-----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, K4kOdyJ3wRhOW32RjV9h4kML3oNLWKO1R/ehRFrCMleQOCMb8ek5P6WT9vBHFlLs iCoBcHfxlZ12oNzrUh4SEA== 0000927356-98-001453.txt : 19980827 0000927356-98-001453.hdr.sgml : 19980827 ACCESSION NUMBER: 0000927356-98-001453 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980712 FILED AS OF DATE: 19980826 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON CHICKEN INC CENTRAL INDEX KEY: 0000894751 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 363904053 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22802 FILM NUMBER: 98698235 BUSINESS ADDRESS: STREET 1: 14123 DENVER WEST PARWAY STREET 2: PO BOX 4086 CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3032789500 MAIL ADDRESS: STREET 1: 14123 DENVER WEST PARKWAY STREET 2: PO BOX 4086 CITY: GOLDEN STATE: CO ZIP: 80401 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 12, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ COMMISSION FILE NUMBER 0-22802 BOSTON CHICKEN, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3904053 (State or other jurisdiction of (IRS Employer incorporation or organization ) Identification No.) 14123 Denver West Parkway P. O. Box 4086 Golden, CO 80401-4086 (Address of principal executive offices, including zip code) (303) 278-9500 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of Common Stock, $.01 par value per share, outstanding as of August 17, 1998: 77,130,853. BOSTON CHICKEN, INC. INDEX
PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Balance Sheets as of December 28, 1997 and July 12, 1998............................................................2 Consolidated Statements of Operations for the quarters and two quarters ended July 13, 1997 and July 12, 1998....................................3 Consolidated Statements of Cash Flows for the quarters and two quarters ended July 13, 1997 and July 12, 1998..........4 Notes to Consolidated Financial Statements...............................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................13 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................19 Item 4. Submission of Matters to a Vote of Security Holders................19 Item 6. Exhibits and Reports on Form 8-K...................................19 Signature Page..............................................................21 Exhibit Index......................................................Exhibit - 1
1 BOSTON CHICKEN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
December 28, July 12, 1997 1998 ------------------- ------------------- (unaudited) ASSETS ------ Current Assets: Cash and cash equivalents (including $10,000 of restricted cash at July 1998)........................... $ 90,559 $ 24,549 Accounts receivable, net................................ 13,894 5,922 Inventories............................................. 16,132 16,716 Prepaid expenses and other current assets............... 1,436 3,914 Deferred income taxes................................... 2,353 2,353 ------------------- ------------------- Total current assets................................ 124,374 53,454 Property and Equipment, net.................................. 530,582 533,327 Notes Receivable, net........................................ 609,175 232,139 Deferred Financing Costs, net................................ 24,570 21,986 Goodwill, net................................................ 639,364 694,862 Other Assets, net............................................ 77,062 71,399 ------------------- ------------------- Total assets....................................... $2,005,127 $1,607,167 =================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable........................................ $ 33,205 $ 15,939 Accrued expenses........................................ 85,207 84,957 Other current liabilities............................... 14,119 11,171 Senior Secured Revolver-Boston Chicken, Inc............. - 48,000 ------------------- ------------------- Total current liabilities.......................... 132,531 160,067 Deferred Franchise Revenue................................... 5,723 5,268 Convertible Subordinated Debt-Boston Chicken, Inc............ 417,020 417,020 Convertible Subordinated Debt-Einstein/Noah Bagel Corp....... 125,000 125,000 Liquid Yield Option Notes.................................... 197,442 205,955 Senior Debt-Einstein/Noah Bagel Corp......................... 24,000 25,825 Deferred Income Taxes........................................ 2,353 2,353 Other Noncurrent Liabilities................................. 44,753 47,904 Minority Interests........................................... 253,630 244,510 Commitments and Contingencies Stockholders' Equity: Preferred Stock----$.01 par value; authorized 20,000,000 shares; no shares issued and outstanding............... - - Common Stock----$.01 par value; authorized 480,000,000 shares; issued and outstanding: 71,400,179 shares at December 1997 and 72,335,078 shares at July 1998............................................... 714 723 Additional paid-in capital.............................. 918,266 925,897 Accumulated deficit..................................... (116,305) (553,355) ------------------- ------------------- 802,675 373,265 ------------------- ------------------- Total liabilities and stockholders' equity......... $2,005,127 $1,607,167 =================== ===================
The accompanying notes to the consolidated financial statements are an integral part of these statements. 2 BOSTON CHICKEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Two Quarter Ended Quarters Ended ------------------------- ------------------------- July 13, July 12, July 13, July 12, 1997 1998 1997 1998 ------------ ----------- ------------ ----------- Revenue: Company stores................................... $ 58,086 $ 170,583 $108,178 $ 374,512 Royalties and franchise related fees............. 37,318 145 78,750 4,687 Interest income.................................. 21,192 - 46,432 3,221 ------------ ----------- ------------ ----------- Total revenue................................. 116,596 170,728 233,360 382,420 Costs and Expenses: Store operations: Food and paper................................ 21,481 59,465 40,215 131,674 Labor......................................... 15,009 51,407 26,762 110,426 Other controllable costs...................... 5,255 14,380 9,995 36,507 Rent, occupancy and related................... 4,885 19,801 8,115 39,248 Contractual and discretionary marketing....... 5,295 10,078 9,258 21,156 General and administrative....................... 15,455 67,160 33,677 120,864 Depreciation and amortization (excluding goodwill amortization)............... 7,573 12,744 15,794 29,550 Goodwill amortization............................ 1,797 4,739 3,677 10,693 Provision for loan losses........................ - 10,000 - 212,000 Losses of Boston Chicken Inc.'s area developers.................................... - 35,258 - 93,337 ------------ ----------- ------------ ----------- Total costs and expenses...................... 76,750 285,032 147,493 805,455 ------------ ----------- ------------ ----------- Income (Loss) from Operations...................... 39,846 (114,304) 85,867 (423,035) Other Income (Expense): Interest expense, net............................ (9,311) (13,925) (16,540) (30,692) Gain (loss) on issuances of subsidiary's stock.......................................... (619) - 82 (17) Other income (expense), net...................... 1,667 (3,940) 1,641 (2,930) ------------ ----------- ------------ ----------- Total other income (expense).................. (8,263) (17,865) (14,817) (33,639) ------------ ----------- ------------ ----------- Income (Loss) Before Income Taxes and Minority Interest......................... 31,583 (132,169) 71,050 (456,674) Income Taxes....................................... 12,509 - 27,942 - Minority Interest in (Earnings) Loss of Subsidiaries............................... (1,836) 7,676 (4,422) 19,624 ------------ ----------- ------------ ----------- Net Income (Loss).................................. $ 17,238 $(124,493) $ 38,686 $(437,050) ============ =========== ============ =========== Basic Earnings (Loss) Per Share.................... $0.26 $(1.72) $0.59 $(6.09) ============ =========== ============ =========== Diluted Earnings (Loss) Per Share.................. $0.25 $(1.72) $0.56 $(6.09) ============ =========== ============ =========== Weighted Average Number of Common Shares Outstanding: Basic.......................................... 65,724 72,303 65,145 71,809 ============ =========== ============ =========== Diluted........................................ 72,080 72,303 72,371 71,809 ============ =========== ============ ===========
The accompanying notes to the consolidated financial statements are an integral part of these statements. 3 BOSTON CHICKEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Two Quarters Ended ------------------------------------------ July 13, July 12, 1997 1998 ------------------ ----------------- Cash Flows from Operating Activities: Net income (loss)............................................... $ 38,686 $(437,050) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization................................. 20,109 40,243 Interest on liquid yield option notes......................... 7,873 8,513 Deferred income taxes......................................... 3,504 - Loss (gain) on sale of subsidiary's stock..................... (82) 17 Minority interests............................................ 4,422 (19,624) Warrant and option expense.................................... - 3,945 Provision for write-down of assets............................ - 28,306 Provision for loan losses..................................... - 212,000 Revenue not recognized from Boston Chicken, Inc.'s area developers.................................................... - 85,677 Losses of Boston Chicken, Inc.'s area developers.............. - 93,337 Gain on disposal of assets.................................... (1,057) (496) Changes in assets and liabilities, excluding effects from acquisition: Accounts receivable and due from affiliates................. (6,811) 7,753 Accounts payable and accrued expenses....................... (49,402) (26,641) Deferred franchise revenue.................................. (7,439) - Other assets and liabilities................................ (5,798) (10,092) ------------------ ----------------- Net cash provided by (used in) operating activities....... 4,005 (14,112) ------------------ ----------------- Cash Flows from Investing Activities: Purchase of property and equipment............................ (37,710) (13,780) Proceeds from the sale of assets.............................. 10,599 3,118 Acquisition of other assets................................... (7,654) - Issuance of notes receivable.................................. (783,121) (316,929) Repayments of notes receivable................................ 472,468 225,682 ------------------ ----------------- Net cash used in investing activities..................... (345,418) (101,909) ------------------ ----------------- Cash Flows from Financing Activities: Proceeds from issuance of common stock........................ 5,747 186 Proceeds from issuance of subsidiary's common stock........... 9,985 - Proceeds from issuance of convertible subordinated debt....... 412,500 - Increase in deferred financing costs.......................... (11,487) - Proceeds from credit facilities............................... 283,200 69,700 Repayments of credit facilities............................... (283,200) (19,875) ------------------ ----------------- Net cash provided by financing activities................. 416,745 50,011 ------------------ ----------------- Net Increase (Decrease) in Cash and Cash Equivalents............ 75,332 (66,010) Cash and Cash Equivalents, beginning of period.................. 100,800 90,559 ------------------ ----------------- Cash and Cash Equivalents, end of period........................ $ 176,132 $ 24,549 ================== =================
The accompanying notes to the consolidated financial statements are an integral part of these statements. 4 BOSTON CHICKEN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION; SEC COMMENTS The consolidated interim financial statements have been prepared by Boston Chicken, Inc. (the "Company") and are unaudited. The financial statements and notes thereto have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not necessarily include all information and footnotes required by generally accepted accounting principles. In the opinion of the Company, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's consolidated financial position, results of operations and cash flows as of July 12, 1998 and for all periods presented have been made. The statements are subject to year-end audit adjustment. A description of the Company's accounting policies and other financial information is included in the audited consolidated financial statements as filed with the Securities and Exchange Commission in the Company's Form 10-K for the year ended December 28, 1997. The consolidated results of operations for the quarter and two quarters ended July 12, 1998 are not necessarily indicative of the results expected for the full year. On August 19, 1998, the Company received a letter from the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "SEC Staff") containing comments of the SEC Staff regarding the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1997 (the "Form 10-K"), as well as related comments on the Company's Quarterly Report on Form 10-Q for the quarterly period ended April 19, 1998 and the Company's Current Reports on Form 8-K dated May 19, 1998 and June 16, 1998 (collectively, with the Form 10-K, the "SEC Documents"). Such comments relate to the accounting for the Company's transactions with its financed area developers and other matters and have been the subject of ongoing discussion between the Company and the SEC Staff since its May 5, 1998 comment letter, previously noted in the Company's June 25, 1998 Form 8-K. The Company intends to continue to attempt to resolve such comments with the SEC Staff in the near future, but has not done so as of the date hereof. The Company's accounting and reporting for such matters in this 10-Q are generally consistent with the accounting and reporting employed in its previous filings with the SEC. However, there can be no assurance that the Company's positions with respect to such comments made by the SEC Staff will be accepted. If such positions are not accepted, the Company may be required to amend the SEC Documents to modify or restate filings with the Securities and Exchange Commission. The Comments made by the SEC Staff with respect to the SEC Documents may have a number of effects on the Company, including, for example: (i) until such comments are resolved with the SEC Staff, the Company will not be able to cause the shelf registration statement that is required to be filed with respect to the preferred stock and common stock of the Company to be issued to the holders of interests in BCEF and Market Partners to become effective; (ii) until such comments are resolved with the SEC Staff, the Company may experience delays to other transactions involving the Company that are subject to review by the Securities and Exchange Commission; and (iii) any material additional or restated disclosure may have an effect on the progress or outcome of the current securities class action litigation against the Company and certain other persons. 2. GOING CONCERN Based upon the decline in store cash flow of the Boston Market system during 1998, unless the Company is able to renegotiate its senior credit facilities, sell assets and/or improve Boston Market store performance, the Company may not generate sufficient liquidity to meet its financial obligations in 1998. As announced in a May 19, 1998 press release and the May 27, 1998 Form 8-K, Arthur Andersen LLP, the Company's independent public accountants, has reissued its report on the Company's 1997 financial statements to include a qualification which states there exists substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities, that might result should the Company be unable to continue as a going concern. See Note 8; Subsequent Events. 3. AREA DEVELOPER FINANCING Area Developer Financing The Company has historically offered convertible and non-convertible secured debt financing to Boston Market area developers to partially finance store development and working capital needs. Interest is set at the applicable reference rate of Bank of America National Trust and Savings Association as established from time to time (8.5% at July 12, 1998 and an average rate of 8.5% for 1998) plus 1%, and is payable each four-week period. The loan is secured by a pledge of substantially all of the assets of the area developer and generally by a pledge of the equity interests of the owners of the developer. As previously announced, the Company has established provisions for potential loan losses on all but one of its area developers' notes and, subsequent to July 12, 1998, the Company has converted outstanding loans to ten area developers into majority equity interests in those area developers. See Note 3(c) herein; Area Developer Information and Note 8; Subsequent Events. (a) LOAN CONVERSION OPTION Under the convertible loans extended to area developers, the Company is entitled to convert all or any portion of the loan amount, subject to a moratorium period, into equity in the area developer at the conversion price set forth in the loan agreement, which is at a premium over the per unit price paid by the investors in the area developer for their equity investment made concurrently with the execution of the loan agreement or subsequent amendments thereto. The Company received a waiver of the moratorium period from all but one of its area developers and on July 15, 1998, the Company converted $564 million of gross loans ($173 million of net loans) to ten of the 13 area developers into a majority equity interest in each of those area developers (see Note 8). Default provisions contained in the area developer loans typically include default in payment of principal and interest, breach of a representation or warranty or of any covenant contained in the loan agreement or security instruments, bankruptcy or bankruptcy-related act of the borrower, resignation or termination of key management personnel, default under the area development agreement, termination of three or more franchise agreements, dissolution or liquidation, material adverse change in financial condition, default of other indebtedness such as the 5 master lease, sublease or any real estate lease, a judgment in excess of $100,000 (not satisfied, vacated or covered by insurance) and the invalidity or termination of any security instrument. To the extent such loan is not fully drawn or has been drawn and repaid, the Company has a corresponding option to acquire, at the loan conversion price, the amount of additional equity it could have acquired by conversion of the loan, had the loan been fully drawn. In March 1998, the Company converted its $119.2 million of loans to BC Great Lakes, L.L.C. ("Great Lakes") into an 85% equity interest in Great Lakes. Prior to conversion, the Company had previously established a $34.4 million provision for potential loan losses related to Great Lakes' loans, reducing the net carrying value of the loans to $84.8 million. The Great Lakes transaction added 113 Boston Market' stores, operating in the Chicago, Detroit, Milwaukee, Toledo metropolitan areas and parts of Indiana to the Company store base. As part of this transaction, the Company assumed approximately $11 million in liabilities owed to third parties. The transaction has been accounted for as a purchase, and, accordingly, the purchase price was allocated to identified assets and liabilities based upon their fair values at the date of the transaction, resulting in goodwill of approximately $63.0 million (based upon a preliminary allocation), which is being amortized over a 35-year life. The operating results of Great Lakes are included in results of operations from the date of acquisition. The following represents the unaudited pro forma results of operations as if the purchase transaction described above had occurred at the beginning of the Company's 1998 fiscal year (in thousands of dollars, except per share data): Total revenue............ $ 406,005 Net loss................. (438,868) Basic loss per share..... $ (6.11) Diluted loss per share... (6.11) (b) COMMITMENTS TO EXTEND AREA DEVELOPER FINANCING The following tables summarize loan commitments, loan availability, outstanding loan balances (included in Notes Receivable on the Company's balance sheets) and contributed capital for Boston Market and area developers (in thousands of dollars, except number of area developers):
DECEMBER 28, JULY 12, 1997 1998 ------------------- -------------------- Boston Market: - ---------------------------------------------------------- Number of area developers receiving financing............. 14 13 Loan commitments.......................................... $ 842,148 $ 810,672 Loan availability......................................... (42,105) (41,596) ------------------- -------------------- Loans outstanding, gross.................................. 800,043 769,076 Loan allowances and loan reductions....................... (198,371) (546,445) ------------------- -------------------- Loans outstanding, net.................................... $ 601,672 $ 222,631 =================== ==================== Contributed capital....................................... $ 276,104 $ 250,499 =================== ====================
As of July 12, 1998, giving effect to the conversion of loans to ten of the Company's area developers into a majority equity interest (see Note 8), the total loan commitments, gross loans outstanding and net loans outstanding, to the remaining three area developers, were $208.1 million, $207.8 million and $47.1 million respectively. 6 The following tables summarize area developer financing activity of boston market area developers (in thousands of dollars):
TWO QUARTERS ENDED ----------------------------------------------- JULY 13, JULY 12, 1997 1998 -------------------- -------------------- Boston Market: - ---------------------------------------------------------- Area developer loan balances, beginning of year........... $ 647,265 $ 800,043 Additional loan advances.................................. 549,956 314,923 Loan repayments........................................... (362,875) (225,681) Loans converted into equity or eliminated in consolidation....................................... (80,000) (120,209) -------------------- -------------------- Area developer loan balances, end of quarter.............. $ 754,346 $ 769,076 ==================== ====================
The majority of the loan advance and repayment activity reflects the revolving nature of the loans, that is, amounts are drawn and repaid to optimize cash management. (C) AREA DEVELOPER INFORMATION Three Boston Market area developers accounted for approximately 13%, 11%, and 11% of the Boston Market area developers' gross notes receivable balance at July 12, 1998 and no other Boston Market area developer individually accounted for 10% or more of such notes receivable balance as of such date. Subsequent to July 12, 1998 (see Note 8), the Company converted two of these area developer loans, representing 13% and 11% of the gross notes receivable balance, into a majority equity interest. A loan is considered impaired if it is probable that the Company will be unable to collect all contractual principal and interest when due. As of December 28, 1997 and July 12, 1998, the Company believed that each of the area developer loans may be impaired. Once a loan is deemed impaired, the Company determines the ultimate collectibility of the loan without regard to the contractual terms of the existing loan. Such evaluation has resulted in a provision for potential loan losses of $212.0 million during the two quarters ended July 12, 1998 (in addition to the $128.0 million provision for potential loan losses during fiscal 1997), which related to 13 of the area developer loans aggregating $881.9 million (including Great Lakes' loans) at July 12, 1998. No provision for potential loan losses was deemed necessary for the remaining one area developer loan which had a loan balance of $7.4 million at July 12, 1998. The provision for potential loan losses has been based upon management's review of use of loan proceeds, the form and amount of consideration in the acquisition of BCEF and Market Partners (see Note 8) and evaluations regarding the cost and availability of capital and the value of the collateral securing the loans. Management will continue to evaluate the extent to which loans are impaired and determine if additional provisions for potential loan losses may be required in future quarters. The provision for potential loan losses does not relieve the area developers of their obligation to repay their indebtedness to the Company. The balance at the beginning of fiscal 1998, average balance for the two quarters ended July 12, 1998 and balance at the end of the second quarter of 1998, of all of the Company's area developer loans, was $800.0 million, $790.3 million and $769.1 million, respectively. The Company recognizes interest income on impaired loans, if in its judgement, the interest is ultimately collectible. Total interest income for the two quarters ended July 12, 1998 recognized on impaired loans was $3.2 million, all of which has been collected by the Company. The total interest income the Company would have earned based upon the contractual terms of the loans was $41.0 million for the two quarters ended July 12, 1998. The activity in the allowance for loan losses for the two quarters ended July 12, 1998 was as follows (in thousands of dollars): Balance at December 28, 1997............. $128,000 Provision for loan losses................ 212,000 Great Lakes loan conversion.............. (34,419) Costs charged to the allowance........... (4,450) Loan write-offs.......................... - ------------------ Balance at July 12, 1998................. $301,131 ================== Commencing from the date the Company announced its intent in October 1997 to acquire BCEF and Market Partners, the Company has recognized in a single line item on its consolidated statement of operations, the net losses of 7 the area developers in which BCEF and Market Partners have preferred equity interests, which aggregated $93.3 million for the two quarters ended July 12, 1998. The losses, which exclude fees to the Company, were primarily non-cash and were due to goodwill and fixed asset writedowns by the area developers. The Company continues to charge such area developers royalties, franchise and related fees and interest, but no longer recognizes these payments as revenue. The area developer net losses recognized by the Company have been correspondingly reduced by the amount of the royalties, franchise and related fees and interest not recognized by the Company, which amounts aggregated $66.2 million for the two quarters ended July 12, 1998. In addition, if an area developer generates insufficient cash on a cumulative basis from store operations, capital contributions and other sources (excluding borrowings from the Company) to pay royalties, interest and franchise fees when due, the Company will not recognize such fees, which amounts aggregated $19.5 million for the two quarters ended July 12, 1998. The area developer losses and revenue not recognized by the Company have been presented as a reduction of the notes receivable balance from area developers in the accompanying balance sheet. The Boston Market area developer notes receivable balance as of December 28, 1997 and July 12, 1998, is summarized as follows (in thousands of dollars):
December 28, July 12, 1997 1998 --------------------- --------------------- Notes Receivable.................. $ 800,043 $ 769,076 Provision for loan losses......... (128,000) (301,131) Losses of area developers......... (49,352) (142,689) Revenue from area developers not recognized.................... (21,019) (102,625) --------------------- --------------------- Notes Receivable, net............. $ 601,672 $ 222,631 ===================== =====================
The following tables set forth certain combined financial information provided to the Company by Boston Market financed area developers. During 1996, two financed area developers were formed, and their data have been included in the table for 1996 from the dates of their respective formation and two financed area developers combined with two other financed area developers with geographically contiguous territories. The table excludes Mid-Atlantic Restaurant Systems L.P., New Jersey Rose, L.L.C., and BC New York, L.L.C. for both years and Mayfair Partners, L.P. and Great Lakes for 1997, the loans to which have been converted into equity or eliminated in consolidation (in thousands, except number of financed area developers and store data):
DECEMBER 29, DECEMBER 28, 1996 1997 ------------------- ------------------- Boston Market Financed Area Developers: - ---------------------------------------------------------- Total number of financed area developers.................. 14 13 Total number of financed area developer stores open....... 841 734 Balance sheet data: Total gross assets..................................... $ 640,534 $ 516,300 Total debt: To the Company...................................... 555,105 687,366 To third parties (including capital lease 23,797 20,462 obligations)....................................... Total other liabilities (including trade payables)..... 105,635 108,974 Total stockholder/partner/member deficit............... (102,754) (377,960)
8
Fiscal Years Ended -------------------------------------------- DECEMBER 29, DECEMBER 28, 1996 1997 -------------------- ------------------- Statement of operations data: Gross revenue.......................................... $ 865,082 $ 801,792 Income (loss) from continuing operations............... (156,505) (337,342) Statement of cash flows data: Cash flows from (used in) operating activities......... $(128,819) $(244,435) Cash flows from (used in) investing activities......... (82,307) (35,555) Cash flows from (used in) financing activities......... 212,366 272,555 -------------------- ------------------- Net change in cash................................ $ 1,240 $ (7,435) ==================== ===================
4. ROYALTIES AND FRANCHISE RELATED FEES Royalties and franchise related fees are comprised of the following (in thousands of dollars):
Quarter Ended Two Quarters Ended --------------------------------- --------------------------------- July 13, July 12, July 13, July 12, 1997 1998 1997 1998 -------------- -------------- ------------- --------------- Royalties............................................. $15,308 $ 107 $36,164 $1,982 Lease and real estate services income................. 7,447 38 16,691 2,534 Initial franchise and area developer fees............. 5,210 - 12,075 - Software license and maintenance fees................. 9,353 - 13,820 171 -------------- -------------- ------------- --------------- $37,318 $ 145 $78,750 $4,687 ============== ============== ============= ===============
5. Commitments Bagel Store Development Funding, L.L.C. ("Bagel Funding") has invested a total of approximately $89.5 million, representing an approximately 21% equity interest in Einstein/Noah Bagel Partners, L.P. ("Bagel Partners"), a majority owned subsidiary of Einstein/Noah Bagel Corp. ("ENBC"), a majority owned subsidiary of the Company. ENBC is the manager of Bagel Funding. Bagel Funding has the right to require Bagel Partners or ENBC to redeem Bagel Funding's equity interest in Bagel Partners at a pre-determined formula price based on store level cash flow of Bagel Partners in the event that, at any time after December 5, 1999 and prior to June 5, 2001, ENBC does not consent to a public offering of such equity interests or the termination of certain rights and obligations under franchise and license agreements between ENBC and Bagel Partners. Such right becomes exercisable prior to December 5, 1999 if there is a Change in Control (as defined in the Bagel Partners partnership agreement) of ENBC. ENBC or Bagel Partners may pay the purchase price for such equity interests in cash, shares of the ENBC's common stock or any combination thereof. The Company and ENBC have entered into agreements with certain vendors which provide for minimum purchases over specified terms. Such agreements call for retroactive rate adjustments or cash settlement in the event of purchase shortfalls. For the quarter ended July 12, 1998, the Company had established provisions of $11.4 million for the amount of rate adjustments or cash settlements anticipated to result from projected shortfalls. In the event there are additional projected shortfalls, the Company and ENBC will be subject to additional charges. 6. CONTINGENCIES The Company, Saad J. Nadhir, former Co-Chairman of the Board and Chief Executive Officer and a former director of the Company, Scott A. Beck, former Co-Chairman of the Board and President and a former director of the Company, and Mark W. Stephens, former Vice-Chairman of the Board and Chief Financial Officer and a former director of the Company (the "Individual Defendants"), and investment banking firms which had underwritten securities offerings by the Company (the "Underwriter Defendants") and the Company's independent public accountants are defendants in a class action lawsuit filed in the United States District Court for the District of Colorado (the "federal proceeding"). The federal proceeding is comprised of separate actions that were consolidated into one 9 action for pre-trial purposes on August 8, 1997. The Company, the Individual Defendants, the Underwriter Defendants and the Company's independent public accountants, are defendants in a separate class action lawsuit filed in Jefferson County District Court in the State of Colorado (the "state proceeding"). The state proceeding is comprised of two separate actions that were consolidated into one action on November 13, 1997. Also on November 13, 1997, the judge in the state proceeding agreed to stay the state proceeding until resolution of the federal proceeding. The complaints in the federal proceeding and the state proceeding allege, among other things, that the Company and the other defendants violated Sections 11, 12(2) and 15 of the Securities Act of 1933, as amended, and Section 10(b) of the Securities Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, as well as certain similar provisions of Colorado state securities statutes. The plaintiffs are seeking, among other things, (i) to certify each of the complaints as a class action on behalf of all persons who purchased securities of the Company during the purported class period, (ii) an award of unspecified compensatory damages, interests and costs to all members of the purported class period and (iii) equitable relief permitted by law, equity or federal or state statutes. On February 10, 1998, the Company filed a motion to dismiss the complaint in the federal case. The Company believes that the complaints are without merit and intends to vigorously defend against the allegations made in such complaints. ENBC, Scott A. Beck, former Chairman of the Board and a former director of ENBC, Mark R. Goldston, former President and Chief Executive Officer and a former director of ENBC, Theodore R. Heininger, former Vice President-Controller of ENBC, W. Eric Carlborg, Chief Financial Officer of ENBC, the underwriters in ENBC's initial public offering and ENBC's independent public accountants are defendants in a class action lawsuit filed in the United States District Court for the District of Colorado. The lawsuit is comprised of separate actions that were consolidated into one action for pre-trial purposes. ENBC and certain of the other defendants are also defendants in a class action lawsuit filed in state court in Jefferson County Colorado, although such action has been stayed pending resolution of the federal case. The complaints allege, among other things, that ENBC and the other defendants violated Sections 11, 12(2) and 15 of the Securities Act of 1933, as amended, and Section 10(b) of the Securities Exchange Act of 1934, as amended and Rule 10b-5 promulgated thereunder, as well as certain similar provisions of Colorado state securities statutes. In each case, the plaintiffs are seeking, among other things, (i) to certify their complaint as a class action on behalf of all persons who purchased the securities of ENBC during the purported class period, (ii) an award of unspecified compensatory damages, interest and costs to all members of the purported class and (iii) equitable relief permitted by law, equity or federal or state statutes. On February 10, 1998, ENBC filed a motion to dismiss the complaint in the federal case. ENBC has stated in its most recent Form 10-Q that it believes that the complaints are without merit and intends to vigorously defend against the allegations made in such complaints. In July 1997, GFI America, Inc. a former vendor of processed beef products to the Company and its area developers, initiated an action against the Company by filing a complaint in the District Court for Hennepin County, Minnesota. In the complaint, the plaintiff asserted various causes of action including misappropriation of trade secrets, breach of unilateral and bilateral contract, breach of fiduciary duty, fraud, promissory estoppel, equitable estoppel and violation of Minnesota trade secrets law arising from the Company's decision to stop purchasing processed beef products from the plaintiff and commence purchasing such products from another vendor. The plaintiff sought injunctive relief and unspecified damages, reasonable attorneys' fees and costs, and such other relief available under state law. The matter was removed to federal court, and in October 1997, the court denied the plaintiff's motion for injunctive relief. The Company filed a motion to dismiss the complaint in September 1997, which motion was granted in part in May 1998. The court dismissed certain of the plaintiff's breach of contract claims and plaintiff's claims for breach of fiduciary duty and negligent misrepresentation and ruled that the plaintiff may amend its complaint to replead certain of its other claims. The plaintiff has requested the court reconsider an earlier discovery motion ruling or, in the alternative, dismiss the case. The case is in the discovery phase. The Company denies the material allegations asserted in the complaint and intends to vigorously defend against the complaint. The Company is subject to various other lawsuits, claims, and other legal matters in the course of conducting its business, including its business as a franchisor. The Company believes that the outcome of such lawsuits, claims, and other legal matters will not have a material impact on the Company's consolidated financial position or results of operations. 7. SEGMENT INFORMATION The Financial Accounting Standards Board has issued Financial Accounting Standard No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS No. 131") which became effective for the Company commencing in the first quarter of 1998. SFAS No. 131 requires disclosure of operating segments, which as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by 10 the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates in two different segments; home meal replacement and retail bagel sales. The Company's Boston Market operations operate in the home meal replacement segment and ENBC's operations operate in the retail bagel segment. The following provides information on the Company's segments (in thousand of dollars):
Two Quarters Ended Two Quarters Ended July 13, 1997 July 12, 1998 ------------------------------------------ ------------------------------------------- Home Meal Home Meal Replacement Retail Bagels Replacement Retail Bagels ------------------- ------------------ ------------------- ------------------ Revenue from external customers................. $ 203,357 $ 30,003 $ 184,046 $198,374 Intersegment revenue....... 2,221 - 3,020 - Income (loss) before income taxes and minority interests................. 51,827 14,801 (410,925) (26,125) Total assets............... 1,488,269 517,502 956,390 650,777
8. Subsequent Events On July 15, 1998, BCEF and Market Partners merged into a wholly owned subsidiary of the Company. The consideration for BCEF was 1,553,991 shares of common stock, 1,204,593 shares of 10% series A exchangeable preferred stock (the "Preferred Stock") with an aggregate liquidation preference of $60.2 million, but initially redeemable at 50% of such face amount increasing over time to 110% of such amount, and $4.5 million in cash. The consideration for Market Partners was 1,946,000 shares of common stock, 1,331,400 shares of Preferred Stock with an aggregate liquidation preference of $66.6 million, but initially redeemable at 50% of such face amount increasing over time to 110% of such amount, and $5.5 million in cash. The Company has agreed to file a shelf registration statement to register the common stock and Preferred Stock (the "Registration Statement") by September 13, 1998 and use its reasonable best efforts to cause the Registration Statement to be declared effective by December 12, 1998. In the event the Shelf Registration is not filed by September 13, 1998, the Company is required to pay $2.5 million to the holders of the common stock and Preferred Stock, excluding certain individuals. In the event the Shelf Registration Statement is not declared effective by December 12, 1998, commencing December 13, 1998, the annual dividend rate on the Preferred Stock will increase to 11% and will further increase by 0.5% for each 90 day period thereafter, up to a maximum rate of 12%. In the event the dividend rate increases, on the date immediately following the date on which the Shelf Registration is declared effective, the dividend rate will be reduced to 10%. Dividends on the Preferred Stock are payable quarterly and may, at the option of the Company, be paid either in cash or additional shares of Preferred Stock for the first twelve dividend payments. Thereafter, dividends will be paid in cash. Commencing with the thirteenth dividend payment, the annual dividend rate will permanently increase by 25 basis points per quarter for each dividend period in which dividends are not paid. In the event of the dissolution, liquidation or winding up of the Company, the Preferred Stock ranks senior to common stock and any other issued junior preferred stock. The holders of the Preferred Stock do not have any voting rights, except as provided by Delaware law. The Company is required to redeem the Preferred Stock on July 15, 2005 at a redemption price equal to 110% of its liquidation preference, plus any unpaid dividends. The Company, at its option, may redeem at any time the Preferred Stock at prices ranging from 50% to 110% of the original liquidation preference, plus unpaid dividends. Upon the occurrence of a change in control, as defined, the Company will be required to make an offer to repurchase all or any part of the Preferred Stock at prices ranging from 65% to 110% of the original liquidation preference, plus unpaid dividends. At any time, the Company has the option to exchange the Preferred Stock in whole for exchange debentures (the "Exchange Debentures"), the principal amount of which will be equal to the liquidation preference. The preferred 11 holders will also be paid all unpaid dividends in cash. The Exchange Debentures, if issued, will have an interest rate, redemption provisions and maturity equivalent to the dividend rate, redemption provisions and maturity of the Preferred Stock. On July 15, 1998, the Company also converted its outstanding loans, to ten of the 11 area developers in which BCEF and Market Partners had preferred equity investments, into majority equity interests. The following is a listing of the amount of the gross loans converted and the percentage of common equity interest acquired in each area developer (in thousands):
COMMON EQUITY INTEREST ACQUIRED LOAN CONVERTED AREA DEVELOPER - -------------------------------------- --------------------- ------------------- P&L Food Services, L.L.C.............. $ 52,277 86% BC Boston, L.P........................ 51,585 91% BCE West, L.P......................... 47,540 83% BC GoldenGate, L.L.C.................. 57,759 96% Finest Foodservice, L.L.C............. 87,936 98% BC Superior, L.L.C.................... 56,893 74% BC Heartland, L.L.C................... 7,370 97% B.C.B.M. Southwest, L.P............... 60,002 95% BC Tri-States, L.L.C.................. 39,636 75% R&A Food Services, L.P................ 103,154 90%
The acquisitions of BCEF, Market Partners and the area developers will be accounted for as purchases, and accordingly, the purchase prices will be allocated to identified assets and liabilities based upon an estimate of their fair values at the date of the acquisitions. The following represents the unaudited pro forma results of operations for the two quarters ended July 12, 1998, as if the purchase transactions described above and the BC Great Lakes purchase transaction as described in Note 3 had occurred at the beginning of the Company's 1998 fiscal year (in thousands of dollars, except per share data): Total revenue....................... $ 654,931 Net loss............................ (331,475) Basic loss per share................ $ (4.53) Diluted loss per share.............. (4.53) Also on July 15, 1998, the Company amended its senior revolving credit facility ("Revolver Facility") and 1996 master lease facility (the "1996 Master Lease Facility" and together with the "Revolver Facility", the "Credit Facility"). The amended Revolver Facility provides the Company with an additional revolving credit facility of $39.3 million consisting of a $4.3 million revolving loan and a $35.0 million revolving liquidity facility. Proceeds of the $4.3 million loan were used to satisfy required payments on the 1995 master lease facility. All borrowings outstanding on the Credit Facility become due October 17, 1998. For any letters of credit which were issued pursuant to the Credit Facility which remain outstanding on October 17, 1998, the Company is required to pledge cash collateral to the lenders for the outstanding balance or provide an irrevocable standby letter of credit to the lenders. As of July 15, 1998, the Company had $4.8 million in letters of credit. All borrowings on the Revolver Facility bear interest at the agent's base rate, plus an applicable margin, or at a eurodollar rate, plus an applicable margin. A commitment fee of 0.5% per annum of the average daily unused portion of the Revolver Facility is required. In connection with the amendment to the Revolver Facility, the Company has guaranteed obligations totaling $4.9 million of certain employees or former employees to one of the Comapany's senior lenders. Pursuant to the amendment of the 1996 Master Lease Facility, the Company agreed to purchase all the assets leased under the facility and to pay the outstanding balance due under the facility of $166.1 million on October 17, 1998. 9. RECLASSIFICATIONS Certain reclassifications have been made to the 1997 financial statements to conform to the 1998 presentation. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CERTAIN STATEMENTS IN THIS FORM 10-Q CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF BOSTON CHICKEN, INC. (THE "COMPANY") AND EINSTEIN/NOAH BAGEL CORP. ("ENBC") AND THEIR RESPECTIVE AREA DEVELOPERS, FRANCHISEES AND LICENSEES, BOSTON MARKET(R) STORES, EINSTEIN BROS.(R) BAGELS AND NOAH'S NEW YORK BAGELS(R) STORES, AND PROGRESSIVE FOOD CONCEPTS, INC. ("PFCI") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: THE SUCCESS OF THE COMPANY'S EFFORTS TO REFINANCE ITS SENIOR CREDIT FACILITIES, RESTRUCTURE ITS PUBLICLY TRADED CONVERTIBLE SUBORDINATED DEBT AND TO SELL ALL OR SOME OF ITS EQUITY INTERESTS IN ENBC, AND TO RAISE CAPITAL THROUGH DEBT OR EQUITY FINANCING; STORE PERFORMANCE (INCLUDING SALES AND PROFIT MARGINS); COMPETITION; SUCCESS OF OPERATING INITIATIVES; DEVELOPMENT AND OPERATING COSTS; ADVERTISING AND PROMOTIONAL EFFORTS; BRAND AWARENESS; ADVERSE PUBLICITY; ACCEPTANCE OF NEW PRODUCT OFFERINGS (E.G., MENU ITEMS AND PRICING STRUCTURES); CHANGES IN BUSINESS STRATEGY; CHANGES IN DEVELOPMENT PLANS; AVAILABILITY AND COST OF CAPITAL; FOOD, LABOR AND EMPLOYEE BENEFIT COSTS; CHANGES IN GOVERNMENT REGULATIONS; REGIONAL WEATHER CONDITIONS; AND OTHER FACTORS REFERENCED IN THIS FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE COMMISSION. THE CAUTIONARY STATEMENTS MADE PURSUANT TO THE REFORM ACT HEREIN AND ELSEWHERE BY THE COMPANY SHOULD NOT BE CONSTRUED AS EXHAUSTIVE OR AS ANY ADMISSION REGARDING THE ADEQUACY OF DISCLOSURES MADE BY THE COMPANY PRIOR TO THE EFFECTIVE DATE OF THE REFORM ACT. THE COMPANY CANNOT ALWAYS PREDICT OR DETERMINE AFTER THE FACT WHAT FACTORS WOULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING STATEMENTS OR OTHER STATEMENTS. IN ADDITION, READERS ARE URGED TO CONSIDER STATEMENTS THAT INCLUDE THE TERMS "BELIEVES", "BELIEF", "EXPECTS", "PLANS", "OBJECTIVES", "ANTICIPATES", "INTENDS" OR THE LIKE TO BE UNCERTAIN AND FORWARD-LOOKING. ALL CAUTIONARY STATEMENTS MADE HEREIN SHOULD BE READ AS BEING APPLICABLE TO ALL FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR. ALL FORWARD-LOOKING STATEMENTS RELATING TO THE COMPANY'S ATTEMPT TO REFINANCE AND RESTRUCTURE ITS SENIOR DEBT, 1995 MASTER LEASE AND ITS OUTSTANDING PUBLICLY TRADED CONVERTIBLE SUBORDINATED DEBENTURES AND TO RAISE ADDITIONAL DEBT AND/OR EQUITY FINANCING ARE SUBJECT, AMONG OTHER THINGS, TO THE FORMULATION BY THE COMPANY AND ITS CREDITORS OF AN ACCEPTABLE REFINANCING AND RESTRUCTURING PLAN, THE CONSENT OF THE REQUIRED PERCENTAGE OF SUCH CREDITORS TO SUCH PLAN, THE AVAILABILITY TO THE COMPANY OF VARIOUS REFINANCING ALTERNATIVES AND MARKET CONDITIONS GENERALLY. ARTHUR ANDERSEN, LLP, THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS, HAS REISSUED ITS REPORT ON THE COMPANY'S 1997 FINANCIAL STATEMENTS TO INCLUDE A QUALIFICATION WHICH STATES THERE IS SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN. ALL STATEMENTS MADE CONCERNING EXPECTED FINANCIAL PERFORMANCE, ONGOING BUSINESS STRATEGIES AND POSSIBLE FUTURE ACTIONS WHICH THE COMPANY INTENDS TO PURSUE CONSTITUTE FORWARD-LOOKING STATEMENTS. THE IMPLEMENTATION OF THESE STRATEGIES AND OF SUCH FUTURE ACTIONS AND THE ACHIEVEMENT OF SUCH FINANCIAL PERFORMANCE ARE EACH SUBJECT TO NUMEROUS CONDITIONS, UNCERTAINTIES AND RISK FACTORS. ACCORDINGLY, NO ASSURANCE CAN BE GIVEN THAT THE COMPANY WILL BE ABLE TO SUCCESSFULLY ACCOMPLISH ITS STRATEGIC OBJECTIVES OR ACHIEVE SUCH FINANCIAL PERFORMANCE. THE COMPANY IS ATTEMPTING TO RESOLVE CERTAIN COMMENTS OF THE SEC STAFF WITH RESPECT TO CERTAIN OF ITS PERIODIC FILINGS UNDER THE SECURITIES EXCHANGE ACT OF 1934. IF THE COMPANY'S POSITIONS ARE NOT ACCEPTED, THE COMPANY MAY BE REQUIRED TO AMEND SUCH FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. SEE NOTE 1 TO THE FINANCIAL STATEMENTS. GENERAL The move to a Company-controlled system has significantly impacted the Company's results of operations and financial position. Commencing from the date the Company announced its intent to acquire BC Equity Funding, L.L.C. ("BCEF") and Market Partners, L.L.C. ("Market Partners"), the Company recognized, in a single line item on its consolidated statement of operations, the net losses of the area developers in which BCEF and Market Partners have preferred equity investments. The Company continues to charge such area developers royalties, franchise and related fees and interest, but the Company no longer recognizes these payments as revenue. As a result, the area developers' net losses recognized by the Company have been correspondingly reduced by the amount of the royalties, franchise and related fees and interest not recognized by the Company. Additionally during the fourth quarter of 1997, ENBC acquired a majority equity interest in all of its area developers. As a result of this acquisition, the revenue generated by ENBC as a lender, franchisor and service provider is eliminated in consolidation and replaced with store revenue and operating expenses. As a result of the foregoing, the Company's results of operations for the quarter and two quarters ended July 12, 1998 are not readily comparable to the quarter and two quarters ended July 13, 1997. Commencing in the third quarter of 1998, the Company completed the acquisition of BCEF and Market Partners and converted its loans 13 into a majority equity interest in ten of its 13 area developers. Consequently, the results of operations in future quarters will not be readily comparable to prior quarters. RESULTS OF OPERATIONS Revenue. Total revenue increased $54.1 million or 46% for the quarter ended July 12, 1998 over the quarter ended July 13, 1997 and increased $149.1 million or 64% for the two quarters ended July 12, 1998 over the comparable prior period. Royalties and franchise related fees decreased $37.2 million or nearly 100% and interest income decreased $21.2 million or 100% for the quarter ended July 12, 1998 over the quarter ended July 13, 1997. Royalties and franchise related fees decreased $74.1 million or 94% and interest income decreased $43.2 million or 93% for the two quarters ended July 12, 1998 over the comparable prior period. As a result of the Company's anticipated acquisition of BCEF and Market Partners, the Company did not recognize royalties, franchise and related fees and interest income totaling $25.1 million for the quarter ended July 12, 1998 and $66.2 million for the two quarters ended July 12, 1998, from 11 of its 14 area developers. Also, as a result of certain area developers generating insufficient cash on a cumulative basis from store operations, capital contributions and other sources (excluding borrowings from the Company) to pay royalties, interest and franchise fees when due, the Company did not recognize revenue aggregating $12.1 million and $19.5 million during the second quarter of 1998 and two quarters ended July 12, 1998, respectively. Further, ENBC's conversion to a company-owned system has resulted in its royalties and franchise and related fees and interest income being replaced with company-owned store revenue. Revenue from Company restaurants is significantly affected by the average number of restaurants in the periods being compared. The average number of Company-owned Boston Market restaurants was 413 for the quarter ended July 12, 1998 compared to 225 Company-owned Boston Market restaurants for the quarter ended July 13, 1997. The average number of Company-owned Boston Market restaurants was 351 for the two quarters ended July 12, 1998 compared to 173 Company-owned Boston Market restaurants for the two quarters ended July 13, 1997. The increase in the average number of Company-owned Boston Market restaurants was primarily attributable to the acquisition of majority equity interests in Mayfair Partners, L.P. and B.C. Great Lakes, L.L.C. ("Great Lakes"). The average number of ENBC company-owned stores was 554 for the quarter ended July 13, 1998 compared to none for the quarter ended July 13, 1997. The average number of ENBC company-owned stores was 557 for the two quarters ended July 12, 1998 compared to seven ENBC company-owned stores for the two quarters ended July 13, 1997. The increase in the average number of ENBC company-owned stores was attributable to the acquisition of a majority equity interest in all of its area developers in December 1997. Revenue from Company- owned restaurants and ENBC company-owned stores increased $112.5 million or 194% for the quarter ended July 12, 1998 compared to the quarter ended July 13, 1997. Company-owned Boston Market restaurants accounted for $24.6 million or 22% of the increase and ENBC company-owned stores accounted for $87.9 million or 78% of the increase. Revenue from Company-owned and ENBC company-owned restaurants increased $266.3 million or 246% for the two quarters ended July 12, 1998 compared to the two quarters ended July 13, 1997. Company-owned Boston Market restaurants accounted for $70.1 million or 26% of the increase and ENBC company- owned stores accounted for $196.2 million or 74% of the increase. Commencing in the third quarter of 1998, the Company anticipates further increases in revenue from Company-owned restaurants as a result of the Company's conversion of its loans into a majority equity interest in ten of its 13 area developers. Cost of operations. The cost of restaurant operations (food and paper; labor; other controllable costs, including telephone, utilities, security, repairs and maintenance, supplies, help wanted advertisements, uniforms and laundry; rent; other occupancy and related and contractual and discretionary marketing) increased $103.2 million or 199% for the quarter ended July 12, 1998 over the quarter ended July 13, 1997, and increased $244.7 million or 259% for the two quarters ended July 12, 1998 over the comparable prior period. The increases were primarily due to an increase in the number of Company-owned Boston Market restaurants and ENBC company-owned stores. For the quarter ended July 12, 1998, Company-owned Boston Market restaurants accounted for $27.5 million or 27% of the increase and ENBC company-owned stores accounted for $75.7 million or 73% of the increase. For the two quarters ended July 12, 1998, Company-owned Boston Market restaurants accounted for $72.9 million or 30% of the increase and ENBC company-owned stores accounted for $171.8 million or 70% of the increase. Cost of restaurant operations for Company-owned Boston Market restaurants, as a percentage of restaurant revenue, increased from 89.4% for the quarter ended July 13, 1997 to 96.1% for the quarter ended July 12, 1998. Cost of restaurant operations for Company-owned Boston Market restaurants, as a percentage of restaurant revenue, increased from 87.3% for the two quarters ended July 13, 1997 to 94.0% for the two quarters ended July 12, 1998. The increases were primarily attributable to higher labor costs, coupled with lower revenue which resulted in rent, utilities and other fixed store operating costs representing a greater percentage of restaurant revenue. Cost of store operations for ENBC company-owned stores, as a percentage of store 14 revenue, was 86.1% for the quarter ended July 12, 1998. There were no ENBC company-owned stores for the comparable 1997 period. Cost of store operations for ENBC company-owned stores, as a percentage of store revenue, increased from 81.2% for the two quarters ended July 13, 1997 to 87.4% for the two quarters ended July 12, 1998. The increases were due to differences in store concept and configuration. ENBC company-owned stores operating in 1997 were significantly smaller in size and were staffed with fewer employees. Stores operating in the 1998 quarters operate under ENBC's current Einstein Bros. Bagels and Noah's New York Bagels concepts. General and administrative expenses. Included in general and administrative expenses for the quarter ended July 12, 1998, were $30.0 million of special charges consisting of $11.4 of provisions for vendor commitments for the Boston Market system associated with anticipated purchase shortfalls, $8.6 million of computer software and fixed asset write-offs for assets no longer in use, $5.5 million of severance charges (including $3.5 million of stock option expense) for former management and $4.5 million of restaurant closure and impairment losses. Disregarding these special charges, general and administrative expenses increased $21.7 million or 140% for the quarter ended July 12, 1998 over the quarter ended July 13, 1997, representing general and administrative expenses attributable to the Boston Market system which increased $17.5 million or 150% for the quarter ended July 12, 1998 compared to the prior comparable quarter and ENBC's general and administrative expenses increased $4.2 million or 111% for the quarter ended July 12, 1998 compared to the prior comparable quarter. Disregarding these special charges, general and administrative expenses increased $57.2 million or 170% for the two quarters ended July 12, 1998 over the two quarters ended July 13, 1997 representing expenses attributable to the Boston Market system which increased $44.1 million or 185% for the two quarters ended July 12, 1998 compared to the prior comparable period and ENBC's general and administrative expenses increased $13.1 million or 133% for the two quarters ended July 12, 1998 compared to the prior comparable period. The increases in both the Boston Market's and ENBC's general and administrative expenses were primarily due to larger company-owned restaurant and store bases in 1998 compared to 1997. Commencing in the third quarter of 1998, the Company anticipates further increases in general and administrative expenses as a result of the Company's conversion of its loans into a majority equity interest in ten of its 13 area developers. Depreciation and amortization (excluding goodwill amortization). Depreciation and amortization increased $5.2 million or 68% for the quarter ended July 12, 1998 over the quarter ended July 13, 1997. The Company's depreciation and amortization increased $0.4 million or 6% for the quarter ended July 12, 1998 compared to the prior comparable quarter and ENBC's depreciation and amortization increased $4.8 million or 524% for the quarter ended July 12, 1998 compared to the prior comparable quarter. Depreciation and amortization increased $13.8 million or 87% for the two quarters ended July 12, 1998 over the prior comparable period. The Company's depreciation and amortization increased $3.0 million or 21% for the two quarters ended July 12, 1998 compared to the prior comparable period and ENBC's depreciation and amortization increased $10.8 million or 30% for the two quarters ended July 12, 1998 compared to the prior comparable period. The increases in both the Company's and ENBC's depreciation and amortization were primarily due to larger company-owned restaurant and store bases in 1998 compared to 1997. Commencing in the third quarter of 1998, the Company anticipates further increases in depreciation and amortization as a result of the Company's conversion of its loans into a majority equity interest in ten of its 13 area developers. Goodwill amortization. Goodwill amortization increased $2.9 million or 164% for the quarter ended July 12, 1998 over the quarter ended July 13, 1997. The Company's goodwill amortization increased $0.9 million or 70% for the quarter ended July 12, 1998 compared to the prior comparable quarter and ENBC's goodwill amortization increased $2.0 million or 438% for the quarter ended July 12, 1998 compared to the prior comparable quarter. Goodwill amortization increased $7.0 million or 191% for the two quarters ended July 12, 1998 over the comparable prior period. The Company's goodwill amortization increased $2.4 million or 92% for the two quarters ended July 12, 1998 compared to the prior comparable period and ENBC's goodwill amortization increased $4.6 million or 27% for the two quarters ended July 12, 1998 compared to the prior comparable period. The increases in both the Company's and ENBC's goodwill amortization were primarily due to acquisitions of controlling interests in area developers in 1998 and 1997. Commencing in the third quarter of 1998, the Company anticipates further increases in goodwill amortization as a result of the Company's conversion of its loans into a majority equity interest in ten of its 13 area developers. Provision for loan losses. Primarily as a result of lower than expected store sales and customer transactions in 1998, the Company established a $10.0 million provision for potential loan losses in the second quarter of 1998 and $212.0 million provision for potential loan losses for the two quarters ended July 12, 1998 (in addition to the $128.0 million provision for potential loan losses established in the fourth quarter of 1997), after a determination that an additional portion of its loans to certain of its area developers may not be recoverable. There can be no assurance that 15 the Company's loan recoverability analysis will not result in additional provisions for potential loan losses in subsequent quarters. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 13. Losses of Boston Chicken, Inc.'s Area Developers. As a result of the Company's anticipated acquisition of BCEF and Market Partners, the Company has recognized, in a single line item on its statement of operations, the net losses of the area developers in which BCEF and Market Partners had preferred equity interests. The losses, which totaled $35.3 million for the quarter ended July 12, 1998 and $93.3 million for the two quarters ended July 12, 1998, were primarily non-cash due to goodwill and fixed asset write-downs by the area developers. Such amount represents the net losses (reduced by royalties, franchise and related fees and interest not recognized by the Company) of the area developers. The recognition of the area developer losses has been accounted for as a reduction of the area developers' note receivable balance. The Company will continue to recognize the area developer net losses in a single line item on its statement of operations until it has acquired a majority equity interest in such area developers through conversion of its convertible loans to such area developers or other acquisition by the Company of such area developers. Beginning in the third quarter of 1998, the Company acquired a majority equity interest in ten of the eleven area developers in which BCEF and Market Partners have preferred equity interests. Commencing in the third quarter of 1998, the Company will consolidate such area developer's results of operations in its financial statements. Due in part to significant depreciation charges associated with an increased Company restaurant base and significant goodwill amortization charges which would result from the transactions, the Company would expect to report a net loss in at least 1998. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 13. Other Income (Expense). The Company incurred $17.9 million of other expenses for the second quarter of 1998 compared to $8.3 million for the second quarter of 1997. The Company incurred $33.6 million of other expenses for the two quarters ended July 12, 1998 compared to $14.8 million for the comparable prior period. The increases primarily related to additional interest expense incurred on the Company's $287.5 million of convertible subordinated debentures and ENBC's $125.0 million of convertible subordinated debentures, both issued in the second quarter of 1997. Income Taxes. Due to the uncertainty of having sufficient taxable income to utilize losses generated in the 1998 quarters, no income tax benefit was provided. Minority Interest. For the quarter ended July 12, 1998, the minority interests in subsidiaries absorbed $7.7 million of such subsidiaries' losses whereas for the quarter ended July 13, 1997, the minority interests in subsidiaries represented a charge of $1.8 million. For the two quarters ended July 12, 1998, the minority interests in subsidiaries absorbed $19.6 million of such subsidiaries' losses whereas for the two quarters ended July 13, 1997, the minority interests in subsidiaries represented a charge of $4.4 million. The changes were primarily due to ENBC incurring a loss in 1998 compared to reporting income in the prior comparable periods. LIQUIDITY AND CAPITAL RESOURCES Historic Sources and Uses of Cash Cash used in operations totaled $14.1 million for the two quarters ended July 12, 1998 compared to $4.0 million of cash generated from operations for the two quarters ended July 13, 1997. The reduction in cash was primarily attributable to less cash generated from operations before non-cash charges and credits partially offset by less cash used for working capital purposes. Included in the cash flows from operating activities for 1998, was $85.7 million of royalties, franchise related fees and interest paid to the Company by its area developers but not recognized as revenue. For the two quarters ended July 12, 1998, certain area developers utilized loan proceeds from the Company to pay these royalties, franchise related fees and interest. Through the two quarters ended July 12, 1998, the Company borrowed $10.0 million from its revolving credit facility to fund the escrow account pursuant to the Agreement and Plan of Merger to acquire BCEF and Market Partners and borrowed an additional $38.0 million from its revolving credit facility to fund scheduled contractual payments on indebtedness and for working capital purposes. During the two quarters ended July 12, 1998, ENBC had $1.8 million in net borrowings on its senior credit facilities. The Company's primary use of capital has been to fund loan obligations to its financed area developers. Net loan advances to Boston Market area developers were $89.2 million for the two quarters ended July 12, 1998 (consisting 16 of $314.9 million of loan advances, net of $225.7 million of loan repayments). Net loan advances by the Company and ENBC to their area developers for the two quarters ended July 13, 1997 were $305.5 million (consisting of $772.1 million of loan advances, net of $466.6 million of loan repayments). The net amounts advanced during 1998 were primarily used to fund operating expenses. During the first quarter of 1998, the Company converted its $119.2 million of loans to Great Lakes, the Company's area developer for the Great Lakes region, into an 85% equity interest in Great Lakes. On July 15, 1998, the Company acquired BCEF and Market Partners in exchange for consideration of $126.8 million aggregate liquidation preference of Preferred Stock, 3.5 million shares of common stock and $10.0 million in cash from the escrow account discussed above. The 10% dividend on the Preferred Stock is payable in additional shares of Preferred Stock for a period of three years and payable in cash thereafter. The Preferred Stock is optionally redeemable by the Company at any time, in cash, at redemption prices which start at 50% of its face value and increase over time. The Preferred Stock is mandatorily redeemable in 2005 at a price of 110% of its face value. Also, on July 15, 1998, the Company converted $564 million of loans by the Company to ten financed area developers into a majority equity interest in each of those area developers. As a result of the conversions, the number of company-owned Boston Market restaurants increased by 527, bringing the total number of company-owned stores to 936, or approximately 81% of the Boston Market system. The Company's and ENBC's other uses of capital have included the opening of new ENBC stores, maintaining their existing restaurants and maintaining their corporate infrastructure. Total other capital expenditures were $13.8 million for the two quarters ended July 12, 1998 and $33.7 million for the two quarters ended July 13, 1997. Expected Sources and Uses of Cash The Company's uses of capital for the remainder of 1998, other than providing working capital for operating losses (including scheduled payments on the Company's lease obligations) and expenses associated with the restructuring of existing indebtedness, will be maintaining stores and paying interest and principal on outstanding indebtedness. ENBC's primary uses of capital in 1998, other than providing working capital for normal operating expenses, will be maintaining stores, opening new stores and paying principal and interest on outstanding indebtedness. For the remainder of 1998, the Company expects its primary sources of cash will be from additional senior financing described below and sale of assets. On July 15, 1998, the Company renegotiated its revolving credit facility (the "Revolver Facility") and its 1996 master lease financing (the "1996 Master Lease Facility," and together with the "Revolver Facility," the "Credit Facility"). The senior lenders who are party to the Credit Facility provided the Company with $39.3 million in additional financing, consisting of a $35.0 million liquidity facility ("Liquidity Facility") and a $4.3 million term loan facility (together the "1998 Credit Facility"). The Liquidity Facility is being used primarily for working capital, refinancing and restructuring costs and scheduled debt service. The 1998 Credit Facility matures on October 17, 1998. Pursuant to the 1998 Credit Facility, the lenders thereunder have agreed to forbear the second quarter net weekly per store average revenue covenant contained in the Credit Facility. Covenants contained in the 1998 Credit Facility include, among others, a minimum cumulative systemwide cash flow requirement and adherence by the Company to an agreed upon operating budget. Pursuant to the 1998 Credit Facility, the Company also agreed to change the maturity date of the Credit Facility to October 17, 1998, at which time $52.8 million, including $4.8 million in letters of credit under the Revolver Facility and $166.1 million under the 1996 Master Lease Facility, become due. The Company also had outstanding as of July 15, 1998 an additional $51.0 million of master lease financing (the "1995 Master Lease Facility") that contains cross-default and cross-acceleration provisions with the facilities agreement governing the Credit Facility. Any such acceleration would also permit holders of other subordinated debt of the Company to exercise their remedies, which include acceleration of their debt, which in the aggregate totaled approximately $623 million as of July 15, 1998. Also, in early October 1998, a portion of the 1995 Master Lease Facility expires. The Company has agreed to purchase the assets being leased for $21.1 million. The Company will attempt to renegotiate the terms of the 1995 Master Lease or refinance the 1995 Master Lease in conjunction with its refinancing of its other senior debt. The Company will attempt to refinance its senior debt, restructure its outstanding publicly traded convertible subordinated debt and raise additional debt and/or equity financing before the Credit Facility and 1998 Credit Facility mature. There can be no assurance the Company will be successful in such restructuring and refinancing efforts. Any such restructuring, refinancing and/or additional financing may entail significant equity dilution to the holders of the Company's common stock at that time. Should the Company be unable to refinance its senior debt, restructure its 17 outstanding publicly traded convertible subordinated debt and raise additional debt and/or equity, it may be forced to seek protection under applicable bankruptcy law. The Company's current liquidity may adversely affect its relationship with its suppliers which could have a material adverse effect on the Company's business, financial condition and results of operations. Although the Company is evaluating the sale of assets in an effort to improve its liquidity position, there can be no assurance that the Company will be successful in obtaining the additional capital needed to implement its business plan and meet its financial obligations. Additionally, should the Company be able to sell assets, there can be no assurance the Company will recover the full amount invested in such assets. 18 PART II - OTHER INFORMATION Item 1. Legal Proceedings. The information set forth under Note 6 of the Company's Notes to Consolidated Financial Statements contained in Part I of this Form 10-Q is incorporated herein by reference thereto. Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting was held on May 20, 1998. Each of the Company's current directors was elected. The votes cast for and withheld for each such director were as follows: Director For Withheld -------- --- -------- J. Michael Jenkins 58,477,387 974,538 Arnold C. Greenberg 58,315,351 1,136,574 J. Bruce Harreld 58,332,807 1,119,118 M Howard Jacobson 58,300,193 1,151,732 Peer Pedersen 58,348,704 1,103,221 Item 6. Exhibits and Reports on Form 8-K A. Exhibits: See Exhibit Index appearing elsewhere herein, which is incorporated herein by reference. B. Reports on Form 8-K: The Company filed three reports on Form 8-K for the quarter ended July 12, 1998. The first report was dated May 1, 1998 and reported under Item 5 (Other Events) that the Company had named J. Michael Jenkins as Chairman of the Board, Chief Executive Officer and President of the Company. The Company also reported under Item 5 (Other Events) that Saad J. Nadhir, Scott A. Beck and Mark W. Stephens had resigned from their various executive officer and director positions with the Company. The second report was dated May 27, 1998 and reported, among other things, under Item 5 (Other Events) (i) the Company's first quarter results of operations, (ii) that Arthur Andersen LLP, the Company's auditors, had included an explanatory paragraph in its audit report that there is substantial doubt about the Company's ability to continue as a going concern, (iii) that Lawrence E. White was named Chief Financial Officer of the Company, and (iv) that the Company had retained Morgan Stanley & Co. Incorporated to advise and assist the Company in evaluating the sale of all or a portion of the shares of common stock of ENBC owned by the Company to one or more third parties. In addition, the Company also reported under Item 5 (Other Events) certain financial statement and risk factor disclosure included in its Joint Information Statement/Offering Memorandum circulated to holders of interests in BCEF and Market Partners seeking their consent to the Merger. The third report was dated June 25, 1998 and reported under Item 5 (Other Events) (i) the status of the Company's negotiations with the agent banks under its senior credit facilities and its intention to attempt to refinance and restructure its existing senior debt and publicly traded convertible subordinated debt and (ii) that comments were received, and additional comments were expected to be received, from the Securities and Exchange Commission regarding certain filings by the Company. Subsequent to the end of the quarter, the Company has to date filed two reports on Form 8-K. The first report was dated July 15, 1998 and reported under Item 5 (Other Events) (i) the renegotiation of its senior credit facility with Bank of America National Trust and Savings Association and General Electric Capital Corporation to provide the Company with an additional $39.3 million in financing expiring October 17, 1998 at which time approximately $219 million of other senior debt also becomes due, (ii) announce the engagement of BT Alex.Brown to assist in the restructuring the Company's publicly traded convertible subordinated debt, (iii) conversion by the Company of a total of $564 million of loans to ten area developers into a majority equity interest in those area developers and (iv) the acquisition of BC Equity Funding, L.L.C. and Market Partners, L.L.C., funds that previously held preferred equity interests in 11 of the Company's 13 area developers, for aggregate consideration of (a) $126.8 19 million of the Company's 10% Series A Exchangeable Preferred stock, (b) 3.5 million shares of the Company's common stock and (c) $10.0 million in cash. The second report was dated July 15, 1998 and reported under Item 2 (Acquisition or Disposition of Assets) that the Company on July 15, 1998, had completed the acquisition of the following area developers pursuant to the conversion of approximately $564 million of loans into a majority equity interest in each of those area developers: B.C.B.M. Southwest, L.P. (formerly BC Texas, Inc.), R&A Food Services, L.P. (formerly R&A Food Services, Inc.), Finest Foodservice, L.L.C., P&L Food Services, L.L.C., BC Boston, L.P., BCE West, L.P., GoldenGate, L.L.C., BC Tri-States, L.L.C., BC Superior, L.L.C. and BC Heartland, L.L.C. The Company also reported that on July 15, 1998, it also acquired BC Equity Funding, L.L.C. and Market Partners, L.L.C., funds that previously held preferred equity interests in 11 of the Company's 13 area developers, including the ten area developers whose loans were converted. The Company reported that the required historical and pro forma financial statements for the aforementioned acquisitions would be filed as soon as practicable. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOSTON CHICKEN, INC. Date: August 25, 1998 /s/ J. MICHAEL JENKINS ----------------------------------------------------- J. Michael Jenkins Chairman of the Board, Chief Executive Officer and President Date: August 25, 1998 /s/ LAWRENCE E. WHITE ----------------------------------------------------- Lawrence E. White Chief Financial Officer (Principal Financial Officer) 21 EXHIBIT INDEX
SEQUENTIAL ---------- EXHIBIT PAGE - ------- ---- NUMBER Exhibits NUMBER - ------ -------- ------ 4.1 Registration Rights Agreement dated as of July 15, 1998 among Boston Chicken, Inc., BCI Acquisition Sub, L.L.C. and BC Equity Funding, L.L.C. and Market Partners, L.L.C. 10.1 First Amendment and Consent to Amended and Restated Facilities Agreement dated as of July 15, 1998 by and among Boston Chicken, Inc., Bank of America National Trust and Savings Association and General Electric Capital Corporation (each individually and in their representative capacities). 10.2 Second Amendment and Consent to Secured Revolving Credit Agreement dated as of July 15, 1998 by and among Boston Chicken, Inc., Bank of America National Trust and Savings Association, General Electric Capital Corporation, LaSalle National Bank and Sanwa Business Credit Corporation and Hour LLC (each individually and/or in their representative capacities). 10.3 Amendment No. 2 to Master Lease Agreement No. 2 dated as of July 15, 1998 by and among Boston Chicken, Inc. and General Electric Capital Corporation (individually and in its representative capacity). 10.4 Second Amendment dated June 25, 1998 to the Amended and Restated Accounting and Administrative Services Agreement between the Company and Einstein/Noah Bagel Corp. ("ENBC") (incorporated by reference to Exhibit 10.4 to ENBC's quarterly report on Form 10-Q for the quarter ended July 12, 1998). 10.5 Second Amendment dated June 25, 1998 to the Amended and Restated Computer and Communications Systems Services Agreement between the Company and ENBC (incorporated by reference to Exhibit 10.5 to ENBC's quarterly report on Form 10-Q for the quarter ended July 12, 1998). 10.6 Termination Agreement dated June 25, 1998 between the Company and ENBC terminating the Loan Agreement dated May 27, 1996, as amended, between the Company and ENBC (incorporated by reference to Exhibit 10.6 to ENBC's quarterly report on Form 10-Q for the quarter ended July 12, 1998). 10.7 First Amendment to Office Sublease effective as of May 1, 1998 between the Company and ENBC (incorporated by reference to Exhibit 10.7 to ENBC's quarterly report on Form 10-Q for the quarter ended July 12, 1998). 27 Financial Data Schedule.
________________________________________ *In the case of incorporation by reference to documents filed by Einstein/Noah Bagel Corp. under the Securities Exchange Act of 1934, as amended, Einstein/Noah Bagel Corp.'s file number under that Act is 0-21097. EXHIBIT 1 EX-4.1 2 REGISTRATION RIGHTS AGREEMENT DATED JULY 15, 1998 EXHIBIT 4.1 =============================================================================== REGISTRATION RIGHTS AGREEMENT Dated July 15, 1998 among BOSTON CHICKEN, INC. BCI ACQUISITION SUB, L.L.C. and BC EQUITY FUNDING, L.L.C. MARKET PARTNERS, L.L.C. ================================================================================ REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into on July 15, 1998, among BOSTON CHICKEN, INC., a Delaware corporation (the "Company"), BCI ACQUISITION SUB, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of the Company ("BCI Sub"), BC EQUITY FUNDING, L.L.C., a Delaware limited liability company ("BCEF"), and MARKET PARTNERS, L.L.C., a Delaware limited liability company ("Market Partners"). This Agreement is made pursuant to the Agreement and Plan of Merger dated March 16, 1998, between the Company, BCI Sub, BCEF and Market Partners (the "Merger Agreement"), which provides for the merger (the "Merger") of BCEF and Market Partners with and into BCI Sub, with BCI Sub as the surviving corporation. As a result of the Merger, holders of limited liability company interests in BCEF or Market Partners (the "Holders") will receive, in the aggregate, (i) $126.8 million aggregate liquidation preference 10% Series A Exchangeable Preferred Stock of the Company (the "Preferred Stock"), (ii) 3,500,000 shares of Common Stock, par value $0.01 per share, of the Company (the "Common Stock") and (iii) $10,000,000 in cash (to be divided among only those Holders who are not BCI Insiders). As part of the consideration provided for in the Merger Agreement and, with respect only to Holders who have not previously executed and delivered to BCI a Letter of Transmittal containing the release set forth therein, in consideration of such Holders providing the Release substantially in the form set forth in the Letter of Transmittal, the Company has agreed to provide to the Holders who are not BCI Insiders the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Merger Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time -------- to time, and the rules and regulations of the SEC promulgated thereunder. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended -------- from time to time, and the rules and regulations of the SEC promulgated thereunder. "BCEF" shall have the meaning set forth in the preamble to this ---- Agreement and shall also include BCEF's successors. "BCI Insiders" shall have the meaning set forth in the Merger ------------ Agreement. "Certificate of Designations" shall mean the Certificate of --------------------------- Designations relating to the Preferred Stock dated as of the date hereof, executed by the Company and duly filed on the date hereof with the Delaware Secretary of State, and as the same may be amended from time to time. "Closing Date" shall mean the "Closing Date" as defined in the Merger ------------ Agreement. "Common Stock" shall have the meaning set forth in the preamble to ------------ this Agreement. "Company" shall have the meaning set forth in the preamble to this ------- Agreement and shall also include the Company's successors. "Counsel for the Holders" shall mean Weil, Gotshal & Manges LLP, or ----------------------- such other counsel as shall be selected by the Majority Holders. "Exchange Debentures" shall mean the exchange debentures into which ------------------- the Preferred Stock is exchangeable, at the option of the Company, pursuant to the Certificate of Designations. "Exchange Indenture" shall mean the indenture relating to the Exchange ------------------ Debentures between the Company and a trustee meeting the requirements of the TIA that will be selected by the Company in the event the Company determines to exchange the shares of Preferred Stock for Exchange Debentures, and as the same may be amended from time to time in accordance with the terms thereof. "Holders" shall mean any holders of limited liability company ------- interests in BCEF or Market Partners who are not BCI Insiders, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities. "Letter of Transmittal" shall have the meaning set forth in the Merger --------------------- Agreement. "Majority Holders" shall mean the Holders of a majority of the (a) ---------------- aggregate liquidation preference of outstanding shares of Preferred Stock or the aggregate principal amount of the outstanding Exchange Debentures (as applicable) and (b) the outstanding shares of Common Stock issued pursuant to the Merger, in each case that are also Registrable Securities; provided that -------- whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Market Partners" shall have the meaning set forth in the preamble to --------------- this Agreement and shall also include Market Partners' successors. 2 "Merger Agreement" shall have the meaning set forth in the preamble to ---------------- this Agreement. "Merger" shall have the meaning set forth in the preamble to this ------ Agreement. "Original Issuance Date" shall have the meaning set forth in the ---------------------- Certificate of Designations. "Person" shall mean an individual, partnership, corporation, business ------ trust, joint stock company, limited liability company, trust or unincorporated association, joint venture, government authority or other entity of whatever nature. "Preferred Stock" shall have the meaning set forth in the preamble to --------------- this Agreement and any additional shares of Preferred Stock issued as a dividend thereon pursuant to the Certificate of Designations in respect thereof. "Prospectus" shall mean the prospectus included in the Shelf ---------- Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, and including all material incorporated by reference therein. "Registrable Securities" shall mean all Securities held by Holders who ---------------------- are not BCI Insiders; provided, however, that such Securities shall cease to be -------- ------- Registrable Securities (i) when a Shelf Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Shelf Registration Statement, (ii) when such Securities have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) when such securities are permitted to be sold pursuant to Rule 144 (k) (or any similar provision then in force) or (iv) when such Securities shall have ceased to be outstanding. "Registration Expenses" shall mean any and all expenses incident to --------------------- performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration, listing and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any Holders in connection with blue sky qualification of any of the Registrable Securities), (iii) all expenses of the Company in preparing, word processing, printing and distributing any Shelf Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and disbursements relating to the qualification of the Exchange Indenture under applicable securities laws, (v) the fees and disbursements of the Trustee and its counsel, (vi) the fees and disbursements of counsel for the Company and the fees and disbursements of Counsel for the Holders through the date on which the Shelf Registration Statement is initially declared effective by the SEC and (vii) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance. 3 "SEC" shall mean the Securities and Exchange Commission. --- "Securities" shall mean, collectively, the Preferred Stock, the ---------- Exchange Debentures and the Common Stock. "Shelf Registration" shall mean a registration effected pursuant to ------------------ Section 2(a) hereof. "Shelf Registration Statement" shall mean a "shelf" registration ---------------------------- statement of the Company pursuant to the provisions of Section 2(a) of this Agreement which covers all of the Registrable Securities (which may include other securities of the Company held by persons or entities having been previously granted registration rights by the Company) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "TIA" shall have the meaning set forth in Section 3(l) hereof. --- "Trustee" shall mean the trustee with respect to the Exchange ------- Debentures under the Indenture. 2. Registration Under the 1933 Act. (a) Within 60 days after the Original Issuance Date the Company shall file a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities. The Company shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the SEC within 150 days after the Original Issuance Date. The Company agrees to use its reasonable best efforts to keep the Shelf Registration Statement continuously effective until two years after the Original Issuance Date or such shorter period that will terminate when all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement in order to permit the Prospectus to be usable by the Holders. The Company further agrees to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration and to use its reasonable best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as practicable thereafter. The Company agrees to furnish Counsel for to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (b) The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a). Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. 4 (c) A Shelf Registration Statement pursuant to Section 2(a) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after it has been declared -------- ------- effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Company shall extend the period during which the Shelf Registration Statement shall be maintained effective pursuant to this Agreement by the number of days of such interference, to and including the date on which the offering of Registrable Securities pursuant to such Shelf Registration Statement may legally resume. In the event the Shelf Registration Statement is not filed with the SEC within 60 days after the Original Issuance Date, the Company will immediately be required to pay a penalty in the aggregate amount of $2,500,000 in cash to the Holders on a pro rata basis based on the Registrable Securities held by each Holder. In the event the Shelf Registration Statement is not declared effective on or before the 150th day after the Original Issuance Date, commencing on the 151st day after the Original Issuance Date the annual dividend rate on the Preferred Stock (or the interest rate on the Exchange Debentures, if applicable) will increase to 11% and shall further increase by 0.5% for each period of 90 days thereafter (for greater certainty, if applicable the first 90-day period would commence on the 241st day after the Original Issuance Date and end on the 330th day after the Original Issuance Date and the next 90-day period would commence on the 331st day after the Original Issuance Date) until the Shelf Registration Statement is declared effective, up to a maximum rate of 12%. In the event the annual dividend rate on the Preferred Stock (or the interest rate on the Exchange Debentures) increases pursuant to this Section 2(c), on the date immediately following the date on which the Shelf Registration Statement is declared effective by the SEC, such annual dividend rate (or interest rate) will be reduced to 10%. Any payments to be made to Holders pursuant to this Section 2(c) shall be delivered to the Holders at their address in accordance with Section 5(c) hereof. 3. Registration Procedures. In connection with the obligations of the Company with respect to the Shelf Registration Statement pursuant to Section 2(a) hereof, the Company shall: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and (y) shall be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form, and use its reasonable best efforts to cause such Shelf Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) promptly prepare and file with the SEC post-effective amendments to such Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement effective for the applicable period provided for in Section 2 hereof and cause each Prospectus to be supplemented by any required 5 prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; (c) furnish to each Holder and Counsel for the Holders, without charge, as many copies of the Prospectus, including the preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and the Company consents to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by and in the manner described in the Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use its reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Shelf Registration Statement shall reasonably request in writing by the time the applicable Shelf Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, -------- however, that the Company shall not be required to (i) qualify as a foreign ------- corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) notify each Holder and Counsel for the Holders promptly and, if requested by any such Holder or Counsel for the Holders, confirm such advice in writing (i) when the Shelf Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose, (iii) of the happening of any event during the period the Shelf Registration Statement is effective which, in the good faith determination of the Board of Directors of the Company upon the advice of counsel, makes any statement made in such Shelf Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Shelf Registration Statement or Prospectus in order to make the statements therein not misleading and (iv) of any determination by the Company that a post-effective amendment to the Shelf Registration Statement would be appropriate; 6 (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible moment and provide to each Holder immediate notice of the withdrawal of any such order; (g) furnish to Counsel for the Holders, without charge, at least one conformed copy of the Shelf Registration Statement and any post- effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) upon the occurrence of any event contemplated by Section 3(e)(iii) hereof, use its reasonable best efforts to prepare and file with the SEC as promptly as practicable a supplement or post-effective amendment to the Shelf Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (i) a reasonable time prior to the filing of the Shelf Registration Statement, the Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into the Shelf Registration Statement or the Prospectus after the initial filing of the Shelf Registration Statement, provide copies of such document to the Counsel for the Holders and make such of the representatives of the Company as shall be reasonably requested by Counsel for the Holders available for discussion of such document, and shall not at any time file or make any amendment to the Shelf Registration Statement, the Prospectus or any amendment of or supplement to the Shelf Registration Statement or the Prospectus or any document which is to be incorporated by reference into the Shelf Registration Statement or the Prospectus of which Counsel for the Holders shall not have previously been advised and furnished a copy; (j) obtain a CUSIP number for all Registrable Securities not later than the effective date of the Shelf Registration Statement; (k) cause the Exchange Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Debentures, cooperate with the Trustee and the Holders to effect such changes to the Exchange Indenture as may be required for the Exchange Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and 7 documents required to be filed with the SEC to enable the Exchange Indenture to be so qualified in a timely manner; (l) use its reasonable best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed to the extent such Registrable Securities satisfy applicable listing requirements; (m) maintain a transfer agent and registrar, which may be the same entity, for the Registrable Securities, not later than the effective date of the Shelf Registration Statement; and (n) if reasonably requested by any Holder of Registrable Securities covered by the Shelf Registration Statement, (i) to the extent counsel for the Company deems the inclusion of such information reasonably necessary in order to enable such Holder to be able to sell Registrable Securities, promptly incorporate in a Prospectus supplement such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such filing. The Company may require each Holder to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(iii) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. The Company agrees to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. If the Company shall give any such notice to suspend the disposition of Registrable Securities pursuant to the Shelf Registration Statement, the Company shall extend the period during which the Shelf Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. Any such suspensions may not exceed 50 days (whether or not consecutive) during any 365-day period. 4. Indemnification and Contribution. 8 (a) The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Holder, from and against all losses, claims, damages, liabilities and expenses (including, without limitation, any legal or other expenses reasonably incurred by any Holder or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement (or any amendment thereto) pursuant to which Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or alleged untrue statement or omission (i) based upon information relating to any Holder furnished to the Company in writing by any selling Holder or Counsel for the Holders expressly for use therein or (ii) included or omitted from a preliminary Prospectus, but corrected in the final Prospectus (or an amendment or supplement thereto), if the Holder did not deliver a copy of the final Prospectus (and any then current amendment or supplement thereto) to the person asserting such loses, claims, damages, liabilities or expenses at or prior to the written confirmation of the sale of the Registrable Securities to such person. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and the other selling Holders, and each of their respective directors, officers who sign the Shelf Registration Statement and each Person, if any, who controls the Company and any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company to the Holders, but only with reference to information relating to such Holder furnished to the Company in writing by such Holder or Counsel for the Holders expressly for use in the Shelf Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto). (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding; provided, however, that the failure of any -------- ------- indemnified party to give notice shall not relieve the indemnifying party of its obligations under paragraph (a) or (b) above, except to the extent that the indemnifying party is prejudiced by reason of such failure. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such 9 counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) in the opinion of counsel of the indemnified party a conflict of interest may exist between the indemnified and indemnifying parties. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings, be liable for (a) the fees and expenses of more than one counsel (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning Section 15 of the 1933 Act or Section 20 of the 1934 Act and (b) the fees and expenses of more than one counsel (in addition to any local counsel) for all Holders and all persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Holders and such persons who control any Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may be withheld in its sole discretion) but, if settled with such consent, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in this Section 4 is unavailable to hold harmless an indemnified party under paragraph (a) or (b) above in respect of any losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying and indemnified party from the registration of the Registrable Securities or (ii) if the allocation provided by clause (i) is not permitted by applicable law, the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph (d). No person guilty of fraudulent 10 misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Holders in this Section (d) to contribute shall be several in proportion to the percentage of Registrable Securities registered by them and not joint. (e) Notwithstanding the provisions of this Section 4, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Securities were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The indemnity provisions contained in this Section 4 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any person controlling any Holder, or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) any sale of Registrable Securities pursuant to the Shelf Registration Statement. 5. Miscellaneous. (a) No Inconsistent Agreements. The Company has not entered into, and -------------------------- on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. (b) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of the Majority Holders affected by such amendment, modification, supplement, waiver or consent; provided, however, that whenever the written consent of Holders of a -------- ------- specified percentage of Registrable Securities is required hereunder, Registrable Securities held by Insiders shall not be counted in determining whether such consent was given by the Holders of such required percentage of amount. (c) Notices. All notices and other communications provided for or ------- permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the address of such Holder on the books and records of the Company or its transfer agent on the date hereof or at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 5(c), and (ii) if to the Company, initially at the Company's address set forth in the Merger Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 5(c). All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is 11 acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee, at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such person shall be entitled to receive the benefits hereof. (e) Third Party Beneficiary. The Holders shall be third party ----------------------- beneficiaries to the agreements made hereunder between the Company and BCI Sub, on the one hand, and BCEF and Market Partners, on the other hand, and any Holder shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (f) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Delaware. (i) Severability. In the event that any one or more of the provisions ------------ contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BOSTON CHICKEN, INC. By_____________________________________________ Name: Michael R. Daigle Title: Senior Vice President BCI ACQUISITION SUB, L.L.C. By Boston Chicken, Inc., as Manager By_____________________________________________ Name: Michael R. Daigle Title: Senior Vice President Confirmed and accepted as of the date first above written: BC EQUITY FUNDING, L.L.C. By Boston Chicken, Inc., as Manager By___________________________________ Name: Michael R. Daigle Title: Senior Vice President MARKET PARTNERS, L.L.C. By___________________________________ Name: Alberto Finol, as Manager By___________________________________ Name: Thomas Githens, as Manager 13 EX-10.1 3 FIRST AMENDMENT AND CONSENT TO AMENDED EXHIBIT 10.1 EXECUTION COPY FIRST AMENDMENT AND CONSENT TO AMENDED AND RESTATED FACILITIES AGREEMENT THIS FIRST AMENDMENT AND CONSENT (this "AMENDMENT") dated as of July 15, 1998 is entered into by and among BOSTON CHICKEN, INC., a Delaware corporation (the "COMPANY" or the "BORROWER"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois) (in its individual capacity, "BOFA"), as agent for the Lenders and the Issuing Lender referred to below (in such capacity, together with its successors and assigns, the "LOAN AGENT"), GENERAL ELECTRIC CAPITAL CORPORATION, for itself and as agent for the 1996 Lease Lenders referred to below (in its individual capacity, "GECC"; and in such dual capacity, together with its successors and assigns, the "1996 LEASE AGENT"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Agents for the Liquidity Lenders (individually, a "CO-AGENT" and collectively, the "CO-AGENTS") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the initial Common Collateral Agent. W I T N E S S E T H: ------------------- WHEREAS, the Company, the financial institutions from time to time party thereto (the "ORIGINAL LENDERS"), Bankers Trust Company, as documentation agent (in such capacity, together with its successors and assigns, the "DOCUMENTATION AGENT"), and BofA, as letter of credit issuing bank (in such capacity, the "ISSUING LENDER", and together with the Original Lenders, the "REVOLVING LENDERS") and as Loan Agent entered into that certain Secured Revolving Credit Agreement dated as of December 9, 1996, as amended by the First Amendment and Consent thereto (the "FIRST CREDIT AMENDMENT") dated as of October 24, 1997 (the Secured Revolving Credit Agreement as so amended, the "ORIGINAL CREDIT AGREEMENT"); WHEREAS, concurrently herewith, the Original Credit Agreement has been further amended pursuant to the terms of that certain Second Amendment and Consent thereto (the "SECOND CREDIT AMENDMENT") entered into among the Company, the Loan Agent, the Documentation Agent, the Co-Agents, GECC, the Revolving Lenders and the "Liquidity Lenders" (as defined in the Second Credit Amendment) (the Original Credit Agreement as amended by the Second Credit Amendment, and as further amended, supplemented, modified, restated, refinanced, refunded or renewed from time to time, the "CREDIT AGREEMENT"); WHEREAS, the Company and the 1996 Lease Agent have entered into that certain Master Lease Agreement No. 2, dated as of December 9, 1996 (the "ORIGINAL 1996 LEASE AGREEMENT"), as amended by Amendment No. 1 thereto dated February 28, 1997 and Amendment No. 2 thereto of even date herewith ("1996 LEASE AMENDMENT NO. 2") (as further amended, 1 supplemented, modified, restated, refinanced, refunded or renewed from time to time, the "1996 MASTER LEASE AGREEMENT"); WHEREAS, subject to the terms of the 1996 Master Lease Agreement, GECC has heretofore and may hereafter convey to certain financial institutions (collectively with GECC, the "1996 LEASE LENDERS", and together with the Revolving Lenders and Liquidity Lenders, the "SECURED CREDITORS") participation interests in its rights, duties and obligations under the 1996 Master Lease Agreement; WHEREAS, concurrently with the execution and delivery of the Original Credit Agreement and the Original 1996 Master Lease Agreement, the Company, the Loan Agent, the 1996 Lease Agent and the Common Collateral Agent entered into that certain Intercreditor Agreement dated as of December 9, 1996 (as amended, supplemented, modified or restated from time to time, the "ORIGINAL INTERCREDITOR AGREEMENT"), which sets forth certain agreements with respect to, among other things, voting rights and collateral issues; WHEREAS, concurrently with the execution and delivery of the First Credit Amendment, the Company, the Loan Agent, the 1996 Lease Agent and the Common Collateral Agent entered into that certain Amended and Restated Facilities Agreement (the "RESTATED FACILITIES AGREEMENT") and that certain Amended and Restated Intercreditor Agreement (the "RESTATED INTERCREDITOR AGREEMENT"), each dated as of October 24, 1997; WHEREAS, concurrently herewith, the Company, the Loan Agent, the 1996 Lease Agent, the Lenders, GECC in its capacity as the "Lead 1996 Lease Lender" (as defined below), the "Other Creditors" and the "Cash Management Banks" (each as defined in the Intercreditor Agreement referred to below) have entered into that certain Second Amended and Restated Intercreditor Agreement, pursuant to which the Restated Intercreditor Agreement has been amended and restated in its entirety (as so amended and restated, and as the same may be further amended, modified, supplemented and/or restated from time to time, the "INTERCREDITOR AMENDMENT"), which sets forth certain agreements with respect to, among other things, voting rights and collateral issues between the parties thereto; WHEREAS, the Company hereby reaffirms the covenants, representations and warranties made in the Restated Facilities Agreement, to the extent the same are not affected hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date hereof; WHEREAS, the Company has requested that the Loan Agent, the 1996 Lease Agent and the Common Collateral Agent agree to certain modifications to the Restated Facilities Agreement; WHEREAS, the Company, the Loan Agent (on behalf of itself and the Revolving Lenders and the Liquidity Lenders (the Revolving Lenders and Liquidity Lenders being sometimes 2 referred to herein as the "LENDERS")), the 1996 Lease Agent (on behalf of itself and the 1996 Lease Lenders) and the Common Collateral Agent have agreed to enter into this Amendment on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises, and intending to be legally bound hereby, the Company, the Loan Agent, the 1996 Lease Agent and the Common Collateral Agent hereby agree as follows: SECTION 1. AMENDMENT TO THE FACILITIES AGREEMENT. Effective as of the ------------------------------------- date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2 below, and in reliance on the representations and warranties --------- set forth in Section 3 below, on and after the date hereof, the parties hereto --------- agree that the Facilities Agreement is amended as follows: 1.1 THE PREAMBLE TO THE FACILITIES AGREEMENT IS DELETED IN ITS ENTIRETY AND THE FOLLOWING SUBSTITUTED THEREFOR: (a) THE FIRST PARAGRAPH OF THE PREAMBLE TO THE FACILITIES AGREEMENT IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: THIS AMENDED AND RESTATED FACILITIES AGREEMENT originally dated as of October 24, 1997 and amended by the First Amendment and Consent thereto (the "FIRST AMENDMENT") dated as of July 15, 1998 is among BOSTON CHICKEN, INC., a Delaware corporation (the "COMPANY"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois)(in its individual capacity,"BOFA"), as agent for the Lenders and the Issuing Lender referred to below (in such capacity, together with its successors and assigns, the "LOAN AGENT"), GENERAL ELECTRIC CAPITAL CORPORATION, for itself and as agent for the 1996 Lease Lenders referred to below (in its individual capacity, "GECC"; and in such dual capacity, together with its successors and assigns, the "1996 LEASE AGENT"), BofA and GECC, as Co-Agents for the Liquidity Lenders (individually a "CO-AGENT" and collectively, the "CO-AGENTS") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the initial Common Collateral Agent. (b) THE REMAINING PARAGRAPHS OF THE PREAMBLE TO THE FACILITIES AGREEMENT ARE HEREBY DELETED IN THEIR ENTIRETY AND THE PREAMBLE TO THIS AMENDMENT INCORPORATED THEREIN BY REFERENCE. 1.2 SECTION 1.1 OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS: ----------- (a) TO DELETE THE CURRENT DEFINITIONS FOR THE TERMS SET FORTH BELOW IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: 3 "COLLATERAL ASSIGNMENT OF LEASE" means any Collateral Assignment of Tenant's Rights in Lease in substantially the form of Exhibit A --------- executed by the Company or any Restricted Subsidiary in favor of the Common Collateral Agent for the benefit of each of the Creditor Classes. Unless the context otherwise indicates, each reference to "Collateral Assignment of Lease" shall be to the several Collateral Assignments of Lease entered into for each of the various Creditor Classes. "COLLATERAL ASSIGNMENT OF LOAN" means a Collateral Assignment of Loan Documentation in substantially the form of Exhibit B executed by --------- the Company in favor of the Common Collateral Agent for the benefit of each of the Creditor Classes. Unless the context otherwise indicates, each reference to "Collateral Assignment of Loan" shall be to the several Collateral Assignments of Loan entered into for each of the various Creditor Classes. "COMMON COLLATERAL AGENT" means the Loan Agent, on behalf of each of the Creditor Classes; provided, that at such time as the Credit -------- Agreement shall no longer be in effect, Common Collateral Agent shall mean, for so long as the 1996 Master Lease is in effect, the 1996 Lease Agent. "COMMON COLLATERAL DOCUMENTS" means, collectively, (i) the Security Agreements, the Trademark Security Agreements, the Collateral Assignments of Loan, the Mortgages, the Collateral Assignments of Lease, the Landlords' Consents, the Pledge Agreements and all other security agreements, mortgages, deeds of trust, patent and trademark assignments, lease assignments, guarantees and other similar agreements between the Company, any Guarantor or their respective Subsidiaries and the Common Collateral Agent for the benefit of any of the Creditor Classes now or hereafter delivered to the Common Collateral Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the Uniform Commercial Code or comparable law) against the Company, any Guarantor or their respective Subsidiaries, as debtor, in favor of the Common Collateral Agent for the benefit of the Creditor Classes, as secured party, and (ii) any amendments, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing. "CREDITORS" has the meaning assigned to that term in the Intercreditor Agreement; provided, however, solely for purposes of -------- ------- the use of that term in the definition of Termination Date, in the prefatory language to Articles II through V-A, and in Sections 2.4, 2.11, 3.7 through 3.9, 4.8, 4.15, 4.16 and 7.4, "CREDITORS" means, collectively, the Loan Agent, the Revolving Lenders, the Liquidity Lenders, the 1996 Lease Agent, the 1996 Lease Lenders and the Common Collateral Agent; and "Creditor" means any of the foregoing Persons. 4 "EVENT OF DEFAULT" has the meaning set forth in Section 6.1 ----------- hereof; provided, that any requirement for the giving of notice, the -------- lapse of time, or both, or any other condition, has been satisfied.. "FINANCIAL LEASE" means with respect to any Person at any date, any Capital Lease of such Person and any operating lease of such Person entered into outside of the ordinary course of business (including, without limitation, the 1995 Master Lease but excluding the 1996 Master Lease). "FINANCIAL LEASE DEBT" means, as of any date, (1) with respect to any Capital Lease under which the Company or any of its Restricted Subsidiaries is the lessee, the principal amount thereof as of such date as determined in accordance with GAAP, but specifically excluding Capital Leases of Financed Subsidiaries existing on the date each Financed Franchisee becomes a Financed Subsidiary; (2) with respect to the 1995 Master Lease Agreement, the termination value (as defined therein) as of such date; and (3) with respect to any other Financial Lease under which the Company or any of its Restricted Subsidiaries is the lessee, the present value (using a market rate of interest) as of such date of all remaining rental payments of the Company or such Restricted Subsidiary under such Financial Leases. "GUARANTOR" means any Person which from time to time is a party to a Guaranty, whether as an initial party thereto or by supplement thereto. "GUARANTY" means that certain Subsidiary Guaranty dated as of July 15, 1998 and issued by each of the Restricted Subsidiaries as of such date in favor of either the Loan Agent for the benefit of the Revolving Lenders, Issuing Lenders , Liquidity Lenders or the 1996 Lease Agent for the benefit of the 1996 Lease Lenders, substantially in the form of Exhibit C, in each case as amended from time to time by --------- the addition through a Guaranty Supplement (in the form attached to each such Guaranty) of each new Restricted Subsidiary as a party thereto. "INTERCREDITOR AGREEMENT" - See Recitals. "LENDERS" or "LENDER" shall have the meaning assigned to such term in the Recitals and shall include Bank of America National Trust and Savings Association while acting in the capacity of a Lender, unless otherwise expressly indicated herein. "MORTGAGE" means a mortgage or deed of trust in substantially the form of Exhibit E executed by the Company or a Restricted Subsidiary --------- in favor of the Common Collateral Agent for the benefit of each of the Creditor Classes. Unless the 5 context otherwise indicates, each reference to a "Mortgage" or the "Mortgages" shall be to the Mortgages entered into for each of the various Creditor Classes. "1996 LEASE DOCUMENTS" means the 1996 Master Lease Agreement, the associated Subleases, the respective Guaranties, the Facilities Agreement, the "Secured Promissory Note" and "Reborrowing Note" (as both such terms are defined in the 1996 Master Lease Agreement) and all other agreements, instruments and documents (including, without limitation, mortgages, deeds of trust, chattel mortgages and security agreements) delivered from time to time to the 1996 Lease Agent with respect to the foregoing (as amended, supplemented, modified, restated, refinanced, refunded or renewed from time to time in accordance with the terms of the Intercreditor Agreement). "PLEDGE AGREEMENT" means the pledge agreements in substantially the form of Exhibit F executed by the Company and certain Restricted --------- Subsidiaries in favor of the Common Collateral Agent for the benefit of each of the Creditor Classes. Unless the context otherwise indicates, each reference to the "Pledge Agreement" shall be to the Pledge Agreements entered into for each of the various Creditor Classes. "SENIOR SECURED INDEBTEDNESS" means, at any time, the aggregate principal amount of liquidity loans, revolving loans, supplemental revolving loans and letter of credit obligations (including, without limitation, the unreimbursed amount of any draws under the letters of credit) then outstanding under the Credit Agreement, the aggregate outstanding principal amount of the loans under the 1996 Master Lease plus the aggregate amount of all Financial Lease Debt then outstanding.. "SECURITY AGREEMENT" means any Security Agreement in substantially the form of Exhibit G-1 with respect to the Company and ----------- Exhibit G-2 with respect to the Restricted Subsidiaries in favor of ----------- the Common Collateral Agent for the benefit of each of the Creditor Classes. Unless the context otherwise indicates, each reference to a "Security Agreement" or the "Security Agreements" shall be to the Security Agreements entered into for each of the various Creditor Classes. "STORE REVENUE" means, for any Store, the weekly net revenue (i.e. gross revenue net of all coupons, discounts and other amounts deducted from gross revenues to obtain net revenue) for such Store (whether such Store is operated by the Company or a Franchisee). "TRADEMARK SECURITY AGREEMENT" means a Trademark Security Agreement substantially in the form of Exhibit H executed by the --------- Company or any Restricted Subsidiary in favor of the Common Collateral Agent for the benefit of the Creditor Classes. Unless the context otherwise indicates, each reference to a "Trademark 6 Security Agreement" or the "Trademark Security Agreements" shall be to the Trademark Security Agreements entered into for each of the various Creditor Classes. (b) TO ADD EACH OF THE FOLLOWING DEFINITIONS IN THE APPLICABLE ALPHABETICAL LOCATION: "AGENTS' EXPENSES" means all of the fees, costs and expenses of the Common Collateral Agent, the Loan Agent or the 1996 Lease Agent (including, without limitation, all "Attorney Costs" (as defined in the Intercreditor Agreement), all amounts covered by the terms of Section 7.5 (including, without limitation, for fees and expenses of ----------- Ernst & Young as financial advisors), all Indemnified Liabilities of the type described in Section 7.11 and all other costs and expenses) ------------ (i) arising in connection with the preparation, execution, delivery, modification, restatement, amendment, waiver, termination, interpretation of this Agreement, the Intercreditor Agreement and each other Credit Document or the enforcement (whether in the context of a civil action, adversary proceeding, workout or otherwise) of any of the provisions hereof or thereof or any of the Common Collateral Agent's, Loan Agent's or 1996 Lease Agent's remedies with respect thereto, or (ii) incurred or required to be advanced in connection with the sale or other disposition or the custody, preservation or protection of the Collateral pursuant to any Credit Document and the exercise or enforcement of the Common Collateral Agent's, Loan Agent's, or 1996 Lease Agent's rights under this Agreement, the other Credit Documents, the 1996 Lease Documents and in and to the Collateral. "ASSET SALE" has the meaning set forth in Section 3.15(a)(i) ------------------ hereof. "ASSET SALE PREPAYMENT" has the meaning set forth in Section ------- 3.15(a)(i) hereof. ---------- "BUDGET" shall mean the Budget and related parameters attached as Exhibit A to the Confidential Agreement as amended from time to time --------- in accordance with the provisions of the Intercreditor Agreement. "COLLATERAL" has the meaning given that term in the Intercreditor Agreement. "COLLECTION ACCOUNT" means each lock-box and blocked depository account maintained by the Company and each of its Subsidiaries, subject to a Collection Account Agreement, for the collection of daily receipts from the Stores and other proceeds of Collateral. "COLLECTION ACCOUNT AGREEMENT" means a written agreement substantially in the form of Exhibit L attached hereto (with such --------- changes as may be acceptable 7 to the Common Collateral Agent) among the Company or its Subsidiaries, the Common Collateral Agent, and, as applicable, each of the banks at which the Company and its Subsidiaries maintains a Collection Account. "COLLECTION ACCOUNT BLOCKAGE DATE" means the date, following the occurrence of a Default (other than, during the Suspension Period, a Suspended Default), on which (a) the Loan Agent and the Lease Agent, (b) the Majority Liquidity Lenders or (c) the Majority Revolving Lenders, the Majority 1996 Lease Lenders and the Required 1996 Lenders (as each such term is defined in the Intercreditor Agreement), in the sole discretion of any of the groups identified in clause (a), (b) or (c), instruct(s) the Common Collateral Agent to instruct any financial institution party to a Collection Account Agreement as described in the applicable Collection Account Agreement to remit, during the continuance of such Default, all amounts deposited in the relevant Collection Account to the Common Collateral Agent or as the Common Collateral Agent shall direct. "CONFIDENTIAL AGREEMENT" shall mean that certain Confidential Agreement dated as of the Restructuring Effective Date entered into among the Company, the Loan Agent, the 1996 Lease Agent and the Common Collateral Agent. "CREDITOR CLASSES" means the following three groups of Creditors: (1) the Liquidity Lenders, the Revolving Lenders, the Issuing Lender and the 1996 Lease Lenders; (2) the Cash Management Banks; and (3) the Other Creditors. "ENBC SALE" has the meaning set forth in Section 3.15(b)(i) ------------------ hereof. "ENBC SALE PREPAYMENT" has the meaning set forth in Section ------- 3.15(b)(i) hereof. ---------- "EXCLUDED ASSET SALE" means any Asset Sale consummated pursuant to the provisions of clauses (1),(2) or (4) of Section 4.7 hereof. ----------- "EXISTING 1996 REAL ESTATE COLLATERAL DOCUMENTS" has the meaning set forth in Section 3.13 hereof. ------------ "FIXED FEE DISTRIBUTION AGREEMENT" shall mean that certain Fixed Fee Distribution Agreement dated September 30, 1996 by and between Marriott and the Company, as the same may be amended, modified, supplemented, renewed, or restated from time to time in accordance with the terms hereof. "GENERAL EBITDAL COVENANT" has the meaning set forth in Section ------- 5A.1 hereof. ---- 8 "LEAD 1996 LEASE LENDER" has the meaning given that term in the Credit Agreement. "LIQUIDITY EBITDAL COVENANT" has the meaning set forth in Section ------- 5A.2 hereof. ---- "LIQUIDITY PERCENTAGE" has the meaning given that term in the Credit Agreement. "LIQUIDITY PERIOD" has the meaning given that term in the Intercreditor Agreement. "MARRIOTT" shall mean Marriott Distribution Services, Inc. "NET CASH PROCEEDS" shall mean, in the case of any Asset Sale or any ENBC Sale, cash payments received (including any cash received by way of deferred payment pursuant to a note receivable or otherwise, but only as and when so received) by the Company or any of its Restricted Subsidiaries from any Asset Sale or ENBC Sale less the ---- amount of reasonable fees and commissions payable to persons other than the Company or such Restricted Subsidiary, and other normal expenses of sale, including reasonable costs and expenses related to such sale or other disposition that are to be paid in cash. "1996 LEASE AGENT" has the meaning set forth in the preamble. All references in this Agreement to the "Lease Agent" shall mean and be a reference to the 1996 Lease Agent. "1996 LEASE LENDERS" has the meaning set forth in the preamble. All references in this Agreement to the "Lease Participants" shall mean and be a reference to the 1996 Lease Lenders. Notwithstanding the foregoing, any Reborrowing Loan or other amount to be made by the 1996 Lease Lenders or any payment that is required to be made hereunder or under the Intercreditor Agreement to the 1996 Lease Lenders shall in either such case be made by or to the Lead 1996 Lease Lender, and the Lead 1996 Lease Lender shall collect amounts from or distribute amounts to the 1996 Lease Lenders in accordance with the terms of the applicable participation agreements. "1996 LENDER" has the meaning given that term in the Intercreditor Agreement. "PRO RATA 1996 SHARE" means with respect to any 1996 Lender, the percentage obtained by dividing (A) the sum of the principal amount of such 1996 Lender's Revolving Obligations and 1996 Lease Obligations at such time by (B) the 9 sum of the aggregate principal amount of the Revolving Obligations and 1996 Lease Obligations at such time. "REBORROWING AVAILABILITY" means, as of any time of determination, the aggregate Reborrowing Availability Amount minus the aggregate amount of Reborrowing Loans outstanding as of such time. "REBORROWING AVAILABILITY AMOUNT" has the meaning set forth in Section 3.15(b)(iv)(A) hereof. ---------------------- "REBORROWING AVAILABILITY COMMENCEMENT DATE" has the meaning set forth in Section 3.15(b)(iv)(B) hereof. ---------------------- "REBORROWING AVAILABILITY PERIOD" means the period from the Reborrowing Availability Commencement Date through the Reborrowing Availability Termination Date. "REBORROWING AVAILABILITY TERMINATION DATE" means the first date to occur of (i) the occurrence of an Event of Default (other than, during the Suspension Period, a Suspended Default) and (ii) October 17, 1998. "REBORROWING COMMITMENTS" means the Reborrowing Commitments - Revolver and Reborrowing Commitments - 1996 Master Lease. "REBORROWING COMMITMENTS - REVOLVER" means for each Revolving Lender, as of any time of determination, its provisional commitment to make Reborrowing Loans in an amount not to exceed its Pro Rata 1996 Share of Reborrowing Availability at such time. "REBORROWING COMMITMENTS - 1996 MASTER LEASE" means for each 1996 Lease Lender, as of any time of determination, its provisional commitment to make Reborrowing Loans in an amount not to exceed its Pro Rata 1996 Share of Reborrowing Availability at such time. "REBORROWING LOAN" has the meaning set forth in Section ------- 3.15(b)(iv)(D) hereof. -------------- "REBORROWING PERIOD" means the period commencing on the Reborrowing Availability Commencement Date and ending on the first date thereafter on which all of the Reborrowing Loans have been paid in full and the Reborrowing Commitment has been terminated. 10 "REBORROWING REQUEST" has the meaning set forth in Section ------- 3.15(b)(iv)(C) hereof. -------------- "RESTRUCTURING EFFECTIVE DATE" means the date on which all of the conditions precedent to the effectiveness of the First Amendment hereto shall have been satisfied or waived. "SPECIFIED LIQUIDITY PERIOD" means the period from and after the Restructuring Effective Date until the date on which (i) the Liquidity Obligations have been paid in full and all Liquidity Commitments have been terminated and (ii) the Reborrowing Loans have been paid in full and the Reborrowing Commitments have been terminated. "SUSPENDED DEFAULTS" has the meaning given that term in the Intercreditor Agreement. "SUSPENSION PERIOD" means the period from the Restructuring Effective Date to the Suspension Termination Date. "SUSPENSION TERMINATION DATE" means October 17, 1998, or such earlier date after the Restructuring Effective Date on which any Default other than a Suspended Default has occurred. "TAX REFUND PREPAYMENT" has the meaning set forth in Section 3.15 ------------ hereof. "TERMINATION DATE" has the meaning given that term in the Credit Agreement. (c) TO DELETE THE DEFINED TERM "AGENCY AGREEMENT" THEREFROM; AND (d) TO ADD THE FOLLOWING AT THE END THEREOF: In the event that capitalized terms are used in this Agreement and not defined in this Agreement, such terms shall have the meaning given to them in the Intercreditor Agreement. 1.3 ARTICLE II OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS: -------- (a) SECTION 2.4 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE ----------- TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 2.4 Financial Statements. The Company's audited -------------------- consolidated financial statements as of December 28, 1997 (the "Audited Statements") and its unaudited consolidated financial statements as of April 19, 1998, ("Unaudited 11 Statements") have been furnished to each Creditor. The Audited Statements have been prepared in conformity with GAAP and fairly present the financial condition of the Company and its Subsidiaries as of such dates and the results of operations for the periods then ended. The Unaudited Statements have been prepared in a manner consistent (except for changes in accounting policies permitted by GAAP which have been or are contemporaneously disclosed in writing to each Creditor) with the Audited Statements, except for the lack of normal year-end accruals, reclassifications, and audit adjustments and financial statement footnotes. Except as has been disclosed prior to the Restructuring Effective Date in public filings made by the Company with the Securities and Exchange Commission and except as set forth in the Budget, since the date of the Unaudited Statements, there has been no Material Adverse Change. No information, exhibit, or report furnished by the Company to the Creditors in connection with the negotiation of this Agreement (including, without limitation, any amendment thereto), considered as a whole with all other information, exhibits and reports furnished to the Creditors in connection with the negotiation of this Agreement (including, without limitation, any amendment thereto) at the time it was furnished (and as modified or superseded by any information, exhibits and reports subsequently furnished to the Creditors), contained any material misstatement of fact or omitted to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they were made, not materially misleading; provided, that except as expressly provided below, the Company makes no representation, -------- warranty, or guaranty as to (1) any projections furnished to the Creditors (it being understood that such projections have been prepared by management of the Company on the basis of assumptions which such management believed were reasonable as of the date of such projections in light of the historical financial performance of the business of the Company and of current and reasonably foreseeable business conditions) or (2) any information supplied by Franchisees or contained in analyst reports or other reports prepared by third parties or derived therefrom unless in the case of this clause (2) the Company has actual knowledge at the time such information is delivered to the Creditors that such information contains a material misstatement of fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not materially misleading. (b) SECTION 2.19 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE ------------ CLAUSE (d) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (d) The Company and each of its Restricted Subsidiaries have entered into documents which are effective to create the security interests and Liens as follows:: (i) Liens to secure the Liquidity Obligations, 1996 Lease Obligations and the Revolving Obligations by the 1996 Collateral; 12 (ii) Liens to secure the Cash Management Obligations by the 1996 Collateral; and (iii) Liens to secure the Supplemental Obligations by the 1996 Collateral, and each of such documents secure the "Secured Obligations" purported to be secured thereby. 1.5 ARTICLE III OF THE FACILITIES AGREEMENT IS HEREBY AMENDED AS FOLLOWS: ----------- (a) SECTION 3.4 OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE ----------- FOLLOWING IN THE PROVISO THERETO, IMMEDIATELY PRIOR TO THE PARENTHETICAL CONTAINED THEREIN: ;provided, further, however, that the Net Cash Proceeds of any such sale or other disposition shall be paid to the Common Collateral Agent to the extent required pursuant to Section 3.15 below ------------ (b) SECTION 3.5 OF THE FACILITIES AGREEMENT IS AMENDED BY INSERTING ----------- THE FOLLOWING AT THE END THEREOF: The Company shall deliver to the Common Collateral Agent endorsements (y) to all "All Risk" physical damage insurance policies on all of the Company's and its Restricted Subsidiaries' tangible real and personal property and assets and business interruption insurance policies naming the Common Collateral Agent loss payee or, in the case of the "Lease Assets" (as defined in the 1996 Master Lease), as additional loss payee in addition to the 1996 Lease Agent, and (z) to all general liability and other liability policies naming the Common Collateral Agent on behalf of itself and the Creditors as additional insured. In the event the Company or any of its Restricted Subsidiaries, at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto, then the Common Collateral Agent or any Creditor, without waiving or releasing any obligations or resulting Default hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Common Collateral Agent or such Creditor deems advisable. All sums so disbursed by the Common Collateral Agent or any Creditor shall constitute part of the Secured Obligations, payable as provided in this Agreement and the other Credit Documents. (c) TO DELETE THE TERMS OF SECTION 3.8(4) OF THE FACILITIES AGREEMENT -------------- IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: 13 3.8(4) Compliance Certificate; Budget Reconciliation. Together --------------------------------------------- with the financial statements furnished by the Company under the preceding clauses (1), (2) and (3), a duly completed compliance ----------- ---- --- certificate in the form of Exhibit I signed by the Chief Financial --------- Officer, Chief Accounting Officer, Vice President - Finance or any Senior Vice President of the Company (in his or her capacity as such, and without personal liability therefor) and together with the financial statements furnished by the Company under the preceding clauses (1) and (2), a reconciliation report of actual to projected ----------- --- experience on the Budget, in form and substance and containing such supporting information as is reasonably acceptable to the Agents, signed by the Chief Financial Officer, Chief Accounting Officer, Vice President - Finance or any Senior Vice President of the Company (in his or her capacity as such, and without personal liability therefor) and ; (d) TO DELETE THE TERMS OF SECTION 3.8(6) OF THE FACILITIES AGREEMENT -------------- IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (6) Updated Schedules. On the Restructuring Effective Date and ----------------- as soon as reasonably available thereafter (but in any event within forty-five (45) days after the end of each fiscal quarter of the Company or if requested in writing by any Creditor within forty-five (45) days after the end of each Retail Period), updated Schedules --------- 2.16, 2.17 (on which Schedule it shall identify whether such ---- Collateral is collateral securing the 1995 Master Lease (the "1995 COLLATERAL") or the "Collateral" (as such term is defined in the Intercreditor Agreement)) and 2.18 hereto, which updated schedules ---- shall be deemed as of the date of delivery to amend and restate (a) the previously delivered Schedules 2.16, 2.17 and 2.18 in their -------------- ---- ---- entirety, (b) in the case of Schedule 2.16, Attachment I to each of ------------- the Pledges Agreement in their entirety (provided, that the following -------- items listed on Schedule 2.16 shall be deleted before such schedule ------------- shall be deemed to be Attachment I to the Pledge Agreements: (A) the equity interests designated with an asterisk ("*") on the initial Schedule 2.16 attached hereto and (B) notes or other instruments ------------- evidencing loans and advances permitted by clause (ii) of Section ----------- ------- 4.8), (c) in the case of Schedule 2.17, Schedule I to each of the ------------- Security Agreements in its entirety and (d) in the case of Schedule -------- 2.18, Schedule I to each of the Collateral Assignments of Loan in its ---- entirety; (e) TO DELETE THE REFERENCE TO CLAUSE (4) OF SECTION 4.7 CONTAINED IN ----------- SECTION 3.8(14) THEREFROM IN ITS ENTIRETY AND TO SUBSTITUTE A REFERENCE TO --------------- CLAUSE (5) OF SECTION 4.7 THEREFOR. ----------- (f) TO DELETE THE TERMS OF SECTION 3.8 (15) OF THE FACILITIES ---------------- AGREEMENT IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: 14 (16) General information. Such other information respecting the ------------------- condition or operations, financial or otherwise, of the Company or any Subsidiary as any of the Loan Agent, the Lease Agent, the Documentation Agent, the Common Collateral Agent or the Required Creditors may from time to time reasonably request. Without limiting the foregoing, the Company and its Subsidiaries shall cooperate with the Agents and their financial advisors and provide access to information sufficient so that such financial advisors can prepare a reconciliation of the Company and its Subsidiaries' actual performance to that projected in the short-term treasury (cash-flow) model prepared by the Company and previously delivered to the Creditors (as the same may be updated from time to time). (g) TO INSERT THE FOLLOWING AFTER SECTION 3.8(14) OF THE FACILITIES --------------- AGREEMENT: (15) Weekly Store Revenue. As soon as available and in any -------------------- event within five Business Days after the end of each calendar week, a report of Store Revenue for all Stores operated by the Company, its Restricted Subsidiaries and each Financed Franchisee, in form and substance and containing such supporting information as is reasonably acceptable to the Agents, signed by the Chief Financial Officer, Chief Accounting Officer, Vice President - Finance or any Senior Vice President of the Company (in his or her capacity as such, and without personal liability therefor), including, without limitation, the "flash" report of sales by week by unit in the most complete form as previously delivered to each of the Agents; and (h) TO DELETE THE TERMS OF SECTION 3.10 IN THEIR ENTIRETY AND TO ------------ SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 3.10 [Intentionally Blank.] (i) TO AMEND SECTION 3.11 OF THE FACILITIES AGREEMENT BY AMENDING ------------ EACH REFERENCE THEREIN TO THE "PLEDGE AGREEMENT" TO BE A REFERENCE TO "EACH OF THE PLEDGE AGREEMENTS" AND TO FURTHER AMEND SECTION 3.11 OF THE ------------ FACILITIES AGREEMENT BY DELETING CLAUSE (y) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (y) is consistent with the terms of this Agreement and the other Credit Documents. (j) TO AMEND SECTION 3.13 OF THE FACILITIES AGREEMENT BY ADDING THE ------------ FOLLOWING AT THE END THEREOF: In addition, as of the Restructuring Effective Date, the Company shall and shall cause each of its Restricted Subsidiaries to: 15 (A) Enter into amendments and/or amendments and restatements, in form and substance reasonably acceptable to the Agents and the Liquidity Lenders, to each of the Mortgages and Collateral Assignments of Lease previously delivered (the "EXISTING 1996 REAL ESTATE COLLATERAL DOCUMENTS") to add the Liquidity Obligations to the obligations secured thereby; (B) Enter into additional Mortgages and Collateral Assignments of Lease in form and substance substantially similar to the Existing 1996 Real Estate Collateral Documents, as amended, and covering the same real estate interests together with the interests pledged to the 1996 Lease Agent (subject to the terms of the Intercreditor Agreement) in order to secure: (1) the Cash Management Obligations; and (2) the Supplemental Obligations together with such other documentation as shall be necessary in the reasonable determination of the Common Collateral Agent to effect the assignment of the rights, title and interest of the Company or such Restricted Subsidiary, as the case may be, in and to such owned and leased real property. (K) TO AMEND SECTION 3.14 OF THE FACILITIES AGREEMENT BY DELETING THE ------------ TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 3.14 Further Assurances. Promptly upon request by ------------------ the Common Collateral Agent, the Loan Agent, the 1996 Lease Agent or any of the Majority Liquidity Lenders, the Majority 1996 Lease Lenders, the Majority Revolving Lenders, any Cash Management Bank or any Other Creditor, as applicable, the Company shall (and shall cause any of its Subsidiaries to) do, execute, acknowledge where necessary, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, security agreements, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Common Collateral Agent or such Creditors, as the case may be, may reasonably require from time to time in order (i) to carry out more effectively the intent and purposes of this Agreement or any other Common Collateral Document, (ii) to subject to the Liens created by any of the Common Collateral Documents any of the properties, rights or interests covered by any of the Common Collateral Documents, and (iii) to perfect and maintain the validity, effectiveness and priority of any of the Common Collateral Documents and the Liens intended to be created thereby. Without in any way limiting the foregoing, on or prior to the date that is 30 days following the Restructuring Effective Date, the Company shall and shall cause each of its 16 Restricted Subsidiaries to provide to the Common Collateral Agent all legal descriptions which were not available for owned or leased locations as of the Restructuring Effective Date sufficient to permit the filing of UCC fixture filings for such locations. (l) TO ADD THE FOLLOWING AFTER SECTION 3.14 OF THE FACILITIES ------------ AGREEMENT: SECTION 3.15 Mandatory Prepayments. --------------------- (a) Asset Sales and Tax Refunds. --------------------------- (i) Asset Sale Prepayments. Upon the consummation by the ---------------------- Company or any Restricted Subsidiary of any transaction, whether voluntary or involuntary (including, as a result of any condemnation proceeding) involving the sale, lease, assignment, transfer, or other disposition of any of its now owned or hereafter acquired assets (including, without limitation, shares of stock and indebtedness of Restricted Subsidiaries (but not including the sale, assignment, transfer or other disposition of the shares of stock of ENBC), receivables, real property, leasehold interests, franchise agreements, trademarks, trade names, copyrights, licenses and other general intangible interests) (an "ASSET SALE") (other than the Excluded Asset Sales), except to the extent that the gross amount of the proceeds of such Asset Sale, when combined with the gross amount of the proceeds of all such Asset Sales during the period from the Restructuring Effective Date to the date of such Asset Sale, do not exceed $5,100,000, on the Business Day of the Company's or any of its Restricted Subsidiaries' (i) receipt of any Net Cash Proceeds from any such Asset Sale, or (ii) conversion to cash or cash equivalents of non-cash proceeds (whether principal or interest and including securities, release of escrow arrangements, success payments, earnouts or lease payments) received from any Asset Sale, the Company shall make a mandatory prepayment of the Secured Obligations in an amount equal to one hundred percent (100%) of such Net Cash Proceeds or such proceeds converted from non-cash to cash or cash equivalents (an "ASSET SALE PREPAYMENT"). Notwithstanding anything herein to the contrary, no Asset Sale Prepayment shall be required from the proceeds of the sale, lease, assignment, transfer or other disposition of (y) any of the 1995 Collateral or (z) any of the Sanwa Collateral (although amounts received therefrom shall be included for purposes of determining whether the Company has exceeded the $5,100,000 threshold above). The Company shall make each such Asset Sale Prepayment to the Common Collateral Agent for the benefit of the Creditors as their interests appear and the Common Collateral Agent shall distribute the proceeds thereof in accordance with the terms of clause (iii) below. (ii) Tax Refund Prepayments. Upon the receipt by the Company or ---------------------- any Restricted Subsidiary of any payments from federal, state or local tax refunds, the 17 Company shall make a mandatory prepayment of the Secured Obligations in an amount equal to one hundred percent (100%) of such tax refund payments (a "TAX REFUND PREPAYMENT"). The Company shall make each such Tax Refund Prepayment to the Common Collateral Agent for the benefit of the Creditors as their interests appear and the Common Collateral Agent shall distribute the proceeds thereof in accordance with the terms of clause (iii) below. (iii) Application of Asset Sale and Tax Refund Prepayments. ---------------------------------------------------- Each Asset Sale Prepayment and each Tax Refund Prepayment shall be allocated and applied to the Secured Obligations as follows: FIRST: If such prepayment is made after the occurrence of an Actionable Default, to the Common Collateral Agent in an amount equal to the Agents' Expenses that are unpaid as of such date, and to any of the Creditors that has theretofore advanced or paid any such Agents' Expenses in an amount equal to the amount thereof so advanced or paid by such Creditor prior to such date; SECOND: If such prepayment is made after the occurrence of an Actionable Default, to the Liquidity Lenders for the payment of the accrued and unpaid interest and fees with respect to the Liquidity Obligations, pro rata in accordance with each Liquidity Lender's Liquidity Percentage; THIRD: To the Liquidity Lenders for the prepayment of the outstanding principal balance of the Liquidity Obligations, pro rata in accordance with each Liquidity Lender's Liquidity Percentage and the Liquidity Commitments of such Liquidity Lender shall be permanently reduced pro tanto; --- ----- FOURTH: If such prepayment is made after the occurrence of an Actionable Default, to the 1996 Lenders for the payment of the accrued and unpaid interest and fees with respect to the Revolving Obligations and 1996 Lease Obligations, pro rata in accordance with each 1996 Lender's Pro Rata 1996 Share; FIFTH: To the 1996 Lenders, for the payment of the outstanding principal balance of the Revolving Obligations and the 1996 Lease Obligations, pro rata in accordance with such 1996 Lender's Pro Rata 1996 Share, as a permanent reduction of the Revolving Obligations and 1996 Lease Obligations so repaid; and SIXTH: To the Common Collateral Agent for application pursuant to clauses FIRST through FIFTH of Section 3.3(a) of the -------------- Intercreditor 18 Agreement, as applied without regard to whether or not an Actionable Default exists. (iv) Miscellaneous Matters. In the event that a portion of the --------------------- Revolving Obligations to be repaid pursuant to clause (iii) FOURTH ------------------- above shall include contingent reimbursement obligations in respect of Letters of Credit, the allocable amount with respect thereto shall be deposited with the Common Collateral Agent as cash collateral in respect of such letter of credit obligations. On each date on which a payment is made to a beneficiary pursuant to a draw on a Letter of Credit, the Common Collateral Agent shall distribute to the Issuing Lender from the amounts held pursuant to this subsection (iv) for --------------- application to the payment of the reimbursement obligation due to Issuing Lender with respect to such draw an amount equal to the product of (1) the total amount then held pursuant to this clause ------ (iv), and (2) a fraction, the numerator of which is the amount of such draw and the denominator of which is the aggregate undrawn amount of all outstanding Letters of Credit immediately prior to such draw. On each date on which a reduction in the undrawn amount of any outstanding Letter of Credit occurs other than on account of a payment made to a beneficiary pursuant to a draw on such Letter of Credit, the Agent shall distribute from the amounts held pursuant to this clause ------ (iv) an amount equal to the product of (1) the total amount then held ---- pursuant to this clause (iv) and (2) a fraction the numerator of which ----------- is the amount of such reduction and the denominator of which is the aggregate undrawn amount of all outstanding Letters of Credit immediately prior to such reduction, which amount shall be distributed as provided in clause (iii) above. At such time as no Letters of ------------ Credit are outstanding, any remaining amount held pursuant to this clause (iv), after the distribution therefrom as provided above, shall ----------- be distributed as provided in clause (iii) above. No amounts repaid ------------ under this Section 3.15(a) shall be permitted to be reborrowed. --------------- (b) ENBC Prepayments. ---------------- (i) ENBC Sale Prepayments. Upon the consummation by the Company --------------------- of any transaction involving the sale, assignment, transfer, or other disposition of any of the capital stock of ENBC owned of record or beneficially by the Company (an "ENBC SALE"), the Company shall make a mandatory prepayment of the Secured Obligations in an amount equal to one hundred percent (100%) of the Net Cash Proceeds from such ENBC Sale or such proceeds converted from non-cash to cash or cash equivalents (an "ENBC PREPAYMENT"). The Company shall make such mandatory prepayment to the Common Collateral Agent for the benefit of the Creditors as their interests appear and the Common Collateral Agent shall distribute the proceeds thereof in accordance with the terms of clause (ii) below. ----------- (ii) Application of ENBC Prepayments. Each ENBC Prepayment ------------------------------- shall be allocated and applied to the Secured Obligations as follows: 19 FIRST: If such ENBC Prepayment is made after the occurrence of an Actionable Default, to the Common Collateral Agent in an amount equal to the Agents' Expenses that are unpaid as of such date, and to any of the Creditors that has theretofore advanced or paid any such Agents' Expenses in an amount equal to the amount thereof so advanced or paid by such Creditor prior to such date; SECOND: An amount equal to twenty-five percent (25%) of the remaining Net Cash Proceeds from such ENBC Sale Prepayment to the 1996 Lenders for the payment of (a) first, if such ENBC Prepayment is made after the occurrence of an Actionable Default, the accrued and unpaid interest and fees with respect to the Revolving Obligations and 1996 Lease Obligations, pro rata in accordance with each 1996 Lender's Pro Rata 1996 Share; and (b) second, the outstanding principal balance of the Revolving Obligations and the 1996 Lease Obligations, pro rata in accordance with each 1996 Lender's Pro Rata 1996 Share as a permanent reduction of the Revolving Obligations and 1996 Lease Obligations so repaid; THIRD: An amount equal to the lesser of: (a) the outstanding amount of the Liquidity Obligations (calculated to include interest and fees only if such calculation is made after the occurrence of an Actionable Default) and (b) the remaining amount of the ENBC Prepayment after payment of the amounts under clauses FIRST and SECOND above, to the Liquidity Lenders for the payment of (a) first, if such ENBC Prepayment is made after the occurrence of an Actionable Default, the accrued and unpaid interest and fees with respect to the Liquidity Obligations, pro rata in accordance with each Liquidity Lender's Liquidity Percentage and (b) second, the outstanding principal balance of the Liquidity Obligations, pro rata in accordance with each Liquidity Lender's Liquidity Percentage and, upon such prepayment of principal, the Liquidity Commitments of each Liquidity Lender shall be permanently reduced pro tanto (subject to further --- ----- reduction pursuant to clause FOURTH below); FOURTH: An amount equal to the lesser of: (a) the sum of the outstanding amount of the Revolving Obligations and the 1996 Lease Obligations (in each case calculated to include interest and fees only if such calculation is made after the occurrence of an Actionable Default) and (b) the remaining amount of the ENBC Prepayment after payment of the amounts under clauses FIRST, SECOND and THIRD above to the 1996 Lenders, for the payment of (i) first, if the calculation above was made after the occurrence of an Actionable Default, the accrued and unpaid interest and fees with respect to the Revolving Obligations and 1996 Lease Obligations pro rata in accordance with each 1996 Lender's Pro Rata 1996 Share and 20 (ii) second, the outstanding principal balance of the Revolving Obligations and 1996 Lease Obligations pro rata in accordance with each 1996 Lender's Pro Rata 1996 Share; and FIFTH: Any excess, to the Common Collateral Agent for application pursuant to clauses FIRST through FIFTH of Section ------- 3.3(a) of the Intercreditor Agreement, as applied without regard ------ to whether or not an Actionable Default exists. (iii) Miscellaneous Matters. In the event that a portion of the --------------------- Revolving Obligations to be repaid pursuant to clause (ii) above shall ----------- include contingent reimbursement obligations in respect of Letters of Credit, the allocable amount (the "L/C Amount") with respect thereto shall be deposited with the Common Collateral Agent as cash collateral in respect of such letter of credit obligations. On each date on which a payment is made to a beneficiary pursuant to a draw on a Letter of Credit, the Common Collateral Agent shall distribute to the Issuing Lender from the amounts held pursuant to this subsection (iii) ---------------- for application to the payment of the reimbursement obligation due to Issuing Lender with respect to such draw an amount equal to the product of (1) the total amount then held pursuant to this clause ------ (iii), and (2) a fraction, the numerator of which is the amount of ----- such draw and the denominator of which is the aggregate undrawn amount of all outstanding Letters of Credit immediately prior to such draw. On each date on which a reduction in the undrawn amount of any outstanding Letter of Credit occurs other than on account of a Reborrowing Loan or a payment made to a beneficiary pursuant to a draw on such Letter of Credit, the Agent shall distribute from the amounts held pursuant to this clause (iii) an amount equal to the product of ------------ (1) the total amount then held pursuant to this clause (iii) and (2) a ------------ fraction the numerator of which is the amount of such reduction and the denominator of which is the aggregate undrawn amount of all outstanding Letters of Credit immediately prior to such reduction, which amount shall be distributed as provided in clause (ii). At such ----------- time as no Letters of Credit are outstanding, any remaining amount held pursuant to this clause (iii), after the distribution therefrom ------------ as provided above, shall be distributed as provided in clause (ii) ----------- above. Notwithstanding anything herein to the contrary, the L/C Amount shall be subject to reborrowing either (a) from the cash collateral deposited with the Common Collateral Agent and/or (b) from amounts distributed in payment of reimbursement obligations due with respect to any Letter of Credit at the times, in the amounts and otherwise on the same terms and conditions as though such amount had been distributed to the Revolving Lenders pursuant to the terms of clause FOURTH above. (iv) Effect of ENBC Prepayments; Reborrowing Availability ---------------------------------------------------- Amount; Procedure for Reborrowing. --------------------------------- 21 (A) The "REBORROWING AVAILABILITY AMOUNT" shall initially be zero ($0.00). Upon each payment pursuant to the preceding clause ------ (ii) FOURTH (each a "LEVEL 4 PAYMENT"), the Reborrowing ----------- Availability Amount shall be increased by an amount equal to the lesser of (x) the aggregate amount of the Liquidity Facility Commitments, if any, that remain after the reduction thereof pursuant to the preceding clause (ii) THIRD that corresponds to ----------------- such Level 4 Payment and (y) the aggregate principal amount of such Level 4 Payment. Concurrent with any increase in the Reborrowing Availability Amount as provided in the preceding sentence, the Liquidity Commitments of each Liquidity Lender shall be permanently reduced pro tanto. --- ----- (B) From and after the time at which the Reborrowing Availability Amount is first increased from zero pursuant to the preceding clause (iv)(A) (the date of the first such increase in the Reborrowing Availability Amount, the "REBORROWING AVAILABILITY COMMENCEMENT DATE"): (1) each of the Revolving Lenders and the Lead 1996 Lease Lender shall be obligated, in accordance with the terms hereof and of Section 2.7(4) of the Credit Agreement -------------- and Section IIA of the 1996 Lease Agreement and subject to ----------- the other terms and conditions contained herein and therein and applicable thereto, to reloan its Pro Rata 1996 Share of the Reborrowing Availability Amount; and (2) No Liquidity Loans shall be made at any time at which there are unused Reborrowing Commitments hereunder. (C) Any authorized officer of the Company may request a Reborrowing Loan on behalf of the Company during the Reborrowing Availability Period by giving simultaneous written notice to the Loan Agent and the 1996 Lease Agent in the form of Exhibit J --------- attached hereto ("REBORROWING REQUEST") or such other form as shall be acceptable to the Loan Agent and the 1996 Lease Agent. Each Reborrowing Request shall constitute a deemed representation and warranty by the Company that the conditions contained in each of the Credit Documents to the making of such a Reborrowing Loan have been satisfied. Each Reborrowing Request must be received by the Loan Agent and the 1996 Lease Agent prior to 10:00 A.M., Chicago time, on the proposed date of such borrowing (which must be a Business Day) and shall specify (i) the aggregate principal amount of such borrowing, (ii) the amount of such borrowing to be funded by the 1996 Lease Lenders and the amount of such borrowing to be funded by the Revolving Lenders, allocated between the 1996 Lease Lenders and the Revolving Lenders in accordance with their respective Pro Rata 1996 Shares, and (iii) the proposed date of borrowing (which must be a Business Day). 22 (D) Subject to the terms and conditions set forth in this Agreement, the Credit Agreement, the 1996 Master Lease and the other Credit Documents, each of the Revolving Lenders and 1996 Master Lease Lenders, severally and for itself alone, from time to time during the Reborrowing Availability Period agrees to make loans to the Company on a revolving basis, at such times and in an amount equal to its Pro Rata 1996 Share of the Reborrowing Availability Amount (each, a "REBORROWING LOAN" and collectively, the "REBORROWING LOANS"). It is expressly understood and agreed that, notwithstanding anything to the contrary in any Credit Document, all of the conditions for the making or repayment of Reborrowing Loans that are specified in this Agreement or any of the Credit Agreement, the 1996 Master Lease or the other Credit Documents must be satisfied before any 1996 Lender has any obligation to fund its respective share of the relevant Reborrowing Loan. (E) The aggregate amount requested from the 1996 Lenders in connection with each Reborrowing Loan shall be in a principal amount of $1,000,000 or an integral multiple thereof. All Reborrowing Loans shall be pro rata among the 1996 Lease Lenders and the Revolving Lenders in accordance with their respective Pro Rata 1996 Share. (F) Voluntary prepayments of the Reborrowing Loans shall be governed by and subject to the terms of each of Section 2.7 of ----------- the Credit Agreement and Section IIA of the 1996 Master Lease ----------- Agreement. (c) Mandatory Prepayments resulting from Budget Variance. In ---------------------------------------------------- addition to repayments under clauses (a) and (b) above, if at any time and ----------- --- for any reason the amounts borrowed pursuant to the Liquidity Loans or the Reborrowing Loans are not used for the purposes and within the parameters established in the Budget, the Company shall immediately make a mandatory prepayment of the applicable Secured Obligations in an amount equal to the amount utilized other than in conformity with the Budget. (d) Nothing in this Section 3.15 shall be construed to constitute the ------------ consent of any of the parties to this Agreement to any transaction referred to in clauses (a) and (b) above which is prohibited by other terms ----------- --- of this Agreement, the Credit Agreement or the 1996 Master Lease Agreement. In addition, nothing in this Section 3.15 or anywhere else in the Agreement ------------ shall be construed to constitute the consent of Sanwa Business Credit Corporation to any transaction referred to in clause (a) above with respect ---------- to the Sanwa Collateral which is prohibited by the terms of the documents, instruments or agreements governing the Supplemental Obligations secured by the Sanwa Collateral.. 23 SECTION 3.16 Collection Account Arrangements. (a) All collections -------------------------------- of receipts from each individual Store and other proceeds of Collateral shall be deposited in a Collection Account which prior to the date that is 30 days after the Restructuring Effective Date is subject to a Collection Account Agreement or pursuant to another similar arrangement for the collection of such amounts established by the Company or any of its Subsidiaries and the Common Collateral Agent and shall be transferred in accordance with the provisions of the respective Collection Account Agreements. Any of the foregoing collections received by the Company or any of its Subsidiaries and not so deposited, shall be deemed to have been received by the Company or such Subsidiary as the Common Collateral Agent's trustee and, upon the Company's or such Subsidiary's receipt thereof, the Company shall or shall cause such Subsidiary to immediately transfer all such amounts into a Collection Account in their original form. Such deposits shall be remitted to the Common Collateral Agent, the Company or as the Common Collateral Agent may direct, all in accordance with the provisions of the Collection Account Agreements. The Company hereby represents and warrants that as of the Restructuring Effective Date, Schedule 3.16(a) contains a true and accurate list of all bank accounts ---------------- maintained by the Company and each of its Subsidiaries. (b) Following the Collection Account Blockage Date and during the continuance of a Default (other than, during the Suspension Period, a Suspended Default) giving rise thereto, all payments received by the Common Collateral Agent and all proceeds of other Collateral received by the Common Collateral Agent, whether through payment or otherwise, will be the sole property of the Common Collateral Agent for the benefit of each of the holders of Secured Obligations and will be deemed received by the Collateral Agent for application to the Secured Obligations pursuant to the terms of the Intercreditor Agreement. (c) Notwithstanding the foregoing, the Company and its Subsidiaries shall be permitted to maintain bank accounts with parties which are not subject to Collection Account Agreements provided that (i) the balances in such accounts are deposited not less frequently than once per week into one of the Collection Accounts and (ii) the aggregate balance in all such accounts shall not exceed $350,000 at any time. 1.6 ARTICLE IV OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS: ---------- (A) SECTION 4.1 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE ----------- CLAUSES (10) AND (11) THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (10) Liens arising (i) pursuant to the 1996 Lease Documents, (ii) pursuant to the 1995 Lease Documents, (iii) in favor of the Common Collateral Agent to secure the Liquidity Obligations, the Revolving Obligations, the 1996 Lease Obligations, the Cash Management Obligations and the Supplemental Obligations and (iv) on the Sanwa Collateral to secure 24 the Supplemental Obligations owing to Sanwa Business Credit Corporation; provided, that: -------- (a) at no time shall the Financial Lease Debt arising from the 1995 Lease Documents exceed in principal amount $59,670,000, (b) at no time shall the obligations under the 1995 Lease Documents be secured by any collateral other than the 1995 Lease Collateral; (c) at no time shall the Supplemental Obligations to Sanwa Business Credit Corporation exceed in principal amount $6,980,000; and (d) each holder of the Debt secured by such Liens other than the 1995 Lease Lenders and the 1996 Lease Lenders (other than the Lead 1996 Lease Lenders) shall be a party to the Intercreditor Agreement and each of the 1996 Lease Lenders and each other participant in any of the Liquidity Obligations, the Revolving Obligations, the 1996 Lease Obligations, the Cash Management Obligations and the Supplemental Obligations shall acknowledge and agree to be bound by the terms of the Intercreditor Agreement; (11) Other Liens incurred prior to the Restructuring Effective Date and which are not of the type permitted by the foregoing clauses ------- (1) through (10), provided, that the aggregate amount of Debt secured --- ---- -------- by such Liens shall in no event exceed Ten Million Dollars ($10,000,000). (B) SECTION 4.2 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE ----------- CLAUSES (1), (6), (8), (9), (12) AND (13) THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (1) Debt of the Company: (a) under the Credit Documents, provided, that at no time -------- shall (i) Debt consisting of Revolving Obligations arising from the Credit Agreement exceed $57,115,000, (ii) Debt consisting of Liquidity Obligations arising from the Credit Agreement exceed $35,000,000, (iii) Debt arising from the 1996 Master Lease Agreement exceed $166,125,000; (b) arising out of the Cash Management Arrangements; and (c) Financial Lease Debt arising from the 1995 Lease Documents, provided at no time shall such Financial Lease Debt -------- exceed in principal amount $59,670,000; ... 25 (6) Debt which constitutes indebtedness for borrowed money owed by a Financed Franchisee to a Person other than the Company (including, without limitation, any funding by landlords of leasehold improvements) which indebtedness is in existence on the date such Financed Franchisee becomes a Financed Subsidiary, and any renewal, extension or refinancing of such Debt, provided, that both before and -------- after giving effect to such Financed Franchisee becoming a Financed Subsidiary no Default or Event of Default (other than, during the Suspension Period, a Suspended Default) shall exist or be continuing, and provided further, that the outstanding principal amount of such -------- ------- Debt shall at no time exceed the principal amount of such Debt outstanding on the date such Financed Franchisee becomes a Financed Subsidiary; (8) Debt which constitutes Current Pay Subordinated Debt, provided, that such Debt was incurred prior to the Restructuring -------- Effective Date; (9) Debt which constitutes Non-Current Pay Subordinated Debt, provided that such Debt was incurred prior to the -------- Restructuring Effective Date;... (12) Debt incurred or assumed in connection with Investments and other acquisitions permitted under this Agreement, provided, that such Debt was incurred prior to the -------- Restructuring Effective Date; and (13) Unsecured Debt not of the type described in the foregoing clauses (1) through (12) in an aggregate principal ----------- ---- amount not to exceed at any one time outstanding Twenty-Five Million Dollars ($25,000,000), provided, that such Debt was -------- incurred prior to the Restructuring Effective Date and not in contemplation thereof. (C) SECTION 4.4 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE REFERENCES THEREIN TO "A MASTER LEASE" OR THE "THE MASTER LEASES" THEREFROM AND TO SUBSTITUTE THE TERMS "THE 1995 MASTER LEASE" THEREFOR. (D) SECTION 4.5 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 4.5 Sale and Leaseback. Sell, transfer, or otherwise ------------------ dispose of, or permit any Restricted Subsidiary to sell, transfer, or otherwise dispose of, any real or personal property or fixtures to any Person and thereafter directly or indirectly lease back the same or similar property. 26 (E) SECTION 4.6 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE ----------- TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 4.6 Dividends. Declare or pay any dividends; or --------- purchase, redeem, retire, or otherwise acquire for value any of its capital stock now or hereafter outstanding; or make any distribution of assets to its stockholders as such whether in cash, assets, or obligations of the Company; or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of, any shares of its capital stock; or make any other distribution by reduction of capital or otherwise in respect of any shares of its capital stock; or permit any of its Restricted Subsidiaries (unless failure to so permit would constitute a breach of fiduciary duty) to purchase or otherwise acquire for value any stock of the Company or another Restricted Subsidiary, except that (1) the Company may declare and deliver dividends and make distributions payable solely in (a) common capital stock of the Company or (b) dividends on any Permitted Junior Securities (as defined below) payable in Permitted Junior Securities of the same type, (2) in connection with the purchase of minority equity interests held by Persons in any Restricted Subsidiary of the Company, the Company may issue its 10% Series A Exchangeable Preferred (par value .01 per share) or other equity securities which are pari passu or junior thereto; provided (x) the redemption date thereof -------- shall not be earlier than the redemption date in the 10% Series A Exchangeable Preferred as of the Restructuring Effective Date, (y) no cash dividends shall be payable in respect thereof and (z) the terms and conditions thereof shall not be adverse in any respect to the interests of the Lenders (collectively, the "Permitted Junior Securities") or (3) Guarantors may purchase or otherwise acquire for value stock of the Company, provided, that any such Guarantor shall -------- use such stock as consideration for or in connection with any acquisition permitted pursuant to this Agreement. (F) SECTION 4.7 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE ----------- TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 4.7 Sale of Assets. Provided the proceeds thereof -------------- are paid in accordance with the provisions of Section 3.15(a), if --------------- applicable, sell, lease, assign, transfer, or otherwise dispose of, or permit any Restricted Subsidiary to sell, lease, assign, transfer, or otherwise dispose of, any of its now owned or hereafter acquired assets (including, without limitation, shares of stock and indebtedness of Restricted Subsidiaries, receivables, real property, leasehold interests, franchise agreements, trademarks, trade names, copyrights, licenses and other general intangible interests), except: (1) for assets disposed of in the ordinary course of business; 27 (2) for the sale or other disposition of assets no longer used or useful in the conduct of its business provided that the aggregate amount of all such dispositions from and after the Restructuring Effective Date shall not exceed $250,000; (3) for (a) the sale, leasing or other disposition of real property or the subleasing of leasehold interests entered into prior to the Restructuring Effective Date (or, in the case of the five properties for which de facto lease arrangements were -- ----- entered into prior to the Restructuring Effective Date but for which the formal leases are not entered into until after the Restructuring Effective Date and the cash flow from which is reflected in the Budget, entered into after the Restructuring Effective Date) to an Unrestricted Subsidiary or a franchisee of an Unrestricted Subsidiary for the operation of a retail bagel outlet or (b) the leasing of real property or the subleasing of leasehold interests to any other Person entered into prior to the Restructuring Effective Date; (4) that any Restricted Subsidiary may sell, lease, assign, or otherwise transfer its assets (other than the Sanwa Collateral) to the Company or any Guarantor; provided, adequate -------- provision has been made, on or prior to the consummation of such transaction for the continuation of the liens of the Common Collateral Agent and (if applicable) the 1996 Lease Agent in the assets so transferred pursuant to documentation reasonably acceptable to the Common Collateral Agent and and (if applicable) the 1996 Lease Agent provided further that in the case of a transfer to a Guarantor which is a Special Purpose Subsidiary, such assets are of a type permitted to be owned by a Special Purpose Subsidiary pursuant to clause (3) of the definition of "Special Purpose Subsidiary"; (5) that the Company or any Restricted Subsidiary may sell, lease, assign or otherwise transfer to a Franchisee any real property, leasehold interests or personal property associated with the operation of Stores, provided that (i) such sale, lease, -------- assignment or transfer is on commercially reasonable terms negotiated at arms' length; (ii) after giving effect to such sale, lease, assignment or transfer no Default or Event of Default shall exist or be continuing (other than, during the Suspension Period, a Suspended Default) and (iii) the Net 28 Cash Proceeds thereof are paid to the Common Collateral Agent pursuant to Section 3.15; ------------ (6) that the Company may sell the capital stock of ENBC which it owns (and the Common Collateral Agent shall promptly release any Liens in favor of the Common Collateral Agent on such capital stock); provided, that (a) such sale is on commercially -------- reasonable terms negotiated at arms' length; (b) at least ninety percent (90%) of the aggregate sales price is for cash; (c) any non-cash proceeds received by the Company are pledged to the Common Collateral Agent pursuant to the Pledge Agreement; and (d) all Net Cash Proceeds received by the Company from such sale are paid to the Common Collateral Agent pursuant to Section 3.15. ------------ (7) for any issuances or sales of the capital stock, partnership units or other equity interests of any Restricted Subsidiary or other Person permitted pursuant to Section 4.11; ------------ provided the Net Cash Proceeds thereof are paid to the Common Collateral Agent as an Asset Sale Prepayment; (8) for any sale, lease, assignment, transfer or other disposition permitted or required by any Master Lease as such agreement is constituted as of the Restructuring Effective Date and without taking into account any subsequent amendment thereto other than, in the case of the 1996 Master Lease, amendments thereto that are not in contravention of the Intercreditor Agreement; (9) for any disposition of operating assets permitted by the first proviso in Section 3.4; provided the Net Cash Proceeds ----------- thereof are, subject to the second proviso of Section 3.4, paid to the Common Collateral Agent as an Asset Sale Prepayment; (10) for any transfer by the Company to a Guarantor of the Company's conversion rights, options, first refusal rights or preemptive rights provided in any Financed Franchisee Loan Documents or otherwise, provided that such conversion rights or -------- other rights are exercised by the Guarantor within 10 days after such transfer and in connection therewith the Company shall be in compliance with the provisions of Section 3.11; and ------------ (11) for other dispositions by the Company or any Restricted Subsidiary not of the type described in the foregoing clauses (1) ----------- 29 through (10), provided, that the Net Cash Proceeds thereof are -- -------- paid to the Common Collateral Agent as an Asset Sale Prepayment; and in the case of any such sale, assignment, transfer or other disposition of title, the Common Collateral Agent and (if applicable) the 1996 Lease Agent shall promptly execute, at the Company's expense, all documents reasonably necessary to release any Lien in favor of the Common Collateral Agent or the 1996 Lease Agent, as the case may be, on the disposed assets (but not the proceeds thereof). (G) SECTION 4.8 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE ----------- TERMS OF CLAUSES (1), (3), (5) AND (11) THEREOF IN THEIR ENTIRETY AND TO ----------- --- --- ---- SUBSTITUTE THE FOLLOWING THEREFOR: (1) loans and advances made by the Company to (a) Financed Franchisees and either (y) outstanding as of the Restructuring Effective Date or (z) made after the Restructuring Effective Date provided such loans and advances are made consistent with and within the parameters set forth in the Budget; provided, that (i) the initial -------- loans or advances to any Financed Franchisee are or have been made pursuant to Financed Franchisee Loan Documents in which the Common Collateral Agent for the benefit of the Creditors as their interests appear shall have been granted a security interest pursuant to, and which Financed Franchisee Loan Documents are subject to the terms of, the Collateral Assignment of Loan, (ii) such loans or advances are evidenced by promissory notes pledged to the Common Collateral Agent for the benefit of the Creditors as their interests appear pursuant to the Pledge Agreement, (iii) all such loans and advances to Financed Franchisees shall be secured in the manner described in paragraph (3) ------------- of Schedule 1.1.B, and (iv) all Liens in favor of the Company securing -------------- such loans and advances are duly perfected; (b) Financed Subsidiaries; provided, that (i) such loans and advances are made pursuant to -------- Financed Subsidiary Loan Documents in which the Common Collateral Agent for the benefit of the Creditors as their interests appear shall have been granted a security interest pursuant to, and which Financed Subsidiary Loan Documents are subject to the terms of, the Collateral Assignment of Loan, (ii) such loans or advances are evidenced by promissory notes pledged to the Common Collateral Agent for the benefit of the Creditors as their interests appear pursuant to the Pledge Agreement and (iii) all Liens in favor of the Company securing such loans and advances are duly perfected prior to the initial loan or advance thereunder; (c) Guarantors; provided, that such loans and -------- advances are evidenced by promissory notes pledged to the Common Collateral Agent for the benefit of the Creditors as their interests appear pursuant to the Pledge Agreement; and (d) to the extent and only to the extent a Sublease may be deemed to be 30 a loan or advance, to Franchisees or Financed Subsidiaries as lessees under a Sublease; ... (3) Investments in Unrestricted Subsidiaries made prior to the Restructuring Effective Date;... (5)(a) Investments in Progressive Food Concepts, Inc., a Delaware corporation, made after the Restructuring Effective Date but only to the extent committed to prior to (but not in contemplation of) the Restructuring Effective Date and consistent with the Budget; and (b) loans and advances by the Company or Progressive Food Concepts, Inc. to Harry's Farmer's Market, Inc., a Georgia corporation, in a maximum outstanding principal amount not to exceed at any time the amount of loans and advances which are outstanding on, or for which commitments have otherwise been made prior to (but not in contemplation of) the Restructuring Effective Date and consistent with the Budget, provided, that all such Investments (whether in the form -------- of equity or Debt) are pledged to the Common Collateral Agent for the benefit of the Creditors as their interests appear pursuant to the Pledge Agreement;... (11) loans and advances not of the type described in the foregoing clauses (1) through (10) in the aggregate principal amount not to exceed at any one time outstanding Six Million Dollars ($6,000,000), provided such loans and advances are pledged to the Common Collateral Agent pursuant to the Pledge Agreement. (H) SECTION 4.9 OF THE FACILITIES AGREEMENT IS AMENDED TO RENUMBER ----------- CLAUSE (5) THEREOF AS CLAUSE (6) AND TO ADD THE FOLLOWING THERETO AS NEW CLAUSE (5 ): (5) guaranties executed by the Company or any of its Subsidiaries to guaranty any Cash Management Obligations or Supplemental Obligations or otherwise entered into in favor of any of the Creditors on or prior to the Restructuring Effective Date and which are described on Schedule 4.9 hereto; and ------------ (I) SECTION 4.12 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE ------------ CLAUSE (1) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (1) the Company, any Guarantor, any Financed Subsidiary or any Special Purpose Subsidiary may purchase, acquire or otherwise take title to real property and to "Lease Asset" (as defined in the 1996 Master Lease) (a) in accordance with the terms and provisions of the 1996 Master Lease Agreement or (b) on which Stores are to be operated; provided that such real property or Lease Asset are subject to a lien in favor of either the Common 31 Collateral Agent or the 1996 Lease Agent, in either event, on behalf of the Creditors as their interests appear; (j) SECTION 4.13 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE ------------ CLAUSE (2) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (2) Subordinated Debt and interest thereon may be converted into equity of the Company. (k) SECTION 4.14 OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE ------------ CLAUSE (2) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (2) permit the aggregate principal amount of Debt of all Financed Franchisees which is owed to Persons other than the Company and which is senior to any Debt of such Financed Franchisee owed to the Company to exceed at any time $14,575,000. (l) SECTION 4.15 OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE ------------ FOLLOWING AT THE END THEREOF: During the Specified Liquidity Period, the Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the credit accommodations extended by the Creditors after the Restructuring Effective Date, directly or indirectly, for any purpose or in any amount not consistent with the Budget. (m) ARTICLE IV OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE FOLLOWING AT THE END THEREOF: SECTION 4.16 Fixed Fee Distribution Agreement. During the -------------------------------- Specified Liquidity Period, the Company shall not amend, modify or supplement (or consent to any amendment, modification or supplement of), the Fixed Fee Distribution Agreement where such amendment, modification or supplement provides for the following or which has any of the following effects: (i) requires the Company, any Restricted Subsidiary, any Financed Subsidiary, any Financed Franchisee, any Affiliate of the Company, any Affiliate of any of the foregoing, or any other party to whom the Fixed Fee Distribution Agreement applies to make payment to Marriott or any other party for goods or services within fewer than seven (7) days from the date of the provision of such goods or services (five (5) days on each Friday for goods delivered the prior weekend); or 32 (ii) amends or modifies any condition, covenant or default therein or supplements such agreement with additional conditions, covenants or defaults in a manner which is more onerous or more restrictive to the Company, any Restricted Subsidiary, any Financed Subsidiary, any Financed Franchisee, any Affiliate of the Company, any Affiliate of any of the foregoing, or any other party to whom the Fixed Fee Distribution Agreement applies or which is otherwise materially adverse to the Company, any Restricted Subsidiary, any Financed Subsidiary, any Financed Franchisee, any Affiliate of the Company, any Affiliate of any of the foregoing, or any other party to whom the Fixed Fee Distribution Agreement applies and/or the Creditors. 1.7 ARTICLE V OF THE FACILITIES AGREEMENT IS AMENDED TO DELETE THE LEAD-IN LANGUAGE AT THE BEGINNING OF SECTION 5.3 IN ITS ENTIRETY AND TO SUBSTITUTE THE ----------- FOLLOWING THEREFOR: Maintain, for each fiscal quarter occurring during the respective fiscal periods set forth below, average Store Revenues for all Stores (whether operated by the Company or any of its Subsidiaries or Franchisees), as determined as of the last day of each fiscal period, of not less than the amount set forth below opposite such fiscal period: 1.8 THE FACILITIES AGREEMENT IS AMENDED TO ADD THE FOLLOWING ARTICLE V-A ----------- IMMEDIATELY PRECEDING ARTICLE VI. ---------- ARTICLE V-A RESTRUCTURING COVENANTS ----------------------- So long as any Debt of the Company or any Guarantor arising under any of the Credit Documents shall remain unpaid or any Creditor shall have any contractual obligation under any Credit Document to extend credit of any nature to the Company, the Company will: SECTION 5A.1 General EBITDAL. Maintain cumulative System EBITDAL, --------------- tested for the period from April 20, 1998 to the end of each accounting period set forth below, that is at least the amount set forth below for the period ended with the accounting period set forth below (the "GENERAL EBITDAL COVENANT"): 33 MEASUREMENT PERIOD: MINIMUM CUMULATIVE FROM APRIL 20, 1998 TO THE END EBITDAL FOR SUCH OF THE ACCOUNTING PERIOD SET MEASUREMENT PERIOD FORTH BELOW - ------------------------------------------------- Accounting Period 6 ending ($4,400,000) June 14, 1998 - ------------------------------------------------- Accounting Period 7 ending July ($10,800,000) 12, 1998 - ------------------------------------------------- Accounting Period 8 ending ($18,300,000) August 9, 1998 - ------------------------------------------------- Accounting Period 9 ending ($20,400,000) September 8, 1998 - ------------------------------------------------- Accounting Period 10 ending ($21,800,000) October 4, 1998 - ------------------------------------------------- Notwithstanding anything to the contrary contained in this Agreement or the 1996 Master Lease Agreement, the Company shall, on and after the Restructuring Effective Date, continue to calculate System EBITDAL on a basis consistent with its calculations prior to the Restructuring Effective Date. SECTION 5A.2 Liquidity EBITDAL. Maintain during the Specified ----------------- Liquidity Period cumulative System EBITDAL, tested for the period from April 20, 1998 to the end of each accounting period set forth below, that is at least the amount set forth below for the period ended with the accounting period set forth below (the "LIQUIDITY EBITDAL COVENANT"): MEASUREMENT PERIOD: MINIMUM CUMULATIVE FROM APRIL 20, 1998 TO THE END EBITDAL FOR SUCH OF THE ACCOUNTING PERIOD SET MEASUREMENT PERIOD FORTH BELOW - ------------------------------------------------- Accounting Period 6 ending ($4,000,000) June 14, 1998 - ------------------------------------------------- Accounting Period 7 ending July ($10,000,000) 12, 1998 - ------------------------------------------------- 34 MEASUREMENT PERIOD: MINIMUM CUMLATIVE FROM APRIL 20, 1998 TO THE END EBITDAL FOR SUCH OF THE ACCOUNTING PERIOD SET MEASUREMENT PERIOD FORTH BELOW Accounting Period 8 ending ($17,000,000) August 9, 1998 Accounting Period 9 ending ($18,500,000) September 8, 1998 Accounting Period 10 ending ($19,500,000) October 4, 1998 - ------------------------------------------------------ Notwithstanding anything to the contrary contained in this Agreement or the 1996 Master Lease Agreement, the Company shall, on and after the Restructuring Effective Date, continue to calculate System EBITDAL on a basis consistent with its calculations prior to the Restructuring Effective Date. SECTION 5A.3 Budget Variance. Not, and will not permit its --------------- Restricted Subsidiaries, Financed Subsidiaries, and Financed Franchisees, during the Specified Liquidity Period to permit actual expenditures to vary from the Budget by more than the variance parameters set forth therein. 1.9 ARTICLE VI OF THE FACILITIES AGREEMENT IS AMENDED AS FOLLOWS: (A) TO DELETE THE TERMS OF SECTION 6.1 THEREOF IN THEIR ENTIRETY AND ----------- TO SUBSTITUTE THE FOLLOWING THEREFOR: ARTICLE VI EVENTS OF DEFAULT SECTION 6.1 Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur: (1) Any representation or warranty made or deemed made (pursuant to any Credit Document) by the Company or any Subsidiary in this Agreement or any other Credit Document or which is contained in any certificate, document, opinion, or financial or other statement furnished at any time under or in connection with any Credit Document shall prove, in light of the circumstances under which it was made, to have been incorrect in any material respect on or as of the date made or deemed made; 35 (2) The Company or any Subsidiary shall fail to perform or observe any term, covenant or agreement contained in Sections 3.15(a), 3.15(b), 3.16, 4.3, 4.4, or 4.6 through 4.14 of this Agreement applicable thereto; (3) The Company or any Subsidiary shall fail to perform or observe any term, covenant or agreement contained in Sections 4.1, 4.2, 4.5, in Article V or in Section 5A.1 of this Agreement and such failure shall continue for four (4) Business Days after the earlier of discovery, notification or final calculation thereof applicable thereto; (4) The Company or any Subsidiary shall fail to perform or observe any other term, covenant, or agreement contained in any Credit Document applicable thereto (other than those Sections referenced in the foregoing clauses (2) and (3) and other than those defaults arising under clause (14) below) on its part to be performed or observed and such failure shall continue for fifteen (15) Business Days following notice thereof from any of the Loan Agent, the 1996 Lease Agent, the Required Liquidity Lenders (during the Specified Liquidity Period) or the Required Creditors; (5) The Company or any Restricted Subsidiary shall (i) fail to make any payment of principal, interest, premium, rents or fees with respect to any indebtedness for borrowed money (including, without limitation, the Liquidity Note, the Revolving Notes and the 1996 Lease Obligations) or any Financial Lease Debt of the Company or such Restricted Subsidiary in an amount (for indebtedness other than under the Credit Documents) in excess of $1,000,000, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and any applicable grace periods shall have expired (and in the case of indebtedness for borrowed money, other than the Revolving Notes, the Liquidity Note or the 1996 Lease Obligations or Financial Lease Debt, the amount which the Company or any Restricted Subsidiary so fails to pay is in excess of $1,000,000), or (ii) fail to perform or observe any term, covenant, or condition on its part to be performed or observed under any agreement or instrument relating to any indebtedness for borrowed money (including, without limitation, the Revolving Notes, the Liquidity Note and the 1996 Lease Obligations) or any Financial Lease Debt of the Company or such Restricted Subsidiary in an amount in excess of $1,000,000, when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to 36 permit the acceleration, after the giving of notice, of the maturity of such indebtedness, unless such failure to perform or observe shall be waived by the holder of such indebtedness or Financial Lease Debt without any material payment or other material accommodation on the part of the Company or such Restricted Subsidiary; or any such indebtedness or Financial Lease Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; (6) The Company, any of its Significant Subsidiaries or any aggregation of its Subsidiaries which together would constitute a Significant Subsidiary (a) shall generally not, or shall be unable to, or shall admit in writing its inability to pay its debts as such debts become due; or (b) shall make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver, or trustee for it or a substantial part of its assets; or (c) shall commence any proceeding under any bankruptcy, reorganization, arrangements, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall have any such petition or application filed or any such proceeding commenced against it in which an order for relief is entered or adjudication or appointment is made and which remains undismissed for a period of sixty (60) days or more; or (e) by any act or omission shall indicate its consent to, approval of, or knowing acquiescence in any such petition, application, or proceeding, or order for relief, or the appointment of a custodian, receiver, or trustee for all or any substantial part of its properties; or (f) shall suffer any such custodianship, receivership, or trusteeship to continue undischarged for a period of sixty (60) days or more; (7) Any Financed Franchisee shall fail to pay when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) amounts which individually or in the aggregate equal or exceed $2,000,000 owed to the Company in connection with indebtedness for borrowed money (including any interest or premium thereon) and any applicable grace period shall have expired; (8) One or more judgments, decrees, or orders for the payment of money in excess of the greater of 3% of the consolidated net worth of the Company and its Restricted Subsidiaries at such time or of two million Dollars ($2,000,000) in the aggregate shall be rendered against the Company or any of its Subsidiaries, and such judgments, decrees, or orders shall continue unsatisfied and in effect for a period of twenty (20) 37 consecutive days without being vacated, discharged, satisfied, escrowed, stayed or bonded pending appeal; (9) Any of the following events occur or exist with respect to the Company or any ERISA Affiliate: (a) any Prohibited Transaction involving any Plan; (b) any Reportable Event with respect to any Plan; (c) the filing under Section 4041 of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (d) any event or circumstance that might reasonably constitute grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Plan, or the institution by the PBGC of any such proceedings; (e) complete or partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency, or termination of any Multiemployer Plan; and in each case above, such event or condition, together with all other events or conditions, if any, would be reasonably likely in the opinion of either the Loan Agent or the Lease Agent to subject the Company to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in the aggregate exceed two million Dollars ($2,000,000) and such event or condition remains unsatisfied after fifteen (15) Business Days from its initial occurrence or results in a Lien (subject to Liens permitted under Section 4.1) on Company's assets; (10) Any Guaranty shall, at any time after its execution and delivery and for any reason cease to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by the respective Guarantor, or the respective Guarantor shall deny it has any further liability or obligation under or shall fail to perform its material obligations under such Guaranty (subject to any applicable grace periods set forth therein); (11) With respect to any Common Collateral Document or 1996 Lease Document (to the extent it grants to the 1996 Lease Agent a security interest or other Lien): (a) any such Common Collateral Document or 1996 Lease Document shall for any reason cease to be valid and binding on or enforceable against the Company or any Subsidiary party thereto or the Company or any Subsidiary shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or 38 (b) such Common Collateral Document or 1996 Lease Document shall for any reason (other than pursuant to the terms thereto) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason cease to be a perfected security interest having the priority as set forth in the Credit Documents subject only to Permitted Liens (other than as a result of a release). (12) Any Change of Control; (13) Any Material Adverse Change; or (14) Any of the following shall occur at any time during the Specified Liquidity Period: (a) Marriott, any party entitled to take such action pursuant to the Fixed Fee Distribution Agreement, or any party providing the types of goods or services that were being provided pursuant to the Fixed Fee Distribution Agreement as of the Restructuring Effective Date shall either (i) require the Company, any Subsidiary, any Financed Subsidiary, any Financed Franchisee, any Affiliate of the Company, any Affiliate of any of the foregoing, or any other party to whom the Fixed Fee Distribution Agreement applies to make payment to Marriott or any other party for goods or services within less than seven (7) days from the date of the provision of such goods or services (five (5) days on each Friday for goods delivered the prior weekend), or (ii) declare a default, event of default, breach, or take any enforcement or similar action pursuant to the Fixed Fee Distribution Agreement or any other agreement (whether or not written) pursuant to which goods or services are being provided and such requirement under clause (i) or declaration under clause (ii) continues for five (5) Business Days from the date of its initial occurrence provided it is -------- expressly understood and agreed that during such five- Business Day period the Borrower shall not make payments or otherwise reduce the outstanding principal balance of the accounts payable to Marriott other than as a result of ordinary 39 course fluctuations in the daily distribution requirements of the Company and its Subsidiaries; or (b) The Company or any Subsidiary shall fail to perform or observe any term, covenant or agreement contained in Section 3.15(c), the last sentence of --------------- Section 4.15, Section 4.16, Section 5A.2, Section 5A.3, ------------ ------------ ------------ ------------ Section 6.1(14) or Section 2(c) of the Confidential --------------- ------------ Agreement. (B) TO ADD THE FOLLOWING THERETO IMMEDIATELY AFTER SECTION 6.2: ----------- SECTION 6.3 Suspension Period Forbearance. During the ----------------------------- Suspension Period, the Common Collateral Agent, the Revolving Lenders, Liquidity Lenders and Issuing Lenders, acting herein through the Loan Agent and the 1996 Lease Lenders, acting herein through the 1996 Lease Agent, agree to refrain from exercising the enforcement rights afforded to such parties under the Credit Agreement, 1996 Lease Agreement, Intercreditor Agreement or the other Credit Documents and applicable law in each case which arise upon the occurrence of a Suspended Default (it being understood that for all purposes hereof and under the other Credit Documents, any Suspended Default that shall have occurred or shall occur during the Suspension Period, shall be deemed, during such Suspension Period, not to be a "Default"), provided that such Creditors shall retain their rights that exist prior to the occurrence of a Suspended Default with respect to the disposition by any of the Company or any of its Subsidiaries of any collateral securing the Secured Obligations. On the Suspension Termination Date, each such Suspended Default, shall be deemed to have occurred and be continuing from and after the original date on which such Suspended Default shall have actually occurred and such Creditors shall have full right, power and authority to exercise the enforcement rights afforded to such Creditors upon the occurrence of a Default under the Credit Documents and applicable law. 1.10 ARTICLE VII OF THE FACILITIES AGREEMENT IS AMENDED TO ADD THE FOLLOWING AT THE END THEREOF: 7.13 Press Releases. The Company shall not and shall not permit -------------- any of its Affiliates to issue any press release or other public disclosure with respect to this Agreement, the other Credit Documents or the transactions which are the subject matter thereof which mentions or uses the name of any of the Lenders or 1996 Lease Lenders (in their individual capacities or in any of their various representative capacities) or any of their respective Affiliates without the prior written approval of such Lender. The Company shall not and shall not permit any of its Affiliates to issue in the future any press releases or other public disclosure using the name of any of the Lenders or 1996 Lease Lenders (in their 40 individual capacities or in any of their various representative capacities) or any of their respective Affiliates or referring to this Agreement or the other Credit Documents without the prior written consent of such Lender or 1996 Lease Lender unless the Company or such Affiliate is required to do so under law and then, in any event, the Company or such Affiliate will consult with the applicable Lender, 1996 Lease Lender, Lenders, 1996 Lease Lenders before issuing such press release or other public disclosure. 7.14. No Duties Imposed Upon Co-Agents. None of the Persons -------------------------------- identified in this Agreement as a "Co-Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Credit Documents in such capacity. Without limiting the foregoing, none of the Persons identified in this Agreement as a "Co-Agent" shall have or be deemed to have any fiduciary duty to or fiduciary relationship with any Lender. Each of the Lenders acknowledges that it has not relied, and will not rely, on any of the Persons so identified in deciding to enter into this Agreement, the Second Credit Agreement Amendment or the Intercreditor Agreement or in taking or not taking action hereunder or thereunder. 1.11 THE FACILITIES AGREEMENT IS FURTHER AMENDED TO DELETE THE SCHEDULES AND EXHIBITS THERETO IN THEIR ENTIRETY AND TO SUBSTITUTE THE ATTACHED SCHEDULE AND EXHIBITS THEREFOR. SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall not --------------------------- become effective unless on or before July 16, 1998 each of the following shall have occurred: (a) this Amendment shall have been executed by the Company, the Loan Agent and the 1996 Lease Agent; (b) each of the conditions set forth in Section 3 of the Second Credit --------- Amendment and Section 3 of the 1996 Lease Amendment No. 2 shall have been --------- satisfied; (c) the Company shall have paid all fees required to be paid to the Agents (whether for their own accounts or the accounts of the Creditors set forth therein) pursuant to the terms of the Confidential Agreement on or prior to the effectiveness hereof; (d) the Company shall have reimbursed the Agents for all fees and expenses of counsel, financial advisors and other professionals; 41 (e) the Agents shall have received the other documents, instruments and agreements set forth on the List of Closing Documents (Restructuring) and the List of Closing Documents (Rollup) attached as Exhibit K hereto, --------- in each case in form and substance acceptable to the Agents and duly executed by the parties thereto; and (f) the Agents shall have received such other approvals, opinions or documents as the Agents or any Creditor may reasonably request. SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Agents to ------------------------------ enter into this Amendment, the Company represents and warrants to each such party as of the date hereof that: (a) This Amendment and the Facilities Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Company hereby reaffirms all covenants, representations and warranties made in the Facilities Agreement and the other Loan Documents and 1996 Lease Documents to the extent the same are not amended or waived hereby or pursuant to the Second Credit Agreement Amendment or the 1996 Lease Amendment No. 2, as the case may be, agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. (c) No Default or Event of Default, other than the Suspended Defaults, has occurred under the Facilities Agreement, the Credit Agreement or the 1996 Master Lease. SECTION 4. REFERENCE TO THE EFFECT ON THE FACILITIES AGREEMENT. --------------------------------------------------- (a) Upon the effectiveness of Section 1 hereof, on and after the date --------- hereof, each reference in the Facilities Agreement and the other Credit Documents to "this Facilities Agreement," "hereunder," "hereof," "herein," "thereunder," "thereof," "therein" or words of like import shall mean and be a reference to the Facilities Agreement as amended hereby. (b) Except as specifically modified or waived above, the Facilities Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. SECTION 5. GOVERNING LAW. This Amendment shall be governed by and ------------- construed in accordance with the internal laws of the State of New York. 42 SECTION 6. HEADINGS. Section headings in this Amendment are -------- included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. SECTION 7. COUNTERPARTS. This Amendment may be executed by one or ------------ more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Facsimile transmission of the signature of any party hereto sent to either the Loan Agent or its counsel shall be effective as an original signature provided each party agrees to promptly submit original signature pages hereto in sufficient quantity for each of the parties hereto. SECTION 8. NO STRICT CONSTRUCTION. The parties hereto have ---------------------- participated jointly in the negotiation and drafting of this Amendment, the Facilities Agreement and the other Credit Documents. In the event an ambiguity or question of intent or interpretation arises, this Amendment and the Facilities Agreement as hereby amended and the other Credit Documents shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Amendment, the Facilities Agreement or any of the other Credit Documents. [Remainder of this Page Intentionally Blank.] 43 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above BOSTON CHICKEN, INC. By:_____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Loan Agent and Common Collateral Agent By:_____________________________________ Title:____________________________________ GENERAL ELECTRIC CAPITAL CORPORATION, as the 1996 Lease Agent By:_____________________________________ Title:____________________________________ EX-10.2 4 SECOND AMENDMENT AND CONSENT TO SECURED EXHIBIT 10.2 EXECUTION COPY SECOND AMENDMENT AND CONSENT TO SECURED REVOLVING CREDIT AGREEMENT THIS SECOND AMENDMENT AND CONSENT (this "AMENDMENT") dated as of July 15, 1998 is entered into by and among BOSTON CHICKEN, INC., a Delaware corporation (the "BORROWER"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, GENERAL ELECTRIC CAPITAL CORPORATION, LASALLE NATIONAL BANK, SANWA BUSINESS CREDIT CORPORATION AND HOUR LLC (the "LIQUIDITY LENDERS), GENERAL ELECTRIC CAPITAL CORPORATION, in its individual capacity and joining the Credit Agreement as a Revolving Lender ("GECC"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION AND GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Agents for the Liquidity Lenders (individually a "CO-AGENT" and collectively, the "CO- AGENTS"), those Revolving Lenders identified on the signature pages hereto as "Non-Participating Lenders" (the "NON-PARTICIPATING LENDERS"; the Liquidity Lenders and Non-Participating Lenders being referred to collectively as the "LENDERS"), BANKERS TRUST COMPANY, as Documentation Agent, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), as Issuing Lender and as agent for the Lenders (herein, in such capacity, the "LOAN AGENT"). W I T N E S S E T H: ------------------- WHEREAS, the Borrower, certain of the Liquidity Lenders, the Non- Participating Lenders and the Issuing Lender (referred to collectively as the "REVOLVING LENDERS"), the Documentation Agent and the Loan Agent are parties to that certain Secured Revolving Credit Agreement dated as of December 9, 1996, as amended by the First Amendment and Consent to Secured Revolving Credit Agreement (the "FIRST AMENDMENT"), and as such agreement may be further amended, modified, supplemented or restated from time to time (the "CREDIT AGREEMENT"; terms used but not otherwise defined herein are used herein as defined in the Credit Agreement, as amended and supplemented by this Amendment); WHEREAS, the Borrower has entered into that certain Master Lease Agreement No. 2, dated as of December 9, 1996, as amended by Amendment No. 1 to Master Lease Agreement No. 2 dated as of February 28, 1997 and Amendment No. 2 to Master Lease No. 2 of even date herewith (as amended, the "1996 MASTER LEASE AGREEMENT"), among the Borrower and GECC, for itself and as agent for the 1996 Lease Lenders referred to below (in such dual capacity the "1996 LEASE LOAN AGENT"); WHEREAS, subject to the terms and conditions of the 1996 Master Lease Agreement, GECC (in its capacity as the lead lender under the 1996 Master Lease Agreement, the "LEAD 1996 LEASE LENDER") has heretofore and may hereafter convey to certain financial institutions (together collectively with the Lead 1996 Lease Lender, the "1996 LEASE LENDERS") participating interests in its rights, duties and obligations under the 1996 Master Lease Agreement; WHEREAS, concurrently with the execution and delivery of the Credit Agreement and the 1996 Master Lease Agreement, the Borrower, the Loan Agent and the 1996 Lease Loan Agent entered into that certain Facilities Agreement and that certain Intercreditor Agreement, each dated as of December 9, 1996; WHEREAS, concurrently with the execution and delivery of the First Amendment, the Borrower, the Loan Agent, the 1996 Lease Loan Agent and BofA, in its capacity as the Common Collateral Agent entered into that certain Amended and Restated Facilities Agreement ("AMENDED FACILITIES AGREEMENT") and that certain Amended and Restated Intercreditor Agreement (the "AMENDED INTERCREDITOR AGREEMENT"), each dated as of October 24, 1997; WHEREAS, concurrently herewith, the Borrower, the Loan Agent, the 1996 Lease Loan Agent, the Co-Agents, the Common Collateral Agent, the Lenders and the Lead 1996 Lease Lender have entered into that certain First Amendment and Consent to the Amended Facilities Agreement, pursuant to which the Amended Facilities Agreement has been amended (as so amended, and as the same may be further amended, modified, supplemented and/or restated from time to time, the "FACILITIES AGREEMENT"), which sets forth certain agreements with respect to, among other things, representations, warranties, covenants and defaults among the parties thereto; WHEREAS, concurrently herewith, the Borrower, the Loan Agent, the 1996 Lease Loan Agent, the Co-Agents, the Common Collateral Agent, the Lenders, the Lead 1996 Lease Lender, the "Other Creditors" and the "Cash Management Banks" (each as defined in the Intercreditor Agreement referred to below) have entered into that certain Second Amended and Restated Intercreditor Agreement, pursuant to which the Amended Intercreditor Agreement has been amended and restated in its entirety (as so amended and restated, and as the same may be further amended, modified, supplemented and/or restated from time to time, the "INTERCREDITOR AGREEMENT"), which sets forth certain agreements with respect to, among other things, voting rights and collateral issues between the parties thereto; WHEREAS, the Borrower has requested, among other things, that the Credit Agreement be amended and supplemented in certain respects, including, without limitation, to provide (i) a supplemental revolving loan to the Borrower and (ii) a liquidity facility to the Borrower; WHEREAS, subject to the terms and conditions set forth herein, the Loan Agent, the Documentation Agent, the Co-Agents, the Issuing Lender, the Non- Participating Lenders and the Liquidity Lenders which are currently parties to the Credit Agreement have agreed to amend and supplement the Credit Agreement; 2 WHEREAS, subject to the terms and conditions set forth herein, the Liquidity Lenders that are not currently parties to the Credit Agreement have agreed to become parties to the Credit Agreement as Liquidity Lenders; and WHEREAS, subject to the terms and conditions set forth herein, GECC has agreed to become a party to the Credit Agreement as a Revolving Lender; NOW, THEREFORE, in consideration of the premises, and intending to be legally bound hereby, the Borrower, the Loan Agent, the Documentation Agent, the Co-Agents, the Liquidity Lenders, the Issuing Lender, GECC and the Non- Participating Lenders hereby agree as follows: SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT. Effective as of the date --------------------------------- hereof and subject to the satisfaction of the conditions precedent set forth in Section 3 below, and in reliance on the representations and warranties set forth - --------- in Section 4 below, on and after the date hereof, the parties hereto agree that --------- the Credit Agreement is amended as follows: 1.1 THE PREAMBLE TO THE CREDIT AGREEMENT IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE FOLLOWING: THIS SECURED REVOLVING CREDIT AGREEMENT dated as of December 9, 1996, is entered into among BOSTON CHICKEN, INC., a Delaware corporation (the "BORROWER"), BANKERS TRUST COMPANY, having its principal place of business at 130 Liberty Street, One Bankers Trust Plaza, New York, New York 10006, as Documentation Agent for the Lenders (as defined below) (herein in such capacity, together with any successor thereto in such capacity, called the "DOCUMENTATION AGENT"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), a national bank having its principal place of business at 231 South LaSalle Street, Chicago, Illinois 60697 (together with any successor thereto, "BOFA"), as agent for the Lenders (herein in such capacity, together with any successors thereto in such capacity, called the "LOAN AGENT") and as letter of credit issuing bank (herein in such capacity, together with any successors thereto in such capacity, called the "ISSUING LENDER"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION AND GENERAL ELECTRIC CAPITAL CORPORATION, as co-agents for the Liquidity Lenders (individually a "CO- AGENT" and collectively the "CO-AGENTS"), and the financial institutions parties hereto as lenders (whether as original signatories or pursuant to Section 10.5, or whether signatories hereto as additional parties in ------------ connection with Amendment No. 2 (herein, together with any assignees thereof, collectively called the "LENDERS" and each individually called a "LENDER"). 1.2 SECTION 1.1 OF THE CREDIT AGREEMENT IS AMENDED AS FOLLOWS: ----------- 3 (A) TO DELETE THE CURRENT DEFINITIONS FOR THE TERMS SET FORTH BELOW IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: "APPLICABLE MARGIN" or "APPLICABLE COMMITMENT FEE," as the case may be, means at any time, a margin or fee as follows: (1) in the case of the Applicable Margin: (a) with respect to the Liquidity Obligations and the Reborrowing Loans, two percent (2.0%) per annum; and (b) with respect to the Revolving Obligations (other than the Reborrowing Loans), (i) for any Eurodollar Loan, two and three- quarters percent (2.75%) per annum and (ii) for all other Revolving Obligations, one and one-half percent (1.50%) per annum; and (2) in the case of the Applicable Commitment Fee, a per annum fee of one-half of one percent (0.50%). "BORROWING" means (1) a borrowing hereunder consisting of Revolving Loans made to the Borrower at the same time by the Revolving Lenders pursuant to Article II (including, without limitation, Reborrowing Loans ---------- hereunder made pursuant to Section 2.7), (2) the Supplemental Revolving ----------- Loan made to the Borrower pursuant to Section 2.2 and/or (3) a borrowing ----------- hereunder consisting of Liquidity Loans made to the Borrower at the same time by the Liquidity Lenders pursuant to Article IIA. Any Borrowing ----------- outstanding as of the Restructuring Effective Date which is a Eurodollar Rate Borrowing may continue as a Eurodollar Rate Borrowing until the end of the applicable Interest Period. Any other Borrowing outstanding as of the Restructuring Effective Date or any Borrowing made on or after the Restructuring Effective Date shall be a Floating Rate Borrowing. "BORROWING REQUEST" means a Reborrowing Request or a Liquidity Borrowing Request. "COLLATERAL" has the meaning given that term in the Intercreditor Agreement; provided, however, in no event shall the Collateral include the -------- ------- Sanwa Collateral (as defined in the Intercreditor Agreement). "COMMITMENT" means at any time (i) as to any Revolving Lender, such Revolving Lender's Reborrowing Commitment - Revolver then in effect and (ii) as to any Liquidity Lender, such Liquidity Lender's Liquidity Commitment then in effect. "ELIGIBLE ASSIGNEE" shall mean (i) a commercial bank having total assets in excess of $1,500,000,000 and (ii) a finance company, insurance company or other financial 4 institution or fund, in each case consented to by the Loan Agent (such consent not to be unreasonably withheld), which in the ordinary course of business extends credit of the type evidenced by the Revolving Notes and, if applicable, the Liquidity Notes and has total assets in excess of $250,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA. "FLOATING RATE LOAN" means (i) any Revolving Loan (including the Supplemental Revolving Loan and the Reborrowing Loans) which bears interest at a rate determined by reference to the Floating Rate and (ii) each Liquidity Loan. "GUARANTOR" means any Subsidiary which from time to time executes a Guaranty or becomes a party to a Guaranty. "INTERCREDITOR AGREEMENT" -- See Recitals to Amendment No. 2. -------- "LENDERS" or "LENDER" shall have the meaning assigned to such term in the Preamble and shall include, without limitation, the Revolving Lenders and the Liquidity Lenders and shall include BofA acting in its capacity as Issuing Lender; for purposes of clarification only, to the extent that BofA may have any rights or obligations in addition to those of the Lenders due to its status as Issuing Lender, its status as such will be specifically referenced. "LOAN DOCUMENTS" means this Agreement, the Revolving Notes, the Liquidity Note, the Facilities Agreement, the Intercreditor Agreement, each Guaranty, the Mortgages, each LC Application and all other agreements, instruments and documents delivered from time to time to the Loan Agent or the Issuing Lender with respect to this Agreement or with respect to any liabilities arising in connection herewith, as the same may be amended, supplemented, modified, restated or renewed from time to time. "MORTGAGE" means a mortgage or deed of trust substantially in the form of Exhibit E attached hereto with respect to any parcel of real property --------- referenced on Schedule IV hereto and designated with an "*" executed by ----------- BCRE in favor of the Loan Agent and/or Common Collateral Agent (i) in the case of a Mortgage covering Tranche A Collateral, for the benefit of itself and the Lenders, and (ii) in the case of a Mortgage covering either Tranche B Collateral or Tranche C Collateral, for the benefit of itself and the Creditors generally. "OBLIGATIONS" means all Revolving Loans, Liquidity Loans, advances, debts, liabilities, obligations, reimbursement and indemnification obligations, covenants and duties owing by the Borrower to the Loan Agent, any Lender, the Issuing Lender, any Affiliate of 5 any such Person, or any Indemnitee, of any kind or nature, present or future, arising under this Agreement, the Revolving Notes, the Liquidity Notes or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements, paralegals' fees and all other amounts payable pursuant to Section 10.6 (in each case whether or not allowed), and ------------ any other sum chargeable to the Borrower under this Agreement or any other Loan Document. "REQUIRED LENDERS" means: (i) at any time prior to the occurrence of an Actionable Default, Lenders then holding at least 66-2/3% of (A) the then aggregate unpaid principal amount of the Revolving Loans, plus (B) the ---- face amount of Letters of Credit issued and outstanding pursuant to Section ------- 3.1 or drawn and not reimbursed pursuant to Section 3.9 (to the extent such --- ----------- unreimbursed draws do not constitute Revolving Loans), plus (C) the Total ---- Liquidity Commitment Amount, and (ii) at any time after the occurrence of an Actionable Default, Lenders then holding at least 66-2/3% of (A) the then aggregate unpaid principal amount of the Revolving Loans, plus (B) the ---- aggregate face amount of Letters of Credit issued and outstanding pursuant to Section 3.1 or drawn and not reimbursed pursuant to Section 3.9 (to the ----------- ----------- extent such unreimbursed draws do not constitute Revolving Loans), plus (C) ---- the then aggregate unpaid principal amount of the Liquidity Loans. Notwithstanding anything herein to the contrary, to the extent that the Intercreditor Agreement provides for parties in addition to or in lieu of the Required Lenders with respect to various amendments and/or waivers set forth therein, the terms of the Intercreditor Agreement shall govern. "TERMINATION DATE" means October 17, 1998. (B) TO ADD EACH OF THE FOLLOWING DEFINITIONS IN THE APPLICABLE ALPHABETICAL LOCATION: "AMENDMENT NO. 2" shall mean that certain Second Amendment and Consent to Secured Revolving Credit Agreement dated as of July 15, 1998 amending and supplementing this Agreement. "BUDGET" shall have the meaning assigned to such term in the Facilities Agreement. "CO-AGENT(S)" -- See Preamble to Amendment No. 2. -------- 6 "CONFIDENTIAL AGREEMENT" shall have the meaning assigned to such term in the Facilities Agreement. "DEFAULT RATE" means a per annum interest rate at all times equal to the sum of (a) the otherwise applicable interest rate under Sections 2.4(1) --------------- or 2A.4(1) plus (b) two percent (2.00%). The Default Rate shall be ------- ---- adjusted simultaneously with any change in the applicable interest rates under such Sections. "LEAD 1996 LEASE LENDER" -- See Recitals to Amendment No. 2. -------- "LIQUIDITY AVAILABILITY PERIOD" shall mean the period from the Restructuring Effective Date through the date upon which the Liquidity Commitments are terminated in accordance with the terms hereof. "LIQUIDITY BORROWING REQUEST" -- See Section 2A.2. ------------ "LIQUIDITY COMMITMENT" means, at any time, the commitments of the Liquidity Lenders to make Liquidity Loans pursuant to Section 2A.1, in the ------------ aggregate amount set forth on Schedule IIA, as such amount may be adjusted ------------ from time to time in accordance with the terms hereof. "LIQUIDITY LOAN(S)" -- See Section 2A.1(1). --------------- "LIQUIDITY NOTE" -- See Section 2A.6. ------------ "LIQUIDITY OBLIGATIONS" shall have the meaning assigned to such term in the Intercreditor Agreement. "LIQUIDITY PERCENTAGE" means, at any time as to any Liquidity Lender, the percentage set forth opposite such Liquidity Lender's name on Schedule -------- IIA. --- "LIQUIDITY PERIOD" shall have the meaning assigned to such term in the Intercreditor Agreement. "LOAN AGENT" -- see Preamble to Amendment No. 2. From and after the -------- Restructuring Effective Date, all references in the Credit Agreement and the other Loan Documents to the "Agent" shall mean and be a reference to the Loan Agent. "MAJORITY LIQUIDITY LENDERS" shall have the meaning assigned to such term in the Intercreditor Agreement. 7 "1995 MASTER LEASE AGREEMENT" shall have the meaning assigned to such term in the Facilities Agreement. "1996 LEASE LOAN AGENT" -- See Recitals. From and after the -------- Restructuring Effective Date, all references in the Credit Agreement and the other Loan Documents to the "Lease Agent" shall mean and be a reference to the 1996 Lease Loan Agent. "1996 LEASE LENDERS" -- See Recitals to Amendment No. 2. 1996 Lease -------- Lenders shall in each case include each such Person's respective successors and assigns. From and after the Restructuring Effective Date, all references in the Credit Agreement and the other Loan Documents to the "Lease Participants" shall mean and be a reference to the 1996 Lease Lenders. "1996 MASTER LEASE AGREEMENT" -- See Recitals to Amendment No. 2. -------- "NON-PARTICIPATING LENDER" -- See Preamble to Amendment No. 2. -------- "PRO RATA 1996 SHARE" shall have the meaning assigned to such terms in the Facilities Agreement. "REBORROWING AVAILABILITY AMOUNT" shall have the meaning assigned to such term in the Facilities Agreement. "REBORROWING AVAILABILITY PERIOD" shall have the meaning assigned to such term in the Facilities Agreement. "REBORROWING COMMITMENTS-REVOLVER" shall have the meaning assigned to such term in the Facilities Agreement. "REBORROWING LOAN" -- has the meaning given that term in the Facilities Agreement. Reborrowing Loans constitute Revolving Loans and the terms and conditions of this Agreement applicable to Revolving Loans shall be equally applicable to the Reborrowing Loans. "REBORROWING REQUEST" has the meaning given that term in the Facilities Agreement "RESTRUCTURING EFFECTIVE DATE" means the date on which all of the conditions precedent to the effectiveness of Amendment No. 2 shall have been satisfied or waived. 8 "REVOLVING LENDER(S)" -- See Recitals to Amendment No. 2. From and -------- after the making of the Supplemental Revolving Loan, GECC shall be a Revolving Lender and one of the Revolving Lenders. "REVOLVING OBLIGATIONS" shall have the meaning given to such term in the Intercreditor Agreement. "REVOLVING PERCENTAGE" means, at any time as to any Revolving Lender, the percentages set forth opposite such Revolving Lender's name on Schedule -------- II. The Revolving Percentage for each Revolving Lender applicable with -- respect to the Letters of Credit and the Revolving Lenders' risk participation therein shall be the Letter of Credit Revolving Percentage set forth on Schedule II. The Revolving Percentage for each Revolving ----------- Lender applicable with respect to all other provisions of this Agreement shall be the Revolving Loan Percentage set forth on Schedule II. ----------- "SECURED OBLIGATIONS" shall have the meaning given to that term in the Intercreditor Agreement. "SUPPLEMENTAL REVOLVING LOAN" -- See Section 2,2. ----------- "SUSPENDED DEFAULTS" shall have the meaning given such term in the Intercreditor Agreement. "SUSPENSION PERIOD" shall have the meaning given such term in the Facilities Agreement. "TOTAL LIQUIDITY COMMITMENT AMOUNT" means the sum of all of the Liquidity Lenders' Liquidity Commitments, it being understood that on the Restructuring Effective Date, the Total Liquidity Commitment Amount is $35,000,000. (c) TO DELETE EACH OF THE FOLLOWING DEFINITIONS IN THEIR ENTIRETY: "CONTINUATION/CONVERSION NOTICE," "IMPLIED DEBT RATING," "IMPLIED DEBT RATING LEVEL," "LEASE AGENT," "LEASE PARTICIPANTS," "OUTSTANDING PERCENTAGE," "PERCENTAGE," AND "TOTAL COMMITMENT AMOUNT". (d) TO ADD THE FOLLOWING AT THE END THEREOF: In the event that capitalized terms are used in this Agreement and not defined in this Agreement, such terms shall have the meaning given to them in the Intercreditor Agreement, if such terms are defined therein, or otherwise, in the Facilities Agreement, if such terms are defined therein. From and after the Restructuring Effective Date, and notwithstanding 9 anything herein to the contrary, (1) the term Revolving Loan used herein and in the other Loan Documents shall include the Supplemental Revolving Loan made by GECC pursuant to the terms of Section 2.2, (2) the term ----------- Revolving Lender shall include GECC as the maker of the Supplemental Revolving Loan, and (3) all of the provisions of this Agreement and the other Loan Documents applicable to the Revolving Loans and the Revolving Lenders shall be applicable to the Supplemental Revolving Loan and GECC all as though the Supplemental Revolving Loan had been made as part of a syndicated Borrowing of a Floating Rate Loan under and pursuant to the terms of this Agreement. 1.3 ARTICLE II OF THE CREDIT AGREEMENT IS AMENDED BY DELETING THE TERMS ---------- THEREOF IN THEIR ENTIRETY AND SUBSTITUTING THE FOLLOWING THEREFOR: SECTION 2.1. Outstanding Revolving Loans. --------------------------- (1) Prior to the Restructuring Effective Date, each of the Revolving Lenders has made Revolving Loans to the Borrower in an amount equal to such Lender's Revolving Percentage of the amounts set forth below: (a) loans to the Borrower in an aggregate amount equal to $23,227,100 (the "REVOLVING A LOANS"); and (b) loans to the Borrower in an aggregate amount equal to $29,585,660 (the "REVOLVING B LOANS"); all of which Revolving Loans are outstanding as of the Restructuring Effective Date. On the Restructuring Effective Date, after the making of the Supplemental Revolving Loan to the Borrower by GECC, the outstanding amount of the Revolving B Loans shall be equal to $33,885,660. On the Restructuring Effective Date the face amount of all outstanding Letters of Credit is$4,812,760. (2) [Intentionally Omitted.] (3) [Intentionally Omitted.] (4) All Revolving Loans shall be repaid by the Borrower on the Termination Date, unless paid or payable sooner pursuant to the provisions of this Agreement. (5) Each Revolving Loan which is a Eurodollar Loan as of the Restructuring Effective Date shall continue as a Eurodollar Loan until the end of the applicable Interest Period, at which time such Revolving Loan shall be converted to a 10 Floating Rate Loan and shall continue as a Floating Rate Loan thereafter (each being herein called a "TYPE" of Revolving Loan). Each Revolving Loan which is a Floating Rate Loan as of the Restructuring Effective Date shall continue as a Floating Rate Loan. SECTION 2.2. Supplemental Revolving Loan. Notwithstanding any --------------------------- other term contained in this Agreement to the contrary, on the Restructuring Effective Date, GECC agrees to make a loan (the "SUPPLEMENTAL REVOLVING LOAN") to the Borrower in an amount equal to $4,300,000 on the terms and conditions set forth in this Section 2.2. ----------- (a) The proceeds of the Supplemental Revolving Loan shall be made available by GECC to the Borrower by causing immediately available funds in the amount thereof to be deposited to the account of the Borrower at the principal office of the Loan Agent in Chicago. (b) Any Authorized Officer of the Borrower may request the Supplemental Revolving Loan on behalf of the Borrower and such request shall constitute a deemed representation and warranty by the Borrower that the conditions contained in Section 5.2 have been satisfied. The ----------- Borrower shall have provided to GECC and the Loan Agent irrevocable directions authorizing the proceeds of the Supplemental Revolving Loan to be paid directly to GECC, as fiscal agent under the 1995 Master Lease Agreement for itself and the other lease participants under the 1995 Master Lease Agreement for the payment of all obligations of the Borrower as lessee under the 1995 Master Lease which are due and payable on or prior to the Restructuring Effective Date. (c) The Supplemental Revolving Loan shall constitute a Revolving Loan subject to the terms of this Agreement and the other Loan Documents, including, without limitation the provisions of Sections -------- 2.1, 2.4, 2.7 and 2.8 and the term "REVOLVING LOANS" shall include, --- --- --- --- without limitation, Revolving Loans made by the Revolving Lenders prior to the Restructuring Effective Date, the Supplemental Revolving Loan made on the Restructuring Effective Date and Reborrowing Loans made after the Restructuring Effective Date. Without limiting the foregoing, the Supplemental Revolving Loan shall be repaid by the Borrower on the Termination Date, unless paid or payable sooner pursuant to the provisions of this Agreement. The Supplemental Revolving Loan shall be a Floating Rate Loan. (d) Except as otherwise provided below with respect to Letters of Credit, for all purposes set forth herein and in the other Loan Documents, upon the making of the Supplemental Revolving Loan, GECC shall be treated as one of the Revolving Lenders. Notwithstanding the foregoing, GECC shall not be deemed to have purchased any participation in or be required to fund, pursuant to Section 3.4 or ----------- otherwise, any amount in connection with the Letters of Credit, and its Revolving 11 Percentage with respect to the rights and obligations of the Revolving Lenders applicable to the Letters of Credit shall be 0%. (e) Notwithstanding that the amount of the Supplemental Revolving Loan shall increase the outstanding principal balance of the Revolving B Loans by the amount of such Supplemental Revolving Loan, upon the making of the Supplemental Revolving Loan, GECC shall be deemed to hold its Revolving Percentage in both the Revolving A Loans and the Revolving B Loans. To effect the provisions hereof, upon the making of the Supplemental Revolving Loan, (i) GECC shall be deemed to have purchased and each of the other Revolving Lenders shall be deemed to have sold and assigned, without recourse, representation or warranty, Revolving A Loans and (ii) the other Revolving Lenders shall be deemed to have purchased and GECC shall be deemed to have sold and assigned, without recourse, representation or warranty, Revolving B Loans, in each case in an amount such that after such purchase and assignment GECC and each of the other Revolving Lenders each hold its applicable Revolving Percentage of both the Revolving A Loans and the Revolving B Loans. SECTION 2.3. [Intentionally Omitted.] SECTION 2.4. Interest. -------- (1) Interest Rates. With respect to each Revolving Loan, the -------------- Borrower hereby promises to pay interest on the unpaid principal amount thereof for the period commencing on the date of such Revolving Loan until such Revolving Loan is paid in full, as follows: (a) At all times while such Revolving Loan is a Floating Rate Loan, at a rate per annum equal to the Floating Rate from time to time in effect plus the Applicable Margin for Floating Rate Loans consisting of Revolving Loans; and (b) At all times while such Revolving Loan is a Eurodollar Loan, for each Interest Period, at a rate per annum equal to the Eurodollar Rate (Reserve Adjusted) applicable to such Interest Period, plus the Applicable Margin for Eurodollar Loans. (2) Interest Payment Dates. Accrued interest on each Revolving ---------------------- Loan which is a Floating Rate Loan shall be due and payable monthly in arrears on the first Business Day of each calendar month and at maturity. Accrued interest on each Eurodollar Loan shall be due and payable on the last day of the applicable Interest Period and at maturity. After maturity, accrued interest on all Revolving Loans shall be payable on demand. 12 (3) Interest Periods. Each "Interest Period" for the ---------------- outstanding Eurodollar Loans shall expire as follows: OUTSTANDING EURODOLLAR EXPIRATION OF INTEREST PERIOD LOAN AMOUNT - ------------------------------------------------------- $10,000,000 7/27/98 - ------------------------------------------------------- $ 8,610,125 7/24/98 - ------------------------------------------------------- $ 1,643,580 8/06/98 - ------------------------------------------------------- $ 4,389,875 7/24/98 - ------------------------------------------------------- $17,356,420 8/06/98 - ------------------------------------------------------- $ 6,000,000 7/20/98 - ------------------------------------------------------- (4) [Intentionally Omitted.] (5) Default Interest. After the occurrence and during the ---------------- continuance of any Default (other than, during the Suspension Period, a Suspended Default), the Revolving Loans shall, to the extent permitted by applicable law, thereafter bear interest (compounded monthly and payable upon demand) at the Default Rate. SECTION 2.5. [Intentionally Omitted.] SECTION 2.6. Revolving Notes. All Revolving A Loans made by --------------- each Revolving Lender under this Agreement shall be evidenced by, and repaid with interest in accordance with, the promissory note of the Borrower, a copy of which is attached as Exhibit A-1, payable to the Loan ----------- Agent for the benefit of the Revolving Lenders (the "REVOLVING A NOTE"); and all Revolving B Loans made by each Revolving Lender under this Agreement shall be evidenced by, and repaid with interest in accordance with, the promissory note of the Borrower a copy of which is attached as Exhibit A-2, payable to the Loan Agent for the benefit of the Revolving ----------- Lenders (the "REVOLVING B NOTE"). The Loan Agent is hereby authorized by the Borrower and each Revolving Lender to endorse on the schedule attached to the respective Revolving Note the amount of each respective Revolving Loan and of each payment of principal received by the Loan Agent on account of such Revolving Loan, which endorsement shall, in the absence of demonstrable error, be conclusive as to the outstanding balance of such Revolving Loan made by the Revolving Lenders; provided, that the failure -------- 13 to make such notation with respect to any Revolving Loan or payment shall not limit or otherwise affect the obligations of the Borrower or the Revolving Lenders under this Agreement or the respective Revolving Note. SECTION 2.7. Prepayments; Reborrowing from ENBC Proceeds. (1) ------------------------------------------- Voluntary Prepayments. The Borrower may prepay, at any time when there are --------------------- no Liquidity Loans or Liquidity Commitments outstanding, the Revolving Notes in whole or in part (provided, with respect to any partial prepayment of a Eurodollar Loan, the remaining principal amount of such Eurodollar Loan shall not be less than $1,000,000 or any larger integral multiple of $500,000) with accrued interest to the date of such prepayment on the amount prepaid; provided, that (a) any prepayment of a Eurodollar Loan -------- shall be made subject to the Borrower's payment obligations set forth in Section 4.6, (b) each partial prepayment shall be in a principal amount of ----------- not less than $1,000,000 or such greater amount which shall be an integral multiple thereof, and (c) unless otherwise provided in this Agreement, the Intercreditor Agreement or the Facilities Agreement, any such prepayments shall be applied, first, to prepay Revolving B Loans, if any, and, second, ----- ------ to prepay Revolving A Loans, if any. Except with respect to the Reborrowing Loans under clause (4) below, amounts prepaid may not be ---------- reborrowed hereunder. The right of the Borrower to voluntarily prepay the Revolving Loans shall be exercisable by delivery of written notice (including by facsimile) or telephonic notice (thereafter promptly confirmed in writing) to the Loan Agent prior to 12:00 noon, Chicago time, at least two Business Days prior to the proposed prepayment, which notice shall specify the amount by which the Borrower proposes to prepay the Revolving Loans and the proposed date of such prepayment. (2) [Intentionally Omitted.] (3) Mandatory Prepayments. The Borrower shall prepay the Revolving --------------------- Loans in the amounts and at the times specified in Section 3.15 of the ------------ Facilities Agreement. Except as provided in clause (4) below, amounts prepaid may not be reborrowed hereunder. (4) Reborrowing from ENBC Proceeds. During the Reborrowing ------------------------------ Availability Period the following terms shall be applicable: (a) Subject to the terms and conditions set forth in this Agreement, the Facilities Agreement and the other Loan Documents, each of the Revolving Lenders, severally and for itself alone, from time to time thereafter to but not including the Termination Date, agrees to make Reborrowing Loans as set forth in Section 3.15(b)(iv) of the ------------------- Facilities Agreement; provided, no Reborrowing Loan may be made --------- hereunder unless on the date of the Reborrowing Loan the Borrower is simultaneously borrowing from the 1996 Lease Lenders an amount such that the Reborrowing Loan hereunder does not exceed, as a percentage of the total amount 14 of Reborrowing Loans being made to the Borrower on such date hereunder and by the 1996 Lease Lenders under Article IIA of the 1996 Master ----------- Lease Agreement, the percentage of the prepayments received by the Revolving Lenders pursuant to Section 3.15(b)(ii) and (iii) of the ------------------- ----- Facilities Agreement of the total prepayments received by the Revolving Lenders and 1996 Lease Lenders under Section 3.15(b)(ii) and ----------- (iii). ----- (b) Reborrowing Loans made by the Revolving Lenders shall be applied, first, against the Commitment A until such Commitment is ----- exhausted, thereby constituting Revolving A Loans and second, against ------ the Commitment B until such Commitment is exhausted, thereby constituting Revolving B Loans. (c) All Reborrowing Loans made by the Revolving Lenders shall constitute Revolving Loans subject to the terms of this Agreement and the other Loan Documents, including, without limitation the provisions of Sections 2.1, 2.4, 2.7 and 2.8, and the term "REVOLVING LOANS" ------------ --- --- --- shall include, without limitation, Revolving Loans made by the Revolving Lenders prior to the Restructuring Effective Date, the Supplemental Revolving Loan made on the Restructuring Effective Date and Reborrowing Loans made by the Revolving Lenders after the Restructuring Effective Date. Without limiting the foregoing, all Reborrowing Loans hereunder shall be repaid by the Borrower on the Termination Date, unless paid or payable sooner pursuant to the provisions of this Agreement. (d) Each Reborrowing Loan hereunder shall be a Floating Rate Loan. (e) Any Authorized Officer of the Borrower may request a Reborrowing Loan hereunder on behalf of the Borrower in accordance with the terms of Section 3.15(b)(iv) of the Facilities Agreement. -------------------- Promptly upon receipt of each Reborrowing Request under Section ------- 3.15(b)(iv)(C) of the Facilities Agreement, the Loan Agent shall -------------- advise each Revolving Lender thereof. Not later than 11:00 A.M., Chicago time, on the date of a proposed Borrowing, each Revolving Lender shall provide the Loan Agent at its principal office in Chicago with immediately available funds in an amount equal to such Revolving Lender's Pro Rata 1996 Share of the aggregate principal amount of the proposed borrowing specified in the Reborrowing Request. All Borrowings hereunder shall be pro rata among the Revolving Lenders in accordance with their respective Revolving Percentages. Not later than 1:00 P.M., Chicago time, on the proposed date of Borrowing specified in the Reborrowing Request, subject to the satisfaction of the applicable conditions precedent set forth in the Facilities Agreement and in Article V hereof, the Loan Agent shall make the --------- proceeds of each Reborrowing Loan available to the Borrower by causing an amount of immediately available funds equal to the principal amount of such Reborrowing 15 Loan to be credited to the account of the Borrower at BofA unless otherwise required pursuant to the terms of this Agreement. (f) Unless the Loan Agent shall have been notified by telephone, confirmed in writing, by any Revolving Lender by 11:00 A.M., Chicago time, on the day of a Borrowing hereunder that such Revolving Lender will not make available the amount which would constitute its Revolving Percentage of such Borrowing on the date specified therefor, the Loan Agent may assume, subject to the satisfactory fulfillment by the Borrower of the conditions precedent set forth in the Facilities Agreement and in Article V, that such Revolving Lender has made such --------- amount available to the Loan Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Revolving Lender shall not have made such amount available to the Loan Agent, such Revolving Lender and the Borrower severally agree to repay the Loan Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Loan Agent made such amount available to the Borrower to the date such amount is repaid to the Loan Agent, (i) in the case of payment by a Revolving Lender, at the Federal Funds Rate from time to time in effect based on a year of 360 days or (ii) in the case of payment by the Borrower, at a rate per annum equal to the Floating Rate from time to time in effect plus the Applicable Margin for Floating Rate Loans consisting of Reborrowing Loans. SECTION 2.8. Method of Payment. The Borrower shall make each ----------------- payment under this Agreement with respect to the Revolving Loans and under the Revolving Notes not later than 12:00 noon, Chicago time, on the date when due in lawful money of the United States to the Loan Agent for the account of the Revolving Lenders pro rata according to their respective Revolving Percentages. The Loan Agent shall promptly remit to each Revolving Lender its pro rata share (based on its Revolving Percentage) of all such payments received in collected funds by the Loan Agent for the benefit of such Revolving Lender. The Borrower hereby authorizes the Loan Agent, if and to the extent payment is not made when due under this Agreement or under the Revolving Notes, to charge from time to time against any account of the Borrower with the Loan Agent any amount so due. Whenever any payment to be made under this Agreement or under the Revolving Notes shall be stated to be due on a Saturday, Sunday, or a public holiday, or the equivalent for banks generally under the laws of the State of Illinois, such payment shall be made on the next succeeding Business Day, and such extension of time in such case shall be included in the computation of the payment of interest. All payments under Sections 4.2 and 4.3 shall be made ------------ --- by the Borrower directly to the Lender or Lenders entitled thereto. SECTION 2.9. Use of Proceeds. The proceeds of the Supplemental --------------- Revolving Loan shall be used solely to make payments of amounts due and payable on the Restructuring Effective Date with respect to the 1995 Master Lease Agreement. The 16 proceeds of the Revolving Loans have not been and will not be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or to extend credit to any Person for the purpose of purchasing or carrying any such margin stock. The proceeds of the Reborrowing Loans shall be used by the Borrower only for the purposes, and within the parameters set forth for such purposes, indicated in the Budget. The Borrower hereby covenants, represents and warrants that such use will be solely to fund the Borrower's and its Subsidiaries' working capital requirements in the ordinary course of its business and for the Borrower's and its Subsidiaries' other general corporate purposes not prohibited by this Agreement and consistent with the purposes and within the parameters set forth in the Budget. SECTION 2.10. Sharing of Payments. ------------------- (1) If any Revolving Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of any Revolving Loan in excess of its pro rata share (based on its Revolving Percentage) of payments and other recoveries obtained by all Revolving Lenders on account of principal of and interest on Revolving Loans, such Revolving Lender shall purchase from the other Revolving Lenders such participations in the Revolving Loans as shall be necessary to cause such purchasing Revolving Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of -------- ------- the excess payment or other recovery is thereafter recovered from such purchasing Revolving Lender, the purchase shall be rescinded and each Revolving Lender which has sold a participation to the purchasing Revolving Lender shall repay to the purchasing Revolving Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Revolving Lender's ratable share (according to the proportion of (a) the amount of such selling Revolving Lender's required repayment to the purchasing Revolving Lender to (b) the total amount so recovered from the purchasing Revolving Lender) of any interest or other amount paid or payable by the purchasing Revolving Lender in respect of the total amount so recovered. (2) The Borrower agrees that any Revolving Lender so purchasing a participation from another Revolving Lender pursuant to Section ------- 2.10(1) may, to the fullest extent permitted by law, exercise all of ------- its rights of payment with respect to such participation as fully as if such Revolving Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Revolving Lender receives a secured claim in lieu of a setoff pursuant to Section 10.7, such ------------ Revolving Lender shall, to the extent 17 practicable, exercise its rights in respect to such secured claim in a manner consistent with the rights of the Revolving Lenders entitled under this Section 2.10 to share in the benefits of any recovery of ------------ such secured claim. SECTION 2.11. Computation of Fees and Interest. (1) All computations -------------------------------- of interest for Floating Rate Loans when the Floating Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day or 366-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (2) Each determination of an interest rate by the Loan Agent shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. SECTION 2.12. [Intentionally Omitted.] 1.4 THE CREDIT AGREEMENT IS AMENDED BY INSERTING THE FOLLOWING ARTICLE IIA IMMEDIATELY FOLLOWING ARTICLE II: ARTICLE IIA AMOUNT AND TERMS OF THE LIQUIDITY LOANS --------------------------------------- SECTION 2A.1 Liquidity Loan Commitment. ------------------------- (1) Subject to the terms and conditions set forth in this Article ------- IIA and the other Loan Documents, each of the Liquidity Lenders, severally --- and for itself alone, from time to time during the Liquidity Availability Period agrees to make loans to the Borrower on a revolving basis, at such times and in an amount equal to such Liquidity Lender's Liquidity Percentage of such aggregate amounts as the Borrower may request from all of the Liquidity Lenders under the Liquidity Commitment (the "LIQUIDITY LOANS"); provided, that in no event shall: (x) the aggregate principal -------- amount of Liquidity Loans then outstanding or which any Liquidity Lender shall be committed to have outstanding to the Borrower exceed at any time such Liquidity Lender's Liquidity Percentage of the Total Liquidity Commitment Amount; and (y) the aggregate principal amount of all Liquidity Loans then in effect which all the Liquidity Lenders shall be committed to have outstanding to the Borrower exceed at any one time the Total Liquidity Commitment Amount then in effect; and provided, further, that no Liquidity -------- ------- Loans shall be required to be made hereunder at a time when the Borrower has any unutilized Reborrowing Availability. 18 (2) In the event the aggregate outstanding principal balance of all Liquidity Loans exceeds the Total Liquidity Commitment Amount, the Borrower shall, without notice or demand of any kind, immediately make such repayments of the Liquidity Loans in an amount equal to such excess or take such other actions as shall be necessary to eliminate such excess. (3) All Liquidity Loans shall be repaid by the Borrower on the Termination Date, unless paid or payable sooner pursuant to the provisions of this Article IIA , Section 8.2 or the Facilities Agreement. ----------- ----------- SECTION 2A.2. Liquidity Borrowing Procedure. Any Authorized ----------------------------- Officer of the Borrower may request a Liquidity Loan on behalf of the Borrower during the Liquidity Period in Dollars on any Business Day by giving the Loan Agent telephonic, telex or facsimile notice (which notice shall be irrevocable once given and shall be promptly confirmed in writing if given telephonically) in the form of Exhibit B-1 attached hereto ----------- ("LIQUIDITY BORROWING REQUEST") or such other form as shall be acceptable to the Loan Agent. Each Liquidity Borrowing Request shall constitute a deemed representation and warranty by the Borrower that the conditions contained in Section 5.2 have been satisfied. Each Liquidity Borrowing ----------- Request must be received by the Loan Agent prior to 10:00 A.M., Chicago time, on the proposed date of such Liquidity Borrowing (which must be a Business Day) and shall specify (a) the principal amount of such Liquidity Borrowing, and (b) the proposed date of the Liquidity Loan (which must be a Business Day). Promptly upon receipt of such Liquidity Borrowing Request, the Loan Agent shall advise each Liquidity Lender thereof. Not later than 11:00 A.M., Chicago time, on the date of a proposed Liquidity Loan, each Liquidity Lender shall provide the Loan Agent at its principal office in Chicago with immediately available funds in an amount equal to such Liquidity Lender's Liquidity Percentage of the principal amount of the proposed Liquidity Loan specified in the Liquidity Borrowing Request. Each Liquidity Loan shall be in a principal amount of $1,000,000 or an integral multiple thereof. All Liquidity Loans shall be pro rata among the Liquidity Lenders in accordance with their respective Liquidity Percentages. Not later than 1:00 P.M., Chicago time, on the proposed date of any Liquidity Loan specified in the Liquidity Borrowing Request, subject to the satisfaction of the applicable conditions precedent set forth in Section 5.2, the Loan Agent shall make the proceeds of each Liquidity Loan ----------- received by it available to the Borrower by causing an amount of immediately available funds equal to the principal amount of such Liquidity Loans received by it to be credited to the account of the Borrower at BofA unless otherwise required pursuant to the terms of this Article IIA. ----------- SECTION 2A.3 Funding Reliance. Unless the Loan Agent shall have ---------------- been notified by telephone, confirmed in writing, by any Liquidity Lender by 11:00 A.M., Chicago time, on the day of a Liquidity Loan that such Liquidity Lender will not make available the amount which would constitute its Liquidity Percentage of such Liquidity Loan on the date specified therefor, the Loan Agent may assume, subject to the satisfactory fulfillment by the 19 Borrower of the applicable conditions precedent, that such Liquidity Lender has made such amount available to the Loan Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Liquidity Lender shall not have made such amount available to the Loan Agent, such Liquidity Lender and the Borrower severally agree to repay the Loan Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Loan Agent made such amount available to the Borrower to the date such amount is repaid to the Loan Agent, (i) in the case of payment by a Liquidity Lender, at the Federal Funds Rate from time to time in effect based on a year of 360 days or (ii) in the case of payment by the Borrower, at a rate per annum equal to the Floating Rate from time to time in effect plus the Applicable Margin for Liquidity Loans. SECTION 2A.4 Interest. -------- (1) Interest Rates. With respect to each Liquidity Loan, the -------------- Borrower hereby promises to pay interest on the unpaid principal amount thereof for the period commencing on the date of such Liquidity Loan until such Liquidity Loan is paid in full at a rate per annum equal to the Floating Rate from time to time in effect plus the Applicable Margin for Liquidity Loans. (2) Interest Payment Dates. Accrued interest on all outstanding ---------------------- Liquidity Loans shall be due and payable monthly in arrears on the first Business Day of each calendar month and at maturity. After maturity, accrued interest on all Liquidity Loans shall be payable on demand. (3) Default Interest. After the occurrence and during the ---------------- continuance of any Default (other than, during the Suspension Period, a Suspended Default), the Liquidity Loans shall, to the extent permitted by applicable law, thereafter bear interest (compounded monthly and payable upon demand) at the Default Rate. SECTION 2A.5 Fees. (1) The Borrower agrees to pay to the Loan --- Agent for the account of the Persons set forth therein the fees in the amounts and at the times set forth in the Confidential Agreement. (2) The Borrower further agrees to pay a non-refundable unused commitment fee on the average daily amount by which the Total Liquidity Commitment Amount exceeds the aggregate outstanding Liquidity Loans during the Liquidity Availability Period, at a rate per annum equal to the Applicable Commitment Fee, payable monthly in arrears on the first Business Day of each calendar month and at maturity, and payable to the Loan Agent for the account of each Liquidity Lender in accordance with such Lender's Liquidity Percentage. 20 SECTION 2A.6 Liquidity Note. All Liquidity Loans made by each -------------- Liquidity Lender under this Article IIA shall be evidenced by, and repaid ----------- with interest in accordance with, a single promissory note of the Borrower in substantially the form of Exhibit A-4 attached hereto, duly completed in ----------- a principal amount equal to the Total Liquidity Commitment Amount, payable to the Loan Agent for the benefit of the Liquidity Lenders (the "LIQUIDITY NOTE"). The Loan Agent is hereby authorized by the Borrower and each Liquidity Lender to endorse on the schedule attached to the Liquidity Note the amount of each respective Liquidity Loan and of each payment of principal received by the Loan Agent on account of such Liquidity Loan, which endorsement shall, in the absence of demonstrable error, be conclusive as to the outstanding balance of such Liquidity Loans made by the Liquidity Lenders; provided, that the failure to make such notation -------- with respect to any Liquidity Loan or payment shall not limit or otherwise affect the obligations of the Borrower or the Liquidity Lenders under this Article IIA or the Liquidity Note. ----------- SECTION 2A.7 Voluntary Prepayments; Voluntary Reduction of --------------------------------------------- Commitment; Mandatory Prepayments. --------------------------------- (1) Voluntary Prepayments. The Borrower may prepay at any time --------------------- the Liquidity Note in whole or in part with accrued interest to the date of such prepayment on the amount prepaid, in which event such prepaid amount may be reborrowed under this Article IIA to the extent outstanding amounts ----------- under this Article IIA shall not exceed the Total Liquidity Commitment ----------- Amount at such time; provided, that each partial prepayment shall be in a -------- principal amount which when combined with prepayments being made under the 1996 Master Lease Agreement at the same time is not less than $1,000,000 or such greater amount which shall be an integral multiple thereof. The right of the Borrower to voluntarily prepay the Liquidity Loans shall be exercisable by delivery of written notice (including by facsimile) or telephonic notice (thereafter promptly confirmed in writing) to the Loan Agent prior to 12:00 noon, Chicago time, at least two Business Days prior to the proposed prepayment, which notice shall specify the amount by which the Borrower proposes to prepay the Liquidity Loans and the proposed date of such prepayment. (2) Voluntary Liquidity Commitment Reduction. The Borrower shall ---------------------------------------- have the right, at any time and from time to time, without premium or penalty, to permanently reduce the Total Liquidity Commitment Amount hereunder; provided, that any such reduction in the Total Liquidity -------- Commitment Amount shall reduce the Liquidity Commitment of each Liquidity Lender pro rata based on its Liquidity Percentage; and provided, further, -------- ------- that no such reduction shall reduce the Total Liquidity Commitment Amount to an amount less than the then outstanding Liquidity Loans. The right of the Borrower to voluntarily reduce the Total Liquidity Commitment Amount shall be exercisable by delivery of written notice (including by facsimile) or telephonic notice (thereafter promptly confirmed in writing) to the Loan Agent prior to 12:00 noon, Chicago time, at least two Business Days prior to the proposed reduction in the Total Liquidity Commitment Amount, which notice shall specify 21 the amount by which the Borrower proposes to reduce the Total Liquidity Commitment Amount and the proposed date of such reduction. (3) Mandatory Prepayments; Liquidity Commitment Reductions. The ------------------------------------------------------ Borrower shall prepay the Liquidity Loans in the amounts and at the times specified in Section 3.15 of the Facilities Agreement and the Liquidity ------------ Commitments shall be permanently reduced on the terms and in the amounts set forth therein. SECTION 2A.8 Method of Payment. The Borrower shall make each ----------------- payment under this Article IIA and under the Liquidity Note not later than ----------- 12:00 noon, Chicago time, on the date when due in lawful money of the United States to the Loan Agent for the account of the Liquidity Lenders pro rata according to their respective Liquidity Percentages. The Loan Agent shall promptly remit to each Liquidity Lender its pro rata share (based on its Liquidity Percentage) of all such payments received in collected funds by the Loan Agent for the benefit of such Liquidity Lender. The Borrower hereby authorizes the Loan Agent, if and to the extent payment is not made when due under this Article IIA or under the Liquidity Note, to ----------- charge from time to time against any account of the Borrower with the Loan Agent any amount so due. Whenever any payment to be made under this Article IIA or under the Liquidity Note shall be stated to be due on a ----------- Saturday, Sunday, or a public holiday, or the equivalent for banks generally under the laws of the State of Illinois, such payment shall be made on the next succeeding Business Day, and such extension of time in such case shall be included in the computation of the payment of interest. All payments under Section 4.2 and 4.3 shall be made by the Borrower ----------- --- directly to the Lender or Lenders entitled thereto. SECTION 2A.9 Use of Proceeds. The proceeds of the Liquidity --------------- Loans shall be used by the Borrower only for the purposes, and within the parameters set forth for such purposes, indicated in the Budget. The Borrower hereby covenants, represents and warrants that such use will be solely to fund the Borrower's and its Subsidiaries' working capital requirements in the ordinary course of its business and for the Borrower's and its Subsidiaries' other general corporate purposes not prohibited by this Agreement and consistent with the purposes and within the parameters set forth in the Budget. The Borrower will not, directly or indirectly, use any part of such proceeds for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or to extend credit to any Person for the purpose of purchasing or carrying any such margin stock. SECTION 2A.10 Sharing of Payments. ------------------- (1) If any Liquidity Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of any Liquidity Loan in excess of its pro rata share (based on its Liquidity Percentage) of payments and other recoveries obtained by all Liquidity Lenders on 22 account of principal of and interest on Liquidity Loans, such Liquidity Lender shall purchase from the other Liquidity Lenders such participations in the Liquidity Loans as shall be necessary to cause such purchasing Liquidity Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess -------- ------- payment or other recovery is thereafter recovered from such purchasing Liquidity Lender, the purchase shall be rescinded and each Liquidity Lender which has sold a participation to the purchasing Liquidity Lender shall repay to the purchasing Liquidity Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Liquidity Lender's ratable share (according to the proportion of (a) the amount of such selling Liquidity Lender's required repayment to the purchasing Liquidity Lender to (b) the total amount so recovered from the purchasing Liquidity Lender) of any interest or other amount paid or payable by the purchasing Liquidity Lender in respect of the total amount so recovered. (2) The Borrower agrees that any Liquidity Lender so purchasing a participation from another Liquidity Lender pursuant to Section 2A.10(1) ---------------- may, to the fullest extent permitted by law, exercise all of its rights of payment with respect to such participation as fully as if such Liquidity Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Liquidity Lender receives a secured claim in lieu of a setoff pursuant to Section 10.7, such Liquidity Lender shall, to the extent ------------ practicable, exercise its rights in respect to such secured claim in a manner consistent with the rights of the Liquidity Lenders entitled under this Section 2A.10 to share in the benefits of any recovery of such secured ------------- claim. SECTION 2A.11 Computation of Fees and Interest. (1) All -------------------------------- computations of interest for Liquidity Loans when the Floating Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest in respect of the Liquidity Loans shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365- day or 366-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (2) Each determination of an interest rate by the Loan Agent shall be conclusive and binding on the Borrower and the Liquidity Lenders in the absence of manifest error. 1.5 ARTICLE III OF THE CREDIT AGREEMENT IS AMENDED TO (A) DELETE ALL REFERENCES TO "LENDER," "LENDERS," AND "PERCENTAGE" THEREIN AND TO SUBSTITUTE "REVOLVING LENDER," 23 "REVOLVING LENDERS," AND "REVOLVING PERCENTAGE" RESPECTIVELY THEREFOR. ARTICLE III OF THE CREDIT AGREEMENT IS FURTHER AMENDED AS FOLLOWS: (A) TO DELETE THE TERMS OF SECTION 3.1 THEREIN IN THEIR ENTIRETY AND TO ----------- SUBSTITUTE THE FOLLOWING THEREFOR: 3.1 Outstanding Letters of Credit. Prior to the Restructuring ----------------------------- Effective Date, the Letters of Credit listed on Schedule III have been ------------ issued by the Issuing Lender for the account of the Borrower. All references in this Agreement to Letters of Credit shall mean and be a reference to the Letters of Credit listed on Schedule III and the Issuing ------------ Lender shall have no further obligation to issue or extend the expiration date of any letters of credit. (B) TO DELETE THE TERMS OF SECTION 3.2 THEREIN IN THEIR ENTIRETY AND TO ----------- SUBSTITUTE THE FOLLOWING THEREFOR: 3.2. [Intentionally Omitted.] (C) TO DELETE THE TERMS OF SECTION 3.3 THEREIN IN THEIR ENTIRETY AND TO ----------- SUBSTITUTE THE FOLLOWING THEREFOR: 3.3 Expiration. For each Letter of Credit which does not expire ---------- prior to the Termination Date, on or prior to the Termination Date the Borrower shall have either (i) pledged cash collateral to the Loan Agent therefor in an amount, and pursuant to documentation, reasonably satisfactory to the Loan Agent and the Issuing Lender or (ii) provided to Loan Agent an irrevocable standby letter of credit with respect to each Letter of Credit which shall (w) be issued by one or more financial institutions acceptable to the Loan Agent and the Issuing Lender, (x) be issued for the benefit of the Issuing Lender in an amount reasonably satisfactory to the Loan Agent and the Issuing Lender, (y) not expire until the date that is at least fifteen (15) Business Days following the latest expiration date of the outstanding Letters of Credit and (z) contain other terms and conditions reasonably acceptable to the Loan Agent and the Issuing Lender (a "BACKSTOP LC") (D) TO AMEND SECTION 3.9 BY DELETING THE SECOND SENTENCE THEREOF IN ITS ----------- ENTIRETY. (E) TO AMEND SECTION 3.10 BY DELETING THE FIRST SENTENCE THEREOF IN ITS ------------ ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: If the Issuing Lender makes any payment or disbursement under any Letter of Credit and the Borrower has not reimbursed the Issuing Lender in full for such payment or disbursement 24 on the date on which payment is made under a Letter of Credit, or if any reimbursement received by the Issuing Lender from the Borrower is or must be returned or rescinded upon or during any bankruptcy or reorganization of the Borrower or otherwise, each Revolving Lender other than GECC shall provide the Loan Agent, for the account of the Issuing Lender, at its principal office in Chicago with immediately available funds in an amount equal to such Lender's Revolving Percentage of the amount of such payment or disbursement. (F) TO AMEND SECTION 3.13 BY DELETING THE REFERENCE IN THE FIRST SENTENCE ------------ THEREOF TO SECTION 3.15. ------------ (G) TO AMEND SECTION 3.14(1) BY DELETING THE PHRASE "PAYABLE IN ARREARS ON --------------- THE LAST DAY OF EACH CALENDAR QUARTER" IN THE LAST SENTENCE THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE PHRASE "PAYABLE IN ARREARS ON THE FIRST DAY OF EACH CALENDAR MONTH FOR THE IMMEDIATELY PRECEDING MONTH" THEREFOR. (H) TO DELETE THE TERMS OF SECTION 3.15 THEREIN IN THEIR ENTIRETY AND TO ------------ SUBSTITUTE THE FOLLOWING THEREFOR: 3.15. [Intentionally Omitted.] (I) TO DELETE THE TERMS OF SECTION 3.16 THEREIN IN THEIR ENTIRETY AND TO ------------ SUBSTITUTE THE FOLLOWING THEREFOR: 3.16. [Intentionally Omitted.] 1.6 ARTICLE IV OF THE CREDIT AGREEMENT IS AMENDED TO MAKE THE PROVISIONS THEREOF APPLICABLE NOT ONLY TO THE REVOLVING LOANS AND REVOLVING LENDERS BUT ALSO THE LIQUIDITY LOANS AND LIQUIDITY LENDERS. 1.7 ARTICLE V OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS OF SECTION 5.2 THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 5.2. Conditions Precedent to All Loans. The obligation --------------------------------- of GECC to make the Supplemental Revolving Loan, of the Liquidity Lenders to make each Liquidity Loan and of the Revolving Lenders to make each Reborrowing Loan shall be subject to the further conditions precedent that on the date of such Supplemental Revolving Loan, Liquidity Loan or Reborrowing Loan: 25 (1) The following statements shall be true and the Loan Agent shall have received a certificate signed by a duly Authorized Officer of the Borrower (in his or her capacity as such, and without any personal liability therefor) dated the date of such Supplemental Revolving Loan, Liquidity Loan or Reborrowing Loan, stating that: (a) The representations and warranties contained in Article VI ---------- of this Agreement, in Section II of the Facilities Agreement (or any ---------- successor section therein) and in each other Loan Document are correct in all material respects on and as of the date of such Supplemental Revolving Loan, Liquidity Loan or Reborrowing Loan as though made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date); (b) No Default or Event of Default (other than, during the Suspension Period, a Suspended Default) has occurred and is continuing, or would result from the borrowing of such Supplemental Revolving Loan, Liquidity Loan or Reborrowing Loan; and (c) With respect to (a) the Supplemental Revolving Loan, the proceeds thereof are to be used solely to make payments of amounts due and payable on the Restructuring Effective Date with respect to the 1995 Master Lease Agreement, or (b) each Liquidity Loan or Reborrowing Loan, the purpose for which such Liquidity Loan or Reborrowing Loan is to be used is consistent with the Budget and the Borrower is, and after taking into account the use of such proceeds, will be in within the parameters set forth in the Budget. (2) The Loan Agent shall have received such other information, approvals, opinions, or documents as the Loan Agent or any Lender may reasonably request. 1.8 ARTICLE VI OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 6.1 Real Property. Schedule IV hereto sets forth, as of ------------- ----------- the Restructuring Effective Date, a complete and accurate listing of the common address of each parcel of real property owned or leased by the Borrower or any of its Subsidiaries and by each Financed Franchisee (identifying for each such parcel the owner, lessor and lessee) together with a complete and accurate listing of all mortgages, leasehold mortgages or 26 collateral assignments of lease granted in respect thereof (identifying for each the mortgagor/grantor, the mortgagee/grantee and the debt secured thereby). SECTION 6.2 Mortgages. Each Mortgage delivered to the Loan Agent --------- is effective to grant to the Loan Agent (a) in the case of a Mortgage covering Tranche A Collateral for the benefit of itself and the Lenders and (b) in the case of a Mortgage covering either Tranche B Collateral or Tranche C Collateral for the benefit of itself and the Lenders, the 1996 Lease Loan Agent, and the 1996 Lease Lenders, a legal, valid and enforceable Lien on all the right, title and interest of the mortgagor under such Mortgage in the mortgaged property described therein to secure (a) the Tranche A Loans with respect to the Tranche A Collateral and (b) all Liquidity Obligations, Revolving Obligations, L/C Obligations and the "1996 Lease Obligations" (as defined in the Intercreditor Agreement) with respect to the Tranche B Collateral and Tranche C Collateral. When each such Mortgage is duly recorded in the offices listed on the schedule to such Mortgage and the mortgage recording fees and taxes in respect thereof are paid and compliance is otherwise had with the formal requirements of state law applicable to the recording of real estate mortgages generally, each such mortgaged property, subject to the encumbrances and exceptions to title set forth therein and except as noted in the title policies delivered to the Loan Agent pursuant to Section 5.1(9), will be subject to a legal, valid, -------------- enforceable and perfected first priority Lien. 1.9 ARTICLE VII OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS OF SECTION 7.1 THEREOF IN THEIR ENTIRETY. - ----------- 1.10 ARTICLE VIII OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 8.1. Events of Default. It shall be an "EVENT OF ----------------- DEFAULT" hereunder if any of the following events ("EVENTS OF DEFAULT") shall occur: (1) The Borrower should fail to pay (a) the principal of, or interest or fees on any Obligation owing hereunder, including the Revolving Notes or Liquidity Note or any reimbursement obligations, interest or fee with respect to any LC Obligations, as and when due and payable; (2) Any representation or warranty made or deemed made (pursuant to Section 2.2 or Section 2A.2) by the Borrower in this Agreement or any other ----------- ------------ Loan Document other than the Facilities Agreement or which is contained in any certificate, document, opinion, or financial or other statement furnished at any time under or in connection with any Loan Document other than the Facilities Agreement shall prove, in light of the circumstances under which it was made, to have been incorrect in any material respect on or as of the date made or deemed made; 27 (3) The Borrower or any Subsidiary shall fail to perform or observe any term, covenant or agreement contained in Section 2.9 or Section 2A.9 ----------- ------------ applicable thereto; (4) The Borrower or any Subsidiary shall fail to perform or observe any other term, covenant, or agreement contained in any Loan Document applicable thereto (other than the Revolving Notes or Liquidity Note and the Sections referenced in the foregoing clause (3) or the Facilities Agreement) ---------- on its part to be performed or observed and such failure shall continue for fifteen (15) Business Days following notice thereof from the Loan Agent or the Required Lenders; (5) The occurrence of a Default (as such term is defined in the Facilities Agreement) under the Facilities Agreement (other than, during the Suspension Period, a Suspended Default) and any requirement set forth therein for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied; (6) Any Mortgage shall for any reason (other than pursuant to the terms thereof or as a result of the Loan Agent's action) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason cease to be a perfected and first priority security interest subject only to Liens permitted by Section ------- 4.1 of Facilities Agreement (or any successor section therein) and such --- Mortgage; or (7) The subordination and standstill provisions of the Intercreditor Agreement shall, at any time, be invalidated or otherwise cease to be in full force and effect or the Borrower shall make any payments in contravention of the terms thereof. SECTION 8.2. Effect of Event of Default. If any Event of Default -------------------------- arising from the occurrence of an "Event of Default" described in Section ------- 6.1(6) of (and as defined in) the Facilities Agreement (or any successor ------ section therein) shall occur, automatically the Commitments of each of the Lenders hereunder shall immediately terminate and the outstanding principal amount of the Revolving Notes and the Liquidity Note, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents (including cash collateral for all Letters of Credit) shall become immediately due and payable. In the case of any other Event of Default hereunder, (a) the Loan Agent may (or shall, upon the written request of the Required Lenders), by notice to the Borrower, subject to the Intercreditor Agreement, (1) declare the Commitments of each of the Lenders to be terminated, (2) declare the outstanding principal amount of the Revolving Notes and/or Liquidity Note, all interest thereon, and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Revolving Notes, the Liquidity Note, all such interest, and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower, and (b) the Loan Agent may (or shall, upon the written request of the Majority Liquidity Lenders), by notice to the Borrower, subject to the 28 Intercreditor Agreement, (1) declare the Liquidity Commitments of each of the Liquidity Lenders to be terminated, (2) declare the outstanding principal amount of the Liquidity Note, all interest thereon, and all other amounts payable under this Agreement and the other Loan Documents with respect to the Liquidity Loans to be forthwith due and payable, whereupon the Liquidity Note, all such interest, and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower. Following any such declaration, the Loan Agent may exercise, in the case of the Tranche A Collateral, on behalf of itself and the Lenders, and, in the case of the Tranche B Collateral and Tranche C Collateral, on behalf of all Creditors, all rights and remedies available under the Loan Documents or applicable law. The Loan Agent and/or Issuing Lender may also require, by notice to the Borrower, the Borrower to either (i) pledge cash collateral to the Loan Agent in an amount, and pursuant to documentation, reasonably satisfactory to the Required Lenders, the Loan Agent and the Issuing Lender with respect to all issued and outstanding or drawn and not reimbursed Letters of Credit or (ii) provide to the Loan Agent an irrevocable standby letter of credit with respect to each such issued and outstanding Letter of Credit, which standby letter of credit shall (w) be issued by one or more financial institutions acceptable to the Loan Agent and the Issuing Lender, (x) be issued for the benefit of the Issuing Lender in an amount reasonably satisfactory to the Loan Agent and the Issuing Lender, (y) not expire until the date that is at least fifteen (15) Business Days following the latest expiration date of the outstanding Letters of Credit and (z) contain other terms and conditions reasonably acceptable to the Loan Agent and the Issuing Lender. 1.11 ARTICLE IX OF THE CREDIT AGREEMENT IS AMENDED AS FOLLOWS: (A) SECTION 9.8 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE ----------- FINAL SENTENCE THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: With respect to its Revolving Loans or Liquidity Loans, BofA shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Loan Agent, and the terms "Lender" and "Lenders" include BofA in its individual capacity. (B) SECTION 9.11 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE ------------ CLAUSES (2) AND (3) THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: (2) The Lenders irrevocably authorize the Loan Agent, at its option and in its discretion, to release any Lien granted to or held by the Loan Agent upon any Collateral (a) subject to the terms of the Intercreditor Agreement, upon termination of the Commitments, expiration or other termination of all Letters of Credit (or the posting of cash collateral therefor or provision of a Backstop LC (as defined in Section 3.3) therefor) ----------- and payment in 29 full of all Revolving Loans, Liquidity Loans and all other Obligations known to the Loan Agent and payable under this Agreement or any other Loan Document; or (b) if approved, authorized or ratified in writing in accordance with the Intercreditor Agreement. Upon request by the Loan Agent at any time, the Lenders will confirm in writing the Loan Agent's authority to release particular types or items of Collateral pursuant to this Section ------- 9.11(2), provided that the absence of any such confirmation for whatever ------- reason shall not affect the Loan Agent's rights under this Section 9.11. ------------ (3) Each Lender agrees with and in favor of each other Lender (which agreement shall not be for the benefit of the Borrower or any Subsidiary) that the Borrower's obligation to such Lender under this Agreement and the other Loan Documents is not and shall not be secured by any real property collateral now or hereafter acquired by the Borrower or any of its Subsidiaries other than the real property described in the Mortgages and the real property subject from time to time to the 1996 Master Lease Agreement. (B) SECTION 9.12 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE ------------ TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: 9.12. No Duties Imposed Upon Documentation Agent or Co-Agents. None ------------------------------------------------------- of the Persons identified in this Agreement as a "Documentation Agent" or "Co-Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Loan Documents in such capacity. Without limiting the foregoing, none of the Persons identified in this Agreement as a "Documentation Agent" or "Co- Agent" shall have or be deemed to have any fiduciary duty to or fiduciary relationship with any Lender. In addition to the agreements set forth in Section 9.6, each of the Lenders acknowledges that it has not relied, and ----------- will not rely, on any of the Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 1.12 ARTICLE X OF THE CREDIT AGREEMENT IS AMENDED AS FOLLOWS: --------- (A) SECTION 10.1 OF THE CREDIT AGREEMENT IS AMENDED TO DELETE THE ------------ TERMS THEREOF IN THEIR ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 10.1. Waivers and Amendments. The provisions of this ---------------------- Agreement and of each of the other Loan Documents may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing, is made in accordance with the Intercreditor Agreement and is consented to by the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no such amendment, modification or waiver: -------- (a) which would modify any requirement hereunder that any particular action be taken by (i) all Lenders or by the Required Lenders shall be effective without the 30 consent of each Lender or (ii)the Liquidity Lenders or the Majority Liquidity Lenders, shall be effective without the consent of each Liquidity Lender; (b) which would modify this Section 10.1, change the definition ------------ of "Required Lenders,", change the definition of "Majority Liquidity Lenders," change any Revolving Percentage or Liquidity Percentage for any Lender (except in accordance with Section 10.5 pursuant to an ------------ Assignment and Acceptance), reduce any fees, extend the Termination Date, or subject any Lender to any additional obligations, shall be effective without the consent of each affected Lender; (c) which would extend the due date for, or reduce the amount of, any payment or prepayment of principal of or interest on or any fee related to any Revolving Loan, Liquidity Loan or any LC Obligation, or reduce the rate of interest payable with respect to any Revolving Loan, Liquidity Loan or any LC Obligation, shall be effective without the consent of each affected Lender; provided the Majority Liquidity Lenders -------- shall be permitted to change the amount, timing or rate of the Default Rate applicable to the Liquidity Loans and the Majority Revolving Lenders (as defined in the Intercreditor Agreement) shall be permitted to change the amount, timing or rate of the Default Rate applicable to the Revolving Loans; (d) which would affect adversely the interests, rights or obligations of the Loan Agent or the Issuing Lender (in such capacity), shall be effective without the consent of the Loan Agent or the Issuing Lender, respectively; or (e) release any Guarantor from its obligations under its respective Guaranty or release or subordinate any Lien on any portion of the Collateral, except as contemplated by the Intercreditor Agreement and except as otherwise may be provided in Section 9.11 above. ------------ Upon the effectiveness of any consent, amendment, modification or waiver under this Agreement, the Loan Agent shall promptly give each Lender written notice (including a description) of such consent, amendment, modification or waiver. (B) SECTION 10.5 IS AMENDED TO DELETE SUBCLAUSE (B) AT THE END OF ------------ ------------- CLAUSE (1) THEREOF IN ITS ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: ---------- (b) after giving effect to such assignment (i) no Lender shall have greater than 25% of the Revolving Percentage and (ii) no Liquidity Lender shall have greater than 49% of the Liquidity Percentage as a result of such assignment. 31 (C) SECTION 10.5 OF THE CREDIT AGREEMENT IS FURTHER AMENDED TO ADD THE ------------ FOLLOWING AT THE END THEREOF: (6) Notwithstanding anything in this Section 10.5 or otherwise to the ------------ contrary, no Liquidity Lender shall be permitted to assign any or all of its interest in its Liquidity Loans and Liquidity Commitments or sell participating interests therein unless: (a) such Liquidity Lender shall assign or sell a participation of a constant and not varying percentage of the Liquidity Loans and Liquidity Commitments; and (b) simultaneously with such assignment or participation transaction, the Liquidity Lender shall assign or sell to such assignee or participant the same percentage of the Liquidity Lender's rights and obligations with respect to either (i) the 1996 Lease Obligations and the Reborrowing Commitment - 1996 Master Lease (as defined in the Facilities Agreement) or (ii) the Revolving Loans and Reborrowing Commitment-Revolver; provided, however, if such Liquidity Lender's -------- ------- percentage of the Liquidity Loans and Liquidity Commitments at the time of such assignment or participation transaction exceeds such Liquidity Lender's Pro Rata 1996 Share, such Liquidity Lender shall be permitted to assign or sell a non-pro rata portion of the Liquidity Facility and Liquidity Commitments to any purchaser provided that after taking into account such transaction such selling Liquidity Lender's percentage of the Liquidity Loans and Liquidity Commitments is not less than its Pro Rata 1996 Share. (D) SECTION 10.6 IS AMENDED TO ADD THE FOLLOWING AT THE END THEREOF: ------------ Without limiting the foregoing, the Borrower agrees to pay on demand all reasonable costs and expenses incurred by the Loan Agent in connection with (i) the preparation, execution, delivery, filing, recording, and administration of any of the Loan Documents, (ii) any amendment, modification or waiver of, consent with respect to, or termination of, any of the Loan Documents or advice in connection with the administration thereof, (iii) any litigation, contest, dispute, suit, proceeding or action (whether instituted by the Loan Agent or any other Person, and whether as a party, witness or otherwise) in any way relating to the Loan Documents or any other agreement to be executed or delivered in connection with the Loan Documents, (iv) any work-out or restructuring of the Obligations, and (v) any attempt to enforce any remedies of the Loan Agent against the Borrower or any other Person that may be obligated to the Loan Agent by virtue of any of the Loan Documents, including as to all of the foregoing clauses (i)-(v) the reasonable fees and expenses of counsel, advisors, accountants, consultants (including environmental and management consultants and appraisers) and auditors retained for advice, assistance, or other representation in connection with any of the foregoing matters. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined 32 to be payable by the Loan Agent in connection with the execution, delivery, filing and recording of any of the Loan Documents and the other documents to be delivered under the Loan Documents, and agrees to save the Loan Agent harmless from and against any and all liabilities with respect to or resulting from any delay attributed to the Borrower in paying or failing to pay such taxes and fees. (d) SECTION 10.15 IS AMENDED TO DELETE THE TERMS THEREOF IN THEIR ------------- ENTIRETY AND TO SUBSTITUTE THE FOLLOWING THEREFOR: SECTION 10.15. Facilities Agreement. The Lenders hereby consent -------------------- to the execution and delivery by the Loan Agent of the First Amendment and Consent to Amended and Restated Facilities Agreement (as such agreement is to take effect on the Restructuring Effective Date) and acknowledge and agree that they will be bound by the terms of the Facilities Agreement (as so amended and as further amended, modified, restated or supplemented from time to time hereafter in accordance with the terms hereof and the Intercreditor Agreement). (e) ALL OTHER PROVISIONS OF ARTICLE X ARE AMENDED TO MAKE THE --------- PROVISIONS THEREOF APPLICABLE TO REVOLVING LOANS OR REVOLVING NOTES EQUALLY APPLICABLE TO THE LIQUIDITY LOANS AND THE LIQUIDITY NOTE. (f) ALL PROVISIONS OF ARTICLE X ARE AMENDED TO MAKE THE PROVISIONS --------- THEREOF WHICH ARE APPLICABLE TO THE DOCUMENTATION AGENT EQUALLY APPLICABLE TO THE CO-AGENTS. 1.13 THE CREDIT AGREEMENT IS FURTHER AMENDED TO DELETE ALL OF THE SCHEDULES AND EXHIBITS THERETO AND TO SUBSTITUTE THE SCHEDULES AND EXHIBITS ATTACHED HERETO THEREFOR. SECTION 2. CONSENT. Effective as of the date of this Amendment and ------- subject to the satisfaction of the conditions precedent set forth in Section 3 --------- below, and in reliance on the Borrower's representations and warranties set forth in Section 4 below, the parties hereto hereby consent to the transactions --------- contemplated by the documents, instruments and agreements set forth on the List of Closing Documents attached hereto as Exhibit K. --------- SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall not --------------------------- become effective unless on or before July 15, 1998 each of the following shall have occurred: (a) this Amendment shall have been executed by the Borrower, the Loan Agent, the Documentation Agent, the Co-Agents, the Issuing Lender, each of the Lenders currently party to the Credit Agreement, GECC and each additional Lender being added as a Liquidity Lender; 33 (b) the Loan Agent shall have received an executed copy of the Intercreditor Agreement in the form attached hereto as Exhibit I, duly --------- executed by the parties thereto; (c) the Loan Agent shall have received an executed copy of the First Amendment and Consent to the Amended Facilities Agreement in the form attached hereto as Exhibit J, duly executed by the parties thereto; ---------- (d) the Loan Agent shall have received a duly executed original Liquidity Notes in the form attached hereto as Exhibit A-4; ----------- (e) the Loan Agent shall have received an executed copy of Amendment No. 2 to Master Lease Agreement No. 2 in form and substance acceptable to the Loan Agent and the Lenders duly executed by the Borrower and the 1996 Lease Loan Agent as consented to by each of the 1996 Lease Lenders; (f) the Borrower shall have paid (i) all fees required to be paid to the Loan Agent pursuant to the terms of the Confidential Agreement on or prior to the effectiveness hereof and (ii) all fees required to be paid to GECC on the Restructuring Effective Date pursuant to the terms of its fee agreement with the Borrower of even date herewith; (g) the Borrower shall have reimbursed the Loan Agent for all fees and expenses of counsel, financial advisors and other professionals; (h) the corporate structure of and the Persons which are Subsidiaries of the Borrower shall be acceptable to the Liquidity Lenders; (i) the Loan Agent shall have received an executed copy of the Confidential Agreement in form and substance acceptable to the Loan Agent and (i) the Lenders with respect to the provisions thereof regarding fees and (ii) the Liquidity Lenders with respect to the provisions thereof regarding the Budget; (j) the Loan Agent shall have received a certificate or certificates of the Secretary or Assistant Secretary of the Borrower and each of its Subsidiaries certifying: (i) a copy of the Certificate or Articles of Incorporation of such entity, as theretofore amended; (ii) a copy of the bylaws of such entity, as theretofore amended; (iii) copies of all corporate action taken by such entity, including resolutions of its board of directors, authorizing the execution, delivery, and performance of this Amendment by the Borrower and each other instrument and document to be delivered by the Borrower and its Subsidiaries pursuant to this Amendment and the Facilities Agreement; and (iv) the names and true signatures of the officers of the Borrower and its Subsidiaries authorized to sign this Amendment and the other instruments and documents to be delivered by the Borrower and its Subsidiaries under this Amendment; 34 (k) the Loan Agent shall have received the opinions of Akin, Gump, Hauer & Feld and the Borrower's General Counsel in form and substance acceptable to the Loan Agent; (l) the Loan Agent shall have received evidence that the Common Collateral Loan Agent has been named as loss payee under all policies of casualty insurance, and as additional insured under all policies of liability insurance, required by any Common Collateral Document (as such term is defined in the Facilities Agreement); (m) the Loan Agent shall have received the other documents, instruments and agreements set forth on the List of Closing Documents (Restructuring) and the List of Closing Documents (Rollup) attached as Exhibit K hereto, in --------- each case in form and substance acceptable to the Loan Agent and duly executed by the parties thereto; and (n) the Loan Agent shall have received such other approvals, opinions or documents as the Loan Agent, the Common Collateral Agent or any Lender may reasonably request. SECTION 4. REPRESENTATIONS AND WARRANTIES. To induce the Loan Agent, ------------------------------ the Documentation Agent, the Co-Agents, the Issuing Lender, the Liquidity Lenders, and the Revolving Lenders to enter into this Amendment, the Borrower represents and warrants to each such party as of the date hereof that: (a) This Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Borrower hereby reaffirms all covenants, representations and warranties made in the Credit Agreement and the other Loan Documents to the extent the same are not amended or waived hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment. (c) Other than the Suspended Defaults, no Default or Event of Default has occurred under the Credit Agreement or the Facilities Agreement. SECTION 5. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT. ----------------------------------------------- (a) Upon the effectiveness of this Amendment, on and after the date hereof, each reference in the Credit Agreement to "this Credit Agreement," "hereunder," "hereof," "herein" or words of like import, and each reference to the Credit Agreement in any other "Credit Document" (as defined in 35 the Intercreditor Agreement) shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically modified or waived above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed. SECTION 6. GOVERNING LAW. This Amendment shall be governed by and ------------- construed in accordance with the internal laws of the State of New York, without regard to its conflicts of laws provisions. SECTION 7. HEADINGS. Section headings in this Amendment are included -------- herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. SECTION 8. COUNTERPARTS. This Amendment may be executed by one or ------------ more of the parties to this Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Facsimile transmission of the signature of any party hereto sent to either the Loan Agent or its counsel shall be effective as an original signature provided each party agrees to promptly submit original signature pages hereto in sufficient quantity for each of the parties hereto. SECTION 9. NO STRICT CONSTRUCTION. The parties hereto have ---------------------- participated jointly in the negotiation and drafting of this Amendment, the Credit Agreement and the other Loan Documents. In the event an ambiguity or question of intent or interpretation arises, this Amendment and the Credit Agreement as hereby amended and the other Loan Documents shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Amendment, the Credit Agreement or any of the other Loan Documents. [Remainder of this Page Intentionally Blank.] 36 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. BOSTON CHICKEN, INC. By:_____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Loan Agent and as a Co-Agent By:_____________________________________ Title:____________________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Issuing Lender, as a Revolving Lender and as a Liquidity Lender By:_____________________________________ Title:____________________________________ BANKERS TRUST COMPANY, as Documentation Agent and as a Revolving Lender and as a Non-Participating Lender By:____________________________________ Title:___________________________________ BANK BUMIPUTRA MALAYSIA BERHAD, as a Revolving Lender and as a Non-Participating Lender By:____________________________________ Title:___________________________________ BANCO POPULAR DE PUERTO RICO, as a Revolving Lender and as a Non-Participating Lender By:____________________________________ Title___________________________________ HARRIS TRUST AND SAVINGS BANK, as a Revolving Lender and as a Non-Participating Lender By:____________________________________ Title___________________________________ LASALLE NATIONAL BANK, as a Revolving Lender and as a Liquidity Lender By:____________________________________ Title:___________________________________ SAKURA BANK, as a Revolving Lender and as a Non- Participating Lender By:____________________________________ Title:___________________________________ GENERAL ELECTRIC CAPITAL CORPORATION, as a Co- Agent, as a Revolving Lender and as a Liquidity Lender By:____________________________________ Daniel P. Gioia, Senior Risk Manager Notices to: General Electric Capital Corporation 777 Long Ridge Road Building B, 1st Floor Stamford, Connecticut 06927 Attn: Daniel P. Gioia Fax: 203-703-1777 Confirmation:203-357-6245 SANWA BUSINESS CREDIT CORPORATION, as a Liquidity Lender By:____________________________________ Title:___________________________________ Notices to: One South Wacker Drive Chicago, Illinois 60606 Attn:__________________________ Fax:___________________________ Confirmation:____________________ HOUR LLC, as a Liquidity Lender By: Sunrise Partners L.L.C., its Manager By: Dawn General Partner Corp., its Manager By:_____________________________ Title:____________________________ Notices to: 2 American Lane Grenwich, Connecticut 06836 Attn: Paul Guggenheimer Fax: (203) 862-7229 Confirmation: (203) 861-3269 EX-10.3 5 AMENDMENT NO. 2 TO MASTER LEASE AGREEMENT EXHIBIT 10.3 EXECUTION COPY AMENDMENT NO. 2 TO MASTER LEASE AGREEMENT NO. 2 AND RELATED SCHEDULES by and among GENERAL ELECTRIC CAPITAL CORPORATION, as Lessor and BOSTON CHICKEN, INC., as Lessee Dated as of July 15, 1998 TABLE OF CONTENTS -----------------
Page ----- RECITALS.......................................................................................................... 1 - -------- AGREEMENT......................................................................................................... 2 - --------- 1. Acknowledgments Re: 1996 Master Lease Transaction; Amount of Outstanding Obligation....................... 2 ----------------------------------------------------------------------------------- 2. Amendment of 1996 Master Lease and Schedules.............................................................. 3 -------------------------------------------- 2.1. Reference to Facilities Agreement........................................................... 3 --------------------------------- 2.2. Definitions................................................................................. 3 ----------- 2.3. Section I (Leasing); Termination of Commitments............................................. 8 ----------------------------------------------- 2.4. Section II (Term, Rent and Payment)......................................................... 9 ----------------------------------- 2.5. Section IIA (Reborrowing Loans) [New]....................................................... 9 ------------------------------------- 2.6. Section IIB (Interest; Payments and Prepayments) [New]...................................... 11 ------------------------------------------------------ 2.7. Section III (Taxes)......................................................................... 13 ------------------- 2.8. Section V (Delivery, Use and Operation; Substitution)....................................... 14 ----------------------------------------------------- 2.9 Section VII (Loss or Damage; Stipulated Loss Value)......................................... 15 --------------------------------------------------- 2.10. Section IX (Insurance)...................................................................... 15 ---------------------- 2.11. Section X (Return of Lease Assets).......................................................... 15 ---------------------------------- 2.12. Section XI (Default; Remedies).............................................................. 16 ------------------------------ 2.13. Section XII (Assignment; Subletting)........................................................ 18 ------------------------------------ 2.14. Section XIII (Net Lease; No Set-Off, Etc.................................................... 19 ----------------------------------------- 2.15. Section XIV (Indemnification)............................................................... 19 ----------------------------- 2.16. Section XVI (Representations, Warranties and Covenants of Lessee)........................... 19 ----------------------------------------------------------------- 2.17. Section XVII (Ownership for Tax Purposes; Grant of Security Interest; Usury Savings)........ 20 ------------------------------------------------------------------------------------ 2.18. Section XVIII (End of Lease Options)........................................................ 23 ------------------------------------ 2.19. Section XIX (Miscellaneous)................................................................. 23 --------------------------- a........................................................................................... 23 2.20. Section XXII (Early Termination)............................................................ 24 -------------------------------- 2.21. Schedules................................................................................... 25 --------- a. Paragraph B.3 (Basic Term)................................................... 25 -------------------------- b. Paragraph B.10 (Renewal Term)................................................ 25 ----------------------------- c. Paragraph B.11 (Maximum Lease Term).......................................... 25 ----------------------------------- d. Paragraph C (Term and Rent).................................................. 25 --------------------------- e. Annex E (Amortization Schedule).............................................. 25 ------------------------------- f. Annex F (Return Provisions).................................................. 25 --------------------------- 2.22. References to Deleted Sections............................................... 25 ------------------------------ 3. Conditions Precedent...................................................................................... 25 --------------------
i
3.1. Second Amendment and Related Amendment Documents; Satisfactory Legal Form.......................... 25 ------------------------------------------------------------------------- 3.2. Facilities Agreement Amendment; Second Credit Agreement Amendment; Other Related Documents......... 26 ------------------------------------------------------------------------------------------ 3.3. Confidential Agreement............................................................................. 26 ---------------------- 3.4. Termination of Agency Agreement.................................................................... 26 ------------------------------- 3.5. Payments........................................................................................... 26 -------- 3.6. Corporate Structure................................................................................ 26 ------------------- 4. Representations and Warranties........................................................................... 26 ------------------------------ 5. Miscellaneous............................................................................................ 26 ------------- 5.1. Headings........................................................................................... 26 -------- 5.2. Counterparts....................................................................................... 27 ------------ 5.3. Interpretation..................................................................................... 27 -------------- 5.4. Complete Agreement................................................................................. 27 ------------------ 5.5. Ratification of 1996 Master Lease and Schedules.................................................... 27 ----------------------------------------------- 5.6. Reaffirmation of Grant of Security Interest........................................................ 27 ------------------------------------------- 5.7. Governing Law...................................................................................... 27 ------------- 5.8. Effect............................................................................................. 27 ------ 5.9. Use of Defined Terms............................................................................... 27 -------------------- 5.10. Conflict of Terms.................................................................................. 27 ----------------- 5.11. No Novation........................................................................................ 28 -----------
ii INDEX OF ANNEXES, SCHEDULES AND EXHIBITS ---------------------------------------- Annex A - List of Schedules Schedule 1.4 - Acquisition Loan Principal Amount as of Restructuring Effective Date Exhibit A-1 - Form of Secured Promissory Note Exhibit A-2 - Form of Reborrowing Note Exhibit B - Form of Omnibus Participation Agreement Amendment Exhibit C - Form of Second Amended and Restated Intercreditor Agreement Exhibit D - Form of First Amendment and Consent to Amended and Restated Facilities Agreement Exhibit E - Form of Agency Agreement Termination Letter Exhibit F - Form of Amended Memorandum of Master Lease Exhibit G - Form of Collateral Assignment of Lease Amendment iii AMENDMENT NO. 2 TO MASTER LEASE AGREEMENT NO. 2 AND RELATED SCHEDULES This AMENDMENT NO. 2 TO MASTER LEASE AGREEMENT NO. 2 AND RELATED SCHEDULES (the "Second Amendment") is entered into as of July 15, 1998 by and ---------------- among General Electric Capital Corporation, a corporation organized under the banking laws of the State of New York, for itself and as Agent (in both such capacities, "Lessor") for the Participants under the Participation Agreements ------ (as defined below) and BOSTON CHICKEN, INC., a Delaware corporation ("Lessee") ------ with reference to the following RECITALS, which shall be construed as part of this Second Amendment: RECITALS -------- A. Lessor and Lessee are parties to (i) that certain Master Lease Agreement No. 2 dated as of December 9, 1996 (such agreement, as amended by Amendment No. 1 to Master Lease Agreement No. 2 dated as of February 28, 1997, Amendment No. 2 to Master Lease Agreement dated as of March 18, 1997 (the "Prior ----- Second Amendment"; such Master Lease Agreement No. 2, as so amended, will be - ---------------- referred to in these RECITALS as the "1996 Master Lease") and (ii) those ----------------- Schedules identified in ANNEX A hereto (each, a "Schedule," and collectively, -------- the "Schedules"), each dated the date specified therefor in ANNEX A. --------- Capitalized terms used in these RECITALS that are not otherwise defined in these RECITALS are as defined in the 1996 Master Lease without regard to this Second Amendment. B. Pursuant to the 1996 Master Lease and the Schedules, Lessor "leased" certain real and personal property, defined as the "Lease Assets" in the 1996 Master Lease, to Lessee, for the purposes and with the intent specified in Section XVII thereof. C. Lessor and certain financial institutions are parties to that certain Participation Agreement dated as of December 9, 1996 (such agreement, as amended by Amendment No. 1 to Participation Agreement dated as of February 28, 1997, "Participation Agreement A"). Lessor and AT&T Commercial Finance Corporation - -------------------------- are parties to that certain Participation Agreement dated as of February 28, 1997 (such agreement, "Participation Agreement B"; Participation Agreement A and ------------------------- Participation Agreement B will be referred to collectively as the "Participation ------------- Agreements"). Pursuant to the Participation Agreements, among other things, the - ---------- Participants and ATTCFC (as such terms are defined therein) acquired participation interests in a portion of the obligations of Lessee to Lessor under the 1996 Master Lease and the Schedules (Lessor, such Participants, and ATTCFC will be referred to collectively as the "1996 Lease Lenders"). ------------------ D. In connection and concurrent with the 1996 Master Lease, among other things: 1. Lessee, Bank of America Illinois (now known as Bank of America National Trust and Savings Association), as agent (in such capacity "Loan ---- Agent") and as a lender, and certain other financial institutions as ----- additional lenders (all such lenders will be referred to collectively as the "Bank Lenders") entered into that certain Secured Revolving Credit ------------ Agreement dated as of December 9, 1996 (which agreement was amended by the First Amendment and Consent to Secured Revolving Credit Agreement dated as of October 24, 1997); 1 2. Lessee, Lessor and Loan Agent entered into that certain Facilities Agreement dated as of December 9, 1996, which agreement was amended and restated pursuant to that certain Amended and Restated Facilities Agreement dated as of October 24, 1997 (such agreement, as so amended and restated, the "Existing Facilities Agreement"); and ----------------------------- 3. Lessee, Lessor and Loan Agent entered into that certain Intercreditor Agreement dated as of December 9, 1996 (such agreement, as it was amended and restated pursuant to that certain Amended and Restated Intercreditor Agreement dated as of October 24, 1997, the "Existing -------- Intercreditor Agreement"). ----------------------- E. Lessee has requested, among other things, that Lessor and the Bank Lenders provide certain financial accommodations to Lessee including, among other things, (i) the commitment by some or all of the "1996 Lenders" (as defined in the DEFINITIONS section below) to fund the "Liquidity Loans" (as defined in the Second Amendment and Consent to Secured Revolving Credit Agreement of even date herewith (the "Second Credit Agreement Amendment"), (ii) --------------------------------- the commitment by all of the Bank Lenders and Lessor to fund their pro-rata share of any "Reborrowing Loans" (as defined in and made pursuant to the "Facilities Agreement Amendment" (as defined in the DEFINITIONS section below)), (iii) the agreement by the 1996 Lease Lenders to extend the principal payments required to be made on the next two Rent Payment Dates under the 1996 Master Lease (which Rent Payment Dates are on or about July 15, 1998 and October 7, 1998) to October 17, 1998, and (iv) the agreement of the Bank Lenders and Lessor to make certain amendments to the Existing Facilities Agreement and the Existing Intercreditor Agreement. F. Subject to the terms and conditions hereof, Lessor is willing to accommodate the foregoing requests of Lessee and to amend the 1996 Master Lease and the Schedules and to enter into the Related Amendment Documents (as defined below), all as more fully set forth herein. AGREEMENT --------- NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the receipt and adequacy of which are hereby acknowledged, it is agreed as follows: 1. Acknowledgments Re: 1996 Master Lease Transaction; Amount of Outstanding ------------------------------------------------------------------------ Obligation. The parties acknowledge and agree, consistent with the express - ---------- provisions of SECTION XVII of the 1996 Master Lease as in effect without regard to this Second Amendment, as follows: 1.1. As set forth in SECTION XVII of the 1996 Master Lease as in effect without regard to this Second Amendment, it was the original intent of Lessor and Lessee that (i) for the purposes of Lessee's financial reporting, the transaction contemplated by the 1996 Master Lease be treated by Lessee as an operating lease from Lessor to Lessee, and (ii) for all other purposes, including Federal and state income tax, bankruptcy and Uniform Commercial Code purposes, (1) Lessee would be treated as the owner of the Lease Assets, (2) Lessee would grant to Lessor a security interest or lien, as the case may be, in the Lease Assets and other collateral, and (3) the obligations of Lessee to pay Rent would be treated as payments of principal and interest to Lessor by Lessee. From and after the Restructuring Effective Date, the transactions contemplated by the 1996 Master Lease shall also be treated as a financing transaction for financial reporting purposes, involving secured loans by Lessor to Lessee (collectively, the "Acquisition Loan") to acquire the Lease 2 Assets. Accordingly, on the Restructuring Effective Date, Lessee shall deliver to Lessor the Secured Promissory Note evidencing Lessee's obligation to repay the outstanding balance of the Acquisition Loan together with interest thereon. 1.2. Notwithstanding the fact that title to the Lease Assets may be in the name of Lessor, the Lease Assets are the property of Lessee, and Lessor is merely holding title thereto as an accommodation to Lessee. Lessor is hereby authorized to convey or transfer record title to the Lease Assets to Lessee at such time or times as are mutually agreeable to Lessor and Lessee, it being understood and agreed that any such conveyance or transfer shall be on an AS IS, WHERE IS BASIS, and Lessor shall not be required to make and may specifically disclaim any representation or warranty as to the condition of the relevant Lease Assets and other matters, and notwithstanding any such transfer the Lease Assets shall in all events remain subject to the Lien of Lessor provided for herein. 1.3. Notwithstanding the characterization of Lessee's obligation to pay amounts owing to Lessor pursuant to the 1996 Master Lease as an obligation to pay "principal and interest" and/or "rent" (which obligation was absolute and unconditional), Lessee's obligation to pay amounts owing to Lessor as of the Restructuring Effective Date pursuant to the 1996 Master Lease shall, from and after the Restructuring Effective Date, be an obligation to repay the Acquisition Loan (and all interest thereon), which obligation is absolute and unconditional. 1.4. As of the date hereof, the principal amount of the Acquisition Loan is as set forth on SCHEDULE 1.4 hereto. 2. Amendment of 1996 Master Lease and Schedules. The 1996 Master Lease and -------------------------------------------- the Schedules are hereby amended, effective as of the Restructuring Effective Date, as follows (and all section references in this SECTION 2 shall, unless the context otherwise requires, be references to sections in the 1996 Master Lease): 2.1. REFERENCE TO FACILITIES AGREEMENT. DELETE THE SECOND PARAGRAPH OF THE --------------------------------- PREAMBLE OF THE 1996 MASTER LEASE AND REPLACE IT WITH THE FOLLOWING: This Agreement is executed concurrently with the "Facilities Agreement" (as defined in the "Definitions" section below) and is subject to the provisions thereof and of the "Intercreditor Agreement" (as defined in the "Definitions" section below). Capitalized terms used herein without definition shall be as defined in the Facilities Agreement. 2.2. DEFINITIONS. ADD A NEW SECTION ENTITLED "DEFINITIONS" IMMEDIATELY ----------- BEFORE SECTION I, AS FOLLOWS (IT BEING UNDERSTOOD THAT THE DEFINITIONS SPECIFIED BELOW SHALL SUPERSEDE THE CORRESPONDING DEFINITIONS, IF ANY, IN THE 1996 MASTER LEASE): DEFINITIONS. ----------- In addition to the defined terms appearing in this Agreement, capitalized terms used in this Agreement shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings: "Acquisition Loan" shall be as defined in SECTION 1.1 of the Second ---------------- Amendment. 3 "Agreement" means the 1996 Master Lease Agreement No. 2 dated as of --------- December 9, 1996, as amended by Amendment No. 1 to Master Lease Agreement No. 2 dated as of February 28, 1997, Amendment No. 2 to Master Lease Agreement dated as of March 18, 1997 (the "Prior Second ------------ Amendment"), and Amendment No. 2 to Master Lease Agreement No. 2 dated --------- as of the Restructuring Effective Date (the "Second Amendment"), and ---------------- (subject to the Intercreditor Agreement) as it may be thereafter be amended, modified, extended, amended and restated, or replaced. Although the Prior Second Amendment and the Second Amendment are each denominated an "Amendment No. 2," the Second Amendment does not supersede or replace the Prior Second Amendment, which remains in effect in accordance with its terms. "Amended Memorandum of Lease" means an Amended and Restated Memorandum --------------------------- of Master Lease and Mortgage substantially in the form of EXHIBIT F to the Second Amendment. "ATTCFC" is defined in SECTION XII(B)(3), and includes its permitted ------ successors and assignees. "Bank Lenders" means the "Revolving Lenders" under and as defined in ------------ the Credit Agreement. "BCRE" is defined in SECTION I(B). ---- "BofA" means Bank of America National Trust and Savings Association. ---- "Business Day" means any day other than Saturday, Sunday, and any day ------------ on which banking institutions located in the States of Connecticut, New York, or Colorado are authorized by law and other governmental action to close. "Budget" is defined in the Facilities Agreement. ------ "Collateral Assignment of Lease" is defined in SECTION I(C), as any ------------------------------ such agreement may be amended by a Collateral Assignment of Lease Amendment and as it may from time to time be amended, modified, extended, amended and restated, or replaced in accordance with its respective terms. "Collateral Assignment of Lease Amendment" means a First Amendment to ---------------------------------------- Collateral Assignment and Leasehold Mortgage substantially in the form of EXHIBIT G to the Second Amendment. "Common Collateral Agent" is defined in the Facilities Agreement. ----------------------- "Credit Agreement" means the Secured Revolving Credit Agreement dated ---------------- as of December 9, 1996, as amended by the First Amendment and Consent to Secured Revolving Credit Agreement dated as of October 24, 1997, and the Second Credit Agreement Amendment, and as it may from time to time be amended, modified, extended, amended and restated, or replaced in accordance with the provisions of the Intercreditor Agreement. "Default" is defined in SECTION XI(A). ------- 4 "Equipment" is defined in SECTION I(A). --------- "Estoppel/Waiver Agreement" is defined in SECTION I(C). ------------------------- "Facilities Agreement" means the Amended and Restated Facilities -------------------- Agreement dated as of October 24, 1997 as amended by the Facilities Agreement Amendment and as it may from time to time be amended, modified, extended, amended and restated, or replaced in accordance with its terms and the terms of the Intercreditor Agreement. "Facilities Agreement Amendment" means the First Amendment and Consent ------------------------------ to Amended and Restated Facilities Agreement dated as of the Restructuring Effective Date, in substantially the form of EXHIBIT D to the Second Amendment. "FAD"; "FADs" are defined in SECTION I(A). --- ---- "Fee Improvements" is defined in SECTION I(C). ---------------- "Fee Property" is defined in SECTION I(A). ------------ "Federal Funds Rate" means, for any day, a floating rate equal to the ------------------ weighted average of the rates on overnight federal funds transactions among members of the Federal Reserve System, as determined by Lessor in its sole discretion, which determination shall be final, binding and conclusive (absent manifest error). "Floating Rate" shall be as defined in the Credit Agreement; provided, ------------- -------- that if BofA ceases to be the Loan Agent, "Floating Rate" shall mean for any day a floating rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall Street Journal as the ----------------------- "base rate on corporate loans at large U.S. money center commercial banks" (or, if The Wall Street Journal ceases quoting a base rate of ----------------------- the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points per annum. --------- "GE Agreement" is defined in SECTION XI(J). ------------ "Ground-Lease Leasehold Improvements" is defined in SECTION I(A). ----------------------------------- "Ground Leases" is defined in SECTION I(A). ------------- "Intercreditor Agreement" means the Second Amended and Restated ----------------------- Intercreditor Agreement dated as of the Restructuring Effective Date, in substantially the form of EXHIBIT C to the Second Amendment, as it may from time to time be amended, modified, extended, amended and restated, or replaced in accordance with its terms. "Interest Period" means (i) the period beginning on the Restructuring --------------- Effective Date and ending on the first Rent Payment Date thereafter and (ii) each period thereafter that begins on a Rent Payment Date and ends on the next succeeding Rent Payment Date. 5 "Interest Rate" means (subject to SECTION XIX(I)) the Floating Rate in ------------- effect from time to time plus (i) in the case of the Acquisition Loan, ---- 1.50% and (ii) in the case of any Reborrowing Loans, 2.00%. "Landlord's Waiver" is defined in SECTION I(C). ----------------- "Lease Assets" is defined in SECTION I(A). ------------ "Lease Assets Location" is defined in SECTION IV(C). --------------------- "Lease Commencement Date" is defined in SECTION II. ----------------------- "Lease Obligations" means all loans, advances, debts, liabilities, and ----------------- obligations for the performance of covenants, tasks or duties or for payment of monetary amounts now or hereafter owing by Lessee to Lessor or any Participant, arising under this Agreement, the Schedules, the Notes and the other 1996 Lease Documents (including all principal, interest (including interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of, Lessee, whether or not allowed in such proceeding)), fees, charges, expenses, attorneys' fees and any other amount chargeable to Lessee under any of the provisions hereof or thereof. "Leasehold Improvements" is defined in SECTION I(A). ---------------------- "Lessee" is defined in the PREAMBLE to the Second Amendment. ------ "Lessor" is defined in the PREAMBLE to the Second Amendment. ------ "Loan Payment" means (i) any Rent payment and (ii) each and every ------------ payment that is required to be made hereunder with respect to the Reborrowing Loans, including any interest payment or mandatory prepayment (including on an acceleration) or scheduled principal payment. "Maturity Date" means the first to occur of (i) the Termination Date ------------- and (ii) the acceleration of the Acquisition Loan and/or the Reborrowing Loan pursuant to SECTION XI(A). "Memorandum of Lease" is defined in SECTION I(C), as any such document ------------------- may be amended and restated pursuant to an Amended Memorandum of Lease and as it may from time to time be amended, modified, extended, amended and restated, or replaced in accordance with its respective terms. "Mortgage" is defined in SECTION I(C). -------- "Notes" means, collectively, the Reborrowing Note and the Secured ----- Promissory Note. "Omnibus Participation Agreement Amendment" means "Amendment No. 2 To ----------------------------------------- Participation Agreement Dated As Of December 9, 1996 And Amendment No. 1 To Participation Agreement Dated As Of February 28, 1997" in substantially the form of EXHIBIT B to the Second Amendment and dated as of the Restructuring Effective Date. 6 "Participants" means the Participant Parties (under and as defined in ------------ the Participation Agreements), (ii) any other person who becomes a Participant pursuant to SECTION XII(B)(2), and (iii) any assignee of any of the foregoing. "Participation Agreements" are as defined in RECITAL C of the Second ------------------------ Amendment, as the same are amended by the Omnibus Participation Agreement Amendment and as they may from time to time be amended, modified, extended, amended and restated, or replaced in accordance with their respective terms. "Permitted Liens" is defined in SECTION V(C). --------------- "Potential Default" means any of the events specified in SECTION ----------------- XI(A), whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Premises-Lease Leasehold Improvements" is defined in SECTION I(A). ------------------------------------- "Premises Leases" is defined in SECTION I(A). --------------- "Pro Rata 1996 Share" is defined in the Facilities Agreement. ------------------- "Real Estate" is defined in SECTION I(A). ----------- "Real Estate Taxes" is defined in SECTION III(B). ----------------- "Reborrowing Availability Period" is defined in the Facilities ------------------------------- Agreement. "Reborrowing Availability Termination Date" shall be as defined in the ----------------------------------------- Facilities Agreement. "Reborrowing Commitment-1996 Master Lease" shall be as defined in the ---------------------------------------- Facilities Agreement. "Reborrowing Loan" is defined in SECTION IIA(A). ---------------- "Reborrowing Note" is defined in SECTION IIA(E). ---------------- "Reborrowing Request" is defined in SECTION 3.15(B)(IV)(C) of the ------------------- Facilities Agreement. "Related Amendment Documents" means the Omnibus Participation --------------------------- Agreement Amendment, the Intercreditor Agreement, the Facilities Agreement Amendment, the Notes, each Amended Memorandum of Lease, each Collateral Assignment of Lease Amendment, the "Guaranty" (as defined in the Facilities Agreement) in favor of Lessor, and the "Collateral Documents" (as defined in the Facilities Agreement) to the extent that they secure such Guaranty or any Lease Obligations. "Rent" means each and every payment that is required to be made ---- hereunder with respect to the Acquisition Loan, including interest payments and mandatory prepayments (including on an acceleration) and scheduled principal payments. "Rent Payment Date" means (i) August 1, 1998, (ii) the first day of ----------------- each subsequent calendar month through and including October 1, 1998, and (iii) October 17, 1998 7 (provided, that if any of the foregoing dates is not a Business Day, -------- the relevant Rent Payment Date shall be the immediately succeeding Business Day). "Restructuring Effective Date" means the date upon which all of the ---------------------------- conditions precedent to the effectiveness of the Second Amendment shall have been satisfied or waived. "Second Amendment" means Amendment No. 2 to Master Lease Agreement No. ---------------- 2 dated as of the Restructuring Effective Date. "Second Credit Agreement Amendment" is defined in RECITAL E of the --------------------------------- Second Amendment. "Secured Obligations" is defined in SECTION XVII(B). ------------------- "Secured Promissory Note" means the Secured Promissory Note in ----------------------- substantially the form of EXHIBIT A-1 to the Second Amendment (as it may from time to time be amended, modified, extended, amended and restated, or replaced). "Schedule" is defined in SECTION I(A), as the same are amended -------- pursuant to the Second Amendment and as they be amended, modified, extended, amended and restated, or replaced. "Sublease" is defined in Section XII(A). -------- "Sublessee" is defined in Section XII(A). --------- "Subordination and Intercreditor Agreement" is defined in SECTION ----------------------------------------- I(C). "Taxes" is defined in SECTION III(A). ----- "Term" is defined in SECTION II. ---- "Termination Date" means October 17, 1998. ---------------- "1995 Master Lease Agreement" is defined in SECTION I(C). --------------------------- "1996 Lease Documents" is defined in the Facilities Agreement. -------------------- "1996 Lease Lenders" means, collectively, Lessor (in its capacity as ------------------ "lessor," but not in its capacity as Agent, hereunder) and the Participants. "1996 Lenders" means, collectively, the Bank Lenders and the 1996 ------------ Lease Lenders. "1996 Master Lease" shall have the same meaning as "Agreement." ----------------- 2.3. SECTION I (LEASING); TERMINATION OF COMMITMENTS. ----------------------------------------------- a. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION I OF THE 1996 MASTER LEASE OR OTHERWISE, AS OF THE RESTRUCTURING EFFECTIVE DATE, ALL OBLIGATIONS AND COMMITMENTS OF LESSOR TO PROVIDE FUNDING OR FINANCIAL ACCOMMODATIONS TO LESSEE UNDER THIS AGREEMENT (OTHER THAN THE OBLIGATION TO MAKE REBORROWING LOANS PURSUANT TO SECTION IIA), INCLUDING THE OBLIGATION OF LESSOR TO ACQUIRE LEASE ASSETS AND TO LEASE THEM TO LESSEE PURSUANT TO SECTION I, SHALL TERMINATE. LESSEE SHALL PAY TO LESSOR, ON 8 THE RESTRUCTURING EFFECTIVE DATE, THE ACCRUED AND UNPAID UNUSED COMMITMENT FEE, IF ANY, PAYABLE PURSUANT TO SECTION XIX(M) AS DETERMINED (WITHOUT REGARD TO THIS SECOND AMENDMENT) AS OF SUCH DATE (THE "ACCRUED UNUSED -------------- COMMITMENT FEE"). -------------- b. DELETE SECTION I(D) AND REPLACE IT WITH THE FOLLOWING: (d) [Intentionally Omitted.] 2.4. SECTION II (TERM, RENT AND PAYMENT). DELETE SECTION II AND REPLACE IT ----------------------------------- WITH THE FOLLOWING: II. TERM: Lessee's obligation with respect to the payment of Rent shall commence on the date of execution by Lessee of the Certificate of Acceptance with respect to the Lease Assets (the "LEASE COMMENCEMENT DATE"). The term of this Agreement (the "TERM") shall be the period from the Lease Commencement Date through and including the Maturity Date. Prior to the Restructuring Effective Date, Rent payments shall be made in accordance with the 1996 Master Lease without regard to the Second Amendment. From and after the Restructuring Effective Date, Rent payments hereunder shall be made as provided in Section IIB(b). 2.5. SECTION IIA (REBORROWING LOANS) [NEW]. ADD A NEW SECTION IIA AS ------------------------------------- FOLLOWS: IIA. REBORROWING LOANS: (a) Subject to the terms and conditions specified herein and in Section 3.15(b)(iv) of the Facilities Agreement, during the Reborrowing Availability Period, Lessor agrees to make advances available to Lessee from time to time (each, a "Reborrowing Loan," and ---------------- collectively, the "Reborrowing Loans"); provided, that the aggregate ----------------- -------- amount of Reborrowing Loans outstanding hereunder shall not exceed at any time (i) the amount of the Reborrowing Commitment-1996 Master Lease or (ii) the 1996 Lease Lenders' 1996 Pro Rata Share of the sum of (A) all Reborrowing Loans hereunder and (B) all "Reborrowing Loans" under and as defined in the Credit Agreement. (b) During the Reborrowing Availability Period, Lessee may from time to time borrow, repay and reborrow under this SECTION IIA, subject in all cases to the provisions of SECTION IIA(G) hereof and SECTION 3.15(B)(IV) of the Facilities Agreement. Borrower may request a Reborrowing Loan hereunder in accordance with Section 3.15(b)(iv) of the Facilities Agreement. Each Reborrowing Request sent to Lessor shall be sent to the representatives of Lessor identified under Lessor's signature block hereof at the addresses specified thereon. (c) Unless Lessor shall have been notified by telephone, confirmed in writing, by any other 1996 Lease Lender by 12:00 noon (New York) time, on the day of a Reborrowing Loan hereunder that such 1996 Lease Lender will not make available the amount of its Pro Rata 1996 Share of the aggregate amount requested in the relevant Reborrowing Request, Lessor may assume, subject to the satisfactory 9 fulfillment by Lessee of the conditions precedent set forth in CLAUSE (G) below, that such 1996 Lease Lender has made such amount available to Lessor in accordance with the relevant Participation Agreement and, in reliance upon such assumption, make available to Lessee a corresponding amount. If and to the extent that such 1996 Lease Lender shall not have made such amount available to Lessor, Borrower agrees to repay Lessor forthwith on demand such corresponding amount together with interest thereon, for each day from the date Lessor made such amount available to Lessee to the date such amount is repaid to Lessor at a rate per annum equal to the relevant Interest Rate. Not later than 2:00 P.M. (New York time) on the proposed date of a Reborrowing Loan specified in the Reborrowing Request, subject to the satisfaction of the applicable conditions precedent set forth herein and in the Facilities Agreement, Lessor shall make the proceeds of each Reborrowing Loan available to the Lessee in immediately available funds equal to the principal amount of such Reborrowing Loan to be credited to the account of Lessee. (d) [INTENTIONALLY OMITTED.] (e) Lessee shall execute and deliver to Lessor a Reborrowing Note, which note shall be (A) dated the Restructuring Effective Date and (B) substantially in the form of EXHIBIT A-2 to the Second Amendment (such note, as it may be amended, modified, extended, amended and restated, or replaced, the "Reborrowing Note"). The Reborrowing Note shall ---------------- represent the obligation of Lessee to pay the amount of the Reborrowing Loans made to Lessee, together with interest thereon, as provided for herein. (f) The proceeds of the Reborrowing Loans (i) have not been and will not be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or to extend credit to any "Person" (as defined in the Facilities Agreement) for the purpose of purchasing or carrying any such margin stock and (ii) shall be used by Lessee only for the purposes, and in the amounts set forth for such purposes, indicated in the "Budget" (as defined in the Facilities Agreement). Lessee hereby covenants, represents and warrants that such use will be solely to fund Lessee's and its "Subsidiaries'" (as defined in the Facilities Agreement) working capital requirements in the ordinary course of its business and for Lessee's and its Subsidiaries' other general corporate purposes not prohibited by this Agreement and consistent with the purposes and amounts set forth in the Budget. (g) The obligation of Lessor to make each Reborrowing Loan shall be subject to the further conditions precedent that on the date of such Reborrowing Loan: (1) The following statements shall be true and Lessor shall have received a certificate signed by a duly authorized officer of Lessee (in his or her capacity as such, and without any personal liability therefor) dated the date of such Reborrowing Loan, stating that: 10 (a) The representations and warranties contained in SECTION XVI of this Agreement, in SECTION II of the Facilities Agreement (or any successor section therein) and in each other 1996 Lease Document are correct in all material respects on and as of the date of such Reborrowing Loan as though made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date); (b) No Default or Potential Default has occurred and is continuing, or would result from the borrowing of such Reborrowing Loan; and (c) Set forth on the schedule attached to the certificate is a true and accurate list of the uses for which the proceeds of such Reborrowing Loan will be used and such uses are consistent with the Budget; (2) All of the conditions precedent to the making of such Reborrowing Loan as set forth in the Facilities Agreement, and all of the conditions precedent to the making of the corresponding "Reborrowing Loan" (under and as defined in the Credit Agreement) by the Bank Lenders shall have been satisfied; (3) Concurrently with the making of such Reborrowing Loan, the Bank Lenders shall have made a "Reborrowing Loan" under and as defined in the Credit Agreement in an amount equal to their 1996 Pro Rata Share of the total aggregate Reborrowing Loan requested from the 1996 Lenders in the relevant Reborrowing Request; and (4) Lessor shall have received such other information, approvals, opinions, or documents as Lessor may reasonably request. 2.6. SECTION IIB (INTEREST; PAYMENTS AND PREPAYMENTS) [NEW]. ADD A NEW ------------------------------------------------------ SECTION IIB AS FOLLOWS: IIB. INTEREST; PAYMENTS AND PREPAYMENTS: (a) Applicable Interest Rates; Interest Calculations. The ------------------------------------------------ Acquisition Loan and the Reborrowing Loans shall each bear interest at the respective applicable Interest Rates (including as such rates may be adjusted pursuant to SECTION XIX(I)). All computations of interest hereunder when the Floating Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest 11 and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Payments of Interest. Accrued interest on the Acquisition -------------------- Loan and the Reborrowing Loans shall be due and payable in arrears on each Rent Payment Date through the Maturity Date. After the Maturity Date, interest shall accrue on the Acquisition Loan and the Reborrowing Loans at the respective applicable Interest Rates, and shall be payable on demand. (c) Due Date for Acquisition Loan and Reborrowing Loans. The --------------------------------------------------- entire unpaid Acquisition Loan and all other noncontingent obligations of Lessee to Lessor (other than the Reborrowing Loans) shall be immediately due and payable in full in immediately available funds on the Maturity Date. The entire unpaid Reborrowing Loan shall be immediately due and payable in full in immediately available funds on the first to occur of the Maturity Date and the Reborrowing Availability Termination Date. (d) Loan Payments. All Loan Payments shall be: ------------- (i) paid to Lessor by wire transfer of immediately available funds for receipt prior to 11:00 a.m. New York time to: BANKERS TRUST ONE BANKERS TRUST PLAZA NEW YORK, NEW YORK 10006, ACCOUNT NO. 50-259-088 ABA NO. 021-001-033 REFERENCE: BOSTON CHICKEN-CFN 2107-S. DERAFFELE or to such other account as Lessor may direct in writing; (ii) effective upon receipt, and (iii) in the amount set forth in, and due in accordance with, the provisions hereof. In no event shall any Loan Payment be refunded to Lessee (except in instances of manifest error). All payments due under this Agreement, whether or not specifically denominated as Loan Payments, shall be collectible in the same manner as Loan Payments. (e) Voluntary Prepayments of Reborrowing Loans. Lessee may ------------------------------------------ prepay, at any time when there are no "Liquidity Loans" (as defined in the Credit Agreement) outstanding, the Reborrowing Loans in whole or in part with accrued interest to the date of such prepayment on the amount prepaid; provided, that each such partial prepayment shall be -------- in a principal amount of not less than $1,000,000 or such greater amount which shall be an integral multiple thereof or such lesser amount as 12 is agreed to by Lessor in its sole discretion. Amounts prepaid in accordance with this SECTION IIB(E) may be reborrowed hereunder, subject to the satisfaction of all of the conditions to the making of Reborrowing Loans as set forth in the Facilities Agreement and SECTION IIA. The right of Lessee to voluntarily prepay the Reborrowing Loans shall be exercisable by delivery of written notice (including by facsimile) or telephonic notice (thereafter promptly confirmed in writing) to Lessor prior to 11:00 a.m. New York time, at least two Business Days prior to the proposed prepayment, which notice shall specify the amount by which Lessee proposes to prepay the Reborrowing Loans and the proposed date of such prepayment. Payments may not be made under this SECTION IIB(E) at any time at which a Default has occurred and is continuing. (f) Application of Prepayments. -------------------------- (i) All voluntary and mandatory prepayments of the Lease Obligations (excluding payments made pursuant to the preceding CLAUSE (E)), whether made or required hereunder, pursuant to Section 3.15 or any other provision of the Facilities Agreement, or the Intercreditor Agreement, shall be applied, except to the extent otherwise provided herein or therein, first to any accrued and ----- unpaid fees and expenses of Lessor (whether in its capacity as Agent or in its individual capacity), second to accrued interest on ------ the Acquisition Loan, third to accrued interest on the Reborrowing ----- Loans, fourth, to the principal portion of the Acquisition Loan, ------ and fifth to the principal portion of the Reborrowing Loans. ----- (ii) Any prepayment of the Lease Obligations that, pursuant to this Agreement, the Facilities Agreement or the Intercreditor Agreement, is required to be applied to the principal portion of the Lease Obligations without any specification as to the allocation thereof between the Acquisition Loan and the Reborrowing Loan, shall be applied first to the Acquisition Loan and second to the ----- ------ Reborrowing Loan. (iii) Except for (a) payments applied to the Acquisition Loan pursuant to SECTION 3.15(B)(II) FOURTH of the Facilities Agreement (which may be subject to reborrowing in accordance with SECTION 3.15(B)(IV) of the Facilities Agreement and SECTION IIB hereof) and (b) voluntary prepayments of the Reborrowing Loans pursuant to the preceding CLAUSE (E), no payments or prepayments of principal on the Acquisition Loan or the Reborrowing Loans may be reborrowed. It is understood and agreed that on the Restructuring Effective Date, Lessee shall pay to Lessor that portion of the "Rent" (as defined in the 1996 Master Lease and Schedules without regard to this Second Amendment) constituting interest that has accrued under the 1996 Master Lease and the Schedules for the period through and including the Restructuring Effective Date, calculated in accordance with the 1996 Master Lease and the Schedules as in effect without regard to this Second Amendment (such interest, the "Pre-Amendment Accrued Interest"). ------------------------------- 13 2.7. SECTION III (TAXES). ------------------- a. DELETE THE LAST SENTENCE OF SECTION III(A) AND REPLACE IT WITH THE FOLLOWING: Lessee shall be obligated to indemnify Lessor for any Taxes incurred or imposed in connection with, or attributable to, any conveyance or transfer of any Lease Assets to or for the benefit of Lessee, and all other reasonable and documented expenses incurred by Lessor in connection therewith. b. IN THE FIRST PARAGRAPH OF SECTION III(B), DELETE EVERYTHING OTHER THAN THE FIRST SENTENCE. 2.8. SECTION V (DELIVERY, USE AND OPERATION; SUBSTITUTION). ----------------------------------------------------- a. DELETE SECTIONS V(B), V(C), V(E), V(F) AND V(G) AND REPLACE THEM WITH THE FOLLOWING: (b) The parties acknowledge and agree that Lessee and/or the FADs may close or relocate stores in the ordinary course of its or their business, subject in all events to the provisions of this Agreement and the Facilities Agreement. Lessee agrees that the Lease Assets will be used by Lessee or by FADs pursuant to SECTION XII(A) hereof operating under franchise agreements with Lessee, solely in the conduct of its or their business and in a manner complying with all applicable Federal, state, and local laws and regulations, and any applicable insurance policies, and neither Lessee nor any FAD shall discontinue use of the Lease Assets, except (i) as provided in the first sentence of this SECTION V(B) and (ii) that Lessee may temporarily discontinue use of Equipment or temporarily discontinue use of other Lease Assets, in either case only in connection with the closing or relocation of Lessee's store at a Lease Assets Location for a period not to exceed forty-five (45) days; provided, that Lessee -------- shall not temporarily discontinue use of the Equipment or discontinue use of other Lease Assets pursuant to this CLAUSE (II) with respect to more than twenty-five (25) of Lessee's stores at any one time. (c) Lessee will keep the Lease Assets free and clear of all liens and encumbrances other than (1) those in favor of the Lessor, the Loan Agent and the Common Collateral Agent as security for the Secured Obligations, (2) those arising from the rights and interest of Lessee in any Sublease which shall have been assigned to Lessor, (3) liens for fees, taxes, levies, duties or other governmental charges of any kind, liens of mechanics, materialmen, laborers, employees or suppliers and similar liens arising by operation of law incurred by Lessee or a Sublessee in the ordinary course of business for sums that are not yet delinquent or are being contested in good faith by negotiations or by appropriate proceedings which suspend the collection thereof (provided, however, that such proceedings do not involve any substantial danger (as determined in Lessor's sole discretion) of the sale, forfeiture or loss of the Lease Assets or any interest therein), (4) liens arising out of any judgments or awards against Lessee or a Sublessee which have been adequately bonded to protect Lessor's interest or with respect to which a stay of execution has been obtained pending an appeal or a proceeding for review, (5) any 14 collateral assignment of lease in respect of any Premises Lease or Ground Lease made by a Sublessee to Lessee, (6) minor encumbrances (including, without limitation, easements, rights of way, covenants, zoning variances and similar encumbrances) which do not materially affect the value of the Lease Assets, (7) liens securing the Cash Management Obligations (as defined in, and subject to, the Intercreditor Agreement), and (8) liens securing the Supplemental Obligations (as defined in, and subject to, the Intercreditor Agreement). The liens and encumbrances described in CLAUSES (1) through (8) hereof are referred to as "Permitted Liens." Lessee will --------------- defend, at its own expense, Lessor's interest in the Lease Assets from such claims, liens or legal processes (or from any other claims, liens or legal processes). Lessee will also notify Lessor immediately upon receipt of notice of any lien, attachment or judicial proceeding affecting the Lease Assets in whole or in part. Notwithstanding any other provision to the contrary, a "Permitted Lien" shall not be any lien or encumbrance in favor of a governmental entity for any damages arising from, or costs incurred by such governmental entity in response to, a release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substances or wastes (including, but not limited to, asbestos and petroleum) into the indoor or outdoor environment, which has not been adequately bonded. (e) [Intentionally Omitted.] (f) [Intentionally Omitted.] (g) [Intentionally Omitted.] 2.9. SECTION VII (LOSS OR DAMAGE; STIPULATED LOSS VALUE). DELETE SECTION --------------------------------------------------- VII AND REPLACE IT WITH THE FOLLOWING: [INTENTIONALLY OMITTED] 2.10. SECTION IX (INSURANCE). DELETE THE LAST TWO SENTENCES OF SECTION IX ---------------------- AND REPLACE THEM WITH THE FOLLOWING: If Lessor or Lessee receives any insurance proceeds arising from a loss, damage or destruction to any of the Lease Assets or related real property or any condemnation proceeds from a taking of any Lease Assets, Lessee may, (i) if no Potential Default or Default shall have occurred and be continuing and (ii) subject to any conditions with respect to such proceeds as are applicable pursuant to the Facilities Agreement and any relevant "Security Agreement" and/or "Mortgage" (as such terms are defined in the Facilities Agreement), use such proceeds to repair or replace such property. Any such proceeds that are not so used by Lessee shall be paid directly to Lessor, and Lessor shall (subject to the Intercreditor Agreement) apply such proceeds as provided in SECTION IIB(F). 2.11. SECTION X (RETURN OF LEASE ASSETS). DELETE SECTION X AND REPLACE IT ---------------------------------- WITH THE FOLLOWING (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT THE LEASE ASSETS ARE THE PROPERTY OF 15 LESSEE AND THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE 1996 MASTER LEASE OR IN ANY SCHEDULE, IN NO CIRCUMSTANCE MAY LESSEE ELECT TO RETURN THE LEASE ASSETS TO LESSOR (PROVIDED, THAT NOTHING IN THE FOREGOING IS INTENDED TO -------- LIMIT LESSOR'S RIGHTS OR REMEDIES UNDER THE 1996 MASTER LEASE OR ANY OTHER DOCUMENT)): X. [Intentionally Omitted.] 2.12. SECTION XI (DEFAULT; REMEDIES). DELETE SECTION XI AND REPLACE IT ------------------------------ WITH THE FOLLOWING: XI. DEFAULT; REMEDIES: (a) Lessor may in writing declare this Agreement in default if any of the following (each, a "Default") shall occur (provided that such events shall constitute "Defaults" regardless of whether written notice declaring a Default is or has been given): (1) Lessee breaches its obligation to pay any Loan Payment or any other sum hereunder to Lessor as and when due and payable; (2) Lessee breaches any of its insurance obligations under SECTION IX hereof, or its obligations under SECTION I(C) hereof, or its payment obligations under SECTION III hereof; (3) Lessee breaches any of its obligations under any Subordination and Intercreditor Agreement; (4) Lessee breaches any of its other obligations hereunder and fails to cure that breach within thirty (30) days after written notice thereof; (5) Lessee ceases to do business as a going concern; (6) a "Default" under and as defined in the Facilities Agreement shall have occurred and any requirement set forth therein for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied; (7) this Agreement or any document executed and delivered in connection herewith shall (except in accordance with the terms hereof or thereof) cease to be effective, or any security interest or lien granted in connection herewith shall (except as a result of a failure by Lessor to file a continuation statement) cease to be a perfected first lien; or (8) The subordination and standstill provisions of the Intercreditor Agreement shall, at any time, be invalidated or otherwise cease to be in full force and effect or Lessee shall make any payments in contravention of the terms thereof. IN CONNECTION WITH THE DECLARATION OF ANY DEFAULT HEREUNDER, LESSEE HEREBY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY REQUIREMENT UNDER APPLICABLE LAW OR REGULATIONS 16 THAT A NOTICE FROM LESSOR NOT BECOME EFFECTIVE UNTIL A PERIOD OF DAYS HAS ELAPSED. (b) If any Default shall have occurred and be continuing, Lessor may, without notice, do any or all of the following: (i) terminate the Reborrowing Commitment-1996 Master Lease; (ii) declare all or any portion of the obligations hereunder (including, without limitation, the outstanding principal amount under the Acquisition Loan, the outstanding Reborrowing Loans, all interest on the foregoing, and any other amounts due hereunder) to be forthwith due and payable (provided, that with respect to any default arising due to an Event of -------- Default under Section 6.1(6) of the Facilities Agreement, (A) the Reborrowing Commitment-1996 Master Lease shall automatically terminate and (B) all of the Lease Obligations shall become immediately due and payable), all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Lessee; or (iii) exercise any rights and remedies provided to Lessor under this Agreement or at law or in equity. Lessee hereby authorizes Lessor to enter, with or without legal process, any Real Estate or Lease Assets Location and take possession of the Lease Assets. Lessor may, but shall not be required to, sell Lease Assets at private or public sale, in bulk or in parcels, with or without notice, and without having the Lease Assets present at the place of sale; or Lessor may, but shall not be required to, lease, otherwise dispose of or keep idle all or part of the Lease Assets and Lessor may use Lessee's premises for the foregoing without liability for rent, costs, damages or otherwise. Lessor may also exercise any and all available remedies under the Mortgages, including selling any of the Fee Property; or any and all available remedies under the Collateral Assignments of Lease, including (but not limited to) selling, transferring or assigning the leasehold estate created by the Ground Leases or the Premises Leases. The proceeds of sale, lease or other disposition, if any, shall be applied as provided in the Intercreditor Agreement. Upon the occurrence of any Default hereunder, Lessor shall have a period of twelve (12) months in which to sell the Equipment and Leasehold Improvements on site at the Lease Assets Locations which are Fee Properties. During such period, Lessee shall continue to insure and maintain the Lease Assets as provided herein and shall provide Lessor and its authorized representatives and prospective purchasers access to the Lease Assets for remarketing purposes. (c) [Intentionally Omitted.] (d) [Intentionally Omitted.] (e) [Intentionally Omitted.] (f) After a Default, Lessor may, as a matter of right and without notice to Lessee, and without regard to the value of the Lease Assets or the solvency of Lessee, apply to any court having jurisdiction to appoint a receiver or receivers of the Lease Assets, and Lessee irrevocably consents to any such appointment. Any 17 such receiver(s) shall have all of the usual powers of receivers in similar cases and all of the powers and duties of Lessor in case of entry, and shall continue to have such powers until confirmation of the sale of the Lease Assets, unless such receivership is sooner terminated. (g) After a Default, Lessor may require any subtenant or other person in possession of any or all of the Lease Assets to attorn to Lessor, in which event Lessor shall undertake the obligations of Lessee under any Sublease; provided, however, that Lessor shall not be -------- liable for any amounts paid by a Sublessee to Lessee or for any defaults by Lessee. (h) After a Default, an action of mortgage foreclosure and trustee's sale as now or hereafter provided by law may be commenced and prosecuted to judgment, execution, and sale, for the collection of all amounts due hereunder (including any unpaid Loan Payments and all other Lease Obligations) together with costs, fees, and expenses of such proceedings, including reasonable attorneys' fees and any of the other expenses and fees of the type described in SECTION XIX(k). All errors in any such proceedings, together with any stays of or exemptions from execution, or extensions of time of payment, which may be given by any applicable laws are hereby forever waived and released. (i) The foregoing remedies and all other remedies provided for herein are cumulative, and any or all thereof may be exercised in lieu of or in addition to each other or any remedies which may be available at law, in equity, or under statute and Lessor may exercise any or all such remedies to enforce the terms hereof or recover damages for breach hereof. Lessee waives notice of sale or other disposition (and the time and place thereof), and the manner and place of any advertising. If permitted by law, Lessee shall pay reasonable fees and expenses of the type described in SECTION XIX(k) (including, without limitation, fees of attorneys, accountants, appraisers and consultants) actually incurred by Lessor or any Participant after the occurrence of a Default in connection with such Default or otherwise in enforcing the provisions of this Agreement and any ancillary documents. Waiver of any Default shall not be a waiver of any other or subsequent Default. (j) Any Default under the terms of this Agreement may be declared by Lessor a default under any other agreement between Lessor and Lessee (other than the Facilities Agreement, the Intercreditor Agreement, or (except in accordance with the express terms thereof) the 1995 Master Lease Agreement) with respect to any material obligation for borrowed money, for the deferred purchase price of property or any lease agreement for an amount in excess of One Million Dollars ($1,000,000) (a "GE Agreement"); and any default which is not ------------ cured within any applicable grace periods specified therein, under the terms of any GE Agreement, may be declared by Lessor a Default under this Agreement. (k) The provisions of this SECTION XI are subject to the terms and conditions of the Intercreditor Agreement. 18 2.13. SECTION XII (ASSIGNMENT; SUBLETTING). DELETE CLAUSES (1)-(2) OF ------------------------------------ SECTION XII(B) AND REPLACE THEM WITH THE FOLLOWING: (1) Lessor may, upon written notice to Lessee (but without Lessee's consent), assign this Agreement. Lessee agrees that it will pay all Loan Payments and other Lease Obligations to the assignee; provided, however, if Lessee receives written notice of an assignment -------- from Lessor, Lessee will pay all Loan Payments and other Lease Obligations to such assignee or as instructed by Lessor. Lessee further agrees to confirm in writing receipt of a notice of assignment as reasonably may be requested by assignee. Lessee hereby waives and agrees not to assert against any such assignee any defense, set-off, recoupment claim or counterclaim which Lessee has or may at any time have against Lessor or any other person for any reason whatsoever. (2) Lessee acknowledges that it has been advised that General Electric Capital Corporation is acting hereunder for itself and as agent for the Participants who are parties to Participation Agreements or who may become Participants hereunder. Any new participation interest shall be in a minimum principal amount of $5,000,000.00 or an integral multiple of $1,000,000.00 in excess thereof. Lessee agrees reasonably to cooperate with Lessor in connection with the assignment of any such participation interest, including the execution and delivery of such other documents, instruments, notices, opinions, certificates and acknowledgments as reasonably may be required by Lessor or the relevant new Participant; provided, however, in no event -------- shall Lessee be required to consent to any change that would adversely affect any of the material terms of the transactions contemplated herein. Lessor agrees that it shall continue to act hereunder as agent for the Participants and any assignees of the Participants or shall (A) cause a trust to be created to serve as agent hereunder or (B) appoint a successor Agent which shall be either a 1996 Lease Lender or a commercial bank or trust company having a combined capital and surplus of at least $250,000,000. 2.14. SECTION XIII (NET LEASE; NO SET-OFF, ETC.. DELETE SECTION XIII AND ----------------------------------------- REPLACE IT WITH THE FOLLOWING: XIII. ABSOLUTE OBLIGATIONS; NO SET-OFF, ETC.: Lessee's obligation to pay Loan Payments and all other Lease Obligations shall be absolute and unconditional. Lessee shall not be entitled to any abatement or reductions of, or set-offs against, said Loan Payments or other Lease Obligations, including, without limitation, those arising or allegedly arising out of claims (present or future, alleged or actual, and including claims arising out of strict liability in tort or negligence of Lessor) of Lessee against Lessor or any Participant under this Agreement or otherwise. This Agreement shall not terminate and the obligations of Lessee shall not be affected by reason of any defect in or damage to, or loss of possession, use or destruction of, any Lease Assets from whatsoever cause. It is the intention of the parties that Loan Payments and all other 19 Lease Obligations shall continue to be payable in all events in the manner and at the times set forth herein. 2.15. SECTION XIV (INDEMNIFICATION). DELETE SUBCLAUSE (Y) OF SECTION ----------------------------- XIV(B). 2.16. SECTION XVI (REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE). ----------------------------------------------------------------- DELETE SECTION XVI(I) AND REPLACE IT WITH THE FOLLOWING: (i) [Intentionally Omitted.] 2.17. SECTION XVII (OWNERSHIP FOR TAX PURPOSES; GRANT OF SECURITY ----------------------------------------------------------- INTEREST; USURY SAVINGS). - ------------------------ A. DELETE SECTIONS XVII(A)-(B) AND REPLACE THEM WITH THE FOLLOWING: (a) Lessee is the beneficial owner of the Lease Assets. Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Lease Assets on its Federal income tax return, (ii) not to take actions or positions inconsistent with such treatment on or with respect to its Federal income tax return, and not claim any tax benefits available to an owner of the Lease Assets on or with respect to its Federal income tax return. The foregoing undertakings by Lessor shall not be violated by Lessor's taking a tax position through inadvertence so long as such inadvertent tax position is reversed by Lessor promptly upon its discovery. Lessor or any Participant shall in no event be liable to Lessee if Lessee fails to secure any of the tax benefits available to the owner of the Lease Assets unless (x) Lessor has breached its undertakings set forth in the second sentence of this SECTION XVII(A), and (y) such breach is the direct cause of the Lessee's failure to secure such tax benefits. It is the intent of the parties hereto that for all purposes, including from and after the Restructuring Effective Date with respect to Lessee's financial reporting, and at all times from and after the Lease Commencement Date with respect to Federal and state income tax, bankruptcy and Uniform Commercial Code purposes, (1) Lessee shall be treated as the owner of the Lease Assets, (2) this Agreement grants a security interest or lien, as the case may be, in the Lease Assets and other collateral to Lessor, and (3) the obligations of Lessee to pay Rent constitute a loan obligation with respect to principal and interest payments on the Acquisition Loan. (b) The parties acknowledge and agree that the obligations of Lessee under this Agreement and all Schedules, and the obligations of Lessee under the Facilities Agreement and the Credit Agreement, are cross-collateralized. In order to secure the prompt payment of (i) all of the Lease Obligations from time to time owing hereunder and with respect to the Schedules, and (ii) all "Obligations" under and as defined in the Credit Agreement, and the performance and observance by Lessee of all the agreements, covenants and provisions hereof (including, without limitation, all of the agreements, covenants and provisions hereof that are incorporated in the Schedules) and thereof and of the Facilities Agreement (all of the foregoing being collectively referred to as the "Secured Obligations"): ------------------- 20 (1) Lessee hereby grants to Lessor, in its capacities as (A) Agent for the 1996 Lease Lenders, (B) Agent for the Loan Agent, and (C) Agent for the Common Collateral Agent (and as used in this SECTION XII(B), all references to "Lessor, as Agent" or words of like import shall mean and refer to Lessor in the foregoing capacities), a first priority security interest in the Equipment and Leasehold Improvements "leased" hereunder, together with all additions, attachments, accessories and accessions thereto whether or not furnished by the supplier of the Equipment or Leasehold Improvements and any and all substitutions or replacements therefor, in each such case in which Lessee shall from time to time acquire an interest, and any and all insurance and/or other proceeds (but without Lessee having any power of sale) of the property in and against which a security interest is granted hereunder; (2) Lessee hereby grants to Lessor, as Agent, a first priority security interest in, and assigns, sets over, and transfers to Lessor, as Agent, its successors and assigns, all (except as otherwise provided herein) of its right, title and interest in and to (i) the Subleases and all extensions and renewals thereof, (ii) all rentals and other sums due, now or hereafter, under the Subleases (including, without limitation, all amounts paid pursuant to the exercise by the relevant Sublessee of any option contained in the relevant Sublease), (iii) any and all proceeds of any insurance required under the Subleases, (iv) the security interest granted to Lessee by the Sublessees pursuant to the Subleases, and (v) all products and proceeds of the foregoing; provided, that Lessor shall not exercise -------- its rights hereunder unless and until a Potential Default has occurred and is continuing. Notwithstanding the foregoing assignment, Lessee shall cause each Sublessee to pay Lessee all rentals and other sums payable under the Subleases until Lessor delivers to Lessee notice of a Default hereunder. Upon giving such notice to Lessee, Lessor may notify any and all Sublessees (or, if requested by Lessor, Lessee shall notify such Sublessees) to pay directly to Lessor all rentals and other sums payable and to become payable under the Subleases. Upon any Sublessee's receipt of such notice, Lessee hereby authorizes and directs such Sublessee to pay Lessor all rentals and other sums payable and to become payable under the relevant Sublease; provided, -------- that so long as no Potential Default has then occurred, Lessor shall retain only such of the rentals herein assigned as are required from time to time to discharge the Secured Obligations and, subject to the Intercreditor Agreement, shall remit any excess to Lessee. If any remittance is received by Lessee relating to such Subleases after a Default, such remittances immediately will be delivered to Lessor bearing the endorsement "Pay to the order of General Electric Capital Corporation, as Agent." If the remittance is in a form which precludes an endorsement, Lessee shall, after a Default, hold all such funds in trust for Lessor and immediately pay 21 the amount of the remittance to Lessor. Lessee hereby appoints Lessor its attorney-in-fact to negotiate any remittance which is received by Lessor from Sublessee after a Default and made payable to Lessee. Notwithstanding the foregoing, if after a Default Lessee receives the proceeds of any insurance maintained by a Sublessee as a result of a casualty suffered by subleased Equipment, Lessee immediately will remit such insurance proceeds to Lessor; (3) to the extent the Equipment and Leasehold Improvements may constitute or be deemed to be Lessee's inventory (the "Inventory"), --------- Lessee hereby grants to Lessor, as Agent, a first priority security interest in such Inventory, which shall mean all Equipment and Leasehold Improvements offered or furnished under any contract of service or intended for sale or lease, any and all additions, attachments, accessories and accessions thereto, any and all substitutions, replacements or exchanges therefor, any and all leases, subleases, rentals, accounts and contracts with respect to the Equipment and Leasehold Improvements which may now exist or hereafter arise, together with all rights thereunder and all rental and other payments and purchase options due and to become due thereunder, any and all sales proceeds payable for such property, all insurance, bonds and/or other proceeds of the property and all returned or repossessed Equipment and Leasehold Improvements now or at any time or times hereafter in the possession or under the control of Lessee or Lessor; (4) Lessee hereby grants to Lessor, as Agent, a first priority security interest in, and assigns, sets over and transfers to Lessor, as Agent, its successors and assigns, all (except as otherwise provided herein) of its right, title and interest in and to each Ground Lease and Premises Lease and all extensions and renewals thereof; and, in furtherance thereof, shall execute and deliver to Lessor a Collateral Assignment of Lease with respect to each Ground Lease and Premises Lease; provided, that Lessee or the FAD, as -------- applicable, shall continue to pay and perform all obligations required to be paid and performed by Lessee or the FAD, as applicable, pursuant to the Ground Leases and Premises Leases notwithstanding such assignment for collateral security purposes; and provided, further, -------- ------- that Lessor shall not exercise its rights hereunder unless and until a Potential Default has occurred and is continuing; (5) Lessee also grants to Lessor, as Agent, a security interest in all accounts receivable and general intangibles now owned by Lessee or hereafter acquired or owned by Lessee that might arise or result from any lease or other disposition of any of the Lease Assets or the Inventory, including, but not limited to, the Subleases or any right of Lessee to payment for Lease Assets sold or leased or for services rendered whether or not evidenced by an instrument or chattel paper, and whether or not such right has been earned by performance (the "Sublease Accounts Receivable"); ---------------------------- 22 Upon Lessee's request, Lessor shall, at such time as all of the Secured Obligations have been paid or performed in full (but subject to the Intercreditor Agreement) execute and deliver termination statements and other appropriate documentation reasonably requested by Lessee, all at Lessee's expense, to evidence Lessor's release of its security interest in such Lease Assets, and the related Subleases, Inventory, and Sublease Accounts Receivable. Notwithstanding anything to the contrary set forth herein, the parties acknowledge and agree that (a) solely with respect to any Lease Assets located in any of the States of Florida, Tennessee, Maryland and Virginia (such States, the "Designated States"; as to any Designated ----------------- State, the relevant Lease Assets being hereinafter referred to as the "Allocated Lease Assets"), the security interest granted herein with ---------------------- respect to any such Allocated Lease Assets shall secure only the prompt payment and performance of the Rent obligations attributable to such Allocated Lease Assets, (b) any Collateral Assignment of Lease executed and delivered by Lessee or a FAD in connection with a Ground Lease or Premises Lease of property located in any Designated State, (as to any Designated State, the leaseholds that are subject to the relevant Collateral Assignment(s) of Lease will be hereinafter referred to as the "Allocated Leaseholds") shall secure only the -------------------- prompt payment and performance of the Rent obligations of Lessee attributable to the Leasehold Improvements and Equipment that correspond to the relevant Allocated Leaseholds (or such other amount as is specified or determined by Lessor in its sole and absolute discretion), and (c) any Memorandum of Lease or any Mortgage (collectively, the "Fee Property Mortgages") relating to a Fee ---------------------- Property located in any Designated State (as to any Designated State, the Fee Properties in such State that are subject to a Fee Property Mortgage will be hereinafer referred to as the "Allocated Fee ------------- Properties"), shall secure only the prompt payment and performance of ---------- the Rent obligations of Lessee attributable to the relevant Allocated Fee Property and the corresponding Leasehold Improvements and Equipment (or such other amount as is specified or determined by Lessor in its sole and absolute discretion). B. ADD A NEW CLAUSE (G) (WHICH CONSISTS OF THE FORMER SECTION X(C) TO SECTION XVII) AS FOLLOWS: (g) Lessee hereby waives, to the extent permitted by law, all claims for damages or other liability in connection with Lessor's re- entering and taking possession of the Lease Assets after the occurrence of a Default, and Lessee shall indemnify, defend, protect, and hold Lessor and the Participants harmless from and against any such claims, damages, or other liability, and no such re-entry shall be considered or construed to be a forcible entry, nor shall Lessor or the Participants be guilty of forcible entry or forcible detainer. 2.18. SECTION XVIII (END OF LEASE OPTIONS). DELETE SECTION XVIII (AND ANY ------------------------------------ NOTICE OF AN ELECTION THAT LESSEE MAY HAVE PREVIOUSLY GIVEN WITH RESPECT TO ANY OF THE OPTIONS SPECIFIED IN SECTION XVIII SHALL BE NULL AND VOID AB INITIO) AND --------- REPLACE IT WITH THE FOLLOWING: XVIII. [Intentionally Omitted.] 23 2.19. SECTION XIX (MISCELLANEOUS). --------------------------- a. DELETE CLAUSES (d), (i), AND (k)-(m) OF SECTION XIX AND REPLACE THEM WITH THE FOLLOWING: (d) Lessee agrees that it shall, and shall cause each Sublessee to, at Lessee's expense and upon request of Lessor, duly execute and deliver, or cause to be duly executed and delivered, to Lessor such further instruments (including, without limitation, any instruments necessary or expedient for filing, recording or perfecting the interest of Lessor, as Agent, as provided herein) and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Lessor to carry out more effectually the provisions and purposes of this Agreement. . . . (i) After the occurrence and during the continuance of any Default, the Interest Rate applicable to the Acquisition Loan and the Reborrowing Loans shall be increased by 2.0% above the otherwise applicable rates (as specified in the definition of "Interest Rate" without regard to this SECTION XIX(I)), compounded monthly and payable upon demand. (k) Lessee agrees to pay on demand all reasonable costs and expenses incurred by Lessor (provided, that Lessee shall not be -------- responsible for such costs and expenses incurred by any Participant) in connection with (i) the preparation, execution, delivery, filing, recording, and administration of any of the 1996 Lease Documents, (ii) any amendment, modification or waiver of, consent with respect to, or termination of, any of the 1996 Lease Documents or advice in connection with the administration thereof, (iii) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lessor or any other Person, and whether as a party, witness or otherwise) in any way relating to the 1996 Lease Documents or any other agreement to be executed or delivered in connection with the 1996 Lease Documents, (iv) any work-out or restructuring of the Lease Obligations, and (v) any attempt to enforce any remedies of Lessor against Lessee or any other Person that may be obligated to Lessor by virtue of any of the 1996 Lease Documents, including as to all of the foregoing CLAUSES (I)-(V) (including, without limitation, the reasonable fees and expenses of counsel, advisors, consultants (including environmental and management consultants and appraisers) and auditors retained for advice, assistance, or other representation in connection with any of the foregoing matters. In addition, Lessee shall pay any and all stamp and other taxes and fees payable or determined to be payable by Lessor in connection with the execution, delivery, filing and recording of any of the 1996 Lease Documents and the other documents to be delivered under the 1996 Lease Documents, and agrees to save Lessor harmless from and against any and all liabilities with respect to or resulting from any delay attributed to Lessee in paying or failing to pay such taxes and fees. Without in any way limiting the foregoing, Lessee shall, on the Restructuring Effective Date, pay all fees and expenses of Lessor's attorneys and 24 accountants incurred in connection with the preparation and negotiation of the Second Amendment, the Related Amendment Documents (including the Facilities Agreement Amendment and the Intercreditor Agreement), and all other documents contemplated hereby and thereby. (l) [Intentionally Omitted.] (m) [Intentionally Omitted.] 2.20. SECTION XXII (EARLY TERMINATION). DELETE SECTION XXII AND REPLACE -------------------------------- IT WITH THE FOLLOWING: XXII. [Intentionally Omitted.] 2.21. SCHEDULES. AMEND EACH SCHEDULE AS FOLLOWS: --------- a. PARAGRAPH B.3 (BASIC TERM). THE "BASIC TERM" (AS DEFINED IN -------------------------- PARAGRAPH B.3 OR OTHERWISE IN EACH SCHEDULE), SHALL BE EQUAL TO THE "TERM" UNDER AND AS DEFINED IN THE 1996 MASTER LEASE. b. PARAGRAPH B.10 (RENEWAL TERM). DELETE PARAGRAPH B.10 IN EACH ----------------------------- SCHEDULE (IT BEING UNDERSTOOD THAT THERE SHALL BE NO RENEWAL OPTION WITH RESPECT TO THE 1996 MASTER LEASE OR THE SCHEDULES), AND REPLACE IT WITH THE FOLLOWING: 10. [Intentionally Omitted.] c. PARAGRAPH B.11 (MAXIMUM LEASE TERM). THE "MAXIMUM LEASE TERM" (AS ----------------------------------- DEFINED IN PARAGRAPH B.11 OR OTHERWISE IN EACH SCHEDULE) SHALL BE THE SAME AS THE BASIC TERM; d. PARAGRAPH C (TERM AND RENT). DELETE PARAGRAPH C OF EACH SCHEDULE --------------------------- AND REPLACE IT WITH THE FOLLOWING: C. [Intentionally Omitted.] e. ANNEX E (AMORTIZATION SCHEDULE). AS TO ANY SCHEDULE IN WHICH THE ------------------------------- HEADING OF THE THIRD COLUMN OF ANNEX E IS "AMORTIZED PRINCIPAL BALANCE," SUCH HEADING IS DELETED AND REPLACED WITH "UNAMORTIZED PRINCIPAL BALANCE." f. ANNEX F (RETURN PROVISIONS). DELETE ANNEX F TO EACH SCHEDULE. --------------------------- 2.22. REFERENCES TO DELETED SECTIONS. TO THE EXTENT THAT ANY SECTIONS OR ------------------------------ PARAGRAPHS OF THE 1996 MASTER LEASE OR ANY SCHEDULES ARE BEING DELETED PURSUANT TO THIS SECOND AMENDMENT, ANY REFERENCES TO SUCH DELETED SECTIONS OR PARAGRAPHS IN THE 1996 MASTER LEASE OR ANY SCHEDULE ARE DEEMED TO BE DELETED AS WELL. 3. Conditions Precedent. Notwithstanding any other provision of this Second -------------------- Amendment or any Related Amendment Document, this Second Amendment shall be of no force or effect, and Lessor shall have no obligations hereunder or under any Related Amendment Document to which it is a party, until the following conditions have been satisfied, in Lessor's sole discretion, or waived in writing by Lessor: 25 3.1. Second Amendment and Related Amendment Documents; Satisfactory Legal -------------------------------------------------------------------- Form. Lessor shall have received this Second Amendment and the Related - ---- Amendment Documents duly executed by Lessee (to the extent Lessee is a party thereto) and the other parties thereto and delivered to Lessor (including (i) in the case of each Fee Property, an Amended Memorandum of Lease, and (ii) in the case of each now existing Collateral Assignment of Lease, a Collateral Assignment of Lease Amendment, in all cases duly executed by Lessee and the other parties thereto and in recordable form), and all of the other documents, instruments, certificates, opinions, agreements and other materials listed in the List of Closing Documents (Restructuring) and the List of Closing Documents (Rollup) attached as Exhibit K to the Facilities Agreement Amendment, each in form and substance satisfactory to the Lessor. All legal matters incident to the transactions contemplated by this Second Amendment and the Related Amendment Documents shall be satisfactory to Lessor and its counsel. 3.2. Facilities Agreement Amendment; Second Credit Agreement Amendment; ------------------------------------------------------------------ Other Related Documents. (i) The Facilities Agreement Amendment (and all - ----------------------- documents to be delivered in connection therewith) and the Second Credit Agreement Amendment (and all documents to be delivered in connection therewith) shall be in form and substance acceptable to Lessor, (ii) all conditions precedent to the effectiveness of the Facilities Agreement Amendment and the Second Credit Agreement Amendment shall have been satisfied, and (iii) the Restructuring Effective Date (under and as defined in the Second Credit Agreement Amendment) shall have occurred. 3.3. Confidential Agreement. Lessor shall have received an executed copy ---------------------- of the Confidential Agreement (as defined in the Facilities Agreement Amendment) in form and substance (with respect to the provisions thereof regarding fees) acceptable to Lessor and the other 1996 Lease Lenders. 3.4. Termination of Agency Agreement. The Agency Agreement shall have been ------------------------------- terminated effective as of the Restructuring Effective Date pursuant to a Termination Letter in substantially the form of EXHIBIT E. 3.5. Payments. Lessee shall have made the following payments by wire -------- transfer to Lessor in immediately available funds: (i) the "Pre-Amendment Accrued Interest" (as defined in SECTION 2.6 of this Second Amendment), (ii) the "Accrued Unused Commitment Fee" (as defined in SECTION 2.3(A) of this Second Amendment), (iii) all of the fees and costs of Lessor's special counsel, Murphy Sheneman Julian & Rogers and Ober Kaler Grimes & Shriver, and (iv) payment of all fees required to be paid to Lessor and the other 1996 Lease Lenders as of the Restructuring Effective Date pursuant to the terms of the Confidential Agreement. 3.6. Corporate Structure. The corporate structure of Lessee shall be ------------------- acceptable to Lessor. 4. Representations and Warranties. To induce Lessor to enter into this Second ------------------------------ Amendment and the other Related Amendment Documents to which it is a party, Lessee hereby represents and warrants as follows: 4.1. That its representations and warranties contained in SECTION XVI of the 1996 Master Lease (as amended pursuant to this Second Amendment) are true and correct as of the Restructuring Effective Date; 26 4.2. That this Second Amendment (and the Related Amendment Documents) and the 1996 Master Lease and other 1996 Lease Documents as previously executed and as amended hereby, constitute legal, valid and binding obligations of Lessee and are enforceable against Lessee in accordance with their terms; and 4.3. That no Default has occurred under the 1996 Master Lease. 5. Miscellaneous. ------------- 5.1. Headings. The various headings of this Second Amendment are inserted -------- for convenience of reference only and shall not affect the meaning or interpretation of this Second Amendment or any provisions hereof. 5.2. Counterparts. This Second Amendment may be executed by the parties ------------ hereto in several counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 5.3. Interpretation. No provision of this Second Amendment shall be -------------- construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party's having or being deemed to have structured, drafted or dictated such provision. 5.4. Complete Agreement. This Second Amendment, together with the Related ------------------ Amendment Documents, constitutes the complete agreement between the parties with respect to the subject matter hereof and thereof, and supersedes any prior written or oral agreements, writings, communications or understandings of the parties with respect thereto. 5.5. Ratification of 1996 Master Lease and Schedules. Except as expressly ----------------------------------------------- modified under this Second Amendment or in any Related Amendment Document, Lessee hereby acknowledges, confirms and ratifies all of the terms and conditions set forth in, and all of its respective obligations under, the 1996 Master Lease, the Schedules, and the other 1996 Lease Documents. 5.6. Reaffirmation of Grant of Security Interest. Lessee hereby reaffirms ------------------------------------------- the grant and pledge of a security interest in favor of Lessor, as Agent and for the benefit of the 1996 Lease Lenders and the Bank Lenders, as was provided in the 1996 Master Lease as in effect prior to the Restructuring Effective Date, and confirms that such security interest continues in effect. 5.7. Governing Law. This Second Amendment shall be governed by, and ------------- construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflict of laws. 5.8. Effect. Upon the effectiveness of this Second Amendment, each ------ reference in the 1996 Master Lease to "this Agreement," "hereunder," "hereof" or words of like import, shall mean and be a reference to the 1996 Master Lease as amended hereby, and each reference in the Schedules or any other 1996 Lease Document to the 1996 Master Lease, "thereunder," "thereof," or words of like import shall mean and be a reference to the 1996 Master Lease as amended hereby. 27 5.9. Use of Defined Terms. Capitalized terms which without reference to -------------------- SECTION 2 hereof are not otherwise defined herein shall be as defined in the 1996 Master Lease as amended hereby (unless the context otherwise requires that any such term be as defined in the 1996 Master Lease without regard to the amendments provided for herein). 5.10. Conflict of Terms. In the event of any inconsistency between the ----------------- provisions of this Second Amendment and any provision of the 1996 Master Lease or any Schedule, the terms and provisions of this Second Amendment shall govern and control. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 28 5.11. No Novation. Except as specifically set forth in this Second ----------- Amendment, the execution, delivery and effectiveness of this Second Amendment shall not (i) limit, impair, constitute a waiver by, or otherwise affect any right, power or remedy of, Lessor or any Participant with respect to the 1996 Master Lease, any Schedule or any other 1996 Lease Document, (ii) constitute a waiver of any provision in the 1996 Master Lease, any Schedule or any other 1996 Lease Document, or (iii) alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the 1996 Master Lease, any Schedule any other 1996 Lease Document. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the day and year first above written. "LESSOR": "LESSEE": GENERAL ELECTRIC CAPITAL BOSTON CHICKEN, INC. CORPORATION, FOR ITSELF AND AS AGENT FOR CERTAIN PARTICIPANTS By:_____________________ Name:___________________ By:___________________________ Title:__________________ Name: Daniel P. Gioia Title: Senior Risk Manager ADDRESSES FOR REBORROWING REQUESTS: Yoav Haron Portfolio Analyst 201 High Ridge Road Stamford, CT 06927 Phone: 203/316-7899 Fax: 203/316-7817 and Sandy DeRaffele Transaction Coordinator 777 Long Ridge Road Bldg. B, 1st Floor Stamford, CT 06927 Phone: 203/357-3529 Fax: 203/316-7989 SCHEDULE 1.4 ------------ (Principal Amounts Outstanding on Acquisition Loan as of the Restructuring Effective Date) PRINCIPAL AMOUNT TRANCHE/SERIES OUTSTANDING -------------------------------------------------------- Series A $ 15,752,001.51 Series B $ 30,489,983.28 Series C $119,877,443.07 -------------------------------------------------------- TOTAL $166,119,427.86 -------------------------------------------------------- ANNEX A ------- "SCHEDULES" SCHEDULE SERIES SERIES NO. SCHEDULE DATE SERIES A: A-1 12/13/96 A-2 12/13/96 A-3 12/13/96 A-4 12/13/96 SERIES B: B-1 12/13/96 SERIES C-EQUIPMENT: C-Equipment-1 12/13/96 C-Equipment-2 12/13/96 C-Equipment-3 12/13/96 C-Equipment-4 12/13/96 SERIES C-REAL ESTATE: C-Real Estate-1 12/13/96 C-Real Estate-2 12/13/96 C-Real Estate-3 12/13/96 C-Real Estate-4 12/13/96 C-Real Estate-5 12/13/96 C-Real Estate-6 12/13/96 C-Real Estate-7 12/13/96 C-Real Estate-8 12/13/96 - -------------------------------------------------------------------------------- SCHEDULE SERIES SCHEDULE DATE C-Real Estate-9 12/13/96 C-Real Estate-10 12/13/96 C-Real Estate-11 12/13/96 C-Real Estate-12 12/13/96 C-Real Estate-13 12/13/96 C-Real Estate-14 12/13/96 C-Real Estate-15 12/13/96 C-Real Estate-16 12/13/96 C-Real Estate-17 12/13/96 C-Real Estate-18 12/13/96 C-Real Estate-19 12/13/96 C-Real Estate-20 12/13/96 C-Real Estate-21 12/13/96 C-Real Estate-22 12/13/96 C-Real Estate-23 12/13/96 C-Real Estate-24 12/13/96 C-Real Estate-25 12/13/96 C-Real Estate-26 12/13/96 SCHEDULE SERIES SCHEDULE DATE C-Real Estate-27 12/13/96 C-Real Estate-28 12/13/96 C-Real Estate-29 12/13/96 C-Real Estate-30 12/13/96 C-Real Estate-31 12/13/96 C-Real Estate-32 12/13/96 C-Real Estate-33 12/13/96 C-Real Estate-34 12/13/96 C-Real Estate-35 12/13/96 C-Real Estate-36 12/13/96 C-Real Estate-37 12/13/96 C-Real Estate-38 12/13/96 C-Real Estate-39 12/13/96 C-Real Estate-40 12/13/96 C-Real Estate-41 12/13/96 - ---------------------------------------------------------------------- EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 OTHER DEC-27-1998 DEC-29-1997 JUL-12-1998 24,549 0 5,922 0 16,716 53,454 533,327 0 1,607,167 160,067 747,975 0 0 723 372,542 1,607,167 374,512 382,420 131,674 459,875 0 10,000 30,692 (456,674) 0 0 0 0 0 (437,050) (6.09) (6.09)
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