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EXHIBIT 10.3
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LOAN AGREEMENT
BY AND BETWEEN
EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
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DECEMBER 5, 1997
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TABLE OF CONTENTS
ARTICLE I
The Loan
Page
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1.1 The Loan..........................................................................1
1.2 Purposes of the Loan..............................................................2
1.3 The Loan Account..................................................................2
1.4 Interest Rate.....................................................................2
1.5 Payment of Interest...............................................................3
1.6 Repayment of the Loan.............................................................3
1.7 Term of this Agreement............................................................3
1.8 One Obligation....................................................................3
1.9 Credit Resources..................................................................4
1.10 Payment Method....................................................................4
1.11 Authorization to Advance for Limited Purposes.....................................4
ARTICLE II
Security and Collateral
2.1 Security Interest.................................................................4
2.2 Subsidiary Security Documents.....................................................5
2.3 Pledge of Units...................................................................6
2.4 Preservation of Collateral and Perfection
of Security Interests Therein...................................................6
2.5 Alternate Security and Pledge Agreements..........................................7
ARTICLE III
Conditions to Advances
3.1 No Material Adverse Change........................................................7
3.2 No Default........................................................................8
3.3 Representations and Warranties....................................................8
3.4 Other Requirements................................................................8
3.5 Advance Request...................................................................8
3.6 No Default by Company.............................................................8
3.7 Sufficient Credit Available to Company............................................8
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ARTICLE IV
Representations and Warranties
4.1 Financial Statements..............................................................8
4.2 Partner Units.....................................................................9
4.3 No Material Adverse Change........................................................9
4.4 No Pending Material Litigation or Proceedings ....................................9
4.5 Valid Organization: Due Authorization;
Valid and Binding Agreement......................................................9
4.6 Conduct of Business..............................................................10
4.7 Absence of Material Liabilities..................................................10
4.8 Tax Matters......................................................................11
4.9 Ownership of Collateral; Security Interest Priority..............................11
4.10 Location of Offices, Records, and Facilities.....................................11
4.11 Location of Inventory, Fixtures, Machinery, and Equipment........................12
4.12 Investment Company Act...........................................................12
4.13 Public Utility Holding Company Act...............................................12
4.14 Subsidiaries.....................................................................12
ARTICLE V
Affirmative Covenants
5.1 Financial Statements.............................................................13
5.2 Inspection.......................................................................14
5.3 Conduct of Business..............................................................14
5.4 Insurance........................................................................15
5.5 Use of Proceeds..................................................................16
5.6 Company Loan Compliance..........................................................16
5.7 Company Loan Agreement Representations...........................................16
5.8 Additional Members...............................................................16
ARTICLE VI
Negative Covenants
6.1 Guarantees; Loans; etc...........................................................17
6.2 Disposal of Property.............................................................17
6.3 Compensation to Members and Others...............................................17
6.4 Distributions and Redemption.....................................................17
6.5 Additional Indebtedness..........................................................18
6.6 Mergers, Consolidations, Acquisitions, etc.......................................18
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6.7 Certificate of Limited Partnership and Limited
Partnership Agreement..........................................................18
6.8 Issuance of Units................................................................18
6.9 Liens............................................................................18
6.10 Transactions with Affiliates.....................................................18
6.11 Subsidiaries.....................................................................19
ARTICLE VII
Conditions of Closing
7.1 Proceedings and Documents........................................................19
7.2 Executed Documents...............................................................19
7.3 No Defaults......................................................................20
7.4 Compliance with Company Credit Agreements........................................20
ARTICLE VIII
Default, Rights and Remedies of the Company
8.1 Default..........................................................................20
8.2 Default; Remedies................................................................23
8.3 No Waiver........................................................................24
ARTICLE IX
Miscellaneous
9.1 No Oral Change...................................................................25
9.2 Assignment.......................................................................25
9.3 Costs and Attorneys' Fees........................................................25
9.4 Communications and Notices.......................................................26
9.5 Governing Law....................................................................26
9.6 Headings.........................................................................27
9.7 Severability.....................................................................27
9.8 Avoidance........................................................................27
9.9 Counterparts.....................................................................27
9.10 Entire Agreement.................................................................27
9.11 General Indemnity................................................................27
9.12 Limitation on Damages............................................................28
9.13 Submission to Jurisdiction.......................................................28
9.14 Waiver of Jury Trial.............................................................29
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EXHIBITS
EXHIBIT A Form of Promissory Note of Einstein/Noah Bagel Partners, L.P.
EXHIBIT B Form of Subsidiary Security Agreement
EXHIBIT C Form of Pledge Agreement
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SECURED LOAN AGREEMENT
This Secured Loan Agreement (the "Agreement") is made and entered into
as of the 5th day of December, 1997 between Einstein/Noah Bagel Corp., a
Delaware corporation (the "Company"), and Einstein/Noah Bagel Partners, L.P., a
Delaware limited partnership ("DEVELOPER").
RECITALS
The Company and DEVELOPER have entered into an area development
agreement, as amended from time to time (the "Development Agreement"), pursuant
to which DEVELOPER is required to establish and operate Einstein Bros(R) Bagels
and Noah's New York Bagels(R) 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 license agreements (each
a "License Agreement") for such specific Stores; and
The Company has entered into an Amended and Restated Credit Agreement,
dated as of November 24, 1997, with the Bank of America National Trust and
Savings Association ("Bank of America"), LaSalle National Bank and General
Electric Credit Corporation (as it may be amended from time to time, the "Senior
Credit Facility"), the proceeds of which are intended to be used in part to fund
Advances (as defined herein) to the DEVELOPER required hereunder.
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 third
anniversary of the date hereof (the "Draw Termination Date"), amounts requested
by DEVELOPER in an aggregate principal amount not to exceed $70,000,000 (the
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"Loan"). Each Advance of the Loan ("Advance") shall be in a minimum amount of
$100,000 and shall be made by wire transfer by or on behalf of the Company to
the account of DEVELOPER or by regular check of or on behalf of the 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.
1.2 PURPOSES OF THE LOAN. Proceeds of the Loan shall be used by
DEVELOPER for general corporate purposes, including 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, commissaries
and production facilities in the Development Area pursuant to and in accordance
with the Development Agreement.
1.3 THE LOAN ACCOUNT. The Company shall maintain a loan account
on its books in which shall be recorded all 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 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.
1.4 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 of
interest announced by the Bank of America National Trust and Savings Association
or its successor in interest (the "Bank") from time to time at its head office
as its "reference rate," plus 2.5%. The interest rate shall be adjusted, from
time to time, on the same day on which the Bank adjusts its "reference rate." In
addition, the interest rate shall be increased or reduced by an amount
equivalent to any increase or reduction in the interest rate under the Senior
Credit Facility or any extension, replacement or refinancing thereof. 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).
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(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).
1.5 PAYMENT OF INTEREST. During the Term of the Loan, DEVELOPER
shall pay to the Company interest on the outstanding principal balance of the
Loan on the first day of each of the Company's 13 consecutive four-week
accounting periods used for accounting purposes (each, a "Retail Period").
1.6 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 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 Termination Date based on a
schedule amortizing such outstanding principal balance of the Loan as of such
date in 130 substantially equal periodic installments of principal), plus
accrued but unpaid interest, on the first day of each of the Company's Retail
Periods, commencing on the first day of the first Retail Period in the Company's
fiscal year 2001 and continuing until the first day of the last Retail Period in
the Company's fiscal year 2005, when the entire remaining principal balance of
the Loan and all interest accrued thereon shall be due and payable.
1.7 TERM OF THIS AGREEMENT. This Agreement and all covenants and
agreements of the Company hereunder shall be effective on the date hereof and
shall continue in effect until the last to occur of (i) the date on which there
is no amount (principal or interest) remaining outstanding under the Note and
(ii) the date on which the Company no longer has any obligation to make any
Advances hereunder if DEVELOPER were to make a valid request for an Advance
pursuant to and in accordance with Article 3 hereof.
1.8 ONE OBLIGATION. All Advances made hereunder, and all interest
accrued thereon, shall constitute one obligation of DEVELOPER secured by the
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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.
1.9 CREDIT RESOURCES. DEVELOPER acknowledges that the Company has
informed it that the Company may not from time to time in the future have cash,
cash equivalents, and credit resources sufficient to permit the Company to make
requested Advances under this Agreement while maintaining sufficient working
capital for the Company's operating needs. DEVELOPER agrees that the Company
shall have no obligation to make any Advances if sufficient funds are not
available to the Company under the Senior Credit Facility to fund the full
amount of the requested Advance.
1.10 PAYMENT METHOD. 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.
1.11 AUTHORIZATION TO ADVANCE FOR LIMITED PURPOSES. 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 (a) 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 DEVELOPER has specifically requested
such Advance and without waiver of any of the Company's rights hereunder, and
(b) 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.
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
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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, other than
capital stock of the Company, 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 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 B (a "Subsidiary Security Agreement"), 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 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 in a form
acceptable to the Company, 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
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covered by such Security Instruments shall be included in the term "Collateral"
used herein.
2.3 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 pledge agreement between the Company and all of the
partners of DEVELOPER, other than the Company and the Fund (the "Partners"),
substantially in the form attached hereto as Exhibit C (the "Pledge Agreement").
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
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 2.2 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
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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.
2.5 ALTERNATE SECURITY AND 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 2.3 hereof and the additional security interests described in
Sections 2.2 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 Subsidiary 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.l 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.
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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, the Pledge Agreement and the other
Security Instruments shall be true and correct on and as of the date such
Advance is made.
3.4 OTHER REQUIREMENTS. The Company shall have received, in form
and substance satisfactory to it, all certificates, consents, affidavits,
schedules, instruments, and other documents which DEVELOPER is obligated to
provide to the Company hereunder or which the Company may at any time reasonably
request.
3.5 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, copies of all documents required to be delivered to
Company under Section 5.1 below or otherwise reasonably requested.
3.6 NO DEFAULT BY COMPANY. The Company shall not be in default
under the Senior Credit Facility nor shall any event which, through the passage
of time or the service of notice or both, would mature into a default under the
Senior Credit Agreement, have occurred and be continuing, and the making of an
Advance will not cause the Company to be in default under the Senior Credit
Facility.
3.7 SUFFICIENT CREDIT AVAILABLE TO COMPANY. Sufficient funds shall
be available to the Company under the Senior Credit Facility to fund the full
amount of the requested Advance.
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
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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 PARTNER UNITS. DEVELOPER has previously furnished to the
Company a true and correct copy of the certificate of limited partnership of
DEVELOPER and the limited partnership agreement of DEVELOPER (the "Limited
Partnership 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 Limited Partnership Agreement, and the number of Units set
forth on such Exhibit A constitute 100% of the issued and outstanding ownership
interests in DEVELOPER. 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 partner interests or obligations of DEVELOPER
or for the purchase of any of its partnership 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
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, arbitrator or governmental agency.
4.5 VALID ORGANIZATION: DUE AUTHORIZATION; VALID AND BINDING
AGREEMENT.
(a) DEVELOPER is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
power
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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 each jurisdiction in which failure to so
qualify could have a material adverse effect 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 limited partnership of DEVELOPER or the Limited Partnership
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 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, and (c) obligations under contracts and agreements entered into in the
ordinary course of business.
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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 with 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.
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
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Colorado, 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
"Einstein/Noah Bagel Partners, L.P." and DEVELOPER operates under no other names
than the name Einstein Bros. Bagels, Noah's New York Bagels, Bagel Boulevard,
Baltimore Bagel and Bagel & Bagel on its Stores or such other names authorized
pursuant to and in accordance with any applicable License 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.
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ARTICLE V
AFFIRMATIVE COVENANTS
DEVELOPER covenants and agrees that so long as this Agreement remains
in effect:
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 General Partner, subject to changes resulting from normal, returning
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 any other officer of the General Partner 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 have 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
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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.
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
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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.
(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,
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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 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 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.
5.6 COMPANY LOAN COMPLIANCE. DEVELOPER agrees that it will not
incur any indebtedness or create any lien or take any other action which would
cause the Company to be in default under, or in violation of, any lending
arrangement or credit agreement to which the Company or its parent company, if
any, is a party.
5.7 COMPANY LOAN AGREEMENT REPRESENTATIONS. DEVELOPER agrees that
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.
5.8 ADDITIONAL MEMBERS. DEVELOPER agrees to cause each person
(other than the Company and the Fund) becoming a Partner from time to time after
the date of the Pledge Agreement to execute and deliver to the Company within
five days after such person becomes a Partner a copy of the Pledge Agreement.
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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):
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 person other than the Company, 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.
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 reasonable
salaries and other normal benefits to be paid to employees of DEVELOPER or the
General Partner, which salaries and benefits must be approved by the Company,
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.
6.4 DISTRIBUTIONS AND REDEMPTION.
(a) Subject to the provisions of Section 6.4(b) 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 partners.
(b) Notwithstanding anything to the contrary contained herein,
DEVELOPER may make cash distributions to its partners to the maximum extent
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permitted under the laws of the state of its organization, pursuant to and in
accordance with Section 6.2 of the Limited Partnership Agreement.
6.5 ADDITIONAL INDEBTEDNESS. 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 addi tional 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 to: (a) be a party to any
consolidation, reorganization, or merger; (b) sell or otherwise transfer any
part of its assets (except in the ordinary course of business); (c) effect any
change in its capital structure or in any of its business objectives, purposes,
and operations; (d) acquire any capital in or equity ownership of another
limited liability company, corporation, partnership, or other business
organization; (e) engage in any business other than the operation of Stores and
related production and distribution activities; or (f) liquidate or dissolve or
take any action with a view toward liquidation or dissolution.
6.7 CERTIFICATE OF LIMITED PARTNERSHIP AND LIMITED PARTNERSHIP
AGREEMENT. DEVELOPER shall not make any changes in or amendments to its cer
tificate of limited partnership or the Limited Partnership Agreement as they are
in effect as of the date hereof.
6.8 ISSUANCE OF UNITS. DEVELOPER will not issue any additional
units of partnership interests or grant any option, warrant, or similar right to
acquire units of partnership 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.
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 arm's-length transaction with a person other
than an affiliate.
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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").
ARTICLE VII
CONDITIONS OF CLOSING
The Company's obligations hereunder shall be subject to (a) the
performance by DEVELOPER prior to or on the date hereof 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
date hereof, and (c) the satisfaction, prior to or on the date hereof, of the
following further conditions:
7.1 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.
7.2 EXECUTED DOCUMENTS. DEVELOPER and its Subsidiaries, and to the
extent applicable, the partners 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 Pledge Agreement;
(d) the Subsidiary Security Agreement, where applicable; and
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(e) 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.
7.3 NO DEFAULTS. There shall exist no Event of Default or Default.
7.4 COMPLIANCE WITH COMPANY CREDIT AGREEMENTS. The Company's
performance of its obligations hereunder shall comply with all applicable
restrictions or limitations under any lending arrangements or credit agreements
to which the Company is a party.
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 Note, the Pledge Agreement, the Subsidiary Security
Agreement, 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 Pledge Agreement, the
Subsidiary Security Agreement or in any other Security Instrument;
(e) the breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in Sections 5.5, 6.1, 6.2, 6.4, 6.6,
6.7, 6.8, 6.10 or 6.11 of this Agreement;
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(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'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);
(h) 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;
(i) termination of the lesser of (a) 50% or (b) three of the
franchise or license 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 remedied without any
material adverse effect on the financial condition, results of operations,
assets or other business
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of DEVELOPER and its Subsidiaries taken as a whole to the satisfaction of the
Company in its sole discretion;
(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 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; or
(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 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 (o), both (i) the Company has not failed to make an Advance requested
hereunder as a result of unavailability to the Company of funds under the Senior
Credit Facility 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, 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
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similarly situated restaurant business, or (B) income from operations,
sufficient in either case to complete its development obligations.
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;
(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 Pledge Agreement and/or
the other Security Instruments;
provided, however, that in the case of any event or condition described in
Section 8.1(h) 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.
(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
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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 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.
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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
Pledge Agreement and the Security Instruments), (a) without notice to DEVELOPER,
(i) to any Affiliate of the Company, other than 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,
other than 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.
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
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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:
Einstein/Noah Bagel Partners, L.P.
c/o Einstein/Noah Bagel Corp
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Partner
If to the Company:
Einstein/Noah Bagel Corp.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
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
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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.
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 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,
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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 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 Indemnitee hereunder with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of such Indemnitee. To
the extent that the undertaking to indemnify, pay, and hold harmless set forth
in the preceding sentence may be unenforceable because it violates any law or
public policy, 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 for any matters arising under this
Agreement (including, but not limited to, loss of revenue or profit) whether
such claim alleges breach of contract, tortious conduct including, but not
limited to, negligence, or any other theory.
9.13 SUBMISSION TO JURISDICTION. DEVELOPER agrees that any legal
action or proceeding with respect to this Agreement, the Note, the Pledge
Agreement, the Subsidiary Security Agreement, the 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
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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
Pledge Agreement, the Subsidiary Security Agreement, the 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.
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35
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: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
EINSTEIN/NOAH BAGEL
PARTNERS, L.P.
By: Einstein/Noah Bagel Partners, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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36
PROMISSORY NOTE
$70,000,000 Golden, Colorado
as of December 5, 1997
FOR VALUE RECEIVED, EINSTEIN/NOAH BAGEL PARTNERS, L.P., a Delaware
limited partnership (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 seventy million
dollars ($70,000,000) and any interest thereon, or, if less, the aggregate
unpaid amount of the Loan made pursuant to Section 1.1 of the Loan Agreement and
any interest thereon.
This Promissory Note dated as of December 5, 1997 (the "Note")
evidences the Loan made under, and is referred to in and is executed and
delivered pursuant to, a Loan Agreement 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 National Trust and Savings Association or its
successor in interest (the "Bank") from time to time at its head office as its
"reference rate," plus 2.5%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." In
addition, the interest rate shall be increased or reduced by an amount
equivalent to any increase or reduction in the interest rate under the Senior
Credit Facility or any extension, replacement or refinancing thereof. Interest
on the outstanding principal amount of the Loan shall be payable in arrears as
provided in the Loan Agreement.
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
37
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).
Except as otherwise provided in the Loan Agreement, and 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 Termination Date based on a schedule amortizing
such outstanding principal balance of the Loan as of such date in 130
substantially equal periodic installments of principal), plus accrued but unpaid
interest, on the first day of each of the Company's Retail Periods, commencing
on the first day of the first Retail Period in the Company's fiscal year 2001
and continuing until the first day of the last 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.
ARTICLE I
ADVANCES
I.1 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
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38
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 the Loan Agreement and this
Note.
ARTICLE II
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
II.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 without demand, presentment or notice of any kind and
exercise such other rights and remedies as are available to the holder under the
Loan Agreement or applicable law.
II.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 III
MISCELLANEOUS
III.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.
III.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
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39
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.
III.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 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, hereunto duly authorized.
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
By: Einstein/Noah Bagel Partners, Inc.
Its: General Partner
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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FORM OF SUBSIDIARY SECURITY AGREEMENT
THIS SUBSIDIARY 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 Einstein/Noah Bagel Partners, L.P., a Delaware limited
partnership (the "Borrower"), has entered into a loan agreement dated as of
December ___, 1997 (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 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 December __, 1997, issued
by the Borrower pursuant to the Loan Agreement (the "Note"), (b) the performance
of the covenants herein contained and any monies expended by the Company in
connection therewith, (c) the payment of all obligations and performance of all
covenants of the Borrower under the Loan Agreement, the Pledge Agreement and all
other Security Instruments (as defined in the Loan Agreement) and any other
documents, agreements or instruments between the Borrower or the 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
41
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"):
(a) all of the Subsidiary's real estate, accounts,
equipment (including, but nor 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 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
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42
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.
(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 l(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 l(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.
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(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
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.
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44
(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 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
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45
(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.
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46
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.
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 enforce ability 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
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47
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 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
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48
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.
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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:
----------------------------------
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PLEDGE AGREEMENT
This Pledge Agreement ("Pledge Agreement") dated as of December __,
1997, is made and entered into by and between Einstein/Noah Bagel Corp., a
Delaware corporation (the "Company"), and all of the holders of Units in
Einstein/Noah Bagel Partners, L.P., a Delaware limited partnership (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 Units in the DEVELOPER, and their spouses
(collectively, the "Partners").
RECITALS
1. The Partners own certain of the issued and outstanding Units in the
DEVELOPER, in the amounts set forth on Schedule A hereto.
2. As an inducement to the Company to enter into the loan agreement
with DEVELOPER, dated December ___, 1997 (the "Loan Agreement") the Partners
agreed, among other things, to pledge to the Company, and grant a security
interest to the Company, in and to, 100% of the issued and outstanding Units in
the DEVELOPER (excluding any such Units held by the Fund or the Company).
NOW, THEREFORE, the Company and the Partners have agreed as follows:
1. CERTAIN DEFINITIONS. The capitalized terms and phrases not otherwise
defined herein, shall have the meanings given them in the Loan Agreement, and
the following terms or phrases shall have the following meanings:
"Affiliate" shall mean, with respect to a specified person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with the person specified.
"Collateral" shall mean the Pledged 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.
51
"Default" shall have the meaning given it in Section 10 of this Pledge
Agreement.
"Pledged Units" shall mean all the issued and outstanding Units in the
DEVELOPER now or hereafter owned by the Partners.
"Secured Obligations" shall mean the obligations secured by this Pledge
Agreement described in Section 3 of this Pledge Agreement.
"Units" shall have the meaning ascribed thereto in the limited
partnership agreement of the DEVELOPER dated December __, 1996 (the "Limited
Partnership Agreement"), as it may be amended from time to time.
2. GRANT OF SECURITY INTEREST.
(a) The Partners 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 Partners 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 Partners 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 Partners 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 Partners 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.
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52
4. REPRESENTATIONS AND WARRANTIES. To induce the Company to enter into
this Pledge Agreement, each of the Partners represents and warrants for himself
as follows:
(a) The Partners 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 Partner enforceable in accordance with its terms.
(b) The Partner 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 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 Limited Partnership Agreement, the Partner
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 and 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 Partners shall keep the Pledged
Units and other Collateral free and clear of liens, other than the lien granted
hereunder 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 Partners 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 Partners shall promptly
reimburse the Company for any such
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53
payments and until reimbursement, such payments shall be a part of the Secured
Obligations.
7. CERTAIN RIGHTS RESPECTING PLEDGED UNITS.
(a) The Partners shall continue to be the owners of the
Pledged Units and other Collateral so long as no Default has occurred and is
continuing and may collect and retain 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 Partners 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'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's execution of this Pledge Agreement.
(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 Partners 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 Partners 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 general partner of the
DEVELOPER, or any of them, and to elect new general partners 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
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54
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. DELIVERY OF CERTIFICATES AND TRANSFER DOCUMENTS; PLEDGE OF
ADDITIONAL UNITS. If the Pledged Units are at any time represented by
certificates, the Partners 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 Partners acquires any interest in any additional
partnership units of the DEVELOPER such Partner 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 units acquired by any of the Partners, the Company will hold
certificates representing those units as bailee for DEVELOPER.
9. DEFAULT. At the option of the Company, the occurrence of any
Default under the Loan Agreement shall constitute a default under this Pledge
Agreement.
10. 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 Partners 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 Partners
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 Partners 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
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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
Partners agree that all such private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
11. 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.
12. 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 Partners. The receipt by the Partners 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.
13. 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 Partners:
To the particular Partner at his or her last known
address
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56
If to the Company:
Einstein/Noah Bagel Corp.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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.
14. FURTHER ASSURANCES. The Partners 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.
15. 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.
16. 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 a 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 this Pledge Agreement and the application of
such provision to other persons or
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57
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 and its
successors and assigns, and all obligations of the Partners shall bind their
successors and assigns. The Partners acknowledge that the Company may assign or
otherwise transfer (in whole or in part) the Note, the Loan Agreement or this
Pledge Agreement to any other person, and such other person shall thereupon
become vested with all of the benefits in respect thereof granted to 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 PER FORMED 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 Partner 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 9
and 10 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 10 hereof, and as may be otherwise
appropriate to carry out the transactions contemplated by this Pledge Agreement.
(h) Each of the Partners agrees that any legal action or
proceeding with respect to this Pledge Agreement or the transactions
contemplated hereby may
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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 Partners 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 Partners or by the mailing thereof by registered or certified
mail, postage prepaid addressed to each of the Partners at the address for
notices as provided in Section 13 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 Partners or property in the courts of any other jurisdiction. Each of the
Partners hereby irrevocably waives any objection to the laying of venue of any
such suit or proceeding in the above described courts.
17. 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, or 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.
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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:
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
The DEVELOPER hereby executes this Pledge Agreement for purposes of
acknowledging and consenting to its execution by the DEVELOPER's Partners 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.
EINSTEIN/NOAH BAGEL
PARTNERS, L.P.
By: Einstein/Noah Bagel Partners, Inc.
Its: General Partner
By:
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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Schedule A
To
Pledge Agreement
Pledged Units at December __, 1997
No. of Units Issued To
============ =========
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