<PAGE>
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 12,1996
------------------------------------------
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
incorporation or organization) Identification No.)
3820 Edison Lakes Parkway, Mishawaka, Indiana 46545
- -------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(219) 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.
X Yes No
--- ---
As of June 1, 1996, 8,841,920 shares of common stock of the registrant were
outstanding.
<PAGE>
QUALITY DINING, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MAY 12, 1996
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
- ------------------------------ ----
<S> <C>
Item 1 - Financial Statements:
Consolidated Statements of Income....................... 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....................................... 10
Part II - Other Information
- ---------------------------
Item 4 - Submission of Matters to a Vote of
Security Holders................................. 14
Item 6 - Exhibits and Reports on Form 8-K................. 14
Signatures.......................................................... 14
</TABLE>
Page 2
<PAGE>
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Eight Weeks Ended
May 12, May 14, May 12, May 14,
1996 1995 1996 1995
-------------------- ------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Burger King $ 16,208 $ 12,562 $ 35,588 $ 27,961
Grady's 24,571 -- 41,679 --
Chili's 9,506 9,178 21,086 20,229
Spageddies 1,889 1,159 4,373 1,920
Bruegger's Bagel Bakery 3,228 1,164 6,321 2,144
-------- -------- -------- --------
Total restaurant sales 55,402 24,063 109,047 52,254
-------- -------- -------- --------
Restaurant operating expenses:
Food and beverage 17,406 7,068 34,256 15,543
Payroll and benefits 15,326 6,154 30,650 13,552
Depreciation and amortization 2,527 1,222 5,214 2,694
Other operating expenses 12,620 5,649 24,390 12,188
-------- -------- -------- --------
Total restaurant operating expenses 47,879 20,093 94,510 43,977
-------- -------- -------- --------
Income from restaurant operations 7,523 3,970 14,537 8,277
General and administrative expenses 2,518 1,468 5,088 3,282
Restructuring and integration costs -- -- 1,938 --
-------- -------- -------- --------
Operating income 5,005 2,502 7,511 4,995
-------- -------- -------- --------
Other income (expense):
Interest expense (1,701) (674) (3,125) (1,369)
Gain (loss) on sale of property -- -- 3 (4)
Interest income 40 24 111 58
Other expense, net (60) (37) (130) (60)
-------- -------- -------- --------
Total other expense (1,721) (687) (3,141) (1,375)
-------- -------- -------- --------
Income before income taxes 3,284 1,815 4,370 3,620
Income taxes 1,198 672 1,595 1,340
-------- -------- -------- --------
Net income $ 2,086 $ 1,143 $ 2,775 $ 2,280
======== ======== ======== ========
Net income per share $ .24 $ .17 $ .31 $ .34
======== ======== ======== ========
Weighted average number of shares of
common stock outstanding 8,839 6,761 8,838 6,744
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
QUALITY DINING, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
May 12, October 29,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 3,403 $ 5,639
Accounts receivable 2,787 599
Inventories 1,880 824
Other current assets 1,677 1,352
Deferred income taxes 23 23
-------- -------
Total current assets 9,770 8,437
-------- -------
Property and equipment, net 134,802 63,209
-------- -------
Other assets:
Franchise fees and development costs, net 10,592 10,698
Goodwill, net 9,950 10,216
Trademarks, net 13,260 100
Preopening costs and non-competition agreements, net 1,867 1,709
Liquor licenses 2,312 2,131
Investment in redeemable preferred stock 2,625 2,625
Other 598 121
-------- -------
Total other assets 41,204 27,600
-------- -------
Total assets $185,776 $99,246
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------
Current liabilities:
Current portion of capitalized lease and non-
competition obligations $ 360 $ 360
Current portion of redeemable preferred stock
subscription payable 375 375
Accounts payable 3,579 4,111
Accounts payable, related parties 41 1,076
Accrued liabilities 8,351 3,631
Income taxes payable 102 711
-------- -------
Total current liabilities 12,808 10,264
Long-term debt 88,904 7,413
Capitalized lease and non-competition obligations,
principally to related parties, less current portion 6,806 6,884
Redeemable preferred stock subscription payable,
less current portion 625 875
Deferred income taxes 2,409 2,409
-------- -------
Total liabilities 111,552 27,845
-------- -------
Stockholders' equity:
Preferred stock, without par value: 5,000,000 shares
authorized; none issued
Common stock, without par value: 50,000,000 shares
authorized; 8,861,920 and 8,856,520 shares issued,
respectively 28 28
Additional paid-in capital 63,238 63,190
Retained earnings 11,208 8,433
-------- -------
74,474 71,651
Less treasury stock, at cost, 20,000 shares 250 250
-------- -------
Total stockholders' equity 74,224 71,401
-------- -------
Total liabilities and stockholders' equity $185,776 $99,246
======== =======
See Notes to Consolidated Financial Statements.
Page 4
</TABLE>
<PAGE>
QUALITY DINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twenty-Eight Weeks Ended
May 12, 1996 May 14, 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,775 $ 2,280
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property and equipment 4,174 1,743
Amortization of franchise fees and development costs 297 136
Amortization of preopening costs and intangibles 1,361 832
(Gain) loss on sale of property (3) 4
Net increase in current assets (2,759) (434)
Net increase (decrease) in current liabilities 1,916 (944)
Other 36 --
-------- --------
Net cash provided by operating activities 7,797 3,617
-------- --------
Cash flows from investing activities:
Acquisitions of business, net of cash acquired (74,764) (18,874)
Proceeds from sales of property and equipment 3 --
Purchase of redeemable preferred stock -- (375)
Increase in other assets (739) (107)
Purchase of property and equipment (14,636) (10,131)
Payment of franchise fees and development costs (191) (281)
Payment of preopening costs (882) (561)
-------- --------
Net cash (used in) investing services (91,209) (30,329)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options 55 --
Proceeds from issuance of long-term debt 81,491 23,724
Repayment of capitalized lease obligations (114) (107)
Payment of redeemable preferred stock subscription payable (250) (125)
Other (6) 1
-------- --------
Net cash provided by financing activities 81,176 23,493
-------- --------
Net decrease in cash and cash equivalents (2,236) (3,219)
Cash and cash equivalents, beginning of period 5,639 4,453
-------- --------
Cash and cash equivalents, end of period $ 3,403 $ 1,234
======== ========
Noncash investing and financing activities:
Acquisition of redeemable preferred stock $ -- $ 500
Common stock issued in acquisition -- 3,350
</TABLE>
See Notes to Consolidated Financial Statements.
Page 5
<PAGE>
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 12, 1996
(Unaudited)
Note 1: Description of Business.
As of May 12, 1996, the Company operated 63 quick-service Burger King
restaurants, 19 casual dining restaurants under the trade name Chili's Grill &
Bar, 21 bakeries under the trade name Bruegger's Bagel Bakery, five casual
dining restaurants under the trade name Spageddies Italian Kitchen and 42 casual
dining restaurants under the trade name Grady's American Grill.
Note 2: 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 generally accepted accounting principles 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 twenty-eight week period ended May
12, 1996 are not necessarily indicative of the results that may be expected for
the 52-week year ending October 27, 1996.
These financial statements should be read in conjunction with the Company's
audited financial statements for the fiscal year ended October 29, 1995 included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
Note 3: Acquisitions.
On February 21, 1996, the Company and Bruegger's Corporation ("Bruegger's")
entered into an Agreement and Plan of Merger (the "Merger Agreement") whereby a
wholly owned subsidiary of the Company would be merged with and into Bruegger's
with Bruegger's continuing as the surviving corporation and becoming a wholly
owned subsidiary of the Company. Bruegger's is the largest chain of bagel
bakeries in the United States. As of June 6, 1996, there were 53 owned and 258
franchised Bruegger's bakeries operating in 31 states. The Merger Agreement
provides that, except for dissenting and canceled shares, each outstanding share
of Bruegger's common stock will be converted into 1.2931 shares of Quality
Dining common stock and each outstanding share of Bruegger's preferred stock
will be converted into one share of the Company's convertible preferred stock.
The acquisition and related merger will be accounted for using the purchase
method of accounting.
The acquisition and related merger were approved by the Company's shareholders
at a special meeting on May 23, 1996 and by the shareholders of Bruegger's at a
special meeting on June 6, 1996. The merger became effective June 7, 1996.
On December 21, 1995, the Company acquired 42 Grady's American Grill
restaurants and all rights to the Grady's American Grill concept from Brinker
International, Inc. The Grady's American Grill restaurants are located in 16
states throughout the United States. The purchase price aggregated $75.4 million
Page 6
<PAGE>
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
consisting of $74.4 million in cash and the incurrence of $1 million of
liabilities and direct acquisition costs.
The acquisition was accounted for using the purchase method and the operating
results of the Grady's American Grill restaurants have been included in the
Company's consolidated financial statements since the acquisition date. The
excess of the purchase price over the acquired tangible and intangible net
assets of approximately $13.4 million has been allocated to trademarks and is
being amortized on a straight-line basis over 40 years.
In conjunction with the acquisitions of the Grady's American Grill restaurants
and the rights to the Spageddies restaurant concept in the United States, which
was finalized on October 28, 1995, the Company recorded a pre-tax charge of $1.9
million during the sixteen-week period ended February 18, 1996 for restructuring
and integration costs.
On August 14, 1995, the Company through its wholly owned subsidiary,
BRAVOKILO, Inc., acquired all of the issued and outstanding common stock of
SHONCO, Inc. and three affiliated companies, certain operating assets of three
other affiliated companies and four target reservation agreements from four
additional affiliated companies. SHONCO, Inc. and its affiliated companies are
referred to collectively as "SHONCO". William R. Schonsheck ("Schonsheck") owned
all of the capital stock of all of the SHONCO affiliated group of companies
except for two affiliates in which he owned at least a majority of the capital
stock, with the balance being owned by five other individuals. SHONCO owned and
operated eight Burger King restaurants in the Detroit, Michigan metropolitan
area, and had the right to develop four additional Burger King restaurants in
the Detroit, Michigan metropolitan area under the target reservation agreements
acquired by the Company. In addition, the Company entered into a four-year non-
competition agreement with Schonsheck, whereby the Company is obligated to pay
Schonsheck $200,000 per year during the four-year term of the agreement. The
purchase price of SHONCO, including the non-competition agreement, aggregated
$9,561,000 and consisted of $5,051,000 in cash, the issuance of 316,832 shares
of the Company's common stock, valued at $4,000,000, and the incurrence of a
$510,000 liability under the non-competition agreement (discounted at 8.5%). The
cash portion of the purchase price was funded through borrowings under the
Company's revolving credit facility. The acquisition was accounted for using the
purchase method and the operating results of SHONCO have been included in the
Company's consolidated financial statements since the date of acquisition. The
excess of the purchase price over the acquired tangible and intangible net
assets of approximately $7.7 million has been allocated to franchise rights and
is being amortized on a straight-line basis over 20 years.
The following unaudited pro forma results for the twenty-eight weeks ended May
12, 1996 were developed assuming the Bruegger's and Grady's American Grill
restaurants had been acquired on October 30, 1995. SHONCO is included in the
Company's fiscal 1996 results for the entire twenty-eight weeks. The unaudited
pro forma results for the twenty-eight weeks ended May 14, 1995 were developed
assuming Bruegger's, Grady's American Grill restaurants and SHONCO had been
acquired on October 31, 1994. For both periods, the unaudited pro forma results
are after giving effect to certain adjustments, including interest expense,
depreciation of property and equipment and amortization of acquired intangible
assets:
<TABLE>
<CAPTION>
Pro forma Pro forma
28 weeks ended 28 weeks ended
(in thousands, except per share data) May 12, 1996 May 14, 1995
<S> <C> <C>
Total restaurant sales $135,910 $117,930
Net income (loss) (4,695) 236
Net income (loss) share (.34) .02
</TABLE>
Page 7
<PAGE>
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
The following table presents, on an unaudited pro forma basis, a condensed
consolidated balance sheet as of May 12, 1996, giving effect to the Bruegger's
acquisition as if it had occurred on that date:
<TABLE>
<CAPTION>
Pro forma
(In thousands) May 12, 1996
------------
(Unaudited)
<S> <C>
Current assets $ 12,615
Property and equipment 154,717
Other assets 180,548
--------
Total assets $347,880
========
Current liabilities $ 28,078
Long-term debt 104,912
Capitalized lease and non-competition obligations 6,806
Deferred income taxes 2,409
Redeemable preferred stock 8,400
Stockholders' equity 197,275
--------
Total liabilities and stockholders' equity $347,880
========
</TABLE>
The unaudited pro forma data shown above is not necessarily indicative of the
consolidated results that would have occurred had the acquisitions taken place
at the beginning of the respective periods nor are they necessarily indicative
of results that may occur in the future.
Note 4: Commitments.
As of May 12, 1996, the Company had commitments aggregating approximately $7.4
million for the acquisition and construction of new restaurants.
Note 5: Long-Term Debt.
On April 26, 1996, the Company amended its revolving credit agreement with Texas
Commerce Bank, as agent for a group of seven banks, providing for borrowings of
up to $150 million with interest payable monthly at the lower of the adjusted
LIBOR rate plus 1.5% or the bank's prime rate less .5%. The revolving credit
agreement expires on April 26, 1999 and is unsecured.
The revolving credit agreement contains, among other provisions, certain
restrictive covenants including maintenance of minimum levels of tangible net
worth, as defined, limitations on the incurrence of additional indebtedness and
annual limitations on the payment of cash dividends on, or the purchase or
redemption of, any shares of the Company's capital stock in aggregate amounts
exceeding 40% of the Company's net income for the immediately proceeding fiscal
year.
Note 6: Contingencies.
On November 10, 1994, the Company acquired all of the outstanding stock of
Grayling Corporation, Grayling Management Corporation, Chili's of Mt. Laurel,
Inc., and Chili's of Christiana, Inc. (collectively, "Grayling"). Prior to
entering into negotiations with the Company, Grayling and its principal
shareholder,
Page 8
<PAGE>
QUALITY DINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Concluded
(Unaudited)
T. Garrick Steele ("Steele"), had entered into an agreement (the "Asset
Agreement") to sell substantially all of Grayling's assets to a third party,
KK&G Enterprises, Inc. ("KK&G"). The Asset Agreement was terminated by Grayling
and was not consummated. On September 27, 1994, KK&G filed suit in the Court of
Common Pleas, Philadelphia County, Pennsylvania, against Grayling and Steele
seeking damages and specific performance of the Asset Agreement. Steele is
obligated to continue to defend the lawsuit and indemnify the Company and
Grayling against any loss or damages resulting from the lawsuit. Management
does not expect that the lawsuit will have a material adverse effect on the
Company's financial position or results of operations. In making such
assessment, management considered the financial ability of Steele to defend the
lawsuit and indemnify the Company against any loss or damages resulting from the
lawsuit.
Page 9
<PAGE>
QUALITY DINING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAY 12, 1996
The Company has a 52/53-week fiscal year ending on the last Sunday in
October of each year. The first quarter of the Company's fiscal year consists of
16 weeks with all subsequent quarters being 12 weeks in duration. Fiscal year
1996 ends October 27, 1996.
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth, for the periods indicated, the percentages
which certain items of income and expense bear to total restaurant sales.
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Eight Weeks Ended
-------------------------- --------------------------
May 12, 1996 May 14, 1995 May 12, 1996 May 14, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Restaurant sales:
Burger King 29.3% 52.2% 32.6% 53.5%
Grady's 44.3 - 38.2 -
Chili's 17.2 38.2 19.4 38.7
Spageddies 3.4 4.8 4.0 3.7
Bruegger's Bagel Bakery 5.8 4.8 5.8 4.1
----- ----- ----- -----
Total restaurant sales 100.0 100.0 100.0 100.0
----- ----- ----- -----
Restaurant operating expenses:
Food and beverage 31.4 29.3 31.4 29.8
Payroll and benefits 27.7 25.6 28.1 25.9
Depreciation and amortization 4.5 5.1 4.8 5.2
Other operating expenses 22.8 23.5 22.4 23.3
----- ----- ----- -----
Total restaurant operating expenses 86.4 83.5 86.7 84.2
----- ----- ----- -----
Income from restaurant operations 13.6 16.5 13.3 15.8
General and administrative expenses 4.6 6.1 4.6 6.3
Restructuring and integration costs - - 1.8 -
----- ----- ----- -----
Operating income 9.0 10.4 6.9 9.5
----- ----- ----- -----
Other income (expense):
Interest expense (3.1) (2.8) (2.9) (2.6)
(Gain) loss on sale of property - - - -
Interest income 0.1 0.1 0.1 0.1
Other expense, net (0.1) (0.2) (0.1) (0.1)
----- ----- ----- -----
Total other expense (3.1) (2.9) (2.9) (2.6)
----- ----- ----- -----
Income before income taxes 5.9 7.5 4.0 6.9
Income taxes 2.1 2.8 1.5 2.5
----- ----- ----- -----
Net income 3.8% 4.7% 2.5% 4.4%
===== ===== ===== =====
</TABLE>
Page 10
<PAGE>
PART II - OTHER INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------
Restaurant sales for the second quarter of fiscal 1996 were $55.4 million, an
increase of 130.2% over restaurant sales of $24.1 million for the comparable
period in 1995. The increase was primarily attributable to sales generated by
Company restaurants operating in the second quarter of fiscal 1996 that were not
operating during the second quarter of fiscal 1995. During the first quarter of
fiscal 1996, the Company's Grady's American Grill restaurants contributed $24.6
million of sales, or 78.6% of the total sales increase of $31.1 million.
Comparable restaurant sales (measured by comparing units open for the entire
current period and the entire corresponding period in the prior year) were
negative 1.1% and negative 4.4% for the Company's Burger King and Chili's
restaurants, respectively. The Company's Bruegger's Bagel Bakeries reported a
comparable sales increase of 10.5% for the second quarter of fiscal 1996. The
decreased comparable sales levels at the Company's Burger King and Chili's
restaurants were primarily attributable to unusually severe winter weather
conditions and competitive intrusion.
Restaurant sales for the first twenty-eight weeks of the fiscal year increased
108.7% to $109.0 million versus $52.3 million for the same period in fiscal
1995. Comparable restaurant sales for the period were negative 0.8% and negative
2.8% for the Company's Burger King and Chili's restaurants, respectively. The
Company's Bruegger's Bagel Bakeries reported a comparable sales increase of 7.5%
for the first twenty-eight weeks of the fiscal year.
Total restaurant operating expenses increased $27.8 million to $47.9 million in
the second quarter of fiscal 1996, a 138.3% increase over total restaurant
operating expenses of $20.1 million in the comparable period for fiscal 1995. As
a percentage of total restaurant sales, total restaurant operating expenses
increased from 83.5% in the second quarter of fiscal 1995 to 86.4% in the second
quarter of fiscal 1996 for the following reasons. Food and beverage costs as a
percentage of restaurant sales increased from 29.3% in the second quarter of
fiscal 1995 to 31.4% in the second quarter of fiscal 1996. This increase was a
result of the relatively higher food and beverage costs associated with the
increased number of casual dining restaurants. This includes the 42 Grady's
American Grill units which were acquired in the first quarter of fiscal 1996,
and the Bruegger's Bagel Bakeries operated by the Company. Payroll and benefits
as percentage of total restaurant sales increased from 25.6% in the second
quarter of fiscal 1995 to 27.7% for the comparable period in fiscal 1996. This
increase resulted primarily from the impact of Grady's American Grill and the
opening of new restaurants in the quarter, which generally require higher
payroll expenditures. Depreciation and amortization increased $1.3 million to
$2.5 million for the second quarter of fiscal 1996, an increase of 106.8% over
the comparable period in fiscal 1995. Generally, these increases were
attributable to a substantial number of acquired Grady's American Grill
restaurants. As a percentage of total restaurant sales, depreciation and
amortization decreased from 5.1% in the second quarter of fiscal 1995 to 4.5% in
the second quarter of fiscal 1996.
Other restaurant operating expenses decreased as a percentage of restaurant
sales from 23.5% in the second quarter of fiscal 1995 to 22.8% in the second
quarter of fiscal 1996. This improvement was attributable to effective cost
control at the restaurant level and a higher mix of owned versus leased
properties resulting in lower rent expense as a percentage of total restaurant
sales.
Income from restaurant operations increased 89.5% to $7.5 million for the second
quarter of fiscal 1996 versus $4.0 million for the comparable period in fiscal
1995. As a percentage of total restaurant sales, income from restaurant
operations decreased to 13.6% for the period versus 16.5% for the comparable
period in fiscal 1995 as a net result of the factors described above.
Page 11
<PAGE>
Income from restaurant operations for the first twenty-eight weeks of fiscal
year 1996 was 13.3% of restaurant sales versus 15.8% for the same period in
1995. Food and beverage costs represented 31.4% of sales as compared to 29.8% in
the same period of fiscal 1995. Payroll and benefits increased from 25.9% of
total restaurant sales to 28.1% for the twenty-eight week period as a result of
higher expenses at newly opened and acquired restaurants. Depreciation and
amortization was 4.8% of sales for the period versus 5.2% for the same period in
fiscal 1995.
General and administrative expenses increased 71.5% to $2.5 million for the
second quarter of fiscal 1996 from $1.5 million for the second quarter of fiscal
1995. As a percentage of total restaurant sales, general and administrative
expenses were 4.6% in the second quarter of fiscal 1996 versus 6.1% in the
comparable period in fiscal 1995. This decrease was primarily attributable to
beneficial leverage derived from increased sales at the Company's new and
acquired restaurants. For the twenty-eight weeks ended May 12, 1996, general and
administrative expenses decreased to 4.6% of sales from 6.3% for the comparable
period in fiscal 1995.
During the first quarter of fiscal 1996, the Company recorded a special pre-tax
charge of $1.9 million ($1.2 million after tax) for restructuring and
integration costs related to the acquisitions of Grady's American Grill and
Spageddies Italian Kitchen.
Total other expenses increased to 3.1% of restaurant sales for the second
quarter of fiscal 1996 as compared to 2.9% during the comparable period in
fiscal 1995. This increase was primarily attributable to increased interest
costs arising from borrowings under the Company's revolving credit facility to
fund acquisitions and new restaurant openings.
Net income for the second quarter of fiscal 1996 increased 82.5% to $2.1 million
from $1.1 million for the second quarter of fiscal 1995. Net income per share
for the second quarter of fiscal 1996 was $.24 per share versus $.17 per share
for the comparable period in fiscal 1995. Net income per share reflects a 30.1%
increase in weighted average shares outstanding over the comparable 1995
quarter.
For the twenty-eight weeks ended May 12, 1996, net income increased 21.7% to
$2.8 million as compared to $2.3 million for the comparable period in fiscal
1995. Net income per share was $.31 versus $.34 for the same period in 1995
after the special charge discussed above. Net income per share for the first
half of fiscal 1996 reflects a 31.0% increase in weighted average shares
outstanding over the comparable period in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's cash and cash equivalents were $3.4 million, a decrease of $2.2
million for the twenty-eight weeks ended May 12, 1996. Principal sources of
funds consisted of: (i) those provided by operations ($7.8 million) and (ii)
proceeds from the Company's revolving credit facility ($81.5 million). The
primary use of funds consisted of: (i) expenditures associated with new
restaurant development ($14.6 million); (ii) expenditures associated with the
acquisitions of businesses ($74.8 million); (iii) franchise, development and
preopening costs ($1.1 million) and (iv) repayment of capital lease obligations
and payments on Bruegger's preferred stock ($.4 million).
Cash flow generated from new and existing restaurant operations provides the
Company with a significant source of liquidity. During the twenty-eight weeks
ended May 12, 1996, approximately 51% of the funds required to construct new
restaurants and purchase other equipment was generated by operating activities.
The remainder of the Company's capital requirements were provided by borrowings
under the Company's revolving credit facility. On April 26, 1996, the Company
amended its existing revolving credit facility with Texas Commerce Bank, as
agent for a group of seven banks. The facility, as amended,
Page 12
<PAGE>
provides for borrowings up to a maximum of $150 million, with interest payable
at the adjusted LIBOR rate plus 1.5% or the bank's price rate less .5%. The loan
agreement expires on April 26, 1999 and is unsecured. As of May 12, 1996, there
was $88.9 million outstanding under this revolving credit facility, of which
$74.4 million was utilized in connection with the Grady's American Grill
acquisition which occurred in the first quarter of fiscal 1996. The loan
agreement allows for further indebtedness of up to $5 million in addition to the
$150 million currently available.
On February 22, 1996, the Company announced that it had executed a definitive
merger agreement with Bruegger's Corporation pursuant to which Bruegger's
Corporation would become a wholly owned subsidiary of Quality Dining. The merger
became effective on June 7, 1996. In connection with the acquisition of
Bruegger's, the Company will take a special pre-tax charge ranging from $6.0 to
$8.0 million associated with restructuring and integration costs related to the
merger. This charge will be taken during the Company's third fiscal quarter
ending August 4, 1996. On a net income per share basis, the charge will range
between $.25 and $.33 per share. In addition, the Company will recognize a
purchase price adjustment of $6.0 to $7.0 million which will be added to
goodwill and amortized over a 40 year period.
The Company's primary cash requirements for the remainder of fiscal 1996 will be
to finance capital expenditures in connection with the opening of new
restaurants, improvements to the Company's management information reporting
systems and for general working capital purposes. Capital expenditures for
fiscal 1996, including the effects of the merger with Bruegger's Corporation,
are projected to be approximately $30 to $35 million, of which $14.7 million was
expended in the first half of fiscal 1996. During the twenty-eight weeks of
fiscal 1996, Quality Dining opened or acquired nine new Bruegger's Bagel
Bakeries, 42 Grady's American Grill restaurants, four new Burger King
restaurants and one new Chili's Grill & Bar restaurant.
The Company's growth plans for all of fiscal 1996, including the effects of the
merger with Bruegger's Corporation, includes 40 to 45 Bruegger's Bagel Bakeries,
four to six Burger King restaurants, four to five Chili's restaurants and two to
three Spageddies Italian Kitchen restaurants. Except for the Bruegger's
locations, the Company expects to own real estate for the majority of these
sites. The actual amount of the Company's cash requirements for capital
expenditures depends in part on the number of new restaurants opened and the
land acquisition costs associated with such restaurants. The Company anticipates
that its cash flow from operations, together with amounts available under its
amended revolving credit agreement, will be sufficient to fund its planned
expansion and other operating cash requirements.
Page 13
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the Company's shareholders was held on May 23, 1996, at
which the shareholders approved the Agreement of Merger by and among the
Company, BAC, Inc., a wholly owned subsidiary of the Company, and Bruegger's
Corporation by the vote indicated below:
<TABLE>
<S> <C>
Votes Cast For 6,750,659
Votes Cast Against 4,364
Abstentions 710
Broker Nonvotes 0
</TABLE>
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 proceeds such
exhibits, and is incorporated herein by reference.
(b) Reports on Form 8-K
On May 2, 1996, the Company filed a Current Report on Form 8-K
announcing under Item 5 an agreement for a $150 million three-year
revolving credit facility.
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)
By:
----------------------------------
Michael G. Sosinski
Date: June 21, 1996 Chief Financial Officer
Page 14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C> <C>
3-A Restated Articles of Incorporation of
Registrant, as amended to date
3-B By-Laws of Registrant, as amended to date
10-AC Agreement between Registrant and Nordahl L. Brue
and Michael J. Dressell, dated February 21, 1996
10-I 1993 Stock Option and Incentive Plan, as
amended, of Registrant
27 Financial Data Schedule
</TABLE>
Page 15
<PAGE>
EXHIBIT 3-A
RESTATED ARTICLES OF INCORPORATION
OF
QUALITY DINING, INC.
Quality Dining, Inc. (hereinafter referred to as the "Corporation"),
desiring to amend and restate its Articles of Incorporation effective as of the
date of filing hereof with the Office of the Indiana Secretary of State,
pursuant to the provisions of the Indiana Business Corporation Law (hereinafter
referred to as the "Corporation Law"), submits the following Restated Articles
of Incorporation.
ARTICLE I
Name
----
The name of the Corporation is Quality Dining, Inc.
ARTICLE II
Purposes and Powers
-------------------
Section 2.1. Purposes of the Corporation. The purposes for which the
Corporation is formed are (a) to engage in the general business of owning and
operating restaurants, directly or indirectly through one or more subsidiaries,
and to carry on such activities of every kind or nature as may be allied or
incidental to such general business, and (b) to engage in the transaction of any
or all lawful business for which corporations may now or hereafter be
incorporated under the Corporation Law.
Section 2.2. Powers of the Corporation. The Corporation shall have
(a) all powers now or hereafter authorized by or vested in corporations pursuant
to the provisions of the Corporation Law, (b) all powers now or hereafter vested
in corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its By-Laws as from time to
time in effect.
Section 2.3. Franchise Agreement Related Restrictions. For as long as
the Corporation is a party to one or more franchise agreements with Brinker
International, Inc. (the "Franchise Agreements"), the Corporation's direct
business operations shall be devoted exclusively to the operation of Chili's
Southwestern Bar and Grill restaurants pursuant to the Franchise Agreements.
Upon assignment of all of the Franchise Agreements to a wholly owned subsidiary
of the Corporation, the foregoing provision shall be of no further effect.
<PAGE>
ARTICLE III
Term of Existence
-----------------
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
Registered Office and Agent
---------------------------
The street address of the Corporation's registered office at the time
of adoption of these Restated Articles of Incorporation is 3820 Edison Lakes
Parkway, Mishawaka, Indiana 46545 and the name of its Resident Agent at such
office at the time of adoption of these Restated Articles of Incorporation is
Daniel B. Fitzpatrick.
ARTICLE V
Authorized Shares
-----------------
Section 5.1. Authorized Classes and Number of Shares. The total
number of shares which the Corporation has authority to issue shall be
55,000,000 shares, consisting of 50,000,000 shares of common stock, without par
value (the "Common Stock"), and 5,000,000 shares of Preferred Stock, without par
value (the "Preferred Stock").
Section 5.2. General Terms of All Shares. The Corporation shall have
the power to acquire (by purchase, redemption, or otherwise), hold, own, pledge,
sell, transfer, assign, reissue, cancel, or otherwise dispose of the shares of
the Corporation in the manner and to the extent now or hereafter permitted by
the laws of the State of Indiana (but such power shall not imply an obligation
on the part of the owner or holder of any share to sell or otherwise transfer
such share to the Corporation), including the power to purchase, redeem, or
otherwise acquire the Corporation's own shares, directly or indirectly, and
without pro rata treatment of the owners or holders of any class or series of
shares, unless, after giving effect thereto, the Corporation would not be able
to pay its debts as they become due in the usual course of business or the
Corporation's total assets would be less than its total liabilities (and without
regard to any amounts that would be needed, if the Corporation were to be
dissolved at the time of the purchase, redemption, or other acquisition, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise acquired, unless otherwise
expressly provided with respect to a series of Preferred Stock in the provisions
of these Restated
-2-
<PAGE>
Articles of Incorporation adopted by the Board of Directors pursuant to Section
5.5 hereof describing the terms of such series). Shares of the Corporation
purchased, redeemed, or otherwise acquired by it shall constitute authorized but
unissued shares, unless prior to any such purchase, redemption, or other
acquisition, or within thirty (30) days thereafter, the Board of Directors
adopts a resolution providing that such shares constitute authorized and issued
but not outstanding shares.
The Board of Directors of the Corporation may dispose of, issue, and
sell shares in accordance with, and in such amounts as may be permitted by, the
laws of the State of Indiana and the provisions of these Restated Articles of
Incorporation and for such consideration, at such price or prices, at such time
or times and upon such terms and conditions (including the privilege of
selectively repurchasing the same) as the Board of Directors of the Corporation
shall determine, without the authorization or approval by any shareholders of
the Corporation. Shares may be disposed of, issued, and sold to such persons,
firms, or corporations as the Board of Directors may determine, without any
preemptive or other right on the part of the owners or holders of other shares
of the Corporation of any class or kind to acquire such shares by reason of
their ownership of such other shares.
The Corporation shall have the power to declare and pay dividends or
other distributions upon the issued and outstanding shares of the Corporation,
subject to the limitation that a dividend or other distribution may not be made
if, after giving it effect, the Corporation would not be able to pay its debts
as they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (and without regard to any
amounts that would be needed, if the Corporation were to be dissolved at the
time of the dividend or other distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
of the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Preferred Stock in the
provisions of these Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 5.5 hereof describing the terms of such series).
The Corporation shall have the power to issue shares of one class or series as a
share dividend or other distribution in respect of that class or series or one
or more other classes or series.
Section 5.3. Voting Rights of Shares.
(a) Common Stock. Except as otherwise provided by the Corporation Law
and subject to such shareholder disclosure and recognition procedures (which may
include voting prohibition sanctions) as the Corporation may by action of its
Board of Directors establish, the Common Stock has unlimited voting rights and
each outstanding share of Common Stock shall, when validly
-3-
<PAGE>
issued by the Corporation, entitle the record holder thereof to one vote at all
shareholders' meetings on all matters submitted to a vote of the shareholders of
the Corporation.
(b) Preferred Stock. Except as required by the Corporation Law or by
the provisions of these Restated Articles of Incorporation adopted by the Board
of Directors pursuant to Section 5.5 hereof describing the terms of the
Preferred Stock or a series thereof, the holders of Preferred Stock shall have
no voting rights or powers. Shares of Preferred Stock shall, when validly
issued by the Corporation, entitle the record holder thereof to vote as and on
such matters, but only as and on such matters, as the holders thereof are
entitled to vote under the Corporation Law or under the provisions of these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 5.5 hereof describing the terms of the Preferred Stock or a series
thereof (which provisions may provide for special, conditional, limited, or
unlimited voting rights, including multiple or fractional votes per share, or
for no right to vote, except to the extent required by the Corporation Law) and
subject to such shareholder disclosure and recognition procedures (which may
include voting prohibition sanctions) as the Corporation may by action of the
Board of Directors establish.
Section 5.4. Other Terms of Common Stock. The Common Stock shall be
equal in every respect insofar as their relationship to the Corporation is
concerned, but such equality of rights shall not imply equality of treatment as
to redemption or other acquisition of shares by the Corporation. Subject to the
rights of the holders of any outstanding Preferred Stock issued under Section
5.5 hereof, the holders of Common Stock shall be entitled to share ratably in
such dividends or other distributions (other than purchases, redemptions, or
other acquisitions of shares by the Corporation), if any, as are declared and
paid from time to time on the Common Stock at the discretion of the Board of
Directors. In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, after payment shall have been made
to the holders of the Preferred Stock of the full amount to which they shall be
entitled under this Article V, the holders of Common Stock shall be entitled, to
the exclusion of the holders of the Preferred Stock of any and all series, to
share, ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the Corporation available for distribution to its
shareholders.
Section 5.5. Other Terms of Preferred Stock.
(a) Preferred Stock may be issued from time to time in one or more
series, each such series to have such distinctive designation and such
preferences, limitations, and relative voting and other rights as shall be set
forth in these Restated Articles of Incorporation. Subject to the requirements
of the Corporation
-4-
<PAGE>
Law and subject to all other provisions of these Restated Articles of
Incorporation, the Board of Directors of the Corporation may create one or more
series of Preferred Stock and may determine the preferences, limitations, and
relative voting and other rights of one or more series of Preferred Stock before
the issuance of any shares of that series by the adoption of an amendment to
these Restated Articles of Incorporation that specifies the terms of the series
of Preferred Stock. All shares of a series of Preferred Stock must have
preferences, limitations, and relative voting and other rights identical with
those of other shares of the same series and, if the description of the series
set forth in these Restated Articles of Incorporation so provides, no series of
Preferred Stock need have preferences, limitations, or relative voting or other
rights identical with those of any other series of Preferred Stock.
Before issuing any shares of a series of Preferred Stock, the Board of
Directors shall adopt an amendment to these Restated Articles of Incorporation,
which shall be effective without any shareholder approval or other action, that
sets forth the preferences, limitations, and relative voting and other rights of
the series, and authority is hereby expressly vested in the Board of Directors,
by such amendment:
(1) To fix the distinctive designation of such series and the number
of shares which shall constitute such series, which number may be increased
or decreased (but not below the number of shares thereof then outstanding)
from time to time by action of the Board of Directors;
(2) To fix the voting rights of such series, which may consist of
special, conditional, limited, or unlimited voting rights, including
multiple or fractional votes per share, or no right to vote (except to the
extent required by the Corporation Law);
(3) To fix the dividend or distribution rights of such series and the
manner of calculating the amount and time for payment of dividends or
distributions, including, but not limited to:
(A) the dividend rate, if any, of such series;
(B) any limitations, restrictions, or conditions on the payment
of dividends or other distributions, including whether dividends or
other distributions shall be noncumulative or cumulative or partially
cumulative and, if so, from which date or dates;
-5-
<PAGE>
(C) the relative rights of priority, if any, of payment of
dividends or other distributions on shares of that series in relation
to Common Stock and shares of any other series of Preferred Stock; and
(D) the form of dividends or other distributions, which may be
payable at the option of the Corporation, the shareholder, or another
person (and in such case to prescribe the terms and conditions of
exercising such option), or upon the occurrence of a designated event
in cash, indebtedness, stock or other securities or other property, or
in any combination thereof,
and to make provisions, in the case of dividends or other distributions
payable in stock or other securities, for adjustment of the dividend or
distribution rate in such events as the Board of Directors shall determine;
(4) To fix the price or prices at which, and the terms and conditions
on which, the shares of such series may be redeemed or converted, which may
be
(A) at the option of the Corporation, the shareholder, or another
person or upon the occurrence of a designated event;
(B) for cash, indebtedness, securities, or other property or any
combination thereof; and
(C) in a designated amount or in an amount determined in
accordance with a designated formula or by reference to extrinsic data
or events;
(5) To fix the amount or amounts payable upon the shares of such
series in the event of any liquidation, dissolution, or winding up of the
Corporation and the relative rights of priority, if any, of payment upon
shares of such series in relation to Common Stock and shares of any other
series of special shares; and to determine whether or not any such
preferential rights upon dissolution need be considered in determining
whether or not the Corporation may make dividends, repurchases, or other
distributions;
(6) To determine whether or not the shares of such series shall be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of such
-6-
<PAGE>
series and, if so entitled, the amount of such fund and the manner of its
application;
(7) To determine whether or not the issue of any additional shares of
such series or of any other series in addition to such series shall be
subject to restrictions in addition to restrictions, if any, on the issue
of additional shares imposed in the provisions of these Restated Articles
of Incorporation fixing the terms of any outstanding series of Preferred
Stock theretofore issued pursuant to this Section 5.5 and, if subject to
additional restrictions, the extent of such additional restrictions; and
(8) Generally to fix the other preferences or rights, and any
qualifications, limitations, or restrictions of such preferences or rights,
of such series to the full extent permitted by the Corporation Law;
provided, however, that no such preferences, rights, qualifications,
limitations, or restrictions shall be in conflict with these Restated
Articles of Incorporation or any amendment hereof.
(b) Preferred Stock of any series that have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible, have been converted into shares of the
Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Stock, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Stock in accordance with subsection (a) of this Section 5.5.
ARTICLE VI
Directors
---------
Section 6.1. Number. The Board of Directors at the time of adoption
of these Restated Articles of Incorporation is composed of three (3) members,
and the number of Directors shall be fixed by the By-Laws and may be changed
from time to time by amendment to the By-Laws. Whenever the By-Laws provide
that the number of Directors shall be three (3) or more, the By-Laws may also
provide for staggering the terms of the members of the Board of Directors by
dividing the total number of Directors into three (3) groups (with each group
containing one-third (1/3) of the total, as near as may be) whose terms of
office expire at different times.
Notwithstanding the first sentence of this Section 6.1, any amendment
to the By-Laws that would effect:
-7-
<PAGE>
(a) any increase in the number of Directors over such number as then
in effect,
(b) any reduction in the number of Directors over such number as then
in effect, or
(c) any elimination or modification of the groups or terms of office
of the Directors as the By-Laws then in effect may provide,
shall also be approved by the affirmative vote of a majority of the entire
number of Directors of the Corporation who then qualify as Continuing Directors
with respect to all Related Persons (as such terms are defined for purposes of
Article VIII hereof).
Section 6.2. Qualifications. Directors need not be shareholders of
the Corporation or residents of this or any other state in the United States.
Section 6.3. Vacancies. Vacancies occurring in the Board of
Directors shall be filled in the manner provided in the By-Laws or, if the
By-Laws do not provide for the filling of vacancies, in the manner provided by
the Corporation Law. The By-Laws may also provide that in certain circumstances
specified therein, vacancies occurring in the Board of Directors may be filled
by vote of the shareholders at a special meeting called for that purpose or at
the next annual meeting of shareholders.
Section 6.4. Liability of Directors. A Director's responsibility to
the Corporation shall be limited to discharging his duties as a Director,
including his duties as a member of any committee of the Board of Directors upon
which he may serve, in good faith, with the care an ordinarily prudent person in
a like position would exercise under similar circumstances, and in a manner the
Director reasonably believes to be in the best interests of the Corporation, all
based on the facts then known to the Director.
In discharging his duties, a Director is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom the
Director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to matters
the Director reasonably believes are within such person's professional or
expert competence; or
-8-
<PAGE>
(c) A committee of the Board of which the Director is not a member if
the Director reasonably believes the Committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 6.4 unwarranted.
A Director shall not be liable for any action taken as a Director, or
any failure to take any action, unless (a) the Director has breached or failed
to perform the duties of the Director's office in compliance with this Section
6.4, and (b) the breach or failure to perform constitutes willful misconduct or
recklessness.
Section 6.5. Factors to be Considered by Board. In determining
whether to take or refrain from taking any action with respect to any matter,
including making or declining to make any recommendation to shareholders of the
Corporation, the Board of Directors may, in its discretion, consider both the
short term and long term best interests of the Corporation (including the
possibility that these interests may be best served by the continued
independence of the Corporation), taking into account, and weighing as the
Directors deem appropriate, the social and economic effects thereof on the
Corporation's present and future employees, suppliers and customers of the
Corporation and its subsidiaries, the communities in which offices or other
facilities of the Corporation are located, and any other factors the Directors
consider pertinent.
Section 6.6. Removal of Directors. Any or all of the members of the
Board of Directors may be removed, for good cause, only at a meeting of the
shareholders called expressly for that purpose, by the affirmative vote of the
holders of outstanding shares representing at least sixty-six and two-thirds
percent (66-2/3%) of all the votes then entitled to be cast at an election of
Directors. Directors may not be removed in the absence of good cause.
Section 6.7. Election of Directors by Holders of Preferred Stock.
The holders of one (1) or more series of Preferred Stock may be entitled to
elect all or a specified number of Directors, but only to the extent and subject
to limitations as may be set forth in the provisions of these Restated Articles
of Incorporation adopted by the Board of Directors pursuant to Section 5.5
hereof describing the terms of the series of Preferred Stock.
-9-
<PAGE>
ARTICLE VII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
-------------------------------------
Section 7.1. Meetings of Shareholders. Meetings of the shareholders
of the Corporation shall be held at such time and at such place, either within
or without the State of Indiana, as may be stated in or fixed in accordance with
the By-Laws of the Corporation and specified in the respective notices or
waivers of notice of any such meetings.
Section 7.2. Special Meetings of Shareholders. Special meetings of
the shareholders, for any purpose or purposes, unless otherwise prescribed by
the Corporation Law, may be called at any time by the Board of Directors or the
officers authorized to do so by the By-Laws and shall be called by the Board of
Directors if the Secretary of the Corporation receives one (1) or more written,
dated, and signed demands for a special meeting, describing in reasonable detail
the purpose or purposes for which it is to be held, from the holders of shares
representing at least twenty-five percent (25%) of all the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting;
provided, however, that any such demand(s) delivered to the Secretary at any
time at which the Corporation has more than 50 shareholders must be properly
delivered by the holders of shares representing at least 80% of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting. If the Secretary receives one (1) or more proper written
demands for a special meeting of shareholders, the Board of Directors may set a
record date for determining shareholders entitled to make such demand.
Section 7.3. Meetings of Directors. Meetings of the Board of
Directors of the Corporation shall be held at such place, either within or
without the State of Indiana, as may be authorized by the By-Laws and specified
in the respective notices or waivers of notice of any such meetings or otherwise
specified by the Board of Directors. Unless the By-Laws provide otherwise (a)
regular meetings of the Board of Directors may be held without notice of the
date, time, place, or purpose of the meeting and (b) the notice for a special
meeting need not describe the purpose or purposes of the special meeting.
Section 7.4. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or shareholders,
or of any committee of such Board, may be taken without a meeting, if the action
is taken by all members of the Board or all shareholders entitled to vote on the
action, or by all members of such committee, as the case may be. The action
must be evidenced by one (1) or more written consents describing the action
taken, signed by each Director, or all the shareholders
-10-
<PAGE>
entitled to vote on the action, or by each member of such committee, as the case
may be, and, in the case of action by the Board of Directors or a committee
thereof, included in the minutes or filed with the corporate records reflecting
the action taken or, in the case of action by the shareholders, delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Action taken under this Section 7.4 is effective when the last Director,
shareholder, or committee member, as the case may be, signs the consent, unless
the consent specifies a different prior or subsequent effective date, in which
case the action is effective on or as of the specified date. Such consent shall
have the same effect as a unanimous vote of all members of the Board, or all
shareholders, or all members of the committee, as the case may be, and may be
described as such in any document.
Section 7.5. By-Laws. The Board of Directors shall have the
exclusive power to make, alter, amend, or repeal, or to waive provisions of, the
By-Laws of the Corporation by the affirmative vote of a majority of the entire
number of Directors at the time, except as expressly provided in Section 6.1
hereof and as provided by the Corporation Law. All provisions for the
regulation of the business and management of the affairs of the Corporation not
stated in these Restated Articles of Incorporation shall be stated in the By-
Laws. The Board of Directors may adopt Emergency By-Laws of the Corporation and
shall have the exclusive power (except as may otherwise be provided therein) to
make, alter, amend, or repeal, or to waive provisions of, the Emergency By-Laws
by the affirmative vote of both (a) a majority of the entire number of Directors
at the time and (b) a majority of the entire number of Directors who then
qualify as Continuing Directors with respect to all Related Persons (as such
terms are defined for purposes for Article VIII hereof).
Section 7.6. Interest of Directors. (a) A conflict of interest
transaction is a transaction with the Corporation in which a Director of the
Corporation has a direct or indirect interest. A conflict of interest
transaction is not voidable by the Corporation solely because of the Director's
interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the Director's interest
were disclosed or known to the Board of Directors or a Committee of the
Board of Directors and the Board of Directors or committee authorized,
approved, or ratified the transaction.
(2) The material facts of the transaction and the Director's interest
were disclosed or known to the shareholders entitled to vote and they
authorized, approved, or ratified the transaction.
(3) The transaction was fair to the Corporation.
-11-
<PAGE>
(b) For purposes of this Section 7.6, a Director of the Corporation
has an indirect interest in a transaction if:
(1) Another entity in which the Director has a material financial
interest or in which the Director is a general partner is a party to the
transaction; or
(2) Another entity of which the Director is a director, officer, or
trustee is a party to the transaction and the transaction is, or is
required to be, considered by the Board of Directors of the Corporation.
(c) For purposes of Section 7.6(a)(1), a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of a majority of the Directors on the Board of Directors (or on the
committee) who have no direct or indirect interest in the transaction, but a
transaction may not be authorized, approved, or ratified under this section by a
single Director. If a majority of the Directors who have no direct or indirect
interest in the transaction vote to authorize, approve, or ratify the
transaction, a quorum shall be deemed present for the purpose of taking action
under this Section 7.6. The presence of, or a vote cast by, a Director with a
direct or indirect interest in the transaction does not affect the validity of
any action taken under Section 7.6(a)(1), if the transaction is otherwise
authorized, approved, or ratified as provided in such subsection.
(d) For purposes of Section 7.6(a)(2), a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of the holders of shares representing a majority of the votes entitled to
be case. Shares owned by or voted under the control of a Director who has a
direct or indirect interest in the transaction, and shares owned by or voted
under the control of an entity described in Section 7.6(b), may be counted in
such a vote of shareholders.
Section 7.7. Nonliability of Shareholders. Shareholders of the
Corporation are not personally liable for the acts or debts of the Corporation,
nor is private property of shareholders subject to the payment of corporate
debts.
Section 7.8. Indemnification of Officers, Directors, and Other
Eligible Persons.
(a) To the extent not inconsistent with applicable law, every Eligible
Person shall be indemnified by the Corporation against all Liability and
reasonable Expense that may be incurred by him in connection with or resulting
from any Claim, (1) if such Eligible Person is Wholly Successful with respect to
the Claim, or (2) if not Wholly Successful, then if such Eligible Person is
determined, as provided in either Section 7.8(f) or 7.8(g), to have acted in
good faith, in what he reasonably believed to be the best
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interests of the Corporation or at least not opposed to its best interests and,
in addition, with respect to any criminal claim is determined to have had
reasonable cause to believe that his conduct was lawful or had no reasonable
cause to believe that his conduct was unlawful. The termination of any Claim,
by judgment, order, settlement (whether with or without court approval), or
conviction or upon a plea of guilty or of nolo contendere, or its equivalent,
shall not create a presumption that an Eligible Person did not meet the
standards of conduct set forth in clause (2) of this subsection (a). The
actions of an Eligible Person with respect to an employee benefit plan subject
to the Employee Retirement Income Security Act of 1974 shall be deemed to have
been taken in what the Eligible Person reasonably believed to be the best
interests of the Corporation or at least not opposed to its best interests if
the Eligible Person reasonably believed he was acting in conformity with the
requirements of such Act or he reasonably believed his actions to be in the
interests of the participants in or beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.8 shall include every
pending, threatened, or completed claim, action, suit, or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative, or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise:
(1) by reason of his being or having been an Eligible Person, or
(2) by reason of any action taken or not taken by him in his capacity
as an Eligible Person, whether or not he continued in such capacity at the
time such Liability or Expense shall have been incurred.
(c) The term "Eligible Person" as used in this Section 7.8 shall mean
every person (and the estate, heirs, and personal representatives of such
person) who is or was a Director, officer, employee, or agent of the Corporation
or is or was serving at the request of the Corporation as a Director, officer,
employee, agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other organization
or entity, whether for profit or not. An Eligible Person shall also be
considered to have been serving an employee benefit plan at the request of the
Corporation if his duties to the Corporation also imposed duties on, or
otherwise involved services by, him to the plan or to participants in or
beneficiaries of the plan.
(d) The terms "Liability" and "Expense" as used in this Section 7.8
shall include, but shall not be limited to, counsel fees and disbursements and
amounts of judgments, fines, or
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penalties against (including excise taxes assessed with respect to an employee
benefit plan), and amounts paid in settlement by or on behalf of an Eligible
Person.
(e) The term "Wholly Successful" as used in this Section 7.8 shall
mean (1) termination of any claim against the Eligible Person in question
without any finding of liability or guilt against him, (2) approval by a court,
with knowledge of the indemnity herein provided, of a settlement of any Claim,
or (3) the expiration of a reasonable period of time after the making or
threatened making of any Claim without the institution of the same, without any
payment or promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other
than one who has been Wholly Successful with respect to any Claim) shall be
entitled to indemnification (1) if special independent legal counsel, which may
be regular counsel of the Corporation or other disinterested person or persons,
in either case selected by the Board of Directors, whether or not a
disinterested quorum exists (such counsel or person or persons being hereinafter
called the "Referee"), shall deliver to the Corporation a written finding that
such Eligible Person has met the standards of conduct set forth in Section
7.8(a)(2), and (2) if the Board of Directors, acting upon such written finding,
so determines. The Board of Directors shall, if an Eligible Person is found to
be entitled to indemnification pursuant to the preceding sentence, also
determine the reasonableness of the Eligible Person's Expenses. The Eligible
Person claiming indemnification shall, if requested, appear before the Referee,
answer questions that the Referee deems relevant and shall be given ample
opportunity to present to the Referee evidence upon which he relies for
indemnification. The Corporation shall, at the request of the Referee, make
available facts, opinions, or other evidence in any way relevant to the
Referee's findings that are within the possession or control of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to Section
7.8(f) is found not to be entitled thereto, or if the Board of Directors fails
to select a Referee under Section 7.8(f) within a reasonable amount of time
following a written request of an Eligible Person for the selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.8(f) within a reasonable amount of time following
the selection of a Referee, the Eligible Person may apply for indemnification
with respect to a Claim to a court of competent jurisdiction, including a court
in which the Claim is pending against the Eligible Person. On receipt of an
application, the court, after giving notice to the Corporation and giving the
Corporation ample opportunity to present to the court any information or
evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to
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indemnification with respect to the Claim because such Eligible Person met the
standards of conduct set forth in Section 7.8(a)(2). If the court determines
that the Eligible Person is entitled to indemnification, the court shall also
determine the reasonableness of the Eligible Person's Expenses.
(h) The rights of indemnification provided in this Section 7.8 shall
be in addition to any rights to which any Eligible Person may otherwise be
entitled. Irrespective of the provisions of this Section 7.8, the Board of
Directors may, at any time and from time to time, (1) approve indemnification of
any Eligible Person to the full extent permitted by the provisions of applicable
law at the time in effect, whether on account of past or future transactions,
and (2) authorize the Corporation to purchase and maintain insurance on behalf
of any Eligible Person against any Liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such
liability.
(i) Expenses incurred by an Eligible Person with respect to any Claim,
may be advanced by the Corporation (by action of the Board of Directors, whether
or not a disinterested quorum exists) prior to the final disposition thereof
upon receipt of an undertaking by or on behalf of the Eligible Person to repay
such amount unless he is determined to be entitled to indemnification.
(j) The provisions of this Section 7.8 shall be deemed to be a
contract between the Corporation and each Eligible Person, and an Eligible
Person's rights hereunder shall not be diminished or otherwise adversely
affected by any repeal, amendment, or modification of this Section 7.8 that
occurs subsequent to such person becoming an Eligible Person.
(k) The provisions of this Section 7.8 shall be applicable to Claims
made or commenced after the adoption hereof, whether arising from acts or
omissions to act occurring before or after the adoption hereof.
ARTICLE VIII
Approval of Business Combinations
---------------------------------
Section 8.1. Supermajority Vote. Except as provided in Sections 8.2
and 8.3 hereof, neither the Corporation nor its Subsidiaries, if any, shall
become a party to any Business Combination with a Related Person without the
prior affirmative vote at a meeting of the Corporation's shareholders:
(a) Of not less than sixty-six and two-thirds percent (66-2/3%) of all
the votes entitled to be cast by
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the holders of the outstanding shares of all classes of Voting Stock of the
Corporation considered for purposes of this Article VIII as a single class,
and
(b) Of an Independent Majority of Shareholders.
Such favorable votes shall be in addition to any shareholder vote
which would be required without reference to this Section 8.1 and shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified by law or elsewhere in these Restated
Articles of Incorporation or the By-Laws of the Corporation or otherwise.
Section 8.2. Fair Price Exception. The provisions of Section 8.1 of
this Article VIII shall not apply to a Business Combination if all of the
conditions set forth in subsections (a) through (d) are satisfied.
(a) The fair market value of the property, securities, or other
consideration to be received per share by holders of each class or series of
capital stock of the Corporation in the Business Combination is not less, as of
the date of the consummation of the Business Combination (the "Consummation
Date") than the higher of the following: (1) the highest per share price (with
appropriate adjustments for recapitalizations and for stock splits, stock
dividends, and like distributions), including brokerage commissions and
solicitation fees paid by the Related Person in acquiring any of its holdings of
such class or series of capital stock within the two-year period immediately
prior to the first public announcement of the proposed Business Combination
("Announcement Date") plus interest compounded annually from the date that the
Related Person became a Related Person (the "Determination Date"), or if later
from a date two years before the Consummation Date, through the Consummation
Date, at the rate publicly announced as the "prime rate" of interest of
Citibank, N.A. (or of such other major bank headquartered in New York as may be
selected by a majority of the Continuing Directors) from time to time in effect,
less the aggregate amount of any cash dividends paid and the fair market value
of any dividends paid in other than cash on each share of such stock from the
date from which interest accrues under the preceding clause through the
Consummation Date up to but not exceeding the amount of interest so payable per
share; OR (2) the fair market value per share of such class or series on the
Announcement Date as determined by the highest closing sale price during the 30-
day period immediately preceding the Announcement Date if such stock is listed
on a securities exchange registered under the Securities Exchange Act of 1934
or, if such stock is not listed on any such exchange, the highest closing bid
quotation with respect to such stock during the 30-day period preceding the
Announcement Date on the National Association of Securities Dealers, Inc.
Automated Quotation System or any similar system then in use, or if no such
quotations are available, the fair market
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value of such stock immediately prior to the first public announcement of the
proposed Business Combination as determined by the Continuing Directors in good
faith. In the event of a Business Combination upon the consummation of which
the Corporation would be the surviving corporation or company or would continue
to exist (unless it is provided, contemplated, or intended that as part of such
Business Combination or within one year after consummation thereof a plan of
liquidation or dissolution of the Corporation will be effected), the term "other
consideration to be received" shall include (without limitation) Common Stock
and/or the shares of any other class of stock retained by shareholders of the
Corporation other than Related Persons who are parties to such Business
Combination;
(b) The consideration to be received in such Business Combination by
holders of each class or series of capital stock of the Corporation other than
the Related Person involved shall, except to the extent that a shareholder
agrees otherwise as to all or part of the shares which he or she owns, be in the
same form and of the same kind as the consideration paid by the Related Person
in acquiring the majority of the shares of capital stock of such class or series
already Beneficially Owned by it;
(c) After such Related Person became a Related Person and prior to the
consummation of such Business Combination: (1) such Related Person shall have
taken steps to ensure that the Board of Directors of the Corporation included at
all times representation by Continuing Directors proportionate to the ratio that
the number of shares of Voting Stock of the Corporation from time to time owned
by shareholders who are not Related Persons bears to all shares of Voting Stock
of the Corporation outstanding at the time in question (with a Continuing
Director to occupy any resulting fractional position among the Directors); (2)
such Related Person shall not have acquired from the Corporation, directly or
indirectly, any shares of the Corporation (except upon conversion of convertible
securities acquired by it prior to becoming a Related Person or as a result of a
pro rata stock dividend, stock split, or division of shares or in a transaction
which satisfied all applicable requirements of this Article VIII); (3) such
Related Person shall not have acquired any additional shares of Voting Stock of
the Corporation or securities convertible into or exchangeable for shares of
Voting Stock except as a part of the transaction which resulted in such Related
Person's becoming a Related Person; and (4) such Related Person shall not have
received the benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges, or other financial
assistance or tax credits provided by the Corporation or any Subsidiary, or made
any major change in the Corporation's business or equity capital structure or
entered into any contract, arrangement, or understanding with the Corporation
except any such change, contract, arrangement, or understanding as may have been
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approved by the favorable vote of not less than a majority of the Continuing
Directors of the Corporation; and
(d) A proxy or information statement complying with the requirements
of the Securities Exchange Act of 1934 and the rules and regulations of the
Securities and Exchange Commission thereunder, as then in force for corporations
subject to the requirements of Section 14 of such Act (even if the Corporation
is not otherwise subject to Section 14 of such Act), shall have been mailed to
all holders of shares of the Corporation's capital stock entitled to vote with
respect to such Business Combination. Such proxy or information statement shall
contain on the face page thereof, in a prominent place, any recommendations as
to the advisability (or inadvisability) of the Business Combination which the
Continuing Directors, or any of them, may have furnished in writing and, if
deemed advisable by a majority of the Continuing Directors, a fair summary of an
opinion of a reputable investment banking firm addressed to the Corporation as
to the fairness (or lack of fairness) of the terms of such Business Combination
from the point of view of the holders of shares of Voting Stock other than any
Related Person (such investment banking firm to be selected by a majority of the
Continuing Directors, to be furnished with all information it reasonably
requests, and to be paid a reasonable fee for its services upon receipt by the
Corporation of such opinion).
Section 8.3. Director Approval Exception. The provisions of Section
8.1 hereof shall not apply to a Business Combination if:
(a) The Directors, by a favorable vote of not less than two-thirds
(2/3) of the Directors who then qualify as Continuing Directors, (1) have
expressly approved a memorandum of understanding with the Related Person with
respect to the Business Combination prior to the time that the Related Person
became a Related Person and the Business Combination is effected on
substantially the same terms and conditions as are provided by the memorandum of
understanding, or (2) have otherwise approved the Business Combination; or
(b) The Business Combination is solely between the Corporation and
another corporation, one hundred percent (100%) of the Voting Stock of which is
owned directly or indirectly by the Corporation.
Section 8.4. Definitions. For purposes of this Article VIII:
(a) A "Business Combination" means:
(1) The sale, exchange, lease, transfer, or other disposition to or
with a Related Person or any Affiliate
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or Associate of such Related Person by the Corporation or any Subsidiaries
(in a single transaction or a Series of Related Transactions) of all or
substantially all, or any Substantial Part, of its or their assets or
businesses (including, without limitation, securities issued by a
Subsidiary, if any);
(2) The purchase, exchange, lease, or other acquisition by the
Corporation or any Subsidiaries (in a single transaction or a Series of
Related Transactions) of all or substantially all, or any Substantial Part,
of the assets or business of a Related Person or any Affiliate or Associate
of such Related Person;
(3) Any merger or consolidation of the Corporation or any Subsidiary
thereof into or with a Related Person or any Affiliate or Associate of such
Related Person or into or with another Person which, after such merger or
consolidation, would be an Affiliate or an Associate of a Related Person,
in each case irrespective of which Person is the surviving entity in such
merger or consolidation;
(4) Any reclassification of securities, recapitalization, or other
transaction (other than a redemption in accordance with the terms of the
security redeemed) which has the effect, directly or indirectly, of
increasing the proportionate amount of shares of Voting Stock of the
Corporation or any Subsidiary thereof which are Beneficially Owned by a
Related Person, or any partial or complete liquidation, spinoff, splitoff,
or splitup of the Corporation or any Subsidiary thereof; provided, however,
that this Section 8.4(a)(4) shall not relate to any transaction that has
been approved by a majority of the Continuing Directors; or
(5) The acquisition upon the issuance thereof of Beneficial Ownership
by a Related Person of shares of Voting Stock or securities convertible
into shares of Voting Stock or any voting securities or securities
convertible into voting securities of any Subsidiary of the Corporation, or
the acquisition upon the issuance thereof of Beneficial Ownership by a
Related Person of any rights, warrants, or options to acquire any of the
foregoing or any combination of the foregoing shares of Voting Stock or
voting securities of a Subsidiary, if any.
(b) A "Series of Related Transactions" shall be deemed to include not
only a series of transactions with the same Related
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Person, but also a series of separate transactions with a Related Person or any
Affiliate or Associate of such Related Person.
(c) A "Person" shall mean any individual, firm, corporation, or other
entity and any partnership, syndicate, or other group.
(d) "Related Person" shall mean any Person (other than the Corporation
or any Subsidiary of the Corporation or the Continuing Directors, singly or as a
group) who or that at any time described in the last sentence of the penultimate
paragraph of this subsection (d):
(1) is the Beneficial Owner, directly or indirectly, of more than ten
percent (10%) of the voting power of the outstanding shares of Voting Stock
and who has not been the Beneficial Owner, directly or indirectly, of more
than ten percent (10%) of the voting power of the outstanding shares of
Voting Stock for a continuous period of two years prior to the date in
question; or
(2) is an Affiliate of the Corporation and at any time within the two-
year period immediately prior to the date in question (but not continuously
during such two-year period) was the Beneficial Owner, directly or
indirectly, of ten percent (10%) or more of the voting power of the then
outstanding shares of Voting Stock; or
(3) is an assignee of or has otherwise succeeded to any shares of the
Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Related Person, if
such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933, as amended.
A Related Person shall be deemed to have acquired a share of the
Corporation at the time when such Related Person became the Beneficial Owner
thereof. For the purposes of determining whether a Person is the Beneficial
Owner of ten percent (10%) or more of the voting power of the then outstanding
Voting Stock, the outstanding Voting Stock shall be deemed to include any Voting
Stock that may be issuable to such Person pursuant to a right to acquire such
Voting Stock and that is therefore deemed to be Beneficially Owned by such
Person pursuant to Section 8.4(e)(2)(A). A Person who is a Related Person at (1)
the time any definitive agreement relating to a Business Combination is entered
into, (2) the record date for the determination of shareholders entitled to
notice of and to vote on a Business Combination, or (3) the time
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immediately prior to the consummation of a Business Combination shall be deemed
a Related Person.
A Related Person shall not include the Board of Directors of the
Corporation acting as a group. In addition, a Related Person shall not include
any Person who possesses more than ten percent (10%) of the voting power of the
outstanding shares of Voting Stock of the Corporation at the time of filing
these Restated Articles of Incorporation.
(e) A Person shall be a "Beneficial Owner" of any shares of Voting
Stock:
(1) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(2) which such Person or any of its Affiliates or Associates has (A)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement, or
understanding or upon the exercise of conversion rights, exchange rights,
warrants, or options, or otherwise, or (B) the right to vote pursuant to
any agreement, arrangement, or understanding; or
(3) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of its Affiliates or Associates has
any agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of any shares of Voting Stock.
(f) An "Affiliate" of, or a person Affiliated with, a specific Person
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
(g) The term "Associate" used to indicate a relationship with any
Person, means (1) any corporation or organization (other than this Corporation
or a majority-owned Subsidiary of this Corporation) of which such Person is an
officer or partner or is, directly or indirectly, the Beneficial Owner of five
percent (5%) or more of any class of equity securities, (2) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, (3) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person, or (4) any investment company registered under the
Investment Company Act of 1940, as amended, for which such Person or any
Affiliate of such Person serves as investment adviser.
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(h) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Related Person set
forth in Section 8.4(d) hereof, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
(i) "Continuing Director" means any member of the Board of Directors
of the Corporation (the "Board") who is not associated with the Related Person
and was a member of the Board prior to the time that the Related Person became a
Related Person, and any successor of a Continuing Director who is not associated
with the Related Person and is recommended to succeed a Continuing Director by
not less than two-thirds of the Continuing Directors then on the Board.
(j) "Independent Majority of Shareholders" shall mean the holders of
the outstanding shares of Voting Stock representing a majority of all the votes
entitled to be cast by all shares of Voting Stock other than shares Beneficially
Owned or controlled, directly or indirectly, by a Related Person.
(k) "Voting Stock" shall mean all outstanding shares of capital stock
of the Corporation or another corporation entitled to vote generally on the
election of Directors, and each reference to a proportion of shares of Voting
Stock shall refer to such proportion of the votes entitled to be cast by such
shares.
(l) "Substantial Part" means properties and assets involved in any
single transaction or a Series of Related Transactions having an aggregate fair
market value of more than ten percent (10%) of the total consolidated assets of
the Person in question as determined immediately prior to such transaction or
Series of Related Transactions.
Section 8.5. Director Determinations. A majority of the Continuing
Directors shall have the power to determine for the purposes of this Article
VIII, on the basis of information known to them: (a) the number of shares of
Voting Stock of which any Person is the Beneficial Owner, (b) whether a Person
is an Affiliate or Associate of another, (c) whether a Person has an agreement,
arrangement, or understanding with another as to the matters referred to in the
definition of "Beneficial Owner," (d) whether the assets subject to any Business
Combination constitute a Substantial Part, (e) whether two or more transactions
constitute a Series of Related Transactions, and (f) such other matters with
respect to which a determination is required under this Article VIII.
Section 8.6. Amendment of Article VIII or Certain Other Provisions.
Any amendment, change, or repeal of this Article VIII,
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or of Sections 6.1, 6.5, 7.2 or 9.2, or any other amendment of these Restated
Articles of Incorporation which would have the effect of modifying or permitting
circumvention of this Article VIII or such other provisions of these Restated
Articles of Incorporation, shall require the affirmative vote, at a meeting of
shareholders of the Corporation:
(a) Of at least sixty-six and two-thirds (66-2/3) of the votes
entitled to be cast by the holders of the outstanding shares of all classes of
Voting Stock of the Corporation considered for purposes of this Article VIII as
a single class; and
(b) Of an Independent Majority of Shareholders;
Provided, however, that this Section 8.6 shall not apply to, and such vote shall
not be required for, any such amendment, change, or repeal recommended to
shareholders by the favorable vote of not less than two-thirds (2/3) of the
Directors who then qualify as Continuing Directors with respect to all Related
Persons and any such amendment, change, or repeal so recommended shall require
only the vote, if any, required under the applicable provisions of the
Corporation Law.
Section 8.7. Fiduciary Obligations Unaffected. Nothing in this
Article VIII shall be construed to relieve any Related Person from any fiduciary
duty imposed by law.
Section 8.8. Article VIII Nonexclusive. The provisions of this
Article VIII are nonexclusive and are in addition to any other provisions of law
or these Restated Articles of Incorporation or the By-Laws of the Corporation
relating to Business Combinations, Related Persons, or similar matters.
ARTICLE IX
Miscellaneous Provisions
------------------------
Section 9.1. Amendment or Repeal. Except as otherwise expressly
provided for in these Restated Articles of Incorporation, the Corporation shall
be deemed, for all purposes, to have reserved the right to amend, alter, change,
or repeal any provision contained in these Restated Articles of Incorporation to
the extent and in the manner now or hereafter permitted or prescribed by
statute, and all rights herein conferred upon shareholders are granted subject
to such reservation.
Section 9.2. Redemption of Shares Acquired in Control Share
Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the
Corporation, it is authorized to redeem its securities pursuant to IC 23-1-42-
10.
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Section 9.3. Captions. The captions of the Articles and Sections of
these Restated Articles of Incorporation have been inserted for convenience of
reference only and do not in any way define, limit, construe, or describe the
scope or intent of any Article or Section hereof.
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ARTICLES OF AMENDMENT OF THE
RESTATED ARTICLES OF INCORPORATION
OF QUALITY DINING, INC.
Quality Dining, Inc. (hereinafter referred to as the "Corporation"),
existing pursuant to the Indiana Business Corporation Law and desiring to give
notice of corporate action effectuating amendment of its Restated Articles of
Incorporation, sets forth the following facts:
ARTICLE I
AMENDMENT
Section 1. The name of the Corporation following this amendment continues
to be Quality Dining, Inc.
Section 2. Upon effectiveness of these Articles of Amendment, the
Corporation's Restated Articles of Incorporation shall be amended by adding a
new Section 5.6 thereto, the exact text of which is attached as Exhibit A.
Section 3. The foregoing amendment was duly adopted by the Corporation's
Board of Directors on May 20, 1996. The effective date of such amendment shall
be the date of filing of these Articles of Amendment with the office of the
Secretary of State of the State of Indiana.
ARTICLE II
MANNER OF ADOPTION AND VOTE
Section 1. The amendment was adopted by the Corporation's Board of
Directors without shareholder action, and shareholder action was not required.
<PAGE>
Section 2. The manner of adoption of the amendment by the Corporation's
Board of Directors constitutes full legal compliance with the provisions of the
Indiana Business Corporation Law and the Corporation's Restated Articles of
Incorporation and By-Laws.
IN WITNESS WHEREOF, the undersigned officer of Quality Dining, Inc. has
executed these Articles of Amendment this 6th day of June, 1996.
/S/ David M. Findlay
---------------------------------------
David M. Findlay
Vice President
<PAGE>
DESIGNATION OF SERIES A CONVERTIBLE CUMULATIVE PREFERRED STOCK
Section 5.6. Terms of Series A Convertible Cumulative Preferred Stock. The
designations, preferences, limitations and relative voting and other rights of
the shares of the first series of the authorized Preferred Stock of the
Corporation (such shares being hereinafter sometimes called the "Series A
Preferred Stock"), in addition to those set forth in these Restated Articles of
Incorporation which are applicable to Preferred Stock of all series, are hereby
fixed as follows:
(a) Designation and Amount. The shares of such series shall be
designated the Series A Convertible Cumulative Preferred Stock and the
number of authorized shares constituting such series shall be 141,450
shares. Any authorized shares of such series that are not issued at the
Effective Time of the Merger (as defined in paragraph (e)(viii) below)
shall revert to the status of authorized but unissued Preferred Stock of
the Corporation.
(b) Stated Value. The stated value of the Series A Preferred Stock
shall be $100.00 per share.
(c) Dividends.
(i) When and as declared by the Corporation's Board of Directors,
and to the extent permitted by the Corporation Law, the Corporation
will pay preferential dividends to the holders of the Series A
Preferred Stock as provided in this subsection (i). The Series A
Preferred Stock shall accrue dividends that shall increase with the
passage of time. Except as otherwise provided herein, dividends on
each share of Series A Preferred Stock (a "Share") will accrue
cumulatively on an annual basis, beginning with the first anniversary
of the Date of Issuance (as defined below), at the rate indicated in
the chart below, such rate to be calculated as the specified
percentage of the stated value of such Share from and including the
Date of Issuance of such Share, to and including the date on which the
Corporation redeems such Share (as provided for in subsection (d)
below). Such dividends will accrue whether or not they have been
declared and whether or not there are funds of the Corporation legally
available for the payment of dividends. For the purposes of
determining the amount of any dividend, July 1, 1993 will be deemed
the "Date of Issuance," regardless of (A) the date upon which any
Shares are issued, (B) the number of times transfer of such Shares is
made on the stock records maintained by or for the Corporation, and
(C) the number of certificates which may be issued to evidence such
Shares.
The dividend rate shall follow the table set forth below:
ANNUAL RATE YEARS
----------- -----
0%......................... July 1, 1993-June 30, 2000
2%......................... July 1, 2000-June 30, 2005
4%......................... July 1, 2005-June 30, 2010
6%......................... July 1, 2010-June 30, 2015
8%......................... July 1, 2015-June 30, 2020
10%......................... July 1, 2020-June 30, 2025
(ii) Dividend Payment and Accrual Dates. The Corporation will
pay dividends, if at all, on the Series A Preferred Stock within 60
days following the applicable anniversary date as set forth in the
table above. To the extent dividends are not paid as provided for
herein, all such unpaid dividends will be deemed to have accrued on
each Share outstanding as of the applicable anniversary date, and will
be added to the Liquidation Value (as defined below) of such Share,
and will remain a part thereof until such dividends are paid or until
the Share is redeemed.
(iii) Distribution of Partial Dividend Payments. If at any time
the Corporation pays less than the total amount of dividends then
accrued with respect to the Series A Preferred Stock, such payment
will be distributed ratably among the holders of the Series A
Preferred Stock based upon the aggregate accrued but unpaid dividends
on the Shares held by such holder.
(d) Redemptions.
(i) Scheduled Redemption. Except as set forth herein, the
Corporation will redeem all of the then outstanding Shares of Series A
Preferred Stock on July 1, 2025 (the "Scheduled Redemption Date"),
<PAGE>
at a price per Share equal to the Liquidation Value thereof. The sum of the
stated value of the Share and all accrued cumulative and unpaid dividends
thereon shall be referred to as the "Liquidation Value."
(ii) Special Redemptions. Notwithstanding the foregoing, the Corporation
may redeem all of the then outstanding Shares of Series A Preferred Stock at any
time, upon 30 days prior written notice to the holders of such Shares, at a
price per share equal to the Liquidation Value of the Shares as of the date upon
which the Shares are to be redeemed.
(iii) Payment. For each Share which is to be redeemed, if the funds of the
Corporation legally available for redemption of the Shares on any redemption
date are insufficient to redeem the total number of Shares to be redeemed on
such date, those funds which are legally available will be used to redeem the
maximum possible number of Shares ratably among the holders of the Shares to be
redeemed based upon the aggregate Liquidation Value of such Shares held by each
such holder. At any time thereafter, when additional funds of the Corporation
are legally available for the redemption of Shares, such funds will immediately
be used to redeem the balance of the Shares which the Corporation has become
obligated to redeem on any redemption date but which it has not redeemed.
(iv) Notice of Redemptions. The Corporation will mail written notice of
redemption of Series A Preferred Stock to each record holder not more than sixty
days nor less than thirty days prior to the date on which such redemption is to
be made. Upon mailing any notice of redemption which relates to a redemption at
the Corporation's option, the Corporation will become obligated to redeem the
total number of Shares specified in such notice at the time of redemption
specified therein. In case fewer than the total number of Shares represented by
any certificate are redeemed, a new certificate representing the number of
unredeemed Shares will be issued to the holder thereof without cost of such
holder within three business days after surrender of the certificate
representing the redeemed Shares.
(v) Dividends After Redemption Date. No Share is entitled to any dividends
accruing after the date on which the Liquidation Value of such Share is paid. On
such date all rights of the holders of such Share will cease, and such Share
will not be deemed to be outstanding.
(e) Conversion Rights.
(i) Subject to paragraphs (ii) and (iii) below, any holder of Series A
Preferred Stock may convert all of the Series A Preferred Stock held by such
holder into shares of Common Stock in the manner, and at such time, as provided
for in paragraphs (ii) and (iii), below.
(ii) Each share of Series A Preferred Stock shall be convertible, at the
option of the holder thereof, and without the payment of additional
consideration by the holder thereof, at any time within ninety (90) days after
the Effective Time of the Merger (as defined in paragraph (viii) below) into
such number of fully paid and nonassessable shares of the Corporation's Common
Stock as shall be determined by multiplying the number of shares to be converted
by the Liquidation Value of such shares, and dividing the result by the Fair
Market Value per share of the Corporation's Common Stock.
(iii) The Fair Market Value per share of the Corporation's Common Stock
shall be deemed to be the average closing price per share of the Corporation's
Common Stock on the Nasdaq National Market System for the five trading days
immediately preceding (and not including) the date of the Effective Time of the
Merger.
(iv) Each conversion of Series A Preferred Stock will be deemed to have
been effective as of the close of business on the date on which the certificate
or certificates representing the Series A Preferred Stock to be converted have
been surrendered at the principal office of the Corporation. At such time that
such conversion has been effected, the rights of the holder of such Series A
Preferred Stock as such holder will cease, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
<PAGE>
(v) As soon as possible after a conversion has been effected (but in
any event within five business days in the case of paragraph (vii) below),
the Corporation will deliver to the converting holder:
(A) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified; and
(B) payment in an amount equal to the amount payable under
paragraph (vii) below with respect to such conversion.
(vi) The issuance of certificates for shares of Common Stock upon
conversion of Series A Preferred Stock will be made without charge to the
holders of such Series A Preferred Stock. Upon conversion of each share of
Series A Preferred Stock, the Corporation will take all such actions as are
necessary in order to ensure the Common Stock issuable with respect to such
conversion will be validly issued, fully paid, and non-assessable.
(vii) If any fractional interest in a share of Common Stock would,
except for the provisions of this paragraph (vii), be deliverable upon any
conversion of the Series A Preferred Stock, the Corporation, in lieu of
delivering the fractional share therefor, will pay an amount to the holder
thereof equal to such fractional interest of the Fair Market Value per
share.
(viii) The "Effective Time of the Merger" means the date an
appropriate certificate of Merger is filed with the Delaware Secretary of
State effecting the merger of BAC, Inc., the Corporation's wholly owned
subsidiary, with and into Bruegger's Corporation.
(f) Voting Rights. The holders of the Series A Preferred Stock are entitled
to one vote for each share held at all meetings of stockholders. Except as
required by the Corporation Law or by the provisions of Section 5.6(h), holders
of Series A Preferred Stock shall vote together with the holders of Common Stock
as a single class.
(g) Priorities.
(i) Dividends. As long as any Series A Preferred Stock remains
outstanding, the Corporation will not declare or pay any dividend or make
any distribution upon the Common Stock, unless and until all accrued but
unpaid dividends on Series A Preferred Stock have been fully paid to the
holders of such shares.
(ii) Priority on Liquidation. Upon any liquidation, dissolution, or
winding up of the Corporation, if the assets of the Corporation to be
distributed among the holders of Series A Preferred Stock and the Common
Stock are insufficient to permit payment to the holders of Series A
Preferred Stock in an amount equal to the Liquidation Value of all
outstanding shares of Series A Preferred Stock, then the assets of the
Corporation to be distributed to such holders will be distributed (A)
first, to the holders of Series A Preferred Stock, until such holders have
been paid the aggregate amount which they are entitled to be paid, or, if
the assets to be distributed are insufficient for such purpose, the entire
assets to be distributed will be distributed ratably among such holders
based upon the aggregate Liquidation Value of Series A Preferred Stock held
by each such holder, and (B) second, the balance (if any) will be
distributed ratably among the holders of the Common Stock.
(h) Amendment and Waiver. No amendment, modification or waiver will be
binding or effective with respect to any provision of this Section 5.6 without
the prior written consent of the holders of at least 50% of the Series A
Preferred Stock outstanding at the time such action is taken; provided that no
such action may change (i) the rate at which or the manner in which dividends on
the Series A Preferred Stock accrue, the times at which such dividends become
payable, the amount payable on redemption of the Series A Preferred Stock, or
the times at which redemption of Series A Preferred Stock is to occur, without
the prior written consent of the holders of at least 60% of the Series A
Preferred Stock then outstanding, or (ii) the percentage required to approve any
change described in clause (i) above, without the prior written consent of the
holders of at least 60% of the Series A Preferred Stock then outstanding.
Notwithstanding anything to be contrary in the foregoing, the Corporation may
issue new series of Preferred Stock without the prior written consent of any
holder of Series A Preferred Stock, provided that the Corporation complies with
the requirements of the Corporation Law and these Restated Articles of
Incorporation.
<PAGE>
EXHIBIT 3-B
BY-LAWS
OF
QUALITY DINING, INC.
(As last amended effective June 15, 1996
to amend Sections 2.7, 2.8 and 2.9)
ARTICLE I
Meetings of Shareholders
------------------------
Section 1.1. Annual Meetings. Annual meetings of the shareholders of the
Corporation shall be held on the first Monday of March of each year commencing
in March, 1995, at such hour and at such place within or without the State of
Indiana as shall be designated by the Board of Directors. In the absence of
designation, the meeting shall be held at the principal office of the
Corporation at 11:00 a.m. (local time). The Board of Directors may, by
resolution, change the date or time of such annual meeting. If the day fixed for
any annual meeting of shareholders shall fall on a legal holiday, then such
annual meeting shall be held on the first following day that is not a legal
holiday.
Section 1.2. Special Meetings. Special meetings of the shareholders of
the Corporation may be called at any time by the Board of Directors or the
Chairman of the Board and shall be called by the Board of Directors if the
Secretary receives written, dated and signed demands for a special meeting,
describing in reasonable detail the purpose or purposes for which it is to be
held, from the holders of shares representing at least twenty-five percent (25%)
of all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting; provided, however, that any such demand(s) delivered
to the Secretary at any time at which the Corporation has more than 50
shareholders must be properly delivered by the holders of shares representing at
least 80% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. If the Secretary receives one (1) or
more proper written demands for a special meeting of shareholders, the Board of
Directors may set a record date for determining shareholders entitled to make
such demand. The Board of Directors or the Chairman of the Board, as the case
may be, calling a special meeting of shareholders shall set the date, time and
place of such meeting, which may be held within or without the State of Indiana.
Section 1.3. Notices. A written notice, stating the date, time, and place
of any meeting of the shareholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, shall be delivered or
mailed by the Secretary of the Corporation, to each shareholder of record of the
Corporation entitled to notice of or to vote at such meeting no fewer than ten
(10) nor more than sixty (60) days before the date
<PAGE>
of the meeting. In the event of a special meeting of shareholders required to be
called as the result of a demand therefor made by shareholders, such notice
shall be given no later than the sixtieth (60th) day after the Corporation's
receipt of the demand requiring the meeting to be called. Notice of
shareholders' meetings, if mailed, shall be mailed, postage prepaid, to each
shareholder at his address shown in the Corporation's current record of
shareholders.
Notice of a meeting of shareholders shall be given to shareholders not
entitled to vote, but only if a purpose for the meeting is to vote on any
amendment to the Corporation's Restated Articles of Incorporation, merger, or
share exchange to which the Corporation would be a party, sale of the
Corporation's assets, dissolution of the Corporation, or consideration of voting
rights to be accorded to shares acquired or to be acquired in a "control share
acquisition" (as such term is defined in the Indiana Business Corporation Law).
Except as required by the foregoing sentence or as otherwise required by the
Indiana Business Corporation Law or the Corporation's Restated Articles of
Incorporation, notice of a meeting of shareholders is required to be given only
to shareholders entitled to vote at the meeting.
A shareholder or his proxy may at any time waive notice of a meeting if the
waiver is in writing and is delivered to the Corporation for inclusion in the
minutes or filing with the Corporation's records. A shareholder's attendance at
a meeting, whether in person or by proxy, (a) waives objection to lack of notice
or defective notice of the meeting, unless the shareholder or his proxy at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder or his proxy objects to considering the
matter when it is presented. Each shareholder who has, in the manner above
provided, waived notice or objection to notice of a shareholders' meeting shall
be conclusively presumed to have been given due notice of such meeting,
including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a different
date, time, or place, notice need not be given of the new date, time, or place
if the new date, time, or place is announced at the meeting before adjournment,
unless a new record date is or must be established for the adjourned meeting.
Section 1.4. Voting. Except as otherwise provided by the Indiana Business
Corporation Law or the Corporation's Restated Articles of Incorporation, each
share of the capital stock of any class of the Corporation that is outstanding
at the record date established for any annual or special meeting of shareholders
and is outstanding at the time of and represented in person or by proxy at the
annual or special meeting, shall entitle the record holder
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<PAGE>
thereof, or his proxy, to one (1) vote on each matter voted on at the meeting.
Section 1.5. Quorum. Unless the Corporation's Restated Articles of
Incorporation or the Indiana Business Corporation Law provide otherwise, at all
meetings of shareholders, a majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum for action on
the matter. Action may be taken at a shareholders' meeting only on matters with
respect to which a quorum exists; provided, however, that any meeting of
shareholders, including annual and special meetings and any adjournments
thereof, may be adjourned to a later date although less than a quorum is
present. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Section 1.6. Vote Required To Take Action. If a quorum exists as to a
matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, except
as the Corporation's Restated Articles of Incorporation or the Indiana Business
Corporation Law require a greater number of affirmative votes. Directors shall
be elected by a plurality of the votes properly cast.
Section 1.7. Record Date. Only such persons shall be entitled to notice
of or to vote, in person or by proxy, at any shareholders' meeting as shall
appear as shareholders upon the books of the Corporation as of such record date
as the Board of Directors shall determine, which date may not be earlier than
the date seventy (70) days immediately preceding the meeting. In the absence of
such determination, the record date shall be the fiftieth (50th) day immediately
preceding the date of such meeting. Unless otherwise provided by the Board of
Directors, shareholders shall be determined as of the close of business on the
record date.
Section 1.8. Proxies. A shareholder may vote his shares either in person
or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the
shareholder (including authorizing the proxy to receive, or to waive, notice of
any shareholders' meeting within the effective period of such proxy) by signing
an appointment form, either personally or by the shareholders' attorney-in-fact.
An appointment of a proxy is effective when received by the Secretary or other
officer or agent authorized to tabulate votes and is effective for eleven (11)
months unless a longer period is expressly provided in the appointment form. The
proxy's authority may be limited to a particular meeting or may be general and
authorize the proxy to represent the shareholder at any meeting of shareholders
held within the time provided in the appointment form. Subject to the Indiana
Business Corporation Law
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<PAGE>
and to any express limitation on the proxy's authority appearing on the face of
the appointment form, the Corporation is entitled to accept the proxy's vote or
other action as that of the shareholder making the appointment.
Section 1.9. Removal of Directors. Any or all of the members of the Board
of Directors may be removed, for good cause, only at a meeting of the
shareholders called expressly for that purpose, by a vote of the holders of
outstanding shares representing at least sixty-six and two-thirds percent (66-
2/3%) of the votes then entitled to be cast at an election of Directors.
Directors may not be removed in the absence of good cause.
Section 1.10. Written Consents. Any action required or permitted to be
taken at a shareholders' meeting may be taken without a meeting if the action is
taken by all the shareholders entitled to vote on the action. The action must be
evidenced by one (1) or more written consents describing the action taken,
signed by all the shareholders entitled to vote on the action, and delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records. Action taken under this Section 1.10 is effective when the last
shareholder signs the consent, unless the consent specifies a different prior or
subsequent effective date, in which case the action is effective on or as of the
specified date. Such consent shall have the same effect as a unanimous vote of
all shareholders and may be described as such in any document.
Section 1.11. Participation by Conference Telephone. The Chairman of the
Board or the Board of Directors may permit any or all shareholders to
participate in an annual or special meeting of shareholders by, or through the
use of, any means of communication, such as conference telephone, by which all
shareholders participating may simultaneously hear each other during the
meeting. A shareholder participating in a meeting by such means shall be deemed
to be present in person at the meeting.
ARTICLE II
Directors
---------
Section 2.1. Number and Terms. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors
consisting of eleven (11) directors.
The Directors shall be divided into three (3) groups, with each group
consisting of one-third (1/3) of the total Directors, as near as may be, with
the term of office of the first group to expire at the annual meeting of
shareholders in 1995, the term of office of the second group to expire at the
annual meeting of shareholders in 1996, and the term of office of the third
group to expire at the annual meeting of shareholders in 1997; and at
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<PAGE>
each annual meeting of shareholders, the Directors chosen to succeed those whose
terms then expire shall be identified as being of the same group as the
Directors they succeed and shall be elected for a term expiring at the third
succeeding annual meeting of shareholders.
Despite the expiration of a Director's term, the Director shall continue to
serve until his successor is elected and qualified, or until the earlier of his
death, resignation, disqualification or removal, or until there is a decrease in
the number of Directors. Any vacancy occurring in the Board of Directors, from
whatever cause arising, shall be filled by selection of a successor by a
majority vote of the remaining members of the Board of Directors (although less
than a quorum); provided, however, that if such vacancy or vacancies leave the
Board of Directors with no members or if the remaining members of the Board are
unable to agree upon a successor or determine not to select a successor, such
vacancy may be filled by a vote of the shareholders at a special meeting called
for that purpose or at the next annual meeting of shareholders. The term of a
Director elected or selected to fill a vacancy shall expire at the end of the
term for which such Director's predecessor was elected, or if the vacancy arises
because of an increase in the size of Board of Directors, at the end of the term
specified at the time of election or selection.
The Directors and each of them shall have no authority to bind the
Corporation except when acting as a Board.
Section 2.2. Quorum and Vote Required To Take Action. A majority of the
whole Board of Directors shall be necessary to constitute a quorum for the
transaction of any business, except the filling of vacancies. If a quorum is
present when a vote is taken, the affirmative vote of a majority of the
Directors present shall be the act of the Board of Directors, unless the act of
a greater number is required by the Indiana Business Corporation Law, the
Corporation's Restated Articles of Incorporation or these By-Laws.
Section 2.3. Annual and Regular Meetings. The Board of Directors shall
meet annually, without notice, immediately following the annual meeting of the
shareholders, for the purpose of transacting such business as properly may come
before the meeting. Other regular meetings of the Board of Directors, in
addition to said annual meeting, shall be held on such dates, at such times and
at such places as shall be fixed by resolution adopted by the Board of Directors
and specified in a notice of each such regular meeting, or otherwise
communicated to the Directors. The Board of Directors may at any time alter the
date for the next regular meeting of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of the Board of Directors
may be called by any member of the Board of Directors upon not less than twenty-
four (24) hours' notice given
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<PAGE>
to each Director of the date, time, and place of the meeting, which notice need
not specify the purpose or purposes of the special meeting. Such notice may be
communicated in person (either in writing or orally), by telephone, telegraph,
teletype, or other form of wire or wireless communication, or by mail, and shall
be effective at the earlier of the time of its receipt or, if mailed, five (5)
days after its mailing. Notice of any meeting of the Board may be waived in
writing at any time if the waiver is signed by the Director entitled to the
notice and is filed with the minutes or corporate records. A Director's
attendance at or participation in a meeting waives any required notice to the
Director of the meeting, unless the Director at the beginning of the meeting (or
promptly upon the Director's arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
Section 2.5. Written Consents. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board. The action must be evidenced by
one (1) or more written consents describing the action taken, signed by each
Director, and included in the minutes or filed with the corporate records
reflecting the action taken. Action taken under this Section 2.5 is effective
when the last Director signs the consent, unless the consent specifies a
different prior or subsequent effective date, in which cases the action is
effective on or as of the specified date. A consent signed under this Section
2.5 shall have the same effect as a unanimous vote of all members of the Board
and may be described as such in any document.
Section 2.6. Participation by Conference Telephone. The Board of
Directors may permit any or all Directors to participate in a regular or special
meeting by, or through the use of, any means of communication, such as
conference telephone, by which all Directors participating may simultaneously
hear each other during the meeting. A Director participating in a meeting by
such means shall be deemed to be present in person at the meeting.
Section 2.7. Executive Committee. The Board of Directors shall appoint up
to six (6) members to an Executive Committee. The Executive Committee shall,
subject to the restrictions of Section 2.9, be authorized to exercise the
authority of the full Board of Directors at any times other than during regular
or special meetings of the Board of Directors. All actions taken by the
Executive Committee shall be reported at the first regular meeting of the Board
of Directors following such actions. Members of the Executive Committee shall
serve at the pleasure of the Board of Directors.
Section 2.8. Other Committees. (a) The Board of Directors may create one
(1) or more committees in addition to the Executive Committee and appoint
members of the Board of Directors to serve on them, by resolution of the Board
of Directors adopted
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<PAGE>
by a majority of all the Directors in office when the resolution is adopted. The
committee may exercise the authority of the Board of Directors to the extent
specified in the resolution. Each committee may have one (1) or more members,
and all the members of such committee shall serve at the pleasure of the Board
of Directors.
Section 2.9. Limitations on Committees; Notice, Quorum and Voting.
(a) Neither the Executive Committee nor any other committee hereafter
established may:
(1) authorize dividends or other distributions, except a
committee may authorize or approve a reacquisition of
shares if done according to a formula or method
prescribed by the Board of Directors;
(2) approve or propose to shareholders action that is
required to be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any
of its committees;
(4) except as permitted under Section 2.9(a)(7) below,
amend the Corporation's Restated Articles of
Incorporation under IC 23-1-38-2;
(5) adopt, amend, repeal, or waive provisions of these
By-Laws;
(6) approve a plan of merger not requiring shareholder
approval; or
(7) authorize or approve the issuance or sale or a
contract for sale of shares, or determine the
designation and relative rights, preferences, and
limitations of a class or series of shares, except
the Board of Directors may authorize a committee
(or an executive officer of the Corporation
designated by the Board of Directors) to take the
action described in this Section 2.9(a)(7) within
limits prescribed by the Board of Directors.
(b) Except to the extent inconsistent with the resolutions creating a
committee, Sections 2.1 through 2.6 of these By-Laws, which govern
meetings, action without meetings, notice and waiver of notice, quorum and
voting requirements and telephone participation in meetings of the Board of
Directors, apply to each committee and its members as well.
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<PAGE>
ARTICLE III
Officers
--------
Section 3.1. Designation, Selection and Terms. The officers of the
Corporation shall consist of the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer and the Secretary. The Board of Directors may
also elect Vice Presidents, Assistant Secretaries and Assistant Treasurers, and
such other officers or assistant officers as it may from time to time determine
by resolution creating the office and defining the duties thereof. In addition,
the Chairman of the Board or the President may, by a certificate of appointment
creating the office and defining the duties thereof delivered to the Secretary
for inclusion with the corporate records, from time to time create and appoint
such assistant officers as they deem desirable. The officers of the Corporation
shall be elected by the Board of Directors (or appointed by the Chairman of the
Board or the President as provided above) and need not be selected from among
the members of the Board of Directors, except for the Chairman of the Board and
the President who shall be members of the Board of Directors. Any two (2) or
more offices may be held by the same person. All officers shall serve at the
pleasure of the Board of Directors and, with respect to officers appointed by
the Chairman of the Board or the President, also at the pleasure of such
officers. The election or appointment of an officer does not itself create
contract rights.
Section 3.2. Removal. The Board of Directors may remove any officer at
any time with or without cause. An officer appointed by the Chairman of the
Board or the President may also be removed at any time, with or without cause,
by either of such officers. Vacancies in such offices, however occurring, may be
filled by the Board of Directors at any meeting of the Board of Directors (or by
appointment by the Chairman of the Board or the President, to the extent
provided in Section 3.1 of these By-Laws).
Section 3.3. Chairman of the Board. The Chairman of the Board shall be
the chief executive and principal policymaking officer of the Corporation.
Subject to the authority of the Board of Directors, he shall formulate the major
policies to be pursued in the administration of the Corporation's affairs. He
shall study and make reports and recommendations to the Board of Directors with
respect to major problems and activities of the Corporation and shall see that
the established policies are placed into effect and carried out under the
direction of the President. The Chairman of the Board shall, if present, preside
at all meetings of the shareholders and of the Board of Directors.
Section 3.4. President. Subject to the provisions of Section 3.3, the
President shall be the chief operating officer of the Corporation, shall
exercise the powers and perform the duties which ordinarily appertain to that
office and shall manage and
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<PAGE>
operate the business and affairs of the Corporation in conformity with the
policies established by the Board of Directors and by the Chairman of the Board,
or as may be provided for in these By-Laws. In connection with the performance
of his duties, he shall keep the Chairman of the Board fully informed as to all
phases of the Corporation's activities. In the absence of the Chairman of the
Board, the President shall preside at meetings of the shareholders and of the
Board of Directors.
Section 3.5. Chief Financial Officer. The Chief Financial Officer shall
be the chief financial officer of the Corporation and shall perform all of the
duties customary to that office. He shall be responsible for all of the
Corporation's financial affairs, subject to the supervision and direction of the
Chairman of the Board and the President, and shall have and perform such further
powers and duties as the Board of Directors may, from time to time, prescribe
and as the Chairman of the Board or the President may, from time to time,
delegate to him.
Section 3.6. Vice Presidents. Each Vice President shall have such powers
and perform such duties as the Board of Directors may, from time to time,
prescribe and as the Chairman of the Board or the President may, from time to
time, delegate to him.
Section 3.7. Treasurer. The Treasurer shall perform all of the duties
customary to that office, shall be the chief accounting officer of the
Corporation and shall be responsible for maintaining the Corporation's
accounting books and records and preparing its financial statements, subject to
the supervision and direction of the Chief Financial Officer and other superior
officers within the Corporation. He shall also be responsible for causing the
Corporation to furnish financial statements to its shareholders pursuant to IC
23-1-53-1.
Section 3.8. Assistant Treasurer. In the absence or inability of the
Treasurer, the Assistant Treasurer, if any, shall perform only such duties as
are specifically assigned to him, in writing, by the Board of Directors, the
Chairman of the Board, the President, the Chief Financial Officer, or the
Treasurer.
Section 3.9. Secretary. The Secretary shall be the custodian of the
books, papers, and records of the Corporation and of its corporate seal, if any,
and shall be responsible for seeing that the Corporation maintains the records
required by IC 23-1-52-1 (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual report required
by IC 23-1-53-3. The Secretary shall be responsible for preparing minutes of the
meetings of the shareholders and of the Board of Directors and for
authenticating records of the Corporation, and he shall perform all of the other
duties usual in the office of Secretary of a corporation.
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Section 3.10. Assistant Secretary. In the absence or inability of the
Secretary, the Assistant Secretary, if any, shall perform only such duties as
are provided herein or specifically assigned to him, in writing, by the Board of
Directors, the Chairman of the Board, the President, or the Secretary.
Section 3.11. Salary. The Board of Directors may, at its discretion, from
time to time, fix the salary of any officer by resolution included in the minute
book of the Corporation.
ARTICLE IV
Checks
------
All checks, drafts, or other orders for payment of money shall be signed in
the name of the Corporation by such officers or persons as shall be designated
from time to time by resolution adopted by the Board of Directors and included
in the minute book of the Corporation; and in the absence of such designation,
such checks, drafts, or other orders for payment shall be signed by the
Chairman, the President, the Vice President-Finance or the Treasurer.
ARTICLE V
Loans
-----
Such of the officers of the Corporation as shall be designated from time to
time by resolution adopted by the Board of Directors and included in the minute
book of the Corporation shall have the power, with such limitations thereon as
may be fixed by the Board of Directors, to borrow money in the Corporation's
behalf, to establish credit, to discount bills and papers, to pledge collateral,
and to execute such notes, bonds, debentures, or other evidences of
indebtedness, and such mortgages, trust indentures, and other instruments in
connection therewith, as may be authorized from time to time by such Board of
Directors.
ARTICLE VI
Execution of Documents
----------------------
The Chairman of the Board, the President or any other officer authorized by
the Board of Directors may, in the Corporation's name, sign all deeds, leases,
contracts, or similar documents unless otherwise directed by the Board of
Directors or otherwise provided herein or in the Corporation's Restated Articles
of Incorporation, or as otherwise required by law.
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ARTICLE VII
Stock
-----
Section 7.1. Execution. Certificates for shares of the capital stock of
the Corporation shall be signed by the Chairman of the Board or the President
and by the Secretary and the seal of the Corporation (or a facsimile thereof),
if any, may be thereto affixed. Where any such certificate is also signed by a
transfer agent or a registrar, or both, the signatures of the officers of the
Corporation may be facsimiles. The Corporation may issue and deliver any such
certificate notwithstanding that any such officer who shall have signed, or
whose facsimile signature shall have been imprinted on, such certificate shall
have ceased to be such officer.
Section 7.2. Contents. Each certificate issued after the adoption of
these By-Laws shall state on its face the name of the Corporation and that it is
organized under the laws of the State of Indiana, the name of the person to whom
it is issued, and the number and class of shares and the designation of the
series, if any, the certificate represents, and shall state conspicuously on its
front or back that the Corporation will furnish the shareholder, upon his
written request and without charge, a summary of the designations, relative
rights, preferences, and limitations applicable to each class and the variations
in rights, preferences, and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future series).
Section 7.3. Transfers. Except as otherwise provided by law or by
resolution of the Board of Directors, transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, in person or by duly authorized attorney, on payment of all
taxes thereon and surrender for cancellation of the certificate or certificates
for such shares (except as hereinafter provided in the case of loss,
destruction, or mutilation of certificates) properly endorsed by the holder
thereof or accompanied by the proper evidence of succession, assignment, or
authority to transfer, and delivered to the Secretary or an Assistant Secretary.
Section 7.4. Stock Transfer Records. There shall be entered upon the
stock records of the Corporation the number of each certificate issued, the name
and address of the registered holder of such certificate, the number, kind, and
class of shares represented by such certificate, the date of issue, whether the
shares are originally issued or transferred, the registered holder from whom
transferred, and such other information as is commonly required to be shown by
such records. The stock records of the Corporation shall be kept at its
principal office, unless the Corporation appoints a transfer agent or registrar,
in which case the Corporation shall keep at its principal office a complete and
accurate shareholders' list giving the names and addresses of all
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shareholders and the number and class of shares held by each. If a transfer
agent is appointed by the Corporation, shareholders shall give written notice of
any changes in their addresses from time to time to the transfer agent.
Section 7.5. Transfer Agents and Registrars. The Board of Directors may
appoint one or more transfer agents and one or more registrars and may require
each stock certificate to bear the signature of either or both.
Section 7.6. Loss, Destruction, or Mutilation of Certificates. The holder
of any of the capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, or mutilation of the certificate therefor,
and the Board of Directors may, in its discretion, cause to be issued to him a
new certificate or certificates of stock, upon the surrender of the mutilated
certificate, or, in the case of loss or destruction, upon satisfactory proof of
such loss or destruction. The Board of Directors may, in its discretion, require
the holder of the lost or destroyed certificate or his legal representative to
give the Corporation a bond in such sum and in such form, and with such surety
or sureties as it may direct, to indemnify the Corporation, its transfer agents,
and registrars, if any, against any claim that may be made against them or any
of them with respect to the capital stock represented by the certificate or
certificates alleged to have been lost or destroyed, but the Board of Directors
may, in its discretion, refuse to issue a new certificate or certificates, save
upon the order of a court having jurisdiction in such matters.
Section 7.7. Form of Certificates. The form of the certificates for
shares of the capital stock of the Corporation shall conform to the requirements
of Section 7.2 of these By-Laws and be in such printed form as shall from time
to time be approved by resolution of the Board of Directors.
ARTICLE VIII
Seal
----
The corporate seal of the Corporation shall, if the Corporation elects to
have one, be in the form of a disc, with the name of the Corporation and
"INDIANA" on the periphery thereof and the word "SEAL" in the center.
ARTICLE IX
Miscellaneous
-------------
Section 9.1. Indiana Business Corporation Law. The provisions of the
Indiana Business Corporation law, as amended,
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applicable to all matters relevant to, but not specifically covered by, these
By-Laws are hereby, by reference, incorporated in and made a part of these By-
Laws.
Section 9.2. Fiscal Year. The fiscal year of the Corporation shall end on
the last Sunday in October of each year.
Section 9.3. Election to be governed by Indiana Code (S) 23-1-43.
Effective upon the registration of the Corporation's common stock under Section
12 of the Securities Exchange Act of 1934, as amended, the Corporation shall be
governed by the provisions of IC 23-1-43 regarding business combinations.
Section 9.4. Control Share Acquisition Statute. The provisions of IC
23-1-42 shall apply to the acquisition of shares of the Corporation.
Section 9.5. Redemption of Shares Acquired in Control Share Acquisitions.
If and whenever the provisions of IC 23-1-42 apply to the Corporation, any or
all control shares acquired in a control share acquisition shall be subject to
redemption by the Corporation, if either:
(a) no acquiring person statement has been filed with the
Corporation with respect to such control share acquisition in
accordance with IC 23-1-42-6, or
(b) the control shares are not accorded full voting rights by
the Corporation's shareholders as provided in IC 23-1-42-9.
A redemption pursuant to Section 9.5(a) may be made at any time during the
period ending sixty (60) days after the last acquisition of control shares by
the acquiring person. A redemption pursuant to Section 9.5(b) may be made at any
time during the period ending two (2) years after the shareholder vote with
respect to the granting of voting rights to such control shares. Any redemption
pursuant to this Section 9.5 shall be made at the fair value of the control
shares and pursuant to such procedures for such redemption as may be set forth
in these By-Laws or adopted by resolution of the Board of Directors.
As used in this Section 9.5, the terms "control shares," "control share
acquisition," "acquiring person statement," and "acquiring person" shall have
the meanings ascribed to such terms in IC 23-1-42.
Section 9.6. Amendments. These By-Laws may be rescinded, changed, or
amended, and provisions hereof may be waived, at any meeting of the Board of
Directors by the affirmative vote of a majority of the entire number of
Directors at the time, except as otherwise required by the Corporation's
Articles of Incorporation or by the Indiana Business Corporation Law.
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Section 9.7. Definition of Articles of Incorporation. The term "Articles
of Incorporation" as used in these By-Laws means the Amended or Restated
Articles of Incorporation of the Corporation as from time to time are in effect.
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EXHIBIT 10-AC
AGREEMENT
---------
This Agreement ("Agreement") made and entered into as of the 21st day
of February, 1996, among Quality Dining, Inc., an Indiana corporation ("QDI"),
and Nordahl L. Brue ("Brue") and Michael J. Dressell ("Dressell" and
collectively with Brue, the "Shareholders").
WITNESSETH:
WHEREAS, Bruegger's Corporation, a Delaware corporation
("Bruegger's"), and QDI propose to enter into an Agreement and Plan of Merger
(the "Merger Agreement"), which will provide, among other things, for the
acquisition by QDI of all of the issued and outstanding shares of Common Stock
and Preferred Stock of Bruegger's through a merger (the "Merger") of Bruegger's
with a subsidiary of QDI; and
WHEREAS, the Shareholders presently are the beneficial owners of an
aggregate of 3,383,700 shares of the outstanding Common Stock of Bruegger's; and
WHEREAS, all of the shares of Common Stock of Bruegger's as to which
the Shareholders are presently entitled to vote and all additional shares which
may be hereafter acquired by the Shareholders on or before the Expiration Date
(as defined below) are hereinafter collectively referred to as the "Subject
Shares"; and
WHEREAS, in order to induce QDI to enter into the Merger Agreement and
for other good and valuable consideration, the Shareholders have agreed to vote
the Subject Shares in favor of the Merger at a meeting of the stockholders of
Bruegger's to be called to consider such Merger;
NOW, THEREFORE, the Shareholders and QDI agree as follows:
1. Voting of the Subject Shares. The Shareholders agree to vote all of
the Subject Shares in favor of the Merger which is to be submitted to a vote of
the stockholders of Bruegger's at any meeting (or any adjournment or
postponement thereof) of the stockholders of Bruegger's at which the Merger is
submitted to a vote. This Agreement shall expire upon the termination of the
Merger Agreement in accordance with its terms (the "Expiration Date").
2. Restriction on Transfer. The Shareholders shall not sell, transfer,
pledge or otherwise dispose of, or agree to sell, transfer, pledge or otherwise
dispose of, any interest in the Subject Shares, or any other shares of the
capital stock of Bruegger's received or acquired by them between the date hereof
and
<PAGE>
the Expiration Date, at any time between the date hereof and the Expiration
Date, except for a sale, disposition or transfer to QDI or the gift or other
transfer to a "Permitted Transferee" (as defined in Section 6.10) of up to an
aggregate of 5% of the Subject Shares per Shareholder by each of Brue and
Dressell. Any shares of the capital stock of Bruegger's acquired or purchased by
the Shareholders between the date hereof and the Expiration Date shall be deemed
to be Subject Shares.
3. Hart-Scott-Rodino Filings. If the acquisition of QDI Common Stock
in the Merger would require either Shareholder to comply with the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), such
Shareholder shall (a) take promptly all actions necessary to make the filings
required under the HSR Act, which filings shall comply in all material respects
with the requirements of the HSR Act, (b) comply at the earliest practicable
date with any request for additional information received by such Shareholder
from the Federal Trade Commission or Antitrust Division of the Department of
Justice pursuant to the HSR Act, (c) cooperate with QDI and Bruegger's in
connection with their filings under the HSR Act, and (d) request early
termination of the applicable waiting period.
4. Representations and Warranties of the Shareholders. Each of the
Shareholders hereby represents and warrants to QDI that they are the beneficial
owners of, have valid title to and the right to vote the number of the Subject
Shares set opposite their name on Exhibit A attached hereto, free of any lien,
claim or pledge of any third party other than Key Bank of Vermont and Key Bank
of New York.
5. Representations and Warranties of QDI. QDI hereby represents and
warrants to the Shareholders that it has the requisite corporate power and
authority to enter into and perform all of its obligations under this Agreement
and the Merger Agreement. The execution, delivery and performance of this
Agreement and the Merger Agreement have been duly authorized by all necessary
corporate action on the part of QDI.
6. Registration Rights.
-------------------
6.1. Certain Definitions. As used in this Section 6.1 and elsewhere in
this Section 6, the following terms shall have the following respective
meanings:
"Commission" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registrable Shares" means (i) the shares of Common Stock of QDI
issued to the Shareholders in exchange for the Subject Shares pursuant to the
Merger and (ii) any other shares of Common Stock of QDI issued in respect of
such shares (because of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, however, that shares of Common
Stock which are Registrable Shares shall cease to be Registrable Shares upon any
sale pursuant to a Registration Statement, Section 4(1) of the Securities Act or
Rule 144 under the Securities Act or upon any sale in any manner to a person or
entity which, by virtue of Section 6.11 of this Agreement is not entitled to the
rights provided in this Agreement.
"Registration Expenses" means the expenses described in Section 6.3.
---------------------
"Registration Statement" means a registration statement filed by QDI
with the Commission for a public offering and sale of securities of QDI (other
then a registration statement on Form S-8 or Form S-4, or their successors, or
any other form for a limited purpose, or any registration statement covering
only securities proposed to be issued in exchange for securities or assets of
another corporation).
"Rightsholders" means the Shareholders and any other person or entity
who becomes a Rightsholder under this Agreement pursuant to Section 6.11.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
6.2. Demand Registration Rights.
--------------------------
(a) Until the fifth anniversary of the Effective Time of the Merger
(as defined in the Merger Agreement), Brue and his Permitted Transferees
(as defined in Section 6.11) may request, in writing, that QDI effect the
registration of Registrable Shares owned by such Rightsholder or
Rightsholders having an aggregate offering price of at least $10,000,000
(based on the then current market price or fair value); provided that QDI
shall not be required to effect more than one
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registration pursuant to such request. In addition, until the fifth
anniversary of the Effective Time of the Merger, Dressell and his Permitted
Transferees may request, in writing, that QDI effect the registration of
Registrable Shares owned by such Rightsholder or Rightsholders having an
aggregate offering price of at least $10,000,000 (based on the then current
market price or fair value); provided that QDI shall not be required to
effect more than one registration pursuant to such request. If the
Rightsholders initiating the registration intend to distribute the
Registrable Shares by means of an underwriting, they shall so advise QDI in
their request. In the event such registration is underwritten, the right of
other Rightsholders to participate shall be conditioned on such
Rightsholders' participation in such underwriting. Upon receipt of any such
request, QDI shall promptly give written notice of such proposed
registration to all Rightsholders. Such Rightsholders shall have the right,
by giving written notice to QDI within 30 days after QDI provides its
notice, to elect to have included in such registration such of their
Registrable Shares as such Rightsholders may request in such notice of
election, subject to the approval of the underwriter(s) managing the
offering as provided below. Thereupon, QDI shall, as expeditiously as
possible, use its best efforts to effect the registration of all
Registrable Shares which QDI has been requested to so register on such
registration form as QDI is then eligible to use. Notwithstanding any other
provision of this Section 6.2 if the managing underwriter(s) advises the
Rightsholders initiating the registration in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Rightsholders initiating the registration shall so advise all holders of
Registrable Shares which would otherwise be included in the underwriting
and the number of Registrable Shares that may be included in the
underwriting shall be allocated among all such Rightsholders, including the
Rightsholders initiating the registration, in proportion (as nearly as
practicable) to the amount of Registrable Shares of QDI owned by each such
Rightsholder. If the managing underwriter(s) does not limit the number of
Registrable Shares to be underwritten, QDI or other holders of securities
of QDI who have registration rights similar to those set forth in Section
6.2 or 6.3 hereof may include Common Stock for their respective accounts in
such registration if the managing underwriter(s) states that such inclusion
would not materially and adversely affect the offering of
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Registrable Shares and if the number of Registrable Shares which would
otherwise have been included in such registration and underwriting or the
public offering price thereof will not thereby be limited or reduced.
(b) If at the time of any request to register Registrable Shares
pursuant to this Section 6.2 QDI is engaged or has fixed plans to engage
within 60 days of the time of the request in a registered public offering
as to which the Rightsholders may include Registrable Shares pursuant to
Section 6.3 (subject to the limitations set forth therein) or is engaged in
any other activity which, in the good faith determination of QDI's Board of
Directors, would be adversely affected by the requested registration, then
QDI may at its option direct that such request be delayed for a period not
in excess of six months from the effective date of such offering or the
date of termination of such other material activity, as the case may be,
such right to delay a request to be exercised by QDI not more than once in
any twelve-month period.
6.3 Incidental Registration Rights.
------------------------------
(a) Until the seventh anniversary of the Effective Time of the Merger,
whenever QDI proposes to file a Registration Statement (other than pursuant
to Section 6.2) at any time and from time to time, it will, prior to such
filing, give written notice to all Rightsholders of its intention to do so
(subject to the limitations set forth in paragraph (b) below) and, upon the
written request of a Rightsholder or Rightsholders given within 15 days
after QDI provides such notice (which request shall state the intended
method of disposition of such Registrable Shares), QDI shall use its best
efforts to cause all Registrable Shares which QDI has been requested by
such Rightsholder or Rightsholders to register to be registered under the
Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution
specified in the request of such Rightsholder or Rightsholders; provided,
that QDI shall have the right to postpone or withdraw any registration
effected pursuant to this Section 6.3 without obligation to any
Rightsholder.
(b) In connection with any offering under this Section 6.3 involving
an underwriting, QDI shall not be required to include any Registrable
Shares in such
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underwriting unless the holders thereof accept the terms of the
underwriting as agreed upon between QDI and the underwriter(s) of such
offering. If in the opinion of the managing underwriter(s) of such offering
the registration of all, or part of, the shares of Common Stock which the
Rightsholders have requested to be included pursuant to this Section 6.3
would materially and adversely affect such public offering, then QDI shall
be required to include in the underwriting only that number of such shares,
if any, which the managing underwriter(s) believe(s) may be sold without
causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than
the total number of shares which the Rightsholders have requested to be
included, then (i) QDI shall be entitled to include all shares that it has
requested to be registered and (ii) the Rightsholders who have requested
registration shall participate in the underwriting pro rata with the
holders of any other incidental registration rights based upon their total
ownership of shares of Common Stock of QDI.
6.4. Registration Procedures. If and whenever QDI is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, QDI shall:
(a) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its reasonable efforts to cause that
Registration Statement to become and remain effective for the period
specified in paragraph (b) below;
(b) as expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to
keep the Registration Statement effective for a period ending on the
earlier of (i) 90 days after the effective date or (ii) the date on which
all Registrable Shares registered under such Registration Statement have
been sold; provided, that QDI shall be able to elect that the Registration
Statement not be usable and require each Rightsholder to suspend sales
pursuant to the prospectus contained therein, for a reasonable period of
time, but not in excess of 90 days, if QDI determines in good faith that
the registration and distribution of Registrable Shares (or the use of the
Registration Statement or related prospectus) would interfere with any
pending
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<PAGE>
material acquisition, material corporate reorganization, or any other
material corporate development involving QDI or any of its subsidiaries or
would require premature disclosure thereof (and QDI shall promptly give
each Rightsholder a written notice of such determination and an
approximation of the anticipated delay), and the days during which the
Rightsholder is required to suspend sales shall not be included for
computing the number of days during which the Registration Statement is
effective for purposes of clause (i) above;
(c) as expeditiously as possible furnish to each Rightsholder who is
selling shares pursuant to such registration (a "Selling Holder") such
reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents as the Selling Holder may reasonably request in order
to facilitate the public sale or other disposition of the Registrable
Shares owned by the Selling Holder; and
(d) as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under
the securities or Blue Sky laws of such states as the Selling Holders shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the Selling Holders to consummate the
public sale or other disposition in such states of the Registrable Shares
owned by the Selling Holders; provided, however, that QDI shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If QDI has delivered preliminary or final prospectuses to the Selling
Holders and after having done so the prospectus is amended to comply with the
requirements of the Securities Act, QDI shall promptly notify the Selling
Holders and, if requested, the Selling Holders shall immediately cease making
offers of Registrable Shares and return all undistributed prospectuses to QDI.
QDI shall promptly provide the Selling Holders with revised prospectuses and,
following receipt of the revised prospectuses, the Selling Holders shall be free
to resume making offers of the Registrable Shares.
6.5. Payment of Expenses. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by QDI in complying
with this Agreement including, without
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limitation, all registration and filing fees, exchange or Nasdaq listing fees,
printing expenses, fees and disbursements of counsel and accountants for QDI,
state Blue Sky fees and expenses, and the expense of any special audits incident
to or required by any such registration, but excluding underwriting discounts,
selling commissions and the fees and expenses of the Selling Holders' own
counsel. In any demand registration pursuant to Section 6.2, the Rightsholders
requesting such registration shall pay all Registration Expenses , underwriting
discounts, selling commissions and the fees and disbursements of their counsel.
In any incidental registration pursuant to Section 6.3, QDI shall pay all
Registration Expenses, except that the requesting Rightsholders shall pay their
portion of the filing fees with the Commission, together with any underwriting
discounts or selling commissions and the fees of their own counsel.
6.6. Indemnification. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, QDI will
indemnify and hold harmless the seller of such Registrable Shares, each
underwriter of such Registrable Shares, and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or Blue Sky
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and QDI will reimburse such seller,
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by such seller, underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that QDI will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any untrue statement or omission made in such Registration
Statement, preliminary prospectus or prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished to
QDI, in writing, by or on behalf of such seller, underwriter or controlling
person specifically for use in the preparation thereof.
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<PAGE>
In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless QDI, each of
its directors and officers and each underwriter (if any) and each person, if
any, who controls QDI or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which QDI, such directors and officers,
underwriter or controlling person may become subject under the Securities Act,
Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information furnished in writing to QDI by or on behalf of such seller,
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; provided, however, that the
obligations of such Rightsholders hereunder shall be limited to an amount equal
to the proceeds to each Rightsholder of Registrable Shares sold as contemplated
herein.
Each party entitled to indemnification under this Section 6.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless and to the extent that the Indemnifying
Party is adversely affected by such failure. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel
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<PAGE>
in such proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
6.7. Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration Statement in
an underwritten offering pursuant to Section 6.2(a), QDI agrees to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by QDI of the underwriters of such offering.
6.8. Information by Holder. Each Rightsholder of Registrable Shares
included in any registration shall furnish to QDI such information regarding
such holder and the distribution proposed by such holder as QDI may reasonably
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
6.9. Rule 144 Requirements. QDI agrees to:
---------------------
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of QDI under the Securities
Act and the Exchange Act; and
(c) furnish to any Rightsholder upon request a written statement by
QDI as to its compliance with the reporting requirements of said Rule 144,
and of the Securities Act and the Exchange Act; a copy of the most recent
annual or quarterly report of QDI, and such other reports and documents of
QDI as such holder may reasonably request to avail itself of any similar
rule or regulation of the Commission allowing it to sell any such
securities without registration.
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<PAGE>
6.10. Transfers of Certain Rights; Additional Rightsholders.
-----------------------------------------------------
(a) In General. The rights granted to each Rightsholder pursuant to
the terms of this Agreement may be transferred by such Rightsholder to
another Rightsholder or to any parent, spouse, sibling, child or grandchild
of the transferor or to a trust or custodial account for his, her or their
benefit (such transferee being referred to herein as "Permitted
Transferee"); provided, however, in the case of any transfer referred to in
this paragraph (a), that QDI is given written notice by the Permitted
Transferee at the time of such transfer stating the name and address of the
Permitted Transferee and identifying the securities with respect to which
such rights are being assigned.
(b) Permitted Transferees. Any Permitted Transferee to whom rights
hereunder are transferred shall, as a condition to such transfer, deliver
to QDI a written instrument by which such Permitted Transferee agrees to be
bound by the obligations imposed upon Rightsholders under this Agreement to
the same extent as if such Permitted Transferee were a party hereto.
(c) Subsequent Transferees. A Permitted Transferee to whom rights are
transferred pursuant to this Section 6.10 may not again transfer such
rights to any other person or entity, other than as provided in (a) and (b)
above .
6.11. No Assignment. Except as provided in Section 6.10 hereof, the
rights granted pursuant to this Section 6 may not be transferred or assigned by
any Rightsholder .
7. Enforcement. The parties agree that payment of damages for breach
of this Agreement would not be adequate compensation to QDI for the damage
suffered by such breach and that QDI would be irreparably damaged in the event
this Agreement is not specifically enforced. Accordingly, QDI shall have the
right to an injunction or to specific performance of this Agreement in order to
protect its rights and privileges hereunder. These remedies, however, shall be
cumulative and not exclusive and shall be in addition to all of the rights of
action and remedies which QDI may have pursuant to this Agreement or at law or
in equity.
8. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware.
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<PAGE>
9. Amendments. The provisions of this Agreement may be modified or
amended at any time and from time to time only by an agreement or consent in
writing executed by QDI and the Shareholders; provided, however, that the
provisions of Section 6 of this Agreement may be modified or amended only by an
agreement or consent in writing executed by QDI and the holders of a majority of
the Registrable Shares then outstanding; and provided, further, that the
registration rights granted under Section 6 of this Agreement may be amended
only in a manner which affects all Registrable Shares in the same fashion.
10. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered personally or
sent by telex, facsimile transaction, a nationally recognized overnight delivery
service or registered or certified mail (return receipt requested), postage
prepaid, to the parties to this Agreement at the following addresses or at such
other address for a party as shall be specified by like notice:
If to the Shareholders:
Nordahl L. Brue
Michael J. Dressell
c/o Bruegger's Corporation
P.O. Box 374
159 Bank Street
Burlington, Vermont 05401
If to QDI:
Quality Dining, Inc.
3820 Edison Lakes Parkway
Mishawaka, IN 46545
Attn: President
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of such notices and communications shall be delivered or sent to (i) James A.
Aschleman, Baker & Daniels, at 300 North Meridian Street, Suite 2700,
Indianapolis, Indiana 46204; and (ii) Jay E. Bothwick, Hale and Dorr, 60 State
Street, Boston, MA 02109.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
QUALITY DINING, INC.
By: /s/ Daniel B. Fitzpatrick
-------------------------
Name: Daniel B. Fitzpatrick
---------------------
Title: President and Chief Executive Officer
-------------------------------------
/s/ Nordahl L. Brue
-------------------
Nordahl L. Brue
/s/ Michael J. Dressell
-----------------------
Michael J. Dressell
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<PAGE>
EXHIBIT A
Number of Common Shares
Beneficially Owned
-----------------------
Name of Shareholder
- -------------------
Nordahl L. Brue 1,688,850
Michael J. Dressell 1,694,850
<PAGE>
EXHIBIT 10I
QUALITY DINING, INC.
1993 STOCK OPTION AND INCENTIVE PLAN
(AS AMENDED THROUGH APRIL 9, 1996)
1. PLAN PURPOSE. The purpose of the Plan is to promote the long-term interests
of the Company and its shareholders by providing a means for attracting and
retaining officers and key employees of the Company and its Affiliates.
2. DEFINITIONS. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary corporation" of
the Company as such terms are defined in Section 424(e) and (f), respectively,
of the Code, including any corporation to become a subsidiary corporation
pursuant to a certain Share Exchange and Reorganization Agreement among the
Company and certain related corporations dated as of December 17, 1993.
"Award" -- means the grant by the Committee of an Incentive Stock Option, a
Non-Qualified Stock Option, or Restricted Stock, or any combination thereof, as
provided in the Plan.
"Board" -- means the Board of Directors of the Company.
"Change in Control" -- means each of the events specified in the following
clauses (i) through (iii): (i) any third person, including a "group" as defined
in Section 13(d)(3) of the Exchange Act shall, after the date of the adoption of
the Plan by the Board, first become the beneficial owner of shares of the
Company with respect to which 25% or more of the total number of votes for the
election of the Board of Directors of the Company may be cast, (ii) as a result
of, or in connection with, any cash tender offer, exchange offer, merger or
other business combination, sale of assets or contested election, or combination
of the foregoing, the persons who were directors of the Company shall cease to
constitute a majority of the Board of Directors of the Company or (iii) the
stockholders of the Company shall approve an agreement providing either for a
transaction in which the Company will cease to be an independent publicly owned
entity or for a sale or other disposition of all or substantially all the assets
of the Company; provided, however, that the occurrence of any of such events
shall not be deemed a Change in Control if, prior to such occurrence, a
resolution specifically approving such occurrence shall have been adopted by at
least a majority of the Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee referred to in Section 3 hereof.
"Company" -- means Quality Dining, Inc., an Indiana corporation.
"Continuous Service" -- means the absence of any interruption or termination
of service as an employee of the Company or an Affiliate. Service shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Company or in the case of any transfer between
the Company and an Affiliate or any successor to the Company.
"Disinterested Person" -- means any person who, at the time discretion under
this Plan is exercised, meets the definition of a "disinterested person" in Rule
16b-3 of the Securities and Exchange Commission promulgated under Section 16(b)
of the Exchange Act and then applicable to the Company.
"Employee" -- means any person, including an officer or director, who is
employed by the Company or any Affiliate.
"Exchange Act" -- means the Securities Exchange Act of 1934, as amended.
<PAGE>
"Exercise Price" -- means the price per Share at which the Shares subject to
an Option may be purchased upon exercise of such Option.
"Incentive Stock Option" -- means an option to purchase Shares granted by the
Committee pursuant to Section 6 hereof which is subject to the limitations and
restrictions of Section 8 hereof and is intended to qualify under Section 422 of
the Code.
"Market Value" -- means the last reported sale price on the date in question
(or, if there is no reported sale on such date, on the last preceding date on
which any reported sale occurred) of one Share on the principal exchange on
which the Shares are listed for trading, or if the Shares are not listed for
trading on any exchange, on the NASDAQ National Market System or any similar
system then in use, or, if the Shares are not listed on the NASDAQ National
Market System, the mean between the closing high bid and low asked quotations of
one Share on the date in question as reported by NASDAQ or any similar system
then in use, or, if no such quotations are available, the fair market value on
such date of one Share as the Committee shall determine.
"Non-Qualified Stock Option" -- means an option to purchase shares granted by
the Committee pursuant to Section 6 hereof, which option is not intended to
qualify under Section 422 of the Code.
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock Option.
"Participant" -- means any officer or key employee of the Company or any
Affiliate who is selected by the Committee to receive an Award.
"Plan" -- means this 1993 Stock Option and Incentive Plan of the Company.
"Reorganization" -- means the liquidation or dissolution of the Company or any
merger, consolidation or combination of the Company (other than a merger,
consolidation or combination in which the Company is the continuing entity and
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property or any combination
thereof).
"Restricted Period" -- means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 9
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" -- means Shares which have been contingently awarded to a
Participant by the Committee subject to the restrictions referred to in Section
9 hereof, so long as such restrictions are in effect.
"Securities Act" -- means the Securities Act of 1933, as amended.
"Shares" -- means the Common Stock, without par value, of the Company.
3. ADMINISTRATION. Until such time as the Shares have been registered pursuant
to section 12 of the Exchange Act, the Plan shall be administered by the Board
and all references in the Plan to the Committee shall be deemed to refer to the
Board. Upon the effectiveness of such registration, the Plan shall be thereafter
administered by a Committee consisting of three or more members of the Board,
each of whom shall be a Disinterested Person; provided, however, that if the
full Board does not consist of at least three Disinterested Persons, then the
Committee shall be composed of as many Disinterested Persons as possible and the
remaining member or members of the Committee need not be Disinterested Persons
and; provided, further, if Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Exchange Act or any replacement of such rule shall
hereafter permit the use of a committee of two or more Disinterested Persons and
the Company elects or is required to comply with such rule, then the Committee
shall consist of two or more Disinterested Persons. The members of the Committee
shall be appointed by the Board. Except as limited by the express provisions of
the Plan, the Committee shall have sole and complete authority and discretion to
(i) select Participants and grant Awards; (ii) determine the number of Shares to
be subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the
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terms and conditions upon which Awards shall be granted under the Plan; (iv)
prescribe the form and terms of instruments evidencing such grants; and (v)
establish from time to time regulations for the administration of the Plan,
interpret the Plan, and make all determinations deemed necessary or advisable
for the administration of the Plan. The Committee may maintain and update from
time to time as appropriate, a list designating selected directors as
Disinterested Persons. The purpose of such list shall be to evidence the status
of such individuals as Disinterested Persons, and the Board may appoint to the
Committee any individual actually qualifying as a Disinterested Person,
regardless of whether identified as such on said list.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all members of the Committee without a meeting,
shall be acts of the Committee.
4. PARTICIPANTS. The Committee may select from time to time Participants in
the Plan from those officers and key employees of the Company or its Affiliates
who, in the opinion of the Committee, have the capacity for contributing in a
substantial measure to the successful performance of the Company or its
Affiliates. No Participant may receive Awards in excess of 150,000 Shares in any
calendar year.
5. SHARES SUBJECT TO PLAN. Subject to adjustment by the operation of Section
10 hereof, the maximum number of Shares with respect to which Awards may be made
under the Plan is 1,000,000 Shares. The Shares with respect to which Awards may
be made under the Plan may either be authorized and unissued shares or unissued
shares heretofore or hereafter reacquired and held as treasury shares. An Award
shall not be considered to have been made under the Plan with respect to any
Option which terminates or is surrendered for cancellation or with respect to
Restricted Stock which is forfeited, and new Awards may be granted under the
Plan with respect to the number of Shares as to which such termination or
forfeiture has occurred.
6. GENERAL TERMS AND CONDITIONS OF OPTIONS. The Committee shall have full and
complete authority and discretion, except as expressly limited by the Plan, to
grant Options and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (i) the Exercise Price, (ii) the
number of Shares subject to, and the expiration date of, any Option, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option, and
(iv) the restrictions, if any, to be placed upon such Option or upon Shares
which may be issued upon exercise of such Option. The Committee may, as a
condition of granting any Option, require that a Participant agree to surrender
for cancellation one or more Options previously granted to such Participant.
7. EXERCISE OF OPTIONS.
(a) Except as provided in Section 13, an Option granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such
Option was granted only by such Participant, and except as provided in
paragraphs (c), (d) and (e) of this Section 7, no such Option may be exercised
unless at the time such Participant exercises such Option, such Participant
has maintained Continuous Service since the date of the grant of such Option.
(b) To exercise an Option under the Plan, the Participant shall give
written notice to the Company (which shall specify the number of Shares with
respect to which such Participant elects to exercise such Option) together
with full payment of the Exercise Price. The date of exercise shall be the
date on which such notice is received by the Company. Payment shall be made
either (i) in cash (including check, bank draft or money order) or (ii) by
delivering (A) Shares already owned by the Participant and having a Market
Value on the date of exercise equal to the applicable Exercise Price, or (B) a
combination of cash and such Shares.
(c) If the Continuous Service of a Participant is terminated for cause, or
voluntarily by the Participant for any reason other than death, disability or
retirement, all rights under any Option of such Participant shall expire
immediately upon such cessation of Continuous Service. If the Continuous
Service of a Participant
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<PAGE>
is terminated by reason of death, disability or retirement, such Participant
may exercise such Option, but only to the extent such Participant was entitled
to exercise such Option at the date of such cessation, at any time during the
remaining term of such Option, or, in the case of Incentive Stock Options,
during such shorter period as the Committee may determine and so provide in
the applicable instrument or instruments evidencing the grant of such Option.
If a Participant shall cease to maintain Continuous Service for any reason
other than those set forth above in this paragraph (c) of this Section 7, such
Participant may exercise such Option to the extent that such Participant was
entitled to exercise such Option at the date of such cessation but only within
the period of three (3) months immediately succeeding such cessation of
Continuous Service, and in no event after the expiration date of the subject
Option; provided, however, that such right of exercise after cessation of
Continuous Service shall not be available to a Participant if the Company
otherwise determines and so provides in the applicable instrument or
instruments evidencing the grant of such Option.
(d) In the event of the death of a Participant while in the Continuous
Service of the Company or an Affiliate, the person to whom any Option held by
the Participant at the time of his death is transferred by will or by the laws
of descent and distribution may exercise such Option on the same terms and
conditions that such Participant was entitled to exercise such Option.
Following the death of any Participant to whom an Option was granted under the
Plan, the Committee, as an alternative means of settlement of such Option, may
elect to pay to the person to whom such Option is transferred the amount by
which the Market Value per Share on the date of exercise of such Option shall
exceed the Exercise Price of such Option, multiplied by the number of Shares
with respect to which such Option is properly exercised. Any such settlement
of an Option shall be considered an exercise of such Option for all purposes
of the Plan.
(e) Notwithstanding the provisions of the foregoing paragraphs of this
Section 7, the Committee may, in its sole discretion, establish different
terms and conditions pertaining to the effect of the cessation of Continuous
Service, to the extent permitted by applicable federal and state law.
8. INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted only to
Participants who are Employees. Any provisions of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the Company
and no Incentive Stock Option shall be exercisable more than ten years from the
date such Incentive Stock Option is granted, (ii) the Exercise Price of any
Incentive Stock Option shall not be less than the Market Value per Share on the
date such Incentive Stock Option is granted, (iii) any Incentive Stock Option
shall not be transferable by the Participant to whom such Incentive Stock Option
is granted other than by will or the laws of descent and distribution and shall
be exercisable during such Participant's lifetime only by such Participant, and
(iv) no Incentive Stock Option shall be granted which would permit a Participant
to acquire, through the exercise of Incentive Stock Options in any calendar
year, Shares or shares of any capital stock of the Company or any Affiliate
thereof having an aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) in excess of $100,000. The foregoing
limitation shall be determined by assuming that the Participant will exercise
each Incentive Stock Option on the date that such Option first becomes
exercisable. Notwithstanding the foregoing, in the case of any Participant who,
at the date of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of capital stock of the Company or any Affiliate,
the Exercise Price of any Incentive Stock Option shall not be less than 110% of
the Market Value per Share on the date such Incentive Stock Option is granted
and such Incentive Stock Option shall not be exercisable more than five years
from the date such Incentive Stock Option is granted.
9. TERMS AND CONDITIONS OF RESTRICTED STOCK. The Committee shall have full and
complete authority, subject to the limitations of the Plan, to grant awards of
Restricted Stock and, in addition to the terms and conditions contained in
paragraphs (a) through (f) of this Section 9, to provide such other terms and
conditions (which need not be identical among Participants) in respect of such
Awards, and the vesting thereof, as the Committee shall determine and provide in
the agreement referred to in paragraph (d) of this Section 9.
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(a) At the time of an award of Restricted Stock, the Committee shall establish
for each Participant a Restricted Period during which or at the expiration of
which, the Shares of Restricted Stock shall vest. The Committee may also
restrict or prohibit the sale, assignment, transfer, pledge or other encumbrance
of the Shares of Restricted Stock by the Participant during the Restricted
Period. Except for such restrictions, and subject to paragraphs (c), (d) and (e)
of this Section 9 and Section 10 hereof, the Participant as owner of such Shares
shall have all the rights of a stockholder, including but not limited to, the
right to receive all dividends paid on such Shares and the right to vote such
Shares. The Committee shall have the authority, in its discretion, to accelerate
the time at which any or all of the restrictions shall lapse with respect to any
Shares of Restricted Stock prior to the expiration of the Restricted Period with
respect thereto, or to remove any or all of such restrictions, whenever it may
determine that such action is appropriate by reason of changes in applicable tax
or other laws or other changes in circumstances occurring after the commencement
of such Restricted Period.
(b) Except as provided in Section 12 hereof, if a Participant ceases to
maintain Continuous Service for any reason (other than death, total or partial
disability or normal or early retirement) unless the Committee shall otherwise
determine, all Shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such termination of Continuous Service are
subject to the restrictions imposed by paragraph (a) of this Section 9 shall
upon such termination of Continuous Service be forfeited and returned to the
Company. If a Participant ceases to maintain Continuous Service by reason of
death or total or partial disability, then, unless the Committee shall determine
otherwise, the restrictions with respect to the Ratable Portion of the Shares of
Restricted Stock shall lapse and such Shares shall be free of restrictions and
shall not be forfeited. The Ratable Portion shall be determined with respect to
each separate Award of Restricted Stock issued and shall be equal to (i) the
number of Shares of Restricted Stock awarded to the Participant multiplied by
the portion of the Restricted Period that expired at the date of the
Participant's death or total or partial disability reduced by (ii) the number of
Shares of Restricted Stock awarded with respect to which the restrictions had
lapsed as of the date of the death or total or partial disability of the
Participant.
(c) Each certificate issued in respect of Shares of Restricted Stock awarded
under the Plan shall be registered in the name of the Participant and deposited
by the Participant, together with a stock power endorsed in blank, with the
Company and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture)
contained in the 1993 Stock Option and Incentive Plan of Quality Dining, Inc.,
and an Agreement entered into between the registered owner and Quality Dining,
Inc. Copies of such Plan and Agreement are on file in the office of the
Secretary of Quality Dining, Inc.
(d) At the time of an award of Shares of Restricted Stock, the Participant
shall enter into an Agreement with the Company in a form specified by the
Committee, agreeing to the terms and conditions of the award, that such
Participant will not make the election provided for under Section 83(b) of the
Code with respect to any Shares covered by the award and such other matters as
the Committee shall in its sole discretion determine.
(e) At the time of an award of Shares of Restricted Stock, the Committee may,
in its discretion, determine that the payment to the Participant of dividends
declared or paid on such Shares by the Company or a specified portion thereof,
shall be deferred until the earlier to occur of (i) the lapsing of the
restrictions imposed under paragraph (a) of this Section 9 or (ii) the
forfeiture of such Shares under paragraph (b) of this Section 9, and shall be
held by the Company for the account of the Participant until such time. In the
event of such deferral, there shall be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends, together with interest accrued thereon as
aforesaid, shall be made upon the earlier to occur of the events specified in
(i) and (ii) of the immediately preceding sentence.
(f) At the expiration of the restrictions imposed by paragraph (a) of this
Section 9, the Company shall redeliver to the Participant (or where the relevant
provision of paragraph (b) of this Section 9 applies in the case of a deceased
Participant, to his legal representative, beneficiary or heir) the
certificate(s) and stock power
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<PAGE>
deposited with it pursuant to paragraph (c) of this Section 9 and the Shares
represented by such certificate(s) shall be free of the restrictions referred to
in paragraph (a) of this Section 9.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any change in
the outstanding Shares subsequent to the effective date of the Plan by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
or exchange of shares, merger, consolidation or any change in the corporate
structure or Shares of the Company, the maximum aggregate number and class of
shares as to which Awards may be granted under the Plan and the number and class
of shares with respect to which Awards theretofore have been granted under the
Plan shall be appropriately adjusted by the Committee, whose determination shall
be conclusive. Any shares of stock or other securities received, as a result of
any of the foregoing, by a Participant with respect to Restricted Stock shall be
subject to the same restrictions and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Company in the manner provided in Section 9 hereof.
11. EFFECT OF REORGANIZATION. Awards will be affected by a Reorganization as
follows:
(a) If the Reorganization is a dissolution or liquidation of the Company then
(i) the restrictions of Section 9(a) on Shares of Restricted Stock shall lapse
and (ii) each outstanding Option shall terminate, but each Participant to whom
the Option was granted shall have the right, immediately prior to such
dissolution or liquidation to exercise his Option in full, notwithstanding the
provisions of Section 8, and the Company shall notify each Participant of such
right within a reasonable period of time prior to any such dissolution or
liquidation.
(b) If the Reorganization is a merger or consolidation, other than a Change in
Control subject to Section 12 of this Agreement, upon the effective date of such
Reorganization (i) each Optionee shall be entitled, upon exercise of his Option
in accordance with all of the terms and conditions of the Plan, to receive in
lieu of Shares, shares of such stock or other securities or consideration as the
holders of Shares shall be entitled to receive pursuant to the terms of the
Reorganization; and (ii) each holder of Restricted Stock shall receive shares of
such stock or other securities as the holders of Shares received which shall be
subject to the restrictions set forth in Section 9(a) unless the Committee
accelerates the lapse of such restrictions and the certificate(s) or other
instruments representing or evidencing such shares or securities shall be
legended and deposited with the Company in the manner provided in Section 9
hereof.
The adjustments contained in this Section and the manner of application of such
provisions shall be determined solely by the Committee.
12. EFFECT OF CHANGE OF CONTROL. If the Continuous Service of any Participant
of the Company or any Affiliate is involuntarily terminated, for whatever
reason, at any time within eighteen months after a Change in Control, unless the
Committee shall have otherwise provided in the agreement referred to in
paragraph (d) of Section 9 hereof, any Restricted Period with respect to
Restricted Stock theretofore awarded to such Participant shall lapse upon such
termination and all Shares awarded as Restricted Stock shall become fully vested
in the Participant to whom such Shares were awarded. If a tender offer or
exchange offer for Shares (other than such an offer by the Company) is
commenced, or if the event specified in clause (iii) of the definition of a
Change in Control contained in Section 2 shall occur, unless the Committee shall
have otherwise provided in the instrument evidencing the grant of an Option, all
Options theretofore provided in the instrument evidencing the grant of an
Option, all Options theretofore granted and not fully exercisable shall (except
as otherwise provided in Section 8) become exercisable in full upon the
happening of such event and shall remain so exercisable in accordance with their
terms; provided, however, that no Option shall be exercisable by a director or
officer of the Company within six months of the date of grant of such Option and
no Option which has previously been exercised or otherwise terminated shall
become exercisable.
13. ASSIGNMENTS AND TRANSFERS. Except as otherwise determined by the
Committee, no Award nor any right or interest of a Participant under the Plan in
any instrument evidencing any Award under the Plan may be assigned, encumbered
or transferred except, in the event of the death of a Participant, by will or
the laws of descent and distribution.
-6-
<PAGE>
14. EMPLOYEE RIGHTS UNDER THE PLAN. No officer, employee or other person shall
have a right to be selected as a Participant nor, having been so selected, to be
selected again as a Participant and no officer, employee or other person shall
have any claim or right to be granted an Award under the Plan or under any other
incentive or similar plan of the Company or any Affiliate. Neither the Plan nor
any action taken thereunder shall be construed as giving any employee any right
to be retained in the employ of the Company or any Affiliate.
15. DELIVERY AND REGISTRATION OF STOCK. The Company's obligation to deliver
Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Company shall determine to be necessary or advisable to comply with the
provisions of the Securities Act or any other applicable federal or state
securities legislation. It may be provided that any representation requirement
shall become inoperative upon a registration of the Shares or other action
eliminating the necessity of such representation under the Securities Act or
other securities legislation. The Company shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such shares to listing on
any stock exchange or system on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under any
state or federal law, rule or regulation, as the Company shall determine to be
necessary or advisable.
16. WITHHOLDING TAX. Upon the termination of the Restricted Period with
respect to any Shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such Shares in taxable
income), the Company shall, in lieu of requiring the Participant or other person
receiving such Shares to pay the Company the amount of any taxes which the
Company is required to withhold with respect to such Shares, retain a sufficient
number of Shares held by it to cover the amount required to be withheld. The
Company shall have the right to deduct from all dividends paid with respect to
Shares of Restricted Stock the amount of any taxes which the Company is required
to withhold with respect to such dividend payments.
Where a Participant or other person is entitled to receive Shares pursuant to
the exercise of an Option pursuant to the Plan, the Company shall, in lieu of
requiring the Participant or such other person to pay the Company the amount of
any taxes which the Company is required to withhold with respect to such Shares,
retain a number of such Shares sufficient to cover the amount required to be
withheld.
17. LOANS.
(a) The Company may make loans to a Participant in connection with
Restricted Stock or the exercise of Options subject to the following terms and
conditions and such other terms and conditions not inconsistent with the Plan,
including the rate of interest, if any, as the Company shall impose from time
to time.
(b) No loan made under the Plan shall exceed (i) with respect to Options,
the sum of (A) the aggregate option price payable upon exercise of the Option
in relation to which the loan is made, plus (B) the amount of the reasonably
estimated income taxes payable by the grantee and (ii) with respect to
Restricted Stock, the amount of reasonably estimated income taxes payable by
the grantee. In no event may any such loan exceed the Market Value of the
related Shares at the time of the loan.
(c) No loan shall have an initial term exceeding three years; provided,
that loans under the Plan shall be renewable at the discretion of the
Committee; and provided, further, that the indebtedness under each loan shall
become due and payable on a date no later than (i) one year after termination
of the Participant's employment due to death, retirement or disability, or
(ii) the day of termination of the Participant's employment for any reason
other than death, retirement or disability.
(d) Loans under the Plan may be satisfied by the Participant, as
determined by the Committee, in cash or, with the consent of the Committee, in
whole or in part in Shares at Market Value on the date of such payment.
-7-
<PAGE>
(e) When a loan shall have been made, Shares having an aggregate Market
Value equal to the amount of the loan may, in the discretion of the Committee,
be required to be pledged by the Participant to the Company as security for
payment of the unpaid balance of the loan. Portions of such Shares may, in the
discretion of the Committee, be released from time to time as it deems not to
be needed as security.
(f) Every loan shall meet all applicable laws, regulations and rules of
the Federal Reserve Board and any other governmental agency having
jurisdiction.
18. TERMINATION, AMENDMENT AND MODIFICATION OF PLAN. The Board may at any
time terminate, and may at any time and from time to time and in any respect
amend or modify, the Plan; provided however, that to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act or Section 422 of the
Code (or any other applicable law or regulation, including requirements of any
stock exchange or NASDAQ system on which the Common Stock is listed or quoted)
shareholder approval of any Plan amendment shall be obtained in such a manner
and to such a degree as is required by the applicable law or regulation;
provided further, that no termination, amendment or modification of the Plan
shall in any manner affect any Award theretofore granted pursuant to the Plan
without the consent of the Participant to whom the Award was granted or
transferee of the Award.
19. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective upon
its adoption by the Board of Directors and shareholders of the Company and shall
continue in effect for a term of ten years from the date of adoption unless
sooner terminated under Section 18 hereof.
ADOPTED BY THE BOARD OF DIRECTORS OF
QUALITY DINING, INC. EFFECTIVE AS OF
DECEMBER 17, 1993
ADOPTED BY THE SHAREHOLDERS OF QUALITY
DINING, INC. EFFECTIVE AS OF
DECEMBER 17, 1993
SECTION 4, AS AMENDED, ADOPTED BY THE
BOARD OF DIRECTORS OF QUALITY DINING,
INC. EFFECTIVE AS OF APRIL 9, 1996
SECTION 5, AS AMENDED, ADOPTED BY THE
BOARD OF DIRECTORS OF QUALITY DINING,
INC. EFFECTIVE AS OF DECEMBER 13, 1995
SECTION 5, AS AMENDED, ADOPTED BY THE
SHAREHOLDERS OF QUALITY DINING, INC.
EFFECTIVE AS OF MARCH 12, 1996
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
May 12, 1996 Quarterly Report and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> NOV-27-1996 NOV-27-1996
<PERIOD-START> FEB-19-1996 NOV-30-1995
<PERIOD-END> MAY-12-1996 MAY-12-1996
<CASH> 3,403 3,403
<SECURITIES> 0 0
<RECEIVABLES> 2,787 2,787
<ALLOWANCES> 0 0
<INVENTORY> 1,880 1,880
<CURRENT-ASSETS> 9,770 9,770
<PP&E> 155,767 155,767
<DEPRECIATION> 20,965 20,965
<TOTAL-ASSETS> 185,776 185,776
<CURRENT-LIABILITIES> 12,808 12,808
<BONDS> 0 0
<COMMON> 28 28
0 0
0 0
<OTHER-SE> 74,196 74,196
<TOTAL-LIABILITY-AND-EQUITY> 185,776 185,776
<SALES> 55,402 109,047
<TOTAL-REVENUES> 55,402 109,047
<CGS> 17,406 34,256
<TOTAL-COSTS> 47,879 94,510
<OTHER-EXPENSES> 2,538 7,042
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,701 3,125
<INCOME-PRETAX> 3,284 4,370
<INCOME-TAX> 1,198 1,595
<INCOME-CONTINUING> 2,086 2,775
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,086 2,775
<EPS-PRIMARY> .24 .31
<EPS-DILUTED> 0 0
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