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EXHIBIT 10.2
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LIMITED PARTNERSHIP AGREEMENT
OF
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
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Dated as of December 5, 1997
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TABLE OF CONTENTS
ARTICLE I.........................................................................................................2
Section 1.1 Definitions.........................................................................2
ARTICLE II........................................................................................................9
Section 2.1 Formation of the Partnership........................................................9
Section 2.2 Partnership Name....................................................................9
Section 2.3 Purposes of the Partnership.........................................................9
Section 2.4 Title to Partnership Property......................................................10
Section 2.5 Effective Date.....................................................................10
Section 2.6 Registered Office; Principal Place of Business.....................................10
Section 2.7 Qualifications in Other Jurisdictions..............................................10
ARTICLE III......................................................................................................11
Section 3.1 Term of Partnership................................................................11
ARTICLE IV.......................................................................................................11
Section 4.1 Capital Contributions of the Partners..............................................11
Section 4.2 Withdrawal and Return of Capital...................................................11
Section 4.3 Interest on Capital................................................................11
Section 4.4 Capital Accounts...................................................................11
Section 4.5 Incorporation and Public Offering..................................................12
Section 4.6 Right to Require Termination.......................................................13
Section 4.7 Fund Put Right.....................................................................14
Section 4.8 Registration of ENBC Common Stock..................................................16
Section 4.9 Registration Procedures............................................................18
Section 4.10 Registration Expenses..............................................................22
Section 4.11 Indemnification....................................................................22
Section 4.12 Additional Capital.................................................................24
Section 4.13 Partnership Repurchase Right.......................................................25
Section 4.14 Change in Control..................................................................25
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ARTICLE V........................................................................................................26
Section 5.1 Allocation of Profits and Losses...................................................26
Section 5.2 Special Allocations................................................................26
Section 5.3 Allocation of Tax Credits..........................................................27
Section 5.4 Section 704(c) Allocations.........................................................27
Section 5.5 Certain Other Allocation Rules.....................................................28
Section 5.6 Special Allocation of Recapture....................................................28
Section 5.7 Allocations to the General Partner.................................................28
ARTICLE VI.......................................................................................................29
Section 6.1 Distributions......................................................................29
Section 6.2 Distributions for Tax Purposes.....................................................29
Section 6.3 Restrictions on Distributions......................................................30
Section 6.4 Payment and Withholding of Certain Taxes...........................................30
ARTICLE VII......................................................................................................31
Section 7.1 Rights and Obligations of Limited Partners.........................................31
Section 7.2 Conduct of Other Business Activities by the Partners...............................31
Section 7.3 Assignments by Partners............................................................33
Section 7.4 Admission of Additional Partners...................................................35
Section 7.5 Resignation of Partners Prohibited.................................................35
ARTICLE VIII.....................................................................................................35
Section 8.1 Management of the Partnership......................................................35
Section 8.2 Certain Obligations of General Partner.............................................39
Section 8.3 Liability of General Partner for Certain Acts
or Omissions....................................................................40
Section 8.4 Indemnification....................................................................40
Section 8.5 General Partner as Limited Partner.................................................42
Section 8.6 Tax Matters Partner................................................................43
ARTICLE IX.......................................................................................................43
Section 9.1 Dissolution of Partnership.........................................................43
Section 9.2 Final Accounting...................................................................44
Section 9.3 Liquidation; Distribution..........................................................44
Section 9.4 Termination........................................................................45
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ARTICLE X........................................................................................................45
Section 10.1 Notices............................................................................45
Section 10.2 Governing Law......................................................................45
Section 10.3 Amendments.........................................................................45
Section 10.4 Power of Attorney..................................................................46
Section 10.5 Successors and Assigns.............................................................47
Section 10.6 Counterparts.......................................................................47
Section 10.7 Fiscal Year........................................................................47
Section 10.8 Modifications to be in Writing.....................................................47
Section 10.9 Action for Partition or Distribution in Kind.......................................47
Section 10.10 Captions...........................................................................47
Section 10.11 Pronouns and Plurals...............................................................47
Section 10.12 Validity and Severability..........................................................47
Section 10.13 Statutory References...............................................................48
Section 10.14 Primacy of Certain Agreements......................................................48
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LIMITED PARTNERSHIP AGREEMENT
of
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
This Limited Partnership Agreement (the "Agreement") of
Einstein/Noah Bagel Partners, L.P. (the "Partnership") is made as of December
5, 1997, by and among the persons whose names are set forth on Schedule A
hereto (the "Parties").
Recitals
WHEREAS, the Parties are members of a Delaware limited
liability company known as "Noah's Pacific, L.L.C." (the "Company"). The Members
and Manager of the Company have now determined to convert the Company to a
Delaware limited partnership pursuant to Section 18-216 of the Delaware Limited
Liability Company Act and Section 17-217 of the Delaware Revised Uniform Limited
Partnership Act (the "Act"). Pursuant to Section 17-217, the Members and Manager
of the Company hereby adopt this Limited Partnership Agreement to provide for
the regulation of the affairs of the Partnership.
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of the date hereof, by and among the Company, Colonial Bagels, L.P., Great Lakes
Bagels, L.P., Gulfstream Bagels, L.P. and Sunbelt Bagels, L.L.C. (the "Area
Developers"), each of the Area Developers (other than the Company) will be
merged with and into the Partnership with the Partnership as the surviving
entity; and
WHEREAS, the Parties desire to form the Partnership in order
to conduct the businesses previously conducted by the Area Developers (the
"Business").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the Parties hereby agree as follows:
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ARTICLE I
Section 1.1 Definitions. When used in this Agreement the
following terms shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership
Act as in effect from time to time.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, such Person; for purposes of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or otherwise.
"Agreement" means this Limited Partnership Agreement, as from
time to time amended.
"Area Development Agreement" means the amended and restated
area development agreement dated as of the date hereof between ENBC and the
Partnership, as it may be amended or amended and restated from time to time.
"Assignee" means a person to whom an interest in the
Partnership has been transferred in accordance with the provisions of this
Agreement but who has not been admitted as a substitute or additional Partner.
"Available Cash" means, with respect to any fiscal year, the
sum of (i) all cash receipts of the Partnership during such fiscal year
(excluding for this purpose Capital Contributions, including without limitation
any payments on notes delivered pursuant to Section 4.1), and (ii) all
reductions made by the General Partner during such fiscal year in reserves
established as hereinafter provided, less the sum of (i) all cash operating
expenditures, all cash debt service payments (including payments of principal
and interest and penalties, if any), and all Tax Distributions and (ii) all
additions to reserves during such fiscal year deemed reasonably appropriate by
the General Partner, including reserves for capital expenditures, working
capital and contingent liabilities.
"Bankruptcy" means the occurrence of any event or action
described in Section 17-402A(4) of the Act with respect to the General Partner
or any other Person.
"Capital Account" of a Partner means the Capital Account
established for such Partner under Section 4.4.
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"Capital Contribution" means, with respect to any Partner or
Assignee, the amount of cash and the fair market value of any property other
than cash contributed by the Partner or Assignee (or its predecessor in
interest) to the Partnership.
"Change in Control" shall have the meaning ascribed to it
4.14.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" shall have the meaning ascribed to it in Section
4.8.
"Covered Capacities" shall have the meaning ascribed to it in
Section 8.4.
"Credit Agreement" means ENBC's Credit Agreement with Bank of
America National Trust and Savings Association, LaSalle National Bank and
General Electric Capital Corporation in effect on the date hereof.
"Deferral Period" shall have the meaning ascribed to it in
Section 4.8(c).
"Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for Federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the Federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis.
"Development Schedule" shall have the meaning ascribed to it
in the Area Development Agreement.
"Dissolution" of a Partner which is not a natural person means
that such Partner has terminated its existence, wound up its affairs and
dissolved.
"Distribution" means, with respect to any Partner, the amount
of cash and the fair market value of any property other than cash distributed by
the Partnership to the Partner.
"ENBC" means Einstein/Noah Bagel Corp., a Delaware
corporation.
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"ENBC Note" means the Note, as defined in the Secured Loan
Agreement, as it may be amended or amended and restated from time to time (and
any other note that may be substituted therefor).
"Einstein/Noah Bagel Partners" means Einstein/Noah Bagel
Partners, L.P., a Delaware limited partnership.
"Einstein/Noah Bagel Partners, Inc." means Einstein/Noah Bagel
Partners, Inc., a wholly owned subsidiary of ENBC.
"Fund" means Bagel Store Development Funding, L.L.C., a
Delaware limited liability company.
"Fund Put Right" shall have the meaning ascribed to it in
Section 4.5.
"General Partner" means, as of any particular time,
Einstein/Noah Bagel Partners, Inc., or such other Person who is at such time a
general partner of the Partnership.
"General Partner Units" means Units in the Partnership held by
the General Partner as a general partner.
"Gross Asset Value" means, with respect to any asset, the
adjusted basis for Federal income tax purposes of such asset, except as follows:
(a) The initial Gross Asset Value
of any asset contributed by a Partner to the Partnership shall be the fair
market value of such asset, as determined by the contributing Partner and the
Partnership.
(b) The Gross Asset Values of all
Partnership assets shall be adjusted to equal their respective fair market
values, as determined by the General Partner, as of the following times: (a) the
acquisition of an additional interest in the Partnership by any new or existing
Partner in exchange for more than a de minimis Capital Contribution; (b) the
distribution by the Partnership to a Partner of more than a de minimis amount of
property as consideration for an interest in the Partnership; and (c) the
liquidation of the Partnership within the meaning of Section 1.704-1(b)(2)
(ii)(g) of the Treasury Regulations; provided, however, that adjustments
pursuant to clauses (a) and (b) above shall be made only if the General Partner
reasonably determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Partners. The Gross Asset Values
of any Partnership assets distributed to any Partner shall be the fair market
value of such asset on the date of distribution; and The Gross Asset Values of
Partnership assets shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of
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such assets pursuant to Section 734(b) or Section 743(b) of the Code, but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.074-1(b)(2)(iv)(m) of the Treasury
Regulations and Section 5.2(d). If the Gross Asset Value of an asset has been
determined or adjusted pursuant to clauses (a) or (b), above, such Gross Asset
Value shall thereafter be adjusted in the same manner as would the asset's basis
for federal income tax purposes except that in lieu of regular depreciation, the
Partnership shall take deductions for Depreciation.
"Holders" shall have the meaning ascribed to it in Section
4.8.
"Incorporation" shall have the meaning ascribed to it in
Section 4.5.
"IPO Consent" shall have the meaning ascribed to it in Section
4.5.
"IPO Notice" shall have the meaning ascribed to it in Section
4.5.
"Issue Date" shall have the meaning ascribed to it in Section
4.8.
"License Agreement" means any license agreement between ENBC
and the Partnership.
"License Termination" shall have the meaning ascribed to it
in Section 4.6.
"Limited Partner Units" means Units in the Partnership held by
a partner who is not a general partner.
"Majority Interest" means, with respect to any group of
Partners as of any particular time, Partners in such group whose Units
(including both General Partner Units and Limited Partner Units except as
otherwise specifically provided) at such time exceed one-half of the outstanding
Units of all Partners in such group at such time.
"Newco" shall have the meaning ascribed to it in Section 4.5.
"Notice Holder" shall have the meaning ascribed to it in
Section 4.8(b).
"Nonrecourse Deductions"shall have the meaning ascribed to it
in Section 1.704-2 (b)(1) of the Treasury Regulations.
"Other Business Entity" shall have the meaning ascribed to it
in Section 17-211 of the Act.
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"Partner" means Persons named as partners of the Partnership
on Schedule A hereto and includes Persons admitted as additional Partners or
substitute Partners pursuant to the provisions of this Agreement.
"Partner Nonrecourse Debt" shall have the meaning ascribed to
it in Section 1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(i)(2) of the Treasury Regulations.
"Partnership" means the limited partnership formed hereby.
"Partnership Value" shall have the meaning ascribed to it in
Section 4.7(b).
"Person" means an individual, corporation, partnership,
limited liability partnership, association, trust, joint venture, unincorporated
organization, other entity or group.
"Profits" or "Losses" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(i) any income of the Partnership
that is exempt from federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this definition
shall be added to such taxable income or loss;
(ii) any expenditures of the
Partnership described in Code Section 705(a)(2)(B) or treated as
Section 705(a)(2)(B) expenditures pursuant to Section 1.704-
1(b)(2)(iv)(i) of the Treasury Regulations and not otherwise taken into
account in computing Profits or Losses pursuant to this definition
shall be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset
Value of any Partnership asset is adjusted pursuant to clause (ii) or
(iii) of the definition of "Gross Asset Value", the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
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(iv) gain or loss resulting from
any disposition of any property of the Partnership with respect to
which gain or loss is recognized for Federal income tax purposes shall
be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value; and
(v) in lieu of the depreciation,
amortization and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into
account Depreciation for such fiscal year or other period, computed in
accordance with the definition of "Depreciation."
"Prospectus" shall have the meaning ascribed to it in Section
4.8(b).
"Public Offering" shall have the meaning ascribed to it in
Section 4.5.
"Put Date" shall have the meaning ascribed to it in Section
4.7(b).
"Put Notice" shall have the meaning ascribed to it in Section
4.7.
"Put Price" means the Partnership Value divided by the total
number of outstanding Units at the time of the determination of the Put Price.
"Put Right" shall have the meaning ascribed to it or Section
4.7.
"Registerable Securities" shall have the meaning ascribed to
it in Section 4.8(a).
"Secured Loan Agreement" means the secured loan agreement
originally dated as of the date hereof between ENBC and the Partnership, as it
may be amended or amended and restated from time to time.
"Selling Confirmation" shall have the meaning ascribed to it
in Section 4.8(d).
"Selling Period" shall have the meaning ascribed to it in
Section 4.8(d)(ii).
"Selling Notice" shall have the meaning ascribed to it in
Section 4.8(b).
"Shelf Registration" shall have the meaning ascribed to it in
Section 4.8(a).
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"Shelf Registration Period" shall have the meaning ascribed
to it in Section 4.8(a).
"Shelf Registration Statement" shall have the meaning
ascribed to it in Section 4.8.
"Successors and Assignees" has the meaning ascribed to it in
the Secured Loan Agreement.
"Tax Distributions" shall have the meaning ascribed to it in
Section 6.2(a).
"Tax Matters Partner" shall have the meaning ascribed to it
in Section 8.6.
"Termination Consent" shall have the meaning ascribed to it
in Section 4.6.
"Termination Notice" shall have the meaning ascribed to it in
Section 4.6.
"Transfer" shall have the meaning ascribed to it in Section
7.3(a).
"Treasury Regulations" means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as such regulations
may be amended from time to time.
"Units" refers to the interest of a Partner or Assignee in the
Profits, Losses, income, deductions and credits of the Partnership and
Distributions by the Partnership and includes both General Partner Units and
Limited Partner Units. The number of Units held by each Person admitted to the
Partnership as a Partner and by each Assignee shall be as set forth on Schedule
A, which shall also indicate whether such Units are General Partner Units or
Limited Partner Units.
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ARTICLE II
Section 2.1 Formation of the Partnership. The parties intend
to convert the Company to a limited partnership pursuant to Section 17-217 of
the Act by (i) adopting this Agreement and (ii) filing promptly a certificate of
conversion to limited partnership and a certificate of limited partnership
("Certificate") of the Partnership with the office of the Secretary of State of
the State of Delaware under the name "Einstein/Noah Bagel Partners, L.P." The
Partners hereby agree that the rights, duties and liabilities of the Partners
and the General Partner shall be as provided in the Act, except as otherwise
expressly provided herein.
Section 2.2 Partnership Name. The business of the
Partnership shall be conducted under the name Einstein/Noah Bagel Partners, L.P.
or under such other name as the General Partner may from time to time determine.
Section 2.3 Purposes of the Partnership.
(a) The Partnership is organized primarily for
the purpose of acquiring, constructing, owning and operating stores under the
name Einstein Bros.(R) Bagels and Noah's New York Bagels(R) stores (the
"Stores") as a franchisee or licensee of ENBC. The Partnership is a party to the
Area Development Agreement, pursuant to which it has the right, on the terms and
subject to the conditions set forth herein, to develop and thereafter own and
operate Stores in the Development Area. The Partnership shall be authorized to
engage in any and all other activities, whether or not related to the foregoing,
which in the judgment of the General Partner may be beneficial or desirable for
the achievement of the purposes of the Partnership.
(b) Subject to the limitations expressly set forth
in this Agreement, the Partnership and the General Partner shall have the power
and authority to do any and all acts and things deemed necessary or desirable by
the General Partner to further the Partnership's purposes and carry on its
business, including, but not limited to, the following:
(i) entering into any kind of
activity and performing contracts of any kind necessary or desirable
for the accomplishment of the purposes of the Partnership;
(ii) acquiring any property, real
or personal, in fee or under lease or license, or any rights therein or
appurtenant thereto, necessary or desirable for the accomplishment of
the purposes of the Partnership;
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(iii) borrowing money and issuing
evidences of indebtedness and securing any such indebtedness by
mortgage or pledge of, or other lien on, the assets of the Partnership;
(iv) entering into any such
instruments and agreements as the General Partner may deem necessary or
desirable for the ownership, management, operation, leasing and sale of
the Partnership's property; and
(v) negotiating and concluding
agreements for the sale, exchange or other disposition of all or
substantially all of the properties of the Partnership, or for the
refinancing of any loan or payment obtained by the Partnership.
Section 2.4 Title to Partnership Property. Title to
Partnership property shall be held in the name of the Partnership or its
nominee.
Section 2.5 Effective Date. This Agreement shall become
effective upon the execution of this Agreement by the Parties.
Section 2.6 Registered Office; Principal Place of Business.
The name of the Partnership's registered agent for service of process is The
Corporation Trust Company, and the address of the Partnership's registered
office in the State of Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. The principal place of business of the Partnership shall be at ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇. The General Partner may change the
Partnership's registered agent or the location of the Partnership's registered
office or principal place of business as the General Partner may from time to
time determine.
Section 2.7 Qualifications in Other Jurisdictions. The
General Partner may cause the Partnership to be qualified, formed or registered
under assumed or fictitious names statutes or similar laws in any jurisdiction
in which the Partnership transacts business. The General Partner may execute,
deliver and file any certificates (and any amendments and/or restatements
thereof) necessary for the Partnership to do business in a jurisdiction in which
the Partnership may wish to conduct such business.
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ARTICLE III
Section 3.1 Term of Partnership. The term of the Partnership
shall continue until December 31, 2022, unless the Partnership is earlier
dissolved in accordance with the provisions of this Agreement or the Act.
ARTICLE IV
Section 4.1 Capital Contributions of the Partners. The
Capital Contributions made by each of the Partners are as set forth on Schedule
A.
Section 4.2 Withdrawal and Return of Capital. No Partner
shall have the right to withdraw or to demand a return of any his Capital
Contribution, except upon dissolution and winding up of the Partnership in
accordance with the terms of Section 10.3. Any return of such Capital
Contribution shall be made solely from the assets of the Partnership (including
the Capital Contributions of the Partners) and only in accordance with the terms
hereof, and no Partner shall have personal liability for the return of any other
Partner's Capital Contribution. Under circumstances requiring a return of any
Capital Contribution, no Partner shall have the right to receive property other
than cash except as may be specifically provided herein, and to the extent any
moneys which any Partner is entitled to receive pursuant to Article VI hereof or
any other provision of this Agreement would constitute a return of capital, each
of the Partners consents to the withdrawal of such capital.
Section 4.3 Interest on Capital. No interest shall accrue
or be paid on any Capital Contribution made to the Partnership.
Section 4.4 Capital Accounts.
(a) The Partnership shall create upon its books and
records a capital account ("Capital Account") for each Partner and Assignee,
which shall be maintained in accordance with the following provisions:
(i) To each Partner's or
Assignee's Capital Account there shall be credited such Partner's or
Assignee's Capital Contributions, such Partner's or Assignee's
distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 5.2 to such
Partner or Assignee, the amount of any Partnership liabilities which
are assumed by such Partner or Assignee or which are secured by any
property distributed
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to such Partner or Assignee and such Partner or Assignee's share of any
increase in Gross Asset Value.
(ii) To each Partner's or
Assignee's Capital Account there shall be debited the amount of cash
and the Gross Asset Value of any property distributed to such Partner
pursuant to any provision of this Agreement, such Partner's or
Assignee's distributive share of Losses and any items in the nature of
deductions or losses which are specially allocated pursuant to Section
5.2 to such Partner or Assignee, the amount of any liabilities of such
Partner or Assignee which are assumed by the Partnership or which are
secured by any property contributed by such Partner or Assignee to the
Partnership and such Partner or Assignee's share of any decrease in
Gross Asset Value.
(iii) In the event all or a portion
of an interest in the Partnership is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred
interest.
(iv) In determining the amount of
any liability for purposes of clauses (i) and (ii) above, there shall
be taken into account Section 752(c) of the Code and any other
applicable provisions of the Code and Treasury Regulations.
Section 4.5 Incorporation and Public Offering
(a) At any time after December 5, 1999 (or such
earlier date as a Change in Control occurs) and prior to the end of the 42-
month period commencing on December 5, 1997, the Fund may request by written
notice to the Partnership (the "IPO Notice") that the business and assets of the
Partnership be transferred to a newly organized Delaware corporation (the
"Incorporation") and the Partnership effect a public offering of common stock of
Newco (as defined below) pursuant to a "firm commitment" underwriting (the
"Public Offering"). The right to request the Incorporation and the Public
Offering is personal to the Fund and may not be sold or assigned upon the
Dissolution of the Fund or otherwise. In the event of such a request, the
Incorporation shall be effected on the following terms and in the following
manner:
(i) the parties shall organize a
Delaware corporation ("Newco"), the certificate of incorporation and
the
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bylaws of which shall be in form and substance reasonably satisfactory
to the Fund;
(ii) in the Incorporation the
holders of Units of the Partnership shall receive shares of common
stock of Newco in proportion to the number of Units held by them; and
(iii) the Incorporation shall be
effected pursuant to such agreements, assignments and other instruments
as shall be satisfactory to counsel for the parties, including without
limitation, agreements that include customary representations and
warranties regarding title to any transferred interests.
(b) Upon the Incorporation, Newco will use its
reasonable best efforts, as promptly as practicable, (i) to register the shares
of its common stock held by the Fund under the Securities Act of 1933, as
amended (the "Securities Act"), and all applicable state securities laws, (ii)
to enter into an agreement in customary form for an underwritten "firm
commitment" public offering of such shares with one or more underwriters
selected by Newco and reasonably acceptable to the Fund and (iii) to cause such
offering to be consummated.
(c) Notwithstanding the provisions of Sections
4.5(a) and (b) hereof, the Partnership shall not take any of the steps provided
for in such Sections without the prior written consent of ENBC (the "IPO
Consent").
Section 4.6 Right to Require Termination.
(a) At any time after December 5, 1999 (or such
earlier date as a Change in Control occurs) and prior to the end of the 42-
month period commencing on December 5, 1997, the Fund may request by written
notice to the Partnership (the "Termination Notice") that the Partnership seek
to terminate its obligation to pay royalties (and any obligation of ENBC to
provide services) pursuant to all franchise and license agreements between the
Partnership and ENBC (a "License Termination"). Other than the License
Termination, such franchise and license agreements shall remain in full force
and effect. The right to request the License Termination is personal to the
Fund and may not be sold or assigned upon the Dissolution of the Fund or
otherwise.
(b) Notwithstanding the provisions of Section 4.6(a)
hereof, the parties acknowledge that the Partnership does not and will not have
the right to
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cause the License Termination without the prior written consent of ENBC (the
"Termination Consent").
Section 4.7 Fund Put Right.
(a) In the event that the IPO Consent or the
Termination Consent is not received by the Partnership within 120 days of the
IPO Notice or the Termination Notice, respectively, then the Fund shall have the
right, at any time after such 120 day period and prior to the later of (i) the
end of the 42-month period commencing on December 5, 1997 and (ii) 60 days
after the end of such 120-day period, on the other terms and subject to the
conditions set forth herein (the "Put Right"), to require the Partnership or
ENBC to purchase all but not less than all the Units owned by the Fund at the
Put Price. The Fund may exercise the Put Right by giving written notice to the
Partnership or ENBC of such exercise (the "Put Notice"). The Put Right is
personal to the Fund and may not be sold or assigned upon the Dissolution of
the Fund or otherwise.
(b) The Put Price shall be the Partnership Value (as
herein defined) divided by the total number of Units outstanding as of the date
of the Put Notice (the "Put Date"). The "Partnership Value" means the amount
equal to (i) the income from operations of the Partnership (computed in
accordance with generally accepted accounting principles) before general and
administrative expenses, depreciation and amortization, but after royalties and
marketing expenses (including without limitation contributions to national and
local advertising funds), for the highest of the two fiscal quarters prior to
the quarter in which the Put Date occurs, adjusted by adding back to income from
operations any amounts deducted therefrom representing rental expense with
respect to capital leases and leases that are not classified as capital leases
for financial accounting purposes but that are intended to be treated as secured
borrowings under applicable commercial law and annualized by dividing such
amount by the number of weeks in such quarter and multiplying the result by 52,
multiplied by (ii) 6.5, less (iii) any indebtedness of the Partnership
outstanding on the Put Date, including without limitation the imputed principal
amount of any lease financing (including for this purpose capital leases as well
as leases that are not classified as capital leases for financial accounting
purposes but that are intended to be treated as secured borrowings under
applicable commercial law), plus (iv) any cash balances of the Partnership on
the Put Date.
(c) Upon exercise of the Put Right, the Units owned
by the Fund shall be purchased by the Partnership or ENBC, as selected by the
Partnership, within 60 days of the Put Date. At the election of such purchaser,
the Put Price may be paid in (i) cash, (ii) shares of ENBC common stock, par
value $0.01 per share (the
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"Common Stock") or (iii) any combination of the foregoing. In the event the Put
Price is paid in whole or in part by the delivery of shares of ENBC Common
Stock, (i) the value of such shares shall be equal to the number of shares
delivered multiplied by an amount per share equal to the average of the closing
sales prices per share of ENBC Common Stock, on the principal stock exchange or
quotation system on which such common stock is traded or quoted, for the twenty
trading days ending with the second Business Day preceding the day on which such
shares are delivered (with such prices to be appropriately adjusted, if
necessary, to reflect any stock splits or similar transactions occurring between
the beginning of such twenty-day trading period and the day of delivery), and
(ii) ENBC will use its reasonable best efforts to cause a registration statement
with respect to the resale of such shares of ENBC Common Stock to be filed and
become effective under the Securities Act pursuant to the provisions of Section
4.8 hereof, on or before the date such shares are delivered pursuant hereto (the
"Issue Date").
(d) In the event that the exercise of the Put Right
or the payment of the Put Price requires any filing with, or obtaining the
approval, consent or authorization of, any governmental or other regulatory
body, including without limitation any filing under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, the Fund and the Partnership
shall cooperate to make such filing or obtain such approval, consent or
authorization and the time for payment of the Put Price shall be extended until
such filing is made or such approval, consent or authorization is re ceived.
(e) In the event that the payment of the Put Price
in cash is prohibited by the terms of any credit agreement or other financing
arrangement with one or more third-party lenders to which ENBC or the
Partnership is then a party and the issuance of the number of shares of Common
Stock required to satisfy the Put Price in full is prohibited by applicable law
or the rules of any securities exchange or quotation system on which the Common
Stock is then traded without the prior approval of the stockholders of ENBC,
then (i) ENBC will issue to the Fund the maximum number of shares of Common
Stock in satisfaction of the Put Price that it is permitted to issue without
obtaining prior stockholder approval, (ii) the Put Right shall be deemed
exercised only with respect to that portion of the Units held by the Fund equal
to the portion of the aggregate Put Price actually paid by the issuance of such
Common Stock, (iii) ENBC will use reasonable best efforts to obtain, as soon as
reasonably practicable, the approval by its stockholders of the issuance of
additional shares of Common Stock sufficient to permit the payment in full of
the Put Price with respect to all remaining Units held by the Fund as and to the
extent required by applicable law and the applicable rules of any securities
exchange or quotation system and (iv) upon obtaining such stockholder approval
and subject to the
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other terms hereof, ENBC will issue to the Fund such additional shares of Common
Stock as necessary to satisfy that portion of the Put Price that remains unpaid.
(f) The Fund's exercise of the Put Right together
with the Partnership or ENBC's payment of the Put Price shall constitute a
complete release by the Fund of the Partnership, the General Partner, the
Partners, ENBC and their Affiliates of all claims or rights arising out of, or
on account of, the ownership of Units by the Fund.
Section 4.8 Registration of ENBC Common Stock.
(a) In the event that the Partnership or ENBC
determines to pay the Put Price in shares of ENBC Common Stock, ENBC shall
prepare and file with the Securities and Exchange Commission (the "Commission"),
as soon as practi cable, a registration statement under the Securities Act (the
"Shelf Registration State ment") registering the resale from time to time by
holders thereof of all of the shares of ENBC Common Stock issued in payment of
the Put Price (the "Registerable Securi ties"). The Shelf Registration Statement
shall permit resales of Registerable Securities by holders thereof ("Holders")
in the manner or manners designated by them from time to time, which shall be
set forth in such Shelf Registration Statement. ENBC shall use its reasonable
best efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act prior to the Issue Date and, subject to the provisions
contained herein, to keep the Shelf Registration Statement continuously ef
fective under the Securities Act until the earlier of: (i) the second
anniversary of the Issue Date; (ii) the date on which the Registerable
Securities may be sold by non-affiliates of ENBC, as applicable, pursuant to
paragraph (k) of Rule 144 (or any successor provision) promulgated by the
Commission; and (iii) such date as of which all the Registerable Securities have
been sold pursuant to the Shelf Registration Statement (the period ending at
such earlier date, the "Shelf Registration Period").
(b) Each Holder of Registerable Securities agrees
that if such Holder wishes to sell its Registerable Securities pursuant to the
Shelf Registration Statement and the prospectus included in any Shelf
Registration Statement, and all amendments and supplements to such prospectus,
including post-effective amendments (the "Prospectus"), it will do so only in
accordance with this Section 4.8(b). Each Holder of Registerable Securities
agrees to give written notice to ENBC at least three Business Days prior to any
intended resale of Registerable Securities under the Shelf Registration
Statement, which notice shall specify the date on which such Holder in tends to
begin such distribution and such information with respect to such Holder and the
intended distribution as may be reasonably required to amend the Shelf Regis
tration Statement or supplement the Prospectus with respect to
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such intended distribution (each Holder providing the notice described in this
sentence and with re spect to which the related Selling Period (as defined
herein) is continuing or has been deferred, a "Notice Holder"; each such notice,
a "Selling Notice"). As soon as prac ticable after the date a Selling Notice is
received by ENBC, and in any event within two Business Days after such date,
ENBC shall either:
(i) (A) provide a Selling Confirma
tion (as defined herein) to such Notice Holder or (B) file a supplement
to the Prospectus or a post-effective amendment to the Shelf Regis
tration Statement as required by Section 4.9(a) (and use all reasonable
efforts to cause any such amendment to become effective as soon as
practicable thereafter and immediately thereafter provide a Selling Con
firmation to such Notice Holder); or
(ii) in the event of the happening
of any event of the kind described in Section 4.9(b)(ii)(A),
4.9(b)(ii)(B), 4.9(b)(ii)(C) or 4.9(b)(ii)(D) hereof, ENBC shall
deliver to such Notice Holder the notice required by Section 4.9(b)(ii)
and notify the holder that the consent granted pursuant to Section
4.9(e) is suspended until further notice.
(c) Each such Notice Holder may sell all or any
Registerable Securities pursuant to the Shelf Registration Statement and the
Prospectus only during the Selling Period commencing with the earlier of (x) the
date on which such Notice Holder receives a Selling Confirmation and (y) the
third Business Day after the related Selling Notice has been received by ENBC;
provided that in the event ENBC elects to take the actions permitted by Section
4.8(b)(ii), the commencement of the Selling Period shall be deferred until such
later date as ENBC delivers a Selling Confirmation. A Notice Holder shall not
sell any Registerable Securities pursuant to the Shelf Regis tration Statement
or the Prospectus after the expiration of the applicable Selling Period without
giving a new Selling Notice pursuant to Section 4.8(b) hereof and receiving a
new Selling Confirmation. Notwithstanding the foregoing, the aggregate number of
days during which ENBC shall be entitled to exercise its right under this
paragraph to defer the commencement of a Selling Period or its right under
Section 4.9(b)(ii) to defer existing Selling Periods (any such period of
deferral herein referred to as a "Deferral Period") shall not exceed 60 days
within any twelve-month period; pro vided, however, that each day during any
Deferral Period shall only be counted once in determining the aggregate number
of days in such Deferral Period notwithstanding the occurrence of multiple
concurrent deferrals; and, provided further, if ENBC deems it necessary to file
a post-effective amendment to the Shelf Registration State ment in order to
comply with Section 4.9(a) hereof as a result of any
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Selling Notice or other information provided by a Holder for inclusion in the
Prospectus, then such period of time from the date of filing such post-effective
amendment until the date on which the Shelf Registration Statement is declared
effective by the Commission shall not be treated as a Deferral Period.
In the event ENBC elects to take the actions described in
Section 4.8(b)(ii), ENBC will, at such time as it is in compliance with Section
4.8(a) and as use of the Prospectus may be resumed, immediately provide Selling
Confirmations to all Notice Holders.
(d) (i) "Selling Confirmation" means, with respect
to a Notice Holder and a Selling Notice given by such Notice Holder, a
written notice given by ENBC to such Notice Holder instructing and
notifying such Notice Holder that the Shelf Registration Statement and
Prospectus may be used during the applicable Selling Period to effect
the transactions described in such Selling Notice, that ENBC is then
currently in compliance with Section 4.9(a) and that ENBC reaffirms the
consent granted pursuant to Section 4.9(e); and
(ii) "Selling Period" means, with respect to a
Notice Holder and a Selling Notice given by such Notice Holder, a
period of forty-five calendar days commencing on the earlier of the
date such Notice Holder receives a Selling Confirmation in respect of
the transactions described in such Selling Notice or the third business
day after such Selling Notice has been received by ENBC; provided, that
ENBC may defer existing Selling Periods in accordance with Section
4.9(b)(ii).
Section 4.9 Registration Procedures.
In connection with any Shelf Registration Statement, the
following provisions, shall apply:
(a) ENBC shall ensure that: (i) any Shelf
Registration State ment and any amendment thereto and any Prospectus forming
part thereof and any amendment or supplement thereto comply in all material
respects with the Act and the rules and regulations thereunder; (ii) any Shelf
Registration Statement and any amend ment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and (iii) "any Prospectus forming part of any Shelf
Registration Statement, and any amendment or supplement to such Pro spectus does
not include an untrue statement of a material fact or omit to state a
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23
material fact necessary in order to make the statements therein, in light of the
circum stances under which they were made, not misleading; provided that no
representation or agreement is made hereby with respect to information with
respect to any Holder required to be included in any Shelf Registration
Statement or Prospectus pursuant to the Act or the rules and regulations
thereunder or provided by or on behalf of any Holder.
(b) (i) ENBC shall advise the Holders and, if re-
quested by any such Holder, confirm such advice in writing when the
Shelf Registration Statement or any post-effective amendment thereto
has become effective.
(ii) During any Selling Period, during the
deferral of any Selling Period and within two Business Days of receipt
by ENBC of any Selling Notice, ENBC shall notify the Notice Holders
and, if requested by any such Notice Holder, confirm such notification
in writing:
(A) of the issuance by the Commis sion of
any stop order suspending the effectiveness of the Shelf
Registration Statement or the initiation of any proceedings
for that purpose;
(B) of the receipt by ENBC of any
notification with respect to the suspension of the qualifi
cation of the Securities included in any Shelf Registra tion
Statement for sale in any jurisdiction or the indi cation or
threat of any proceeding for such purpose;
(C) of the happening of any event that
requires the making of any changes in the Shelf Registration
Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state
a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading; and
(D) of the determination by ENBC, in its
judgment, that it is advisable to suspend use of the
Prospectus for valid business reasons (not including avoidance
of ENBC's obligations hereunder) including,
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among other things, the acquisition or divestiture of assets,
public filings with the Commission, pending corporate
developments and similar events; which no ▇▇▇▇ shall be
accompanied by an instruction to defer the use of the
Prospectus until ENBC delivers a Selling Confirmation
whereupon any existing Selling Period shall be deferred and
shall recommence upon delivery of the aforementioned Selling
Confirmation; provided, that such Selling Period shall be
extended by the num ber of days elapsed during any such period
of deferral.
(c) ENBC shall use all reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of any Shelf
Registration Statement at the earliest possible time, including filing an
amendment to the Shelf Registration Statement in a manner reasonably expected by
ENBC to obtain the withdrawal of such order, or filing an additional Shelf
Registration Statement covering all of the Registerable Securities (whereupon
references herein to the Shelf Regis tration Statement shall be deemed to
include reference to such additional filing).
(d) ENBC shall furnish to each Holder of
Registerable Securities upon their written request, without charge, at least one
copy of such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in such writing, all exhibits (including those incorporated by
reference).
(e) ENBC shall, during the Shelf Registration
Period, deliver to each Holder of Registerable Securities, without charge, as
many copies of the Prospectus included in such Shelf Registration Statement and
any amendment or supplement thereto as such Holder may reasonably request; and,
except during such periods as ENBC shall have suspended the use of the
Prospectus pursuant to Section 4.8(b)(ii) or 4.9(b)(ii), ENBC consents to the
use of the Prospectus or any amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registerable
Securities covered by the Prospectus or any amendment or supplement thereto.
(f) Prior to any offering of Registerable Securities
pursuant to any Shelf Registration Statement, ENBC shall register or qualify or
cooperate with the Holders of Registerable Securities included therein and their
respective counsel in connection with the registration or qualification of such
Registerable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as any such Holders reasonably request in writing and do
any and all other acts or things necessary
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25
or advisable to enable the offer and sale in such jurisdictions of the
Registerable Securities; provided, however, that ENBC will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
(g) ENBC shall cooperate with the Holder to
facilitate the timely preparation and delivery of certificates representing
Registerable Securities sold pursuant to any Shelf Registration Statement free
of any restrictive legends and in such denominations and registered in such
names as Holders may request.
(h) Upon the occurrence of any event contemplated
by para graph 4.9(b)(ii)(C) above, ENBC shall promptly prepare a
post-effective amendment to any Shelf Registration Statement or an amendment or
supplement to the related Pro spectus or file any other required document so
that, as thereafter delivered (when and as permitted pursuant to Section
4.8(c)) to purchasers of the Registerable Securities included therein, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(i) ENBC may require each Holder of Registerable
Securi ties to be sold pursuant to any Shelf Registration Statement to furnish
to ENBC such information regarding the Holder and the distribution of the
Registerable Securities as may, from time to time, be required by the Act and
the rules and regulations promulgated thereunder (including the information
specified in Item 507 of Regulation S-K under the Act), and the obligations of
ENBC to any Holder hereunder shall be ex pressly conditioned on the compliance
of such Holder with such request.
(j) ENBC shall, if requested, use its reasonable
efforts to promptly incorporate in a Prospectus supplement or post-effective
amendment to a Shelf Registration Statement such information as a Holder may
provide from time to time to ENBC in writing for inclusion in a Prospectus or
any Shelf Registration Statement concerning such Holder and the distribution of
such Holder's Registerable Securities and shall make all required filings of
such Prospectus supplement or post-effective amendment as soon as practicable
after being notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(k) ENBC shall enter into such agreements and take
all other appropriate actions in order to expedite or facilitate the
registration or the disposition of the Registerable Securities; provided,
however, that ENBC shall not be required to enter into an underwriting agreement
in connection with any such disposition.
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(l) Each Holder of Registerable Securities agrees
by acqui sition of such Registerable Securities that upon receipt of any notice
from ENBC of the happening of any event of the kind described in Section
4.9(b)(ii)(A), 4.9(b)(ii)(B), 4.9(b)(ii)(C) or 4.9(b)(ii)(D) hereof, such Holder
will forthwith discontinue disposition of such Registerable Securities covered
by such Registration Statement or Prospectus and will not resume disposition of
such Registerable Securities under such Holder's receipt of one or more copies
of a supplemented or amended Prospectus contemplated by Section 4.9(e) hereof,
or until it is advised in writing by ENBC that the use of the applicable
Prospectus may be resumed and has received copies of the Prospectus.
Section 4.10 Registration Expenses. ENBC shall pay all fees
and ex penses incurred by it incident to the performance of or compliance with
this Agreement by ENBC including, without limitation: (i) all Commission, stock
ex change or National Association of Securities Dealers, Inc. registration 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 Registerable Securi ties); and (iii) all expenses in
preparing or assisting in preparing, printing and distrib uting any Shelf
Registration Statement, any Prospectus, any amendments or sup plements thereto,
and any other documents relating to ENBC's performance of and compliance with
this Agreement
Section 4.11 Indemnification.
(a) In connection with any Shelf Registration
Statement, ENBC agrees to indemnify and hold harmless each Holder of
Registerable Securities, the directors, officers, employees and agents of each
such Holder and each person who controls any such Holder within the meaning of
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may be come subject under the Securities
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Shelf
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified
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party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that ENBC will not be liable in any case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon: (A) any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to ENBC by or on behalf of any such Holder;
(B) use of a Shelf Registration Statement or the related Prospectus during a
period when a stop order has been issued in respect of such Shelf Registration
Statement or any proceedings for that purpose have been initiated or use of a
Prospectus when use of such Prospectus has been deferred pursu ant to Section
4.8(c) or 4.9(b)(ii); provided, further, in each case, that ENBC deliv ered
prior notice in accordance with Section 10.1 hereof of such stop order,
initiation of proceedings or deferral; or (C) if the Holder fails to deliver a
Prospectus or the then current Prospectus. This indemnity agreement will be in
addition to any liability which ENBC may otherwise have.
(b) Each Holder of Registerable Securities covered
by a Shelf Registration Statement severally agrees to indemnify and hold
harmless ENBC, its directors, officers, employees and agents and each person who
controls ENBC within the meaning of either the Securities Act or the Exchange
Act to the same extent as the foregoing indemnity from ENBC to each such Holder,
but only with reference to written information relating to such Holder furnished
to ENBC by or on behalf of such Holder. This indemnity agreement will be in
addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 4.11 of notice of the commencement of any action such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 4.11, notify the indemnifying party in
writing of the commencement thereof, but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph
4.11(a) or (b) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph 4.11(a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnifi cation is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemni fied party or parties except as
set forth below); provided, however, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the
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indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and local
counsel) if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party; provided further, that the indemnifying party shall
not be responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) representing all the indemnified
parties under paragraph 4.11(a)(i), paragraph 4.11(a)(ii) or paragraph 4.11(b)
above. An indemni fying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(d) The provisions of this Section 4.11 will remain
in full force and effect, regardless of any investigation made by or on behalf
of any Holder or ENBC or any of the officers, directors or controlling persons
referred to in Section 4.11 hereof, and will survive the sale by a Holder of
Securities covered by a Shelf Registration Statement.
Section 4.12 Additional Capital. The Partnership shall be
entitled to sell additional Units at such times, in such amounts, for such
prices and on such terms as may be determined by the General Partner. The
Partners hereby consent to the admission as a Partner of any Person acquiring
Units pursuant to this Section 4.12 who executes this Agreement (if such Person
was not previously a Partner). Notwithstanding anything else in this Agreement,
upon any sale of additional Units, the General Partner agrees to purchase
sufficient additional General Partner Units so that the General Partner shall at
all times own 1% of the outstanding Units.
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Section 4.13 Partnership Repurchase Right. In the event that
any owner of the Units of the Partnership who is an employee of ENBC or any
subsidiary of ENBC ceases to be an employee of ENBC or any subsidiary of ENBC
(for reasons other than death or permanent disability) at any time, the
Partnership shall have the right, but not the obligation, to repurchase at any
time after such employment termination, all of the Units held by such owner at a
price equal to the original purchase price paid by such owner (the "Repurchase
Price"). If such owner paid for part or all of his Units by delivering a note to
the Partnership, the Repurchase Price shall include any interest paid or accrued
on the note through the date of repurchase. The Partnership may exercise its
rights under this Section 4.13 by giving written notice to such owner at any
time after the date that the owner ceases to be an employee of ENBC or any
subsidiary of ENBC. The Repurchase Price shall be paid by the Partnership within
30 days of the date of such notice and shall be payable first by credit against
any note or other obligation of such owner to the Partnership and then in cash.
Section 4.14 Change in Control. A "Change in Control" shall
be deemed to have occurred if any of the following occurs:
(a) the acquisition by any person or entity,
including any syndicate or group deemed to be a "person" under Section 13(d)(3)
or 14(d)(2) of the Exchange Act, or any successor provision, but excluding BCI
and its successors, or any person or group controlled by such persons (a
"Person"), of beneficial ownership, directly or indirectly, through a purchase,
merger, or other acquisition transaction or series of transactions, of shares of
capital stock of ENBC entitling such Person to exercise more than 50% of the
total voting power of all shares of capital stock of ENBC entitling the holders
thereof to vote generally in elections of directors; or
(b) any consolidation of ENBC with, or merger of
ENBC into, any other Person, any merger of another Person into ENBC, or any
sale, lease, or exchange of all or substantially all of the property and assets
of ENBC to another Person (other than (i) sales or leases of property to
franchisees or licensees of ENBC in the ordinary course of business or (ii) a
merger which (x) does not result in any reclassification, conversion, exchange,
or cancellation of outstanding shares of capital stock of ENBC or (y) is
effected primarily to change the jurisdiction of incorporation of ENBC and
results in reclassification, conversion or exchange of outstanding shares of
ENBC Common Stock solely into shares of ENBC Common Stock of the surviving
entity).
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ARTICLE V
Section 5.1 Allocation of Profits and Losses. Subject to
Section 5.2 and the other provisions of this Article V, Profits and Losses of
the Partnership for any fiscal year shall be allocated to the Partners and
Assignees in proportion to their Units.
Section 5.2 Special Allocations. Notwithstanding Section
5.1, the following special allocations shall be made in the following order:
(a) Profits and Losses and items thereof shall be
allocated as though this Agreement contained (and there are hereby incorporated
herein by reference):
(i) a minimum gain chargeback
provision that complies with the requirements of Section 1.704-2(f) of
the Treasury Regulations;
(ii) a nonrecourse debt minimum
gain chargeback provision that complies with the requirements of
of Section 1.704-2(i)(4) of the Treasury Regulations; and
(iii) a qualified income offset
provision that complies with the requirements of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
(b) Nonrecourse Deductions for any fiscal year or
other period shall be specially allocated to the Partners and Assignees in
proportion to their Units.
(c) Any Partner Nonrecourse Deductions for any
fiscal year or other period shall be specially allocated to the Partner or
Assignee who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Sections 1.704-2(i)(1) and (2) of the Treasury Regulations.
(d) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Section 734(b) or Section 743(b) of
the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury
Regulations, to be taken into account in determining Capital Accounts, the
amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases
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the basis of the asset) or loss (if the adjustment decreases such basis) and
such gain or loss shall be specially allocated to the Partners and Assignees in
a manner consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
(e) The allocations set forth in this Section 5.2
(the "Regulatory Allocations") are intended to comply with certain provisions of
Sections 1.704-1 and 1.704-2 of the Treasury Regulations. Notwithstanding any
other provisions of this Agreement, the Regulatory Allocations shall be taken
into account in allocating Profits and Losses and other items of income and
deduction among the Partners and Assignees so that, to the extent possible, the
net amount of such allocations of Profits and Losses, other items of income,
gain, loss and deduction, and the Regulatory Allocations to each Partner or
Assignee shall be equal to the net amount that would have been allocated to each
Partner or Assignee if the Regulatory Allocations had not occurred.
Section 5.3 Allocation of Tax Credits. All tax credits
allowed in connection with any depreciable property (and any related adjustments
to the basis of such property) shall be allocated in the same manner as
deductions for Depreciation of such property, and all tax credits allowed in
connection with other expenditures shall be allocated in the same manner as
deductions arising out of such other expenditures.
Section 5.4 Section 704(c) Allocations.
(a) In accordance with Section 704(c) of the Code
and the Treasury Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Partnership shall be
allocated among the Partners and Assignees so as to take account of any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial fair market value.
(b) In the event the Gross Asset Value of any asset
is adjusted pursuant to the definition of "Gross Asset Value" in Section 1.1,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and the value at which such asset is
reflected in the Capital Accounts of the Partners and Assignees, to the extent
such variation was not previously taken into account pursuant to Section 5.5(a),
in the same manner as under Section 704(c) of the Code and the Treasury
Regulations thereunder.
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(c) Allocations pursuant to Sections 5.5(a) and (b)
shall be determined by the General Partner using any permissible method under
Section 704(c) of the Code and the Treasury Regulations thereunder.
(d) Allocations pursuant to Sections 5.5(a) and (b)
are solely for purposes of federal, state, and local income taxes and
notwithstanding any other provision of this Agreement, such allocations shall
not affect, or in any way be taken into account in computing, any Partner's or
Assignee's Capital Account or share of Profits, Losses, other items, or
Distributions pursuant to any provision of this Agreement.
Section 5.5 Certain Other Allocation Rules.
(a) For purposes of determining the Profits,
Losses, or any other items allocable to any period, Profits, Losses, and any
such other items shall be determined on a daily, monthly or other basis, as
determined by the General Partner in its sole discretion using any permissible
method under Section 706 of the Code and the Treasury Regulations thereunder.
(b) Except as otherwise contemplated by Section 5.1
or any other provision of this Agreement, all items of Partnership income, gain,
loss, deduction, and credit, for any fiscal year or other period, and any other
allocations not otherwise provided for shall be divided among the Partners or
Assignees in the same proportions as they share Profits or Losses, as the case
may be, for such year or other period.
Section 5.6 Special Allocation of Recapture. In making
allocations of Profit among the Partners, the ordinary income portion, if any,
of such Profit caused by the recapture of cost recovery or any other deductions
shall be allocated among those Partners who were previously allocated the cost
recovery or any other deductions in proportion to the amount of such deductions
previously allocated to them. It is intended that the Partners, as between
themselves, shall be allocated the proportionate recapture income as a result of
any cost recovery or other deductions which were previously allocated to them,
in proportion to the amount of such deductions which have been allocated to
them, notwithstanding that a Partner's share of Profits, Losses or liabilities
may increase or decrease from time to time. Nothing in this Section 5.6,
however, shall cause the Partners to be allocated more or less gain or profit
than would otherwise be allocated to them pursuant to this Article V.
Section 5.7 Allocations to the General Partner.
Notwithstanding the other provisions of this Article V, if in any instance, by
virtue of the operation of
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such provisions, less than 1% of any item of income, gain, loss, deduction or
credit would be allocated to the General Partner, then such allocations shall be
modified so that 1% of such item is allocated to the General Partner.
ARTICLE VI
Section 6.1 Distributions.
(a) Except as otherwise provided in Sections
6.1(c), 6.2, 6.4 and 9.3, Distributions shall be made at such times and in
such amounts as may be determined by the General Partner, subject to compliance
with the Act and the covenants set forth in the Secured Loan Agreement.
(b) Except as provided in Sections 6.2, 6.4 and 9.3,
Distributions shall be made to the Partners and Assignees in proportion to their
Units.
(c) The General Partner shall cause the Partnership
to make Distributions of Available Cash not less often than quarterly if but
only if each of the following conditions is satisfied (except that Distributions
pursuant to Sections 6.2, 6.4 and 9.3 shall be made in accordance with such
provisions, without regard to whether the following conditions are satisfied):
(i) the Development Schedule (under each Development Agreement) between the
Partnership and ENBC, as amended from time to time, has been satisfactorily
completed, (ii) the reserves referred to in the definition of the term Available
Cash shall be reasonably adequate to satisfy the Partnership's working capital
needs and to cover foreseeable contingencies, (iii) cash flow during the quarter
is at least equal to Prospective Fixed Charges (as defined in the Secured Loan
Agreement) for the next succeeding quarter and (iv) the Partnership shall be in
compliance with the covenants set forth in the Secured Loan Agreement.
Section 6.2 Distributions for Tax Purposes.
(a) Subject to the provisions of the Act, the
General Partner shall cause the Partnership to make Distributions within 75 days
after the end of any fiscal year of the Partnership, beginning with the fiscal
year ending in December 1998, to each of the Partners and Assignees in an amount
equal to (i) the excess of (A) the total amount of taxable income allocated to
such Partner or Assignee (and any predecessor in interest of such Partner or
Assignee) for such fiscal year, over (B) the amount, if any, by which the sum of
all items of deduction and loss allocated to such Partner or Assignee (and any
predecessor in interest of such Partner or Assignee) for all prior fiscal years
exceeds the sum of all items of taxable income allocated to such Partner or
Assignee for all prior fiscal years, multiplied by (ii) a tax rate reasonably
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selected by a Majority Interest of the Partners as the highest effective
combined statutory rate of federal and state income tax imposed on taxable
income of the Partnership allocated to the Partners or Assignees (or to the
partners or members of any Partner treated as a partnership for federal income
tax purposes) (the "Tax Distributions"); provided, however, that the Tax
Distributions to each of the Partners for any fiscal year shall not be less than
the withholding or estimated tax liability imposed with respect to or on any
Partner by any State or local government with respect to the amount described in
clause (A) above. In the event that in any fiscal year Tax Distributions
computed as set forth above are not paid, then in any succeeding fiscal year in
which Available Cash exceeds required Tax Distributions with respect to such
year, the Tax Distributions payable under this Section 6.2(a) shall be increased
(but not in excess of Available Cash) until such deficiency has been recouped.
(b) The General Partner may cause the Partnership
to make periodic Distributions to the Partners and Assignees during each
fiscal year based on its reasonable estimate of the amount that will be
required to be distributed pursuant to Section 6.2(a) for such fiscal year in
order to provide funds to the Partners and Assignees for the payment of
estimated taxes by them. In the event any such periodic Distributions are made
for any fiscal year, the amount of the Distribution made after the end of the
fiscal year shall be appropriately adjusted so that the total amount
distributed to each Partner or Assignee (taking into account periodic
Distributions made pursuant to this Section 6.2(b)) is equal to the amount such
Partner or Assignee would have been entitled to receive pursuant to Section
6.2(a) had no such periodic Distributions been made.
Section 6.3 Restrictions on Certain Distributions.
Notwithstanding compliance with the foregoing conditions of Sections 6.1 or 6.2,
or any other provision of this Agreement, no Distributions shall be made in the
event that (i) the Credit Agreement or the Secured Loan Agreements, or any
extension, replacement or refinancing of either of them, is in effect, and (ii)
any such agreements prohibit the making of such Distributions.
Section 6.4 Payment and Withholding of Certain Taxes.
Notwithstanding anything to the contrary herein, to the extent that the
Partnership is required, pursuant to any applicable law, (i) to pay tax
(including estimated tax) on a Partner's or Assignee's allocable share of
Partnership items of income or gain, whether or not distributed, or (ii) to
withhold and pay over to the tax authorities any portion of a Distribution
otherwise distributable to a Partner or Assignee, the Partnership may pay over
such tax or such withheld amount to the tax authorities, and such amount shall
be treated as a Distribution to such Partner or Assignee at the time
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it is paid to the tax authorities to the extent it would have otherwise been
distributed to the Partner or Assignee. To the extent such amount is not
distributed (or treated as distributed) pro rata to the Partners or Assignees in
proportion to their Units, it shall be treated as a loan, and shall be repayable
to the Partnership without interest out of future Distributions to such Partner
or Assignee. For purposes of this Section 6.4, the Partnership may assume that
any Partner or Assignee who fails to provide to the Partnership satisfactory
evidence of his tax status for United States federal income tax purposes is a
foreign person.
ARTICLE VII
Section 7.1 Rights and Obligations of Limited Partners.
Notwithstanding any other provisions of this Agreement, no Limited Partner shall
be personally liable for any of the debts of the Partnership or any of its
obligations except to the extent of such Partner's Capital Contribution and its
share of undistributed profit, as provided by the Act. No Limited Partner shall
participate in the control of the business of the Partnership within the meaning
of Section 17-303 of the Act. The Limited Partners shall not have either the
obligation or the right to take part, directly or indirectly, in the active
management of the business of the Partnership, and no Limited Partner is
authorized to do or perform any act, thing or deed in the name of, for or on
behalf of either the General Partner or the Partnership. A Limited Partner is
not authorized and shall not be permitted to do any act, deed, or thing which
will cause such Limited Partner to be classified as a general partner of the
Partnership under the Act, unless such Limited Partner is also a General Partner
hereunder.
Section 7.2 Conduct of Other Business Activities by the
Partners.
(a) The Partners may generally engage in any
business or profession or possess an interest in other businesses or professions
of every nature and description, independently or with others, including but not
limited to, all phases of the restaurant business; provided that no Partner
shall engage in any Competitive Business other than a Permitted Competitive
Business (as such terms are defined in the Development Agreement). The
restriction set forth in the foregoing sentence shall not, however, be
applicable to (i) ENBC, its Successors and Assignees and their Affiliates other
than the Partnership, (ii) participation by any Person in the ownership,
management or operation of the Fund or (iii) investment by the Fund in any other
developer or franchisee of ENBC. Neither the Partnership nor its Partners shall,
under the terms of this Agreement or by virtue of the existence of the
Partnership or the relation created among the Partners, have any rights in or to
any independent
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venture of any other Partner or its Affiliates, or the income or profits
thereof, whether or not any such venture is, or may be deemed to be, competitive
with the Partnership.
(b) In the event that any owner (other than ENBC,
any subsidiary of ENBC or the Fund) of Units in the Partnership ceases to own
Units, whether as a result of a repurchase by the Partnership pursuant to
Section 4.13 hereof, a negotiated sale of such owner's Units to the Partnership
or otherwise, for a period of two years thereafter such owner agrees (i) not to
compete against the Partnership, ENBC or their respective Affiliates (for
purposes of this paragraph 7.2(b), "Affiliates" shall include area developers,
franchisees and joint venturers of the Partnership or ENBC), by directly or
indirectly owning, managing, operating, controlling, being employed by,
participating in, or being connected in any manner with the ownership,
management, operation, or control of (A) any food service establishment that
prepares, serves or sells, and derives more than 5% of its revenues from, bagels
and/or bagel related products (including but not limited to cream cheese and
other spreads, bagel sandwiches and bagel chips) or (B) any food service
establishment, at least 15% of the revenue of which is derived from coffee or
any other product which accounts for at least 15% of the revenue of any food
service establishment owned or operated by the Partnership or ENBC or their
respective Affiliates at the time such owner commences or significantly
increases its ownership, management, or other participation therein, which food
service establishment described in either (A) or (B) above, is located within
five miles of any store owned or operated by the Partnership or ENBC or their
respective Affiliates, or within any standard metropolitan statistical area,
trade area or "area of dominant influence" (as defined by Arbitron Ratings
Company) in which the Partnership, ENBC or their respective Affiliates, as the
case may be, engage, or have developed specific plans to engage, in business and
(ii) not to solicit employees from the Partnership, ENBC or their respective
Affiliates. This paragraph 7.2(b) shall not prevent such owner from
participating as an investor, officer, or director in any restaurant venture not
covered by the foregoing applicable restrictions or prevent such owner from
investing so as to hold less than 2% of the outstanding shares of any company
which is a "reporting company" under the Securities Exchange Act of 1934, as
amended. It is the intention of the parties hereto that this paragraph 7.2(b) be
interpreted so as to be valid under applicable law and, if required for
validity, any court or applicable tribunal may reduce or alter the geographic
scope and duration of this paragraph 7.2(b), by substitution of words or
otherwise, so as to create the broadest permissible protection to the
Partnership and ENBC.
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Section 7.3 Assignments by Partners.
(a) A Partner or Assignee may not assign, pledge,
mortgage, hypothecate, sell, or otherwise dispose or encumber (hereinafter
referred to as a "Transfer") all or any part of his Units in the Partnership to
any Assignee (and no such Transfer, whether voluntary or involuntary, whether by
operation of law or otherwise and whether or not for value, shall be effective)
unless:
(i) ENBC shall have consented in
writing to such transfer;
(ii) in the case of a Transfer of
Units by any Partner or Assignee other than the General Partner, the
General Partner shall have consented in writing to such Transfer (which
consent may be withheld in the sole and absolute discretion of the
General Partner except for a Transfer of Units pursuant to the
dissolution of the Fund, in which case the General Partner shall
consent) and in the case of a Transfer of Units by the General Partner
(other than Units held by ENBC or its Successors or Assignees), a
Majority Interest of Partners other than the General Partner shall have
consented in writing to such Transfer (which consent may be withheld in
the sole and absolute discretion of such Partners);
(iii) such Transfer shall be made by
means of an assignment in such form as shall be reasonably satisfactory
to the General Partner;
(iv) the Partnership shall have
received advice of counsel satisfactory to the General Partner to the
effect: (a) that the proposed Transfer is permissible under the
Securities Act of 1933, as amended, the rules and regulations of the
Securities and Exchange Commission thereunder and all applicable state
securities laws; and (b) that the proposed Transfer will not adversely
affect the classification of the Partnership as a partnership for
federal income tax purposes;
(v) the Assignee shall have
executed and delivered a counterpart signature page to the Pledge
Agreement, as such term is defined in the Secured Loan Agreement; and
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(vi) the assignor and Assignee,
and, if deemed necessary by the General Partner, all other Partners,
shall have executed all such certificates and other documents and
performed all such acts as the General Partner reasonably deems
necessary or appropriate to effect a valid transfer of the Units being
transferred, and to preserve the rights, status and existence of the
Partnership.
(b) The Partnership shall, after the effective date
of any Transfer pursuant to the provisions of this Section 7.3, pay all
Distributions on account of the Units so transferred to the Assignee, provided,
however, that if instructed to do so in writing by the assignor and the
Assignee, the General Partner shall cause the Partnership to pay to the assignor
a portion of the Tax Distribution provided for in Section 6.2 that would
otherwise have been payable to the Assignee for the year in which the Transfer
occurs, equal to the amount that would have been payable under Section 6.2 with
respect to the Units transferred if the period beginning on the first day of the
fiscal year in which the Transfer occurred and ending on the effective date of
the Transfer had been a separate fiscal year of the Partnership. Any such
Distribution paid to the assignor shall be treated as if paid to the Assignee
for purposes of determining the Capital Account balance of the Assignee.
(c) Any Partner who Transfers all of his Units in
the Partnership shall, upon the effective date of such Transfer, cease to be a
Partner for all purposes, except that no assignment of all or any portion of his
Units in the Partnership shall relieve the assignor of his obligations under
this Agreement whether arising prior to or subsequent to such Transfer.
(d) An Assignee who has not become a substitute or
additional Partner in the manner provided in this Agreement shall have no rights
whatsoever in respect of the Partnership except the rights specifically accorded
him by the terms of this Agreement. The provisions of this Agreement shall be
binding on all Assignees.
(e) No Assignee of Units shall have the right to
become a substitute or additional Partner unless the conditions set forth in
Section 7.3 (a) (i) through (vi) have been satisfied and:
(i) the General Partner and a
Majority Interest of Partners other than the assignor shall have
consented in writing to the substitution or addition of such Person as
a Partner (which consent of the General Partner or Partners may be
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withheld in the sole and absolute discretion of the General Partner or
Partners); and
(ii) the Assignee shall have paid
to the Partnership the costs and expenses (including attorneys' fees
and filing costs) incurred in effecting the substitution or addition.
(f) Notwithstanding anything to the contrary
herein, (i) the General Partner and Partners shall not cause or permit Units to
become traded on an established securities market and (ii) the General Partner
and Partners shall withhold their consent to any Transfer that, to the General
Partner's knowledge after reasonable inquiry, would otherwise be accomplished by
a trade on a secondary market (or the substantial equivalent thereof). For
purposes of this subsection the terms "traded on an established securities
market" and "secondary market (or the substantial equivalent thereof)" shall
have the meanings set forth in Sections 469(k)(2) and 7704 of the Code and any
regulations promulgated thereunder that are in effect at the time of the
proposed Transfer.
Section 7.4 Admission of Additional Partners. Persons
acquiring Units for additional capital pursuant to Section 4.12 shall be
admitted to the Partnership as Partners as provided in such Section 4.12.
Section 7.5 Resignation of Partners Prohibited. No Partner
shall have the right to resign or withdraw from the Partnership as a Partner
(except that this restriction shall not prevent any Partner from transferring
its interest in the Partnership to the extent otherwise permitted by Section
7.3).
ARTICLE VIII
Section 8.1 Management of the Partnership.
(a) The business and affairs of the Partnership
shall be managed by the General Partner, subject to the limitations expressly
set forth in this Agreement. The General Partner shall have full authority to
act for the Partnership in all matters in connection with or relating to the
Partnership's Business.
(b) The General Partner of the Partnership shall be
Einstein/Noah Bagel Partners, Inc., a California corporation. The General
Partner may be removed, and a successor General Partner elected, by the vote of
a Majority Interest of the Partners; provided, however, that the General Partner
may only be removed if at the same time a successor General Partner is elected
and the successor
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General Partner acquires at least 1% of the then outstanding Units in the
Partnership, treating as outstanding for this purpose any Units with respect to
which options have been granted and are outstanding under the Partnership's Unit
Option Plan.
(c) The General Partner shall possess and enjoy all
the rights and powers of a general partner under the Act, except as otherwise
provided for by this Agreement. On behalf of the Partnership and in furtherance
of the business of the Partnership, the General Partner shall have the authority
to perform all acts which the Partnership is authorized to perform, without the
consent of the Partners, including the authority to:
(i) purchase or otherwise acquire,
outright or by lease, at such time or times, for such prices and on
such terms as it deems desirable, real or personal property, tangible
or intangible, of all types for use in the Partnership's business,
which property may be owned at the time of such purchase by the General
Partner or its Affiliates;
(ii) execute and deliver such
documents, instruments or agreements as the General Partner may deem
necessary or desirable for the acquisition, operation and disposition
of the Partnership's business and the investment, management and
maintenance of its assets, or for other Partnership purposes, and
amendments, revisions and substitutions to any of the foregoing,
including, without limitation, the Area Development Agreement, the
License Agreements, the Secured Loan Agreement and all exhibits thereto
and documents contemplated therein, the ENBC Note, and any and all
other documents related to, or in connection with, the formation of the
Partnership and the acquisition of the business and assets of the
Partnership;
(iii) acquire, and make all
decisions relating to, any interests of the Partnership in any
corporation, partnership, limited liability company, joint venture, or
other entity, including, without limitation, decisions relating to: (a)
the execution of subscription, shareholders', partnership, operating,
limited liability company or joint venture agreements, voting
agreements, or the like having such terms as the General Partner, in
its sole discretion, shall determine or consent to; (b) the operation,
financing or acquisition or sale of properties of such entity, and (c)
the sale of the Partnership's interest in the entity;
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(iv) enter into leases, licenses,
sublicenses, franchises or other agreements with respect to all or any
portion of the Partnership's property, whether or not such leases,
licenses or agreements (including renewal or option terms) shall extend
beyond the date of termination of the Partnership, upon such terms as
it deems proper;
(v) compromise, submit to
arbitration, ▇▇▇ on, or defend all claims in favor of or against the
Partnership;
(vi) do all acts it deems
necessary or appropriate for the protection and preservation of the
Partnership's assets, including insuring the business and assets of the
Partnership in such amounts and against such risks as the General
Partner deems advisable;
(vii) subject to the provisions of
Section 8.1(f), sell or otherwise dispose of any or all of the assets
of the Partnership in one or more transactions at any time;
(viii) finance any assets or
activities of the Partnership or refinance, increase, modify,
consolidate, prepay or extend any debts, mortgages or other security
obligations of the Partnership; borrow money (including borrowings from
the General Partner or any other Partner or their Affiliates, there
being no obligation, however, for the General Partner or any of their
Affiliates to make any such loan) on a secured or unsecured basis and
grant or pledge Partnership assets as security for any such loan and
confess a judgment against the Partnership in connection therewith;
(ix) hold the Partnership assets
in the Partnership name or the name of one or more nominees;
(x) open one or more bank
accounts in the name of the Partnership or in any other name in which
the Partnership's funds are to be held, make deposits therein, draw
funds therefrom and deal in or with the Partnership's funds in such
manner as it may deem appropriate;
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(xi) make distributions of
Partnership funds or assets to the Partners and Assignees as provided
for by this Agreement; and
(xii) make such income tax
elections as it deems appropriate or desirable, in its sole
discretion exercise all rights, powers and duties as Tax Matters
Partner, as contemplated by the Code and the Regulations, prepare and
file tax returns for the Partnership with federal, state and local
authorities; file amendments to such returns; participate on behalf of
the Partnership in audits of such returns; consent to extensions
relating to such returns; execute on behalf of the Partnership
documents relating to the settlement of tax proceedings involving the
Partnership or its tax returns; participate at the Partnership's
expense in administrative and judicial proceedings, including appeals,
relating to the Partnership's tax returns or its tax liabilities; and
settle issues relating to the Partnership's federal and, to the extent
required, state and local income tax returns even though the Partners
rather than the Partnership shall be subject to tax as so determined.
(d) The General Partner may, on behalf of the
Partnership, employ, engage, retain or deal with any persons, corporations or
other entities (including its Affiliates) to act in such capacities as the
General Partner may determine.
(e) With respect to third parties, the signature of
the General Partner on any agreement, contract, mortgage, deed of trust,
promissory note, instrument or other document shall be sufficient to bind the
Partnership in respect thereof and shall conclusively evidence the authority of
the General Partner with respect thereto, and no Person need look to any other
evidence or require joinder or consent of any other Person.
(f) In the event that the General Partner proposes
a merger or consolidation of the Partnership with or into any Other Business
Entity or a sale of substantially all of the assets of the Partnership, such
merger, consolidation or sale shall require the approval of a Majority Interest
of the Units owned by Partners.
(g) Any approval, consent, vote or other action of
the Partners required or contemplated by this Agreement may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the approval, consent, vote or other action so taken is
signed by Partners holding
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the requisite number of Units and delivered to the General Partner. Any failure
to give notice of any such approval, consent, vote or other action to the
Partners not executing a consent shall not effect the validity of the approval,
consent, vote or other action.
(h) ENBC shall have the power to elect the board of
directors of the General Partner; provided, that ENBC shall be required to elect
as directors of the General Partner at least two persons who are not officers,
directors or employees of ENBC or Boston Chicken, Inc.
Section 8.2 Certain Obligations of General Partner. The
General Partner shall:
(a) arrange for Partnership records and books of
account to be maintained in which shall be entered fully and accurately all
transactions and other matters relative to the Partnership business;
(b) make available to any Partner, at such
Partner's request, during normal business hours and at the principal place of
business of the Partnership, all books and records of the Partnership required
to be maintained by this Section 8.2, and such other financial information as
shall be reasonably requested by any Partner; provided, that the General
Partner shall not be required to disclose to any Partner information regarding
the Partnership if such information is acquired by the Partnership or the
General Partner under circumstances where the disclosure thereof to a Partner
may be in violation of any fiduciary duty of the Partnership or the General
Partner or in violation of a confidentiality agreement to which the Partnership
or the General Partner is subject;
(c) use its best efforts to provide, or cause to be
provided, to all Partners at least the following reports, within the time period
specified below:
(i) within 90 days after the end
of each fiscal year, a statement of operations for such fiscal year and
a balance sheet as of the end of such fiscal year, which shall be
prepared in accordance with generally accepted accounting principles
and audited by a firm of independent certified public accountants; and
(ii) within 75 days after the end
of each fiscal year, the information necessary for Partners to prepare
so much of their federal and all applicable state income tax returns as
relates to the Partnership; and
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(iii) as soon as practicable after
the end of each quarter (as determined for federal estimated tax
purposes), such information relating to the Partnership as is
reasonably necessary for each Partner (or its constituent partners or
shareholders) to determine its (or their) quarterly federal and state
estimated tax liability.
(d) cause the Partnership to timely file all
required Partnership federal, state, local and foreign tax and information
returns; and
(e) cause the Partnership to be duly qualified in
each jurisdiction in which it proposes to commence business if such
qualification is necessary to avoid subjecting Partners to additional liability.
Section 8.3 Liability of General Partner for Certain Acts or
Omissions. The doing of any act or the failure to do any act by the General
Partner, the effect of which may cause or result in loss or damage to the
Partnership, shall not subject the General Partner to any liability to the
Partners if the General Partner acted in good faith and in a manner the General
Partner reasonably believed to be in or not opposed to the best interests of the
Partnership.
Section 8.4 Indemnification.
(a) To the fullest extent permitted under the Act,
the Partnership shall indemnify any Person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Partnership) by reason of the
fact that he is or was a General Partner or Partner of the Partnership, or a
director, management committee or advisory member or officer (or Person serving
in any capacity equivalent to any of the foregoing) of the Partnership or a
General Partner, or is or was serving at the request of the Partnership as a
director, management or advisory committee member or officer (or in any capacity
equivalent to any of the foregoing) of another corporation, part nership, joint
venture, trust or other enterprise (all of the foregoing being herein
collectively referred to as "Covered Capacities"), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reason ably incurred by him in connection with such action, suit, or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Partnership, and, with respect to any
criminal action or pro ceeding, had no reasonable cause to believe his conduct
was unlawful.
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(b) The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or pleas of nolo
contendre or its equivalent, shall not of itself create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in and not opposed to the best interests of the Partnership, and with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful. To the fullest extent permitted under the Act, the
Partnership shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the Partnership to procure a judgment in its favor by reason of the
fact that he is or was serving in any of the Covered Capacities, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Partnership and except that no indemnification shall be made in respect to
any claim, issue or matter as to which such action or suit alleges misconduct in
the performance of his duty to the Partnership unless and then only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, and in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
be indemnified for such expenses which the court shall deem proper.
(c) Anything in Sections 8.4(a) or (b) to the
contrary notwithstanding, to the extent that any person referred to therein has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to therein or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Sections 8.4(a) or
(b) (unless ordered by a court) shall be made by the Partnership only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in Sections 8.4(a) or (b). Such determination
shall be made by the General Partner. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Partnership in advance
of the final disposition of such action, suit or proceeding, as authorized by
the General Partner in the specific case upon receipt of any undertaking by or
on behalf of the indemnitee to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Partnership.
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(e) The indemnification provided by this Section
8.4 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, agreement, or otherwise, and
shall continue as to a person who has ceased to serve in a Covered Capacity and
shall inure to the benefit of his successors in interest, including but not
limited to his trustees, heirs, executors, and administrators.
(f) The Partnership shall have the power to
purchase and maintain insurance on behalf of any person who is or was serving
in any of the Covered Capacities and incurred by him in any such capacity or
arising out of his status as such, whether or not the Partnership would have
the power to indemnify him against such liability under the provisions of this
Section.
(g) Each Person who is or was an employee or agent
of the Partnership or an employee or agent of a General Partner, or who is or
was serving at the request of the Partnership as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise may be
indemnified (or covered by insurance), in the manner and to the extent provided
in this Section 8.4 for persons acting in Covered Capacities, at the discretion
of the General Partner.
(h) The Partnership shall have the right to assume
the defense of any action, suit or proceeding in connection with which any
Person is entitled to indemnification under this Section 8.4 and to select
counsel for such purpose. No Person entitled to indemnification hereunder shall
consent to entry of any judgment or enter into any settlement in connection with
any such action, suit or proceeding without the consent of the Partnership, and
the Partnership shall not, without the consent of each such Person that is
entitled to indemnification, consent to entry of any judgment or enter into any
settlement in connection with such action, suit or proceeding which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Person of a release from all liability in respect to such claim or
litigation.
(i) Indemnification under this Section 8.4 shall
not be available to any Person in the case of any action, suit or proceeding
brought against the Partnership by or on behalf of such Person.
Section 8.5 General Partner as Limited Partner. To the
extent the General Partner has invested in the Partnership as a Limited Partner,
it shall acquire the same rights and obligations as other Limited Partners.
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Section 8.6 Tax Matters Partner.
(a) The General Partner is hereby appointed the "Tax
Matters Partner" of the Partnership for all purposes pursuant to the Code and
the Treasury Regulations. The General Partner is hereby authorized to designate
another Partner of the Partnership to serve as the Tax Matters Partner. The Tax
Matters Partner will (i) furnish to each Partner or Assignee affected by an
audit of the Partnership income tax returns a copy of each notice or other
communication received from the Internal Revenue Service or applicable state
authority, (ii) keep each such Partner and Assignee informed of any
administrative or judicial proceeding for the adjustment at the partnership
level of any "partnership items," and (iii) allow each such Partner and Assignee
an opportunity to participate in all such administrative and judicial
proceedings.
(b) The Tax Matters Partner shall have the authority
conferred on a Tax Matters Partner by the Code and the Treasury Regulations.
(c) The Partnership is not obligated to pay any
fees or other compensation to the Tax Matters Partner in his capacity as such.
However, the Partnership will reimburse the Tax Matters Partner for any and all
out-of-pocket costs and expenses (including reasonable attorneys and other
professional fees) incurred by him in his capacity as Tax Matters Partner. Each
Partner who elects to participate in administrative tax proceedings will be
responsible for its own expenses incurred in connection with such
participation. In addition, the cost of any adjustments to a Partner and the
cost of any resulting audits or adjustments of a Partner's tax return will be
borne solely by the affected Partner.
(d) The Partnership will indemnify, defend and hold
the Tax Matters Partner harmless from and against any loss, liability, damage,
cost or expense (including reasonable attorneys' and other professional fees)
sustained or incurred as a result of any act or decision concerning Partnership
tax matters and within the scope of his responsibilities as Tax Matters Partner,
so long as such act or decision was not made fraudulently or in bad faith and
did not constitute willful or wanton misconduct or gross negligence.
ARTICLE IX
Section 9.1 Dissolution of Partnership. Upon the Bankruptcy
of any Partner, the Partnership shall be dissolved unless a Majority Interest of
the remaining Partners shall elect, within a period of 90 days from the date of
such occurrence, to
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continue the Partnership and, if necessary, designate a successor General
Partner. The Partnership shall also be dissolved upon the happening of any of
the following events:
(a) the action of the General Partner, with the
approval of not less than a Majority Interest of the Partners, to dissolve the
Partnership; or
(b) the entry of a decree of judicial dissolution
under Section 17-802 of the Act or as otherwise provided in the Act.
The Partnership shall not be dissolved upon the occurrence of
any other event.
Section 9.2 Final Accounting. Upon dissolution and
termination of the Partnership, an accounting shall be made of the accounts of
each Partner and of the Partnership's assets, liabilities and operations, from
the date of the last previous accounting to the date of such termination.
Section 9.3 Liquidation; Distribution. In the event of the
dissolution of the Partnership, the General Partner (or in the event the
dissolution is caused by the Bankruptcy or Dissolution of the General Partner, a
person selected by a Majority Interest of the Partners) shall act in an orderly
manner as liquidating trustee and, in an orderly manner, shall wind up the
affairs of the Partnership and, after paying all debts and liabilities of the
Partnership, including all costs of dissolution, shall distribute the remaining
assets in the following order of priority:
(a) first, to the establishment of any reserves
which the liqui dating trustee may deem reasonably necessary for any contingent
or unforeseen liabili ties or obligations of the Partnership arising out of or
in connection with the Partnership, which reserves may, at the option of the
liquidating trustee, be paid over by the liquidating trustee to an escrow agent,
to be held by it for the purpose of disbursing such reserves in payment of any
of the aforementioned contingencies, and, at the expiration of such period as
the liquidating trustee shall deem advisable, for distributing the balance
thereafter remaining in the manner hereinafter provided; and
(b) second, to the Partners and Assignees in
accordance with their positive Capital Account balances, after taking into
account all Capital Account adjustments for the taxable year during which the
liquidation occurs, in compliance with Treasury Regulations Section
1.704-1(b)(2)(ii)(b)(2).
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Section 9.4 Termination. A reasonable time shall be
allowed for the orderly liquidation of the assets of the Partnership and the
discharge of liabilities to creditors so as to enable the General Partner or
liquidating trustee to minimize the normal losses attendant upon a liquidation.
Each of the Partners shall be furnished with a statement prepared by the
Partnership's then certified public accountant, which shall set forth the
assets and liabilities of the Partnership as at the date of complete
liquidation. Upon compliance with the distribution plan set forth in Section
10.3 (including any payment over to any escrowee if there are sufficient funds
therefor), the Partners shall cease to be such, and the General Partner or the
liquidating trustee shall execute, acknowledge, and cause to be filed a
certificate of cancellation of the Partnership. Upon completion of the
dissolution, winding up, liquidation and distribution of the liquidation
proceeds, the Partnership shall terminate.
ARTICLE X
Section 10.1 Notices. Except as otherwise provided herein,
all notices and other written communications required or permitted to be given
under this Agreement shall be in writing and shall be sent by Federal Express or
other reliable courier, transmitted by fax, personally delivered or mailed by
certified or registered mail, return receipt requested. Any notices to be given
to the Partners shall be given or delivered to the addresses set forth on
Schedule A hereto or such other address of which a Partner may notify the
General Partner in writing. Any notices to be given to the Partnership shall be
sent or delivered to the office of the Partnership as specified herein or at
such other address as the General Partner may specify in a notice to all of the
Partners. Each notice given to the Partners or the Partnership shall also be
given to Einstein/Noah Bagel Corp., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: General Counsel or to such other address of which ENBC shall
notify the Partnership in writing. Notices sent for next day delivery by Federal
Express or other reliable courier shall be deemed given the next business day
after sending, notices transmitted by fax or personally delivered shall be
deemed given when so transmitted or delivered, respectively, and notices sent by
certified or registered mail shall be deemed given on the third business day
after sending.
Section 10.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the Act.
Section 10.3 Amendments.
(a) Subject to the provisions of Sections 10.3(b)
and (c), this Agreement may be amended only in writing with the written consent
of Persons holding a majority of all outstanding Units.
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(b) Amendments to this Agreement which are of a
clerical or inconsequential nature or which may be required to comply with the
Act or the terms of this Agreement, and which do not adversely affect the
Partners in any material respect or which are required or contemplated by this
Agreement, including, without limitation, amendments necessary to reflect the
Transfer of Units or the admission, substitution or withdrawal of a Partner that
is otherwise permitted by this Agreement or the change in the name of the
registered agent, the address of the registered office or the address of the
office at which Partnership records are kept, may be made by the General
Partner, without notice to or consent of any Partner, through the exercise of
the power of attorney granted the General Partner by Section 10.4 of this
Agreement.
(c) No amendment shall increase the liability of
any Partner, decrease the Capital Account of any Partner, decrease the number
of Units of any Partner or affect the right of any Partner to receive
Distributions, except in each case with the written consent of the Partner
adversely affected thereby.
Section 10.4 Power of Attorney. Each Partner does irrevocably
constitute and appoint the General Partner, as his true and lawful attorney and
agent (with full power of substitution) with full power and authority in his
name, place and stead to execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (i) all certificates and other
instruments (including counterparts of this Agreement) which the General Partner
deems necessary or appropriate to establish or to qualify or continue the
Partnership as a limited partnership in the State of Delaware and in such other
states as the General Partner may determine; (ii) all instruments which the
General Partner deems necessary or appropriate to effect an amendment to this
Agreement in accordance with the terms of this Agreement; (iii) all conveyances
and other instruments which the General Partner deems necessary or appropriate
to effect the dissolution and termination of the Partnership; and (iv) all
instruments relating to the admission of additional or substitute Partners or
withdrawal of Partners in accordance with the terms of this Agreement. The
foregoing grant of authority: (a) shall survive the death, incompetence or
termination of existence of any or all of the Partners; (b) may be executed by
the General Partner for the Partners by the signature of the General Partner
together with a list of all of the Partners; (c) shall bind any person who
becomes a substitute or additional Partner pursuant to this Agreement; and (d)
shall continue to bind any Partner who assigns the whole or any portion of his
interest, except that where the Assignee thereof has been approved for admission
to the Partnership as a substitute Partner pursuant to this Agreement, then, as
to such assigning Partner this power of attorney shall survive the delivery of
such assignment for the sole purpose of enabling the General Partner to execute,
acknowledge and file
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any instrument necessary to effect such substitution and file any instrument
necessary to effect such substitution. Upon the request of the General Partner,
the Partners shall execute any certificate or other instrument with respect to
which the General Partner could have invoked this power of attorney.
Section 10.5 Successors and Assigns. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Partners, the Assignees and their respective legal representatives,
heirs, successors and assigns.
Section 10.6 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
Section 10.7 Fiscal Year. The fiscal year of the Partnership
shall be the period, if any, specified in the Secured Loan Agreement or, if none
is so specified, the period selected by the General Partner. The Partnership
shall use the accrual method of accounting for tax and financial reporting
purposes.
Section 10.8 Modifications to be in Writing. This Agreement
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and no amendment, modification or alteration of the terms
hereof shall be binding unless the same be in writing and adopted in accordance
with the provisions of Section 10.3.
Section 10.9 Action for Partition or Distribution in Kind.
Each of the parties hereto irrevocably waives any right which it may have to
partition Partnership property or maintain an action for distribution of
Partnership property in kind.
Section 10.10 Captions. The captions herein are inserted for
convenience of reference only and shall not affect the construction of this
Agreement.
Section 10.11 Pronouns and Plurals. Whenever the context may
require, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa.
Section 10.12 Validity and Severability. If any provision
herein shall be held invalid or unenforceable, such decision shall not affect
the validity or enforceability of any other provisions hereof, all of which
other provisions shall, in such case, remain in full force and effect.
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Section 10.13 Statutory References. Each reference in this
Agreement to a particular statute or regulation, or a provision thereof, shall,
at any particular time, be deemed to be a reference to such statute or
regulation, or provision thereof, or to any similar or superseding statute or
regulation, or provision thereof, as at such time in effect.
Section 10.14 Primacy of Certain Agreements. Notwithstanding
anything to the contrary contained herein, the Partners acknowledge that the
Partnership is currently and may in the future be subject to certain agreements,
including the Secured Loan Agreement, the Area Development Agreement and the
License Agreement, with terms that are or may be inconsistent with the
provisions of this Agreement, and that the provisions of those agreements shall
control in the event of any conflict herewith and may limit or preclude the
Partners' ability to exercise their rights or realize any benefits otherwise
available to them hereunder. The Partners further agree that any distribution
made or compensation paid in violation of the Secured Loan Agreement, the Area
Development Agreement or any License Agreement shall be reimbursed by the
recipient thereof upon demand by the Partnership.
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This Agreement is accepted and agreed to by:
GENERAL PARTNER:
EINSTEIN/NOAH BAGEL
PARTNERS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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SCHEDULE A
GENERAL PARTNER
Name Mailing Address
Einstein/Noah Bagel Partners, Inc. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
LIMITED PARTNERS
Mailing Capital Number
Name Address Contribution of Units
