SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended May 12, 2002
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______________ to ____________________
Commission file number 0-23420
QUALITY DINING, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1804902
- -------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4220 Edison Lakes Parkway, Mishawaka, Indiana 46545
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(Address of principal executive offices and zip code)
(574) 271-4600
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __X____ No ________
The number of shares of the registrant's common stock outstanding as of
June 20, 2002 was 11,489,099.
QUALITY DINING, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MAY 12, 2002
INDEX
Page
PART I. - Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Statements of Operations....................3
Consolidated Balance Sheets..............................4
Consolidated Statements of Cash Flows....................5
Notes to Consolidated Financial Statements...............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........18
Part II - Other Information
Item 1. Legal Proceedings.......................................29
Item 2. Changes in Securities...................................29
Item 3. Defaults upon Senior Securities.........................29
Item 4. Submission of Matters to a Vote of Security Holders.....29
Item 5. Other Information.......................................29
Item 6. Exhibits and Reports on Form 8-K........................29
Signatures........................................................29
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 12, May 13, May 12, May 13,
2002 2001 2002 2001
Revenues: ------ ------ ------ ------
Burger King $ 28,262 $ 17,452 $ 63,806 $ 39,959
Chili's Grill & Bar 17,695 15,816 40,249 36,480
Grady's American Grill 12,294 14,876 29,480 34,788
Italian Dining Division 3,918 4,070 9,137 9,258
------- ------- ------- -------
Total revenues 62,169 52,214 142,672 120,485
------- ------- ------- -------
Operating expenses:
Restaurant operating expenses:
Food and beverage 17,834 14,770 40,816 34,028
Payroll and benefits 18,202 15,208 42,863 35,225
Depreciation and amortization 2,495 2,662 5,728 6,203
Other operating expenses 15,678 12,674 35,829 29,501
------- ------- ------- -------
Total restaurant operating expenses 54,209 45,314 125,236 104,957
------- ------- ------- -------
Income from restaurant operations 7,960 6,900 17,436 15,528
General and administrative 4,708 3,677 10,265 8,250
Facility closing costs 204 - 204 216
Amortization of intangibles 98 201 228 470
------- ------- ------- -------
Operating income 2,950 3,022 6,739 6,592
------- ------- ------- -------
Other income (expense):
Interest expense (1,945) (2,429) (4,715) (5,864)
Gain (loss) on sale of property
and equipment 245 12 170 4
Interest income 4 6 8 13
Other income (expense), net 293 318 719 675
------- ------- ------- -------
Total other expense, net (1,403) (2,093) (3,818) (5,172)
------- ------- ------- -------
Income before income taxes 1,547 929 2,921 1,420
Income tax provision 324 490 756 857
------- ------- ------- -------
Net income $ 1,223 $ 439 $ 2,165 $ 563
======= ======= ======= =======
Basic net income per share $ 0.11 $ 0.04 $ 0.19 $ 0.05
======= ======= ======= =======
Diluted net income per share $ 0.11 $ 0.04 $ 0.19 $ 0.05
======= ======= ======= =======
Weighted average shares outstanding:
Basic 11,206 11,590 11,206 11,686
======= ======= ======= =======
Diluted 11,422 11,625 11,378 11,709
======= ======= ======= =======
See Notes to Consolidated Financial Statement.
QUALITY DINING, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
May 12, October 28,
2002 2001
ASSETS ------- -------
Current assets:
Cash and cash equivalents $ 1,769 $ 2,070
Accounts receivable 2,184 1,842
Inventories 2,047 2,042
Deferred income taxes 2,580 1,999
Other current assets 3,140 2,042
------- -------
Total current assets 11,720 9,995
------- -------
Property and equipment, net 108,499 119,433
------- -------
Other assets:
Assets held for sale 9,847 -
Deferred income taxes 7,420 8,001
Trademarks, net 6,176 6,405
Franchise fees and development fees, net 9,600 10,029
Goodwill 8,176 8,068
Liquor licenses, net 2,736 2,757
Other 2,627 2,550
------- -------
Total other assets 46,582 37,810
------- -------
Total assets $ 166,801 $ 167,238
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capitalized leases
and long-term debt $ 1,891 $ 1,808
Accounts payable 11,732 10,735
Accrued liabilities 21,024 20,857
------- -------
Total current liabilities 34,647 33,400
Long-term debt 105,523 108,964
Capitalized leases principally to related
parties, less current portion 3,958 4,230
------- -------
Total liabilities 144,128 146,594
------- -------
Common stock subject to redemption - 264
Stockholders' equity:
Preferred stock, without par value:
5,000,000 shares authorized; none issued - -
Common stock, without par value: 50,000,000
shares authorized; 12,848,099 and 12,940,736
shares issued, respectively 28 28
Additional paid-in capital 237,013 237,002
Accumulated deficit (210,305) (212,470)
Unearned compensation (440) (557)
------- -------
26,296 24,003
Treasury stock, at cost, 1,360,573
and 1,360,573 shares, respectively (3,623) (3,623)
------- -------
Total stockholders' equity 22,673 20,380
------- -------
Total liabilities and stockholders' equity $ 166,801 $ 167,238
======= =======
See Notes to Consolidated Financial Statement
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Twenty-Eight Weeks Ended
May 12, May 13,
2002 2001
Cash flows from operating activities: ------- -------
Net income $ 2,165 $ 563
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
property and equipment 5,524 6,220
Amortization of other assets 862 1,008
Gain on sale of property and equipment (170) (4)
Amortization of unearned compensation 128 55
Changes in current assets and current liabilities:
Net increase in current assets (1,445) (130)
Net increase (decrease)in current liabilities 1,164 (2,520)
------- -------
Net cash provided by operating activities 8,228 5,192
------- -------
Cash flows from investing activities:
Proceeds from sales of property and equipment 256 144
Purchase of property and equipment (4,329) (3,343)
Purchase of other assets (454) (330)
Other (108) -
------- -------
Net cash used in investing activities (4,635) (3,529)
------- -------
Cash flows from financing activities:
Borrowings of long-term debt 62,990 29,750
Repayment of long-term debt (66,354) (31,100)
Payment for stock subject to redemption (264) -
Purchase of treasury stock - (1,925)
Repayment of capitalized lease obligations (266) (266)
------- -------
Net cash used by financing activities (3,894) (3,541)
------- -------
Net decrease in cash and cash equivalents (301) (1,878)
Cash and cash equivalents, beginning of period 2,070 2,912
------- -------
Cash and cash equivalents, end of period $ 1,769 $ 1,034
======= =======
See Notes to Consolidated Financial Statements.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 12, 2002
(Unaudited)
Note 1: Description of Business.
Nature of Business Quality Dining, Inc. (the "Company") operates
four distinct restaurant concepts. It owns the Grady's American
Grill(R) and two Italian Dining concepts and operates Burger King(R)
restaurants and Chili's Grill & Bar(R) ("Chili's") as a franchisee
of Burger King Corporation and Brinker International, Inc.
("Brinker"), respectively. The Company operates its Italian
Dining restaurants under the tradenames of Spageddies Italian
Kitchen(R) ("Spageddies"(R)) and Papa Vino's(TM) Italian Kitchen ("Papa
Vino's"). As of May 12, 2002, the Company operated 189
restaurants, including 116 Burger King restaurants, 33 Chili's,
32 Grady's American Grill restaurants, three Spageddies and five
Papa Vino's.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the
accounts of Quality Dining, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for
interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X promulgated by the
Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for annual financial
statement reporting purposes. In the opinion of management, all
adjustments, consisting only of normal recurring accruals,
considered necessary for a fair presentation have been included.
Operating results for the 28-week period ended May 12, 2002 are
not necessarily indicative of the results that may be expected
for the 52-week year ending October 27, 2002.
These financial statements should be read in conjunction with the
Company's audited financial statements for the fiscal year ended
October 28, 2001 included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
Adoption of Statement of Financial Accounting Standards No. 141
and No. 142
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS 141 requires that the purchase method
of accounting be used for business combinations initiated after
June 30, 2001. SFAS 141 also establishes criteria that must be
used to determine whether acquired intangible assets should be
recognized separately from goodwill in the Company's financial
statements. Under SFAS 142, amortization of goodwill, including
goodwill recorded in past business combinations, will discontinue
upon adoption of this standard. In addition, goodwill and
indefinite-lived intangible assets will be tested for impairment
in accordance with the provisions of SFAS 142. SFAS 142 is
effective for fiscal years beginning after December 15, 2001.
The Company has early adopted the provisions of SFAS 142, in the
first quarter of fiscal 2002. SFAS 142 allows up to six months
from the date of adoption to complete the transitional goodwill
impairment test which requires the comparison of the fair value
of a
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 12, 2002
(Unaudited)
reporting unit to its carrying value (using amounts measured as
of the beginning of the year of adoption) to determine whether
there is an indicated transitional goodwill impairment. The
quantification of an impairment requires the calculation of an
"implied" fair value for a reporting unit's goodwill. If the
implied fair value of the reporting unit's goodwill is less than
its recorded goodwill, a transitional goodwill impairment charge
is recognized and reported as a cumulative effect of a change in
accounting principle. The Company completed the impairment
testing of goodwill during the second quarter of fiscal 2002 and
determined that there is no transitional goodwill impairment.
Intangible Assets
- -----------------
As of May 12, 2002
--------------------------------
Gross Carrying Accumulated
Amount Amortization
($000s) ($000s)
Amortized intangible assets: ------- -------
Trademarks $ 8,343 $ (2,167)
Franchise fees and development fees 14,501 (4,901)
------- -------
Total $ 22,844 $ (7,068)
======= =======
The Company's intangible asset amortization expense for the
twenty-eight weeks ended May 12, 2002 was $621,000. The
estimated intangible amortization expense for each of the next
five years is $1,153,000.
In the fourth quarter of fiscal 2001, the Company recorded an
impairment charge related to certain Grady's American Grill
restaurants that resulted in a reduction of the net book value of
the Grady's American Grill trademark by $4,920,000. In
conjunction with the Company's impairment assessment, the Company
revised its estimate of the remaining useful life of the
trademark to 15 years. The original estimated life of the
trademark had been 40 years. As a result of these changes, net
income for the twenty-eight weeks ended May 12, 2002, was
decreased by $50,000, which is less than $0.01 per diluted share.
Goodwill
The Company operates four distinct restaurant concepts in the
food-service industry. It owns the Grady's American Grill and
two Italian Dining concepts and operates Burger King restaurants
and Chili's Grill & Bar restaurants as a franchisee of Burger
King Corporation and Brinker International, Inc., respectively.
The Company has identified each restaurant concept as an
operating segment based on management structure and internal
reporting. The Company has two operating segments with goodwill
- - Chili's Grill & Bar and Burger King. The Company had a total
of $8,176,000 in goodwill as of May 12, 2002. The Chili's Grill
and Bar operating segment had $6,903,000 of goodwill and the
Burger King operating segment had $1,273,000 of goodwill.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 12, 2002
(Unaudited)
Adoption of Statement 142
- -------------------------
The following table reports the comparative impact the adoption
of Statement 142 has on the reported results of operations.
Twenty-Eight Weeks Ended
May 12, May 13,
2002 2001
------- -------
($000s except for earnings-per-share amounts)
Reported net income $ 2,165 $ 563
Add back: Goodwill amortization - 291
------- -------
Adjusted net income $ 2,165 $ 854
======= =======
Basic earnings per share:
Reported net income $0.19 $0.05
Goodwill amortization - 0.02
------- -------
Adjusted net income $0.19 $0.07
======= =======
Diluted earnings per share:
Reported net income $0.19 $0.05
Goodwill amortization - 0.02
------- -------
Adjusted net income $0.19 $0.07
======= =======
Note 3: Acquisitions and Dispositions.
On October 15, 2001, the Company purchased certain assets from
BBD Business Consultants, LTD. and its affiliates. BBD Business
Consultants, LTD. operated 42 Burger King restaurants in the
Grand Rapids, Michigan metropolitan area. The Company also
purchased leasehold improvements and entered into lease
agreements with the landlords of 41 of the 42 Burger King
restaurants. One restaurant was closed on November 26, 2001 due
to the inability to secure a long-term lease with the landlord.
In conjunction with this transaction the Company obtained
franchise agreements for the acquired restaurants from Burger
King Corporation. The purchase price for the restaurants
aggregated $6,067,000 and consisted of $4,212,000 in cash and
$1,855,000 in assumed liabilities. The acquisition was accounted
for as a purchase. Goodwill of approximately $1,096,000 was
recorded in connection with the acquisition, and subsequently
adjusted by approximately $108,000 in the first quarter for the
finalization of various liabilities.
On May 16, 2002, the Company sold nine of its Grady's American
Grill restaurants for $10.5 million. As of the balance sheet
date the Company had committed to a plan to dispose of the
Grady's American Grill restaurants and therefore the related
assets have been classified as held for sale as of May 12, 2002.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
Note 4: Commitments.
As of May 12, 2002, the Company had commitments aggregating
approximately $3,380,000 for restaurant construction and the
purchase of new equipment.
Note 5: Debt Instruments.
As of May 12, 2002, the Company had a financing package totaling
$125,066,000, consisting of a $76,000,000 revolving credit
agreement (the "Bank Facility") and a $49,066,000 mortgage
facility (the "Mortgage Facility"), as described below.
The Mortgage Facility currently includes 34 separate mortgage
notes, with terms of either 15 or 20 years. The notes have fixed
rates of interest of either 9.79% or 9.94%. The notes require
equal monthly interest and principal payments. The mortgage notes
are collateralized by a first mortgage/deed of trust and security
agreement on the real estate, improvements and equipment on 19 of
the Company's Chili's restaurants (nine of which the Company
mortgaged its leasehold interest) and 15 of the Company's Burger
King restaurants (three of which the Company mortgaged its
leasehold interest). The mortgage notes contain, among other
provisions, certain restrictive covenants including maintenance
of a consolidated fixed charge coverage ratio for the financed
properties.
The Bank Facility executed with JP Morgan Chase Bank, as agent
for a group of six banks, provided for borrowings of up to
$76,000,000 with interest payable at the adjusted LIBOR rate plus
a contractual spread. The weighted average borrowing rate on May
12, 2002 was 4.62%. The Company had $13,824,000 available under
the Bank Facility as of May 12, 2002. The Bank Facility was
collateralized by the stock of certain subsidiaries of the
Company, certain interests in the Company's franchise agreements
with Brinker and Burger King Corporation and substantially all of
the Company's personal property not pledged in the Mortgage
Facility.
The Bank Facility contained restrictive covenants including
maintenance of certain prescribed debt and fixed charge coverage
ratios, limitations on the incurrence of additional indebtedness,
limitations on consolidated capital expenditures, cross-default
provisions with other material agreements, restrictions on the
payment of dividends (other than stock dividends) and limitations
on the purchase or redemption of shares of the Company's capital
stock.
Effective June 10, 2002, the Company refinanced the Bank Facility
with a $60,000,000 revolving credit agreement (the "New
Facility") with JP Morgan Chase Bank, as agent, and four other
banks. The New Facility, provides for borrowings at the adjusted
LIBOR rate plus a contractual spread which compares to the Bank
Facility as follows:
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
RATIO OF FUNDED DEBT
TO CASH FLOW LIBOR MARGIN
BANK FACILITY NEW FACILITY
- -------------------- --------------- ------------
4.50 < or = X 3.00% 3.00%
4.00 < or = X 2.75% 3.00%
3.50 < or = X 2.50% 3.00%
3.00 < or = X 2.25% 2.75%
2.50 < or = X 1.75% 2.25%
X < 2.50 1.25% 1.75%
The New Facility also contains covenants requiring maintenance of
funded debt to cash flow and fixed charge coverage ratios which
compare to the Bank Facility as follows:
COVENANT BANK FACILITY NEW FACILITY
------------- ------------
MAXIMUM FUNDED DEBT
TO CASH FLOW RATIO
- -------------------
Fiscal 2002
Q1 4.25 N/A
Q2 4.25 4.00
Q3 3.75 4.00
Q4 3.75 4.00
Fiscal 2003
Q1 through Q3 N/A 4.00
Q4 N/A 3.75
Fiscal 2004
Q1 through Q3 N/A 3.75
Q4 N/A 3.50
Fiscal 2005
Q1 through Q2 N/A 3.50
Thereafter N/A 3.00
FIXED CHARGE COVERAGE RATIO 1.55 1.50
The New Facility also contains certain other restrictive
covenants, terms and conditions that are substantially the same
as those that were contained in the Bank Facility. The New
Facility is collateralized by substantially all of the Company's
assets not pledged in the Mortgage Facility.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
Note 6: Earnings Per Share.
The Company had outstanding common shares of 11,590,151 as of May
12, 2002. The Company has granted options to purchase common
shares to its employees and outside directors. The Company has
also granted restricted stock to its employees. These options
and restricted stock have a dilutive effect on the calculation of
earnings per share. The following is a reconciliation of the
numerators and denominators of the basic and diluted earnings per
share computation as required by SFAS 128.
Twelve weeks ended Twenty-eight weeks ended
May 12, May 13, May 12, May 13,
2002 2001 2002 2001
------- ------- ------- -------
(In thousands, except per share amounts)
Basic net income per share:
Net income available to
common shareholders (numerator) $1,223 $ 439 $2,165 $ 563
Weighted average common shares ======= ======= ======= =======
outstanding (denominator) 11,206 11,590 11,206 11,686
======= ======= ======= =======
Basic net income per share $ 0.11 $ 0.04 $ 0.19 $ 0.05
======= ======= ======= =======
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
Twelve weeks ended Twenty-eight weeks ended
May 12, May 13, May 12, May 13,
2002 2001 2002 2001
------- ------- ------- -------
(In thousands, except per share amounts)
Diluted net income per share:
Net income available to
common shareholders (numerator) $1,223 $ 439 $2,165 $ 563
======= ======= ======= =======
Weighted average common shares
outstanding 11,206 11,590 11,206 11,686
Effect of dilutive securities:
Options on common stock 216 35 172 23
Total common shares and dilutive ------- ------- ------- -------
securities(denominator) 11,422 11,625 11,378 11,709
======= ======= ======= =======
Diluted net income per share $ 0.11 $ 0.04 $ 0.19 $ 0.05
======= ======= ======= =======
Note 7: Segment Reporting.
The Company operates four distinct restaurant concepts in the
food-service industry. It owns the Grady's American Grill and
two Italian Dining concepts and operates Burger King restaurants
and Chili's Grill & Bar restaurants as a franchisee of Burger
King Corporation and Brinker International, Inc., respectively.
The Company has identified each restaurant concept as an
operating segment based on management structure and internal
reporting. For purposes of applying SFAS 131, the Company
considers the Grady's American Grill, the two Italian concepts
and Chili's Grill & Bar to be similar and have aggregated them
into a single reportable operating segment (Full Service). The
Company considers the Burger King restaurants as a separate
reportable segment (Quick Service). Summarized financial
information concerning the Company's reportable segments is shown
in the following table. The "other" column includes corporate
related items and income and expense not allocated to reportable
segments.
Full Quick
(Dollars in thousands) Service Service Other Total
---------------------- ------- ------- ------- -------
Second quarter fiscal 2002
- ---------------------------
Revenues $ 33,907 $ 28,262 $ - $ 62,169
Income from restaurant
operations 4,150 3,881 (71) 7,960
Operating income 2,290 1,192 (532) $ 2,950
Interest expense (1,945)
Other income 542
Income before income --------
Taxes $ 1,547
========
Depreciation and
amortization 1,447 1,070 247 2,764
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
Full Quick
(Dollars in thousands) Service Service Other Total
---------------------- ------- ------- ------- -------
Second quarter fiscal 2001
- --------------------------
Revenues $ 34,762 $ 17,452 $ - $ 52,214
Income from restaurant
operations 4,266 2,602 32 6,900
Operating income 2,376 993 (347) $ 3,022
Interest expense (2,429)
Other income 336
Income before income -------
taxes $ 929
=======
Depreciation and
amortization 2,065 723 308 3,096
First twenty-eight weeks of fiscal 2002
- ---------------------------------------
Revenues $ 78,866 $ 63,806 $ - $142,672
Income from restaurant
operations 9,437 7,998 1 17,436
Operating income 5,329 2,197 (787) $ 6,739
Interest expense (4,715)
Other income 897
Income before income -------
taxes $ 2,921
=======
Depreciation and
amortization 3,370 2,408 608 6,386
First twenty-eight weeks of fiscal 2001
- ----------------------------------------
Revenues $ 80,526 $ 39,959 $ - $120,485
Income from restaurant
operations 9,833 5,620 75 15,528
Operating income 5,661 1,975 (1,044) $ 6,592
Interest expense (5,864)
Other income 692
Income before income -------
taxes $ 1,420
=======
Depreciation and
amortization 4,810 1,684 734 7,228
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
Note 8: Contingencies.
The Company is a party to one legal proceeding relating to the
Company's previously owned bagel-related businesses.
D & K Foods, Inc., Pacific Capital Ventures, Inc., and PLB
Enterprises, Inc., franchisees of Bruegger's Franchise
Corporation, and Ken Wagnon, Dan Carney, Jay Wagnon and Patrick
Beatty, principals of the foregoing franchisees, commenced an
action on July 16, 1997 in the United States District Court for
the District of Maryland, against Bruegger's Corporation,
Bruegger's Franchise Corporation, Quality Dining, Inc., Daniel B.
Fitzpatrick, Michael J. Dressell and Nordahl L. Brue, alleging
that the plaintiffs purchased their franchises based upon
financial representations that did not materialize, that they
purchased preferred stock in Bruegger's Corporation based upon
false representations, that Bruegger's Corporation falsely
represented its intentions with respect to purchasing bakeries
from the plaintiffs or providing financing to the plaintiffs, and
that the defendants violated implied covenants of good faith and
fair dealing. On February 28, 2001, the parties reached a
settlement of this matter pursuant to which the Company made an
initial payment of $125,000 and an additional payment of $175,000
in December 2001. As part of the settlement, the Company also
purchased 96,064 shares of its common stock owned by the
plaintiffs, in December 2001, for approximately $264,000 or $2.75
per share. The Company had reclassified $264,000 from
stockholders' equity to common stock subject to redemption on its
consolidated balance sheet related to its agreement to purchase
such shares from the plaintiff in December 2001. The Company had
previously accrued for the full amount of the settlement,
including the expense portion of the share repurchase.
On or about April 15, 1997, Texas Commerce Bank National
Association ("Texas Commerce") made a loan of $4,200,000 (the
"Loan") to BFBC Ltd., a Florida limited partnership ("BFBC"). At
the time of the Loan, BFBC was a franchisee under franchise
agreements with Bruegger's Franchise Corporation (the
"Franchisor"). The Company at that time was an affiliate of the
Franchisor. In connection with the Loan and as an accommodation
of BFBC, the Company executed to Texas Commerce a "Guaranty". By
the terms of the Guaranty the Company agreed that upon maturity
of the Loan by default or otherwise that it would either (1) pay
the Loan obligations or (2) buy the Loan and all of the related
loan documents (the "Loan Documents") from Texas Commerce or its
successors. In addition several principals of BFBC (the
"Principal Guarantors") guaranteed repayment of the Loan by each
executing a "Principal Guaranty". On November 10, 1998, Texas
Commerce (1) declared that the Loan was in default, (2) notified
BFBC, the Principal Guarantors and the Company that all of the
Loan obligations were due and payable, and (3) demanded payment.
The Company elected to satisfy its obligations under the Guaranty
by purchasing the Loan from Texas Commerce. On November 24,
1998, the Company bought the Loan for $4,294,000. Thereafter,
the Company sold the Loan to its Texas affiliate Grady's American
Grill, L.P. ("Grady's"). On November 30, 1998 Grady's commenced
an action seeking to recover the amount of the Loan from one of
the Principal Guarantors, Michael K. Reilly ("Reilly"). As part
of this action Grady's also seeks to enforce a Subordination
Agreement that was one of the Loan Documents against MKR
Investments, L.P., a partnership ("MKR"). Reilly is the general
partner of MKR. This action is pending in the
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
United States District Court for the Southern District of Texas
Houston Division as Case No. H-98-4015. Reilly has denied
liability and filed counterclaims against Grady's alleging that
Grady's engaged in unfair trade practices, violated Florida's
"Rico" statute, engaged in a civil conspiracy and violated state
and federal securities laws in connection with the Principal
Guaranty (the "Counterclaims"). Reilly also filed a third party
complaint ("Third Party Complaint") against Quality Dining, Inc.,
Grady's American Grill Restaurant Corporation, David M. Findlay,
Daniel B. Fitzpatrick, Bruegger's Corporation, Bruegger's
Franchise Corporation, Champlain Management Services, Inc.,
Nordahl L. Brue, Michael J. Dressell and Ed Davis ("Third Party
Defendants") alleging that Reilly invested in BFBC based upon
false representations, that the Third Party Defendants violated
state franchise statutes, committed unfair trade practices,
violated covenants of good faith and fair dealing, violated the
state "Rico" statute and violated state and federal securities
laws in connection with the Principal Guaranty.
In addition, BFBC and certain of its affiliates, including the
Principal Guarantors ("Intervenors") have intervened and asserted
claims against Grady's and the Third Party Defendants that are
similar to those asserted in the Counterclaims and the Third
Party Complaint. Reilly and the Intervenors are seeking damages
in an amount no less than $10 million, an unspecified amount of
punitive damages, attorney's fees, costs and interest. Based upon
the currently available information, the Company does not believe
that the ultimate resolution of this matter will have a material
adverse effect on the Company's financial position or results of
operations, however, there can be no assurance thereof. Neither
can there be any assurance that the Company will be able to
realize sufficient value from Reilly or the Principal Guarantors
to satisfy the amount of the Loan.
In the foregoing case, one or more present or former officers and
directors of the Company were named as party defendants, but
where subsequently dismissed by the Court. The Company advanced
defense costs on their behalf until they were dismissed by the
Court.
Pursuant to the Share Exchange Agreement by and among Quality
Dining, Inc., Bruegger's Corporation, Nordahl L. Brue and Michael
J. Dressell ("Share Exchange Agreement"), the Agreement and Plan
of Merger by and among Quality Dining, Inc., Bagel Disposition
Corporation and Lethe, LLC, and certain other related agreements
entered into as part of the disposition of the Company's bagel-
related businesses, the Company was responsible for 50% of the
first $14 million of franchise-related litigation expenses,
inclusive of attorney's fees, costs, expenses, settlements and
judgments (collectively "Franchise Damages"). Bruegger's
Corporation and certain of its affiliates are obligated to
indemnify the Company from all other Franchise Damages. The
Company was originally obligated to pay the first $3 million of
its share of Franchise Damages in cash. The Company has
satisfied this obligation. The remaining $4 million of the
Company's share of Franchise Damages was originally payable by
crediting amounts owed to the Company pursuant to the $10 million
Subordinated Note ("Subordinated Note") issued to the Company by
Bruegger's Corporation. However, as a result of the Bruegger's
Resolution (described below), the remainder of the Company's
share of Franchise Damages is payable in cash.
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
On or about September 10, 1999, Bruegger's Corporation, Lethe
LLC, Nordahl L. Brue, and Michael J. Dressel commenced an action
against the Company in the United States District Court for the
District of Vermont alleging that the Company breached various
provisions of the Share Exchange Agreement which arose out of the
ongoing dispute concerning the net working capital adjustment
contemplated by the Share Exchange Agreement. On February 1,
2000, the Company filed counter-claims against Bruegger's
Corporation for the working capital adjustment to which it
believes it is entitled. Additionally, on or about September 13,
1999, Messrs. Brue and Dressell asserted a claim for breach of
representations and warranties under the Share Exchange
Agreement.
On February 28, 2001, the Company and Bruegger's Corporation
reached a settlement (the "Bruegger's Resolution") of their
various disputes that includes, among other things, the following
provisions: (a) the principal amount of the Subordinated Note
was restated to $10.7 million; (b) the Company and Bruegger's
Corporation each released their claim against the other to
receive a net working capital adjustment; (c) the Subordinated
Note was modified to, among other things, provide for an
extension of the period through which interest is to be accrued
and added to the principal amount of the Subordinated Note from
October, 2000 through January, 2002. From January, 2002 through
June, 2002, one-half of the interest is to be accrued and added
to the principal amount of the Subordinated Note and one-half of
the interest is to be paid in cash. Commencing in January, 2003,
interest is to be paid in cash through the maturity of the
Subordinated Note in October 2004; (d) the Company and Bruegger's
Corporation are each responsible for 50% of the Franchise Damages
with respect to the claims asserted by BFBC Ltd., et al., (e)
Bruegger's Corporation is entitled to 25% of any net recovery
made by the Company on the BFBC, Ltd., Loan; provided, however,
that any such entitlement is required to be applied to the
outstanding balance of the Subordinated Note; (f) Bruegger's
Corporation and its affiliates released their claims for breach
of representations and warranties under the Share Exchange
Agreement; and (g) Bruegger's Corporation is entitled to a credit
of two dollars against the Subordinated Note for every one dollar
that Bruegger's Corporation prepays against the Subordinated Note
prior to October, 2003 up to a maximum credit of $4 million. As
of the fourth quarter of fiscal 2001, Bruegger's Corporation
advised the Company that it is unable to continue to pay its 50%
share of Franchise Damages. Accordingly, it is likely that the
Company will have to incur the full expense of the BFBC
litigation and that Bruegger's Corporation will not have the
ability to perform its indemnity obligations, if any. The ongoing
expense of the BFBC litigation may be significant to the
Company's results of operations. Such expense is not presently
estimable as it depends upon a number of variables including the
extent to which the Company obtains favorable rulings on motions
it has filed, the length and outcome of any trial, whether or not
any appeal is taken and, if so, whether the Company is bringing
or responding to the appeal.
It is also likely that the Company may never receive any
principal or interest payments in respect of the Subordinated
Note. The Company has never recognized any interest income from
the Subordinated Note and has previously reserved for the full
amount of the Subordinated Note. Additionally, the Company is a
guarantor of the occupancy leases for certain bagel restaurants
currently operated by affiliates of Bruegger's Corporation. As a
result of
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
May 12, 2002
(Unaudited)
the Company's current assessment of Bruegger's Corporation's
financial position, in the fourth quarter of fiscal 2001, the
Company recorded a charge of $455,000 to reserve for the
estimated liability for the obligations as a guarantor.
The Company is involved in various other legal proceedings
incidental to the conduct of its business, including employment
discrimination claims. Based upon currently available
information, the Company does not expect that any such
proceedings will have a material adverse effect on the Company's
financial position or annual results of operations but there can
be no assurance thereof.
Note 9: Franchisee Commitment.
On January 27, 2000 the Company executed a "Franchisee
Commitment" pursuant to which it agreed to undertake certain
"Transformational Initiatives" including capital improvements and
other routine maintenance in all of its Burger King restaurants.
The capital improvements include the installation of signage
bearing the new Burger King logo and the installation of a new
drive-through ordering system. The initial deadline for
completing these capital improvements - December 31, 2001 - has
been extended to December 31, 2002, although the Company met the
initial deadline with respect to 66 of the 70 Burger King
restaurants subject to the Franchisee Commitment. In addition,
the Company agreed to perform, as necessary, certain routine
maintenance such as exterior painting, sealing and striping of
parking lots and upgraded landscaping. The Company completed
this maintenance prior to September 30, 2000, as required. In
consideration for executing the Franchisee Commitment, the
Company received "Transformational Payments" totaling
approximately $3.9 million during fiscal 2000. In addition, the
Company received supplemental Transformational Payments of
$135,000 in October, 2001 and an additional $180,000 in the first
quarter of fiscal 2002. The portion of the Transformational
Payments that corresponds to the amount required for the capital
improvements will be recognized as an offset to depreciation
expense over the useful life of the capital improvements. The
portion of the Transformational Payments that corresponds to the
required routine maintenance was recognized as a reduction in
maintenance expense over the period during which maintenance was
performed. The remaining balance of the Transformational Payments
was recognized as other income ratably through December 31, 2001,
the term of the initial Franchisee Commitment except that the
supplemental Transformational Payments were recognized as other
income when earned and payable by Burger King Corporation and in
the second quarter of fiscal 2002, the Company recognized as
other income the $281,000 difference between the previously
estimated cost of the required capital improvements and the
actual cost thereof.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company has a 52/53-week fiscal year ending on the last
Sunday in October of each year. The current fiscal year consists
of 52 weeks and ends October 27, 2002. The first quarter of the
Company's fiscal year consists of 16 weeks with all subsequent
quarters being 12 weeks in duration.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages which certain items of revenue and expense bear to
total revenues.
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 12, May 13, May 12, May 13,
2002 2001 2002 2001
------ ------- ------- ------
Total revenues 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Restaurant operating expenses
Food and beverage 28.7 28.3 28.6 28.2
Payroll and benefits 29.3 29.1 30.0 29.2
Depreciation and
amortization 4.0 5.1 4.0 5.1
Other operating expenses 25.2 24.3 25.1 24.6
----- ----- ----- -----
Total restaurant operating
expenses 87.2 86.8 87.7 87.1
Income from operations 12.8 13.2 12.3 12.9
General and administrative 7.6 7.0 7.2 6.8
Facility closing costs 0.3 - 0.2 0.2
Amortization of intangibles 0.2 0.4 0.1 0.4
----- ----- ----- -----
Operating income 4.7 5.8 4.8 5.5
----- ----- ----- -----
Other income (expense):
Interest expense (3.1) (4.7) (3.3) (4.9)
Interest income - - - -
Other income (expense), net .9 .6 .5 .6
----- ----- ----- -----
Total other expense, net (2.2) (4.1) (2.8) (4.3)
----- ----- ----- -----
Income before income taxes 2.5 1.7 2.0 1.2
Income tax provision 0.5 0.9 0.5 0.7
----- ----- ----- -----
Net income 2.0% 0.8% 1.5% 0.5%
===== ===== ===== =====
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Restaurant sales for the Company were $62,169,000 for the second
quarter of fiscal 2002 versus $52,214,000 for the comparable
period in fiscal 2001, an increase of $9,955,000. Restaurant
sales for the first twenty-eight weeks of fiscal 2002 were
$142,672,000 versus $120,485,000 for the comparable period in
fiscal 2001, an increase of $22,187,000.
The Company's Burger King restaurant sales were $28,262,000 in
the second quarter of fiscal 2002 compared to sales of
$17,452,000 in the same period of fiscal 2001, an increase of
$10,810,000. The Company had increased revenues of $9,270,000
from 41 Burger King restaurants in the Grand Rapids, Michigan
metropolitan area which were purchased on October 15, 2001. The
Company also had increased revenue of $760,000 due to additional
sales weeks from one restaurant opened in fiscal 2002 and three
restaurants opened in fiscal 2001 which were open for their first
full year in fiscal 2002. The Company's Burger King restaurants
had average weekly sales of $20,303 in the second quarter of
fiscal 2002 versus $20,463 in the same period in fiscal 2001.
The restaurants in the Grand Rapids acquisition have
significantly lower sales than the Company's other Burger King
restaurants and therefore adversely affected the average weekly
sales for both the quarter and the twenty-eight weeks ended May
12, 2002. Sales at restaurants open for more than one year
increased 3.3% in the second quarter of fiscal 2002 when compared
to the same period in fiscal 2001. Sales increased $23,847,000 to
$63,806,000 for the first twenty-eight weeks of fiscal 2002
compared to $39,959,000 for the comparable period in fiscal 2001.
The Company had increased revenues of $21,205,000 from the 41
Burger King restaurants it acquired in the Grand Rapids, Michigan
metropolitan area. The Company had increased revenue of
$1,759,000 due to additional sales weeks from one restaurant
opened in fiscal 2002 and three restaurants opened in fiscal 2001
which were open for their first full year in fiscal 2002. Average
weekly sales were $19,659 in the first twenty-eight weeks of
fiscal 2002 versus $20,091 in the same period in fiscal 2001.
Sales at restaurants open for more than one year increased 1.4%
in the first 28 weeks of fiscal 2002 when compared to the same
period in fiscal 2001. The Company believes that the increase in
the comparable store sales was mainly due to the increased
success of Burger King Corporation's marketing initiatives.
The Company's Chili's Grill & Bar restaurant sales increased
$1,879,000 to $17,695,000 in the second quarter of fiscal 2002
compared to $15,816,000 in the same period in fiscal 2001. The
Company had increased revenue of $1,099,000 due to additional
sales weeks from two new restaurants opened during fiscal 2001.
Average weekly sales increased to $44,685 in the second quarter
of fiscal 2002 versus $42,515 in the same period of fiscal 2001.
Sales at restaurants open for more than one year increased 4.9%
in the second quarter of fiscal 2002 when compared to the same
period in fiscal 2001. Sales for the first twenty-eight weeks of
fiscal 2002 increased $3,769,000 to $40,249,000 compared to
$36,480,000 for the same period in fiscal 2001. The Company had
increased revenue of $2,686,000 due to additional sales weeks
from two new restaurants opened during fiscal 2001. The average
weekly sales were $43,560 in the first twenty-eight weeks of
fiscal 2002 versus $42,027 in the same period in fiscal 2001.
Sales at restaurants open for more than one year increased 3.8%
in the first 28 weeks of fiscal 2002 when compared to the same
period in fiscal 2001. The Company believes that the increase in
average weekly sales was mainly due to successful operational and
marketing initiatives both by the Company and the franchisor.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Sales in the Company's Grady's American Grill restaurant division
were $12,294,000 in the second quarter of fiscal 2002 compared to
sales of $14,876,000 in the same period in fiscal 2001, a
decrease of $2,582,000. The Company closed two units in the first
quarter of fiscal 2002. The absence of these units accounted for
$603,000 of the sales decrease during the second quarter of
fiscal 2001. The Company's Grady's American Grill restaurants had
average weekly sales of $32,015 in the second quarter of fiscal
2002 versus $36,461 in the same period in fiscal 2001. Sales at
restaurants open for more than one year decreased 15.0% in the
second quarter of fiscal 2002 when compared to the same period in
fiscal 2001. Sales for the first twenty-eight weeks of fiscal
2002 were $29,480,000 compared to $34,788,000 for the same period
in fiscal 2001, a decrease of $5,308,000. The absence of the
closed restaurants contributed approximately $1,052,000 to the
sales decrease. Average weekly sales were $32,305 in the first
twenty-eight weeks of fiscal 2002 versus $36,087 in the same
period in fiscal 2001. Sales at restaurants open for more than
one year decreased 13.2% in the first 28 weeks of fiscal 2002
when compared to the same period in fiscal 2001.
The Company continues to experience a significant decrease in
sales and cash flow at its Grady's American Grill division. The
Company continues to pursue various management actions in
response to this declining trend, including evaluating strategic
business alternatives for the division both as a whole and at
each of its restaurant locations.
The Company sold nine of its Grady's American Grill restaurants
for approximately $10.5 million on May 16, 2002. The Company
recorded an impairment charge of $4.1 million related to these
nine restaurants during the fourth quarter of fiscal 2001. As a
consequence of this loss and in connection with the
aforementioned evaluation, the Company estimated the future cash
flows expected to result from the continued operation and the
residual value of the remaining restaurant locations in the
division and concluded in the fourth quarter of fiscal 2001 that,
in 12 locations, the undiscounted estimated future cash flows
were less than the carrying amount of the related assets.
Accordingly, the Company concluded that these assets had been
impaired and recorded an impairment charge related to these
assets aggregating $10.4 million during the fourth quarter of
fiscal 2001.
While the Company believes that the Grady's American Grill assets
are reported at their estimated fair values as of May 12, 2002,
there can be no assurances thereof.
The Company's Italian Dining Division restaurant sales decreased
$152,000 to $3,918,000 in the second quarter of fiscal 2002
compared to $4,070,000 in the same period in fiscal 2001. The
average weekly sales were $40,809 in the second quarter of fiscal
2002 versus $42,400 in the same period of fiscal 2001. Sales at
restaurants open for more than one year decreased 3.7% in the
second quarter of fiscal 2002 when compared to the same period in
fiscal 2001. Sales for the first twenty-eight weeks of fiscal
2002 decreased $121,000 to $9,137,000 compared to $9,258,000 for
the same period in fiscal 2001. The average weekly sales were
$40,791 in the first twenty-eight weeks of fiscal 2002 versus
$41,332 in the same period in fiscal 2001. Sales at restaurants
open for more than one year decreased 1.3% in the first twenty-
eight weeks of fiscal 2002 when compared to the same period in
fiscal 2001.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Total restaurant operating expenses, as a percentage of
restaurant sales, increased to 87.2% for the second quarter of
fiscal 2002 versus 86.8% in the second quarter of fiscal 2001 and
87.7% in the first twenty-eight weeks of fiscal 2002 versus 87.1%
in the same period of fiscal 2001. The following factors
influenced the operating margins.
On October 15, 2001, the Company purchased 42 Burger King
restaurants in the Grand Rapids, Michigan metropolitan area (one
of which was subsequently closed). The acquired Burger King
restaurants have significantly lower operating margins than the
Company's other Burger King restaurants. The new Burger King
restaurants therefore had a negative effect on operating margins.
The Company believes that over time these operating margins will
improve and be similar to the Company's historical operating
margins.
Food and beverage costs increased to 28.7% of total revenues in
the second quarter of fiscal 2002 compared to 28.3% of total
revenues in the same period in fiscal 2001 and 28.6% in the first
twenty-eight weeks of fiscal 2002 compared to 28.2% in the same
period of fiscal 2001. Food and beverage costs in dollars and as
a percentage of sales increased in the quick service segment due
to the purchase of Burger King restaurants in Grand Rapids,
Michigan. The Company had an increase in food and beverage costs
of $2,830,000 in the second quarter and $6,422,000 in the first
twenty-eight weeks of fiscal 2002 due to the addition of 41
Burger King restaurants in Grand Rapids, Michigan. The full
service segment's food and beverage costs, as a percentage of
sales, were higher than the prior year. This increase was mainly
due to increased costs at the Company's Grady's American Grill
restaurants.
Payroll and benefits were 29.3% of total revenues in the second
quarter of fiscal 2002 compared to 29.1% in the same period of
fiscal 2001. Payroll and benefits were 30.0% of total revenues in
the first twenty-eight weeks of fiscal 2002 compared to 29.2% in
the same period of fiscal 2001. The Company experienced an
increase in payroll, as a percentage of sales, in both the full
service and the quick service segments. The increase as a
percentage of sales in the full service segment was mainly due to
the decreased average weekly sales in the Company's Grady's
American Grill restaurants. The increase as a percent of sales
and in total dollars in the quick service segment was due to the
purchase of the Burger King restaurants in Grand Rapids,
Michigan. The Company experienced an increase in payroll of
$2,785,000 in the second quarter and $6,756,000 in the first
twenty-eight weeks of fiscal 2002 due to the addition of the
Burger King restaurants in Grand Rapids, Michigan.
Depreciation and amortization, as a percentage of total revenues,
decreased to 4.0% for the second quarter of fiscal 2002 compared
to 5.1% in the same period in fiscal 2001. The decrease was
mainly due to a $402,000 decrease at the Company's Grady's
division, which was a direct result of the fiscal 2001 asset
impairment charge discussed above. This decrease was partially
offset by a $225,000 increase in depreciation and amortization in
the quick service segment due to the addition of 41 Burger King
restaurants in Grand Rapids, Michigan. Depreciation and
amortization, as a percentage of total revenues, decreased to
4.0% in the first twenty-eight weeks of fiscal 2002 compared to
5.1% in the same period in fiscal 2001. The decrease was mainly
due to a $937,000 decrease at the Company's Grady's division.
The decrease was a direct result of the fiscal 2001 asset
impairment charge discussed above. This decrease was partially
offset by a $515,000 increase in depreciation and amortization in
the quick service segment due to the addition of 41 Burger King
restaurants in Grand Rapids, Michigan.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Other restaurant operating expenses include rent and utilities,
royalties, promotional expense, repairs and maintenance, property
taxes and insurance. Other restaurant operating expenses as a
percentage of total revenues increased in the second quarter of
fiscal 2002 to 25.2% compared to 24.3% in the same period of
fiscal 2001 and to 25.1% in the first twenty-eight weeks of
fiscal 2002 compared to 24.6% in the same period of fiscal 2001.
The increase in other restaurant operating expenses as a
percentage of sales and in total dollars was mainly due to the
quick service segment incurring more restaurant operating
expenses related to the addition of 41 Burger King restaurants in
Grand Rapids, Michigan. The acquisition of the Grand Rapids
restaurants increased restaurant operating expenses $2,686,000 in
the second quarter and $6,241,000 in the first twenty-eight weeks
of fiscal 2002.
Income from restaurant operations increased $1,060,000 to
$7,960,000, or 12.8% of revenues, in the second quarter of fiscal
2002 compared to $6,900,000, or 13.2% of revenues, in the
comparable period of fiscal 2001. Income from restaurant
operations in the Company's Quick Service segment increased
$1,279,000 while the Company's Full Service segment decreased
$116,000 from the prior year. Income from restaurant operations
increased $1,908,000 to $17,436,000, or 12.3% of revenues, in the
first twenty-eight weeks of fiscal 2002 compared to $15,528,000,
or 12.9% of revenues, in the comparable period of fiscal 2001.
Income from restaurant operations in the Company's Quick Service
segment increased $2,378,000 while the Company's Full Service
segment decreased $396,000 when compared to the first twenty-
eight weeks of the prior year.
General and administrative expenses were $4,708,000 in the second
quarter of fiscal 2002 compared to $3,677,000 in the second
quarter of fiscal 2001 and $10,265,000 in the first twenty-eight
weeks of fiscal 2002 compared to $8,250,000 in the same period of
fiscal 2001. As a percentage of total restaurant sales, general
and administrative expenses were 7.6% in the second quarter of
fiscal 2002 versus 7.0% in the second quarter of fiscal 2001 and
7.2% in the first twenty-eight weeks of fiscal 2002 compared to
6.8% in the same period of fiscal 2001. In the second quarter of
fiscal 2002 the Company recorded approximately $595,000 in
expenses related to the Company's litigation with BFBC, LTD. and
in the first twenty-eight weeks of fiscal 2002 the Company
recorded approximately $880,000 for the BFBC, LTD litigation (See
Note 8). The Company did not incur similar expenses during fiscal
2001. The Company also incurred additional general and
administrative expenses related to the addition of 41 Burger King
restaurants in Grand Rapids, Michigan. The increase in the second
quarter of fiscal 2002 was $303,000 and the increase in the first
twenty-eight weeks of fiscal 2002 was $762,000.
The Company incurred $204,000 in Grady's facility closing costs
in the first twenty-eight weeks of fiscal 2002 versus $216,000 in
the same period of fiscal 2001.
Amortization of intangibles, as a percentage of total revenues,
decreased to 0.2% for the second quarter of fiscal 2002 compared
to 0.4% in the same period in fiscal 2001, and to 0.1% in the
first twenty-eight weeks of fiscal 2002 compared to 0.4% for the
same period in fiscal 2001. The Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets" at the beginning of fiscal
2002. Under SFAS 142, amortization of goodwill was discontinued.
Total other expenses, as a percentage of revenues, decreased to
2.2% for the second quarter of fiscal 2002 from 4.1% during the
comparable period in fiscal 2001, and to 2.8% in the first twenty-
eight weeks of fiscal 2002 compared to 4.3% in the same period of
fiscal 2001. The decrease was due to lower interest rates which
reduced the Company's interest expense in the second quarter and
first twenty-eight weeks of fiscal 2002 versus the same period in
fiscal 2001.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The provision for income taxes was $324,000 for the second
quarter of fiscal 2002 versus $490,000 in the comparable period
in fiscal 2001. The provision for income taxes was $756,000 for
the first twenty-eight weeks of fiscal 2002 versus $857,000 in
the comparable period in fiscal 2001. The Company's federal tax
expense was completely offset by a reduction in the Company's
deferred tax valuation allowance for both the second quarter and
the first twenty-eight weeks of fiscal 2002. The Company has a
large portion of state taxes which are based on criteria other
than income. The Company expects to incur approximately
$1,400,000 in state income taxes during fiscal 2002.
For the second quarter of fiscal 2002, the Company reported net
income of $1,223,000 compared to net income of $439,000 for the
same period of fiscal 2001 and $2,165,000 in the first twenty-
eight weeks of fiscal 2002 compared to $563,000 in the same
period of fiscal 2001.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally for building or
acquiring new restaurants, replacing equipment and remodeling
existing restaurants. The Company has historically financed these
activities using principally cash flows from operations and its
credit facilities. The Company's restaurants generate cash
immediately through sales. As is customary in the restaurant
industry, the Company does not have significant assets in the
form of trade receivables or inventory, and customary payment
terms generally result in several weeks of trade credit from its
vendors. Therefore, the Company's current liabilities have
historically exceeded its current assets.
In the first twenty-eight weeks of fiscal 2002, cash provided by
operating activities was $8,228,000 compared to $5,192,000 in
fiscal 2001. The increase in fiscal 2002 compared to fiscal 2001
was mainly due to the timing of cash disbursements, which
resulted in an increase in accounts payable and accrued
liabilities of $1,164,000 in fiscal 2002 versus a decrease in
accounts payable and accrued liabilities of $2,520,000 in fiscal
2001.
The Company had a net repayment of $2,600,000 under its revolving
credit agreement during the first twenty-eight weeks of fiscal
2002. As of May 12, 2002, the Company's revolving credit
agreement had an additional $13,824,000 available for future
borrowings. The Company's average borrowing rate on May 12, 2002,
was 4.62%. The revolving credit agreement is subject to certain
restrictive covenants that require the Company, among other
things, to achieve agreed upon levels of cash flow. Under the
revolving credit agreement the Company's funded debt to
consolidated cash flow ratio and fixed charge coverage ratio
requirements were 4.25 and 1.55, respectively, on May 12, 2002.
The Company was in compliance with these requirements with a
funded debt to consolidated cash flow ratio of 4.13 and a fixed
charge coverage ratio of 1.67.
The Company did not repurchase any shares of stock during the
first twenty-eight weeks of fiscal 2002. The Company repurchased
736,073 shares of its common stock in the open market in the
first twenty-eight weeks of fiscal 2001 for $1,925,000. The
Company does not presently intend to repurchase shares due to the
Company's significant capital expenditure budget for fiscal 2002.
During the first twenty-eight weeks of fiscal 2002, the Company
had $4,329,000 in capital expenditures in connection with the
opening of new restaurants and the refurbishing of existing
restaurants.
The Company's primary cash requirements in fiscal 2002 will be
capital expenditures in connection with the opening of new
restaurants, remodeling of existing restaurants, maintenance
expenditures, and the reduction of debt under the Company's debt
agreements. During fiscal 2002, the Company anticipates opening
two new Burger King restaurants and two full service restaurants.
The Company also plans to replace three existing Burger King
buildings with new buildings at the same locations. The actual
amount of the Company's cash requirements for capital
expenditures depends in part on the number of new restaurants
opened, whether the Company owns or leases new units and the
actual expense related to remodeling and maintenance of existing
units. While the Company's capital expenditures for fiscal 2002
are expected to range from $16,000,000 to $18,000,000, if the
Company has alternative uses or needs for its cash, the Company
believes it could delay such planned expenditures. A significant
delay in opening restaurants could cause a default in the
Company's development agreements if the Company were not able to
obtain waivers from Brinker and Burger King. In such event, the
Company could lose its right to open additional Chili's and
Burger King restaurants and, in the case of Chili's, its right to
exclusivity in its markets.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
A default in either the Brinker or the Burger King development
agreements would have no impact on restaurants the Company
currently operates.
The Company has debt service requirements of approximately
$1,337,000 in fiscal 2002, consisting primarily of the principal
payments required under the mortgage facility.
As of May 12, 2002, the Company had a $76,000,000 revolving
credit agreement (the "Bank Facility"). The Bank Facility
executed with JP Morgan Chase Bank, as agent for a group of six
banks, provided for borrowings of up to $76,000,000 with interest
payable at the adjusted LIBOR rate plus a contractual spread. The
Bank Facility was collateralized by the stock of certain
subsidiaries of the Company, certain interests in the Company's
franchise agreements with Brinker and Burger King Corporation and
substantially all of the Company's personal property not pledged
in the Mortgage Facility.
The Bank Facility contained restrictive covenants including
maintenance of certain prescribed debt and fixed charge coverage
ratios, limitations on the incurrence of additional indebtedness,
limitations on consolidated capital expenditures, cross-default
provisions with other material agreements, restrictions on the
payment of dividends (other than stock dividends) and limitations
on the purchase or redemption of shares of the Company's capital
stock.
Effective June 10, 2002, the Company refinanced the Bank Facility
with JP Morgan Chase Bank, as agent, and four other banks, with a
$60,000,000 revolving credit agreement (the "New Facility"). The
New Facility provides for borrowings at the adjusted LIBOR rate
plus a contractual spread which compares to the Bank Facility as
follows:
RATIO OF FUNDED DEBT
TO CASH FLOW LIBOR MARGIN
- ------------------- BANK FACILITY NEW FACILITY
------------- ------------
4.50 < or = X 3.00% 3.00%
4.00 < or = X 2.75% 3.00%
3.50 < or = X 2.50% 3.00%
3.00 < or = X 2.25% 2.75%
2.50 < or = X 1.75% 2.25%
X < 2.50 1.25% 1.75%
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The New Facility also contains covenants requiring maintenance of
funded debt to cash flow and fixed charge coverage ratios which
compare to the Bank Facility as follows:
COVENANT BANK FACILITY NEW FACILITY
------------- ------------
MAXIMUM FUNDED DEBT
TO CASH FLOW RATIO
- -------------------
Fiscal 2002
Q1 4.25 N/A
Q2 4.25 4.00
Q3 3.75 4.00
Q4 3.75 4.00
Fiscal 2003
Q1 through Q3 N/A 4.00
Q4 N/A 3.75
Fiscal 2004
Q1 through Q3 N/A 3.75
Q4 N/A 3.50
Fiscal 2005
Q1 through Q2 N/A 3.50
Thereafter N/A 3.00
FIXED CHARGE COVERAGE RATIO 1.55 1.50
The New Facility also contains certain other restrictive
covenants, terms and conditions that are substantially the same
as those that were contained in the Bank Facility.
The Company does not believe that its current business plans will
be impeded by its leverage. Should the Company's leverage impede
its business plan, the Company believes it could reduce its
capital spending and/or recapitalize its balance sheet. Its
principal opportunities to reduce capital spending would be to
scale back its new unit development and/or its planned remodel
budget. The Company believes its principal opportunity to
recapitalize its balance sheet would be to enter into a sale-
leaseback transaction involving certain of
its restaurant properties. Although the Company prefers to own
its real estate, in addition to the properties in the Mortgage
Facility, the Company currently owns 20 restaurants and has
ground leases for 9 others that might be suitable for such a
transaction.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
OTHER MATTERS
Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and
Results of Operations are based upon the consolidated financial
statements, which were prepared in accordance with accounting
principles generally accepted in the United States of America.
These principles require management to make estimates and
assumptions that affect the reported amounts in the consolidated
financial statements and notes thereto. Actual results may differ
from these estimates, and such differences may be material to the
consolidated financial statements. Management believes that the
following significant accounting policies involve a higher degree
of judgment or complexity.
Property and equipment
Property and equipment are depreciated on a straight-line basis
over the estimated useful lives of the assets. The useful lives
of the assets are based upon management's expectations for the
period of time that the asset will be used for the generation of
revenue. Management periodically reviews the assets for changes
in circumstances that may impact their useful lives.
Impairment of long-lived assets
Management periodically reviews property and equipment for
impairment using historical cash flows as well as current
estimates of future cash flows. This assessment process requires
the use of estimates and assumptions that are subject to a high
degree of judgment. In addition, management periodically assesses
the recoverability of goodwill and other intangible assets which
requires assumptions regarding the future cash flows and other
factors to determine the fair value of the assets. If these
assumptions change in the future, management may be required to
record impairment charges for these assets.
Income taxes
The Company has recorded a valuation allowance to reduce its
deferred tax assets since it is more likely than not that some
portion of the deferred assets will not be realized. Management
has considered future taxable income and ongoing feasible tax
strategies in assessing the need for the valuation allowance; if
these estimates and assumptions change in the future, the Company
may be required to adjust its valuation allowance. This could
result in a charge to, or an increase in, income in the period
such determination is made.
Other estimates
Management is required to make judgments and or estimates in the
determination of several of the accruals that are reflected in
the consolidated financial statements. Management believes that
the following accruals are subject to a higher degree of
judgment.
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Management uses estimates in the determination of the required
accruals for general liability, workers' compensation and health
insurance. These estimates are based upon a detailed examination
of historical and industry claims experience. The claim
experience may change in the future and may require management to
revise these accruals.
Management is periodically involved in various legal actions
arising in the normal course of business. Management is required
to assess the probability of any adverse judgments as well as the
potential ranges of any losses. Management determines the
required accruals after a careful review of the facts of each
legal action. The accruals may change in the future due to new
developments in these matters.
Management continually reassesses its assumptions and judgments
and makes adjustments when significant facts and circumstances
dictate. Historically, actual results have not been materially
different than the estimates that are described above.
This report contains certain forward-looking statements,
including statements about the Company's development plans, that
involve a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially are the
following: the availability and cost of suitable locations for
new restaurants; the availability and cost of capital to the
Company; the ability of the Company to develop and operate its
restaurants; the hiring, training and retention of skilled
corporate and restaurant management and other restaurant
personnel; the integration and assimilation of acquired
businesses; the overall success of the Company's franchisors; the
ability to obtain the necessary government approvals and third-
party consents; and changes in governmental regulations,
including increases in the minimum wage.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Note 8 to the unaudited consolidated financial statements of the
Company included in Part I of this report is incorporated herein
by reference.
Item 2. Changes in Securities
None
Items 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
A list of exhibits required to be filed as part of this
report is set forth in the Index to Exhibits, which
immediately precedes such exhibits, and is incorporated
herein by reference.
(b)Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Quality Dining, Inc.
(Registrant)
Date: June 25, 2002 By: /s/Christopher L. Collier
--------------------------
Vice President of Finance
(Principal financial officer)
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- ---------------------------------
4-O Fourth Amended and Restated Revolving
Credit Agreement dated as of May 30, 2002
by and between Quality Dining, INC. and GAGHC, INC.,
as borrowers, and JP Morgan Chase Bank, as
Administrative Agent, Bank of America, National
Association, as Syndication Agent and J.P.
Morgan Securities INC., as Arranger
4-P INTERCREDITOR AGREEMENT dated as of the 15th day
of October, 2001, by and among BURGER KING
CORPORATION, the Franchisee and JP Morgan
Chase Bank, as Administrative Agent for
the Banks.
Exhibit 4-O
- -----------------------------
FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED AS OF MAY 30, 2002
BY AND BETWEEN
QUALITY DINING, INC.
AND
GAGHC, INC.,
as Borrowers,
AND
THE BANKS WHICH ARE PARTY HERETO
AND
JP MORGAN CHASE BANK
(as successor to Chase Bank of Texas, National Association),
as Administrative Agent
AND
BANK OF AMERICA, NATIONAL ASSOCIATION
(formerly, NationsBank, N.A.),
as Syndication Agent
J.P. MORGAN SECURITIES INC.,
as Arranger
TABLE OF CONTENTS Page
ARTICLE I. DEFINITIONS....................................1
ARTICLE II. THE ADVANCES..................................15
2.1 Advances............................................15
2.2 Election by Borrower................................19
2.3 Increased Costs; Capital Adequacy...................20
2.4 Liquidation Fee.....................................22
2.5 Basis for Determining LIBOR Rate Inadequate or
Unfair.............................................22
2.6 Payments............................................23
2.7 Setoff; etc.........................................23
2. Sharing.............................................24
29 Revolving Credit Commitment Fee.....................24
2.10 Amendment Fees......................................25
2.11 Lending Branch......................................25
2.12 Letters of Credit...................................25
2.13 Application of Payments and Collections.............28
2.14 Extension of Termination Date.......................29
2.15 The Swing Line......................................29
ARTICLE III. CONDITIONS PRECEDENT........................32
3.1 Conditions Precedent to Effectiveness...............32
3.2 Conditions Precedent to All Advances, Swing Loans and
Issuances of Letters of Credit.....................35
ARTICLE IV. REPRESENTATIONS AND WARRANTIES...............36
4.1 Organization; etc...................................36
4.2 Due Authorization...................................36
4.3 Subsidiaries........................................36
4.4 Validity of the Agreement; etc......................37
4.5 Financial Statements................................37
4.6 Litigation; etc.....................................37
4.7 Compliance with Law.................................37
4.8 ERISA Compliance....................................38
4.9 Title to Assets.....................................38
4.10 Indebtedness........................................38
4.11 Use of Proceeds.....................................38
4.12 Margin Stock........................................38
4.13 Investment Company Act..............................39
4.14 Unregistered Securities.............................39
4.15 Public Utility Holding Company Act..................39
4.16 Accuracy of Information.............................39
4.17 Tax Returns; Audits.................................39
4.18 Environmental and Safety Regulations................39
4.19 Forecasts...........................................40
4.20 Solvency............................................40
4.21 No Default..........................................40
4.22 Subsidiary Guarantors...............................40
ARTICLE V. CERTAIN AFFIRMATIVE COVENANTS.................41
5.1 Financial Information; etc..........................41
5.2 Maintenance of Corporate Existence; etc.............42
5.3 Payment of Taxes; etc...............................43
5.4 Compliance with Laws................................43
5.5 Books and Records; etc..............................43
5.6 Insurance...........................................43
5.7 Conduct of Business.................................44
5.8 Maintain Business...................................44
5.9 ERISA...............................................44
5.10 Changes to GAAP.....................................44
5.11 Use of Proceeds.....................................45
5.12 Subsidiary Guaranty.................................45
5.13 Security Documents..................................45
5.14 Survival of Warranties and Representations..........48
ARTICLE VI. CERTAIN FINANCIAL COVENANTS AND NEGATIVE
COVENANTS...................................48
6.1 Fixed Charge Coverage Ratio.........................49
6.2 Leverage Ratio......................................49
6.3 Limitations on Indebtedness.........................49
6.4 Liens...............................................50
6.5 Dividends, Stock Purchase and Restricted Payments...50
6.6 Sales of Assets.....................................51
6.7 Mergers and Consolidations..........................51
6.8 Preferred Stock of Subsidiaries.....................52
6.9 Disposition of Securities of a Subsidiary...........52
6.10 Investments.........................................53
6.11 Transactions with Affiliates........................53
6.12 Capital Expenditures................................53
6.13 Acquisitions........................................53
6.14 SPE.................................................53
6.15 Rate Hedging Obligations............................53
6.16 Franchise Agreements................................54
ARTICLE VII. EVENTS OF DEFAULT...........................54
7.1 Events of Default...................................54
7.2 Action If Event of Default..........................55
7.3 Remedies............................................56
ARTICLE VIII. THE AGENT..................................56
8.1 Appointment and Authorization.......................56
8.2 Power...............................................56
8.3 Employment of Counsel; etc..........................57
8.4 Reliance............................................57
8.5 General Immunity....................................57
8.6 Credit Analysis.....................................58
8.7 Agent and Affiliates................................58
8.8 Indemnification.....................................59
8.9 Successor Administrative Agent......................59
8.10 Agents' Fees........................................59
8.11 Collateral Matters..................................60
8.12 Syndication Agent and Arranger......................60
ARTICLE IX. AMENDMENT AND RESTATEMENT....................60
9.1 Amendment and Restatement of Existing Credit
Agreement..........................................60
9.2 Master Assignment of Revolving Credit Loans.........60
9.3 Replacement of Revolving Credit Notes...............62
9.4 Replacement of Swing Line Note......................63
9.5 Security Documents..................................63
9.6 Release of Excluded Assets..........................63
ARTICLE X. MISCELLANEOUS.................................63
10.1 Waivers, Amendments; etc.............................63
10.2 Payment Dates........................................64
10.3 Notices..............................................64
10.4 Costs and Expenses...................................64
10.5 Indemnification......................................65
10.6 Severability.........................................65
10.7 Cross-References.....................................65
10.8 Headings.............................................65
10.9 Governing Law........................................65
10.10 Successors and Assigns...............................65
10.11 Execution in Counterparts............................67
10.12 Joint and Several Liability..........................67
10.13 Financial Information................................67
10.14 Consent to Jurisdiction..............................67
10.15 Waiver of Jury Trial.................................68
SCHEDULE I - Commitments
ANNEX I - List of Jurisdictions in which the
Borrower is Qualified to Do Business
ANNEX II - List of Subsidiaries; Jurisdiction of
Incorporation and Stock Ownership
ANNEX III - Indebtedness; Liens
ANNEX IV - Investments
ANNEX V - Description of Real Property
ANNEX VI - List of Excluded Property
EXHIBIT A - Form of Revolving Credit Note
EXHIBIT B - Notice of Borrowing
EXHIBIT C - Form of Swing Line Note
EXHIBIT D - Legal Opinion of Counsel
EXHIBIT E - Form of Assignment Agreement
FOURTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This Fourth Amended and Restated Revolving Credit Agreement dated
as of May 30, 2002 by and between QUALITY DINING, INC., an
Indiana corporation, and GAGHC, Inc., a Delaware corporation, as
Borrowers, the banks now or hereafter parties hereto (the
"Banks"), JP MORGAN CHASE BANK (as successor to Chase Bank of
Texas, National Association), in its capacity as Administrative
Agent for the Banks (in its capacity as such, and together with
any successor administrative agent hereunder, the "Administrative
Agent") and BANK OF AMERICA, NATIONAL ASSOCIATION, as Syndication
Agent (in its capacity as such, the "Syndication Agent").
WHEREAS, the Borrowers have requested and the Banks have agreed
to amend the Existing Credit Agreement (as defined below);
WHEREAS, the Borrowers, the Banks and the Agents have agreed to
enter into this Agreement in order to amend and restate the
Existing Credit Agreement; and
WHEREAS, it is the intention of the parties to this Agreement
that this Agreement not constitute a novation of the obligations
under the Existing Credit Agreement and that, from and after the
Effective Date, the Existing Credit Agreement shall be amended
and restated hereby and all references herein to "hereunder,"
"hereof," or words of like import and all references in any other
Loan Document to the "Credit Agreement" or words of like import
shall mean and be a reference to the Existing Credit Agreement as
amended and restated hereby.
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and of any loans or extensions of credit
heretofore, now or hereafter made to or for the benefit of the
Borrowers by the Banks and the Agents, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
The following terms when used in this Agreement shall, except
where the context otherwise requires, have the following meanings
(such definitions to be equally applicable to the singular and
plural forms thereof):
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the Commencement Date, by
which either of the Borrowers and/or their respective
Subsidiaries (other than an SPE) (i) acquires any going business
or all or substantially all of the assets of any firm,
corporation or division thereof, whether through purchase of
assets, merger or otherwise or (ii) directly or indirectly
acquires (in one transaction or as the most recent transaction in
a series of transactions) voting power for the election of
directors (other than securities having such power only by reason
of the happening of a contingency) or a majority (by percentage
of voting power) of the outstanding partnership interests of a
partnership (any such target business, assets, corporation,
partnership or the like herein referred to as a "Target").
"Acquisition Closing Date" means the date of the consummation of
any Acquisition of any Target under the terms of this Agreement.
"Adjusted LIBOR Rate" shall mean a rate per annum determined
pursuant to the following formula:
LIBOR Rate
Adjusted LIBOR Rate = -----------------------
1 - Reserve Requirement
"Advance" shall mean an Advance as described in Section 2.1(a).
"Affiliate" shall include, with respect to any Person, any Person
which directly or indirectly controls, is controlled by, or is
under common control with such party and in addition, in the case
of the Borrower and each Subsidiary, each officer, director,
stockholder, joint venturer and partner of the Borrower and each
Subsidiary. For purposes of this definition, a Person shall be
deemed to control another Person if the controlling Person owns
directly or indirectly five percent (5%) or more of the shares of
stock of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the controlled Person, whether through
ownership of stock, by contract or otherwise.
"Agent" shall mean each of the Administrative Agent and the
Syndication Agent, and "Agents" shall mean the Administrative
Agent and the Syndication Agent collectively.
"Agreement" shall mean this Fourth Amended and Restated Revolving
Credit Agreement as originally executed and as amended, modified
or supplemented from time to time.
"Arranger" shall mean J.P. Morgan Securities Inc., as book
manager and lead arranger of the credit facilities provided to
the Borrowers by this Agreement.
"Banks" shall mean the Banks referenced in the preamble hereto or
any assignee or successor thereto, and including, without
limitation, Chase as issuing bank of the Letters of Credit and
LaSalle as lender in respect of the Swing Loans.
"Base Rate" shall mean, for any day, a fluctuating rate of
interest per annum equal to the higher of (i) the Prime Rate for
such day, and (ii) the Federal Funds Rate plus 0.50%.
"Base Rate Loan" shall mean, as of any date, an Advance
designated as a "Base Rate Loan" pursuant to Section 2.2.
"Board of Directors" shall mean the Board of Directors of QDI,
GAGHC or any Subsidiary Guarantor, as applicable.
"Borrower" shall mean each of QDI and GAGHC; and "Borrowers"
shall mean QDI and GAGHC together.
"Business Day" shall mean any day on which commercial banks are
not authorized or required to close in Houston, Texas, or
Chicago, Illinois, and if such day relates to an event, a
transaction or a notice in respect of a LIBOR Base Loan, a day
which is also a day on which dealings in U.S. Dollar deposits are
carried out in the London interbank market.
"Capital Expenditure" shall mean any expenditure by a Borrower or
any Subsidiary in respect of the purchase or other acquisition of
assets which, in conformity with GAAP, are included in the
property, plant, equipment, or other fixed asset accounts
reflected in the consolidated balance sheet of QDI.
"Capital Lease" shall mean a lease of (or other agreement
conveying the right to use) real and/or personal property, which
obligation is, or in accordance with GAAP (including Statement of
Financial Accounting Standards No. 13 of the Financial Accounting
Standards Board) is required to be, classified and accounted for
as a capital lease on a balance sheet of such Person.
"Capital Lease Obligations" shall mean, with respect to any
Person, any obligation of such Person to pay rent or other
amounts under a Capital Lease and for purposes of this Agreement
the amount of each Capital Lease Obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Change of Control" shall mean the ownership, through purchase or
otherwise (including the agreement to act in concert without
anything more), by any Person or group of Persons (other than one
or more of Daniel B. Fitzpatrick, the spouse, children or
grandchildren or the heirs of Daniel B. Fitzpatrick or any trusts
created for their benefit) acting in concert, directly or
indirectly, in one or more transactions, of (i) beneficial
ownership or control of securities representing more than 30% of
the combined voting power of QDI's Voting Stock or
(ii) substantially all of the assets of QDI.
"Chase" shall mean JP Morgan Chase Bank, in its individual
capacity.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral Assignment of Franchise Agreements" shall mean the
collateral assignments of franchise agreements, in form and
substance reasonably acceptable to the Administrative Agent,
executed and delivered by the Borrowers and QDI's Subsidiaries to
the Administrative Agent for the benefit of the Bank's, as the
same may be amended, supplemented or otherwise modified from time
to time.
"Collateral Assignment of Leases" shall mean the collateral
assignments of leases, in form and substance reasonably
acceptable to the Administrative Agent, executed and delivered by
the Borrowers and QDI's Subsidiaries to the Administrative Agent
for the benefit of the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.
"Commencement Date" shall mean the first day of the third fiscal
quarter of QDI's 2002 fiscal year.
"Commitment" shall mean, for each Bank, the aggregate amount of
such Bank's Revolving Credit Commitment and Swing Line Commitment
(if any); provided, however, that the aggregate Commitments of
all Banks shall not exceed $60,000,000.
"Consolidated Capital Expenditures" shall mean, for any fiscal
period, the sum of all Capital Expenditures made by the
Borrowers and their consolidated Subsidiaries during such period.
"Consolidated Cash Flow" of any person shall mean, for any period
for which the amount thereof is to be determined, Consolidated
Net Income of such Person for such period, plus (to the extent
deducted in determining Consolidated Net Income and without
duplication to adjustments to net income of such Person
(determined in accordance with GAAP) made in the determination of
Consolidated Net Income) (i) provisions for any Federal, state or
local taxes during such period, (ii) interest expense of such
Person during such period and (iii) depreciation and amortization
of such Person during such period, and (iv) other non-cash income
or expenses of such Person during such period.
"Consolidated Net Income" shall mean, for any period for which
the amount thereof is to be determined, the net income (or net
losses) of QDI and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP after deducting, to the extent
included in computing said net income and without duplication,
(i) the income (or deficit) of any Person (other than a
Subsidiary) in which QDI or any of its Subsidiaries has any
ownership interest, except to the extent that any such income has
been actually received by QDI or such Subsidiary in the form of
cash dividends or similar cash distributions, (ii) any income (or
deficit) of any other Person accrued prior to the date it becomes
a Subsidiary of QDI or merges into or consolidates with QDI or
another of its Subsidiaries, (iii) the gain or loss (net of any
tax effect) resulting from the sale, exchange or disposal of any
capital assets, (iv) any gains or losses, or other income (net of
any tax effect in respect thereof) which is nonrecurring or
otherwise properly classified as extraordinary in accordance with
GAAP, (v) income resulting from any reappraisal, reevaluation or
write-up of any assets, (vi) any portion of the net income of the
Subsidiaries which for any reason is not available for
distribution, and (vii) the proceeds of any life insurance policy
on the life of any officer, director or employee of QDI or any of
its Subsidiaries.
"Default" shall mean any event which if continued uncured would,
with notice or lapse of time or both, constitute an Event of
Default.
"Earnings Available for Fixed Charges" shall mean, for any period
for which the amount thereof is to be determined, the sum of
(without duplication): (i) the Consolidated Cash Flow of QDI and
its Subsidiaries for such period, and (ii) the rents and other
payments (exclusive of property taxes, property and liability
insurance premiums and maintenance costs) made by QDI and its
Subsidiaries during such period under Operating Leases.
"Effective Date" shall mean the later of May 30, 2002 and the
date on which the conditions set forth in Article III are
satisfied.
"Environmental Indemnity" shall have the meaning assigned thereto
in Section 3.1(a)(vii).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder and under the Code, in
each case as in effect from time to time. References to sections
of ERISA shall be construed to also refer to any successor
sections.
"ERISA Affiliate" shall mean any corporation, trade or business
that is, along with QDI or any of its Subsidiaries, a member of a
controlled group of corporations or a controlled group of trades
or businesses, as described in Sections 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall mean any Event of Default described in
Article VII.
"Excluded Property" shall mean each of the following: (i) the
Grady's American Grill restaurants which on the date hereof are
under contract for sale and (ii) the Grady's American Grill
restaurants which are being held for sale, as listed on Annex VI
hereto.
"Existing Credit Agreement" shall mean the Third Amended and
Restated Revolving Credit Agreement dated as of May 11, 1999 by
and between, QDI, GAGHC, the Banks which are a party thereto (the
"Existing Banks") and Chase, as Administrative Agent, as amended,
supplemented or modified prior to the date hereof.
"Existing Notes" shall mean the promissory notes issued by the
Borrowers in favor of the Existing Banks evidencing the Loans
outstanding under the Existing Credit Agreement.
"Federal Funds Rate" means a fluctuating interest rate per annum
equal for each day to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Fixed Charges" shall mean, for any period for which the amount
thereof is to be determined, the sum of the following (without
duplication): (i) Interest Expense of QDI and its Subsidiaries
for such period, plus (ii) all rents and other payments
(exclusive of property taxes, property and liability insurance
premiums and maintenance costs) which are made by QDI and its
Subsidiaries during such period under Operating Leases in respect
of which QDI or any of its Subsidiaries is obligated as a lessee
or user or as a guarantor of the obligations of a lessee or user,
plus (iii) Capital Lease Obligations paid or required to be paid
by QDI or any of its Subsidiaries during such period, plus
(iv) the Principal Requirements for such period.
"Franchise" in respect of any Person shall mean all rights of
such Person as a franchisee pursuant to a Franchise Agreement
relating to one or more of the businesses conducted by such
Person or an Affiliate of such Person.
"Franchise Agreement" in respect of any Person shall mean each of
the franchise agreements to which such Person is a party as
franchisee, as any of the same may from time to time be amended,
modified, supplemented or restated.
"Funded Debt" of any Person shall mean all Indebtedness owed or
guaranteed by such Person which by its terms matures more than
one year from the date of creation or which is renewable at the
option of the obligor for more than one year from such date
whether or not theretofore renewed.
"GAAP" shall mean generally accepted accounting principles
consistently applied and maintained throughout the term of this
Agreement except for such changes as are in accordance with the
generally accepted accounting principles in effect at the time of
such change, shall be concurred in by the certified public
accountants certifying the financial statements of QDI and its
Subsidiaries and shall be disclosed in the financial statements
(or notes thereto). Whenever any accounting term is used herein
which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
"GAGHC" shall mean GAGHC, Inc., a Delaware corporation, and its
successors and assigns, and any surviving, resulting or
transferee corporation.
"Guarantee(s)" shall mean all guarantees, sales with recourse,
endorsements (other than for collection or deposit in the
ordinary course of business) and other obligations (contingent or
otherwise) by any Person to pay, purchase, repurchase or
otherwise acquire or become liable upon or in respect of any
Indebtedness of any other Person, and, without limiting the
generality of the foregoing, all obligations (contingent or
otherwise) by any Person to purchase products, supplies or other
property or services for any Person under agreements requiring
payment therefore regardless of the non-delivery or non-furnishing
thereof, or to make investments in any other Person, or to
maintain the capital, working capital, solvency or general
financial conditions of any other Person, or to indemnify any
other Person against and hold him harmless from damages, losses
and liabilities, all under circumstances intended to enable such
other Person or Persons to discharge any Indebtedness or to
comply with agreements relating to such Indebtedness or otherwise
to assure or protect creditors against loss in respect of such
Indebtedness. The amount of any Guarantee shall be deemed to be
the amount of the Indebtedness of, or damages, losses or
liabilities of, the other Person or Persons in connection with
which the Guarantee is made or to which it is related unless the
obligations under the Guarantee are limited to a determinable
amount, in which case the amount of such Guarantee shall be
deemed to be such determinable amount.
"Indebtedness" of any Person shall mean and include, as of any
date as of which the amount thereof is to be determined, (i) all
obligations of such Person for borrowed money or which has been
incurred in connection with the acquisition of Property; (ii) all
Guarantees of such Person; (iii) all indebtedness, liabilities
and other obligations secured by any Lien on or in respect of
Property of such Person, whether or not liability has been
assumed by such Person for the payment of such obligations;
(iv) all indebtedness, liabilities and other obligations of such
Person arising under any conditional sale or other title
retention agreement, whether or not the rights and remedies of
the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property; (v) all
obligations of such Person as an account party in respect of
letters of credit and bankers acceptances; (vi) all net
obligations of such Person in respect of Rate Hedging Obligations
and (vii) Capital Lease Obligations of such Person.
"Indebtedness Ratio" shall mean, as of any date of determination
thereof, the ratio of (i) Funded Debt of QDI and its Subsidiaries
as of such date, excluding, however, for purposes of this
calculation, any obligations in respect of letters of credit (to
the extent undrawn) securing insurance and workers' compensation
programs of QDI and its Subsidiaries, to (ii) the Pro Forma
Consolidated Cash Flow of QDI and its Subsidiaries for the twelve-
month period ending on such date.
"Intercreditor Agreement" shall mean the Intercreditor Agreement
dated as of August 3, 1999 by and among Captec Financial Group,
Inc. and CNL Financial Services, Inc., as mortgage lenders, Chase
for itself and as Administrative Agent, QDI, Bravokilo, Inc.,
Southwest Dining, Inc. and Grayling Corporation, as the operating
companies, and BKCAP, LLC, BKCN, LLC, SWCAP, LLC, SWCN, LLC,
GRAYCAP, LLC, and GRAYCN, LLC, as Borrowers, as it may be amended
or modified from time to time.
"Interest Expense" shall mean, for any period for which the
amount thereof is to be determined, the consolidated interest
expense of QDI and its Subsidiaries, including all interest on
Indebtedness (including imputed interest related to Capitalized
Leases), all amortization of debt discount and expense and Rate
Hedging Obligations of the Borrowers and their Subsidiaries, to
the extent required to be reflected on the income statement of
QDI and its Subsidiaries on a consolidated basis in accordance
with GAAP.
"Interest Period" shall mean, with respect to any LIBOR Base
Loan, the period designated by a Borrower for the computation of
interest commencing on the date the relevant Advance is made and
ending on the date which is one (1), two (2), three (3) or six
(6) months thereafter. For purposes of determining an Interest
Period, a month means a period starting on one day in a calendar
month and ending on a numerically corresponding date in the next
calendar month, provided, however, that if there is no
numerically corresponding day in the month in which an Interest
Period is to end or if an Interest Period begins on the last day
of a calendar month, such Interest Period shall end on the last
Business Day of such next calendar month and provided further
that no Interest Period may extend beyond the Termination Date.
"Investment" shall mean any purchase of capital stock,
obligations or other securities of any Person, any contribution
of capital to any Person, any loan, advance or extension of
credit to any Person or other investment or acquisition of any
interest in any Person.
"Junior Subordinated Note" shall mean the junior subordinated
note dated October 20, 1997 in the original principal amount of
$10,000,000 issued by Bruegger's Corporation to QDI, and
thereafter assigned by QDI to Southwest Dining, Inc., as it may
be amended, modified, restated or replaced from time to time.
"LaSalle" shall mean LaSalle Bank National Association, in its
individual capacity.
"L/C Outstandings" shall mean, at any time, the sum of (i) the
stated amount available to be drawn under all Letters of Credit
outstanding and (ii) the aggregate amount of all unpaid drawings
in respect of all Letters of Credit.
"Leasehold Mortgages" shall mean the leasehold mortgages and
deeds of trust, in form and substance reasonably acceptable to
the Administrative Agent, executed and delivered by the Borrowers
and QDI's Subsidiaries in favor of the Administrative Agent for
the benefit of the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.
"Letter of Credit" is defined in Section 2.12.
"LIBOR Base Loan" shall mean, for any Interest Period, an Advance
designated as a LIBOR Base Loan pursuant to Section 2.2.
"LIBOR Rate" shall mean for each Interest Period the rate of
interest per annum as determined by the Administrative Agent
(rounded upward, if necessary, to the nearest whole multiple of
one-sixteenth of one percent (1/16th of 1%)) at which deposits of
United States Dollars in immediately available and freely
transferable funds are offered at 11:00 A.M. London time two (2)
Business Days prior to the commencement of such Interest Period
to the Administrative Agent or its agent in the London interbank
market for a term comparable to such Interest Period and in an
amount comparable to the principal amount of the LIBOR Base Loan
to be outstanding during such Interest Period.
"Lien" shall mean: (a) any interest in Property (whether real,
personal or mixed and whether tangible or intangible) which
secures the payment of indebtedness or an obligation owed to, or
a claim by, a Person other than the owner of such Property,
whether such interest is based on common law, statute or
contract, including, without limitation, any such interest
arising from a mortgage, charge, pledge, security agreement,
conditional sale, Capital Lease or trust receipt, or arising from
a lease, consignment or bailment given for security purposes, and
(b) any exception to or defect in the title to or ownership
interest in such Property, including, without limitation,
reservations, rights of entry, possibilities of reverter,
encroachments, easements, rights of way, restrictive covenants,
leases and licenses. For purposes of this Agreement, a Borrower
or any Subsidiary shall be deemed to be the owner of any Property
which it has acquired or holds subject to a conditional sale
agreement, Capital Lease or other arrangement pursuant to which
title to the Property has been retained by or vested in some
other person for security purposes.
"Loan" shall mean, individually or collectively, as the case may
be, a Base Rate Loan, a LIBOR Base Loan or a Swing Loan.
"Loan Document" shall mean, individually or collectively, as the
case may be, this Agreement, the Notes, the Subsidiary Guaranty,
the Reaffirmation of Subsidiary Guaranty, the Environmental
Indemnity and each Security Document, each as originally executed
and as amended, modified or supplemented from time to time.
"Material Adverse Occurrence" shall mean any occurrence of
whatsoever nature (including, without limitation, any adverse
determination in any litigation, arbitration or governmental
investigation or proceeding) which could materially adversely
affect the business, properties, operations or condition,
financial or otherwise, of QDI and its Subsidiaries or could
materially impair the ability of QDI or its Subsidiaries to
perform its obligations under the Loan Documents.
"Maximum Repurchase Amount" shall mean, as of any date of
determination thereof, (i) with respect to fiscal year 2002,
$5,000,000, and (ii) with respect to any fiscal year thereafter,
the sum of the Allowable Repurchase Amounts for the current
fiscal year and for each of the preceding fiscal years,
commencing with fiscal year 2003, less the aggregate amount of
Restricted Payments made on and after the Commencement Date, but
immediately prior to and without giving effect to the proposed
Restricted Payment to repurchase capital stock of QDI pursuant to
the first proviso to Section 6.5 hereof. For purposes hereof,
"Allowable Repurchase Amount" for each fiscal year shall mean
$5,000,000.
"Monthly Payment Date" shall mean the first Business Day of each
calendar month, commencing on the first of such dates to occur
after the Effective Date.
"Moody's" shall mean Moody's Investors Service, Inc., or any
successor to the rating agency business thereof.
"Mortgage Transaction" shall mean one or more transactions in
existence as of the Effective Date (a) pursuant to which (i) QDI
and/or a Subsidiary thereof sold for fair consideration all or a
portion of the Subject Assets to a SPE, (ii) QDI and/or its
Subsidiaries leased from such SPE the Subject Assets which were
sold to such SPE, as contemplated by clause (i) above, and
(iii) none of QDI and its Subsidiaries (other than such SPE) have
entered into any Guarantee in respect of any of the obligations
of such SPE and (b) in respect of which the aggregate annual
rentals and other payments (exclusive of property taxes, property
and liability insurance premiums and maintenance costs) shall not
exceed the annual mortgage payments payable by the SPEs to
unaffiliated third parties.
"Mortgages" shall mean the mortgages and deeds of trust, in form
and substance reasonably acceptable to the Administrative Agent,
executed and delivered by the Borrowers and QDI's Subsidiaries in
favor of the Administrative Agent for the benefit of the Banks,
as the same may be amended, supplemented or otherwise modified
from time to time.
"Net Proceeds" shall mean, with respect to any sale of assets,
the proceeds of such sale net of (i) direct out-of-pocket costs
and expenses of such sale, (ii) federal and state income taxes,
sales taxes, transfer taxes or similar taxes imposed on the
seller on account of such sale, and (iii) amounts, if any,
required to be paid with respect to Indebtedness secured by any
Lien on such assets which is senior in priority to the Lien of
the Administrative Agent, if any, on such assets.
"Northern" shall mean The Northern Trust Company, in its
individual capacity.
"Note(s)" shall mean, individually or collectively, as the case
may be, (a) the Revolving Credit Notes, (b) the Swing Line Note
and (c) such other promissory notes accepted by the Banks in
exchange for or in substitution of any such Notes.
"Note Pledge Agreement" shall mean the Note Pledge Agreement
dated as of October 22, 1997 by and between Southwest Dining,
Inc. and the Administrative Agent for the benefit of the Banks,
as it may be amended, modified, restated or replaced from time to
time.
"Notice of Borrowing" shall mean the notice in the form of
Exhibit B attached hereto to be delivered to the Administrative
Agent pursuant to Section 2.1(d).
"Obligations" shall mean (i) all Loans (including the Base Rate
Loans, LIBOR Base Loans and Swing Loans), Advances, L/C
Outstandings, debts, liabilities, obligations, covenants and
duties owing by the Borrowers or the Subsidiary Guarantors to the
Administrative Agent, the Banks or any Bank of any kind or
nature, present or future, arising under this Agreement or any
other Loan Document, whether evidenced by any note, guaranty or
other instrument, whether for the payment of money or in kind,
whether arising by reason of any extension of credit, issuing,
guaranteeing or confirming of a letter of credit, guaranty,
indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment or purchase),
absolute or contingent, due or to become due, and however
acquired and (ii) all Rate Hedging Obligations owing at any time
or from time to time by the Borrowers or the Subsidiary
Guarantors, or any of them, to the Banks or any Bank. The term
includes, without limitation, all principal, interest, fees,
charges, expenses, reasonable attorneys' fees, and any other sum
chargeable to the Borrowers or the Subsidiary Guarantors under
this Agreement or any other Loan Document or in connection with
any Rate Hedging Obligation.
"Operating Lease" shall mean a lease (excluding Capital Leases)
of Property to which QDI or any of its Subsidiaries is a party as
lessee having an unexpired term (including any periods of renewal
or extension which may be exercised at the option of the lessor
or lessee) in excess of one year.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Percentage" shall mean, with respect to each Bank, the
percentage derived from dividing such Bank's Commitment by the
sum of the aggregate Commitments for all Banks; provided that
after the termination of the Commitments, "Percentage" shall
mean, with respect to each Bank, the percentage derived by
dividing the principal amount outstanding of such Bank's Note(s)
by the aggregate principal amount outstanding of all Notes.
"Permitted Disposition" shall mean (i) any sale by a Borrower or
any Subsidiary of inventory in the ordinary course of its
business and on usual and customary terms, (ii) any sale of a
past due receivable for collection only in the ordinary course of
business, (iii) any sale of assets of a Subsidiary to QDI or a
Subsidiary Guarantor, (iv) any sale of equipment no longer used
or useful in the business of a Borrower or any Subsidiary and
(v) any sale or lease by a Borrower or any Subsidiary of any
other assets (including without limitation the capital stock of
any Subsidiary), provided that no sale or lease of assets by the
Borrower or a Subsidiary described in clause (v) above shall be a
Permitted Disposition unless the Net Proceeds of such sale or
lease are applied within twelve months (x) to prepay Funded Debt
of the Borrowers and/or (y) to acquire replacement assets having
equal or greater value.
"Permitted Investment" shall mean any of the following
Investments made by QDI or any of its Subsidiaries in any Person:
(i) obligations, with a maturity of less than two years from the
date of acquisition thereof, issued by or unconditionally
guaranteed by the United States of America or an agency or
instrumentality thereof backed by the full faith and credit of
the United States of America; (ii) direct obligations of any
state of the United States, any subdivision or agency thereof or
any municipality therein which are rated by S&P or Moody's in one
of the top two rating classifications and maturing within two
years of the date of acquisition thereof; (iii) certificates of
deposit or banker's acceptances, maturing within two years of the
date of acquisition thereof, issued by commercial banks organized
under the laws of the United States or any state thereof, having
capital, surplus and undivided profits aggregating not less than
$100 million and whose unsecured long-term debt is rated in one
of the top two rating classifications by S&P or Moody's; (iv)
commercial paper of any corporation organized under the laws of
the United States or any state thereof, rated in one of the top
two rating classifications by S&P or Moody's and with a maturity
of less than 270 days from the date of acquisition thereof; (v)
Investments of QDI in and to any Wholly-Owned Subsidiary of QDI
(other than any SPE) and Investments of any Wholly-Owned
Subsidiary of QDI in and to QDI or any Wholly-Owned Subsidiary of
QDI (other than any SPE), including any Investments in a
corporation which after giving effect thereto will become a
Wholly-Owned Subsidiary; (vi) Investments existing as of the date
of this Agreement, as disclosed on Annex IV; (vii) the Junior
Subordinated Note; and (viii) Investment in SPEs in an aggregate
amount not to exceed $40,000,000.
"Person" shall mean any natural person, corporation, firm, joint
venture, partnership, limited liability company, association,
trust or other entity or organization, whether acting in an
individual, fiduciary or other capacity, or any government or
political subdivision thereof or any agency, department or
instrumentality thereof.
"Plan" shall mean each employee benefit plan or other class of
benefits covered by Title IV of ERISA, in either case whether now
in existence or hereafter instituted, of QDI, any of its
Subsidiaries or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement, dated as of
October 31, 1997, entered into by certain of QDI's Subsidiaries
in favor of the Administrative Agent for the benefit of the
Banks, as it may be amended, modified, restated or replaced from
time to time.
"Pledgor" shall mean each of the Borrowers and their respective
Subsidiaries and Affiliates which is a party to the Pledge
Agreement, the Note Pledge Agreement, the Security Agreement or
any other Security Document at any time or from time to time.
"Preferred Stock" shall mean any class of capital stock of a
Person with respect to which mandatory payments are required or
with respect to which a payment (of interest, dividends or return
of capital) has a preference or priority over the making of a
similar payment on any other class of capital stock of such
Person.
"Prime Rate" shall mean the rate announced by Chase from time to
time as its prime rate, changing as and when such prime rate
changes; Chase may lend to its customers at rates that are at,
above or below the Prime Rate.
"Principal Requirements" shall mean, for any period for which the
amount thereof is to be determined, all payments of principal
made or required to be made by QDI and its Subsidiaries during
such period on Indebtedness for borrowed money (other than
Capital Leases).
"Pro Forma Consolidated Cash Flow" shall mean, for any period for
which the amount thereof is to be determined, Consolidated Cash
Flow of QDI 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 the Consolidated Cash Flow of such Property for
the portion of such period that such Property has been in
operation annualized for such period.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or
intangible.
"QDI" shall mean Quality Dining, Inc., an Indiana corporation,
and its successors and assigns, and any surviving, resulting or
transferee corporation.
"Rate Hedging Obligations" shall mean any and all obligations of
such Person, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefore), under (i) any and all agreements, devices or
arrangements designed to protect at least one of the parties
thereto from the fluctuations of interest rates applicable to
such party's assets or liabilities, including but not limited to
interest rate swaps, basis swaps, interest rate floors, interest
rate collars, interest rate caps, forward rate agreements or
other similar rate protection transactions, or any combination of
or option with respect to any of the foregoing, and (ii) any and
all cancellations, buy backs, reversals, terminations or
assignments of any of the foregoing.
"Real Property" shall mean all real property or interests therein
wherever situated now, heretofore or hereafter owned, leased or
utilized by QDI or any of its Subsidiaries.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor to all or a portion thereof establishing margin
requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor to all or a portion thereof establishing margin
requirements.
"Regulatory Change" shall mean any change after the date hereof
in any (or the adoption after the date hereof of any new):
(a) Federal or state law or foreign law applying to a class
of financial institutions (including the Administrative Agent or
one or more of the Banks); or
(b) regulation, interpretation, directive or request
(whether or not having the force of law) applying to a class of
financial institutions (including the Administrative Agent or one
or more of the Banks) of any court or governmental authority
charged with the interpretation or administration of any law
referred to in clause (a) of this definition or of any fiscal,
monetary or other authority having jurisdiction over the
Administrative Agent or any Bank.
"Required Banks" shall mean Banks (excluding Banks whose failure
to fund an advance have not been cured) whose Percentage, in the
aggregate, equals or exceeds 51%.
"Reserve Requirement" shall mean, for any Interest Period for any
LIBOR Base Loan, the sum (expressed as a decimal) of (a) the
average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of
the Federal Reserve System against "Eurocurrency liabilities" and
(b) any other reserves required to be maintained by such member
banks by reason of any Regulatory Change against (i) any category
of liabilities which includes deposits by reference to which the
LIBOR Rate is to be determined or (ii) any category of extensions
of credit or other assets which includes a LIBOR Base Loan.
"Restricted Payments Basket" as of any date shall mean, for the
period commencing on the Commencement Date through such date of
determination, (a) the sum of (i) $5,000,000, (ii) the
Consolidated Cash Flow of QDI and its Subsidiaries for such
period, and (iii) Net Proceeds received in cash in connection
with the sale after the Commencement Date of one or more Grady's
American Grill restaurants, in an aggregate amount not to exceed
$5,000,000, less (b) the sum of (i) the aggregate amount of
Capital Expenditures during such period, (ii) the aggregate
Principal Requirements during such period, (iii) the aggregate
Capital Lease Obligations during such period, (iv) the aggregate
Interest Expense during such period, and (v) the aggregate amount
of taxes (federal, state and local) paid or payable by the
Borrowers and their Subsidiaries during such period.
"Revolving Credit Commitment" shall mean for each Bank the amount
appearing opposite such Bank's name under the heading "Revolving
Credit Commitments" in Schedule I, as such amount may be reduced
pursuant to Section 2.1(b) or temporarily adjusted pursuant to
Section 2.1(d) or increased pursuant to Section 2.15(f), and as
said Schedule I may be amended from time to time pursuant to
Section 10.10.
"Revolving Credit Loan" shall mean, individually or collectively,
a Base Rate Loan or a LIBOR Base Loan.
"Revolving Credit Note" shall mean each of the promissory notes,
substantially in the form of Exhibit A attached hereto, made by
the Borrowers payable to the order of each of the Banks to
evidence the Advances made by such Bank.
"Revolving Credit Percentage" shall mean, with respect to each
Bank, the percentage derived by dividing such Bank's Revolving
Credit Commitment by the sum of the Revolving Credit Commitments
for all Banks.
"Security Agreement" shall mean the Pledge and Security Agreement
dated as of September 11, 1998, entered into by the Borrowers and
certain of their respective Subsidiaries in favor of the
Administrative Agent for the benefit of the Banks, as it may be
amended, modified, restated or replaced from time to time.
"Security Document" shall mean the Pledge Agreement, the Note
Pledge Agreement, the Security Agreement, the Collateral
Assignments of Franchise Agreements, the Collateral Assignments
of Leases, the Mortgages, the Leasehold Mortgages and each other
mortgage, assignment, pledge or security agreement or document
executed from time to time by any person in favor of the
Administrative Agent for the benefit of the Banks, to secure all
or any portion of the Obligations, as said agreements or
documents may be amended, modified, restated or replaced from
time to time.
"SPE" shall mean one or more Delaware corporations, each of which
was established as a single purpose entity for the purpose of
engaging in a Mortgage Transaction, and its successors and
assigns, and any surviving, resulting or transferee corporation.
"S&P" shall mean Standard & Poor's Ratings Services, a division
of the McGraw Hill Companies, Inc., or any successor to the
rating agency business thereof.
"Subject Assets" shall mean the fee interests and/or leasehold
interests in the parcels of real property identified in Annex V
hereto and the equipment (including fixtures) located on such
parcels of real property.
"Subsidiary" of any Person shall mean (i) any corporation of
which more than 50% of the outstanding shares of capital stock of
any class or classes having ordinary voting power for the
election of directors (irrespective of whether or not at the time
stock of any class or classes of such corporation shall have or
might have voting power by reason of the happening of any
contingency) is now or hereafter owned directly or indirectly by
such Person, by such Person and one or more of its Subsidiaries,
or by one or more of such Person's other Subsidiaries, and
(ii) any partnership, association, limited liability company,
joint venture or other entity in which such Person, such Person
and one or more of its Subsidiaries, or one or more of its
Subsidiaries, is either a general partner or has an equity
interest of more than 50% at the time.
"Subsidiary Guaranty" shall mean the Subsidiary Guaranty dated
December 21, 1995 entered into by each of the Subsidiary
Guarantors, in favor of Northern, as agent for the benefit of the
Banks, as reaffirmed as of the Effective Date by each such
Subsidiary Guarantor in favor of the Administrative Agent
hereunder for the benefit of the Banks. Notwithstanding the
foregoing, for so long as any Indebtedness described under the
caption "Indebtedness of SPE's" on Annex III remains outstanding,
each of the SPEs shall for all purposes of this Agreement be
deemed not to be a "Subsidiary Guarantor".
"Subsidiary Guarantor" shall mean each of Bravokilo, Inc.,
Southwest Dining, Inc., Full Service Dining, Inc., Grayling
Corporation, GAGLC, Inc., Grady's American Grill Restaurant
Corporation, Grady's Inc., Grady's American Grill, LP and
Bravogrand, Inc. and each other Person which shall hereafter be
or become a Wholly-Owned Subsidiary of QDI and shall become a
party to the Subsidiary Guaranty.
"Swing Line" means the credit facility for making Swing Loans
described in Section 2.15 hereof.
"Swing Line Commitment" means the commitment of LaSalle to make
Swing Loans in the aggregate amount of $3,000,000 at any one time
outstanding.
"Swing Loan" is defined in Section 2.15(a) hereof.
"Swing Line Note" is defined in Section 2.15(e) hereof.
"Termination Date" shall mean the date which is the earlier of
(a) November 1, 2005, or such later date as may be established
pursuant to Section 2.14, or (b) the date upon which the
obligation of the Banks to make Advances is terminated pursuant
to Section 2.1(c).
"Unfunded Obligations" shall mean at any time the obligations of
the Borrowers to Chase in respect of undrawn amounts of Letters
of Credit. Each Unfunded Obligation will be deemed to be in an
amount equal to the undrawn amount of the relevant Letter of
Credit.
"Unused Portion" shall mean, as of any date, the excess of the
aggregate Revolving Credit Commitments on such date over the sum
of the aggregate outstanding principal amount of the Advances and
the aggregate stated amount of the outstanding Letters of Credit
on such date.
"Voting Stock" shall mean stock or similar interests of any class
or classes (however designated), the holders of which are
generally and ordinarily, in the absence of contingencies,
entitled to vote for the election of the directors (or Persons
performing similar functions) of a corporation or other business
entity.
"Wholly-Owned Subsidiary" shall mean a Subsidiary in which all
voting shares (except for directors' qualifying shares, if any)
are owned by QDI and/or one or more Wholly Owned Subsidiaries of
QDI.
Other terms defined herein shall have the meanings ascribed to
them herein.
ARTICLE II.
THE ADVANCES
2.1 Advances.
(a) Revolving Credit Commitments. Each Bank severally
agrees, subject to the terms and conditions hereinafter set
forth, to make an advance (each an "Advance") to the Borrowers
from time to time on any Business Day during the period from the
date hereof and ending on the Termination Date; provided,
however, that no Bank shall be required to make any Advance if,
after giving effect to such Advance, the sum of the aggregate
outstanding principal amount of all Advances made by such Bank,
plus the Bank's Revolving Credit Percentage of L/C Outstandings
would exceed such Bank's Revolving Credit Commitment. Each
borrowing under this Section 2.1(a) shall consist of Advances
made on the same day by the Banks ratably in accordance with
their respective Revolving Credit Commitments. Within the limits
set forth above, the Borrowers may borrow, prepay and reborrow
pursuant to this Section 2.1(a). Each Advance shall be in an
aggregate minimum amount of $500,000.00.
(b) Reduction of Revolving Credit Commitments.
(A) The Borrowers, or either of them, at any time
on at least three (3) Business Days' prior written notice to the
Administrative Agent (which shall promptly notify each Bank), may
reduce the Revolving Credit Commitments pro rata among the Banks
permanently in a minimum aggregate amount of $100,000.00;
provided, however, that the Borrowers may not reduce any such
Revolving Credit Commitments below an amount equal to the sum of
the principal amount then outstanding on the Revolving Credit
Notes plus the aggregate amount of the L/C Outstandings.
(B) The aggregate Revolving Credit Commitments of
the Banks shall be automatically and permanently reduced pursuant
to Section 2.1(h)(ii) hereof.
(c) Termination. The obligation of the Banks to make
Advances, of LaSalle to make Swing Loans and of Chase to issue
Letters of Credit shall terminate:
(A) Upon written notice by the Borrowers to the
Administrative Agent (which shall promptly notify each Bank) at
any time when no amount is outstanding on the Notes, no Letters
of Credit are outstanding hereunder and all drawings under
Letters of Credit have been reimbursed in accordance with Section
2.12(c) hereof;
(B) Immediately and without further action upon the
occurrence of an Event of Default described in clauses (f) and
(g) of Section 7.1; or
(C) Immediately when any Event of Default (other
than of the nature specified in clauses (f) and (g) of Section
7.1) shall have occurred and be continuing and either: (A) the
Required Banks shall have demanded payment of the Notes or
(B) the Required Banks shall so elect by giving written notice to
the Borrowers for purposes of this clause.
(d) Manner of Borrowing. Either Borrower may request an
Advance by delivering to the Administrative Agent in respect of
each requested Advance a written Notice of Borrowing (which may
be transmitted by telecopier) or by oral notice to the
Administrative Agent confirmed by a written Notice of Borrowing
(which may be transmitted by telecopier), indicating thereon the
amount of the Advance requested, by not later than 10:00 a.m.
(Houston, Texas time) on the Business Day preceding the Business
Day on which an Advance is to be made; provided, however, if such
Advance is to be made as a LIBOR Base Loan, such Borrower shall
give such Notice of Borrowing to the Administrative Agent by not
later than 10:00 a.m. (Houston, Texas time) on the third Business
Day preceding the Business Day on which an Advance is to be made.
Any such Notice of Borrowing given by a Borrower shall be
irrevocable. Upon receipt of such Notice of Borrowing, the
Administrative Agent shall promptly notify each Bank thereof. By
not later than 2:00 p.m. (Houston, Texas time) on the requested
Business Day of an Advance, each Bank shall make available to the
Administrative Agent, at its address referred to in Section 10.3,
in immediately available funds, the amount of such Bank's
Advance. After (and subject to) the Administrative Agent's
receipt of such funds and upon satisfaction of the applicable
conditions set forth in Article III, the Administrative Agent
shall make such Advance available to the requesting Borrower by
transferring the amount thereof in immediately available funds
for credit to an account (other than a payroll account)
maintained by such Borrower at the Administrative Agent, or
otherwise as directed by such Borrower. If the Administrative
Agent shall receive less than all the amounts payable by the
Banks in accordance with this Section 2.1, the Administrative
Agent shall make available to the requesting Borrower such amount
as it shall actually have received. Unless the Administrative
Agent shall have been notified by any Bank prior to the date of
an Advance that such Bank does not intend to make available to
the Bank its portion of such Advance, the Administrative Agent
may assume that each Bank has made such amount available to the
Administrative Agent on the date of such Advance and the
Administrative Agent may, in reliance upon such assumption, make
available to the requesting Borrower a corresponding amount. If
and to the extent any Bank shall not have made available its
Advance to the Administrative Agent on the date of any Advance,
the Administrative Agent shall notify such Bank and Chase of such
Bank's failure and, if such Bank fails to make its Advance, Chase
may in its sole discretion make an Advance (the "Over-Advance")
to repay the Administrative Agent forthwith on demand a
corresponding amount and the Bank which failed to make its
Advance agrees to repay Chase forthwith on demand a corresponding
amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers until the date
such amount is repaid to Chase at the interest rate applicable
during such period to the Advances and the principal amount
repaid by such Bank shall constitute such Bank's Advance for
purposes of this Agreement. In the event any Bank fails to make
available its Advance to the Administrative Agent on the date of
any Advance and Chase elects not to make an Over-Advance, such
Bank and the Borrowers severally agree to repay to the
Administrative Agent forthwith upon demand such corresponding
amount together with interest thereon for each day from the date
such amount is made available by the Administrative Agent to the
date such amount is repaid to the Administrative Agent at the
rate applicable to such Advance. If Chase makes any Over-
Advance, Chase's and such other Bank's relevant Revolving Credit
Commitments shall be temporarily increased and decreased,
respectively, by the amount of the Over-Advance and any payments
allocable to such other Bank shall be paid to Chase until the
principal of and interest on the Over-Advance shall be paid in
full. The failure of any Bank to make any Advance to be made by
it shall not relieve any other Bank of its obligation, if any,
hereunder to make its Advance on the date of such Advance. No
Bank shall be responsible for the failure of any other Bank to
make an Advance to be made by such Bank on the date of any such
Advance. The Administrative Agent shall promptly give the
Borrowers notice of any Bank's failure to make its Advance. Each
request for an Advance shall be deemed a representation and
warranty by the Borrowers, binding upon each of the Borrowers,
that all conditions precedent to such Advance under Article III
are satisfied as of the date of such request and as of the date
of such Advance.
(e) Revolving Credit Notes. The Advances (other than any
Over-Advance) made by a Bank shall be evidenced by, and be
payable in accordance with the terms of, the Revolving Credit
Note made by the Borrowers payable to the order of such Bank in a
principal amount equal to the Revolving Credit Commitment of such
Bank; subject, however, to the provisions of such Revolving
Credit Note to the effect that the principal amount payable
thereunder at any time shall not exceed the then unpaid principal
amount of the Advances made by such Bank. Each of the Borrowers
hereby irrevocably authorizes each Bank to make or cause to be
made, at or about the time of each Advance made by such Bank, an
appropriate notation on the records of such Bank, reflecting the
principal amount of such Advance, and such Bank shall make or
cause to be made, on or about the time of receipt of payment of
any principal of any Advance, an appropriate notation on its
records reflecting such payment and such Bank will, prior to any
transfer of any of such Revolving Credit Note, endorse on the
reverse side thereof the outstanding principal amount of the
Advances evidenced thereby. Failure to make any such notation
shall not affect the Borrowers' obligations in respect of such
Advances. The aggregate amount of all Advances set forth on the
records of such Bank shall be rebuttable presumptive evidence of
the principal amount owing and unpaid on such Bank's Revolving
Credit Note. The aggregate amount of all Over-Advances set forth
on the records of Chase shall be rebuttable presumptive evidence
of the principal amount owing and unpaid on the Over-Advances.
Upon request of the Borrowers, or either of them, each Bank
agrees to provide the Borrowers with a written summary of the
records maintained by it under this Section 2.1(e).
(f) Interest on Advances. The Borrowers agree to pay
interest on the aggregate outstanding principal amount of the
Advances as follows:
(A) with respect to any Advance constituting a Base
Rate Loan, at a fluctuating rate per annum equal to the sum of
the Base Rate and the Applicable Base Rate Margin (as determined
in accordance with Section 2.1(g)); and
(B) with respect to any Advance constituting a
LIBOR Base Loan, at a rate per annum equal at all times during
the Interest Period relating to such LIBOR Base Loan to the sum
of the Adjusted LIBOR Rate, plus the Applicable LIBOR Margin (as
determined in accordance with Section 2.1(g)).
The Borrowers agree to pay interest on any overdue installment of
principal of or interest on any Advance from the due date thereof
until paid, (i) in the case of any Base Rate Loan, at a rate per
annum at all times equal to the sum of the rate in effect thereon
plus 1.50% per annum and (ii) in the case of any LIBOR Base Loan,
at a rate per annum equal to the sum of 1.50% plus the rate of
interest in effect thereon at the time of such default until the
end of the Interest Period then applicable thereto and thereafter
at a rate per annum equal to the sum of 1.50% per annum, plus the
Base Rate, plus the Applicable Base Rate Margin from time to time
in effect.
Interest accrued on each Advance shall be payable (A) with
respect to each Base Rate Loan, on each Monthly Payment Date; and
(B) with respect to each LIBOR Base Loan, on the last day of each
Interest Period applicable thereto and in the case of any
Interest Period in excess of three (3) months, on each date
occurring at three (3) month intervals after the first day of
such Interest Period. Interest accrued after the Termination
Date shall be payable upon demand. No provision of this
Agreement or the Revolving Credit Notes shall require the payment
or permit the collection of interest in excess of the rate
permitted by applicable law. Interest shall be calculated for
actual days elapsed on the basis of a 360-day year.
(g) Determination of Applicable Margin.
(i) The Applicable Base Rate Margin and the
Applicable LIBOR Margin (collectively, the "Applicable Margin")
in respect of any Base Rate Loan or LIBOR Base Loan, as
applicable, shall be determined by reference to the table set
forth below on the basis of the type of Loan and the Indebtedness
Ratio determined by reference to the most recent financial
statements delivered pursuant to Section 5.1(a) or 5.1(b).
Applicable Applicable Base
Indebtedness Ratio LIBOR Margin Rate Margin
- ---------------------------------------------------------------
Greater than or equal
to 3.50:1.00 3.00% 1.25%
Less than 3.50:1.00
but greater than or
equal to 3.00:1.00 2.75% 1.00%
Less than 3.00:1.00
but greater than or
equal to 2.50:1.00 2.25% 0.50%
Less than 2.50:1.00 1.75% 0.00%
(ii) Upon receipt of the financial statements
delivered pursuant to Section 5.1(a) or Section 5.1(b), as
applicable, the Applicable Margin shall be adjusted, such
adjustment being effective on the tenth Business Day after
receipt of such financial statements and the Compliance
Certificate to be delivered in connection therewith; provided,
however, if the Borrowers shall not have timely delivered such
financial statements in accordance with Section 5.1(a) or
Section 5.1(b), as applicable, beginning with the date upon which
such financial statements should have been delivered and
continuing until such financial statements are delivered, the
Applicable Margin shall equal the Applicable Margin for the prior
period; provided further, however, that if upon delivery of such
financial statements the Applicable Margin is adjusted upwards,
the adjustment of the Applicable Margin shall be retroactive to
the date upon which such financial statements should have been
delivered.
(h) Prepayment. (i) The Borrowers shall have the right, by
giving written notice to the Administrative Agent by not later
than 11:00 a.m. (Houston, Texas time) on the second Business Day
preceding the date of such prepayment, to prepay all or any
portion of an Advance, without premium or penalty; provided, that
any Base Rate Loan may be prepaid in whole or in part at any time
and any LIBOR Base Loan may be prepaid in whole or in part on the
last day of the Interest Period applicable thereto; provided
further, that each partial prepayment shall be in an aggregate
principal amount of not less than $100,000 and shall be
accompanied by accrued interest to the date of prepayment on the
amount prepaid. No voluntary prepayment of any LIBOR Base Loan
prior to the last day of the Interest Period applicable thereto
shall be made.
(ii) Concurrently with the consummation of a sale,
in a transaction or a series of related transactions, of all or a
portion of the assets of the Borrowers and their Subsidiaries
(including without limitation the capital stock of any Subsidiary
of QDI but excluding the assets sold in any Permitted Disposition
described in clauses (i), (ii), (iii) and (iv) of the definition
of Permitted Disposition) the aggregate Net Proceeds of which
exceed $10,000,000 (the "Excess Proceeds"), the Borrowers shall
(i) prepay the Loans in a principal amount equal to the Net
Proceeds of such sale and (ii) permanently and automatically
reduce the Revolving Credit Commitments of the Banks in an amount
equal to the Excess Proceeds.
(iii) At any time that the sum of the aggregate
outstanding principal balance of the Loans and the aggregate
stated amount of L/C Outstandings exceeds the aggregate Revolving
Credit Commitments, the Borrowers shall immediately prepay the
outstanding principal amount of the Loans in an amount equal to
such excess.
2.2 Election by Borrower. The Borrowers, or either of them,
may elect in accordance with this Section 2.2 to obtain and
maintain all or any portion of an Advance as a Base Rate Loan or
all or any portion of an Advance which is in an integral multiple
of $500,000 as a LIBOR Base Loan. In addition, the Borrowers, or
either of them, may elect in accordance with this Section 2.2 to
convert all or any portion of any Advance from one type of
Revolving Credit Loan to another type of Revolving Credit Loan;
provided however, that (a) any conversion to a LIBOR Base Loan
shall be only in an integral multiple of $500,000, (b) any
conversion of any LIBOR Base Loan into a Base Rate Loan shall be
made on, and only on, the last day of the Interest Period then
applicable thereto and (c) no Revolving Credit Loan may be
obtained, continued as, or converted into, a LIBOR Base Loan when
any Default or Event of Default has occurred and is continuing.
Subject to the provisions of the prior sentence, the Borrowers,
or either of them, may convert a LIBOR Base Loan into a Base Rate
Loan upon one Business Day's prior written notice to the
Administrative Agent of the Borrower's election to do so. A
Borrower, not less than three (3) Business Days prior to the date
on which (i) a LIBOR Base Loan is to be obtained, (ii) a Base
Rate Loan is to be converted into a LIBOR Base Loan or (iii) any
LIBOR Base Loan is to be continued as a LIBOR Base Loan at the
end of the Interest Period then applicable thereto, shall give
written notice to the Administrative Agent of such Borrower's
election to do so; said notice shall specify the amount of such
LIBOR Base Loan and the first day and duration of the Interest
Period pertaining thereto. If, upon the expiration of any
Interest Period, the Borrowers shall fail to elect the duration
of a new Interest Period for any LIBOR Base Loan or to designate
a Base Rate Loan in accordance with this Section 2.2, the
Borrowers shall be deemed to have elected automatically to
convert such LIBOR Base Loan into a Base Rate Loan on the last
day of the Interest Period then applicable thereto. On the date
on which the aggregate unpaid principal amount of any LIBOR Base
Loan shall be reduced, by payment or prepayments or otherwise, to
less than an integral multiple of $500,000, such LIBOR Base Loan
shall automatically convert into a Base Rate Loan at the end of
the Interest Period then applicable thereto. Each of the
Borrowers hereby irrevocably authorizes each Bank to make, or
cause to be made, an appropriate notation on the records of such
Bank, reflecting the date and original principal amount of each
Advance made by such Bank, the dates for each period when such
Advance is being maintained as a Base Rate Loan or a LIBOR Base
Loan, the interest rate for each such period and the dates of
principal and interest payments on such Advance. Failure to make
any such notation shall not affect the Borrowers' obligations in
respect of such Advances. Each Bank's records shall be
rebuttable presumptive evidence of the matters stated therein.
Upon request by the Borrowers, or either of them, each Bank
agrees to provide the Borrowers with a written summary of the
records maintained by it under this Section 2.2.
2.3 Increased Costs; Capital Adequacy.
(a) Increased Costs. If (i) as a result of any Regulatory
Change (A) any reserve (other than the amount of such reserve as
has been included in the computation of the Adjusted LIBOR Rate),
special deposit or similar requirements relating to any extension
of credit or other assets of or any deposits with or other
liabilities of, any Bank which affects the making or maintaining
by such Bank of any loans (including the Loans) or letters of
credit (including the Letters of Credit) are imposed, modified or
deemed applicable; or (B) any other condition affecting this
Agreement or the making or maintaining by any Bank of any loans
(including the Loans) or letters of credit (including the Letters
of Credit) is imposed on such Bank; or (ii) other circumstances
arise affecting any Bank or the position of any Bank in the
relevant market, and such Bank reasonably determines that, by
reason thereof, the cost to such Bank of making or maintaining
any loans (including the Loans) or letters of credit (including
the Letters of Credit) is increased as a result of such change in
circumstances, or any amount receivable hereunder in respect of
any Loan or Letter of Credit is reduced (and such Bank shall not
have been compensated for such increase or reduction by an
increase in interest or otherwise by Regulatory Change), then
such Bank shall promptly notify the Borrowers in writing and the
Borrowers shall pay upon request such additional amount or
amounts (which shall be specified in such request) as will (in
the reasonable determination of such Bank) compensate such Bank
for such additional cost or reduction; provided, however, that
the Borrowers' liability for additional amounts computed in
accordance with this Section 2.3(a) shall be neither changed nor
waived by any failure to give such notice.
(b) Capital Adequacy. If any Regulatory Change imposes,
modifies or deems applicable any capital adequacy, capital
maintenance or similar requirement (including a request or
requirement which affects the manner in which any Bank allocates
capital resources to its commitments, including a Commitment
hereunder) and as a result thereof, the rate of return on any
Bank's capital as a consequence of a Commitment hereunder or the
making or maintaining of any Loans or Letters of Credit hereunder
is reduced to a level below that which such Bank could reasonably
have achieved but for such circumstances, then and in each such
case upon notice from time to time by a Bank to the Borrowers,
the Borrowers shall pay to such Bank such additional amount or
amounts as shall compensate such Bank for such reduction in rate
of return; provided, however, that the Borrowers' liability for
additional amounts computed in accordance with this
Section 2.3(b) shall be neither changed nor waived by any failure
to give such notice.
(c) Taxes. If any Regulatory Change shall subject any Bank
or any Loan or Letter of Credit to any tax (including, without
limitation, any United States interest equalization tax or
similar tax however named applicable to the acquisition or
holding of debt obligations and any interest or penalties with
respect thereto), duty, charge, stamp tax, fee, deduction or
withholding in respect of this Agreement or any Loan or Letter of
Credit, except such taxes as may be measured by the overall net
income of such Bank and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which such
Bank's principal executive office or its lending branch is
located and such Bank in good faith determines that the result
thereof is to increase the cost (whether by incurring a cost or
adding to a cost) to such Bank of making or maintaining any Loan
or Letter of Credit hereunder or to reduce the amount of
principal or interest received by such Bank (without benefit of,
or credit for, any prorations, exemptions, credits or other
offsets available under any such laws, treaties, regulations,
guidelines or interpretations thereof), then such Bank shall
promptly notify in writing the Borrowers and the Borrowers shall
pay, upon request, such additional amount or amounts as will (in
the reasonable determination of such Bank) compensate such Bank
for such additional cost or reduction; provided, however, that
the Borrowers' liability for additional amounts computed in
accordance with this Section 2.3(c) shall be neither changed nor
waived by any failure to give such notice.
(d) Applicable Tax Forms. On or prior to the Effective Date
in the case of each Bank which is a party hereto as of the
Effective Date, and on the date of the delivery to the
Administrative Agent of the Assignment Agreement pursuant to
which it became a Bank in the case of each other Bank, each Bank
organized under the laws of a jurisdiction outside the United
States shall provide the Administrative Agent and the Borrowers
with the forms prescribed by the Internal Revenue Service of the
United States certifying that such Bank is exempt from United
States withholding taxes with respect to all payments to be made
to such Bank hereunder and under the Notes. Each Bank which so
delivers such a form further undertakes to deliver to each of the
Borrowers and the Administrative Agent additional copies of such
form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it,
and such amendments thereto or extensions or renewals thereof as
may be reasonably requested by the Borrowers or the
Administrative Agent, in each case certifying that such Bank is
entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal
income taxes. If for any reason during the term of this
Agreement, any Bank becomes unable to submit the forms referred
to above or the information or representations contained therein
are no longer accurate in any material respect, such Bank shall
promptly notify the Administrative Agent and the Borrowers in
writing to that effect. Unless the Borrowers and the
Administrative Agent have received forms or other documents
satisfactory to them indicating that payments hereunder or under
any Note are not subject to United States withholding tax, the
Borrowers or the Administrative Agent shall withhold taxes from
such payments at the applicable statutory rate in the case of
payments to or for any Bank organized under the laws of a
jurisdiction outside the United States.
(e) Change in Lending Office. Any Bank claiming any
additional amounts payable pursuant to this Section 2.3 shall use
its best efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its
lending office or branch if the making of such change would avoid
the need for, or reduce the amount of, any such additional
amounts which may thereafter accrue and would not, in the
reasonable judgment of such Bank, be otherwise disadvantageous to
such Bank.
(f) Conclusive and Binding; Survival. With respect to any
additional amount or amounts owing by the Borrowers pursuant to
this Section 2.3, a statement of a Bank as to any such additional
amount or amounts shall, in the absence of manifest error, be
conclusive and binding on the Borrowers. In determining such
amount, a Bank may use any method of averaging and attribution
that it (in its sole and absolute discretion) shall deem
applicable. The obligations of the Borrowers under this
Section 2.3 shall survive the termination of this Agreement.
2.4 Liquidation Fee. Each of the Borrowers understands that
upon the request for a LIBOR Base Loan for an Interest Period,
each Bank intends to enter into funding arrangements with third
parties on terms and conditions which could result in substantial
losses to such Bank if such LIBOR Base Loan is not made or does
not remain outstanding for the entire Interest Period.
Therefore, if either (a) after a Borrower requests a LIBOR Base
Loan, the LIBOR Base Loan is not made on the first day of the
specified Interest Period for any reason (including, but not
limited to, the failure of the Borrowers to comply with one or
more of the conditions precedent to any Advance under this
Agreement) other than a wrongful failure by such Bank to make the
LIBOR Base Loan, or (b) any LIBOR Base Loan is repaid in whole or
in part prior to the last day of its Interest Period (whether as
a result of acceleration, operation of law or otherwise), the
Borrowers agree to indemnify such Bank for any loss, cost and
expense incurred by it resulting therefrom, including without
limitation any loss of profit and any loss or cost in liquidating
or employing deposits acquired to fund or maintain the LIBOR Base
Loan.
2.5 Basis for Determining LIBOR Rate Inadequate or Unfair.
If with respect to any Interest Period:
(a) a Bank is advised that deposits in lawful money of the
United States of America (in the applicable amounts) are not
being offered to such Bank in the eurodollar market for the
relevant Interest Period, or a Bank otherwise determines (which
determination shall be binding and conclusive on all parties)
that by reason of circumstances affecting the relevant market or
the position of such Bank in such market adequate and reasonable
means do not exist for ascertaining the Adjusted LIBOR Rate;
(b) a Bank determines that the Adjusted LIBOR Rate will not
adequately and fairly reflect the cost to such Bank of
maintaining or funding a LIBOR Base Loan for the relevant
Interest Period, or that the making or funding of a LIBOR Base
Loan has become impracticable as a result of an event occurring
after the date of this Agreement which in the opinion of such
Bank materially affects such LIBOR Base Loan; or
(c) a Bank determines in good faith that any Regulatory
Change makes it unlawful or impracticable for such Bank to make
or continue to maintain any LIBOR Base Loan;
then such Bank shall promptly notify the Borrowers of such
circumstances and then so long as such circumstances shall
continue: (i) the obligation of such Bank to make a LIBOR Base
Loan and to convert any Revolving Credit Loan into a LIBOR Base
Loan shall be terminated and (ii) all LIBOR Base Loans of such
Bank then outstanding shall automatically be converted into Base
Rate Loans on the last day of the Interest Period then applicable
thereto, provided that if it shall become unlawful or
impracticable for such Bank to maintain any LIBOR Base Loan, such
Loan shall automatically and immediately be converted into a Base
Rate Loan. If any such conversion of a LIBOR Base Loan occurs on
a day which is not the last day of then current Interest Period
with respect thereto, the Borrowers shall pay such amounts, if
any, as may be required pursuant to Section 2.4 hereof.
2.6 Payments. Any other provision of this Agreement to the
contrary notwithstanding, the Borrowers shall make each payment
of interest on and principal of the Revolving Credit Notes, and
fees and other payments due under this Agreement (except as
otherwise expressly provided herein), in immediately available
funds to the Administrative Agent at its office referred to in
Section 10.3 hereof not later than 11:00 a.m. (Houston, Texas
time) on the date when due. Each of the Borrowers hereby
authorizes and directs the Administrative Agent and agrees that
on the Business Day on which any payment of principal, interest
and/or fees are due, the Administrative Agent may automatically
charge one or more demand deposit accounts of the Borrowers
maintained with the Administrative Agent. All payments by the
Borrowers under this Agreement shall be made without offset,
counterclaim or other deduction and in such amounts as may be
necessary in order that all such payments shall not be less than
the amounts otherwise specified to be paid under this Agreement
and the Notes. The Administrative Agent will promptly thereafter
distribute like funds ratably to each Bank (unless such amount is
not to be shared ratably in accordance with the terms hereof).
2.7 Setoff; etc. Upon the occurrence and during the
continuance of an Event of Default, each Bank is hereby
authorized at any time and from time to time, without notice to
the Borrowers (any such notice being expressly waived by the
Borrowers), 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 Bank to or for
the credit or the account of the Borrowers, or either of them,
including specifically any amounts held in any account maintained
at such Bank, against any and all amounts which may be owed to
the Administrative Agent or the Banks, or any of them, by the
Borrowers, or either of them, in connection with this Agreement
or any Loan Document. The rights of the Banks under this
Section 2.7 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
the Banks may have. Each of the Borrowers agrees that any holder
of a Note or of any participation in a Note may, to the fullest
extent permitted by law, exercise all its rights of payment
(including set-off) with respect to such participation as fully
as if such holder were the direct creditor of such Borrower in
the amount of such participation. Each Bank agrees to use
reasonable efforts to notify the Borrowers of any exercise of its
rights pursuant to this Section 2.7, provided, however, that
failure to provide such notice shall not affect the Bank's rights
under this Section 2.7 or the effectiveness of any action taken
pursuant hereto.
2.8 Sharing. If any Bank shall obtain any payment (whether
voluntary, involuntary, by application of offset or otherwise) on
account of the Loans made by it in excess of such Bank's ratable
share of payments on account of the Loans obtained by all the
Banks, such Bank shall purchase from the other Banks such
participations in the Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment ratably
with each of them; provided, however, that if all or any portion
of the excess payment is thereafter recovered from such
purchasing Bank, the purchase shall be rescinded and the purchase
price restored pro rata according to the extent of such recovery,
but without interest. Each of the Borrowers agrees that any Bank
so purchasing a participation from another Bank pursuant to this
Section 2.8 may, to the fullest extent permitted by law, exercise
all its rights of payment (including the right to setoff) with
respect to such participation as fully as if such Bank were the
direct creditor of such Borrower in the amount of such
participation.
2.9 Revolving Credit Commitment Fee. (a) The Borrowers
agree, jointly and severally, to pay a commitment fee (the
"Revolving Credit Commitment Fee") for the period (including,
without limitation, any portion thereof when the Banks'
obligations to lend shall be suspended by reason of the
Borrowers' inability to satisfy the conditions of Article III)
commencing on the Effective Date and continuing through the
Termination Date, computed on the average daily amount of the
Unused Portion during the period for which payment is made at the
rate per annum equal to the Applicable Fee Percentage (as
determined in accordance with subsection (b) of this
Section 2.9). Such Revolving Credit Commitment Fee shall be
payable to the Administrative Agent for the ratable benefit of
the Banks in arrears on each Monthly Payment Date occurring after
the Effective Date.
(b) The Applicable Fee Percentage shall be determined by
reference to the table set forth below on the basis of the
Indebtedness Ratio determined by reference to the most recent
financial statements delivered pursuant to Section 5.1(a) or
5.1(b).
Indebtedness Ratio Applicable Fee Percentage
- -------------------------------------------------------------
Greater than or equal to 2.50:1.00 0.50%
Less than 2.50:100 0.375%
Upon receipt of the financial statements delivered pursuant to
Section 5.1(a) or Section 5.1(b), as applicable, the Applicable
Fee Percentage shall be adjusted, such adjustment being effective
on the tenth Business Day after receipt of such financial
statements and the Compliance Certificate to be delivered in
connection therewith; provided, however, if the Borrowers shall
not have timely delivered such financial statements in accordance
with Section 5.1(a) or Section 5.1(b), as applicable, beginning
with the date upon which such financial statements should have
been delivered and continuing until such financial statements are
delivered, the Applicable Fee Percentage shall equal the
Applicable Fee Percentage for the prior period; provided further,
however, that if upon delivery of such financial statements the
Applicable Fee Percentage is adjusted upwards, the adjustment of
the Applicable Fee Percentage shall be retroactive to the date
upon which such financial statements should have been delivered.
2.10 Amendment Fees. The Borrowers agree to pay on the
Effective Date to the Administrative Agent for the ratable
benefit of the Banks which are party hereto a nonrefundable
amendment fee pursuant to the terms of a letter dated March 14,
2002 (the "Fee Letter"), between the Borrowers and the
Administrative Agent.
2.11 Lending Branch. Subject to the provisions of Section
2.3(e), each Bank may, at its option, elect to make, fund or
maintain its Loans hereunder at the branch or office specified on
the signature pages hereto or such other of its branches or
offices as such Bank may from time to time elect.
2.12 Letters of Credit.
(a) Subject to all of the terms and conditions hereof
(including Section 2.1(a) hereof, assuming the Borrowers had
requested an Advance in the amount of the stated amount of the
Letter of Credit), at the written request of a Borrower, Chase
will on or after the date hereof issue standby letters of credit
("Letters of Credit") for the account or benefit of such Borrower
expiring on or before the fifth Business Day preceding the
Termination Date; provided, however, Chase shall not be required
to issue a Letter of Credit if, after giving effect thereto,
(i) the aggregate stated amount of all outstanding Letters of
Credit, plus unreimbursed reimbursement obligations, would exceed
$6,000,000 or (ii) the sum of the aggregate outstanding principal
amount of all Revolving Credit Loans and the L/C Outstandings
would exceed the aggregate amount of the Revolving Credit
Commitments. The aggregate stated amount of any and all Letters
of Credit shall count against and reduce the available Revolving
Credit Commitments hereunder on a pro rata basis.
(b) Immediately upon the issuance of each Letter of Credit
hereunder, each Bank shall be deemed to have automatically,
irrevocably and unconditionally purchased and received from Chase
an undivided interest and participation in and to such Letter of
Credit, the obligations of the Borrowers in respect thereof, and
the liability of Chase thereunder in an amount equal to the
amount available for drawing under such Letter of Credit
multiplied by such Bank's Revolving Credit Percentage. The
Administrative Agent will notify each Bank promptly (a) upon the
issuance of any Letter of Credit and (b) upon any draw under a
Letter of Credit. On or before the Business Day on which Chase
makes payment of any draw on a Letter of Credit, on demand of
Chase (which demand shall not require payment prior to the
Business Day such payment is required to be made under the Letter
of Credit), each Bank shall make payment to the Administrative
Agent for the account of Chase, in immediately available funds an
amount equal to such Bank's Revolving Credit Percentage of the
amount of such payment or draw. The obligation of each Bank to
reimburse the Administrative Agent for the account of Chase shall
be unconditional, continuing, irrevocable and absolute. In the
event that any Bank fails to make payment to the Administrative
Agent for the account of Chase of any amount due hereunder, the
Administrative Agent shall be entitled to receive, retain and
apply against such obligation the principal and interest
otherwise payable to such Bank hereunder until the Administrative
Agent receives such payment from such Bank on behalf of Chase or
such obligation is otherwise fully satisfied; provided, however,
that nothing contained in this sentence shall relieve such Bank
of its obligation to reimburse the Administrative Agent on behalf
of Chase for such amount in accordance with this Section 2.12.
(c) If and to the extent a drawing is at any time made under
such a Letter of Credit, the Borrowers agree to pay to the
Administrative Agent, for the account of Chase and the Banks
immediately and unconditionally upon demand in lawful money of
the United States, an amount equal to each amount which shall be
so drawn. Interest shall be payable on any and all amounts
remaining unpaid by the Borrowers under this subsection from the
date such amounts become payable (whether at stated maturity, by
acceleration or otherwise) until payment in full at the rate
which would be payable on any outstanding Base Rate Loans which
were then overdue. The Administrative Agent shall have the right
to convert the reimbursement obligation of the Borrowers arising
out of any such drawing into an Advance made under this Agreement
(each of the Borrowers hereby irrevocably authorizing the
Administrative Agent to refinance without notice to the Borrowers
the reimbursement obligation of the Borrowers arising out of any
such drawing into such an Advance and to take all action on
behalf of the Borrowers required pursuant to Section 2.1(d)
hereof to request such Advance), and such Advance to be evidenced
by the Revolving Credit Notes and for all purposes of this
Agreement although without regard to the conditions precedent to
making any such Advance and any requirement of this Agreement
that each Advance under this Agreement be in a minimum amount.
If and to the extent any such Letter of Credit expires or
otherwise terminates in a manner satisfactory to Chase without
having been drawn upon, the available Revolving Credit
Commitments of the Banks shall to such extent be reinstated.
(d) The Borrowers agree to pay (i) monthly, in arrears, to
the Administrative Agent for the ratable benefit of the Banks a
letter of credit fee, computed at an annual rate equal to the
Applicable LIBOR Margin in effect from time to time applied to
the aggregate amount available for drawing under all of the
Letters of Credit issued for the account of the Borrowers, or
either of them, from the date of issuance of each Letter of
Credit until the expiration thereof, and (ii) to Chase directly
for its benefit as issuing bank, all customary fees (including
fronting fees) and other issuance, amendment, document
examination, negotiation and presentment expenses and related
charges in connection with the issuance, amendment, presentation
of drafts, and the like customarily charged by Chase with respect
to standby letters of credit, payable at the time of invoice of
such amounts.
(e) (i) In addition to amounts payable as elsewhere
provided in this Agreement, each of the Borrowers hereby agrees
to protect, indemnify, pay and save harmless the Administrative
Agent, each Bank and Chase from and against any and all
liabilities and costs which the Administrative Agent, any Bank or
Chase may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit other than,
in the case of Chase, as a result of its gross negligence or
willful misconduct, as determined by the final judgment of a
court of competent jurisdiction, in determining whether documents
presented under any Letter of Credit comply with the terms
thereof, or (B) the failure of Chase to honor a drawing under
such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de
facto governmental authority (all such acts or omissions herein
called "Governmental Acts").
(ii) As among the Borrowers, the Banks, Chase and
the Administrative Agent, the Borrowers assume all risks of the
acts and omissions of, or misuse of such Letter of Credit by, the
beneficiary of any Letter of Credit. In furtherance and not in
limitation of the foregoing, subject to the provisions of the
Letter of Credit applications and Letter of Credit reimbursement
agreements executed by the Borrowers, or either of them, at the
time of request for any Letter of Credit, Chase, the
Administrative Agent and the Banks shall not be responsible:
(A) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection
with the application for and issuance of the Letters of Credit,
even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) for
the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective
for any reason; (C) for failure of the beneficiary of a Letter of
Credit to comply with conditions required in order to draw upon
such Letter of Credit; (D) for errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (E) for errors in interpretation
of technical trade terms; (F) for any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit or of the proceeds
thereof; (G) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter
of Credit; and (H) for any consequences arising from causes
beyond the control of the Administrative Agent, Chase and the
Banks.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth, any
action taken or omitted by Chase under or in connection with
Letters of Credit issued on behalf of the Borrowers, or either of
them, or any related certificates shall not, in the absence of
gross negligence or willful misconduct of Chase, as determined by
the final judgment of a court of competent jurisdiction, in
determining whether documents presented under any Letter of
Credit comply with the terms thereof, put Chase, the
Administrative Agent or any Bank under any resulting liability to
the Borrowers or relieve the Borrowers of any of their
obligations hereunder to any such Person.
(iv) Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and
obligations of the Borrowers contained in this Section 2.12(e)
shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and
termination of this Agreement.
(f) Upon the occurrence of any Event of Default (and provided
the Notes are accelerated), the Borrowers shall immediately pay
to the Administrative Agent, for the benefit of the Banks, an
amount equal to the Unfunded Obligations, and upon receipt of the
payment of such amount, the Administrative Agent shall deposit
such funds in an interest-bearing cash account (the "Cash
Account") in the name of the Borrowers maintained with the
Administrative Agent as to which the Borrowers shall have no
right of withdrawal, except as provided below. Upon any draw on
a Letter of Credit, the Administrative Agent shall pay the
amounts allocated in respect of such Unfunded Obligation to
Chase. Upon cancellation or termination of a Letter of Credit
without its being fully drawn, the Administrative Agent shall
reapply the amounts allocated in respect of such Unfunded
Obligation as provided in Section 2.13(a) or (b) above, as
applicable, as if such portion had then been paid to the
Administrative Agent by the Borrowers for application pursuant to
said Section.
2.13 Application of Payments and Collections.
(a) Subject to the provisions of subsection (b) below or any
agreement of the Administrative Agent and the Banks to the
contrary, all payments and prepayments and any other amounts
received by the Administrative Agent from or for the benefit of
the Borrowers shall be applied, first, to pay principal of and
interest on any portion of the Advances which the Administrative
Agent may have advanced on behalf of any Bank for which the
Administrative Agent has not then been reimbursed by such Bank or
the Borrowers, second, to pay all other obligations in respect of
fees, expenses, reimbursements or indemnities then due and
payable, third, to pay interest then due in respect of the
Revolving Credit Loans, and fourth, to pay the principal of the
Revolving Credit Loans then due and payable.
(b) After the occurrence of an Event of Default and while the
same is continuing, the Administrative Agent shall, unless the
Administrative Agent and the Banks shall agree otherwise, apply
all payments and prepayments in respect of any Obligations
hereunder in the following order:
FIRST, to pay interest on and then principal of any portion
of the Advances which the Administrative Agent may have advanced
on behalf of any Bank for which the Administrative Agent has not
then been reimbursed by such Bank or the Borrowers;
SECOND, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Administrative
Agent;
THIRD, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Banks;
FOURTH, to the payment of interest accrued on all Loans and
any amounts due pursuant to Sections 2.3, 2.4 and 2.15(g), to be
allocated among the Banks pro rata based on the respective
aggregate amounts of such accrued interest and amounts owed to
them; and
FIFTH, to the payment of the outstanding principal amounts
of all Loans and to the provision of cash collateral for Unfunded
Obligations, to be allocated among the Banks, LaSalle and Chase
pro rata based on the respective outstanding principal amounts of
the Loans and the aggregate outstanding Unfunded Obligations.
(c) Each of the Banks hereby irrevocably designates the
Administrative Agent its attorney in fact for the purpose of
receiving any and all payments to be made to such Bank in respect
of Obligations held by it, and hereby directs each payor of any
such payment to make such payment to the Administrative Agent;
and each of the Banks hereby further agrees that if,
notwithstanding the foregoing, it should receive any such
payment, it shall hold such payment in trust for, and promptly
deliver such payment to, the Administrative Agent.
Notwithstanding the foregoing, this Section 2.13(c) shall only
apply to LaSalle in respect of Swing Loans after the occurrence
of an Event of Default and while the same is continuing.
(d) Whenever any portion of any payment received or amount
realized by the Administrative Agent is applied pursuant to FIFTH
of clause (b) above, the part thereof allocated to Unfunded
Obligations shall be held by the Administrative Agent for the
benefit of Chase and the Banks. Pending distribution of such
amounts, the Administrative Agent shall hold such amounts in the
Cash Account pursuant to Section 2.12(f).
(e) The Administrative Agent shall promptly distribute to
each Bank at its primary address set forth on the appropriate
signature page hereof or at such other address as a Bank may
request in writing, such funds as such Bank may be entitled to
receive.
2.14 Extension of Termination Date. At least 90 but not more
than 120 days prior to each anniversary of the date hereof, the
Borrowers may request the Banks, by written notice to the
Administrative Agent, to consent to a one-year extension of the
Termination Date. Each Bank shall, in its sole discretion,
determine whether to consent to such request and shall notify the
Administrative Agent of its determination within 30 days of such
Bank's receipt of notice of such request. If any Bank shall not
have consented to such request during such 30-day period, the
Termination Date shall not be extended. If such request shall
have been consented to by the Administrative Agent and all the
Banks, the Administrative Agent shall notify the Borrowers in
writing of such consent, and such extension shall become
effective upon the delivery by the Borrowers to the
Administrative Agent and each Bank, on or prior to such
anniversary date, of (i) a certificate of a duly authorized
officer of the Borrowers, dated such date, as to the accuracy,
both before and after giving effect to such proposed extension,
of the representations and warranties set forth in Article IV and
as to the absence, both before and after giving effect to such
proposed extension, of any Default or Event of Default, (ii)
certified copies of all corporate and governmental approvals, if
any, required to be obtained by the Borrowers, or either of them,
or any of the Subsidiary Guarantors in connection with such
extension and (iii) an opinion or opinions of counsel to the
Borrowers and the Subsidiary Guarantors as to the matters set
forth in Exhibit D after giving effect to such extension and such
other matters as any Bank, through the Administrative Agent, may
reasonably request.
2.15 The Swing Line.
(a) Swing Loans. Subject to all of the terms and conditions
hereof, LaSalle agrees to make loans to the Borrowers ("Swing
Loans") which shall not in the aggregate at any time outstanding
exceed the Swing Line Commitment. The Swing Line Commitment
shall be available to the Borrowers and may be availed of by the
Borrowers, or either of them, from time to time and borrowings
thereunder may be repaid and reborrowed during the period ending
on the Termination Date.
(b) Payment.
(i) Each Swing Loan shall be due and payable on the
Termination Date. The Borrowers may voluntarily prepay any Swing
Loan before its maturity at any time upon notice to LaSalle prior
to 2:30 p.m. (Chicago time) on the date fixed for prepayment,
each such prepayment to be made by the payment of the principal
amount to be prepaid, plus accrued interest thereon to the date
of prepayment and any amount due LaSalle under Section 2.15(g)
hereof as a result of such prepayment.
(ii) Each Swing Loan shall bear interest (computed
on the basis of 360 days and actual days elapsed) at (x) a
fluctuating rate per annum equal to the Base Rate or (y) if the
Borrower so elects in accordance with the following provisions,
the Quoted Rate (as defined below); provided, however, that upon
the occurrence and during the continuance of any Event of
Default, such Swing Loan shall bear interest at a rate per annum
equal to the sum of 1.50% per annum, plus the Base Rate, plus the
Applicable Base Rate Margin from time to time in effect.
Interest on each Swing Loan shall be due and payable on each
Monthly Payment Date or, in the event of Swing Loans bearing
interest at the Quoted Rate, the last day of each Quoted Interest
Period (as defined below) applicable thereto, and interest after
maturity (whether by lapse of time, acceleration or otherwise)
shall be due and payable upon demand.
(iii) The Borrower will make each payment under this
Section 2.15 and under the Swing Line Note on the day when due to
LaSalle at its address set forth in Section 10.3 in immediately
available funds. If LaSalle does not receive such payment when
due, then LaSalle may, but is not obligated to, apply amounts in
any account that the Borrowers, or either of them, maintain with
LaSalle to such payment. Notwithstanding the foregoing, after
the occurrence of an Event of Default and while the same is
continuing, all payments shall be made to the Administrative
Agent in accordance with Section 2.13.
(c) Requests for Swing Loans. The Borrowers, or either of
them, shall give LaSalle prior notice (which may be written or
oral) no later than 12:00 Noon (Chicago time) on the date upon
which such Borrower(s) requests that any Swing Loan be made, of
the amount and date of such Swing Loan and, if applicable, the
interest period selected therefore (the "Quoted Interest Period").
Within one hundred twenty (120) minutes after receiving such
notice, LaSalle shall in its discretion quote an interest rate to
the Borrowers at which LaSalle would be willing to make such
Swing Loan available to the Borrowers for the Quoted Interest
Period (the rate so quoted for the Quoted Interest Period being
herein referred to as the "Quoted Rate"). The Borrowers
acknowledge and agree that the interest rate quote is given for
immediate and irrevocable acceptance, and if the Borrowers, or
either of them, does not so immediately accept the Quoted Rate
for the full amount requested by the Borrower for such Swing
Loan, the Quoted Rate shall be deemed immediately withdrawn and
such Swing Loan shall bear interest at the Base Rate from time to
time in effect. Subject to all of the terms and conditions
hereof, the proceeds of such Swing Loan shall be made available
to the Borrowers no later than 3:00 p.m. (Chicago time) on the
date so requested in funds immediately available at the principal
office of LaSalle in Chicago, Illinois. Anything contained in
the foregoing to the contrary notwithstanding, (i) the obligation
of LaSalle to make Swing Loans shall be subject to all of the
terms and conditions of this Agreement and (ii) LaSalle shall not
be obligated to make more than one Swing Loan during any one day.
LaSalle shall promptly notify the Administrative Agent, and the
Administrative Agent shall thereafter notify each Bank, of each
Swing Loan and the amount of each Swing Loan made since the last
notice. The Borrowers agree that LaSalle may rely on any such
telephonic or telecopy notice given by any person LaSalle in good
faith believes is an authorized representative of the Borrower
without the necessity of independent investigation, and in the
event any such notice by telephone conflicts with any written
confirmation, such telephonic notice shall govern if LaSalle has
acted in reliance thereon.
(d) Swing Line Note. The Swing Loans made to the Borrower by
LaSalle shall be evidenced by a single promissory note of the
Borrower issued to LaSalle in the form of Exhibit C hereto. Such
promissory note is hereinafter referred to as the "Swing Line
Note."
(e) Swing Line Fees. The Borrowers agree, jointly and
severally, to pay a commitment fee (the "Swing Line Commitment
Fee") for the period (including, without limitation, any portion
thereof when LaSalle's obligation to lend shall be suspended by
reason of the Borrowers' inability to satisfy the conditions of
Article III) commencing on the Effective Date and continuing
through the Termination Date, computed on the average daily
amount of the excess of the Swing Line Commitment on such date
over the aggregate outstanding principal amount of the Swing
Loans during the period for which payment is made at the rate per
annum equal to the Applicable Fee Percentage (as determined in
accordance with subsection (b) of Section 2.9). Such Swing Line
Commitment Fee shall be payable to LaSalle in arrears on each
Monthly Payment Date occurring after the Effective Date.
(f) Conversion to Advances. Either LaSalle or the Borrowers,
or either of them, may, prior to the Termination Date and upon at
least two Business Days' prior written notice to the
Administrative Agent and to the Borrowers or LaSalle, as
applicable (which notice shall be promptly transmitted by the
Administrative Agent to each Bank), in whole but not in part,
terminate the Swing Line Commitment and increase LaSalle's
Revolving Credit Commitment by the amount of the Swing Line
Commitment on the date specified in such notice (the "Conversion
Date"), provided that no Event of Default or Unmatured Event of
Default shall exist at the time of the request of the proposed
increase. In such event:
(i) On the Conversion Date, (A) the Revolving
Credit Commitment of LaSalle shall be increased by the amount of
the Swing Line Commitment, (B) the Revolving Credit Percentages
of each Bank will be revised to reflect the increase in LaSalle's
Revolving Credit Commitment and (C) each Bank shall purchase (or
sell, as applicable) a portion of its Advances in an amount
necessary such that, after giving effect to the increase in the
aggregate Revolving Credit Commitments, each Bank will hold its
Revolving Credit Percentage (as revised) of outstanding Advances.
In consideration for the sale and assignment of Revolving Credit
Loans hereunder, each purchasing Bank shall pay on the Conversion
Date to the Administrative Agent for the ratable benefit of the
selling Banks an amount equal to the principal amount of Advances
to be acquired by such Bank hereunder. On or after the Conversion
Date, each of the Banks shall be entitled to receive from the
Administrative Agent all payments of principal, interest and fees
with respect to any interest assigned to it hereby. The
assigning Bank shall be entitled to any interest on or fees in
respect of any interest assigned for periods prior to the
Conversion Date. In the event that any Bank receives any payment
to which any other Bank may be entitled, then the Bank receiving
such amount shall promptly remit it to the Administrative Agent
on behalf of such other Banks. The Borrowers shall execute and
deliver a replacement Revolving Credit Note to LaSalle in the
principal amount of LaSalle's Revolving Credit Commitment, as so
increased.
(ii) On the Conversion Date, the Borrowers will be
deemed to have requested an Advance (without regard to any
requirement of this Agreement that each Advance under this
Agreement be in a minimum amount) constituting a Base Rate Loan
in an amount equal to the amount of the Swing Loans outstanding
on such date. Based upon the Revolving Credit Percentages of
each Bank as revised in accordance with clause (i) above, each
Bank (including LaSalle) shall make the proceeds of its requested
Advance available to the Administrative Agent, in immediately
available funds, before 12:00 Noon (Chicago time) on the
Conversion Date. The proceeds of such Advances shall be paid to
LaSalle and applied to repay the outstanding Swing Loans.
In the event that any such purchase occurs on a date other than
the end of an interest period in respect of any LIBOR Base Loan
or any Quoted Interest Period in respect of any Swing Loan, the
Borrower shall pay any amounts that would be owing to any Bank
pursuant to Sections 2.4 and 2.15(b) as if such purchase were a
prepayment.
(g) Liquidation Fee. Each of the Borrowers understands that
upon the acceptance by the Borrower of a Quoted Rate in respect
of a Swing Loan, LaSalle intends to enter into funding
arrangements with third parties on terms and conditions which
could result in substantial losses to LaSalle if such Swing Loan
is not made at the Quoted Rate or does not remain outstanding for
the entire Quoted Interest Period. Therefore, if either (a)
after a Borrower accepts a Quoted Rate in respect of a Swing
Loan, the Swing Loan is not made on the first day of the
applicable Quoted Interest Period for any reason (including, but
not limited to the failure of the Borrowers to comply with one or
more of the conditions precedent to any Swing Loan under this
Agreement) other than a wrongful failure by LaSalle to make the
Swing Loan, or (b) such Swing Loan is repaid in whole or in part
prior to the last day of its Interest Period (whether as a result
of acceleration, operation of law or otherwise), the Borrowers
agree to indemnify LaSalle for any loss, cost and expense
incurred by it resulting therefrom, including without limitation
any loss of profit and any loss or cost in liquidating or
employing deposits acquired to fund or maintain such Swing Loan.
ARTICLE III.
CONDITIONS PRECEDENT
3.1 Conditions Precedent to Effectiveness. The effectiveness
of this Agreement and the obligation of each of the Banks to make
any Advance hereunder, of LaSalle to make a Swing Loan or of
Chase to issue any Letter of Credit hereunder is subject to the
following conditions precedent:
(a) The Administrative Agent shall have received copies (in
sufficient number for each of the Banks to receive a copy) of all
of the following, each in form and substance reasonably
satisfactory to the Administrative Agent and the Banks, unless
waived by each of the Banks:
(i) This Agreement, appropriately completed and duly
executed by the parties hereto;
(ii) Reaffirmation of Subsidiary Guaranty, duly executed
and delivered by each of the Subsidiary Guarantors;
(iii) Mortgages relating to each parcel of Real Property
owned by the Borrowers or any of QDI's Subsidiaries, in
recordable form, appropriately completed and duly executed by the
parties thereto;
(iv) Leasehold Mortgages relating to each parcel of Real
Property (other than any Excluded Property) subject to a ground
lease pursuant to which either of the Borrowers or any of QDI's
subsidiaries is lessee, in recordable form, appropriately
completed and duly executed by the parties thereto, provided,
however, that, it shall not be a condition of the Effective Date
that the Borrowers and QDI's Subsidiaries execute a Leasehold
Mortgage in respect of any parcel of Real Property subject to a
ground lease if (i) such ground lease prohibits the execution of
such Leasehold Mortgage without the prior consent, approval or
other action of the ground lessor and (ii) the Borrowers and
QDI's Subsidiaries have been unable, as of such date, to obtain
the consent, approval or other action of the ground lessor
thereto;
(v) Collateral Assignment of Leases, duly executed by the
parties thereto, granting to the Administrative Agent, for the
benefit of the Banks, a collateral assignment of and security
interest in each of the leases relating to Real Property (other
than any Excluded Property) leased by Borrowers or any of QDI's
Subsidiaries as lessee, provided, however, that, it shall not be
a condition of the Effective Date that the Borrowers and QDI's
Subsidiaries execute a Collateral Assignment of Lease in respect
of any parcel of Real Property subject to a lease if (i) such
lease prohibits the execution of such Collateral Assignment of
Lease without the prior consent or approval of the landlord and
(ii) the Borrowers and QDI's Subsidiaries have been unable, as of
such date, to obtain the consent or approval of the landlord, and
provided further that any Collateral Assignment of Leases
relating to the Subject Assets are subject to the Intercreditor
Agreement;
(vi) Agreements or estoppel letters from each of the
lessors on each parcel of Real Property leased by the Borrowers
or any of QDI's Subsidiaries, in form and substance satisfactory
to the Administrative Agent, which the Borrowers and QDI's
Subsidiaries have obtained as of the date hereof;
(vii) An environmental indemnity, in form and substance
satisfactory to the Administrative Agent, duly executed by each
of the Borrowers (the "Environmental Indemnity");
(viii) A certificate of the secretary of each of the
Borrowers, certifying that (i) a correct and complete copy of its
Articles of Incorporation, with all amendments thereto, is
attached to the certificate, (ii) a correct and complete copy of
its Bylaws, with all amendments thereto, is attached to the
certificate, (iii) a correct and complete copy of the resolutions
of its Board of Directors authorizing the execution, delivery and
performance of the Loan Documents to which it is a party are
attached to the certificate, and such resolutions have not been
subsequently modified or repealed and (iv) there are no
proceedings pending or contemplated as to the merger,
consolidation, liquidation or dissolution of such Borrower;
(ix) A certificate of the secretary of each Subsidiary
Guarantor, certifying that (i) with respect to each Subsidiary
Guarantor which is a corporation, (A) a correct and complete copy
of its Articles of Incorporation, with all Amendments thereto, is
attached to the certificate, (B) a correct and complete copy of
its Bylaws, with all amendments thereto, is attached to the
certificate, and (C) a correct and complete copy of the
resolutions of its Board of Directors authorizing the execution,
delivery and performance of the Loan Documents to which it is a
party are attached to the certificate, and such resolutions have
not been subsequently modified or repealed, (ii) with respect to
each Subsidiary Guarantor which is a limited partnership, (A) a
correct and complete copy of the agreement of limited
partnership, with all amendments thereto, is attached to the
certificate and (B) all action on behalf of the partnership and
the partners necessary to authorize the execution, delivery and
performance of the Loan Documents to which it is a party has been
taken, and (iii) there are no proceedings pending or contemplated
as to the merger, consolidation, liquidation or dissolution of
such Subsidiary Guarantor;
(x) A certified copy of all documents evidencing any
necessary consent or governmental approvals (if any) with respect
to the execution, delivery and performance of the Loan Documents
and the consummation of the transactions contemplated hereby;
(xi) A certificate executed by the secretary or any
assistant secretary of each of the Borrowers certifying the names
of the officers of such Borrower authorized to sign the Loan
Documents and to give notices and other communications in
connection with this Agreement and the transactions contemplated
hereby, together with a sample of the true signature of such
officers;
(xii) A certificate executed by the secretary or an
assistant secretary of each of the Subsidiary Guarantors
certifying the names of the officers of such Subsidiary
authorized to sign the Subsidiary Guaranty or the Reaffirmation
of Subsidiary Guaranty, as applicable, and any Security Documents
to which it is a party;
(xiii) A favorable opinion of counsel to the Borrowers and
the Subsidiary Guarantors substantially in the form of Exhibit D
attached hereto;
(xiv) A closing certificate (the "Closing Certificate"),
executed by the president, senior vice president or chief
financial officer of QDI, certifying that (i) the representations
and warranties contained in this Agreement and each other Loan
Document are true and accurate in all material respects, and (ii)
no Default or Event of Default has occurred and is continuing;
(xv) Evidence of insurance for all insurance required to
be maintained by the Borrowers and their respective Subsidiaries
pursuant to this Agreement and the Security Documents;
(xvi) Such other approvals or documents as the
Administrative Agent or the Required Banks may reasonably
request;
(b) Payment by QDI to the Administrative Agent for the
ratable benefit of the Banks of a nonrefundable amendment fee in
accordance with the provisions of Section 2.10 hereof; and
(c) Payment by the Borrowers of all costs and expenses of the
Administrative Agent's special counsel (including, without
limitation, legal fees and expenses) incurred in connection with
the preparation and execution of the Loan Documents and incident
to all proceedings in connection with, transactions contemplated
by, and documents relating to this Agreement and the Loan
Documents.
Upon the making of the initial Advance hereunder, the foregoing
conditions shall be deemed to be satisfied; provided, however,
that the making of such Advance shall not constitute a waiver by
the Administrative Agent or any Bank of any right which the
Administrative Agent or such Bank may have in the event that any
certificate, financial statement or other document delivered
pursuant to this Section 3.1 or otherwise in connection with the
transactions contemplated by this Agreement shall prove to have
been false or misleading in any material respect.
3.2 Conditions Precedent to All Advances, Swing Loans and
Issuances of Letters of Credit. The obligation of each of the
Banks to make any Advance hereunder, of LaSalle to make any Swing
Loan hereunder or of Chase to issue any Letters of Credit shall
be further subject to the satisfaction of each of the following
conditions, unless waived in writing by each of the Banks:
(a) In the case of an Advance, a Notice of Borrowing
appropriately completed and duly executed by a Borrower; in the
case of a Swing Loan, a request meeting the requirements of
Section 2.15(c) hereof; and, in the case of a Letter of Credit,
an application for a letter of credit, in form and substance
satisfactory to Chase, appropriately completed and duly executed
by a Borrower;
(b) The representations and warranties set forth in
Article IV hereof and in each of the other Loan Documents are
true and correct on the Effective Date and on the date of and
after giving effect to the making of the Advance or Swing Loan or
the issuance of the Letter of Credit, except that the
representations and warranties set forth in Section 4.5 as to the
financial statements of QDI shall be deemed a reference to the
audited and unaudited financial statements of QDI, as the case
may be, most recently delivered to the Banks pursuant to Section
5.1;
(c) No Default or Event of Default and no Material Adverse
Occurrence shall then have occurred and be continuing on the date
of the making of the Advance or Swing Loan or the issuance of the
Letter of Credit; and
(d) The making of the Advance by such Bank, the making of
such Swing Loan by LaSalle or the issuance of the Letter of
Credit by Chase is not in violation of any applicable law, rule
or regulation or any directive, request or order of any court or
governmental authority having jurisdiction over such Bank,
LaSalle or Chase, as applicable.
The delivery of the Notice of Borrowing, the request for the
Swing Loan or the application for the issuance of a Letter of
Credit, as applicable, by a Borrower shall constitute a
certification by the Borrowers, binding upon each of the
Borrowers, as to the matters set forth in subsections (b) and (c)
above.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each of the Borrowers represents and warrants to the
Administrative Agent and each of the Banks that as of the date
hereof, as of the Effective Date, and as of the date of each
Advance, each Swing Loan and each issuance of a Letter of Credit,
as follows:
4.1 Organization; etc. Each of the Borrowers is a
corporation validly organized and existing and in good standing
under the laws of the state of its organization, has full power
and authority to own its property and conduct its business as
conducted by it and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where
the nature of its business or the character of its property makes
such qualification or licensing necessary. A list of
jurisdictions in which each of the Borrowers is qualified to do
business is set forth in Annex I. Each of the Borrowers has full
power and authority to enter into and to perform its obligations
under the Loan Documents and to request Advances, Swing Loans and
Letters of Credit under the Agreement. Each of the Borrowers has
all licenses, permits and Franchises necessary to carry on its
business as now being conducted and to own and operate its
Property, except for permits, licenses and Franchises the failure
of which to obtain will not result in a Material Adverse
Occurrence.
4.2 Due Authorization. The execution, delivery and
performance by each of the Borrowers and of each of the
Subsidiary Guarantors of the Loan Documents to which it is a
party have been duly authorized by all necessary corporate
action, do not require any approval or consent of, or any
registration, qualification or filing with, any governmental
agency or authority or any approval or consent of any other
Person, do not and will not conflict with, result in any
violation of or constitute any default under, any provision of
the organizational, constitutive or governing documents
(including, as applicable, articles of incorporation, bylaws and
partnership agreements) of either of the Borrower or any of the
Subsidiary Guarantors, any agreement binding on or applicable to
the Borrowers, or either of them, any of the Subsidiary
Guarantors or any of their respective Property, or any law or
governmental regulation or court decree or order binding upon or
applicable to the Borrowers, or either of them, any of the
Subsidiary Guarantors or any of their respective Property and
will not result in the creation or imposition of any Lien on any
of their respective Property pursuant to the provisions of any
agreement binding on or applicable to the Borrowers, either of
them, any of the Subsidiary Guarantors or any of their respective
Property, except any such Liens created pursuant to the Security
Documents in favor of the Administrative Agent, for the benefit
of the Banks.
4.3 Subsidiaries. Neither of the Borrowers has any
Subsidiaries except those listed on Annex II, which correctly
sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the percentage ownership of each Subsidiary
which is owned, of record or beneficially, by each Borrower
and/or one or more of its Subsidiaries. Each of the Borrowers
and QDI's Subsidiaries has good and marketable title to all of
the shares or other equity interests it purports to own of each
of its Subsidiaries, free and clear of any Lien (other than any
Liens in favor of the Administrative Agent for the benefit of the
Banks) and all such shares have been duly issued and are fully
paid and nonassessable. Each Subsidiary has been duly organized
and is validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization and is duly
licensed or qualified and in good standing in each other
jurisdiction where the nature of the business transacted by it or
the character of its properties owned or leased makes such
qualification or licensing necessary. A list of the
jurisdictions in which each Subsidiary is qualified to do
business is set forth on the attached Annex II. Each Subsidiary
has full power and authority to own and operate its properties,
to carry on its business as now conducted and to enter into and
perform the Subsidiary Guaranty and the Security Documents to
which it is a party. Each Subsidiary has all licenses, permits
and Franchises necessary to carry on its business as now being
conducted and to own and operate its properties, except for
permits, licenses and Franchises the failure of which to obtain
will not result in a Material Adverse Occurrence.
4.4 Validity of the Agreement; etc. Each Loan Document is
the legal, valid and binding obligation of each of the Borrowers
and of each of the Subsidiary Guarantors which are a party
thereto and is enforceable in accordance with its terms.
4.5 Financial Statements. The consolidated balance sheets of
QDI and its Subsidiaries as of October 28, 2001, October 29, 2000
and October 31, 1999 and the related consolidated statements of
income, stockholders' equity and cash flows for the three years
ended October 28, 2001, October 29, 2000 and October 31, 1999
certified by PricewaterhouseCoopers LLP, QDI's independent public
accountants, copies of which have heretofore been delivered to
the Banks, were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved and present fairly the financial condition and results
of operations and cash flows of QDI and its Subsidiaries for and
as of the end of each of such years. The unaudited consolidated
balance sheet of QDI and its Subsidiaries as of February 17, 2002
and the unaudited statements of operations for the sixteen week
period ended on said date, copies of which have heretofore been
delivered to the Banks, have been prepared in accordance with
GAAP, present fairly in all material respects the financial
position of QDI and its Subsidiaries, on a consolidated basis, as
of said date and the result of operations and cash flows of QDI
and its Subsidiaries, on a consolidated basis, for said period,
subject to customary year-end adjustments.
4.6 Litigation; etc. Except as disclosed in QDI's Quarterly
Report on Form 10-Q for the sixteen week period ended
February 17, 2002, there is no action, suit or proceeding at law
or equity, or before or by any federal, state, local or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending, or to the
knowledge of the Borrowers threatened, against the Borrowers or
any of QDI's Subsidiaries or any of their respective Property,
which if determined adversely would be a Material Adverse
Occurrence or would affect the ability of the Borrowers or any of
QDI's Wholly-Owned Subsidiaries to perform their respective
obligations under the Loan Documents; and neither of the
Borrowers nor any of QDI's Subsidiaries is in default with
respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or federal, state, local or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, where the effect of such
default would be a Material Adverse Occurrence.
4.7 Compliance with Law. Neither of the Borrowers nor any of
QDI's Subsidiaries is (a) in default with respect to any order,
writ, injunction or decree of any court, governmental authority
or arbitration board or tribunal to which it is a named party or
(b) in violation of any law, rule, regulation, ordinance or order
relating to its or their respective businesses, the violation of
which would result in a Material Adverse Occurrence.
4.8 ERISA Compliance. The Internal Revenue Service has
issued a determination that each Plan (except for any Plan which
is unfunded and maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees) is qualified under Section 401(a) and
related provisions of the Code, as amended by ERISA, and that
each related trust or custodial account is exempt from taxation
under Section 501(a) of the Code. All Plans comply in all
material respects with ERISA and other applicable laws. There
exist with respect to the Borrowers, or either of them, or any of
QDI's Subsidiaries no "multi-employer plans," as defined in the
Multi-employer Pension Plan Amendments Act of 1980, for which a
material withdrawal or termination liability may be incurred.
There exist with respect to all Plans or trusts: (a) no material
accumulated funding deficiency within the meaning of ERISA;
(b) no termination of any Plan or trust which would result in any
material liability to the PBGC or any "reportable event," as that
term is defined in ERISA, which is likely to constitute grounds
for termination of any Plan or trust by the PBGC; and (c) no
"prohibited transaction," as that term is defined in ERISA, which
is likely to subject any Plan, trust or party dealing with any
Plan or trust to any material tax or penalty on prohibited
transactions imposed by Section 4975 of the Code.
4.9 Title to Assets. Each of the Borrowers and each of QDI's
Subsidiaries has good and marketable fee simple title to all of
its Property constituting real property and good and marketable
title to and ownership of all of its Property and assets
constituting personal property, in each case as disclosed on the
consolidated financial statements of QDI as of and for the
sixteen week period ending February 17, 2002 (except for any such
Property disposed of by the Borrowers or any of QDI's
Subsidiaries in the ordinary course of business), free and clear
of all Liens except for Liens and other encumbrances permitted
pursuant to Section 6.4. Each of the Borrowers and each of QDI's
Subsidiaries has a valid leasehold in all Property leased by it
and used in the operation of its business.
4.10 Indebtedness. Except for Indebtedness listed in Annex
III, neither of the Borrowers nor any of QDI's Subsidiaries has
any Indebtedness.
4.11 Use of Proceeds. The proceeds of the Advances and Swing
Loans will be used by the Borrowers to fund the working capital
requirements of the Borrowers and for other general corporate
purposes.
4.12 Margin Stock. No part of any Advance or any Swing Loan
shall be used at any time by the Borrowers, or either of them, to
purchase or carry margin stock (within the meaning of Regulation
U) or to extend credit to others for the purpose of purchasing or
carrying any margin stock. Neither of the Borrowers nor any of
QDI's Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the
purposes of purchasing or carrying any such margin stock. No
part of the proceeds of any Advance will be used by the
Borrowers, or either of them, for any purpose which violates, or
which is inconsistent with, any regulations promulgated by the
Board of Governors of the Federal Reserve System.
4.13 Investment Company Act. Neither of the Borrowers nor any
of QDI's Subsidiaries is an "investment company," or an
"affiliated person" of, or a "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. The
making of the Advances and Swing Loans, the application of the
proceeds and repayment thereof by the Borrowers and the
performance of the transactions contemplated by the Agreement
will not violate any provision of said Act, or any rule,
regulation or order issued by the Securities and Exchange
Commission thereunder.
4.14 Unregistered Securities. Neither of the Borrowers nor
any of QDI's Subsidiaries has (a) issued any unregistered
securities in violation of the registration requirements of
Section 5 of the Securities Act of 1933, as amended, or any other
law; or (b) violated any rule, regulation or requirement under
the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.
4.15 Public Utility Holding Company Act. Neither of the
Borrowers nor any of QDI's Subsidiaries is a "holding company,"
or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.16 Accuracy of Information. All information heretofore or
herewith furnished by or on behalf of the Borrowers to the
Administrative Agent or the Banks for purposes of or in
connection with the Agreement or any transaction contemplated by
the Agreement is, and all other such information hereafter
furnished by or on behalf of the Borrowers to the Administrative
Agent or the Banks will be, true and accurate in every material
respect on the date as of which such information is dated or
certified and no such information contains any material
misstatement of fact or omits to state a material fact or any
fact necessary to make the statements contained therein not
misleading.
4.17 Tax Returns; Audits. Each of the Borrowers and QDI's
Subsidiaries has filed all federal, state and local income tax
returns and other reports which are required to be filed, and has
paid all taxes as shown on said returns and on all assessments
received by any such Person (except for any assessments which are
being contested in good faith by appropriate proceedings that
will prevent a forfeiture or sale of any property and for which
an adequate book reserve in accordance with GAAP shall have been
set aside), to the extent that such taxes have become due or has
obtained extensions with respect to the filing of such returns
and has made provision for the payment of taxes anticipated to be
payable in connection with such returns. Each of the Borrowers
and QDI's Subsidiaries has made all required withholding
deposits. The Borrowers do not have knowledge of any objections
to or claims for additional taxes by federal, state or local
taxing authorities against it or any of its Subsidiaries which
would be a Material Adverse Occurrence.
4.18 Environmental and Safety Regulations. Each of the
Borrowers and each of QDI's Subsidiaries are in compliance with
all requirements of applicable federal, state and local
environmental, pollution control, health and safety statutes,
laws and regulations except for any noncompliance which,
individually or in the aggregate, could not result in a Material
Adverse Occurrence with respect to such Borrower or such
Subsidiary and are not the subject of any federal or state
investigation evaluating whether any remedial action is needed to
respond to a release of any toxic or hazardous waste or substance
into the environment. Each of the Borrowers further represents
and warrants that (i) the Real Property and its intended use
complies with all applicable laws, governmental regulations and
the terms of any enforcement action by any federal, state,
regional or local governmental agency, including, without
limitation, all applicable federal, state and local laws
pertaining to air and water quality, hazardous waste, waste
disposal and other environmental matters (including, but not
limited to, the Clean Water, Clean Air, Federal Water Pollution
Control, Solid Waste Disposal, Resource Conservation and Recovery
and Comprehensive Environmental Response, Compensation, and
Liability Acts, as said acts may be amended), and the rules,
regulations and ordinances of all applicable federal, state and
local agencies and bureaus, except in each case for any
noncompliance which, individually or in the aggregate, could not
result in a Material Adverse Occurrence and (ii) no notice,
demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or threatened
by any governmental or other entity with respect to any alleged
failure by the Borrowers, or either of them, or any of QDI's
Subsidiaries to comply in any respect with any of such
environmental laws except for any such liability for which an
adequate book reserve in accordance with GAAP shall have been set
aside in respect thereto.
4.19 Forecasts. The forecasts of QDI and its Subsidiaries,
furnished to the Administrative Agent and each of the Banks,
consisting of consolidated balance sheets, consolidated cash flow
statements and consolidated income statements of QDI and its
Subsidiaries after giving effect to the making of the Advances
hereunder and the application of the proceeds thereof, together
with appropriate supporting details and a statement of underlying
assumptions, have been prepared in the light of the past business
history of QDI and its Subsidiaries and on the basis of the
assumptions set forth therein, which assumptions are in the
opinion of the Borrowers reasonable. Such forecasts have been
prepared in good faith and represent the good faith opinion of
the Borrowers as to the most probable course of business of QDI
and its Subsidiaries on the basis of the assumptions which are
set forth therein.
4.20 Solvency. After giving effect to the transactions
contemplated by this Agreement, each of the Borrowers and QDI's
Subsidiaries has capital sufficient to carry on its business, is
solvent and is able to pay its debts and obligations as they
mature in the ordinary course. After giving effect to the
consummation of the transactions contemplated by this Agreement,
each of the Borrowers and QDI's Subsidiaries now owns property
having a value, both at fair valuation and at present fair
saleable value, greater than the amount required to pay its
debts, obligations and contingent liabilities.
4.21 No Default. As of the date hereof, no Default or Event
of Default has occurred and is continuing.
4.22 Subsidiary Guarantors. Each of the Wholly-Owned
Subsidiaries of QDI (except for any SPE, for so long as such SPE
remains a single purpose entity engaged solely in a Mortgage
Transaction, and except for Wholly-Owned Subsidiaries of QDI
(other than any SPE) which do not in the aggregate have assets in
excess of $500,000) have executed the Subsidiary Guaranty, the
Security Agreement and such other Security Documents which are
necessary or desirable to grant to the Administrative Agent for
the benefit of the Banks, a security interest and Lien in
substantially all of the assets of such Subsidiary. Grady's Inc.
does not have assets in excess of $225,000.
ARTICLE V.
CERTAIN AFFIRMATIVE COVENANTS
Each of the Borrowers agrees with the Administrative Agent and
each of the Banks that, from the date hereof and thereafter for
so long as any portion of any Advance, any Swing Loan or any
Letter of Credit shall be outstanding or any Bank shall have any
Commitment hereunder, unless the Required Banks shall otherwise
consent in writing:
5.1 Financial Information; etc. The Borrowers will furnish
to the Administrative Agent and each of the Banks copies of the
following financial statements, reports and information:
(a) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of QDI, a copy of the
audited consolidated financial statements, including balance
sheet, related statements of income, statements of stockholders'
equity and statements of cash flows, of QDI and its consolidated
Subsidiaries for such fiscal year, with comparative figures for
the preceding fiscal year, prepared in accordance with GAAP,
certified without qualification or exception by
PricewaterhouseCoopers LLP or such other nationally or regionally
recognized firm of independent public accountants which are
reasonably acceptable to the Administrative Agent and the
Required Banks;
(b) as soon as available and in any event within forty-five
(45) days after the end of each of the first three (3) fiscal
quarterly periods of each fiscal year of QDI, consolidated
statements of income, stockholders' equity and cash flows of QDI
and its consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the
end of such period, and the related consolidated balance sheets
as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding period in the preceding fiscal year, accompanied by
a certificate of a senior financial officer of QDI which shall
state that said financial statements fairly present the
consolidated financial condition and results of operations of QDI
and its Subsidiaries in accordance with GAAP for such period;
(c) with each financial statement required by Section 5.1(a)
and (b) to be delivered to the Administrative Agent and each of
the Banks, (i) a certificate ("Compliance Certificate") in a form
acceptable to the Administrative Agent and the Required Banks
signed by the president, the senior vice president or the chief
financial officer of QDI (i) stating that, to the best of his
knowledge after reasonable investigation, no Default or Event of
Default has occurred and is continuing, or if a Default or an
Event of Default has occurred and is continuing, a statement of
the nature thereof and the action which the Borrowers propose to
take with respect thereto, and (ii) setting forth, in sufficient
detail, the information and computations required to establish
whether or not the Borrowers were in compliance with the
requirements of Sections 6.1 through 6.3, inclusive, and Section
6.5, during the periods covered by the financial reports then
being furnished and as of the end of such periods;
(d) with each financial statement required by Section 5.1(a)
to be delivered to the Administrative Agent and each of the Banks
for a fiscal year, a separate written statement of the
independent public accountant which certified such financial
statements that (i) such accountants have obtained no knowledge
of any Default or Event of Default having occurred and
continuing, or if such accountants have obtained knowledge of any
such Default or Event of Default, the accountants shall disclose
such Defaults or Events of Default and the nature thereof and
(ii) that such accountants have reviewed the Compliance
Certificate to be delivered by QDI for and as of the end of such
fiscal year and found the calculations contained therein to be
accurate and in agreement with such financial statements;
(e) promptly upon their becoming available, copies of all
registration statements and reports (including without limitation
reports on Forms 10-K, 10-Q and 8-K) which QDI shall have filed
with the Securities and Exchange Commission;
(f) promptly upon the mailing thereof to the stockholders of
QDI, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly after a Borrower knows or has reason to know
that any Default has occurred, a notice of such Default
describing the same in reasonable detail and a description of the
action that the Borrowers have taken and propose to take with
respect thereto;
(h) promptly after receipt thereof, all letters and reports
to management of QDI prepared by its independent certified public
accountants and the responses of the management of QDI thereto;
(i) promptly following the commencement of any litigation,
suit, administrative proceeding or arbitration relating to the
Borrowers, or either of them, or any of QDI's Subsidiaries
relating to the transactions contemplated by this Agreement or
which if adversely determined could be a Material Adverse
Occurrence, a notice thereof describing the allegations of such
litigation, suit, administrative proceeding or arbitration and
such Borrower's or such Subsidiary's response thereto;
(j) promptly upon learning thereof, a notice of any
"reportable event" or "prohibited transaction" or the imposition
of a withdrawal or termination liability within the meaning of
ERISA in connection with any Plan and, when known, any action
taken by the Internal Revenue Service, Department of Labor or
PBGC with respect thereto; and
(k) such other information with respect to the financial
condition and operations of the Borrowers or any of QDI's
Subsidiaries as the Administrative Agent or any Bank may
reasonably request.
5.2 Maintenance of Corporate Existence; etc. Except as
permitted by Section 6.7, each of the Borrowers shall maintain
and preserve, and cause each of their respective Subsidiaries to
maintain and preserve, its corporate existence and qualification
and good standing in all states in which such qualification and
good standing are required in order to conduct its business and
own its property as conducted and owned in such states.
5.3 Payment of Taxes; etc. Each of the Borrowers shall pay
and discharge, and shall cause each of their respective
Subsidiaries to pay and discharge, as the same may become due and
payable, all taxes, assessments and other governmental charges or
levies against or on any of its Property, as well as claims of
any kind which, if unpaid, might become a Lien upon any of its
Property; provided, however, that the foregoing shall not require
the Borrowers or any of their Subsidiaries to pay any such tax,
assessment, charge or levy so long as the validity thereof shall
be contested in good faith by appropriate proceedings that will
prevent a forfeiture or sale of any Property and an adequate book
reserve in accordance with GAAP shall have been set aside with
respect thereto. Each of the Borrowers shall make, and shall
cause each of their respective Subsidiaries to make, all required
withholding deposits.
5.4 Compliance with Laws. Each of the Borrowers shall carry
on, and shall cause each of their respective Subsidiaries to
carry on, its business activities in substantial compliance with
all applicable federal or state laws and all applicable rules,
regulations and orders of all governmental bodies and offices
having power to regulate or supervise its business activities,
including, without limitation, all applicable environmental,
pollution control, health and safety statutes, laws and
regulations. Each of the Borrowers shall maintain, and shall
cause each of their respective Subsidiaries to maintain, all
material rights, liens, franchises, permits, certificates of
compliance or grants of authority required in the conduct of its
business. Each of the Borrowers agrees that the Real Property
and its intended use will comply at all times with all applicable
laws, governmental regulations and the terms of any enforcement
action now or hereafter commenced by any federal, state, regional
or local governmental agency, including, without limitation, all
applicable federal, state and local laws pertaining to air and
water quality, hazardous waste, waste disposal and other
environmental matters (including, but not limited to, the Clean
Water, Clean Air, Federal Water Pollution Control, Solid Waste
Disposal, Resource Conservation and Recovery and Comprehensive
Environmental Response, Compensation, and Liability Acts, as said
acts may be amended from time to time), and the rules,
regulations and ordinances of all applicable federal, state and
local agencies and bureaus.
5.5 Books and Records; etc. Each of the Borrowers shall
keep, and shall cause each of their respective Subsidiaries to
keep, books and records reflecting all of its business affairs
and transactions in accordance with GAAP and permit the
Administrative Agent and each of the Banks and their respective
representatives, at reasonable times and intervals and upon
reasonable notice to the Borrowers, to visit the offices of
Borrowers and their Subsidiaries, discuss financial matters with
officers of the Borrowers or their Subsidiaries and with its
independent public accountants (and by this provision each of the
Borrowers authorizes its independent public accountants to
participate in such discussions) and examine any of the
Borrowers' or any of its Subsidiaries' books and other corporate
records.
5.6 Insurance. Each of the Borrowers will maintain, and will
cause each of their respective Subsidiaries to maintain,
insurance coverage in such forms and amounts and against such
risks including without limitation insurance with respect to its
Property, the operation thereof and its business against
casualties, contingencies and risks and insurance against loss or
damage from such hazard and risks to the person or property of
others, as are customary for corporations similarly situated and
engaged in the same or a similar business and owning and
operating similar properties. All such insurance shall be
carried with financially sound and reputable insurers.
5.7 Conduct of Business. Each of the Borrowers shall
maintain and keep, and shall cause each of their respective
Subsidiaries to maintain and keep, its assets, property and
equipment in good repair, working order and condition and from
time to time make or cause to be made all needed renewals,
replacements and repairs.
5.8 Maintain Business. Each of the Borrowers shall continue
to engage primarily, and shall cause each of their respective
Subsidiaries to continue to engage primarily, in the business or
businesses being conducted on the date of this Agreement.
5.9 ERISA.
(a) Each of the Borrowers agrees that all assumptions and
methods used to determine the actuarial valuation of employee
benefits, both vested and unvested, under any Plan, and each such
Plan, will comply in all material respects with ERISA and other
applicable laws.
(b) Neither of the Borrowers will at any time permit any Plan
to:
(i) engage in any "prohibited transaction" as such term
is defined in Section 4975 of the Code or in Section 406 of
ERISA;
(ii) incur any "accumulated funding deficiency" as such
term is defined in Section 302 of ERISA, whether or not waived;
or
(iii) be terminated under circumstances which are likely
to result in the imposition of a lien on the property of the
Borrowers, or either of them, or any of QDI's Subsidiaries
pursuant to Section 4068 of ERISA, if and to the extent such
termination is within the control of the Borrower;
if the event or condition described in (i), (ii) or (iii) above
is likely to subject the Borrowers, or either of them, or any
Subsidiary or ERISA Affiliate to a Material Adverse Occurrence.
(c) Upon the request of the Administrative Agent or any Bank,
the Borrowers will furnish a copy of the annual report of each
Plan (Form 5500) required to be filed with the Internal Revenue
Service. Copies of annual reports shall be delivered no later
than thirty (30) days after the date the copy is requested.
5.10 Changes to GAAP. In the event that the Borrowers, or
either of them, makes any changes to the generally accepted
accounting principles used in the preparation of such Borrower's
books and/or financial statements such that such principles are
not applied consistently with any such principles applied during
any prior period, (a) such change shall be in accordance with the
generally accepted accounting principles in effect at the time of
such change and shall be concurred in by the certified public
accountants certifying the financial statements of QDI and its
Subsidiaries, and (b) the Borrowers shall give the Administrative
Agent thirty (30) days prior written notice thereof. The
Administrative Agent is hereby authorized, in consultation with
the Borrowers, to adjust the financial covenants of this
Agreement to reflect the effect of such changes.
5.11 Use of Proceeds. The Borrowers will use the proceeds of
the Advances and Swing Loans only for lawful purposes and in
accordance with Sections 4.11 and 4.12 hereof.
5.12 Subsidiary Guaranty. QDI hereby agrees to cause each
Person which is or may hereafter become a Wholly-Owned Subsidiary
of QDI (other than (i) GAGHC and (ii) Wholly-Owned Subsidiaries
of QDI which in the aggregate have assets of less than $500,000)
to execute, deliver and perform the Subsidiary Guaranty. At the
time that any Wholly-Owned Subsidiary becomes a party to the
Subsidiary Guaranty, the Borrowers shall have delivered to the
Administrative Agent copies (in sufficient number for each of the
Banks to receive a copy) of each of the following documents in
form and substance reasonably satisfactory to the Administrative
Agent and the Banks:
(a) Counterpart signature page to the Subsidiary Guaranty,
duly executed by such Subsidiary;
(b) A copy of the articles of incorporation (or similar
charter document), including all amendments thereto, of such
Subsidiary, certified by the Secretary of State of the state of
its incorporation;
(c) A copy of (i) the By-laws (or similar charter document)
of such Subsidiary and (ii) the resolutions of the Board of
Directors and of the shareholders (if required) of such
Subsidiary authorizing the execution, delivery and performance of
the Subsidiary Guaranty, each certified as true and complete by
the secretary or assistant secretary of such Subsidiary;
(d) An incumbency certificate executed by the secretary or
assistant secretary of such Subsidiary, certifying the names of
the officers authorized to execute the Subsidiary Guaranty,
together with a sample of the true signatures of such officers;
(e) Certificates of good standing (or the substantial
equivalent thereof) for such Subsidiary certified by the
Secretaries of State of the state of its incorporation and each
other state in which it is required to be qualified; and
(f) a favorable opinion of counsel to such Subsidiary in form
and substance reasonably satisfactory to the Administrative
Agent.
Notwithstanding the foregoing, for so long as any SPE remains a
single purpose entity engaged solely in a Mortgage Transaction,
such SPE shall not be required to execute, deliver and perform
the Subsidiary Guaranty.
5.13 Security Documents. (a) Within 60 days after the
Closing Date, the Borrowers shall deliver to the Administrative
Agent: (i) Leasehold Mortgages relating to each parcel of Real
Property (other than any Excluded Property) which is subject to a
ground lease pursuant to which either of the Borrowers or any of
QDI's Subsidiaries is lessee, in recordable form, appropriately
completed and duly executed by the parties thereto, provided,
however, that the Borrowers and QDI's Subsidiaries shall not be
obligated to execute a Leasehold Mortgage in respect of any
parcel of Real Property subject to a ground lease if (x) such
ground lease prohibits the execution of such Leasehold Mortgage
without the prior consent, approval or other action of the ground
lessor and (y) the Borrowers and QDI's Subsidiaries have been
unable, after using commercially reasonable efforts, to obtain
the consent, approval or other action of the ground lessor
thereto, (ii) Collateral Assignment of Leases, duly executed by
the parties thereto, granting to the Administrative Agent, for
the benefit of the Banks, a collateral assignment of and security
interest in each of the leases relating to Real Property (other
than any Excluded Property) leased by Borrowers or any of QDI's
Subsidiaries as lessee, provided, however, that the Borrowers and
QDI's Subsidiaries shall not be obligated to execute a Collateral
Assignment of Lease in respect of any parcel of Real Property
subject to such lease if (x) such lease prohibits the execution
of such Collateral Assignment of Lease without the prior consent
or approval of the landlord and (y) the Borrowers and QDI's
Subsidiaries have been unable, after using commercially
reasonable efforts, to obtain the consent or approval of the
landlord thereto and (iii) agreements or estoppel letters from
each of the lessors on each parcel of Real Property leased by the
Borrowers or any of QDI's subsidiaries, in form and substance
satisfactory to the Administrative Agent, which the Borrowers and
QDI's Subsidiaries were able to obtain using commercially
reasonable efforts.
(b) If (1) the Excluded Property described in clause (i) of
the definition of "Excluded Property" is not sold on or prior
December 31, 2002, (2) if the Excluded Property described in
clause (ii) of the definition of "Excluded Property" is not
subject to a contract for sale as of December 31, 2002 or (3) if
the Excluded Property described in clause (ii) of the definition
of "Excluded Property" is not sold on or prior to June 30, 2003,
the Borrowers shall deliver to the Administrative Agent on or
before December 31, 2002 or June 30, 2003, as applicable:
(i) Mortgages in favor of the Administrative Agent, for the
benefit of the Banks, in recordable form, appropriately completed
and duly executed by the parties thereto, with respect to each
parcel of such Excluded Property in which either Borrower or any
of QDI's Subsidiaries has a fee interest, (ii) Leasehold
Mortgages relating to each parcel of such Excluded Property which
is subject to a ground lease pursuant to which either of the
Borrowers or any of QDI's Subsidiaries is lessee, in recordable
form, appropriately completed and duly executed by the parties
thereto, provided, however, that the Borrowers and QDI's
Subsidiaries shall not be obligated to execute a Leasehold
Mortgage in respect of any such parcel of Excluded Property
subject to a ground lease if (x) such ground lease prohibits the
execution of such Leasehold Mortgage without the prior consent or
approval of the ground lessor and (y) the Borrowers and QDI's
Subsidiaries have been unable, after using commercially
reasonable efforts, to obtain the consent or approval of the
ground lessor thereto, (ii) a Collateral Assignment of Lease,
duly executed by the parties thereto, granting to the
Administrative Agent, for the benefit of the Banks, a collateral
assignment of and security interest in each of the leases
relating to any such Excluded Property leased by Borrowers or any
of QDI's Subsidiaries as lessee, provided, however, that the
Borrowers and QDI's Subsidiaries shall not be obligated to
execute a Collateral Assignment of Lease in respect of any parcel
of Real Property subject to such lease if (x) such lease
prohibits the execution of such Collateral Assignment of Lease
without the prior consent or approval of the landlord and (y) the
Borrowers and QDI's Subsidiaries have been unable, after using
commercially reasonable efforts, to obtain the consent or
approval of the landlord thereto, and (iii) agreements or
estoppel letters from each of the lessors on each parcel of Real
Property leased by the Borrowers or any of QDI's subsidiaries, in
form and substance satisfactory to the Administrative Agent,
which the Borrowers and QDI's Subsidiaries are able to obtain
using commercially reasonable efforts.
(c) If at any time either Borrower or any Subsidiary of a
Borrower acquires an ownership interest in or creates an entity
which is or becomes a Subsidiary, such Borrower shall, or the
Borrowers shall cause their respective Subsidiaries to, take all
such action and execute such agreements, documents and
instruments, including without limitation execution and delivery
of a counterpart signature page in the form of Annex I to the
Pledge Agreement and Annex I to the Security Agreement and
execution and delivery of such other Security Documents, that may
be necessary or desirable to grant to the Administrative Agent,
for the benefit of the Banks, a first priority, perfected
security interest and Lien in all of the assets of and all of the
capital stock of such new Subsidiary. If at any time either
Borrower or any Subsidiary acquires an interest in any assets not
covered by the Security Documents then in effect, such Borrower
shall, or the Borrowers shall cause their respective Subsidiaries
to, take all such action and execute such agreements, documents
and instruments, including without limitation any Security
Documents, that may be necessary or desirable to grant to the
Administrative Agent for the benefit of the Banks, a first
priority, perfected security interest in such assets. With
respect to any fee interest in any real property acquired or
ground lease in respect of any real property leased after the
Closing Date by either Borrower or any of QDI's Subsidiaries,
such Borrower shall, or the Borrowers shall cause its Subsidiary
to, promptly execute and deliver a first priority Mortgage or
Leasehold Mortgage, as applicable, in favor of the Administrative
Agent, for the benefit of the Banks, covering such real property,
and shall provide the Administrative Agent with the following
documents (w) a mortgagee's title insurance policy covering such
real property, (x) an ALTA survey thereof, together with a
surveyor's certificate, (y) to the extent reasonably available to
the Borrowers, an environmental audit report covering such real
property and (z) with respect to any real property subject to a
ground lease, any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in connection
therewith which the Borrowers and QDI's Subsidiaries are able to
obtain using commercially reasonable efforts. With respect to
any leasehold interest in real property acquired by either
Borrower or any of QDI's subsidiaries, such Borrower shall, or
the Borrowers shall cause such Subsidiary to, promptly execute
and deliver a Collateral Assignment of Lease with respect to such
real property, together with any consents or estoppels reasonably
deemed necessary or advisable by the Administrative Agent in
connection therewith which the Borrowers and QDI's Subsidiaries
are able to obtain using commercially reasonable efforts.
Notwithstanding the foregoing, (i) the Borrowers shall not be
required to, or be required to cause its Subsidiaries to, pledge
the assets or capital stock of any Subsidiary if QDI and/or any
of its Subsidiaries is subject to any effective and enforceable
contractual obligation which prohibits the pledge of the assets
or capital stock of such Subsidiary pursuant to the Pledge
Agreement or the Security Agreement; provided that QDI and/or its
Subsidiaries shall use reasonable efforts to obtain any necessary
waivers, consents or amendments to permit such pledge or to
obtain reasonably equivalent security and (ii) the Borrowers and
their Subsidiaries shall not be obligated to pledge the assets or
capital stock of a Subsidiary, provided that the aggregate value
of the assets and the capital stock of the Subsidiaries that have
not been pledged to the Administrative Agent for the benefit of
the Banks shall not at any time exceed $500,000.
(d) At the time that any Borrower or any Subsidiary or
Affiliate thereof becomes a party to a Security Document, the
Borrowers shall have delivered to the Administrative Agent copies
(in sufficient number for each of the Banks to receive a copy) of
each of the following documents in form and substance reasonably
satisfactory to the Administrative Agent and the Banks:
(i) (A) Counterpart signature page to the Pledge
Agreement, duly executed by such Borrower or such Subsidiary,
(B) counterpart signature page to the Security Agreement, duly
executed by the applicable Pledgor and/or (C) such other Security
Document, duly executed by the parties thereto, as applicable;
(ii) A copy of (A) the articles of incorporation (or
similar charter document), including all amendments thereto, of
each Pledgor, (B) the By-laws (or similar charter document) of
each Pledgor and (C) the resolutions of the Board of Directors
and of the shareholders (if required) of each Pledgor authorizing
the execution, delivery and performance of each such Security
Document, each certified as true and complete by the secretary or
assistant secretary of such Pledgor;
(iii) An incumbency certificate executed by the secretary
or assistant secretary of each Pledgor, certifying the names of
the officers authorized to execute each such Security Document,
together with a sample of the true signatures of such officers;
(iv) A favorable opinion of counsel to each Pledgor in
form and substance reasonably satisfactory to the Administrative
Agent;
(v) Delivery of stock certificates, stock powers,
irrevocable proxies, instructions or other instruments or
documents required to be delivered pursuant to the applicable
Security Document; and
(vi) UCC-1 Financing Statements in form acceptable to the
Administrative Agent appropriately completed, duly executed by
the applicable Pledgor and filed in all places that the
Administrative Agent, in its sole judgment, deems necessary or
desirable.
Notwithstanding the foregoing, for so long as any SPE remains a
single purpose entity engaged solely in a Mortgage Transaction,
such SPE shall not be required to execute, deliver and perform
any Security Documents.
5.14 Survival of Warranties and Representations. Each of the
Borrowers covenants, warrants and represents to the
Administrative Agent and each Bank that all representations and
warranties of the Borrowers contained in this Agreement and in
the other Loan Documents shall be true at the time of Borrowers'
execution of this Agreement and shall survive the execution,
delivery and acceptance hereof and thereof by the parties thereto
and the closing of the transactions described herein and therein
or related hereto and thereto and any investigation at any time
made by or on behalf of the Administrative Agent or any of the
Banks shall not diminish their rights to rely thereon.
ARTICLE VI.
CERTAIN FINANCIAL COVENANTS AND NEGATIVE COVENANTS
Each of the Borrowers agrees with the Administrative Agent and
each of the Banks that, from the date hereof and thereafter for
so long as any portion of any Advance, any Swing Loan or any
Letter of Credit shall be outstanding or any Bank shall have any
Commitment hereunder, unless the Required Banks shall otherwise
consent in writing:
6.1 Fixed Charge Coverage Ratio. (a) For each twelve-
month period ending on the last day of each fiscal quarter of
QDI, the Borrowers shall maintain a ratio of Earnings Available
for Fixed Charges to Fixed Charges of not less than 1.50:1.00.
(b) Neither of the Borrowers will, nor permit any of its
Subsidiaries to, enter into any Operating Lease if after giving
effect thereto on a pro forma basis the ratio of Earnings
Available for Fixed Charges to Fixed Charges would be less than
1.50:1.00.
6.2 Leverage Ratio. For each twelve-month period ending on
the last day of each fiscal quarter of QDI, the Borrowers shall
maintain a ratio of Funded Debt of QDI and its Subsidiaries, on a
consolidated basis, as of the last day of such fiscal quarter to
Pro Forma Consolidated Cash Flow for the twelve-month period
ending on such date, of not more than the ratio set forth below:
Maximum Ratio of Funded Debt to
Applicable Fiscal Quarter Pro Forma Consolidated Cash Flow
- ----------------------------------------------------------------
Each fiscal quarter occurring 4.00:1.00
through the third fiscal quarter
of 2003 fiscal year
Fourth fiscal quarter of 2003 3.75:1.00
fiscal year and the first, second
and third fiscal quarters of
2004 fiscal year
Fourth fiscal quarter of 2004 3.50:1.00
fiscal year and first and second
fiscal quarters of 2005 fiscal year
Each fiscal quarter thereafter 3.00:1.00
6.3 Limitations on Indebtedness. Neither of the Borrowers
will, nor will QDI permit any of its Subsidiaries to, create,
issue, guarantee or otherwise become liable in respect of any
Indebtedness, except:
(a) Indebtedness existing on the date hereof and disclosed on
Annex III hereto;
(b) Indebtedness represented by the Notes or outstanding
under the Subsidiary Guaranty or any other Loan Document;
(c) Capital Lease Obligations incurred after the Commencement
Date, provided that after taking into account the incurrence of
such Capital Lease Obligations, (x) the aggregate outstanding
Capital Lease Obligations incurred pursuant to this clause (c)
shall not exceed $5,000,000 and (y) no Default or Event of
Default shall exist;
(d) Indebtedness owing to QDI or any of its Wholly-Owned
Subsidiaries (other than any SPE);
(e) Rate Hedging Obligations permitted by Section 6.15
hereof;
(f) Indebtedness, in addition to Indebtedness permitted by
clauses (a) through (d) above, in an aggregate principal amount
at any one time outstanding not to exceed $1,000,000, which
Indebtedness shall not be secured by a Lien on any Property of
the Borrowers or their respective Subsidiaries.
6.4 Liens. Neither of the Borrowers will, nor will QDI
permit any of its Subsidiaries to, create, incur or permit to
exist any Lien on its Property, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or own or
acquire or agree to acquire Property of any kind subject to any
Lien, except the following:
(a) Liens securing taxes, assessments or governmental charges
or levies or the claims or demands of contractors, materialmen,
mechanics, carriers, warehousemen, landlords and other like
Persons, provided the payment thereof is not at the time required
by Section 5.3 hereof;
(b) Liens incurred or deposits made in the ordinary course
of business (A) in connection with workmen's compensation,
unemployment insurance, social security and other like laws or
(B) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations, surety,
appeal and performance bonds and other similar obligations not
incurred in connection with the borrowing of money, the obtaining
of advances or the payment of the deferred purchase price of
Property;
(c) attachments, judgment and other similar Liens arising in
connection with court proceedings, provided the execution or
other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith
and by appropriate proceedings in such manner as not to have the
Property subject to such Liens forfeitable;
(d) easements, rights-of-ways, reservations, exceptions,
minor encroachments, restrictions and similar charges created or
incurred in the ordinary course of business which in the
aggregate do not materially interfere with the business
operations of the Borrowers, or either of them, or any of their
respective Subsidiaries;
(e) Liens existing on the date hereof and disclosed on Annex
III hereto;
(f) Liens securing Capital Lease Obligations permitted
pursuant to Section 6.3(c) hereof;
(g) Liens in favor of QDI or a Subsidiary Guarantor; and
(h) Liens in favor of the Administrative Agent for the
benefit of the Banks.
For purposes of this Section 6.4, all Liens of a Person which
becomes a Subsidiary and which are outstanding as of the date
such Person becomes a Subsidiary shall be deemed to have been
incurred as of such date.
6.5 Dividends, Stock Purchase and Restricted Payments.
Neither of the Borrowers will, nor will QDI permit any of its
Subsidiaries to, except as hereinafter provided: (a) declare or
pay any dividends, either in cash or Property, on any shares of
its capital stock of any class (except dividends payable by QDI
solely in shares of common stock of QDI and dividends payable
solely to QDI or a Wholly-Owned Subsidiary of QDI, other than any
SPE); or (b) directly or indirectly, or through any Subsidiary,
purchase, redeem, retire, or otherwise acquire any shares of its
capital stock, or other equity interests therein, of any class or
any warrants, rights or options to purchase or acquire any shares
of its capital stock, or other equity interests therein (except
for any such purchases, redemptions, retirements or other
acquisitions payable solely in shares of common stock of QDI); or
(c) make any other distribution, either directly or indirectly or
through any Subsidiary, in respect of its capital stock, or other
equity interests therein (such declarations or payments of
dividends, purchases, redemptions or retirements of stock and
warrants, rights or options, and all such other distributions
being herein collectively called "Restricted Payments"); provided
that, notwithstanding the foregoing, QDI may repurchase shares of
its capital stock outstanding if (i) after giving effect thereto,
the aggregate cumulative amount of all Restricted Payments made
in any fiscal year in respect of such repurchases does not exceed
the then applicable Maximum Repurchase Amount, (ii) after giving
effect thereto, the aggregate cumulative amount of all Restricted
Payments made in respect of such repurchases on and after the
Commencement Date does not exceed the Restricted Payments Basket,
(iii) as of the date of payment of such Restricted Payment the
ratio of Funded Debt of QDI and its Subsidiaries, on a
consolidated basis, as of the last day of the preceding fiscal
quarter of QDI to Pro Forma Consolidated Cash Flow of QDI for the
twelve-month period ending on such date (the "Leverage Ratio")
after giving effect to such Restricted Payment (and any
Indebtedness incurred in connection therewith), is less than the
greater of (x) the then applicable Maximum Ratio of Funded Debt
to Pro Forma Consolidated Cash Flow as set forth in Section 6.2
hereof, less 0.25, and (y) 3.0 to 1.0 and (iv) at the time of
payment of such Restricted Payment no Default or Event of Default
exists and, after giving effect to such Restricted Payment, no
Default or Event of Default would exist; and provided, further,
that the restrictions set forth in this Section 6.5 shall not
apply to any Rights nor to any shares of Series B Participating
Cumulative Preferred Stock distributed or issued pursuant to the
Rights Agreement, dated as of May 27, 1997, between QDI and
ChaseMellon Shareholder Services, L.L.C., as successor Rights
Agent (the "Rights Agreement'). As used herein, the term
"Rights" shall have the same meaning ascribed to it in the Rights
Agreement.
For purposes of this Section 6.5, the amount of any Restricted
Payment which is payable or distributable in Property other than
cash or shares of capital stock of QDI shall be deemed to be the
fair market value (as determined in good faith by the Board of
Directors of QDI) of such Property as of the date of the payment
of such Restricted Payment.
6.6 Sales of Assets. Neither of the Borrowers will, nor will
QDI permit any of its Subsidiaries to, sell, lease, transfer or
otherwise dispose of assets (including without limitation the
capital stock of any Subsidiary), other than Permitted
Dispositions.
6.7 Mergers and Consolidations. Neither of the Borrowers
will, nor will QDI permit any of its Subsidiaries to, consolidate
with or merge into any other Person or permit any other Person to
consolidate with or merge into it (except that a Subsidiary may
consolidate with or merge into QDI or a Wholly-Owned Subsidiary
of QDI, other than any SPE); provided that the foregoing
restriction does not apply to the merger or consolidation of QDI
with another corporation if:
(i) the corporation which results from such merger or
consolidation (the "surviving corporation") is organized under
the laws of the United States of America or a jurisdiction
thereof;
(ii) the due and punctual payment of the principal of and
premium, if any, and interest on the Notes, according to their
tenor, and the due and punctual performance and observance of all
of the covenants in the Notes and this Agreement to be performed
or observed by QDI, are expressly assumed in writing by the
surviving corporation; and
(iii) immediately after the consummation of the transaction
and after giving effect thereto, no condition or event shall
exist which constitutes a Default, an Event of Default or a
Change of Control.
6.8 Preferred Stock of Subsidiaries. The Borrowers will not
permit any Subsidiary of QDI to issue Preferred Stock, any
security convertible into Preferred Stock or options, warrants or
rights to purchase Preferred Stock of any Subsidiaries of QDI
except shares held by QDI or a Wholly-Owned Subsidiary of QDI
(other than any SPE) and shares of Preferred Stock held by others
at the time such Subsidiary becomes a Subsidiary of QDI, provided
that such shares of Preferred Stock are not issued or transferred
by QDI or any Subsidiary to others in contemplation of, or in
connection with, such Subsidiary becoming a Subsidiary.
6.9 Disposition of Securities of a Subsidiary. Neither of
the Borrowers will, nor permit any of its Subsidiaries to, sell
or otherwise dispose of any shares of the stock or other equity
interests therein (or any options or warrants to purchase stock
or other equity interests therein or other securities convertible
or exchangeable therefore) of a Subsidiary (said stock, options,
warrants and other securities herein called "Subsidiary Stock"),
nor will either of the Borrowers permit any of its Subsidiaries
to issue, sell or otherwise dispose of any shares of its own
Subsidiary Stock, if the effect of the transaction would be to
reduce the proportionate interest of such Borrower and its other
Subsidiaries in the outstanding Subsidiary Stock of the
Subsidiary whose shares are the subject of the transaction,
provided that the foregoing restrictions shall not apply to:
(a) the issue of directors' qualifying shares; or
(b) the sale for cash consideration to a Person in a single
transaction (other than directly or indirectly to an Affiliate)
of the entire investment (whether represented by stock, debt,
claims or otherwise) of such Borrower and its other Subsidiaries
in any Subsidiary (other than GAGHC), if all of the following
conditions are met:
(i) the sale or other disposition of the assets by such
Borrower and its other Subsidiaries is permitted by Section 6.6;
(ii) in the opinion of such Borrower's Board of
Directors, the sale is for fair value and is in the best
interests of the Borrowers;
(iii) the Subsidiary being disposed of has no continuing
investment in any other Subsidiary not being simultaneously
disposed of or in the Borrowers; and
(iv) immediately after the consummation of the transaction
and after giving effect thereto, no condition or event shall
exist which constitutes a Default or an Event of Default.
Notwithstanding the foregoing, (i) GAGHC shall at all times
remain a Wholly-Owned Subsidiary of QDI and (ii) neither QDI nor
any Subsidiary may dispose of any Subsidiary Stock to any SPE.
6.10 Investments. Neither of the Borrowers will, nor permit
any of its Subsidiaries to, make or permit to exist any
Investment other than Permitted Investments.
6.11 Transactions with Affiliates. Neither of the Borrowers
will, nor will QDI permit any of its Subsidiaries to, enter into
any material transaction (including, without limitation, the
purchase, sale or exchange of Property, the rendering of any
service, the making of any material investment in an Affiliate or
the repayment of any indebtedness owed to an Affiliate) with an
Affiliate (other than a Borrower or a Subsidiary Guarantor (other
than Grady's Inc.)), except in the ordinary course of business
and pursuant to the reasonable requirements of such Borrower's or
such Subsidiary's business, upon terms which are fair and
reasonable to such Borrower or such Subsidiary and which are not
less favorable to such Borrower or such Subsidiary than would be
obtained in a comparable transaction with a Person not an
Affiliate.
6.12 Capital Expenditures. The Borrowers shall not, and shall
not permit any of their Subsidiaries to, expend or contract to
expend any amount for Capital Expenditures during any fiscal year
if as a result thereof the Consolidated Capital Expenditures for
such fiscal year shall exceed (i) the amount specified below
opposite such fiscal year (the "Maximum Consolidated Capital
Expenditures") plus (ii) the aggregate amount, if positive, of
the Maximum Consolidated Capital Expenditures set forth below for
each of the preceding fiscal years, commencing with fiscal year
2002, on a cumulative basis, less the actual aggregate amount of
Consolidated Capital Expenditures made in such prior fiscal
years, on a cumulative basis:
Maximum Consolidated
Fiscal Year Capital Expenditures
- ---------------------------------------------------------------
2002 $20,000,000
Each fiscal year thereafter $18,000,000
6.13 Acquisitions. The Borrowers shall not, nor permit any
of their respective Subsidiaries to, make any Acquisitions, other
than an Acquisition relating to the operation and development of
Burger King restaurants and/or Chili's Grill and Bar restaurants.
6.14 SPE. No SPE shall engage in any activity or conduct any
business other than a Mortgage Transaction.
6.15 Rate Hedging Obligations. Neither of the Borrowers
will, nor permit any of its Subsidiaries to, create, incur,
guarantee or otherwise become liable on or in respect of any Rate
Hedging Obligations, except for any such Rate Hedging Obligations
entered into on commercially reasonable terms with a commercial
or investment bank or other financial institution in the ordinary
course of business and not for speculative purposes.
6.16 Franchise Agreements. Neither of the Borrowers will,
nor permit any of its Subsidiaries to, terminate or agree to
terminate any Franchise Agreement to which such Person is a
party, or amend, modify or grant a waiver of any material
provisions of any such Franchise Agreement, if such termination,
amendment, modification or waiver results in a Material Adverse
Occurrence.
ARTICLE VII.
EVENTS OF DEFAULT
7.1 Events of Default. The term "Event of Default" shall
mean any of the following events:
(a) A default in the payment when due of the principal of the
Notes;
(b) A default in the payment when due of any interest on the
Notes or of fees under this Agreement and such default shall
continue unremedied for five (5) days;
(c) A default in the due performance and observance of any of
the covenants contained in Sections 5.2, 5.6, 6.1 through 6.16,
inclusive;
(d) A default (other than those defaults described in other
subsections of this Section 7.1) by the Borrowers, or either of
them, in the due performance and observance of any of the
covenants contained in this Agreement and such default shall
continue unremedied for a period of thirty (30) days after notice
from the Administrative Agent or any Bank to either of the
Borrowers thereof;
(e) A default by the Borrowers, or either of them, or any of
their respective Subsidiaries on any Indebtedness or any event
shall occur or any condition shall exist in respect of any
Indebtedness of such Borrower or such Subsidiary, or under any
agreement securing or relating to such Indebtedness, the effect
of which is (i) to result in the failure to pay when due at least
$500,000 in aggregate principal amount of such Indebtedness or
(ii) to cause or permit any holder of such Indebtedness or a
trustee to cause at least $500,000 in aggregate principal amount
of such Indebtedness to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment;
(f) An involuntary case under any applicable federal or state
bankruptcy laws shall be commenced against either of the
Borrowers or any of QDI's Subsidiaries and the petition shall not
be dismissed, stayed, bonded or discharged within sixty (60) days
after the commencement of the case; the entry of a decree or
order by a court having jurisdiction in the premises in respect
of either of the Borrowers or any of QDI's Subsidiaries under the
federal bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other
similar law; or the entry of a decree or order by a court having
jurisdiction in the premises appointing a receiver, liquidator,
assignee, trustee, sequestrator or other similar official of
either of the Borrowers or any of QDI's Subsidiaries or of any
substantial part of the property of either of the Borrowers or
any of QDI's Subsidiaries, or ordering the winding up or
liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of sixty (60)
consecutive days;
(g) The commencement by either of the Borrowers or any of
QDI's Subsidiaries of a voluntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other
similar law or the consent by it to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of either of the Borrowers or any of QDI's
Subsidiaries or of any substantial part of the property of either
of the Borrowers or any of QDI's Subsidiaries, or the making by
it of an assignment for the benefit of creditors, or the failure
by either of the Borrowers or any of QDI's Subsidiaries to pay
its debts generally as they become due, or the taking of any
action by either of the Borrowers or any of QDI's Subsidiaries in
furtherance thereof;
(h) Any judgments, writs, warrants of attachment, executions
or similar process (to the extent not covered by insurance) shall
be issued or levied against either of the Borrowers or any of
QDI's Subsidiaries or any of the assets of either of the
Borrowers or any of QDI's Subsidiaries where the amount of such
judgments, writs, warrants of attachment, executions or similar
process exceeds $500,000 in the aggregate and where such
judgments, writs, warrants of attachment, executions or similar
process are not discharged, released, vacated, suspended, stayed,
abated or fully bonded prior to any sale and in any event within
thirty (30) days after its issue or levy;
(i) Any representation or warranty set forth in this
Agreement or any other Loan Document shall be untrue in any
material respect on the date as of which the facts set forth are
stated or certified, or deemed stated or certified;
(j) Default shall occur in the observance or performance by
any Subsidiary of any provision, covenant or agreement of the
Subsidiary Guaranty;
(k) The Subsidiary Guaranty shall cease to be in full force
and effect or any Subsidiary shall so state in writing;
(l) A Change of Control shall occur; or
(m) Any Security Document shall cease to be in full force and
effect or any Pledgor shall so state in writing; or the
Administrative Agent, for the benefit of the Banks, shall cease
to have a first priority, perfected security interest on all or
any portion of the collateral subject or purported to be subject
to any Security Document.
7.2 Action If Event of Default. If an Event of Default
described in Section 7.1(f) or (g) shall occur, the full unpaid
principal amount of the Notes and all other amounts due and owing
hereunder shall automatically be due and payable without any
declaration, notice, presentment, protest or demand of any kind
(all of which are hereby waived) and the obligation of the Banks
to make additional Advances or Swing Loans or to issue Letters of
Credit shall automatically terminate. If any other Event of
Default shall occur and be continuing, the Required Banks, upon
written notice to the Borrowers, may terminate the Banks'
obligation to make additional Advances, LaSalle's obligation to
make Swing Loans and Chase's obligation to issue Letters of
Credit and may declare the outstanding principal amount of the
Notes and all other amounts due and owing hereunder to be due and
payable without other notice to the Borrowers, presentment,
protest or demand of any kind (all of which are hereby waived),
whereupon the full unpaid amount of the Notes and any and all
other amounts, which shall be so declared due and payable shall
be and become immediately due and payable.
7.3 Remedies. The Administrative Agent, personally or by
attorney, may in its discretion, proceed to protect and enforce
its rights by pursuing any available remedy including a suit or
suits in equity or at law, whether for damages or for the
specific performance of any obligation, covenant or agreement
contained in this Agreement or in the Notes, or in aid of the
execution of any power herein or therein granted, or for the
enforcement of any other appropriate legal or equitable remedy,
as the Administrative Agent shall deem most effectual to collect
the payments then due and thereafter to become due on the Notes
or under this Agreement, to enforce performance and observance of
any obligation, agreement or covenant of the Borrowers hereunder
or under the Notes or to protect and enforce any of the
Administrative Agent's or any Bank's rights or duties hereunder.
No remedy herein conferred upon or reserved to the Administrative
Agent or any Bank is intended to be exclusive of any other remedy
or remedies, and each and every such remedy shall be cumulative,
and shall be in addition to every other remedy given hereunder or
under any other Loan Document now or hereafter existing at law,
in equity or by statute.
Each Bank agrees that it will not take any action, nor institute
any actions or proceedings, against the Borrowers hereunder or
under any Loan Document, without the prior written consent of the
Required Banks or, as may be provided in this Agreement or the
other Loan Documents, at the direction of the Administrative
Agent.
ARTICLE VIII.
THE AGENT
8.1 Appointment and Authorization. Each Bank hereby
irrevocably appoints Chase as the administrative agent of such
Bank and authorizes the Administrative Agent to act on such
Bank's behalf to the extent provided herein or under any of the
other Loan Documents or in connection therewith, and to take such
other action and exercise such other powers as may be reasonably
incidental thereto. Notwithstanding the use of the term "agent,"
it is expressly understood and agreed that the Administrative
Agent shall not have any fiduciary responsibilities to any Bank
by reason of this Agreement and that the Administrative Agent is
merely acting as the representative of the Banks with only those
duties as are expressly set forth in this Agreement and the other
Loan Documents. In its capacity as the Banks' contractual
representative, the Administrative Agent (i) does not hereby
assume any fiduciary duties to any of the Banks and (ii) is
acting as an independent contractor, the rights and duties of
which are limited to those expressly set forth in this Agreement
and the other Loan Documents. Each of the Banks hereby agrees to
assert no claim against the Administrative Agent on any agency
theory or any other theory of liability for breach of fiduciary
duty, all of which claims each Bank hereby waives.
8.2 Power. The Administrative Agent shall have and may
exercise such powers under this Agreement and any other Loan
Documents as are specifically delegated to the Administrative
Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto. As to any matters not
expressly provided for by the Loan Documents (including, without
limitation, enforcement or collection of the Notes), the
Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required
Banks, and such instructions shall be binding upon all Banks and
all holders of the Notes; provided, however, that the
Administrative Agent shall not be required to take any action
which exposes the Administrative Agent to personal liability or
which is contrary to any Loan Document or applicable law. The
Administrative Agent shall not have any implied duties or any
obligation to take any action under this Agreement or any other
Loan Document except such action as is specifically provided by
this Agreement or any other Loan Document to be taken by the
Administrative Agent. The Administrative Agent shall act as an
independent contractor in performing its obligations as
Administrative Agent hereunder and nothing contained herein shall
be deemed to create a fiduciary relationship among or between the
Administrative Agent and the Borrowers or among or between the
Administrative Agent and any Bank.
8.3 Employment of Counsel; etc. The Administrative Agent may
execute any of its duties under this Agreement or any other Loan
Document, and any instrument, agreement or document executed,
issued or delivered pursuant hereto or in connection herewith, by
or through employees, agents and attorneys-in-fact and shall not
be answerable for the default or misconduct of any such employee,
agent or attorney-in-fact selected by it with reasonable care.
The Administrative Agent shall be entitled to rely on advice of
counsel (including counsel who are the employees of the
Administrative Agent) selected by the Administrative Agent
concerning all matters pertaining to the agency hereby created
and its duties under any of the Loan Documents.
8.4 Reliance. The Administrative Agent shall be entitled to
rely upon and shall not be under a duty to examine or pass upon
the validity, effectiveness, genuineness of any notice, consent,
waiver, amendment, certificate, affidavit, letter, telegram,
statement, paper, document or writing believed by it to be
genuine and to have been signed or sent by the proper Person or
Persons, and the Administrative Agent shall be entitled to assume
that the same are valid, effective and genuine and what they
purport to be.
8.5 General Immunity. Neither the Administrative Agent nor
any of the Administrative Agent's directors, officers, agents,
attorneys or employees shall be liable to any Bank for any action
taken or omitted to be taken by it or them under the Loan
Documents or in connection therewith except that the
Administrative Agent shall be obligated on the terms set forth
herein for performance of its express obligations hereunder and
except that no Person shall be relieved of any liability imposed
by law for willful misconduct or gross negligence. Without
limitation on the generality of the foregoing, the Administrative
Agent: (a) shall not be responsible to any Bank for any
recitals, statements, warranties or representations under the
Loan Documents or any agreement or document relative thereto or
for the financial condition of the Borrowers; (b) shall not be
responsible for the authenticity, accuracy, completeness, value,
validity, effectiveness, due execution, legality, genuineness,
enforceability or sufficiency of any of the Loan Documents;
(c) shall not be responsible for the validity, genuineness,
creation, perfection or priority of any of the liens created or
reaffirmed by any of the Loan Documents, or the validity,
genuineness, enforceability, existence, value or sufficiency of
any collateral or other security; (d) shall not be bound to
ascertain or inquire as to the performance or observance of any
of the terms, covenants or conditions of any of the Loan
Documents on the part of the Borrowers or of any of the terms of
any such agreement by any party thereto and shall have no duty to
inspect the property (including the books and records) of the
Borrowers; (e) shall incur no liability under or in respect of
any of the Loan Documents or any other document or Collateral by
acting upon any notice, consent, certificate or other instrument
or writing (which may be by telegram, cable or telex) believed by
the Administrative Agent to be genuine and signed or sent by the
proper party; and (f) may consult with legal counsel (including
counsel for the Borrowers), independent public accountants and
other experts selected by the Administrative Agent and shall not
be liable for any action taken or omitted to be taken in good
faith in accordance with the advice of such counsel, accountants
or experts.
8.6 Credit Analysis. Each Bank has made, and shall continue
to make, its own independent investigation or evaluation of the
operations, business, property and condition, financial and
otherwise, of the Borrowers in connection with the making of its
commitments hereunder and has made, and will continue to make,
its own independent appraisal of the creditworthiness of the
Borrowers. Without limiting the generality of the foregoing,
each Bank acknowledges that prior to the execution of this
Agreement, it had this Agreement and all other Loan Documents and
such other documents or matters as it deemed appropriate relating
thereto reviewed by its own legal counsel as it deemed
appropriate, and it is satisfied with the form of this Agreement
and all other Loan Documents. Each Bank agrees and acknowledges
that neither the Administrative Agent nor any of its directors,
officers, attorneys or employees makes any representation or
warranties about the creditworthiness of the Borrowers or with
respect to the due execution, legality, validity, genuineness,
effectiveness, sufficiency or enforceability of this Agreement or
any other Loan Documents, or the validity, genuineness,
execution, perfection or priority of Liens created or reaffirmed
by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral
or other security. Each of the Banks shall use its best efforts
to provide the other Banks with any credit or other material
information which comes into the possession of such Bank on or
before a Default or Event of Default or at any time thereafter
with respect to the operations, business, property, condition or
creditworthiness of the Borrowers but no Bank shall have any
liability to any other Bank for its inadvertent failure to do so.
Each Bank, upon the request of another Bank, shall deliver to
such other bank any financial statement, report, certificate or
other document required to be delivered to the Banks pursuant to
Section 5.1 which the requesting Bank did not receive. Except as
explicitly provided herein, neither the Administrative Agent nor
any Bank has any duty or responsibility, either initially or on a
continuing basis, to provide any other Bank with any credit or
other information with respect to such operations, business,
property, condition or creditworthiness, whether such information
comes into its possession on or before a Default or an Event of
Default or at any time thereafter.
8.7 Agent and Affiliates. With respect to the Loans made by
it and the Notes issued to it, each Agent, in its individual
capacity, shall have the same rights and powers under the Loan
Documents as any other Bank and may exercise the same as though
it were not an Agent; and the term "Bank" or "Banks" shall,
unless otherwise expressly indicated, include each Agent in its
individual capacity. Each Agent, in its individual capacity, and
its Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of
business with, the Borrowers, or either of them, or any of QDI's
Subsidiaries, and any person or entity who may do business with
or own securities of the Borrowers, or either of them, all as if
it were not an Agent and without any duty to account therefore to
the Banks.
8.8 Indemnification. The Banks jointly and severally agree
to indemnify and hold harmless the Administrative Agent and its
officers, directors, employees and agents (to the extent not
reimbursed by the Borrowers), ratably according to their
respective Commitments, from and against any and all claims,
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or
asserted against the Administrative Agent or any of its officers,
directors, employees or agents, in any way relating to or arising
out of any investigation, litigation or proceeding concerning or
relating to the transaction contemplated by this Agreement or any
of the other Loan Documents, or any of them, or any action taken
or omitted by the Administrative Agent or any of its officers,
directors, employees or agents, under any of the Loan Documents;
provided, however, that no Bank shall be liable for any portion
of such claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent or any of its officers,
directors, employees or agents. Without limitation of the
foregoing, each Bank agrees to reimburse the Administrative Agent
promptly upon demand for such Bank's proportionate share of any
out-of-pocket expenses (including counsel fees) incurred by
Administrative Agent or its officers, directors, employees or
agents in connection with the preparation, execution,
administration, or enforcement of, or legal advice in respect of
rights or responsibilities under any of, the Loan Documents, to
the extent that the Administrative Agent is not reimbursed for
such expenses by the Borrowers.
8.9 Successor Administrative Agent. The Administrative Agent
may resign at any time as Administrative Agent under the Loan
Documents by giving thirty (30) days' prior written notice
thereof to the Banks and the Borrowers. Upon any such
resignation, the Required Banks shall have the right to appoint a
successor Administrative Agent hereunder; provided that prior to
the occurrence of a Default the Borrowers shall consent (which
consent shall not be unreasonably withheld) thereto. If no
successor Administrative Agent shall have been so appointed by
the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving
of notice of resignation, then the retiring Administrative Agent
may, on behalf of the Banks, appoint a successor Administrative
Agent, which shall be a commercial bank organized under the laws
of the United States or of any state thereof and having a
combined capital and surplus of at least $200,000,000. Upon the
acceptance of any appointment as Administrative Agent under the
Loan Documents by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and
obligations under the Loan Documents. After any retiring
Administrative Agent's resignation or removal as Administrative
Agent under the Loan Documents, the provisions of this
Article VIII shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent
under the Loan Documents.
8.10 Agents' Fees. The Borrowers agree to pay to Chase, for
its own account, the fees agreed to by QDI and Chase pursuant to
the Fee Letter, or as otherwise agreed from time to time.
8.11 Collateral Matters. The Administrative Agent is
authorized on behalf of all the Banks, without the necessity of
any notice to or further consent from the Banks, from time to
time to take any action with respect to the Security Documents or
any collateral thereunder which may be necessary to perfect and
maintain perfected the security interest in and Liens upon the
collateral granted pursuant to the Security Documents. The Banks
irrevocably authorize the Administrative Agent, at its option and
in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any collateral (i) upon termination of
the Commitments and payment in full of all Loans and all other
obligations of the Borrowers known to the Administrative Agent
and payable under this Agreement or any other Loan Document;
(ii) constituting property sold or to be sold or disposed of as
part of or in connection with any disposition permitted
hereunder; (iii) consisting of an instrument evidencing
Indebtedness or other debt instrument, if the Indebtedness
evidenced thereby has been paid in full; or (iv) if approved,
authorized or ratified in writing by all the Banks. Upon request
by the Administrative Agent at any time the Banks will confirm in
writing the Administrative Agent's authority to release
particular types or items of collateral pursuant to this Section
8.11, provided that the absence of any such confirmation for
whatever reason shall not affect the Administrative Agent's
rights under this Section 8.11.
8.12 Syndication Agent and Arranger. Notwithstanding anything
contained herein which may be construed to the contrary, neither
the Syndication Agent nor the Arranger shall exercise any of the
rights or have any of the responsibilities of the Administrative
Agent hereunder, or any other rights or responsibilities other
than respective rights and responsibilities as Banks, if
applicable, hereunder.
ARTICLE IX.
AMENDMENT AND RESTATEMENT
9.1 Amendment and Restatement of Existing Credit Agreement.
The Borrowers, the Banks, and the Agents agree that, upon the
execution and delivery by each of the parties hereto of this
Agreement and satisfaction of the conditions set forth in Article
III, the terms and provisions of the Existing Credit Agreement
shall be and hereby are amended, superseded and restated in their
entirety by the terms and provision of this Agreement. It is the
intention of the parties to this Agreement that this Agreement
not constitute a novation of the obligations under the Existing
Credit Agreement and shall not operate as a novation, waiver of
any right, power or remedy of the Administrative Agent or any
Bank nor constitute an amendment or a waiver of any provision of
the Loan Documents, except as expressly set forth herein and
shall be limited to the particular instance expressly set forth
herein. All Loans made and Obligations incurred under the
Existing Credit Agreement which are outstanding on the Effective
Date shall continue as Loans and Obligations under (and shall be
governed by the terms of) this Agreement. From and after the
Effective Date, the Existing Credit Agreement shall be amended
and restated hereby and all references herein to "hereunder,"
"hereof," or words of like import and all references in any other
Loan Document to the "Credit Agreement" or words of like import
shall mean and be a reference to the Existing Credit Agreement as
amended and restated hereby.
9.2 Master Assignment of Revolving Credit Loans. Prior to
the Effective Date, the "Commitment" (as defined in the Existing
Credit Agreement) of each of the Existing Banks under the
Existing Credit Agreement are equal to the amounts set forth
opposite the Bank's name in Part A to Schedule I. As of the
Effective Date, each of the Banks' Revolving Credit Commitments
shall equal the amounts set forth opposite such Bank's name in
Part B of Schedule I and each such Banks' outstanding Obligations
and rights and duties hereunder in respect thereof shall be
allocated ratably according to its Revolving Credit Percentage.
To effect such reallocation, the parties hereto agree as follows:
(a) Assignment and Assumption. Each of the Banks whose
Revolving Credit Percentage on the Effective Date is less than
its "Percentage" (as defined in the Existing Credit Agreement)
prior to the Effective Date (the "Assignors") hereby sell and
assign to the other Banks (the "Assignees"), and each of the
Assignees hereby purchases and assumes from the Assignors, as of
the Effective Date an interest in and to the Assignors' Revolving
Credit Commitments, outstanding Revolving Credit Loans, rights
and obligations with respect to Letters of Credit, and other
obligations in respect thereof and Assignors' rights and
obligations under this Agreement in respect thereof, such that
after giving effect to such assignment, the Revolving Credit
Commitment of each of the Assignees and each of the Assignors
shall equal the amounts set forth in Part B of Schedule I
opposite such Bank's name. As of the Effective Date, each of the
Assignees shall have the rights and obligations of a Bank under
the Loan Documents with respect to the rights and obligations
assigned to the Assignees hereunder by the Assignors and each of
the Assignors shall relinquish its rights and be released from
its Obligations under this Agreement with respect to the rights
and obligations assigned to the Assignees hereunder and shall
retain its rights against the Borrowers under Sections 10.4 and
10.5. From and after the Effective Date, any Existing Bank which
shall not have a Commitment as of the Effective Date shall no
longer constitute a "Bank" for purposes of this Agreement, but
shall retain its rights as an Assignor against the Assignees
pursuant to paragraphs (b) and (e) hereof. The Administrative
Agent hereby waives the processing fee for the assignments
pursuant to this Section 9.2 provided for in Section 10.10(b) of
this Agreement.
(b) Payment Obligations. On and after the Effective Date,
each of the Assignees shall be entitled to receive from the
Administrative Agent all payments of principal, interest and fees
with respect to the interest assigned hereby. Each of the
Assignees shall advance funds directly to the Administrative
Agent with respect to all Advances and reimbursement payments
made on or after the Effective Date with respect to the interest
assigned hereby. In consideration for the sale and assignment of
Loans hereunder, the Assignees shall pay on the Effective Date to
the Administrative Agent for the ratable account of the Assignors
an amount for each Assignee equal to the principal amount of the
portion of all Loans assigned to such Assignee hereunder. Each
of the Assignees will also promptly remit to the Administrative
Agent for the ratable benefit of the Assignors any amounts of
interest on Loans and fees received from the Administrative Agent
which relate to the portion of the Loans assigned to the
Assignees hereunder for periods prior to the Effective Date and
not previously paid by the Assignees to the Assignors. In the
event that any party hereto receives any payment to which any
other party hereto is entitled, then the party receiving such
amount shall promptly remit it to the Administrative Agent on
behalf of the other party hereto. The Administrative Agent shall
promptly remit to each Assignor all amounts received on behalf of
such Assignor. In no event will the Effective Date occur if the
payments required to be made by each of the Assignees to the
Administrative Agent for the account of the Assignors under this
paragraph (b) are not made on the proposed Effective Date.
(c) Representations of the Assignors; Limitation of the
Assignors' Liability. Each of the Assignors (only as to itself)
represents and warrants that with respect to its interest
assigned hereby, it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim created by the respective
Assignor. It is understood and agreed that the assignment and
assumption hereunder are made without recourse to the Assignors
and that the Assignors make no other representation or warranty
of any kind to the Assignees. Neither the Assignors nor any of
their respective, officers, directors, employees, agents or
attorneys shall be responsible for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or
collectability of any Loan Documents, (ii) any representation,
warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness
of the Borrowers or any guarantor, (iv) the performance of or
compliance with any of the terms or provisions of any of the Loan
Documents, (v) inspecting any of the property, books or records
of the Borrowers, or (vi) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans,
Letters of Credit or the Loan Documents.
(d) Representations of the Assignees. Each of the Assignees
(only as to itself) (i) confirms that as of the Effective Date,
it is a Bank under this Agreement and has received a copy of the
Agreement and the other Loan Documents, together with copies of
the financial statements requested by such Assignee and such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into the
Agreement; (ii) agrees that it will, independently and without
reliance upon Chase or the Assignors or any other Bank and based
on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents; and (iii) confirms
that none of the funds, monies, assets or other consideration
being used to make the purchase and assumption hereunder are
"plan assets" as defined under ERISA and that its rights,
benefits and interests in and under the Loan Documents will not
be "plan assets" under ERISA.
(e) Indemnity. Each of the Assignees severally agrees to
indemnify and hold harmless each of the Assignors against any and
all losses, cost and expenses (including, without limitation,
reasonable attorneys' fees) and liabilities incurred by it in
connection with or arising in any manner from such Assignee's non-
performance of the obligations assumed under this Section 9.2.
(f) Subsequent Assignments. After the Effective Date, each
of the Banks shall have the rights pursuant to Section 10.10 of
this Agreement to assign the rights which are assigned to such
Assignee hereunder to any entity or person, provided that, unless
the prior written consent of the Assignors is obtained, the
Assignee is not thereby released from its obligations to the
Assignors hereunder, if any remain unsatisfied, including,
without limitation, its obligations under paragraphs (b) and (e)
hereof.
9.3 Replacement of Revolving Credit Notes. The Borrowers
shall execute and deliver replacement Revolving Credit Notes to
each of the Banks. Each of the Revolving Credit Notes amends and
restates and is issued in substitution for each of the Existing
Notes. On the Effective Date: (a) each of the Existing Banks
shall return its Existing Note to the Borrowers; (b) each of the
Banks shall receive a new Revolving Credit Note in the principal
amount of such Bank's Revolving Credit Commitment; and (c) all
Revolving Credit Loans made pursuant to the Existing Credit
Agreement outstanding on such date shall be deemed to be
Revolving Credit Loans hereunder by the Banks, ratably in
accordance with their respective Revolving Credit Commitments,
shall be evidenced by the Revolving Credit Notes, and shall be
entitled to all of the benefits and bear all of the obligations
of this Agreement.
9.4 Replacement of Swing Line Note. The Borrowers shall
execute and deliver a replacement Swing Line Note to LaSalle,
which amends and restates and is issued in substitution for the
Existing Note. On the Effective Date: (a) LaSalle shall return
its Existing Note to the Borrowers; (b) LaSalle shall receive a
new Swing Line Note in the principal amount of the Swing Line
Commitment; and (c) all Swing Line Loans made pursuant to the
Existing Credit Agreement outstanding on such date shall be
deemed to be Swing Loans hereunder, shall be evidenced by the
Swing Line Note, and shall be entitled to all of the benefits and
bear all of the obligations of this Agreement.
9.5 Security Documents. Each of the Borrowers hereby
acknowledges and agrees that the Obligations, including the
Notes, all Advances and Swing Loans now outstanding or hereafter
made hereunder and all amounts now or hereafter owing to the
Administrative Agent and the Banks under or pursuant to this
Agreement or any other Loan Document and all Rate Hedging
Obligations owing by the Borrowers and/or their Subsidiaries to
the Banks or any Bank, shall be secured under and pursuant to the
Note Pledge Agreement, the Pledge Agreement, the Security
Agreement and each and every other Security Document and that all
references therein to the "Credit Agreement" shall be deemed a
reference to this Agreement and all capitalized terms not
otherwise defined therein shall have the meanings ascribed
thereto in this Agreement.
9.6 Release of Excluded Assets. The Banks irrevocably
authorize and direct the Administrative Agent to release any Lien
granted to or held by the Administrative Agent under any Security
Document upon any Excluded Assets, whether by amendment to such
Security Documents or otherwise. For purposes hereof, "Excluded
Assets" shall mean all right, title and interest of any Pledgor
in any contract or any General Intangible (as defined in the
Security Agreement), or any copyright license or trademark
license arising under any contract to the extent that such
contract prohibits the grant of a security interest in such
contract without the consent of any other party thereto or would
give any other party to such contract the right to terminate its
obligations thereunder (it being understood that the foregoing
shall not be deemed to obligate such Pledgor to obtain such
consents).
ARTICLE X.
MISCELLANEOUS
10.1 Waivers, Amendments; etc. The provisions of this
Agreement, including the closing conditions set forth herein, may
from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to
by the Borrowers and the Required Banks; provided, that no
amendment, waiver or consent shall, unless in writing and signed
by all the Banks, do any of the following: (a) waive any of the
conditions specified in Article III, (b) increase the Commitments
of the Banks or subject the Banks to any additional obligations,
(c) reduce the principal of, or interest on, the Notes or any
fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Notes
or any fees or other amounts payable hereunder, (e) change the
percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action
hereunder, or (f) amend this Section 10.1 or (g) except as
specifically permitted hereby or thereby, release or impair the
security interest in any of the collateral granted to the
Administrative Agent, for the benefit of the Banks, under the
Security Documents or discharge any Subsidiary Guarantor;
provided, further, that no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in
addition to the Banks required above to take such action, affect
the rights or duties of the Administrative Agent under this
Agreement or any Note.
No failure or delay on the part of the Administrative Agent, any
Bank or the holder of any Note in exercising any power or right
under this Agreement or any Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof or
the exercise of any other power or right. No notice to or demand
on the Borrowers in any case shall entitle it to any notice or
demand in similar or other circumstances.
10.2 Payment Dates. Whenever any payment to be made hereunder
by or to the Banks or to the holder of any Note shall otherwise
be due on a day which is not a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension
of time shall be included in computing the fees or interest
payable on such next succeeding Business Day.
10.3 Notices. All communications and notices provided under
this Agreement shall be in writing by mail, telecopy or personal
delivery and if to the Borrowers addressed or delivered to QDI at
its address shown on the signature page hereof or if to the
Administrative Agent or the Banks delivered to it at the address
shown on the signature page hereof, or to any party at such other
address as may be designated by such party in a notice to the
other parties. Any notice, if mailed properly addressed, shall
be deemed given upon the third Business Day after the placing
thereof in the United States mail, postage prepaid; any notice
shall be deemed given when transmitted by telecopier or when
personally delivered.
10.4 Costs and Expenses. The Borrowers agree to pay, or
reimburse, the Administrative Agent for all reasonable expenses
for the preparation of this Agreement, including exhibits, and
the Loan Documents and any amendments hereto or thereto or
consents or waivers hereunder or thereunder as may from time to
time hereafter be required thereby or by the transactions
contemplated hereby, including, but not limited to, the fees and
out-of-pocket expenses of the Administrative Agent, charges and
disbursements of special counsel to the Administrative Agent from
time to time incurred in connection with the preparation and
execution of this Agreement and any document relevant to this
Agreement, including the Loan Documents, any amendments hereto or
thereto, or consents or waivers hereunder or thereunder, and the
consideration of legal questions relevant hereto and thereto.
The Borrowers agree to pay, or reimburse, the Administrative
Agent and each Bank upon demand for all reasonable costs and
expenses (including attorneys', auditors' and accountants' fees
and expenses) arising out of the transactions contemplated by
this Agreement and the Loan Documents, in connection with any
work-out or restructuring of the transactions contemplated hereby
and by the Loan Documents and any collection or enforcement of
the obligations of the Borrowers hereunder or thereunder, whether
or not suit is commenced, including, without limitation,
reasonable attorneys' fees and legal expenses in connection with
any appeal of a lower court's order or judgment. The obligations
of the Borrowers under this Section 10.4 shall survive any
termination of this Agreement.
10.5 Indemnification. In consideration of the execution and
delivery of this Agreement by the Administrative Agent and the
Banks, the Borrowers agree to indemnify, exonerate and hold the
Administrative Agent, each Bank and their respective officers,
directors, employees and agents (the "Indemnified Parties") free
and harmless from and against any and all actions, causes of
action, suits, losses, claims, damages, penalties, judgments,
liabilities and damages, and expenses in connection therewith,
including, without limitation, reasonable attorneys' fees and
disbursements and all expenses of litigation or preparation
therefore whether or not the Administrative Agent or such Bank is
a party thereto (the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out
of, or relating to:
(a) any transaction financed or to be financed in whole or in
part directly or indirectly with proceeds of any Advance or Swing
Loan, or
(b) the execution, delivery, performance or enforcement of
this Agreement, the Loan Documents or any document executed
pursuant hereto or thereto by any of the Indemnified Parties,
except for any such Indemnified Liabilities arising on account of
such Indemnified Party's breach of contract or such Indemnified
Party's gross negligence or willful misconduct in violation of
law or in tort. The provisions of this Section 10.5 shall
survive termination of this Agreement and payment in full of the
Notes.
10.6 Severability. Any provision of this Agreement or the
Notes executed pursuant hereto which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement or the Notes or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.7 Cross-References. References in this Agreement to any
Section or Article are, unless otherwise specified, to such
Section or Article of this Agreement.
10.8 Headings. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
10.9 Governing Law. This Agreement and the Notes shall each
be deemed to be a contract made under and governed by the
internal laws (and not the law of conflicts) of the State of
Indiana.
10.10 Successors and Assigns. (a) This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns except that: (i)
neither of the Borrowers may assign or transfer its rights
hereunder without the prior written consent of each of the Banks;
and (ii) any assignment by a Bank must be made in compliance with
subsection (b) below. Notwithstanding clause (ii) of this
subsection (a), any Bank may at any time, without the consent of
Borrowers or the Administrative Agent, assign all or any portion
of its rights under this Agreement and its Notes to a Federal
Reserve Bank; provided, however, that no such assignment shall
release the transferor Bank from its obligations hereunder.
Except to the extent otherwise required by its context, the word
"Bank" where used in this Agreement shall mean and include any
such assignee and such assignee shall be bound by and have the
benefits of this Agreement the same as if such holder had been a
signatory hereto.
(b) Any Bank may, in the ordinary course of its business and
in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or a portion of
its Revolving Credit Commitments, all Advances owing to it, all
of its participation interests in existing Letters of Credit and
its obligation to participate in additional Letters of Credit
hereunder and its rights and obligations under this Agreement in
respect thereof in accordance with the provisions of this
subsection (b). Each assignment shall be of a constant, and not
a varying, ratable percentage of the assigning Bank's rights and
obligations under this Agreement. Such assignment shall be
substantially in the form of Exhibit E hereto and shall not be
permitted hereunder unless (i) such assignment is for all of such
Bank's Revolving Credit Commitment and the rights and obligations
under this Agreement related thereto or (ii) the amount of the
Revolving Credit Commitment assigned by the assigning Bank
pursuant to each assignment shall be at least $10,000,000 and the
amount of the Revolving Credit Commitment retained by the
assigning Bank shall be at least $10,000,000. The consent of the
Administrative Agent (which consent shall not be unreasonably
withheld or delayed) shall be required prior to an assignment
becoming effective with respect to a transferee which is not a
Bank or an Affiliate thereof if at the time of such assignment no
Event of Default shall have occurred and is continuing. In
addition, the consent of the Borrowers shall be required (which
consent shall not be unreasonably withheld or delayed) prior to
an assignment becoming effective if such assignment is at a time
when no Default or Event of Default has occurred and is
continuing. Upon (i) delivery to the Administrative Agent of an
executed Assignment Agreement, together with any required
consents and (ii) payment of a $2,000 fee to the Administrative
Agent for processing such assignment, such assignment shall
become effective on the effective date specified in such
Assignment Agreement. On and after the effective date of such
assignment, such transferee, if not already a Bank, shall for all
purposes be a Bank party to this Agreement and any other Loan
Documents executed by the Banks and shall have all the rights and
obligations of a Bank under the Loan Documents, to the same
extent as if it were an original party hereto, and no further
consent or action by the Borrowers, the Banks or the
Administrative Agent shall be required to release the transferor
Bank with respect to the percentage of the Revolving Credit
Commitment, Advances and Letter of Credit participations assigned
to such transferee Bank. Upon the consummation of any assignment
pursuant to this Section 10.10, the Administrative Agent and the
Borrowers shall make appropriate arrangements so that replacement
Revolving Credit Notes are issued to such transferor Bank and new
Revolving Credit Notes or, as appropriate, replacement Revolving
Credit Notes, are issued to such transferee Bank, in each case in
principal amounts reflecting their Revolving Credit Commitment,
as adjusted pursuant to such assignment.
(c) Each Bank may, without the consent of the Borrowers or
the Administrative Agent, sell participations to one or more
banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of
its Commitment, the Loans owing to it, its interest as an issuer
with respect to Letters of Credit, its participations in Letters
of Credit and its obligation to participate in additional Letters
of Credit hereunder); provided, however, that (i) such Bank's
obligations under this Agreement shall remain unchanged,
(ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the
participating banks or other entities shall be entitled to the
benefit of the cost protection provisions contained in
Section 2.3 to the extent of the Bank selling such participation
and the Borrowers' aggregate obligations with respect to Section
2.3 shall not be increased by reason of such participation, and
(iv) the Borrowers, the Administrative Agent and the other Banks
shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this
Agreement, and such Bank shall retain the sole right (and shall
not limit its rights) to enforce the obligations of the Borrowers
relating to the Loans and to approve any amendment, modification
or waiver of any provision of this Agreement (other than
amendments, modifications or waivers with respect to any fees
payable hereunder (to the extent such participants are entitled
to such fees) or the amount of principal of or the rate at which
interest is payable on the Loans, or the dates fixed for payments
of principal of or interest on the Loans).
10.11 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
10.12 Joint and Several Liability. The obligations of the
Borrowers to make payment of the Obligations hereunder and under
the Notes are joint and several. The Administrative Agent may
proceed directly against either or both of the Borrowers to
obtain performance of and to collect and recover the full amount,
or any portion, of the Obligations, without first proceeding
against the other Borrower or any other Person, or against any
security or collateral for the Obligations.
10.13 Financial Information. Each Borrower assumes
responsibility for keeping itself informed of the financial
condition of the other Borrower and any and all endorsers and/or
other guarantors of all or any part of the Obligations, and of
all other circumstances bearing upon the risk of nonpayment of
the Obligations, or any part thereof, that diligent inquiry would
reveal, and such Borrower agrees that the Administrative Agent
and the Banks shall have no duty to advise such Borrower of
information known to them regarding such condition or any such
circumstances.
10.14 Consent to Jurisdiction. EACH OF THE BORROWERS HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY INDIANA STATE OR
FEDERAL COURT SITTING IN SOUTH BEND, INDIANA, OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
NOTES OR ANY OTHER LOAN DOCUMENT AND EACH OF THE BORROWERS HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR
FEDERAL COURT. EACH OF THE BORROWERS HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. EACH OF THE BORROWERS IRREVOCABLY CONSENTS TO THE
SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING BY UNITED STATES CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, OF COPIES OF SUCH PROCESS TO THE BORROWER'S ADDRESS
SPECIFIED IN SECTION 10.3. EACH OF THE BORROWERS AGREES THAT A
JUDGMENT, FINAL BY APPEAL OR EXPIRATION OF TIME TO APPEAL WITHOUT
AN APPEAL BEING TAKEN, 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 SECTION 10.14 SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
OR ANY BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWERS OR EITHER OF THEM, OR THEIR RESPECTIVE PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.
10.15 Waiver of Jury Trial. EACH OF THE BORROWERS, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY NOTE, OR ANY OTHER INSTRUMENT
OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
QUALITY DINING, INC.
Address: 4220 Edison Lakes Parkway
Mishawaka, Indiana 46545
Attention: John C. Firth
Executive Vice President,
General Counsel and Secretary
By: _________________________________
John C. Firth
Executive Vice President, General
Counsel and Secretary
GAGHC, INC.
By: _________________________________
John C. Firth
Vice President
JP MORGAN CHASE BANK (formerly
Chase Bank of Texas National Association),
in its individual capacity and as
Administrative Agent
Address: 712 Main Street
Houston, TX 77002
Attention: Michael Costello
By: _________________________________
Name: _________________________
Title: _________________________
BANK OF AMERICA NATIONAL
ASSOCIATION (formerly, NationsBank,
N.A.)
Address: 600 Peachtree Street, NE, 19th
Floor
Atlanta, GA 30308
Attention: Daniel Holland
By: _________________________________
Name: _________________________
Title: _________________________
LASALLE BANK N.A.
Address: 120 S. LaSalle Street
Chicago, IL 60603
Attention: David Knapp
By: _________________________________
Name: _________________________
Title: _________________________
NATIONAL CITY BANK OF INDIANA
Address: 101 N. Main Street
Elkhart, IN 46516
Attention: Gary Graham
By: _________________________________
Name: _________________________
Title: _________________________
THE NORTHERN TRUST COMPANY
Address: 50 S. LaSalle Street, B-2
Chicago, IL 60675
Attention: Art Fogel
By: _________________________________
Name: _________________________
Title: _________________________
Executed solely for the purpose of
acknowledging and agreeing to the assignment
of the Revolving Credit Commitments and
Revolving Credit Loans under the Existing
Credit Agreement pursuant to Section 9.2
hereof:
BANK ONE, INDIANA, N.A. (formerly
known as NBD Bank, N.A.)
Address: BankOne Plaza, 17th Floor
Chicago, IL 60670
Attention: Henry Howe
By: _________________________________
Name: _________________________
Title: _________________________
SUNTRUST BANK (formerly known as
SunTrust Bank, Central Florida, N.A.)
Address: c/o SunTrust Banks, Inc.
303 Peachtree Street NE
MC 1922
Atlanta, GA 30308
Attention: Vipul H. Patel
By: _________________________________
Name: _________________________
Title: _________________________
SCHEDULE I
PART A
COMMITMENTS UNDER EXISTING CREDIT AGREEMENT
Bank Commitment Percentage
- ----------------------------------------------------------------
JP Morgan Chase Bank $15,200,000.00 20.00%
(as successor to Chase Bank of
Texas National Association)
Bank One, Indiana, NA $14,250,000.00 18.75%
(formerly known as NBDBank, N.A.)
Bank of America, National $14,250,000.00 18.75%
Association
(formerly NationsBank, N.A.)
LaSalle Bank N.A. $12,669,200.00 16.67%
SunTrust Bank $10,130,800.00 13.33%
(formerly known as SunTrust Bank,
Central Florida, N.A.)
The Northern Trust Company $ 9,500,000.00 12.50%
PART B
COMMITMENTS AS OF EFFECTIVE DATE
Revolving Swing Revolving
Credit Line Credit
Bank Commitment Commitment Percentage
Percentage
- ----------------------------------------------------------------
JP Morgan $15,000,000 __ 26.31579% 25.00000%
Chase Bank
Bank of $15,000,000 __ 26.31579% 25.00000%
America,
National
Association
National $10,000,000 __ 17.54386% 16.66667%
City Bank
The Northern $10,000,000 __ 17.54386% 16.66667%
Trust Company
LaSalle Bank $ 7,000,000 $3,000,000 12.28070% 16.66667%
N.A.
Bank One, -0- __ -0- -0-
Indiana, NA
Sun Trust Bank -0- __ -0- -0-
TOTAL $57,000,000 $3,000,000
ANNEX I
LIST OF JURISDICTIONS IN WHICH THE BORROWER IS QUALIFIED TO DO
BUSINESS
See attached
ANNEX II
LIST OF SUBSIDIARIES; JURISDICTION OF INCORPORATION AND STOCK
OWNERSHIP
See attached
ANNEX III
INDEBTEDNESS; LIENS
See attached
ANNEX IV
INVESTMENTS
See attached
ANNEX V
DESCRIPTION OF REAL PROPERTY
See attached
Exhibit 4-P
INTERCREDITOR AGREEMENT
TABLE OF CONTENTS
1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
FRANCHISEE AND GUARANTORS
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BKC
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LENDER
4. DEFAULT UNDER THE LOAN AGREEMENTS
4.1 Notice to BKC of Default
4.2 Notice to BKC of Intent to Foreclose
5. REMEDIES UNDER LOAN DOCUMENTS
5.1 Limits on Security Interest and Collateral
Assignment
(a) Security Interest
(b) Collateral Assignment
5.2 Review Meeting
5.3 Pre-Conditions to Exercise of Remedies
(a) Control and Dominion
(b) Right of First Refusal; Right of Approval
(c) Payment of Amounts Past Due to BKC
(d) Payment of Other Amounts Due to BKC
5.4 Management of Restaurants
(a) BKC Management
(b) Continued Operation by Franchisees or Another
BKC Licensee
(c) Election
5.5 Disposition of Restaurants
(a) Sale Within Twelve Months
(b) Terms of Sale; Bundling of Collateral
(c) BKC Approval of Buyer
(d) Consent of New BKL Landlord
(e) No Other Sale
(f) Termination of Affected Franchise Agreements
(g) Lender's Rights
6. BKL LEASES
6.1 Assignment
7. DEFAULT UNDER FRANCHISE AGREEMENTS AND BKL LEASES
7.1 Notice to Lender of Default
7.2 Lender's Opportunity to Cure Monetary Default
7.3 Lender's Opportunity to Cure Non-Monetary Default
7.4 BKC Right to Close
8. ASSIGNMENT
9. BREACH OF CONTRACT; EQUITABLE REMEDIES
10. TERM OF AGREEMENT
11. CONSENT AND ACKNOWLEDGMENT OF COMMERCIALLY REASONABLE
TERMS
11.1 Acknowledgments
11.2 Consent to Terms of Sale
12. GENERAL RELEASE
13. RIGHT OF AUDIT
14. CAPTION HEADINGS
15. NOTICES
16. CHOICE OF LAW; JURISDICTION AND VENUE
17. NO AMENDMENTS
17.1 This Agreement
17.2 Franchise Agreements
18. INTEGRATION
19. BINDING EFFECT
20. TITLES
21. SEVERABILITY
22. CONSTRUCTION OF AGREEMENT
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT ("Agreement") dated as of the 15th
day of October, 2001, by and among BURGER KING CORPORATION
("BKC"), the individual, individuals, entity and/or entities set
forth on Schedule A hereto (individually, a "Franchisee" and
collectively, the "Franchisees"), and the individual,
individuals, entity and/or entities set forth on Schedule B
hereto ("Guarantor") and JP Morgan Chase Bank, as Administrative
Agent for the Banks, as defined in the Third Amended and Restated
Revolving Credit Agreement (the "Lender").
WHEREAS, certain Burger KingO restaurants identified by BKC
store number and address on Schedule C hereto (individually, a
"Restaurant" and collectively, the "Restaurants") are operated by
the Franchisees pursuant to franchise agreements (individually, a
"Franchise Agreement" and collectively, the "Franchise
Agreements") issued by BKC;
WHEREAS, certain of the Restaurants are located on real
property (individually, a "BKL Property" and collectively, the
"BKL Properties") currently leased to the Franchisees pursuant to
certain lease/sublease agreements with BKC, as lessor
(individually, a "BKL Lease" and collectively, the "BKL Leases");
WHEREAS, the Guarantor is the indirect owner of all of the
outstanding equity interests in the Franchisee (the "Equity
Interests");
WHEREAS, the Guarantor has guaranteed payment and
performance of all of the Franchisees' debts and obligations to
BKC pursuant to certain agreements of guaranty (the "Guaranties")
as detailed on Schedule C hereto;
WHEREAS, the Franchisee and Guarantor have previously
entered into a loan agreement and certain related documents
(collectively, the "Loan Documents"), including one or more
promissory notes payable to the Lender in the original principal
amount of Seventy-six million and no/100 Dollars ($76,000,000);
WHEREAS, the Franchisee and Guarantor have requested that
BKC consent to, among other things, a security interest in the
Franchise Agreements, all as provided in the Loan Documents; and
WHEREAS, BKC has agreed to consent to this request subject
to and in consideration of the covenants, terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the parties hereto agree as follows:
1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
FRANCHISEE AND GUARANTORS.
1.1 Each Franchisee and Guarantor represents and
warrants that (i) each of the Franchise Agreements
and BKL Leases are in full force and effect;
(ii) to the best of their knowledge, there are no
material defaults by BKC under any of the
Franchise Agreements or BKL Leases and no event
has occurred which, with the passage of time or
the giving of notice, would constitute a material
default by BKC under any of the Franchise
Agreements or BKL Leases; (iii) they will continue
to perform all obligations under those agreements;
and (iv) the obligations of the Guarantors under
the Guaranties are unaffected by this Agreement.
1.2 Except as expressly provided herein, each Franchisee
represents and warrants to BKC that it shall
continue to comply with the terms and conditions
of the Franchise Agreements, BKL Leases, and any
other agreement with BKC, including the limitation
that it shall not sell, assign, pledge, encumber,
or otherwise transfer any interest in such
agreements.
1.3 Each Guarantor represents and warrants that it shall
not sell, assign, pledge, encumber or otherwise
transfer any legal or beneficial interest in its
Equity Interests in the Franchisees in violation
of the terms of the Franchise Agreements or any
other agreement with BKC.
1.4 In the event that any Guarantor is an entity (an
"Entity") whose equity is wholly or partially
owned by another Guarantor (an "Owner"), each such
Owner hereby agrees and reaffirms that he shall
not sell, assign, pledge, encumber or otherwise
transfer any legal or beneficial interest in the
Entity in violation of the terms of the Franchise
Agreements or any other agreement with BKC.
1.5 Franchisees and Guarantors each acknowledge and
agree that this Agreement and the consent
contained herein shall not apply to the Equity
Interests or BKL Leases. Franchisee and Guarantor
each warrant and represent to BKC that no interest
of the Guarantor in the Equity Interests or BKL
Leases shall be collateralized, pledged or
otherwise subjected to the terms and conditions of
the Loan Documents.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BKC BKC
hereby represents and warrants as follows:
2.1 That the guaranteed minimum annual rent as defined
in the BKL Leases are paid in full as of the date
hereof.
2.2 That the royalty and advertising charges as defined
under the Franchise Agreements that have
previously come due are paid in full as of the
date hereof.
2.3 Within the thirty (30) days prior to the date of
this Agreement, BKC has not sent Franchisees a
written notice of default under the Franchise
Agreements or BKL Leases.
2.4 BKC makes no warranties or representations
except as expressly set forth above. Without
limiting the foregoing, BKC has made no
investigation as to any defaults or breaches of
the Franchise Agreements or BKL Leases nor
inspection of any of the Restaurants except as
expressly set forth above.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LENDER.
Lender hereby represents and warrants as follows:
3.1 Lender's rights under the Loan Documents to realize
on the collateral described in Section 5 of this
Agreement shall be and are hereby expressly made,
subject to the covenants, conditions and
restrictions contained in this Agreement.
3.2 Except as expressly provided herein, Lender has and
will acquire no right, title, security interest,
pledge or other right in, to or against any BKL
Lease, any BKL Property, or the Equity Interests
by virtue of the Loan Documents, this Agreement,
or any other agreement.
4. DEFAULT UNDER THE LOAN DOCUMENTS
4.1 Notice to BKC of Default. In the event Lender
delivers a notice of default or demand for payment
under any of the Loan Documents, Lender shall also
give simultaneous written notice of such default
or demand to BKC (a "Loan Default Notice"). The
Loan Default Notice shall specify the exact
default(s) and any applicable grace period. In
the event that such default(s) are cured within
any applicable grace period, Lender shall also
deliver written notice to BKC that the default(s)
are cured.
4.2 Notice to BKC of Intent to Foreclose. In the event
Franchisees fail to timely and properly cure the
default(s) set forth in the Loan Default Notice,
Lender shall deliver fourteen (14) days prior
written notice to BKC and the Franchisees as a
condition precedent to the exercise of its rights
and remedies under the Loan Documents and this
Agreement (the "Foreclosure Notice").
5. REMEDIES UNDER LOAN DOCUMENTS. The Lender's rights
and remedies under the Loan Documents shall be limited
in the following manner.
5.1 Limits on Security Interest and Collateral
Assignment.
(a) Security Interest. Notwithstanding
anything in the Loan Documents to the
contrary, the parties to this Agreement agree
that: (i) no security interest granted to
the Lender shall apply to the Equity
Interests, and (ii) any security interest in
the Franchise Agreements shall be limited to
a security interest in the proceeds of a
private sale of the Franchisees' rights under
the Franchise Agreements pursuant to the
terms and conditions of Section 9-504 of the
Uniform Commercial Code as in effect from
time to time in the State in which the
individual Restaurant is located (the "UCC"),
and the Lender shall have no right to conduct
a public sale or retain the Franchisees'
rights under any Franchise Agreement in
satisfaction of the loan as contemplated by
Section 9-505 of the UCC.
(b) Collateral Assignment. Notwithstanding
anything in the Loan Documents to the
contrary, the parties to this Agreement agree
that the Franchisees' tenancy rights under
any BKL Lease may not be collaterally
assigned to the Lender.
5.2 Review Meeting. Upon receipt by BKC of a
Foreclosure Notice, Lender and BKC shall exercise
their best efforts to meet within fourteen (14)
days at a mutually agreed site, for the purpose of
reviewing the Restaurants and the desirability of
the application of this Agreement to each such
Restaurant (the "Review Meeting"). At the time of
the Review Meeting, upon the mutual agreement of
BKC and Lender, any Restaurant may be excluded
from the provisions of this Agreement and,
thereafter, the Lender shall immediately release
its security interest in the Franchise Agreement
for each such Restaurant. Thereafter, BKC shall
be free to exercise its rights and remedies under
the Franchise Agreement and BKL Lease, if any, for
each such Restaurant as provided therein and the
Lender shall be free to exercise its rights
against any remaining collateral at the relevant
Restaurant site without reference to this
Agreement. All Restaurants which shall continue
to be subject to the provisions of this Agreement
after the Review Meeting shall be referred to
hereinafter individually as an "Affected
Restaurant" and collectively as the "Affected
Restaurants." The Franchise Agreements relating
to such Affected Restaurants shall be referred to
hereinafter individually as an "Affected Franchise
Agreement" and collectively as the "Affected
Franchise Agreements." The BKL Leases relating to
such Affected Restaurants shall be referred to
hereinafter individually as an "Affected BKL
Lease" and collectively as the "Affected BKL
Leases." If the Review Meeting does not take
place, then all of the Restaurants shall be deemed
Affected Restaurants.
5.3 Pre-Conditions to Exercise of Remedies. The
exercise by the Lender of its right to force an
assignment or sale of the Franchisees' rights and
obligations under the Affected Franchise
Agreements shall be subject to the following terms
and conditions precedent:
(a) Control and Dominion. The Lender must
take possession of and acquire control and
dominion over substantially all of the
tangible real and personal property of the
Franchisees delivered as collateral under the
Loan Documents, whether by exercise of the
Lender's rights under the Loan Documents or
by agreement with the Franchisees.
(b) Right of First Refusal; Right of Approval.
Any transfer of the Affected Franchise
Agreements must be made subject to and in
accordance with BKC's rights under the
Affected Franchise Agreements, including, but
not limited to, (i) BKC's right of first
refusal to purchase any or all of the
Affected Restaurants and the real property
and furniture, fixtures and equipment
associated therewith and located therein, and
(ii) BKC's right to approve the sale,
transfer and proposed transferee of the
Affected Franchise Agreements and Affected
Restaurants.
(c) Payment of Amounts Past Due to BKC.
Lender's timely payment to BKC pursuant to
Section 7.2 hereof of all sums past due and
owing to BKC under each of the Affected
Franchise Agreements and any Affected BKL
Lease covering the premises of any Affected
Restaurants, as well as those past due sums
related to products or supplies sold by BKC
for use in the Affected Restaurants,
including without limitation, any pre- and
post-petition amounts due from any Franchisee
who is the subject of a proceeding under the
United States Bankruptcy Code or any similar
law affecting the rights of creditors
generally.
(d) Payment of Other Amounts Due to BKC.
Lender's timely payment to BKC when due of
(i) all sums which become due to BKC under
the Affected Franchise Agreements and
Affected BKL Leases in connection with
operation of the Affected Restaurants during
the term of this Agreement, and (ii) all sums
which become due to BKC in connection with
products or supplies sold by BKC during the
term of this Agreement for use in the
Affected Restaurants. Without limiting the
foregoing, it is expressly understood that
Lender must pay all post-petition amounts due
from a Franchisee which is the subject of a
proceeding under the United States Bankruptcy
Code, or any similar law affecting the rights
of creditors generally, when due under the
terms of the Affected Franchise Agreement or
Affected BKL Lease, without reference to any
right of such Franchisee to defer such
payment pending assumption of those
agreements or for any other reason.
5.4 Management of Restaurants. After receipt by
BKC of a Foreclosure Notice and the satisfaction
by the Lender of the requirements of
Section 5.3(a) above (the "Realization Date"), the
Affected Restaurants shall be managed and operated
in the following manner:
(a) BKC Management. BKC shall have the
initial right, but not the obligation, to
assume the operation of some or all of the
Affected Restaurants under a management
agreement (a "Management Agreement") in form
and content reasonably acceptable to counsel
for BKC and Lender for a period of time up to
(i) the date on which any such Affected
Restaurant is sold by Lender to a third party
or to BKC pursuant to this Agreement,
(ii) the expiration date of the Affected
Franchise Agreements and Affected BKL Leases,
or (iii) expiration of the Sale Period (as
defined below), whichever is earlier (the
"Management Period"). In return for
operating the Affected Restaurants, the
Management Agreement shall include, at a
minimum and in addition to such other terms
as BKC may require pursuant to the preceding
sentence, all of the following:
(1) A management fee in an amount equal
to a percentage of monthly Gross Sales
(as defined in the Franchise Agreements)
generated at each Affected Restaurant
operated by BKC, which percentage figure
shall be the greater of ten percent
(10%) or the then current percentage
rate charged for comparable management
services in a similar factual situation,
if any (factors to be considered in
determining the applicable percentage
rate to be charged are the number,
location and size of the Restaurants to
be operated by BKC);
(2) The option of expending two and one-
half percent (2.5%) of monthly Gross
Sales generated at each such Restaurant
for local marketing, in addition to the
four percent (4%) advertising
contribution to be paid under the
Affected Franchise Agreement for each
Affected Restaurant;
(3) The option of expending, out of the
Gross Sales for each Affected
Restaurant, up to $25,000.00 per year
for (i) repairs and maintenance and/or
(ii) alterations necessary to conform
the Affected Restaurant to the then
current image for Burger KingO
restaurants; and
(4) The right to replace or add
additional signs and/or equipment to
each Affected Restaurant as it becomes
necessary to conform with menu or
operational changes required by BKC to
be implemented at such time. The cost
for any such replacement or additional
equipment will be paid out of the Gross
Sales generated at all of the Affected
Restaurants.
(b) Continued Operation By Franchisees or
Another BKC Licensee. In the event that BKC
elects not to manage the Affected Restaurants
as provided above, BKC shall, in its sole
discretion, either: (a) approve Franchisees
to continue to operate any or all of the
Affected Restaurants during the Management
Period or (b) approve one or more multi-unit
BKC licensees reasonably acceptable to BKC
and Lender to supervise the operation of any
or all of the Affected Restaurants during
such period, pursuant to a management
agreement reasonably acceptable to such
licensee, BKC and Lender. BKC will, as a
courtesy only, assist the Lender in
identifying any such BKC licensees, but shall
owe no legal obligation or duty to the Lender
in this regard and shall have no liability to
the Lender for any failure to so assist the
Lender. If Franchisee and/or an approved BKC
licensee(s), if any, are approved to operate
the Affected Restaurants during such period,
such Restaurants shall be operated pursuant
to the terms of the corresponding Affected
Franchise Agreements.
(c) Election. BKC shall exercise its option
to operate the Affected Restaurants pursuant
to Section 5.4(a) above or designate the
Franchisee or another entity to operate the
Affected Restaurants pursuant to
Section 5.4(b) above, by delivering written
notice thereof to the Lender within fourteen
(14) days of BKC's receipt of a Foreclosure
Notice (the "Management Election Notice").
If BKC does not deliver a Management Election
Notice, BKC shall be deemed to have elected
to have the Franchisees continue to operate
the Affected Restaurants pursuant to
Section 5.4(b).
5.5 Disposition of Restaurants. Any sale, transfer
or assignment of the Affected Franchise Agreements
or Affected BKL Leases by the Lender shall be
subject to the provisions of Section 5.3 and the
following conditions.
(a) Sale Within Twelve Months. At any time
after its receipt of the Foreclosure Notice,
BKC may deliver written notice (the "Notice
to Sell") to the Lender dictating that the
Lender shall have twelve (12) months from
receipt of the Notice to Sell to sell and
transfer by private sale one or more of the
Affected Restaurants and Affected Franchise
Agreements, together with all of the real and
personal property associated therewith,
pursuant to the terms of this Agreement and
the Affected Franchise Agreement. Provided,
however, that if Lender is utilizing its best
efforts to lift or remove any stay or
judicial or statutory impediment imposed on
the sale of an Affected Restaurant, the
twelve (12) month period shall not commence,
or if it has commenced it shall be tolled,
during any period when Lender is prevented
from selling such Affected Restaurant by
reason of the filing by Franchisees of a
petition for relief under the United States
Bankruptcy Code or by reason of any federal,
state or local law or any other order of a
court of competent jurisdiction preventing
the sale of any such Restaurant. This twelve
(12) month period, together with any
extension (as provided above), is herein
referred to as the "Sale Period."
(b) Terms of Sale; Bundling of Collateral.
During the Sale Period, the Lender shall
"bundle" the real property interest (whether
a fee or leasehold) and the personal property
used in connection with the operation of each
Affected Restaurant, together with the
Affected Franchise Agreement, in order to
require that any proposed asset sale by
Lender of such Affected Restaurant include
the Affected Franchise Agreements and real
property interest, furniture, fixtures,
equipment and other personalty necessary to
maintain the operational integrity of each
Affected Restaurant. While each Affected
Restaurant must be sold in this manner, the
Lender is free to sell each Affected
Restaurant separately or in groups, subject
only to its obligation (as limited by the
provisions of Section 11 below) to act in a
commercially reasonable manner.
(c) BKC Approval of Buyer. Any purchaser(s)
must be acceptable to BKC and satisfy BKC's
then current standards for receiving approval
to acquire an interest in a Burger KingO
restaurant. Lender, Franchisee, and
Guarantor acknowledge, agree, and understand
that (i) the requirements defining acceptable
purchasers and for approving prospective BKC
franchisees or the requests for existing
franchisees to develop, operate or acquire an
interest in additional Burger KingO
restaurants are subject to change by BKC, in
its sole discretion, and (ii) any disapproval
by BKC due to the failure of any prospective
purchaser or franchisee to meet such
requirements shall be deemed a reasonable
action by BKC unless BKC has applied its
criteria in a bad faith effort to harm the
financial interests of the Lender. BKC
agrees to cooperate with Lender in the
latter's efforts to find an acceptable
purchaser(s) for the Affected Restaurants,
but has no obligation to locate buyer(s).
Lender agrees to sell or assign the Affected
Restaurants and Affected Franchise Agreements
by private sale only, and not by public sale
or auction.
(d) Consent of New BKL Landlord. In the event
that BKC sells, transfers, assigns,
mortgages, or pledges its interest in a BKL
Property or BKL Lease to a third party (a
"New Landlord") as provided in Section 6.1(c)
below, Lender shall, in addition to
satisfying all of the other conditions set
forth in this Section 5.5, obtain the prior
written consent (a "Landlord Consent") of the
New Landlord before transferring the
Franchisees' rights under an Affected
Franchise Agreement to a third party.
(e) No Other Sale. Any transfer, sale,
conveyance or assignment made in violation of
the terms of Section 5.5 above shall
constitute a material breach of this
Agreement by Lender and BKC shall be entitled
to any and all remedies permitted by law or
equity, including injunctive relief to enjoin
any such unauthorized sale, transfer,
conveyance or assignment.
(f) Termination of Affected Franchise
Agreements and BKL Leases.
(i)Subject to the provisions of Sections
6.1(c) and 7 of this Agreement, BKC
agrees to not terminate any of the
Affected Franchise Agreements or
Affected BKL Leases during the Sale
Period if Lender complies with the terms
and conditions of this Agreement and
each and every one of the Affected
Franchise Agreements and Affected BKL
Leases, including, but not limited to,
operational standards and all payment
obligations for royalties, advertising
and rent.
(ii)In the event the Affected Restaurants and
related Affected Franchise Agreements and
Affected BKL Leases are not sold and
transferred within the Sale Period applicable
to each of them, BKC shall have the
subsequent right to terminate the unsold and
untransferred Affected Franchise Agreements
and Affected BKL Leases upon delivery of
thirty (30) days prior written notice to
Lender and the Franchisees.
(iii)In the event that the Lender or the
Franchisees fail to meet any other condition
or obligation under this Agreement or any of
the Affected Franchise Agreements or Affected
BKL Leases, including without limitation the
obligation to pay when due all amounts
payable under the Affected Franchise
Agreements and Affected BKL Leases as a group
for the full term of this Agreement, BKC
shall have the subsequent right to terminate
any then unsold and untransferred Affected
Franchise Agreement and Affected BKL Lease
upon delivery of thirty (30) days prior
written notice to Lender and the Franchisees.
(iv)Upon termination of any or all of the
Affected Franchise Agreements or Affected BKL
Leases, (x) Lender's security interest in the
relevant Affected Franchise Agreement shall
automatically terminate and be of no further
force and effect, (y) Lender shall execute
and file relevant termination statements as
required by law or requested by the
Franchisees or BKC, and (z) Lender shall
comply with all post-termination covenants
contained in such Franchise Agreements and
BKL Leases, including, but not limited to,
making at its own expense such removals or
changes in signs and the Restaurant buildings
and premises as BKC shall request so as to
effectively distinguish the Restaurant
buildings and premises from their former
appearance and from any other Burger KingO
restaurant. It is expressly understood,
however, that nothing in this Agreement shall
obligate the Lender to compensate BKC for
amounts due to BKC which have not yet accrued
at the time of termination.
(g) Lender's Rights. Upon termination of the
Lender's security interest in any of the
Franchise
Agreements, whether pursuant to the
provisions of
Sections 5.2 or 5.5(f) hereof, or otherwise,
the
Lender shall be free to exercise its rights
against its remaining collateral relating to
the
corresponding Restaurant pursuant to the
terms of
the Loan Documents and without reference to
this
Agreement.
6. BKL LEASES
6.1 Assignment. For so long as BKC remains the owner or
lessee of the BKL Property subject to any BKL Lease,
BKC agrees as follows:
(a) In the event that the Lender (i) acquires
control and dominion over the tangible personal
property used in connection with the operation of
the Restaurant which is subject to the BKL Lease,
(ii) such Restaurant is designated as an Affected
Restaurant, (iii) all obligations due under the
BKL Lease are paid and performed in full when due,
and (iv) the Lender meets all of its obligations
under Section 5.3 hereof, then BKC agrees that
the manager appointed pursuant to the terms of
Section 5.4 shall have the right to occupy the BKL
Property on the same terms and conditions as the
Franchisees, and that BKC shall not terminate the
BKL Lease until expiration of the relevant Sale
Period.
(b) In the event that (i) all of the conditions set
forth in Section 6.1(a) are met and (ii) BKC
approves an assignment of the Affected Franchise
Agreement relating to the Affected Restaurant
operated on the BKL Property, then BKC shall also
consent to the assignment of the Affected BKL
Lease to the same assignee.
(c) Notwithstanding anything in this Agreement to
the contrary, it is expressly understood that BKC
remains free to sell any BKL Property and assign
its rights under any BKL Lease at any time, and
the terms of this Agreement and this Section 6
shall not apply to, restrict, or obligate any such
buyer or assignee.
7. DEFAULT UNDER FRANCHISE AGREEMENTS AND BKL LEASES
7.1 Notice to Lender of Default. In the event BKC
delivers a notice of default under any of the Franchise
Agreements or BKL Leases (a "Contract Default Notice"),
BKC shall simultaneously deliver a copy of the Contract
Default Notice to Lender. In the event the default(s)
set forth in the Contract Default Notice are subject to
an applicable grace period, BKC shall also deliver
notice in writing to Lender that such default(s) have
or have not been cured within such cure period (the
"Cure Notice").
7.2 Lender's Opportunity to Cure Monetary Default.
(a) In the event Franchisees fail to cure a
monetary default under any Franchise Agreement or
BKL Lease (a "Payment Default") within any
applicable grace period, BKC agrees that Lender
shall have the right to cure the Payment Default
within five (5) calendar days after Lender
receives its copy of the Cure Notice. In the
event Lender elects not to cure any such Payment
Default, then BKC may immediately terminate the
related Franchise Agreement and BKL Lease, if any,
without further notice or opportunity to cure and
pursue any and all remedies permitted thereunder
and by law.
(b) Notwithstanding the foregoing, if (i) Lender
should exercise the right to cure Payment Defaults
two (2) consecutive calendar months, or to cure
Payment Defaults in an aggregate of six (6)
calendar months, and (ii) Lender fails to
contemporaneously after such last default
contemplated above deliver a Foreclosure Notice
and file and diligently pursue an action to
foreclose on assets pledged to it under the Loan
Documents, then BKC may terminate the related
Franchise Agreement and BKL Lease, if any.
7.3 Lender's Opportunity To Cure Non-Monetary Default.
(a) (i) In the event Franchisees fail to cure a non-
monetary default under any Franchise Agreement or
BKL Lease (a "Non-Monetary Default") within any
applicable cure period, Lender shall have thirty
(30) days after receipt of the Cure Notice to
deliver a Foreclosure Notice. This thirty (30)
day period is hereinafter be referred to as the
"Election Period."
(ii) Notwithstanding the foregoing, if (X) Lender
should exercise the right to cure Non-Monetary
Defaults three (3) times within an eighteen (18)
consecutive month period or to cure Payment
Defaults in an aggregate of six (6) calendar
months and (Y) Lender fails to contemporaneously
after such last default contemplated above deliver
a Foreclosure Notice and file and diligently
pursue an action to foreclose on assets pledged to
it under the Loan Documents, then BKC may
terminate the related Franchise Agreement, if any.
(b) In the event of the occurrence of a non-
curable, Non-Monetary Default, the Election Period
shall commence on Lender's receipt of the Contract
Default Notice.
(c) Franchisees, Guarantors, and Lender agree that
during the Election Period BKC shall have the
right, but not the obligation, in its sole
discretion, to: (i) take such necessary actions to
abate and cure the Non-Monetary Default(s) under
the Franchise Agreements which actions shall
include, but not be limited to, temporarily
closing any of the Restaurants affected by such
default(s) due to health reasons or other
emergencies (as provided in Section 7.4 below
herein); removing from such Restaurants those
products, signs, equipment or other materials
which are not approved by BKC; and taking such
other actions which BKC deems necessary in order
to mitigate damage to BKC and its trademarks
and/or (ii) supervise the operation of such
Restaurants pursuant to a temporary management
agreement which shall include the terms set forth
in Section 5.4(a) herein. Franchisees, Guarantor,
and Lender acknowledge and agree that monetary
damages will be inadequate to remedy the damage
caused to BKC in the event a material Non-Monetary
Default under any of the Franchise Agreements
remains uncured. Accordingly, BKC shall be
entitled to injunctive relief, including, but not
limited to, a temporary restraining order, issued
by a court of competent jurisdiction in order to
enforce its rights specified in this
Section 7.3(c).
(d) In the event Lender fails to notify BKC of its
election within the Election Period pursuant to
said Section 7.3(a) or fails to diligently pursue
its remedies against the relevant Affected
Franchise Agreement or Affected BKL Lease, then
BKC may immediately terminate the relevant
Franchise Agreement and BKL Lease affected by the
defaults without further notice or opportunity to
cure and pursue any and all remedies permitted
thereunder and by law without further notice to
Lender.
7.4 BKC Right to Close. Notwithstanding the foregoing
provisions of Section 7.3, BKC shall have the right to
immediately close, without prior notice or any
opportunity to cure, any of the Restaurants which BKC
deems, in its sole discretion, necessary due to reasons
of public health and safety or due to an emergency.
7.5 BKC's Right to Terminate Franchise Agreements.
Notwithstanding anything to the contrary in this
Agreement, if Lender delivers a Foreclosure Notice
under this Agreement, BKC shall have the right to
immediately terminate the Franchise Agreement(s)
related to the Foreclosure Notice. If Lender has
issued a Foreclosure Notice and is in compliance with
its obligations to BKC under this Agreement, BKC shall
issue to Lender a limited license to enable another BKC
licensee to operate the Affected Restaurant(s), subject
to the Foreclosure Notice and consistent with Section
5.4(b), and on the same terms and conditions set forth
in the terminated Franchise Agreement(s) through the
end of the Sale Period, and shall issue to the
purchaser of such Affected Restaurant(s) a replacement
franchise agreement on the same terms and conditions as
the terminated Franchise Agreement.
8. ASSIGNMENT
8.1 Franchisees may not assign or transfer its interest
in this Agreement without the written consent of the
other parties hereto. BKC or Lender may assign their
respective interests herein without the consent of any
party hereto.
9. BREACH OF CONTRACT; EQUITABLE REMEDIES
9.1 In the event any party shall breach the terms of
this Agreement, any other party hereto may declare a
breach and pursue any remedy available at law or in
equity. It is expressly understood and agreed that
monetary damages may be inadequate to remedy a material
breach of this Agreement and that injunctive relief may
be granted by a court of competent jurisdiction.
Further, in light of the nature of this Agreement and
the potential need for BKC to take prompt action to
abate a dangerous condition and/or mitigate the damage
to its trademarks and service marks, in the event of
default by any of the parties hereunder or by
Franchisees under the Franchise Agreements, if a court
orders BKC to post a bond as a condition to the entry
of an order for injunctive relief, the parties jointly
and severally agree that such bond shall be in a
nominal amount of money not to exceed FIVE THOUSAND AND
NO/100 DOLLARS ($5,000.00).
10. TERM OF AGREEMENT
10.1 This Agreement shall commence on the date first
written above and shall continue until payment in full
of all obligations under the Loan Documents or until
the expiration or earlier termination of all of the
Franchise Agreements and BKL Leases, whichever is
earlier, at which time this Agreement shall expire and
become of no further force and effect.
10.2 Upon or within a reasonable time after such
expiration or termination the parties agree to sign any
reasonable documents requested by any party in order to
confirm such expiration or termination.
11. CONSENT AND ACKNOWLEDGMENT
11.1 Acknowledgments. Franchisees and Guarantors
acknowledge and understand the provisions of this
Agreement and the procedures set forth herein relating
to the requirements that, in the event of an exercise
by the Lender of its rights and remedies under the Loan
Documents and this Agreement, such exercise shall be
subject to the terms of Section 5 hereof.
11.2 Consent To Terms of Sale. In consideration of BKC
and Lender executing this Agreement, each Franchisee
and Guarantor, for themselves and any person or entity
claiming by, through or under them, represent, covenant
and agree as follows:
(a) This Agreement and the Loan Documents are not
entered into with any actual intent to hinder,
delay or defraud any of their creditors; that
Franchisees and Guarantors do not intend to incur
debts beyond their ability to pay in connection
with the Loan Documents; and that Franchisees and
Guarantors do not have assets unreasonably small
in relation to their businesses as a result of the
Loan Documents or this Agreement.
(b) This Agreement and the procedures set forth in
Section 5 with respect to a sale and transfer of
the Affected Restaurants, the Affected Franchise
Agreements, the Affected BKL Leases, and the real
and personal property associated therewith,
constitute a commercially reasonable procedure for
disposing of the Lender's collateral, there being
no nationally recognized market therefor, and it
being acknowledged that it is designed to generate
a fair and reasonable equivalent value.
(c) Franchisees and Guarantors shall not seek to
challenge or enjoin the consummation of any sale
of an Affected Restaurant, Affected Franchise
Agreement or real or personal property associated
therewith on the grounds that the procedures set
forth in Section 5 are not commercially
reasonable, and agree that their only remedy shall
be to challenge and seek monetary damages from the
Lender for any unreasonable decision by the Lender
in determining whether to sell the Restaurants as
a group or individually.
12. GENERAL RELEASE
12.1 In consideration of BKC executing this Agreement
and in consideration of BKC consenting to the grant to
Lender of the security interest in the Franchise
Agreements and the right to transfer the BKL Leases
subject to the terms of this Agreement, each Franchisee
and each Guarantor for himself/herself and his/her
respective heirs, successors, assigns, personal
representatives, affiliates, subsidiaries and parent
company (individually and collectively the "Releasing
Parties") hereby release and forever discharge BKC and
its respective successors, assigns, affiliates, parent
company, directors, officers, employees, agents and
representatives (individually and collectively, the
"Released Parties") as to any and all claims, damages,
liabilities and causes of action whatsoever, whether
known or unknown, which the Releasing Parties have now
or may have in the future by reason of any matter,
cause of thing whatsoever arising out of or relating to
the Franchise Agreements, BKL Leases, or any other
agreement between any or all of the Released Parties
and any or all of the Releasing Parties, or the
relationship and/or course of dealing between any or
all of the Releasing Parties and the Released Parties,
and any other matters which existed prior to the date
of this Agreement.
13. RIGHT OF AUDIT
13.1 Each Franchisee agrees that BKC or its
representatives, at BKC expense, shall at all
reasonable times, have the right to examine or audit
the books, records, federal or state tax returns,
accounts of, and any other information or records
necessary to trace or account for loan funds hereunder,
as well as to verify the accuracy of the
representations made by each Franchisee hereunder. In
the event an audit discloses a violation of the terms
and conditions of this Agreement, Franchisees shall be
liable for all costs and expenses associated with the
audit including, but not limited to, the costs of
accounting fees, travel, lodging and wages reasonably
incurred including wages paid to BKC employees.
Franchisees and Lender mutually consent to the release
to BKC of all information relating to loan funding,
disbursements or withdrawals under the Loan Documents.
14. CAPTION HEADINGS
14.1 The caption headings are used in this Agreement
only as a matter of convenience and for reference and
do not define, limit or describe the scope of this
Agreement nor the intent of any provision contained
herein.
15. NOTICES
15.1 All notices hereunder shall be in writing and shall
be deemed properly delivered if sent by (i) U.S. Mail
return receipt requested or (ii) nationally recognized
overnight courier service, and if sent to the following
addresses:
If to BKC:
Burger King Corporation
17777 Old Cutler Road
Miami, FL 33157
ATTENTION: General Counsel, Senior Vice President
If to Franchisees and/or Guarantors:
Bravogrand, Inc.
4220 Edison Lakes Parkway
Mishawaka, IN 46545
ATTENTION: Daniel B. Fitzpatrick, President
If to Lender:
Michael Costello
JP Morgan Chase
707 Travis, 4-CBBN-59
Houston, Texas 77002
or to such persons or places as BKC, Franchisees,
Guarantors, or Lender may direct by written notice to
all of the other parties hereto. Notices or other
communications hereunder shall be deemed delivered and
received on the date of actual delivery.
16. CHOICE OF LAW; JURISDICTION AND VENUE
16.1 This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
The parties hereto acknowledge and agree that the
United States District Court for the Southern District
of Florida, or if such court lacks jurisdiction, the
11th Judicial Court (or its successor) in and for Miami-
Dade County, Florida, shall be the venue and exclusive
proper forum in which to adjudicate any case or
controversy arising, either directly or indirectly,
under or in connection with this Agreement or related
documentation and the parties further agree that, in
the event of litigation arising out of or in connection
with this Agreement in these courts, they will not
contest or challenge the jurisdiction or venue of these
courts.
17. AMENDMENTS
17.1 This Agreement. Except as expressly provided
herein, nothing in this Agreement shall be construed to
modify or amend any of the terms and conditions of the
Franchise Agreements or BKL Leases and the Franchise
Agreements and BKL Leases shall be controlling in the
event of any ambiguity between this Agreement and the
Franchise Agreements or BKL Leases.
17.2 Franchise Agreements. BKC and the Franchisees
shall not materially amend or terminate by mutual
agreement any of the Franchise Agreements without the
prior consent of the Lender, which consent shall not be
unreasonably withheld.
18. INTEGRATION
18.1 This Agreement and the other documents being
executed and delivered pursuant hereto incorporate all
prior discussions and negotiations among the parties
and constitute the full and entire agreement and
understanding between the parties hereto with respect
to the subject matter hereof. No amendment hereto
shall be effective unless it is in writing and signed
by all of the parties hereto.
19. BINDING EFFECT
19.1 Except as otherwise expressly provided herein, the
provisions of this Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their
respective heirs, successors, assigns, executors,
personal representatives and administrators.
20. TITLES
20.1 The titles of the provisions of this Agreement are
for convenience or reference only and are not to be
considered in construing this Agreement.
21. SEVERABILITY
21.1 If one or more of the provisions contained in this
Agreement or in any document contemplated hereby, or
any application thereof, shall be invalid, illegal or
unenforceable, in any respect under the laws of any
jurisdiction, the validity, legality and enforceability
of the remaining provisions contained herein and
therein, and any application thereof, shall not in any
way be affected or impaired thereby or under the laws
of any other jurisdiction.
22. CONSTRUCTION OF AGREEMENT
22.1 This Agreement has been prepared after negotiations
between the parties hereto, and if any ambiguity is
contained herein then in resolving such ambiguity no
weight shall be given in favor of or against either
party solely on account of its drafting this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date of first written above:
JP Morgan Chase ("LENDER")
By:
___________________________________
Print Name: Michael Costello
Its: Vice President
Attest:________________________________
Its:___________________________________
BURGER KING CORPORATION
By:__________________________________
Assistant Secretary
BKC
_____________________("FRANCHISEE")
By:___________________________________
Print Name:___________________________
Title:________________________________
Attest:________________________________
Print Name:____________________________
Title:_________________________________
WITNESSES: GUARANTOR
Quality Dining, Inc.
_______________________ By:___________________________________
Print Name: Daniel B. Fitzpatrick
Title: President
_______________________ Attest:________________________________
Print Name: John C. Firth
Title: Secretary
SCHEDULE A TO INTERCREDITOR AGREEMENT
FRANCHISEES:
Bravogrand, Inc.
SCHEDULE B TO INTERCREDITOR AGREEMENT
GUARANTOR:
Bravokilo, Inc.
Quality Dining, Inc.
SCHEDULE C TO INTERCREDITOR AGREEMENT
Burger Date of
King Date of Consent
Restaurant Franchise or
No. Address Agreement Assignment
- ----------------------------------------------------------------
273 3900 Plainfield Avenue, NE
Grand Rapids, MI 49525 10/15/01 10/15/01
329 1209 Leonard N.W.
Grand Rapids, MI 49504 10/15/01 10/15/01
408 600 28th Street
Grand Rapids, MI 49508 10/15/01 ?
489 461 Fuller Avenue, N.E.
Grand Rapids, MI 49503 10/15/01 10/15/01
551 1313 28th Street, SW
Wyoming, MI 49509 10/15/01 10/15/01
1145 3975 South. Division
Grand Rapids, MI 49508 10/15/01 10/15/01
1146 2672 Alpine Avenue, NW
Grand Rapids, MI 49544 10/15/01 10/15/01
1340 2880 - 28th Street, SE
Kentwood, MI 49512 10/15/01 10/15/01
1576 4560 Chicago Drive
Grand Rapids, MI 49418 10/15/01 10/15/01
1902 145 Michigan, NE
Grand Rapids, MI 49503 10/15/01 10/15/01
2355 1710 South Beacon Blvd.
Grand Haven, MI 49417 10/15/01 10/15/01
2356 187 North River Drive
Holland, MI 49423 10/15/01 10/15/01
2852 1114 N. Lafayette Street
Greenville, MI 49544 10/15/01 10/15/01
4291 8707 28th Street, SE
Grand Rapids, MI 49506 10/15/01 10/15/01
4610 651 East 16th Street
Holland, MI 49423 10/15/01 10/15/01
4943 471 68th Street, SW
Grand Rapids, MI 49508 10/15/01 10/15/01
5409 410 Pearl Street.
Grand Rapids, MI 49504 10/15/01 10/15/01
5673 2201 44th Street.
Kentwood, MI 49508 10/15/01 10/15/01
6219 4555 32nd Avenue
Hudsonville, MI 49426 10/15/01 10/15/01
7169 261 South State Street
Zeeland, MI 49464 10/15/01 10/15/01
7180 120 South Dexter
Ionia, MI 48846 10/15/01 10/15/01
7385 4065 17 Mile Road
Cedar Springs, MI 49319 10/15/01 10/15/01
7476 590 South State Street
Sparta, MI 49345 10/15/01 10/15/01
7503 1120 West Main Street
Lowell, MI 49331 10/15/01 10/15/01
7548 1704 West Washington
Greenville, MI 48838 10/15/01 10/15/01
7636 2204 Plainfield, NE
Grand Rapids, MI 49505 10/15/01 10/15/01
7735 2378 North Park Plaza Drive
Holland, MI 49424 10/15/01 10/15/01
8518 735 Michigan Avenue
Holland, MI 49423 10/15/01 10/15/01
8648 9643 Belding Road
Belding, MI 48809 10/15/01 10/15/01
8666 125 68th Street
Coopersville, MI 49404 10/15/01 10/15/01
8690 1814 Baldwin
Jenison, MI 49428 10/15/01 10/15/01
8796 2990 E. Paris, SE
Kentwood, MI 49508 10/15/01 10/15/01
8834 5260 Eastern Avenue.
Kentwood, MI 49508 10/15/01 10/15/01
8835 15549 Cleveland
Spring Lake, MI 49456 10/15/01 10/15/01
8993 4616 West River Drive, NW
Comstock Park, MI 49321 10/15/01 10/15/01
9672 31 44th Street
Grandville, MI 49418 10/15/01 10/15/01
9685 750 South Division
Grand Rapids, MI 49507 10/15/01 10/15/01
9303 4751 14 Mile Road
Rockford, MI 49341 10/15/01 10/15/01
9487 9730 Adams Street
Holland, MI 49424 10/15/01 10/15/01
9833 6411 Blue Star Highway
Saugatuck, MI 49453 10/15/01 10/15/01
11440 5135 Broadmoor
Kentwood, MI 49512 10/15/01 10/15/01
13005 990 44th Street, SW
Wyoming, MI 49509 10/15/01 10/15/01