EXHIBIT 10.1
AMENDED AND RESTATED
PROJECT AND
APPROVED SUPPLIER AGREEMENT
May 1, 1998
among
EINSTEIN/NOAH BAGEL CORP.,
▇▇▇▇▇▇ BAGEL SUPPLY COMPANY, LLC,
▇▇▇▇▇▇ BAKERIES, INC.,
▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇
and
▇▇▇▇ ▇. ▇▇▇▇▇▇
AMENDED AND RESTATED
PROJECT AND
APPROVED SUPPLIER AGREEMENT
This amended and restated agreement (the "Agreement") is made and
entered into as of this 1/st/ day of May, 1998 by and among Einstein/Noah Bagel
Corp., a Delaware corporation ("ENBC"), ▇▇▇▇▇▇ Bagel Supply Company, LLC, an
Indiana limited liability company (the "Supplier"), ▇▇▇▇▇▇ Bakeries, Inc., an
Indiana corporation ("▇▇▇▇▇▇"), ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇. The Supplier and ▇▇▇▇▇▇ are herein sometimes collectively referred to
as the "▇▇▇▇▇▇ Companies", and ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
are herein sometimes collectively referred to as the "Harlans."
RECITALS
--------
ENBC, directly and through its wholly-owned subsidiaries, owns and
operates retail bagel stores, and ENBC has also granted franchise rights to own
and operate retail bagel stores under trademarks owned by ENBC and its
subsidiaries and using ENBC's system. The Supplier previously entered into a
Project and Approved Supplier Agreement with ENBC dated as of May 24, 1996,
which agreement was amended and restated as of August 1, 1997 (the "Prior
Project Agreement") pursuant to which ENBC designated Supplier as an approved
supplier of ENBC to supply frozen bagel dough products to ENBC and its
subsidiaries and franchisees. The parties desire to amend and restate the Prior
Project Agreement, all as hereinafter set forth.
COVENANTS
---------
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1.0 DEFINITIONS
1.1 As used herein the following terms shall have the meanings given
them below:
"Accounting Period" shall mean one of twelve (12) periods of four or
five consecutive weeks in each fiscal year of the Supplier during the Term that
is designated by the Supplier as an accounting period.
"Authorized Recipients" shall have the meaning ascribed to it in Section
6.3.
"Bagel Lines" shall mean the Original Bagel Line and the Second Bagel
Line.
"Category A Products" shall mean Products consisting of frozen bagels
produced by Supplier that are intended for resale under any brand name owned by
ENBC and produced using Formulations, Proprietary Information or patented
technology owned by ENBC.
"Category B Products" shall mean Products consisting of frozen bagels
produced by Supplier that are not Category A Products.
"ENBC Allocated Charges" shall mean those costs of ENBC charged to the
Supplier as described in Section 7.7.
"ENBC Franchisee" shall mean a franchisee or licensee of ENBC.
"ENBC Subsidiary" shall mean a subsidiary of ENBC.
"Encumbrances" shall mean liens, mortgages, pledges, charges,
encumbrances, assessments, restrictions, covenants, easements or title defects
of any nature whatsoever.
"Equipment Lease" shall mean that certain amended and restated lease
agreement between the Supplier and ENBC contemplated by Section 2.1 hereof
(including any equipment schedule thereto).
"Equipment Financing Documents" shall mean the Equipment Lease,
together with all other agreements, instruments and documents contemplated by
such agreement.
"Financing Documents" shall mean the Equipment Financing Documents and
the Working Capital Financing Documents.
"Formulations" shall have the meaning ascribed to it in Section 6.5.
"Lease" shall mean that certain Lease Agreement dated August 27, 1996
between ▇▇▇▇▇▇ and the Supplier.
"Leasehold Premises" shall have the meaning ascribed to it in Section
3.6.
"Materials Cost" shall mean the Supplier's cost of ingredients and
packaging used in manufacturing the Products during each Quarterly Period,
determined in the manner set forth in Exhibit A hereto. For this purpose,
ingredients shall include corn meal used in manufacturing the Products.
"Mortgage" shall mean the existing mortgage loan on the land and
buildings owned by ▇▇▇▇▇▇, consisting of the Production Facility and the
facility adjacent thereto, made by the Mortgage Holders.
"Mortgage Holders" shall mean LaSalle National Bank and KeyBank
National Association.
"Occupancy Cost" shall mean building rental expense, real estate
taxes, utilities, maintenance and repair and property casualty insurance.
2
"Option Agreement" shall mean that certain amended and restated option
agreement of even date herewith among ENBC, the Supplier and the Harlans.
"Original Bagel Line" shall mean the first ▇▇▇▇▇▇▇ bagel line owned by
ENBC and leased to and operated by the Supplier, together with the other
components of such bagel production line installed in the Production Facility,
including without limitation mixers, bagel cooking unit, proofer, retarder,
blast freezer and packaging equipment.
"Procedures" shall have the meaning ascribed to it in Section 6.5.
"Production Facility" shall mean ▇▇▇▇▇▇'▇ 575,000 square foot
production facility in Avon, Indiana as described in the Lease.
"Products" shall mean frozen bagel dough products.
"Proprietary Information" shall have the meaning ascribed to it in
Article 12.0.
"Quarterly Period" shall mean the first three Accounting Periods of
the Supplier during each fiscal year of the Supplier during the Term and each
subsequent period of three Accounting Periods thereafter during said fiscal
year.
"Second Bagel Line" shall mean the second ▇▇▇▇▇▇▇ bagel line owned by
ENBC and leased to and operated by the Supplier, together with the other
components of such bagel production line installed in the Production Facility,
including without limitation mixers, bagel cooking unit, additional components
for the proofer and retarder constituting a portion of the Original Bagel Line,
modifications to the blast freezer constituting a portion of the Original Bagel
Line, and packaging equipment.
"Specifications" shall have the meaning ascribed to it in Section 6.5.
"Term" shall mean the period commencing on the date hereof and
continuing until the date this Agreement expires or is terminated pursuant to
Article 13.0 hereof.
"Title Policy" shall mean that certain Leasehold Loan Policy dated
August 30, 1996 issued by Chicago Title Insurance Company (Policy No. 15-0140-
109-0000001).
"Working Capital Financing" shall mean the loan by the Working Capital
Lenders to the Supplier.
"Working Capital Financing Documents" shall mean the revolving credit
agreement between the Working Capital Lenders and the Supplier, together with
all other agreements, instruments and documents contemplated by such agreement.
3
"Working Capital Lenders" shall mean LaSalle National Bank and KeyBank
National Association.
ARTICLE 2.0 CLOSING OF THE AGREEMENT
2.1 On the date hereof, the parties shall enter into an amended and
restated lease agreement and related equipment schedule, governing the
Supplier's lease of equipment from ENBC, in the form agreed by the Supplier and
ENBC.
2.2 On the date hereof, the parties to the amended and restated option
agreement dated as of August 15, 1997 and the right of first refusal agreement
dated as of August 27, 1996 among ENBC, ▇▇▇▇▇▇ and the Harlans, shall enter into
an amended and restated option agreement and an amended and restated right of
first refusal agreement, respectively, in the form agreed by them.
2.3 ENBC shall cause Einstein/Noah Bagel Partners, L.P., a subsidiary
of ENBC, to pay to Supplier $100,000 in cash, within 15 days after the execution
and delivery of this Agreement.
ARTICLE 3.0 REPRESENTATIONS AND WARRANTIES OF THE ▇▇▇▇▇▇ COMPANIES
In order to induce ENBC to enter into this Agreement and to perform its
obligations hereunder, the ▇▇▇▇▇▇ Companies jointly and severally represent and
warrant to ENBC that:
3.1 Each of the ▇▇▇▇▇▇ Companies is duly organized and validly
existing under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to enter into this Agreement and to carry out the
transactions and agreements contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of each of the ▇▇▇▇▇▇ Companies.
3.2 This Agreement has been duly executed and delivered by each of the
▇▇▇▇▇▇ Companies and is a valid and binding obligation of each of them,
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement by the ▇▇▇▇▇▇ Companies nor the consummation of the transactions
contemplated hereby will: (a) conflict with or violate any provision of its
organizational documents, or of any law, ordinance or regulation or any decree
or order of any court or administrative or other governmental body which is
either applicable to, binding upon or enforceable against either of the ▇▇▇▇▇▇
Companies or (b) result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under, any mortgage, contract,
agreement, indenture, will, trust or other instrument which is either binding
upon or enforceable against either of the ▇▇▇▇▇▇ Companies or the assets and
properties of either of them, except pursuant to the Working Capital Financing
Documents and the Mortgage. No permit, consent, approval or authorization of, or
declaration to or filing with, any regulatory or other governmental authority is
required in connection with the execution and delivery of this Agreement by the
▇▇▇▇▇▇ Companies and the consummation by them of the transactions contemplated
hereby, except for
4
such of the foregoing as are identified in Schedule 3.8 previously furnished to
ENBC, all of which have been obtained, and except for documents the ▇▇▇▇▇▇
Companies have executed and which are to be recorded pursuant to the Financing
Documents.
3.3 Schedule 3.3 previously furnished to ENBC accurately and
completely sets forth, with respect to each of the ▇▇▇▇▇▇ Companies: (a) the
number of shares of each class of its capital stock or other units of equity
interest which are issued and outstanding and (b) the name and address of, and
the number of shares of each class of capital stock or other units of equity
interest owned by, each of its shareholders or other equity owners. All voting
rights in each of the ▇▇▇▇▇▇ Companies are vested exclusively in its shares of
capital stock, in the case of ▇▇▇▇▇▇, and in units of equity interest, in the
case of the Supplier, and other than shareholder agreements or operating
agreements which have been provided to ENBC (the "Shareholder Agreements"),
there are no voting trusts, proxies or other agreements or understandings with
respect to the voting of the capital stock or other units of equity interest of
either of the ▇▇▇▇▇▇ Companies. Except pursuant to the Shareholder Agreements
and the right of first refusal granted to ENBC pursuant to that certain Right of
First Refusal Agreement dated as of August 27, 1996 among ENBC and the Harlans,
there are no outstanding warrants, options or rights of any kind to acquire from
either of the ▇▇▇▇▇▇ Companies, or from the shareholders or other equity owners
of either of the ▇▇▇▇▇▇ Companies, any shares of capital stock or other units of
equity interest of either of the ▇▇▇▇▇▇ Companies, and neither of the ▇▇▇▇▇▇
Companies has any obligation to acquire any of its issued and outstanding shares
of capital stock or other units of equity interest from any holder thereof.
3.4 Set forth in Schedule 3.4 are the following financial statements
of the ▇▇▇▇▇▇ Companies:
3.4.1 balance sheets of (a) ▇▇▇▇▇▇ at December 31, 1996 and
January 3, 1998; and (b) the Supplier at December 31, 1996 and January 3,
1998; and
3.4.2 statements of operations and cash flow of (a) ▇▇▇▇▇▇ for
the years ended December 31, 1996 and January 3, 1998; and (b) the Supplier
for the partial year ended December 31, 1996 and the year ended January 3,
1998.
Such financial statements, together with the balance sheet of ▇▇▇▇▇▇ at December
31, 1995 and the statement of operations and cash flow of ▇▇▇▇▇▇ for the year
ended December 31, 1995 previously delivered by ▇▇▇▇▇▇ to ENBC, present fairly
in all material respects the financial position of each of the ▇▇▇▇▇▇ Companies
covered thereby at said balance sheet dates and the results of operations and
cash flows of each of the ▇▇▇▇▇▇ Companies for each of the said periods covered,
and they have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. The balance sheet of ▇▇▇▇▇▇ at
January 3, 1998 is herein sometimes referred to as the "▇▇▇▇▇▇ Balance Sheet,"
and the balance sheet of the Supplier at January 3, 1998 is herein sometimes
referred to as the "Supplier Balance Sheet."
3.5 Neither of the ▇▇▇▇▇▇ Companies has any liabilities or
obligations, accrued, absolute, contingent or otherwise, except: (a) to the
extent reflected or taken into account in
5
determining net worth in the ▇▇▇▇▇▇ Balance Sheet or the Supplier Balance Sheet
and not heretofore paid or discharged; (b) contractual obligations of the ▇▇▇▇▇▇
Companies incurred in the ordinary course of business; (c) liabilities of the
▇▇▇▇▇▇ Companies incurred in the ordinary course of business since the date of
the ▇▇▇▇▇▇ Balance Sheet and the Supplier Balance Sheet; (d) obligations of the
▇▇▇▇▇▇ Companies under this Agreement and the other documents now or hereafter
executed in connection therewith, and (e) obligations of the ▇▇▇▇▇▇ Companies
under contracts identified in Schedule 3.9 previously furnished to ENBC.
3.6 The premises covered by the Lease (the "Leasehold Premises"): (a)
have direct access to public roads or access to public roads by means of a
perpetual access easement, such access being sufficient to satisfy the
reasonably anticipated transportation requirements of the Supplier's business to
be conducted at the Leasehold Premises; and (b) are served by all utilities,
including but not limited to water, electricity, natural gas, sewer and
telephone, in such quantity and quality as are sufficient to satisfy the
reasonably anticipated production levels and business activities of the
Supplier's business to be conducted at the Leasehold Premises. Neither of the
▇▇▇▇▇▇ Companies has received notice of: (a) any condemnation proceeding with
respect to any portion of the Leasehold Premises, and, to the best of their
knowledge, no proceeding is contemplated by any governmental authority; or (b)
any special assessment which may affect the Leasehold Premises and to the best
of their knowledge, no such special assessment is contemplated by any
governmental authority.
3.7 The Supplier has good and marketable title to all of its assets
and properties, free and clear of all Encumbrances, except as set forth in the
Financing Documents or the Title Policy or on Schedule 3.7 previously furnished
to ENBC.
3.8 The ▇▇▇▇▇▇ Companies possess all licenses and other required
governmental or official approvals, permits or authorizations, the failure to
possess which would have a material adverse effect on the business, financial
condition or results of operations of either of the ▇▇▇▇▇▇ Companies. All such
licenses, approvals, permits and authorizations are in full force and effect,
the ▇▇▇▇▇▇ Companies are in material compliance with their requirements, and no
proceeding is pending or to the best of the knowledge of the ▇▇▇▇▇▇ Companies,
threatened to revoke or amend any of them. Schedule 3.8 previously furnished to
ENBC contains an accurate and complete list of all such licenses, approvals,
permits and authorizations. None of such licenses, approvals, permits and
authorizations are or will be impaired or in any way affected by the execution
and delivery of this Agreement or the Schedule to the Equipment Lease or the
consummation of the transactions contemplated hereby.
3.9 Schedule 3.9 previously furnished to ENBC accurately and
completely lists each contract to which either of the ▇▇▇▇▇▇ Companies is a
party related to the construction of the Production Facility, and each contract
to which either of the ▇▇▇▇▇▇ Companies is a party related to the acquisition of
equipment for use in the Production Facility. None of such contracts has been
further amended or modified and each of them is in full force and effect.
Except in connection with a dispute with Greenfield Builders pertaining to the
completion of caulking work, neither of the ▇▇▇▇▇▇ Companies is in breach of or
default under any of such contracts, and no event has occurred which with the
passage of time or the giving of notice or both would cause
6
a material breach of or default under any such contract. Except in connection
with a dispute with Greenfield Builders pertaining to the completion of caulking
work, neither of the ▇▇▇▇▇▇ Companies is aware of any breach of or default under
any such contract by the other party thereto.
3.10 Except as set forth on Schedule 3.10 previously furnished to
ENBC, there are no actions, suits, claims, governmental investigations or
arbitration proceedings ("Actions") pending or, to the best of the knowledge of
the ▇▇▇▇▇▇ Companies, threatened against or adversely affecting either of the
▇▇▇▇▇▇ Companies or any of their assets or properties and, to the best of the
knowledge of the ▇▇▇▇▇▇ Companies, there is no basis for any of the foregoing.
Except for ▇▇▇▇▇▇'▇ settlement agreement with the West Central Conservancy
District, there are no outstanding orders, decrees or stipulations issued by any
federal, state, local or foreign judicial or administrative authority in any
proceeding to which either of the ▇▇▇▇▇▇ Companies is or was a party.
3.11 Each of the ▇▇▇▇▇▇ Companies is in material compliance with all
laws, regulations and orders applicable to it, its assets, properties and
business. Neither of the ▇▇▇▇▇▇ Companies has received notification of any
asserted past or present failure to comply with any laws, and to the best of
their knowledge, no proceeding with respect to any such violation is
contemplated.
3.12
3.12.1 Neither of the ▇▇▇▇▇▇ Companies has transported, stored,
treated or disposed, nor has either of them allowed or arranged for
any third parties to transport, store, treat or dispose of Hazardous
Substances or other waste to or at any location other than a site
lawfully permitted to receive such Hazardous Substances or other waste
for such purposes, nor has either of them performed, arranged for or
allowed by any method or procedure such transportation, storage,
treatment or disposal in contravention of any laws or regulations.
Neither of the ▇▇▇▇▇▇ Companies has disposed, or allowed or arranged
for any third parties to dispose, of Hazardous Substances or other
waste upon the Leasehold Premises, except as permitted by law. For
purposes of this Section 3.12.1, the term "Hazardous Substances" shall
have the meaning given it in the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Sections 9601, et seq.), as
amended, and the regulations promulgated pursuant thereto ("CERCLA"),
or any similar state law.
3.12.2 Since the acquisition of the Leasehold Premises, ▇▇▇▇▇▇
has not permitted to occur, nor is there presently occurring, a
Release of any Hazardous Substance on, into or beneath the surface of
the Leasehold Premises, except that the parties acknowledge that
▇▇▇▇▇▇ discharges wastewater into the sewage treatment plant of the
West Central Conservancy District. For purposes of this Section
3.12.2, the term "Release" shall mean releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping.
7
3.12.3 Neither of the ▇▇▇▇▇▇ Companies has transported or
disposed, nor has it allowed or arranged for any third parties to
transport or dispose, any Hazardous Substance or other waste to or at
a site which, pursuant to CERCLA or any similar state law: (a) has
been placed on the National Priorities List or its state equivalent,
or (b) the Environmental Protection Agency or the relevant state
agency has proposed or is proposing to place on the National
Priorities List or its state equivalent. Neither of the ▇▇▇▇▇▇
Companies has received notice, or has any knowledge of any facts which
could give rise to any notice, that either of the ▇▇▇▇▇▇ Companies is
a potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA or any other
applicable law or regulation. Neither of the ▇▇▇▇▇▇ Companies has
submitted nor was either of them required to submit any notice
pursuant to Section 103(c) of CERCLA with respect to the real estate
that is covered by the Lease. Neither of the ▇▇▇▇▇▇ Companies has
received any written or oral request for information in connection
with any federal or state environmental cleanup site. Neither of the
▇▇▇▇▇▇ Companies has undertaken (or been requested to undertake) any
response or remedial actions or clean-up action of any kind at the
request of any federal, state or local governmental entity, or at the
request of any other person or entity.
3.12.4 Neither of the ▇▇▇▇▇▇ Companies uses, or has used, any
Underground Storage Tanks, and, except as set forth in Schedule 3.12
previously furnished to ENBC, the ▇▇▇▇▇▇ Companies are not aware of
any Underground Storage Tanks previously or currently on or under the
Leasehold Premises. For purposes of this Section 3.12.4, the term
"Underground Storage Tanks" shall have the meaning given it in the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et
seq.).
3.12.5 Schedule 3.12 previously furnished to ENBC (together
with information furnished to ENBC in writing on April 17, 1998)
identify (a) all environmental audits, assessments or occupational
health studies relating to the assets, properties or business of
either of the ▇▇▇▇▇▇ Companies undertaken by governmental agencies or
either of the ▇▇▇▇▇▇ Companies or their agents; (b) the results of any
ground, water, soil, air or asbestos monitoring undertaken with
respect to the Leasehold Premises, except for tests of sewage
discharge, which test results are available to ENBC, if requested; (c)
all written communications between either of the ▇▇▇▇▇▇ Companies and
any environmental agencies within the past three years; and (d) all
citations issued to either of the ▇▇▇▇▇▇ Companies within the past
three years under the Occupational Safety and Health Act (29 U.S.C.
Sections 651 et seq.).
ARTICLE 4.0 REPRESENTATIONS AND WARRANTIES OF ENBC
In order to induce the ▇▇▇▇▇▇ Companies to enter into this Agreement
and to perform their obligations hereunder, ENBC represents and warrants to the
▇▇▇▇▇▇ Companies that:
4.1 ENBC is duly organized and legally existing under the laws of the
State of Delaware, with full corporate power and authority to enter into this
Agreement and to carry out the transactions and agreements contemplated hereby.
The execution, delivery and performance
8
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action of ENBC.
4.2 This Agreement has been duly executed and delivered by ENBC and
is a valid and binding obligation of ENBC, enforceable in accordance with its
terms. Neither the execution and delivery of this Agreement by ENBC nor the
consummation of the transactions contemplated hereby will: (a) conflict with or
violate any provision of the certificate of incorporation of bylaws of ENBC or
of any decree or order of any court or administrative or other governmental body
which is either applicable to, binding upon or enforceable against ENBC; or (b)
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under, any mortgage, contract, agreement, indenture or other
instrument which is either binding upon or enforceable against ENBC. No permit,
consent, approval or authorization of, or declaration to or filing with, any
regulatory or other government authority is required in connection with the
execution and delivery of this Agreement by ENBC and the consummation of the
transactions contemplated hereby.
4.3 There are no Actions pending or, to the best of the knowledge of
ENBC, threatened against or affecting ENBC or any of its assets or properties
which Actions are related to this Agreement or ENBC's obligations hereunder and,
to the best of the knowledge of ENBC, there is no basis for any of the
foregoing. There are no outstanding orders, decrees or stipulations issued by
any federal, state, local or foreign judicial or administrative authority in any
proceeding to which ENBC is or was a party related to this Agreement or ENBC's
obligations under this Agreement.
4.4 ENBC is in material compliance with all laws, regulations and
orders applicable to its performance under this Agreement. ENBC has received no
notification of any asserted past or present failure to comply with any such
laws, and to the best of its knowledge, no proceeding with respect to any such
violation is contemplated.
ARTICLE 5.0 CERTAIN COVENANTS OF ENBC AND THE ▇▇▇▇▇▇ COMPANIES
5.1 The ▇▇▇▇▇▇ Companies agree that (a) the use of any portion of the
Production Facility or the Bagel Lines for production of any products for
persons other than ENBC, ENBC Subsidiaries, ENBC Franchisees and Authorized
Recipients shall be subject to ENBC's prior written approval, which may be
subject, by way of illustration and not limitation,hall not be unreasonably
withheld; provided that ENBC hereby consents to the ▇▇▇▇▇▇ Companies' use of the
Production Facility in the manner identified on Schedule 5.3 previously
furnished to ENBC. The parties agree that ENBC's approval will be deemed to be
unreasonably withheld if the following conditions are met: (i) ENBC has
consented to the waiver of its rights under Section 6.2 hereof (which ENBC may
grant or withhold in its sole discretion), (ii) it is demonstrated to ENBC's
satisfaction that Proprietary Information or other intellectual property
(including patent rights) of ENBC will not be subject to a risk of unauthorized
use or disclosure by reason of such use of the Production Facility, and (iii) it
is demonstrated to ENBC's satisfaction that such use of the Production Facility
will not interfere with or otherwise adversely effect the use of the Production
Facility to produce Category A
9
Products under this Agreement, it being understood that ENBC may condition its
consent to any such production on the terminability of such production, upon not
less than six (6) months notice, by ENBC, if ENBC determines that such
termination is required to accommodate the needs of ENBC, ENBC Subsidiaries,
ENBC Franchisees and Authorized Recipients for Category A Products.
5.2 The parties agree to use reasonable efforts to notify each other of
opportunities for bagel production business available within the geographic
markets they are able to service from their existing production capacity (e.g.,
business east of the eastern boundaries of Montana, Wyoming, Colorado and New
Mexico, in the case of Supplier, and business west of such boundaries in the
case of ENBC).
5.3
5.3.1 On the terms and subject to the conditions set forth herein, in
the event that Category A Products shipped by Supplier are less than the
following minimum amounts during the periods provided below, then, subject to
Section 5.3.2, ENBC (or such ENBC Subsidiaries, ENBC Franchisees or Authorized
Recipients as ENBC shall select) shall make a payment ("Make-Whole Payment") as
hereinafter provided:
(a) 3,747,000 dozen Category A Products during the first
Quarterly Period of 1998;
(b) 4,095,000 dozen Category A Products during the second
Quarterly Period of 1998;
(c) 4,125,000 dozen Category A Products during the third
Quarterly Period of 1998;
(d) 4,000,000 dozen Category A Products during the fourth
Quarterly Period of 1998;
(e) 4,100,000 dozen Category A Products during the first
Quarterly Period of each year thereafter;
(f) 4,260,000 dozen Category A Products during the second
Quarterly Period of each year thereafter;
(g) 4,260,000 dozen Category A Products during the third
Quarterly Period of each year thereafter; and
(h) 4,100,000 dozen Category A Products for the fourth
Quarterly Period of each year thereafter (such amount to be prorated for the
partial Quarterly Period immediately prior to the end of the term of this
Agreement).
10
5.3.2 Notwithstanding the terms of Section 5.3.1, if the minimum
volume requirements in Section 5.3.1 are not satisfied for any Quarterly Period,
no Make-Whole Payment will be payable by ENBC if the aggregate production of
Category A Products and Category B Products for such Quarterly Period exceeds
7,140,000 dozen bagels in the aggregate.
5.3.3 In the event the minimum volume requirements provided for in
Section 5.3.1 or Section 5.3.2, if applicable, are not satisfied for any
Quarterly Period (the "Measuring Quarter"), then the Make-Whole Payment shall be
equal to the excess of the minimum amounts for the Measuring Quarter over the
amounts actually shipped during the Measuring Quarter, multiplied by [ ]* per
bagel. Such Make-Whole Payment shall be made within the Quarterly Period
following the Measuring Quarter.
5.3.4 In the event production of Category A Products for any
Measuring Quarter exceeds 7,140,000 dozen bagels, then Supplier shall pay to
ENBC, within the Quarterly Period following the Measuring Quarter, an amount
equal to the excess of the production of Category A Products shipped for the
Measuring Quarter over the minimum amounts for the Measuring Quarter, multiplied
by [ ]* per bagel.
5.4
5.4.1 In the event the Supplier does not ship an amount of Category B
Products at least equivalent to the following minimum amounts for the periods
indicated, then ENBC shall have the right to purchase Category B Products from
Supplier for resale to purchasers of Category B Products for a price per bagel
equivalent to that otherwise charged under this Agreement (but with a Toll
Charge of [ ]* per bagel adjusted in the manner provided in Section 7.3):
(a) 250,000 dozen Category B Products for the fourth Quarterly
Period of 1998;
(b) 600,000 dozen Category B Products for the first Quarterly
Period of 1999;
(c) 900,000 dozen Category B Products for the second Quarterly
Period of 1999; and
(d) 1,200,000 dozen Category B Products for the third Quarterly
Period of 1999; and
(e) 1,500,000 dozen Category B Products for each Quarterly
Period thereafter.
Bagels purchased by ENBC pursuant to this Section 5.4 shall be purchased
pursuant to this Agreement and otherwise subject to its terms as they relate to
Products or Category A Products generally, but shall constitute Category B
Products.
*Confidential Treatment Requested.
11
5.4.2 Notwithstanding anything contained herein to the contrary,
in allocating available production in the Production Facility, the parties
acknowledge that subject to the terms of Section 5.1, production of Category A
Products shall take priority. Notwithstanding the terms of Section 5.4.1,
production by the ▇▇▇▇▇▇ Companies of Category B Products shall take priority
over production for ENBC of Category B Products pursuant to Section 5.4.1.
5.5 Commencing on the date hereof, and continuing until the later of
any exercise of the option by ENBC pursuant to the Option Agreement or the
termination or expiration of this Agreement, the ▇▇▇▇▇▇ Companies agree to
deliver to ENBC the financial statements required to be provided to the Mortgage
Holders and Working Capital Lenders under their respective credit agreements
with said Mortgage Holders and Working Capital Lenders as in effect on the date
hereof (whether or not such credit agreements hereafter remain in effect or are
amended or modified), together with any copies of any amendments or
modifications to such credit agreements promptly upon their becoming effective.
Article 6.0 DESIGNATION OF THE SUPPLIER AS AN APPROVED SUPPLIER; PURCHASE AND
SALE OF THE PRODUCTS
6.1 ENBC hereby designates the Supplier as an approved supplier of
Products to ENBC, ENBC Subsidiaries, ENBC Franchisees and Authorized Recipients
(as hereinafter defined). On the terms and subject to the conditions set forth
herein, and during the Term hereof, the Supplier agrees to sell to ENBC, ENBC
Subsidiaries, ENBC Franchisees and Authorized Recipients Products produced by
the Supplier at the Production Facility.
6.2 The ▇▇▇▇▇▇ Companies jointly and severally agree that during the
Term, and for a period of one year thereafter, none of the ▇▇▇▇▇▇ Companies or
any Affiliate of the ▇▇▇▇▇▇ Companies shall, without the prior written consent
of ENBC, produce any bagels or bagel dough at the Production Facility for sale
or distribution to any Specialty Retailer (as hereinafter defined). For this
purpose, a "Specialty Retailer" shall mean (A) any food service establishment
that prepares, serves or sells, and derives more than 30% 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), other than delicatessens
located in supermarkets, convenience stores or grocery stores that do not use a
brand name of a Specialty Retailer, or (B) any food service establishment, at
least 30% of the revenue of which is derived from coffee and related products
(e.g., whole bean coffee and specialty coffee drinks). In addition, the ▇▇▇▇▇▇
Companies jointly and severally agree that during the Term, none of the ▇▇▇▇▇▇
Companies or any Affiliate of the ▇▇▇▇▇▇ Companies shall enter into any
agreement to produce pre-proofed raw frozen bagels for Maplehurst Bakeries, Inc.
("Maplehurst") or any Affiliate of Maplehurst unless Maplehurst has agreed in
writing that the restrictions set forth in Section 3.1 of the supply agreement
dated as of August 2, 1994 between ▇▇▇▇▇▇ and Maplehurst do not apply to the
supply of Products by the ▇▇▇▇▇▇ Companies under this Agreement. For purposes of
this Section 6.2, an "Affiliate" shall mean any person or entity that controls
or is controlled by, or is under common control with, such person, and the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") shall mean the possession, direct or indirect, of the power
12
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting shares, by contract, or otherwise.
Notwithstanding the first sentence of this Section 6.2, in the event any of the
▇▇▇▇▇▇ Companies or their Affiliates is producing bagels or bagel dough for a
Specialty Retailer at the end of the Term pursuant to a written consent of ENBC
given prior to such time, the restriction set forth herein shall not apply to
continued sales to such Specialty Retailer after the Term hereof. Upon
Supplier's request, ENBC shall advise Supplier in writing of the identity of the
persons ENBC considers to constitute Specialty Retailers under this Section 6.2
as of the time of such request.
6.3 Notwithstanding any other provision of this Agreement to the
contrary, ENBC may at any time arrange upon reasonable notice to the Supplier
for the Products to be sold to ENBC, ENBC Subsidiaries and ENBC Franchisees
through one or more subsidiaries, affiliates, joint ventures, area developers,
franchisees, vendors, processors or other persons ("Authorized Recipients") or
for the Products otherwise to be sold directly to such other Authorized
Recipients, subject to the Supplier's right to be reasonably satisfied as to the
creditworthiness of any Authorized Recipients. In such event (a) orders may be
placed with the Supplier by such Authorized Recipients, rather than by ENBC,
ENBC Subsidiaries or ENBC Franchisees, and the obligation to pay for the
Products delivered to any Authorized Recipient shall be solely that of the
Authorized Recipient and not the obligation of ENBC or any ENBC Subsidiary or
ENBC Franchisee, (b) the provisions of this Article governing the purchase and
sale of the Products shall continue to govern the purchase and sale of such
Products, (c) the provisions of Article 7.0 shall govern the pricing of the
Products to Authorized Recipients, subject to the provisions of Section 5.4.1 as
to Category B Products, and (d) the product warranties in Article 9.0, the
covenants in Sections 10.1 and 10.2, and the indemnification and insurance
provisions in Article 11.0 shall be made for the benefit of ENBC or the ENBC
Subsidiary or ENBC Franchisee that ultimately purchases the Products, as well as
for the benefit of the Authorized Recipient. The Supplier may cease the supply
of Products to ENBC or any ENBC Subsidiary, ENBC Franchisee or Authorized
Recipient, as the case may be, if any balance owed to the Supplier by such
entity is not paid within 30 days after it has become due. ENBC will cooperate
with Supplier to resolve any disputes with ENBC Subsidiaries, ENBC Franchisees
or Authorized Recipients.
6.4 ENBC, ENBC Subsidiaries, ENBC Franchisees and Authorized
Recipients shall notify the Supplier from time to time of the quantity of
Products they wish to purchase from the Supplier by placing purchase orders with
the Supplier. Each order shall be filled by the Supplier within seven days
after the Supplier's receipt of the order. During the term hereof, the Supplier
shall sell to ENBC, ENBC Subsidiaries, ENBC Franchisees and Authorized
Recipients the Products ordered by them, up to a maximum aggregate of (a)
2,630,880 dozen bagels per Accounting Period which consists of four weeks, and
(b) 3,288,600 dozen bagels per Accounting Period which consists of five weeks.
ENBC agrees to use reasonable best efforts to provide the Supplier, at the
beginning of each Accounting Period, with rolling good faith estimates of the
volume of Products it expects to be ordered from the Supplier under this Section
6.4 in such Accounting Period and the five succeeding Accounting Periods, but
such estimates shall be used for planning purposes only and shall not be deemed
orders or otherwise create any commitment whatsoever on the part of ENBC.
13
6.5 The Category A Products shall be produced (a) using such
formulations as ENBC shall specify from time to time in writing (the
"Formulations"), (b) in accordance with such size, weight and other
specifications as ENBC shall establish from time to time in writing (the
"Specifications"), and (c) in accordance with such manufacturing procedures as
ENBC shall specify from time to time in writing (the "Procedures"). The
Supplier agrees that it shall not analyze or reverse engineer any such
Formulations, Specifications and Procedures or any ingredients supplied for use
therein. All Formulations, Specifications and Procedures are subject to change
upon reasonable written notice from ENBC to the Supplier at any time, except
that (x) the Supplier shall have such time as may be reasonably necessary for
the Supplier to implement such changed Formulations, Specifications and
Procedures in its production of the Category A Products, and (y) certain changes
in Formulations, Specifications and Procedures may result in an adjustment to
the Toll Charge, as provided in Section 7.4. All Formulations, Specifications
and Procedures shall be owned exclusively by ENBC but the Supplier shall have a
royalty-free nonexclusive license, without the right to grant sublicenses, to
use such Formulations, Specifications and Procedures and other intellectual
property of ENBC (including U. S. patent no. 5,707,676) to produce Category A
Products for sale to ENBC, ENBC Subsidiaries, ENBC Franchisees and Authorized
Recipients under this Agreement, and the Supplier shall have a license to use
the Formulations, Specifications and Procedures and other intellectual property
of ENBC (including U. S. patent no. 5,707,676) to produce Category B Products,
to the extent and on the terms granted by ENBC, it being understood that any
such license may be granted or withheld by ENBC in its sole discretion. Upon
Supplier's request, ENBC shall advise Supplier in writing of the Formulations,
Specifications, Procedures and other intellectual property of ENBC used to
produce Category A Products.
6.6 ENBC shall have the right to have one or more of its employees or
representatives who are engaged in ENBC's product development present at the
Production Facility at any time that the Supplier is producing the Products and
all such individuals will comply with the Supplier's established policies and
procedures applicable to similarly situated employees and will be bound by the
confidentiality provisions of Article 12.0 hereof.
6.7 The Category A Products shall be packaged using such packaging
materials and labeling as shall be determined by ENBC. The Supplier agrees to
maintain an inventory of such packaging materials and labels which shall be
consistent with the quantity of Category A Products estimated in the rolling
good faith estimates made by ENBC pursuant to Section 6.4 above or as otherwise
reasonably directed by ENBC. All trademarks, trade names and trade dress
appearing on or in packaging and labeling shall be the exclusive property of
ENBC but the Supplier shall have a royalty-free nonexclusive license, without
the right to grant sublicenses, to use such trademarks and trade dress solely to
package and label the Category A Products
14
manufactured in accordance with the provisions of this Agreement for sale to
ENBC, ENBC Subsidiaries, ENBC Franchisees and Authorized Recipients under this
Agreement.
6.8 ENBC shall be responsible for arranging for the procurement of
ingredients and raw materials used to produce the Category A Products on
standard vendor terms and, at ENBC's option, ENBC may supply any ingredients or
raw materials directly to the Supplier (with ENBC, at its option, owning such
ingredients or raw materials).
6.9 Products supplied hereunder shall be shipped F.O.B. the
Production Facility, and ownership and risk of loss with respect to the Products
supplied hereunder shall pass to ENBC or the ENBC Subsidiary, ENBC Franchisee or
Authorized Recipient when delivered to a carrier at the F.O.B. point.
6.10 Payment terms shall be (a) net 15 days, together with interest at
a rate of 12% per annum from the date any amounts are past due or (b) such other
terms as are mutually agreed by the Supplier, on the one hand, and any of the
ENBC Subsidiaries or ENBC Franchisees or Authorized Recipients that purchase
Products from the Supplier, on the other hand. In no event shall ENBC be
construed as a guarantor of payment (or any other obligation) of any ENBC
Franchisee or Authorized Recipient, but ENBC will be responsible for any
obligation of any ENBC Subsidiaries. The parties agree that any amounts owed by
either party under Section 5.3 hereof shall bear interest at a rate of 12% per
annum during any period such amounts are due but remain unpaid.
ARTICLE 7.0 PRICING
7.1 The Products shall be sold to ENBC, ENBC Subsidiaries, ENBC
Franchisees and Authorized Recipients at the Materials Cost plus the Loss
Factor, plus a toll charge per bagel (the "Toll Charge"). The Toll Charge for
Category A Products will be [ ]* per bagel from the date hereof through the
balance of the Term hereof. The Toll Charge shall be subject to adjustment as
provided in Sections 7.3, 7.4 and 7.7 hereof. The Loss Factor will be equal to
[ ]* multiplied by the Materials Cost.
7.2 The Materials Cost shall be determined based upon a Statement of
Materials Cost for each Accounting Period which shall be prepared by the
Supplier in accordance with the provisions of Exhibit A. The Materials Cost
shall be redetermined as of the end of each Accounting Period during the Term as
set forth in Section 7.2 hereof and the prices based upon such redetermination
shall take effect beginning with products shipped on or after the first business
day of the Accounting Period following the redetermination. Each Statement of
Materials Cost shall be delivered to ENBC within ten business days after the end
of the Accounting Period to which it relates and shall include the information
required by Exhibit A. Within 90 days after the end of each calendar year
during the Term, the Supplier shall cause to be delivered the Statement of
Materials Cost for the last Accounting Period in each of the Quarterly Periods
during which this Agreement was in effect during such calendar year, accompanied
by a report of Ernst & Young, or such other independent accountants as the
Supplier may select from time to time to do the regular annual review of its
financial statements and who may be approved
* Confidential Treatment Requested
15
by ENBC (such approval not to be unreasonably withheld), in the form set forth
in Exhibit B. The fees and expenses of such independent accountants shall be
borne by the Supplier. The Supplier acknowledges that a copy of each Statement
of Materials Cost (and each report of independent accountants thereon) may be
provided by ENBC to any ENBC Franchisee.
7.3 The Toll Charge shall be adjusted, effective as of the first day
of the third Quarterly Period of each fiscal year during the Term hereof,
beginning in fiscal year 1999. The amount of the adjustment shall equal the
Toll Charge in effect immediately before such adjustment minus 0.25c minus the
Fixed Costs, and then multiplying such result by the percentage increase in the
Consumer Price Index for the urban area including Indianapolis, Indiana,
published by the Department of Labor for the 12 month period ending on March 31
of the year in which the Toll Charge adjustment is to take place. For this
purpose, "Fixed Costs" shall mean the building rental expense for the 12
previous Accounting Periods ending on the last day of the third Accounting
Period of the fiscal year divided by 342,720,000. In the event the Consumer
Price Index ceases to be published for any reason, the parties shall select
another index designed to approximate as closely as practicable the Consumer
Price Index.
7.4 In the event that changes in Formulations, Specifications or
Procedures result in additional costs or savings to ▇▇▇▇▇▇ or the Supplier that
are not reflected in Materials Cost, the parties shall make appropriate
adjustments in the Toll Charge and/or the Loss Factor to reflect such costs or
savings. In addition, the parties agree that ENBC shall bear as part of its
research and development, the cost of Product losses and production related
costs that arise from the development of Category A Products (or Category B
Products purchased pursuant to Section 5.4.1) or test runs of the Category A
Products (or Category B Products purchased pursuant to Section 5.4.1). The
Supplier shall invoice ENBC for each such cost in a timely manner, and in any
event no later than sixty (60) days from the date on which such cost first
arose. Costs associated with such research and development shall be reimbursed
within 30 days of invoice.
7.5 [Intentionally Omitted.]
7.6 The Supplier shall provide to ENBC and the accountants referred
to in Section 7.2 all information requested by them in order to permit (a) the
preparation of each report referred to in Section 7.2 and the determination of
the Materials Cost therefrom, and (b) each adjustment to the Toll Charge
provided for herein. The Supplier shall also permit ENBC (and its
representatives) and such accountants to have access to its books and records,
and to meet with members of the Supplier's management, at any time upon
reasonable notice during normal business hours. The Supplier shall also permit
accountants selected by ENBC to have access to its books and records, and to
meet with members of the Supplier's management, at any time upon reasonable
notice during normal business hours, provided, however, that (a) the fees and
expenses of such accountants shall be borne by ENBC, and (b) it shall be a
condition to the covenant of the Supplier in this Section 7.6 to give such
accountants access to the Supplier's books and records that such accountants
shall agree in writing to be bound by the confidentiality provisions of Article
12.0 hereof.
16
7.7 ENBC may charge the Supplier for various costs incurred by ENBC
in connection with research and development, product development, procurement or
other costs related to the development, production, distribution and sale of the
Category A Products, and such costs shall result in an addition to the purchase
price for the Category A Products over a period comparable to the length of a
Quarterly Period.
ARTICLE 8.0 [Intentionally Omitted.]
ARTICLE 9.0 PRODUCT WARRANTIES
9.1 The Supplier warrants to ENBC and all ENBC Subsidiaries and ENBC
Franchisees that purchase Products from the Supplier that:
9.1.1 each shipment of Products supplied hereunder shall be
manufactured in accordance with the provisions of Section 6.5 hereof, shall be
of good and merchantable quality and shall be fit for the purposes for which
they are intended to be used, except to the extent any lack of merchantability
or lack of fitness for the intended purposes is attributable to the use by the
Supplier of the Formulations, Procedures and Specifications;
9.1.2 none of the Products supplied hereunder shall be
adulterated or misbranded within the meaning of the Federal Food Drug and
Cosmetics Act, as amended, except to the extent misbranding is attributable to
the use of the Formulations, Procedures or Specifications, and none of the
Products will be an article which may not be introduced into interstate commerce
under the provisions of Section 404, 409 or 706 of that Act; and
9.1.3 none of the Products supplied hereunder shall be
adulterated or misbranded within the meaning of any applicable provision of any
state or municipal law, which provision is similar to any provision of the
Federal Food, Drug and Cosmetics Act, as amended, except to the extent
misbranding is attributable to the use of the Formulations, Procedures or
Specifications.
The foregoing warranties shall survive inspection and acceptance of any of the
Products, and payment therefor, by ENBC, ENBC Subsidiaries and ENBC Franchisees.
ARTICLE 10.0 OTHER COVENANTS OF THE PARTIES
10.1 Each party agrees to comply with all governmental laws,
regulations and orders applicable to its operations under this Agreement, and to
bear any and all taxes, fees or other governmental charges applicable to its
operations. ▇▇▇▇▇▇ and the Supplier agree to comply with the Lease.
10.2 The Supplier agrees to permit representatives of ENBC to inspect
the Leasehold Premises at any time to assure compliance with the terms of this
Agreement and all such individuals will comply with the Supplier's established
policies and procedures applicable to
17
similarly situated employees and will be bound by the confidentiality provisions
of Article 12.0 hereof.
10.3 ▇▇▇▇▇▇ and the Supplier agree that they shall not, without the
prior written consent of ENBC, amend or modify the Lease. The Supplier also
agrees that it shall not, without the prior written consent of ENBC, agree to
amend or modify the Subordination and Nondisturbance Agreement dated August 27,
1996.
10.4 Except as may be contemplated by the Option Agreement, each of
ENBC, on the one hand, and the Supplier and ▇▇▇▇▇▇, on the other hand, agrees
that they will not, directly or indirectly, at any time prior to the first
anniversary of the expiration of the Lease, solicit or hire any employee of any
other party, unless such employee has been terminated by the other party, or
unless such employee terminated his or her employment with the other party at
least one year prior to the date of the first such solicitation or hiring.
10.5 ▇▇▇▇▇▇ agrees to devote to Supplier such of its resources as may
be necessary to assist Supplier in timely and completely performing all of the
Supplier's obligations under this Agreement.
ARTICLE 11.0 INDEMNIFICATION AND INSURANCE
11.1 The Supplier agrees to indemnify ENBC and all ENBC Subsidiaries
and ENBC Franchisees for, and hold ENBC and all ENBC Subsidiaries and ENBC
Franchisees that purchase Products harmless from and against, all expenses,
losses, costs, deficiencies, liabilities and damages (including related counsel
fees) incurred or suffered by them resulting from: (a) any breach of any
representation or warranty made by the Supplier in or pursuant to this
Agreement; (b) any default in the performance of any of the covenants or
agreements made by the Supplier in this Agreement; (c) any claim or action by
any consumer or any other third party arising out of the production or sale of
the Products by the Supplier (including any claims or actions for personal
injury and any products liability claims or action), provided, however, that the
Supplier shall have no obligation to indemnify ENBC or any ENBC Subsidiary or
ENBC Franchisee with respect to any claim or action to the extent such claim or
action is attributable to the alteration, handling or misbranding of Products
after they have been delivered to ENBC or any ENBC Subsidiary or ENBC Franchisee
or is attributable to the use by the Supplier of the Formulations, Procedures
and Specifications; or (d) any claim or action brought by any federal, state,
local or foreign governmental agency in connection with the production or sale
of the Products by the Supplier (including without limitation any claim or
action under any law or regulation relating to public health, the sale of food
and drugs, and the safe conduct of business), provided, however, that the
Supplier shall have no obligation to indemnify ENBC or any ENBC Subsidiary or
ENBC Franchisee with respect to any claim or action to the extent such claim or
action is attributable to the alteration, handling or misbranding of Products
after they have been delivered to ENBC or any ENBC Subsidiary or ENBC Franchisee
or is attributable to the use by the Supplier of the Formulations, Procedures
and Specifications.
18
11.2 ENBC agrees to indemnify the Supplier for, and to hold the
Supplier harmless from and against, all expenses, losses, costs, deficiencies,
liabilities and damages (including related counsel fees) incurred or suffered by
the Supplier resulting from: (a) any breach of any representation or warranty
made by ENBC in or pursuant to this Agreement; (b) any default in the
performance of any of the covenants or agreements made by ENBC in this
Agreement; (c) any claim or action by any consumer, governmental agency or any
other third party, including any claim of infringement or violation of, or
conflict with, any patent or trade secret of any third party, to the extent such
claim or action is attributable to the use by the Supplier of the Formulations,
Procedures and Specifications or is attributable to the alteration, handling or
misbranding of Products after they have been delivered to ENBC, or any ENBC
Subsidiary, ENBC Franchisee or Authorized Recipient; or (d) any claim or action
by any third party alleging infringement or violation of, or conflict with, any
trademarks, trade names or trade dress, to the extent such claim or action is
attributable to the use of trademarks, trade names or trade dress used in
accordance with ENBC's instructions pursuant to Section 6.7.
11.3 The parties agree that each party shall have the exclusive right
to control the defense (and the right to establish the terms of any settlement)
of any claim or action by any third party that could result in such party having
an indemnification obligation under Section 11.1 or Section 11.2 with counsel of
such party's selection, that each party will promptly give the other party
written notice of any claim or action of which it becomes aware that could
result in such other party having an indemnification obligation under Section
11.1 or Section 11.2, and that each party will fully cooperate with the other
party in the defense of any claim or action by the other party hereunder.
11.4 ENBC and the Supplier acknowledge and agree that ENBC, ENBC
Subsidiaries and ENBC Franchisees, on the one hand, and the Supplier, on the
other hand, may be required to enter into indemnity agreements with Authorized
Recipients. ENBC and the Supplier agree that (a) in the event ENBC or any ENBC
Subsidiary or ENBC Franchisee is obligated to make indemnity payments under any
such agreement resulting from any of the matters described in clauses (a)
through (d), inclusive, of Section 11.1 hereof, the Supplier shall indemnify
ENBC or such ENBC Subsidiary or ENBC Franchisee for, and hold ENBC and such ENBC
Subsidiary or ENBC Franchisee harmless from and against, such payment in
accordance with Section 11.1 hereof, and (b) in the event the Supplier is
obligated to make indemnity payments under any such agreement resulting from any
of the matters described in clauses (a) through (d), inclusive, of Section 11.2
hereof, ENBC shall indemnify the Supplier, and hold the Supplier harmless from
and against, such payment in accordance with Section 11.2 hereof.
11.5 The Supplier represents and warrants that it carries: (a)
policies of worker's compensation and employer's liability insurance that comply
with all state and federal laws, and (b) policies of comprehensive general
liability insurance covering the Supplier's premises and operations, including
premises and operations coverage, owner's and contractor's protective coverage,
products and completed operations coverage, full blanket contractual coverage
and broad form property damage coverage, with a combined single limit of
$9,000,000 naming ENBC as an additional insured and containing endorsements (i)
providing that the Supplier's comprehensive general liability coverage
(including products liability) (the "Supplier CGL
19
Coverage") is primary relative to ENBC or any ENBC Subsidiary or ENBC
Franchisee, and that any other insurance maintained by ENBC or any ENBC
Subsidiary or ENBC Franchisee with respect to the risks covered by the Supplier
CGL Coverage is excess and non-contributing, and (ii) waiving any and all rights
of subrogation against ENBC, ENBC Subsidiaries and ENBC Franchisees with respect
to the Supplier CGL Coverage, and (iii) providing for a continuation of the
Supplier CGL Coverage beyond the expiration or termination of this Agreement for
claims made following such expiration or termination that are attributable to
the manufacture of Products by the Supplier during the Term. The Supplier also
represents and warrants that all premiums which have become due on such policies
have been paid, that such policies are in full force and effect, and that such
policies may not be canceled, changed or allowed to lapse through non-renewal,
failure to pay premiums or otherwise except upon not less than 60 days' prior
written notice to the Supplier and ENBC, except that such notice period need not
exceed 10 days in the case of failure to pay premiums. The Supplier has
previously delivered to ENBC evidence of the foregoing insurance coverages by
providing to ENBC a satisfactory Accord Certificate of Coverage of ENBC as an
additional insured, and will hereafter provide ENBC with a satisfactory Accord
Certificate of Coverage upon the issuance of any renewal or replacement
policies. The Supplier agrees to maintain such policies in full force and
effect, in the amount set forth above, throughout the term of this Agreement,
and to maintain ENBC as an additional insured under such policies.
ARTICLE 12.0 CONFIDENTIALITY
12.1 As used in this Agreement, the term "Proprietary Information"
shall mean any knowledge or information, written or oral, which relates in any
manner to the respective businesses of the Supplier and ENBC which is
confidential and proprietary information of the disclosing party, whether or not
disclosed prior to, on or after the date hereof, including, without limitation,
the business concepts, recipes, food preparation methods, equipment, operating
techniques, marketing methods, financial information, demographic and trade area
information, prospective site locations, market penetration techniques, plans,
or schedules, customer profiles, preferences, or statistics, menu breakdowns,
itemized costs, franchisee composition, territories, and development plans,
products, production techniques and all related trade secrets or confidential or
proprietary information treated as such by the disclosing party, whether by
course of conduct, by letter or report, or by the use of any appropriate
proprietary stamp or legend designating such information or item to be
confidential or proprietary. Proprietary Information shall include all
information furnished to Supplier in writing pursuant to Section 6.1 or Section
6.5. As used in this Article 12.0, the term "disclosing party" shall mean the
party to this Agreement which discloses or makes available Proprietary
Information to the receiving party, and the term "receiving party" shall mean
the party to this Agreement to whom Proprietary Information is disclosed or made
available by the disclosing party.
12.2 Without limiting the generality of Section 12.1 hereof, the
parties acknowledge and agree that the Formulations, Specifications and
Procedures are the Proprietary Information of ENBC and will be treated as
Proprietary Information that does not become stale with the passage of time for
purposes of the last sentence of Section 12.3 hereof.
20
12.3 The receiving party shall hold all Proprietary Information in
strict confidence, shall use such Proprietary Information only for the benefit
of the disclosing party and shall disclose such Proprietary Information only to
the receiving party's employees and agents who have a need to know such
Proprietary Information in order to assist the receiving party in performing its
obligations under this Agreement provided such employees and agents each have
individually entered into a confidentiality agreement in form satisfactory to
the disclosing party or are otherwise obligated by a written agreement with the
receiving party to maintain the confidence of the Proprietary Information, which
agreement the parties hereby agree may be directly enforced by the disclosing
party. The receiving party shall not disclose Proprietary Information to any
other person or entity. The obligations hereunder to maintain the
confidentiality of Proprietary Information shall continue: (a) for five years
from the date of disclosure of the Proprietary Information, in the case of
Proprietary Information that by its nature becomes stale with the passage of
time (e.g., financial information, development plans) and (b) indefinitely, in
the case of the Proprietary Information that by its nature does not become stale
with the passage of time (e.g. trade secrets, production techniques, recipes).
12.4 The obligations of the parties specified in Section 12.3 shall
not apply to any Proprietary Information which (a) is disclosed in a printed
publication available to the public prior to the date of this Agreement, or
becomes known to the public through no act of the receiving party or its
employees, agents or other person or entity which has received such Proprietary
Information from or through the receiving party, provided, however, that a
combination of ingredients or processes that has not been disclosed to, or
become known by, the public shall remain subject to Section 12.3 notwithstanding
the fact that the identity of such ingredients or processes may be known, (b) is
approved for release by written authorization of an officer of the disclosing
party, (c) can be established by the receiving party by documentary evidence to
have been in the legitimate and lawful possession of the receiving party at the
time revealed by the disclosing party to the receiving party, (d) is lawfully
received by the receiving party without restriction from a third party
subsequent to this Agreement, which third party did not obtain the Proprietary
Information through improper means or disclose the Proprietary Information
without authorization, or (e) is required to be disclosed by law or regulation
or by proper order of a court of applicable jurisdiction after adequate notice
to the disclosing party, sufficient to permit the disclosing party to seek a
protective order therefor, the imposition of which protective order the
receiving party agrees to approve and support. In addition, after consultation
with the disclosing party, the receiving party may disclose only that
Proprietary Information that the receiving party believes in good faith it is
required to disclose (x) in connection with any filing that is made or
disclosure document that is prepared for the purpose of complying with federal
or state securities or franchise laws, rules or regulations or (y) to comply
with the rules of any stock exchange or quotation system or any other regulatory
requirements; provided, however, that in any event trade secrets, production
techniques, recipes and similar Proprietary Information of a disclosing party
will not be disclosed by the receiving party without the written consent of the
disclosing party.
12.5 The receiving party (and each employee, agent, or other person or
entity which has received such Proprietary Information from or through the
receiving party) shall, upon the request of the disclosing party, return all
documents and other tangible manifestations of
21
Proprietary Information received from the disclosing party, including all copies
and reproductions thereof. The receiving party will thereafter certify in
writing to the disclosing party that all Proprietary Information has either been
returned to the disclosing party or destroyed.
ARTICLE 13.0 TERM
13.1 The initial term of this Agreement shall commence on the date
hereof and continue until April 16, 2005, except that this Agreement shall
terminate upon the exercise by ENBC of its option under the Option Agreement.
13.2 The provisions of Articles 9.0, 10.0, 11.0 and 12.0 and any other
provisions hereof requiring performance by a party following termination shall
survive the expiration or any termination of this Agreement.
13.3 Upon expiration or termination of this Agreement for any reason,
ENBC shall purchase from the Supplier all finished Products in inventory, all
packaging materials and labeling in inventory purchased by the Supplier pursuant
to Section 6.7 hereof, and the ingredients and raw materials in the Supplier's
inventory, at the Supplier's cost, F.O.B. the Production Facility, and (a) ENBC
shall pay to the Supplier any Make-Whole Payment under Section 5.3 and any
amounts charged to, but not previously recovered by, the Supplier under Section
7.7, and (b) the Supplier shall pay to ENBC any amount that has not previously
been paid under Section 5.3.4.
ARTICLE 14.0 MISCELLANEOUS
14.1 ENBC and the Supplier may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
14.2 Each party to this Agreement shall pay all of the expenses
incurred by it in connection with this Agreement, including without limitation
its legal and accounting fees and expenses, and the commission, fees and
expenses of any person employed or retained by it to bring about, or to
represent it in, the transactions contemplated hereby.
14.3 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Supplier may not assign its rights or delegate its duties hereunder without the
prior written consent of ENBC.
14.4 This instrument and the exhibits attached hereto contain the
entire agreement of the parties hereto with respect to the purchase and sale of
the Products from the Supplier and the other transactions contemplated herein,
and supersede all prior understandings and agreements of the parties with
respect to the subject matter hereof. Any reference herein to this Agreement
shall be deemed to include the exhibits attached hereto. In the event of any
inconsistency between this Agreement and any purchase order, confirmation or
similar document or instrument of ENBC, any ENBC Subsidiary or ENBC Franchisee
or the Supplier, this Agreement shall govern.
22
14.5 Except as expressly set forth in this Agreement or hereafter
agreed in writing by the Supplier and ENBC, (a) ENBC is not promising,
committing to or guaranteeing that any business relationship with the Supplier
or the Supplier's status as an approved supplier will continue for any specified
time period, and (b) ENBC is not agreeing to reimburse the Supplier for any
costs, expenses, investments or other amounts incurred or expended by the
Supplier (and no such amounts have been or will be incurred or expended in
reliance on continued business from ENBC or ENBC Subsidiaries or ENBC
Franchisees).
14.6 The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
14.7 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.8 Any notice, request, information or other document to be given
hereunder shall be in writing. Any notice, request, information or the document
shall be deemed duly given three business days after it is sent by registered or
certified mail, postage prepaid, to the intended recipient, addressed as
follows:
If to the Supplier or ▇▇▇▇▇▇, addressed to such party at the
following address:
▇▇▇▇▇▇ Bakeries, Inc.
▇▇▇▇ ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to such party at the following address:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Dawley, Inc.
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
and a copy to:
▇▇▇▇▇▇▇▇▇, Daily, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
23
If to ENBC, addressed as follows:
Einstein/Noah Bagel Corp.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President - Supply Chain
with a copy to:
Einstein/Noah Bagel Corp.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Any party may send any notice, request, information or other document to be
given hereunder using any other means (including personal delivery, courier,
messenger service, fax or ordinary mail), but no such notice , request,
information or other document shall be deemed duly given unless and until it is
actually received by the party for whom it is intended. Any party may change
the address to which notices hereunder are to be sent to it by giving written
notice of such change of address in the manner herein provided for giving
notice.
14.9 This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado applicable to contracts made and to be
performed wholly therein.
14.10 In the event of a breach or threatened breach of any of the
provisions of Section 6.2 or Article 12.0 of this Agreement, the parties
acknowledge and agree that the non-breaching party will not have an adequate
remedy at law and therefore will be entitled to enforce any such provision by
temporary or permanent injunctive or mandatory relief as a remedy for any such
breach, and that such remedy shall not be deemed to be the exclusive remedy for
any such breach but shall be in addition to all other remedies, subject,
however, to the provisions of Section 14.11 hereof.
14.11 In no event shall either party hereto seek, or be liable to the
other party hereto for, speculative, exemplary or punitive damages.
14.12 No press release or other public or trade announcement or statement
related to this Agreement or the transactions contemplated hereby (or the
existence of any discussions or negotiations between the parties regarding any
other possible transactions) will be issued, and no disclosure of this Agreement
or the terms hereof will made, by either of the ▇▇▇▇▇▇ Companies without the
prior approval of ENBC. ENBC agrees to use reasonable best efforts to consult
with the ▇▇▇▇▇▇ Companies prior to issuing any press release or public or trade
announcement or statement relating to this Agreement or the transactions
contemplated hereby.
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
EINSTEIN/NOAH BAGEL CORP.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Senior Vice President
▇▇▇▇▇▇ BAGEL SUPPLY COMPANY, LLC
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ BAKERIES, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
25
Exhibits
--------
Exhibit A Determination of Materials Cost
Exhibit B Form of Statement of Independent Accountants
Schedules
---------
Schedule 3.4 Financial Statements of the ▇▇▇▇▇▇ Companies
Schedule 5.3 Permitted Production Facility Uses
Exhibit A
---------
Determination of
Materials Cost
--------------
Exhibit B
---------
Form of Statement
of
Independent Accountants
-----------------------
Board of Directors
Einstein/Noah Bagel Corp.
Ladies and Gentlemen:
At your request, we have performed certain agreed upon procedures, as
enumerated below, with respect to the Statements of Materials Cost of ▇▇▇▇▇▇
Bagel Supply Company, LLC, for each of the Quarterly Periods in the year ended
December 31, 19__. These procedures, which were specified by the Board of
Directors of Einstein/Noah Bagel Corp., and the Board of Managers of ▇▇▇▇▇▇
Bagel Supply Company, LLC were performed solely to meet the requirements of the
Project and Approved Supplier Agreement among Einstein/Noah Bagel Corp., ▇▇▇▇▇▇
Bagel Supply Company, LLC, and ▇▇▇▇▇▇ Bakeries, Inc., ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Approved Supplier Agreement"). It is
understood that this report is solely for your information and should not be
used by those who did not participate in determining the procedures.
a. We have compared the costs as reported in the Statements of
Materials Cost to the costs and expenses as reflected in the
general ledger of ▇▇▇▇▇▇ Bagel Supply Company, LLC, and
reconciled any material differences.
b. We have compared the Statements of Materials Cost to the listing
of costs as per Exhibit A of the referenced Approved Supplier
Agreement and noted any material addition of cost categories.
c. We have compared the total reported number of bagels produced
with the Production Log and reconciled any material differences.
d. We have tested the Statements of Materials Cost for mathematical
accuracy.
Because the procedures described above do not constitute an
examination of financial statements in accordance with the Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants, we do not express an opinion on whether the
financial statement is presented in conformity with AICPA guidelines.
In connection with the procedures referred to above, no matters came
to our attention that caused us to believe that the Statements of Materials Cost
were not reflective of the general ledger, that cost categories were included
that were not reflected in Exhibit A of the Approved Supplier Agreement, that
the number of bagels reported was materially different than those
shown on the Production Log or that any of the Statements of Materials Cost is
mathematically inaccurate. Had we performed additional procedures or had we made
an examination in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants, matters might have come to our attention that would have been
reported to you. We have no responsibility to update this report for events and
circumstances occurring after the date of this report.
