EXHIBIT 2
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT, dated as of June 15, 2004 (this
"Agreement"), by and among Xxxxxx X. Xxxxxxxxxxx, Xxxxxx X. Xxxxxxxxxxx, Xxxxx
X. Xxxxxxxxxxx, Xxxx X. Xxxxxxxxxxx and Xxxx X. Xxxxx (each a "Shareholder" and
together, the "Shareholder Group").
WITNESSETH:
WHEREAS, the Shareholder Group, together with certain controlled
entities, collectively owns 5,181,751 shares of common stock, no par value (the
"Common Stock"), of Quality Dining, Inc., an Indiana corporation (the
"Company"), representing 44.7% of the outstanding shares of Common Stock, plus
exercisable options to purchase 216,002 shares of Common Stock;
WHEREAS, the Shareholder Group proposes to enter into a transaction
with the Company to be structured as a merger (the "Merger") of an entity to be
newly formed by the Shareholder Group ("Merger Corp.") with and into the
Company, with the Company being the surviving corporation pursuant to which (i)
the Company's public shareholders would receive cash in exchange for their
shares of Common Stock and (ii) the members of the Shareholder Group would
maintain their equity investment in the Company (the "Proposal"), such Proposal
to be on substantially the terms and conditions set forth in the proposal letter
attached hereto as Exhibit A (the "Proposal Letter"); and
WHEREAS, the members of the Shareholder Group are entering into this
Agreement to facilitate the implementation of the Proposal;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Joint Filing of Schedule 13D. Each Shareholder will cooperate in
the filing of a joint Schedule 13D with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 which will describe the provisions of
the Proposal and this Agreement, and to that end, will enter into a joint filing
agreement with respect to such Schedule 13D and any necessary amendments
thereto.
2. Actions with Respect to Merger Corp. Each Shareholder will use
his respective reasonable best efforts and cooperate with each other with
respect to the structuring, financing and implementation of the Proposal. To
that end, the Shareholder Group will form Merger Corp. as their vehicle for
carrying out the Proposal. Each Shareholder will contribute to Merger Corp. all
of his right, title and interest in the Common Stock, free and clear of any
lien, in exchange for a proportionate number of shares of common stock of Merger
Corp. In the Merger, the outstanding shares of
common stock of Merger Corp. will be exchanged for an equal number of shares of
new common stock of the Company.
3. Voting Agreement. Following approval by the Board of Directors of
the Company (the "Board") of the Merger and the agreement and plan of merger by
and between Merger Corp. and the Company (the "Merger Agreement"), each
Shareholder will cause his shares of Common Stock to be voted at a meeting of
the shareholders of the Company in favor of the Merger and the Merger Agreement.
Each Shareholder will also vote his shares of Common Stock against any other
proposal submitted to the shareholders of the Company which would be
inconsistent with the terms of this Agreement or the effectuation of the
Proposal.
4. Permission to Disclose; Publicity. Each Shareholder agrees that
the Company and the Shareholder Group may publish and disclose in any documents
filed with any governmental or regulatory authority in connection with any of
the transactions contemplated by this Agreement, including in any Schedule 14A,
Schedule 14C, Schedule 13E-3 or Form 8-K filed in connection with the Proposal
or any of the other transactions contemplated by this Agreement, his identity
and ownership of Common Stock and the nature of his commitments, arrangements
and undertakings contained in this Agreement.
5. Other Representations, Warranties and Covenants. Each Shareholder
(severally and not jointly) hereby represents and warrants to and covenants to
each other Shareholder as follows:
5.1 Power; Binding Agreement. Such Shareholder has the power and
authority to enter into and perform all of such Shareholder's obligations under
this Agreement. The execution, delivery and performance of this Agreement by the
Shareholder does not and will not violate any other agreement to which such
Shareholder is a party including, without limitation, any voting agreement,
shareholder agreement or voting trust. This Agreement constitutes a valid and
binding agreement of such Shareholder, enforceable against such Shareholder in
accordance with its terms.
5.2 Ownership of Stock. Such Shareholder is and at all times through
the closing of the Merger will be the owner, beneficially and of record, of the
number of shares of Common Stock set forth on Exhibit B hereto, free and clear
of any lien, and will transfer to Merger Corp. good and valid title to such
Common Stock free and clear of any lien.
5.3 No Conflicts. None of the execution and delivery of this
Agreement by the Shareholder, the consummation by such Shareholder of the
transactions contemplated hereby or compliance by such Shareholder with any of
the provisions hereof shall (i) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which such Shareholder is a party or by which such Shareholder or
any of such Shareholder's properties or assets may be bound, or (ii) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to such Shareholder or any of such Shareholder's properties or
assets.
5.4 Restriction on Transfers and Proxies and Non-Interference. Such
Shareholder shall not (i) directly or indirectly, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the offer for sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any shares of Common Stock or any interest therein, except to
another member of the Shareholder Group or pursuant to their respective xxxxx or
the laws of descent and distribution; (ii) grant any proxies or powers of
attorney, deposit any shares of Common Stock into a voting trust or enter into a
voting agreement with respect to any shares of Common Stock that would be
inconsistent with this Agreement; or (iii) take any action that would make any
representation or warranty of such Shareholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Shareholder from
performing any of such Shareholder's obligations under this Agreement or in any
of such Shareholder's respective capacities as a shareholder of the Company.
5.5 Waiver of Appraisal Rights. Such Shareholder hereby waives any
rights of appraisal or rights to dissent from the Merger that he may have.
6. Termination. This Agreement shall terminate, and the transactions
contemplated hereby shall be abandoned, upon the earlier of (i) the decision of
Xxxxxx X. Xxxxxxxxxxx to disband the Shareholder Group; (ii) the date 12 months
following the date of this Agreement; (iii) the formal rejection of the Proposal
by the Board or any committee of the Board formed to evaluate and negotiate the
Proposal and a refusal by the Board or such committee to continue negotiations
with the Shareholder Group; (iv) the termination of the Merger Agreement in
accordance with its terms; or (v) the date upon which the Merger becomes
effective.
7. Miscellaneous.
7.1 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among any of the parties with respect to the subject matter hereof.
7.2 Expenses. The parties hereto agree that, whether or not the
transactions contemplated hereby are consummated, each Shareholder will pay such
Shareholder's own costs and expenses (including the fees and expenses of legal
counsel, financial advisors and other experts) incurred in connection with the
negotiation, execution and delivery of this Agreement and the performance of its
terms, including in connection with the evaluation, negotiation, documentation
and effectuation of the Proposal; provided, however, that (i) the costs and
expenses incurred with respect to the engagement of any advisors by the
Shareholder Group and (ii) any commitment and other
similar fees and expenses paid to potential sources of financing for the
Proposal will be shared equally by the Shareholder Group to the extent not paid
or reimbursed by the Company.
7.3 Assignment. This Agreement shall not be assigned by any
Shareholder without the prior written consent of the other parties hereto and no
rights, or any direct or indirect interest herein, shall be transferable
hereunder without the prior written consent of the other parties hereto.
7.4 Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties to be
bound thereby.
7.5 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given if
delivered personally or by facsimile transmission or mail (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Xxxxxx X. Xxxxxxxxxxx:
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
If to Xxxxxx X. Xxxxxxxxxxx:
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
If to Xxxxx X. Xxxxxxxxxxx:
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
If to Xxxx X. Xxxxxxxxxxx:
State House of Indiana
000 X. Xxxxxxxxxx, Xxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
If to Xxxx X. Xxxxx:
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
in each case, with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.6 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
7.7 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specified terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
7.8 Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
7.9 No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder or thereunder, and any custom or
practice of the parties at variance with the terms hereof or thereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
7.10 No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
7.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without giving
effect to the principles of conflicts of law thereof.
7.12 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
7.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by each party
hereto as of the date first above written.
/s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxxxx
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Xxxxx X. Xxxxxxxxxxx
/s/ Xxxx X. Xxxxxxxxxxx
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Xxxx X. Xxxxxxxxxxx
/s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
EXHIBIT A
PROPOSAL LETTER
Xxxxxx X. Xxxxxxxxxxx
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
June 15, 2004
Board of Directors
Quality Dining, Inc.
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Gentlemen:
I am pleased to present to the Board of Directors this proposal for
a transaction in which the public shareholders of the Company will have the
opportunity to receive a cash payment representing an attractive premium to
current market value in exchange for their shares of common stock (the
"Proposal"). To that end, I have assembled a group of Company shareholders
consisting of Xxxxxx X. Xxxxxxxxxxx, Xxxxx X. Xxxxxxxxxxx, Xxxx X. Xxxxxxxxxxx,
Xxxx X. Xxxxx and myself and certain of our controlled entities (collectively,
the "Shareholder Group") who together own 44.7% of the outstanding shares (and
45.7% including their stock options). While the members of the Shareholder Group
are prepared to acquire the Company as contemplated by the Proposal, we are not
interested in selling our stake to a third party, whether in connection with a
sale of the Company or otherwise. We also anticipate that other members of the
Company's management may join the Shareholder Group prior to consummation of the
transaction.
The proposed transaction would be effected by means of a merger of a
newly-formed entity into the Company, with the Company surviving as a
privately-held corporation (the "Merger"). In the Merger, the Company's public
shareholders would receive $2.75 in cash in exchange for each of their shares,
while members of the Shareholder Group would retain their equity interests in
the Company. The Proposal represents a 23% premium over the closing price of the
common stock on June 14, 2004 and, as such, offers the Company's shareholders
full and fair value. It is our present intention, following the Merger, to
maintain the status of the Company as an independent multi-concept restaurant
operator, to continue to cause the principal operations of the Company to be
centered in Mishawaka, Indiana, and to keep the Company's business organization
substantially intact.
We believe that the Proposal presents an excellent opportunity for
the Company's shareholders to realize a premium for their shares at a fair price
while allowing management to focus on the implementation of important strategic
goals without having also to address the burdens and costs of being a public
company. These costs have significantly increased with the passage of the
Xxxxxxxx-Xxxxx Act and the related regulations promulgated by the Securities and
Exchange Commission and Nasdaq and, in fact, compliance will become even more
expensive and burdensome with the approaching phase-in of new rules relating to
internal control procedures. All this is compounded by the fact that the
Company's stock suffers from minimal public float and trading volume, a lack of
research coverage by analysts and the negative perception associated with being
a restaurant franchisee. Therefore, this is an opportune time for the public
shareholders to cash out their shares and the Company to be relieved of the
burdens of being a public corporation.
We are prepared to commence negotiations immediately with respect to
a binding, definitive agreement to effectuate the Merger. To assist us, the
Shareholder Group has retained Bank of America Securities as our financial
advisor and Milbank, Tweed, Xxxxxx & XxXxxx LLP as our special corporate
counsel. As is customary for a transaction of this nature, the Proposal is
subject to the availability of the necessary financing at closing. The Company's
current bank group has provided us with written commitments for funding, copies
of which are attached to this letter, both to finance the Merger and to
refinance the Company's existing bank debt. This financing will be subject only
to normal closing conditions. In addition, the Shareholder Group has agreed with
the bank group to contribute $5 million in the form of subordinated debt and/or
equity to the financing of the Merger. The Company's existing mortgage financing
would remain in place as it does not accelerate upon a purchase of the Company
by me.
The Merger is subject to the approval of the Board and the
shareholders. We assume that if the Board decides to pursue the proposed
transaction, it will establish a special committee of independent directors for
the purpose of negotiating the Merger with the Shareholder Group and presenting
its recommendations to the full Board. We also assume that the committee will
retain an independent investment banking firm to render a fairness opinion with
respect to the price to be paid to the public shareholders in the Merger. The
Proposal is also subject to compliance with any applicable federal and state
regulatory requirements as well as to obtaining approvals from the Company's
franchisors. We do not anticipate that satisfaction of these regulatory
requirements or obtaining any of these approvals will interfere with or
unreasonably delay consummation of the Merger.
The Proposal remains subject to the negotiation and execution of a
definitive Merger agreement and creates no rights in favor of the Company or any
member of the Shareholder Group with respect to the Proposal or the Merger. A
binding commitment with respect to the Proposal and the Merger will result only
from execution of a definitive agreement, subject to the conditions expressed
therein. We are submitting the Proposal on the basis and with the expectation
that a meeting of the Board to give initial consideration to the Proposal will
be held as soon as reasonably practicable and that we will receive an indication
whether or not the Board is prepared to proceed with a good faith consideration
of the Proposal immediately following that meeting.
We expect that the Company will issue a press release with respect
to the Proposal. As you can appreciate, the representatives of the Shareholder
Group should be given an opportunity in advance to review and comment on such
press release and any related public filings. Similarly, the members of the
Shareholder Group will be filing a Schedule 13D with the SEC with respect to the
Proposal and the proposed Merger and the arrangements they have entered into
with respect thereto.
If you wish to discuss any aspect of the Proposal or this letter
further, please feel free to contact the undersigned. I can arrange for
appropriate representatives of the Shareholder Group to appear before the Board
or a special committee of the Board to discuss the Proposal in greater detail.
The Shareholder Group believes that our Proposal is in the best
interests of the Company and will be attractive to the Company's public
shareholders. It is our view that providing a premium to our public shareholders
and operating the Company as a private enterprise is the best alternative for
all concerned.
Thank you in advance for your consideration of this letter and our
Proposal. We look forward to hearing from you shortly.
Very truly yours,
/s/ Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxxxxxxx
[JPMORGAN LOGO]
Senior Secured Credit Facilities
Commitment Letter
June 10, 2004
Xxxxxx X. Xxxxxxxxxxx
c/o Quality Dining, Inc.
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxxxxxxx:
You have requested that X.X. Xxxxxx Securities Inc., hereinafter
referred to as "JPMorgan" agree to structure, arrange and syndicate senior
secured credit facilities in an aggregate principal amount of up to $50,000,000
(the "Facilities"), consisting of a revolving credit facility of up to
$20,000,000 (the "Revolver") and a term loan facility of up to $30,000,000 (the
"Term Loan") for a company to be formed by you, certain members of management of
Quality Dining, Inc. and others (the "Borrower"), and that JPMorgan Chase Bank
("JPMCB"), commit to provide a portion of the Facilities and to serve as
administrative agent ("Administrative Agent") for the Facilities.
JPMorgan is pleased to advise you that it is willing to act as
exclusive advisor, lead arranger, and bookrunner for the Facilities.
Furthermore, JPMCB is pleased to advise you of (a) its commitment to
provide up to $12,500,000 of the Facilities, and (b) its agreement to use
commercially reasonable efforts to assemble a syndicate of financial
institutions identified by JPMorgan and JPMCB in consultation with you, to
provide the balance of the necessary commitments for the Facilities, in each
case upon the terms and subject to the conditions set forth or referred to in
this commitment letter (the "Commitment Letter") and in the Summary of Terms and
Conditions attached hereto as Exhibit A (the "Term Sheet"). It is a condition to
JPMCB's commitment hereunder that the portion of the Facilities not being
provided by JPMCB shall be provided by the other Lenders referred to below.
It is agreed that JPMCB will act as the sole and exclusive
Administrative Agent, and that JPMorgan will act as the sole and exclusive
advisor, lead arranger, and bookrunner (in such capacity, the "Arranger"), for
the Facilities, and each will, in such capacities, perform the duties and
exercise the authority customarily performed and exercised by it in such roles.
You agree that no other agents, co-agents or arrangers will be appointed, no
other titles will be awarded and no compensation (other that expressly
contemplated by the Term Sheet and the Fee Letter referred to below) will be
paid in connection with the Facilities unless you and we shall so agree, except
that Bank of America shall be "Syndication Agent" and National City Bank shall
be "Documentation Agent."
We intend to syndicate the Facilities (including, in our discretion,
all or part of JPMCB's commitment hereunder) to a group of financial
institutions (together with JPMCB, the "Lenders") identified by us in
consultation with you. JPMorgan intends to commence syndication efforts promptly
upon the execution of this Commitment Letter, and you agree actively to assist
JPMorgan in completing a syndication satisfactory to it. Such assistance shall
include (a) your using commercially reasonable efforts to ensure that the
syndication efforts benefit materially from your existing lending relationships,
(b) direct contact between senior management and advisors of the Borrower and
the proposed Lenders, (c) assistance in the preparation of a Confidential
Information Memorandum and other marketing materials to
Quality Dining, Inc.
June 10, 2004
Page 2
be used in connection with the syndication and (d) the hosting, with JPMorgan,
of one or more meetings of prospective Lenders.
As the Arranger, JPMorgan will manage all aspects of the syndication,
including, in consultation with you, decisions as to the selection of
institutions to be approached and when they will be approached, when their
commitments will be accepted, which institutions will participate, the
allocations of the commitments among the Lenders and the amount and distribution
of fees among the Lenders. In acting as the Arranger, JPMorgan will have no
responsibility other than to arrange the syndication. To assist JPMorgan in its
syndication efforts, you agree promptly to prepare and provide to JPMorgan and
JPMCB all information with respect to the Borrower and the transactions
contemplated hereby, including all financial information and projections (the
"Projections"), as we may reasonably request in connection with the arrangement
and syndication of the Facilities. You hereby represent and covenant that (a)
all information other than the Projections (the "Information") that has been or
will be made available to JPMCB or JPMorgan by you or any of your
representatives is or will be, when furnished, complete and correct in all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made and (b) the Projections
that have been or will be made available to JPMCB or JPMorgan by you or any of
your representatives have been or will be prepared in good faith based upon
reasonable assumptions. You understand that in arranging and syndicating the
Facilities we may use and rely on the Information and Projections without
independent verification thereof.
As consideration for JPMCB's commitment hereunder and JPMorgan's
agreement to perform the services described herein, you agree to pay to JPMCB
the nonrefundable fees set forth in the Fee Letter dated the date hereof and
delivered herewith (the "Fee Letter").
JPMCB's commitment hereunder and JPMorgan's agreement to perform the
services described herein are subject to (a) there not occurring or becoming
known to us any material adverse condition or material adverse change in or
affecting the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower or of Quality Dining, Inc. ("QDI") and its
subsidiaries, taken as a whole, (b) our completion of and satisfaction in all
respects with a due diligence investigation of the Borrower and of QDI and its
subsidiaries, (c) our not becoming aware after the date hereof of any
information or other matter affecting the Borrower, QDI or its subsidiaries or
the transactions contemplated hereby which is inconsistent in a material and
adverse manner with any such information or other matter disclosed to us prior
to the date hereof, (d) there not having occurred a material disruption of or
material adverse change in financial, banking or capital market conditions that,
in our judgment, could materially impair the syndication of the Facilities, (e)
our satisfaction that prior to and during the syndication of the Facilities
there shall be no competing offering, placement or arrangement of any debt
securities or bank financing by or on behalf of the Borrower or any affiliate
thereof, except as contemplated by the Term Sheet, (f) the negotiation,
execution and delivery on or before November 30, 2004 of definitive
documentation with respect to the Facilities satisfactory to JPMCB and its
counsel and (g) the other conditions set forth or referred to in the Term Sheet.
The terms and conditions of JPMCB's commitment hereunder and of the Facilities
are not limited to those set forth herein and in the Term Sheet. Those matters
that are not covered by the provisions hereof and of the Term Sheet are subject
to the approval and agreement of JPMCB, JPMorgan and the Borrower.
You agree to indemnify and hold harmless JPMCB, JPMorgan, their
respective affiliates and their respective officers, directors, employees,
advisors, and agents (each, an "indemnified person") from and against any and
all losses, claims, damages and liabilities to which any such indemnified person
may become subject arising out of or in connection with this Commitment Letter,
the Facilities, the use of the proceeds thereof or any related transaction or
any claim, litigation, investigation or proceeding relating to any of the
foregoing, regardless of whether any indemnified person is a party thereto, and
to reimburse each indemnified person upon demand for any legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified person,
apply to losses, claims, damages, liabilities or related expenses to the extent
they arise from the willful misconduct or gross negligence of such indemnified
person. YOU AGREE THAT
Quality Dining, Inc.
June 10, 2004
Page 3
THE INDEMNITY CONTAINED IN THE PRECEDING SENTENCE EXTENDS TO AND IS INTENDED TO
COVER LOSSES AND RELATED EXPENSES ARISING OUT OF THE ORDINARY, SOLE OR
CONTRIBUTORY NEGLIGENCE OF ANY INDEMNIFIED PERSON. You also agree to reimburse
JPMCB, JPMorgan and their affiliates on demand for all out-of-pocket expenses
(including due diligence expenses, syndication expenses, travel expenses, and
reasonable fees, charges and disbursements of counsel) incurred in connection
with the Facilities and any related documentation (including this Commitment
Letter, the Term Sheet, the Fee Letter and the definitive financing
documentation) or the administration, amendment, modification or waiver thereof.
No indemnified person shall be liable for any damages arising from the use by
others of Information or other materials obtained through electronic,
telecommunications or other information transmission systems or for any special,
indirect, consequential or punitive damages in connection with the Facilities.
This Commitment Letter shall not be assignable by you without the prior
written consent of JPMCB and JPMorgan (and any purported assignment without such
consent shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
you, JPMCB and JPMorgan. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of manually executed counterpart hereof. This Commitment Letter and the
Fee Letter are the only agreements that have been entered into among us with
respect to the Facilities and set forth the entire understanding of the parties
with respect thereto. This Commitment Letter shall be governed by, and construed
in accordance with, the laws of the State of Texas.
You acknowledge that JPMCB, JPMorgan and their affiliates may be
providing debt financing, equity capital or other services (including financial
advisory services) to other companies in respect of which you may have
conflicting interests regarding the Transaction and otherwise. JPMCB and
JPMorgan agree on behalf of themselves and their affiliates that they will not
use confidential information obtained from you by virtue of the Transaction or
its other relationships with you in connection with the performance by JPMCB or
JPMorgan of services for other companies, and JPMCB and JPMorgan will not
furnish any such information to other companies. You also acknowledge that JPMCB
and JPMorgan have no obligation to use in connection with the Transaction, or to
furnish to you, confidential information obtained from other companies.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers or their advisors, agents and advisors
who are directly involved in the consideration of this matter or (b) as may be
compelled in a judicial or administrative proceeding or as otherwise required by
law (in which case you agree to inform us promptly thereof), provided, that the
foregoing restrictions shall cease to apply (except in respect of the Fee Letter
and its terms and substance) after this Commitment Letter has been accepted by
you.
The reimbursement, indemnification and confidentiality provisions
contained herein and in the Fee Letter shall remain in full force and effect
regardless of whether definitive financing documentation shall be executed and
delivered and notwithstanding the termination of this Commitment Letter or
JPMCB's commitment hereunder.
In order to enable JPMorgan and JPMCB to bring relevant expertise to
bear on their engagements under this agreement from among their global
affiliates, you agrees that JPMorgan and JPMCB may perform the services
contemplated hereby in conjunction with their affiliates, and that any JPMorgan
or JPMCB affiliates performing services hereunder shall be entitled to the
benefits and subject to the terms of this agreement.
THIS COMMITMENT LETTER, THE ATTACHED TERM SHEET, THE FEE LETTER AND ALL
EXHIBITS, SCHEDULES AND OTHER ATTACHMENTS HERETO AND THERETO CONSTITUTE A
Quality Dining, Inc.
June 10, 2004
Page 4
"LOAN AGREEMENT" FOR PURPOSES OF SECTION 26.02 OF THE TEXAS BUSINESS AND
COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., Houston time, on June 11, 2004. JPMCB's commitment and
JPMorgan's agreements herein will expire at such time in the event JPMCB has not
received such executed counterparts in accordance with the immediately preceding
sentence.
JPMCB and JPMorgan are pleased to have been given the opportunity to
assist you in connection with this important financing.
Very truly yours,
JPMORGAN CHASE BANK
By:
-------------------------------
Name:
Title:
X.X. XXXXXX SECURITIES INC.
By:
-------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Managing Director
Accepted and agreed to as of
the date first written above by:
By:
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
EXHIBIT A
SUMMARY OF TERMS AND CONDITIONS
JUNE 10, 2004
CAPITALIZED TERMS NOT DEFINED HEREIN SHALL BE DEFINED ACCORDING TO THE FOURTH
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED MAY 30, 2002 BY AND AMONG
QUALITY DINING, INC. AND GAGHC, INC., AS BORROWERS, XX XXXXXX, AS ADMINISTRATIVE
AGENT, AND THE BANKS PARTY THERETO (THE "QDI CREDIT AGREEMENT").
FACILITIES: A. $ 20,000,000 Revolving Credit Facility ("Revolver").
B. $ 30,000,000 Term Loan ("Term Loan", together the
"Facilities").
BORROWER: A COMPANY TO BE FORMED BY XXXXXX X. XXXXXXXXXXX, CERTAIN
MEMBERS OF MANAGEMENT OF Quality Dining, Inc. and others
("NEWCO") and after the consummation of the Subject
Acquisition, Quality Dining, Inc. ("QDI")
GUARANTORS: UPON CONSUMMATION OF THE SUBJECT ACQUISITION (AS DEFINED
BELOW), All current and future wholly-owned subsidiaries of
QDI, except for wholly-owned subsidiaries of QDI which in
aggregate have assets of less than $500,000.
Personal guaranty of Xxxxxx X. Xxxxxxxxxxx. The guaranty will
be released when the Senior Leverage Ratio is less than 3.50x
for two consecutive quarters and the Senior Leverage covenant
upon release of the guaranty is no higher than 4.00x.
BOOK MANAGER &
LEAD ARRANGER: X.X. Xxxxxx Securities Inc. ("JPMorgan").
AGENT: JPMorgan Chase Bank ("JPMCB") as Administrative Agent for a
syndicate of lenders (the "Lenders"). Subject to the
conditions outlined herein, JPMC will commit up to $12,500,000
of the Facilities and to arrange the remaining portion from
lenders acceptable to the Borrower, JPMCB and JPMorgan on a
best efforts basis.
PURPOSE: Up to $14,000,000 may be used to fund a portion of the
purchase price paid to acquire QDI, through an acquisition of
stock and/or a merger (the "Subject Acquisition"). Upon
consummation of the Subject Acquisition, the facilities will
also be used to repay existing debt under QDI's existing
$60,000,000 Revolver and for general corporate purposes. The
Revolver may be used for standby letters of credit in an
aggregate amount not to exceed $6,000,000.
MATURITY: A. November 1, 2009.
B. November 1, 2009.
SCHEDULED
AMORTIZATION: A. Subject to compliance with the terms of the Facility, the
Borrower may borrow, repay and reborrow at any time prior
to Maturity. The full balance will be due at Maturity.
B. Equal quarterly payments based on annual amortization amounts of:
FISCAL YEAR AMOUNT ($)
2005 5,000,000
2006 5,000,000
2007 5,000,000
2008 5,000,000
2009 5,000,000
Maturity 5,000,000
INTEREST RATE
AND UNUSED FEES: At the Borrower's option: (i) the Base Rate (greater of (a)
Agent's Prime Rate or (b) the federal funds rate plus 1/2%)
plus the Base Rate Margin, or (ii) the LIBOR Rate for selected
interest periods of one, two, three, or six months plus the
LIBOR Margin. The Base Rate and LIBOR Margins will be
determined by the ratio of Funded Senior Debt to Pro Forma
Consolidated Cash Flow as shown in the table below.
UNUSED
SENIOR LEVERAGE BASE RATE LIBOR COMMITMENT
RATIO MARGIN MARGIN FEES
x > 4.25 2.00% 3.75% 0.500%
-
x > 4.00 1.75% 3.50% 0.500%
-
x > 3.75 1.50% 3.25% 0.500%
-
x > 3.50 1.25% 3.00% 0.500%
-
x > 3.00 1.00% 2.75% 0.500%
-
x > 2.50 0.50% 2.25% 0.500%
-
x > 2.00 0.25% 2.00% 0.375%
-
2.00 < x 0.00% 1.75% 0.375%
SECURITY: The Facilities will be secured by a first priority, perfected
security interest in (i) all existing and acquired collateral
including, but not limited to, substantially all of the
personal property of the Borrower and its subsidiaries and the
stock of subsidiaries, except where prohibited by contractual
obligations (e.g., stock of Bravokilo and Bravogrand cannot be
pledged as a result of a prohibition in the Franchise
Agreement with Burger King) and except for subsidiaries with
an aggregate value of less than $500,000, and (ii) all
currently unencumbered and all new restaurant properties and
associated assets. Borrower will obtain, for the benefit of
the Banks, Intercreditor Agreements substantially similar to
the existing Intercreditor Agreement among the Borrower, the
Lenders and Burger King Corporation, the existing Consent to
Collateral Agreement among the Borrower, the Lenders and
Xxxxxxx International, and the existing Intercreditor
Agreements with mortgage lenders currently in effect for the
benefit of the lenders to QDI. A summary of the collateral is
shown in Exhibit I.
CONDITIONS
PRECEDENT: Usual and customary for transactions of this nature including,
but not limited to the following:
- Issuance of Subordinated Debt ("Subordinated Debt") and/or
equity, on terms acceptable to JPMorgan and JPMCB, by Newco
in a minimum amount of $5,000,000. The Subordinated Debt
will have a maturity no earlier than May 1, 2010. There
shall be no cash interest payment made on the Subordinated
Debt until the Senior Leverage Ratio is less than 3.50x for
two consecutive quarters, and no default would be created
by such payment. There shall be no scheduled amortization
or voluntary prepayments on the Subordinated Debt. There
shall be no security pledged by the Borrower to the
Subordinated Debt holder, and there shall be no action
taken by the holder with regard to acceleration or
foreclosure rights until the full repayment of the
Facilities.
- Maximum Senior Leverage Ratio at closing of 4.00x,
- Minimum Pro Forma Consolidated Cash Flow at closing of
$23,200,000 for the trailing twelve months,
- Documentation in respect of the Subject Acquisition and the
Facilities in form and substance satisfactory to the Agent,
- Payment by the Borrower of all fees and expenses,
- Receipt of notice of borrowing,
- Representations and warranties are true and correct,
- No default, event of default or material adverse occurrence
shall have occurred and be continuing, and
- The making of the advances by the Lenders shall not be in
violation of any law, regulation, or similar provision of
any court or governmental authority.
REPRESENTATIONS &
WARRANTIES: Substantially the same as in the QDI Credit Agreement
including, but not limited to the following:
- Organization of Borrowers, good standing, qualification,
licenses and permits, and etc.
- Due authorization, no conflicts, and etc.,
- Subsidiaries, qualification, ownership, licenses and
permits, and etc.
- Validity of documentation,
- Financial statements of Borrower and Guarantors,
- Litigation, judgments, and etc.,
- Compliance with law,
- ERISA compliance,
- Title to assets,
- Indebtedness,
- Use of proceeds,
- Margin stock,
- Investment Company Act
- Unregistered securities,
- Public Utility Holding Company Act,
- Accuracy of information,
- Tax returns, audits,
- Environmental and safety regulations,
- Forecasts, Solvency,
- No default, and
- Subsidiary guarantors.
AFFIRMATIVE
COVENANTS: Substantially the same as in the QDI Credit Agreement,
including, but not limited to the following:
- Financial statements and information of Borrower and
Guarantors,
- Maintenance of existence, good standing, etc.,
- Payment of taxes, etc.,
- Compliance with laws,
- Books and records,
- Insurance,
- Conduct of business,
- Nature of business,
- ERISA,
- Changes to GAAP, certification, notification,
- Use of proceeds,
- Subsidiary guaranty,
- Security documents, and
- Survival of representations and warranties.
FINANCIAL
COVENANTS: The financial covenants will be calculated in substantially
the same form as in the QDI Credit Agreement. The calculations
will be based on GAAP as of the Closing Date, excluding the
effects of the consolidation as it relates to affiliated real
estate partnerships, whether now existing or hereafter entered
into upon terms substantially similar to those contained in
the existing partnerships, in which the Borrower has no
ownership interest and has no obligation to repay or guarantee
any obligation of such entity.
Revised Definition - "Pro Forma Consolidated Cash Flow" shall
mean, for any period for which the amount thereof is to be
determined, Consolidated Cash Flow of the Borrower and its
Subsidiaries during such period; provided that (i) in respect
of any Acquisition consummated during such period the
Consolidated Cash Flow thereof shall be calculated on a pro
forma basis as if such Acquisition had occurred on the first
day of such period, and (ii) in respect of any Property
developed during such period, the Consolidated Cash Flow of
such Property shall be an amount equal to the average
Consolidated Cash Flow, for the preceding twelve (12) month
period, of all other Properties of the Borrower of the same
brand, similar type and store configuration which have been
open for business for one year or more.
- Fixed Charge Coverage Ratio. The ratio of (i) the sum of
Consolidated Cash Flow and rent expense to (ii) the sum of
cash interest expense, rent expense, capital lease
obligations paid, and scheduled principal payments shall
not be less than 1.20x for any 12-month period. The
incurrence of new operating lease obligations shall be
conditioned upon pro forma compliance with the fixed charge
coverage ratio.
- Senior Leverage Ratio. The ratio of (i) Funded Senior Debt
to (ii) Pro Forma Consolidated Cash Flow shall not exceed
the amounts specified below for the applicable period:
PERIOD MAXIMUM SENIOR
LEVERAGE RATIO
Closing through 2Q05 4.50x
3Q05 through 4Q05 4.00x
1Q06 through 2Q06 3.75x
3Q06 through 4Q06 3.50x
1Q07 through 4Q07 3.00x
1Q08 through 4Q08 2.50x
Thereafter 2.00x
- Capital Expenditures. Capital Expenditures shall be limited
to the following annual amounts:
FISCAL YEAR AMOUNT ($)
2005 7,500,000
2006 4,500,000
Thereafter 3,500,000
To the extent that the Senior Leverage Ratio is less than
3.50x for two consecutive quarters and the Senior Leverage
covenant is less than 4.00x, the annual limit for Capital
Expenditures per fiscal year shall increase to $7,500,000.
NEGATIVE
COVENANTS: The negative covenants will be in substantially the same form
as in the QDI Credit Agreement, and shall include the
following:
- Indebtedness. None except:
- Permitted existing indebtedness,
- Indebtedness related to the Facilities,
- Permitted rate hedging indebtedness, and
- Other unsecured indebtedness less than $1MM in the
aggregate.
- Liens. None except:
- Existing liens,
- Liens related to the Facilities, and
- Intercompany liens
- Sales of Assets. None, subject to certain permitted
dispositions.
- Mergers and Consolidations. None, subject to certain
exceptions.
- Preferred Stock of Subsidiaries. None, subject to certain
exceptions.
- Disposition of Securities of a Subsidiary. None, subject to
certain exceptions.
- Investments. None, subject to certain exceptions including
qualifying money market instruments, investments in
wholly-owned subsidiaries, and existing investments.
- Transactions with Affiliates. None, subject to certain
exceptions. Lease agreements with Affiliates will not be
amended without the approval of Majority Lenders.
- Owners' Compensation -- Limitations on owners' compensation
TBD.
- Acquisitions. None, except for those related to the
operation and development of Burger King restaurants and/or
Chili's Grill and Bar restaurants.
- SPE. Limitation on SPE activities to the existing mortgage
transaction.
- Rate Hedging Obligation. None, except those entered into on
commercially reasonably terms in the ordinary course of
business and not for speculative purposes.
- Franchise Agreements. No terminations, amendments,
modifications, etc. which results in a material adverse
occurrence.
EVENTS OF
DEFAULT: Usual and customary for transactions of this nature,
including, but not limited to the following:
- Default in the payment of principal of the Facilities
notes.
- Default in the payment of interest or fees related to the
Facilities, subject to a five day cure period.
- Default with respect to any covenant regarding maintenance
of existence and good standing, maintenance of insurance,
financial covenants, or any negative covenant.
- Default, other than as described above, with respect to any
other provision of the Facilities, subject to a 30-day cure
period.
- Cross default to any indebtedness in excess of $500,000.
- Customary provisions regarding bankruptcy, liquidation, and
etc.
- Unstayed judgments in excess of $500,000.
- Any representation or warranty shall have been untrue in
any material respect.
- Default with respect to any guaranty by any subsidiary with
respect to the Facilities.
- The occurrence of a change of control.
- Any security document related to the Facilities shall cease
to be in full force and effect.
ASSIGNMENTS AND
PARTICIPATIONS: Usual and customary.
YIELD PROTECTION: Usual and customary.
INDEMNITIES: Usual and customary.
AMENDMENTS AND
WAIVERS: 51% vote required, subject to customary exceptions requiring
100% approval.
GOVERNING LAW: State of Indiana.
EXHIBIT I
SUMMARY OF COLLATERAL
REAL ESTATE COLLATERAL SUMMARY
BANK COLLATERAL
-----------------------------------------
Fee Ground
AS OF: 4-28-04 Property Lease Lease Total
-----------------------------------------
BURGER KING 5 4 52 61
CHILI'S 2 9 8 19
ITALIAN DINING 5 4 0 9
XXXXX'X 1 0 0 1
-----------------------------------------
TOTAL 13 17 60 90
LASALLE BANK N.A. [LASALLE BANK LOGO]
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
June 14, 2004
X.X. Xxxxxx Securities Inc.
000 Xxxxxx, 0-XXXX-00
Xxxxxxx, XX 00000
Ladies and Gentlemen:
We refer to the Summary of Terms and Conditions for Newco included in the
Confidential Information Memorandum dated June 2004. Subject only to
satisfactory documentation, we are pleased to commit $4,000,000 to the
$20,000,000 Revolving Credit Facility and $6,000,000 to the $30,000,000 Term
Loan. We understand that allocations will be made at the discretion of Newco and
X.X. Xxxxxx Securities Inc.
Furthermore, we represent that our commitment represents a commitment from our
institution and does not in any way include a commitment or other arrangement
from any other non-affiliated institution. Lastly, we acknowledge and agree that
no secondary selling or offers to purchase will occur until such time as the
Agent declares the preliminary syndication to be complete.
Very truly yours,
/s/ Xxxxx X. Xxxxx
Authorized Officer: Xxxxx X. Xxxxx
Title: Senior Vice President
Lender: LaSalle Bank NA
Telephone Number: 000-000-0000
June 11, 2004
X.X. Xxxxxx Securities Inc.
000 Xxxxxx, 0-XXXX-00
Xxxxxxx, XX 00000
Ladies and Gentlemen:
We refer to the Summary of Terms and Conditions for Newco included in the
Confidential Information Memorandum dated June 2004. Subject only to
satisfactory documentation, we are pleased to commit $3,400,000 to the
$20,000,000 Revolving Credit Facility and $5,100,000 to the $30,000,000 Term
Loan. We understand that allocations will be made at the discretion of Newco and
X.X. Xxxxxx Securities Inc.
Furthermore, we represent that our commitment represents a commitment from our
institution and does not in any way include a commitment or other arrangement
from any other non-affiliated institution. Lastly, we acknowledge and agree that
no secondary selling or offers to purchase will occur until such time as the
Agent declares the preliminary syndication to be complete.
Very truly yours,
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X Xxxxxx
Vice President, National City Bank
Telephone Number: (000) 000-0000
June 14, 2004
X.X. Xxxxxx Securities Inc.
000 Xxxxxx, 0-XXXX-00
Xxxxxxx, XX 00000
Ladies and Gentlemen:
We refer to the Summary of Terms and Conditions for Newco included in the
Confidential Information Memorandum dated June 2004. Subject only to
satisfactory documentation, we are pleased to commit $3,334,000 to the
$20,000,000 Revolving Credit Facility and 5,001,000 to the $30,000,000 Term
Loan. We understand that allocations will be made at the discretion of Newco and
X.X. Xxxxxx Securities Inc.
Furthermore, we represent that our commitment represents a commitment from our
institution and does not in any way include a commitment or other arrangement
from any other non-affiliated institution. Lastly, we acknowledge and agree that
no secondary selling or offers to purchase will occur until such time as the
Agent declares the preliminary syndication to be complete.
Very truly yours,
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Vice President
The Northern Trust Company
000-000-0000
Bank of America
Restaurant Finance Group
GA1-006-13-20
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, Xxxxxxx 00000-0000
June 15, 2004
X.X. Xxxxxx Securities Inc.
000 Xxxxxx, 0-XXXX-00
Xxxxxxx, XX 00000
Ladies and Gentlemen:
We refer to the Summary of Terms and Conditions for Newco included in the
Confidential Information Memorandum dated June 2004. Subject only to the
following:
- Satisfactory documentation, and
- Syndication Agent title,
we are pleased to commit up to $5,000,000 to the $20,000,000 Revolving Credit
Facility and up to $7,500,000 to the $30,000,000 Term Loan, and in no event
shall Bank of America's allocation be less than the Agent.
Furthermore, we represent that our commitment represents a commitment from our
institution and does not in any way include a commitment or other arrangement
from any other non-affiliated institution. Lastly, we acknowledge and agree that
no secondary selling or offers to purchase will occur until such time as the
Agent declares the preliminary syndication to be complete.
Very truly yours,
/s/ Xxxxx X. Xxxxxx, Xx.
Xxxxx X. Xxxxxx, Xx.
Vice President
Bank of America
000-000-0000
EXHIBIT B
STOCK OWNERSHIP TABLE
SHAREHOLDER SHARES OF COMMON STOCK EXERCISABLE OPTION SHARES
----------- ---------------------- -------------------------
Xxxxxx X. Xxxxxxxxxxx 3,929,073 23,200
Xxxxxx X. Xxxxxxxxxxx 233,746 48,162
Xxxxx X. Xxxxxxxxxxx 347,445 48,904
Xxxx X. Xxxxxxxxxxx 497,131 20,000
Xxxx X. Xxxxx 174,356 75,736
