-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CPNobwfIf1TxKBjaRLSH0YmoMsuorZtp5PsS51gibkgmJj5GX2pJYujvpWU3rQWB u+NHhTs6EFab5i749R06OQ== 0000950103-96-001037.txt : 19960806 0000950103-96-001037.hdr.sgml : 19960806 ACCESSION NUMBER: 0000950103-96-001037 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960805 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AU BON PAIN CO INC CENTRAL INDEX KEY: 0000724606 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 042723701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42571 FILM NUMBER: 96603988 BUSINESS ADDRESS: STREET 1: 19 FID KENNEDY AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232100 MAIL ADDRESS: STREET 1: 19 FID KENNEDY AVE CITY: BOSTON STATE: MA ZIP: 02210 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY GROUP INC /DE/ CENTRAL INDEX KEY: 0000789625 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132838811 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 SC 13D/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) Au Bon Pain Co., Inc. (Name of Issuer) Class A Common Stock $.0001 Par Value Per Share (Title of Class of Securities) 050103 10 0 (CUSIP Number) Michael Zuckert Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Tel. No.: (212) 761-4000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 24, 1996 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with this statement: [ ]. SCHEDULE 13D (Amendment No. 1) ______________________________ ________________________________ | | | | |CUSIP No. 050103 10 0 | | Page 2 of 24 Pages | |____________________________| |______________________________| ___________________________________________________________________________ | 1 | NAME OF REPORTING PERSON | | | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON | | | Morgan Stanley Group Inc. | | | 13-2838811 | |____|____________________________________________________________________| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | | | _ | | | Inapplicable (a) |_| | | | _ | | | (b) |_| | |____|____________________________________________________________________| | 3 | SEC USE ONLY | | | | |____|____________________________________________________________________| | 4 | SOURCE OF FUNDS | | | WC, 00 | |____|____________________________________________________________________| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED _ | | | PURSUANT TO ITEMS 2(d) or 2(E) |_| | | | Inapplicable | |____|____________________________________________________________________| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | Delaware | |____|____________________________________________________________________| | | 7 | SOLE VOTING POWER | | | | 317 | | NUMBER OF |____|_______________________________________________| | SHARES | 8 | SHARED VOTING POWER | | BENEFICIALLY | | 1,332,068 | | OWNED BY |____|_______________________________________________| | EACH | 9 | SOLE DISPOSITIVE POWER | | REPORTING | | 317 | | PERSON |____|_______________________________________________| | WITH | 10 | SHARED DISPOSITIVE POWER | | | | 1,332,068 | |____________________|____|_______________________________________________| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | 1,332,385 | |____|_________________________________________________ __________________| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES _ | | | CERTAIN SHARES Inapplicable |_| | |____|____________________________________________________________________| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | | |____|____________________________________________________________________| | 14 | TYPE OF REPORTING PERSON | | | HC, CO | |____|____________________________________________________________________| SCHEDULE 13D (Amendment No. 1) ______________________________ ________________________________ | | | | |CUSIP No. 050103 10 0 | | Page 3 of 24 Pages | |____________________________| |______________________________| ___________________________________________________________________________ | 1 | NAME OF REPORTING PERSON | | | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON | | | PG Investors, Inc. | | | 13-3642657 | |____|____________________________________________________________________| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | | | _ | | | Inapplicable (a) |_| | | | _ | | | (b) |_| | |____|____________________________________________________________________| | 3 | SEC USE ONLY | | | | |____|____________________________________________________________________| | 4 | SOURCE OF FUNDS | | | 00 | |____|____________________________________________________________________| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED _ | | | PURSUANT TO ITEMS 2(d) or 2(E) |_| | | | Inapplicable | |____|____________________________________________________________________| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | Delaware | |____|____________________________________________________________________| | | 7 | SOLE VOTING POWER | | | | 236,867 | | NUMBER OF |____|_______________________________________________| | SHARES | 8 | SHARED VOTING POWER | | BENEFICIALLY | | 1,089,601 | | OWNED BY |____|_______________________________________________| | EACH | 9 | SOLE DISPOSITIVE POWER | | REPORTING | | 236,867 | | PERSON |____|_______________________________________________| | WITH | 10 | SHARED DISPOSITIVE POWER | | | | 1,089,601 | |____________________|____|_______________________________________________| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | 1,326,468 | |____|____________________________________________________________________| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES _ | | | CERTAIN SHARES Inapplicable |_| | |____|____________________________________________________________________| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | 11.7% | |____|____________________________________________________________________| | 14 | TYPE OF REPORTING PERSON | | | IA, CO | |____|____________________________________________________________________| SCHEDULE 13D (Amendment No. 1) ______________________________ ________________________________ | | | | |CUSIP No. 050103 10 0 | | Page 4 of 24 Pages | |____________________________| |______________________________| ___________________________________________________________________________ | 1 | NAME OF REPORTING PERSON | | | S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON | | | Princes Gate Investors, L.P. | | | | |____|____________________________________________________________________| | 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | | | _ | | | Inapplicable (a) |_| | | | _ | | | (b) |_| | |____|____________________________________________________________________| | 3 | SEC USE ONLY | | | | |____|____________________________________________________________________| | 4 | SOURCE OF FUNDS | | | 00 | |____|____________________________________________________________________| | 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED _ | | | PURSUANT TO ITEMS 2(d) or 2(E) |_| | | | Inapplicable | |____|____________________________________________________________________| | 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | | | Delaware | |____|____________________________________________________________________| | | 7 | SOLE VOTING POWER | | | | 993,896 | | NUMBER OF |____|_______________________________________________| | SHARES | 8 | SHARED VOTING POWER | | BENEFICIALLY | | 0 | | OWNED BY |____|_______________________________________________| | EACH | 9 | SOLE DISPOSITIVE POWER | | REPORTING | | 993,896 | | PERSON |____|_______________________________________________| | WITH | 10 | SHARED DISPOSITIVE POWER | | | | 0 | |____________________|____|_______________________________________________| | 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | | | 993,896 | |____|____________________________________________________________________| | 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES _ | | | CERTAIN SHARES Inapplicable |_| | |____|____________________________________________________________________| | 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | | | 8.8% | |____|____________________________________________________________________| | 14 | TYPE OF REPORTING PERSON | | | PN | |____|____________________________________________________________________| The following information amends and restates the Schedule 13D filed on January 4, 1994 (the "Schedule 13D"). Item 1. Security and Company. The class of equity securities to which this statement relates is the Class A Common Stock, $.0001 par value per share (the "Shares"), of Au Bon Pain Co., Inc., a Delaware corporation (the "Company"). On December 22, 1993, the Company issued to several purchasers $30,000,000 in aggregate principal amount of 4.75% Convertible Subordinated Notes due 2001 (the "Notes"). The Notes are convertible at any time until the close of business on January 2, 2001 into fully paid and non-assessable Shares at a conversion price (subject to adjustment) equal to $25.50 principal amount for each Share, or currently 1,176,468 Shares in the aggregate. On July 24, 1996, the Company issued to several purchasers warrants (the "Warrants") that entitle the holders thereof to purchase in the aggregate 150,000 Shares. The Warrants are exercisable at any time prior to the close of business on July 24, 2001; the exercise price (subject to certain adjustments) is $5.62 per Share. The principal executive offices of the Company are located at 19 Fid Kennedy Avenue, Boston, MA 02210-2497. Item 2. Identity and Background. The names of the persons filing this statement (the "Reporting Persons") are: (i) Morgan Stanley Group Inc. ("MS Group"), (ii) PG Investors, Inc. ("PGI Inc.") and (iii) Princes Gate Investors, L.P. ("Princes Gate L.P."). The address of the principal business and the principal office of each of the Reporting Persons is: 1585 Broadway, New York, NY 10036. The name, business address, present principal occupation or employment, and citizenship of each director and executive officer of MS Group and PGI Inc. is set forth on Schedule A. MS Group is a holding company whose wholly-owned subsidiaries are engaged in the investment banking, broker-dealer, investment advisory and real estate businesses. PGI Inc. is a wholly-owned subsidiary of MS Group and its principal business is to serve (i) as the general partner of Princes Gate L.P., an investment partnership organized and managed by MS Group and the principal business of which is the investment of capital provided by its limited partners, (ii) as the general partner of a separate co-investment partnership (the "Co-investment Partnership") and (iii) as the investment manager for certain other investors (the "Investors") that are offered the opportunity to participate in investments made by Princes Gate L.P. The control person of Princes Gate L.P. is PGI Inc., its general partner, which holds a 1% interest in the partnership. Each of MS Group, Princes Gate L.P. and PGI Inc. is organized under the laws of the State of Delaware. In the ordinary course of its business, MS Group, through its wholly-owned broker-dealer subsidiary Morgan Stanley & Co. Incorporated ("MS & Co."), makes a market in the Shares in the over-the-counter market and holds on behalf of customers Shares over which it exercises discretionary authority. A portion of the Shares of which MS Group may be deemed to be the beneficial owner are 317 Shares held by MS & Co. as of July 24, 1996 in its capacity as market-maker and 5,600 shares over which MS & Co. exercises discretionary authority held on behalf of customers. MS Group, through MS & Co., possesses the sole power to vote and to dispose of the Shares held by MS & Co. as market-maker and the shared power to vote and to dispose of the Shares over which it exercises discretionary authority. The remaining 1,326,468 Shares of which MS Group may be deemed to be the beneficial owner constitute the Shares obtainable upon conversion of the Notes and exercise of the Warrants acquired by Princes Gate L.P., the Co-investment Partnership and the Investors. Pursuant to the partnership agreements of Princes Gate L.P. and the Co-investment Partnership, management and control of the partnerships and their investments are vested exclusively in PGI Inc. as general partner, and PGI Inc. has the authority to dispose of the Notes and the Warrants held by Princes Gate L.P. and the Co-investment Partnership and to vote the Shares obtainable on conversion of the Notes and exercise of the Warrants. Pursuant to investment management agreements with the Investors on whose behalf PGI Inc. has also acquired the Notes and the Warrants, these Notes and Warrants and the Shares obtainable on conversion of the Notes and exercise of the Warrants may be disposed of only by PGI Inc. or with the consent of PGI Inc. Such consent may be withheld or granted in PGI Inc.'s discretion, and each Investor has granted PGI Inc. an irrevocable proxy giving PGI Inc. exclusive authority to vote such Shares. As a result of these arrangements, PGI Inc. may be deemed to be the beneficial owner of all the Notes and the Warrants acquired on behalf of Princes Gate L.P., the Co-investment Partnership and the Investors and of the Shares obtainable on conversion of the Notes and exercise of the Warrants. During the last five years, none of the Reporting Persons nor any person controlling the Reporting Persons nor, to the best of their knowledge, any of the persons listed on Schedule A attached hereto, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. The source of funds for the purchases made by MS Group through its broker-dealer subsidiary MS & Co. acting in its market-making capacity was working capital of MS & Co. The source of funds for the purchases made by PGI Inc. on behalf of its clients was (i) funds of the limited partners of Princes Gate L.P., (ii) Investor funds that are managed by PGI Inc. pursuant to the investment management agreements with each Investor and (iii) funds of a limited partner in the Co-investment Partnership. The source of funds for the purchases made by Princes Gate L.P. was funds of the limited partners. Item 4. Purpose of Transaction. MS Group has acquired 317 Shares through its wholly-owned broker-dealer subsidiary MS & Co. acting in its capacity as market-maker in the Shares and not for the purpose of the acquiring control of the Company. MS & Co. currently intends to continue to make a market in the Shares in the ordinary course of its business. MS & Co. holds on behalf of its customers 5,600 Shares over which it exercises discretionary authority. MS & Co. holds such Shares in the ordinary course of its business and not for the purpose of acquiring control of the Company. Princes Gate L.P. and PGI Inc. have acquired the Notes and the Warrants on behalf of the limited partners in the partnerships and on behalf of the Investors for investment purposes in the ordinary course of business as investment manager for these clients and not for the purpose of acquiring control of the Company. The Reporting Persons intend to review from time to time the Company's business affairs and financial position. Based on such evaluation and review, as well as general economic and industry conditions existing at the time, the Reporting Persons may consider from time to time various alternative courses of action. Such actions may include the acquisition of additional Shares through open market purchases, privately negotiated transactions, tender offer, exchange offer or otherwise. Alternatively, such actions may involve the sale of all or a portion of the Shares in the open market, in privately negotiated transactions, through a public offering or otherwise. Except as set forth above, the Reporting Persons have no plan or proposals which relate to or would result in any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Company. (a) MS Group has acquired, and for the purpose of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), beneficially owns 1,332,385 Shares, representing approximately 11.7% of the outstanding Shares (based on the sum of (i) 10,019,856 Shares reported by the Company as outstanding on May 30, 1996 in its report on Form 10-Q for the quarter ended April 20, 1996, (ii) 1,176,468 Shares obtainable upon conversion of the Notes and (iii) 150,000 Shares issuable upon exercise of the Warrants). PGI Inc. has acquired, and for the purpose of Rule 13d-3 promulgated under the Exchange Act, beneficially owns 1,326,468 Shares, representing approximately 11.7% of the outstanding Shares (calculated as described above). Princes Gate L.P. has acquired, and for the purpose of Rule 13d-3 promulgated under the Exchange Act, beneficially owns 993,896 Shares, representing approximately 8.8% of the outstanding Shares (calculated as described above). Except as set forth in this Item 5(a), neither the Reporting Persons, nor any other person controlling the Reporting Persons, nor, to the best of their knowledge, any persons named in Schedule A hereto beneficially owns any Shares. (b) MS Group has sole power to vote and to dispose of 317 Shares acquired in market-making activities; shared power to vote and to dispose of 1,326,468 Shares obtainable upon conversion of the Notes and exercise of the Warrants as a result of its ownership of PGI Inc. and shared power to vote and to dispose of 5,600 Shares held on behalf of customers in discretionary accounts. PGI Inc. has sole power to vote and to dispose of 236,867 Shares held on behalf of the Investors and shared voting and dispositive power with respect to 1,089,601 Shares obtainable upon conversion of the Notes and exercise of the Warrants held by Princes Gate L.P. and the Co-investment Partnership. Princes Gate L.P., acting through its general partner PGI Inc., has sole power to vote and to dispose of 993,896 Shares obtainable upon conversion of the Notes and exercise of the Warrants. (c) On December 22, 1993 (i) MS Group and PGI Inc. acquired beneficial ownership of 1,176,468 Shares obtainable upon conversion of the Notes at a conversion price of $25.50 per Share, and (ii) Princes Gate L.P. acquired beneficial ownership of 881,504 Shares obtainable upon conversion of the Notes at a conversion price of $25.50 per Share. On July 24, 1996, (i) MS Group and PGI Inc. acquired beneficial ownership of 150,000 Shares obtainable upon exercise of the Warrants at an exercise price of $5.62 per Share, and (ii) Princes Gate L.P. acquired beneficial ownership of 112,392 Shares obtainable upon exercise of a Warrant at an exercise price of $5.62 per Share. During the 60 days prior to July 24, 1996, in connection with its over-the-counter market-making activities in the Shares, MS Group made purchases aggregating 104,700 Shares and sales aggregating 104,600 Shares. These transactions were effected at prices ranging from $6.88 to $8.88 per Share. Other transactions effected by MS & Co. during the 60 days prior to July 26, 1996 are set forth on Schedule B attached thereto. (d) Inapplicable. (e) Inapplicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Company. On December 17, 1993, the Company and several purchasers (the "Purchasers") entered into a Securities Purchase Agreement (the "Agreement") with respect to the Notes. The summary of certain of the terms of the Agreement set forth herein is qualified in its entirety by reference to the copy of the Agreement attached as Exhibit I to the Schedule 13D and incorporated herein by reference. Pursuant to the Agreement, upon the basis of certain representations and warranties, but subject to certain terms and conditions, the Company agreed to sell to each Purchaser and each Purchaser agreed, severally but not jointly, to purchase from the Company the Notes in the principal amount set forth below the name of such Purchaser on the signature pages thereof at 100% of their principal amount. Pursuant to the Agreement, the Company agreed to indemnify and hold harmless each Purchaser against all losses, claims, damages or liabilities resulting from any breaches by the Company of its representations, warranties or covenants made under the Agreement or resulting from any action, claim or proceeding arising out of the matters or transactions subject to or contemplated by the Agreement or any instrument referred to in the Agreement. Also pursuant to the Agreement, each Purchaser agreed to indemnify and hold harmless the Company and its affiliates against all losses, claims, damages or liabilities resulting from any breaches by any such Purchaser of its representations, warranties or covenants made under the Agreement. On July 24, 1996, the Company, its wholly-owned subsidiary Saint Louis Bread Company, Inc. ("SLB") entered into an Agreement and Waiver (the "Waiver"), and the Company entered into the Modification Agreement (the "Modification Agreement"), in each case, with the Purchasers. The summary of certain of the terms of the Waiver and the Modification Agreement set forth herein is qualified in its entirety by reference to the copies of the Waiver attached hereto as Exhibit II and the Modification Agreement attached hereto as Exhibit III, each of which is incorporated herein by reference. Pursuant to the Waiver, the Company issued Warrants to purchase in the aggregate 150,000 Shares to Purchasers. In addition, under the terms of the Waiver, if prior to the second anniversary of the date of the Waiver, SLB or the Company or any of its affiliates receives or otherwise negotiates any offer to purchase any equity securities of SLB in a transaction not involving a public offering registered under the Securities Act of 1933, as amended (the "Securities Act"), and SLB, the Company or any of its affiliates intends to pursue such offer, then the Purchasers will have the right of first refusal to purchase such equity securities on the same terms as offered to or negotiated by SLB, the Company or any of its affiliates, except that the Purchasers may, in certain circumstances, substitute cash for any non-cash consideration offered. The Purchasers were also granted the right to receive certain types of information from the Company and the right to attend board meetings. Additionally, certain provisions of the Notes were amended pursuant to the Waiver and the Modification Agreement. The registration rights granted by the Company to the Purchasers and set forth in Exhibit D to the Agreement have been superseded by the Registration Rights Agreement (the "Registration Rights Agreement") entered into among Allied Capital Corporation, Allied Capital Corporation II, Capital Trust Investments, Ltd., the Purchasers and the Company on July 24, 1996. The summary of certain of the terms of the Registration Rights Agreement set forth herein is qualified in its entirety by reference to the copy of the Registration Rights Agreement attached hereto as Exhibit IV which is incorporated herein by reference. Holders of Registrable Securities (as defined in the Registration Rights Agreement) will be entitled to require the Company to register under the Securities Act (a "Demand Registration") all or part of their Registrable Securities. "Registrable Securities" means Shares issued upon conversion of the Notes or upon exercise of the Warrants until (i) a registration statement covering such Shares has been declared effective by the Securities and Exchange Commission and such Shares have been disposed of pursuant to such effective registration statement, (ii) such Shares are sold under circumstances in which all of the applicable conditions of Rule 144 under the Securities Act are met, or (iii) such Shares have been otherwise transferred and the Company has delivered a new certificate not bearing the legend referring to the restrictions on transfer under the Securities Act, such that the Shares may be resold without subsequent registration under the Securities Act. The Company will not be required to effect more than one Demand Registration in any 12-month period and no more than a total of two Demand Registrations at the request of the Purchasers. The minimum size of a Demand Registration will be Registrable Securities having a market value of $3 million or, if less, will constitute all Registrable Securities held by the Purchasers. Holders of Registrable Securities will also be entitled to include such Registrable Securities in registrations by the Company or the other parties to the Registration Rights Agreement (a "Piggyback Registration"), subject to certain limitations. The Company will pay substantially all of the costs and expenses incurred in connection with any Demand Registration or Piggyback Registration, except for underwriting fees, discounts or commissions attributable to the sale of Registrable Securities. Except for the agreements as described above, to the best knowledge of the Reporting Persons, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the persons enumerated in Item 2, and any other person, with respect to any securities of the Company, including, but not limited to, transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. Exhibit 99.1: Securities Purchase Agreement dated as of December 17, 1993 among the Company and the Purchasers listed on the signature pages thereof (filed on January 4, 1994). Exhibit 99.2: Agreement and Waiver dated as of July 24, 1996 among the Company, SLB and the Purchasers. Exhibit 99.3: Modification Agreement among the Company and the Purchasers dated as of July 24, 1996. Exhibit 99.4: Registration Rights Agreement dated as of July 24, 1996 among Allied Capital Corporation, Allied Capital Corporation II, Capital Trust Investments, Ltd., the Purchasers and the Company. SIGNATURES After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: August 5, 1996 Morgan Stanley Group Inc. By: /s/ Philip N. Duff ---------------------------- Name: Philip N. Duff Title: Chief Financial Officer and Managing Director PG Investors, Inc. By: /s/ Hartley R. Rogers ---------------------------- Name: Hartley R. Rogers Title: President Princes Gate Investors, L.P. By: PG Investors, Inc., as General Partner By: /s/ Hartley R. Rogers ---------------------------- Name: Hartley R. Rogers Title: President Schedule A DIRECTORS AND EXECUTIVE OFFICERS OF MORGAN STANLEY GROUP INC. The name, business address and title with Morgan Stanley Group Inc., and present principal occupation or employment and the name, principal business and address of employer, of each of the directors and executive officers of Morgan Stanley Group Inc. are set forth below. If no business address is given, the director's or officer's business address is 1585 Broadway, New York, N.Y. 10036. The address of Morgan Stanley Group Inc. is 1585 Broadway, New York, N.Y. 10036. Each person listed below is a citizen of the United States of America, except Mr. Walker, who is a citizen of Great Britain. Name, Title and Business Address Present Principal Occupation ----------------- ---------------------------- Richard B. Fisher Chairman of the Board of Directors, (Chairman of the Board of Managing Director and Director, Directors, Managing Director Morgan Stanley Group Inc. and Director) and Morgan Stanley & Co. Incorporated John J. Mack President, Managing Director and (President, Managing Director Director, Morgan Stanley Group Inc. and Director) and Morgan Stanley & Co. Incorporated Philip N. Duff Chief Financial Officer and Managing (Chief Financial Officer and Director, Morgan Stanley Group Inc. Managing Director) and Chief Financial Officer and Managing Director, Morgan Stanley & Co. Incorporated Jonathan M. Clark Secretary and General Counsel, Morgan (Secretary and General Counsel) Stanley Group Inc. and Secretary, General Counsel, Managing Director and Director, Morgan Stanley & Co. Incorporated Eileen K. Murray Treasurer, Morgan Stanley Group Inc. (Treasurer) and Treasurer and Managing Director, Morgan Stanley & Co. Incorporated Barton M. Biggs Managing Director and Director, Morgan (Managing Director and Director) Stanley Group Inc. and Morgan Stanley & Co. Incorporated Robert P. Bauman Director, Morgan Stanley Group Inc. (Director) Daniel B. Burke Retired (Director) Capital Cities/ABC, Inc. 77 W. 66th Street, Tenth Floor New York, NY 10023-6298 S. Parker Gilbert Retired (Director) Peter F. Karches Managing Director and Director, Morgan (Managing Director and Director) Stanley Group Inc. and Morgan Stanley & Co. Incorporated Allen E. Murray Retired (Director) 3225 Gallows Road Fairfax, VA 22037 Sir David Alan Walker Managing Director and Director, Morgan (Managing Director and Director) Stanley Group Inc. and Morgan Stanley & Co. Incorporated Paul J. Rizzo Retired (Director) Charlene R. Herzer Assistant Secretary, Morgan Stanley (Assistant Secretary) Group Inc. and Assistant Secretary and Vice President, Morgan Stanley & Co. Incorporated Patricia A. Kurtz Assistant Secretary, Morgan Stanley (Assistant Secretary) Group Inc. and Assistant Secretary and Principal, Morgan Stanley & Co. Incorporated Ralph L. Pellechio Assistant Secretary, Morgan Stanley (Assistant Secretary) Group Inc. and Assistant Secretary and Managing Director, Morgan Stanley & Co. Incorporated DIRECTORS AND EXECUTIVE OFFICERS OF PG INVESTORS, INC. The name, business address and title with PG Investors, Inc., and present principal occupation or employment and the name, principal business and address of employer, of each of the directors and executive officers of PG Investors, Inc. are set forth below. If no business address is given, the director's or officer's business address is 1585 Broadway, New York, N.Y. 10036. The address of PG Investors, Inc. is c/o Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, N.Y. 10036. Each person listed below is a citizen of the United States of America. Name, Title and Business Address Present Principal Occupation ---------------- ---------------------------- Directors - --------- Hartley R. Rogers President, PG Investors, Inc.; Managing Director, Morgan Stanley & Co. Incorporated Tarek Abdel Meguid Managing Director, Morgan Stanley & Co. Incorporated Bruce Fiedorek Managing Director, Morgan Stanley & Co. Incorporated Joseph G. Fogg Managing Director, Morgan Stanley & Co. Incorporated Executive Officers (Who Are Not Directors) - ------------------------- Debra M. Aaron Vice President, PG Investors, Inc.; Principal, Morgan Stanley & Co. Incorporated Bruce R. Sandberg Vice President, PG Investors, Inc.; Principal, Morgan Stanley & Co. Incorporated James M. Wilmott Vice President, PG Investors, Inc.; Vice President, Morgan Stanley & Co. Incorporated Patricia A. Kurtz Secretary, PG Investors, Inc.; Principal, Morgan Stanley & Co. Incorporated Charlene R. Herzer Assistant Secretary, PG Investors, Inc.; Vice President, Morgan Stanley & Co. Incorporated Laura A. Chenoweth Assistant Secretary, PG Investors, Inc.; Attorney, Morgan Stanley & Co. Incorporated David R. Powers Vice President, PG Investors, Inc. Frank V. Saracino Vice President and Treasurer, PG Investors, Inc. Schedule B Purchases of Class A Common Stock (all transactions effected on NASDAQ) (all prices exclude commissions) Date Number of Shares Price Per Share ---- ---------------- --------------- 5/31/96 900 9.00 5/31/96 500 9.00 5/31/96 100 9.00 5/31/96 500 9.00 6/3/96 1,600 8.88 6/21/96 2,000 7.63 6/21/96 100 7.75 6/28/96 1,400 7.50 ----- 7,100 Sales of Class A Common Stock (all transactions effected on NASDAQ) (all prices exclude commissions) Date Number of Shares Price Per Share ---- ---------------- --------------- 5/31/96 12,000 8.55 6/5/96 20,000 8.75 6/6/96 15,000 8.44 6/6/96 5,000 8.63 6/11/96 100 8.50 6/19/96 300 7.56 6/20/96 200 7.63 6/21/96 200 7.63 6/21/96 2,000 7.63 6/24/96 100 7.75 6/24/96 500 7.75 6/25/96 100 7.63 6/27/96 500 7.50 6/28/96 200 7.50 7/3/96 100 7.25 7/9/96 100 7.00 7/22/96 900 7.00 7/22/96 1,000 7.00 ------ 58,300 EX-99.2 2 CONFORMED COPY AGREEMENT AND WAIVER AGREEMENT AND WAIVER dated as of July 24, 1996 among Au Bon Pain Co., Inc., a Delaware corporation (the "Company"); Saint Louis Bread Company, Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("SLB") (for the purposes of Sections 2 and 17 hereof); Princes Gate Investors, L.P. ("PGI"); Acorn Partnership I, L.P. ("Acorn"); PGI Investments Limited ("PGI Investments"); PGI Sweden AB ("PGI Sweden"); and Gregor Von Opel (PGI, Acorn, PGI Investments, PGI Sweden and Mr. Von Opel referred to herein collectively as the "Holders"). W I T N E S S E T H: WHEREAS, the Holders are the holders of the Company's 4.75% Convertible Subordinated Notes due January 2, 2001 (the "Notes"); WHEREAS, the Company intends to issue the Senior Subordinated Debentures to Allied Capital Corporation, Allied Capital Corporation II, and Capital Trust Investments, Ltd. (collectively, the "Lenders") in an amount not exceeding $15,000,000 pursuant to an Investment Agreement in the form of Exhibit A attached hereto (the "Senior Subordinated Debentures"); WHEREAS, the issuance by the Company of the Senior Subordinated Debentures requires the consent of the Holders pursuant to Section 3.2 of the Notes; and WHEREAS, the Holders have agreed to consent to the issuance of the Senior Subordinated Debentures in consideration of (i) certain covenants of the Company set forth herein and (ii) the issuance by the Company to the Holders of warrants for the purchase of 150,000 shares of the Company's Class A common stock, par value $.0001 per share (the "Class A Common Stock") substantially in the form of Exhibit B hereto (the "Warrants"); NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions. (a) The following terms, as used herein, have the following meanings: "Fully Diluted" means, with respect to any determination of the number of shares of Common Stock outstanding or held by any Person, such number of shares shall be calculated by taking into account all outstanding shares of Common Stock, all shares of Common Stock issuable upon conversion or exchange of any securities convertible into or exchangeable for Common Stock, or upon exercise of any options, warrants or other rights to purchase or subscribe for Common Stock or securities convertible into or exchangeable for Common Stock. "Investment Agreement" means the Investment Agreement dated as of the date hereof among the Company, SLB, ABP Midwest Manufacturing, Inc. and the Lenders. "Investment Documents" shall mean, collectively, this Agreement, the Warrants, the Purchase Agreement, the Notes and all other instruments and documents executed and delivered in connection therewith. "Obligations" shall mean, collectively, all of the Company's indebtedness, liabilities and obligations arising under this Agreement and each of the other Investment Documents and any renewals, modifications, and extensions thereof, including, but not limited to, the principal, interest, late charges and other sums due and owing under the Notes and any other obligations of the Company to any of the Holders, including such other or additional financing that any of the Holders may extend to the Company or any of its Subsidiaries at any time. "Percentage Ownership" means, with respect to any Holder or group of Holders, at any time (i) the number of shares of Common Stock that such Holder beneficially owns (or, without duplication, has the right to acquire) at such time, divided by (ii) the total number of shares of Common Stock at such time, in each case calculated on a Fully Diluted basis. "Period" means each four-week fiscal period of the Company. "SLB Equity Securities" means any (i) shares of capital stock of SLB, (ii) any securities convertible into or exchangeable for any shares of capital stock of SLB; or (iii) options, warrants or other rights to purchase or subscribe for shares of capital stock of SLB. "Senior Management" means the Co-Chairmen, Chief Executive Officer, President, and Chief Financial Officer of the Company and SLB. (b) Capitalized terms used but not separately defined herein shall have the meanings ascribed such terms in the Securities Purchase Agreement dated as of December 17, 1993 among the Company and the Holders (the "Purchase Agreement"). 2. Rights of First Refusal. (a) If prior to the second anniversary of the date hereof, SLB, the Company or any of the Affiliates of the Company receives from or otherwise negotiates with any Person an offer to purchase any SLB Equity Securities in a transaction not involving a public offering registered under the Securities Act of 1933, as amended (a "Section 2 Offer") and SLB, the Company or any of its Affiliates intends to pursue such sale of such SLB Equity Securities to such Person (the "Offeror"), SLB shall give prior written notice thereof (an "Offer Notice") to PGI, on behalf of all Holders. The Offer Notice shall identify the SLB Equity Securities proposed to be sold by SLB, the Offeror, a description of the material terms of such SLB Equity Securities (including, if applicable, maturity and dividend or interest rate), the form of consideration, the consideration per SLB Equity Security to be paid for such SLB Equity Securities (the "Sale Price") and all other material terms and conditions of the Section 2 Offer. (b) The receipt of an Offer Notice by PGI shall constitute an offer (the "Offer") by SLB to sell to the Holders on the terms set forth in the Offer Notice the SLB Equity Securities at the Sale Price. PGI shall have a period of 20 Business Days following receipt of the Offer Notice (the "Offer Period") in which to accept such offer on behalf of the Holders as to all of the SLB Equity Securities so offered by giving a written notice of acceptance to SLB (together with a copy thereof to the Company) prior to the expiration of such Offer Period. If PGI fails to notify the Company prior to the expiration of the Offer Period it will be deemed to have declined the Offer on behalf of the Holders. In the event the consideration set forth in the Offer Notice consists in whole or in part of non-cash consideration, PGI shall have the right to elect, should it accept the Offer, to substitute for such non-cash consideration an amount of cash equal to the fair market value of such non-cash consideration (as determined in accordance with Section 2(f) hereof). The Company shall, during the Offer Period, provide PGI with such information regarding SLB as PGI may request and shall permit PGI to interview members of Senior Management in order to evaluate the Offer. (c) Each Holder on whose behalf PGI has accepted the Offer shall purchase at the Sale Price and pay for the SLB Equity Securities as to which the Offer was accepted by PGI on its behalf, at the election of the Company or SLB, as the case may be, by wire transfer or bank or certified check, within 20 Business Days of the date on which notice of such acceptance was given by PGI; provided that if the purchase and sale of such SLB Equity Securities is subject to any prior regulatory approval, subject to Section 2(d)(ii), the time period during which such purchase and sale may be consummated shall be extended until the expiration of five Business Days after all such approvals shall have been received. (d) If (i) PGI shall reject all SLB Equity Securities pursuant to the Offer or (ii) any required consent or regulatory approval for the purchase of the SLB Equity Securities subject thereto shall not be obtained within 45 days of acceptance of the Offer, SLB shall have a period of 20 Business Days during which to consummate the sale of any or all of the SLB Equity Securities subject to such Offer to the Offeror at a price not less than the Sale Price and on the same terms and conditions as were set forth in the Offer Notice; provided that if the transfer to the Offeror is subject to regulatory approval, the period of 20 Business Days in which it may be consummated shall be extended by 25 Business Days. If SLB does not consummate the sale of the SLB Equity Securities subject to the Section 2 Offer in accordance with the foregoing time limitations, SLB may not thereafter sell any SLB Equity Securities without repeating the foregoing procedures. (e) For the purposes of this Section 2, PGI shall act as agent for each of the Holders other than PGI. (f) For the purposes of this Section 2, in the event any SLB Equity Securities are proposed to be transferred for consideration in whole or in part other than cash, the fair market value of any non-cash consideration shall be determined by an appraisal to be performed by an investment bank, or other Person engaged primarily in the business of appraising the form of non-cash consideration in question, of recognized national standing which is not an Affiliate of the Company or any of the Holders and which is otherwise mutually acceptable to the Company and PGI. 3. Quarterly Visitation and Board Observation Rights. At the option of the Holders, the Company shall afford the Holders, for so long as the aggregate Percentage Ownership of the Holders exceeds 2%, either: (a) the opportunity to meet, once every three months, for a period of four hours (or, at the option of the Holders, any shorter period of time) (each such meeting, a "Quarterly Meeting"), with Senior Management (or, at the option of the Holders, such other employees of the Company or SLB as the Holders and the Company may agree) to review the operating and financial performance of the Company and its Subsidiaries, the strategic outlook for the Company, the matters discussed at any meeting of the Company's (or any Subsidiary's) board of directors, and any other issues or concerns the Holders may reasonably raise. The Company and the Holders shall use their reasonable efforts to schedule each Quarterly Meeting at a mutually convenient time and place; or (b) the opportunity to have a representative (an "Observer") attend as an observer at (but not participate in or vote at) each meeting, held either in person or by telephone, of the board of directors of the Company (and any executive committee thereof). The Company shall give each Holder notice of all such meetings (x) to be held in person, at least two weeks prior thereto, and (y) to be held telephonically, 24 hours prior thereto. 4. Warrants. The Company shall issue to each of the Holders the number of Warrants set forth opposite the name of each Holder below: Holder No. of Warrants ------ --------------- PGI 112,392 Acorn 10,823 PGI Investments 10,714 PGI Sweden 10,714 Mr. Von Opel 5,357 5. Information. In addition to any information the Company has previously agreed to furnish to the Holders, for so long as the aggregate Percentage Ownership of the Holders exceeds 2%, the Company shall furnish the Holders with: (a)(i) all written materials and other information given to the directors of the Company and the directors of each Subsidiary at the same time such materials and information are given to such directors, (ii) with respect to the regular and special meetings of the board of directors of the Company and of the board of directors of each Subsidiary, written minutes of any such meeting no later than 30 days following any such meeting, (iii) with respect to any special meeting of the board of directors of the Company and of the board of directors of any Subsidiary of the Company, the agenda for any such meeting prior to such meeting, (iv) the corporate summary (substantially in the form of Exhibit C hereto) for each Period and the period from the beginning of the fiscal year to the end of the respective Period, (v) a cash flow analysis (substantially in the form of Exhibit D hereto) for each Period and the period from the beginning of the fiscal year to the end of the respective Period, (vi) a report setting forth, on a per-store basis, total sales per store for every Au Bon Pain and Saint Louis Bread Company store owned by the Company for each Period and the period from the beginning of the fiscal year to the end of the respective Period, (vii) any financial analysis or presentation prepared for the board of directors of the Company or any committee thereof by non-employee financial consultants or advisors, promptly upon delivery of any such analysis or presentation to the board of directors of the Company and (viii) the management letter from the Company's independent auditors with respect to the audit of the Company's financial statements, no later than 10 days following delivery thereof to the Company. The Company shall provide the information required by Sections 6(a)(iv), 6(a)(v) and 6(a)(vi) hereof, in each case, no later than 21 days following the end of each Period; (b) that information which the Company has agreed to furnish to the Lenders pursuant to Sections 4.01, 4.02, 4.03, 4.04 and 4.19 of the Investment Agreement at the times and in the manner set for therein; (c) from time to time any other information any Holder may reasonably request; and (d) (i) not less than 48 hours' prior notice of any telephonic or other meeting with financial analysts regarding quarterly and annual earnings announcements and other material announcements, and (ii) in connection with any such meetings, any press releases pertaining to such meetings, as far in advance of such meeting as practicable. 6. Amendment of the Notes. Each Holder's Note is hereby amended by: (a) inserting the following definition to Section 1.1: "Investment Agreement" means the Investment Agreement among the Issuer, Saint Louis Bread Company, Inc., ABP Midwest Manufacturing, Inc., Allied Capital Corporation, Allied Capital Corporation II, Capital Trust Investments, Ltd. dated as of July 24, 1996. "Senior Subordinated Debentures" means the Senior Subordinated Debentures in the aggregate principal amount of $15,000,000 issued by the Issuer to Allied Capital Corporation, Allied Capital Corporation II and Capital Trust Investments, Ltd. on July 24, 1996. (b) inserting a new Section 3.8: Section 3.8. Terms of Certain Notes. The Issuer shall not amend, waive or modify the terms of its Senior Subordinated Debentures or the Investment Agreement (i) to change the maturity date of such Senior Subordinated Debentures to any date prior to July 24, 2000, (ii) to increase the Basic Interest Rate or the Default Interest Rate payable on the Senior Subordinated Debentures (whether or not payable in cash), (iii) to amend the provisions of Sections 4.08 and Article VII of the Investment Agreement, or (iv) in any other manner which adversely affects the rights of the Holders in any material manner. (c) inserting a new Section 3.5(a)(iv): For the purposes of this Section 3.5, all or substantially all of the Issuer's assets shall have been deemed to have been sold if the Issuer shall have transferred any portion of its assets, or of the assets of Saint Louis Bread Company, Inc. or of ABP Midwest Manufacturing, Inc., either having a fair market value or for aggregate consideration (in cash or fair market value of property received) equal to the greater of (i) 20% or more of the market capitalization of the Issuer based upon the average price per share of Class A Common Stock of the Issuer for the five trading days preceding the asset disposition, or (ii) 20% or more of the net worth of the Issuer, on a consolidated basis, determined in accordance with GAAP. (d) deleting Section 4.1(g)(iii) and replacing it with the with the following: "(iii) appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official of the Issuer) or for 20% or more of the property of the Issuer." 7. Waiver. Subject to its receipt of the Warrants to be issued to it pursuant to Section 4 hereof, each Holder hereby grants a waiver to the Company of the provisions of Section 3.2 of such Holder's Note solely for the purposes of issuing to the Lenders, no later than the date hereof, the Senior Subordinated Debentures in the form of Exhibit E hereto pursuant to the terms of the Investment Agreement for aggregate consideration of $15,000,000. 8. Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 9. Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or any Holder. 10. Amendment; Waiver. No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective. No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by all the parties hereto. 11. Notices. All notices and other communications given or made pursuant hereto or pursuant to any other agreement among the parties, unless otherwise specified, shall be given in accordance with Section 7.1 of the Purchase Agreement except that such notices shall be given to: Princes Gate Investors, L.P. Acorn Partnership I, L.P. PGI Investments Limited PGI Sweden AB Gregor Von Opel c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, N.Y. 10036 Attention: Hartley R. Rogers Telephone: (212) 761-4000 Telecopier: (212) 761-0517 12. Headings. The headings contained in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 14. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. 15. Specific Enforcement. Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies which may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available. 16. Severability. If one or more provisions of this Agreement are held to be unenforceable to any extent under applicable law, such provision shall be interpreted as if it were written so as to be enforceable to the maximum possible extent so as to effectuate the parties' intent to the maximum possible extent, and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms to the maximum extent permitted by law. 17. Expenses. (a) The Company shall reimburse the Holders for all fees and expenses incurred by the Holders in connection with this Agreement. (b) The Company shall pay all expenses of any nature, whether incurred in or out of court, and whether incurred before or after the Notes shall become due at their maturity date or otherwise (including, but not limited to, reasonable attorneys' fees and costs) which the Holders may deem necessary or proper in connection with the collection of any of the Obligations. The Holders are authorized to pay at any time and from time to time any or all of such expenses, to add the amount of such payment to the amount of principal outstanding under the Notes, and to charge interest thereon at the rate specified in the Notes. (c) Without limiting the Holders' entitlements under Sections 18(a) and (b) hereof, or under the terms of any of the other Investment Documents, each of the Company and SLB, jointly and severally (each, a "Reimbursing Party"), hereby agrees to reimburse the Holders for any and all costs and fees, including reasonable attorney's fees and expenses, incurred by any of the Holders or their Affiliates in connection with: (i) any suit, action, claim or other activity of the Holders to collect the Obligations or any portion thereof or to enforce any of the provisions of this Agreement or any other Investment Document against such Reimbursing Party; and (ii) any suit, action, claim or other liability asserted against any of the Holders or their Affiliates by such Reimbursing Party in any case in which such Reimbursing Party does not prevail with respect to substantially all of its claim. 18. Entire Agreement. This Agreement, the Notes, the Registration Rights Agreement dated as of the date hereof among the Company, the Holders and the Lenders and the Modification Agreement dated as of the date hereof among the Company and each of the Holders constitute the entire agreement among the parties and supersede all prior agreements and understandings, covenants or representations by or among the parties, written or oral, with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AU BON PAIN CO., INC. By: /s/ Louis I. Kane --------------------------------- Name: Louis I. Kane Title: Co-Chairman SAINT LOUIS BREAD COMPANY, INC. (for the purposes of Sections 2 and 17 hereof only) By: /s/ Louis I. Kane --------------------------------- Name: Louis I. Kane Title: Executive Vice-President PRINCES GATE INVESTORS, L.P. By PG INVESTORS, INC., its General Partner By: /s/ David R. Powers --------------------------------- Name: David R. Powers Title: Vice President ACORN PARTNERSHIP I, L.P. By PG INVESTORS, INC., its General Partner By: /s/ David R. Powers --------------------------------- Name: David R. Powers Title: Vice President PGI INVESTMENTS LIMITED By PG INVESTORS, INC., as Attorney-in-Fact By: /s/ David R. Powers --------------------------------- Name: David R. Powers Title: Vice President PGI SWEDEN AB By PG INVESTORS INC. as Attorney-in-Fact By: /s/ David R. Powers --------------------------------- Name: David R. Powers Title: Vice President GREGOR VON OPEL BY PG INVESTORS INC. as Attorney-In-Fact By: /s/ David R. Powers --------------------------------- Name: David R. Powers Title: Vice President EX-99.3 3 BOS-BUS:285640 CONFORMED COPY MODIFICATION AGREEMENT MODIFICATION AGREEMENT dated as of JULY 24, 1996 among AU BON PAIN CO., INC. (the "Issuer") and PRINCES GATE INVESTORS, L.P., ACORN PARTNERSHIP I, L.P., PGI INVESTMENTS LIMITED, PGI SWEDEN AB, and GREGOR VON OPEL (collectively, the "Investors"). WHEREAS, the Issuer issued those certain 4.75% Convertible Subordinated Notes (collectively the "Notes") due January 2, 2001 to the Investors in the aggregate principal amount of $30,000,000 pursuant to the terms of that certain Securities Purchase Agreement dated as of December 17, 1993 among the Issuer and each of the Investors; WHEREAS, the Issuer wishes to issue certain Senior Subordinated Debentures in the aggregate principal amount of $15,000,000 (collectively, the "Debentures") to Allied Capital Corporation, Allied Capital Corporation II and Capital Trust Investments, Ltd. pursuant to the terms of that certain Investment Agreement dated as of JULY 24, 1996 (the "Investment Agreement"), by and among the Issuer, certain of its affiliates, Allied Capital Corporation, Allied Capital Corporation II and Capital Trust Investments, Ltd. and to have the indebtedness evidenced by such Debentures treated as "Senior Indebtedness" under the terms of the Notes; WHEREAS, the Investors have consented to the issuance of such Debentures and have agreed to treat such Debentures as "Senior Indebtedness" under the terms of the Notes; WHEREAS, the Issuer and the Investors have agreed to modify certain provisions set forth in the Notes as set forth herein; NOW, THEREFORE, the undersigned hereby agree as follows: 1. Amendment to Section 6.1 and 6.2 of the Notes. Each of the Issuer and the Investors hereby covenants and agrees that Section 6.1 and 6.2 of the Notes shall be deleted and the following Sections 6A, 6.1 and 6.2 substituted therefor: Section 6.A. Definitions. For purposes of this Section 6, the following terms shall have the following meanings: "Senior Payment Default" means any default in the payment of any amounts owing with respect to Senior Indebtedness when due and payable, whether at maturity, upon any redemption, upon acceleration, declaration or otherwise, and including, without limitation, any default in the payment of any principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), collateral protection expenses, other reimbursement or indemnity obligations and other obligations, whether now or hereafter owing, created or evidenced by or owing or arising under or in connection with Senior Indebtedness or any prior, concurrent, or subsequent notes, instruments, agreements or guaranties of indebtedness, liabilities or obligations of any type or form whatsoever relating thereto or evidencing Senior Indebtedness and including any and all interest accruing or out of pocket costs or expenses incurred after the date of any filing by or against the Issuer of any petition under the federal Bankruptcy Code or any other bankruptcy, insolvency or reorganization act regardless of whether the claim therefor is allowed or allowable in the case or proceeding relating thereto. "Subordinated Note Amount" means all principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), collateral protection expenses and other reimbursement and indemnity obligations, whether now or hereafter owing, created or evidenced by or outstanding under the Notes or any prior, concurrent or subsequent notes, debentures, instruments or agreements of indebtedness, liabilities or obligations of any type or form whatsoever relating thereto (or issued in replacement thereof) in favor of any Holder. Section 6.1. Notes Subordinated to Senior Indebtedness. The Issuer covenants and agrees and each Holder, by his acceptance hereof likewise covenants and agrees, that all Notes shall be subject to the provisions of Section 6 of this Note; and each person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof accepts and agrees that the payment of the Subordinated Note Amount by the Issuer shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment, to the prior payment in full of Senior Indebtedness. Section 6.2. No Payment on Notes in Certain Circumstances. (a) If any Senior Payment Default occurs and is continuing with respect to any Senior Indebtedness, no payment shall be made by the Issuer with respect to any Subordinated Note Amount nor shall the Notes be acquired by the Issuer for cash, property or otherwise. (b) If any event of default (other than a Senior Payment Default) occurs and is continuing (or if such an event of default would occur upon any payment with respect to the Notes) with respect to any Senior Indebtedness, as such event of default is defined in such Senior Indebtedness, permitting the holders thereof to accelerate the maturity thereof and if the holder or holders or a representative of such holder or holders gives written notice of the event of default to the Issuer (a "Default Notice"), then, unless and until such event of default has been cured or waived or has ceased to exist or the Issuer receives notice from the holder or holders of the relevant Senior Indebtedness terminating a Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the "Blockage Period"), the Issuer shall not (x) make any payment of or with respect to the Subordinated Note Amount or (y) acquire any of the Notes for cash or property or otherwise. At the expiration of such Blockage Period, the Issuer shall, subject to Section 6.2(a), promptly pay to the Holders all sums which the Issuer would have been obligated to pay during such Blockage Period but for this Section 6.2(b). Only one such Blockage Period may be commenced within any 360 consecutive days. For all purposes of this Section 6.2(b), no event of default which existed or was continuing under the Senior Indebtedness to which the Blockage Period relates on the date such Blockage Period commenced shall be or be made the basis for the commencement of any subsequent Blockage Period by the holder or holders of such Senior Indebtedness unless such event of default is cured or waived for a period of not less than 90 consecutive days. (c) Notwithstanding the foregoing, in the event that any payment shall be received by any Holder when such payment is prohibited by Section 6.2(a) or 6.2(b), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent of the amounts then due and owing on the Senior Indebtedness, if any. Further Amendment of Section 6. The following Section 6.9 shall be inserted at the end of Section 6 of the Note: 6.9. Voided Payments. To the extent that the Issuer or any guarantor of, or provider of collateral for Senior Indebtedness makes any payment on Senior Indebtedness that is subsequently invalidated, declared to be fraudulent or preferential or set aside or is required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or reorganization act, state or federal law, common law or equitable cause (such payment being hereinafter referred to as a "Voided Payment"), then to the extent of such Voided Payment, that portion of the Senior Indebtedness that had been previously satisfied by such Voided Payment shall be revived and continue in full force and effect as if such Voided Payment had never been made. In the event that a Voided Payment is recovered from any holder of Senior Indebtedness, a Senior Payment Default shall be deemed to have existed and to be continuing with respect to such Senior Indebtedness from the date of such holder's initial receipt of such Voided Payment until the full amount of such Voided Payment is irrevocably restored to such holder. During any continuance of any such Senior Payment Default, the terms of Section 6 of the Notes shall be in full force and effect with respect to the Notes. To the extent that any Holders have received any payments with respect to the Notes subsequent to the date of the initial receipt by a holder of Senior Indebtedness of such Voided Payment and such payments have not been invalidated, declared to be fraudulent or preferential or set aside or required to be repaid to a trustee, receiver, or any other party under any bankruptcy act, state or federal law, common law or equitable cause, the Holders shall be obligated and hereby agree that any such payment so made or received shall be deemed to have been received in trust for the benefit of the holders of Senior Indebtedness, and the Holders hereby agree to pay to the holders of Senior Indebtedness, (pro rata on the basis of each such holders respective amount of Senior Indebtedness) the full amount so received by the Holders during such period of time to the extent necessary fully to restore to the holders of Senior Indebtedness the amount of such Voided Payment. Payment in Cash. For purposes of applying the provisions of Section 6 of the Notes to Senior Indebtedness consisting of indebtedness evidenced by the Debentures and all indebtedness of the Issuer owing under or arising in connection with the agreements and instruments described on Schedule 1 hereto (together with the Senior Indebtedness evidenced by the Debentures, the "Scheduled Senior Indebtedness"), all references in Section 6 to the "payment in full" of Senior Indebtedness or to such Senior Indebtedness being "paid in full" shall be deemed to mean with respect to the Scheduled Senior Indebtedness the payment of the Scheduled Senior Indebtedness in full in cash and the phrase "or such payment duly provided for" shall be deemed to be deleted from the first sentence of Section 6.3 of the Note for purposes of applying such section to Scheduled Senior Indebtedness. The terms of this Section 3 shall be binding on the Holders of the Notes for all purposes thereof. Forbearance. Notwithstanding anything to the contrary set forth in Section 6 of the Notes, the Investors hereby agree that no Holder will take or omit to take any action or assert any claim with respect to the Notes and the Subordinated Note Amount or otherwise which is inconsistent with the terms of Section 6 of the Note or this Modification Agreement and no Holder will seek in any judicial proceeding to enjoin or otherwise prevent the holders of Scheduled Senior Indebtedness from enforcing their rights hereunder, or with respect to the subordination provisions of the Note or under any agreement, instrument or other document evidencing any Scheduled Senior Indebtedness or entered into in connection therewith or to void the claims of any holder of Scheduled Senior Indebtedness with respect to any of the Scheduled Indebtedness. This paragraph may be relied on by the holders of Scheduled Senior Indebtedness only and shall not be deemed to modify generally the terms of Section 6 of the Notes. The terms of this Section 4 shall be binding on the Holders of the Notes for all purposes thereof. Consent to Debentures. The Investors hereby consent to the issuance by the Issuer and certain of its Affiliates of the Debentures in the aggregate principal amount of $15,000,000 pursuant to the terms of the Investment Agreement and agree that the indebtedness evidenced by the Debentures shall be "Senior Indebtedness" as defined in the Notes. Representations and Warranties. The Issuer and the Investors hereby represent that the undersigned Investors constitute all of the Holders of the Notes. Each of the Issuer and the Investors further represent and warrant for itself only that it has the corporate power and authority and has been duly authorized to execute and deliver this Modification Agreement. Transfers of Notes. Each of the Investors agree that they will not assign, sell or otherwise transfer any of the Notes unless the assignee, purchaser or transferee thereof agrees in writing to be bound by the terms of this Modification Agreement and acknowledges that the Notes and their rights relating thereto are modified hereby. No Further Modifications. Except as specifically modified hereby, the terms of the Notes shall remain in full force and effect. Parties in Interest; Successors and Assigns. This Modification Agreement shall bind the parties hereto and their successors and assigns. The Issuer and the Investors acknowledge that the holders of the Scheduled Senior Indebtedness are taking certain actions in reliance on the agreements set forth in this Modification Agreement and further agree that the holders of the Scheduled Senior Indebtedness, and any notes, debentures, instruments or agreements issued to refinance or replace such Scheduled Senior Indebtedness, including, without limitation, any future assignees, purchasers or other transferees of such Scheduled Senior Indebtedness shall be entitled to rely hereon and enforce the terms hereof as though such holders, assignees, purchasers and other transferees were a direct party hereto. Miscellaneous. This Modification Agreement may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. This Modification Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have executed this Modification Agreement as of the date first above written. AU BON PAIN CO., INC. By: /s/ Louis I. Kane ---------------------------------- Name: Louis I. Kane Title: Co-Chairman PRINCES GATE INVESTORS, L.P. By: PG Investors, Inc. its General Partner By: /s/ David R. Powers ---------------------------------- Name: David R. Powers Title: Vice President ACORN PARTNERSHIP I, L.P. By: PG Investors, Inc. its General Partner By: /s/ David R. Powers ---------------------------------- Name: David R. Powers Title: Vice President PGI INVESTMENTS LIMITED By: PG Investors, Inc. as Attorney-in-Fact By: /s/ David R. Powers ---------------------------------- Name: David R. Powers Title: Vice President PGI SWEDEN AB By: PG Investors, Inc. as Attorney-in-Fact By: /s/ David R. Powers ---------------------------------- Name: David R. Powers Title: Vice President GREGOR VON OPEL By: PG Investors, Inc. as Attorney-in-Fact By: /s/ David R. Powers ---------------------------------- Name: David R. Powers Title: Vice President Schedule 1 to Modification Agreement 1. That certain Amended and Restated Revolving Credit and Term Loan Agreement dated as of March 17, 1995 by and among (a) Au Bon Pain Co., Inc., Saint Louis Bread Company, Inc., and ABP Midwest Manufacturing, Inc., and (b) USTrust, The First National Bank of Boston, and Citizens Bank of Massachusetts (as amended, modified or restated and in effect from time to time, including any replacement agreement therefor), and the Loan Documents as defined therein. 2. That certain Unlimited Guaranty dated February 8, 1993 from ABP Wisconsin, Inc. in favor of USTrust (as amended, modified or restated and in effect from time to time). 3. That certain Unlimited Guaranty dated December 30, 1994 from Old Westbury Expressions, Inc. in favor of USTrust (as amended, modified or restated and in effect from time to time). 4. That certain Revolving Credit Agreement dated as of January 12, 1996 by and between Au Bon Pain Co., Inc. and INAC Corp. (as amended, modified or restated and in effect from time to time). 5. That certain Letter of Credit Reimbursement Agreement dated as of July 1, 1995 by and among ABP Midwest Manufacturing, Inc., Au Bon Pain Co., Inc. and Citizens Trust Company (as amended, modified or restated and in effect from time to time). 6. That certain Guaranty dated as of July 20, 1995 from Au Bon Pain Co., Inc. in favor of Citizens Trust Company (as amended, modified or restated and in effect from time to time, including any replacement guarantees therefor). 7. That certain Guaranty dated as of July 20, 1995 from Saint Louis Bread Company, Inc. in favor of Citizens Trust Company (as amended, modified or restated and in effect from time to time, including any replacement guarantees therefor). EX-99.4 4 CONFORMED COPY REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated as of July 24, 1996 among (a) ALLIED CAPITAL CORPORATION, a Maryland corporation, ("ACC") ALLIED CAPITAL CORPORATION II ("ACC II"), a Maryland corporation, CAPITAL TRUST INVESTMENTS, LTD., a Guernsey corporation ("CTI" and collectively with ACC and ACC II, the "Allied Holders"), (b) PRINCES GATE INVESTORS, L.P., ("Princes Gate"), ACORN PARTNERSHIP I, L.P., ("Acorn"), PGI INVESTMENTS LIMITED, ("PGI"), PGI SWEDEN AB, ("PGI Sweden"), and GREGOR VON OPEL, ("GVO" and collectively with Princes Gate, Acorn, PGI, and PGI Sweden, the "PG Holders"), and (c) AU BON PAIN CO., INC., a Delaware corporation ("ABP" or the "Issuer"). WHEREAS, ACC, ACC II AND CTI have agreed to extend credit to ABP, Saint Louis Bread Company, Inc. and ABP Midwest Manufacturing, Inc. pursuant to an Investment Agreement dated as of July 24, 1996 (the "Investment Agreement"), by and among ACC, ACC II and CTI and ABP, Saint Louis Bread Company, Inc. and ABP Midwest Manufacturing, Inc.; and WHEREAS, pursuant to the terms of a certain Securities Purchase Agreement (the "Securities Purchase Agreement") dated as of December 1993, Princes Gate, Acorn, PGI, PGI Sweden, GVO and PG Holdings have purchased from ABP, and are currently the holders of, ABP's 4.75% Convertible Subordinated Notes due January 2, 2001 in the aggregate principal amount of $30,000,000 (as amended, modified or restated and in effect from time to time, the "4.75% Subordinated Convertible Notes") and in connection therewith were granted certain registration rights by ABP, which rights were granted to the PG Holders in said Securities Purchase Agreement and Exhibit D thereto (collectively the "Original Registration Rights Agreements"). The PG Holders and ABP desire to terminate their respective rights and obligations under the Original Registration Rights Agreements in consideration of the execution by ABP and each of the PG Holders of this Agreement; and WHEREAS, in order to induce Allied Holders to enter into the Investment Agreement and the other agreements and transactions contemplated thereby, ABP has agreed to enter into this Agreement with the Allied Holders and the PG Holders. ARTICLE I DEFINITIONS SECTION 1.1. Definitions. The following terms, as used herein, have the following meanings: "Affiliate" has the meaning provided in Rule 405 promulgated under the Securities Act. "Allied Holders" has the meaning provided in the first recital above. "Allied Majority Holders" means the Holder or Holders of 75% of Registrable Securities then held by Allied Holders. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Class A Common Stock, par value of $.0001 per share, of the Issuer. "Demand Registration" means, unless the context requires another meaning, a registration request pursuant to Section 2.1(a)(1) or Section 2.1(b)(1) of this Agreement. "Holder" means the initial purchaser of any Registrable Security or any permitted assignee or transferee of such Registrable Security. "Issuer" has the meaning set forth in the introductory paragraph above. "Majority Holders" means the Holder or Holders of a majority of Registrable Securities then outstanding. "PG Holders" has the meaning set forth in the second recital above. "PG Majority Holders" means the Holder or Holders of a majority of Registrable Securities then held by PG Holders. "Piggy-Back Registration" means a Piggy-Back Registration as defined in Section 2.2. "Registrable Securities" means the shares of Common Stock issued or issuable upon conversion of the 4.75% Subordinated Convertible Notes and the shares of Common Stock issued or issuable upon exercise of the Warrants, and any securities into which such Common Stock shall have been changed or any securities resulting from any reclassification of such Common Stock, until (i) a registration statement covering such shares of Common Stock has been declared effective by the Commission and such shares have been disposed of pursuant to such effective registration statement, (ii) such shares are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or (iii) such shares have been otherwise transferred and the Issuer has delivered a new certificate or other evidence of ownership for such shares not bearing a legend referring to restrictions on transfer under the Securities Act and such shares may be resold without subsequent registration under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Selling Holder" means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act. "Underwriter" means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer's market-making activities. "Warrants" means the stock purchase warrants issued and sold by the Issuer to (i) the Allied Holders pursuant to the Subordinated Investment Agreement and (ii) to the PG Holders pursuant to the Agreement and Waiver among the Issuer, certain of its subsidiaries and the PG Holders dated as of the date hereof. ARTICLE II REGISTRATION RIGHTS SECTION 2.1. Demand Registration. (a) By Allied Holders. (1) Request for Registration. Allied Majority Holders may make a written request for registration under the Securities Act of all or part oftheir Registrable Securities (an "Allied Demand Registration"); provided, that (x) the Issuer shall not be obligated to effect more than one Allied Demand Registration in any 12-month period, and no more than two Allied Demand Registrations in total and (y) the number of shares requested to be sold in each such registration shall have an aggregate fair market value (determined at the time such request is made) of at least Three Million Dollars ($3,000,000) or, if less, shall constitute all Registrable Securities then held by Allied Holders. Such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within 5 Business Days after receipt of such request, the Issuer will give written notice of such registration request to all other Holders of the Registrable Securities and include in such registration all such Registrable Securities with respect to which the Issuer has received written requests for inclusion therein within 10 Business Days after the receipt by the applicable Holder of the Issuer's notice. Each such request will also specify the number of shares of Registrable Securities to be registered and the intended method of disposition thereof. (2) Additional Demand Registrations. If the Allied Majority Holders in an Allied Demand Registration so elect, the offering of such Registrable Securities pursuant to such Allied Demand Registration shall be in the form of an underwritten offering. The Allied Majority Holders shall select the book-running managing Underwriter in connection with such offering and any additional investment bankers and managers to be used in connection with the offering; provided that such managing Underwriter and additional investment bankers and managers must be reasonably satisfactory to the Issuer. To the extent 10% or more of the Registrable Securities so requested to be registered by the Allied Majority Holders are excluded from the offering in accordance with Section 2.3, then such demand shall not count for purposes of the limitations set forth in Section 2.1(a)(1) above. (b) By PG Holders. (1) Request for Registration. PG Holders may make a written request for registration under the Securities Act of all or part of their Registrable Securities (a "PG Demand Registration"); provided, that (x) the Issuer shall not be obligated to effect more than one PG Demand Registration in any 12-month period, and no more than two PG Demand Registrations in total and (y) the number of shares requested to be sold in each such registration shall have an aggregate fair market value (determined at the time such request is made) of at least $3 million or, if less, shall constitute all Registrable Securities then held by PG Holders. Such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within 5 Business Days after receipt of such request, the Issuer will give written notice of such registration request to all other Holders of the Registrable Securities and include in such registration all such Registrable Securities with respect to which the Issuer has received written requests for inclusion therein within 10 Business Days after the receipt by the applicable Holder of the Issuer's notice. Each such request will also specify the number of shares of Registrable Securities to be registered and the intended method of disposition thereof. (2) Additional Demand Registrations. If the PG Majority Holders in a PG Demand Registration so elect, the offering of such Registrable Securities pursuant to such PG Demand Registration shall be in the form of an underwritten offering. The PG Holders shall select the book-running managing Underwriter in connection with such offering and any additional investment bankers and managers to be used in connection with the offering; provided that such managing Underwriter and additional investment bankers and managers shall be reasonably satisfactory to the Issuer. To the extent 10% or more of the Registrable Securities so requested to be registered by the PG Holders are excluded from the offering in accordance with Section 2.3, then such demand shall not count for purposes of the limitations set forth in Section 2.1(b)(i) above. SECTION 2.2. Piggy-Back Registration. If the Issuer proposes to file a registration statement under the Securities Act with respect to an offering by the Issuer for its own account or for the account of any of its respective security holders of any class of security (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission), or filed in connection with an exchange offer or offering of securities solely to the Issuer's existing security holders), including a registration statement filed in connection with a Demand Registration, then the Issuer shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than 10 business days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request (a "Piggy-Back Registration"). The Issuer shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Issuer included therein. SECTION 2.3. Reduction of Offering. Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.1(a)(1), Section 2.1(b)(1) or Section 2.2 deliver a written opinion to the Holders of the Registrable Securities included in such offering that (i) the size of the offering that the Holders, the Issuer and such other persons intend to make or (ii) the kind of securities that the Holders, the Issuer and any other persons or entities intend to include in such offering are such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then if the size of the offering is the basis of such Underwriter's opinion, the amount of securities to be offered shall be cut back only to the extent necessary and the accounts of Holders shall be reduced pro rata (according to the Registrable Securities proposed for registration) to such extent to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters, which securities shall be included in the following order of priority: (1) with respect to an Allied Demand Registration, the Issuer will include in such registration in the following priority: (x) first, up to the full amount of Registrable Securities proposed to be offered and sold by the Allied Holders, reduced pro rata to the extent necessary, (y) second, up to the full amount of Registrable Securities proposed to be offered and sold by the PG Holders, reduced pro rata to the extent necessary, and then (z) any shares of Common Stock held by other persons that the Issuer may be obligated to include in such registration; (2) with respect to a PG Demand Registration, the Issuer will include in such registration in the following priority: (x) first, up to the full amount of Registrable Securities proposed to be offered and sold by the PG Holders, reduced pro rata to the extent necessary, (y) second, up to the full amount of Registrable Securities proposed to be offered and sold by the Allied Holders, reduced pro rata to the extent necessary, and then (z) any shares of Common Stock held by other persons that the Issuer may be obligated to include in such registration; and (3) with respect to a registration initiated by the Issuer for its own account, (x) first, all shares of Common Stock the Issuer proposes to offer and sell, (y) second, up to the full amount of Registrable Securities proposed to be offered and sold by Holders of Registrable Securities, reduced pro rata to the extent necessary, and then (z) any shares of Common Stock held by other persons that the Issuer may be obligated to include in such registration; and ARTICLE III REGISTRATION PROCEDURES SECTION 3.1. Filings; Information. Whenever Holders request that any Registrable Securities be registered pursuant to Section 2.1 hereof, the Issuer will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request: (a) The Issuer will as expeditiously as possible and in any event within 30 days from the receipt of such request prepare and file with the Commission a registration statement on any form for which the Issuer then qualifies or which counsel for the Issuer shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days; provided that if the Issuer shall furnish to the Holders making a request pursuant to Section 2.1 a certificate signed by its Chairman of the Board (or either Co-Chairman of the Board) stating that in his good faith judgment it would be significantly disadvantageous to the Issuer or its shareholders for such a registration statement to be filed as expeditiously as possible and stating the reasons for such judgment, the Issuer shall have a period of not more than 90 days within which to file such registration statement measured from the date of receipt of the request in accordance with Section 2.1. (b) The Issuer will, if requested, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder and each Underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder and Underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder. Each Selling Holder shall provide the Issuer with its or his comments to such registration statement, prospectus and amendments thereto or supplements thereof, as the case may be, within five (5) business days of its or his receipt of such document(s). (c) After the filing of the registration statement, the Issuer will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (d) The Issuer will use its best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as any Selling Holder reasonably (in light of such Selling Holder's intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Issuer and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder: provided that the Issuer will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction. (e) The Issuer will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly make available to each Selling Holder any such supplement or amendment. (f) The Issuer and the Selling Holders will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. (g) The Issuer will make available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Issuer (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Issuer's officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Issuer reasonably determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Issuer or its Affiliates unless and until such is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought by subpoena or in a court of competent jurisdiction, give notice to the Issuer and allow the Issuer, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. (h) The Issuer will furnish, at the effectiveness of the registration statement and again at closing, to each Selling Holder and to each Underwriter, if any, a signed counterpart, addressed to such Selling Holder and such Underwriter, of (i) an opinion or opinions of counsel to the Issuer and (ii) a comfort letter or comfort letters from the Issuer's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be. (i) The Issuer will otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. (j) The Issuer will use its best efforts to cause all such Registrable Securities to be listed on each securities exchange or quotation system on which similar securities issued by the Issuer are then listed. The Issuer's registrar and transfer agent is Boston Equiserve, L.P., 150 Royal Street, Canton, MA 02021. As a condition to its rights to sell Registrable Securities in such registration, each Selling Holder of Registrable Securities shall, upon the Issuer's request, promptly furnish in writing to the Issuer such information regarding the distribution of the Registrable Securities as the Issuer may from time to time reasonably request and such other information as may be legally required in connection with such registration. Each Selling Holder agrees that, upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 3.1(e) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(e) hereof, and, if so directed by the Issuer, such Selling Holder will deliver to the Issuer all copies, other than permanent file copies then in such Selling Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Issuer shall give such notice, the Issuer shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 3.1(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 3.1(e) hereof to the date when the Issuer shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 3.1(e) hereof. SECTION 3.2. Registration Expenses. In connection with any registration statement required to be filed hereunder, the Issuer shall pay all expenses incurred in connection with the registration hereunder (the "Registration Expenses") including, without limitation, the following: (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Issuer and customary fees and expenses for independent certified public accountants retained by the Issuer (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 3.1(h) hereof), (vii) the reasonable fees and expenses of any special experts retained by the Issuer in connection with such registration, and (viii) reasonable fees and expenses of not more than one counsel (who shall be reasonably acceptable to the Issuer) for all Holders whose Registrable Securities are included in such registration provided, however, that if representation for all such Holders by the same counsel would be inappropriate due to actual or potential differing interests between them, then in any such case the Issuer shall pay the reasonable fees and expenses of one additional counsel. The Issuer shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities. ARTICLE IV INDEMNIFICATION AND CONTRIBUTION SECTION 4.1. Indemnification by the Issuer. The Issuer agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors and agents, and each Person, if any, who controls the Issuer (an "Issuer Control Person") or such Selling Holder within the meaning, in each case, of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Issuer shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Issuer by such Selling Holder or on such Selling Holder's behalf expressly for use therein provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Selling Holder from whom the person asserting any such loss, claim, damage or liability purchased the Registrable Securities if it is determined that (i)it was the responsibility of such Selling Holder to provide such person with a current copy of the prospectus, (ii) such Selling Holder had been furnished with copies of such current prospectus within a reasonable time prior to such purchase, and (iii) such current copy of the prospectus would have cured the defect giving rise to such loss, claim, damage or liability. The Issuer also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.1. SECTION 4.2. Indemnification by Holders of Registrable Securities. Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Issuer, its officers, directors and agents and each Person, if any, who controls the Issuer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuer to such Selling Holder, but only with reference to information related to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder's behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus subject to the proviso that the liability of each Selling Holder to the Issuer and its officers, directors, agents and control persons set forth in this Section 4.2 shall be limited to the net proceeds received by such Selling Holder as a result of his or its sale of Registrable Securities pursuant to such registration statement or prospectus (including amendments and supplements thereto) Notwithstanding the foregoing, each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each person who controls such Underwriters on substantially the same basis as that of the indemnification of the Issuer provided in this Section 4.2. SECTION 4.3. Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (an "Indemnified Party") shall promptly notify the person against whom such indemnity may be sought (an "Indemnifying Party") in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them as reasonably determined by the Indemnified Party or (iii) Indemnifying Party fails to retain counsel or diligently pursue the defense. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the Indemnifying Party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 business days after receipt by such Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of with any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding. SECTION 4.4. Contribution. If the indemnification provided for in this Article 4 is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Issuer and the Selling Holders (subject to the limitations on liabilities of each Selling Holder to the Issuer set forth in the proviso contained in Section 4.2 hereof) on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Issuer and the Selling Holders on the one hand and the Underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Issuer and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Issuer on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Issuer and of each Selling Holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Issuer and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Issuer and the Selling Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Issuer and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer and the Selling Holders or by the Underwriters. The relative fault of the Issuer on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuer and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Selling Holder were offered to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section ll(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Selling Holder's obligations to contribute pursuant to this Section 4.4 are several in proportion to the proceeds of the offering received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint. ARTICLE V MISCELLANEOUS SECTION 5.1. Participation in Underwritten Registrations. No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these Registration Rights. SECTION 5.2. Rule 144. The Issuer covenants that it will use its best efforts to file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Issuer will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 5.3. Holdback Agreements. (a) Restrictions on Public Sale by Holder of Registrable Securities. To the extent not inconsistent with applicable law, each Holder whose securities are included in a registration statement agrees not to effect any public sale or distribution of the issue being registered or a similar security of the Issuer, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 90-day period beginning on, the effective date of such registration statement (except as part of such registration), if and to the extent requested by the managing Underwriter or Underwriters in the case of an underwritten public offering. (b) Restrictions on Public Sale by the Issuer and Others. The Issuer and its Affiliates agree (i) not to effect any public sale or distribution of any securities similar to those being registered in accordance with Section 2.1 or Section 2.2 hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90-day period beginning on, the effective date of any registration statement (except as part of such registration statement where the Majority Holders of the Registrable Securities to be included in such registration statement consent) or the commencement of a public distribution of Registrable Securities; and (ii) that any agreement entered into after the date of the Agreement pursuant to which the Issuer issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any public sale or distribution of any such securities during the periods described in (i) above, in each case including a public sale or distribution pursuant to Rule 144 under the Securities Act (except as part of any such registration, if permitted); provided, however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities. SECTION 5.4. Existing Registration Agreements. Issuer represents that it is not obligated under any agreement other than this Agreement to register any of its securities on behalf of third parties. Issuer covenants and agrees it will not, in the absence of a written agreement with each of the PG Majority Holders and the Allied Majority Holders, on and after the date hereof grant any registration rights to any third party except on terms which subordinates those registration rights to the rights granted under this Agreement. SECTION 5.5 Notices. All notices or communications under this agreement or the Debentures shall be mailed, postage prepaid, delivered by facsimile, or delivered by courier to the following addresses (or to such other address as shall at any time be designated by any party in writing to the other parties): To ACC and ACC II: Allied Capital Corporation and Allied Capital Corporation II c/o Allied Capital Corporation 1666 K Street, N.W., Ninth Floor Washington, DC 20006 Attention: Gay S. Truscott, Vice President Facsimile: (202) 659-2053 With a copy to: Piper & Marbury L.L.P. 1200 Nineteenth Street, N.W. Washington, DC 20036 Attention: Anthony H. Rickert, Esquire Facsimile: (202) 223-2085 To CTI: Capital Trust Investments, Ltd. c/o Capital Trust Limited 49 Mount Street London, England W1Y5RE Attention: Bassam Aburdene Fax: 011 441 71 499 0524 With a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 Attention: Charles E. Engros, Esquire Facsimile: (212) 309-6273 To Princes Gate: Princes Gate Investors, L.P. Acorn Partnership I, L.P. PGI Investments Limited PGI Sweden AB Gregor Von Opel c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Attention: Hartley R. Rogers Telecopier: (212) 761-0517 With a copy to: Davis, Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: Paul R. Kingsley Facsimile: (212) 450-4800 To the Issuer: Au Bon Pain Co., Inc. 19 Fid Kennedy Avenue Marine Industrial Park Boston, MA 02210-2497 Attention: Louis I. Kane Facsimile: (617) 423-7879 With a copy to: Gadsby & Hannah LLP 125 Summer Street Boston, MA 02110 Attention: Walter D. Wekstein, Esquire Marianne Gilleran, Esquire Facsimile: (617) 345-7050 Rejection or other refusal to accept, or the inability to deliver because of a changed address of which not notice was given, shall not affect the effectiveness or the date of delivery for any notice sent in accordance with the foregoing provisions. Each such notice, request or other communication shall be deemed sufficiently given, served, sent and received for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of the messenger or the answer back being deemed conclusive (but not exclusive) evidence of such delivery) or at such time as delivery is refused by addressee upon presentation. SECTION 5.6 Binding Agreement. This Agreement shall bind and inure to the benefit of each of the Holders, the Borrowers, and except as otherwise expressly provided to the contrary herein, each of their respective heirs and permitted successors and assigns. Without limiting the generality of the foregoing sentence, the rights of the Holders to cause the Issuer to register Registrable Securities granted pursuant to this Agreement may be transferred or assigned by any holder to a transferee or assignee; provided, however, that the transferee or assignee of such rights assumes the obligations of such transferor or assignor, as the case may be, under this Agreement and that such transferee or assignee executes and delivers a copy of this Agreement to the Issuer. SECTION 5.7 Entire Agreement; Integration Clause. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the subject matter hereof, and any prior agreements, including, without limitation, the Original Registration Rights Agreement, are hereby terminated. SECTION 5.8 No Oral Modification or Waivers. The terms hereof may not be modified or waived orally, but only by an instrument in writing signed by the party against which enforcement of the modification or waiver (as the case may be) is sought. SECTION 5.9 Venue; Personal Jurisdiction; Full Faith and Credit; Personal Service. (a) Venue for the adjudication of any claim or dispute arising out of this Agreement or any of the other Investment Documents shall be proper only in the state or federal courts of the City and State of New York, and all parties to this Agreement and the other Investment Documents hereby consent to such venue and agree that it shall not be not inconvenient and not subject to review by any court other than such courts in New York; (b) The Issuer intends and agrees that the courts of the jurisdictions in which the Issuer is formed and in which the Issuer conducts its business should afford full faith and credit to any judgment rendered by a court of the State of New York against the Issuer under this Agreement, and the Issuer intends and agrees that such courts should hold that the New York courts have jurisdiction to enter a valid, in personam judgment against the Issuer; (c) The Issuer agrees that service of any summons and complaint, and other process which may be served in any suit, action or other proceeding, may be made by mailing via U.S. certified or registered mail or by hand-delivering a copy of such process to the Issuer at its address specified above, with a copy to its counsel at its address specified above; and (d) The Issuer expressly acknowledges and agrees that the provisions of this Section 5.9 are reasonable and made for the express benefit of each of the Holders. SECTION 5.10 Waiver of Trial by Jury. Each party to this Agreement agrees that any suit, action or proceeding, whether claim, defense or counterclaim, brought or instituted by any party hereto or any successor or assign of any party on or with respect to this Agreement or which in any way relates, directly or indirectly, to any event, transaction or occurrence arising out of or in any way connected with this Agreement or dealings of the parties hereto with respect to the subject matter hereof, shall be tried only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS CHOICE. SECTION 5.11 Headings. The headings of the paragraphs and sub-paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement. SECTION 5.12 Severability. To the extent any provision herein violates any applicable law, that provision shall be considered void and the balance of this Agreement shall remain unchanged and in full force and effect. SECTION 5.13 Counterparts. This Agreement may be executed in as many counterpart copies as may be required. It shall not be necessary that the signature of, or on behalf of, each party appear on each counterpart, but it shall be sufficient that the signature of, or on behalf of, each party appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in any proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties. SECTION 5.14 Consent or Approval of Holders. To the extent the terms of this Agreement or any of the other Investment Documents require the Issuer to obtain the consent, waiver or approval of Holders, or if the Issuer wishes to amend this Agreement, such consent, waiver, approval, or amendment shall be effective upon receipt by the Issuer of written consent or approval from the individuals or entities holding not less than two-thirds (2/3rds) of the Registrable Securities then held by, in each case, the Allied Holders and the PG Holders. SECTION 5.15 Governing Law. This Agreement shall be governed by, and interpreted and construed in accordance with, the internal laws of the State of New York (without regard to its conflicts of law principles). (Signatures next page) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written by their authorized representatives thereunto duly authorized. Very truly yours, AU BON PAIN CO., INC. By: /s/ Louis I. Kane ------------------------------- Name: Louis I. Kane Title: Co-Chairman ALLIED CAPITAL CORPORATION By: /s/ ------------------------------- Name: Title: ALLIED CAPITAL CORPORATION II By: /s/ ------------------------------- Name: Title: CAPITAL TRUST INVESTMENTS, LTD. By: /s/ ------------------------------- Name: Title: PRINCES GATE INVESTORS, L.P. By PG Investors, Inc. its General Partner By: /s/ David R. Powers ------------------------------- Name: David R. Powers Title: Vice President ACORN PARTNERSHIP I, L.P. By PG Investors, Inc., its General Partner By: /s/ David R. Powers ------------------------------- Name: David R. Powers Title: Vice President PGI INVESTMENTS LIMITED By PG Investors, Inc., as Attorney-In-Fact By: /s/ David R. Powers ------------------------------- Name: David R. Powers Title: Vice President PGI SWEDEN AB By PG Investors, Inc. as Attorney-In-Fact By: /s/ David R. Powers ------------------------------- Name: David R. Powers Title: Vice President GREGOR VON OPEL By PG Investors, Inc., as Attorney-In-Fact By: /s/ David R. Powers ------------------------------- Name: David R. Powers Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----