<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
QUALITY DINING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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INDIANA 35-1804902
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3820 EDISON LAKES PARKWAY
MISHAWAKA, INDIANA 46545
(219) 271-4600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
DANIEL B. FITZPATRICK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
QUALITY DINING, INC.
3820 EDISON LAKES PARKWAY
MISHAWAKA, INDIANA 46545
(219) 271-4600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JAMES A. ASCHLEMAN, ESQ. JOHN J. JENKINS, ESQ.
BAKER & DANIELS CALFEE, HALTER & GRISWOLD
300 N. MERIDIAN STREET 1400 MCDONALD INVESTMENT CENTER
SUITE 2700 800 SUPERIOR AVENUE
INDIANAPOLIS, INDIANA 46204 CLEVELAND, OHIO 44114
(317) 237-0300 (216) 622-8200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, without
par value............. 2,618,895 Shares $31.25 $81,840,469 $28,221
</TABLE>
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(1) Includes 341,595 shares of Common Stock that may be sold if the over-
allotment option granted to the Underwriters is exercised. See
"Underwriting."
(2) Calculated pursuant to Rule 457(c) based upon the average of the high and
low sale prices of the Common Stock on the Nasdaq National Market System
on June 27, 1996.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 3, 1996
2,277,300 SHARES
QUALITY DINING, INC.
COMMON STOCK
(WITHOUT PAR VALUE)
LOGO
Of the 2,277,300 shares of Common Stock offered hereby, 2,200,000 shares are
being issued and sold by the Company and 77,300 shares are being sold by the
Selling Shareholders. The Company will not receive any of the proceeds from the
sale of the shares of Common Stock by the Selling Shareholders. See "Principal
and Selling Shareholders."
The Common Stock is traded on the Nasdaq National Market System under the
symbol "QDIN." On July 1, 1996, the last reported sale price of the Common
Stock on the Nasdaq National Market System was $32.50 per share. See "Recent
Stock Prices."
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
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Total(3)................... $ $ $ $
</TABLE>
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(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $400,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 341,595 shares of Common Stock at the Price to Public,
less the Underwriting Discounts and Commissions shown above, solely to
cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ , and $ , respectively. See "Underwriting."
The Shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on or
about July , 1996 at the offices of Schroder Wertheim & Co. Incorporated, New
York, New York.
SCHRODER WERTHEIM & CO.
GOLDMAN, SACHS & CO.
WESSELS, ARNOLD & HENDERSON
MORGAN KEEGAN & COMPANY, INC.
July , 1996
<PAGE>
[Photographs depicting the interior of a Bruegger's bakery and a
selection of bagels, together with logos for the Company's various
restaurant concepts]
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IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON NASDAQ IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements contained elsewhere in this Prospectus.
References herein to the "Company" include the Company and its subsidiaries and
their respective predecessors, unless the context otherwise requires. Unless
otherwise indicated, all information in this Prospectus assumes that the over-
allotment option granted to the Underwriters has not been exercised. The
Company's fiscal year is the 52 or 53-week period ending on the last Sunday in
October of each year. Fiscal 1991, 1992, 1994 and 1995 each consisted of 52
weeks, and fiscal 1993 consisted of 53 weeks. This Prospectus contains forward-
looking statements. Forward-looking statements are made based upon management's
expectations and beliefs concerning future events impacting the Company. All
forward-looking statements involve risk and uncertainty. Actual results may be
materially affected by a number of factors, some of which may be beyond the
control of the Company. See "Risk Factors."
THE COMPANY
Quality Dining, Inc. (the "Company") is the owner, operator and franchisor of
Bruegger's Bagel Bakery ("Bruegger's"), the largest and, management believes,
the fastest growing chain of fresh bagel bakeries in the United States. The
Company also operates four other distinct restaurant concepts. It owns the
Grady's American Grill and Spageddies Italian Kitchen ("Spageddies") concepts
and develops and operates Burger King restaurants and Chili's Grill & Bar
("Chili's") as a franchisee of Burger King Corporation and Brinker
International, Inc. ("Brinker"), respectively. As of June 30, 1996, the Company
operated and franchised 469 restaurants, including 339 Bruegger's (76 Company-
owned and 263 franchised), 42 Grady's American Grills, five Spageddies, 63
Burger King restaurants and 20 Chili's.
The Company's fundamental business strategy is to combine the significant
growth potential of Bruegger's with the Company's proven operating skills and
the strong cash flow of its other restaurant operations.
The Company intends to develop the Bruegger's brand through the aggressive
expansion of its system of Company-owned and franchised Bruegger's bakeries.
Prior to the acquisition of Bruegger's Corporation on June 7, 1996, the Company
developed and operated Bruegger's bakeries as a franchisee, and Daniel B.
Fitzpatrick, the Company's President and Chief Executive Officer, served as a
director of Bruegger's Corporation. The Company's objectives are to establish
the Bruegger's brand as the leading, most recognized brand in the bagel
industry, to enhance Bruegger's existing position as the largest chain of fresh
bagel bakeries in the United States and to be the leader in the markets it
enters. The Company's goal is to have 2,000 Bruegger's systemwide by the end of
fiscal 2000. By the end of fiscal 1996, the Company plans to have 445 to 475
Bruegger's systemwide (90 to 100 Company-owned and 355 to 375 franchised). By
the end of fiscal 1997, the Company plans to have 675 to 750 Bruegger's
systemwide (175 to 200 Company-owned and 500 to 550 franchised). The Company's
franchisees have entered into development agreements providing for the opening
of a minimum of 653 additional franchised bakeries by the end of 2001,
approximately half of which are required under the agreements to be open within
the next three years.
The Company's rapid expansion plan for Bruegger's is driven by the concept's
demonstrated consumer appeal and attractive unit economics. Bruegger's
currently operates in 52 metropolitan markets in 32 states. Since it was
founded in 1983, Bruegger's has experienced 11 consecutive years of systemwide
comparable store sales growth. Bruegger's generated systemwide net sales of
over
3
<PAGE>
$150 million, and mature Bruegger's bakeries (open two or more years) generated
on average approximately $801,000 in net sales for the 12 months ended May 12,
1996. Based on the Company's historical experience, a typical Bruegger's bakery
costs approximately $350,000 to develop.
Bruegger's offers freshly baked bagels, its branded premium "Javahh!" coffee,
Bruegger's branded cream cheese, bagel-based sandwiches, soups and other food
and beverage items. Bruegger's differentiates itself from its competitors by
providing customers with bagels baked in small batches on site throughout the
day using fresh, not frozen, dough. In order to provide its customers with a
consistently high-quality product and to minimize transportation and production
costs, Bruegger's is vertically integrated. Bruegger's units are served by over
30 strategically located Company or franchisee-owned commissaries that produce
fresh dough and distribute other products to Bruegger's bakeries on a daily
basis.
The Company intends to supplement the growth of its Bruegger's concept with
continued expansion of the Company's other restaurant concepts. In addition to
Bruegger's, by the end of fiscal year 1996, the Company expects to have
approximately 42 Grady's American Grills, six to seven Spageddies, 63 to 65
Burger King restaurants and 21 to 23 Chili's. During fiscal year 1997, the
Company plans to add an additional one to two Grady's American Grills, one to
two Spageddies, four to six Burger King restaurants and three to five Chili's.
Management believes that the Company has the operating and development
expertise required to fully develop the Bruegger's brand and execute its
aggressive expansion plans. Since its founding in 1981, the Company has grown
from a two-unit Burger King franchisee to a leading multi-concept restaurant
operator with 469 owned and franchised units at June 30, 1996. The Company has
achieved this growth while remaining consistently profitable in each year of
its operation. Management attributes the Company's growth and financial success
to its operation of well-positioned, value-based concepts, focus on total
customer satisfaction and hands-on management style. Management believes that
as a result of these factors, the Company's restaurants appeal to a broad range
of customers and generate a high level of repeat business and customer loyalty.
The Company will consider selective acquisitions which would accelerate the
development of the Company's existing concepts.
THE OFFERING
Common Stock offered by the Company..... 2,200,000 shares
Common Stock offered by the Selling 77,300 shares
Shareholders............................
Common Stock to be outstanding after 16,495,264 shares(1)
the Offering............................
Use of Proceeds......................... To repay borrowings under the
Company's revolving credit facility
Nasdaq National Market System Symbol.... QDIN
- --------
(1) Excludes outstanding options to purchase an aggregate of 665,464 shares
granted under the Company's 1993 Stock Option and Incentive Plan (the "1993
Stock Option Plan") and the Company's Outside Directors Stock Option Plan
(the "Outside Directors Plan").
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RESTAURANT DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 28 WEEKS ENDED
---------------------------------------------- --------------------
OCTOBER 29, 1995 MAY 12, 1996
OCTOBER 31, OCTOBER 30, -------------------- --------------------
1993 1994 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
----------- ----------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales:
Grady's American
Grill................. $ -- $ -- $ -- $100,858 $41,679 $56,810
Burger King............ 49,032 49,716 57,013 64,832 35,588 35,588
Chili's................ 9,963 14,286 38,267 38,267 21,086 21,086
Spageddies............. -- 174 4,741 4,741 4,373 4,373
Bruegger's............. -- 191 5,270 20,888 6,321 18,053
------- ------- ------- -------- ------- -------
Total restaurant sales.. 58,995 64,367 105,291 229,586 109,047 135,910
Franchise revenues...... -- -- -- 4,051 -- 2,833
------- ------- ------- -------- ------- -------
Total revenues....... 58,995 64,367 105,291 233,637 109,047 138,743
------- ------- ------- -------- ------- -------
Income from restaurant
operations(2).......... 10,259 11,623 17,728 33,366 14,828 19,198
General, administrative
and other expenses..... 4,143 4,065 5,706 14,991 5,088 10,686
Amortization of goodwill
and trademarks......... 8 8 539 4,417 419 2,379
Restructuring,
integration and special
charges................ -- -- -- -- 1,938 7,896
------- ------- ------- -------- ------- -------
Operating income
(loss)................ 6,108 7,550 11,483 13,958 7,383 (1,763)
------- ------- ------- -------- ------- -------
Income (loss) before
income taxes........... 4,527 6,260 9,129 5,019 4,370 (6,240)
Income taxes (benefit).. -- 2,332 3,240 3,018 1,595 (1,545)
------- ------- ------- -------- ------- -------
Net income (loss)...... $ 4,527(3) $ 3,928(3) $ 5,889 $ 2,001 $ 2,775 $(4,695)
======= ======= ======= ======== ======= =======
Net income (loss) per
share................. (3) (3) $ 0.85 $ 0.16 $ 0.31 $ (0.34)
======= ======== ======= =======
Weighted average
shares outstanding.... (3) (3) 6,925 12,302 8,838 13,965
======= ======== ======= =======
RESTAURANT DATA:
Units open at end of
period:
Bruegger's:
Owned.................. -- 3 12 45(4) 21 65(4)
Franchised............. -- -- -- 163(4) -- 246(4)
------- ------- ------- -------- ------- -------
Total systemwide
Bruegger's............ -- 3 12 208 21 311
------- ------- ------- -------- ------- -------
Other concepts:
Grady's American
Grill................. -- -- -- 42(4) 42 42
Burger King............ 44 48 59 59 63 63
Chili's................ 4 8 18 18 19 19
Spageddies............. -- 1 5 5 5 5
------- ------- ------- -------- ------- -------
Total other concepts... 48 57 82 124 129 129
------- ------- ------- -------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
AT MAY 12, 1996
----------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED(5)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficiency................. $ (3,038) $(15,463) $(15,463)
Total assets............................... 185,776 347,880 347,880
Long-term debt and capitalized lease and
non-competition obligations............... 95,710 111,718 44,193
Total stockholders' equity................. 74,224 197,275 274,915
</TABLE>
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(1) Pro forma income statement data for fiscal 1995 gives effect to the
acquisitions of Bruegger's Corporation, Grady's American Grill and the
SHONCO Companies as if such transactions had occurred on October 31, 1994.
Pro forma income statement data for the 28 weeks ended May 12, 1996 gives
effect to the acquisitions of Bruegger's Corporation and Grady's American
Grill as if such transactions had occurred on October 30, 1995. Pro forma
balance sheet data at May 12, 1996 gives effect to the acquisition of
Bruegger's Corporation as if it had occurred on that date.
(2) Income from restaurant operations has been adjusted to include franchise
revenues and exclude amortization of goodwill and trademarks.
(3) For fiscal 1993 and 1994, net income, net income per share and weighted
average shares outstanding were reported on a pro forma basis. See Notes 7
and 8 to Selected Financial Data.
(4) Pro forma restaurant data for fiscal 1995 and the 28 weeks ended May 12,
1996 includes, as Company-owned restaurants, the Bruegger's bakeries
operated by Bruegger's Corporation at the end of the respective periods.
Pro forma restaurant data for fiscal 1995 includes, as Company-owned
restaurants, 42 Grady's American Grill restaurants acquired on December 21,
1995.
(5) As adjusted to reflect the issuance and sale of 2,200,000 shares of Common
Stock by the Company at an assumed public offering price of $32.50 per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds."
The foregoing should be read in conjunction with the Selected Financial Data
and the Pro Forma Condensed Consolidated Financial Statements and the notes
thereto appearing elsewhere herein.
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, investors
should carefully consider the following factors in evaluating the Company and
its business before purchasing shares of Common Stock offered hereby.
AGGRESSIVE GROWTH STRATEGY
The Company has grown significantly during the past two years, both
internally and through strategic acquisitions. The Company intends to continue
to pursue an aggressive growth strategy. The Company's expansion plans
emphasize the rapid growth of the Bruegger's concept. The Company's goal is to
have 2,000 Bruegger's systemwide by the end of fiscal 2000. The Company plans
to have 445 to 475 Bruegger's systemwide (90 to 100 Company-owned and 355 to
375 franchised) by the end of fiscal 1996. By the end of fiscal 1997, the
Company plans to have 675 to 750 Bruegger's systemwide (175 to 200 Company-
owned and 500 to 550 franchised). The Company's decision to emphasize
Bruegger's reflects management's judgment concerning, among other things, the
size of the potential market for bagel-based restaurant concepts, the
continuing appeal of the Bruegger's concept to consumers and the Company's
ability to successfully manage rapid systemwide growth. In addition, the
success of the Company's expansion efforts depends on a number of other
factors, including the availability and cost of suitable locations, the
availability of adequate financing for the Company and its franchisees, the
hiring, training and retention of skilled management and other restaurant
personnel, the ability to obtain the necessary governmental permits and
approvals and third party consents, including the consents of its franchisors,
the competitive environment and other factors, some of which are beyond the
Company's control. As a result of the foregoing factors, there can be no
assurance that the Company's expansion plans can be achieved, that each of the
new restaurants will be operated profitably or that such expansion will not
result in reduced sales at existing Company restaurants located near newly
opened restaurants. Mature Bruegger's units (those open two or more years)
typically realize higher sales volumes than new units. Management believes
that the Company's plan to accelerate the expansion of Bruegger's will cause
the average maturity of Bruegger's units to decline, which may have an adverse
effect on average per unit sales.
RECENT ACQUISITIONS REQUIRE ASSIMILATION AND INTEGRATION
The Company has acquired ownership of three of its concepts in the last 10
months: Spageddies in October 1995, Grady's American Grill in December 1995,
and Bruegger's in June 1996. As a result, the Company has grown significantly
in size and broadened the geographic area in which it operates. Any
acquisition involves inherent uncertainties, such as the effect on the
acquired businesses of integration into a larger organization and the
availability of management resources to oversee the operations of the acquired
business. The Company's ability to integrate the operations of acquired
concepts is essential to its future success. There can be no assurance as to
the Company's ability to integrate new businesses nor as to its success in
managing the significantly larger operations resulting therefrom.
In addition, the Company has recorded significant intangible assets in
connection with the Grady's American Grill and Bruegger's acquisitions.
Applicable accounting standards require the Company to review long-lived
assets (such as goodwill and other intangible assets) for impairment whenever
events or changes in circumstances indicate that the carrying values of those
assets may not be recoverable. In the event that the Company determines that
the carrying value of such intangible assets is impaired, it would write-down
such carrying value, which would result in a charge to earnings. Any such
charge could have a material adverse effect on the Company's financial
results.
PROPRIETARY CONCEPTS REQUIRE GREATER MANAGEMENT ATTENTION
The Company's ability to manage the significantly larger and more diverse
operations resulting from its recent and anticipated growth will be essential
to its success. The Company's business historically has focused primarily on
the development and operation of Burger King and Chili's
6
<PAGE>
restaurants. Burger King Corporation and Brinker are well established
franchisors and Burger King and Chili's restaurants have an established record
as viable concepts. Burger King Corporation historically has made considerable
advertising and promotional expenditures intended to heighten the goodwill
associated with its trademarks and has developed sophisticated cooperative
purchasing and other arrangements to assist its franchisees. Brinker has also
provided its Chili's franchisees with considerable advertising and promotional
support.
Since October 1995, the Company has acquired ownership of the Bruegger's,
Grady's American Grill and Spageddies concepts. These concepts have varying
degrees of name recognition. The retail bagel segment represents an emerging
quick-service restaurant concept, the long-term appeal and development
potential of which have not yet been fully established. Although the Company
opened its first Spageddies in 1994, it is not yet a proven concept and is
still in the developmental stage. In addition, the Company's acquisition of
the Bruegger's, Grady's American Grill and Spageddies concepts has caused it
to assume many functions performed by the previous owners, requiring increased
staffing and expenditures in the areas of advertising and marketing,
purchasing, management information systems and others. Moreover, the Company
is now a franchisor of the Bruegger's concept, which is a new role for the
Company. Accordingly, the Company's development and operation of these
restaurant concepts are subject to a wider range of risks than those
associated with the development and operation of its Burger King and Chili's
restaurants.
As a result of the foregoing factors, there can be no assurance that the
Company's expansion plans can be achieved, that the perceived benefits of the
acquisitions will be realized or that each of the new restaurant concepts will
be operated profitably.
BRUEGGER'S HISTORY OF LOSSES AND POSSIBLE FUTURE LOSSES
There can be no assurance that the perceived benefits of the Company's
recent acquisition of Bruegger's Corporation will be realized. Bruegger's
Corporation experienced net losses since March 3, 1992, including net losses
for the fiscal years ended December 27, 1994 and December 26, 1995 of $1.8
million and $5.5 million, respectively. For the quarter ended March 19, 1996,
Bruegger's Corporation had a net loss of $1.7 million and an accumulated
deficit of $10.1 million as of such date. Since March 3, 1992, the strategy of
Bruegger's Corporation has been to aggressively grow its base of owned and
franchised bakeries. As a result, Bruegger's Corporation incurred significant
start up costs associated with owning bakeries and establishing infrastructure
necessary to manage the development of owned bakeries, to institutionalize
procedures and systems, and to organize and implement an active franchising
program. The Company expects that these costs will continue to be significant
as the Company continues to implement its rapid expansion plans for
Bruegger's. There can be no assurance when or if revenues from the Bruegger's
concept will be sufficient to offset these costs or achieve profitability for
the Company's Bruegger's operations.
BRUEGGER'S FRANCHISE OPERATIONS ARE DEPENDENT ON FRANCHISEES
As of June 30, 1996, the Company had 36 Bruegger's franchisees and 263
franchised Bruegger's. The Company's expansion plans for Bruegger's are based
in part on the commitments of the current franchisees to open new bakeries in
their exclusive territories. Messrs. Nordahl L. Brue and Michael J. Dressell
and/or Richard Brue, the brother of Mr. Brue, are the principal shareholders
of certain franchisees (the "Original Franchisees") that operated Bruegger's
bakeries prior to the incorporation of Bruegger's Corporation and the
establishment of the Bruegger's franchise system. The Original Franchisees
have been awarded exclusive territories (Minnesota, Upstate New York, the
greater Hartford, Connecticut area and the greater Pittsburgh, Pennsylvania
area and portions of Iowa, Massachusetts (including the greater Boston area)
and North Carolina), but are not obligated to develop a minimum number of
bakeries. The Company does not intend to enter into franchising arrangements
with a significant number of new Bruegger's franchisees. Accordingly,
expansion plans for the Bruegger's concept are dependent in part upon the
ability of the Company's existing Bruegger's
7
<PAGE>
franchisees to develop additional bakeries. Moreover, the Company will realize
a portion of its revenues from continuing royalty payments from its Bruegger's
franchisees and such revenues will be dependent upon the ability of its
franchisees to operate and develop their Bruegger's and to promote and deliver
the Bruegger's concept and its reputation for quality and value.
Although the Bruegger's franchisees have been selected utilizing established
criteria, there can be no assurance that such franchisees will have the
business ability or access to financial resources necessary to successfully
develop or operate Bruegger's in their franchise areas in a manner consistent
with the Bruegger's concept and standards. Should its franchisees encounter
business or operational difficulties, the Company's revenues would be affected
and it could negatively impact the Bruegger's brand and the ability to sell new
franchises if the Company desires to do so.
RISKS AND REQUIREMENTS OF FRANCHISEE STATUS
The Company currently franchises its Burger King and Chili's restaurants from
Burger King Corporation and Brinker, respectively. Due to the nature of
franchising and the Company's agreements with its franchisors, the success of
the Company's franchised concepts is, in large part, dependent upon the overall
success of its franchisors, including the financial condition, management and
marketing success of its franchisors and the successful operation of
restaurants opened by other franchisees. Certain matters with respect to the
Company's franchise concepts must be coordinated with, and approved by, the
Company's franchisors. In particular, certain franchisors must approve the
opening by the Company of any new franchised restaurant, including franchises
opened within the Company's existing franchised territories, and the closing of
any of the Company's existing franchised restaurants. The Company's franchisors
also maintain discretion over the menu items that may be offered in the
Company's franchised restaurants. By virtue of franchise and other agreements,
the Company is required to pay to its franchisors certain fees upon the opening
of new franchised restaurants, monthly royalty fees and national advertising
fees. These agreements also provide for the termination of the Company as a
franchisee upon the failure of the Company to comply with certain restrictions
and obligations imposed on it.
In addition, the Company's development agreements with Burger King
Corporation and Brinker commit the Company to develop at least 55 new
restaurants within certain territories by various dates through 2001, of which
the Company had opened 35 as of June 30, 1996. Should the Company fail to
comply with the development agreements, the franchisors could, among other
remedies, terminate the exclusive nature of the Company's development rights in
these areas.
GOVERNMENT REGULATIONS AFFECT RESTAURANT BUSINESS
The restaurant business is subject to extensive laws and regulations relating
to the development and operation of restaurants, including regulations relating
to the sale of alcoholic beverages, zoning, the preparation and sale of food
and employer/employee relationships. The loss of a liquor license for a
particular Grady's American Grill, Spageddies or Chili's restaurant would most
likely result in the closing of the restaurant. Any substantial increases in
the minimum wage or mandatory health care coverage could also adversely affect
the Company. In addition, because of its franchise operations for Bruegger's,
the Company is subject to the Trade Regulation Rule of the Federal Trade
Commission titled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" and state and local laws and
regulations that govern the offer, sale and termination of franchises and the
refusal to renew franchises. Continued compliance with this broad federal,
state and local regulatory network is essential and costly and the failure to
comply with such regulations may have an adverse effect on the Company and its
franchisees. Violations of franchising laws and/or state laws and regulations
regulating substantive aspects of doing business in a particular state could
limit the Company's ability to sell franchises or subject the Company and its
affiliates to rescission offers, monetary damages, penalties, imprisonment
and/or injunctive proceedings. In addition, under court decisions in certain
states absolute vicarious liability may be imposed upon franchisors based upon
8
<PAGE>
claims made against franchisees. While the Company believes that it maintains
adequate insurance coverage for such claims, there can be no assurance that
such insurance will be sufficient to cover potential claims against the
Company.
COMPETITION IS INTENSE
The restaurant industry is intensely competitive with respect to price,
service, location and food quality. The industry is mature and competition can
be expected to increase. There are many well-established competitors with
substantially greater financial and other resources than the Company, some of
which have been in existence for a substantially longer period than the
Company and may have substantially more units in the markets where the
Company's restaurants are or may be located. The Company's Bruegger's concept
competes against local and regional bagel shops, regional and national deli
and lunch restaurants, supermarkets and convenience stores. The Company also
faces competition from regional and national bagel chains, including Manhattan
Bagel Company, Inc., Chesapeake Bagels, New York Bagel Enterprises, Inc. and
Einstein Bros. Bagels, Inc. The principal competitors to the Company's Burger
King restaurants are McDonald's, Wendy's, Hardee's and "double drive-thru"
restaurants. The competitors to the Company's Chili's and Spageddies
restaurants are other casual dining concepts such as T.G.I. Friday's,
Applebee's, Bennigan's, Olive Garden, Red Lobster and Chi-Chi's restaurants.
The primary competitors to Grady's American Grill are Houston's, J.
Alexander's, Cooker Bar & Grille, and O'Charley's Restaurant & Lounge, as well
as a large number of locally-owned, non-chain restaurants. The Company
believes that competition is likely to become even more intense in the future.
RISKS ASSOCIATED WITH THE FOOD SERVICE INDUSTRY
The Company and the restaurant industry generally are significantly affected
by factors such as changes in local, regional or national economic conditions,
changes in consumer tastes, weather conditions and various other consumer
concerns. In addition, factors such as increases in food, labor and energy
costs, the availability and cost of suitable restaurant sites, fluctuating
insurance rates, state and local regulations and the availability of an
adequate number of hourly-paid employees can also adversely affect the
restaurant industry.
DEPENDENCE ON KEY PERSONNEL
The success of the Company's business will continue to be dependent upon the
services of Daniel B. Fitzpatrick, President and Chief Executive Officer of
the Company. The Company maintains key man life insurance on the life of Mr.
Fitzpatrick in the principal amount of $3.0 million. The loss of the services
of Mr. Fitzpatrick would have a material adverse effect upon the Company.
RELATED PARTY TRANSACTIONS
The Company historically has engaged in related party transactions with
entities controlled by its founding shareholders. It is anticipated that the
Company will continue to engage in certain of these transactions. Related
party transactions are subject to the review and approval of the Company's
Audit Committee, which is composed exclusively of the Company's disinterested
Directors, and such transactions have been on terms no less favorable to the
Company than those that could be obtained from unaffiliated third parties.
In addition, Messrs. Nordahl L. Brue and Michael J. Dressell and their
affiliates are parties to a number of arrangements with Bruegger's
Corporation, including franchise agreements with more favorable terms than
other franchisees; certain exclusive supply arrangements with respect to the
cream cheese sold to Bruegger's units by Franklin County Cheese Corporation,
an entity affiliated with Messrs. Brue and Dressell; arrangements for
purchases of bagel dough and other products from the Company-owned
commissaries; arrangements with respect to the sale of bakery equipment to
Bruegger's units; the lease for Bruegger's headquarters in Burlington,
Vermont; and guaranties by Bruegger's Corporation of certain leases. Messrs.
Brue and Dressell, the co-founders of Bruegger's, have served on the Company's
Board of Directors since June 7, 1996.
9
<PAGE>
CONTROL BY INSIDERS
As of June 30, 1996, the executive officers and directors of the Company
beneficially owned approximately 57.0% of the shares of the Company's Common
Stock and will continue to own 49.5% after the Offering. Accordingly, senior
management of the Company has sufficient voting power to effectively control
the outcome of any matter submitted to the shareholders for approval, and to
block certain amendments to the Company's Restated Articles of Incorporation
and certain transactions that require a supermajority vote.
CERTAIN ANTI-TAKEOVER PROVISIONS
The division of the Company's Board of Directors into classes, the ability
of the Board of Directors to issue shares of preferred stock in one or more
series and to determine the designation, voting and other rights, preferences,
privileges and restrictions applicable to such shares, together with the
heightened shareholder approval requirements associated with certain business
combination transactions involving a Related Person (as defined) and
applicable provisions of Indiana law, may have the effect of discouraging a
merger, tender offer, proxy contest or other transaction involving a change in
control of the Company that has not received the prior approval of a majority
of the Company's Board of Directors. In addition, the Company's franchise
agreements with Burger King Corporation and Brinker require the Company to
obtain the prior consent of those franchisors for any new members of the Board
of Directors of the Company.
USE OF PROCEEDS
Assuming an offering price of $32.50 per share, the net proceeds to the
Company from the sale of 2,200,000 shares of Common Stock being offered by the
Company are estimated to be $67.5 million ($78.1 million if the Underwriters'
over-allotment option is exercised in full). The Company intends to use
substantially all of the net proceeds to repay borrowings outstanding under
its existing $150 million unsecured revolving credit facility which expires on
April 26, 1999. Borrowings under the credit facility bear interest at the
adjusted LIBOR rate plus 1.5%. At June 30, 1996, the outstanding borrowings
under the revolving credit facility were $110.6 million. Of such balance,
$74.4 million was incurred in connection with the acquisition of Grady's
American Grill in December 1995 and $16.1 million was incurred to repay
certain short-term debt assumed in connection with the acquisition of
Bruegger's Corporation on June 7, 1996. A portion of the net proceeds,
estimated to be less than $15.0 million, may be used to purchase Bruegger's
units from certain franchisees. Although the Company is having discussions
with certain franchisees regarding the purchase of a limited number of units,
there are currently no definitive agreements or understandings with respect to
any such proposed acquisition, and there can be no assurance that any
acquisitions of Bruegger's units will be completed.
The Company will not receive any proceeds from the sale of shares by the
Selling Shareholders.
10
<PAGE>
RECENT STOCK PRICES
The Company's Common Stock commenced trading on the Nasdaq National Market
on March 2, 1994 under the symbol "QDIN". Prior thereto, there was no public
market for the Common Stock. The following table sets forth, for the calendar
periods indicated, the high and low sale prices per share for the Company's
Common Stock, as reported on the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994
First Quarter (from March 2, 1994)..................... $12.875 $11.625
Second Quarter......................................... 11.750 10.750
Third Quarter.......................................... 13.125 10.750
Fourth Quarter......................................... 13.625 12.000
1995
First Quarter.......................................... 12.625 11.625
Second Quarter......................................... 16.375 12.188
Third Quarter.......................................... 21.500 15.750
Fourth Quarter......................................... 26.875 18.875
1996
First Quarter.......................................... 31.250 19.750
Second Quarter......................................... 39.500 26.500
Third Quarter (through July 1, 1996)................... 33.500 31.750
</TABLE>
On July 1, 1996, the last sale price of the Company's Common Stock as
reported on the Nasdaq National Market was $32.50 per share.
As of June 30, 1996, there were approximately 240 holders of record of
Common Stock.
11
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company: (i) at May 12, 1996; (ii) pro forma to reflect the acquisition of
Bruegger's Corporation; and (iii) as adjusted to reflect the issuance and sale
of 2,200,000 shares of Common Stock by the Company, at an assumed public
offering price of $32.50 per share, and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds." The table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Financial Statements
incorporated by reference in this Registration Statement.
<TABLE>
<CAPTION>
MAY 12, 1996
------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
Short-term debt:
Current portion of capitalized lease and non-
competition obligations...................... $ 360 $ 360 $ 360
======== ======== ========
Long-term debt:
Revolving line of credit...................... $ 88,904 $104,912 $ 37,387
Capitalized lease and non-competition
obligations.................................. 6,806 6,806 6,806
-------- -------- --------
Total long-term debt........................ 95,710 111,718 44,193
-------- -------- --------
Redeemable Preferred Stock, $100 stated value;
Series A, cumulative, convertible; 141,450
shares authorized; 84,000 shares issued, pro
forma and no shares issued, as adjusted(1)..... -- 8,400 --
-------- -------- --------
Stockholders' equity(1):
Preferred Stock, without par value; 4,858,550
shares authorized; none issued............... -- -- --
Common Stock, without par value; 50,000,000
shares authorized; 8,861,920 shares issued;
13,989,062 shares issued, pro forma;
16,474,594 shares issued, as adjusted........ 28 28 28
Additional paid-in capital.................... 63,238 186,289 263,929
Retained earnings............................. 11,208 11,208 11,208
-------- -------- --------
74,474 197,525 275,165
Less treasury stock, 20,000 shares............ 250 250 250
-------- -------- --------
Total stockholders' equity.................. 74,224 197,275 274,915
-------- -------- --------
Total capitalization...................... $169,934 $317,393 $319,108
======== ======== ========
</TABLE>
- --------
(1) In addition to giving effect to the issuance and sale of 2,200,000 shares
of Common Stock contemplated hereby, amounts reported under the As
Adjusted column give effect to the issuance of 117,800 shares of the
Company's Series A preferred stock to the former holders of Bruegger's
Corporation redeemable preferred stock, the redemption of 16,650 shares
of Series A preferred stock and the conversion of 101,150 shares of
Series A preferred stock into an aggregate of approximately 285,532
shares of the Company's Common Stock.
12
<PAGE>
BUSINESS
GENERAL
The Company is the owner, operator and franchisor of Bruegger's, the largest
and, management believes, the fastest growing chain of fresh bagel bakeries in
the United States. The Company also operates four other distinct restaurant
concepts. It owns the Grady's American Grill and Spageddies concepts and
develops and operates Burger King restaurants and Chili's as a franchisee of
Burger King Corporation and Brinker, respectively. As of June 30, 1996, the
Company operated and franchised 469 restaurants, including 339 Bruegger's (76
Company-owned and 263 franchised), 42 Grady's American Grills, five
Spageddies, 63 Burger King restaurants and 20 Chili's.
The Company's fundamental business strategy is to combine the significant
growth potential of Bruegger's with the Company's proven operating skills and
the strong cash flow of its other restaurant operations.
EXPANSION
The Company intends to develop the Bruegger's brand through the aggressive
expansion of its system of Company-owned and franchised Bruegger's bakeries.
The Company acquired Bruegger's Corporation on June 7, 1996. The Company's
objectives are to establish the Bruegger's brand as the leading, most
recognized brand in the bagel industry, to enhance Bruegger's existing
position as the largest chain of fresh bagel bakeries in the United States and
to be the leader in the markets it enters. The Company's goal is to have 2,000
Bruegger's systemwide by the end of fiscal 2000. By the end of fiscal 1996,
the Company plans to have 445 to 475 Bruegger's systemwide (90 to 100 Company-
owned and 355 to 375 franchised). By the end of fiscal 1997, the Company plans
to have 675 to 750 Bruegger's systemwide (175 to 200 Company-owned and 500 to
550 franchised). The Company's franchisees have entered into development
agreements providing for the opening of a minimum of 653 additional franchised
bakeries by the end of 2001, approximately half of which are required under
the agreements to be open within the next three years.
The Company intends to supplement the growth of its Bruegger's concept with
continued expansion of the Company's other restaurant concepts. In addition to
Bruegger's, by the end of fiscal year 1996, the Company expects to have
approximately 42 Grady's American Grills, six to seven Spageddies, 63 to 65
Burger King restaurants and 21 to 23 Chili's. During fiscal year 1997, the
Company plans to add an additional one to two Grady's American Grills, one to
two Spageddies, four to six Burger King restaurants and three to five Chili's.
The Company will consider selective acquisitions which would accelerate the
development of the Company's existing concepts.
OPERATING PHILOSOPHY
Management believes that the Company has the expertise required to fully
develop the Bruegger's brand and execute its aggressive expansion plan. Since
its founding in 1981, the Company has grown from a two-unit Burger King
franchisee to a leading multi-concept restaurant operator with 469 owned and
franchised units at June 30, 1996. The Company has achieved this growth while
remaining consistently profitable in each year of its operation. Management
attributes the Company's growth and financial success to its operating
philosophy, which is shared by all of the Company's concepts and is comprised
of the following four key elements:
Value-Based Concepts
Value-based restaurant concepts are important to the Company's business
strategy. Accordingly, in each of its restaurants, the Company seeks to
provide customers with value, which is a product of high-quality menu
selections, reasonably priced food, prompt, courteous service and a pleasant
dining atmosphere.
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<PAGE>
Focus on Customer Satisfaction
Through its comprehensive management training programs and experienced
management team, the Company seeks to ensure that its employees provide
customers with an enjoyable dining experience on a consistent basis.
Hands-On Management Style
Members of the Company's senior management are actively involved in the
operations of each of the Company's restaurant concepts. This active management
approach is a key factor in the Company's efforts to control costs and maximize
operating income.
Quality Franchise Partners
The Company has historically sought franchisors and franchisees with
established reputations for leadership in their various segments of the
restaurant industry, who have proven integrity and share the Company's focus on
value, customer service and quality.
RECENT EVENTS
On June 7, 1996, the Company acquired Bruegger's Corporation, the nation's
largest chain of fresh bagel bakeries. Pursuant to the terms of a merger
agreement, Bruegger's Corporation became a wholly owned subsidiary of Quality
Dining, Inc. In connection with the merger, 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 and is not reflected
in the pro forma financial information included in this Prospectus. 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.
On July 1, 1996, the Company entered into an agreement to acquire three bagel
bakeries from an unaffiliated third party for a purchase price of $3.5 million,
payable in cash. The acquisition is scheduled to close by July 15, 1996.
BRUEGGER'S BAGEL BAKERIES
General
Bruegger's is the largest chain of fresh bagel bakeries in the United States.
Bruegger's offers freshly baked bagels, its branded premium "Javahh!" coffee,
Bruegger's branded cream cheese, bagel-based sandwiches, soups and other food
and beverage items. Bruegger's differentiates itself from its competitors by
providing customers with bagels baked in small batches on site throughout the
day using fresh, not frozen, dough. In order to provide its customers with a
consistently high-quality product and to minimize transportation and production
costs, Bruegger's is vertically integrated. Bruegger's units are served by over
30 strategically located Company or franchisee-owned commissaries that produce
fresh dough and distribute other products to Bruegger's bakeries on a daily
basis.
The Brand
The Company's objective is to establish Bruegger's as the leading brand in
the bagel industry. In order to achieve this objective, the Company seeks to:
(i) rapidly expand the points of distribution for Bruegger's products through
the addition of new Bruegger's units; (ii) prominently feature the Bruegger's
brand name and logo in its units and in the packaging and display of its
products; and (iii) encourage repeat business and customer loyalty by
maintaining high standards of quality and consistency. Management believes that
penetrating each of its target markets with a large number of strategically
placed Bruegger's units will facilitate the development of the Bruegger's
brand, increase trial of the Company's products and lead to a high level of
brand awareness. In each of its retail locations, the Company emphasizes easily
identifiable and visible signage and logos to reinforce brand identity. Local
operators of Bruegger's units further brand awareness through involvement with
local community events, activities and promotions. In addition, the Company has
a significant marketing budget for advertising and product promotions, which
management expects to increase as Bruegger's systemwide sales grow.
14
<PAGE>
Retail Locations
As of June 30, 1996, there were 76 Company-owned and 263 franchised bakeries
operating in 52 metropolitan markets in 32 states. The following table sets
forth the states in which Bruegger's bakeries were located on such date:
<TABLE>
<CAPTION>
STATE COMPANY FRANCHISED TOTAL
----- ------- ---------- -----
<S> <C> <C> <C>
Arizona.......................................... 2 2
California....................................... 10 10
Colorado......................................... 8 8
Connecticut...................................... 8 8
Florida.......................................... 6 6
Georgia.......................................... 2 2
Idaho............................................ 3 3
Illinois......................................... 14 2 16
Indiana.......................................... 4 4
Iowa............................................. 16 16
Kentucky......................................... 3 3
Maryland......................................... 15 15
Massachusetts.................................... 7 28 35
Michigan......................................... 10 10
Minnesota........................................ 27 27
Missouri......................................... 2 2
Nebraska......................................... 7 7
Nevada........................................... 2 2
New Hampshire.................................... 2 2
New Jersey....................................... 1 1
New York......................................... 35 35
North Carolina................................... 23 23
Ohio............................................. 35 35
Pennsylvania..................................... 2 20 22
South Carolina................................... 1 1
Tennessee........................................ 2 2
Texas............................................ 11 11
Utah............................................. 3 3
Vermont.......................................... 1 1 2
Virginia......................................... 7 7
Washington....................................... 12 12
Wisconsin........................................ 7 7
--- --- ---
32 States.................................... 76 263 339
=== === ===
</TABLE>
The Retail Concept
The Bruegger's chain of freshly-baked bagel bakeries is based on the concept
of combining the superior quality of a traditional bagel bakery with the high
volume and convenience of a quick-service restaurant. This concept, which has
been developed and refined since 1983, has enabled Bruegger's Corporation to
open Bruegger's units on a national basis, while maintaining its high
standards for freshness and quality. This concept has also enabled Bruegger's
to develop a distinctive brand image.
Products. As part of its operational strategy, the Bruegger's menu is
focused on a limited number of items including bagels, sandwiches, cream
cheeses, coffee, soups, desserts and other beverages. The Company believes
that this menu provides it with a marketing focus and facilitates the
maintenance of its high standards for product quality and freshness at all of
its bakeries.
Bagels. Bruegger's makes its bagels using a traditional production
process. Bruegger's bagels are kettle-boiled and then hearth-baked to give
the bagels a crispy exterior and a chewy texture inside. The Company
believes that this process distinguishes it from many of its
15
<PAGE>
competitors who use frozen dough or who make their bagels using the
"steamed" method which produces bagels with a softer crust. In addition,
this process permits Bruegger's bagels to be baked in each bakery in small
batches throughout the day by a trained baker, so that each bakery can
continually offer fresh, hot bagels.
Cream Cheese. Cream cheese is an important part of the Bruegger's menu.
The Company sells a proprietary brand of specialty cream cheeses under the
Bruegger's label on bagel sandwiches and in separate containers for take-
out. A large variety of spreads are available, including flavors such as
vegetable, smoked salmon and honey walnut, along with "light" cream cheeses
in plain and additional flavors. Each flavor starts with the same high-
quality cream cheese, to which fresh ingredients are added to create an
array of choices for the customer.
Sandwiches. All sandwiches sold by Bruegger's are made to order and are
served on a bagel using high-quality meats and other ingredients.
Bruegger's sells both traditional deli sandwiches and specialty sandwiches
such as the Leonardo da Veggie and the Chicken Fajita. The Company believes
that the quality and variety of Bruegger's lunch menu contributes to the
high proportion of lunch sales.
Coffee. Bruegger's sells its branded "Javahh!" coffee, a blend of freshly
roasted arabica beans from Costa Rica and Colombia which are ground in the
bakery and brewed fresh throughout the day. A variety of coffees, including
a limited number of flavored coffees, is also available. In addition,
Bruegger's is in the process of testing Javahhccino!, a sweet, frozen,
coffee-based beverage. Bruegger's supports its Javahh! brand through in-
store merchandising and the sale of Javahh! travel mugs to promote repeat
business.
Soups. As an integral component of its lunch menu, Bruegger's offers
soups made in accordance with Bruegger's proprietary recipes. Each bakery
selects the soups it serves from a list of 12 to 15 soups, including
several vegetarian soups, and offers up to four soups each day. Customers
often choose to have Bruegger's soup as a light lunch or as a side with a
bagel sandwich.
Customer Service. Bruegger's goal is to provide quick, friendly and
attentive service to its customers. Bruegger's depends on a high rate of
repeat business and views customer service as a critical factor to repeat
business. Through its emphasis on training, personnel development and
compensation incentives, the Company believes that it attracts and retains
well-qualified, highly-motivated Bruegger's employees who are committed to
providing high levels of customer service.
Bakery Design. The Company designs its Bruegger's units to convey an image
of fresh products and fast service and to provide customers with a casual,
warm and comfortable environment. Since Bruegger's offers both take-out and
eat-in service, most bakeries are configured to accommodate a high volume of
traffic and provide seating for between 50 and 60 people. The current bakery
interior emphasizes Bruegger's traditional bagel-baking process by prominently
displaying the oven, which customers may view through a "theater baking"
window. In addition, artwork and decor items reinforce Bruegger's commitment
to authenticity and freshness in all of its products, from the oversized cream
cheese lids and the bagel-baking story to the narrative describing Bruegger's
coffee, Javahh! Bruegger's units generally range in size from 1,900 to 2,700
square feet, with an average size of approximately 2,300 square feet.
Management Structure
The Company has in place an experienced management team, composed of
franchising, financial, marketing, real estate and development professionals
with extensive prior experience, as well as a strong and well-organized
operating system for its Bruegger's concept.
The Company has determined to consolidate Bruegger's executive offices with
those of the Company at its Mishawaka, Indiana headquarters. The operations of
the Company's Bruegger's bakeries will be managed through six regional
offices. The Company plans to complete its
16
<PAGE>
implementation of this regional office structure by the end of the first
quarter of fiscal 1997. The Company anticipates that each regional office will
be headed by a regional vice president, and staffed with other management
personnel with responsibilities for regional operations, marketing, training,
quality assurance, real estate and franchise support. Each regional office
will report to Nelson Marchioli, Bruegger's newly hired Chief Operating
Officer.
Bruegger's Operations
In an effort to achieve the quality of a traditional bagel bakery with the
high volume and convenience of a quick-service restaurant, the Company has
instituted and developed standardized operating procedures and management
information systems which are designed to enable it to maintain quality and
consistency in its operation of bakeries.
Commissaries. The Company produces its bagel dough for Company-owned
Bruegger's units at six commissaries. Franchisees typically build their own
commissaries to service the Bruegger's units in their markets. There are
currently over 30 Company-owned and franchisee-owned commissaries systemwide.
In addition to producing and distributing fresh bagel dough on a daily basis,
the commissaries function as distributors of other products to the bakeries,
including cream cheese, smoked salmon, sandwich meats and paper products.
The commissary system enables Bruegger's to control and monitor the quality
and consistency of its primary product line. In addition, the commissary
system enables Bruegger's to achieve cost efficiencies as compared to
producing bagel dough in each bakery from (i) lower equipment costs because
duplicate equipment is not required, (ii) lower occupancy costs because
warehouse space, not retail space, is used for production and (iii) the larger
production runs facilitated by the commissary system. Finally, the commissary
system facilitates the delivery of fresh bagel dough on a timely basis instead
of using frozen dough as some competitors do.
The average development cost of the Company's commissaries is approximately
$565,000, excluding an in-unit commissary in Burlington, Vermont. The Company
has an additional commissary under development in Philadelphia, Pennsylvania
to service that market and anticipates incurring similar costs in its
development.
Purchasing. The Company sets quality standards for all products used or sold
in Bruegger's units. In order to maintain product consistency and food safety
standards and to take advantage of volume discounts, franchised bakeries are
required to participate in selected national purchasing programs relating to
cream cheese, coffee, fountain soda, soup, meats, cheese, fish and some
condiments and to purchase such products from suppliers designated by
Bruegger's.
Franchise Program
As of June 30, 1996, the Company was a party to franchise and development
agreements with 36 franchisees, who were operating 263 franchised bakeries.
Each franchisee has been awarded an exclusive territory in which to operate.
The Company's franchisees, other than the Original Franchisees, have committed
to open an additional 653 bakeries. The Original Franchisees are not obligated
to build additional bakeries, but have advised the Company that they intend to
do so. The Company believes that its franchising program is substantially
complete and does not intend to add a large number of new franchisees. The
Company believes that its strategy of working with a limited number of capable
franchisees is the best strategy to permit rapid expansion and a high degree
of system responsiveness to market developments and Bruegger's-related
developments.
Approval. The Company has traditionally evaluated potential Bruegger's
franchisees on the basis of, among other things, their business background,
restaurant operating experience and financial resources. In particular, the
Company has focused on whether the franchisee has experience in multi-unit
operations, has proven ability to execute an aggressive growth plan while
maintaining the highest standards of quality and has the capital resources to
develop additional bakeries.
17
<PAGE>
Development Agreements. The Company enters into development agreements with
each of its franchisees pursuant to which it grants each franchisee the
exclusive right to develop a minimum number of bakeries within a specified
territory. Under the current development agreement, each franchisee pays a
development fee upon the execution of the development agreement in an amount
negotiated by the Company and the franchisee (which the Company expects to be
about $75,000 for an average size market). Each franchisee also pays an
initial franchise fee ($25,000 for each of the first three bakeries; $20,000
for each additional bakery) upon the execution of each franchise agreement for
each bakery opened. Prior to the adoption of the current form of development
agreement, each franchisee paid a development fee based on the number of
bakeries such franchisee committed to develop during the 15-month initial term
($25,000 for each of the first three bakeries; $20,000 for each additional
bakery). In the event that during the 15-month initial term the franchisee
developed more bakeries than it had committed to develop, the franchisee was
not required to pay any development or initial franchise fees with respect to
such additional bakeries. Following the 15-month initial term (and assuming
that at least three bakeries were opened during the initial term), the
franchisee was required to pay an initial franchise fee of $20,000 upon the
execution of each franchise agreement for each bakery opened. Originally,
franchisees paid an initial franchise and development fee of $1,000 for each
bakery and purchased shares of Bruegger's Corporation's preferred stock upon
the execution of the development agreement and subscribed to purchase
additional shares over the next four years.
Franchise Agreements. The Company's standard Bruegger's franchise agreement
generally provides for a term of 20 years and payment of a royalty fee of 5%
of gross sales. In addition, the standard franchise agreement generally
requires the franchisee to spend 4% of gross sales on advertising, one half of
which must be contributed to a general advertising fund that is used to
promote the Bruegger's concept on a local and regional level, although during
a franchise's first year, a franchisee need only contribute 1% of gross sales
to the general advertising fund, with 2% required spending on local store
marketing.
The Company has the right to terminate any franchise agreement for a variety
of reasons, including a franchisee's failure to make payments when due or
failure to adhere to Bruegger's policies and standards. Many state franchise
laws limit the ability of a franchisor to terminate or refuse to renew a
franchise.
Franchise Sites. The Company furnishes each franchisee with assistance in
selecting sites and developing bakeries. Each franchisee is responsible for
selecting the location of its bakeries but must obtain the Company's approval
of each location based on the accessibility and visibility of the site and
targeted demographic factors, including population, density, income, age and
traffic.
Original Franchisees. As of June 30, 1996, the Original Franchisees owned
and operated 148 franchised bakeries in New England, Iowa, Minnesota, New
York, North Carolina and Pennsylvania. Until Bruegger's Corporation commenced
operations in 1993, all Bruegger's units were operated by the Original
Franchisees. Portions of the Original Franchisee territories include the
original development territories of Bruegger's.
The Original Franchisees have been awarded exclusive territories, but are
not obligated to develop a minimum number of bakeries. The franchise
agreements with the Original Franchisees differ from the standard Bruegger's
franchise agreements in that the Original Franchisees are not required to pay
initial franchise or development fees and pay franchise royalties of 4% of
gross sales.
Franchise Operations. All franchisees are required to operate their bakeries
in compliance with Bruegger's policies, standards and specifications,
including matters such as menu items, ingredients, materials, supplies,
services, fixtures, furnishings, decor and signs. Each franchisee must serve
items from an approved menu, but has full discretion to determine the prices
to be charged to its customers.
Trademarks and Service Marks
The Company owns a number of trademarks and service marks that have been
registered with the United States Patent and Trademark Office, including
Bruegger's(R), Bruegger's Fresh Bagel
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<PAGE>
Bakery(R) and the logo for Bruegger's Fresh Bagel Bakery, Bruegger's Bagel
Bakery Fresh Bagels(R) and the logo for Bruegger's Bagel Bakery Fresh Bagels,
Brueggeroons(R), Bruegger's Last Night's Bagels(R) and the logo for Bruegger's
Last Night's Bagels, and The Best Thing Round(R). In addition, Bruegger's has
trademark applications pending for a number of additional marks, including
Javahh!(TM), We Bake Them in Small Batches All Day Long Because People Come in
Small Batches All Day Long(TM), Totally Completely Obsessed with
Freshness(TM), Javahhccino!(TM) and the logo for Bruegger's Bagels/Baked
Fresh.
GRADY'S AMERICAN GRILL
General
Grady's American Grill restaurants feature high-quality food in a classic
American style, served in a warm and inviting setting. Prior to the Company's
acquisition of the concept from Brinker on December 21, 1995, Brinker owned
and operated all of the 42 Grady's American Grill restaurants now owned and
operated by the Company. Grady's American Grill menu features signature prime
rib, high-quality steaks, daily servings of fresh seafood, inviting salads,
sandwiches, soups and legendary desserts. Entrees emphasize on-premise scratch
preparation in a classic American style.
Location
The Company's 42 Grady's American Grill restaurants are located in 16
states, primarily in the South and Southwest.
SPAGEDDIES ITALIAN KITCHEN
General
Spageddies, a concept developed by Brinker and now owned by the Company, are
Italian casual dining restaurants which offer high-quality food, generous
portions and value-driven prices, all enjoyed in a festive and energized
atmosphere. The concept is being refined to incorporate an upscale menu,
enhanced decor and service and a name change.
Spageddies restaurants are casual, modestly-priced Italian restaurants
featuring pasta, pizzas, soups, salads, sandwiches, breads and traditional
Italian entrees, as well as a full-service bar. The meals are served in an
open, family-friendly environment, complete with festive lighting, various
pepper and cheese displays and an open kitchen with a wood-burning pizza oven.
Location
The Company currently operates five Spageddies restaurants, including two in
Indiana, two in Ohio and one in Michigan.
BURGER KING RESTAURANTS
General
Headquartered in Miami, Florida, Burger King Corporation is an indirect
wholly-owned subsidiary of Grand Metropolitan PLC, London, England. Burger
King Corporation has been franchising Burger King restaurants since 1954 and
has since expanded to locations in 50 states, the District of Columbia, and 56
foreign countries and international territories. As of May 31, 1996, there
were 8,405 Burger King restaurants in operation worldwide comprised of 829
company-owned restaurants and 7,576 franchised restaurants. Each Burger King
restaurant offers a diverse menu containing a variety of traditional and
innovative food items, featuring the Whopper(R) sandwich and other flame-
broiled hamburgers and sandwiches which are prepared to order with the
customer's choice of condiments.
19
<PAGE>
Location
The Company operates its Burger King restaurants in four metropolitan area
markets: South Bend, Indiana (20 restaurants); Fort Wayne, Indiana (13
restaurants); Detroit, Michigan (16 restaurants); and Southwestern Michigan
(14 restaurants).
CHILI'S GRILL & BAR
General
The Chili's restaurant concept is owned by Brinker, a publicly-held
corporation headquartered in Dallas, Texas. As of June 28, 1996, there were
490 Chili's restaurants system-wide, comprised of 352 company-owned and 138
joint ventured or franchised restaurants. Chili's restaurants are full-service
restaurants, featuring a casual atmosphere and quick, efficient and friendly
table service designed to minimize customer waiting time and facilitate table
turnover. Service personnel are dressed casually in jeans or slacks, knit
shirts and aprons to reinforce the casual, informal environment. Chili's
restaurants provide a limited menu of broadly appealing items, including a
variety of hamburgers, fajitas, chicken and seafood entrees and sandwiches,
barbecued ribs, salads, appetizers and desserts, all of which are prepared
fresh daily according to recipes specified by Chili's.
Location
The Company currently operates 20 Chili's restaurants, nine of which are
located in the Midwest and 11 of which are located in the Philadelphia market.
SUPPORT SERVICES
From its headquarters in Mishawaka, Indiana, the Company provides
accounting, information technology, human resources, finance, marketing, and
site selection and development support services for each of its operating
subsidiaries, except Bruegger's Corporation. Bruegger's Corporation currently
provides these services from its headquarters located in Burlington, Vermont;
however, the Company plans to relocate Bruegger's Corporation's headquarters
to the Company's corporate office in Mishawaka by March 1, 1997.
Management
During the past two fiscal years, the Company has added significant
management resources to coordinate and direct the Company's strategic growth.
The Company believes that these additions to its management team have enhanced
its ability to manage the larger and more diverse operations resulting from
its current and planned growth.
Each of the Company's restaurant concepts is managed by an experienced
management team. The Company's Bruegger's business is managed by the
Bruegger's Corporation Chief Executive Officer through a regional management
structure. Each geographic region is managed by an Operating Partner, with an
operations team located within each specific market. The Company's Burger King
business is also managed by geographic region, with a Director of Operations
located in each specific market. Each Director of Operations reports to the
Chief Operating Officer of the Company's Burger King division. The Company's
full service concepts are each managed by a Director of Operations who reports
to the Vice President--Full Service Dining Division. For the Company's Grady's
American Grill concept, two regional Directors report to the Vice President--
Grady's American Grill Division.
Site Selection
Site selection for new restaurants is made by the Company's senior
management under the direction of the Company's Chief Development Officer,
subject in the case of the Company's franchised restaurants to the approval of
its franchisors. Within a potential market area, the Company evaluates high-
traffic locations to determine profitable trading areas. Site-specific factors
considered by the Company include traffic generators, points of distinction,
visibility, ease of ingress and egress, proximity to direct competition,
access to utilities, local zoning regulations and various other factors. In
addition, in evaluating potential Chili's, Spageddies and Grady's American
Grill sites, the Company
20
<PAGE>
considers applicable laws regulating the sale of alcoholic beverages. The
Company regularly reviews potential sites for expansion. Once a potential site
is selected, the Company utilizes demographic and psychographic data provided
by consultants retained by the Company, Burger King Corporation or Brinker, as
the case may be, to assist in final site selection.
Quality Control
The Company's senior management and restaurant management staff are
principally responsible for assuring compliance with the Company's and its
franchisors' operating procedures. The Company and its franchisors have
uniform operating standards and specifications relating to the quality,
preparation and selection of menu items, maintenance and cleanliness of the
premises and employee conduct. Compliance with these standards and
specifications is monitored by frequent on-site visits and inspections by the
Company's senior management.
Management Information Systems
Financial controls are maintained through a centralized, computerized,
accounting system which allows the Company to track sales, labor costs and
product mix on an ongoing basis. Currently, the Company's Bruegger's
Corporation subsidiary maintains its own centralized, computerized, accounting
system at its headquarters in Burlington, Vermont, which system will be
integrated with the Company's system following Bruegger's Corporation's
headquarters move to Mishawaka. The Company has stand alone point-of-sale
registers installed in each of its restaurants. This system allows each unit
to track sales by product and customer counts. This information enables the
Company to analyze customer purchasing habits, operating trends and
promotional results. The computer system also enables the Company to audit
franchisee royalty payments more easily.
The Company's Chili's, Spageddies and Grady's American Grill restaurants use
fully automated reporting systems incorporating software provided by Brinker
and generate detailed financial information which is provided to the Company's
executive offices on a daily basis. The Company currently is in the process of
upgrading the financial reporting systems at its Burger King restaurants and
other components of its centralized computer system to allow the use of fully
automated financial reporting for all of the Company's restaurant concepts,
including Bruegger's, in a single, central location.
As a result of upgrades completed in fiscal 1995 and the acquisition of the
Grady's American Grill concept, the Company has undergone a significant
modification of its financial reporting systems. The Company anticipates that
additional modifications and upgrades will be required during fiscal 1996 and
fiscal 1997, primarily as a result of the merger with Bruegger's Corporation,
to centralize and consolidate the Company's management information systems.
Training
The Company maintains comprehensive training programs for all of its
restaurant management personnel. Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction.
The Company requires that certain Bruegger's managers, franchise operators
and bakers, as well as commissary managers, participate in the Bruegger's
training program (although the Company permits certain of its franchisees to
operate their own training program). The training program consists of five
days of operational basics and two weeks of supervised on-the-job training and
focuses on Bruegger's philosophies, policies and operating procedures. The
Company offers the training program on an as-needed basis and requires that
such training be provided before a manager, operator or
21
<PAGE>
baker assumes such position. In addition, each Bruegger's unit requires its
bakers to complete a specialized training program focused on ensuring the
consistent execution of the baking process.
The training program for the Company's Burger King restaurant managers
features an intensive four-week hands-on training period followed by two weeks
of classroom instruction and simulated restaurant management activities. Upon
certification, new managers work closely with experienced managers to solidify
their skills and expertise. The Company's existing restaurant managers
regularly participate in the Company's ongoing training efforts, including
classroom programs, off-site training at Burger King Corporation's regional
and national training centers and other training/development programs which
the Company's senior management designs from time to time. The Company
generally seeks to promote from within to fill Burger King restaurant
management positions.
The Company requires all general and restaurant managers of its Chili's
restaurants to participate in Chili's system-wide comprehensive 13-week
training program. The program teaches management trainees Chili's detailed
food preparation standards and procedures. The Company also participates in
regional and national training and development programs sponsored by Brinker.
Managers of the Company's Spageddies and Grady's American Grill restaurants
participate in similar training programs conducted by the Company.
Purchasing
Purchasing decisions from an approved list of suppliers are made by each of
the Company's restaurant managers based on his or her assessment of the
provisioning needs of the particular location. Purchase orders and invoices
are reviewed by restaurant general managers and by senior management.
The purchasing needs of the Company's Bruegger's units are primarily
satisfied by Company-owned commissaries. Each commissary produces fresh bagel
dough daily and delivers it, along with Bruegger's branded cream cheese and
coffee and certain paper products, to the bakeries. Other items required in
the operation of Bruegger's units are purchased by the bakery manager pursuant
to system-wide specifications.
The Company participates in system-wide purchasing and distribution programs
with respect to its Chili's and Burger King restaurants which have been
effective in reducing store level expenditures on food and paper packaging
commodities. The Company is fully responsible for the purchasing needs of its
other owned concepts, Spageddies and Grady's American Grill. The Company's
centralized food and beverage department contracts with full-service
distributors. In order to meet the future needs of its owned concepts, the
Company has expanded the food and beverage department to include an executive
chef and other functions for each of these concepts.
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<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and Directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel B. Fitzpatrick........... 39 President and Chief Executive Officer,
Director
Stephen A. Finn................. 49 President and Chief Executive Officer of
Bruegger's Corporation, Director
Michael G. Sosinski............. 41 Chief Financial Officer and Treasurer,
Director
James K. Fitzpatrick............ 40 Senior Vice President and Chief Development
Officer, Director
William R. Schonsheck........... 45 Senior Vice President, Chief Operating
Officer of Burger King Division, Director
Gerald O. Fitzpatrick........... 35 Senior Vice President (South Bend, IN
Burger King operations)
John C. Firth................... 38 Senior Vice President, General Counsel and
Secretary
Arthur J. DeAngelis............. 42 Vice President--Grady's American Grill
Division
Scott C. Smith.................. 40 Vice President--Full Service Dining
Division
Bruce A. Phillips............... 40 Vice President--Bagel Division
David M. Findlay................ 34 Vice President--Planning and Shareholder
Relations
Michael J. Wargo................ 35 Vice President--Director of Human Resources
Nordahl L. Brue................. 51 Director, Co-Founder of Bruegger's
Corporation
Arthur J. Decio................. 64 Director
Michael J. Dressell............. 46 Director, Co-Founder of Bruegger's
Corporation
Ezra H. Friedlander............. 53 Director
Steven M. Lewis................. 45 Director
Christopher J. Murphy III....... 49 Director
</TABLE>
23
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 30, 1996,
including beneficial ownership by each person (or group of affiliated persons)
who is known by the Company to own beneficially more than 5% of the Common
Stock, by each of the Company's directors, by the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers, and by all current Directors and executive officers as a group.
Except as otherwise noted, the Company believes that the persons named in the
table have sole voting and sole investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL
BENEFICIAL OWNERSHIP
OWNERSHIP AFTER
PRIOR TO OFFERING SHARES OFFERING (1)
---------------------------- BEING ----------------------------
NAME SHARES PERCENT OFFERED SHARES PERCENT
---- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Daniel B.
Fitzpatrick(2)......... 2,265,609(3)(4) 15.8% 0 2,265,609(3)(4) 13.7%
Ezra H. Friedlander..... 377,931(3)(5)(6) 2.6% 0 377,931(3)(5)(6) 2.3%
James K. Fitzpatrick.... 321,788(3)(7) 2.2% 0 321,788(3)(7) 1.9%
Gerald O. Fitzpatrick... 208,862(3)(8) 1.5% 0 208,862(3)(8) 1.3%
Michael G. Sosinski..... 52,262(3)(9)(10) * 0 52,262(3)(9)(10) *
Christopher J. Murphy
III.................... 19,117(3)(11)(12) * 0 19,117(3)(11)(12) *
Arthur J. Decio......... 7,000(3)(11) * 0 7,000(3)(11) *
Steven M. Lewis......... 7,250(3)(11)(13) * 0 7,250(3)(11)(13) *
William R. Schonsheck... 334,284(3)(14) 2.3% 0 334,284(3)(14) 2.0%
Scott C. Smith.......... 5,505(3)(15)(16) * 0 5,505(3)(15)(16) *
Nordahl L. Brue(2)...... 2,154,797(17) 15.1% 0 2,154,797(17) 13.1%
Michael J. Dressell(2).. 2,163,701 15.1% 0 2,163,701 13.1%
Stephen A. Finn......... 267,620 1.9% 0 267,620 1.6%
T. Garrick Steele....... 82,901 * 75,000 7,901 *
Anita L. Wood........... 2,861 * 2,300 561 *
All executive officers
and Directors as a
group
(18 persons)........... 8,206,463(3)(18) 57.0% 0 8,206,463(3)(18) 49.5%
</TABLE>
- --------
* Less than 1%
(1) Does not give effect to the exercise of the Underwriters' over-allotment
option. If the over-allotment option is exercised in full, the Company
will issue and sell to the Underwriters an additional 341,595 shares of
Common Stock.
(2) The address of this shareholder is 3820 Edison Lakes Parkway, Mishawaka,
Indiana 46545.
(3) Does not include shares subject to stock options which are not
exercisable within 60 days.
(4) Includes presently exercisable stock options to purchase 11,600 shares,
granted under the Company's 1993 Stock Option Plan.
(5) Includes 15,000 shares held in a trust of which Mr. Friedlander is the
trustee with investment control and the income beneficiary.
(6) Includes presently exercisable stock options to purchase 2,000 shares,
granted under the Company's Outside Directors Plan.
(7) Includes presently exercisable stock options to purchase 11,300 shares,
granted under the 1993 Stock Option Plan.
(8) Includes presently exercisable stock options to purchase 11,215 shares,
granted under the 1993 Stock Option Plan.
(9) Includes presently exercisable stock options to purchase 15,235 shares,
granted under the 1993 Stock Option Plan.
24
<PAGE>
(10) Includes 100 shares owned by Mr. Sosinski's minor children.
(11) Includes presently exercisable stock options to purchase 4,000 shares,
granted under the Outside Directors Plan.
(12) Includes 3,765 shares held by Mr. Murphy's minor children and 1,000
shares held by certain retirement plans in which Mr. Murphy is a
participant.
(13) Includes 500 shares held in a trust for the benefit of Mr. Lewis' minor
children.
(14) Includes presently exercisable stock options to purchase 15,000 shares,
granted under the 1993 Stock Option Plan.
(15) Includes presently exercisable stock options to purchase 2,905 shares,
granted under the 1993 Stock Option Plan.
(16) Includes 50 shares owned by Mr. Smith's minor child.
(17) Includes 5,172 shares held by Mr. Brue's minor children and 2,586 shares
held by Mr. Brue as custodian for a minor child.
(18) Includes presently exercisable stock options to purchase 79,410 shares,
granted under the 1993 Stock Option Plan, and 14,000 shares, granted
under the Outside Directors Plan.
25
<PAGE>
UNDERWRITING
The Underwriters named below have severally agreed, subject to certain
conditions, to purchase from the Company and the Selling Shareholders the
aggregate number of shares of Common Stock set forth opposite their respective
names.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Schroder Wertheim & Co. Incorporated.....................
Goldman, Sachs & Co......................................
Wessels, Arnold & Henderson L.L.C........................
Morgan Keegan & Company, Inc.............................
---------
Total................................................ 2,277,300
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all the 2,277,300 shares of Common Stock offered hereby, if any are
purchased. Schroder Wertheim & Co. Incorporated, Goldman, Sachs & Co.,
Wessels, Arnold & Henderson L.L.C. and Morgan Keegan & Company, Inc., as
representatives (the "Representatives") of the several Underwriters, have
advised the Company and the Selling Shareholders that the Underwriters propose
to offer the shares to the public initially at the offering price set forth on
the cover page of this Prospectus; that the Underwriters propose initially to
allow a concession not in excess of $ per share to certain dealers,
including the Underwriters; that the Underwriters and such dealers may
initially allow a discount not in excess of $ per share to other dealers;
and that the public offering price and the concession and discount to dealers
may be changed by the Representatives after the public offering.
The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of the Underwriting Agreement, to
purchase up to an additional 341,595 shares of Common Stock, at the public
offering price less underwriting discounts and commissions, all as set forth
on the cover page of this Prospectus. The Underwriters may exercise the option
only to cover over-allotments, if any, in the sale of shares of Common Stock
in the Offering. To the extent that the Underwriters exercise this option,
each Underwriter will be committed, subject to certain conditions, to purchase
a number of the additional shares proportionate to such Underwriter's initial
commitment.
In connection with the Offering, certain underwriters may engage in passive
market making transactions in the Company's Common Stock on the Nasdaq
National Market System immediately prior to the commencement of sales in the
Offering, in accordance with Rule 10b-6A under the Securities Exchange Act of
1934. Passive market making consists of displaying bids on Nasdaq limited by
the bid prices of independent market makers and purchases limited by such
prices and effected in response to order flow. Net purchases by a passive
market maker on each day are limited to a specified percentage of the passive
market maker's average daily trading volume in the Common Stock during a
specified prior period and must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Common Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
Schroder Wertheim & Co. Incorporated and Morgan Keegan & Company, Inc. have
provided certain investment banking services to the Company and its
subsidiaries, for which they have received
26
<PAGE>
customary compensation. Schroder Wertheim & Co. Incorporated served as the
lead managing underwriter of the Company's 1995 public offering of Common
Stock, and provided financial advisory services to Bruegger's Corporation in
connection with its acquisition by the Company. Morgan Keegan & Company, Inc.
served as the lead managing underwriter of the Company's 1994 initial public
offering and as a co-manager of its 1995 public offering. In addition, Morgan
Keegan & Company, Inc. rendered a fairness opinion to the Company's Board of
Directors in connection with the Company's acquisition of Bruegger's
Corporation.
The Company, the Selling Shareholders, and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The Company, its executive officers and Directors and the Selling
Shareholders have agreed not to sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Schroder Wertheim & Co. Incorporated.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Baker & Daniels, Indianapolis, Indiana. Certain legal matters will
be passed upon for the Underwriters by Calfee, Halter & Griswold, Cleveland,
Ohio, who will rely on the opinion of Baker & Daniels as to matters of Indiana
law.
EXPERTS
The consolidated financial statements of the Company as of October 30, 1994
and October 29, 1995, and for each of the three fiscal years in the period
ended October 29, 1995, incorporated by reference in its Annual Report on Form
10-K for the fiscal year ended October 29, 1995 and in this Prospectus, have
been audited by Coopers & Lybrand L.L.P., independent accountants, as stated
in their report with respect thereto, and have been incorporated by reference
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Grayling Corporation as of December 20, 1992 and
December 19, 1993, and for each of the three years ended December 19, 1993,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto and are incorporated by reference herein in reliance upon
the authority of said firm as experts in giving said reports.
The combined financial statements of SHONCO, Inc., SHONCO II, Inc., SHONCO
III, Inc., SHONCO IV, Inc., SHONCO V, Inc. and SHONCO Seven Management, Inc.
(collectively, "SHONCO, Inc., et al.") as of December 31, 1994, and for the
year then ended, incorporated by reference in this Prospectus, have been
audited by Plante & Moran, LLP, independent accountants, as stated in their
report with respect thereto, and have been incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The combined financial statements of the Grady's Purchased Restaurants as of
June 29, 1994, and June 28, 1995, and for each of the years in the three-year
period ended June 28, 1995, incorporated by reference in this Prospectus, have
been incorporated by reference herein in reliance on the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Bruegger's Corporation as of
December 27, 1994 and December 28, 1993, and for each of the fifty-two week
periods in the two-year period ended
27
<PAGE>
December 27, 1994, incorporated by reference in this Prospectus, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Bruegger's Corporation for the
fiscal year ended December 26, 1995, incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said reports.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
(File No. 0-23420) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
October 29, 1995;
2. The Company's Current Report on Form 8-K, dated January 5, 1996, as
amended by Form 8-K/A, dated February 27, 1996;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
February 18, 1996;
4. The Company's Current Report on Form 8-K, dated May 1, 1996;
5. The Company's Current Report on Form 8-K, dated May 31, 1996;
6. The Company's Current Report on Form 8-K, dated June 13, 1996;
7. The Company's Quarterly Report on Form 10-Q for the quarter ended May
12, 1996;
8. Financial statements of Grayling Corporation as of December 20, 1992
and December 19, 1993, and for each of the three years ended December 19,
1993, contained in pages 3 through 20 of the Company's Amendment No. 1 on
Form 8-K/A, dated December 22, 1994, to the Company's Current Report on
Form 8-K, dated November 23, 1994;
9. Combined financial statements of SHONCO, Inc., SHONCO II, Inc., SHONCO
III, Inc., SHONCO IV, Inc., SHONCO V, Inc. and SHONCO Seven Management,
Inc. as of December 31, 1994, and for the year then ended, contained in
pages 22 through 31 of the Company's Current Report on Form 8-K, dated
August 28, 1995;
10. Combined financial statements of Bruegger's Corporation, North Shore
Bagels, Inc., Erie Bagels, Inc., Odyssey Bagels, Inc., B F Holding, Inc.
and Bruegger's Franchise Corporation as of December 28, 1993, December 27,
1994 and December 26, 1995, and for each of the three years then ended,
contained in pages F-1 through F-27 of the Company's Registration Statement
on Form S-4 (Registration No. 333-2050); and
11. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
February 18, 1994, including any amendments or reports filed for the
purpose of updating any such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Registration
Statement and prior to the termination of the offering of securities made
hereby shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the dates of filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained in this Registration
Statement, or in any other subsequently filed document which is also
28
<PAGE>
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all
such documents that have been or may be incorporated by reference herein
(other than exhibits to such documents which are not specifically incorporated
by reference into such documents). Requests for such documents should be
directed to David Findlay, 3820 Edison Lakes Parkway, Mishawaka, Indiana
46545, telephone (219) 271-4600.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by the Company with the Commission may be
inspected and copied at the offices of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's Regional Offices at
7 World Trade Center, Suite 1300, New York, New York 10048-1102 and Suite
1400, Citicorp Center, 500 West Madison St., Chicago, Illinois 60661-2511.
Copies of such materials may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov. which contains reports, proxy statments and other
infomation regarding registrants that file electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed therewith. For
further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to such Registration Statement and to the
financial statements, exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any contract or other
documents referred to are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement. The Registration Statement, including
the exhibits thereto, may be inspected without charge at the principal office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or part thereof may be obtained from such office upon the
payment of the prescribed fees.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete and in each
instance where such contract or other document has been filed as an exhibit to
the Registration Statement, reference is made to the exhibit as filed, each
such statement being qualified in all respects by such reference.
NEITHER BRINKER INTERNATIONAL, INC., NOR BURGER KING CORPORATION
(COLLECTIVELY, THE "FRANCHISORS") OR ANY OF THEIR SUBSIDIARIES, AFFILIATES,
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ACCOUNTANTS OR ATTORNEYS ARE IN ANY
WAY PARTICIPATING IN, APPROVING OR ENDORSING THIS OFFERING OF SECURITIES, ANY
OF THE UNDERWRITING OR ACCOUNTING PROCEDURES USED IN THE OFFERING, OR ANY
REPRESENTATIONS MADE IN CONNECTION WITH THE OFFERING. THE GRANT BY THE
FRANCHISORS OF ANY FRANCHISE OR OTHER RIGHTS TO THE OFFEROR IS NOT INTENDED
AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL,
ENDORSEMENT OR ADOPTION OF ANY STATEMENT REGARDING FINANCIAL OR OTHER
PERFORMANCE WHICH MAY BE CONTAINED IN THE OFFEROR'S OFFERING MATERIALS.
29
<PAGE>
ANY REVIEW BY THE FRANCHISORS OF THE OFFERING MATERIALS OR THE INFORMATION
INCLUDED THEREIN HAS BEEN CONDUCTED SOLELY FOR THE BENEFIT OF THE FRANCHISORS
TO DETERMINE CONFORMANCE WITH THE FRANCHISOR'S INTERNAL POLICIES, AND NOT TO
BENEFIT OR PROTECT ANY OTHER PERSON. NO INVESTOR SHOULD INTERPRET SUCH REVIEW
BY THE FRANCHISOR OR THE USE AND DISPLAY OF ANY FRANCHISOR LOGOS, TRADEMARKS
OR SERVICEMARKS HEREIN AS APPROVAL, ENDORSEMENT, ACCEPTANCE OR ADOPTION OF ANY
REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN THE MATERIALS REVIEWED.
THE ENFORCEMENT OR WAIVER OF ANY OBLIGATION OF THE OFFEROR UNDER ANY
AGREEMENT BETWEEN THE OFFEROR AND THE FRANCHISORS OR FRANCHISORS' AFFILIATES
IS A MATTER OF THE FRANCHISORS' OR THE FRANCHISORS' AFFILIATES' SOLE
DISCRETION. NO INVESTOR SHOULD RELY ON ANY REPRESENTATION, ASSUMPTION OR
BELIEF THAT THE FRANCHISORS OR FRANCHISORS' AFFILIATES WILL ENFORCE OR WAIVE
PARTICULAR OBLIGATIONS OF THE OFFEROR UNDER SUCH AGREEMENTS.
BURGER KING CORPORATION IS THE EXCLUSIVE LICENSEE OF THE BUN HALVES LOGO, A
FEDERALLY REGISTERED TRADEMARK.
30
<PAGE>
QUALITY DINING, INC.
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
Selected Financial Data................................................. F-2
Pro Forma Condensed Consolidated Balance Sheet as of May 12, 1996....... F-5
Pro Forma Condensed Consolidated Statements of Income for the 52 weeks
ended October 29, 1995................................................. F-7
Pro Forma Condensed Consolidated Statements of Income for the 28 weeks
ended May 12, 1996..................................................... F-8
</TABLE>
F-1
<PAGE>
QUALITY DINING, INC.
SELECTED FINANCIAL DATA
Balance sheet data as of October 25, 1992, October 31, 1993, October 30,
1994 and October 29, 1995 and income statement data for the fiscal years ended
October 27, 1991, October 25, 1992, October 31, 1993, October 30, 1994 and
October 29, 1995 have been derived from financial statements audited by
Coopers & Lybrand L.L.P., independent accountants. Balance sheet data as of
October 27, 1991 have been derived from the audited financial statements of
the affiliated companies, which have been consolidated for purposes of
presentation and have been adjusted to present information on a basis
consistent with subsequent periods. The selected pro forma financial
information set forth below for the fiscal year ended October 29, 1995
reflects the Company's acquisition of 42 Grady's American Grill restaurants on
December 21, 1995 and acquisition of the SHONCO Companies on August 14, 1995.
The selected pro forma financial information set forth below for the 28 weeks
ended May 12, 1996 reflects the Company's acquisition of 42 Grady's American
Grill restaurants on December 21, 1995. Such pro forma information is for
informational purposes only and may not necessarily be indicative of the
results of operations and financial position of the Company as they may be in
the future or what the results of operations of the Company would have been
had the transactions described in the notes been consummated at the assumed
dates. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Company's Financial Statements, including
the notes thereto, incorporated by reference in this Registration Statement.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
---------------------------------------------------------------------------
OCTOBER 29, 1995
OCTOBER 27, OCTOBER 25, OCTOBER 31, OCTOBER 30, -----------------------
1991 1992 1993 1994 ACTUAL PRO FORMA(2)
----------- ----------- ----------- ----------- --------- ------------
(IN THOUSANDS, EXCEPT UNIT, SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales:
Grady's American
Grill................. $ -- $ -- $ -- $ -- $ -- $ 100,858
Burger King............ 41,372 43,762 49,032 49,716 57,013 64,832
Chili's................ 1,265 4,625 9,963 14,286 38,267 38,267
Spageddies............. -- -- -- 174 4,741 4,741
Bruegger's............. -- -- -- 191 5,270 5,270
------- ------- --------- --------- --------- ---------
Total restaurant
sales............... 42,637 48,387 58,995 64,367 105,291 213,968
------- ------- --------- --------- --------- ---------
Restaurant operating
expenses:
Food and beverage...... 12,145 13,168 16,465 18,576 31,176 66,293
Payroll and benefits... 10,662 12,193 14,830 16,190 27,191 55,740
Depreciation and
amortization.......... 1,906 2,044 2,384 2,635 5,678 9,990
Other operating
expenses.............. 11,612 12,516 15,065 15,351 24,057 54,276
------- ------- --------- --------- --------- ---------
Total restaurant
operating expenses.. 36,325 39,921 48,744 52,752 88,102 186,299
------- ------- --------- --------- --------- ---------
Income from restaurant
operations............. 6,312 8,466 10,251 11,615 17,189 27,669
General and
administrative
expenses............... 2,629 3,087 3,543 3,852 5,744 8,994
Consulting fee.......... -- -- 600 -- --
Compensation expense
(income)--stock
options................ -- -- -- 213 (38) (38)
------- ------- --------- --------- --------- ---------
Operating income..... 3,683 5,379 6,108(4) 7,550(5) 11,483 18,713
------- ------- --------- --------- --------- ---------
Other income (expense):
Interest expense....... (1,391) (1,226) (1,673) (1,314) (2,699) (8,650)
Gain (loss) on sale of
property and
equipment............. -- -- 2 (59) 343 343
Interest income........ 413 169 165 155 127 118
Other expense, net..... -- -- (75) (72) (125) (85)
------- ------- --------- --------- --------- ---------
Total other expense.. (978) (1,057) (1,581) (1,290) (2,354) (8,274)
------- ------- --------- --------- --------- ---------
Income before income
taxes.................. 2,705 4,322 4,527 6,260 9,129 10,439
Income taxes............ -- -- -- 2,332 3,240 3,680
------- ------- --------- --------- --------- ---------
Net income........... $ 2,705 $ 4,322 $ 4,527(4) $ 3,928(5) $ 5,889 $ 6,759
======= ======= ========= ========= ========= =========
Net income per share. $ .85 $ .94
========= =========
Weighted average
shares outstanding.. 6,925,310 7,175,120
========= =========
Pro forma income data:
Net income as
reported.............. $ 2,705 $ 4,322 $ 4,527 $ 3,928
Pro forma provision
for income taxes(7)... 1,001 1,599 1,675 512
------- ------- --------- ---------
Pro forma net
income(7)........... $ 1,704 $ 2,723 $ 2,852(4) $ 3,416(5)
======= ======= ========= =========
Pro forma net income
per share........... $ .64(4) $ .59(5)
========= =========
Pro forma weighted
average number of
common and common
equivalent shares
outstanding......... 4,437,552(8) 5,800,800(8)
========= =========
RESTAURANT DATA:
Units open at end of
period:
Burger King............ 40 44 44 48 59
Chili's................ 1 2 4 8 18
Spageddies............. -- -- -- 1 5
Bruegger's............. -- -- -- 3 12
BALANCE SHEET DATA:
Working capital
deficiency............. $(1,668) $ (751) $ (888) $ (1,894) $ (1,827)
Total assets............ 17,249 22,671 24,946 43,273 99,247
Long-term debt and
capitalized lease and
non-competition
obligations. 10,700 15,666 16,621 7,492 14,298
Total stockholders'
equity................. 2,719 3,014 3,761 26,582 71,401
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
28 WEEKS ENDED
------------------------------------
MAY 12, 1996
MAY 14, -------------------------
1995 ACTUAL PRO FORMA(3)
--------- --------- ------------
(IN THOUSANDS, EXCEPT UNIT,
SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales:
Grady's American Grill................... $ -- $ 41,679 $ 56,810
Burger King.............................. 27,961 35,588 35,588
Chili's.................................. 20,229 21,086 21,086
Spageddies............................... 1,920 4,373 4,373
Bruegger's............................... 2,144 6,321 6,321
--------- --------- ---------
Total restaurant sales................. 52,254 109,047 124,178
--------- --------- ---------
Restaurant operating expenses:
Food and beverage........................ 15,543 34,256 39,180
Payroll and benefits..................... 13,552 30,650 34,637
Depreciation and amortization............ 2,694 5,342 5,893
Other operating expenses................. 12,188 24,390 28,595
--------- --------- ---------
Total restaurant operating expenses.... 43,977 94,638 108,305
--------- --------- ---------
Income from restaurant operations......... 8,277 14,409 15,873
General and administrative expenses....... 3,282 5,088 5,576
Restructuring and integration costs....... -- 1,938 1,938
--------- --------- ---------
Operating income....................... 4,995 7,383(6) 8,359
--------- --------- ---------
Other income (expense):
Interest expense......................... (1,369) (3,125) (3,968)
Gain (loss) on sale of property and
equipment............................... (4) 3 3
Interest income.......................... 58 111 111
Other expense, net....................... (60) (2) (2)
--------- --------- ---------
Total other expense.................... (1,375) (3,013) (3,856)
--------- --------- ---------
Income before income taxes................ 3,620 4,370 4,503
Income taxes.............................. 1,340 1,595 1,635
--------- --------- ---------
Net income............................. $ 2,280 $ 2,775(6) $ 2,868
========= ========= =========
Net income per share................... $ .34 $ .31(6) $ .32
========= ========= =========
Weighted average shares outstanding.... 6,744,123 8,837,540 8,837,540
RESTAURANT DATA:
Units open at end of period:
Grady's American Grill................... -- 42
Burger King.............................. 50 63
Chili's.................................. 17 19
Spageddies............................... 3 5
Bruegger's............................... 7 21
BALANCE SHEET DATA:
Working capital deficiency................ $ (3,710) $ (3,038)
Total assets.............................. 71,952 185,776
Long-term debt and capitalized lease and
non-competition obligations.............. 31,110 95,710
Total stockholders' equity................ 32,213 74,224
</TABLE>
- --------
(1) The fiscal year ended October 31, 1993 consisted of 53 weeks. All other
fiscal years presented consisted of 52 weeks.
(2) The pro forma income statement data of the Company for the 52 weeks ended
October 29, 1995 reflects how the Company's statement of income might have
appeared if the Company's acquisition of 42 Grady's American Grill
restaurants, which was finalized on December 21, 1995, and acquisition of
the SHONCO Companies, which was finalized on August 14, 1995, had both
occurred on October 31, 1994. The Company's acquisition of 42 Grady's
American Grill restaurants was detailed in a Form 8-K, dated January 5,
1996, as amended by Form 8-K/A, dated February 27, 1996.
F-3
<PAGE>
(3) The pro forma income statement data of the Company for the 28 weeks ended
May 12, 1996 reflects how the Company's statement of income might have
appeared if the Company's acquisition of 42 Grady's American Grill
restaurants had occurred on October 30, 1995.
(4) Operating income and net income for fiscal 1993 includes a non-recurring
pre-tax charge in the amount of $600,000 associated with a consulting
agreement. This charge reduced fiscal 1993 pro forma net income and pro
forma net income per share by $378,000 and $.09, respectively.
(5) Operating income for fiscal 1994 includes a non-recurring pre-tax charge
of $213,000 associated with the granting of nonqualified stock options to
certain non-executive employees of the Company and net income for fiscal
1994 includes a non-recurring, non-cash charge of $680,000 associated with
the after tax effect of the above charge and a $546,000 charge to record
deferred income taxes upon termination of the Company's S Corporation
status. These charges reduced pro forma net income and pro forma net
income per share for fiscal 1994 by $680,000 and $.12, respectively.
(6) Operating income for the 28 weeks ended May 12, 1996 includes a special
pre-tax charge of $1,938,000 associated with restructuring and integration
costs related to the acquisitions of 42 Grady's American Grill restaurants
and the rights to the Spageddies restaurant concept in the United States.
This charge reduced net income and net income per share for the 28 weeks
ended May 12, 1996 by $1,230,000 and $.14, respectively.
(7) Reflects federal and state income taxes (assuming a 37% effective tax
rate) as if the Company had been taxed as a C Corporation rather than an S
Corporation during all periods ending prior to March 1, 1994, the date of
termination of its S Corporation status.
(8) For the 52 weeks ended October 30, 1994, includes 4,437,552 shares of the
Company's Common Stock and Common Stock equivalents outstanding, as
described below, from November 1, 1993 to March 1, 1994 and 6,471,250
shares of the Company's Common Stock outstanding from that date through
October 30, 1994. For the 53 weeks ended October 31, 1993, includes
4,000,000 shares of the Company's Common Stock outstanding and 437,552
shares of the Company's Common Stock and Common Stock equivalents assumed
to be outstanding. The 437,552 shares of the Company's Common Stock and
Common Stock equivalents assumed to be outstanding are equivalent to the
number of shares of the Company's Common Stock at the initial public
offering price of $11.50 per share and the application of the estimated
proceeds therefrom necessary to fund that portion of distributions in
excess of fiscal 1993 undistributed earnings in the aggregate amount of
$4.4 million at October 31, 1993 and 26,359 Common Stock equivalents
assumed outstanding resulting from the granting of nonqualified stock
options to certain non-executive employees of the Company to purchase an
aggregate of 26,590 shares of the Company's Common Stock.
F-4
<PAGE>
QUALITY DINING, INC.
PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 12, 1996
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet
reflects the acquisition by the Company of Bruegger's Corporation as if it had
occurred on May 12, 1996. Such pro forma information is based upon the
historical balance sheet of the Company as of May 12, 1996 and the historical
balance sheet of Bruegger's Corporation as of May 14, 1996, giving effect to
the Merger and the pro forma adjustments set forth in the accompanying notes
to pro forma condensed consolidated balance sheet. This pro forma condensed
consolidated balance sheet should be read in conjunction with the pro forma
condensed consolidated statements of income of the Company and the historical
financial statements and notes thereto of the Company and Bruegger's
Corporation incorporated by reference in this Registration Statement.
This unaudited pro forma condensed consolidated balance sheet is not
necessarily indicative of what the actual consolidated financial position of
the Company would have been at May 12, 1996, nor does it purport to represent
the future consolidated financial position of the Company.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
------------ ----------- ---------------------------
QUALITY BRUEGGER'S
DINING, INC. CORPORATION
------------ -----------
MAY 14,
ASSETS MAY 12, 1996 1996 ADJUSTMENTS CONSOLIDATED
------ ------------ ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents.............. $ 3,403 $ 926 $ (750)(1) $ 3,579
Accounts receivable....... 2,787 1,281 (37)(2) 4,031
Inventories............... 1,880 593 -- 2,473
Other current assets...... 1,677 893 (61)(2) 2,509
Deferred income taxes..... 23 -- -- 23
-------- -------- -------- --------
Total current assets.... 9,770 3,693 (848) 12,615
-------- -------- -------- --------
Property and equipment,
net....................... 134,802 19,915 -- 154,717
-------- -------- -------- --------
Other assets:
Franchise fees and
development costs, net... 10,592 -- (24)(2) 10,568
Goodwill, net............. 9,950 -- 141,845 (1) 151,795
Trademark................. 13,260 -- -- 13,260
Preopening costs and non-
competition agreements,
net...................... 1,867 -- -- 1,867
Liquor licenses........... 2,312 -- -- 2,312
Investment in redeemable
preferred stock.......... 2,625 -- (2,625)(3) --
Other..................... 598 148 -- 746
-------- -------- -------- --------
Total other assets...... 41,204 148 139,196 180,548
-------- -------- -------- --------
Total assets............ $185,776 $ 23,756 $138,348 $347,880
======== ======== ======== ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C>
Current liabilities:
Current portion of
capitalized lease, non-
competition obligations
and long-term debt....... $ 360 $ 16,008 $(16,008)(4) $ 360
Current portion of
redeemable preferred
stock subscription
payable.................. 375 -- (375)(3) --
Accounts payable.......... 3,579 2,890 (98)(2) 6,371
Accounts payable, related
parties.................. 41 -- 41
7,000 (1)
Accrued liabilities....... 8,453 5,857 (4)(2) 21,306
-------- -------- -------- --------
Total current
liabilities............ 12,808 24,755 (9,485) 28,078
Long-term debt............. 88,904 -- 16,008 (4) 104,912
Capitalized lease and non-
competition obligations,
principally to related
parties, less current
portion................... 6,806 -- -- 6,806
Redeemable preferred stock
subscription payable, less
current portion........... 625 -- (625)(3) --
Deferred income taxes...... 2,409 -- -- 2,409
-------- -------- -------- --------
Total liabilities....... 111,552 24,755 5,898 142,205
-------- -------- -------- --------
Redeemable preferred stock. -- 10,025 (1,625)(3) 8,400
-------- -------- -------- --------
Stockholders' equity
(deficiency):
Common stock.............. 28 4 (4)(1) 28
(1,977)(1)
Additional paid-in
capital.................. 63,238 1,977 123,051 (1) 186,289
Retained earnings
(deficit)................ 11,208 (13,005) 13,005 (1) 11,208
-------- -------- -------- --------
74,474 (11,024) 134,075 197,525
Less treasury stock....... (250) -- -- (250)
-------- -------- -------- --------
Total stockholders'
equity (deficiency).... 74,224 (11,024) 134,075 197,275
-------- -------- -------- --------
Total liabilities and
stockholders' equity... $185,776 $ 23,756 $138,348 $347,880
======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet.
F-5
<PAGE>
QUALITY DINING, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) To reflect the acquisition of Bruegger's Corporation by the Company and
record the excess of the purchase price over the acquired tangible net
assets ("goodwill"). A summary of the acquisition of Bruegger's
Corporation by the Company and the related pro forma adjustments reflected
in the accompanying pro forma condensed consolidated balance sheet are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
PURCHASE PRICE:
<S> <C>
Fair value of 5,127,142 shares of the Company's Common
Stock issued in exchange for all of the outstanding
Bruegger's Corporation Common Stock valued at $24 per
share................................................ $123,051
Estimated acquisition and post-merger integration
costs................................................ 7,750
--------
$130,801
========
NET ASSETS ACQUIRED:
Stockholders' deficiency of Bruegger's Corporation as
of May 14, 1996...................................... $(11,024)
Elimination of capitalized Bruegger's Corporation
franchise fees on the balance sheet of the Company... (20)
Excess of purchase price over acquired tangible net
assets ("goodwill").................................. 141,845
--------
$130,801
========
</TABLE>
The fair value per share of the Company's Common Stock was determined by an
average of the actual quoted closing market prices of the Company's Common
Stock a few days before and after the February 22, 1996 public announcement
of the Bruegger's Corporation acquisition.
(2) Elimination of certain transactions between the Company and Bruegger's
Corporation, including accounts payable from the Company to Bruegger's
Corporation for food purchases ($23), franchise fees paid by the Company
to Bruegger's Corporation ($14), development costs paid by the Company to
Bruegger's Corporation ($4) and advertising rebates due to the Company by
Bruegger's Corporation ($61).
(3) Elimination of the Company's investment in Bruegger's Corporation
Preferred Stock and the related stock subscription payable to Bruegger's
Corporation. Upon consummation of the Merger, all of the shares of
Bruegger's Corporation Preferred Stock held by the Company were cancelled
and the remaining outstanding shares of Bruegger's Corporation Preferred
Stock were converted into an equal number of shares of the Company's
Preferred Stock. The shares of the Company's Preferred Stock may be
converted, at the option of the holder thereof, at any time within 90 days
after the Merger into the number of shares of the Company's Common Stock
determined by dividing the $100 per share stated value of the Company's
Preferred Stock by the average quoted closing price per share of the
Company's Common Stock for the five trading days immediately preceding the
Merger ($35.425).
(4) To reflect repayment of current maturities of Bruegger's Corporation long-
term debt at the time of consummation of the Merger using proceeds from
borrowings under the Company's long-term revolving credit agreement.
F-6
<PAGE>
QUALITY DINING, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE 52 WEEKS ENDED OCTOBER 29, 1995
(UNAUDITED)
The following unaudited pro forma condensed consolidated statement of income
reflects the acquisition by the Company of Bruegger's Corporation as if it had
occurred on October 31, 1994. Such pro forma information is based upon the pro
forma results of operations of the Company for the 52 weeks ended October 29,
1995, giving effect to the acquisition of 42 Grady's American Grill
restaurants, which was finalized on December 21, 1995, and the acquisition of
the SHONCO Companies, which was finalized on August 14, 1995, and the
historical results of operations of Bruegger's Corporation for the 52 weeks
ended October 31, 1995, giving effect to the Merger and the pro forma
adjustments set forth in the accompanying notes to pro forma condensed
consolidated statements of income. This pro forma condensed consolidated
statement of income should be read in conjunction with the pro forma condensed
consolidated balance sheet of the Company and the historical financial
statements and notes thereto of the Company and Bruegger's Corporation
incorporated by reference in this Registration Statement.
This unaudited pro forma condensed consolidated statement of income is not
necessarily indicative of what the actual consolidated results of operations
of the Company would have been assuming the Merger had been completed as set
forth above, nor does it purport to represent the consolidated results of
operations of the Company for future periods.
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL PRO FORMA
------------------- ---------------- ---------------------------
QUALITY BRUEGGER'S
DINING, INC. CORPORATION
------------------- ----------------
52 WEEKS ENDED 52 WEEKS ENDED
OCTOBER 29, 1995(1) OCTOBER 31, 1995 ADJUSTMENTS CONSOLIDATED
------------------- ---------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Restaurant sales:
Grady's American
Grill................. $100,858 $ -- $ -- $100,858
Burger King............ 64,832 -- -- 64,832
Chili's................ 38,267 -- -- 38,267
Spageddies............. 4,741 -- -- 4,741
Bruegger's............. 5,270 15,618 -- 20,888
-------- ------- ------- --------
Total restaurant
sales............... 213,968 15,618 -- 229,586
-------- ------- ------- --------
Restaurant operating
expenses:
Food and beverage...... 66,293 5,605 -- 71,898
Payroll and benefits... 55,740 4,728 -- 60,468
Depreciation and
amortization.......... 9,990 1,094 3,546 (3) 14,630
(263)(4)
Other operating
expenses.............. 54,276 3,733 (54)(5) 57,692
-------- ------- ------- --------
Total restaurant
operating expenses.. 186,299 15,160 3,229 204,688
-------- ------- ------- --------
Income from restaurant
operations............. 27,669 458 (3,229) 24,898
(11)(6)
(263)(4)
Franchise revenues...... -- 4,379 (54)(5) 4,051
Bruegger's commissary
revenue................ -- 4,222 (434)(7) 3,788
Bruegger's commissary
expenses............... -- (4,229) 434 (7) (3,795)
General and
administrative
expenses............... (8,994) (6,028) -- (15,022)
Compensation income--
stock options.......... 38 -- -- 38
-------- ------- ------- --------
Operating income (loss). 18,713 (1,198) (3,557) 13,958
-------- ------- ------- --------
Other income (expense):
Interest expense....... (8,650) (614) -- (9,264)
Gain on sale of
property.............. 343 -- -- 343
Interest income........ 118 24 -- 142
Other expense, net..... (85) (75) -- (160)
-------- ------- ------- --------
Total other expense.. (8,274) (665) -- (8,939)
-------- ------- ------- --------
Income (loss) before
income taxes........... 10,439 (1,863) (3,557) 5,019
Income taxes (benefit).. 3,680 20 (682)(9) 3,018
-------- ------- ------- --------
Net income (loss)....... $ 6,759 $(1,883) $(2,875) $ 2,001
======== ======= ======= ========
Net income per share.... $ 0.94 $ 0.16
======== ========
Weighted average number
of shares of common
stock outstanding...... 7,175 5,127 (10) 12,302
======== ======= ========
</TABLE>
See accompanying notes to pro forma condensed consolidated statements of
income.
F-7
<PAGE>
QUALITY DINING, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE 28 WEEKS ENDED MAY 12, 1996
(UNAUDITED)
The following unaudited pro forma condensed consolidated statement of income
reflects the acquisition by the Company of Bruegger's Corporation as if it had
occurred on October 30, 1995. Such pro forma information is based upon the pro
forma results of operations of the Company for the 28 weeks ended May 12,
1996, giving effect to the acquisition of 42 Grady's American Grill
restaurants, which was finalized on December 21, 1995, and the historical
results of operations of Bruegger's Corporation for the 28 weeks ended May 14,
1996, giving effect to the Merger and the pro forma adjustments set forth in
the accompanying notes to pro forma condensed consolidated statements of
income. This pro forma condensed consolidated statement of income should be
read in conjunction with the pro forma condensed consolidated balance sheet of
the Company and the historical financial statements and notes thereto of the
Company and Bruegger's Corporation incorporated by reference in this
Registration Statement.
This unaudited pro forma condensed consolidated statement of income is not
necessarily indicative of what the actual consolidated results of operations
of the Company would have been assuming the Merger had been completed as set
forth above, nor does it purport to represent the consolidated results of
operations of the Company for future periods.
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL PRO FORMA
--------------- -------------- ---------------------------
QUALITY DINING, BRUEGGER'S
INC. CORPORATION
--------------- --------------
28 WEEKS ENDED 28 WEEKS ENDED
MAY 12, 1996(2) MAY 14, 1996 ADJUSTMENTS CONSOLIDATED
--------------- -------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Restaurant sales:
Grady's American
Grill................. $ 56,810 $ -- $ -- $ 56,810
Burger King............ 35,588 -- -- 35,588
Chili's................ 21,086 -- -- 21,086
Spageddies............. 4,373 -- -- 4,373
Bruegger's............. 6,321 11,732 -- 18,053
-------- ------- ------- --------
Total restaurant
sales............... 124,178 11,732 -- 135,910
-------- ------- ------- --------
Restaurant operating
expenses:
Food and beverage...... 39,180 4,025 -- 43,205
Payroll and benefits... 34,637 4,171 -- 38,808
1,909 (3)
Depreciation and
amortization.......... 5,765 1,004 128 (8) 8,806
(316)(4)
Other operating
expenses.............. 28,595 2,912 (86)(5) 31,105
-------- ------- ------- --------
Total restaurant
operating expenses.. 108,177 12,112 1,635 121,924
-------- ------- ------- --------
Income (loss) from
restaurant operations.. 16,001 (380) (1,635) 13,986
(6)(6)
(316)(4)
Franchise revenues...... -- 3,241 (86)(5) 2,833
Bruegger's commissary
revenue................ -- 2,983 (262)(7) 2,721
Bruegger's commissary
expenses............... -- (2,838) 262 (7) (2,576)
General and
administrative
expenses............... (5,576) (5,255) -- (10,831)
Restructuring,
integration and special
charges................ (1,938) (5,958) -- (7,896)
-------- ------- ------- --------
Operating income (loss). 8,487 (8,207) (2,043) (1,763)
-------- ------- ------- --------
Other income (expense):
Interest expense....... (3,968) (646) -- (4,614)
Gain on sale of
property.............. 3 -- -- 3
Interest income........ 111 33 -- 144
Other expense, net..... (130) (8) 128 (8) (10)
-------- ------- ------- --------
Total other expense.. (3,984) (621) 128 (4,477)
-------- ------- ------- --------
Income (loss) before
income taxes........... 4,503 (8,828) (1,915) (6,240)
Income taxes (benefit).. 1,635 -- (3,180)(9) (1,545)
-------- ------- ------- --------
Net income (loss)....... $ 2,868 $(8,828) $ 1,265 $ (4,695)
======== ======= ======= ========
Net income (loss) per
share.................. $ 0.32 $ (0.34)
======== ========
Weighted average number
of shares of common
stock outstanding...... 8,838 5,127 (10) 13,965
======== ======= ========
</TABLE>
See accompanying notes to pro forma condensed consolidated statements of
income.
F-8
<PAGE>
QUALITY DINING, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) The pro forma condensed consolidated statement of income of the Company
for the 52 weeks ended October 29, 1995 reflects how the Company's
statement of income might have appeared if the acquisition of 42 Grady's
American Grill restaurants on December 21, 1995 and the acquisition of the
SHONCO Companies on August 14, 1995 had both occurred on October 31, 1994.
Presented below is summarized condensed income statement data reflecting
the historical results of operations of the Company and the pro forma
effects of the acquisitions of 42 Grady's American Grill restaurants and
the SHONCO Companies for the 52 weeks ended October 29, 1995 as was
detailed in the Company's Form 8-K, dated January 5, 1996, as amended by
Form 8-K/A, dated February 27, 1996. The pro forma effects consist of the
historical results of operations of the 42 Grady's American Grill
restaurants and the SHONCO Companies giving effect to certain adjustments,
including interest expense, depreciation of property and equipment and
amortization of acquired intangible assets.
<TABLE>
<CAPTION>
PRO FORMA EFFECT OF
QUALITY --------------------- QUALITY DINING
DINING GRADY'S PRO FORMA
HISTORICAL AMERICAN GRILL SHONCO COMBINED
---------- -------------- ------ --------------
<S> <C> <C> <C> <C>
Restaurant sales........ $105,291 $100,858 $7,819 $213,968
Income from restaurant
operations............. 17,189 9,761 719 27,669
Operating income........ 11,483 6,511 719 18,713
Income before income
taxes.................. 9,129 890 420 10,439
Net income.............. 5,889 622 248 6,759
Net income per share.... .85 .94
</TABLE>
(2) The pro forma condensed consolidated statement of income of the Company
for the 28 weeks ended May 12, 1996 reflects how the Company's statement
of income might have appeared if the acquisition of 42 Grady's American
Grill restaurants on December 21, 1995 had occurred on October 30, 1995.
Presented below is summarized condensed income statement data reflecting
the historical results of operations of the Company and the pro forma
effect of the acquisition of 42 Grady's American Grill restaurants for the
28 weeks ended May 12, 1996. The pro forma effect consists of the
historical results of operations of the 42 Grady's American Grill
restaurants giving effect to certain adjustments, including interest
expense, depreciation of property and equipment and amortization of
acquired intangible assets.
<TABLE>
<CAPTION>
PRO FORMA
QUALITY EFFECT OF QUALITY DINING
DINING GRADY'S PRO FORMA
HISTORICAL AMERICAN GRILL COMBINED
---------- -------------- --------------
<S> <C> <C> <C>
Restaurant sales.............. $109,047 $15,131 $124,178
Income from restaurant
operations................... 14,537 1,464 16,001
Operating income.............. 7,511 976 8,487
Income before income taxes.... 4,370 133 4,503
Net income.................... 2,775 93 2,868
Net income per share.......... .31 .32
</TABLE>
(3) Amortization over a 40-year period of $141,845 of goodwill associated with
the acquisition of Bruegger's Corporation by the Company.
(4) Elimination of royalties paid by the Company to Bruegger's Corporation.
(5) Elimination of advertising fees paid by the Company to Bruegger's
Corporation.
(6) Elimination of franchise fees paid and capitalized by the Company and
recognized by Bruegger's Corporation as income.
F-9
<PAGE>
(7) Elimination of commissary revenue and expenses for sales by Bruegger's
Corporation to the Company.
(8) Reclassification of trademark amortization.
(9) Income tax benefit of the net loss of Bruegger's Corporation and
adjustment (6) above at the Company's effective tax rate of 36%.
(10) Reflects the issuance of 5,127,142 shares of the Company's Common Stock
in connection with the acquisition of Bruegger's Corporation. For
purposes of the computation of the weighted average number of shares of
Common Stock outstanding, no effect has been given to the number of
shares of the Company's Common Stock issuable upon the conversion of the
Company's Preferred Stock since the amount is not material.
F-10
<PAGE>
INSIDE BACK COVER PAGE
[Photo of Bruegger's Cream Cheese and other products]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLI-
CATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATES AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Use of Proceeds............................................................ 10
Recent Stock Prices........................................................ 11
Capitalization............................................................. 12
Business................................................................... 13
Management................................................................. 23
Principal and Selling Shareholders......................................... 24
Underwriting............................................................... 26
Legal Matters.............................................................. 27
Experts.................................................................... 27
Incorporation of Certain Documents by Reference............................ 28
Available Information...................................................... 29
Index to Financial Information............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,277,300 SHARES
[COMPANY LOGO]
QUALITY DINING, INC.
COMMON STOCK
(WITHOUT PAR VALUE)
SCHRODER WERTHEIM & CO.
GOLDMAN, SACHS & CO.
WESSELS, ARNOLD & HENDERSON
MORGAN KEEGAN & COMPANY, INC.
JULY , 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
EXPENSES AMOUNT*
-------- -------
<S> <C>
Securities and Exchange Commission registration fee................ $ 28,221
National Association of Securities Dealers, Inc. fee............... 8,685
Nasdaq NMS fee..................................................... 17,500
Printing and engraving expenses.................................... 125,000
Legal fees and expenses............................................ 125,000
Accounting expenses and fees....................................... 30,000
Transfer Agent and Registrar fees.................................. 10,000
Blue Sky fees and expenses (including fees of counsel)............. 15,000
Miscellaneous...................................................... 40,594
--------
Total.......................................................... $400,000
========
</TABLE>
- --------
*The filing fees set forth above are actual. All other fees and expenses are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Indiana Business Corporation Law provides in regard to indemnification
of directors and officers as follows:
23-1-37-8. [BASIS.] (a) A corporation may indemnify an individual made a
party to a proceeding because the individual is or was a director against
liability incurred in the proceeding if;
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed;
(A) in the case of conduct in the individual's official capacity with
the corporation, that the individual's conduct was in its best
interest; and
(B) in all other cases, that the individual's conduct was at least
not opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual either;
(A) had reasonable cause to believe the individual's conduct was
lawful; or
(B) had no reasonable cause to believe the individual's conduct was
unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (a)(2)(B).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
23-1-37-9. [AUTHORIZED.] Unless limited by its articles of incorporation, a
corporation shall indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which the director
was a party because the director is or was a director of the corporation
against reasonable expenses incurred by the director in connection with the
proceeding.
S-1
<PAGE>
23-1-37-13. [OFFICERS, EMPLOYEES OR AGENTS.] Unless a corporation's articles
of incorporation provide otherwise:
(1) An officer of the corporation, whether or not a director, is entitled
to mandatory indemnification under section 9 of this chapter, and is
entitled to apply for court-ordered indemnification under section 11 of
this chapter, in each case to the same extent as a director;
(2) The corporation may indemnify and advance expenses under this chapter
to an officer, employee, or agent of the corporation, whether or not a
director, to the same extent as to a director; and
(3) A corporation may also indemnify and advance expenses to an officer,
employee, or agent whether or not a director, to the extent, consistent
with public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or contract.
23-1-37-15. [REMEDY NOT EXCLUSIVE OF OTHER RIGHTS.] (a) The indemnification
and advance for expenses provided for or authorized by this chapter does not
exclude any other rights to indemnification and advance for expenses that a
person may have under:
(1) A corporation's articles of incorporation or bylaws;
(2) A resolution of the board of directors or of the shareholders; or
(3) Any other authorization, whenever adopted, after notice, by a
majority vote of all the voting shares then issued and outstanding.
(b) If the articles of incorporation, by-laws, resolutions of the board of
directors or of the shareholders, or other duly adopted authorization of
indemnification or advance for expenses limit indemnification or advance for
expenses, indemnification and advance for expenses are valid only to the
extent consistent with the articles, by-laws, resolutions of the board of
directors or of the shareholders, or other duly adopted authorization of
indemnification or advance for expenses.
(c) This chapter does not limit a corporation's power to pay or reimburse
expenses incurred by a director, officer, employee, or agent in connection
with the person's appearance as a witness in a proceeding at a time when the
person has not been made a named defendant or respondent to the proceeding.
Reference is made to the Registrant's Restated Articles of Incorporation,
which, under certain circumstances, require indemnification by the Registrant
of its officers, directors, employees and agents. In general, the Registrant's
Restated Articles of Incorporation permit indemnification if: the indemnified
person acted in good faith and in a manner which he reasonably believed to be
in the best interest of the Registrant; and in criminal actions, the
indemnified person had no reasonable cause to believe his conduct to be
unlawful. Any such person would be entitled to indemnification as a matter of
right if he has been wholly successful, on the merits, with respect to any
such actions; if not, his indemnification would be dependent on a
determination by (i) the Board of Directors, based upon a written finding of
legal counsel or another independent referee or (ii) a court of competent
jurisdiction, that the required standards of conduct have been met. A
judgment, settlement, conviction or a plea of nolo contendere would not of
itself preclude indemnification. Indemnification could include reasonable
expenses of the indemnified person, judgments, fines and settlement payments.
The Restated Articles of Incorporation authorize the Registrant to advance
funds for expenses to an indemnified person, but only upon receipt of an
undertaking that he will repay the same if it is ultimately determined that he
is not entitled to indemnification. The rights of indemnification provided by
the Restated Articles of Incorporation would not be exclusive of any other
rights to which any indemnified person may otherwise be entitled, and such
rights would extend to the heirs and legal representatives of such person.
S-2
<PAGE>
Reference is also made to the Form of Underwriting Agreement filed as
Exhibit 1 hereto which provides for indemnification of the Directors and
officers signing the Registration Statement and certain controlling persons of
the Registrant against certain liabilities including certain liabilities under
the Securities Act of 1933, as amended (the "Securities Act"), in certain
instances by the Underwriters and the Selling Shareholders.
The Registration Rights Agreement, dated as of November 10, 1994, between
the Registrant and certain Selling Shareholders provides for indemnification
of the Directors, officers and certain controlling persons of the Registrant
with respect to certain statements or omissions in the Registration Statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon information furnished to the Registrant by such a
shareholder for use in the preparation of such documents.
In addition, the Company has obtained a directors' and officers' liability
and company reimbursement policy in the amount of $1,000,000, which insures
against certain liabilities, including liabilities under the Securities Act,
subject to applicable retentions.
ITEM 16. EXHIBITS.
The list of exhibits is incorporated herein by reference to the Index to
Exhibits on page E-1.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification for such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liabilities under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus to be filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
S-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MISHAWAKA, INDIANA, ON THE 2ND DAY OF JULY, 1996.
Quality Dining, Inc.
/s/ Daniel B. Fitzpatrick
By: _________________________________
DANIEL B. FITZPATRICK, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Daniel B. Fitzpatrick and Michael G. Sosinski
and each or any one of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
/s/ Daniel B. Fitzpatrick President, Chief July 2, 1996
- ------------------------------------- Executive Officer
DANIEL B. FITZPATRICK and Director
(Principal
Executive Officer)
/s/ Michael G. Sosinski Chief Financial July 2, 1996
- ------------------------------------- Officer, Treasurer
MICHAEL G. SOSINSKI and Director
(Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Nordahl L. Brue Director July 2, 1996
- -------------------------------------
NORDAHL L. BRUE
/s/ Arthur J. Decio Director July 2, 1996
- -------------------------------------
ARTHUR J. DECIO
/s/ Michael J. Dressell Director July 2, 1996
- -------------------------------------
MICHAEL J. DRESSELL
/s/ Stephen A. Finn Director July 2, 1996
- -------------------------------------
STEPHEN A. FINN
S-4
<PAGE>
SIGNATURE TITLE DATE
/s/ James K. Fitzpatrick Director July 2, 1996
- -------------------------------------
JAMES K. FITZPATRICK
/s/ Ezra H. Friedlander Director July 2, 1996
- -------------------------------------
EZRA H. FRIEDLANDER
/s/ Steven M. Lewis Director July 2, 1996
- -------------------------------------
STEVEN M. LEWIS
/s/ Christopher J. Murphy III Director July 2, 1996
- -------------------------------------
/s/ William R. Schonsheck Director July 2, 1996
CHRISTOPHER J. MURPHY III
- -------------------------------------
WILLIAM R. SCHONSHECK
S-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ----------- ---
<C> <S> <C>
1 Form of Underwriting Agreement...................................
4-A (1) Restated Articles of Incorporation of Registrant, as amended
to date..........................................................
4-B (2) By-Laws of Registrant, as amended to date....................
5* Opinion of Baker & Daniels, counsel for Registrant, as to the
legality of the securities being registered, and consent.........
23-A Written consent of Coopers & Lybrand L.L.P.......................
23-B* The written consent of Baker & Daniels will be contained in its
opinion to be filed as Exhibit 5.................................
23-C Written consent of Arthur Andersen LLP...........................
23-D Written consent of Plante & Moran, LLP...........................
23-E Written consent of KPMG Peat Marwick LLP.........................
23-F Written consent of KPMG Peat Marwick LLP.........................
24 The power of attorney is on the signature page...................
</TABLE>
- --------
* To be filed by amendment.
(1) The copy of this exhibit filed as Exhibit 3-A to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended May 12, 1996 is
incorporated herein by reference.
(2) The copy of this exhibit filed as Exhibit 3-B to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended May 12, 1996 is
incorporated herein by reference.
E-1
<PAGE>
DRAFT: 07/2/96
QUALITY DINING, INC.
2,277,300 Shares
Common Stock
(Without Par Value)
UNDERWRITING AGREEMENT
New York, New York
July , 1996
SCHRODER WERTHEIM & CO. INCORPORATED
GOLDMAN, SACHS & CO.
WESSELS, ARNOLD & HENDERSON, L.L.C.
MORGAN KEEGAN & COMPANY, INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Schroder Wertheim & Co. Incorporated
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
Quality Dining, Inc., an Indiana corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters"), an aggregate of
2,277,300 shares of Common Stock, without par value (the "Common Stock"), and
the persons named in Schedule II hereto (the "Selling Stockholders"), propose,
subject to the terms and conditions stated herein, to sell to the Underwriters
an aggregate of 77,300 shares of Common Stock. The 2,277,300 shares of Common
Stock to be sold by the Company and the Selling Stockholders are herein referred
to as the "Firm Securities." In addition, the Company proposes to grant to the
Underwriters an option to purchase up to an additional 341,595 shares of Common
Stock (the "Option Securities") on the terms and for the purposes set forth in
Section 2 hereof. The Firm Securities and the Option Securities are herein
collectively referred to as the "Securities." Except as may be expressly set
forth below, any reference to you in this Agreement shall be solely in your
capacity as the Representatives.
1.A. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-______), and as
a part thereof a preliminary prospectus, in respect of the Securities, has
been filed with the Securities and Exchange Commission (the "Commission")
in the form heretofore delivered to you and, with the exception of exhibits
to the registration statement, to you for each of the other Underwriters;
if such registration statement has not
<PAGE>
become effective, an amendment (the "Final Amendment") to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective, will promptly be filed by the
Company with the Commission; if such registration statement has become
effective and any post-effective amendment to such registration statement
has been filed with the Commission prior to the execution and delivery of
this Agreement, which amendment or amendments shall be in form acceptable
to you, the most recent such amendment has been declared effective by the
Commission; if such registration statement has become effective, a final
prospectus (the "Rule 430A Prospectus") relating to the Securities
containing information permitted to be omitted at the time of effectiveness
by Rule 430A of the rules and regulations of the Commission under the
Securities Act of 1933, as amended (the "Act"), will promptly be filed by
the Company pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act (any preliminary prospectus filed as part of such
registration statement being herein called a "Preliminary Prospectus," such
registration statement as amended at the time that it becomes or became
effective, or, if applicable, as amended at the time the most recent post-
effective amendment to such registration statement filed with the
Commission prior to the execution and delivery of this Agreement became
effective (the "Effective Date"), including all exhibits thereto and all
information deemed to be a part thereof at such time pursuant to Rule 430A
of the rules and regulations of the Commission under the Act, being herein
called the "Registration Statement" and the final prospectus relating to
the Securities in the form first filed pursuant to Rule 424(b)(1) or (4) of
the rules and regulations of the Commission under the Act or, if no such
filing is required, the form of final prospectus included in the
Registration Statement, being herein called the "Prospectus"); any
reference herein to any Preliminary Prospectus or the Prospectus or the
Registration Statement shall be deemed to include any information
incorporated by reference therein, as of the date of such Preliminary
Prospectus, the Prospectus or the Registration Statement, as the case may
be, and any reference to any amendment or supplement to any Preliminary
Prospectus, the Prospectus or the Registration Statement shall be deemed to
refer to any documents filed after such date under the Securities Exchange
Act of 1934, as amended ("the "Exchange Act"), and the rules and
regulations of the Commission thereunder and so incorporated by reference;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be
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stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
you expressly for use therein;
(c) On the Effective Date and the date the Prospectus is filed with
the Commission, and when any further amendment or supplements thereto
become effective or are filed with the Commission, as the case may be, the
Registration Statement, the Prospectus and such amendment or supplements
did and will conform in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through you expressly for use
therein;
(d) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(e) The Company has been duly incorporated and is validly existing as
a corporation under the laws of the State of Indiana, with all requisite
corporate power and authority to own its properties and to conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
property, or conducts any business, so as to require such qualification
(except where the failure to so qualify would not have a material adverse
effect on the condition, financial or otherwise, or the business affairs or
prospects of the Company and its subsidiaries, taken as a whole); and each
of the Company's subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with all requisite corporate power and
authority to own its properties and to conduct its business as described in
the Prospectus, and has been duly qualified as a foreign
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corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which the ownership or leasing of
its properties or the nature or conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(f) All the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned by the Company free and clear of all
liens, encumbrances, equities, security interests, or claims; and there are
no outstanding options, warrants or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of any subsidiary or any security convertible or
exchangeable or exercisable for capital stock of any subsidiary; except as
disclosed in the Registration Statement and except for the shares of stock
of each subsidiary owned by the Company, neither the Company nor any
subsidiary owns, directly or indirectly, any shares of capital stock of any
corporation or has any equity interest in any firm, partnership, joint
venture, association or other entity, except for a 50% joint venture
interest in a joint venture with a developer to construct and own the
Company's new corporate headquarter's office building;
(g) The Company has all requisite right, power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by the Company of its obligations under
this Agreement have been duly and validly authorized by all requisite
corporate action of the Company; and this Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that the
indemnification provisions set forth in Section 8 of this Agreement may be
limited by federal or state securities laws or the public policy underlying
such laws;
(h) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
which loss or interference is material to the Company and its subsidiaries,
taken as a whole; and, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not
been, and prior to the Time of Delivery (as defined in Section 4 hereof)
there will not be, any material change in the capital stock (other than
shares issued pursuant to exercise of
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employee stock options and non-employee director stock options that the
Prospectus indicates are outstanding (the "Stock Option Shares") or
pursuant to the terms of convertible securities of the Company outstanding
on the date hereof) or short-term debt or long-term debt of the Company or
any of its subsidiaries, or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the Prospectus;
(i) The Company and its subsidiaries have good and marketable title
in fee simple to all material real property and good and marketable title
to all material personal property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are described
or contemplated by the Prospectus, or such as do not materially affect the
value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries, and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such real property and buildings by
the Company and its subsidiaries;
(j) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all the
issued shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable, are free of any
preemptive rights, rights of first refusal or similar rights, were issued
and sold in compliance with the applicable Federal and state securities
laws and conform in all material respects to the description in the
Prospectus; except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, and there
are no commitments, plans or arrangements to issue any shares of capital
stock of the Company or any security convertible or exchangeable or
exercisable for capital stock of the Company; there are no holders of
securities of the Company who, by reason of the filing of the Registration
Statement have the right (and have not waived such right) to request the
Company to include in the Registration Statement securities owned by them,
other than such rights as have been satisfied by the inclusion of
securities in the Registration Statement;
(k) The Securities to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued,
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<PAGE>
fully paid and nonassessable, and will conform in all material respects to
the description thereof in the Prospectus and will be quoted on the Nasdaq
National Market as of the Effective Date;
(l) The performance of this Agreement, the consummation of the
transactions herein contemplated and the issue and sale of the Securities
and the compliance by the Company with all the provisions of this Agreement
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim, or encumbrance upon, any
of the property or assets of the Company or any of its subsidiaries
pursuant to, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in any violation
of the provisions of the Articles of Incorporation or the By-laws, in each
case as amended to the date hereof, of the Company or any of its
subsidiaries or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties, and no consent, approval,
authorization, order, registration or qualification of or with any court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation of the other transactions contemplated by
this Agreement, except the registration under the Act of the Securities,
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or Blue
Sky laws in connection with the purchase and distribution of the Securities
by the Underwriters;
(m) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries or any of their respective officers or directors is a party or
of which any property of the Company or any of its subsidiaries is the
subject, other than litigation or proceedings incident to the business
conducted by the Company and its subsidiaries which will not individually
or in the aggregate have a material adverse effect on the current or future
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened or contemplated by others; and, to
the best of the Company's knowledge, neither the Company nor any of its
subsidiaries is involved in any labor dispute, nor is any labor dispute
threatened;
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(n) The Company and its subsidiaries have all material licenses,
permits and other approvals or authorizations of and from governmental or
regulatory authorities ("Permits") as are necessary under applicable law to
own or lease their respective properties and to conduct their respective
businesses in the manner now being conducted and as described in the
Prospectus; and the Company and its subsidiaries have fulfilled and
performed all of their respective obligations with respect to such Permits,
and no event has occurred which allows, or after notice or lapse of time or
both would allow, revocation or termination thereof or result in any other
material impairment of the rights of the holder of any such permits;
(o) Coopers & Lybrand LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and delivered
their report with respect to the audited consolidated financial statements
and schedules (other than those relating to Grayling Corporation
("Grayling"), the Shonco entities ("SHONCO"), 42 Grady's American Grill
Restaurants ("Grady's) and Bruegger's Corporation ("Bruegger's")) included
or incorporated by reference in the Registration Statement and the
Prospectus, are independent public accountants as required by the Act and
the rules and regulations of the Commission thereunder. KPMG Peat Marwick
LLP, who have reported on the financial statements of Grady's and
Bruegger's, are independent accountants with respect to Grady's and
Bruegger's, as required by the Act and the rules and regulations of the
Commission thereunder. Arthur Andersen LLP, who have reported on the
financial statements of Grayling and Bruegger's, are independent
accountants with respect to Grayling and Bruegger's, as required by the Act
and the rules and regulations of the Commission thereunder. Plante & Moran,
LLP, who have reported on the financial statements of SHONCO, are
independent accountants with respect to SHONCO, as required by the Act and
the rules and regulations of the Commission thereunder;
(p) The consolidated financial statements and schedules of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the financial
condition, the results of operations and the cash flows of the Company and
its subsidiaries as of the dates and for the periods therein specified in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved, except as otherwise stated
therein; and the other financial and statistical information and data set
forth in the Registration Statement and the Prospectus is accurately
presented and, to the extent such information and data is derived from the
financial statements and books and records of the Company and its
subsidiaries, is prepared on a basis consistent with such financial
statements and the books and
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records of the Company and its subsidiaries. The pro forma financial
information included in the Registration Statement and the Prospectus have
been properly compiled and comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X of the
Commission; no other financial statements or schedules are required to be
included in the Registration Statement and the Prospectus;
(q) There are no statutes or governmental regulations, or any
contracts or other documents that are required to be described in or filed
as exhibits to the Registration Statement which are not described therein
(or as to which the required description is not contained in the
information incorporated by reference therein) or filed as exhibits
thereto; and all such contracts to which the Company or any subsidiary is a
party have been duly authorized, executed and delivered by the Company or
such subsidiary, constitute valid and binding agreements of the Company or
such subsidiary and are enforceable against the Company or subsidiary in
accordance with the terms thereof, and, to the best of the Company's
knowledge, the other contracting party or parties thereto are not in
material breach or default under any of such agreements;
(r) The Company and its subsidiaries own or possess adequate patent
rights or licenses or other rights to use patent rights, inventions,
trademarks, service marks, trade names, copyrights, technology and know-how
necessary to conduct the general business now or proposed to be operated by
them as described in the Prospectus; neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patent, patent rights,
inventions, trademarks, service marks, trade names, copyrights, technology
or know-how which, singly or in the aggregate, could materially adversely
affect the business, operations, financial condition, income or business
prospects of the Company and its subsidiaries considered as a whole; and
the discoveries, inventions, products or processes of the Company and its
subsidiaries referred to in the Prospectus do not, to the Company's
knowledge, infringe or conflict with any patent or right of any third
party, or any discovery, invention, product or process which is the subject
of a patent application filed by any third party, known to the Company;
(s) Neither the Company nor any of its subsidiaries are in violation
of any term or provision of its Articles of Incorporation or By-Laws, in
each case as amended to the date hereof, or in violation of any law,
ordinance, administrative or governmental rule or regulation applicable to
the Company or any of its subsidiaries, or of any decree of any court or
governmental agency or body having jurisdiction over the
8
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Company or any of its subsidiaries where the consequences of such violation
would have a material adverse effect on the operations of the Company and
its subsidiaries, taken as a whole;
(t) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default in the due performance
and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, bank loan or credit agreement, lease or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which any of them or their respective properties is bound or
may be affected, where such default would have a material adverse effect on
the Company and its subsidiaries, taken as a whole;
(u) The Company and its subsidiaries have timely filed all necessary
tax returns and notices and have paid all federal, state, county, local and
foreign taxes of any nature whatsoever for all tax years through October
29, 1995, to the extent such taxes have become due. The Company has no
knowledge, or any reasonable grounds to know, of any tax deficiencies which
would have a material adverse effect on the Company or any of its
subsidiaries; the Company and its subsidiaries have paid all taxes which
have become due, whether pursuant to any assessments, or otherwise, and
there is no further liability (whether or not disclosed on such returns) or
assessments for any such taxes, and no interest or penalties accrued or
accruing with respect thereto, except as may be set forth or adequately
reserved for in the financial statements included or incorporated by
reference in the Registration Statement; the amounts currently set up as
provisions for taxes or otherwise by the Company and its subsidiaries on
their books and records are sufficient for the payment of all their unpaid
federal, foreign, state, county and local taxes accrued through the dates
as of which they speak, and for which the Company and its subsidiaries may
be liable in their own right, or as a transferee of the assets of, or as
successor to any other corporation, association, partnership, joint venture
or other entity;
(v) The Company will not, during the period of 180 days after the
date hereof except pursuant to this Agreement, offer, sell, contract to
sell or otherwise dispose of any capital stock of the Company (or
securities convertible into, or exchangeable for, capital stock of the
Company), directly or indirectly, without the prior written consent of
Schroder Wertheim & Co. Incorporated, except: (i) pursuant to the terms of
convertible securities of the Company outstanding on the date hereof; and
(ii) the grant of options pursuant to the 1993 Stock Option and Incentive
Plan and the Outside Directors Stock Option Plan (the "Stock Option
Plans");
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(w) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences;
(x) Neither the Company nor any of its subsidiaries is in violation
of any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants, nor any federal or
state law relating to discrimination in the hiring, promotion or paying of
employees nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated thereunder, where such
violation would have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(y) To the best of the Company's knowledge, none of the Company or
its subsidiaries, or its officers, directors, employees or agents has used
any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity, or made any unlawful
payment of funds of the Company or any subsidiary or received or retained
any funds in violation of any law, rule or regulation; and
(z) None of the Company or its subsidiaries, or its officers,
directors, employees or agents have taken or will take, directly or
indirectly, any action designed to or which has constituted or that might
reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities.
(aa) The conditions for use of Form S-3 with respect to the
transactions contemplated hereby, as set forth in the General Instructions
thereto, have been satisfied.
1.B. Each Selling Stockholder, severally and not jointly, represents and
warrants to and agrees with, each of the Underwriters that:
(a) Such Selling Stockholder has, and at the Time of Delivery (as
defined in Section 4 hereof) will have, good and
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valid title to the Securities to be sold by such Selling Stockholder
hereunder, free and clear of any liens, encumbrances, equities, security
interests, claims and other restrictions of any nature whatsoever, and such
Selling Stockholder has the full legal, right, power and authority, and any
approval required by law, to enter into this Agreement and to sell, assign,
transfer and deliver the Securities being sold by such Selling Stockholder
hereunder and to make the representations, warranties, covenants and
agreements made by it in this Agreement; and upon the delivery of and
payment for such Securities as herein provided, the several Underwriters
will acquire good and valid title thereto, free and clear of all liens,
encumbrances, equities, security interests, claims and other restrictions
of any nature whatsoever;
(b) Such Selling Stockholder has duly executed and delivered an
agreement and power of attorney (with respect to such Selling Stockholder,
the "Agreement and Power-of-Attorney", in the form heretofore delivered to
the Representatives, appointing each of Daniel B. Fitzpatrick, Michael G.
Sosinski and David B. Findlay as such Selling Stockholder's attorney-in-
fact (the "Attorney-in-Fact") with authority to execute, deliver and
perform this Agreement on behalf of such Selling Stockholder and appointing
KeyCorp Shareholder Services, Inc. as custodian thereunder (the
"Custodian"). Certificates in negotiable form, endorsed in blank, or
accompanied by blank stock powers duly executed, with signatures
appropriately guaranteed, representing the Securities to be sold by such
Selling Stockholder hereunder have been deposited with the Custodian
pursuant to the Agreement and Power-of-Attorney for the purpose of delivery
pursuant to this Agreement. Such Selling Stockholder has full power to
enter into the Agreement and Power-of-Attorney and to perform its
obligations thereunder. The Agreement and the Power-of-Attorney have been
duly executed and delivered by such Selling Stockholder and, assuming due
authorization, execution and delivery by the Custodian, are the legal,
valid, binding and enforceable instruments of such Selling Stockholder.
Such Selling Stockholder agrees that each of the Securities represented by
the certificates on deposit with the Custodian is subject to the interests
of the Underwriters, the Company and the other Selling Stockholders
hereunder, that the arrangements made for such custody, the appointment of
the Attorney-in-Fact and the right, power and authority of the Attorney-in-
Fact to execute and deliver this Agreement and to carry out the terms of
this Agreement, are to that extent irrevocable and that the obligations of
such Selling Stockholder hereunder shall not be terminated, except as
provided in this Agreement or the Agreement and Power-of-Attorney, by any
act of such Selling Stockholder, by operation of law or otherwise, whether
by the death or incapacity of any Selling Stockholder. If any Selling
Stockholder should die or become incapacitated, or if any other event
should occur,
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before the delivery of such Securities hereunder, the certificates for such
Securities deposited with the Custodian shall be delivered by the Custodian
in accordance with the respective terms and conditions of this Agreement as
if such death, incapacity or other event had not occurred, regardless of
whether or not the Custodian or the Attorney-in-Fact shall have received
notice thereof;
(c) Such Selling Stockholder will not, during the period of 180 days
after the date hereof, except pursuant to this Agreement, offer, sell,
contract to sell, or otherwise dispose of any capital stock of the Company
(or securities convertible into, or exchangeable for, capital stock of the
Company), directly or indirectly, without the prior written consent of
Schroder Wertheim & Co. Incorporated;
(d) Neither the execution and delivery or performance of this
Agreement or the Agreement and Power-of-Attorney or the consummation of the
transactions herein or therein contemplated nor the compliance with the
terms hereof or thereof by such Selling Stockholder will conflict with, or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge, claim or encumbrance on any property of the Company or any of
its subsidiaries under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder's property is bound, or any statute,
ruling, judgment, decree, order, or regulation of any court or other
governmental authority or any arbitrator applicable to such Selling
Stockholder; and no consent, approval, authorization, order, registration
or qualification of or with any governmental authority, except such as have
been obtained, such as may be required under state or foreign securities or
Blue Sky laws or by the by-laws and rules of the National Association of
Securities Dealers, Inc. and, if the registration statement filed with
respect to the Securities is not effective under the Act as of the time of
execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act;
(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to cause or result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities;
(f) The sale by such Selling Stockholder of Securities pursuant
hereto is not prompted by any adverse information concerning the Company
that is not set forth in the Registration Statement or the Prospectus;
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(g) Such Selling Stockholder has reviewed the Prospectus and the
Registration Statement, and the information regarding such Selling
Stockholder set forth therein under the caption "Principal and Selling
Shareholders" is complete and accurate; and
(h) At the Time of Delivery, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the
sale and transfer of the Securities to be sold by such Selling Stockholder
to the several Underwriters hereunder will have been fully paid or provided
for by such Selling Stockholder and all laws imposing such taxes will have
been fully complied with.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the several Underwriters an aggregate of 2,200,000
Firm Securities, each Selling Stockholder agrees to sell to the several
Underwriters the number of Firm Securities set forth on Schedule II opposite the
name of such Selling Stockholder and each of the Underwriters agrees to purchase
from the Company and the Selling Stockholders, at a purchase price of $______
per share, the respective aggregate number of Firm Securities determined in the
manner set forth below. The obligation of each Underwriter to the Company and
each of the Selling Stockholders, respectively, shall be to purchase that
portion of the number of shares of Common Stock to be sold by the Company or
such Selling Stockholder pursuant to this Agreement as the number of Firm
Securities set forth opposite the name of such Underwriter on Schedule I bears
to the total number of Firm Securities to be purchased by the Underwriters
pursuant to this Agreement, in each case adjusted by you such that no
Underwriter shall be obligated to purchase Firm Securities other than in 100
share amounts. In making this Agreement, each Underwriter is contracting
severally and not jointly.
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the several Underwriters, as required (for
the sole purpose of covering over-allotments in the sale of the Firm
Securities), up to an aggregate of 341,595 Option Securities at the purchase
price per share of the Firm Securities being sold by the Company and the Selling
Stockholders as stated in the preceding paragraph. The right to purchase the
Option Securities may be exercised by your giving 48 hours prior written or
telephonic notice (subsequently confirmed in writing) to the Company of your
determination to purchase all or a portion of the Option Securities. Such
notice may be given at any time within a period of 30 days following the date of
this Agreement. Option Securities shall be purchased severally for the account
of each Underwriter in proportion to the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule I hereto. No Option
Securities shall be delivered to or for the accounts of the Underwriters unless
the Firm Securities shall be simultaneously delivered or shall theretofore have
been
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delivered as herein provided. The respective purchase obligations of each
Underwriter shall be adjusted by you so that no Underwriter shall be obligated
to purchase Option Securities other than in 100 share amounts. The Underwriters
may cancel any purchase of Option Securities at any time prior to the Option
Securities Delivery Date (as defined in Section 4 hereof) by giving written
notice of such cancellation to the Company.
3. The Underwriters propose to offer the Securities for sale upon the
terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Firm Securities to be
purchased by each Underwriter hereunder shall be delivered by or on behalf of
the Company and the Selling Stockholders to you for the account of such
Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by certified or official bank check or checks payable in
New York Clearing House funds, to the order of the Company, for the purchase
price of the Firm Securities being sold by the Company, and to the order of the
Selling Stockholders for the purchase price of the Firm Securities being sold by
the Selling Stockholders, at the office of Schroder Wertheim & Co. Incorporated,
Equitable Center, 787 Seventh Avenue, New York, New York, at 9:30 A.M., New York
City time, on ________ __, 1996, or at such other time, date and place as you
and the Company may agree upon in writing, such time and date being herein
called the "Time of Delivery."
Certificates in definitive form for the Option Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
to you for the account of such Underwriter, against payment by such Underwriter
or on its behalf of the purchase price thereof by certified or official bank
check or checks, payable in New York Clearing House funds, to the order of the
Company, for the purchase price of the Option Securities, in New York, New York,
at such time and on such date (not earlier than the Time of Delivery nor later
than ten business days after giving of the notice delivered by you to the
Company with reference thereto) and in such denominations and registered in such
names as shall be specified in the notice delivered by you to the Company with
respect to the purchase of such Option Securities. The date and time of such
delivery and payment are herein sometimes referred to as the "Option Securities
Delivery Date." The obligations of the Underwriters shall be subject, in their
discretion, to the condition that there shall be delivered to the Underwriters
on the Option Securities Delivery Date, opinions and certificates, dated such
Option Securities Delivery Date referring to the Option Securities, instead of
the Firm Securities, but otherwise to the same effect as those required to be
delivered at the Time of Delivery pursuant to Section 7(d), 7(e), 7(f), 7(g) and
7(j).
Certificates for the Firm Securities and the Option Securities so to be
delivered will be in good delivery form, and in such denominations and
registered in such names as you may request not
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less than 48 hours prior to the Time of Delivery and the Option Securities
Delivery Date, respectively. Such certificates will be made available for
checking and packaging in New York, New York, at least 24 hours prior to the
Time of Delivery and Option Securities Delivery Date.
5. (a) The Company covenants and agrees with each of the Underwriters:
(i) If the Registration Statement has not become effective, to
file promptly the Final Amendment with the Commission and use its best
efforts to cause the Registration Statement to become effective; if
the Registration Statement has become effective, to file promptly the
Rule 430A Prospectus with the Commission; to make no further amendment
or any supplement to the Registration Statement or Prospectus which
shall be disapproved by you after reasonable notice thereof; to advise
you, promptly after it receives notice thereof of the time when the
Registration Statement, or any amendment thereto, or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of
the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and in the event of the
issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain
withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(iii) To furnish one of the Representatives and counsel for
the Underwriters, without charge, signed copies of the registration
statement originally filed with respect to the Securities and each
amendment thereto (in each case including all exhibits thereto) and to
each
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other Underwriter, without charge, a conformed copy of such
registration statement and each amendment thereto (in each case
without exhibits thereto) and, so long as a prospectus relating to the
Securities is required to be delivered under the Act, as many copies
of each Preliminary Prospectus, the Prospectus and all amendments or
supplements thereto as you may from time to time reasonably request.
If at any time when a prospectus is required to be delivered under the
Act an event shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make statements therein, in the light of the circumstances under which
they were made when such Prospectus is delivered, not misleading, or
if for any other reason it shall be necessary to amend or supplement
the Prospectus in order to comply with the Act, the Company will
forthwith prepare and, subject to the provisions of Section 5(a)(i)
hereof, file with the Commission an appropriate supplement or
amendment thereto, and will furnish to each Underwriter and to any
dealer in securities, without charge, as many copies as you may from
time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance in accordance with the requirements
of Section 10 of the Act;
(iv) To make generally available to its stockholders as soon as
practicable, but in any event not later than 45 days after the close
of the period covered thereby, an earnings statement in form complying
with the provisions of Section 11(a) of the Act covering a period of
12 consecutive months beginning not later than the first day of the
Company's fiscal quarter next following the Effective Date;
(v) To file promptly all documents required to be filed with
the Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act
subsequent to the Effective Date and during any period when the
Prospectus is required to be delivered;
(vi) For a period of three years from the Effective Date, to
furnish to its stockholders after the end of each fiscal year an
annual report (including a consolidated balance sheet and statements
of income, cash flow and stockholders' equity of the Company and its
subsidiaries certified by independent public accountants) and, as soon
as practicable after the end of each of the first three quarters of
each fiscal year (beginning with the fiscal quarter ending after the
Effective Date), consolidated summary financial information of the
Company
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and its subsidiaries for such quarter in reasonable detail;
(vii) During a period of three years from the Effective Date, to
furnish to you copies of all reports or other communications
(financial or other) furnished to its stockholders, and deliver to you
(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is
listed; and (ii) such additional information concerning the business
and financial condition of the Company as you may from time to time
reasonably request in connection with your obligations hereunder;
(viii) To apply the net proceeds from the sale of the Securities
in the manner set forth in the Prospectus under the caption "Use of
Proceeds";
(ix) That it will not and will cause its subsidiaries,
officers, directors, employees, agents and affiliates not to, take,
directly or indirectly, any action designed to cause or result in, or
that might reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities;
(x) That prior to the Time of Delivery there will not be any
change in the capital stock or material change in the short-term debt
or long-term debt of the Company or any of its subsidiaries, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management financial position, stockholders' equity or results of
operations of the Company or any of its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus or other than shares
issued pursuant to exercise of employee stock options and non-employee
director stock options that the Prospectus indicates are outstanding;
(xi) That it will not, during the period of 180 days after the
date hereof (other than pursuant to this Agreement), offer, sell,
contract to sell or otherwise dispose of any capital stock of the
Company (or securities convertible into, or exchangeable for, capital
stock of the Company) directly or indirectly, without the prior
written consent of Schroder Wertheim & Co. Incorporated, except
pursuant to: (i) the terms of convertible securities outstanding on
the date hereof;
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and (ii) the grant of options pursuant to the Stock Option Plans; and
(xii) That it has caused the Securities to be included for
quotation on the Nasdaq National Market as of the Effective Date.
(b) Each Selling Stockholder, severally and not jointly covenants and
agrees with each of the Underwriters that:
(i) Such Selling Stockholder will not during the period of 180
days after the date hereof, except pursuant to this Agreement, offer,
sell, contract to sell, or otherwise dispose of any capital stock of
the Company (or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly, without the
prior written consent of Schroder Wertheim & Co. Incorporated;
(ii) Such Selling Stockholder will not, directly or indirectly,
take any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities;
(iii) As soon as any Selling Stockholder is advised thereof,
such Selling Stockholder will advise the Representatives and confirm
such advice in writing, (i) of receipt by the Selling Stockholder or
by any representative or agent of such Selling Stockholder of any
communication from the Commission relating to the Registration
Statement, the Prospectus or any Preliminary Prospectus, or any notice
or order of the Commission relating to the Company or any of the
Selling Stockholders in connection with the transactions contemplated
by this Agreement and (ii) of the happening of any event which makes
or may make any statement made in the Registration Statement, the
Prospectus or any Preliminary Prospectus untrue or that requires the
making of any change in the Registration Statement, Prospectus or
Preliminary Prospectus, as the case may be, in order to make such
statement, in light of the circumstances in which it was made, not
misleading; and
(iv) Such Selling Stockholder will deliver to the
Representatives prior to the Time of Delivery a properly completed and
executed United States Treasury Department Form W-9.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid: (i) the fees, disbursements and
expenses of counsel and accountants
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for the Company, and all other expenses in connection with the preparation,
printing and filing of the Registration Statement and the Prospectus and
amendments and supplements thereto and the furnishing of copies thereof,
including charges for mailing, air freight and delivery and counting and
packaging thereof and of any Preliminary Prospectus and related offering
documents to the Underwriters and dealers; (ii) the cost of printing this
Agreement, the Agreement Among Underwriters, the Selling Agreement,
communications with the Underwriters and selling group and the Preliminary and
Supplemental Blue Sky Memoranda and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities for offering and sale under
securities laws as provided in Section 5(b) hereof, including filing and
registration fees and the fees, disbursements and expenses for counsel for the
Underwriters in connection with such qualification and in connection with Blue
Sky surveys or similar advice with respect to sales; (iv) the filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Securities; (v) all
fees and expenses in connection with quotation of the Securities on the Nasdaq
National Market; and (vi) all other costs and expenses incident to the
performance of the Company's obligations hereunder which are not otherwise
specifically provided for in this Section 6, including the fees of the Company's
Transfer Agent and Registrar, the cost of any stock issue or transfer taxes on
sale of the Securities to the Underwriters, the cost of the Company's personnel
and other internal costs, the cost of printing and engraving the certificates
representing the Securities and all expenses and transfer taxes incident to the
sale and delivery of the Securities to be sold by the Company and the Selling
Stockholders to the Underwriters hereunder.
It is understood, however, that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company and the Selling Stockholders herein are, at and
as of the Time of Delivery, true and correct, the condition that the Company and
the Selling Stockholders shall have performed all its and their obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Registration Statement shall have become effective, and you
shall have received notice thereof not
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later than 10:00 P.M., New York City time, on the date of execution of this
Agreement, or at such other time as you and the Company may agree; if
required, the Prospectus shall have been filed with the Commission in the
manner and within the time period required by Rule 424(b); no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information
on the part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) All corporate proceedings and related legal and other matters in
connection with the organization of the Company and the registration,
authorization, issue, sale and delivery of the Securities shall have been
reasonably satisfactory to Calfee, Halter & Griswold, counsel to the
Underwriters, and Calfee, Halter & Griswold shall have been timely
furnished with such papers and information as they may reasonably have
requested to enable them to pass upon the matters referred to in this
subsection;
(c) You shall not have advised the Company or any Selling Stockholder
that the Registration Statement or Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact or omits to state
a fact which in your judgment is in either case material and in the case of
an omission is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(d) Baker & Daniels, counsel to the Company, shall have furnished to
you their written opinion, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws
of the jurisdiction of its incorporation, with all requisite corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and
the Prospectus. Each of the Company and its subsidiaries is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction in which the ownership or leasing of its properties or
the nature or conduct of its business makes such qualification
necessary, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole. To such counsel's knowledge, the
Company does not own or control, directly or indirectly, any
corporation, association or other entity except as set forth in
Exhibit 21 to the Company's
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Annual Report on Form 10-K and Bruegger's Corporation, North Shore
Bagels, Inc., Erie Bagels, Inc., Odyssey Bagels, Inc., B F Holding,
Inc. and Bruegger's Franchise Corporation.
(ii) All of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and are validly
issued and outstanding, are fully paid and non-assessable and, to the
best knowledge of such counsel, are owned by the Company (A)
beneficially and (B) free and clear of all liens, encumbrances,
security interests, or claims of any nature whatsoever.
(iii) The Common Stock conforms in all material respects to
the description thereof contained or incorporated by reference in the
Registration Statement and the Prospectus.
(iv) The Company has authorized capital stock as set forth
under the caption "Capitalization" in the Registration Statement and
the Prospectus as of the date therein. All of the issued and
outstanding shares of capital stock of the Company, including the
Securities to be sold by the Selling Stockholders, are duly authorized
and are validly issued, are fully paid and nonassessable and to such
counsel's knowledge were not issued in violation of any preemptive
rights. To such counsel's knowledge, there are no preemptive rights
to subscribe for or to purchase any of the Securities to be issued and
sold by the Company. To the knowledge of such counsel, except as
disclosed in the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any shares of capital stock of the Company or
any security convertible into or exchangeable for capital stock of the
Company. When the shares of Common Stock to be sold by the Company
and the Selling Stockholders under this Agreement are delivered in
accordance with this Agreement, good and marketable title thereto will
be transferred to the Underwriters who have severally purchased such
shares of Common Stock under this Agreement.
(v) Except as disclosed in the Prospectus, such counsel does
not know of any past, pending or threatened action, suit, proceeding,
inquiry or investigation before any court or before or by any public,
regulatory or governmental body or board against or involving the
properties or business of the Company or the Selling Stockholders of a
character required to be disclosed in the Prospectus or, as to
threatened litigation, of a character which would be required to be
disclosed if
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filed, or in either case which, if successful, would have a material
adverse effect on the Company or its subsidiaries, taken as a whole.
(vi) Neither the issuance, sale and delivery by the Company
and the Selling Stockholders of the shares of Common Stock, nor the
execution, delivery and performance of this Agreement, nor the
consummation by the Company of any of the other transactions
contemplated hereby will conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien,
encumbrance, claim or security interest upon any property or assets of
the Company pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or agreement or other instrument identified by
the Company to such counsel as being material to the business of the
Company or its subsidiaries to which the Company or any of its
subsidiaries is a party or by which any of them are bound or to which
any of the property of the Company or any of its subsidiaries is
subject nor will such action violate the provisions of the respective
Articles of Incorporation or By-Laws of the Company or any of its
subsidiaries, or any law, administrative rule or regulation or
arbitrators' or administrative or court decree, judgment, or order or
material franchise or permit applicable to the Company or its
subsidiaries known to such counsel (except that the opinion called for
by this clause (vi) may exclude from its scope any law or
administrative rule or regulation applicable under the "blue sky" laws
of any jurisdiction in connection with the purchase and distribution
of the Securities by the Underwriters).
(vii) The Registration Statement has become effective under the
1933 Act and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or is
pending or contemplated. Other than financial statements and other
financial and operating data and schedules contained or incorporated
by reference therein, as to which counsel need express no opinion, the
Registration Statement, all Preliminary Prospectuses, the Prospectus,
any amendment or supplement thereto, and the documents incorporated by
reference in the Prospectus conform as to form in all material
respects with the requirements of Form S-3 and the 1933 Act
Regulations.
(viii) The descriptions in or incorporated by reference in the
Registration Statement and the Prospectus of the contracts, leases and
other legal documents therein described present fairly in all material
respects the information required to be shown
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and there are no contracts, leases or other documents known to such
counsel of a character required to be described or incorporated by
reference in the Registration Statement or the Prospectus or to be
filed or incorporated by reference as exhibits to the Registration
Statement which are not described, filed or incorporated by reference
as required. There are no statutes or regulations applicable to the
Company or certificates, permits or other authorizations from
governmental regulatory officials or bodies required to be obtained or
maintained by the Company known to such counsel of a character
required to be disclosed or incorporated by reference in the
Registration Statement or the Prospectus which have not been so
disclosed or incorporated by reference and properly described therein.
(ix) This Agreement has been duly and validly authorized,
executed and delivered by the Company and the Selling Stockholders,
and, assuming the due authorization, execution and delivery by the
Underwriters, will be valid and binding obligations of the Company and
the Selling Stockholders enforceable in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability
relating to or affecting creditor's rights, or by general equity
principles, and except to the extent that the indemnification
provisions in Section 8 hereof may be limited by federal or state
securities laws or the public policy underlying such laws.
(x) No consent, approval, authorization or order of any court
or government agency or body is required for the valid authorization,
issuance, sale and delivery of the Securities or for the execution,
delivery or performance of this Agreement by the Company and the
Selling Stockholders or the consummation by the Company and the
Selling Stockholders of the transactions contemplated hereby, except
such as have been obtained and such as may be required under state
securities or "blue sky" laws or by the NASD in connection with the
purchase and distribution of the shares of Common Stock by the
Underwriters, as to which such counsel need express no opinion.
(xi) Neither the Company nor any of its subsidiaries is
presently in breach of or default under its respective Articles of
Incorporation or By-laws and, to the knowledge of such counsel, no
material default exists and no event has occurred which with notice or
after the lapse of time to cure or both, would constitute a material
default, in the due performance and observance of any term, covenant
or condition of any material
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written indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument known to such counsel to which
the Company or any of its subsidiaries is a party or to which any of
their properties is subject and which has been identified by the
Company as being material to its business or the business of its
subsidiaries, except in each case where any such default would not
have a material adverse effect on the financial condition or results
of operations of the Company and its subsidiaries, taken as a whole.
(xii) The descriptions in or incorporated by reference in the
Prospectus of the statutes, regulations, legal or governmental
proceedings, contracts and other documents therein described or
incorporated by reference are accurate in all material respects and
fairly summarize the information required to be shown.
(xiii) To such counsel's knowledge, no holders of shares of
Common Stock or other securities of the Company have registration
rights with respect to the offering contemplated by the Registration
Statement and this Agreement, except such as have been satisfied by
the inclusion of such shares in the Registration Statement or waived
by the holders thereof.
(xiv) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder.
Such counsel shall also state that nothing has come to such counsel's
attention that would lead such counsel to believe that either the
Registration Statement or any amendment or supplement thereto, at the time
such Registration Statement or amendment or supplement became effective and
as of the Time of Delivery, or the Prospectus or any amendment or
supplement thereto as of its date and as of the Time of Delivery, contains
or contained any untrue statement of material fact or omitted or omits to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
In rendering their opinions set forth in Section 7(d) above, such
counsel may rely, to the extent deemed advisable by such counsel, (a) as to
factual matters, upon certificates of public officials, officers of the
Company, and the Selling Stockholders and (b) as to the laws of any
jurisdiction other than the United States and jurisdictions in which they
are admitted, on opinions of counsel (provided, however, that you shall
have received a copy of each of such opinions which shall be dated the Time
of Delivery, addressed to you or otherwise authorizing you to rely thereon,
and Baker & Daniels
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in its opinion to you delivered pursuant to this subsection, shall state
that such counsel are satisfactory to them and Baker & Daniels has no
reason to believe that the Underwriters and they are not justified to so
rely);
(e) John Firth, General Counsel to the Company, shall have furnished
to you his written opinion, dated the Time of delivery, in form and
substance satisfactory to you and to Calfee, Halter & Griswold, to the
effect that:
(i) All development agreements and franchise agreements between
the Company and any of the subsidiaries and Burger King Corporation
and Brinker International, Inc. (collectively, the "Franchisors") are
legal, valid and binding obligations of the Company or the subsidiary,
as the case may be, enforceable in accordance with their respective
terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles, and except to the further extent that
the ability of the Franchisors to enforce certain provisions thereof
may be limited under applicable state statutes regulating the
relationship between franchisors and franchisees.
(ii) All development and franchise agreements between Bruegger's
and its franchisees are the valid and binding obligations of
Bruegger's, enforceable in accordance with their respective terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws of general applicability
relating to or affecting creditors' rights and to general equitable
principles, and except to the further extent that the ability of
Bruegger's to enforce certain provisions thereof may be limited under
applicable state statutes regulating the relationship between
franchisors and franchisees.
In rendering the opinions set forth in Section 7(e) above, such
counsel may rely, to the extent deemed advisable by such counsel, (a) as to
factual matters upon certificates of public officials and officers of the
Company, and (b) as to the laws of any jurisdiction other than the United
States and jurisdictions in which he is admitted, on opinions of counsel
(provided, however that you shall have received a copy of each of such
opinions which shall be dated the Time of Delivery, addressed to you or
otherwise authorizing you to rely thereon, and John Firth in his opinion to
you delivered pursuant to this subsection, shall state that such counsel
are satisfactory to him and he has no reason to believe that the
Underwriters and they are not justified to so rely);
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(f) Calfee, Halter & Griswold, counsel to the Underwriters, shall
have furnished to you their written opinion or opinions, dated the Time of
Delivery, in form and substance satisfactory to you, with respect to the
incorporation of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(g) At the time this Agreement is executed and also at the Time of
Delivery Coopers & Lybrand LLP shall have furnished to you a letter or
letters, dated the date of this Agreement and the Time of Delivery, in form
and substance satisfactory to you, to the effect, that:
(i) They are independent accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion the consolidated financial statements of
the Company and its subsidiaries (including the related schedules and
notes) included or incorporated by reference in the Registration
Statement and Prospectus and covered by their reports included or
incorporated by reference therein comply as to form in all material
respects with the applicable accounting requirements of the Act or the
Exchange Act, as applicable, and the published rules and regulations
thereunder;
(iii) On the basis of specified procedures as of a specified date
not more than five days prior to the date of their letter (which
procedures do not constitute an examination made in accordance with
generally accepted auditing standards), consisting of a reading of the
latest available unaudited interim consolidated financial statements
of the Company and its subsidiaries, a reading of the latest available
minutes of any meeting of the Board of Directors and stockholders of
the Company and its subsidiaries since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its subsidiaries
who have responsibility for financial and accounting matters, and such
other procedures or inquiries as are specified in such letter, nothing
came to their attention that caused them to believe that:
(A) The unaudited consolidated condensed financial
statements of the Company and its subsidiaries included or
incorporated by reference in the Prospectus do not comply in form
in all
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material respects with the applicable accounting requirements of
the Act and the rules and regulations promulgated thereunder or
are not presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent
with that of the audited consolidated financial statements
included in the Registration Statement and the Prospectus;
(B) As of a specified date not more than five days prior to
the date of their letter, there was any change in the capital
stock, or the long-term debt or short-term debt of the Company
and its subsidiaries on a consolidated basis, or any decrease in
total assets, total current assets, or stockholders' equity or
other items specified by the Representatives, of the Company and
its subsidiaries on a consolidated basis, each as compared with
the amounts shown on the May 12, 1996 balance sheet included or
incorporated by reference in the Registration Statement and the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or such other changes, decreases or increases which are
described in their letter and which do not, in the sole judgment
of the Representatives, make it impractical or inadvisable to
proceed with the purchase and delivery of the Securities as
contemplated by the Registration Statement; and
(C) For the period from May 13, 1996 to a specified date
not more than five days prior to the date of such letter, there
was any decrease, as compared with the corresponding period of
the preceding fiscal year, in the following consolidated amounts:
total restaurant sales, income from restaurant operations, income
before income taxes, net income or pro forma net income per share
of the Company and its subsidiaries except in all instances for
decreases which the Registration Statement discloses have
occurred or may occur; or such other decreases which are
described in their letter and which do not, in the sole judgment
of the Representatives, make it impractical or inadvisable to
proceed with the purchase and delivery of the Securities as
contemplated by the Registration Statement; and
(iv) In addition to the examination referred to in their
reports included in the Registration Statement and the Prospectus and
the limited procedures referred to in clause (iii) above, they have
carried out certain
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specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information specified by
the Representatives, which are derived from the general accounting
records of the Company and its subsidiaries which appear in (a) the
Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement, (b) the Company's Annual Report on Form 10-K
for the year ended October 29, 1995, under Items 1, 6 and 7, (c) the
Company's Quarterly Reports on Form 10-Q for the quarters ended
February 18, 1996 and May 12, 1996 under Items 1 and 2 of Part I, and
(d) the Company's Current Reports on Form 8-K (i) dated January 5,
1996, as amended on February 27, 1996 and (ii) dated June 13, 1996,
under Item 7, and have compared such amounts and financial information
with the accounting records of the Company and its subsidiaries, and
have found them to be in agreement and have proved the mathematical
accuracy of certain specified percentages.
(v) On the basis of a reading of the pro forma consolidated
financial statements included in the Registration Statement and the
Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the
comments set forth in this clause (v) inquiries of certain officials
of the Company and its consolidated subsidiaries and Bruegger's who
have responsibility for financial and accounting matters and proving
the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the pro forma consolidated
financial statements, nothing came to their attention that caused them
to believe that the pro forma consolidated financial statements do not
comply in form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts
in the compilation of such statements.
(h) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and since the respective
dates as of which information is given in the Prospectus, there shall not
have been any change in the capital stock (other than shares issued
pursuant to the exercise of or pursuant to the terms of convertible
securities of the Company outstanding on the date hereof) or short-term
debt or long-term debt of the Company or any of its subsidiaries nor any
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<PAGE>
change or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which,
in any such case is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated in
the Prospectus;
(i) Between the date hereof and the Time of Delivery there shall have
been no declaration of war by the Government of the United States; at the
Time of Delivery there shall not have occurred any material adverse change
in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any
outbreak or material escalation of hostilities or other calamity or crisis,
the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce
contracts for the resale of Securities and no event shall have occurred
resulting in (i) trading in securities generally on the New York Stock
Exchange or in the Common Stock on the principal securities market in which
the Common Stock is quoted being suspended or limited or minimum or maximum
prices being generally established on such market, or (ii) additional
material governmental restrictions, not in force on the date of this
Agreement, being imposed upon trading in securities generally by the New
York Stock Exchange or in the Common Stock on the principal securities
exchange or market in which the Common Stock is quoted or by order of the
Commission or any court or other governmental authority, or (iii) a general
banking moratorium being declared by either Federal or New York
authorities;
(j) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at the Time of Delivery certificates signed
by the chief executive officer and the chief financial officer, on behalf
of the Company, and by each Selling Stockholder, satisfactory to you as to
such matters as you may reasonably request and as to (i) the accuracy of
its and their respective representations and warranties herein at and as of
the Time of Delivery and (ii) the performance by the Company and each
Selling Stockholder of all their respective obligations hereunder to be
performed at or prior to the Time of Delivery; the Company and the Selling
Stockholders shall have furnished or caused to be furnished to you at the
Time of Delivery certificates signed by the chief executive officer and the
chief financial officer, on behalf of the Company, and by each Selling
Stockholder as to (i) the fact that they have carefully examined the
Registration Statement and Prospectus and, (a) as of the Effective Date,
the statements contained or incorporated by reference in the
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<PAGE>
Registration Statement and the Prospectus were true and correct and neither
the Registration Statement nor the Prospectus omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading (except that each Selling Stockholder shall be
responsible only for information relating to them or required to be
disclosed by them) and (b) since the Effective Date, no event has occurred
that is required by the Act or the rules and regulations of the Commission
thereunder to be set forth in an amendment of, or a supplement to, the
Prospectus that has not been set forth in such an amendment or supplement;
and (ii) the matters set forth in subsection (a) of this Section 7;
(k) Each director and executive officer of the Company and each
Selling Stockholder shall have delivered to you an agreement not to offer,
sell, contract to sell or otherwise dispose of any shares of capital stock
of the Company (or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly, for a period of 180
days after the date of this Agreement, without the prior written consent of
Schroder Wertheim & Co. Incorporated; and
(l) The Company shall have delivered to you evidence that the
Securities have been authorized for quotation, upon notice of issuance, on
the Nasdaq National Market as of the Effective Date.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained or incorporated by reference in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky application or other document executed by
the Company specifically for that purpose or based upon information furnished by
the Company filed in any state or other jurisdiction in order to qualify any or
all of the Securities under the securities laws thereof or filed with the
Commission or any securities association or securities exchange (each, an
"Application"), or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements made or
incorporated by reference therein not misleading, or (ii) any untrue statement
or alleged untrue statement made by the Company in Section 1.A of this Agreement
or (iii) the employment by the Company of any device, scheme or artifice to
defraud, or the engaging by the Company in any act, practice or course of
business which operates or would operate as a fraud or deceit, or any conspiracy
with respect thereto, in which the Company shall participate, in connection with
the issuance and sale of any of the
30
<PAGE>
Securities, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating,
preparing to defend, defending or appearing as a third-party witness in
connection with any such action or claim; provided, however, that the Company
shall 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 an untrue statement or
alleged untrue statement or omission or alleged omission relating to an
Underwriter made in any Preliminary Prospectus, the Registration Statement, the
Prospectus or such amendment or supplement or any Application in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein.
(b) Each Selling Stockholder, severally and not jointly, will
indemnify and hold harmless each Underwriter, the Company and the other Selling
Stockholder against any losses, claims, damages or liabilities to which such
Underwriter, the Company or such other Selling Stockholder may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained or
incorporated by reference in the Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made or incorporated by
reference therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Preliminary Prospectus, the Registration
Statement, the Prospectus or such amendment or supplement in reliance upon and
in conformity with information furnished to such Underwriter or the Company by
such Selling Stockholder expressly for use therein, or (ii) any untrue statement
or alleged untrue statement made by such Selling Stockholder in Section 1.B of
this Agreement, and will reimburse such Underwriter, the Company or such other
Selling Stockholder for any legal or other expenses incurred by such
Underwriter, the Company or such other Selling Stockholder in connection with
investigating, preparing to defend, defending or appearing as a third-party
witness in connection with any such action or claim. No Selling Stockholder
against whom a claim for indemnity is made on the basis of the provisions of
this Section 8(b) shall be required to indemnify, hold harmless or reimburse the
Company or Underwriters in an aggregate amount in excess of the proceeds
received by the Selling Stockholder in connection herewith.
(c) In addition to any obligations of the Company and each of the
Selling Stockholders under Section 8(a) and 8(b), the Company and each of the
Selling Stockholders agree that they shall perform their indemnification
obligations under Section 8(a) and Section 8(b) (as modified by the last
paragraph of this Section 8(c)) with respect to counsel fees and expenses and
other expenses
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reasonably incurred by making payments within 45 days to the Underwriter in the
amount of the statements of the Underwriter's counsel or other statements which
shall be forwarded by the Underwriter, and that it shall make such payments
notwithstanding the absence of a judicial determination as to the propriety and
enforceability to the obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been improper
by a court until such time as a court orders return of such payments.
(d) Each Underwriter will indemnify and hold harmless the Company and
the Selling Stockholders against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or any Application, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement, the Prospectus or such
amendment or supplement or any Application in reliance upon and in conformity
with written information furnished to the Company or such Selling Stockholder by
such Underwriter relating to such Underwriter through you expressly for use
therein, and will reimburse the Company or such Selling Stockholder for any
legal or other expenses reasonably incurred by the Company or such Selling
Stockholder in connection with investigating or defending any such action or
claim.
The indemnity agreement in this Section 8(d) shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company or of any Selling Stockholder and to each person, if any, who controls
the Company or any Selling Stockholder within the meaning of the Act or the
Exchange Act.
(e) Promptly after receipt by an indemnified party under Section
8(a), 8(b) or 8(d) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party under Section 8(a), 8(b) or
8(d) except to the extent it was unaware of such action and has been prejudiced
in any material respect by such
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<PAGE>
failure or from any liability which it may have to any indemnified party
otherwise than under such Section 8(a), 8(b) or 8(d). In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. If, however, (i) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party or (ii) an indemnified party
shall have reasonably concluded that representation of such indemnified party
and the indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them and the indemnified party so notifies the
indemnifying party, then the indemnified party shall be entitled to employ
counsel different from counsel for the indemnifying party at the expense of the
indemnifying party and the indemnifying party shall not have the right to assume
the defense of such indemnified party. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition to
local counsel) for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same set of allegations or circumstances. The counsel with respect to which
fees and expenses shall be so reimbursed shall be designated in writing by
Schroder Wertheim & Co. Incorporated in the case of parties indemnified pursuant
to Section 8(a) and Section 8(b) and by the Company in the case of parties
indemnified pursuant to Section 8(d).
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(f) In order to provide for just and equitable contribution under the
Act in any case in which (i) any Underwriter (or any person who controls any
Underwriter within the meaning of the Act or the Exchange Act) makes claim for
indemnification pursuant to Section 8(a) or Section 8(b) hereof, but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or
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<PAGE>
the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Section 8(a) or Section 8(b)
provides for indemnification in such case or (ii) contribution under the Act may
be required on the part of any Underwriter or any such controlling person in
circumstances for which indemnification is provided under Section 8(d), then,
and in each such case, each indemnifying party shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject as an
indemnifying party hereunder (after contribution from others) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Selling Stockholders on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 8(e) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Selling Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by the Company and the Selling Stockholders bear to
the total underwriting discounts and commissions received by the Underwriters
with respect to the Securities purchased under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Selling Stockholders on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, each of the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 8(f) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(f).
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 8(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions
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of this Section 8(f), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 8(f) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(g) Promptly after receipt by any party to this Agreement of notice
of the commencement of any action, suit or proceeding, such party will, if a
claim for contribution in respect thereof is to be made against another party
(the "contributing party"), notify the contributing party of the commencement
thereof; but the omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party for contribution
under the Act except to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any liability which
it may have to any other party other than for contribution under the Act. In
case any such action, suit or proceeding is brought against any party, and such
party notifies a contributing party of the commencement thereof, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified.
9. (a) If any Underwriter shall default in its obligation to purchase
the Firm Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Firm Securities on the terms contained herein. If the aggregate number of Firm
Securities as to which Underwriters default is more than one-eleventh of the
aggregate number of all the Firm Securities and within 36 hours after such
default by any Underwriter you do not arrange for the purchase of such Firm
Securities, then the Company and the Selling Stockholders shall be entitled to a
further period of 36 hours within which to procure another party or other
parties satisfactory to you to purchase such Firm Securities on such terms. In
the event that, within the respective prescribed periods, you notify the Company
and the Selling Stockholders that you have so arranged for the purchase of such
Firm Securities, or the Company and the Selling Stockholders notify you that
they have so arranged for the purchase of such Firm Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the
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Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Firm Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Firm Securities of such defaulting Underwriter or Underwriters by you or the
Company and the Selling Stockholders or both as provided in subsection (a)
above, the aggregate number of such Firm Securities which remain unpurchased
does not exceed one-eleventh of the aggregate number of all the Firm Securities,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of the Firm Securities
which such Underwriter agreed to purchase hereunder and, in addition, to require
each nondefaulting Underwriter to purchase its pro rata share (based on the
number of Firm Securities which such Underwriter agreed to purchase hereunder)
of the Firm Securities of such defaulting Underwriter or Underwriters for which
such arrangements have not been made; but nothing shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Firm Securities of a defaulting Underwriter or Underwriters by you or the
Company and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Firm Securities which remain unpurchased exceeds one-
eleventh of the aggregate number of all the Firm Securities, or if the Company
and the Selling Stockholders shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase Firm
Securities of a defaulting Underwriter or Underwriters, then this Agreement
shall thereupon terminate without liability on the part of any non-defaulting
Underwriter, the Company or any Selling Stockholder, except for the expenses to
be borne by the Company and the Selling Stockholders and the Underwriters as
provided in Section 6 hereof and the indemnity agreement in Section 8 hereof;
but nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, each of the Selling Stockholders and the
several Underwriters, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, or an officer or director or controlling person
of the Company, or any of the Selling Stockholders, or any controlling person of
any of the Selling Stockholders, and shall survive delivery of and payment for
the Securities.
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11. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon, New
York City time, on the first full business day after the Registration Statement
becomes effective, or at such time after the Registration Statement becomes
effective as you may authorize the sale of the Securities to the public by
Underwriters or other securities dealers, or (b) if the Registration Statement
has heretofore become effective, at the earlier of 24 hours after the filing of
the Prospectus with the Commission or at such time as you may authorize the sale
of the Securities to the public by Underwriters or securities dealers, unless,
prior to any such time you shall have received notice from the Company that it
elects that this Agreement shall not become effective, or you, or through you
such of the Underwriters as have agreed to purchase in the aggregate fifty
percent or more of the Firm Securities hereunder, shall have given notice to the
Company that you or such Underwriters elect that this Agreement shall not become
effective; provided, however, that the provisions of this Section and Section 6
and Section 8 hereof shall at all times be effective.
If this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company and the
Selling Stockholders shall not then be under any liability to any Underwriter
except as provided in Section 6 and Section 8 hereof, but if this Agreement
becomes effective and is not terminated pursuant to Section 9 hereof, but the
Securities are not delivered by or on behalf of the Company or any of the
Selling Stockholders as provided herein because the Company or any of the
Selling Stockholders has been unable to comply with the terms and conditions
hereof, the Company will reimburse the Underwriters through you for all out-of-
pocket expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Securities, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter except
as provided in Section 6 and Section 8 hereof.
12. The statements set forth in the last paragraph on the front cover page
of the Prospectus, the paragraphs on the inside front cover of the Prospectus
containing passive market making and stabilization language and the second and
third paragraphs under the caption "Underwriting" in the Prospectus constitute
the only information furnished by any Underwriter through the Representatives to
the Company for purposes of Sections 1(b), 1(c) and 8 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Schroder Wertheim & Co. Incorporated on behalf of you
as the
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Representatives, and in all dealings with the Selling Stockholders hereunder,
you and the Company shall be entitled to act and rely upon any statement,
request, notice or agreement furnished in writing by or on behalf of such
Selling Stockholder or made or given by the Attorney-in-Fact for such Selling
Stockholder.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
you as the Representatives in care of Schroder Wertheim & Co. Incorporated,
Equitable Center, 787 Seventh Avenue, New York, New York 10019, Attention:
Syndicate Department; and if to the Company or the Selling Stockholders, shall
be delivered or sent by letter sent by mail, telex or facsimile transmission
(subsequently confirmed by delivery or by letter sent by mail) to the address of
the Company set forth in the Registration Statement, Attention: Daniel B.
Fitzpatrick; provided, however, that any notice to any Underwriter pursuant to
Section 8(d) hereof shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and each of the Selling Stockholders and, to
the extent provided in Section 8 and Section 10 hereof, the officers and
directors of the Company and each person who controls the Company, any Selling
Stockholder or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
15. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
16. This Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof.
17. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts each of which shall be deemed to be an
original but all such counterparts shall together constitute one and the same
instrument. If the foregoing is in accordance with your understanding, please
sign and return to us two counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
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<PAGE>
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement Among Underwriters, manually or
facsimile executed counterparts of which, to the extent practicable and upon
request, shall be submitted to the Company for examination, but without warranty
on your part as to the authority of the signers thereof.
Very truly yours,
QUALITY DINING, INC.
By: _________________________________
Name: Daniel B. Fitzpatrick
Title: President, Chairman & CEO
SELLING STOCKHOLDERS
By: _________________________________
As Attorney-in-Fact for each of
the Selling Stockholders listed
in Schedule II
Accepted as of the date hereof:
SCHRODER WERTHEIM & CO. INCORPORATED
GOLDMAN, SACHS & CO.
WESSELS, ARNOLD & HENDERSON, L.L.C.
MORGAN KEEGAN & COMPANY, INC.
By: SCHRODER WERTHEIM & CO. INCORPORATED
By: _________________
Managing Director
39
<PAGE>
SCHEDULE I
Underwriter Number of Firm Securities
----------- -------------------------
Schroder Wertheim & Co. Incorporated
Goldman, Sachs & Co.
Wessels, Arnold & Henderson, L.L.C.
Morgan Keegan & Company, Inc
Total . . . . . . . . . . . . . . . . . . 2,277,300
=========
40
<PAGE>
SCHEDULE II
Selling Number of Firm
Stockholder Securities to be Sold
----------- ---------------------
T. Garrick Steele 75,000
Anita L. Wood 2,300
41
<PAGE>
EXHIBIT 23-A
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus forming a
part of the Registration Statement on Form S-3 filed by Quality Dining, Inc.,
of our report dated December 22, 1995, on our audits of the consolidated
financial statements of Quality Dining, Inc. and subsidiaries as of October
29, 1995 and October 30, 1994, and for the fifty-two week periods ended
October 29, 1995 and October 30, 1994 and the fifty-three week period ended
October 31, 1993. We also consent to the reference to our firm under the
caption "Experts" in the Prospectus.
COOPERS & LYBRAND L.L.P.
South Bend, Indiana
July 1, 1996
<PAGE>
EXHIBIT 23-C
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and all references to our Firm) included in or made a part of this
Registration Statement.
Arthur Andersen LLP
New York, New York
June 28, 1996
<PAGE>
EXHIBIT 23-D
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement on Form S-3 filed
by Quality Dining Inc., of our report dated August 1, 1995, on our audit of
the combined financial statements of Shonco, Inc. et al as of December 31,
1994 and for the year then ended. We also consent to the reference to our firm
under the caption "Experts" in the Prospectus.
Plante & Moran, LLP
July 1, 1996
Southfield, Michigan
<PAGE>
EXHIBIT 23-E
KPMG PEAT MARWICK LLP
One Church Street
P.O. Box 564
Burlington, VT 05402
The Board of Directors
Bruegger's Corporation
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the registration statement.
KPMG Peat Marwick LLP
Burlington, Vermont
July 1, 1996
<PAGE>
EXHIBIT 23-F
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Quality Dining, Inc.:
We consent to the incorporation by reference herein of our report dated
November 22, 1995, with respect to the combined balance sheets of the Grady's
Purchased Restaurants, as defined, as of June 28, 1995 and June 29, 1994, and
the related combined statements of income and invested equity, and cash flows
for each of the years in the three-year period ended June 28, 1995 and to the
reference to our firm under the heading "Experts" in the registration
statement.
KPMG Peat Marwick LLP
Dallas, Texas
July 1, 1996
