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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-01-008613.txt : 20010329
<SEC-HEADER>0000912057-01-008613.hdr.sgml : 20010329
ACCESSION NUMBER: 0000912057-01-008613
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20001230
FILED AS OF DATE: 20010328
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PANERA BREAD CO
CENTRAL INDEX KEY: 0000724606
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812]
IRS NUMBER: 042723701
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1226
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 000-19253
FILM NUMBER: 1582781
BUSINESS ADDRESS:
STREET 1: 19 FID KENNEDY AVE
CITY: BOSTON
STATE: MA
ZIP: 02210
BUSINESS PHONE: 6174232100
MAIL ADDRESS:
STREET 1: 19 FID KENNEDY AVE
CITY: BOSTON
STATE: MA
ZIP: 02210
FORMER COMPANY:
FORMER CONFORMED NAME: AU BON PAIN CO INC
DATE OF NAME CHANGE: 19940201
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>a2042851z10-k405.txt
<DESCRIPTION>10-K405
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
<TABLE>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000,
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-19253
------------------------
PANERA BREAD COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-2723701
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6710 CLAYTON RD., 63117
RICHMOND HEIGHTS, MO (Zip code)
(Address of principal executive
offices)
</TABLE>
(314) 633-7100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $.0001 PAR VALUE
(Title of class)
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 and 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the registrant's voting Class A and Class B
Common Stock held by non-affiliates as of March 13, 2001 was approximately
$341,438,390. There is no public trading market for the registrant's Class B
Common Stock.
Number of shares outstanding of each of the registrant's classes of common
stock, as of March 13, 2001: Class A Common Stock, $.0001 par value: 12,210,783
shares, Class B Common Stock, $.0001 par value: 1,480,982 shares.
The Company intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 30,
2000. Portions of such proxy statement are incorporated by reference in response
to Part III, Items 10, 11, 12, and 13.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Panera Bread Company (the "Company") previously filed reports under the name
Au Bon Pain Co., Inc. The name change occurred as a result of the sale of the Au
Bon Pain Division to private investors effective May 16, 1999. The Company now
consists of the Panera Bread/Saint Louis Bread Co. concept, with the Company
doing business as Saint Louis Bread Co. in the Saint Louis area, and as Panera
Bread outside of that area. As of December 30, 2000, the Company had 90
Company-operated bakery-cafes (including 2 specialty bakery-cafes), and 172
franchise-operated bakery-cafes (including 2 specialty bakery-cafes). As of
December 25, 1999, the Company had 81 Company-operated bakery-cafes (including 2
specialty bakery-cafes) and 102 franchise-operated bakery-cafes (including 2
specialty bakery-cafes). The Company specializes in high quality food for
breakfast and lunch, including fresh baked goods, made-to-order sandwiches on
freshly baked breads, soups, salads, custom roasted coffees, and other cafe
beverages, and targets suburban dwellers and workers by offering a premium
specialty bakery and cafe experience with a neighborhood emphasis.
The Company's bakery-cafes are principally located in suburban, strip mall
and regional mall locations. Its business is currently operating in Arkansas,
Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire,
New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South
Carolina, Tennessee, Texas, Virginia, and Wisconsin (see "Properties"). The
Company's revenues were approximately $151.4 million and system-wide sales for
Panera Bread, which include sales by franchisees, were approximately
$350.8 million for the fiscal year ended December 30, 2000 compared to
system-wide sales, for Panera Bread on a stand-alone basis, of $202.1 for fiscal
year ended December 25, 1999.
The Company sold the Au Bon Pain Division to ABP Corporation for
$73 million in cash before contractual purchase price adjustments of
$1 million. The sale was effective May 16, 1999. Results of operations for the
fifty-two week period ending December 25, 1999, includes the results of the
divested Au Bon Pain Division for the period December 27, 1998 through May 16,
1999. The Au Bon Pain Division had $51.5 million of revenue and $3.2 million of
operating earnings through May 16, 1999. For the fifty-two week period ended
December 25, 1999, the Company recorded a pre-tax loss of $5.5 million related
to the transaction, and a $0.6 million pre-tax ($0.4 million after tax)
extraordinary loss related to the early extinguishment of debt from the proceeds
of the sale. For the quarter ended July 8, 2000, the Company recorded a one time
gain of $.9 million before taxes ($.5 million after tax) related to the sale of
the Au Bon Pain Division. The original sales agreement dated August 12, 1998,
and amended October 28, 1998, included a provision prohibiting the sale of the
Au Bon Pain Division by ABP Corporation to another party within 18 months of the
date of the agreement. This payment was received in connection with amending the
original sales agreement to allow for a sale. Additionally, during the fourth
quarter ended December 30, 2000, the Company recorded a $.9 million pre-tax,
non-recurring charge associated with the sale of the Au Bon Pain Business Unit
which occurred in May 1999. Of that amount $.4 million, before taxes, represents
a loss on the sale of the Au Bon Pain Business Unit and $.5 million represents a
receivable from Au Bon Pain which has been fully reserved.
CONCEPT AND STRATEGY
The Company's concept focuses on the emerging "Specialty Bread/Bakery-Cafe"
category. Its artisan sourdough breads, which are breads made with a craftsman's
attention to quality and detail, and overall award-winning bakery expertise are
at the heart of the concept's menu. The concept is designed to deliver against
the key consumer trends of today, specifically the need for an efficient but
more esthetically pleasing experience than that offered by traditional fast
food. The concept's goal is to make
2
<PAGE>
Panera Bread a nationally recognized brand name, and in doing so, the Company
hopes to reap the economic benefits that a strong brand name offers. Its menu,
prototype, operating systems, design and real estate strategy allow it to
compete successfully in four sub-businesses: breakfast, lunch, day-time "chill
out" (the time between breakfast and lunch and between lunch and dinner when
customers visit our bakery-cafes to take a break from their daily activities),
and take home bread. Average annualized unit volume per Company-Operated
bakery-cafe for the full fiscal year ended December 30, 2000, was approximately
$1,471,000 (excluding the two specialty cafes) for the Panera Bread/Saint Louis
Bread Co. concept compared to average annualized unit volume per cafe of
approximately $1,330,000 the fiscal year ended December 25, 1999.
The distinctive nature of the Company's menu offerings (centered around the
fresh sourdough products), the quality of its restaurant operations, the
Company's signature cafe design and the prime locations of its cafes are
integral to the Company's success. The Company believes that its concept has
significant growth potential in the suburban markets which it hopes to realize
through both Company and franchise efforts. Franchising is a key component of
the Company's success. At year end, there were 172 franchised bakery-cafes
opened and signed commitments to open an additional 561 bakery-cafes. As of
December 25, 1999 there were 102 franchised bakery-cafes opened and signed
commitments to open an additional 543 bakery-cafes. The average annualized unit
volume per franchised bakery-cafe for the fiscal year ended December 30, 2000,
was approximately $1,710,000 compared to approximately $1,568,000 for those
cafes for the fiscal year ended December 25, 1999 excluding the two specialty
franchised bakery-cafes.
On a system-wide basis, average annualized unit volumes increased 12% for
the year to approximately $1,617,000 compared to $1,444,000 for the year ended
December 25, 1999 (excluding the four specialty bakery-cafes).
MENU
The menu is designed to provide the Company's target customers with products
which build on the strength of the Company's bakery expertise and to meet
customers' new and ever-changing taste profiles. The key menu groups are fresh
baked goods, made-to-order sandwiches, soups, and cafe beverages. Included
within these menu groups are: a variety of freshly baked bagels, breads,
muffins, scones, rolls, and sweet goods; made-to-order sandwiches; hearty,
unique soups; custom roasted coffees and cafe beverages such as espresso and
cappuccino. The Company's concept emphasizes the sophisticated specialty and
sourdough breads which supports a significant take-home business.
The Company regularly reviews and revises its menu offerings to satisfy
changing customer preferences and to maintain customer interest amongst its
target customer groups, the "bread loving trend-setters" and the "bread loving
traditionalists". Both of these target customer groups seek a quality experience
that reflects their discriminating tastes. The major characteristic that sets
these two groups apart is the more enthusiastic embrace of new and nutritional
menu items by the "Trend-Setters". New menu items are developed in corporate
test kitchens and then introduced in a limited number of the Company's
bakery-cafes to determine customer response and verify that preparation and
operating procedures maintain consistency, high quality standards and
profitability. If successful, they are then introduced in the Company's
bakery-cafes, and finally to the franchise bakery-cafes.
MARKETING
The Company believes it competes on the basis of providing an entire
experience rather than price. Pricing is structured so customers perceive good
value, with high quality food at reasonable prices to encourage frequent visits.
The Company measures its average check per transaction. The total average check
per transaction at the Company-owned bakery-cafes for 2000 was $5.80. Breakfast
average check per transaction was $4.03, and lunch average check per transaction
was $6.89. The
3
<PAGE>
Company attempts to increase its per location sales through menu development,
promotions, and by sponsorship of local community charitable events. The Company
may utilize external media when deemed appropriate and cost effective in
specific markets.
SITE SELECTION
During 2000, the Company increased the number of Company-operated
bakery-cafes by 9, opening 11 and closing 2 bakery-cafes for a total at
December 30, 2000 of 90 locations. The two closed bakery-cafes were part of a
real estate repositioning strategy. They were smaller, original Saint Louis
Bread cafes and were replaced by a new prototype bakery-cafe located centrally
between them. The franchise-operated locations increased by 70 to 172 locations
at December 30, 2000.
The bakery-cafe concept relies on a substantial volume of repeat business.
In evaluating a potential location, the Company studies the surrounding trade
area, obtaining demographic information within that area and information on
quick service breakfast and lunch competitors. Management evaluates the
Company's ability to establish a dominant presence within that area in order to
create entry barriers to other competitors. Based on this information the
Company determines projected sales and return on investment.
The Company uses sophisticated fixtures and materials in the bakery-cafe
design for its concept. The design visually reinforces the distinctive
difference between the Company's bakery-cafes and other quick service
restaurants serving breakfast and lunch. Many of the Company's cafes also
feature outdoor cafe seating. The average construction, equipment,
furniture/fixture, and signage cost for the 11 bakery-cafes opened in 2000 was
approximately $.7 million after landlord allowances.
The average bakery-cafe size ranges between 3,500 and 4,500 square feet.
Currently all Company-owned bakery-cafes are in leased premises. Lease terms are
typically ten years with one or two five-year renewal option periods thereafter.
Leases typically have a minimum base occupancy charge, charges for a
proportionate share of building operating expenses and real estate taxes, and
contingent percentage rent based on sales above a stipulated sales level.
FRESH DOUGH PRODUCTION
The Company's bakery-cafes use fresh dough for their sourdough breads and
bagels. Fresh dough is supplied daily by the Company's commissary system for
both Company-owned and franchise-operated bakery-cafes. The Company operated 11
regional commissaries as of December 30, 2000, and 10 as of December 25, 1999.
The remaining baked goods are prepared with frozen dough. During 1996, the
Company completed construction of a state of the art frozen dough production
facility in Mexico, Missouri to supply frozen dough. On March 23, 1998, the
Company sold the Mexico production facility and its wholesale frozen dough
business to Bunge Food Corporation ("Bunge") for approximately $13 million in
cash. Concurrent with the sale, the Company entered into a five-year supply
agreement with Bunge for the supply of substantially all of its frozen dough
needs. The agreement automatically renews on an annual basis unless either party
provides written cancellation notice to the other. Pricing is based on Bunge's
cost plus a specified mark-up calculated on each individual product that is
purchased. The agreement contains minimum volume commitments, and provides for
financial penalties if either party cancels the agreement before the initial
term is complete.
The sale of the frozen dough production facility provides economies of scale
in plant production which are reflected in the economics of the five-year
agreement and allows the Company to take advantage of Bunge's significant
purchasing power. The five-year supply agreement allows the bakery-cafes to
continue to offer the same high quality fresh baked goods, because the frozen
dough products
4
<PAGE>
purchased from Bunge are made on the same equipment, by the same management
team, using the same proprietary processes and specifications as prior to the
sale.
COMPETITION
The Company experiences competition from numerous sources in its trade
areas. The Company's bakery-cafes compete based on customers needs for
breakfast, lunch, daytime "chill-out" (the time between breakfast and lunch as
well as the time between lunch and dinner) and take home bread sales. The
competitive factors are price, service, and quality of products. The Company
competes for leased space in desirable locations. Certain of the Company's
competitors may have capital resources exceeding those available to the Company.
MANAGEMENT INFORMATION SYSTEMS
Each Company-operated bakery-cafe has computerized cash registers to collect
point-of-sale transaction data, which is used to generate pertinent marketing
information, including product mix and average check. All product prices are
programmed into the system from the Company's corporate office.
The Company's in-store personal computer-based management support system is
designed to assist in labor scheduling and food cost management, to provide
corporate and retail operations management quick access to retail data, and to
reduce managers' administrative time. The system supplies sales, bank deposit,
and variance data to the Company's accounting department in St. Louis on a daily
basis. The Company uses this data to generate weekly consolidated reports
regarding sales and other key measures, as well as detailed profit and loss
statements for each bakery-cafe every four weeks. Additionally, the Company
monitors the average check, customer count, product mix, and other sales trends.
The commissaries have computerized systems which allow the commissaries to
accept electronic orders from the bakery-cafes and deliver the ordered product
back to the bakery-cafe.
The Company has network/integration systems which are corporate office
electronic systems and tools which link various information subsystems and
databases, encompassing e-mail and all major financial systems, such as general
ledger database systems and all major operational systems, such as store
operating performance database systems.
DISTRIBUTION
The Company currently utilizes independent distributors to distribute frozen
dough products and other materials to Company-operated bakery-cafes. By
contracting with independent distributors, the Company has been able to
eliminate investment in distribution systems and to focus its managerial and
financial resources on its retail operations. The distributor picks up frozen
dough products throughout the week from the plants and delivers them to the
cafes. Virtually all other supplies for retail operations, including paper
goods, coffee, and smallwares, are contracted for by the Company and delivered
by the vendors to the distributor for delivery to the bakery-cafes. The
individual bakery-cafes order directly from a distributor two to three times per
week.
Franchised bakery-cafes operate under individual contracts with either the
Company's distributor or other regional distributors.
5
<PAGE>
FRANCHISE OPERATIONS
The Company began a broad-based franchising program in 1996. The Company is
actively seeking to extend its franchise relationships beyond its current
franchisees. The franchise agreement typically requires the payment of an
up-front franchise fee of $35,000 and continuing royalties of 5% on sales from
each bakery-cafe. The franchisees are required to purchase all of their dough
products from sources approved by the Company. The Company's commissary system
supplies fresh dough products to substantially all franchise-operated
bakery-cafes.
The Company has entered into 39 separate franchise area development
agreements for a total of 733 bakery-cafes of which 172 have been opened as of
December 30, 2000. The Company's strategy is to execute growth in a controlled
and disciplined manner. Under the terms of the franchise development agreements,
a schedule is determined with respect to a specified number of franchise
openings as to which the developer pays a non-refundable fee. In the event that
the schedule is not adhered to, the developer will lose development exclusivity
in the territory. At the present time, the Company does not have any
international franchise development agreements in place having decided to focus
on domestic opportunities for expansion.
EMPLOYEES
As of December 30, 2000, the Company has 2,202 full-time employees (defined
as associates who average 25 hours or more per week), of whom 175 are employed
in general or administrative functions principally at or from the Company's
executive offices in St. Louis, Missouri; 273 are employed in the Company's
commissary operations; and 1,754 are employed in the Company's bakery-cafe
operations and as bakers and associates at the bakery-cafes. The Company also
has 1,689 part-time hourly employees at the bakery-cafes. There are no
collective bargaining agreements. The Company considers its employee relations
to be excellent.
TRADEMARKS
The "Panera Bread" and "Saint Louis Bread Company" names are of material
importance to the Company and are trademarks registered with the United States
Patent and Trademark Office. In addition, other marks of lesser importance have
been filed with the United States Patent and Trademark Office.
GOVERNMENT REGULATION
Each Company-operated and franchised bakery-cafe is subject to regulation by
federal agencies and to licensing and regulation by federal agencies as well as
to licensing and regulation by state and local health, sanitation, safety, fire,
alcoholic beverage control and other departments. Difficulties or failures in
obtaining and retaining the required licensing or approval could result in
delays or cancellations in the opening of restaurants as well as fines and
possible closure relating to existing restaurants.
The Company is also subject to federal and a substantial number of state
laws regulating the offer and sale of franchises. Such laws impose registration
and disclosure requirements on franchisors in the offer and sale of the
franchises and may also apply substantive standards to the relationship between
franchisor and franchisee. The Company does not believe that current or
potential future regulations of franchises have or will have any material impact
on the Company's operations. The Company is subject to the Fair Labor Standards
Act and various state laws governing such matters as minimum wages, overtime,
and other working conditions.
The Company and its commissaries are subject to various federal, state, and
local environmental regulations. Compliance with applicable environmental
regulations is not believed to have any material
6
<PAGE>
effect on capital expenditures, earnings or the competitive position of the
Company. Estimated capital expenditures for environmental compliance matters are
not material.
The Americans with Disabilities Act prohibits discrimination in employment
and public accommodations on the basis of disability. Under the Americans with
Disabilities Act, the Company could be required to expend funds to modify its
bakery-cafes to provide service to, or make reasonable accommodations for the
employment of, disabled persons. The Company believes that compliance with the
requirements of the Americans with Disabilities Act will not have a material
adverse effect on its financial condition, business or operations.
ITEM 2. PROPERTIES
All Company-operated bakery-cafes are located in leased premises with lease
terms typically for ten years with one or two five-year renewal option periods
thereafter. Leases typically have a minimum base occupancy charge, charges for a
proportionate share of building operating expenses, and real estate taxes and a
contingent percentage rent based on sales above a stipulated sales level. The
average bakery-cafe ranges from 3,500 to 4,500 square feet in size.
Information with respect to the Company-operated leased commissaries as of
December 30, 2000 is set forth below:
<TABLE>
<CAPTION>
FACILITY SQUARE FOOTAGE
- -------- --------------
<S> <C>
St. Louis, MO Commissary.................................... 12,100
Dallas, TX Commissary....................................... 1,000
Denver, CO Commissary....................................... 5,000
Washington, DC Commissary................................... 8,900
Atlanta, GA Commissary...................................... 10,000
Detroit, MI Commissary...................................... 5,200
Minneapolis, MN Commissary.................................. 4,800
Cincinnati, OH Commissary................................... 8,500
Warren, OH Commissary....................................... 11,000
Chicago, IL Commissary...................................... 20,600
Orlando, FL Commissary...................................... 5,900
</TABLE>
In 2000, the Company leased short-term office space in Norwood, MA, to house
portions of its Development and Commissary functions. The annual rent is
approximately $27,200 and the lease has a one-year renewal option.
The Company is in the process of consolidating its office space in St.
Louis, MO. Office space of approximately 10,300 square feet in Webster Groves,
MO leased for approximately $150,000 annually through August 31, 2002, and
additional office space leased in St. Louis, MO for approximately $46,000
annually through November, 2001, are being relinquished in favor of a new office
space that will house all corporate functions.
New corporate office space was leased on October 31, 2000 in Richmond
Heights, MO. The office space consists of approximately 34,000 square feet, and
the annual rent is approximately $600,000. The lease expires October 31, 2010.
7
<PAGE>
PANERA BREAD/SAINT LOUIS BREAD CO. BAKERY-CAFES
<TABLE>
<CAPTION>
COMPANY-OPERATED FRANCHISE-OPERATED TOTAL
STATE BAKERY-CAFES BAKERY-CAFES BAKERY-CAFES
- ----- ---------------- ------------------ ------------
<S> <C> <C> <C>
Arkansas......................................... 0 1 1
Colorado......................................... 0 3 3
Florida.......................................... 0 11 11
Georgia.......................................... 8 1 9
Iowa............................................. 0 6 6
Illinois......................................... 25 15 40
Indiana.......................................... 0 5 5
Kansas........................................... 0 9 9
Kentucky......................................... 0 4 4
Massachusetts.................................... 2 1 3
Maryland......................................... 0 5 5
Maine............................................ 0 1 1
Michigan......................................... 15 2 17
Minnesota........................................ 0 10 10
Missouri......................................... 35 13 48
North Carolina................................... 0 4 4
Nebraska......................................... 0 4 4
New Hampshire.................................... 0 3 3
New Jersey....................................... 0 5 5
Ohio............................................. 0 36 36
Oklahoma......................................... 0 8 8
Pennsylvania..................................... 0 8 8
Rhode Island..................................... 0 1 1
South Carolina................................... 1 0 1
Tennessee........................................ 0 6 6
Texas............................................ 0 4 4
Virginia......................................... 4 0 4
Wisconsin........................................ 0 6 6
TOTALS......................................... 90 172 262
</TABLE>
The following table sets forth the number of Company-operated and
franchise-operated Panera Bread and Saint Louis Bread Co. bakery-cafes
(including specialty cafes) which were open as of the dates indicated:
<TABLE>
<CAPTION>
DEC. 30, DEC. 25, DEC. 26, DEC. 27, DEC. 28,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Company-operated.................................... 90 81 70 60 53
Franchise-operated.................................. 172 102 45 19 11
Total............................................... 262 183 115 79 64
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not subject to any material litigation, but is subject to
claims and legal action in the ordinary course of its business. The Company
believes that all such claims and actions currently pending against it are
either adequately covered by insurance or would not have a material adverse
effect on the Company if decided in a manner unfavorable to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted no matters to a vote of security holders during the
fourth quarter of the fiscal year ended December 30, 2000.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
(a) Market Information.
The Company's Class A Common Stock is traded on The Nasdaq National Market
tier of the Nasdaq Stock Market under the symbol "PNRA". There is no established
public trading market for the Company's Class B Common Stock. The following
table sets forth the high and low sale prices as reported by Nasdaq for the
fiscal periods indicated.
<TABLE>
<CAPTION>
1999 HIGH LOW
- ---- -------- --------
<S> <C> <C>
First Quarter............................................... 7 1/8 5
Second Quarter.............................................. 9 5
Third Quarter............................................... 7 5/8 6 3/16
Fourth Quarter.............................................. 8 1/2 6 1/2
</TABLE>
<TABLE>
<CAPTION>
2000 HIGH LOW
- ---- -------- --------
<S> <C> <C>
First Quarter............................................... 9 1/8 6 1/8
Second Quarter.............................................. 10 5/8 7
Third Quarter............................................... 21 3/8 9 7/8
Fourth Quarter.............................................. 25 7/16 15 1/4
</TABLE>
On March 13, 2001, the last sale price for the Class A Common Stock, as
reported on the Nasdaq National Market System, was $24 15/16.
(b) Holders.
On March 13, 2001, the Company had 1,330 holders of record of its Class A
Common Stock and 70 holders of its Class B Common Stock.
(c) Dividends.
The Company has never paid cash dividends on its capital stock and has no
intention of paying cash dividends in the foreseeable future.
9
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
----------------------------------------------------
DEC. 30, DEC. 25, DEC. 26, DEC. 27, DEC. 28,
2000(1) 1999(3) 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Restaurant sales........................ $125,486 $156,738 $237,102 $233,212 $225,625
Franchise sales and other revenues...... 12,059 7,384 6,161 5,974 3,556
Commissary sales to franchisees......... 13,844 7,237 6,397 11,704 7,753
-------- -------- -------- -------- --------
151,389 171,359 249,660 250,890 236,934
-------- -------- -------- -------- --------
Costs and expenses:
Cost of food and paper products......... 41,084 52,445 81,140 82,578 77,330
Restaurant operating expenses........... 61,972 79,677 123,060 119,537 115,364
Commissary cost of sales................ 12,261 6,490 6,100 7,807 8,301
Depreciation and amortization........... 8,412 6,379 12,667 16,862 16,195
General and administrative.............. 16,381 17,104 18,769 16,417 14,979
Non-recurring charges................... 494 5,545 26,236 -- 4,435
-------- -------- -------- -------- --------
140,604 167,640 267,972 243,201 236,604
-------- -------- -------- -------- --------
Operating profit (loss)................... 10,785 3,719 (18,312) 7,689 330
Interest expenses, net.................... 164 2,745 6,396 7,204 5,140
Other (income) expense, net............... (409) 735 1,445 212 2,513
Minority interest/(income)................ -- (25) (127) (42) (40)
-------- -------- -------- -------- --------
Income (loss) before provision (benefit)
for income taxes and extraordinary
items................................... 11,030 264 (26,026) 315 (7,283)
Provision (benefit) for income taxes...... 4,177 511 (5,532) (1,492) (2,918)
-------- -------- -------- -------- --------
Income (loss) before extraordinary
items................................... 6,853 (247) (20,494) 1,807 (4,365)
Extraordinary loss on the early
extinguishment of debt, net of tax of
$197.................................... -- 382 -- -- --
-------- -------- -------- -------- --------
Net income (loss)......................... $ 6,853 $ (629) $(20,494) $ 1,807 $ (4,365)
======== ======== ======== ======== ========
Per common share:
Basic:
Income (loss) before extraordinary
item.................................. $ .55 $ (.02) $ (1.72) $ .15 $ (.37)
Extraordinary loss on the early
extinguishment of debt................ $ -- $ (.03) $ -- $ -- $ --
Net income (loss)....................... $ .55 $ (.05) $ (1.72) $ .15 $ (.37)
Diluted:
Income (loss) before extraordinary
item.................................. $ .52 $ (.02) $ (1.72) $ .15 $ (.37)
Extraordinary loss on the early
extinguishment of debt................ $ -- $ (.03) $ -- $ -- $ --
Net income (loss)....................... $ .52 $ (.05) $ (1.72) $ .15 $ (.37)
Weighted average shares of common stock outstanding:
Basic................................... 12,557 12,137 11,943 11,766 11,705
Diluted................................. 13,134 12,137 11,943 11,913 11,705
Comparable restaurant sales percentage
increase for Company-operated
bakery-cafes............................ 8.1% 3.3%(2) 2.1% 3.6% 0.7%
</TABLE>
- ------------------------
(1) Fiscal year 2000 consists of 53 weeks. Fiscal years 1999, 1998, 1997 and
1996 were comprised of 52 weeks.
(2) 1999 comparable restaurant sales consist of Panera Bread Company
bakery-cafes only.
(3) Includes the results of the Au Bon Pain Division until it was sold on
May 16, 1999.
10
<PAGE>
<TABLE>
<CAPTION>
AS OF
---------------------------------------------------------
DEC. 30, DEC. 25, DEC. 26, DEC. 27, DEC. 28,
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT COMPANY-OPERATED BAKERY-CAFES OPEN)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital (deficit)................. $ 3,396 $ (3,215) $ (8,239) $ (58) $ (1,748)
Total assets.............................. 111,689 91,029 153,618 186,516 196,428
Long-term debt, less current maturities... -- -- 34,089 42,527 49,736
Convertible subordinated notes............ -- -- 30,000 30,000 30,000
Stockholders' equity...................... 91,588 73,246 73,327 92,274 90,056
Company-operated bakery-cafes open........ 90 81(4) 219 217 229
</TABLE>
- ------------------------
(4) Consists of Panera Bread Company-owned stores only at the end of 1999.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth the percentage relationship to total revenue,
except where otherwise indicated, of certain items included in the Company's
consolidated statements of operations for the periods indicated. Percentages may
not add due to rounding:
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000(3) 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Restaurant sales.......................................... 82.9% 91.5% 95.0%
Franchise and other revenues.............................. 8.0 4.3 2.5
Commissary sales to franchisees........................... 9.1 4.2 2.5
----- ----- -----
Total Revenues........................................ 100.0% 100.0% 100.0%
----- ----- -----
Cost and Expenses:
Restaurant cost of sales(1)
Cost of food and paper products......................... 32.7% 33.4% 34.2%
Labor................................................... 29.2 29.0 28.4
Occupancy............................................... 7.4 9.9 11.8
Other................................................... 12.8 12.0 11.7
----- ----- -----
Total Restaurant Cost of Sales........................ 82.1% 84.3% 86.1%
----- ----- -----
Commissary cost of sales(2)................................. 88.6% 89.7% 95.4%
Depreciation and amortization............................... 5.6 3.7 5.1
General and administrative.................................. 10.8 10.0 7.5
Non-recurring charges....................................... .3 3.2 10.5
----- ----- -----
Operating profit (loss)..................................... 7.1 2.2 (7.3)
Interest expenses, net...................................... .1 1.6 2.6
Other (income) expense, net................................. (.3) 0.4 0.3
Loss on sale of assets...................................... -- -- 0.3
Minority interest........................................... -- -- (0.1)
Income (loss) before income taxes and extraordinary item.... 7.3 0.2 (10.4)
Income tax provision (benefit).............................. 2.8 0.3 (2.2)
Income (loss) before extraordinary item..................... 4.5 (0.1) (8.2)
Extraordinary loss from early extinguishment of debt, net of
tax....................................................... -- 0.2 --
----- ----- -----
Net income (loss)........................................... 4.5% (0.4)% (8.2)%
===== ===== =====
</TABLE>
- ------------------------
(1) As a percentage of Company restaurant sales.
(2) As a percentage of commissary sales to franchisees.
(3) Fiscal year 2000 is comprised of 53 weeks. Fiscal years 1999 and 1998 are
comprised of 52 weeks.
12
<PAGE>
INTRODUCTION
Panera Bread Company may be referred to as the "Company", "Panera Bread" or
in the first person notation of "we", "us", and "ours" in the following
discussion. On December 22, 1993, the Saint Louis Bread Company was acquired by
Au Bon Pain, Co., Inc. At the time of the acquisition, the Saint Louis Bread
Company had 19 company-operated bakery-cafes and one franchised unit. The Saint
Louis Bread Company continued to grow while owned by Au Bon Pain, expanding the
concept into other markets through the opening of 51 Company owned bakery-cafes
and 44 franchise-operated bakery-cafes. In August, 1998, the Company entered
into a Stock Purchase Agreement to sell the Au Bon Pain Division to ABP
Corporation (the "Buyer"). The transaction was consummated on May 16, 1999 and
is detailed more completely later in this document. The Company now consists of
the Panera Bread/Saint Louis Bread Company bakery-cafes and its related
franchise operations. At the end of fiscal year 2000, there were 90
company-owned (including two specialty bakery-cafes) and 172 franchised
bakery-cafes (including two specialty bakery-cafes) operating in 28 states.
The Company intends to continue to expand the number of company-owned and
franchised bakery-cafes. Our expansion strategy is to develop markets that
complement our existing commissary operations enabling us to take advantage of
operational and distribution efficiencies. In addition, we plan to continue
expansion into new markets where an adequate return on capital can be obtained.
The Company's commissary system is a significant competitive advantage for
the Company. While requiring a major commitment of capital, the commissaries
assure both consistent quality and supply of fresh dough products to both
company-owned and franchised bakery-cafes. In order to develop a specific market
with our concept, a commissary must be available to service the market. A
commissary may begin operations by serving one bakery-cafe, however, as our
target markets are developed and built out over time, the commissary becomes
more efficient. In addition, the commissary system allows the Company to control
product quality for both company-owned and franchised bakery-cafes thereby
increasing product consistency and enhancing brand identity. It is the intention
of the Company to focus its immediate growth in areas that allow it to continue
to gain efficiencies within its current commissary structure by focusing in
areas that geographically complement markets already served by an existing
commissary unit.
The Company's revenues are derived from restaurant sales, commissary sales
to franchisees and franchise and other revenues. Commissary sales to franchisees
are the sales of fresh dough products to our franchisees. Franchise and other
revenues include royalty income and franchise fees. The cost of food and paper
products, labor, occupancy, and other operating expenses relate primarily to
restaurant sales. The cost of commissary sales relates to the sale of dough
products to our franchisees. General and administrative and depreciation
expenses relate to all areas of revenue generation.
The Company's fiscal year ends on the last Saturday in December. The
Company's fiscal year normally consists of 13 four-week periods, with the first,
second, and third quarters ending 16 weeks, 28 weeks, and 40 weeks,
respectively, into the fiscal year. In the year 2000, the Company's fiscal year
is comprised of 53 weeks.
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
RESULTS OF OPERATIONS
Effective May 16, 1999, the Company completed its transaction to sell the Au
Bon Pain Division. For the fifty-three weeks ended December 30, 2000, results of
operations include only the results of the Panera Bread/Saint Louis bread Co.
business unit. Results of operations for the fifty-two weeks ended December 25,
1999 also include the results of the divested Au Bon Pain Division through the
date of the divestiture. For the fifty-two weeks ended December 25, 1999, the
Company recorded a $5.5 million
13
<PAGE>
pre-tax loss related to the sale and a $.4 million extraordinary loss net of tax
related to the early extinguishments of debt.
In the second quarter of 2000, the Company recorded a one time gain of
$.9 million before taxes related to the sale of the Au Bon Pain Division. The
original sales agreement dated August 12, 1998, and amended October 28, 1998,
included a provision prohibiting the sale of the Au Bon Pain division by ABP
Corporation to another party within 18 months of the date of this agreement.
This payment was received in connection with amending the original sales
agreement to allow for a sale. The one time gain of $.9 million before taxes
related to the sale of the Au Bon Pain Division was substantially offset in the
fourth quarter of 2000 by the recording of a $.9 million pre-tax, non-recurring
charge associated with the sale of the Au Bon Pain Business Unit which occurred
in May 1999. Of that amount $.4 million, before taxes, represents an additional
loss on the sale of the Au Bon Pain Business Unit and $.5 million represents a
receivable from Au Bon Pain which management has fully reserved. In the fourth
quarter of 2000, the Company recorded a pre-tax, non-recurring charge to
earnings of $.5 million related to the closing of four bakery-cafes. This charge
included approximately $.3 million for the write-down of impaired assets for two
bakery-cafes that were closed in the first quarter of 2001 and $.2 million
related to the closing of two bakery-cafes in the fourth quarter of 2000.
REVENUES
Total revenues for the fifty-three weeks ended December 30, 2000 declined
11.7% to $151.4 million compared to $171.4 million for the fifty-two weeks ended
December 25, 1999. The decrease was primarily due to the inclusion of the Au Bon
Pain Division's results through May 16, 1999. For Panera Bread on a stand-alone
basis, total revenues increased 37.5% from $110.1 million in 1999. Several
factors (as set forth below) contributed to the growth in total revenues
including the opening of new bakery-cafes and increases in comparable restaurant
sales and annualized sales volume as well as the extra week in the fifty-three
week fiscal year.
Restaurant revenue for fiscal year 2000 for the Company declined 19.9% to
$125.5 million from $156.7 million for fiscal year 1999. Restaurant revenue for
Panera Bread on a stand-alone basis for fiscal year 2000 increased 28.9% to
$125.5 million from $97.4 million for fiscal year 1999. The increase in
restaurant revenue on a stand-alone basis is primarily due to the opening of 11
new company-owned bakery-cafes since the end of 1999 and a 8.1% increase in
comparable store sales for the fiscal year ended December 30, 2000. System-wide
average annualized unit volumes increased by 12.0% to $1.6 million for the
fiscal year ended December 30, 2000. These average annualized unit volumes
exclude the revenues of two company-owned and two franchise-operated specialty
bakery-cafes.
For Panera Bread on a stand-alone basis, increases in comparable net
bakery-cafe sales for fiscal year 2000 were as follows:
<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
DECEMBER 30, 2000 DECEMBER 25, 1999
----------------- -----------------
<S> <C> <C>
Company owned............................... 8.1% 3.3%
Franchise operated.......................... 10.3% 2.0%
System-wide................................. 9.1% 2.9%
</TABLE>
The above comparable bakery-cafe sales exclude the revenues of the four
specialty bakery-cafes as previously mentioned and are based on sales for
bakery-cafes opened eighteen months or longer.
Franchise sales and other revenues consist of franchise fees and royalties.
The Company's franchise sales and other revenues rose 63.5% in fiscal 2000 to
$12.1 million from $7.4 million in fiscal 1999. For fiscal year 2000, franchise
sales and other revenues increased 89.1% to $12.1 million from $6.4 million for
Panera Bread on a stand-alone basis in the same period in 1999. The growth was
primarily driven by an increase in franchise royalties. The increase in royalty
revenue can be attributed to the addition
14
<PAGE>
of 70 franchised bakery-cafes opened since 1999 and higher average sales volumes
being achieved by franchisees in 2000. The average annualized franchise
bakery-cafe sales volume for fiscal year 2000 was $1.7 million, which is a 9.0%
increase over fiscal year 1999.
Commissary sales to franchisees increased 91.7% to $13.8 million for fiscal
year 2000 versus $7.2 million for fiscal year 1999. On a stand-alone basis,
commissary sales to franchisees increased 119.0% from 1999 sales of
$6.3 million. The increase was driven by the increased number of franchised
units open and the higher average annualized unit sales volumes as discussed
previously.
A total of 81 Panera Bread bakery-cafes were opened during fiscal year 2000.
Eleven of the locations were company-owned bakery-cafes and 70 were
franchise-operated bakery-cafes. These openings brought the total number of
bakery-cafes open as of December 30, 2000 to 262 comprised of 90 company-owned
and 172 franchised bakery-cafes. As of December 30, 2000, there were commitments
to develop an additional 561 franchised bakery-cafes.
COSTS AND EXPENSES
The cost of food and paper products does include the costs associated with
the commissary operations that sell fresh dough product to company-owned
bakery-cafes. The costs associated with the commissary operations that sell
fresh dough products to the franchised bakery-cafes are excluded. These costs
are shown separately as Commissary Cost of Sales on the Consolidated Statements
of Operations. The cost of food and paper products declined to 32.7% of
restaurant sales for the fifty-three weeks ended December 30, 2000. This
compares to 33.4% of restaurant sales for the fifty-two weeks ended
December 25, 1999. On a stand-alone basis, 32.7% of restaurant sales for the
cost of food and paper products for fiscal year 2000 compares to 33.8% for
fiscal year 1999. The improvement in 2000 is primarily due to higher sales
volumes, which helps gain efficiencies in the commissaries and bakery-cafes and
improves purchasing power with certain vendors. Additionally, the commodity
markets were fairly stable in 2000.
For fiscal year 2000, commissary cost of sales was $12.3 million or 88.6% of
commissary sales to franchisees, compared to $6.5 million or 89.7% of commissary
sales to franchisees for fiscal year 1999. For Panera Bread on a stand-alone
basis, $12.3 million or 88.6% of commissary sales to franchisees in fiscal year
2000 compared to $6.6 million or 103.3% for the comparable period in 1999. The
higher commissary cost of sales for the fifty-three weeks ended December 30,
2000 compared to the fifty-two weeks ended December 25, 1999, is primarily due
to the 70 franchised bakery-cafes added since the end of fiscal 1999 and the
higher average unit volumes. The lower percentage cost of sales in 2000 compared
to 1999 is primarily due to the increased purchasing leverage at the
commissaries.
Labor expense was $36.6 million or 29.2% of restaurant sales for fiscal year
2000 compared to $45.4 million or 29.0% in fiscal year 1999. For Panera Bread on
a stand-alone basis, $36.6 million or 29.2% of restaurant sales in fiscal year
2000 compared to $27.5 million or 28.3% for the comparable period in 1999. The
increase in labor cost as a percentage of restaurant sales was primarily due to
an increase in the average hourly wage paid by the Company as a result of the
highly competitive labor market, an increase in management staffing, and
increased management bonuses due to better operating performance.
Occupancy costs were $9.3 million or 7.4% of restaurant sales for fiscal
year 2000 compared to $15.6 million or 9.9% of restaurant sales for fiscal year
1999. The decrease in occupancy cost as a percentage of restaurant sales was due
to the sale of the Au Bon Pain Division, which had historically incurred higher
occupancy costs due to their locations in downtown areas of larger cities. For
Panera Bread on a stand-alone basis, the Company incurred $9.3 million or 7.4%
of restaurant sales in occupancy costs for fiscal year 2000 compared to
$7.2 million or 7.4% of restaurant sales for fiscal year 1999.
15
<PAGE>
Other restaurant operating expenses were $16.1 million or 12.8% of
restaurant sales for fiscal year 2000 compared to $18.7 million or 12.0% of
restaurant sales for fiscal year 1999. For Panera Bread on a stand-alone basis,
$16.1 million or 12.8% of restaurant sales for fiscal 2000 compares to
$11.8 million or 12.1% of restaurant sales for fiscal 1999. The increased
percentage for the fiscal year ending December 30, 2000 was primarily due to
$1.0 million of incremental advertising expenses recorded in connection with the
television advertising campaign initiated in the Chicago and St. Louis markets.
Depreciation and amortization was $8.4 million, or 5.6% of total revenue in
fiscal year 2000, compared to $6.4 million or 3.7% of total revenue in fiscal
year 1999. The increase was due to the fact that fiscal year 1999 included
revenues from the Au Bon Pain Division while depreciation expenses for the Au
Bon Pain Division was suspended as the division was classified as an asset held
for sale.
General and administrative expenses were $16.4 million, or 10.8% of total
revenue, and $17.1 million, or 10.0% of total revenue, for the fiscal years
ended December 30, 2000 and December 25, 1999, respectively. For Panera Bread on
a stand-alone basis, $16.4 million or 10.8% of total revenue for fiscal 2000
compares to $12.6 million or 11.4% of total revenue for fiscal 1999. The
decrease on a stand-alone basis as a percentage of total revenue between years
is primarily due to the fact that in fiscal year 1999, the Company was paying Au
Bon Pain for transitional services at the same time that it was building its
accounting and information technology infrastructure. Therefore, there were a
number of duplicative costs incurred by the Company in fiscal year 1999.
NON-RECURRING CHARGE
A non-recurring charge of $.5 million was recorded in the fiscal year ended
December 30, 2000. This charge included three components. In the second quarter
of 2000, the Company recorded a one-time gain of $.9 million before taxes
related to the sale of the Au Bon Pain Division. The original sales agreement
dated August 12, 1998, and amended October 28, 1998, included a provision
prohibiting the sale of the Au Bon Pain Division by ABP Corporation to another
party within 18 months of the date of this agreement. This payment was received
in connection with amending the original sales agreement to allow for a sale.
The one time gain of $.9 million before taxes related to the sale of the Au Bon
Pain Division was substantially offset in the fourth quarter of 2000 by the
recording of a $.9 million pre-tax, non-recurring charge associated with the
sale of the Au Bon Pain Business Unit, which occurred in May 1999. Of that
amount $.4 million, before taxes, represents an additional loss on the sale of
the Au Bon Pain Business Unit and $.5 million represents a receivable from Au
Bon Pain which management has fully reserved. In the fourth quarter of 2000, the
Company recorded a pre-tax, non-recurring charge to earnings of approximately
$.5 million which includes approximately $.3 million for the write-down of
impaired assets, related to the closing of two bakery-cafes to be closed in the
first quarter of 2001. Additionally, this charge included approximately
$.2 million for the write-off of fixed assets related to two bakery-cafes that
were closed in the fourth quarter of 2000.
In fiscal year 1999, in conjunction with the sale of the Au Bon Pain
Division, the Company recorded a non-cash, non-recurring, pre-tax charge of
$5.5 million. This in conjunction with a charge of $24.2 million taken in the
fourth quarter of 1998 reflected a write-down under Statement of Financial
Standards No. 14, "Accounting for the Impairment of Long-Lived Assets and for
the Long-Lived Assets to be Disposed of".
OPERATING PROFIT
Operating profit for fiscal year 2000 increased to $10.8 million or 7.1% of
total revenue from $3.7 million or 2.2% of total revenue, in fiscal year 1999.
For Panera Bread on a stand-alone basis, operating profit was $10.8 million or
7.1% of total revenue for fiscal 2000 compared to $5.1 million or 4.7% of total
revenue for fiscal 1999. Operating income in fiscal year 2000 rose primarily due
to increased revenues from company-owned bakery-cafes, franchise royalties, and
commissary sales to
16
<PAGE>
franchisees. Operating income for the Company for fiscal year 1999 was favorably
impacted by $4.7 million in reduced depreciation and amortization expenses
associated with the Au Bon Pain Division assets held for sale after August 12,
1998. Operating profit for fiscal year 1999 was negatively affected by the
$5.5 million non-recurring charge related to the sale of the Au Bon Pain
Division.
INTEREST EXPENSE
Interest expense was $.2 million or .1% of total revenue for fiscal year
2000 versus $2.7 million or 1.6% of total revenue for fiscal year 1999. The
decrease in interest expense is primarily due to repayment of the Company's
outstanding debt with the proceeds from the sale of the Au Bon Pain Division.
For Panera Bread on a stand-alone basis, $.2 million or .1% of total revenues in
fiscal 2000 compares to $.4 million or .4% of total revenue for fiscal year
1999.
OTHER (INCOME) EXPENSE
Other income was $.4 million for the fiscal year 2000 compared with
$.7 million of other expense for the comparable period in 1999. For Panera Bread
on a stand-alone basis, the $.4 million of other income for fiscal 2000 compares
to $.2 million of other expense for fiscal 1999. The difference between years
was primarily due to increased interest income in fiscal year 2000.
INCOME TAXES
The provision for income taxes increased to $4.2 million for fiscal year
2000 versus $.5 million in fiscal year 1999. The tax provision for the fiscal
year ended December 30, 2000, reflects a combined federal, state, and local
effective tax rate of 38%. The tax provision in 1999 of 194% was due to the
impact of state income taxes, non-deductible meals and entertainment allowances
as well as non-deductible goodwill on a significantly reduced pre-tax income.
As of December 30, 2000 and December 25 1999, the Company has net operating
losses of approximately $20.9 million and $24.8 million, respectively, which can
be carried forward twenty years to offset Federal taxable income. At
December 30, 2000 and December 25, 1999, the Company had Federal jobs tax credit
carryforwards of approximately $1.2 million, which expire in the years 2014-2015
and charitable contribution carryforwards of approximately $4.8 million and
$3.8 million, respectively, which expire in the years 2000-2003. In addition,
the Company has Federal alternative minimum tax credit carryforwards of
approximately $3.8 million and $3.7 million at December 30, 2000 and
December 25, 1999 respectively, which are available to reduce future regular
Federal income taxes over an indefinite period. The Company reevaluates the
positive and negative evidence impacting the realizability of its deferred
income tax assets on an annual basis.
NET INCOME
Net income for fiscal year 2000 was $6.9 million or $.52 per diluted share
compared to a net loss of $.6 million or $.05 per diluted share for fiscal year
1999. The increase in net income in 2000 was due to an increase in restaurant
sales and franchise revenues for Panera Bread bakery-cafes and the absence of
significant net charges related to the sale of the Au Bon Pain Division in 1999.
Net income for 1999 was negatively impacted by a $.4 million extraordinary loss,
net of tax, that was taken due to the early extinguishments of debt and a
$5.5 million pre-tax non-recurring charge related to the sale of the Au Bon Pain
Division. During 2000, the Company recorded a $.9 million pre-tax gain related
to post-transaction negotiations arising out of the sale of the Au Bon Pain
Division. This gain was offset by a $.9 million pre-tax, non-recurring charge
associated with the sale of the Au Bon Pain Business Unit recorded in the fourth
quarter of 2000. For Panera Bread on a stand-alone basis, net income was
$4.3 million for fiscal year 1999, which included a tax benefit of $1.4 million
recorded in the fourth quarter of 1999.
17
<PAGE>
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
RESULTS OF OPERATIONS
As noted earlier, in August 1998, the Board of Directors of Au Bon Pain
entered into a Stock Purchase agreement whereby the Au Bon Pain Division was
sold to ABP Corporation (the "Buyer"). On May 16, 1999, the Company completed
its transaction to sell the Au Bon Pain Division. For the fiscal year ended
December 25, 1999, the Company recorded a pre-tax loss of $5.5 million related
to the transaction and a $0.6 million pre-tax ($0.4 million net of tax)
extraordinary loss related to the early extinguishments of debt from the
proceeds of the sale. Results of operations in the third and fourth quarters of
1999 reflect the results of the Panera Bread Company as a stand-alone entity
while results of operations for the fiscal year ended December 25, 1999, also
include the results of the divested Au Bon Pain Division for the period
December 27, 1998 through May 16, 1999.
REVENUES
Total restaurant sales from company-operated bakery-cafes declined 33.9% to
$156.7 million in 1999 from $237.1 million in 1998. The reason for this decline
was the sale of the Au Bon Pain Division as of May 16, 1999. As a stand-alone
entity, Panera Bread's 1999 restaurant sales increased 25.7% to $97.4 million
from $77.5 million in 1998. Several factors contributed to the growth in Panera
Bread's restaurant sales including the opening of 12 new bakery-cafes in 1999,
and a 3.3% increase in comparable restaurant sales.
Franchise and other revenues rose to $7.4 million in 1999 from $6.2 million
in 1998, a 19.4% increase. For Panera Bread on a stand-alone basis, franchise
and other revenues rose to $6.4 million in 1999, from $3.5 million in 1998, an
increase of 82.9%. This increase was primarily driven by a 170.6% rise in
franchise royalties to $4.6 million in 1999 from $1.7 million in 1998. The
increase in royalty activity can be attributed to the addition of 56 franchised
bakery-cafes in 1999 and the higher sales volumes achieved in 1999. The average
annualized sales volume for all franchised bakery-cafes in 1999 was
$1.6 million compared to $1.3 million in 1998.
During 1999, 4 franchise area development agreements were signed
representing commitments for the development of 60 bakery-cafes. As of
December 25, 1999, there were franchise commitments in place for the development
of an additional 543 bakery-cafes. In 1999, the Company opened 68 new
bakery-cafes including 12 company-owned and 56 franchised bakery-cafes
representing a 59% increase in the number of bakery-cafes opened as of the end
of fiscal year 1999 compared to prior year-end.
Commissary sales to franchisees increased 12.5% in 1999 to $7.2 million from
$6.4 million in 1998. On a stand-alone basis, Panera Bread's commissary sales to
franchisees increased to $6.3 million in 1999, a 215.0% increase from 1998 sales
of $2.0 million. The increase in sales to franchisees can be attributed to the
addition of 56 franchised bakery-cafes in 1999 and higher bakery-cafe unit
volumes achieved in 1999.
COSTS AND EXPENSES
The cost of food and paper products was $52.4 million, or 33.4% of Company
restaurant sales, in 1999 compared to $81.1 million, or 34.2% of Company
restaurant sales, in 1998. For Panera Bread on a stand-alone basis, the cost of
food and paper products was $32.9 million, or 33.8% of Company restaurant sales
in 1999 compared to $27.7 million, or 35.8% of company restaurant sales in 1998.
The cost of food and paper products does not include food costs that are
associated with the commissary operations that sell fresh dough products to
franchised bakery-cafes. The primary reason for the overall decline was that the
Au Bon Pain units historically ran at a higher food cost percentage than the
Panera Bread units. With the sale of the Au Bon Pain Division in May, 1999, the
full year results were more heavily weighted to the Panera Bread units.
18
<PAGE>
The costs associated with the sale of fresh dough products to franchises are
included in commissary cost of sales, and include the cost of sales, salaries,
benefits, and other operating expenses, excluding depreciation associated with
the sale of fresh dough products to our franchisees. In 1999, commissary cost of
sales as a percentage of commissary sales to franchisees declined to 89.7% from
95.4% in 1998. For Panera Bread on a stand-alone basis, commissary cost of sales
as a percentage of commissary sales to franchisees increased to 103.3% in 1999
from 91.8% in 1998. The overall decline is due to the commissaries becoming more
efficient as they service more bakery-cafes. Only one new commissary was opened
in 1999 while Panera Bread added 68 new bakery-cafes on a system-wide basis.
The cost of labor as a percentage of restaurant revenues increased to 29.0%
in 1999 from 28.4% in 1998. For Panera Bread on a stand-alone basis, the cost of
labor as a percentage of restaurant revenues increased to 28.3% in 1999 from
27.7% in 1998. The overall increase in labor for the year is primarily due to an
increase in the average hourly wage rate driven by low unemployment and a highly
competitive labor market.
The cost of occupancy as a percentage of restaurant revenue decreased to
9.9% in 1999 from 11.8% in 1998. For Panera Bread on a stand-alone basis, the
cost of occupancy as a percentage of restaurant revenue remained consistent at
7.4% in 1999 and 7.4% in 1998. The overall decrease is due primarily to
increased sales volumes at company-operated bakery-cafes and the sale of the Au
Bon Pain Division, which had historically incurred higher occupancy costs due to
their locations in the downtown areas of larger cities.
Other restaurant operating expenses increased as a percentage of restaurant
revenues to 12.0% in 1999 from 11.7% in 1998. For Panera Bread on a stand-alone
basis, other restaurant operating expenses increased as a percentage of
restaurant revenue to 12.1% in 1999 from 11.7% in 1998. The overall increase is
primarily due to increases in the fixed costs associated with the opening of 12
new bakery-cafes in 1999 and a small increase in advertising at the Panera Bread
bakery-cafes during the year.
Depreciation and amortization decreased as a percentage of total revenue to
3.7% in 1999 from 5.1% in 1998. For Panera Bread on a stand-alone basis,
depreciation and amortization decreased as a percentage of total revenue to 5.8%
in 1999 from 6.0% in 1998. The overall decrease was primarily due to the sale of
the Au Bon Pain Division assets and to the suspension of depreciation and
amortization associated with those assets held for sale after August 12, 1998.
General and administrative expenses increased as a percentage of total
revenues to 10.0% in 1999 from 7.5% in 1998. For Panera Bread on a stand-alone
basis, general and administrative expenses increased as a percentage of total
revenues to 11.4% in 1999 from 11.3%, which includes an allocation of
$2.4 million for overhead services provided by Au Bon Pain Co., Inc., in 1998.
The overall increase in 1999 included a charge for transitional overhead
services provided to Panera Bread by the buyer of the Au Bon Pain business unit
through the end of the year at the same time that Panera Bread was experiencing
increased costs associated with building its accounting and information systems
infrastructure.
Operating income (loss) increased to $3.7 million in 1999 from $(18.3)
million in 1998. Operating income in 1999 was reduced by a $5.5 million
non-recurring charge related to the sale of the Au Bon Pain Division. Operating
income in 1999 was increased by $4.7 million due to the elimination of
depreciation and amortization expense associated with the Au Bon Pain Division
assets sold in 1999. The operating loss in 1998 included non-recurring charges
recorded by the Company of $26.0 million, including a charge of $24.2 million,
related principally to the write down of certain assets under Statement of
Financial Accounting Standards, 121 "Accounting for the Impairment of Long-Lived
Assets and for the Long-Lived Assets to be Disposed of" ("SFAS 121") related to
the planned sale of assets and the closing of eight underperforming Au Bon Pain
cafes and one Panera Bread bakery-cafe. Operating income in 1998 was favorably
impacted by approximately $4.5 million as a result of the
19
<PAGE>
suspension of depreciation and amortization of the Au Bon Pain Division assets
held for sale as of August 12, 1998, the date of the agreement to sell that
business. Before the non-recurring charges and suspension of depreciation and
amortization, operating income increased by 32.4% in 1999 to $4.5 million in
1999 from $3.4 million in 1998.
Interest expense as a percentage of total revenue decreased to 1.6% in 1999
from 2.6% in 1998. This reduction is due primarily to the repayment of the
Company's outstanding debt with the proceeds of the sale of the Au Bon Pain
Division.
In connection with the early extinguishment of debt, the Company recorded a
$.4 million extraordinary loss net of $.2 million of taxes. The debt was repaid
with the proceeds from the sale of the Au Bon Pain Division.
INCOME TAXES
The income tax provision was $.5 million in 1999 compared to an income tax
benefit of $5.5 million in 1998. The 1999 effective tax rate was 194% primarily
due to state income taxes, non-deductible meals and entertainment allowance as
well as non-deductible goodwill. The $5.5 million benefit in 1998 was primarily
due to a $24.2 million charge taken to write-down the value of the Au Bon Pain
Division assets in connection with the sale, offset principally by a valuation
allowance related to state net operating loss carryforwards and capital losses
related to the sale.
As of December 25, 1999, the Company had federal net operating loss
carryforwards of approximately $24.8 million, as well as approximately
$4.9 million of federal tax credit carryforwards available to reduce future
income taxes. The federal net operating loss carryforwards expire principally in
the year 2018. The tax credit carryforwards include approximately $3.7 million
of federal Alternative Minimum Tax Credits which have an indefinite life and
$1.2 million of federal jobs tax credits which expire in the years beginning
with 2014-2015. The Company provided a valuation allowance of $4.7 million to
reduce its deferred tax assets to a level which, more likely than not, will be
realized. The valuation allowance is primarily attributable to the potential for
the non-deductibility of capital losses related to the taxable loss on the sale
of the Au Bon Pain Division and the expectation that certain deferred state tax
assets will be unrealizable following the sale. The Company reevaluates the
positive and negative evidence impacting the realization of its deferred tax
assets on an annual basis.
NET LOSS
The net loss in 1999 was $.6 million compared to a net loss of
$20.5 million in 1998. The net loss in 1999 included a $5.5 million
non-recurring charge related to the sale of the Au Bon Pain Division and a
$.4 million after tax extraordinary loss from the early extinguishment of debt
from the proceeds from the sale. 1998's results included a $24.2 million charge
taken as a result of the write-down of the value of the Au Bon Pain Division
assets in connection with the sale as well as closure of eight underperforming
Au Bon Pain Cafes and one Panera Bread Bakery-Cafe.
Other than the non-recurring charges, net income in 1999 was higher than
1998 primarily due to higher operating earnings and lower interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $9.0 million at December 30, 2000 compared
with $1.9 million at December 25, 1999. The Company's principal requirements for
cash are capital expenditures for constructing and equipping new bakery-cafes
and maintaining or remodeling existing bakery-cafes and commissaries and working
capital. For the fifty-three weeks ended December 30, 2000, the Company met its
requirements for capital with cash from operations and proceeds from the
exercise of stock options of $8.2 million.
20
<PAGE>
Funds provided by operating activities for the fifty-three weeks ended
December 30, 2000, were $20.1 million compared to $6.7 million for the fifty-two
weeks ended December 25, 1999. Funds provided by operating activities increased
primarily as a result of an increase in net income and depreciation expense.
Total capital expenditures for the fifty-three weeks ended December 30,
2000, were $20.1 and were primarily related to the opening of eleven new
company-owned bakery-cafes, the opening of one additional commissary, and for
maintaining or remodeling existing bakery-cafes. The expenditures were funded by
cash from operating activities and the proceeds from the exercise of stock
options. Total capital expenditures were $15.3 million for the fifty-two weeks
ended December 25, 1999, which included $2.1 million in capital expenditures for
the divested Au Bon Pain Division. For Panera Bread on a stand-alone basis, the
$13.2 million in 1999 capital expenditures were primarily related to the opening
of 12 new company-owned bakery-cafes and 1 additional commissary.
On December 26, 2000, the Company entered into a revolving credit agreement
for $10.0 million at LIBOR plus 1.0%, approximately 7.5% at December 30, 2000,
which extends until December 31, 2003. As of December 30, 2000, the Company had
$9.4 million available under the line of credit with $0.6 million utilized by
outstanding standby letters of credit. The Company was in compliance with all
covenants associated with its borrowings as of December 30, 2000.
As of December 25, 1999, the Company had a $10.0 million unsecured revolving
line of credit bearing interest at the Company's option of either the LIBOR rate
plus 2.25% or the commercial bank's prime rate plus .75%. As of December 25,
1999, the Company had $9.4 million available to it under the line of credit with
$0.6 million being utilized by outstanding standby letters of credit. The
Company was in compliance with all covenants associated with its borrowing as of
December 30, 1999.
Financing activities provided $7.8 million in 2000. In 1999, $63.9 million
was utilized from financing activities. The financing activities in 2000
included proceeds from the exercise of stock options of $8.2 million. The
financing activities in 1999 included the net repayment of all outstanding debt
of $64.2 million with the proceeds from the sale of Au Bon Pain.
The Company had a working capital surplus of $3.4 million and a working
capital deficit of $3.2 million at December 30, 2000, and December 25, 1999,
respectively. The working capital surplus in 2000 was primarily due to an
increase in cash and cash equivalents. The Company has experienced no short term
or long-term liquidity difficulties having been able to finance its operations
through internally generated cash flow and its revolving line of credit.
During 2001, the Company currently anticipates spending a total of
approximately $22 to $24 million, principally for the opening of approximately
14 new company-owned bakery-cafes, the opening of one additional commissary, and
for maintaining and remodeling approximately 10 existing cafes. The Company
expects to fund these expenditures principally through internally generated cash
flow supplemented, where necessary, by borrowings on its line of credit.
IMPACT OF INFLATION
In the past, the Company has been able to recover inflationary cost and
commodity price increases through increased menu prices. There have been and
there may be in the future, delays in implementing such menu price increases,
and competitive pressures may limit the Company's ability to recover such cost
increases in their entirety. Historically, the effects of inflation on the
Company's net income have not been materially adverse.
A majority of the Company's employees are paid hourly rates related to
federal and state minimum wage laws. Although the Company has and will continue
to attempt to pass along any increased labor costs through food price increases,
there can be no assurance that all such increased labor costs can be reflected
in its prices or that increased prices will be absorbed by consumers without
diminishing to some degree consumer spending at the bakery-cafes. However, the
Company has not
21
<PAGE>
experienced to date a significant reduction in gross profit margins as a result
of changes in such laws, and management does not anticipate any related future
significant reductions in gross profit margins.
FORWARD LOOKING STATEMENTS
Matters discussed in this report which relate to events or developments that
are expected to occur in the future, including any discussion of growth or
anticipated operating results are forward-looking statements within the meaning
of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 (identified by the words "estimate", "project",
"anticipates", "expects", "intends", "believes", "future", and similar
expressions). These are statements which express management's belief,
expectations or intentions regarding the Company's future performance. Moreover,
a number of factors could cause the Company's actual results to differ
materially from those set forth in the forward-looking statements due to known
and unknown risks and uncertainties. The Company's operating results may be
negatively affected by many factors, including but not limited to the lack of
availability of sufficient capital to it and the developers party to franchise
development agreements with the Company, variations in the number and timing of
bakery-cafe openings, public acceptance of new bakery-cafes, consumer
preferences, competition, commodity costs, and other factors that may affect
retailers in general. The foregoing list of important factors is not exclusive.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 defines derivative
instruments and requires that these items be recognized as assets or liabilities
in the statement of financial position. This statement is effective for
financial statements issued for periods beginning January 1, 2000. However, SFAS
No. 137 defers the effective date for one year to January 1, 2001. As of
December 30, 2000, the Company does not have any derivative instruments.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company had no holdings of derivative financial or commodity instruments
at December 30, 2000. The Company's unsecured revolving line of credit bears an
interest rate using the commercial bank's prime rate or LIBOR as the basis, and
therefore is subject to additional expense should there be an increase in prime
or LIBOR interest rates. Panera Bread has no foreign operations and accordingly,
no foreign exchange rate fluctuation risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following described consolidated financial statements of the Company are
included in response to this item:
Report of Independent Accountants.
Consolidated Balance Sheets as of December 30, 2000, and December 25, 1999.
Consolidated Statements of Operations for the fiscal years ended
December 30, 2000, December 25, 1999, and December 26, 1998.
Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 2000, December 25, 1999, and December 26, 1998.
Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 30, 2000, December 25, 1999, and December 26, 1998.
Notes to Consolidated Financial Statements.
Valuations and Qualifying Accounts.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF PANERA BREAD COMPANY:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Panera Bread Company and its subsidiaries at December 30, 2000 and
December 25, 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 30, 2000, in conformity
with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
St. Louis, Missouri
March 2, 2001
24
<PAGE>
PANERA BREAD COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DEC. 30, DEC. 25,
2000 1999
----------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 9,011 $ 1,936
Accounts receivable, less allowance of $86 and $197 in
2000 and 1999, respectively............................. 3,105 2,686
Inventories (Note 3)...................................... 2,442 1,880
Prepaid expenses.......................................... 1,027 484
Refundable income taxes................................... 474 98
Deferred income taxes (Note 10)........................... 5,193 5,473
----------- --------
Total current assets.................................. 21,252 12,557
----------- --------
Property and equipment, net (Note 4)........................ 59,857 47,191
Other assets:
Notes receivable.......................................... -- 35
Intangible assets, net of accumulated amortization of
$6,921 and $5,932 in 2000 and 1999 respectively......... 17,790 18,779
Deferred financing costs.................................. 24 88
Deposits and other (Note 11).............................. 4,731 3,960
Deferred income taxes (Note 10)........................... 8,035 8,419
----------- --------
Total other assets.................................... 30,580 31,281
----------- --------
Total assets.......................................... $ 111,689 $ 91,029
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable.......................................... $ 5,396 $ 3,535
Accrued Expenses (Note 6)................................. 12,086 12,237
Current portion of computer equipment financing........... 374 --
----------- --------
Total current liabilities............................. 17,856 15,772
Deferred revenue (Note 18).................................. 2,245 2,011
----------- --------
Total liabilities..................................... 20,101 17,783
Commitments and contingencies (Notes 9 and 15)
Stockholders' equity (Note 12):
Common stock, $.0001 par value:
Class A, shares authorized 50,000,000; issued and
outstanding 11,870,918 and 10,630,717 in 2000 and 1999,
respectively............................................ 1 1
Class B, shares authorized 2,000,000; issued and
outstanding 1,481,922 and 1,535,821 in 2000 and 1999,
respectively............................................ -- --
Treasury stock, carried at cost........................... (900) --
Additional paid-in capital................................ 82,971 70,581
Retained earnings......................................... 9,516 2,664
----------- --------
Total stockholders' equity............................ 91,588 73,246
----------- --------
Total liabilities and stockholders' equity............ $ 111,689 $ 91,029
=========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Restaurant sales...................................... $125,486 $156,738 $237,102
Franchise and other revenues.......................... 12,059 7,384 6,161
Commissary sales to franchisees....................... 13,844 7,237 6,397
-------- -------- --------
Total revenue..................................... 151,389 171,359 249,660
-------- -------- --------
Costs and expenses:
Restaurant Expenses:
Cost of food and paper products..................... 41,084 52,445 81,140
Labor............................................... 36,609 45,385 67,218
Occupancy........................................... 9,313 15,552 28,016
Other operating expenses............................ 16,050 18,740 27,826
-------- -------- --------
103,056 132,122 204,200
Commissary cost of sales.............................. 12,261 6,490 6,100
Depreciation and amortization......................... 8,412 6,379 12,667
General and administrative expenses................... 16,381 17,104 18,769
Non-recurring charge (Note 5)......................... 494 5,545 26,236
-------- -------- --------
Total costs and expenses.......................... 140,604 167,640 267,972
-------- -------- --------
Operating profit (loss)................................. 10,785 3,719 (18,312)
Interest expense........................................ 164 2,745 6,396
Other (income) expense, net............................. (409) 735 710
Loss on sale of assets.................................. -- -- 735
Minority interest....................................... -- (25) (127)
-------- -------- --------
Income (loss) before income taxes and extraordinary
item.................................................. 11,030 264 (26,026)
Income tax provision (benefit) (Note 10)................ 4,177 511 (5,532)
-------- -------- --------
Income (loss) before extraordinary item................. 6,853 (247) (20,494)
Extraordinary loss from early extinguishments of debt,
net of tax of $197.................................... -- 382 --
-------- -------- --------
Net Income (loss)....................................... $ 6,853 $ (629) $(20,494)
======== ======== ========
Per common share:
Basic:
Income (loss) before extraordinary item............... $ .55 $ (.02) $ (1.72)
Extraordinary loss on the early extinguishment of
debt................................................ $ -- $ (.03) $ --
Net income (loss)..................................... $ .55 $ (.05) $ (1.72)
Diluted:
Income (loss) before extraordinary item............... $ .52 $ (.02) $ (1.72)
Extraordinary loss on the early extinguishment of
debt................................................ $ -- $ (.03) $ --
Net income (loss)..................................... $ .52 $ (.05) $ (1.72)
Weighted average shares of common stock outstanding:
Basic................................................. 12,557 12,137 11,943
Diluted............................................... 13,134 12,137 11,943
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE>
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
------------------------------
DEC. 30, DEC. 25, DEC. 26,
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)......................................... $ 6,853 $ (629) $(20,494)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 8,412 6,379 12,667
Amortization of deferred financing costs.................. 88 406 683
Provision for losses on accounts receivable............... (111) 93 56
Minority interest......................................... -- (25) (127)
Tax benefit from exercise of stock options................ 4001 -- 75
Deferred income taxes..................................... 664 42 (6,664)
Loss on early extinguishment of debt...................... -- 382 --
Non-recurring charge...................................... 494 5,545 26,236
Loss on disposal of assets................................ -- -- 735
Changes in operating assets and liabilities:
Accounts receivable....................................... (308) (1,596) 15
Inventories............................................... (562) (65) 212
Prepaid expenses.......................................... (543) (3,560) (535)
Refundable income taxes................................... (376) -- 480
Accounts payable.......................................... 1,861 (3,037) 4,069
Accrued expenses.......................................... (645) 769 3,104
Deferred revenue.......................................... 234 2,011 --
------- -------- --------
Net cash provided by operating activities............. 20,062 6,715 20,512
------- -------- --------
Cash flows from investing activities:
Additions to property and equipment....................... (20,089) (15,306) (21,706)
Proceeds from sale of assets.............................. -- 72,163 12,694
Change in cash included in net current liabilities held
for sale................................................ -- (466) (1,305)
Payments received on notes receivable..................... 35 114 240
Increase in intangible assets............................. -- (50) (139)
Increase (decrease) in deposits and other................. (771) 855 (956)
Increase in notes receivable.............................. -- (30) (45)
------- -------- --------
Net cash (used in) provided by investing activities... (20,825) 57,280 (11,217)
------- -------- --------
Cash flows from financing activities:
Exercise of employee stock options........................ 8,206 96 1,203
Proceeds from long-term debt issuance..................... 765 41,837 75,418
Principal payments on long-term debt...................... (391) (106,073) (84,253)
Purchase of treasury stock................................ (900) -- --
Proceeds from issuance of common stock.................... 182 148 268
Common stock issued for employee stock bonus.............. -- 304 --
Increase in deferred financing costs...................... (24) (110) (506)
Decrease in minority interest............................. -- (121) (418)
------- -------- --------
Net cash provided by (used in) financing activities... 7,838 (63,919) (8,288)
------- -------- --------
Net increase in cash and cash equivalents................... 7,075 76 1,007
Cash and cash equivalents at beginning of year.............. 1,936 1,860 853
------- -------- --------
Cash and cash equivalents at end of year.................... $ 9,011 $ 1,936 $ 1,860
======= ======== ========
Supplemental cash flow information:
Cash paid during the year for:
Interest................................................ $ 85 $ 4,250 $ 5,544
Income taxes............................................ $ 512 $ 241 $ 268
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE>
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND
DECEMBER 26, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
$.0001 PAR VALUE
-----------------------------------------
CLASS A CLASS B TREASURY STOCK ADDITIONAL TOTAL
------------------- ------------------- ------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
-------- -------- -------- -------- -------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Dec. 27, 1997... 10,187 $ 1 1,610 $ -- -- $ -- $68,486 $23,787 $92,274
Exercise of employee
stock options.......... 178 1,204 1,204
Income tax benefit
related to stock option
plan................... 75 75
Exercise of Warrants..... (323) (323)
Issuance of common
stock.................. 101 591 591
Conversions of Class B to
Class A................ 52 (52)
Net loss................. (20,494) (20,494)
------- ------- ----- ---- -------- ----- ------- ------- -------
Balance, Dec. 26, 1998... 10,518 $ 1 1,558 $ -- -- $ -- $70,033 $ 3,293 $73,327
Exercise of employee
stock options.......... 14 96 96
Issuance of common
stock.................. 29 148 148
Issuance of common stock
for employee bonus..... 48 304 304
Conversions of Class B to
Class A................ 22 (22)
Net loss................. (629) (629)
------- ------- ----- ---- -------- ----- ------- ------- -------
Balance, Dec. 25, 1999... 10,631 $ 1 1,536 $ -- -- $ -- $70,581 $ 2,664 $73,246
Exercise of employee
stock options.......... 1,089 8,206 8,206
Issuance of common
stock.................. 20 182 182
Issuance of common stock
for employee bonus..... -- 1 (1) --
Exercise of Warrants..... 132
Conversions of Class B to
Class A................ 54 (54)
Repurchase of Class A
common stock........... (55) 55 (900) (900)
Income tax benefit
related to stock option
plan................... 4,001 4,001
Net income............... 6,853 6,853
------- ------- ----- ---- -------- ----- ------- ------- -------
Balance, Dec. 30, 2000... 11,871 $ 1 1,482 $ -- 55 $(900) $82,971 $ 9,516 $91,588
======= ======= ===== ==== ======== ===== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
28
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Panera Bread Company operates a retail bakery-cafe business and franchising
business under the concept names "Panera Bread Company" and "Saint Louis Bread
Company". Up until the year ended December 26, 1998, the Company operated under
the name Au Bon Pain Co., Inc. and consisted of two retail bakery-cafe
businesses and two franchising businesses operating under the concept names "Au
Bon Pain" and "Saint Louis Bread Company". As described in Note 5, on May 16,
1999, the Company sold the Au Bon Pain Division.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
For the year ended December 30, 2000, the consolidated financial statements
consist of the accounts of Panera Bread Company, Panera Bread Company, Inc., a
wholly owned subsidiary and ABP Midwest Manufacturing Co., Inc., a wholly owned
subsidiary. For the years ended December 25, 1999 and December 26, 1998, the
consolidated statements include the accounts of Au Bon Pain Co., Inc., ABP
Holdings, Inc., a wholly owned subsidiary, Saint Louis Bread Company, Inc.
("Saint Louis Bread"), a wholly owned subsidiary, ABP Midwest Manufacturing Co.,
Inc, a wholly owned subsidiary, and investments in joint ventures in which a
majority interest is held (the "Company"). All intercompany balances and
transactions have been eliminated.
PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity at the
time of purchase of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
Substantially all accounts receivable are due from franchisees for purchases
of fresh dough products and for royalties from December sales. The Company
generally does not require collateral and maintains reserves for potential
uncollectable accounts, which in the aggregate have not exceeded management's
expectation.
INVENTORIES
Inventories, which consist of food products, paper goods and supplies,
smallwares and promotional items are valued at the lower of cost, or market,
determined under the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized using the
29
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
straight-line method over the shorter of their estimated useful lives or the
remaining terms of the leases. The estimated useful lives used for financial
statement purposes are:
<TABLE>
<S> <C>
Leasehold improvements...................................... 10-23 years
Machinery and equipment..................................... 3-10 years
Furniture and fixtures...................................... 3-10 years
Signage..................................................... 10 years
</TABLE>
Interest is capitalized in connection with the construction of new locations
or facilities. The capitalized interest is recorded as part of the asset to
which it relates and is amortized over the asset's estimated useful life.
Capitalized interest amounted to $0, $96,279, and $114,928 in 2000, 1999 and
1998, respectively.
Upon retirement or sale, the cost of assets disposed of and their related
accumulated depreciation are removed from the accounts. Any resulting gain or
loss is credited or charged to operations. Maintenance and repairs are charged
to expense when incurred, while betterments are capitalized.
INTANGIBLE ASSETS
Intangible assets consist of goodwill arising from the excess of cost over
the fair value of net assets acquired at the original acquisition of the
Company. Goodwill is amortized on a straight-line basis over twenty-five years.
The Company examines the carrying value of its excess of cost over net assets
acquired and other intangible assets to determine whether there are any
impairment losses. If indications of impairment were present in intangible
assets used in operations, and future cash flows were not expected to be
sufficient to recover the assets' carrying amount, an impairment loss would be
charged to expense in the period identified. No event has been identified that
would indicate an impairment of the value of material intangible assets recorded
in the accompanying consolidated financial statements.
IMPAIRMENT OF LONG-LIVED ASSETS
Periodically management assesses, based on undiscounted cash flows, if there
has been a permanent impairment in the carrying value of its long-lived assets
and, if so, the amount of any such impairment, by comparing anticipated
discounted future operating income from acquired businesses with the carrying
value of the related long-lived assets. In performing this analysis, management
considers such factors as current results, trends, future prospects and other
economic factors.
INCOME TAXES
The provision for income taxes is determined in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
Any effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
30
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Costs incurred in connection with obtaining debt financing are amortized
over the terms of the related debt.
FRANCHISE AND DEVELOPMENT FEES
Franchise fees are the result of sales of area development rights and the
sale of individual franchise locations to third parties, both domestically and
internationally. Upon completion of the sale of the Au Bon Pain Division on
May 16, 1999, the Company no longer had any international franchisees. Fees from
the sale of area development rights are fully recognized as revenue upon
completion of all commitments related to the agreements. Fees from the sale of
individual franchise locations are fully recognized as revenue upon the
commencement of franchise operations.
CAPITALIZATION OF CERTAIN DEVELOPMENT COSTS
The Company capitalizes certain expenses associated with the development and
construction of new store locations. Capitalized costs of $.8 million and
$.8 million as of December 30, 2000 and December 25, 1999, respectively, are
recorded as part of the asset to which they relate and are amortized over the
asset's useful life.
REVENUE RECOGNITION
The Company records revenues from normal recurring sales upon the
performance of services. Revenue from the sales of franchises is recognized as
income when the Company has substantially performed all of its material
obligations under the franchise agreement. Continuing royalties, which are a
percentage of net sales of franchised restaurants, are accrued as income when
earned.
ADVERTISING COSTS
The Company's policy is to report advertising costs as expenses in the
periods in which the costs are incurred. The total amounts charged to
advertising expense were approximately $2.8 million, $1.8 million and
$1.9 million for the years ended December 30, 2000, December 25, 1999 and
December 26, 1998, respectively.
PRE-OPENING COSTS
All pre-opening costs associated with the opening of new retail locations
are expensed when incurred.
FISCAL YEAR
The Company's fiscal year ends on the last Saturday in December. Fiscal
years for the consolidated financial statements included herein include 53 weeks
for the fiscal year ended December 30, 2000, and 52 weeks for the fiscal years
ended December 25, 1999, and December 26, 1998.
31
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE DATA
Earnings per share is based on the weighted average number of shares
outstanding during the period after consideration of the dilutive effect, if
any, for common stock equivalents, including stock options, warrants and
preferred stock. Earnings per common share are computed in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share," which requires companies to present basic earnings per share and diluted
earnings per share. Basic earnings per share are computed by dividing net income
by the weighted average number of shares of common stock outstanding during the
year. Diluted earnings per common share are computed by dividing net income by
the weighted average number of shares of common stock outstanding and dilutive
securities outstanding during the year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's long-term debt, including current
maturities, approximates fair value because the interest rates on these
instruments change with market interest rates. The carrying amounts for accounts
receivable and accounts payable approximate their fair values due to the short
maturity of these instruments.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 defines derivative
instruments and requires that these items be recognized as assets or liabilities
in the statement of financial position. This statement is effective for
financial statements issued for periods beginning January 1, 2000. However, SFAS
No. 137 deferred the effective date for one year to January 1, 2001. As of
December 30, 2000, the Company did not have any derivative instruments.
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 25,
2000 1999
------------ ------------
<S> <C> <C>
Food:
Commissaries...................................... $ 310 $ 178
Bakery-cafes...................................... 908 729
Paper goods......................................... 170 134
Smallwares.......................................... 1,036 768
Other............................................... 18 71
------ ------
$2,442 $1,880
====== ======
</TABLE>
32
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 25,
2000 1999
------------ ------------
<S> <C> <C>
Leasehold improvements.............................. $39,852 $33,080
Machinery and equipment............................. 30,358 21,995
Furniture and fixtures.............................. 8,497 6,350
Signage............................................. 2,167 1,320
Construction in progress............................ 3,537 2,701
------- -------
84,411 65,446
Less accumulated depreciation and amortization...... 24,554 18,255
------- -------
Property and equipment, net......................... $59,857 $47,191
======= =======
</TABLE>
The Company recorded depreciation expense related to these assets of
$7.4 million, $5.4 million in 2000 and 1999 respectively.
5. SALE OF AU BON PAIN DIVISION AND NON-RECURRING CHARGES
The Company, together with its wholly-owned subsidiary ABP Holdings, Inc.
("ABPH") entered into a Stock Purchase Agreement dated August 12, 1998 and
amended October 28, 1998 with ABP Corporation (the "Buyer"), an affiliate of
Bruckmann, Rosser, Sherrill & Co., L.P., relative to the transfer of
substantially all of the assets and liabilities of the Company's Au Bon Pain
Division business (the "Au Bon Pain Division") and sale of all of the
outstanding capital stock of ABPH to the Buyer, whereby the Buyer would become
the owner of the Au Bon Pain Division (the "Sale"). The Sale was effective
May 16, 1999 for $73 million in cash before contractual purchase price
adjustments of approximately $1 million. The Company, which now consists of the
Panera Bread/Saint Louis Bread Co. Business Unit only, has been renamed Panera
Bread Company. The proceeds from the sale were used to repay all outstanding
debt and provide cash for growth. In addition, the Company recorded an
extraordinary loss net of taxes of $0.4 million associated with the early
extinguishment of debt outstanding in the second quarter of 1999.
In conjunction with the sale, the Company recorded a non-cash,
non-recurring, pre-tax charge of $5.5 million in the first quarter of 1999 and
$24.2 million in 1998. This charge was to reflect a write-down under Statement
of Financial Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for the Long-Lived Assets to be Disposed of" ("SFAS 121"). The charge
is included as a separate component of operating expenses. The non-cash charge
was taken to record an impairment for long lived assets to be disposed of as a
result of the agreement entered into for the subsequent sale of the Au Bon Pain
Division. Operating income for the years ended December 25, 1999, and
December 26, 1998, were favorably impacted by $4.7 million and $4.5 million due
to the suspension of depreciation and amortization associated with the Au Bon
Division assets held for sale after August 12, 1998.
Restaurant sales and net operating loss (before non-recurring charges and
the suspension of depreciation and amortization) in the Au Bon Pain Division
held for sale as of December 26, 1998 were $159.6 million and $3.0 million,
respectively. In fiscal year 1999, revenues and net operating income (before
non-recurring charges and the suspension of depreciation and amortization) in
the Au
33
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SALE OF AU BON PAIN DIVISION AND NON-RECURRING CHARGES (CONTINUED)
Bon Pain Division through the time of its sale on May 16, 1999, were
$51.5 million and $3.2 million respectively.
During 1998, the Company recorded $2.0 million in non-recurring, non-cash
charges in accordance with SFAS 121, to write-down the book value of eight
underperforming Au Bon Pain stores whose leases expired in 1998 and were not
renewed, and to record the closing of one Panera Bread location. The charge is
included as a separate component of operating expenses and includes a
$1.6 million fixed asset write-down and a $0.4 million other asset write-down.
In the first quarter of 1998 the Company sold the Mexico, Missouri
production facility and its wholesale frozen dough business to Bunge Foods
Corporation ("Bunge") for approximately $13 million in cash. The Company
recognized a pre-tax loss on the sale of the facility of approximately
$.7 million in the Company's results of operations.
In the second quarter of 2000, the Company recorded a one time gain of
$.9 million before taxes related to the sale of the Au Bon Pain Division. The
original sales agreement dated August 12, 1998, and amended October 28, 1998,
included a provision prohibiting the sale of the Au Bon Pain division by ABP
Corporation to another party within 18 months of the date of this agreement.
This payment was received in connection with amending the original sales
agreement to allow for a sale. The one time gain of $.9 million before taxes
related to the sale of the Au Bon Pain Division was substantially offset in the
fourth quarter of 2000 by the recording of a $.9 million pre-tax, non-recurring
charge associated with the sale of the Au Bon Pain Business Unit which occurred
in May 1999. Of that amount $.4 million, before taxes, represents an additional
loss on the sale of the Au Bon Pain Business Unit and $.5 million represents a
receivable from Au Bon Pain which management has fully reserved. Also in the
fourth quarter of 2000, the Company recorded a pre-tax, non-recurring charge to
earnings of approximately $.5 million which includes approximately $.3 million
for the write-down of impaired assets, related to the closing of two
bakery-cafes in the first quarter of 2001. Additionally, this charge included
approximately $.2 million for the write-off of fixed assets related to two
bakery-cafes that were closed in the fourth quarter of 2000.
6. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 25,
2000 1999
------------ ------------
<S> <C> <C>
Accrued insurance................................... $ 796 $ 881
Rent................................................ 1,168 780
Compensation and employment related taxes........... 3,119 2,594
Taxes, other than income taxes...................... 1,780 4,383
Other............................................... 5,223 3,599
------- -------
$12,086 $12,237
======= =======
</TABLE>
34
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT
The Company had a $10.0 million unsecured revolving line of credit at
December 30, 2000 and December 25, 1999, respectively. The revolving line of
credit bears an interest rate of LIBOR plus 1%, approximately 7.5% and 6.8% at
December 30, 2000 and December 25, 1999, respectively. The revolving credit
agreement contains restrictions relating to future indebtedness, liens,
investments, distributions, mergers, acquisition or sale of assets and certain
leasing transactions. The agreement also requires the maintenance of certain
financial ratios and covenants. The revolving credit agreement also contains a
commitment fee of .225% and .50% of the unused portion of the revolving line of
credit at December 30, 2000 and December 25, 1999, respectively. At
December 30, 2000 and December 25, 1999, the Company had outstanding letters of
credit against the revolving line of credit aggregating $.6 million. There were
no outstanding borrowings under the revolving credit agreement at December 30,
2000 and December 25, 1999.
On July 24, 1996, the Company issued $15 million senior subordinated
debentures maturing in July, 2000. The debentures accrued interest at varying
fixed rates over the four year term, ranging from 11.25% to 14.0%. In connection
with the private placement, warrants with an exercise price of $5.62 per share
were issued to purchase between 400,000 and 580,000 shares of the Company's
Class A Common Stock, depending on the term which the debentures remained
outstanding and certain future events. In connection with the sale of the Au Bon
Pain Division on May 16, 1999, all amounts outstanding related to the senior
subordinated debentures were repaid. At December 30, 2000 and December 25, 1999,
0 and 392,500 warrants were issued and outstanding, respectively, all of which
were vested.
8. CONVERTIBLE SUBORDINATED NOTES
In December 1993, the Company issued $30.0 million of its unsecured 4.75%
Convertible Subordinated Notes due 2001 ("1993 Notes"). The 1993 Notes were
convertible at the holders' option into shares of the Company's Class A Common
Stock at $25.50 per share. The note agreement required the Company to maintain
minimum permanent capital, as therein defined. The Company used the proceeds
from the Sale to redeem all the outstanding notes during the year ended
December 25, 1999.
9. COMMITMENTS
The Company is obligated under noncancelable operating leases for
commissaries and retail stores. Lease terms are generally for ten years with
renewal options at certain locations and generally require the Company to pay a
proportionate share of real estate taxes, insurance, common area and other
operating costs. Substantially all store leases provide for contingent rental
payments based on sales in excess of specified amounts. In addition, the Company
is contingently liable for certain of the operating leases of the Au Bon Pain
Division.
35
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS (CONTINUED)
Aggregate minimum requirements under these leases are, as of December 30,
2000, approximately as follows (in thousands):
<TABLE>
<S> <C>
2001........................................................ $ 8,259
2002........................................................ 8,288
2003........................................................ 7,846
2004........................................................ 7,401
2005........................................................ 6,057
Thereafter.................................................. 20,081
-------
$57,932
=======
</TABLE>
Rental expense under operating leases was approximately $8.5 million,
$14.0 million and $19.7 million in 2000, 1999 and 1998, respectively, which
included contingent rentals of approximately $0.4 million, $1.1 million and
$3.1 million, respectively.
10. INCOME TAXES
The provision (benefit) for income taxes in the consolidated statements of
operations is comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal............................................... $ -- $ -- $ --
State................................................. (488) 469 1,057
------- ------- -------
(488) 469 1,057
------- ------- -------
Deferred:
Federal............................................... 3,455 (13) (8,220)
State................................................. 1,210 55 1,631
------- ------- -------
4,665 42 (6,589)
------- ------- -------
Tax provision (benefit) before extraordinary item....... $ 4,177 $ 511 $(5,532)
======= ======= =======
</TABLE>
36
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
A reconciliation of the statutory federal income tax rate and the effective
tax rate as a percentage of income (loss) before income taxes and extraordinary
item follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Statutory rate provision (benefit).......................... 34.0% 34.0% (34.0)%
State income taxes, net of federal tax benefit.............. 4.5 68.3 1.7
Charitable contributions.................................... (1.2) -- (0.7)
Company-owned life insurance (See Note 11).................. -- 32.8 (4.4)
Non-deductible goodwill and meals and entertainment......... 0.6 58.7 0.8
Other, net.................................................. 1.1 (0.2) 2.1
Change in valuation allowance............................... (1.1) -- 13.2
----- ----- -----
37.9% 193.6% (21.3)%
===== ===== =====
</TABLE>
The tax effects of the significant temporary differences which comprise the
deferred tax assets (liabilities) are as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Current assets:
Receivables reserve..................................... $ 35 $ --
Accrued expenses........................................ 1,558 2,353
Net operating loss carryforward........................... 3,600 3,120
Total current......................................... 5,193 5,473
Non-current assets/liabilities:
Property, plant and equipment........................... (685) (333)
Accrued expenses........................................ 743 1,182
Goodwill................................................ (1,879) (1,611)
Tax credit carryforward................................. 5,079 5,079
Net operating loss carryforward......................... 4,881 6,951
Charitable contribution carryforward.................... 1,963 1,571
Other reserves.......................................... 2,552 322
Total non-current..................................... 12,654 13,161
Total deferred tax asset.............................. 17,847 18,634
Valuation allowance................................... (4,619) (4,742)
------- -------
Total net deferred tax asset.............................. $13,228 $13,892
======= =======
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The valuation allowance is
primarily attributable to the potential for the non-deductibility of capital
losses related to the taxable loss on sale of the Au Bon Pain Division, the
expectation that deferred state tax assets will be unrealizable in states where
the Company no longer operates and that the Company will be unable to utilize
certain charitable contribution carryforwards prior to their expiration. As of
December 30, 2000 and December 25 1999, the Company has net operating losses of
approximately $20.9 million and $24.8 million, respectively, which can be
carried forward twenty years to offset Federal taxable income. At December 30,
2000 and December 25, 1999, the Company had Federal jobs tax credit
carryforwards of approximately $1.2 million, which expire in
37
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
the years 2014-2015 and charitable contribution carryforwards of approximately
$4.8 million and $3.8 million, respectively, which expire in the years
2000-2003. In addition, the Company has Federal alternative minimum tax credit
carryforwards of approximately $3.8 million and $3.7 million at December 30,
2000 and December 25, 1999 respectively, which are available to reduce future
regular Federal income taxes over an indefinite period. The Company reevaluates
the positive and negative evidence impacting the realizability of its deferred
income tax assets on an annual basis.
As discussed in Note 11, the Company is a party to a Company-owned life
insurance program ("COLI"). Due to the leveraged nature of the program, the
Company received substantial tax benefits for the period 1994 - 1998. Recent tax
court litigation, not involving the Company, has challenged the deductibility of
such tax benefits. Management has provided reserves related to the COLI tax
benefit which it believes are sufficient should such benefits be eventually
disallowed.
11. DEPOSITS AND OTHER
The Company has established a deposit program with its distributor, which
allows the Company to receive lower distribution costs. The savings exceed the
carrying value of the deposit. The deposit is flexible and the Company may at
times decrease the amount on deposit, at its discretion. The deposit outstanding
was $1.6 million and $1.3 million at December 30, 2000 and December 25, 1999,
respectively.
During fiscal year 1994, the Company established a company-owned life
insurance program covering a substantial portion of its employees. At
December 30, 2000 and December 25, 1999, the cash surrender value of
$13.1 million and $77.7 million, respectively, and the insurance policy loans of
$13.0 million and $75.7 million, respectively, were netted and included in other
assets on the consolidated balance sheet. The loans are collateralized by the
cash values of the underlying life insurance policies and require interest
payments at a rate of 9.07%. In 1996, tax law changes adopted as part of the
Health Insurance Portability and Accountability Act significantly reduced the
level of tax benefits recognized under the Company's COLI program. The Company
included $0 and $0.4 million of expenses in other (income) expense, net,
relating to COLI in 2000 and 1999, respectively.
12. STOCKHOLDERS' EQUITY
COMMON STOCK
Each share of Class B Common Stock has the same dividend and liquidation
rights as each share of Class A Common Stock. The holders of Class B Common
Stock are entitled to three votes for each share owned. The holders of Class A
Common Stock are entitled to one vote for each share owned. Each share of
Class B Common Stock is convertible, at the shareholder's option, into Class A
Common Stock on a one-for-one basis. The Company had reserved at December 30,
2000 7,044,105 shares, of its Class A Common Stock for issuance upon conversion
of Class B Common Stock and exercise of awards granted under the Company's 1992
Equity Incentive Plan, Formula Stock Option Plan for Independent Directors and
conversion of the 1993 Notes (see Note 8).
38
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
REGISTRATION RIGHTS
Certain holders of Class A and Class B Common Stock, pursuant to stock
subscription agreements, can require the Company, under certain circumstances,
to register their shares under the Securities Act of 1933 or have included in
certain registrations all or part of such shares, at the Company's expense.
TREASURY STOCK
The Company spent $.9 million in the third quarter of 2000 to repurchase
54,500 shares of Class A Common Stock at an average cost of $16.51 per share.
13. STOCK OPTIONS
STOCK-BASED COMPENSATION
In accordance with SFAS 123, "Accounting for Stock-Based Compensation", the
Company has elected to follow the provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and
provide the required pro-forma disclosure in the footnotes to the financial
statements as if the measurement provisions of SFAS 123 had been adopted.
Accordingly, no compensation costs have been recognized for the stock option
plans as the exercise price of stock options equals the market price of the
underlying stock on the date of grant. Had compensation costs for the Company's
stock option plans been determined based on the fair value at the grant date for
awards since 1995 consistent with the provisions of SFAS 123, the Company's net
income (loss) and diluted income (loss) per share for the years ended
December 30, 2000, December 25, 1999 and December 26, 1998 would have been as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------------- -------------------------- --------------------------
DILUTED DILUTED DILUTED
NET INCOME NET INCOME NET LOSS NET LOSS NET LOSS NET LOSS
(IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE
-------------- ---------- -------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
As reported..................... $6,853 $.52 $ (629) $(.05) $(20,494) $(1.72)
Pro forma....................... $5,569 $.42 $(1,941) $(.16) $(21,642) $(1.81)
</TABLE>
The effects of applying SFAS 123 in this pro-forma disclosure are not likely
to be representative of the effects on reported net income for future years.
SFAS 123 does not apply to awards prior to 1995 and additional awards in future
years are anticipated.
The fair value of the options granted during 2000, 1999, and 1998 was $6.50
per share, $3.22 per share and $4.12 per share, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: dividend yield 0%, volatility of 40%, risk-free interest rate of
6.20% in 2000, 5.68% in 1999, and 5.14% in 1998, and an expected life of
7 years in 2000 and 6 years in 1999 and 1998.
1992 EQUITY INCENTIVE PLAN
In May 1992, the Company adopted its Equity Incentive Plan ("Equity Plan")
to replace its Non-Qualified Incentive Stock Option Plan. Under the Equity Plan,
a total of 950,000 shares of Class A Common Stock were initially reserved for
awards under the Equity Plan. The Equity Plan was subsequently amended by the
Board of Directors and the stockholders to increase the number of shares
39
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK OPTIONS (CONTINUED)
available thereunder from 950,000 to 4,300,000. Awards under the Equity Plan can
be in the form of stock options (both qualified and non-qualified), stock
appreciation rights, performance shares, restricted stock or stock units.
FORMULA STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS
On January 27, 1994, the Company's Board of Directors authorized the Formula
Stock Option Plan for Independent Directors, as defined in the agreement. This
plan authorized a one-time grant of an option to purchase 10,000 shares of the
Company's Class A Common Stock at its closing price on January 26, 1994.
Each independent director who is first elected as such after the effective
date of the Directors' Plan shall receive, as of the date he or she is so
elected, a one-time grant of an option to purchase up to 5,000 shares of
Class A Common Stock at a price per share equal to the closing price of the
Class A Common Stock as reported by the NASDAQ/National Market System for the
trading day immediately preceding the date of the person's election to the
board.
In addition, all independent directors serving in such capacity as of the
last day of each fiscal year commencing with the fiscal year ending
December 31, 1994 receive an option to purchase up to 5,000 shares of Class A
Common Stock at the closing price for the prior day.
Each option granted is fully vested at the grant date, and is exercisable,
either in whole or in part, for 10 years following the grant date. The Company
had granted 136,099 and 123,606 options under this plan as of December 30, 2000
and December 25, 1999.
Activity under the Equity Plan and its predecessor is summarized below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 27, 1997............................ 2,991,518 $ 7.44
Granted................................................... 841,583 $ 8.84
Exercised................................................. (151,060) $ 6.69
Cancelled................................................. (376,710) $ 9.17
---------- ------
Outstanding at December 26, 1998............................ 3,305,331 $ 8.18
---------- ------
Granted................................................... 200,678 $ 6.65
Exercised................................................. (14,057) $ 6.85
Cancelled................................................. (201,003) $ 7.52
---------- ------
Outstanding at December 25, 1999............................ 3,290,949 $ 7.56
---------- ------
Granted................................................... 291,037 $12.73
Exercised................................................. (1,088,546) $ 7.55
Cancelled................................................. (200,041) $ 8.54
---------- ------
Outstanding at December 30, 2000............................ 2,293,399 $ 8.13
---------- ------
</TABLE>
40
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK OPTIONS (CONTINUED)
The following table summarizes information concerning currently outstanding
and exercisable options:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING ---------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE AVERAGE PRICE EXERCISABLE AVERAGE PRICE
-------------- ----------- ------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$6.00-6.87 547,178 7.80 $6.46 120,875 $6.35
$6.88-10.93 1,513,687 5.54 7.70 1,304,506 7.48
$10.94-13.44 132,965 7.17 11.16 83,840 11.30
$13.45-22.81 99,569 6.86 19.78 12,569 20.33
--------- ---- ----- --------- -----
2,293,399 6.23 $8.13 1,521,790 $7.71
</TABLE>
Options vest over a five year period and must be exercised within seven to
ten years from the date of the grant. Of the options at December 30, 2000,
December 25, 1999, and December 26, 1998, 1,521,790, 2,325,445, and 1,418,994,
respectively, were vested and exercisable with a weighted average exercise price
at December 30, 2000, December 25, 1999, and December 26, 1998, of $7.71, $7.68,
and $7.34, respectively.
1992 EMPLOYEE STOCK PURCHASE PLAN
In May 1992, the Company adopted its 1992 Employee Stock Purchase Plan
("1992 Purchase Plan") to replace its Employee Stock Purchase Plan. The 1992
Purchase Plan was subsequently amended by the Board of Directors and
Stockholders to increase the number of shares of Class A Common Stock reserved
for issuance from 150,000 to 350,000. The 1992 Purchase Plan gives eligible
employees the option to purchase Class A Common Stock (total purchases in a year
may not exceed 10% of an employee's prior year compensation) at 85% of the fair
market value of the Class A Common Stock at the date of purchase. There were
20,255 and 28,492 shares purchased with a weighted average fair value of
purchase rights of $1.59 and $.92 as of December 30, 2000 and December 25, 1999.
14. DEFINED CONTRIBUTION BENEFIT PLAN
The Au Bon Pain Employee 401(k) Plan ("Savings Plan") was adopted by the
Company in 1991 under Section 401(k) of the Internal Revenue Code of 1986, as
amended (Code). All employees of the Company, including executive officers, are
eligible to participate in the Savings Plan. A participating employee may elect
to defer on a pre-tax basis up to 15% of his or her salary, subject to the
limitations imposed by the Code. This amount is contributed to the Savings Plan.
All amounts vest immediately and are invested in various funds as directed by
the participant. The full amount in a participant's account will be distributed
to a participant upon termination of employment, retirement, disability or
death. The Company did not contribute to the Savings Plan.
The Saint Louis Bread Company Employee 401(k) Plan ("Saint Louis Bread
Savings Plan") was adopted by the former Saint Louis Bread Company in 1993 under
Section 401(k) of the Internal Revenue Code of 1986, as amended. In 1997 the
"Saint Louis Bread Savings Plan" was merged into the Au Bon Pain "Savings Plan".
Plan participants of the "Saint Louis Bread Savings Plan" retained the matching
contributions made through 1996 with a vesting schedule of seven years. There
was no further matching in 1999 and 1998. In 2000, the Company contributed
approximately $.1 million toward matching participant contributions.
41
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in the
normal course of business. In the opinion of management, the ultimate
liabilities with respect to these actions will not have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.
16. BUSINESS SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The Company has three reportable
business segments. The Company Store Operations segment is comprised of the
operating activities of the 90 bakery-cafes owned by the Company. These
bakery-cafes sell fresh baked goods, made-to-order sandwiches on freshly baked
breads, soups, salads, custom roasted coffees, and other complementary products
through on-premise sales. All of the fresh dough products used by Company
bakery-cafe operations are purchased from the Commissary Operations segment.
The Franchise Operations segment is comprised of the operating activities of
the franchise business unit which licenses qualified operators to conduct
business under the Panera Bread Company name and also monitors the operations of
these stores. Under the terms of the agreements, the licensed operators pay
royalties and fees to the Company in return for the use of the Panera Bread
Company name.
The Commissary Operations segment supplies fresh dough items to both
Company-owned and franchise operated bakery-cafes. The fresh dough is sold to
both Company-owned and franchised bakery-cafes at a cost equal to 27% of the
retail value of the product. The sales and related costs to the franchise
bakery-cafes are separately stated on the face of the Consolidated Statements of
Operations. The operating profit related to the sales to Company-owned
bakery-cafes is classified as a reduction to the cost of food and paper products
on the Consolidated Statements of Operations.
42
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. BUSINESS SEGMENT INFORMATION (CONTINUED)
Segment information for total assets and capital expenditures is not
presented as such information is not used in measuring segment performance or
allocating resources among segments.
<TABLE>
<CAPTION>
DEC. 30, DEC. 25, DEC. 26,
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Company Store Operations.................................. $125,486 $156,738 $237,102
Franchise Operations...................................... 12,059 7,384 6,161
Commissary Operations..................................... 24,696 18,315 23,408
Intercompany Sales Eliminations........................... (10,852) (11,078) (17,011)
-------- -------- --------
Total Revenues.......................................... $151,389 $171,359 $249,660
-------- -------- --------
OPERATING PROFIT
Company Store Operations.................................. $ 22,430 $ 24,616 $ 32,902
Franchise Operations...................................... 9,818 5,646 4,967
Commissary Operations..................................... 1,583 747 297
Unallocated General and Administrative Expenses........... (14,140) (15,366) (17,575)
Non-Recurring Charges (Footnote 5)........................ (494) (5,545) (26,236)
-------- -------- --------
Operating Profit (Loss) Before Depreciation and
Amortization Expense.................................. $ 19,197 $ 10,098 $ (5,645)
-------- -------- --------
DEPRECIATION AND AMORTIZATION EXPENSES
Company Store Operations.................................. $ 5,318 $ 4,425 $ 9,638
Franchise Operations...................................... -- -- --
Commissary Operations..................................... 979 677 932
Corporate Administration.................................. 2,115 1,277 2,097
-------- -------- --------
Total Depreciation and Amortization Expenses............ $ 8,412 $ 6,379 $ 12,667
-------- -------- --------
</TABLE>
43
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
------------------------------------------
DECEMBER 30, DECEMBER 25, DECEMBER 26,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) used in net income (loss) per common
share -- basic........................................ $ 6,853 $ (629) $(20,494)
Net income (loss) used in net income (loss) per common
share -- diluted...................................... $ 6,853 $ (629) $(20,494)
Weighted average number of shares outstanding --
basic................................................. 12,557 12,137 11,943
Effect of dilutive securities:
Employee stock options................................ 532 -- --
Stock warrants........................................ 45 -- --
Weighted average number of shares outstanding --
diluted............................................... 13,134 12,137 11,943
Per common share:
Basic:
Income (loss) before extraordinary item............... $ .55 $ (.02) $ (1.72)
Extraordinary loss on the early extinguishment of
debt................................................ $ -- $ (.03) $ --
Net income (loss)..................................... $ .55 $ (.05) $ (1.72)
Diluted:
Income (loss) before extraordinary item............... $ .52 $ (.02) $ (1.72)
Extraordinary loss on the early extinguishment of
debt................................................ $ -- $ (.03) $ --
Net income (loss)..................................... $ .52 $ (.05) $ (1.72)
</TABLE>
During 1998, options to purchase 1,176,000 shares of common stock at $25.50
per share were outstanding in conjunction with the issuance of $30 million of
convertible subordinated notes (see Note 8). These shares were not included in
the computation of diluted earnings per share for the fiscal year ended
December 26, 1998 because the addition of interest expense, after the effect of
income taxes, of $855,000 to net income (loss) would have been antidilutive.
These options were no longer outstanding as of December 25, 1999, as the
convertible subordinated notes have been repaid.
Options to purchase 18,333 and 248,450 shares of common stock, respectively,
at an average price of $6.35 and $5.77 per share and warrants to purchase 45,608
and 96,000 shares of common stock at $5.62 per share were outstanding but were
not included in the computation of diluted earnings per share for the fiscal
years ended December 25, 1999 or December 26, 1998 because the effect would have
been antidilutive.
18. DEFERRED REVENUE
During 1999, the Company changed soft drink providers. As a result of this
change, the Company received an upfront payment of $2,530,000. These funds are
available for both company-owned and franchised bakery-cafes to cover costs of
conversion and transition. The upfront payments are being allocated at a rate of
$3,000 per applicable company-owned and franchised bakery-cafe. The Company is
then recognizing the $3,000 per company owned bakery-cafe over the five year
life of the soft drink contract. During fiscal year 2000 and 1999, the Company
paid $225,000 and $303,000, respectively, to franchisees and is recognizing
approximately $276,000 and $216,000, respectively, of income related to
company-owned stores.
44
<PAGE>
PANERA BREAD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents selected quarterly financial data for the
periods indicated (in thousands, except per share data)
<TABLE>
<CAPTION>
APRIL 15, JULY 8, SEPTEMBER 30, DECEMBER 30,
2000 2000 2000 2000
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues.......................................... $40,426 $32,294 $36,093 $42,576
Operating profit.................................. 2,540 3,246 2,475 2,524
Income before extraordinary item.................. 1,515 1,933 1,644 1,761
Net income........................................ 1,515 1,933 1,644 1,761
Basic earnings per share
Income before extraordinary loss................ $ .12 $ .16 $ .13 $ .14
Extraordinary loss.............................. -- -- -- --
------- ------- ------- -------
Net income.................................... $ .12 $ .16 $ .13 $ .14
======= ======= ======= =======
Diluted earnings per share
Income before extraordinary loss................ $ .12 $ .15 $ .12 $ .13
Extraordinary loss.............................. -- -- -- --
------- ------- ------- -------
Net income.................................... $ .12 $ .15 $ .12 $ .13
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
APRIL 17, JULY 10, OCTOBER 2, DECEMBER 25,
1999 1999 1999 1999
--------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues............................................ $77,925 $36,877 $26,395 $30,162
Operating profit (loss)............................. (1,875) 1,796 1,222 2,576
Income (loss) before extraordinary item............. (4,625) 748 669 2,961
Net income (loss)................................... (4,625) 366 669 2,961
Basic earnings per share
Income (loss) before extraordinary loss........... $ (.38) $ .06 $ .06 $ .24
Extraordinary loss................................ -- $ (.03) -- --
------- ------- ------- -------
Net income (loss)............................... $ (.38) $ .03 $ .06 $ .24
======= ======= ======= =======
Diluted earnings per share
Income (loss) before extraordinary loss........... $ (.38) $ .06 $ .05 $ .24
Extraordinary loss................................ -- $ (.03) -- --
------- ------- ------- -------
Net income (loss)............................... $ (.38) $ .03 $ .05 $ .24
======= ======= ======= =======
</TABLE>
In the second quarter of 2000, the Company recorded a one-time gain of
$.9 million before taxes related to the sale of the Au Bon Pain Division. This
one time gain of $.9 million has been reclassified as a non-recurring charge in
order to conform with the fourth quarter presentation of other offsetting ABP
sale related charges (see Note 5). In the fourth quarter of 2000, the Company
recorded a $.9 million pre-tax, non-recurring charge associated with the sale of
the Au Bon Pain Business Unit. Additionally, the Company recorded a $.5 million
non-recurring charge related to the write down of assets related to closed
bakery-cafes.
45
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Information required by Part III (Items 10 through 13) is incorporated by
reference to the Company's definitive proxy statement for its 2000 annual
meeting of stockholders which is expected to be filed with the Securities and
Exchange Commission on or before April 30, 2001. If for any reason such a proxy
statement is not filed within such period, this Form 10-K will be appropriately
amended.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following described consolidated financial statements of the Company are
included in this report:
Report of Independent Accountants
Consolidated Balance Sheets as of December 30, 2000 and December 25, 1999.
Consolidated Statements of Operations for the fiscal years ended
December 30, 2000, December 25, 1999, and December 26, 1998.
Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 2000, December 25, 1999, and December 26, 1998.
Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 30, 2000, December 25, 1999, and December 26, 1998.
Notes to Consolidated Financial Statements.
(a) 2. FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule for the Company is filed
herewith:
SCHEDULE II--Valuations and Qualifying Accounts
PANERA BREAD COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING AT END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
- ----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful accounts
Fiscal year ended December 26, 1998................... $ 134 $ 96 $ 22 $ 208
Fiscal Year ended December 25, 1999................... $ 208 $ 93 $104 $ 197
Fiscal Year ended December 30, 2000................... $ 197 $ 86 $197 $ 86
Deferred Tax Valuation Allowance
Fiscal Year ended December 26, 1998................... $1,308 $3,434 $ -- $4,742
Fiscal Year ended December 25, 1999................... $4,742 $ -- $ -- $4,742
Fiscal Year ended December 30, 2000................... $4,742 $ -- $123 $4,619
</TABLE>
46
<PAGE>
(a) 3. EXHIBITS
(b) REPORTS ON FORM 8-K
The Company filed one report on Form 8-K during the fourth quarter of 2000.
On November 20, 2000, the Company reported under Item 5 on its Form 8-K that
Henry J. Nasella had resigned from the Company's Board of Directors, effective
as of November 11, 2000, in order to pursue other business opportunities.
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
PANERA BREAD COMPANY
By: /s/ RONALD M. SHAICH
-----------------------------------------
Ronald M. Shaich
Chairman and Chief Executive Officer
</TABLE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons in
the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RONALD M. SHAICH
------------------------------------------- Chairman and Chief March 28, 2001
Ronald M. Shaich Executive Officer
/s/ GEORGE E. KANE
------------------------------------------- Director March 28, 2001
George E. Kane
/s/ ROBERT GIAIMO
------------------------------------------- Director March 28, 2001
Robert Giaimo
/s/ DOMENIC COLASACCO
------------------------------------------- Director March 28, 2001
Domenic Colasacco
/s/ WILLIAM W. MORETON Senior Vice President,
------------------------------------------- Treasurer, and Chief March 28, 2001
William W. Moreton Financial Officer
</TABLE>
48
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
2.1 Asset Purchase Agreement by and among Au Bon Pain Co., Inc.,
ABP Midwest Manufacturing Co., Inc. and Bunge Foods
Corporation dated as of February 11, 1998; Amendment to
Asset Purchase Agreement, dated as of March 23, 1998.
Incorporated by reference to Exhibit 2.1 to the Company's
Annual Report on Form 10-K for the year ended December 27,
1997.
2.2.1 Stock Purchase Agreement dated August 12, 1998 by and
between the Company, ABP Holdings, Inc. ('ABPH') and ABP
Corporation. Incorporated by reference to the Company's
Report on Form 8-K filed August 21, 1998.
2.2.2 Amendment to Stock Purchase Agreement dated October 28, 1998
by and among the Company, ABPH and ABP Corporation.
Incorporated by reference to the Company's Report on Form
8-K filed November 6, 1998.
3.1 Certificate of Incorporation of Registrant, as amended to
June 2, 1991. Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
3.1.1 Certificate of Amendment to Certificate of Incorporation,
dated and filed June 3, 1991. Incorporated by reference to
Exhibit 3.1.1 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.
3.1.2 Certificate of Amendment to the Certificate of Incorporation
filed on June 2, 1994. Incorporated by reference to Exhibit
3.1.2 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.
3.1.3 Certificate of Designations, Preferences and Rights of the
Class B Preferred Stock (Series 1), filed November 30, 1994.
Incorporated by reference to Exhibit 3.1.3 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.
3.2 Bylaws of Registrant, as amended to date. Incorporated by
reference to Registrant's registration statement on Form S-1
(File No. 33-40153), Exhibit 3.2.
4.1.1 Revolving Credit Agreement dated as of December 26, 2000
among the Issuer, Panera Bread Company, and SunTrust Bank,
as Lender.*
4.2 Form of 4.75% Convertible Subordinated Note due 2001.
Incorporated by reference to Registrant's Form 8-K filed
December 22, 1993, Exhibit 4.
10.3.3 Registrant's 1992 Employee Stock Purchase Plan. Incorporated
by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 30, 1995.
10.3.4 Registrant's Formula Stock Option Plan for Independent
Directors and form of option agreement thereunder, as
amended. Incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended December 30,
1995.
10.6.1 Employment Agreement between the Registrant and Richard
Postle. Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 30, 1995.+
10.6.5 Employment Letter between the Registrant and William
Moreton. Incorporated by reference to Exhibit 10.6.5 of the
Registrant's Annual Report on Form 10-K for the year ended
December 25, 1999.+
10.6.6 Employment Letter between the Registrant and Michael
Kupstas. Incorporated by reference to Exhibit 10.6.6 of the
Registrant's Annual Report on Form 10-K for the year ended
December 25, 1999.+
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
10.6.7 Employment Letter between the Registrant and Thomas Howley.
Incorporated by reference to Exhibit 10.6.7 of the
Registrant's Annual Report on Form 10-K for the year ended
December 25, 1999.+
10.6.8 Employment Letter between the Registrant and Kenneth
Puzder.*+
10.6.9 Employment Letter between the Registrant and Diane
Davidson.*+
10.6.10 Employment Letter between the Registrant and Kathy
Kuhlenbeck.*+
10.7.1 Form of Stock Purchase Warrant from Au Bon Pain Co., Inc. to
Allied Capital Corporation, Allied Capital Corporation II,
and Capital Trust Investments, Ltd. Incorporated by
reference to Exhibit 10.7.1 of the Registrant's Annual
Report on Form 10-K for the year ended December 28, 1996.
10.7.2 Form of Contingent Stock Purchase Warrant from Au Bon Pain
Co., Inc. to Allied Capital Corporation, Allied Capital
Corporation II and Capital Trust Investments, Ltd.
Incorporated by reference to Exhibit 10.7.2 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.
10.7.3 Form of Stock Purchase Warrant from Au Bon Pain Co, Inc. to
Princes Gate Investors, L.P., Acorn Partnership I L.P., PG
Investments Limited, PGI Sweden AB and Gregor Von Open.
Incorporated by reference to Exhibit 10.7.3 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.
10.7.4 Registration Rights Agreement dated as of July 24, 1996
among Allied Capital Corporation, Allied Capital Corporation
II, Capital Trust Investments, Ltd., Princes Gate Investors,
L.P., Acorn Partnership I, L.P., PGI Investments Limited,
PGI Sweden AB, Gregor Von Open and Au Bon Pain Co., Inc.,
Incorporated by reference to Exhibit 10.7.4 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.
10.8.4 Form of Rights Agreement, dated as of October 21, 1996
between the Registrant and State Street Bank and Trust
Company. Incorporated by reference to the Registrant's
Registration Statement on Form 8-A (File No. 000-19253).
10.9 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Saint Louis Bread Company, Inc. dated as of
March 23, 1998. Incorporated by reference to Exhibit 10.9 to
the Company's Annual Report on Form 10-K for the year ended
December 27, 1997.
10.10 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Au Bon Pain Co., Inc. dated as of March 23,
1998. Incorporated by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the year ended
December 27, 1997.
10.11 Executive Employment Agreement between the Company and Sam
Yong dated June 16, 1998. Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
July 11, 1998.+
10.12 Lease and Construction Exhibit between Bachelor Foods, Inc.,
the Lessor, and Panera, Inc., the Lessee, dated
September 7, 2000.*
21 Registrant's Subsidiaries. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 25, 1999.
23.1 Consent of PricewaterhouseCoopers L.L.P.*
</TABLE>
- ------------------------
* Filed herewith.
+ Management contract or compensatory plan required to be filed as an exhibit
to this Form 10-K pursuant to Item 14(c).
50
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1-1
<SEQUENCE>2
<FILENAME>a2042851zex-4_11.txt
<DESCRIPTION>EXHIBIT 4.1.1
<TEXT>
<PAGE>
EXHIBIT 4.1.1
REVOLVING CREDIT AGREEMENT
dated as of December 26, 2000
between
PANERA BREAD COMPANY
as Borrower
AND
SUNTRUST BANK
as Lender
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I DEFINITIONS; CONSTRUCTION......................................................1
Section 1.1 Definitions........................................................1
Section 1.2 Accounting Terms and Determination................................12
Section 1.3 Terms Generally...................................................13
ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS..........................................13
Section 2.1 Loans and Note....................................................13
Section 2.2 Procedure for Loans...............................................14
Section 2.3 Interest Elections................................................14
Section 2.4 Optional Reduction and Termination of Commitments.................15
Section 2.5 Repayment of Loans................................................15
Section 2.6 Optional Prepayments..............................................15
Section 2.7 Interest on Loans.................................................15
Section 2.8 Fees..............................................................16
Section 2.9 Computation of Interest and Fees..................................17
Section 2.10 Increased Costs..................................................17
Section 2.11 Funding Indemnity................................................18
Section 2.12 Payments Generally...............................................18
Section 2.13 Letters of Credit................................................18
ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT.........................21
Section 3.1 Conditions To Effectiveness.......................................21
Section 3.2 Each Credit Event.................................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES...............................................22
Section 4.1 Existence; Power..................................................22
Section 4.2 Organizational Power; Authorization...............................23
Section 4.3 Governmental Approvals; No Conflicts..............................23
Section 4.4 Financial Statements..............................................23
Section 4.5 Litigation........................................................23
Section 4.6 Compliance with Laws and Agreements...............................24
Section 4.7 Investment Company Act, Etc.......................................24
Section 4.8 Taxes.............................................................24
Section 4.9 Margin Regulations................................................24
Section 4.10 ERISA............................................................24
Section 4.11 Ownership of Property............................................24
Section 4.12 Disclosure.......................................................25
Section 4.13 Labor Relations..................................................25
Section 4.14 Subsidiaries.....................................................25
ARTICLE V AFFIRMATIVE COVENANTS.........................................................25
Section 5.1 Financial Statements and Other Information........................25
i
<PAGE>
Section 5.2 Notices of Material Events........................................27
Section 5.3 Existence; Conduct of Business....................................27
Section 5.4 Compliance with Laws, Etc.........................................27
Section 5.5 Payment of Obligations............................................27
Section 5.6 Books and Records.................................................28
Section 5.7 Visitation, Inspection, Etc.......................................28
Section 5.8 Maintenance of Properties; Insurance..............................28
Section 5.9 Use of Proceeds and Letters of Credit.............................28
Section 5.10 Additional Subsidiaries..........................................28
ARTICLE VI FINANCIAL COVENANTS..........................................................28
Section 6.1 Leverage Ratio....................................................29
Section 6.2 Consolidated Fixed Charge Coverage Ratio..........................29
Section 6.3 Consolidated Net Worth............................................29
ARTICLE VII NEGATIVE COVENANTS..........................................................29
Section 7.1 Indebtedness......................................................29
Section 7.2 Negative Pledge...................................................30
Section 7.3 Fundamental Changes...............................................30
Section 7.4 Investments, Loans, Etc...........................................31
Section 7.5 Restricted Payments...............................................32
Section 7.6 Sale of Assets....................................................32
Section 7.7 Transactions with Affiliates......................................32
Section 7.8 Restrictive Agreements............................................32
Section 7.9 [RESERVED]........................................................33
Section 7.10 Hedging Agreements...............................................33
Section 7.11 Amendment to Material Documents..................................33
Section 7.12 Accounting Changes...............................................33
Section 7.13 Acquisitions.....................................................33
ARTICLE VIII EVENTS OF DEFAULT..........................................................34
Section 8.1 Events of Default.................................................34
ARTICLE IX MISCELLANEOUS................................................................36
Section 9.1 Notices...........................................................36
Section 9.2 Waiver; Amendments................................................37
Section 9.3 Expenses; Indemnification.........................................38
Section 9.4 Successors and Assigns............................................39
Section 9.5 Governing Law; Jurisdiction; Consent to Service of Process........40
Section 9.6 WAIVER OF JURY TRIAL..............................................41
Section 9.7 Right of Setoff...................................................41
Section 9.8 Counterparts; Integration.........................................41
Section 9.9 Survival..........................................................41
Section 9.10 Severability.....................................................42
Section 9.11 Confidentiality..................................................42
Section 9.12 Interest Rate Limitation.........................................42
</TABLE>
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SCHEDULES
Schedule 4.14 - Subsidiaries
Schedule 7.1 - Outstanding Indebtedness
Schedule 7.2 - Existing Liens
Schedule 7.4 - Existing Investments
EXHIBITS
Exhibit A - Revolving Credit Note
Exhibit B - Form of Subsidiary Guarantee
Agreement and Annex
Exhibit 2.2 - Notice of Borrowing
Exhibit 2.4 - Form of Continuation
Exhibit 3.1(b)(vii) - Form of Officer's Certificate
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REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "AGREEMENT") is made and entered into
as of December 26, 2000 by and between PANERA BREAD COMPANY, a Delaware
corporation (the "BORROWER"), and SUNTRUST BANK, a Georgia banking corporation
(the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender establish a $10,000,000
revolving credit facility for Borrower; and
WHEREAS, subject to the terms and conditions of this Agreement, the Lender
is willing to establish the requested revolving credit facility.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Borrower and the Lender agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
SECTION 1.1 DEFINITIONS. In addition to the other terms defined herein, the
following terms used herein shall have the meanings herein specified (to be
equally applicable to both the singular and plural forms of the terms defined):
"ADJUSTED LIBO RATE" shall mean, with respect to each Interest Period for a
Eurodollar Loan, the rate per annum obtained by (a) dividing (i) LIBOR for such
Interest Period by (ii) a percentage equal to 1.00 MINUS the Eurodollar Reserve
Percentage and (b) then adding 1.00%.
"AFFILIATE" shall mean, as to any Person, any other Person that directly,
or indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such Person.
"AVAILABILITY PERIOD" shall mean the period from the Closing Date to the
Commitment Termination Date.
"BASE RATE" shall mean the higher of (i) the per annum rate which the
Lender publicly announces from time to time to be its prime lending rate, as in
effect from time to time, and (ii) the Federal Funds Rate, as in effect from
time to time, PLUS one-half of one percent (0.50%). The Lender's prime lending
rate is a reference rate and does not necessarily represent the lowest or best
rate charged to customers. The Lender may make commercial loans or other loans
at rates of interest at, above or below the Lender's prime lending rate. Each
change in the Lender's prime lending rate shall be effective from and including
the date such change is publicly announced as being effective.
<PAGE>
"BORROWER" shall have the meaning in the introductory paragraph hereof.
"BUSINESS DAY" shall mean (i) any day other than a Saturday, Sunday or
other day on which commercial banks in Nashville, Tennessee are authorized or
required by law to close and (ii) if such day relates to a borrowing of, a
payment or prepayment of principal or interest on, a conversion of or into, or
an Interest Period for, a Eurodollar Loan or a notice with respect to any of the
foregoing, any day on which dealings in Dollars are carried on in the London
interbank market.
"CAPITAL EXPENDITURES" shall mean for any period, without duplication, (a)
the additions to property, plant and equipment and other capital expenditures of
the Borrower and its Subsidiaries that are (or would be) set forth on a
consolidated statement of cash flows of the Borrower for such period prepared in
accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower
and its Subsidiaries during such period.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean all obligations of
such Person to pay rent or other amounts under any lease (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CHANGE IN CONTROL" shall mean the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in a single
transaction or a series of related transactions) of all or substantially all of
the assets of the Borrower to any Person or "group" (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder in effect on the date hereof), (b) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
"group" (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof) of 30% or more of the outstanding shares of the voting stock of the
Borrower; or (c) occupation of a majority of the seats (other than vacant seats)
on the board of directors of the Borrower by Persons who were neither (i)
nominated by the current board of directors or (ii) appointed by directors so
nominated.
"CHANGE IN LAW" shall mean (i) the adoption of any applicable law, rule or
regulation after the date of this Agreement, (ii) any change in any applicable
law, rule or regulation, or any change in the interpretation or application
thereof, by any Governmental Authority after the date of this Agreement, or
(iii) compliance by the Lender with any request, guideline or directive (whether
or not having the force of law) of any Governmental Authority made or issued
after the date of this Agreement.
"CLOSING DATE" shall mean the date on which the conditions precedent set
forth in SECTION 3.1 and SECTION 3.2 have been satisfied or waived in accordance
with SECTION 9.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time.
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<PAGE>
"COMMITMENT" shall mean the obligation of the Lender to make Loans to the
Borrower in an aggregate principal amount not exceeding $10,000,000.00.
"COMMITMENT TERMINATION DATE" shall mean the earliest of (i) December 31,
2003, (ii) the date on which the Commitment is terminated pursuant to SECTION
2.4 and (iii) the date on which all amounts outstanding under this Agreement
have been declared or have automatically become due and payable (whether by
acceleration or otherwise).
"CONSOLIDATED CASH FLOW" shall mean consolidated EBITDAR LESS Maintenance
Capital Expenditures.
"CONSOLIDATED EBITDA" shall mean, for the Borrower and its Subsidiaries for
any period, an amount equal to the sum of (a) Consolidated Net Income for such
period PLUS (b) to the extent deducted in determining Consolidated Net Income
for such period, (i) Consolidated Interest Expense, (ii) income tax expense,
(iii) depreciation and amortization and (iv) all other non-cash charges,
determined on a consolidated basis in accordance with GAAP in each case for such
period.
"CONSOLIDATED EBITDAR" shall mean, for the Borrower and its Subsidiaries
for any period, an amount equal to the sum of (a) Consolidated EBITDA and (b)
Consolidated Lease Expense.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" shall mean, for any period of
four consecutive fiscal quarters of the Borrower and its Subsidiaries, the ratio
of (a) Consolidated Cash Flow to (b) Consolidated Fixed Charges for such period.
"CONSOLIDATED FIXED CHARGES" shall mean, for the Borrower and its
Subsidiaries for any period, the sum (without duplication) of (a) Consolidated
Interest Expense for such period, (b) scheduled principal payments made on
Consolidated Long Term Debt during such period, (c) scheduled payments with
respect to Capital Lease Obligations; (d) income tax expense during such period,
(e) Restricted Payments paid during such period and (f) Consolidated Lease
Expense for such period.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for the Borrower and its
Subsidiaries for any period determined on a consolidated basis in accordance
with GAAP, the sum of (i) total cash interest expense, including without
limitation the interest component of any payments in respect of Capital Leases
Obligations capitalized or expensed during such period (whether or not actually
paid during such period) PLUS (ii) the net amount payable (or MINUS the net
amount receivable) under Hedging Agreements during such period (whether or not
actually paid or received during such period).
"CONSOLIDATED LEASE ADJUSTED DEBT" shall mean, as of any date of
determination, the sum of (i) all Indebtedness of the Borrower and its
Subsidiaries for borrowed money; (ii) all Capital Lease Obligations of the
Borrower and its Subsidiaries; (iii) all Guarantees of Borrower and its
Subsidiaries (excluding all guaranteed operating leases associated with Au Bon
Pain as lessee); and (iv) the net present value (calculated using a discount
rate of 10%) of future minimum commitments under all operating leases of
Borrower and its Subsidiaries.
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<PAGE>
"CONSOLIDATED LEASE EXPENSE" shall mean, for any period, the aggregate
amount of fixed and contingent rentals payable by the Borrower and its
Subsidiaries with respect to leases of real and personal property (excluding
Capital Lease Obligations) determined on a consolidated basis in accordance with
GAAP for such period.
"CONSOLIDATED LEVERAGE RATIO" shall mean, as of any date of determination
with respect to the Borrower and its Subsidiaries, the ratio of (i) Consolidated
Lease Adjusted Debt as of such date to (ii) Consolidated EBITDAR as of such
date.
"CONSOLIDATED LONG TERM DEBT" shall mean Indebtedness for borrowed money
which has a maturity date of one year or longer from its initial date.
"CONSOLIDATED NET INCOME" shall mean, for any period, the net income (or
loss) of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, but excluding therefrom (to the
extent otherwise included therein) (i) any extraordinary gains or losses, (ii)
any gains attributable to write-ups of assets and (iii) any equity interest of
the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any
Person that is not a Subsidiary and (iv) any income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with the Borrower or any Subsidiary on the date that such Person's
assets are acquired by the Borrower or any Subsidiary.
"CONSOLIDATED NET WORTH" shall mean, as of any date, (i) the total assets
of the Borrower and its Subsidiaries that would be reflected on the Borrower's
consolidated balance sheet as of such date prepared in accordance with GAAP,
after eliminating all amounts properly attributable to minority interests, if
any, in the stock and surplus of Subsidiaries, MINUS the sum of (i) the total
liabilities of the Borrower and its Subsidiaries that would be reflected on the
Borrower's consolidated balance sheet as of such date prepared in accordance
with GAAP and (ii) the amount of any write-up in the book value of any assets
resulting from a revaluation thereof or any write-up in excess of the cost of
such assets acquired reflected on the consolidated balance sheet of the Borrower
as of such date prepared in accordance with GAAP.
"CONTROL" shall mean the power, directly or indirectly, either to (i) vote
50% or more of securities having ordinary voting power for the election of
directors (or persons performing similar functions) of a Person or (ii) direct
or cause the direction of the management and policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "CONTROLLING", "CONTROLLED BY", and "UNDER COMMON CONTROL WITH" have
meanings correlative thereto.
"DEFAULT" shall mean any condition or event that, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"DEFAULT INTEREST" shall have the meaning set forth in SECTION 2.7(B).
"DOLLAR(S)" and the sign "$" shall mean lawful money of the United States
of America.
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<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated), which, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for the purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA EVENT" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator appointed by the PBGC of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
"EURODOLLAR" when used in reference to any Loan, refers to whether such
Loan bears interest at a rate determined by reference to the Adjusted LIBO Rate.
"EURODOLLAR RESERVE PERCENTAGE" shall mean the aggregate of the maximum
reserve percentages (including, without limitation, any emergency, supplemental,
special or other marginal reserves) expressed as a decimal (rounded upwards to
the next 1/100th of 1%) in effect on any day to which the Lender is subject with
respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of
Governors of the Federal Reserve System (or any Governmental Authority
succeeding to any of its principal functions) with respect to eurocurrency
funding (currently referred to as "eurocurrency liabilities" under Regulation
D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to the
Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"EVENT OF DEFAULT" shall have the meaning provided in Article VIII.
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<PAGE>
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers, as published by the
Federal Reserve Bank of New York on the next succeeding Business Day or if such
rate is not so published for any Business Day, the Federal Funds Rate for such
day shall be the average rounded upwards, if necessary, to the next 1/100th of
1% of the quotations for such day on such transactions received by the Lender
from three Federal funds brokers of recognized standing selected by the Lender.
"GAAP" shall mean generally accepted accounting principles in the United
States applied on a consistent basis and subject to the terms of SECTION 1.2.
"GOVERNMENTAL AUTHORITY" shall mean the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTEE" of or by any Person (the "GUARANTOR") shall mean any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly and including any obligation, direct or indirect, of the guarantor
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued in support of
such Indebtedness or obligation; PROVIDED, that the term "Guarantee" shall not
include endorsements for collection or deposits in the ordinary course of
business. The amount of any Guarantee shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
Guarantee is made or, if not so stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith. The term
"Guarantee" used as a verb has a corresponding meaning.
"HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts, commodity agreements and other similar
agreements or arrangements designed to protect against fluctuations in interest
rates, currency values or commodity values.
"INDEBTEDNESS" of any Person shall mean, without duplication (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of business; PROVIDED, that for purposes of SECTION 8.1(F), trade
6
<PAGE>
payables overdue by more than 120 days shall be included in this definition
except to the extent that any of such trade payables are being disputed in good
faith and by appropriate measures), (iv) all obligations of such Person under
any conditional sale or other title retention agreement(s) relating to property
acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi)
all obligations, contingent or otherwise, of such Person in respect of letters
of credit, acceptances or similar extensions of credit, (vii) all Guarantees of
such Person of the type of Indebtedness described in clauses (i) through (vi)
above, (viii) all Indebtedness of a third party secured by any Lien on property
owned by such Person, whether or not such Indebtedness has been assumed by such
Person, (ix) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any common stock of such
Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, except to the extent that the
terms of such Indebtedness provide that such Person is not liable therefor.
"INTEREST PERIOD" shall mean, with respect to any Eurodollar Loan, a period
of one, two, three or six months, as the Borrower may request; PROVIDED, that:
(i) the initial Interest Period for any such Loan shall commence on
the date of such Loan and each Interest Period occurring thereafter in
respect of such Loan shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period would otherwise end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless such Business Day falls in another calendar month, in
which case such Interest Period would end on the next preceding Business
Day;
(iii) any Interest Period which begins on the last Business Day of a
calendar month or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period shall end on
the last Business Day of such calendar month; and
(iv) no Interest Period may extend beyond the Commitment Termination
Date.
"LC COMMITMENT" shall mean that portion of the Commitment that may be used
by the Borrower for the issuance of Letters of Credit in an aggregate face
amount not to exceed $5,000,000.
"LC DISBURSEMENT" shall mean a payment made by the Lender pursuant to a
Letter of Credit.
"LC DOCUMENTS" shall mean the Letters of Credit and all applications,
agreements and instruments relating to the Letters of Credit.
"LC EXPOSURE" shall mean, at any time, the sum of (i) the aggregate undrawn
amount of all outstanding Letters of Credit at such time, PLUS (ii) the
aggregate amount of all LC Disbursements that have not been reimbursed by or on
behalf of the Borrower at such time.
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<PAGE>
"LETTER OF CREDIT" shall mean any letter of credit issued pursuant to
SECTION 2.13 by the Lender for the account of the Borrower pursuant to the LC
Commitment.
"LIBOR" shall mean, for any applicable Interest Period with respect to any
Eurodollar Loan, the rate per annum for deposits in Dollars for a period equal
to such Interest Period appearing on the display designated as Page 3750 on the
Dow Jones Markets Service (or such other page on that service or such other
service designated by the British Banker's Association for the display of such
Association's Interest Settlement Rates for Dollar deposits) as of 11:00 a.m.
(London, England time) on the day that is two Business Days prior to the first
day of the Interest Period or if such Page 3750 is unavailable for any reason at
such time, the rate which appears on the Reuters Screen ISDA Page as of such
date and such time; PROVIDED, that if the Lender determines that the relevant
foregoing sources are unavailable for the relevant Interest Period, LIBOR shall
mean the rate of interest determined by the Lender to be the average (rounded
upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at
which deposits in Dollars are offered to the Lender two (2) Business Days
preceding the first day of such Interest Period by leading banks in the London
interbank market as of 10:00 a. m. for delivery on the first day of such
Interest Period, for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Loan of the Lender.
"LIEN" shall mean any mortgage, pledge, security interest, lien (statutory
or otherwise), charge, encumbrance, hypothecation, assignment, deposit
arrangement, or other arrangement having the practical effect of the foregoing
or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having the same economic
effect as any of the foregoing).
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note, the LC
Documents, the Notice of Borrowing, the Subsidiary Guarantee Agreement, and any
and all other instruments, agreements, documents and writings executed in
connection with any of the foregoing.
"LOAN PARTIES" shall mean the Borrower and the Subsidiary Loan Parties.
"LOAN" shall mean a loan made by the Lender to the Borrower under its
Commitment.
"MAINTENANCE CAPITAL EXPENDITURES" shall mean Capital Expenditures for
maintaining existing assets of Borrower and it Subsidiaries.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences whether or not related, a
material adverse change in, or a material adverse
8
<PAGE>
effect on, (i) the business, results of operations, financial condition, assets,
liabilities or prospects of the Borrower and of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform
any of their respective obligations under the Loan Documents, (iii) the rights
and remedies of the Lender under any of the Loan Documents or (iv) the legality,
validity or enforceability of any of the Loan Documents.
"MATERIAL INDEBTEDNESS" shall mean Indebtedness (other than the Loans and
Letters of Credit) or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and the Subsidiaries in an aggregate
principal amount exceeding $2,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Subsidiary in respect to any Hedging Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.
"NOTE" shall mean a revolving credit note of the Borrower payable to the
order of the Lender in the principal amount of the Commitment, in substantially
the form of EXHIBIT A.
"NOTICE OF CONTINUATION" shall mean the notice given by the Borrower to the
Lender in respect of the continuation of an outstanding Loan as provided in
SECTION 2.3(B) hereof.
"NOTICE OF BORROWING" shall have the meaning as set forth in SECTION 2.2.
"OBLIGATIONS" shall mean all amounts owing by the Borrower to the Lender
pursuant to or in connection with this Agreement or any other Loan Document,
including without limitation, all principal, interest (including any interest
accruing after the filing of any petition in bankruptcy or the commencement of
any insolvency, reorganization or like proceeding relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), all reimbursement obligations, fees, expenses, indemnification
and reimbursement payments, costs and expenses (including all fees and expenses
of counsel to the Lender incurred pursuant to this Agreement or any other Loan
Document), whether direct or indirect, absolute or contingent, liquidated or
unliquidated, now existing or hereafter arising hereunder or thereunder,
together with all renewals, extensions, modifications or refinancings thereof.
"OFF-BALANCE SHEET LIABILITIES" of any Person shall mean (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability of such Person under any sale
and leaseback transactions which do not create a liability on the balance sheet
of such Person, (iii) any liability of such Person under any so-called
"synthetic" lease transaction or (iv) any obligation arising with respect to any
other transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheet of such
Person.
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<PAGE>
"PARTICIPANT" shall have the meaning set forth in SECTION 9.4(C).
"PAYMENT OFFICE" shall mean the office of the Lender located at 201 Fourth
Avenue North, Nashville, Tennessee 37219, or such other location as to which the
Lender shall have given written notice to the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA, and any successor entity performing similar functions.
"PERMITTED ENCUMBRANCES" shall mean
(i) Liens imposed by law for taxes not yet due or which are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves are being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law created in the
ordinary course of business for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves are being maintained in accordance with GAAP;
(iii) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(iv) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(v) judgment and attachment liens not giving rise to an Event of
Default or Liens created by or existing from any litigation or legal
proceeding that are currently being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being
maintained in accordance with GAAP; and
(vi) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or materially
interfere with the ordinary conduct of business of the Borrower and its
Subsidiaries taken as a whole;
PROVIDED, that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERMITTED INVESTMENTS" shall mean:
(i) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States (or
by any agency thereof to the extent such obligations are backed by the full
faith and credit of the United States), in each case maturing within one
year from the date of acquisition thereof;
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(ii) commercial paper having the highest rating, at the time of
acquisition thereof, of S&P or Moody's and in either case maturing within
six months from the date of acquisition thereof;
(iii) certificates of deposit, bankers' acceptances and time deposits
maturing within 180 days of the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the
laws of the United States or any state thereof which has a combined capital
and surplus and undivided profits of not less than $500,000,000;
(iv) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (i) above and entered
into with a financial institution satisfying the criteria described in
clause (iii) above; and
(v) mutual funds investing solely in any one or more of the Permitted
Investments described in clauses (i) through (iv) above.
"PERSON" shall mean any individual, partnership, firm, corporation,
association, joint venture, limited liability company, trust or other entity, or
any Governmental Authority.
"PLAN" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be in effect from time to time, and any
successor regulations.
"RELATED PARTIES" shall mean, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"RESPONSIBLE OFFICER" shall mean any of the president, the chief executive
officer, the chief operating officer, the chief financial officer, the treasurer
or a vice president of the Borrower or such other representative of the Borrower
as may be designated in writing by any one of the foregoing with the consent of
the Lender; and, with respect to the financial covenants only, the chief
financial officer or the treasurer of the Borrower.
"RESTRICTED PAYMENT" shall have the meaning set forth in SECTION 7.5.
"S&P" shall mean Standard & Poor's.
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"SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any
corporation, partnership, joint venture, limited liability company, association
or other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, partnership, joint venture, limited liability company,
association or other entity (i) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power, or in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, Controlled or held, or (ii) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent. Unless
otherwise indicated, all references to "Subsidiary" hereunder shall mean a
Subsidiary of the Borrower.
"SUBSIDIARY GUARANTEE AGREEMENT" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of EXHIBIT B, made by the Subsidiary Loan
Parties in favor of the Lender.
"SUBSIDIARY LOAN PARTY" shall mean each and every Subsidiary that is
required to execute the Subsidiary Guarantee Agreement under SECTION 5.10
hereof.
"TAXES" shall mean any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATION. Unless otherwise defined or
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP as
in effect from time to time, applied on a basis consistent (except for such
changes approved by the Borrower's independent public accountants) with the most
recent audited consolidated financial statement of the Borrower delivered
pursuant to SECTION 5.1(A); PROVIDED, that if the Borrower notifies the Lender
that the Borrower wishes to amend any covenant in Article VI to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the Lender
notifies the Borrower that it wishes to amend Article VI for such purpose), then
the Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Lender.
SECTION 1.3 TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phase "without limitation". The word "will"
shall be construed to have the same meaning and
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effect as the word "shall". In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and the word "to" means "to but excluding". Unless the context
requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as it was originally executed or as it
may from time to time be amended, supplemented or otherwise modified (subject to
any restrictions on such amendments, supplements or modifications set forth
herein), (ii) any reference herein to any Person shall be construed to include
such Person's successors and permitted assigns, (iii) the words "hereof",
"herein" and "hereunder" and words of similar import shall be construed to refer
to this Agreement as a whole and not to any particular provision hereof, (iv)
all references to Articles, Sections, Exhibits and Schedules shall be construed
to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v)
all references to a specific time shall be construed to refer to the time in the
city and state of the Lender's principal office, unless otherwise indicated.
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENTS
SECTION 2.1 LOANS AND NOTE.
(a) Subject to the terms and conditions set forth herein, the Lender
agrees to make Loans to the Borrower, from time to time during the
Availability Period, in an aggregate principal amount outstanding at any
time that will not result in the sum of the principal amount of Loans then
outstanding plus the outstanding LC Exposure to exceed the Commitment.
During the Availability Period, the Borrower shall be entitled to borrow,
prepay and reborrow Loans in accordance with the terms and conditions of
this Agreement; PROVIDED, that the Borrower may not borrow or reborrow
should there exist a Default or Event of Default.
(b) The Borrower's obligation to pay the principal of, and interest
on, the Loans shall be evidenced by the records of the Bank and by the
Note. The entries made in such records and/or on the schedule annexed to
the Note shall be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, that the failure or
delay of the Lender in maintaining or making entries into any such record
or on such schedule or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans (both principal and unpaid
accrued interest) in accordance with the terms of this Agreement.
SECTION 2.2 PROCEDURE FOR LOANS. The Borrower shall give the Lender written
notice (or telephonic notice promptly confirmed in writing) of each Loan
substantially in the form of Exhibit 2.2 (a "NOTICE OF BORROWING") prior to
11:00 a.m. two (2) Business Days prior to the requested date of each Loan. Each
Notice of Borrowing shall be irrevocable and shall specify: (i) the principal
amount of the Loan, (ii) the proposed date of such Loan (which shall be a
Business Day), and (iii) the duration of the initial Interest Period applicable
thereto (subject to the provisions of the definition of Interest Period). The
aggregate
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principal amount of each Loan shall be not less than $100,000 or a larger
multiple of $100,000, or in such lesser amounts equal to the amount of the
unused Commitment. Upon the satisfaction of the applicable conditions set forth
in Article III hereof, the Lender will make the proceeds of each Loan available
to the Borrower at the Payment Office on the date specified in the applicable
Notice of Borrowing by crediting an account maintained by the Borrower with the
Lender or at the Borrower's option, by effecting a wire transfer of such amount
to an account designated by the Borrower to the Lender.
SECTION 2.3 INTEREST ELECTIONS.
(a) Each Loan shall be a Eurodollar Loan and shall have an initial
Interest Period as specified in the applicable Notice of Borrowing.
Thereafter, the Borrower may elect to continue the Interest Period for any
Eurodollar Loan, all as provided in this Section.
(b) To make an election pursuant to this Section, the Borrower shall
give the Lender prior written notice (or telephonic notice promptly
confirmed in writing) of each Eurodollar Loan (a "NOTICE OF CONTINUATION")
that is to be continued prior to 11:00 a.m. two (2) Business Days prior to
a continuation of the Loan. Each such Notice of Continuation shall be
irrevocable and shall specify (i) the Loan to which such Notice of
Continuation applies; (ii) the effective date of the election made pursuant
to such Notice of Continuation, which shall be a Business Day; and (iii)
the Interest Period applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of
"Interest Period."
(c) If, on the expiration of any Interest Period in respect of any
Eurodollar Loan, the Borrower shall have failed to deliver a Notice of
Continuation, then, unless such Loan is repaid as provided herein, the
Borrower shall be deemed to have elected to convert such Loan to a
Eurodollar Loan with an Interest Period of one month. No Loan may be
continued as a Eurodollar Loan if a Default or an Event of Default exists,
unless the Lender shall have otherwise consented in writing.
SECTION 2.4 OPTIONAL REDUCTION AND TERMINATION OF COMMITMENTS.
(a) Unless previously terminated, the Commitment shall terminate on
the Commitment Termination Date.
(b) Upon at least two (2) Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) to the Lender (which
notice shall be irrevocable), the Borrower may reduce the Commitment in
part or terminate the Commitment in whole; PROVIDED, that (i) any partial
reduction pursuant to this SECTION 2.4 shall be in an amount of at least
$100,000 and any larger multiple of $100,000, and (ii) no such reduction
shall be permitted which would reduce the Commitment (after giving effect
thereto and any concurrent prepayments made under SECTION 2.6) to an amount
less than the outstanding Loans PLUS the outstanding LC Exposure.
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SECTION 2.5 REPAYMENT OF LOANS. The outstanding principal amount of all
Loans shall be due and payable (together with accrued and unpaid interest
thereon) on the Commitment Termination Date.
SECTION 2.6 OPTIONAL PREPAYMENTS. The Borrower shall have the right at any
time and from time to time to prepay any Loan, in whole or in part, without
premium or penalty, by giving irrevocable written notice (or telephonic notice
promptly confirmed in writing) to the Lender no later than 11:00 a.m. not less
than two (2) Business Days prior to any such prepayment. Each such notice shall
be irrevocable and shall specify the proposed date of such prepayment and the
principal amount of each Loan or portion thereof to be prepaid. Such amount
shall be due and payable on the date designated in such notice, together with
accrued interest to such date on the amount so prepaid in accordance with
SECTION 2.7(A); PROVIDED, that if a Eurodollar Loan is prepaid on a date other
than the last day of an Interest Period applicable thereto, the Borrower shall
also pay all amounts required pursuant to SECTION 2.11. Each partial prepayment
of any Loan shall be in an amount that would be permitted in the case of an
advance of a Loan pursuant to SECTION 2.2.
SECTION 2.7 INTEREST ON LOANS.
(a) The Borrower shall pay interest on each Eurodollar Loan at the
Adjusted LIBO Rate for the applicable Interest Period in effect for such
Loan.
(b) While an Event of Default exists or after acceleration, at the
option of the Lender, the Borrower shall pay interest ("DEFAULT INTEREST")
with respect to all Eurodollar Loans at the rate otherwise applicable for
the then-current Interest Period PLUS an additional 2% per annum until the
last day of such Interest Period, and thereafter, and with respect to all
Loans and all other Obligations hereunder (other than Loans), at the Base
Rate, PLUS an additional 2% per annum.
(c) Interest on the principal amount of all Loans shall accrue from
and including the date such Loans are made to but excluding the date of any
repayment thereof. Interest on all outstanding Eurodollar Loans shall be
payable on the last day of each Interest Period applicable thereto, and, in
the case of any Eurodollar Loans having an Interest Period in excess of
three months, on each day which occurs every three months after the initial
date of such Interest Period, and on the Commitment Termination Date. All
Default Interest shall be payable on demand.
(d) The Lender shall determine each interest rate applicable to the
Loans hereunder and shall promptly notify the Borrower of such rate in
writing (or by telephone, promptly confirmed in writing). Any such
determination shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 2.8 FEES.
(a) COMMITMENT FEE. The Borrower agrees to pay to the Lender a
commitment fee, which shall accrue at a rate equal to 0.225% per annum on
the daily amount of the unused Commitment during the Availability Period;
PROVIDED, HOWEVER, that if the Lender continues to have any Loans or LC
Exposure
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outstanding after the Commitment Termination Date, then the commitment fee
shall continue to accrue on the amount of the Lender's unused Commitment
from and after the Commitment Termination Date to the date that all of the
Lender's outstanding Loans and/or LC Exposure have been paid in full.
(b) UTILIZATION FEE. If, during any calendar month, the average daily
outstanding Loans shall exceed 50% of the Commitment, the Borrower shall
pay to Lender a utilization fee, which shall accrue at a rate equal to
0.25% on the amount of such average daily outstanding Loan amount for such
month.
(c) LETTER OF CREDIT FEES. The Borrower agrees to pay to the Lender a
letter of credit fee which shall accrue at one percent (1%) per annum on
the average daily amount of the Lender's LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements) attributable to such
Letter of Credit during the period from and including the date of issuance
of such Letter of Credit to but excluding the date on which such Letter
expires or is drawn in full (including without limitation any LC Exposure
that remains outstanding after the Commitment Termination Date), as well as
the Lender's standard fees with respect to issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.
(d) CLOSING FEE. The Borrower shall pay to Lender a closing fee equal
to 0.20% of the Commitment. The Closing Fee shall be due and payable on the
Closing Date.
(e) PAYMENTS. Accrued fees (other than the closing fee referenced in
paragraph (d)) shall be payable quarterly in arrears on the last day of
each March, June, September and December, commencing on March 31, 2001 and
on the Commitment Termination Date (and if later, the date the Loans and LC
Exposure shall be repaid in their entirety).
SECTION 2.9 COMPUTATION OF INTEREST AND FEES. All computations of interest
and fees hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or fees are payable (to the
extent computed on the basis of days elapsed). Each determination by the Lender
of an interest amount or fee hereunder shall be made in good faith and, except
for manifest error, shall be final, conclusive and binding for all purposes.
SECTION 2.10 INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement that is not otherwise included in the
determination of the Adjusted LIBO Rate hereunder against assets of,
deposits with or for the account of, or credit extended by, the Lender
(except any such reserve requirement reflected in the Adjusted LIBO
Rate); or
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(ii) impose on the Lender or the eurodollar interbank market any
other condition affecting this Agreement or any Eurodollar Loans made
by the Lender; and the result of the foregoing is to increase the cost
to the Lender of making, converting into, continuing or maintaining a
Eurodollar Loan or to increase the cost to the Lender of issuing any
Letter of Credit or to reduce the amount received or receivable by the
Lender hereunder (whether of principal, interest or any other amount),
then the Borrower shall promptly pay, upon written notice from and
demand by the Lender, within five Business Days after the date of such
notice and demand, additional amount or amounts sufficient to
compensate the Lender for such additional costs incurred or reduction
suffered.
(b) If the Lender shall have determined that on or after the date of
this Agreement any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on the Lender's
capital (or on the capital of the Lender's parent corporation) as a
consequence of its obligations hereunder or under or in respect of any
Letter of Credit to a level below that which the Lender or the Lender's
parent corporation could have achieved but for such Change in Law (taking
into consideration the Lender's policies or the policies of the Lender's
parent corporation with respect to capital adequacy) then, from time to
time, within five (5)
Business Days after receipt by the Borrower of written demand by the
Lender, the Borrower shall pay to the Lender such additional amounts as
will compensate the Lender or the Lender's parent corporation for any such
reduction suffered.
(c) A certificate of the Lender setting forth the amount or amounts
necessary to compensate the Lender or its parent corporation, as the case
may be, specified in paragraph (a) or (b) of this Section shall be
delivered to the Borrower and shall be conclusive, absent manifest error.
The Borrower shall pay the Lender such amount or amounts within 10 days
after receipt thereof.
(d) Failure or delay on the part of the Lender to demand compensation
pursuant to this Section shall not constitute a waiver of the Lender's
right to demand such compensation.
SECTION 2.11 FUNDING INDEMNITY. In the event of (a) the payment of any
principal of a Eurodollar Loan other than on the last day of the Interest Period
applicable thereto (including as a result of an Event of Default), (b) the
conversion or continuation of a Eurodollar Loan other than on the last day of
the Interest Period applicable thereto, or (c) the failure by the Borrower to
borrow, prepay, or continue any Eurodollar Loan on the date specified in any
applicable notice (regardless of whether such notice is withdrawn or revoked),
then, in any such event, the Borrower shall compensate the Lender, within five
(5) Business Days after written demand from the Lender, for any loss, cost or
expense attributable to such event. Such loss, cost or expense shall be deemed
to include an amount determined by the Lender to be the excess, if any, of (A)
the amount of interest that would have accrued on the principal amount of such
Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate
applicable to such Eurodollar Loan for the period from the date of such event to
the last day of the then current Interest Period therefor (or in the
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case of a failure to borrow or continue, for the period that would have been the
Interest Period for such Eurodollar Loan) over (B) the amount of interest that
would accrue on the principal amount of such Eurodollar Loan for the same period
if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid
or converted or the date on which the Borrower failed to borrow or continue such
Eurodollar Loan. A certificate as to any additional amount payable under this
SECTION 2.11 submitted to the Borrower by the Lender shall be conclusive, absent
manifest error.
SECTION 2.12 PAYMENTS GENERALLY. The Borrower shall make each payment
required to be made by it hereunder prior to 11:00 a.m., on the date when due,
in immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the Lender, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the Lender at
its Payment Office. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be made payable for the period of such extension. All payments
hereunder shall be made in Dollars.
SECTION 2.13 LETTERS OF CREDIT.
(a) During the Availability Period, the Lender agrees to issue, at the
request of the Borrower, Letters of Credit for the account of the Loan
Parties on the terms and conditions hereinafter set forth; PROVIDED, that
(i) each Letter of Credit shall expire on the earlier of (A) the date one
year after the date of issuance of such Letter of Credit (or in the case of
any renewal or extension thereof, one year after such renewal or extension)
and (B) the date that is five (5) Business Days prior to the Commitment
Termination Date; (ii) each Letter of Credit shall be in a stated amount of
at least $50,000; and (iii) the Borrower may not request any Letter of
Credit, if, after giving effect to such issuance (A) the LC Exposure would
exceed the LC Commitment or (B) the LC Exposure, PLUS the outstanding Loans
would exceed the Commitment.
(b) To request the issuance of a Letter of Credit (or any amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower
shall give the Lender irrevocable written notice at least three (3)
Business Days prior to the requested date of such issuance specifying the
date (which shall be a Business Day) such Letter of Credit is to be issued
(or amended, extended or renewed, as the case may be), the expiration date
of such Letter of Credit, the amount of such Letter of Credit , the name
and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Letter of Credit. In
addition to the satisfaction of the conditions in Article III, the issuance
of such Letter of Credit (or any amendment which increases the amount of
such Letter of Credit) will be subject to the further conditions that such
Letter of Credit shall be in such form and contain such terms as the Lender
shall approve and that the Borrower shall have executed and delivered any
additional applications, agreements and instruments relating to such Letter
of Credit as the Lender shall reasonably require; PROVIDED, that in the
event of any conflict between such applications, agreements or instruments
and this Agreement, the terms of this Agreement shall control.
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(c) The Lender shall examine all documents purporting to represent a
demand for payment under a Letter of Credit promptly following its receipt
thereof. The Lender shall notify the Borrower of such demand for payment
and whether the Lender has made or will make a LC Disbursement thereunder;
PROVIDED, that any failure to give or delay in giving such notice shall not
relieve the Borrower of its obligation to reimburse the Lender with respect
to such LC Disbursement. The Borrower shall be irrevocably and
unconditionally obligated to reimburse the Lender for any LC Disbursements
paid by the Lender in respect of such drawing, without presentment, demand
or other formalities of any kind.
(d) If any Event of Default shall occur and be continuing, on the
Business Day that the Borrower receives notice from the Lender demanding
the deposit of cash collateral pursuant to this paragraph, the Borrower
shall deposit in an account with the Lender, in the name of the Lender and
for the benefit of the Lender, an amount in cash equal to the LC Exposure
as of such date plus any accrued and unpaid interest thereon; PROVIDED,
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable,
with demand or notice of any kind, upon the occurrence of any Event of
Default with respect to the Borrower described in clause (g) or (h) of
SECTION 8.1. Such deposit shall be held by the Lender as collateral for the
payment and performance of the obligations of the Borrower under this
Agreement. The Lender shall have exclusive dominion and control, including
the exclusive right of withdrawal, over such account. Such deposits shall
earn interest Federal Funds rate of interest on the investment of such
deposits, which investments shall be made at the option and sole discretion
of the Lender and at the Borrower's risk and expense, such deposits shall
not bear interest. Interest and profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall applied by the
Lender to reimburse itself for LC Disbursements for which it had not been
reimbursed and to the extent so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at
such time or, if the maturity of the Loans has been accelerated, be applied
to satisfy other obligations of the Borrower under this Agreement. If the
Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount plus any
interest earned thereon (to the extent not so applied as aforesaid) shall
be returned to the Borrower with three Business Days after all Events of
Default have been cured or waived.
(e) The Borrower's obligation to reimburse LC Disbursements hereunder
shall be absolute, unconditional and irrevocable and shall be performed
strictly in accordance with the terms of this Agreement under all
circumstances whatsoever and irrespective of any of the following
circumstances:
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(i) Any lack of validity or enforceability of any Letter of
Credit or this Agreement;
(ii) The existence of any claim, set-off, defense or other right
which the Borrower or any Subsidiary or Affiliate of the Borrower may
have at any time against a beneficiary or any transferee of any Letter
of Credit (or any Persons or entities for whom any such beneficiary or
transferee may be acting), the Lender or any other Person, whether in
connection with this Agreement or the Letter of Credit or any document
related hereto or thereto or any unrelated transaction;
(iii) Any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect;
(iv) Payment by the Lender under a Letter of Credit against
presentation of a draft or other document to the Lender that does not
comply with the terms of such Letter of Credit, if such non-compliance
is immaterial;
(v) Any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of, or provide
a right of setoff against, the Borrower's obligations hereunder; or
(vi) The existence of a Default or an Event of Default.
Neither the Lender nor any Related Party of the Lender shall have any
liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the
circumstances referred to above), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to any Letter of
Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the Lender; PROVIDED, that
the foregoing shall not be construed to excuse the Lender from
liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are
hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by the Lender's failure
to exercise care when determining whether drafts or other documents
presented under a Letter of Credit comply with the terms thereof. The
parties hereto expressly agree, that in the absence of gross
negligence or willful misconduct on the part of the Lender (as finally
determined by a court of competent jurisdiction), the Lender shall be
deemed to have exercised care in each such determination. In
furtherance of the foregoing and without limiting the generality
thereof, the parties agree that, with respect to documents presented
that appear on their face to be in substantial compliance with the
terms of a Letter of Credit, the Lender may, in its sole discretion,
either accept and make payment upon
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such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to
accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.
(f) Each Letter of Credit shall be subject to the Uniform Customs and
Practices for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, as the same may be amended from time to time,
and, to the extent not inconsistent therewith, the governing law of this
Agreement set forth in SECTION 9.5.
ARTICLE III
CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT
SECTION 3.1 CONDITIONS TO EFFECTIVENESS. The obligations of the Lender to
make the initial Loan and to issue the initial Letter of Credit hereunder is
subject to the receipt by the Lender of the following documents in form and
substance reasonably satisfactory to the Lender:
(a) this Agreement duly executed and delivered by the Borrower;
(b) a duly executed Note;
(c) a duly executed Subsidiary Guarantee Agreement;
(d) a certificate of the Secretary or Assistant Secretary of each Loan
Party, attaching and certifying copies of its bylaws and of the resolutions
of its boards of directors, authorizing the execution, delivery and
performance of the Loan Documents to which it is a party and certifying the
name, title and true signature of each officer of such Loan Party executing
the Loan Documents to which it is a party;
(e) certified copies of the articles of incorporation or other charter
documents of each Loan Party, together with certificates of good standing
or existence, as may be available from the Secretary of State of the
jurisdiction of incorporation of such Loan Party and each other
jurisdiction where such Loan Party is required to be qualified to do
business as a foreign corporation;
(f) a certificate, dated the Closing Date and signed by a Responsible
Officer, confirming compliance with the conditions set forth in paragraphs
(a), (b) and (c) of SECTION 3.2.
SECTION 3.2 EACH CREDIT EVENT. The obligation of the Lender to make any
Loan or to issue, amend, renew or extend any Letter of Credit is subject to the
satisfaction of the following conditions:
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(a) at the time of and immediately after giving effect to such Loan or
the issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default or Event of Default shall exist; and
(b) all representations and warranties of each Loan Party set forth in
the Loan Documents shall be true and correct in all material respects on
and as of the date of such Loan or the date of issuance, amendment,
extension or renewal of such Letter of Credit, in each case before and
after giving effect thereto; and
(c) since the date of the most recent financial statements of the
Borrower described in SECTION 5.1(A), there shall have been no change which
has had or could reasonably be expected to have a Material Adverse Effect.
The making of each Loan and each issuance, amendment, extension or renewal of
any Letter of Credit shall be deemed to constitute a representation and warranty
by the Borrower on the date thereof as to the matters specified in paragraphs
(a), (b) and (c) of this SECTION 3.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
SECTION 4.1 EXISTENCE; POWER. The Borrower and each of its Subsidiaries (i)
is duly organized, validly existing and in good standing as a corporation under
the laws of the jurisdiction of its organization, (ii) has all requisite power
and authority to carry on its business as now conducted, and (iii) is duly
qualified to do business, and is in good standing, in each jurisdiction where
such qualification is required, except where a failure to be so qualified could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 4.2 ORGANIZATIONAL POWER; AUTHORIZATION. The execution, delivery
and performance by each Loan Party of the Loan Documents to which it is a party
are within such Loan Party's organizational powers and have been duly authorized
by all necessary organizational action. This Agreement has been duly executed
and delivered by the Borrower, and constitutes, and each other Loan Document to
which any Loan Party is a party, when executed and delivered by such Loan Party,
will constitute, valid and binding obligations of the Borrower or such Loan
Party (as the case may be), enforceable against it in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
SECTION 4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS. The execution, delivery
and performance by the Borrower of this Agreement, and by each Loan Party of the
other Loan Documents to which it is a party (a) do not require any consent or
approval of, registration or filing with, or any action by, any Governmental
Authority, except those as have been obtained or made and are in full force and
effect or where the failure to do so, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect,
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(b) will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any of its Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a default
under any indenture, material agreement or other material instrument binding on
the Borrower or any of its Subsidiaries or any of its assets or give rise to a
right thereunder to require any payment to be made by the Borrower or any of its
Subsidiaries and (d) will not result in the creation or imposition of any Lien
on any asset of the Borrower or any of its Subsidiaries, except Liens (if any)
created under the Loan Documents.
SECTION 4.4 FINANCIAL STATEMENTS. The Borrower has furnished to the Lender
(i) the audited consolidated balance sheet of the Borrower and its Subsidiaries
as of December 25, 1999 and the related consolidated statements of income,
shareholders' equity and cash flows for the fiscal year then ended audited by
PriceWaterhouseCooper LLP and (ii) the unaudited consolidated balance sheet of
the Borrower and its Subsidiaries as at the end of September 30, 2000, and the
related unaudited consolidated statements of income and cash flows for the
fiscal quarter and year-to-date period then ending, certified by a Responsible
Officer. Such financial statements fairly present the consolidated financial
condition of the Borrower and its Subsidiaries as of such dates and the
consolidated results of operations for such periods in conformity with GAAP
consistently applied, subject to year end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii). Since
September 30, 2000, there have been no changes with respect to the Borrower and
its Subsidiaries which have had or could reasonably be expected to have, singly
or in the aggregate, a Material Adverse Effect.
SECTION 4.5 LITIGATION. No litigation, investigation or proceeding of or
before any arbitrators or Governmental Authorities is pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of its Subsidiaries (i) as to which there is a reasonable possibility of an
adverse determination that could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or (ii) which in any
manner draws into question the validity or enforceability of this Agreement or
any other Loan Document.
SECTION 4.6 COMPLIANCE WITH LAWS AND AGREEMENTS. The Borrower and each
Subsidiary is in compliance with (a) all applicable laws, rules, regulations and
orders of any Governmental Authority, and (b) all indentures, agreements or
other instruments binding upon it or its properties, except where
non-compliance, either singly or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.7 INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any of
its Subsidiaries is (a) an "investment company", as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended or (c) otherwise subject to any other
regulatory scheme limiting its ability to incur debt.
SECTION 4.8 TAXES. The Borrower and its Subsidiaries have timely filed or
caused to be filed all Federal income tax returns and all other material tax
returns that are required to be filed by them, and have paid all taxes shown to
be due and payable on such
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returns or on any assessments made against it or its property and all other
taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority, except (i) to the extent the failure to do so would not
have a Material Adverse Effect or (ii) where the same are currently being
contested in good faith by appropriate proceedings and for which the Borrower or
such Subsidiary, as the case may be, has set aside on its books adequate
reserves.
SECTION 4.9 MARGIN REGULATIONS. None of the proceeds of any of the Loans or
Letters of Credit will be used for "purchasing" or "carrying" any "margin stock"
with the respective meanings of each of such terms under Regulation U as now and
from time to time hereafter in effect or for any purpose that violates the
provisions of the applicable Margin Regulations.
SECTION 4.10 ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.
SECTION 4.11 OWNERSHIP OF PROPERTY.
(a) Each of the Borrower and its Subsidiaries has good title to, or
valid leasehold interests in, all of its real and personal property
material to the operation of its business.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed, or
otherwise has the right, to use, all patents, trademarks, service marks,
trade names, copyrights and other intellectual property material to its
business, and the use thereof by the Borrower and its Subsidiaries does not
infringe on the rights of any other Person, except for any such
infringements that, individually or in the aggregate, would not have a
Material Adverse Effect.
SECTION 4.12 DISCLOSURE. The Borrower has disclosed to the Lender all
agreements, instruments, and corporate or other restrictions to which the
Borrower or any of its Subsidiaries is subject, and all other matters known to
any of them, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the reports (including
without limitation all reports that the Borrower is required to file with the
Securities and Exchange Commission), financial statements, certificates or other
information furnished by or on behalf of the Borrower to the Lender in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or thereunder (as modified or supplemented by any other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, taken as a
whole, in light of the circumstances under which they were made, not misleading.
SECTION 4.13 LABOR RELATIONS. There are no strikes, lockouts or other
material labor disputes or grievances against the Borrower or any of its
Subsidiaries, or, to the Borrower's knowledge, threatened against or affecting
the Borrower or any of its Subsidiaries, and no
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significant unfair labor practice, charges or grievances are pending against the
Borrower or any of its Subsidiaries, or to the Borrower's knowledge, threatened
against any of them before any Governmental Authority. All payments due from the
Borrower or any of its Subsidiaries pursuant to the provisions of any collective
bargaining agreement have been paid or accrued as a liability on the books of
the Borrower or any such Subsidiary, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 4.14 SUBSIDIARIES. Schedule 4.14 sets forth the name of, the
ownership interest of the Borrower in, the jurisdiction of incorporation of, and
the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary
Loan Party, in each case as of the Closing Date.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as the Lender has a
Commitment hereunder or the principal of and interest on any Loan or any fee or
any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:
SECTION 5.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower will
deliver to the Lender:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of Borrower, a copy of the annual audited report for
such fiscal year for the Borrower and its Subsidiaries, containing a
consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such fiscal year and the related consolidated statements of income,
stockholders' equity and cash flows (together with all footnotes thereto)
of the Borrower and its Subsidiaries for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and reported on by PriceWaterhouseCooper LLP or other
independent public accountants of nationally recognized standing (without a
"going concern" or like qualification, exception or explanation and without
any qualification or exception as to scope of such audit) to the effect
that such financial statements present fairly in all material respects the
financial condition and the results of operations of the Borrower and its
Subsidiaries for such fiscal year on a consolidated basis in accordance
with GAAP and that the examination by such accountants in connection with
such consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(b) as soon as available and in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year of the
Borrower, an unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal quarter and the related unaudited
consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal quarter and the then elapsed portion of such
fiscal year, setting forth in each case in
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comparative form the figures for the corresponding quarter and the
corresponding portion of Borrower's previous fiscal year, all certified by
the chief financial officer or treasurer of the Borrower as presenting
fairly in all material respects the financial condition and results of
operations of the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) concurrently with the delivery of the financial statements
referred to in clauses (a) and (b) above, a certificate of a Responsible
Officer, (i) certifying as to whether there exists a Default or Event of
Default on the date of such certificate, and if a Default or an Event of
Default then exists, specifying the details thereof and the action which
the Borrower has taken or proposes to take with respect thereto, (ii)
setting forth in reasonable detail calculations demonstrating compliance
with Article VI and (iii) stating whether any change in GAAP or the
application thereof has occurred since the date of the Borrower's audited
financial statements referred to in SECTION 4.4 and, if any change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed with
the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all functions of said Commission, or with any national
securities exchange, or distributed by the Borrower to its shareholders
generally, as the case may be; and
(e) promptly following any request therefor, such other information
regarding the results of operations, business affairs and financial
condition of the Borrower or any Subsidiary as the Lender may reasonably
request.
SECTION 5.2 NOTICES OF MATERIAL EVENTS. The Borrower will furnish to the
Lender prompt written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or, to the
knowledge of the Borrower, affecting the Borrower or any Subsidiary which,
if adversely determined, could reasonably be expected to result in a
Material Adverse Effect;
(c) the occurrence of any ERISA Event that alone, or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding $2,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
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Each notice delivered under this Section shall be accompanied by a written
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
SECTION 5.3 EXISTENCE; CONDUCT OF BUSINESS. The Borrower will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and maintain in full force and effect its legal existence and
its respective rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business
and will continue to engage in the same business as presently conducted or such
other businesses that are reasonably related thereto; PROVIDED, that nothing in
this Section shall prohibit any merger, consolidation, liquidation or
dissolution permitted under SECTION 7.3.
SECTION 5.4 COMPLIANCE WITH LAWS, ETC. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and
requirements of any Governmental Authority applicable to its properties, except
where the failure to do so, either individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.5 PAYMENT OF OBLIGATIONS. The Borrower will, and will cause each
of its Subsidiaries to, pay and discharge at or before maturity, all of its
obligations and liabilities (including without limitation all tax liabilities
and claims that could result in a statutory Lien) before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.6 BOOKS AND RECORDS. The Borrower will, and will cause each of
its Subsidiaries to, keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities to the extent necessary to prepare the
consolidated financial statements of Borrower in conformity with GAAP.
SECTION 5.7 VISITATION, INSPECTION, ETC. The Borrower will, and will cause
each of its Subsidiaries to, permit any representative of the Lender to visit
and inspect its properties, to examine its books and records and to make copies
and take extracts therefrom, and to discuss its affairs, finances and accounts
with any of its officers and with its independent certified public accountants,
all at such reasonable times and as often as the Lender may reasonably request
after reasonable prior notice to the Borrower.
SECTION 5.8 MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower will, and
will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear except where the failure to do so, either individually or
it the aggregate, could not reasonably be expected to result in a Material
Adverse Effect and (b) maintain with financially sound and reputable insurance
companies, insurance with respect to its properties and business, and
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the properties and business of its Subsidiaries, against loss or damage of the
kinds customarily insured against by companies in the same or similar businesses
operating in the same or similar locations.
SECTION 5.9 USE OF PROCEEDS AND LETTERS OF CREDIT. The Borrower will use
the proceeds of all Loans to finance working capital needs and for other general
corporate purposes of the Borrower and its Subsidiaries. No part of the proceeds
of any Loan will be used, whether directly or indirectly, for any purpose that
would violate any rule or regulation of the Board of Governors of the Federal
Reserve System, including Regulations T, U or X. All Letters of Credit will be
used for general corporate purposes.
SECTION 5.10 ADDITIONAL SUBSIDIARIES. If any additional Subsidiary is
acquired or formed after the Closing Date, the Borrower will, within ten (10)
business days after such Subsidiary is acquired or formed, notify the Lender
thereof and will cause such Subsidiary to become a Subsidiary Loan Party by
executing agreements in the form of Annex I to Exhibit B in form and substance
satisfactory to the Lender and will cause such Subsidiary to deliver
simultaneously therewith similar documents applicable to such Subsidiary
required under SECTION 3.1 as reasonably requested by the Lender.
ARTICLE VI
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as the Lender has its
Commitment hereunder or the principal of or interest on or any Loan remains
unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit
remains outstanding:
SECTION 6.1 LEVERAGE RATIO. As of the end of each fiscal quarter of the
Borrower, commencing with the fiscal quarter ending December 29, 2000,
Borrower's Consolidated Leverage Ratio (calculated on a trailing four-quarters
basis) will not exceed 2.50 to 1.00.
SECTION 6.2 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. As of the end of each
fiscal quarter of the Borrower, commencing with the fiscal quarter ending
December 29, 2000, Borrower's a Fixed Charge Coverage Ratio (calculated on a
trailing four-quarters basis) shall be not less than 1.25 to 1.00.
SECTION 6.3 CONSOLIDATED NET WORTH. The Borrower will not permit its
Consolidated Net Worth at any time to be less than the sum of $80,000,000, PLUS
50% of Consolidated Net Income earned subsequent to Borrower's fiscal year
ending in December of 2000 on a cumulative basis; PROVIDED, that if Consolidated
Net Income is negative in any fiscal quarter the amount added for such fiscal
quarter shall be zero and such negative Consolidated Net Income shall not reduce
the amount of Consolidated Net Income added from any previous fiscal quarter.
The amount of Consolidated Net Worth set forth above shall also be increased by
75% of the net proceeds of any public or private offering of common stock of the
Borrower after the Closing Date. Promptly upon the consummation of such
offering, the Borrower shall notify the Lender in writing of the amount of such
equity offering.
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ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as the Lender has its
Commitment hereunder or the principal of or interest on any Loan remains unpaid
or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains
outstanding:
SECTION 7.1 INDEBTEDNESS. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness created pursuant to the Loan Documents;
(b) Indebtedness existing on the date hereof and set forth on SCHEDULE
7.1 and extensions, renewals and replacements of any such Indebtedness that
do not increase the outstanding principal amount thereof (immediately prior
to giving effect to such extension, renewal or replacement) or shorten the
maturity or the weighted average life thereof;
(c) Indebtedness of the Borrower owing to any Subsidiary and of any
Subsidiary owing to the Borrower or any other Subsidiary; PROVIDED, that
any such Indebtedness that is owed to a Subsidiary shall be a Subsidiary
Loan Party;
(d) Guarantees by the Borrower of Indebtedness of any Subsidiary and
by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;
PROVIDED, that Guarantees by a Subsidiary shall be a Subsidiary Loan Party;
(e) Indebtedness in respect of obligations under Hedging Agreements
permitted by SECTION 7.10; and
(f) other Indebtedness in an aggregate principal amount not to exceed
$10,000,000 at any time outstanding.
SECTION 7.2 NEGATIVE PLEDGE. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any
of its assets or property now owned or hereafter acquired or, except:
(a) Permitted Encumbrances;
(b) any Liens on any property or asset of the Borrower or any
Subsidiary existing on the Closing Date set forth on SCHEDULE 7.2;
PROVIDED, that such Lien shall not apply to any other property or asset of
the Borrower or any Subsidiary;
(c) purchase money Liens upon or in any fixed or capital assets to
secure the purchase price or the cost of construction or improvement of
such fixed or capital assets or to secure Indebtedness incurred solely for
the purpose of financing the acquisition, construction or improvement of
such fixed or capital assets (including Liens securing any Capital Lease
Obligations); PROVIDED, that (i) such Lien secures
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Indebtedness permitted by SECTION 7.1(C), (ii) such Lien attaches to such
asset concurrently or within 90 days after the acquisition, improvement or
completion of the construction thereof; (iii) such Lien does not extend to
any other asset; and (iv) the Indebtedness secured thereby does not exceed
the cost of acquiring, constructing or improving such fixed or capital
assets;
(d) any Lien (i) existing on any asset of any Person at the time such
Person becomes a Subsidiary of the Borrower, (ii) existing on any asset of
any Person at the time such Person is merged with or into the Borrower or
any Subsidiary of the Borrower or (iii) existing on any asset prior to the
acquisition thereof by the Borrower or any Subsidiary of the Borrower;
PROVIDED, that any such Lien was not created in the contemplation of any of
the foregoing and any such Lien secures only those obligations which it
secures on the date that such Person becomes a Subsidiary or the date of
such merger or the date of such acquisition; and
(e) extensions, renewals, or replacements of any Lien referred to in
paragraphs (a) through (d) of this Section; PROVIDED, that the principal
amount of the Indebtedness secured thereby is not increased and that any
such extension, renewal or replacement is limited to the assets originally
encumbered thereby.
SECTION 7.3 FUNDAMENTAL CHANGES.
(a) The Borrower will not, and will not permit any Subsidiary to,
merge into or consolidate into any other Person, or permit any other Person
to merge into or consolidate with it, or sell, lease, transfer or otherwise
dispose of (in a single transaction or a series of transactions) all or
substantially all of its assets (in each case, whether now owned or
hereafter acquired) or all or substantially all of the stock of any of its
Subsidiaries (in each case, whether now owned or hereafter acquired) or
liquidate or dissolve; PROVIDED, that if at the time thereof and
immediately after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing (i) the Borrower or any Subsidiary
may merge with a Person if the Borrower (or such Subsidiary if the Borrower
is not a party to such merger) is the surviving Person, (ii) any Subsidiary
may merge into another Subsidiary; PROVIDED, that if any party to such
merger is a Subsidiary Loan Party, the Subsidiary Loan Party shall be the
surviving Person, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of all or substantially all of its assets to the Borrower
or to a Subsidiary Loan Party and (iv) any Subsidiary (other than a
Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines
in good faith that such liquidation or dissolution is in the best interests
of the Borrower and is not materially disadvantageous to the Lender;
PROVIDED, that any such merger involving a Person that is not a
wholly-owned Subsidiary immediately prior to such merger shall not be
permitted unless also permitted by SECTION 7.4.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to, engage to any material extent in any business other than businesses of
the type conducted by the Borrower and its Subsidiaries on the date hereof
and businesses reasonably related thereto.
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SECTION 7.4 INVESTMENTS, LOANS, ETC. The Borrower will not, and will not
permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant
to any merger with any Person that was not a wholly-owned Subsidiary prior to
such merger), any common stock, evidence of indebtedness or other securities
(including any option, warrant, or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person (all of the foregoing being collectively called "INVESTMENTS"), or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person that constitute a business unit, except:
(a) Investments (other than Permitted Investments) existing on the
date hereof and set forth on SCHEDULE 7.4 (including Investments in
Subsidiaries);
(b) Permitted Investments;
(c) Guarantees constituting Indebtedness permitted by SECTION 7.1;
(d) Investments made by the Borrower in or to any Subsidiary and by
any Subsidiary to the Borrower or in or to another Subsidiary;
(e) loans or advances to employees, officers or directors of the
Borrower or any Subsidiary in the ordinary course of business for travel,
relocation and related expenses;
(f) Hedging Agreements permitted by SECTION 7.10; and
(g) Other Investments which in the aggregate do not exceed $5,000,000
in any fiscal year of the Borrower.
SECTION 7.5 RESTRICTED PAYMENTS. The Borrower will not, and will not permit
its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any dividend on any class of its stock, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, retirement, defeasance or other acquisition of, any shares
of common stock or Indebtedness subordinated to the Obligations of the Borrower
or any options, warrants, or other rights to purchase such common stock or such
Indebtedness, whether now or hereafter outstanding (each, a "RESTRICTED
PAYMENT"), except for (i) dividends payable by the Borrower solely in shares of
any class of its common stock; (ii) Restricted Payments made by any Subsidiary
to the Borrower or to another Subsidiary; (iii) repurchases of Borrower's
capital shares which do not exceed $5,000,000 in the aggregate; and (iv) cash
dividends paid on, and cash redemptions of, the common stock of the Borrower;
PROVIDED, that no Default or Event of Default has occurred and is continuing at
the time such dividend is paid or redemption is made.
SECTION 7.6 SALE OF ASSETS. The Borrower will not, and will not permit any
of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise
dispose of, any of its assets, business or property, whether now owned or
hereafter acquired, or, in the case of any
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Subsidiary, issue or sell any shares of such Subsidiary's common stock to
any Person other than the Borrower (or to qualify directors if required by
applicable law), except:
(a) the sale or other disposition for fair market value of obsolete or
worn out property or other property not necessary for operations disposed
of in the ordinary course of business;
(b) the sale of inventory and Permitted Investments in the ordinary
course of business; and
(c) the sale or other disposition of such assets in an aggregate
amount not to exceed $10,000,000 from the Closing Date to the Commitment
Termination Date.
SECTION 7.7 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will
not permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among the Borrower and its Subsidiaries not involving
any other Affiliates and (c) any Restricted Payment permitted by SECTION 7.5.
SECTION 7.8 RESTRICTIVE AGREEMENTS. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement that prohibits, restricts or imposes any condition upon (a)
the ability of the Borrower or any Subsidiary to create, incur or permit any
Lien upon any of its assets or properties, whether now owned or hereafter
acquired, or (b) the ability of any Subsidiary to pay dividends or other
distributions with respect to its common stock, to make or repay loans or
advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of
the Borrower or any other Subsidiary or to transfer any of its property or
assets to the Borrower or any Subsidiary of the Borrower; PROVIDED, that (i) the
foregoing shall not apply to restrictions or conditions imposed by law or by
this Agreement or any other Loan Document, (ii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is sold and such sale is permitted
hereunder, (iii) clause (a) shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions and conditions apply only to the property or
assets securing such Indebtedness and (iv) clause (a) shall not apply to
customary provisions in leases and other contracts restricting the assignment
thereof.
SECTION 7.9 [RESERVED]
SECTION 7.10 HEDGING AGREEMENTS. The Borrower will not, and will not permit
any of the Subsidiaries to, enter into any Hedging Agreement, other than Hedging
Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which the Borrower or any Subsidiary is exposed in the conduct of its
business or the management
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of its liabilities. Solely for the avoidance of doubt, the Borrower acknowledges
that a Hedging Agreement entered into for speculative purposes or of a
speculative nature (which shall be deemed to include any Hedging Agreement under
which the Borrower or any of the Subsidiaries is or may become obliged to make
any payment (i) in connection with the purchase by any third party of any common
stock or any Indebtedness or (ii) as a result of changes in the market value of
any common stock or any Indebtedness) is not a Hedging Agreement entered into in
the ordinary course of business to hedge or mitigate risks.
SECTION 7.11 AMENDMENT TO MATERIAL DOCUMENTS. The Borrower will not, and
will not permit any Subsidiary to, amend, modify or waive any of its rights in a
manner materially adverse to the Lender under its certificate of incorporation,
bylaws or other organizational documents.
SECTION 7.12 ACCOUNTING CHANGES. The Borrower will not, and will not permit
any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Borrower or of any Subsidiary by more than 30 days, except to change the
fiscal year of a Subsidiary to conform its fiscal year to that of the Borrower.
SECTION 7.13 ACQUISITIONS. Enter into any agreement providing for any
acquisition unless (i) lines of business of the Person to be acquired are
substantially the same as one or more line or lines of business conducted by the
Borrower or its Subsidiaries, (ii) no Default or Event of Default shall have
occurred and be continuing either immediately prior to or immediately after
giving effect to such acquisition, (iii) the Person acquired shall be a
wholly-owned Subsidiary, or be merged into the Borrower upon consummation of the
acquisition (or if assets are being acquired, the acquiror shall be the Borrower
or a Subsidiary), and (iv) after giving effect to such acquisition, the
aggregate costs of all acquisition incurred during the term of this Agreement
(on a cumulative basis) shall not exceed $20,000,000.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 EVENTS OF DEFAULT. If any of the following events (each an
"EVENT OF DEFAULT") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or of any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment or otherwise; or
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount payable under clause (a) of this
Article) payable under this Agreement or any other Loan Document, when and
as the same shall become due and payable, and such failure shall continue
unremedied for a period of five (5) Business Days; or
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(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with this Agreement
or any other Loan Document (including the Schedules attached thereto) and
any amendments or modifications hereof or waivers hereunder, or in any
certificate, report, financial statement or other document submitted to the
Lender by any Loan Party or any representative of any Loan Party pursuant
to or in connection with this Agreement or any other Loan Document shall
prove to be incorrect in any material respect when made or deemed made or
submitted; or
(d) the Borrower shall fail to observe or perform any covenant or
agreement contained in SECTION 5.3 (with respect to the Borrower's
existence) or Article VI; or
(e) the Borrower shall fail to observe any covenant under Article VII
and such failure is not cured within ten (10) Business Days thereof; or
(f) any Loan Party shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those referred to in
clauses (a), (b) and (d) above), and such failure shall remain unremedied
for 30 days after the earlier of (i) any officer of the Borrower becomes
aware of such failure, or (ii) notice thereof shall have been given to the
Borrower by the Lender; or
(g) the Borrower or any Subsidiary (whether as primary obligor or as
guarantor or other surety) shall fail to pay any principal of or premium or
interest on any Material Indebtedness that is outstanding, when and as the
same shall become due and payable (whether at scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument evidencing such Indebtedness; or any other event
shall occur or condition shall exist under any agreement or instrument
relating to such Indebtedness and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of
such event or condition is to accelerate, or permit the acceleration of,
the maturity of such Indebtedness; or any such Indebtedness shall be
declared to be due and payable; or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or redemption),
purchased or defeased, or any offer to prepay, redeem, purchase or defease
such Indebtedness shall be required to be made, in each case prior to the
stated maturity thereof; or
(h) the Borrower or any Subsidiary shall (i) commence a voluntary case
or other proceeding or file any petition seeking liquidation,
reorganization or other relief under any federal, state or foreign
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a custodian, trustee, receiver, liquidator or
other similar official of it or any substantial part of its property, (ii)
consent to the institution of , or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (i) of
this Section, (iii) apply for or consent to the appointment of a custodian,
trustee, receiver, liquidator or other similar official for the Borrower or
any such Subsidiary or for a
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substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make
a general assignment for the benefit of creditors, or (vi) take any action
for the purpose of effecting any of the foregoing; or
(i) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any Subsidiary or its debts, or any
substantial part of its assets, under any federal, state or foreign
bankruptcy, insolvency or other similar law now or hereafter in effect or
(ii) the appointment of a custodian, trustee, receiver, liquidator or other
similar official for the Borrower or any Subsidiary or for a substantial
part of its assets, and in any such case, such proceeding or petition shall
remain undismissed for a period of 60 days or an order or decree approving
or ordering any of the foregoing shall be entered; or
(j) the Borrower or any Subsidiary shall become unable to pay, shall
admit in writing its inability to pay, or shall fail to pay, its debts as
they become due; or
(k) an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with other ERISA Events that have occurred,
could reasonably be expected to result in liability to the Borrower and the
Subsidiaries in an aggregate amount exceeding $2,000,000; or
(l) any judgment or order for the payment of money in excess of
$250,000 in the aggregate shall be rendered against the Borrower or any
Subsidiary, and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be a period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(m) any non-monetary judgment or order shall be rendered against the
Borrower or any Subsidiary that could reasonably be expected to have a
Material Adverse Effect, and there shall be a period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(n) a Change in Control shall occur or exist; or
(o) any provision of any Subsidiary Guarantee Agreement shall for any
reason cease to be valid and binding on, or enforceable against, any
Subsidiary Loan Party, or any Subsidiary Loan Party shall so state in
writing, or any Subsidiary Loan Party shall seek to terminate its
Subsidiary Guarantee Agreement;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Section) and at any time thereafter
during the continuance of such event, the Lender may, by notice to the Borrower,
take any or all of the following actions, at the same or different times: (i)
terminate its Commitment; (ii) declare the principal of
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and any accrued interest on the Loans, and all other Obligations owing
hereunder, to be, whereupon the same shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower and (iii) exercise all remedies contained in
any other Loan Document; and that, if an Event of Default specified in either
clause (h) or (i) shall occur, the Commitment shall automatically terminate and
the principal of the Loans then outstanding, together with accrued interest
thereon, and all fees, and all other Obligations shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NOTICES.
(a) Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications to
any party herein to be effective shall be in writing and shall be delivered
by hand or overnight courier service, mailed by certified or registered
mail or sent by telecopy, as follows:
To the Borrower: Panera Bread Company
7930 Big Bend Boulevard
Webster Grove, MO 63119
Attention: William W. Moreton, CFO
Facsimile No.: (314) 918-7773
To the Lender: SunTrust Bank
201 Fourth Avenue North
Nashville, TN 37219
Attention: Bill Priester, Vice President
Facsimile No.: (615) 748-5269
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
such notices and other communications shall, when transmitted by overnight
delivery, or faxed, be effective when delivered for overnight (next-day)
delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date
deposited into the mails or if delivered, upon delivery.
(b) Any agreement of the Lender herein to receive certain notices by
telephone or facsimile is solely for the convenience and at the request of
the Borrower. The Lender shall be entitled to rely on the authority of any
Person purporting to be a Person authorized by the Borrower to give such
notice and the Lender shall not have any liability to the Borrower or other
Person on account of any action taken or not taken by the Lender in
reliance upon such telephonic or facsimile notice. The obligation of the
Borrower to repay the Loans and all other Obligations hereunder shall not
be affected in any way or to any extent by any failure of the Lender to
receive written confirmation of any telephonic or facsimile
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notice or the receipt by the Lender of a confirmation which is at variance
with the terms understood by the Lender to be contained in any such
telephonic or facsimile notice.
SECTION 9.2 WAIVER; AMENDMENTS.
(a) No failure or delay by the Lender in exercising any right or power
thereunder or any other Loan Document, and no course of dealing between the
Borrower and the Lender, shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other
or further exercise thereof or the exercise of any other right or power
hereunder or thereunder. The rights and remedies of the Lender hereunder
and under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies provided by law. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for
which given. Without limiting the generality of the foregoing, the making
of a Loan or the issuance of a Letter of Credit shall not be construed as a
waiver of any Default or Event of Default, regardless of whether the Lender
may have had notice or knowledge of such Default or Event of Default at the
time.
(b) No amendment or waiver of any provision of this Agreement or the
other Loan Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Borrower and the Lender and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 9.3 EXPENSES; INDEMNIFICATION.
(a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and
expenses of the Lender (including, without limitation, the reasonable fees,
charges and disbursements of outside counsel and the allocated cost of
inside counsel) in connection with the enforcement or protection of its
rights in connection with this Agreement, including its rights under this
Section, or in connection with the Loans made or any Letters of Credit
issued hereunder, including all such out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Loans or
Letters of Credit.
(b) The Borrower shall indemnify the Lender and each Related Party of
the Lender (each, an "INDEMNITEE") against, and hold each of them harmless
from, any and all costs, losses, liabilities, claims, damages and related
expenses, including the fees, charges and disbursements of any counsel for
any Indemnitee, which may be incurred by or asserted against any Indemnitee
arising out of, in connection with
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or as a result of (i) the execution or delivery of any this Agreement or
any other agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the
consummation of any of the transactions contemplated hereby, (ii) any Loan
or Letter of Credit or any actual or proposed use of the proceeds therefrom
(including any refusal by the Lender to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand
do not strictly comply with the terms of such Letter of Credit), or (iii)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort, or any
other theory and regardless of whether any Indemnitee is a party thereto;
PROVIDED, that the Borrower shall not be obligated to indemnify any
Indemnitee for any of the foregoing arising out of such Indemnitee's gross
negligence or willful misconduct as determined by a court of competent
jurisdiction in a final and nonappealable judgment.
(c) The Borrower shall pay, and hold the Lender harmless from and
against, any and all present and future stamp, documentary, and other
similar taxes with respect to this Agreement and any other Loan Documents
or any payments due thereunder, and save the Lender harmless from and
against any and all liabilities with respect to or resulting from any delay
or omission to pay such taxes.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to actual or direct damages) arising out of, in connection with or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the transactions contemplated therein, any Loan or the Letter of
Credit or the use of proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after
written demand therefor.
SECTION 9.4 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its
rights hereunder without the prior written consent of the Lender (and any
attempted assignment or transfer by the Borrower without such consent shall
be null and void).
(b) The Lender may at any time assign to one or more assignees all or
a portion of its rights and obligations under this Agreement and the other
Loan Documents (including all or a portion of its Commitment and the Loans
and LC Exposure at the time owing to it); PROVIDED, that the Borrower must
give its prior written consent (which consent shall not be unreasonably
withheld or delayed) to any assignment, except an assignment to an
Affiliate of the Lender or during the
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occurrence and continuation of a Default or an Event of Default. Upon the
execution and delivery of an assignment agreement by the Lender and such
assignee and payment by such assignee of an amount equal to the purchase
price agreed between the Lender and such assignee, such assignee shall
become a party to this Agreement and the other Loan Documents and shall
have the rights and obligations of a Lender under this Agreement, and the
Lender shall be released from its obligations hereunder to a corresponding
extent. Upon the consummation of any such assignment hereunder, the Lender,
the assignee and the Borrower shall make appropriate arrangements to have a
new Note issued to reflect such assignment.
(c) The Lender may at any time, without the consent of the Borrower,
sell participations to one or more banks or other entities (a
"PARTICIPANT") in all or a portion of the Lender's rights and obligations
under this Agreement; PROVIDED, that (i) the Lender's obligations under
this Agreement shall remain unchanged, (ii) the Lender shall remain solely
responsible to the other parties hereto for the performance of its
obligations hereunder, and (iii) the Borrower shall continue to deal solely
and directly with the Lender in connection with the Lender's rights and
obligations under this Agreement and the other Loan Documents. Any
agreement between the Lender and the Participant with respect to such
participation shall provide that the Lender shall retain the sole right and
responsibility to enforce this Agreement and the other Loan Documents and
the right to approve any amendment, modification or waiver of this
Agreement and the other Loan Documents; PROVIDED, that such participation
agreement may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver of this
Agreement described in the first proviso of SECTION 9.2(B) that affects the
Participant.
(d) The Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement and the Note to
secure its obligations to a Federal Reserve Bank without complying with
this Section; PROVIDED, that no such pledge or assignment shall release the
Lender from any of its obligations hereunder or substitute any such pledgee
or assignee for such Lender as a party hereto.
SECTION 9.5 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) This Agreement and the other Loan Documents shall be construed in
accordance with and be governed by the law (without giving effect to the
conflict of law principles thereof) of the State of Tennessee.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the non-exclusive jurisdiction of the United
States District Court of the Middle District of Tennessee and of the
Chancery Court of Davidson County, Tennessee, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document or the transactions contemplated
hereby or thereby, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and
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unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such Tennessee state court or, to
the extent permitted by applicable law, such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. Nothing in
this Agreement or any other Loan Document shall affect any right that the
Lender may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against the Borrower or its
properties in the courts of any jurisdiction.
(c) The Borrower irrevocably and unconditionally waives any objection
which it may now or hereafter have to the laying of venue of any such suit,
action or proceeding described in paragraph (b) of this Section and brought
in any court referred to in paragraph (b) of this Section. Each of the
parties hereto irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to the service
of process in the manner provided for notices in SECTION 9.1. Nothing in
this Agreement or in any other Loan Document will affect the right of any
party hereto to serve process in any other manner permitted by law.
SECTION 9.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.7 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
the Lender shall have the right, at any time or from time to time upon the
occurrence and during the continuance of an Event of Default, without prior
notice to the Borrower, any such notice being expressly waived by the Borrower
to the extent permitted by applicable law, to set off and apply against all
deposits (general or special, time or demand, provisional or final) of the
Borrower at any time held or other obligations at any time owing by the Lender
to or for the credit or the account of the Borrower against any and all
Obligations held by the Lender, irrespective of whether the Lender shall have
made demand hereunder and although such Obligations may be unmatured. The Lender
agrees promptly to notify the Borrower after
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any such set-off and any application made by the Lender; PROVIDED, that the
failure to give such notice shall not affect the validity of such set-off and
application.
SECTION 9.8 COUNTERPARTS; INTEGRATION. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. This
Agreement, the other Loan Documents, and any separate letter agreement(s)
relating to any fees payable to the Lender constitute the entire agreement among
the parties hereto and thereto regarding the subject matters hereof and thereof
and supersede all prior agreements and understandings, oral or written,
regarding such subject matters.
SECTION 9.9 SURVIVAL. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the Lender may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitment
has not expired or terminated. The provisions of SECTIONS 2.11 and 9.3 shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans, the expiration
or termination of the Letters of Credit and the Commitments or the termination
of this Agreement or any provision hereof. All representations and warranties
made herein, in the certificates, reports, notices, and other documents
delivered pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the other Loan Documents, and the making of the Loans.
SECTION 9.10 SEVERABILITY. Any provision of this Agreement or any other
Loan Document held to be illegal, invalid or unenforceable in any jurisdiction,
shall, as to such jurisdiction, be ineffective to the extent of such illegality,
invalidity or unenforceability without affecting the legality, validity or
enforceability of the remaining provisions hereof or thereof; and the
illegality, invalidity or unenforceability of a particular provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 9.11 CONFIDENTIALITY. The Lender agrees to take normal and
reasonable precautions to maintain the confidentiality of any information
designated in writing as confidential and provided to it by the Borrower or any
Subsidiary, except that such information may be disclosed (i) to any Related
Party of the Lender, including without limitation accountants, legal counsel and
other advisors, (ii) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process, (iii) to the extent requested by any
regulatory agency or authority, (iv) to the extent that such information becomes
publicly available other than as a result of a breach of this Section, or which
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becomes available to the Lender or any Related Party of the Lender on a
nonconfidential basis from a source other than the Borrower, (v) in connection
with the exercise of any remedy hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, and (ix)
subject to provisions substantially similar to this SECTION 9.11, to any actual
or prospective assignee or Participant, or (vi) with the consent of the
Borrower. Any Person required to maintain the confidentiality of any information
as provided for in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the degree of care to maintain
the confidentiality of such information as an ordinary Person would accord its
own confidential information.
SECTION 9.12 INTEREST RATE LIMITATION. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which may be treated as interest on
such Loan under applicable law (collectively, the "CHARGES"), shall exceed the
maximum lawful rate of interest (the "MAXIMUM RATE") which may be contracted
for, charged, taken, received or reserved by the Lender in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Rate to the date of repayment, shall
have been received by the Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER:
PANERA BREAD COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
LENDER:
SUNTRUST BANK
By:
-----------------------------------------
Title:
--------------------------------------
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SCHEDULE 4.14
SUBSIDIARIES
Panera, Inc. 100% Borrower
ABP Midwest Manufacturing Company, Inc. 100% Borrower
Pain Francais, Inc. 100% Borrower
Panera Bread Foundation, Inc. 100% Borrower
<PAGE>
SCHEDULE 7.1
OUTSTANDING INDEBTEDNESS
<PAGE>
SCHEDULE 7.2
EXISTING LIENS
<PAGE>
SCHEDULE 7.4
EXISTING INVESTMENTS
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$10,000,000 Nashville, Tennessee
December 26, 2000
FOR VALUE RECEIVED, the undersigned, PANERA BREAD COMPANY, a Delaware
corporation (the "BORROWER"), hereby promises to pay to SunTrust Bank (the
"LENDER") or its registered assigns at its principal office or any other office
that the Lender designates, on the Commitment Termination Date (as defined in
the Revolving Credit Agreement dated as of December ____, 2000 (as the same may
be amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), between the Borrower and the Lender, the lesser of the principal
sum of TEN MILLION and no/100 Dollars ($10,000,000.00) and the aggregate unpaid
principal amount of all Loans made by the Lender to the Borrower pursuant to the
Credit Agreement, in lawful money of the United States of America in immediately
available funds, and to pay interest from the date hereof on the principal
amount thereof from time to time outstanding, in like funds, at said office, at
the rate or rates per annum and payable on such dates as provided in the Credit
Agreement. In addition, should legal action or an attorney-at-law be utilized to
collect any amount due hereunder, the Borrower further promises to pay all costs
of collection, including the reasonable attorneys' fees of the Lender.
The Borrower promises to pay interest, on demand, on any overdue principal
and, to the extent permitted by law, overdue interest from their due dates at a
rate or rates provided in the Credit Agreement.
All borrowings evidenced by this Revolving Credit Note and all payments and
prepayments of the principal hereof and the date thereof shall be endorsed by
the holder hereof on the schedule attached hereto and made a part hereof or on a
continuation thereof which shall be attached hereto and made a part hereof, or
otherwise recorded by such holder in its internal records; PROVIDED, that the
failure of the holder hereof to make such a notation or any error in such
notation shall not affect the obligations of the Borrower to make the payments
of principal and interest in accordance with the terms of this Revolving Credit
Note and the Credit Agreement.
This Revolving Credit Note is issued in connection with, and is entitled to
the benefits of, the Credit Agreement which, among other things, contains
provisions for the acceleration of the maturity hereof upon the happening of
certain events, for prepayment of the principal hereof prior to the maturity
hereof and for the amendment or waiver of certain provisions of the Credit
Agreement, all upon the terms and conditions therein specified. THIS REVOLVING
CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF TENNESSEE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
PANERA BREAD COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
2
<PAGE>
LOANS AND PAYMENTS
<TABLE>
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UNPAID PRINCIPAL NAME OF PERSON
AMOUNT OF LOAN PAYMENTS OF BALANCE OF MAKING
DATE PRINCIPAL NOTE NOTATION
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
EXHIBIT B
SUBSIDIARY GUARANTY AGREEMENT
SUBSIDIARY GUARANTEE AGREEMENT dated as of December 26, 2000, among
[list each of the Subsidiaries] (each such subsidiary individually, a
"GUARANTOR" and collectively, the "GUARANTORS") of PANERA BREAD COMPANY, a
Delaware corporation (the "BORROWER"), and SUNTRUST BANK, a Georgia banking
corporation (the "LENDER")
Reference is made to the Revolving Credit Agreement dated as of December
26, 2000 (as amended, supplemented or otherwise modified from time to time,
the "CREDIT AGREEMENT"), between the Borrower and the Lender. Capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.
The Lender has agreed to make Loans to and issue Letters of Credit for the
account of the Borrower, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Each of the Guarantors is a
direct or indirect wholly-owned Subsidiary of the Borrower and acknowledges that
it will derive substantial benefit from the making of the Loans and the issuance
of the Letters of Credit by the Lender. The obligations of the Lender to make
Loans and to issue Letters of Credit are conditioned on, among other things, the
execution and delivery by the Guarantors of a Subsidiary Guarantee Agreement in
the form hereof. As consideration therefor and in order to induce the Lender to
make Loans and to issue Letters of Credit, the Guarantors are willing to execute
this Subsidiary Guarantee Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. GUARANTEE. Each Guarantor unconditionally guarantees, jointly
with the other Guarantors and severally, as a primary obligor and not merely as
a surety, (a) the due and punctual payment of (i) the principal of and premium,
if any, and interest (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement or disbursements, interest thereon and
obligations to provide cash collateral, and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Lender under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents; and (c) the due and punctual payment and performance of all
obligations of the Borrower, monetary or otherwise, under
<PAGE>
each Hedging Agreement entered into with Lender or an Affiliate of a Lender (all
the monetary and other obligations referred to in the preceding clauses (a)
through (c) being collectively called the "OBLIGATIONS"). Each Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and that it will remain bound upon
its guarantee notwithstanding any extension or renewal of any Obligation.
SECTION 2. OBLIGATIONS NOT WAIVED. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the Borrower of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the fullest
extent permitted by applicable law, the obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Lender to assert any claim or
demand or to enforce or exercise any right or remedy against the Borrower or any
other Guarantor under the provisions of the Credit Agreement, any other Loan
Document or otherwise or (b) any rescission, waiver, amendment or modification
of, or any release from any of the terms or provisions of, this Agreement, any
other Loan Document, any Guarantee or any other agreement, including with
respect to any other Guarantor under this Agreement.
SECTION 3. GUARANTEE OF PAYMENT. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Lender to any balance
of any deposit account or credit on the books of the Lender in favor of the
Borrower or any other person.
SECTION 4. NO DISCHARGE OR DIMINISHMENT OF GUARANTEE. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Lender to assert any claim or demand or
to enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Obligations, or by any other act or omission that may or might in any manner
or to the extent vary the risk of any Guarantor or that would otherwise operate
as a discharge of each Guarantor as a matter of law or equity (other than the
indefeasible payment in full in cash of all the Obligations).
SECTION 5. DEFENSES OF BORROWER WAIVED. To the fullest extent permitted by
applicable law, each Guarantor waives any defense based on or arising out of any
defense of the Borrower or the unenforceability of the Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of the
Borrower, other than the final and indefeasible payment in full in cash of the
Obligations. The Lender may, at its election, compromise or adjust any part of
the Obligations or make any other accommodation with the Borrower or any other
guarantor, without affecting or impairing in any way the liability
2
<PAGE>
of any Guarantor hereunder except to the extent the Obligations have been fully,
finally and indefeasibly paid in cash. Pursuant to applicable law, each
Guarantor waives any defense arising out of any such election even though such
election operates, pursuant to applicable law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other Guarantor.
SECTION 6. AGREEMENT TO PAY; SUBORDINATION. In furtherance of the foregoing
and not in limitation of any other right that the Lender has at law or in equity
against any Guarantor by virtue hereof, upon the failure of the Borrower or any
other Loan Party to pay any Obligation when and as the same shall become due,
whether at maturity, by acceleration, after notice of prepayment or otherwise,
each Guarantor hereby promises to and will forthwith pay, or cause to be paid,
to the Lender in cash the amount of such unpaid Obligations. Upon payment by any
Guarantor of any sums to the Lender, all rights of such Guarantor against the
Borrower arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in cash of all the Obligations. In addition, any indebtedness of the
Borrower now or hereafter held by any Guarantor is hereby subordinated in right
of payment to the prior payment in full in cash of the Obligations. If any
amount shall erroneously be paid to any Guarantor on account of (i) such
subrogation, contribution, reimbursement, indemnity or similar right or (ii) any
such indebtedness of the Borrower, such amount shall be held in trust for the
benefit of the Lender and shall forthwith be paid to the Lender to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of the Loan Documents.
SECTION 7. INFORMATION. Each Guarantor assumes all responsibility for being
and keeping itself informed of the Borrower's financial condition and assets,
and of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that such Guarantor
assumes and incurs hereunder, and agrees that the Lender will not have any duty
to advise any of the Guarantors of information known to it or any of them
regarding such circumstances or risks.
SECTION 8. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and
warrants as to itself that all representations and warranties relating to it (as
a Subsidiary of the Borrower) contained in the Credit Agreement are true and
correct.
SECTION 9. TERMINATION. The guarantees made hereunder (a) shall terminate
when all the Obligations have been paid in full in cash and the Lender has no
further commitment to lend under the Credit Agreement, the LC Exposure has been
reduced to zero and the Lender has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by Lender or any
Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor
or otherwise. In connection with the foregoing, the Lender shall execute and
deliver to such Guarantor or Guarantor's designee, at such Guarantor's expense,
any documents or instruments which such Guarantor shall reasonably request from
time to time to evidence such termination and release.
3
<PAGE>
SECTION 10. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Lender, and a counterpart hereof
shall have been executed on behalf of the Lender, and thereafter shall be
binding upon such Guarantor and the Lender and their respective successors and
assigns, and shall inure to the benefit of such Guarantor, the Lender, and its
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void). If all of the capital stock of a
Guarantor is sold, transferred or otherwise disposed of pursuant to a
transaction permitted by the Credit Agreement, such Guarantor shall be released
from its obligations under this Agreement without further action. This Agreement
shall be construed as a separate agreement with respect to each Guarantor and
may be amended, modified, supplemented, waived or released with respect to any
Guarantor without the approval of any other Guarantor and without affecting the
obligations of any other Guarantor hereunder.
SECTION 11. WAIVERS; AMENDMENT. (a) No failure or delay of the Lender of
any in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights of the Lender are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or consent to any departure by any Guarantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver and consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on any Guarantor in any case shall entitle such Guarantor to any other or
further notice in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors and the Lender.
SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE.
SECTION 13. NOTICES. All communications and notices hereunder shall be in
writing and given as provided in Section 9.1 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it at
its address set forth on Schedule I attached hereto.
SECTION 14. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants,
agreements representations and warranties made by the Guarantors herein and in
the certificates or
4
<PAGE>
other instruments prepared or delivered in connection with or pursuant to this
Agreement or the other Loan Document shall be considered to have been relied
upon by the Lender and shall survive the making by the Lender of the Loans and
the issuance of the Letters of Credit regardless of any investigation made by
any of it or on its behalf, and shall continue in full force and effect as long
as the principal of or any accrued interest on any Loan or any other fee or
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or the LC Exposure does not equal zero and as long as the Commitments
have not been terminated.
(b) In the event one or more of the provisions contained in this Agreement
or in any other Loan Document should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 15. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract (subject to Section 10), and shall become
effective as provided in Section 10. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 16. RULES OF INTERPRETATION. The rules of interpretation specified
in Section 1.3 of the Credit Agreement shall be applicable to this Agreement.
SECTION 17. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Guarantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Chancery Court of Davidson County,
Tennessee or Federal court of the United States of America sitting in Nashville,
Tennessee, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such Tennessee State
court or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Lender may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against any
Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have
5
<PAGE>
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or the other Loan Documents in any Tennessee State or
Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 13. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 18. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18.
SECTION 19. ADDITIONAL GUARANTORS. Pursuant to Section 5.10 of the Credit
Agreement, each Subsidiary Loan Party that was not in existence on the date of
the Credit Agreement is required to enter into this Agreement as a Guarantor
upon becoming Subsidiary Loan Party. Upon execution and delivery after the date
hereof by the Lender and such Subsidiary of an instrument in the form of Annex
1, such Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor herein. The execution and delivery
of any instrument adding an additional Guarantor as a party to this Agreement
shall not require the consent of any other Guarantor hereunder. The rights and
obligations of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
SECTION 20. RIGHT OF SETOFF. If an Event of Default shall have occurred and
be continuing, Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other Indebtedness at any time owing by such Lender to or for the credit or the
account of any Guarantor against any or all the obligations of such Guarantor
now or hereafter existing under this Agreement and the other Loan Documents held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement or any other Loan Document and although such
obligations may be unmatured. The rights of Lender under this Section 20 are in
addition to other rights and remedies (including other rights of setoff) which
such Lender may have.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
[LIST EACH OF THE SUBSIDIARIES]
By:
-----------------------------------------
Title:
--------------------------------------
SUNTRUST BANK
By:
-----------------------------------------
Title:
--------------------------------------
7
<PAGE>
ANNEX 1 TO THE
SUBSIDIARY GUARANTEE AGREEMENT
SUPPLEMENT NO. ____ dated as of ____________________, 20____, to the
Subsidiary Guarantee Agreement (the "GUARANTEE AGREEMENT") dated as of December
____, 2000 among each of the subsidiaries listed on Schedule I thereto (each
such Subsidiary individually, a "GUARANTOR" and collectively, the "GUARANTORS")
of PANERA BREAD COMPANY, a Delaware corporation (the "BORROWER"), and SUNTRUST
BANK, a Georgia banking corporation, as Lender (the "LENDER").
A. Reference is made to the Revolving Credit Agreement dated as of December
____, 2000 (as amended, supplemented or otherwise modified from time to time,
the "CREDIT AGREEMENT"), among the Borrower and the Lender. Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Credit Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lender to make Loans and to issue Letters of Credit. Pursuant to
Section 5.11 of the Credit Agreement, each Subsidiary Loan Party that was not in
existence or not a Subsidiary Loan Party on the date of the Credit Agreement is
required to enter into the Guarantee Agreement as a Guarantor upon becoming a
Subsidiary Loan Party. Section 19 of the Guarantee Agreement provides that
additional Subsidiaries of the Borrower may become Guarantors under the
Guarantee Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Borrower (the "NEW
GUARANTOR") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Guarantor under the Guarantee Agreement in
order to induce the Lender to make additional Loans and to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Lender and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 19 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a Guarantor in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated herein
by reference.
<PAGE>
SECTION 2. The New Guarantor represents and warrants to the Lender that
this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Lender shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Lender. Delivery of
an executed signature page to this Supplement by facsimile transmission shall be
as effective as delivery of a manually signed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 13 of the Guarantee Agreement. All communications
and notices hereunder to the New Guarantor shall be given to it at the address
set forth under its signature below, with a copy to the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Lender for its
out-of-pocket expenses in connection with this Supplement, including the fees,
disbursements and other charges of counsel for the Lender.
2
<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Lender have duly executed
this Supplement to the Guarantee Agreement as of the day and year first above
written.
--------------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
SUNTRUST BANK
By:
-----------------------------------------
Title:
--------------------------------------
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6-8
<SEQUENCE>3
<FILENAME>a2042851zex-10_68.txt
<DESCRIPTION>EXHIBIT 10.6.8
<TEXT>
<PAGE>
EXHIBIT 10.6.8
September 8, 2000
Kenneth Puzder
2871 Fox Meadow Lane
Saint Louis, Missouri 63010
Dear Ken:
Based on your prior experience, background presented and the excellent
impression that you have given us, Panera Bread / Saint Louis Bread Co., is
pleased to offer you the position of Vice President Controller, reporting
directly to the Chief Financial Officer and Senior Vice President, Bill Moreton.
We would like this position to be effective on or before Monday, October 2,
1999. This offer is contingent on background checks.
Your salary for this position will be payable at the annual rate of $115,000. In
addition, it is our understanding that your compensation will include the
following:
o Consideration for 20,000 stock options, which vest to you over five years.
The price per share depends on the value per share on the date of the next
Board of Director's meeting following your hire date.
o You will be included in our 2001 Incentive Program. This program rewards
you for the completion and quality of individually agreed upon objectives
as well as the achievement of your business unit's financial goals and
overall Company profitability. Your incentive target is 20% of your base
rate (we refer to it as a "double" when you meet agreed upon expectations)
with an upside potential of 40% ("homerun"-significantly exceeding
expectations). The incentive can be paid out in full or portion thereof,
including 0% ("strike"), according to financial performance and your
individual performance. If the Company strikes-out for the plan year, no
incentive will be paid out. The plan design can be changed without notice.
As a full-time Panera Bread employee, you will be eligible to participate in all
Panera Bread benefit plans. The waiting periods and premiums related to these
benefits and specific information about plan content will be explained during
the orientation process. Our benefit package is subject to ongoing review and
<PAGE>
modifications from time to time. You will receive an Employee Handbook at your
benefits orientation, which will explain our vacation and holiday schedule.
Panera Bread is a non-smoking work facility. If you have specific questions
about our benefits, please contact Courtney Higgins at extension 6318.
This offer is also contingent on your ability to provide employment eligibility
documentation as required by law. Please indicate your acceptance of this offer
by signing and returning one original of this letter no later than Monday,
September 25, 2000, after which time this offer will expire.
We believe that your background and experience will provide a solid foundation
for success with Panera Bread. We are extremely enthusiastic about our future
growth. If you have any questions about the enclosed information, please let me
know. Once again, Ken, we welcome you to Panera Bread and we look forward to
your participation, energy, and contributions.
Sincerely,
Karol McNutt Bill Moreton
Director Compensation and Benefits CFO and Senior Vice President
Ron Shaich
Chairman and CEO
I have read and accepted the provisions as outlined above.
- ----------------- -------------------------------
Date Ken Puzder
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6-9
<SEQUENCE>4
<FILENAME>a2042851zex-10_69.txt
<DESCRIPTION>EXHIBIT 10.6.9
<TEXT>
<PAGE>
EXHIBIT 10.6.9
August 29, 2000
Diane Davidson
11615 Serama
St. Louis, MO 63131
Dear Diane:
Based on your experience, background presented and the excellent impression that
you have given us, Panera Bread / Saint Louis Bread Co., is pleased to offer you
a temporary assignment of Interim General Counsel, reporting to the Chief
Financial Officer, Bill Moreton and Chief Executive Officer, Ron Shaich. We
would like this position to be effective on Tuesday, September 5, 2000. Your
earnings for this position will be payable weekly at the annual rate of $110,000
for which you will receive a 1099 at year-end.
This offer is also contingent upon background verification and on your ability
to provide employment eligibility documentation as required by law. Nothing in
this letter is intended or should be construed to execute a contract for a
definite term. Both you and the Company are free to terminate the employment
relationship at any time. Please indicate your acceptance of this offer by
signing and returning one original of this letter by Tuesday, September 5, 2000,
after which time this offer will expire.
We believe that your background and experience will be very beneficial to Panera
Bread / Saint Louis Bread Co. We are extremely enthusiastic about our future
growth. If you have any questions about the enclosed information, please let me
know. Once again, Diane, we welcome you to Panera Bread / Saint Louis Bread Co.
and we look forward to your participation, energy, and contributions.
Sincerely,
Karol McNutt Bill Moreton
Director of Compensation, Benefits Chief Financial Officer
I have read and accepted the provisions as outlined above.
- ----------------- -------------------------------
Date Diane Davidson
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6-10
<SEQUENCE>5
<FILENAME>a2042851zex-10_610.txt
<DESCRIPTION>EXHIBIT 10.6.10
<TEXT>
<PAGE>
EXHIBIT 10.6.10
September 7, 2000
Kathy Kuhlenbeck
16023 Forest Valley Drive
Ballwin, Missouri 63021
Dear Kathy:
Based on your prior experience, background presented and the excellent
impression that you have given us, Panera Bread / Saint Louis Bread Co., is
pleased to offer you the position of Vice President Financial Planning and
Analysis, reporting directly to the Chief Financial Officer and Senior Vice
President, Bill Moreton. We would like this position to be effective Monday,
October 9, 1999. This offer is contingent on background checks.
Your salary for this position will be payable at the annual rate of $120,000. In
addition, it is our understanding that your compensation will include the
following:
o Consideration for 20,000 stock options, which vest to you over five years.
The price per share depends on the value per share on the date of the next
Board of Director's meeting following your hire date.
o You will be included in our 2001 Incentive Program. This program rewards
you for the completion and quality of individually agreed upon objectives
as well as the achievement of your business unit's financial goals and
overall Company profitability. Your incentive target is 20% of your base
rate (we refer to it as a "double" when you meet agreed upon expectations)
with an upside potential of 40% ("homerun"-significantly exceeding
expectations). The incentive can be paid out in full or portion thereof,
including 0% ("strike"), according to financial performance and your
individual performance. If the Company strikes-out for the plan year, no
incentive will be paid out. The plan design can be changed without notice.
o You will receive a $6000 one-time bonus payable within your first 30-days
of employment.
<PAGE>
As a full-time Panera Bread employee, you will be eligible to participate in all
Panera Bread benefit plans. The waiting periods and premiums related to these
benefits and specific information about plan content will be explained during
the orientation process. Our benefit package is subject to ongoing review and
modifications from time to time. You will receive an Employee Handbook at your
benefits orientation, which will explain our vacation and holiday schedule.
Panera Bread is a non-smoking work facility. If you have specific questions
about our benefits, please contact Courtney Higgins at extension 6318.
This offer is also contingent on your ability to provide employment eligibility
documentation as required by law. Please indicate your acceptance of this offer
by signing and returning one original of this letter no later than Monday,
September 18, 2000, after which time this offer will expire.
We believe that your background and experience will provide a solid foundation
for success with Panera Bread. We are extremely enthusiastic about our future
growth. If you have any questions about the enclosed information, please let me
know. Once again, Kathy, we welcome you to Panera Bread and we look forward to
your participation, energy, and contributions.
Sincerely,
Karol McNutt Bill Moreton
Director Compensation and Benefits CFO and Senior Vice President
I have read and accepted the provisions as outlined above.
- ----------------- -------------------------------
Date Kathy Kuhlenbeck
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>6
<FILENAME>a2042851zex-10_12.txt
<DESCRIPTION>EXHIBIT 10.12
<TEXT>
<PAGE>
EXHIBIT 10.12
LEASE AND CONSTRUCTION EXHIBIT
THE ESQUIRE OFFICE BUILDING
I. BASIC LEASE PROVISIONS
A. BUILDING:
The Esquire Office Building
6710 Clayton Road
St. Louis, Missouri 63117
B. LANDLORD and ADDRESS:
Bachelor Foods, Inc., a Kentucky corporation
1956 NW 167th Avenue
Pembroke Pines, FL 33028
C. TENANT: Panera, Inc., a Delaware corporation
D. DATE OF LEASE: September 7, 2000.
E. PREMISES: A portion of an office building consisting of the entire
first and second floors and a portion of the basement floor including
storage space, all as shown on Exhibit E, located at 6710 Clayton
Road, St. Louis, Missouri. The Premises does not include the space
presently occupied by Outback Steakhouse or Landlord's office and
storage adjacent to the Outback Steakhouse on the ground floor.
F. ANNUAL BASE RENT: First year (based upon 365 days): $560,000 per year.
Years 2 - the end of the fourth year: $616,000 per year. The fifth
year through the end of the term: $621,000 per year.
G. LEASE TERM: Ten (10) years commencing on the Commencement Date.
H. COMMENCEMENT DATE: The earlier of i) November 1, 2000; or ii)
substantial completion of Tenant's improvements and Tenant's occupancy
of the Premises.
I. EXPIRATION DATE: Ten (10) full years after the Commencement Date.
J. EXHIBITS:
1. EXHIBIT A: Construction Exhibit.
2. EXHIBIT B: Construction Allowance.
3. EXHIBIT D: Parking Agreement Exhibit
4. EXHIBIT E: Floor Plans of the Premises
II. LEASE OF PREMISES:
For and in consideration of the rental and of the covenants and agreements
hereinafter set forth to be kept and performed by Tenant, Landlord hereby leases
to Tenant and Tenant hereby leases from Landlord the Premises which are
contained in THE ESQUIRE OFFICE BUILDING (hereinafter referred to as "the
Building") located at
1
<PAGE>
6710 Clayton Road, St. Louis, Missouri, for the term and upon the conditions
provided in this Lease, all as shown on Exhibit C.
Upon delivery of the Premises to Tenant (the Premises Delivery Date),
Tenant shall immediately commence the construction of Tenant's Work as described
in Exhibit A and shall diligently pursue such construction to completion.
"Premises Delivery Date" is the date on which Landlord delivers possession of
the Premises to Tenant and the Premises are available to Tenant to commence
Tenant's Work.
Tenant shall take the Premises in AS IS condition without any
representation or warranty. No agreement of Landlord to alter, remodel,
decorate, clean or improve the Premises or the Building and no representation
regarding the condition of the Premises or the Building have been made by or on
behalf of Landlord to Tenant, except as stated in this Lease. All provisions of
this Lease, except for the payment of Rent and all other charges, shall be
applicable commencing with the delivery of the Premises to Tenant.
Notwithstanding anything in the Lease to the contrary, Landlord, Outback
Steakhouse, or any subsequent tenant of the Outback Steakhouse space ("third
party") shall have access to portions of the unfinished basement space for
maintenance, repair and installation of its utilities and drainage systems.
Where access must be gained through Tenant's space, such third party shall give
reasonable prior notice to Tenant.
III. RELOCATION (INTENTIONALLY DELETED)
IV. TERM
The term of this Lease shall commence on the Commencement Date and shall
expire on the Expiration Date or at the expiration of the number of years
provided in Section 1.G. after the Commencement Date if no Expiration Date is
provided.
Tenant agrees that in the event of the inability of Landlord for any reason
to deliver possession of the Premises to Tenant as intended by the parties,
Landlord shall not be liable for any damages caused by the delay, nor shall the
delay affect the validity of this Lease or the obligations of Tenant hereunder.
V. RENT:
Commencing on the earlier of November 1, 2000 or such date that Tenant has
relocated its offices into the Premises the Tenant agrees to pay as rental for
the use and occupancy of the Premises, at the times and in the manner
hereinafter provided the following sums of money.
A. ANNUAL BASE RENT: The Annual Base Rent shall be payable in twelve (12)
equal monthly installments during each year, in advance, on the first day of
each calendar month without demand and without setoff or deduction. Should the
rental period commence on a day of the month other than the first day of such
month, then the rental for the first fractional month shall be pro-rated based
upon a thirty (30) day month.
B. RENT TAX: In addition to Annual Base Rent and other charges to be paid
by Tenant hereunder, Tenant shall reimburse to Landlord, within thirty (30) days
of receipt of a demand therefore, any and all taxes, charges, and/or surcharges
payable by Landlord (other than a tax on net income) whether or not now
customary or within the contemplation of the parties hereto; (a) upon, allocable
to, or measured by the area of the Premises or on the rent payable hereunder,
including without limitation any gross
2
<PAGE>
income tax or excise tax levied by the State, any political subdivision thereof,
City or Federal Government with respect to the receipt of such rent; or (b) upon
or with respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion
thereof; or (c) upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises.
Tenant also agrees to pay, before delinquency, any and all taxes levied or
assessed and which become payable during the term hereof upon or measured by the
value of Tenant's equipment, furniture, fixtures and personal property located
in the Premises. For the purpose of determining said amount, figures supplied by
the Assessor as to the amount so assessed shall be conclusive. Tenant shall
comply with the provisions of any law, ordinance or rule of the taxing
authorities which require Tenant to file a report of Tenant's property located
in the Premises.
C. INTENTIONALLY DELETED
D. REAL ESTATE TAXES AND OPERATING EXPENSES ADJUSTMENT
1. DEFINITIONS:
For the purposes of this Section V.D., the following words and phrases
shall have the following meanings:
a. Intentionally deleted.
b. Intentionally deleted.
c. "Operating Expenses" shall mean all costs, expenses and
disbursements of every kind and nature which Landlord shall pay or become
obligated to pay in connection with the management, operation, maintenance,
cleaning, trash removal, insuring, heating, cooling, replacement and repair of
the Building and the land, and of the personal property, fixtures, machinery,
equipment, systems and apparatus located in or used in connection with the
Building or the land, including, but not limited to, the following:
(i) Wages, salaries and related expenses and benefits of all
on-site and off-site employees engaged directly in the operation, management,
maintenance, engineering and security of the Building.
(ii) Supplies, materials and rental of equipment used in the
operation, management and maintenance of the Building.
(iii) Maintenance and repair of all heating, air conditioning
and ventilation equipment.
(iv) All maintenance, janitorial and service agreements for the
Building and the equipment therein, including, without limitation, trash
removal, and elevator maintenance.
(v) Reasonable management fees and expenses.
(vi) Legal expenses and consultant's fees; provided, however,
that legal expenses shall not include the cost of negotiating leases, collecting
rents, evicting
3
<PAGE>
tenants nor shall it include costs incurred in legal proceedings with or against
any tenant or to enforce the provisions of any lease.
(vii) All insurance premiums and costs, including reasonable
insurance deductibles and including but not limited to, the premiums and cost of
fire, casualty and liability coverage and rental abatement and earthquake
insurance (if Landlord elects to provide such coverage) applicable to the
Building, Landlord's personal property used in connection therewith, and
Landlord's employees.
(viii) Repairs, replacements and general maintenance (excluding
repairs and replacements paid by proceeds of insurance).
(ix) All maintenance costs relating to public and service areas
of the Building, including (but without limitation) sidewalks, landscaping,
service areas, mechanical rooms and Building exteriors.
(x) Amortization (together with reasonable financing charges) of
capital improvement made to the Building subsequent to the initial construction
of the building which will improve the operating efficiency of the Building or
which may be required to comply with laws, ordinances, rules or regulations
promulgated, adopted or enforced after completion of the initial construction of
the Building and improvements of the Premises pursuant to Exhibit A.
(xi) Costs paid for parking area maintenance, repairs or
restoration or costs for these items paid pursuant to any reciprocal easement or
similar agreement.
(xii) All maintenance and repair costs pursuant to Article XII.
MAINTENANCE.
Operating Expenses shall not include the following: costs of
improvements to the Premises and the premises of other tenants of the Building;
charges for depreciation of the original cost of the Building; interest and
principal payments on mortgages; ground rental payments; and salaries and other
compensation of executive officers of the Manager senior to the individual
building manager. Operating Expenses also exclude the following:
(a) The cost (or the depreciation of the cost) of the original
construction of the Building or any additions or expansions to the Common Areas
or the Building (permitted capital expenses shall be capitalized and depreciated
pursuant to generally accepted accounting principles with an imputed interest
rate of 2% over the prime rate); (b) the cost of correcting any defects in the
original construction of the Building; (c) any reserves for future expenditures
not yet incurred; (d) ground lease rental; (e) costs incurred by Landlord for
repair or restoration to the extent that Landlord is reimbursed by insurance or
condemnation proceeds or that the same is covered by warranty; (f) costs,
including permit, license and inspection costs incurred with respect to the
installation of improvements made for tenants or other occupants or incurred in
renovating or otherwise improving, decorating, painting or redecorating vacant
space for tenants or other occupants; (g) attorneys' fees, leasing commissions
and other costs and expenses incurred in connection with negotiations or
disputes with present or prospective tenants or other occupants of the Building;
(h) expenses in connection with services or benefits which are not offered to
Tenant; (i) costs incurred by Landlord due to the negligence or misconduct of
Landlord or its agents, contractors, licensees and employees or the violation by
Landlord or any tenants or other occupants of the terms and conditions of
another lease of space or other agreements including this Lease; (j) overhead
and profit increment paid to landlord or to subsidiaries or affiliates of
Landlord
4
<PAGE>
for services to the extent the same exceeds the costs of such services rendered
by other first-class unaffiliated third parties on a competitive basis; (k)
interest, principal points and fees on debts or amortization on any mortgage or
mortgages or any other debt instrument encumbering all or any portion of the
Building or the real property upon which the Building is located; (1) any
compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord; (m) items and services for which Tenant or any
other tenant reimburses Landlord or which Landlord provides exclusively to one
or more tenants (other than Tenant) but not all tenants without reimbursement;
(n) advertising and promotional expenditures in connection with leasing the
Building, and costs of the installation of signs identifying the owner and/or
manager of the Building; (o) electric power costs for which any tenant or
occupant directly contracts with the local public service company; (p) any costs
relating to hazardous materials, asbestos and the like not resulting from
actions of Tenant and which are not incidental to the operation of a typical
suburban office building; (q) charitable contributions; (r) off-site traffic
lights; (t) any charge for Landlord's income taxes, excess profit taxes, or
franchise taxes; (v) the cost of any electric current or other utility furnished
to any leaseable area of the Building; and (w) there shall be no duplication in
charges to Tenant by reason of the provision in this Lease setting forth
Tenant's obligation to reimburse Landlord for common area expenses and any other
provision herein.
d. Intentionally deleted
e. "Taxes" shall mean all federal, state and local governmental taxes,
assessments and charges (including transit, transit district, or business
district taxes, charges, surcharges, or assessments) of every kind or nature,
whether general, special, ordinary or extraordinary, which Landlord shall pay or
become obligated to pay because of or in connection with the ownership, leasing,
management, control or operation of the Building and the Land. For purposes
hereof, Taxes for any year shall be Taxes which are due for payment or paid in
that year, and shall include any interest on assessments payable in
installments. Taxes shall not include any capital stock, inheritance, general
income, gift or estate taxes, except that if a change occurs in the method of
taxation resulting in whole or in part in the substitution of any such taxes, or
any other assessment, for any Taxes as above defined, such substituted taxes or
assessments shall be included in the Taxes.
f. Intentionally deleted
g. Intentionally Deleted.
h. Intentionally Deleted.
i. Intentionally deleted
2. ADJUSTMENTS TO ANNUAL BASE RENT
Commencing November 1, 2001 and each year thereafter(including any and all
option periods), Annual Base Rent shall be increased (but not decreased)by an
amount equal to Tenant's pro rata share of the difference between the sum of the
Operating and Tax Expenses for the year in question and the sum of the Operating
and Tax Expenses for the "Base Year." The "Base Year" shall be the fiscal year
November 1, 2000 through October 31, 2001. Base Year Taxes shall be based upon
the tax assessment for the calendar year 2000. For services and other Operating
Expense items which are provide to Tenant exclusively (including, but not
limited to, janitorial service and HVAC maintenance repair), Tenant's pro rata
share shall be 100%. For
5
<PAGE>
services and Operating Expense items which are provided
for the benefit of other tenants in the Building, Tenant's pro rata share shall
be fairly and equitably determined which determination may be based upon square
footage of space occupied by tenants in the Building; provided, however, it will
be 75% so long as Outback Steakhouse is occupying the remainder of the Building
other than a small space next to the Outback space occupied by the Landlord.
3. PROJECTIONS
For purposes of calculating Taxes and Operating Expenses for any year,
Landlord may make reasonable estimates, forecasts or projections (collectively,
the "Projections") of Taxes and Operating Expenses for such year. Landlord shall
deliver to Tenant a written statement (i) setting forth the Projections of
Operating Expenses and Taxes for the year in question and (ii) providing a
calculation of the increase in installments of Annual Base Rent to become
effective for said year; provided, however, that the failure of Landlord to
provide any such statement shall not relieve Tenant from its obligation to
continue to pay Adjusted Annual Base Rent at the rate then in effect under this
Lease, and if and when Tenant receives such statement from Landlord, Tenant
shall pay any increases in Annual Base Rent reflected thereby effective
retroactively to the beginning of the year.
4. READJUSTMENTS
Within 120 days following the end of each year, or at such earlier time as
Landlord shall be able to determine the actual amounts of Operating Expenses and
Taxes for the year last ended, Landlord shall notify Tenant in writing of such
actual amounts and copies of appropriate back up such as the paid tax bill and a
reasonably detailed breakdown of operating expenses. If such actual amounts
exceed the Projections for such year, then Tenant shall, within 30 days after
the date of such written notice from Landlord, pay to Landlord an amount equal
to the excess of the Adjusted Annual Base Rent payable for the year last ended
based upon actual Operating Expenses and Taxes for such year over the total
Adjusted Annual Base Rent paid by Tenant during such year. The obligation to
make such payments shall survive the expiration or earlier termination of the
Term. If the total Adjusted Annual Base Rent paid by Tenant during such year
exceeds the amount payable for such year based upon actual Operating Expenses
and Taxes for such year, then Landlord shall credit such excess to installments
of Adjusted Annual Base Rent or payable after the date of Landlord's notice
until such excess has been exhausted, or if this Lease shall expire prior to
full application of such excess, Landlord shall pay to Tenant the balance
thereof not previously applied against Rent. No interest or penalties shall
accrue on any amounts which Landlord is obligated to credit or pay to Tenant by
reason of this Section.
5. BOOKS AND RECORDS
Landlord shall maintain books and records showing Operating Expenses and
Taxes in accordance with sound accounting and management practices, which
records shall be available to Tenant for inspection at the offices of Landlord
upon reasonable prior notice.
E. Tenant shall pay all sums of money required to be paid pursuant to the
terms of this Article V and all other sums of money or charges required to be
paid by Tenant under this Lease without set off or deduction. The term "Rent" in
this Lease shall be defined to include the Base Annual Rent and all other
charges payable by Tenant to Landlord under this Lease. If such amounts or
charges are not paid at the time
6
<PAGE>
provided in this Lease, they shall nevertheless be collectible with the next
installment of Base Annual Rent and Landlord shall have all of the rights
available to it at law and equity for the collection of rent to collect such
overdue amounts. Landlord's obligations under this Lease are deemed to be
independent covenants and not condition precedent to Tenant's obligations under
this Lease, including Tenant's obligation to pay Annual Base Rent and all other
charges.
VI. SECURITY DEPOSIT: INTENTIONALLY DELETED
VII. UTILITIES AND SERVICES
During the term of this Lease, the following utilities shall be furnished
to or for the benefit of the Premises.
A. ELECTRIC AND GAS: Tenant shall, at its own cost and expense, contract
directly with the public utility for the electrical and gas service and shall
pay for all electricity and gas consumed in the Premises.
B. HEATING AND AIR CONDITIONING: Landlord shall maintain and repair the
heating and air conditioning equipment in the Premises as may be required in
Landlord's reasonable judgement. The costs in connection therewith shall be an
Operating Expense pursuant to Section V.D. The costs of utilities consumed in
the operation of the HVAC system will be paid by Tenant directly to the public
utility. Whenever heat generating machines, lighting, equipment, etc. are used
in the Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises or provide additional conditioned air to the
Premises, and the cost (including the cost of installation, operation and
maintenance) shall be paid by Tenant to Landlord upon demand.
C. WATER AND TOILET SERVICE: Landlord shall provide drinking water and
toilet facilities in such locations in the Building as Landlord shall determine
for use by Tenant, its employees and customers. Tenant shall contract directly
with the water and sewer utility companies and pay all water and sewer bills. If
the water and/or sewer account cannot be transferred into Tenant's name,
Landlord will pay the water and/or sewer charges for the Premises and Tenant
will reimburse Landlord for these charges.
D. JANITORIAL: Landlord shall provide janitorial services to the Premises
substantially similar to those provided in other office buildings charging
comparable aggregate rent in St. Louis. Tenant shall provide its own interior
and exterior window washing.
E. ELEVATOR SERVICE: Landlord shall provide passenger elevator service in
such manner as Landlord shall reasonably determine. Tenant shall comply with all
reasonable rules and regulations for elevator service.
F. PHONE SERVICE: Telephone service and its costs shall be the
responsibility of Tenant.
G. SECURITY: Tenant shall be responsible for providing at its expense any
and all security services and devices which it requires or desires.
H. PARKING: Landlord acknowledges that the Tenant's right to the use of
adequate parking for Tenant's use under the Richmond Heights Zoning Code is a
7
<PAGE>
material inducement to Tenant to enter into this Lease and Landlord grants to
Tenant the non-exclusive right to the use of 136 parking spaces during the term
of its Lease or any extension thereof. Tenant's parking shall be limited to the
non-exclusive use of the 136 parking spaces identified on Exhibit C-3 to the
Interim Parking and Easement Agreement (the "IPEA") recorded in Book 9066 at
page 1126 of the St. Louis county Records (a copy of which Exhibit is attached
hereto as Exhibit D). Landlord represents that, other than Outback Steakhouse or
another tenant utilizing the portion of the Building presently used by Outback
Steakhouse, no other Disproportionate User (as defined in the IPEA) shall be
permitted in the Building. In addition, Landlord shall not lease any space in
the Building to a movie theater, bowling alley, pool hall, skating rink, adult
entertainment facility, health club, fitness center, video or other game room.
In the event Landlord breaches the representations or covenants herein contained
or if the parking described above is not available to Tenant, Tenant may
terminate this Lease; provided, however, in the event Landlord is able to secure
substitute parking in the immediate vicinity of the Premises or in a location
reasonably acceptable to Tenant of not less than the spaces required by the
Richmond Heights Missouri Zoning Code within fourteen (14) days of notice from
Tenant, Tenant shall not have the termination right contained herein.
I. NON-LIABILITY: Landlord shall not be liable for, and Tenant shall not be
entitled to, any damages or abatement or reduction of rent by reason of
Landlord's failure to furnish any utilities or services when such failure is
caused by accidents, breakage, repairs, strikes, lockouts or other labor
disturbances or labor disputes of any character, or by any other cause similar
or dissimilar, beyond the reasonable control of Landlord, nor shall such
interruption be construed as a constructive or other eviction of Tenant.
Landlord shall not be liable under any circumstances for lost profits or other
consequential damages. through or in connection with or incidental to failure to
furnish any utilities and/or services, or due to other acts or omissions of
Landlord, its employees, agents or contractors. Tenant's sole remedy shall be an
abatement of rent and other rental charges and for direct damages.
Tenant has the right to obtain business interruption insurance or such
other policies as may be necessary to protect Tenant against such risks. All
policies shall contain a waiver of subrogation endorsement whereby the insurance
companies agree to waive their claims against Landlord, its affiliates,
subsidiaries, employees, officers and directors.
J. ADDITIONAL SERVICE: Landlord shall in no event be obligated to furnish
any services or utilities, other than those specified above. If Landlord elects
to furnish services or utilities requested by Tenant in addition to those
specified above, Tenant shall pay Landlord's then prevailing rates for such
services and utilities, within 10 days after receipt of Landlord's invoices
thereof. If Tenant shall fail to make any such payment, Landlord may, without
notice to Tenant and in addition to Landlord's other remedies under this Lease,
discontinue any or all of the additional services. No discontinuance of any
service pursuant to this section shall result in any liability of Landlord to
Tenant or be deemed to be an eviction or a disturbance of Tenant's use of the
Premises.
8
<PAGE>
IX. POSSESSION, USE, AND ENJOYMENT
A. POSITIVE OBLIGATIONS:
1. The Premises shall be used and occupied by Tenant for general office
purposes only and for no other purpose without the prior written consent of
Landlord. The Premises shall not be used for intense purposes which require high
numbers of personnel for available space such as a call center.
The Outback Steakhouse lease requires Tenant to agree to the following use
restrictions:
Tenant agrees not to use, or permit the use, of the Premises or any portion
thereof, for a full service restaurant, or any facility owning an on-premises
wine, beer or liquor license.
Tenant agrees not to use, or permit the use, of the Premises or any portion
thereof, for the operation of a movie theater, bowling alley, pool hall, skating
rink, adult entertainment facility, health club, fitness center, video or other
game room, video store or theater.
2. Tenant shall at its sole cost and expense promptly comply with all laws,
statutes, ordinances and governmental rules, regulations or requirements now in
force or which may hereafter be in force and with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted relating
to or affecting the condition, use or occupancy of the Premises, excluding
structural changes not relating to or required by the condition, use or
occupancy of the Premises, or otherwise not related to or otherwise required by
Tenant's improvements or acts.
B. NEGATIVE OBLIGATIONS:
1. Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate or affect any fire or other insurance upon the Building or any of
its contents (unless Landlord approves such acts or use and Tenant agrees to pay
any increased premium as a result of such acts or use), or cause a cancellation
of any insurance policy covering said Building or any part thereof or any of its
contents, nor shall Tenant sell or permit to be kept, used or sold in or about
said Premises any articles which may be prohibited by a standard form policy of
fire insurance.
2. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or injure or annoy them or use or allow the
Premises to be used for any unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in or about the Premises. Tenant shall
not commit or suffer to be committed any waste in or upon the Premises.
3. Tenant shall not use the Premises or permit anything to be done in or
about the Premises which will in any way conflict with any applicable statute,
ordinance or governmental rule or regulation or requirement of duly constituted
public authorities now in force or which may hereafter be enacted or
promulgated.
4. Tenant shall not do anything in the Premises or Building which would
tend to injure the reputation of the Building.
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5. Tenant shall not install anything in the Premises which the floor cannot
properly support.
6. Tenant shall permit no pickets or other labor disturbance in the
Building or which block access to the Building.
7. Tenant shall not store, use, handle, transport or dispose of any
hazardous substances (including any petroleum product) of any type or nature, as
may be defined by any governmental or agencies' law, order, regulation or
standard except those which are reasonably required and are customarily used in
offices. Tenant covenants all such substances shall be handled, used,
transported, processed and disposed of in accordance with all applicable
federal, state and local environmental laws, regulations, standards and
ordinances. Tenant shall be solely responsible for obtaining and complying with
all permits required for handling, use, transportation, processing and disposal
of such substances and shall hold all such permits in Tenant's own name. Tenant
shall indemnify, defend and hold Landlord harmless from any and all claims,
costs, expenses and causes of action, liabilities, judgments and orders,
including attorneys' fees, arising out of Tenant's actual or alleged violation
of any such law, standard or permit and shall remove all hazardous substances
from the Premises at the end of the term and leave the Premises in clean
condition, without any contamination from hazardous substances whatsoever.
Tenant's obligations under this indemnity shall survive the termination of the
Lease. This provision shall be strictly construed against Tenant.
8. Tenant shall not, without Landlord's prior consent, install in the
Premises any machinery which is attached to or becomes part of the Premises
including, but not limited to, HVAC equipment, industrial coolers. or vaults.
Landlord's consent shall not be unreasonably withheld.
X. COVENANT OR QUIET ENJOYMENT
So long as Tenant shall not be in default under this Lease, Tenant shall be
entitled to peaceful and quiet enjoyment of the Premises, subject to the terms
of this Lease.
XI. ASSIGNMENT AND SUBLETTING
A. Without the prior written consent of Landlord, not to be unreasonably
withheld, Tenant shall not assign, mortgage, pledge, hypothecate or otherwise
transfer or permit the transfer of this Lease or the interest of Tenant in this
Lease, in whole or in part, by operation of law or otherwise. Tenant shall not
sublet the Premises or any portion thereof without Landlord's prior written
consent which may be withheld in Landlord's sole discretion. If Tenant desires
to enter into any assignment of the Lease or sublease of the Premises, Tenant
shall deliver written notice thereof to Landlord, together with a copy of the
proposed assignment or sublease agreement at least 60 days prior to the
commencement date of the term of the proposed assignment or sublease. In making
its determination of whether to consent to any proposed assignment Landlord may
take into consideration the business reputation and credit worthiness of the
proposed assignee, the intended use of the Premises by the proposed assignee,
the estimated pedestrian and vehicular traffic in the Premises and to the
Building which would be generated by the proposed assignee, the hours of
operation of the proposed assignee, the density of the employees (e.g. call
centers) of the proposed assignee, and any other factors which Landlord shall
deem relevant. Any approved assignment or sublease shall be expressly subject to
the terms and conditions of this Lease, and Tenant shall pay Landlord any
consideration received by the Tenant from the assignee or subtenant for the
entering into of the assignment or sublease and in addition thereto on the first
day of each month during the term of the assignment or sublease, the excess of
all rent and other consideration due from the assignee
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or subtenant for such month over the Annual Base Rent due under this Lease for
said month (proportionately adjusted in the event of a sublease of a portion of
the Premises).
B. In the event of any sublease or assignment, Tenant shall not be released
or discharged from any liability, whether past, present or future, under this
Lease, including any renewal term of this Lease.
C. In the event Landlord shall consent to a sublease or assignment, Tenant
shall pay Landlord's reasonable attorney's fees and other reasonable expenses
incurred in connection with giving such consent, not to exceed $1,500.00.
D. If Tenant or the Guarantor of this Lease, if any, is a corporation the
stock of which is not traded on any national securities exchange or nationally
in the National Association of Securities Dealers over the counter market, then
the following shall constitute an assignment of this Lease for all purposes of
this Section: (i) the merger, consolidation or reorganization of such
corporation; and/or (ii) the sale, issuance, or transfer, cumulatively or in one
transaction, of any voting stock, by Tenant or the Guarantor of this Leases or
the stockholders of record of either as of the date of this Lease, which results
in a change in the voting control of Tenant or the Guarantor of this Lease,
except any such transfer by inheritance or testamentary disposition. If Tenant
or the Guarantor of this Lease, if any, is a joint venture, partnership, limited
liability company, or other association, then for all purposes of this Section,
the sale, issuance or transfer, cumulatively or in one transaction, of either
voting control or of a twenty-five percent (25%) interest, or the termination of
any joint venture, partnership, limited liability company or other association,
shall constitute an assignment, except any such transfer by inheritance or
testamentary disposition.
E. Notwithstanding anything to the contrary contained elsewhere in this
Article XI, the Tenant may, without Landlord's prior consent:
(i) Assign or sublease this Lease, or sublet all or any part of the
Premises to its parent corporation or to any affiliate of Tenant. As used in
this subsection: the term "parent" means any entity that controls Tenant; and
the term "affiliate" means any entity which is directly or indirectly controlled
by or controlling any parent or subsidiary of Tenant. The terms "control" and
"controlled by" and "controlling" shall have the meanings given those terms
under the federal securities laws. Such assignee or sublessee shall remain the
parent or affiliate of Tenant, as the case may be, throughout the remainder of
the Lease term.
(ii) Assign or sublease this Lease to any corporation into which or with
which Tenant or its parent may merge or to any corporation or other business
entity or to any company which may result from a reorganization or consolidation
by or with Tenant, or to which Tenant shall sell all or substantially all of its
assets r all or substantially all of its corporate shares, provided that such
resulting corporation or assignee or sublease corporation in the case of a sale
to a third party is a reputable retailer with experience in operating
restaurants and has a net worth equal to or greater than Tenant's net worth as
of the date of this Lease and the date of the assignment or subletting.
It shall be a condition of any assignment, other transfer, or subletting
permitted under this Article XI that the assignee, transferee, or tenant agree
directly with the Landlord, in form reasonably satisfactory to the Landlord, to
be bound by all Tenant obligations hereunder, including, without limitation, the
obligation to pay Rental and other amounts provided for
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under this Lease and the covenant against further assignment or other transfer
or subletting. As an additional condition, the transferring Tenant shall remain
jointly and severally liable for all Tenant obligations hereunder, including,
without limitation, the obligation to pay the Rental and other amounts provided
for under this Lease and the covenant against further assignment or other
transfer or subletting. Tenant shall give Landlord thirty (30) days prior
written notice of any such assignment or sublease, which notice contains all
information and documentation Landlord requires to satisfy itself as to the
above three (3) conditions; and shall give Landlord a copy of the executed
sublease or assignment agreement within fifteen (15) days after the execution
thereof.
(F) Any rents received from any permitted assignee or sublessee in
excess of the rents reserved hereunder shall be paid by Tenant to Landlord as
consideration for the right to assign or sublet. Such rents shall not include
consideration reasonably attributable to goodwill, inventory, furniture or
equipment or the Unamortized Cost of Tenant's Work (after deducting the amount
of the Construction Allowance).
(G) Anything herein to the contrary notwithstanding, Landlord's consent
shall not be required for any public offering of stock in Tenant or its
Guarantor through a nationally recognized exchange.
XII. MAINTENANCE
A. Landlord's Obligations: Landlord shall maintain the entrance, exterior,
roof, structural elements, parking lot, common areas outside the building
structure, landscaped areas, the interior of the Premises which Landlord
constructed including ceilings, light fixtures, walls, floor slab, all doors,
exterior windows, all plumbing pipes, electrical wiring, heating, ventilating
and air conditioning equipment, and switches, in a first class condition in such
manner as Landlord in its sole discretion shall determine. All of Landlord's
maintenance and repair expenses shall be treated as Operating Expenses under
Section V.D. of this Lease. Tenant shall reimburse Landlord for the cost of
performing any of said maintenance or repairs caused by the negligence or
improper acts or omissions of Tenant, its employees, agents, subtenants,
contractors or invitees.
B. Tenant's Obligations: Notwithstanding anything in subsection A. above,
Tenant at Tenant's sole cost and expense shall maintain, repair and replace as
may be necessary all portions of the Premises constructed by Tenant as described
in Exhibit A of this Lease, including without limitation the floor and wall
coverings, interior glass, painting, replacement of bulbs and ballasts, and
keeping plumbing lines clear to the point of connection with the common sewer
main. Tenant expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Tenant the right to make repairs at
Landlord's expense or to terminate this Lease because of Landlord's failure to
keep the Premises in good order, condition and repair.
C. Compliance with Law. Landlord and Tenant shall each do all acts required
to comply with all applicable laws, ordinances, regulations and rules of any
public authority relating to their respective maintenance obligations as set
forth herein.
D. Operating Expense Limitations.
(1) The building, of which the Premises are a part, will be managed by a
management company selected by Landlord and Operating Expense services will be
performed by third parties selected by Landlord. Landlord estimates that for the
Base Year (November 2000 - October 31, 2001), Operating Expenses will be in a
range of $3.50 to $5.50 per square foot (exclusive of real estate taxes,
utilities or insurance).
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(2) If, in Tenant's reasonable business judgment, Operating
Expenses increase excessively during a Lease Year, Tenant will notify Landlord,
describing in detail the increase or increases, and Landlord will work with the
Tenant to resolve Tenant's concern which will include, but not be limited to,
securing two competitive bids for the service or services which are in question.
(3) During any Lease Year if, in Tenant's reasonable judgment, Landlord
fails to provide the services which it is required to provide under the terms of
the Lease, Tenant shall notify Landlord in writing, describing in detail the
problem with the service or services and Landlord shall have thirty (30) days
thereafter in which to remedy the problem.
XIII. INITIAL CONSTRUCTION AND ALTERATIONS
Tenant shall not, without the prior written consent of Landlord, make or
cause to be made any alterations, improvements, additions or installations
("ALTERATIONS") in or to the Premises. If any proposed ALTERATION is of such a
nature that the cost of its removal and/or restoring the Premises for future use
or releasing would be material, Landlord may withhold its consent to such
ALTERATION unless Tenant agrees to remove such ALTERATION and restore the
physical integrity of the Premises at the end of the term. If Landlord so
consents, before commencement of any such work or delivery of any materials into
the Premises or the Building, Tenant shall furnish to Landlord for approval
architectural plans and specifications, names and addresses of all contractors,
copies of all contracts, necessary permits and licenses, certificates of
insurance against any and all claims, costs, expenses, damages and liabilities
which may arise in connection with Tenant's work in the Premises, all in such
form and amount as may be satisfactory to Landlord. Tenant agrees to indemnify,
defend and hold Landlord, its mortgagees, the managing agent and their
respective agents and employees forever harmless against all injuries, damages,
claims and liabilities of every kind, nature and description which may arise out
of or in any way be connected with such work. All such work shall be done only
by contractors or mechanics approved by Landlord (which approval shall not be
unreasonably withheld). Tenant shall pay the cost of all such work and the cost
of decorating the Premises and the Building occasioned thereby. Upon completion
of such work, Tenant shall furnish Landlord with contractors', subcontractors',
and material suppliers' affidavits and full and final waivers of lien covering
all labor and materials expended and used in connection therewith. All such work
shall be in accordance with all applicable legal, governmental and
quasi-governmental requirements, ordinances and rules (including the Board of
Fire Underwriters), and all requirements of applicable insurance companies. All
such work shall be done in a good and workmanlike manner and with the use of
good grades of materials. Tenant shall permit Landlord, if Landlord so desires,
to inspect construction in connection with such work; provided, however, that
such inspection or right to inspect by Landlord or approval of plans by Landlord
shall not constitute any warranty by Landlord to Tenant or third parties of the
adequacy of the design, workmanship or quality of such work or materials for
Tenant's intended use or impose any liability upon Landlord in connection with
the performance of such work. All alterations, improvements, additions
and permanent installations to or on the Premises (other than safes and vaults
which shall remain the property of the Tenant and shall be removed from the
Premises at the end of the term) shall become part of the Premises at the time
of their installation and shall remain in the Premises at the expiration or
termination of this Lease, or termination of Tenant's right of possession of the
Premises, without compensation or credit to Tenant.
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XIV. LIENS
Tenant shall not permit any lien or claim for lien of any mechanic, laborer
or supplier or any other lien to be filed against the Building, the land upon
which the Building is situated, the Premises, or any part thereof arising out of
work performed, or alleged to have been performed by, or at the direction of, or
on behalf of Tenant. If any such lien or claim for lien is filed, Tenant
immediately either shall have such lien or claim for lien released of record or
shall deliver to Landlord a bond in form, content, amount, and issued by surety
satisfactory to Landlord indemnifying Landlord, its mortgagees and others
designated by Landlord against all costs and liabilities resulting from such
lien or claim for lien and the foreclosure or attempted foreclosure thereof. If
Tenant fails to have such lien or claim for lien so released or to deliver such
bond to Landlord, Landlord, without investigating the validity of such lien, may
pay or discharge the same and Tenant shall reimburse Landlord upon demand for
the amount so paid by Landlord, including Landlord's reasonable expenses and
reasonable attorney's fees.
XV. INDEMNITY AND WAIVER
After delivery of the Premises and continuing during the term of this
Lease, Tenant agrees to defend, indemnify and hold harmless Landlord, any
mortgagee, ground lessor, Landlord's managing agent, Landlord's broker and their
respective agents and employees, against any and all injuries, damages, claims,
demands, costs and expenses of every kind and nature (including attorneys'
fees), including those arising from any injury or damage to any person, property
or business: (a) sustained in or about the Premises, (b) resulting from the
negligence of Tenant, its employees, agents, servants, invitees, licensees or
subtenants, or (c) resulting from the failure of Tenant to perform its
obligations under this Lease; provided, however, Tenant's obligations under this
section shall not apply to injury or damage resulting from the sole negligence
of Landlord, any mortgagee or ground lessor, Landlord's managing agent,
Landlord's broker or their respective agents and employees, or the failure of
Landlord to perform its obligations hereunder. If any such proceeding is brought
against Landlord or the parties listed above or their respective agents or
employees, Tenant covenants to defend such proceeding at its sole cost by legal
counsel reasonably satisfactory to Landlord.
Subject to the above paragraph, Landlord agrees to defend, indemnify and
hold harmless Tenant and its respective agents and employees, against any and
all injuries, damages, claims, demands, costs and expenses of every kind and
nature (including attorneys' fees), arising from any injury or damage to any
person, property or business resulting from the negligence of Landlord, its
employees, agents, or contractors, or resulting from the failure of Landlord to
perform its obligations under this Lease. If any such proceeding is brought
against Tenant or its respective agents or employees, Landlord covenants to
defend such proceeding at its sole cost by legal counsel reasonably satisfactory
to Tenant.
Unless caused by the sole negligence of Landlord, any mortgagee or ground
lessor, Landlord's managing agent, Landlord's broker or their respective agents
and employees, or the failure of Landlord to perform its obligations hereunder,
Landlord shall not be liable or responsible for any personal property of Tenant,
or of employees, agents, customers or other invitees of Tenant, wherever located
in or about the Premises of the Building, and shall not be liable for any damage
to or loss of such personal property arising from any act or neglect of any
other tenants of the Building or their employees, customers, agents, or other
invitees, or any other persons, or from the bursting, running, over-flowing, or
leaking of any tank, sewer, water pipe, stream pipe or boiler, or from heating
or plumbing fixtures or from electric wires or from gas or odors in
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or about the Premises or in or about the building. Tenant acknowledges that
portions of the Premises are under the Outback Steakhouse restaurant and that
leakage may, from time to time, occur. Tenant shall not store high value items
in this area and shall take necessary precautions against occasional leakage.
All of Tenant's property stored in the unfinished portion of the basement will
be at the sole risk of Tenant and Tenant shall make no claim against Landlord or
its employees or officers on account of damage to such property.
To the full extent permitted by law, Tenant hereby releases and waives all
claims against Landlord, any mortgagee or ground lessor, Landlord's managing
agent and their respective agents and employees for injury or damage to persons,
property or business sustained in or about the Building or Premises by Tenant,
its agents, employees or invitees due to lack or failure of security.
XVI. DEFAULT
A. EVENTS OF DEFAULT
Each of the following shall constitute a breach of this Lease by Tenant:
Tenant's failure to pay any installment of Rent within ten (10) days after
written notice that such payment is overdue (Tenant acknowledges that Base Rent
is due on the first of the month and that this provision shall not be construed
to allow Tenant an additional 10 days each month to pay Base Rent); Tenant's
failure to observe or perform any of the other covenants, conditions or
provisions of this Lease to be observed or performed by Tenant and such default
is not cured within thirty (30) days after written notice thereof to Tenant (or
if more than thirty (30) days shall be required because of the nature of the
default, if Landlord shall fail to proceed diligently to cure such default after
written notice thereof); the interest of Tenant in this Lease being levied upon
under execution or other legal process; the filing of a petition by or against
Tenant to declare Tenant bankrupt, or seeking a plan of reorganization or
arrangement under any Chapter of the Bankruptcy Act and the same is not
dismissed within sixty days thereafter, or any amendment, replacement or
substitution therefor, or to delay payment of, reduce or modify Tenant's debts,
or any other action taken to reorganize or modify Tenant's capital structure, or
for the dissolution of Tenant; the declaration or finding that Tenant is
insolvent by law; any assignment of Tenant's property for the benefit of
creditors; the appointment of a receiver for Tenant or Tenant's property; or the
abandonment of the Premises.
B. LANDLORD'S REMEDIES
In the event of any breach of this Lease by Tenant, Landlord, at its
option, without further notice or demand to Tenant, may in addition to all other
rights and remedies provided in this Lease, at law or in equity: (a) terminate
this Lease and Tenant's right of possession of the Premises, and recover
immediately the amount by which all current and future rent and all other
charges and monetary obligations due hereunder during the remainder of the
original lease term exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided, and all other damages to which Landlord is entitled
under law, specifically including, without limitation, all Landlord's expenses
of reletting (including repairs, alterations, improvements, additions,
decorations, legal fees and brokerage commissions), or (b) terminate Tenant's
right of possession of the Premises without terminating this Lease, in which
event Landlord may, but shall not be obligated to, relet the Premises, or any
part thereof for the account of Tenant, for such rent and term and upon such
terms and conditions as are acceptable to Landlord. For purposes of such
reletting, Landlord is authorized to decorate, repair, alter and improve the
Premises to the extent reasonably necessary. If a sufficient sum not be realized
therefrom after payment of all Landlord's expenses of reletting (including
repairs,
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alterations, improvements, additions, decorations, legal fees and brokerage
commissions) to satisfy the payment when due of Rent and other charges reserved
under this Lease for any monthly period, then Tenant shall pay Landlord, a sum
equal to the amount of Rent and other charges due under this Lease for each such
monthly period, or if the Premises have been relet, Tenant shall pay any such
deficiency monthly. Tenant agrees that Landlord may file suit to recover any
sums due to Landlord hereunder from time to time and that such suit or recovery
of any amount due Landlord hereunder shall not be any defense to any subsequent
action brought for any amount not theretofore reduced to judgment in favor of
Landlord. In the event Landlord elects, pursuant to this subsection (b), to
terminate Tenant's right of possession only without terminating this Lease,
Landlord may, at Landlord's option, enter into the Premises, remove Tenant's
signs and other evidences of tenancy, and take and hold possession thereof,
provided, however, that such entry and possession shall not terminate this Lease
or release Tenant, in whole or in part, from Tenant's obligation to pay the Rent
reserved hereunder for the full Term or from any other obligation if Tenant
under this Lease. At any time thereafter Landlord may elect to terminate this
Lease and be entitled to damages as provided above.
C. LANDLORD'S DEFAULT
In the event Landlord shall neglect or fail to perform or observe any of
the covenants, provisions or conditions contained in this Lease on its part to
be performed or observed within thirty (30) days after written notice of default
(or if more than thirty (30) days shall be required because of the nature of the
default, if Landlord shall fail to proceed diligently to cure such default after
written notice thereof), then in that event Landlord shall be responsible to
Tenant for any and all direct damages (but not consequential or speculative
damages) sustained by Tenant as a result of Landlord's breach.
If the Building or any part thereof are at any time subject to a ground
lease, mortgage or a deed of trust and Tenant is give written notice thereof,
including the address of such party, then Tenant shall give written notice to
such party of any default by Landlord, specifying the default in reasonable
detail and affording such party a reasonable opportunity to make performance for
and on behalf of Landlord. If and when the said party has made performance on
behalf of Landlord such default shall be deemed cured.
XVII. BANKRUPTCY OR INSOLVENCY
A. In the event the Tenant shall become a Debtor under Chapter 7 of the
Bankruptcy code, and the Trustee or Tenant shall elect to assume this Lease for
the purpose of assigning the same or otherwise, such election and assignment may
only be made if all of the terms and conditions of "B" and "D" hereof are
satisfied. If such Trustee shall fail to elect or assume this Lease within sixty
(60) days after filing of the Petition, this Lease shall be deemed to have been
rejected. Landlord shall be thereupon immediately entitled to possession of the
Premises without further obligation to Tenant or Trustee, and this Lease shall
be canceled, but Landlord's right to be compensated for damages in such
liquidation proceeding shall survive.
B. In the event that a Petition for reorganization or adjustment of debts
is filed concerning Tenant under Chapter 11 or 13 of the Bankruptcy Code, or a
proceeding is filed under Chapter 7 of the Bankruptcy Code and is transferred to
Chapters 11 or 13, the Trustee or Tenant, as Debtor-In-Possession, must elect to
assume this Lease within seventy-five (75) days from the date of filing of the
Petition under Chapters 11 or 13, or the Trustee or Debtor-In-Possession shall
be deemed to have rejected this Lease. No
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election by the Trustee or Debtor-In- Possession to assume this Lease, whether
under Chapters 7, 11, or 13, shall be effective unless each of the following
conditions, which Landlord and Tenant acknowledge are commercially reasonable in
the context of a bankruptcy proceeding of Tenant, have been satisfied, and
Landlord has so acknowledged in writing:
1. The Trustee or the Debtor-In-Possession has cured, or has provided
Landlord adequate assurance (as defined below) that:
a. Within ten (10) days from the date of such assumption, the Trustee
will cure all monetary defaults under this Lease; and,
b. Within thirty (30) days from the date of such assumption, the
Trustee will cure all non-monetary defaults under this Lease.
2. The Trustee or the Debtor-In-Possession has compensated, or has provided
to Landlord adequate assurance (as defined below) that within ten (10) days from
the date of assumption, Landlord will be compensated for any pecuniary loss
incurred by Landlord arising from the default of Tenant, the Trustee, or the
Debtor-In-Possession as recited in Landlord's written statement of pecuniary
loss sent to the Trustee or Debtor-In-Possession.
3. The Trustee or the Debtor-In-Possession has provided Landlord with
adequate assurance of the future performance of each of Tenant's, Trustee's or
Debtor-In-Possession's obligations under this Lease, provided, however, that:
a. The Trustee or Debtor-In-Possession shall also deposit with Landlord
as security for the timely payment of rent, an amount equal to three (3) months
rent and other monetary charges accruing under this Lease; and,
b. If not otherwise required by the terms of this Lease, the Trustee or
Debtor-In-Possession shall also pay in advance on the date Base Annual Rent is
payable and in monthly installments thereafter amounts equal to in one-twelfth
(1/12th) of Tenant's annual obligations under this Lease for operations and
maintenance charges, electric charges, taxes and other similar charges.
c. The obligations imposed upon the Trustee or Debtor-In-Possession
shall continue with respect to Tenant or any assignee of the Lease after the
completion of bankruptcy proceedings.
4. The assumption of the Lease will not:
a. Breach any provision in any other lease, mortgage, financing
agreement or other agreement by which Landlord is bound relating to the
Building; or,
b. For purposes of this Article, Landlord and Tenant acknowledge that,
in the context of a bankruptcy proceeding of Tenant, at a minimum "adequate
assurance" shall mean:
(i) The Trustee or the Debtor-In-Possession has and will
continue to have sufficient unencumbered assets after the payment of all secured
obligations and administrative expenses to assure Landlord that the Trustee or
Debtor-In-Possession will have sufficient funds to fulfill the obligations of
Tenant under this Lease, and to keep the Premises properly staffed with
sufficient employees to conduct a fully-operational business on the Premises;
and,
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(ii) The Bankruptcy Court shall have entered an Order
segregating sufficient cash payable to Landlord and/or the Trustee or
Debtor-In-Possession shall have granted a valid and perfected first lien and
security interest and/or mortgage in property of Tenant, Trustee or
Debtor-In-Possession, acceptable as to value and kind to Landlord, to secure to
Landlord the obligation of the Trustee or Debtor-In-Possession to cure the
monetary and/or non-monetary defaults under this Lease within the time periods
set forth above.
C. In the event that this Lease is assumed by a Trustee appointed for
Tenant or by Tenant as Debtor-In-Possession under the provisions of Section "B"
hereof and thereafter Tenant is liquidated or files a subsequent Petition for
reorganization or adjustment of debts under Chapters 11 or 13 of the Bankruptcy
Code, then, and in either of such events, Landlord may, at its option, terminate
this Lease and all rights of Tenant hereunder, by giving Tenant written notice
of its election to do so terminate by no later than thirty (30) days after the
occurrence of either of such events.
D. If the Trustee or Debtor-In-Possession has assumed the Lease pursuant to
the terms and provisions of Sections A or B herein, for the purpose of assigning
(or elects to assign) Tenant's interest under this Lease or the estate created
thereby, to any other person, such interest or estate may be so assigned only if
Landlord shall acknowledge in writing that the intended assignee has provided
adequate assurance as defined in this Section D of future performance of all of
the terms, covenants and conditions of this Lease to be performed by Tenant.
For purposes of this Section D, Landlord and Tenant acknowledge that, in
the context of a bankruptcy proceeding of Tenant, at minimum "adequate assurance
of future performance" shall mean that each of the following conditions have
been satisfied, and Landlord has so acknowledged in writing:
1. The assignee has submitted a current financial statement audited by a
Certified Public Accountant which shows a net worth and working capital in
amounts determined to be sufficient by Landlord to assure the future performance
by such assignee of Tenant's obligations under this Lease;
2. The assignee, if requested by Landlord, shall have obtained
guarantees in form and substance satisfactory to Landlord from one or more
persons who satisfy Landlord's standards of creditworthiness;
3. Landlord has obtained all consents or waivers from any third party
required under any lease, mortgage, financing arrangement or other agreement by
which Landlord is bound to permit Landlord to consent to such assignment.
E. When, pursuant to the Bankruptcy Code, the Trustee or Debtor-In-
Possession shall be obligated to pay reasonable use and occupancy charges for
the use of the Premises of any portion thereof, such charges shall not be less
than the Annual Base Rent as defined in this Lease and other monetary
obligations of Tenant for the payment of operation and maintenance charges,
electric charges, taxes and similar charges.
F. Neither Tenant's interest in the lease, nor any estate of Tenant hereby
created, shall pass to any Trustee, receiver, assignee for the benefit of
creditors, or any other person or entity, or otherwise by operation of law under
the laws of any state having jurisdiction of the person or property of Tenant
(herein- after referred to as the "state law") unless Landlord shall consent to
such transfer in writing. No acceptance by Landlord of rent or any other
payments from any such trustee, receiver, assignee,
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person or other entity shall be deemed to have waived, nor shall it waive the
need to obtain Landlord's consent of Landlord's right to terminate this Lease
for any transfer of Tenant's interest under this Lease without such consent.
G. In the event the estate of Tenant created hereby shall be taken in
execution or by other process of law, or if Tenant or any guarantor of Tenant's
obligations hereunder (hereinafter referred to as the "guarantor") shall be
adjudicated insolvent pursuant to the provisions of any present or future
insolvency law under state law, or if any proceedings are filed by or against
the guarantor under the Bankruptcy Code, or any similar provisions of any future
federal bankruptcy law, or if a Receiver or Trustee of the property of Tenant or
the guarantor shall be appointed under state law by reason of Tenant's or the
guarantor's insolvency or inability to pay its debts as they become due or
otherwise, or if any assignment shall be made of Tenant's or the guarantor's
property for the benefit of creditors under state law; then and in such event
Landlord may, at its option, terminate this Lease and all rights of Tenant
hereunder by giving Tenant written notice of the election to so terminate within
thirty (30) days after the occurrence of such event.
XVIII. SURRENDER AND HOLDING OVER
Upon expiration or termination of this Lease or termination of Tenant's
right of possession of the Premises, or any part thereof, Tenant shall surrender
and vacate the Premises immediately and deliver possession thereof to Landlord
in a clean, good and tenantable condition, ordinary wear and tear excepted.
Notwithstanding anything in the Lease to the contrary, Tenant shall remove at
its expense all safes and vaults and repair any damage caused by such removal.
Upon any termination which occurs other than by reason of Tenant's default,
Tenant shall be entitled to remove from the Premises all moveable personal
property of Tenant, provided Tenant immediately shall repair all damage
resulting from such removal. In the event possession of the Premises is not
immediately delivered to Landlord or if Tenant shall fail to remove all of
Tenant's moveable personal property, as aforesaid, Landlord may remove any of
such property therefrom without any liability to Tenant. All movable personal
property which may be removed from the Premises by Landlord shall be
conclusively presumed to have been abandoned by Tenant and title thereto shall
pass to Landlord without any cost or credit therefor and Landlord may, at its
option and at Tenant's expense, store and/or dispose of such property.
Tenant shall pay Landlord one and one-half times the adjusted Annual Base
Rent then applicable for each month or portion thereof Tenant retains possession
of the Premises, or any portion thereof, after the expiration or termination of
this Lease, and also shall pay all damages sustained by Landlord by reason of
such retention of possession. The provisions of this Article shall not
constitute a waiver by Landlord of any re-entry rights of Landlord hereinbefore
or by law provided.
XIX. DAMAGE BY FIRE OR OTHER CASUALTY
A. SUBSTANTIAL UNTENANTABILITY
If the Building or the Premises are made substantially untenantable by fire
or other casualty, Landlord may elect either to: (a) terminate this Lease as of
the date of the fire or other casualty by giving Tenant written notice thereof
within 90 days after said date; or (b) proceed to repair or restore the Building
or the Premises, other than floor and wall treatment, and personal property paid
for or installed by Tenant. Landlord shall not exercise its right to terminate
this Lease pursuant to (a) above unless (i) the Premises are substantially
destroyed, or (ii) the Premises are damaged to the extent of
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20% of its replacement cost by a casualty not insured against or required to be
insured against, or (iii) if the Premises are damaged to the extent of 20% of
its replacement costs during the last 2 years of the Lease term.
If Landlord elects to proceed pursuant to subsection (b) above, Landlord
shall notify Tenant thereof within 90 days after the date of such fire or other
casualty, which notice shall contain Landlord's reasonable estimate of the time
required to substantially complete such repair or restoration. In the event such
estimate indicates that the time so required will exceed 270 days from the date
of the casualty, then Tenant shall have the right to terminate this Lease as of
the date of such casualty by giving written notice thereof to Landlord not later
than 20 days after the date of Landlord's notice. If Landlord's estimate
indicates that the repair or restoration can be substantially completed within
270 days, or if Tenant fails to exercise its right to terminate this Lease, as
aforesaid, this Lease shall remain in force and effect. If this Lease is not
terminated Tenant shall restore all of the floor and wall covering, fixtures,
carpeting, and personal property which it originally installed or paid for.
Landlord, at its sole option, may elect to cause Tenant to make such
repairs and restoration, in which event Tenant shall promptly complete the same
and Landlord will make available to Tenant for the sole purpose of
reconstruction of the Premises the insurance proceeds received by Landlord from
its insurance carrier. In the event of any such reconstruction by Tenant, an
architect duly registered in Missouri shall be selected by Landlord and shall
direct the payment of such insurance proceeds. Such insurance proceeds shall be
payable to Tenant only upon receipt by Landlord of certificates of said
architect stating that the payments specified therein are properly payable for
the purpose of reimbursing Tenant for expenditures actually made by Tenant in
connection with such work. At the election of Landlord, direct payments may be
made to material suppliers and laborers upon written certification by said
architect that such payments are due and payable. Any such insurance proceeds in
excess of Tenant's actual expenditures in restoring the damage or destruction
shall belong to Landlord.
B. INSUBSTANTIAL UNTENANTABILITY
If the Premises or the Building are damaged by fire or other casualty but
neither is rendered substantially untenantable, then Landlord shall proceed to
repair and restore the Building or the Premises, other than the wall and floor
covering and personal property paid for or installed by Tenant (which Tenant
shall repair and restore), unless such damage occurs during the last 12 months
of the Term, in which event Landlord shall have the right to terminate this
Lease as of the date of such fire or other casualty by giving written notice
thereof to Tenant within 30 days after the date of such fire or other casualty.
C. RENT ABATEMENT
If all or any part of the Premises are rendered untenantable by fire or
other casualty and this Lease is not terminated, the Annual Base Rent and other
charges shall abate for that part of the Premises which is untenantable
calculated on a square foot and per diem basis from the date of the fire or
other casualty until Landlord has substantially completed the repair and
restoration work in the Premises which it is required to perform.
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XXI. EMINENT DOMAIN
A. TAKING OF WHOLE
In the event the whole or any substantial part of the Building or the
Premises is taken or condemned by any competent authority for any public use or
purpose (including a deed given in lieu of condemnation), this Lease shall
terminate as of the date title vests in such authority, and Annual Base Rent
shall be apportioned as of said date.
B. TAKING OF PART
In the event a part of the Building or the Premises is taken or condemned
by any competent authority for any public use or purpose (including a deed given
in lieu of condemnation) and the Premises are no longer suitable for its
business purpose, either Tenant or Landlord shall have the right to terminate
this Lease effective the date of taking by giving the other party written notice
within 30 days of the date of taking. In the event this Lease is not terminated;
Landlord, upon receipt and to the extent of the award in condemnation or
proceeds of sale allocated to the Premises in a fair and equitable manner, shall
make necessary repairs and restorations to restore the Premises remaining to as
near its former condition as circumstances will permit, and to the Building to
the extent necessary to constitute the portion of the Building not so taken or
condemned as a complete architectural unit. In the event of a partial taking or
condemnation of the Premises and/or Building as herein provided, the rentable
area of the Premises and/or Building as specified in this Lease shall be reduced
for all purposes under this Lease by the number of square feet of rentable area
of the Premises and/or Building so taken or condemned and Rent shall be
proportionately reduced.
C. COMPENSATION
Landlord shall be entitled to receive the entire price or award from any
such sale, taking or condemnation without any payment to Tenant, provided,
however, Tenant shall have the right separately to pursue against the condemning
authority an award in respect of the loss, if any, to fixtures and other
personal property, unamortized cost of Tenant's leasehold improvements in excess
of the Construction Allowance (amortization to be on a straight line basis over
the initial term of the Lease) and for relocation expenses, provided such does
not in any way reduce Landlord's award.
XXII. INSURANCE
A. Tenant, at Tenant's expense, agrees to maintain in force from the date
the Premises are delivered to Tenant and continuing throughout the Term: (1)
Comprehensive General Liability Insurance on an occurrence basis with minimum
limits of liability in an amount equal to $3,000,000 combined single limit for
bodily injury, personal injury or death to one or more person or persons and for
damage to property, including water and sprinkler damage; and (2) Fire
Insurance, with extended coverage and vandalism and malicious mischief
endorsements, in an amount adequate to cover the full replacement value of all
equipment, fixtures, contents, wall and floor coverings and all of Tenant's
personal property in the Premises.
B. The liability policy shall name Landlord, Landlord's related entities,
Landlord's mortgagee and ground lessor, the managing agent and their respective
agents and employees as additional insureds. Each policy shall be issued by one
or more responsible insurance companies reasonably satisfactory to Landlord and
shall contain
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the following provisions and endorsements: (i) that such insurance may not be
canceled or amended without 30 days prior written notice to Landlord and
Landlord's mortgagee and ground lessor; (ii) an express waiver of any right of
subrogation by the insurance company against Landlord, Landlord's mortgagee
and/or ground lessor, the managing agent and their respective agents and
employees; and (iii) that the policy shall not be invalidated should the insured
waive in writing prior to a loss, any or all rights of recovery against any
other party for losses covered by such policies. All liability policies shall
contain a provision that the Landlord, although named as an additional insured,
shall nevertheless be entitled to recovery under said policies for any loss
occasioned to it, its servants, agents and employees by reason of Tenant's
negligence. Tenant's policies shall be primary policies not contributing with
and not in excess of coverage which Landlord may carry.
C. Tenant shall deliver to Landlord, certificates of insurance of all
policies and renewals thereof to be maintained by Tenant hereunder, not less
than 10 days prior to the Commencement Date and not less than 10 days prior to
the expiration date of each policy.
D. The Landlord and Tenant hereby waive any rights each may have against
the other on account of any loss or damage to the Premises or the building of
which it is a part or the contents suffered by the Landlord or the Tenant, as
the case may be, arising from any risk covered by the insurance they carry or
are required to carry. This waiver shall not apply to loss or damage of property
unless the loss or damage occurs during the time the insurance policies of a
party contain, at no additional cost, a waiver of subrogation endorsement or if
extra costs shall be charged, so long as the other party pays the extra cost.
All of Landlord's and Tenant's casualty policies shall contain such an
endorsement if it is available, subject to the above sentence regarding extra
costs.
XXIII. RULES AND REGULATIONS
A. Tenant agrees for itself and for its subtenants, employees, agents, and
invitees to comply with the following rules and regulations and with all
reasonable modifications and additions thereto which Landlord may from time to
time make: (1) No sign, lettering, picture, notice, advertisement or other item
shall be placed on any outside window or in a position to be visible from
outside the Building; (2) Tenant shall not use the name "The ESQUIRE OFFICE
Building" for any purpose other than Tenant's business address; (3) Tenant shall
not use the name "The ESQUIRE OFFICE Building" for Tenant's business address
after Tenant vacates the Premises; (4) Tenant shall not use any picture or
likeness of the Building in any circular, notices, advertisements or
correspondence without Landlord's consent not to be unreasonably withheld; (6)
Sidewalks, entrances, passages, courts, corridors, halls, elevators and
stairways in and about the Premises shall not be obstructed nor shall objects be
placed against or upon glass partitions, doors or windows which would be
unsightly from the Building's corridors or from the exterior of the Building;
(7) No animals, pets, bicycles or other vehicles shall be brought or permitted
to be in the Building or the Premises; (8) Room to room canvasses to solicit
business from other tenants of the Building are not permitted; (9) Tenant shall
not waste electricity, water or air conditioning and shall cooperate fully with
Landlord to assure the most effective and efficient operation of the Building's
heating and air conditioning systems; (11) No locks or similar devices shall be
attached to any door except by Landlord and Landlord shall have the right to
retain a key to all such locks; (12) Tenant assumes full responsibility of
protecting the Premises from theft, robbery and pilferage. Except during
Tenant's normal business hours, Tenant shall keep all doors to the Premises
locked and other means of entry to the Premises closed and secured; (13) Only
machinery or mechanical devices of a nature directly related to Tenant's
ordinary use of the Premises shall be installed, placed or
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used in the Premises and the installation and use of all such machinery and
mechanical devices is subject to the other rules contained in this section and
the other portions of this Lease; (14) Except with the prior approval of
Landlord, all cleaning, repairing, janitorial, decorating, painting or other
services and work in and about the Premises shall be done only by authorized
Building personnel; (15) Safes, furniture, equipment, machines and other large
or bulky articles shall be brought to the Building and into and out of the
Premises at such times and in such manner as the Landlord shall direct
(including the designation of elevator) and at Tenant's sole risk and cost; (16)
Tenant shall not in any manner deface or damage the Building; (17) Inflammable
material such as gasoline, kerosene, naphtha and benzene, or explosives or any
other articles of an intrinsically dangerous nature or any materials which are
considered hazardous under any law, ordinance, order or directive are not
permitted in the Building or the Premises; (18) Tenant shall ascertain from
Landlord the maximum amount of electrical current which can safely be used in
the Premises, taking into account the capacity of the electric wiring of the
Building and the Premises and the needs of other tenants, and shall not use more
than such safe capacity. Landlord's consent to the installation of electrical
equipment shall not relieve Tenant from the obligation not to use more
electricity than such safe capacity; (19) To the extent permitted by law, Tenant
shall not permit picketing or other union activity involving its employees in
the Building, except in those locations and subject to time and other
limitations as to which Landlord may give prior written consent; (20) Tenant
shall not enter into or upon the roof or basement of the Building or any
heating, ventilation, air conditioning, mechanical or elevator machinery housing
areas; (21) Tenant shall not distribute literature, flyers, handouts or
pamphlets of any type in any of the common areas of the Building, without the
prior written consent of Landlord; (22) Tenant shall not cook, otherwise prepare
or sell any food or beverages in or from the Premises except for employee use as
may be found in typical offices; (23) Tenant shall not permit the use of any
apparatus for sound production or transmission in such manner that the sound so
transmitted or produced shall be audible or vibrations therefrom shall be
detectable beyond the Premises; (24) Tenant shall keep all electrical and
mechanical apparatus free of vibration, noise and air waves which may be
transmitted beyond the Premises; (25) Tenant shall not permit objectionable
odors or vapors to emanate from the Premises; (26) Tenant shall not place a load
upon any floor of the Premises exceeding the floor load capacity for which such
floor was designed or allowed by law to carry; and (27) No floor covering shall
be affixed to any floor in the Premises by means of glue or other adhesive
without Landlord's prior written consent.
B. Landlord shall not be responsible for any violation of the foregoing
rules and regulations by other tenants of the Building and shall have no
obligation to enforce the same against other tenants.
XXIV. LANDLORD'S RIGHTS IN REGARDS TO BUILDING
Landlord shall have the following rights exercisable without notice (except
as expressly provided to the contrary in this Lease), without liability to
Tenant for damage or injury to persons, property or business and without being
deemed an eviction or disturbance of Tenant's use or possession of the Premises
or giving rise to any claim for set-off or abatement of Rent: (a) To change the
Building's name or street address upon 30 days prior written notice to Tenant;
(2) To install, affix and maintain all signs on the exterior and/or interior of
the Building; (3) To designate and/or approve prior to installation, all types
of signs, window shades, blinds, drapes, awnings or other similar items, and all
internal lighting that may be visible from the exterior of the Premises; (4) To
display the premises to prospective tenants at reasonable hours during the last
12 months of the Term; (5) To limit the use of portions of the common areas of
the Building (including elevators and/or toilet rooms) to only designated
tenants or occupants of the
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Building and to change the arrangement of entrances, doors, corridors, elevators
and stairs in the Building, (6) To grant to any party the exclusive right to
conduct any business or render any service in or to the Building, provided such
exclusive right shall not operate to prohibit Tenant from using the Premises for
the purposes permitted hereunder; (8) To have access for Landlord and other
tenants of the Building to any mail chutes and boxes located in or on the
Premises according to the rules of the United States Post Office; (9) To close
the Building after normal business hours, except that Tenant and its employees
and invitees shall be entitled to admission under such regulations as Landlord
prescribes for non- normal hours and for security purposes; (10) To take any and
all reasonable measures, including inspections and repairs to the Premises or to
the Building, as may be necessary or desirable in the operation or protection
thereof; (11) To retain at all times master keys or pass keys to the Premises;
(13) To install and maintain pipes, ducts, conduits, wires and structural
elements located in the Premises which service other parts of the Building; and
(14) To change the shape, size, number of floors, and eliminate or add any
improvements to any portion of the Building in a manner that does not materially
and adversely affect the Premises.
XXV. ESTOPPEL CERTIFICATE
Tenant shall from time to time, upon not less than 20 business days prior
written request by Landlord or any mortgagee deliver to Landlord or such
mortgagee a statement in writing certifying: (a) That this Lease is unmodified
and in full force and effect or, if there have been modifications, that this
Lease as modified, is in full force and effect; (b) The amount of Annual Base
Rent then payable hereunder and the date to which Rent has been paid; (c) That
Landlord is not in default under this Lease, or, if in default, a detailed
description of such default(s); (d) That Tenant is or is not in possession of
the Premises, as the case may be; and (e) Such other information as Landlord may
reasonably request.
XXVI. SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
This Lease and the rights of Tenant hereunder shall be and are hereby made
expressly subject and subordinate at all times to any ground or underlying lease
of the land and/or the Building now or hereafter existing and all amendments,
renewals and modifications thereto and extensions thereof, and to the lien of
any mortgage or deed of trust now or hereafter existing against the land and/or
the Building, which may include other land and/or buildings and to all advances
made or hereafter to be made upon the security thereof. Tenant agrees to execute
and deliver such further instruments subordinating this Lease to any such ground
or underlying lease or to the lien of any such mortgage or deed of trust as may
be requested in writing by Landlord from time to time. Tenant acknowledges that
its title is and always shall be subordinate to the title of the owner of the
land and the Building, and nothing herein contained shall empower Tenant to do
any act which can, shall or may encumber the title of the owner of the land or
the Building. Tenant's obligation to subordinate this Lease to any future ground
lessor or lender shall be conditioned upon the ground lessor or lender agreeing
to recognize this Lease in the event of a default or foreclosure provided Tenant
is not in default past the period to cure, and such recognition does not
decrease Tenant's rights or increase Tenant's obligations.
If any ground or underlying lessor or mortgagee or trustee of deed requires
that this Lease be prior rather than subordinate, Tenant shall promptly and
without charge execute a document effecting and/or acknowledging such priority
and the Tenant's attornment obligation.
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In the event of the cancellation or termination of any such ground or
underlying lease in accordance with its terms or by the surrender thereof,
whether voluntary, involuntary or by operation of law, or by summary
proceedings, or the foreclosure of any such mortgage or deed of trust by
voluntary agreement or otherwise, or the commencement of any judicial action
seeking such foreclosure, Tenant, at the request of the then Landlord, shall
attorn to and recognize such ground or underlying lessor, mortgagee, holder of
the deed of trust, or purchaser in foreclosure as Tenant's Landlord under this
Lease so long as Tenant's rights under its lease are recognized and its
obligations thereunder are not increased and provided such ground or underlying
lessor, mortgagee, holder of the deed of trust, or purchaser in foreclosure
agrees that Tenant shall have the right to remain in possession of the Premises
under this Lease and the terms and conditions thereof. Tenant agrees to execute
and deliver at any time upon request of such ground or underlying lessor,
mortgagee, holder of the deed of trust, purchaser, or their successors, any
instrument to further evidenced such attornment. Tenant hereby waives its right,
if any, to elect to terminate this Lease or to surrender possession of the
Premises in the event of any such ground or underlying lease termination, or
mortgage or deed of trust foreclosure.
If, in connection with the procurement, continuation or renewal of any
financing for which the Building or of which the interest of the lessee therein
under a ground or underlying lease, represents collateral in whole or in part,
the lender or ground or underlying lessor shall request reasonable modifications
of this Lease. Tenant will not unreasonably withhold its consent provided such
modifications do not increase Tenant's obligations or reduce Tenant's rights
under this Lease.
XXVII. NOTICES
Whenever in this Lease it shall be required or permitted that notice or
demand be given or served by either party to this Lease to or on the other, such
notice or demand shall be given or served, and shall not be deemed to have been
duly given or served unless in writing and forwarded by certified or registered
mail, return receipt requested, addressed if to Tenant at the Premises with a
copy to Thomas R. Howley, Vice President & General Counsel, Panera Bread
Company, 159 Overland Road, Waltham, Massachusetts 02451 and if to Landlord to
the address set forth for Landlord in Section I of the Lease. Either party may
change such address by written notice to the other.
Prior to the occupation of the Premises by Tenant for its business
operation, notices to Tenant shall be sent to 7930 Big Bend Blvd., St. Louis,
Mo. 63119 with a copy to Thomas R. Howley, Vice President & General Counsel,
Panera Bread Company, 159 Overland Road, Waltham, Massachusetts 02451.
XXVIII. OPTION TO EXTEND
Provided Tenant is not in default beyond any applicable cure period, or
such default has been waived by Landlord, at the time Tenant exercises its
option or at the time the then current term expires and further provided Tenant
has not assigned the Lease or sublet the Premises in a transaction requiring
Landlord's consent as set forth in Article XI, Tenant shall have the right and
option to extend the term of this Lease for two renewal periods of five years
each. Tenant shall give Landlord written notice exercising Tenant's option to
extend the term of this Lease not less than nine months prior to the expiration
of the then current term. If not given in a timely manner, the option(s) to
extend will be of no force or effect.
During each option period the Annual Base Rent shall be at the then
prevailing fair market rental rate (hereinafter referred to as "Market Rental
Rate"), based upon the price
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for comparable space in Class B buildings in the St. Louis suburban area, as of
the commencement date of the intended renewal term, taking into consideration,
without limitation, such relevant factors as the base year for calculating
Tenant's obligation with respect to increases in Taxes and Operating Expenses
and the amounts of these charges, the use of the Premises as general office, the
condition, quality, size and utility of the Premises, and the caliber and
financial strength of Tenant. In no event shall the Market Rental Rate be less
than the Annual Base Rent for the last year of the Lease term prior to the
Option period in question. Landlord shall notify Tenant of Landlord's
determination of Market Rental Rate within fifteen days after receipt of
Tenant's notice exercising its option. In the event Tenant disagrees with
Landlord's determination of Market Rental Rate, Tenant shall notify Landlord in
writing of same, along with Tenant's written proposal of Market Rental Rate,
within fifteen days after receipt of Landlord `s determination. If the parties
cannot agree upon a Market Rental Rate within fifteen business days after
Landlord's receipt of Tenant's notice, the parties agree to have the Market
Rental Rate determined by the process set forth below.
(1) Each of Landlord and Tenant shall engage an appraiser who is a
member of the American Institute of Real Estate Appraisers (an "MAI APPRAISER")
within twenty (20) days after Landlord's receipt of Tenant's notice .
(2) Each MAI Appraiser shall determine the Market Rental Rate within
thirty (30) days after the appointment of the last of the two. If the appraisals
are within 10% of each other the MAI Appraisers appointed by Landlord and Tenant
shall choose a third MAI Appraiser within fifteen (15) days and shall notify
Landlord and Tenant of such choice. Each party shall bear the cost of its
appointed MAI Appraiser and shall share equally the cost of the third MAI
Appraiser. If the two appraisals are not within 10% of each other then each of
the parties shall pick a new MAI Appraiser and start the process over until the
two appraisals are within 10% of each other.
(3) The third MAI Appraiser shall appraise the property and determine
the Market Rental Rate within thirty (30) days after its appointment and shall
notify Landlord and Tenant thereof.
(4) The average of the two highest appraisals shall become the Market
Rental Rate for the option period.
(5) The Market Rental Rate, as determined by the foregoing procedure,
shall be binding upon Landlord and Tenant.
XXIX. MISCELLANEOUS
A. Waivers. Failure of either party to complain of any act or omission on
the part of the other party, no matter how long the same may continue, shall not
be deemed to be a waiver by said party of any of its rights hereunder. No waiver
by either party at any time, express or implied, of any breach of any provision
of this lease shall be a consent to any subsequent breach of the same or any
other provision. If any action by either party shall require the consent or
approval of the other party, the other party's consent to or approval of such
action on any one occasion shall not be deemed a consent to or approval of said
action on any subsequent occasion or a consent to or approval of any other
action on the same or any subsequent occasion. Any and all rights and remedies
which either party may have under this lease or by operation of law, either at
law or in equity, upon any breach, shall be distinct, separate and cumulative
and shall not be deemed inconsistent with each other; and no one of them,
whether exercised by said party or not, shall be deemed to be in exclusion of
any other; and any two or more or all of such rights and remedies may be
exercised at the same time. Without limiting the
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generality of the foregoing, if any restriction contained in this lease for the
benefit of either party shall be violated, said party, without waiving any claim
for breach of agreement against the other party, may bring such proceedings as
it may deem necessary, either at law or in equity, in its own name or in the
name of the other party, against the person violating said restriction.
B. Headings. The headings for the various provisions of this lease are used
only as a matter of convenience for reference, and are not to be considered a
part of this lease or to be used in determining the intent of the parties to
this lease.
C. Attorney's Fees. In the event that the Landlord should institute any
suit against Tenant for violation of any of the covenants or conditions of this
lease or for recovery of possession of the Demised Premises, or should the
Tenant institute suit against Landlord for violation of any of the covenants or
conditions of this lease, or should either party intervene in any action or
proceeding in which the other is a party, to enforce or protect its interest or
rights hereunder, the prevailing party shall be entitled to reasonable fees of
its attorneys, related expenses, and court costs.
D. Construction of Language. The language in all parts of this lease shall
in all cases be construed as a whole and simply according to its fair meaning
and not strictly for or against either the Landlord or the Tenant, and the
construction of this lease and any of its various provisions shall be unaffected
by any claim, whether or not justified, that it has been prepared, wholly or in
substantial part, by or on behalf of either party.
E. Governing Law. This lease shall be governed by and construed in
accordance with the laws of the State of Missouri.
F. Time. Time is of the essence of this lease and each and all of its
provisions.
G. This Instrument. This lease shall not be modified in any way except by a
writing subscribed by both parties.
H. Access to Premises. Tenant shall permit Landlord and the holder of any
mortgage or deed of trust or its or their agents to enter the Premises at all
reasonable hours for the purpose of inspection of both the Premises and the
equipment therein; or making repairs that Tenant may neglect or refuse to make
in accordance with the agreements, terms, covenants and conditions hereof; for
the purpose of showing the Premises to persons wishing to purchase or make a
mortgage loan upon the same; for posting notices of non-responsibility in
connection with alterations and construction (which notices shall not be removed
by Tenant until after the expiration of the statutory lien period); and at any
time within one (1) year prior to the expiration of the term to persons wishing
to rent the Premises.
I. Sale or Conveyance by Landlord. In the event of a sale or conveyance by
Landlord of the Premises, the same shall operate to release Landlord from any
future liability on any of the covenants or conditions, express or implied,
herein contained in favor of Tenant, provided said transferee agrees to abide by
and to perform all of the obligations of Landlord under this lease subsequent to
such transfer, and in such event, Tenant agrees to look solely to the
responsibility of the successor in interest of the Landlord in and to this
lease.
Notwithstanding anything to the contrary provided in this Lease, it is
specifically understood and agreed by Landlord and Tenant that there shall be
absolutely no personal liability on the part of Landlord, or its successor, or
any partners, shareholders, beneficiaries, employees, or officers of Landlord,
or its successor, with respect to any of
27
<PAGE>
the terms, conditions and covenants of this Lease, and that Tenant shall look
solely to the interest of Landlord in the Building for the satisfaction of each
and every remedy of Tenant in the event of any breach by Landlord of any terms,
conditions and covenants of this Lease to be observed or performed by Landlord.
J. Interpretation. It is agreed that if any provision of this lease or the
application of any provision to any person or any circumstance shall be
determined to be invalid or unenforceable, then such determination shall not
affect any other provision of this lease or the application of said provision to
any other person or circumstance, all of which other provisions shall remain in
full force and effect; and it is the intention of the parties hereto that if any
provision of this lease is capable of two constructions, one of which would
render the provision void and the other of which would render the provision
valid, then the provision shall have the meaning which renders it valid.
K. Successors and Assigns. The words "Landlord" and "Tenant" and the
pronouns referring thereto, as used in this lease, shall mean, where the context
required or admits, the persons named herein as Landlord and as Tenant,
respectively, and their respective heirs, legal representatives, successors and
assigns, irrespective of whether singular or plural, masculine, feminine or
neuter. The agreements and conditions in this lease contained on the part of
Landlord to be performed and observed shall be binding upon Landlord and its
heirs, legal representatives, successors and assigns and shall inure to the
benefit of Tenant and its heirs, legal representatives, successors and assigns,
and the agreements and conditions on the part of Tenant to be performed and
observed shall be binding upon Tenant and its heirs, legal representatives,
successors and assigns. If Tenant shall be more than one person, the obligations
of Tenant shall be joint and several.
L. Delays. In any case where either party hereto is required to do any act,
delays caused by or resulting from Act of God, war, civil commotion, fire or
other casualty, labor difficulties, difficulties in obtaining proper zoning,
environmental or other permits, general shortages of labor, materials or
equipment, government regulations or other causes beyond such party's reasonable
control shall not be counted in determining the time when the performance of
such act must be completed, whether such time be designated by a fixed time, a
fixed period of time or "a reasonable time" (financial inability excepted). In
any case where work is to be paid for out of insurance proceeds or condemnation
awards, due allowance shall be made, both to the party required to perform such
work and to the party required to make such payment, for delays in the
collection of such proceeds and awards.
M. Self Help. If Tenant shall default in the performance or observance of
any agreement or condition in this lease contained on its part to be performed
or observed other than an obligation to pay money, and shall not cure such
default within thirty (30) days after notice from Landlord specifying the
default (or shall not within said period commence to cure such default and
thereafter prosecute the curing of such default to completion with due
diligence), Landlord may, at its option, without waiving any claim for damages
for breach of agreement, at any time thereafter cure such default for the
account of Tenant, and any amount paid or any contractual liability incurred by
Landlord in so doing shall be deemed paid or incurred for the account of Tenant,
and Tenant agrees to reimburse Landlord therefor or hold Landlord harmless
therefrom; provided that Landlord may cure any such default as aforesaid prior
to the expiration of said waiting period but after notice to Tenant, if the
curing of such default prior to the expiration of said waiting period is
reasonably necessary to protect the real estate or Landlord's interest therein,
or to prevent injury or damage to persons or property. If Tenant shall fail to
reimburse Landlord upon demand for any amount paid for the
28
<PAGE>
account of Tenant hereunder, said amount shall be added to and become due as a
part of the next payment of rent due hereunder.
N. If Tenant shall fail to pay, when due, any installment of Annual Base
Rent or any other charge, such unpaid amounts shall bear interest at the maximum
lawful rate from the date due to the date of payment. If any installment of
Annual Base Rent or any other charge is not received within five (5) business
days of the due date, there shall be a late payment fee equal to 2 1/2 percent
of the overdue amount.
O. Landlord represents that:
(a) If Landlord is a corporation, Landlord represents and warrants that
Landlord is duly organized, validly existing, in good standing in the state of
its incorporation, and has all requisite power and authority to own and lease
property and conduct business in the state where the Premises are located, and
each individual executing this Lease on behalf of Landlord represents and
warrants that he or she is duly authorized to execute and delivery this Lease on
behalf of Landlord;
(b) Landlord represents and warrants that this Lease is binding on
Landlord in accordance with its terms;
(c) Landlord represents and warrants that Landlord is the fee owner of
the Premises subject only to items of record;
(d) Landlord represents and warrants that Landlord has no knowledge of
(i) enacted, pending or proposed condemnation proceedings or other governmental
action, (ii) pending or threatened litigation relating to or affecting the
Premises, (iii) current or proposed plans to alter access to the Premises, or
(iv) the presence on the Premises of anything dangerous to humans such as
Hazardous Materials, which would adversely affect the construction of Tenant
Improvements or the conduct of Tenant's permitted uses on the Premises.
P. Broker
(a) Landlord and Tenant agree that the only broker employed in this
transaction was Johnson Group and Schlafly Corporation, and Landlord agrees to
pay said brokers for any and all commissions and fees as agreed upon between
them.
(b) Landlord and Tenant represent and warrant, each to the other, that
they have had no dealings with any other broker or agent in connection with this
lease, and Landlord and Tenant covenant to hold harmless and indemnify Tenant or
Landlord, as the case may be, from and against any and all costs, expense or
liability for any damaged (including attorney's fees and expenses),
compensation, commissions and charges claimed by any broker or agent with
respect to this lease or the negotiation thereof, arising out of Landlord's
and/or Tenant's conduct or conversation, as the case may be.
Q. The Tenant represents that it has full right and authority to enter into
this lease and by doing so violates no existing agreement or indenture to which
it is a party or which it is bound or affected, or, if Tenant is a corporation,
any provisions of its Articles of Incorporation, By-Laws or other governing or
enabling documents or regulations and that the execution and delivery of this
lease has been duly authorized by the Tenant's Board of Directors; and upon
request of Landlord, Tenant will deliver to Landlord a true, correct and
certified copy of the enabling resolutions adopted by Tenant's Board of
Directors.
29
<PAGE>
R. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES. Any alleged default, claim or controversy arising out
of or related to this Lease or the breach thereof shall be submitted to and
settled by arbitration in accordance with the Arbitration Rules of the American
Arbitration Association. The cost of such arbitration shall be allocated between
the parties by the arbitrator or arbitrators. The award rendered by the
arbitrator or arbitrators shall be final, and judgment may be entered upon it in
accordance with the laws of Missouri. This arbitration provision shall not apply
to any disputes regarding Article VII.H. of the Lease.
S. Attached hereto and forming a part of this Lease by and between Bachelor
Foods, Inc., Landlord, and Panera, Inc. Tenant, is a Guaranty executed by Panera
Bread Company.
T. THIS WRITING CONTAINS THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND
SUPERSEDES ANY PRIOR STATEMENT, AGREEMENT OR REPRESENTATION AND NO AGENT,
REPRESENTATIVE, SALESMAN OR OFFICER OF LANDLORD HAS AUTHORITY TO MAKE, OR HAS
MADE, ANY STATEMENT, AGREEMENT OR REPRESENTATION, EITHER ORAL OR WRITTEN, IN
CONNECTION HEREWITH, MODIFYING, ADDING, OR CHANGING THE TERMS AND CONDITIONS
HEREIN SET FORTH. NO MODIFICATION OF THIS LEASE SHALL BE BINDING UNLESS SUCH
MODIFICATION IS IN WRITING AND SIGNED BY BOTH PARTIES.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this lease the
day and year first above written.
LANDLORD TENANT
BACHELOR FOODS, INC. PANERA, INC.
By: By:
--------------------------- ---------------------------
Eric P. Bachelor William W. Moreton
President Senior Vice President
and
By:
---------------------------
Michael J. Kupstas
Assistant Secretary
30
<PAGE>
STATE OF MISSOURI )
) SS
COUNTY OF ST. LOUIS )
Be it remembered that on this ____day of September, 2000, before me, a
notary public in and for the county and state aforesaid, came Eric P. Bachelor,
the President of Bachelor Foods, Inc. a Kentucky corporation, who is personally
known to me to be such officer, and who is personally known to be the person who
executed as such officer the within instrument of writing on behalf of such
corporation, and person duly acknowledged the execution of the same to be the
act and deed of said corporation.
-----------------------------
Notary Public
My Commission Expires:
STATE OF MISSOURI )
) SS
COUNTY OF ST. LOUIS )
Be it remembered that on this ______day of September, 2000, before me, a
notary public in and for the county and state aforesaid, came William W.
Moreton, Senior Vice President of Panera, Inc., a Delaware corporation, who is
personally known to me to be such officer, and who is personally known to be the
person who executed as such officer the within instrument of writing on behalf
of such corporation, and person duly acknowledged the execution of the same to
be the act and deed of said corporation.
------------------------------
Notary Public
My Commission Expires:
STATE OF MISSOURI )
) SS
COUNTY OF ST. LOUIS )
Be it remembered that on this ______day of September, 2000, before me, a
notary public in and for the county and state aforesaid, came Michael J.
Kupstas, Assistant Secretary of Panera, Inc., a Delaware corporation, who is
personally known to me to be such officer, and who is personally known to be the
person who executed as such officer the within instrument of writing on behalf
of such corporation, and person duly acknowledged the execution of the same to
be the act and deed of said corporation.
------------------------------
Notary Public
My Commission Expires:
31
<PAGE>
EXHIBIT A
WORK LETTER
THIS WORK LETTER is entered into by and between Landlord and Tenant and shall be
deemed a part of and a supplement to the Lease. Landlord and Tenant agree as
follows:
1. LANDLORD'S WORK: Landlord has no construction obligations in regards to the
Premises. Tenant has inspected the Premises and the building and accepts them in
an "AS IS" condition with no representations or warranties of any kind by
Landlord except as expressly provided in this Lease.
2. TENANT'S WORK: Tenant shall perform a complete build-out of the Premises so
that the Premises are comparable to other new suburban first class office space
in the St. Louis metropolitan area. The quality of the finishes and buildout
shall be subject to the review and approval of Landlord, which may be withheld
in its reasonable discretion. Tenant's general contractor must use Kent Plumbing
as its plumbing subcontractor.
3. PREPARATION AND APPROVAL OF TENANT IMPROVEMENT PLANS: Tenant shall proceed
with due diligence to have a architect licensed in Missouri prepare drawings,
plans and specifications for its leasehold improvements to the Premises
(including its storefront signs). The drawings, plans and specifications shall
be subject to Landlord's approval, which Landlord may deny in its reasonable
discretion. The plans shall reflect office space of a quality consistent with
other new suburban first class office space in the St. Louis metropolitan area.
The quality of the finishes and buildout shall be subject to the review and
approval of Landlord, which may be withheld in its reasonable discretion. If
Landlord disapproves all or any portion of the plans, Landlord shall give Tenant
a written explanation of the reasons for the disapproval, and Tenant shall,
within ten (10) days, submit revised plans and specifications for Landlord's
review and approval. After approval by Landlord of same, Tenant shall proceed
with due diligence to obtain all necessary permits and licenses and to install
and construct, at its sole cost, and with contractors and subcontractors
approved by Landlord, the leasehold improvements in accordance with the approved
drawings, plans and specifications and to install such fixtures and equipment
and perform such other work as necessary or appropriate to prepare the Premises
for the use and business set forth in this Lease.
4. TENANT'S WORK; COMPLETION; ACCEPTANCE: All of Tenant's Work shall be
performed in accordance with all applicable code, governmental, legal and
insurance requirements and in a good workmanlike manner using first quality
materials. Landlord or its representative shall have the right at all reasonable
times to enter upon the Premises for the purpose of inspecting Tenant's Work to
verify that it conforms with the approved Plans. Tenant shall give Landlord
written notice (the "Completion Notice") of the date on which Tenant's Work has
reached Substantial Completion. Within twenty (20) days after receipt of the
Completion Notice, Landlord shall cause the Premises to be inspected and give
Tenant written notice either accepting the Premises or specifying any good faith
reasons why Landlord believes Tenant's Work has not reached Substantial
Completion. Landlord shall not unreasonably withhold its acceptance of the
Premises. Tenant shall promptly correct or complete any uncompleted portions of
Tenant's Work specified in Landlord's notice.
32
<PAGE>
5. WARRANTIES: Each contract and subcontract shall contain the guaranty of the
contractor or subcontractor that the portion of Tenant's Work covered thereby
will be free from any and all defects in workmanship and materials for one year
after the completion of Tenant's Work and such further period as manufacturers'
warranties shall provide with respect to materials and equipment which are
subject to manufacturers' warranties. The aforesaid guaranty shall include the
obligations to repair or replace in a first class and workmanlike manner, and
without any additional charge, any and all of Tenant's Work done or furnished by
said contractor or subcontractor, or by any of his subcontractors, employees or
agents, which shall be or become defective because of faulty materials or
workmanship within the period covered by such guaranty. All warranties or
guarantees as to materials or workmanship on or with respect to Tenant's Work
shall be written so that they shall inure to the benefit of Landlord and Tenant
and can be directly enforced by either, and Tenant shall give to Landlord any
assignments or other assurance necessary to effectuate the same. Copies of all
manufacturer's warranties shall be given to Landlord.
6. TENANT'S INSURANCE: Prior to commencing any work Tenant shall furnish
Landlord with certificates of insurance setting forth the following coverages
(1) workmen's compensation and employer's liability insurance with limits of the
statutory amount, or One Million Dollars ($1,000,000), whichever is greater; (2)
commercial general liability insurance affording protection for bodily and
personal injury including death, with limits of Two Million Dollars ($2,000,000)
per person and Two Million Dollars ($2,000,000) per occurrence; (3) property
damage, with limits of One Million Dollars ($1,000,000); (4) motor vehicle
liability and property damage in the amounts set forth in (2) and (3), and (5)
Builder's Risk Insurance in the full amount of the construction contracts. Such
insurance shall fully protect Landlord and any other parties in interest
designated by Landlord, as well as Tenant.
7 TENANT'S INDEMNITY: Tenant agrees to indemnify, defend and hold Landlord
harmless against any and all claims for injury to persons or damage to property
arising out of or by reason of the performance of Tenant's Work, and claims,
fines, and penalties arising out of any failure of Tenant or its agents,
contractors and employees to comply with any law, ordinance, code requirement,
regulations or other requirement applicable to Tenant's Work.
LANDLORD TENANT
BACHELOR FOODS, INC. PANERA, INC.
By: By:
---------------------------- ------------------------------
Eric P. Bachelor William W. Moreton
President Senior Vice President
and
By:
------------------------------
Michael J. Kupstas
Assistant Secretary
33
<PAGE>
CONSTRUCTION ALLOWANCE
Landlord agrees that in consideration of Tenant's completing Tenant's
construction work in accordance with the requirements of this Lease, Landlord
will make a contribution to Tenant in the amount of the lesser of i)
$450,000.00; or ii) the cost of Tenant's leasehold improvements but exclusive of
the cost of plans, signage, equipment, furniture, moveable trade fixtures and
other personal property.
Payment of the Construction Allowance shall be through a disbursing agent as
approved by Landlord's bank. Tenant shall be required to comply with the
requirements of the disbursing agent pursuant to a contract entered into by
Tenant and the disbursing agent. A copy of the Disbursing Agreement (titled
Construction Escrow Agreement) approved by all parties is attached to this Lease
and will be executed by all parties prior to the commencement of construction.
In the event the amount of the construction contract is in excess of $450,000,
Tenant shall deposit with the disbursing agent the amount of the difference
before Landlord is required to deposit any funds with the disbursing agent.
Tenant's deposit need not be made in one lump sum in advance. Partial deposits
may be made in a timely manner so that money is available for payment to the
contractors when due. Tenant shall also promptly deposit with the disbursing
agent the amount of any change orders to the extent the construction contract is
in excess of $450,000.
LANDLORD TENANT
BACHELOR FOODS, INC. PANERA, INC.
By: By:
---------------------------- ------------------------------
Eric P. Bachelor William W. Moreton
President Senior Vice President
and
By:____________________________
Michael J. Kupstas
Assistant Secretary
34
<PAGE>
EXHIBIT 2.2
NOTICE OF BORROWING
____________________, 20____
SunTrust Bank
- ---------------------------------
Nashville, TN _____________
Attention:
Dear Sirs:
Reference is made to the Revolving Credit Agreement dated as of December
____, 2000 (as amended and in effect on the date hereof, the "Credit
Agreement"), between the undersigned, as Borrower and SunTrust Bank, as Lender.
Terms defined in the Credit Agreement are used herein with the same meanings.
This notice constitutes a Notice of Borrowing, and the Borrower hereby requests
a Loan under the Credit Agreement, and in that connection the Borrower specifies
the following information with respect to the Revolving Borrowing requested
hereby:
(A) Principal amount of Loan: ___________________________
(B) Date of Loan (which is a Business Day): _______________________
(C) Interest Period: ______________________________
(D) Location and number of Borrower's account to which proceeds of Loan are
to be disbursed: ____________________________________
The Borrower hereby represents and warrants that the conditions specified
in paragraphs (a), (b) and (c) of Section 3.2 of the Credit Agreement are
satisfied.
Very truly yours,
PANERA BREAD COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
35
<PAGE>
EXHIBIT 2.4
FORM OF CONTINUATION
___________________, 20____
SunTrust Bank
- ----------------------
Nashville, TN __________
Attention:
Dear Sirs:
Reference is made to the Revolving Credit Agreement dated as of December
____, 2000 (as amended and in effect on the date hereof, the "Credit
Agreement"), among the undersigned, as Borrower, and SunTrust Bank, as Lender.
Terms defined in the Credit Agreement are used herein with the same meanings.
This notice constitutes a Continuation and the Borrower hereby requests the
continuation of a Loan under the Credit Agreement, and in that connection the
Borrower specifies the following information with respect to the Loan to be
continued as requested hereby:
(A) Loan to which this request applies: _________________________________
(B) Principal amount of Loan to be converted/continued: _________________
(C) Effective date of election (which is a Business Day): _______________
(D) Interest Period of resulting Loan: __________________________________
Very truly yours,
PANERA BREAD COMPANY
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
36
<PAGE>
EXHIBIT 3.1(B)(VII)
FORM OF OFFICER'S CERTIFICATE
Reference is made to the Revolving Credit Agreement dated as of December
____, 2000 (the "Credit Agreement"), between Panera Bread Company, as Borrower,
and SunTrust Bank, as Lender. Terms defined in the Credit Agreement are used
herein with the same meanings. This certificate is being delivered pursuant to
Section 3.1(g) of the Credit Agreement.
I, _________________________, _________________________ of the Borrower, DO
HEREBY CERTIFY that:
(a) the representations and warranties of the Borrower set forth in the
Credit Agreement are true and correct on and as of the date hereof; and
(b) no Default or Event of Default has occurred and is continuing at the
date hereof; and
(c) since ____________________, 20____, which is the date of the most
recent financial statements described in Section 5.1(a) of the Credit Agreement,
there has been no change which has had or could reasonably be expected to have a
Material Adverse Effect.
IN WITNESS WHEREOF, I have hereunto signed my name this ___ day of
_______________, 20____.
PANERA BREAD COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
37
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>a2042851zex-23_1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<PAGE>
23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP*
We consent to the incorporation by reference in the registration statements
of Panera Bread Company and Au Bon Pain Co., Inc. on form S-8 (File Nos.
33-41989, 33-41990, 33-46682, 33-46683, 33-96510, 33-96506, 333-01668,
333-31855, 333-31857) and Form S-3 (File Nos. 33-82292 and 333-80927) of our
report dated March 2, 2001 on our audit of the consolidated financial statements
and financial statement schedule of Panera Bread Company as of December 30,
2000, and for each of the three years in the period ended December 30, 2000,
which report is included in the Annual Report on Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------------------------------------------------------
St. Louis, Missouri
March 28, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----