voting Units is sufficient to elect the manager
or managers of the Company, approve the merger, consolidation, or sale
of substantially all of the assets of the Company, or take any other
action whatsoever.
9. The Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
10. The Company is not a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary
3
66
company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
11. The Agreement creates a valid security interest in
your favor as security for the payment of the obligations of the
Company under the Agreement and the Note in all of the Company's
right, title, and interest in and to all personal property (the "Code
Collateral") included within the definition of the term Collateral (as
defined in the Agreement) in which a security interest can be granted
under the UCC and Non- [opining jurisdiction] Codes (as such term is
hereinafter defined).(1) We have examined the financing statements (the
"Financing Statements") to be filed in the filing offices listed on
Annex I attached hereto (the "Filing Offices") with respect to the
security interests granted to EBBI pursuant to the Agreement, and upon
the filing of such Financing Statements in the Filing Offices, and
assuming that the representations made in the Agreement with respect
to the location of the Code Collateral and the chief executive office
of the Company are and remain true and correct: (a) all filings,
registrations and recordings necessary to perfect the security
interest granted to you under such Agreement in respect of all Code
Collateral in which a security interest may be perfected by filing a
financing statement in the Filing Offices will have been accomplished;
and (b) the security interests granted to you pursuant to such
Agreement in and to such Code Collateral will be perfected to the
extent that such security interests may be perfected by filing
financing statements in the Filing Offices under the UCC and the
Non-[opining jurisdiction] Codes.
[12. The Subsidiary Security Agreement creates a valid
security interest in your favor as security for the payment of the
obligations of the Company under the Agreement and the Note in all of
the Subsidiary's right, title, and interest in and to all personal
property (the "Code Collateral") included within the definition of the
term Collateral (as defined in the Agreement) in which a security
interest can be granted under the UCC and Non-[opining jurisdiction]
Codes (as such term is hereinafter defined).(2) We have examined the
financing statements (the "Financing Statements") to be filed in the
filing offices listed on Annex I attached hereto (the "Filing
Offices") with respect to the security interests granted to EBBI
pursuant to the Subsidiary Security Agreement, and upon the filing of
such Financing Statements in the Filing Offices, and assuming that the
representations made in the Subsidiary Security Agreement with respect
to the location
-----------------------
(1*) Opinion with respect to the perfection of security interests in
Non-Opining Jurisdictions is only required when the Company has code Collateral
or its chief executive office outside of the Non-Opining Jurisdiction.
(2*) Opinion with respect to the perfection of security interests in
Non-Opining Jurisdictions is only required when the Company has code Collateral
or its chief executive office outside of the Non-Opining Jurisdiction.
4
67
of the Code Collateral and the chief executive office of the
Subsidiary are and remain true and correct: (a) all filings,
registrations and recordings necessary to perfect the security
interest granted to you under such Subsidiary Security Agreement in
respect of all Code Collateral in which a security interest may be
perfected by filing a financing statement in the Filing Offices will
have been accomplished; and (b) the security interests granted to you
pursuant to such Subsidiary Security Agreement in and to such Code
Collateral will be perfected to the extent that such security
interests may be perfected by filing financing statements in the
Filing Offices under the UCC and the Non-[opining jurisdiction]
Codes.]
13. The Pledge Agreement create a valid security interest
in your favor as security for payment of the Secured Obligations in
the Collateral (as such terms are defined in the Pledge Agreement).
The security interests created in your favor under the Pledge
Agreement with respect to such Pledged Units constitute perfected
security interests in such Pledged Units.
In addition to any assumptions, qualifications and other
matters set forth elsewhere herein, the opinions set forth above are subject to
the following:
(a) For the purposes of this opinion, we have assumed
that the Code Collateral exists and the Company and the Subsidiary have rights
or title to each item thereof, that all natural persons have legal capacity,
that all items submitted to us as originals are authentic and all signatures
thereon are genuine, that all items submitted to us as copies conform to the
originals and each such original or copy is complete and has been duly executed
and delivered by each party (other than the Company and the Subsidiary)
pursuant to due authorization as such party's legal, valid, and binding
obligation, enforceable against such party in accordance with its respective
terms.
(b) Our opinion with respect to the legality, validity,
binding effect, and enforceability of any document or agreement is subject to
the effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, or similar law affecting creditors' rights generally
and to the effect of general principles of equity, including (without
limitation) concepts of materiality, reasonableness, good faith, and fair
dealing (regardless of whether considered in a proceeding in equity or at law).
(c) We call your attention to the following matters (as
well as those matters set out in paragraph (d) below) as to which we express no
opinion:
(i) the Company's agreement in the Agreement to indemnify
you against costs, expenses, or liability notwithstanding your acts of
gross negligence or willful misconduct;
5
68
(ii) the Company's agreements in the Agreement for payment
or reimbursement of costs, fees, and expenses or indemnification for
claims, losses, or liabilities to the extent any such provision may be
determined by a court or other tribunal to be in an unreasonable
amount, to constitute a penalty, or to be contrary to public policy;
(iii) any of the waivers or remedies contained in the
Documents, whether or not any Document deems any such waiver or remedy
commercially reasonable, if such waivers or remedies are determined
(1) not to be commercially reasonable within the meaning of the UCC,
(2) to conflict with mandatory provisions under the UCC or other
applicable law, or (3) to be taken in a manner determined to be
unreasonable or not performed in good faith or with fair dealing or
with honesty in-fact;
(iv) certain other provisions contained in the Documents
which may be limited or rendered ineffective by applicable laws or
judicial decisions governing such provisions or holding their
enforcement to be unreasonable under the then-existing circumstances,
but such laws and judicial decisions do not, in our opinion, render
the Documents invalid as a whole or leave you without remedies; or
(v) the priority or continued perfection of any security
interest or lien granted by the Company to you under any of the
Documents.
(d) Our opinions set forth in paragraph 8 above are
subject to the following further qualifications, exclusions and assumptions:
(i) Our opinions are qualified by and subject to:
(A) in the case of proceeds, continuation of
perfection of your security interest therein is limited to the extent
set forth in Section 9-306 of the UCC;
(B) in the case of property which becomes
collateral after the date hereof, Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx
Bankruptcy Code (the "Bankruptcy Code") provides that a transfer is
not made until the debtor has rights in the property transferred, so a
security interest in after-acquired property which is security for
other than a contemporaneous advance may be treated as a voidable
preference under the conditions (and subject to the exceptions)
provided by Section 547;
(C) Section 552 of the Bankruptcy Code limits the
extent to which property acquired by a debtor after the commencement
of the case under the Bankruptcy Code may be subject to a security
interest arising from a security agreement entered into by the debtor
before the commencement of such case; and
6
69
(D) Section 364 of the Bankruptcy Code provides
that the extension of secured credit after the commencement of a case
under the Bankruptcy Code requires court approval.
(ii) We express no opinion as to:
(A) the creation or perfection of any security
interest in any fixtures or property excluded from the provisions of
the UCC pursuant to 9-104; and
(B) the perfection of any security interest in
accounts that are an obligation of the Federal government or any
agency or political subdivision thereof to the extent that any
applicable laws require any actions in addition to filing of the
Financing Statements.
(iii) We have assumed with your permission that:
(A) the Company has right, title, and interest in
and to the collateral pledged by it;
(B) all items of collateral (including, without
limitation, money, Units, or additional instruments) pledged under the
Pledge Agreement, of which possession must be obtained and retained by
a secured party in order to perfect its security interest pursuant to
Section 9-103 and 9-304 of the UCC, are in your actual or constructive
possession and not in the possession of the Company or any of its
subsidiaries, affiliates, or agents;
(C) all items of collateral constitute items
which are mobile in nature and, if installed on any property, do not
constitute fixtures; and
(D) none of the collateral consists of consumer
goods, farm products, crops, timber, minerals, or the like (including
oil and gas), or accounts resulting from the sale thereof, receivables
due from any government or agency or department thereof, beneficial
interests in a trust or a decedent's estate, letters of credit,
inventory which is subject of any negotiable documents of title, such
as a negotiable xxxx of lading or warehouse receipt held by anyone
other than you or on your behalf, or items which are subject to a
requirement of any jurisdiction, including the State, which provides
for a registration or certificate of title or a filing other than
under the UCC.
Whenever our opinion with respect to the existence or absence
of facts is indicated to be based on our knowledge or awareness, we are
referring solely to the actual knowledge of the particular [firm name]
attorneys who have represented the Company in connection with the Documents.
Except as expressly set forth herein, we have not undertaken any independent
7
70
investigation to determine the existence or absence of such facts and no
inference as to our knowledge concerning such facts should be drawn from the
fact that such representation has been undertaken by us.
Our opinions expressed herein are limited to the laws of the
State of [opining jurisdiction], [the general corporation law of the state of
the Company's and Subsidiary's incorporation if different than the opining
jurisdiction] and the federal laws of the United States, and we do not express
any opinion herein concerning any other law except as expressly set forth in
paragraph 8 above. With respect to our opinions in paragraph 8, to the extent
our opinions are not governed by federal or [opining jurisdiction] law, our
opinions are based solely and exclusively on a review of Subsections 9-103(3),
9-203(1) and (2), 9-302(1), 9-303, 9-401(1) and 9-402(1) and (3) of the Uniform
Commercial Codes as reported by [Commerce Clearing House, Inc. in the Secured
Transactions Guide for the states listed on Annex I] (collectively, the states
listed on Annex I are sometimes referred to herein as the "Non-[opining
jurisdiction] Jurisdictions" and the Uniform Commercial Codes as adopted and in
effect in such Non-[opining jurisdiction] Jurisdictions are sometimes called
the "Non-[opining jurisdiction] Codes"). We have not reviewed, and we express
no opinion on, local custom with respect to, and any other sections of, the
Non-[opining jurisdiction] Codes, including any provisions that are referred to
in the sections that we have reviewed which are noted above, nor have we
reviewed any other statutes of the Non-[opining jurisdiction] Jurisdictions or
judicial decisions construing or interpreting the laws of the Non-[opining
jurisdiction] Jurisdictions, including the Non-[opining jurisdiction] Codes.
By rendering the opinions set forth in paragraph 8 we do not intend to indicate
that we are experts on, or qualified to render opinions on, the laws of the
Non-[opining jurisdiction] Jurisdictions. Accordingly, we caution you that the
opinions in paragraph 8 could be materially affected by local custom, other
provisions of the Non-[opining jurisdiction] Codes, other statutes, laws, or
regulations of the Non-[opining jurisdiction] Jurisdictions or judicial
decisions of courts construing or interpreting the laws of the Non-[opining
jurisdiction] Jurisdictions, including the Non-[opining jurisdiction] Codes.
This opinion is furnished to you solely in connection with the
transactions described above and may not be relied upon by you (and to the
extent indicated in the previous sentence, your counsel) for any other purpose
or by any other person in any manner or for any purpose.
Very truly yours,
8
71
Annex 1
UCC-1 Financing Statement filings to perfect a security interest in collateral
not constituting fixtures:
State Filing Office Reporting Publication
----- ------------- ---------------------
9
72
Exhibit A
CERTIFICATE
The undersigned hereby certifies that he is the duly elected Secretary of
__________________, a Delaware limited liability company (the "Company"), and
further certifies that the following documents are the only documents to which
the Company is a party that affect or purport to affect the Company's right to
borrow money under, or the Company's right to undertake and perform its
obligations under, the Documents (as defined in the Secured Loan Agreement,
dated as of _____ __, 199_, between the Company and Einstein/Noah Bagel Corp.)
Date:
------------------
-------------------
Secretary
1
73
EXHIBIT G
ACCOUNTING AND ADMINISTRATION SERVICES AGREEMENT
This Accounting and Administration Services Agreement ("Agreement") is
made the ____ day of _____, 199_, by and between ______________________, a
Delaware limited liability company ("DEVELOPER"), and Boston Chicken, Inc.,
Delaware corporation ("Company").
RECITALS
1. Einstein/Noah Bagel Corp. ("ENBC") and DEVELOPER have entered
into an Area Development Agreement dated as of _____ __, 199_, as amended (the
"ADA"), and have entered into or propose to enter into one or more franchise
agreements (each a "Franchise Agreement" and, collectively, the "Franchise
Agreements"), each providing for the franchise by the ENBC to DEVELOPER of the
right to operate an Einstein Bros.(TM) Bagel store.
2. Pursuant to the ADA and/or the Franchise Agreements, DEVELOPER
is required to maintain certain accounting records and provide to ENBC certain
periodic financial reports and other data.
3. DEVELOPER has requested and Company has offered that,
effective _________, 199_ (the "Effective Date"), Company assist DEVELOPER in
maintaining certain accounting records and preparing certain financial reports
required under the ADA and/or the Franchise Agreements.
4. DEVELOPER desires to enter into an agreement pursuant to which
Company would perform such services for DEVELOPER upon the terms and subject to
the conditions hereinafter provided.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, as well as other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the parties
hereby agree as follows:
1. Accounting Services.
1.1 Commencing on the Effective Date and upon the terms and
subject to the conditions set forth in this Agreement, Company shall provide to
DEVELOPER for each Noah's store operated by DEVELOPER pursuant to the ADA and
the Franchise Agreements (each a "Unit") the following accounting services (the
"Services"):
(a) per-Unit calculation of revenue and expenses by
accounting category per Company's standard chart of accounts and calculation of
Royalty Based Revenue and Royalty Fees (as each term is defined in the
Franchise Agreements);
1
74
(b) administration and maintenance of corporate payroll,
and administration of the processing of payroll and calculation of applicable
tax and other withholdings relating to the Units through Company's designated
payroll service bureau;
(c) administration of accounts payable (including check
generation);
(d) administration of recurring cash transfers between
DEVELOPER's applicable Unit and corporate bank accounts;
(e) administration and maintenance of a DEVELOPER general
ledger trial balance, balance sheet, income statement and certain other
corporate and Unit reports by accounting category per Company's standard chart
of accounts and consistent with periodic reports Company customarily prepares
in the normal course of business to manage its financial affairs, and periodic
distribution of such reports to DEVELOPER using Company's Report Distribution
System;
(f) maintenance of all accounting records supporting
DEVELOPER's financial statements (consistent with Company's record retention
program) in reasonable fashion separate and discrete from the accounting
records of Company; and
(g) preparation of period end reconciliations and
associated period end journal entries for all DEVELOPER balance sheet accounts.
1.2 The Services shall not include any of the following, each of
which is the sole responsibility of DEVELOPER:
(a) selection of accounting policies to be applied to
DEVELOPER's books and records; however, Company will consistently apply the
appropriate policies selected by DEVELOPER;
(b) negotiation of terms and conditions between DEVELOPER
and its suppliers, vendors, and others, such as remittance due dates and
discounts;
(c) quarterly review and edit of DEVELOPER's vendor
masterfile for current and accurate data; however, Company will appropriately
apply updates to the vendor masterfile as directed by DEVELOPER;
(d) signature and final release of trade accounts payable
disbursement checks in excess of $200,000;
(e) final review and approval of annual financial
statements;
(f) cash investment activities; however, Company will
initiate and manage repetitive and/or fixed cash management activities as
directed in writing by DEVELOPER;
2
75
(g) approval and coding of invoices for disbursement;
(h) preparation of budgets (except that Company will
develop a budget process and calendar to facilitate the preparation of annual
budgets by DEVELOPER, which DEVELOPER agrees to adopt and adhere to); and
(i) preparation, filing, or signing of any tax returns
required to be filed by DEVELOPER, with the exception of sales and use tax
returns which will be prepared, but not, however, filed or signed by Company.
1.3 DEVELOPER agrees to effectively apply locally the policies and
procedures defined in Company's Accounting Manual (and in particular Accounting
Policy and Procedures Bulletin 93-13), as the same may be modified and updated
from time to time, on a timely basis, which actions and compliance shall be a
condition to Company's obligations hereunder.
1.4 DEVELOPER agrees to utilize Company's designated auditors and
tax consultants for annual audit and tax return preparation activities.
1.5 DEVELOPER agrees to utilize Company's designated bankers
(except for Unit bank accounts) and credit card processors for all corporate
cash management activities.
1.6 DEVELOPER agrees to supply Company all information, materials,
data, and documents necessary or advisable to properly perform the Services in
such form, format, or media as Company may reasonably request, to make
available the officers of DEVELOPER to answer any inquiries in connection
therewith, and to cooperate with Company in the performance of its duties.
2. Fees for Services and Expense Reimbursement.
2.1 In consideration of the Services, DEVELOPER agrees, commencing
on the Effective Date, to pay to Company, separate and apart from any fee
otherwise payable under the ADA or any Franchise Agreement, an accounting
services fee, as follows:
(a) a base fee for services to DEVELOPER payable by
DEVELOPER for each four-week accounting period of Company ("Accounting Period")
of $4,500 (the "Base Fee"); and
(b) a unit fee for each Unit open and operating during
all or any portion of such Accounting Period, which unit fee shall depend on
the number of Units directly owned and operated by DEVELOPER pursuant to the
ADA, and shall be equal to:
(i) $850 per Accounting Period for each such Unit
open and operating during all or any portion of such Accounting Period, until
DEVELOPER opens and operates 12 or more Units;
3
76
(ii) $750 per Accounting Period after DEVELOPER
opens its 12th Unit and prior to the opening of the 30th Unit open and
operating during all or any portion of such Accounting Period;
(iii) $650 per Accounting Period after DEVELOPER
opens its 30th Unit and prior to the opening of the 50th Unit open and
operating during all or any portion of such Accounting Period;
(iv) $550 per Accounting Period after DEVELOPER
opens its 50th Unit and prior to the opening of the 100th Unit open and
operating during all or any portion of such Accounting Period;
(v) $450 per Accounting Period after DEVELOPER opens
its 100th Unit and prior to the opening of the 200th Unit open and operating
during all or any portion of such Accounting Period; and
(vi) $350 per Accounting Period after DEVELOPER
opens its 200th Unit and for all Units opened thereafter during all or any
portion of such Accounting Period.
In the event that DEVELOPER and the Units meet certain reporting requirements,
administrative procedure compliance requirements, and timeliness deadlines as
Company may establish and announce from time to time in its sole discretion,
the unit fees set forth in (i) through (vi), above shall be reduced for
DEVELOPER to $700, $600, $500, $400, $300, and $250, respectively.
DEVELOPER agrees that the foregoing fees (base fee and unit fees) may be
increased cumulatively by not more than 10% per fiscal year at the sole
discretion of Company effective upon written notice thereof.
2.2 In addition to the payment of fees as specified in Section 2.1
of this Agreement, DEVELOPER shall reimburse Company for all non-ordinary,
out-of-pocket expenses incurred by Company or its affiliates in connection with
the Services rendered by them hereunder, including, but not limited to, travel
expenses, legal fees, fees of experts, audit fees, tax fees, payroll service
fees, etc. All non-ordinary, out-of-pocket expenses, however, must be approved
by DEVELOPER prior to incurring such expense. Expenses payable under this
Section 2.2 shall be paid promptly in the manner specified in Section 4.1 of
this Agreement. These expenses will not include any expenses associated with
computer system enhancements at the Company's Support Center, except as
otherwise agreed to by the parties.
3. Term of Services.
3.1 The term of this Agreement shall be for one year from the
Effective Date unless the parties mutually agree to extend such term; provided
that either party hereto may terminate this Agreement during the term upon 180
days' prior written notice to the other party; and
4
77
provided further that Company may terminate this Agreement without notice and
cease rendering the Services, also without notice, upon any non-payment by
DEVELOPER of the fees and expenses provided for herein when such fees and
expenses are due and payable.
3.2 Termination of this Agreement shall terminate Company's
obligations to provide the Services. Upon termination of this Agreement,
DEVELOPER shall pay to Company the fees due Company in accordance with Section
2.1 hereof for the Services rendered by Company through the date of termination
and reimburse Company in accordance with Section 2.2 hereof for expenses
incurred by Company in connection with the Services rendered by Company through
the date of termination.
4. Payment of Amounts due Hereunder; Liability.
4.1 Company will calculate and DEVELOPER hereby authorizes Company
to collect through electronic funds transfer, at the end of each Accounting
Period, the total dollar amount of all fees and expenses due to Company
hereunder.
4.2 Company shall not be liable for any cost, damage, expense, or
loss of DEVELOPER or its owners, partners, shareholders, officers, members,
directors, employees, suppliers, or vendors, or any other person or entity
arising or resulting, directly or indirectly, from (i) the failure of Company
to perform any of the Services for DEVELOPER or the misperformance of any such
Services, except to the extent such failure to perform or such misperformance
is the result of Company's willful misconduct or gross negligence, in which
event Company's liability shall not exceed its fee for such hereunder for the
Accounting Period in question, or (ii) reliance by DEVELOPER, its owners,
partners, shareholders, officers, members, directors, employees, suppliers, or
vendors, or any other person or entity on any data or advice Company may
provide pursuant to this Agreement. In no event will Company be liable for
indirect, incidental, consequential, special, speculative, exemplary, or
punitive damages (including, but not limited to, loss of revenue or profit).
4.3 COMPANY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER, INCLUDING, BUT NOT
LIMITED TO, THEIR ADEQUACY, QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS
FOR A PARTICULAR PURPOSE.
5. Miscellaneous.
5.1 In performing the Services set forth in this Agreement,
Company will have neither express nor implied power to execute agreements on
behalf of DEVELOPER or in any manner bind DEVELOPER as to any matter not within
the scope of this Agreement.
5
78
5.2 All notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
6
79
If to DEVELOPER:
If to Company:
Boston Chicken, Inc.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
Any party may change the address to which notices hereunder are to be sent to
it by giving written notice of such change of address in the manner herein
provided for giving notice. Any notice delivered personally or by overnight
express courier or facsimile transmission shall be deemed to have been given on
the date it is so delivered, and any notice delivered by registered or
certified mail delivery service shall be deemed to have been duly given three
business days after it is sent to the intended recipient at the address set
forth above.
5.3 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS
THEREOF.
5.4 A failure of any party to insist in any instance upon the
strict and punctual performance of any provision of this Agreement shall not
constitute a continuing waiver of such provision. No party shall be deemed to
have waived any rights, power, or privilege under this Agreement or any
provisions hereof unless such waiver shall have been in writing and duly
executed by the party to be charged with such waiver, and such waiver shall be
a waiver only with respect to the specific instance involved and shall in no
way impair the rights of the waiving party or the obligations of the other
party or parties in any other respect or at any other time. If any provision
of this Agreement shall be waived, or be invalid, illegal, or unenforceable,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain binding and in full force and effect.
5.5 This Agreement may be amended or modified only by a written
instrument signed by each of the parties hereto.
5.6 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings, either or oral or written, with respect
thereto.
7
80
5.7 Nothing contained in this Agreement is intended, nor shall it
be construed, to create any rights in any person not a party to this Agreement.
5.8 This Agreement may not be assigned by DEVELOPER without the
prior written consent of Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BOSTON CHICKEN, INC.
By:
----------------------
Title:
----------------------
-----------------------------
By:
---------------------
its Manager
By:
----------------
Title: President
8
81
EXHIBIT H
LETTER HEAD OF INVESTOR
___________ __, 199_
Einstein/Noah Bagel Corp.
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
The undersigned hereby makes the following representations to Einstein/Noah
Bagel Corp. (the "Company") in connection with and as an inducement to and of
the consummation of certain transactions with ______________________, a
Delaware limited liability company (the "Developer").
The undersigned has conducted an investigation of the Developer, including the
management and current and proposed operations of the Developer, and of the
locations, characteristics and demographics of (i) the sites for Einstein Bros.
Bagel stores in the Development Area (as defined in the Development Agreement
by and between the Company and the Developer of even date herewith) subject to
executed leases or purchase contracts (the "Leased and Contracted Sites"), and
(ii) the potential sites for Einstein Bros. Bagel stores being negotiated in
the Development Area (the "Sites in Progress"), in each case to be purchased by
the Developer from the Company. The undersigned has reviewed all of the
documents, records, reports and other available materials relating to the
Developer's operations, the Leased and Contracted Sites and the Sites in
Progress, and is familiar with their content. The undersigned acknowledges
that it has been given access to and has visited and examined the Developer's
operations and the Leased and Contracted Sites and the Sites in Progress, and
is satisfied with the condition thereof and that all inquiries have been
answered to its satisfaction. For purposes of conducting these investigations,
the undersigned has employed the services of its own agents, representatives,
experts and consultants. In all matters affecting the undersigned's decision
to invest in the Developer, the undersigned is relying upon the advice and
opinions of its own agents, representatives, experts and consultants and not
upon any information or statement, oral or written, of or provided by the
Company or its officers, directors, agents, representatives or attorneys.
Very truly yours,
1
